Mitel exceeds guidance, sets company record for gross margin

Courtney Symons
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Ottawa telecom firm Mitel (TSX:MNW; Nasdaq:MITL) recorded mixed results in its second quarter with lower revenues and a $1.9-million loss, but still beat its internal forecasts and posted other positive figures.

Mitel chief financial officer Steve Spooner.

The firm achieved an overall gross margin – or difference between revenue and cost – of 56.2 per cent, which CEO Richard McBee said is a record for the company.

A large part of the company’s operating costs came from a charge of $9.3 million to implement a restructuring plan announced in August to terminate 200 employees and close excess facilities.

While Mitel has not released numbers for how many were laid off in Ottawa, officials noted last quarter that there were 485 people employed at that time. In OBJ’s Book of Lists published earlier this year, Mitel disclosed 510 employees.

Revenues for the second quarter of the company’s fiscal 2013 year were $145.5 million, a 5.9-per-cent decrease from $154.6 million a year previous.

Compared to last quarter, however, revenues were up five per cent, which Mr. McBee attributed to improvements in Mitel’s channel-focused sales model and the uptake of its virtualization and cloud offerings.

The company reported growth of more than 100 per cent year-over-year in its cloud customer base.

These encouraging numbers led the company to forecast revenues to be in the range of $141 million to $146 million in the third quarter of fiscal 2013. Mitel said it also expects its gross margin to be between 55 per cent and 56 per cent, with operating expenses as a percentage of revenue around 43 per cent to 44 per cent.

“We are pleased with our operating results this quarter, which was driven by solid execution of our business model and our ability to expand our gross margins and proactively manage our cost structure despite the challenging macroeconomic environment,” stated chief financial officer Steve Spooner in the financial release. “While we continue to remain cautious in our forecast, our results this quarter reinforce our confidence in our business model.”

Mitel reported cash and cash equivalents of $87.4 million.

The results come after a “disappointing” first quarter for the company, with halted orders and the announcement of the aforementioned layoffs.

Mitel's stock has struggled since a soft initial public offering on the Nasdaq in 2010. Earlier this year, Mitel expanded to the Toronto Stock Exchange, a move that some analysts said would attract more Canadian institutional and retail investors.

Organizations: Mitel, Toronto Stock Exchange

Geographic location: Ottawa

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