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Press release from Business Wire

Acme Packet Reports Results for Third Quarter of 2011

<p class='bwalignc'> <i><b>– Company Reaffirms 2011 Revenue and Earnings Estimates –</b></i> </p>

Thursday, October 20, 2011

Acme Packet Reports Results for Third Quarter of 201116:05 EDT Thursday, October 20, 2011 BEDFORD, Mass. (Business Wire) -- Acme Packet, Inc. (NASDAQ: APKT), the leader in session delivery network solutions, today announced results for the third quarter ended September 30, 2011 and reaffirmed its business outlook for 2011. Results for the Third Quarter of 2011 Total revenue in the third quarter of 2011 was $70.6 million, compared to $56.6 million in the third quarter of 2010 and $79.7 million in the second quarter of 2011. Net income in the third quarter of 2011 was $7.9 million, or $0.11 per share, compared to $10.5 million, or $0.15 per share, in the third quarter of 2010 and $14.0 million, or $0.20 per share, in the second quarter of 2011. Net income on a non-GAAP1 basis in the third quarter of 2011 was $14.6 million, or $0.21 per share, compared to $13.7 million, or $0.20 per share, in the third quarter of 2010, and $20.4 million, or $0.29 per share, in the second quarter of 2011. All earnings per share results are on a fully diluted basis. “The fundamentals of our business remain strong, and we remain well positioned to take advantage of the profound shift to Internet-based voice, video and unified communications,” said Andy Ory, President and CEO of Acme Packet, Inc. “We are excited about the new products and partnerships that we have launched to drive the next stage of our growth. We remain confident in our ability to execute on our full year business outlook.” Company Reaffirms Business Outlook for 2011 The Company today reaffirmed its business outlook for 2011. The Company's outlook is based on the current indications for its business, which may change at any time. A reconciliation of the Company's expected GAAP to non-GAAP1 business outlook, and a statement as to the use of non-GAAP1 financial measures, is included at the end of this press release. All earnings per share results are on a fully diluted basis.   Business Outlook for Year Ending December 31, 2011 Estimate         Issued October 20, 2011 Total revenue (in millions) $315-$320 Total revenue growth rate Approximately 36%-38% Non-GAAP1 EPS $1.14-$1.18 Non-GAAP1 EPS growth rate Approximately 43%-48% GAAP EPS $0.78-$0.82 GAAP EPS growth rate Approximately 24%-30% Diluted share count (in millions)         71.5   Company to Host Live Conference Call and Webcast The Company's management team will host a live conference call and webcast at 4:30 p.m. eastern time today to discuss the financial results as well as management's outlook for the business. The conference call may be accessed in the United States by dialing 1.800.230.1093 and using access code “APKT”. The conference call may be accessed outside of the United States by dialing +1.612.288.0329 and using access code “APKT”. The conference call will be simultaneously webcast on the Company's investor relations website, which can be accessed at www.ir.acmepacket.com. A replay of the conference call will be available approximately two hours after the call by dialing 1.800.475.6701 or +1.320.365.3844 and using access code 219385 or by accessing the webcast replay on the Company's investor relations website. __________________1A reconciliation of GAAP to non-GAAP results, and a statement on the use of non-GAAP financial measures, is included at the end of this press release. About Acme Packet Acme Packet (NASDAQ: APKT), the leader in session delivery network solutions, enables the trusted, first-class delivery of next-generation voice, data and unified communications services and applications across IP networks. Our Net-Net product family fulfills demanding security, service assurance and regulatory requirements in service provider, enterprise and contact center networks. Based in Bedford, Massachusetts, Acme Packet designs and manufactures its products in the USA, selling them through over 200 reseller partners worldwide. More than 1,525 customers in 107 countries have deployed over 14,000 Acme Packet systems, including 90 of the top 100 service providers and 36 of the Fortune 100. For more information visit www.acmepacket.com. Acme Packet, Inc. Safe Harbor Statement Statements contained herein that are not historical fact (including those in the section “Company Reaffirms Business Outlook for 2011”) may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may relate to, among other things, expected financial and operating results, expected growth rates, future stock-based compensation and amortization expenses, future business prospects and market conditions. Such forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those anticipated. These include, but are not limited to: the amount of stock-based compensation awarded; the applicable Company stock price used to determine stock-based compensation; the exercise pattern of employee stock options; difficulties expanding the Company's customer base; difficulties leveraging market opportunities; difficulties providing solutions that meet the needs of customers; poor product sales; long sales cycles; difficulties developing new products; difficulties in relationships with vendors and partners; higher risks in international operations; difficulties managing rapid growth; difficulties managing the Company's financial performance; the ability to hire and retain employees and appropriately staff operations; the Company's cash needs; the impact of new accounting pronouncements and increased competition. Additional factors that could cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in the Company's recent filings with the Securities and Exchange Commission, including those factors discussed under the caption “Risk Factors” in such filings. Acme Packet, Inc.Condensed Consolidated Statements of Income(in thousands, except share and per share data)(unaudited)           Three Months Ended Nine Months Ended September 30, September 30, 2011   2010 2011   2010 Revenue:     Product $53,077 $ 45,328 $ 177,507 $ 129,452 Maintenance, support and service 17,54411,28646,81431,548 Total revenue 70,62156,614224,321161,000   Cost of revenue: Product 8,778 7,903 30,090 22,886 Maintenance, support and service 3,0422,5568,5736,964 Total cost of revenue 11,82010,45938,66329,850   Gross profit 58,80146,155185,658131,150   Operating expenses: Sales and marketing 27,201 17,012 75,640 50,062 Research and development 13,249 8,896 37,262 26,235 General and administrative 5,406 3,906 15,771 10,785 Merger and integration-related costs 120-300- Total operating expenses 45,97629,814128,97387,082   Income from operations 12,825 16,341 56,685 44,068   Other (expense) income, net (53)189(147)354   Income before provision for income taxes 12,772 16,530 56,538 44,422   Provision for income taxes 4,8466,06520,89515,895   Net income $7,926$ 10,465$35,643$ 28,527   Net income per share: Basic $0.12 $ 0.17 $0.54 $ 0.46 Diluted $0.11 $ 0.15 $0.50 $ 0.43   Weighted average number of common shares used in the calculation of net income per share: Basic 66,752,669 62,772,466 66,011,761 61,371,085 Diluted 70,908,590 68,426,272 70,887,241 67,114,486   Margin: Gross margin 83.3% 81.5% 82.8% 81.5% Operating margin 18.2% 28.9% 25.3% 27.4% Net margin 11.2% 18.5% 15.9% 17.7%     Acme Packet, Inc.Condensed Consolidated Balance Sheets(in thousands)(unaudited)           September 30,2011   December 31, 2010 Assets Current assets: Cash and cash equivalents $156,962 $91,669 Short-term investments 181,660 179,024 Accounts receivable, net 51,246 34,797 Inventory 11,779 6,662 Deferred product costs 1,074 3,572 Deferred tax asset 3,814 3,814 Income taxes receivable 13,404 9,979 Other current assets 6,9533,231 Total current assets 426,892 332,748 Long-term investments - 5,030 Property and equipment, net 24,514 17,156 Acquired intangible assets, net 9,095 9,468 Goodwill 3,269 - Deferred tax asset, net 14,802 14,802 Other assets 425940 Total assets $478,997$380,144   Liabilities and Stockholders' Equity Current liabilities: Accounts payable $7,056 $7,161 Accrued expenses and other current liabilities 13,494 14,629 Deferred revenue 28,83831,998 Total current liabilities 49,38853,788   Deferred revenue 3,4711,546 Deferred rent 1,8204,265   Stockholders' equity: Common stock 74 71 Additional paid-in capital 334,254 266,114 Treasury stock, at cost (37,522) (37,522) Other comprehensive income 21 34 Accumulated retained earnings 127,49191,848 Total stockholders' equity 424,318320,545 Total liabilities and stockholders' equity $478,997$380,144     Condensed Consolidated Statements of Cash Flow(in thousands)(unaudited)           Three Months EndedNine Months EndedSeptember 30,September 302011   2010 2011   2010 Cash provided by operating activities $16,441   $9,715 $36,646   $32,749 Cash provided by (used in) investing activities 10,516 (4,590) (14,486) (53,772) Cash provided by financing activities 9,434 14,894 43,133 41,194     Acme Packet, Inc.Statement on Use of Non-GAAP Financial Measures andReconciliation of Non-GAAP Net Income and Non-GAAP Net Income Per Share(in thousands, except share and per share data)(unaudited)Statement on Use of Non-GAAP Financial Measures: To supplement its condensed consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company discloses certain non-GAAP financial measures, including “non-GAAP net income”, “net income on a non-GAAP basis”, “non-GAAP net income per share”, “non-GAAP EPS”, “net income per share on a non-GAAP basis” and “non-GAAP EPS growth rate”. These non-GAAP financial measures are not presented in accordance with GAAP and are not meant to be a substitute for the most directly comparable GAAP measures of “net income”, “EPS”, “GAAP EPS growth rate” or “net income per share”. Rather, these non-GAAP financial measures should be evaluated in conjunction with its most directly comparable GAAP financial measure and the Company's financial statements as a whole. Management uses these supplemental non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in the Company's business, to assess its performance relative to its competitors, and to establish operational goals and forecasts that are used in allocating resources. Management uses these non-GAAP financial measures because they exclude stock-based compensation expense which is a non-cash charge and related payroll taxes, amortization of acquired intangible assets and merger and integration-related costs associated with the Company's acquisition activities all of which are non-operational costs and expenses. By excluding stock-based compensation expense and related payroll taxes, amortization of acquired intangible assets, and merger and integration-related costs, management can compare the Company's operations to prior periods and to the operations of other companies in its industry who may have materially different unusual, non-operational charges. Management does not consider any of stock-based compensation expense and related payroll taxes, amortization of acquired intangible assets, and merger and integration-related costs to be part of the Company's operating activities or meaningful in evaluating the Company's past financial performance or future prospects. Management believes that excluding these items is useful to investors because it is more representative of ongoing costs and therefore more comparable to historical operations. Because management uses them, management believes that the disclosure of these non-GAAP financial measures to investors provides greater transparency and useful information to help the investor better understand the Company's operating performance and to evaluate the methodology used by management to evaluate and measure such performance. Notwithstanding their utility to investors in understanding operational trends, these non-GAAP measures should not be considered measures of the Company's liquidity. In addition, the Company cautions that its definition of “non-GAAP net income”, “non-GAAP EPS” and “non-GAAP net income per share” may differ from similar measures used by other companies and may differ from period to period. Also, in future periods, management may make other adjustments for expenses and gains that it does not consider reflective of core operating performance in a particular period thereby modifying its definition of “non-GAAP net income”, “non-GAAP EPS” and “non-GAAP net income per share” by excluding these other or additional expenses and gains. Acme Packet, Inc.Non-GAAP Condensed Consolidated Statements of Income(in thousands, except share and per share data)(unaudited)           Three Months Ended Nine Months Ended September 30, September 30, 2011   2010 2011   2010 Revenue:     Product $53,077 $45,328 $177,507 $129,452 Maintenance, support and service 17,54411,28646,81431,548 Total revenue 70,62156,614224,321161,000   Cost of revenue: Product 8,066 7,311 27,882 21,172 Maintenance, support and service 2,4742,2687,0556,201 Total cost of revenue 10,5409,57934,93727,373   Gross profit 60,08147,035189,384133,627   Operating expenses: Sales and marketing 22,316 14,898 62,549 44,448 Research and development 10,309 7,536 29,405 22,459 General and administrative 3,7913,04011,8738,970 Total operating expenses 36,41625,474103,82775,877   Income from operations 23,665 21,561 85,557 57,750   Other (expense) income, net (53)189(147)354   Income before provision for income taxes 23,612 21,750 85,410 58,104   Provision for income taxes 8,9648,06131,39321,232   Net income $14,648$ 13,689$54,017$36,872   Net income per share: Basic $0.22 $0.22 $0.82 $0.60 Diluted $0.21 $0.20 $0.76 $0.55   Weighted average number of common shares used in the calculation of net income per share: Basic 66,752,669 62,772,466 66,011,761 61,371,085 Diluted 70,908,590 68,426,272 70,887,241 67,114,486   Margin: Gross margin 85.1% 83.1% 84.4% 83.0% Operating margin 33.5% 38.1% 38.1% 35.9% Net margin 20.7% 24.2% 24.1% 22.9%     Reconciliation of Non-GAAP Net Income and Non-GAAP Net Income Per Share for the Three and Nine Months Ended September 30, 2011 and September 30, 2010 and the Three Months Ended June 30, 2011:Acme Packet, Inc.GAAP to Non-GAAP ReconciliationThree Months Ended September 30, 2011(in thousands, except share and per share data)(unaudited)                         GAAP   Stock-basedcompensationexpense andrelated payrolltaxes     Amortizationof acquiredintangibleassets       Merger andintegration-related costs           Non-GAAP1 Revenue: Product $53,077 $ - $ - $ - $53,077 Maintenance, support and service 17,544---17,544 Total revenue 70,621---70,621   Cost of revenue: Product 8,778 (327) (385) - 8,066 Maintenance, support and service 3,042(568)--2,474 Total cost of revenue 11,820(895)(385)-10,540   Gross profit 58,801895385-60,081   Operating expenses: Sales and marketing 27,201 (4,784) (101) - 22,316 Research and development 13,249 (2,929) (11) - 10,309 General and administrative 5,406 (1,615) - - 3,791 Merger and integration-related costs 120--(120)- Total operating expenses 45,976(9,328)(112)(120)36,416   Income from operations 12,825 10,223 497 120 23,665   Other income, net (53)---(53)   Income before provision for income taxes 12,772 10,223 497 120 23,612   Provision for income taxes 4,8463,896179438,964   Net income $7,926$6,327$318$77$14,648   Net income per share: Basic $0.12 $0.09 $0.01 $0.00 $0.22 Diluted $0.11 $0.09 $0.01 $0.00 $0.21   Weighted average number of common shares used in the calculation of net income per share: Basic 66,752,669 66,752,669 66,752,669 66,752,669 66,752,669 Diluted 70,908,590 70,908,590 70,908,590 70,908,590 70,908,591   Margin: Gross margin 83.3%85.1% Operating margin 18.2%33.5% Net margin 11.2%20.7%     Acme Packet, Inc.GAAP to Non-GAAP ReconciliationNine Months Ended September 30, 2011(in thousands, except share and per share data)(unaudited)                       GAAP   Stock-basedcompensationexpense andrelated payrolltaxes   Amortizationof acquiredintangibleassets     Merger andintegration-related costs         Non-GAAP1 Revenue: Product $177,507 $ - $ - $ - $177,507 Maintenance, support and service 46,814---46,814 Total revenue 224,321---224,321   Cost of revenue: Product 30,090 (916) (1,292) - 27,882 Maintenance, support and service 8,573(1,518)--7,055 Total cost of revenue 38,663(2,434)(1,292)-34,937   Gross profit 185,6582,4341,292-189,384   Operating expenses: Sales and marketing 75,640 (12,804) (287) - 62,549 Research and development 37,262 (7,823) (34) - 29,405 General and administrative 15,771 (3,898) - - 11,873 Merger and integration-related costs 300--(300)-   Total operating expenses 128,973(24,525)(321)(300)103,827   Income from operations 56,685 26,959 1,613 300 85,557   Other (expense), net (147)---(147)   Income before provision for income taxes 56,538 26,959 1,613 300 85,410   Provision for income taxes 20,8959,8745814331,393   Net income $35,643$17,085$1,032$257$54,017   Net income per share: Basic $0.54 $0.26 $0.02 $0.00 $0.82 Diluted $0.50 $0.24 $0.02 $0.00 $0.76   Weighted average number of common shares used in the calculation of net income per share: Basic 66,011,761 66,011,761 66,011,761 66,011,761 66,011,761 Diluted 70,887,241 70,887,241 70,887,241 70,887,241 70,887,241   Margin: Gross margin 82.8%84.4% Operating margin 25.3%38.1% Net margin 15.9%24.1%     Acme Packet, Inc.GAAP to Non-GAAP ReconciliationThree Months Ended September 30, 2010(in thousands, except share and per share data)(unaudited)                     GAAP   Stock-basedcompensationexpense andrelated payrolltaxes   Amortizationof acquiredintangibleassets         Non-GAAP1 Revenue: Product $ 45,328 $ - $ - $45,328 Maintenance, support and service 11,286--11,286 Total revenue 56,614--56,614   Cost of revenue: Product 7,903 (213) (379) 7,311 Maintenance, support and service 2,556(288)-2,268 Total cost of revenue 10,459(501)(379)9,579   Gross profit 46,15550137947,035   Operating expenses: Sales and marketing 17,012 (2,069) (45) 14,898 Research and development 8,896 (1,349) (11) 7,536 General and administrative 3,906(866)-3,040 Total operating expenses 29,814(4,284)(56)25,474   Income from operations 16,341 4,785 435 21,561   Other income, net 189--189   Income before provision for income taxes 16,530 4,785 435 21,750   Provision for income taxes 6,0651,8351618,061   Net income $ 10,465$2,950$274$ 13,689   Net income per share: Basic $ 0.17 $0.04 $0.01 $0.22 Diluted $ 0.15 $0.04 $0.01 $0.20   Weighted average number of common shares used in the calculation of net income per share: Basic 62,772,466 62,772,466 62,772,466 62,772,466 Diluted 68,426,272 68,426,272 68,426,272 68,426,272   Margin: Gross margin 81.5%83.1% Operating margin 28.9%38.1% Net margin 18.5%24.2%     Acme Packet, Inc.GAAP to Non-GAAP ReconciliationNine Months Ended September 30, 2010(in thousands, except share and per share data)(unaudited)                     GAAP   Stock-basedcompensationexpense andrelated payrolltaxes   Amortizationof acquiredintangibleassets         Non-GAAP1 Revenue: Product $ 129,452 $ - $ - $129,452 Maintenance, support and service 31,548--31,548 Total revenue 161,000--161,000   Cost of revenue: Product 22,886 (577) (1,137) 21,172 Maintenance, support and service 6,964(763)-6,201 Total cost of revenue 29,850(1,340)(1,137)27,373   Gross profit 131,1501,3401,137133,627   Operating expenses: Sales and marketing 50,062 (5,479) (135) 44,448 Research and development 26,235 (3,743) (33) 22,459 General and administrative 10,785(1,815)-8,970 Total operating expenses 87,082(11,037)(168)75,877   Income from operations 44,068 12,377 1,305 57,750   Other income, net 354--354   Income before provision for income taxes 44,422 12,377 1,305 58,104   Provision for income taxes 15,8954,87046721,232   Net income $28,527$7,507$838$36,872   Net income per share: Basic $0.46 $0.12 $0.01 $0.60 Diluted $0.43 $0.11 $0.01 $0.55   Weighted average number of common shares used in the calculation of net income per share: Basic 61,371,085 61,371,085 61,371,085 61,371,085 Diluted 67,114,486 67,114,486 67,114,486 67,114,486   Margin: Gross margin 81.5%83.0% Operating margin 27.4%35.9% Net margin 17.7%22.9%     Acme Packet, Inc.GAAP to Non-GAAP ReconciliationThree Months Ended June 30, 2011(in thousands, except share and per share data)(unaudited)                     GAAP   Stock-basedcompensationexpense andrelated payrolltaxes   Amortizationof acquiredintangibleassets         Non-GAAP1 Revenue: Product $64,688 $ - $ - $64,688 Maintenance, support and service 15,045--15,045 Total revenue 79,733--79,733   Cost of revenue: Product 11,367 (327) (536) 10,504 Maintenance, support and service 2,525(499)-2,026 Total cost of revenue 13,892(826)(536)12,530   Gross profit 65,84182653667,203   Operating expenses: Sales and marketing 24,736 (4,441) (140) 20,155 Research and development 12,719 (2,652) (11) 10,056 General and administrative 5,788(1,303)-4,485 Total operating expenses 43,243(8,396)(151)34,696   Income from operations 22,598 9,222 687 32,507   Other (expense), net (196)--(196)   Income before provision for income taxes 22,402 9,222 687 32,311   Provision for income taxes 8,3943,24124611,881   Net income $14,008$5,981$441$20,430   Net income per share: Basic $0.21 $0.09 $0.01 $0.31 Diluted $0.20 $0.08 $0.01 $0.29   Weighted average number of common shares used in the calculation of net income per share: Basic 66,141,163 66,141,163 66,141,163 66,141,163 Diluted 71,033,614 71,033,614 71,033,614 71,033,614   Margin: Gross margin 82.6%84.3% Operating margin 28.3%40.8% Net margin 17.6%25.6%     Reconciliation of Expected Non-GAAP Net Income and Non-GAAP Net Income Per Share for the Year Ending December 31, 2011 (unaudited):     Twelve Months Ending December 31, 2011(unaudited)(in thousands, except per share data)Low   High   Revenue$315,000$320,000   Reconciliation of non-GAAP net income: Net income $55,800$58,700 Adjustments: Stock-based compensation expense and related payroll taxes, net of taxes 24,10024,100 Amortization of acquired intangible assets, net of taxes 1,2001,200 Merger and integration-related costs 200200 Non-GAAP net income $81,300$84,200   Reconciliation of diluted non-GAAP net income per share: Net income per share $0.78$0.82 Adjustments: Stock-based compensation expense and related payroll taxes, net of taxes 0.340.34 Amortization of acquired intangible assets, net of taxes 0.020.02 Merger and integration-related costs -- Non-GAAP net income per share $1.14$1.18     Acme Packet, Inc.Other Operational Data(unaudited)           Three Months EndedNine Months EndedSeptember 30,2011   June 30,2011   September 30,2010September 30,2011   September 30,2010Other operational data:       Depreciation and amortization (in thousands) $2,835 $1,894 $2,065 $7,087 $5,826 Capital expenditures (in thousands) 5,570 2,598 4,479 12,812 10,546 Days sales outstanding 65 60 48 - - Total headcount 741 710 529 - - Quarterly inventory turnover – annualized 3.27 5.42 5.21 - - Investor Relations:Acme PacketBrian Norris, +1-781-328-4790bnorris@acmepacket.comorMedia and Analysts:Acme PacketMike O'Malley, +1-781-869-2975momalley@acmepacket.com