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Radisys Warns For The Second Time In 6 Months

Jul. 07, 2017 10:05 AM ETRadiSys Corporation (RSYS)83 Comments
Henrik Alex profile picture
Henrik Alex


  • Company misses Q2 revenue expectations by more than 20% just eight weeks after giving guidance.
  • Expect management to reduce Q3 and full year guidance meaningfully on the upcoming Q2 conference call.
  • Gross margin, strategic revenue growth and cash flow guidance for the full year all at substantial risk.
  • Expect further pressure on the company's shares going into the Q2 earnings release and potentially beyond.
  • It will take time and some major business wins to recover some of the credibility lost with the investment community over the past six months.

Thursday after hours, small network solutions provider Radisys (NASDAQ:RSYS) shocked investors with a bold earnings warning:

Radisys Corporation, the services acceleration company, today announced preliminary revenue for the second quarter ended June 30, 2017 of approximately $35 million, compared to the Company’s previously stated guidance range of $41 million to $47 million.

“Delayed buying decisions at two of our largest customers resulted in second quarter revenue below our previously expected range,” stated Brian Bronson, Radisys President and Chief Executive Officer. “Despite these near-term challenges, I remain encouraged by the incremental progress we are continuing to make in proof-of-concepts and trials with tier-one customers across our strategic product lines, including initial engagements for our now commercially available FlowEngine TDE-2000 product. Our highly disruptive products and solutions are actively receiving increased attention from leading service providers, which reinforces my belief that we remain on track to secure new commercial wins in the second half of 2017.

“Additionally, we recently completed an amendment to our existing line of credit with Silicon Valley Bank and Square 1 Bank. The amended agreement provides us with greater financial flexibility by revising our quarterly EBITDA covenants. Importantly, this amendment supports our ability to continue executing toward our long-term strategic objectives.”

Unfortunately, this is already the second time within the last six months the company missed expectations by a wide margin. Back in February, management blamed a stronger than anticipated decline in the company's legacy embedded products business as the reason behind the lower than expected guidance but this time things are different as now "delayed buying decisions" at two of the company's largest customers are cited.

As Radisys is in the midst of transforming to a more software-centered business model, fellow contributors like Gregg Sterling have urged investors to look past the current distractions and instead

This article was written by

Henrik Alex profile picture
I am mostly a trader engaging in both long and short bets intraday and occasionally over the short- to medium term. My historical focus has been mostly on tech stocks but over the past couple of years I have also started broad coverage of the offshore drilling and supply industry as well as the shipping industry in general (tankers, containers, drybulk). In addition, I am having a close eye on the still nascent fuel cell industry.I am located in Germany and have worked quite some time as an auditor for PricewaterhouseCoopers before becoming a daytrader almost 20 years ago. During this time, I managed to successfully maneuver the burst of the dotcom bubble and the aftermath of the world trade center attacks as well as the subprime crisis.Despite not being a native speaker, I always try to deliver high quality research at no charge to followers and the entire Seeking Alpha community.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in RSYS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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