Mitel exceeds earnings guidance in solid Q2

Despite its failure to acquire California-based Polycom, Mitel Networks reported another strong quarter on Thursday thanks to the continuing growth of its cloud-based business and solid results from its traditional enterprise division.

The Kanata-based telecom company, which suffered a setback last month when Polycom rejected its proposed deal in favour of a higher offer from a competitor, reported revenues of $307 million for the three-month period ended June 30 – an increase of 11 per cent from the second quarter of 2015 and slightly above the $285-million to $305-million range the Mitel had led analysts to expect.

Earnings were 19 cents per share, which also exceeded estimates. Mitel reports in U.S. currency.

Mitel’s cloud business continues to drive its revenue growth, but CEO Rich McBee praised the performance of all three of the company’s business sectors – cloud, mobile and enterprise.

“Strong execution across all segments enabled Mitel to deliver outstanding second-quarter results that exceeded analyst consensus and beat the high end of our guidance for non-GAAP revenues and non-GAAP earnings per share,” he said in a statement.

“These results, which came in the midst of intense M&A integration planning, speak volumes to the discipline, professionalism and focus of Mitel employees. We are especially pleased with the strong performance of our enterprise division, which capitalized on our broad global portfolio and footprint to take market share.”

Mitel (TSE: MNW) reported adjusted earnings of $46 million for the quarter, a 43 per cent increase from the same three-month period a year earlier on a pro-forma basis.

“Disciplined management of the business enabled us to convert a strong quarterly revenue performance into adjusted EBITDA that exceeded consensus and enabled us to further strengthen our capital structure,” Steve Spooner, Mitel’s chief financial officer, said in a statement. “Since the beginning of the year, we have paid down $65 million against our credit facility.”

Those payments have helped Mitel cut its long-term debt to slightly more than $590 million, down from nearly $634 million at the end of 2015. The company now has $61.2 million in cash on hand, down from $91.6 million at the end of December.

Mitel said revenues in the third quarter should be between $275 million and $295 million, while it expects earnings in the range of 10 cents to 15 cents per share.

The company’s shares were up $1.22 to $10.90 in late morning trading on the Toronto Stock Exchange.