First-quarter 1999 net loss was $1.5 million, or 6 cents per share, compared with net income of $340,000, or 2 cents and 1 cent per basic and diluted share, respectively, in the first quarter 1998. Versus the fourth quarter of 1998, revenues increased 28 percent and net loss from operations declined by approximately $800,000.
Vertel's first-quarter results include revenues of approximately $600,000 generated by the company's Expersoft subsidiary between March 12, the date on which the Expersoft acquisition closed, and the end of the quarter on March 31. Expersoft's operations during that period were substantially break-even.
"Vertel's revenues improved overall from the prior quarter, as we made progress with regard to approximately $500,000 of order deferrals from the fourth quarter 1998," said Vertel Chief Executive Officer Bruce Brown. "We are not entirely satisfied, however, and are working diligently to improve our top-line growth.
"In particular, sales of our jointly developed TMNTelecore product suite were lower than anticipated from Hewlett-Packard, as our expectations were based on the revenue growth we witnessed from that relationship over the previous two quarters. We continue to explore ways to leverage our relationship with Hewlett-Packard in an effort to maximize the opportunity it represents.
"A number of factors today support my belief that Vertel is turning an important corner," Brown said. "First, we are seeing growing demand for our mediation solutions. These applications quickly and cost-effectively integrate multivendor network elements with network management systems and other operations support systems, or OSSs.
"To remain competitive, telecom carriers are having to increasingly automate their networks across a broad range of vendor equipment and systems, while those networks are growing in scale and complexity. This need is generating demand for Vertel's mediation software.
"In fact, just last week we announced contracts totaling $1.4 million with two major suppliers of wireless telecommunications equipment for mediation solutions based on Vertel's next-generation TMNTelecore platform technology.
"Second, our recent acquisition of Expersoft expands Vertel's portfolio of telecommunications management solutions and greatly enhances our ability to quickly deliver new products to meet the growing demand for telecommunications management software," Brown said.
"We plan to leverage Expersoft's standards-based, high-performance CORBA technology to extend our market focus, and expect to announce a new generation of object management solutions designed specifically for the carrier-grade OSS market in the coming quarter.
"Third, we are implementing our strategy to bring carrier-grade OSSs to newly deployed public Internet protocol, or IP, networks. Our current activities with a major IP network operator will position us competitively for this emerging opportunity.
"Fourth, we believe that we have the experience and leadership necessary to drive our strategy not only among senior management, but increasingly within the ranks of our employees at every level," Brown said. "In the first quarter we realigned management to take maximum advantage of our core competencies and recruited several market-experienced managers into the organization.
"Additionally, we recently made two key officer-level appointments, Vertel's new Vice President of Engineering Tom Greene and Senior Vice President of Worldwide Sales Bill Atkinson, who joined us from Expersoft.
"Tom brings over 20 years of commercial software development experience to his new position and most recently played a critical role in the development of Expersoft's leading-edge distributed object technology.
"Bill is a seasoned executive with a track record of building and directing sales teams to exceed revenue goals for enterprise software companies, penetrating Global 1000 accounts, systems integrators and systems vendors.
"Our ability to forecast and achieve our sales budgets is greatly enhanced by the addition of Bill to our management team. Over the next several months, one of his top priorities will be to integrate the sales organizations of Expersoft and Vertel, and to implement sales automation tools.
"We are focused on generating significant top-line growth going forward, and anticipate that through the first half of this year Vertel will not post a profit," Brown said. "For the full year, however, we expect to break even. Moreover, we have a sound balance sheet that reflects the resources necessary to fund the growth we plan to generate.
"We see significant opportunity for growth as we move forward," Brown said. "The worldwide OSS market is growing at a solid clip, more than 10 percent annually. As this market expands, demand for third-party OSS solutions is also growing.
"Vertel's value is in providing the underlying technologies that give our customers a competitive advantage -- specifically, better time to market and advanced technologies to manage multiple layers of the network architecture.
"Our strategy to deliver intelligent management solutions for carrier
grade IP networks strongly positions Vertel to address this emerging market
opportunity and to help our customers make the transition to convergent
communications."
This news release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995:
Except for the historical information presented, the matters discussed
in this news release are forward-looking statements that involve risks
and uncertainties. These statements are based on the company's current
expectations. Actual results may differ materially from those forward-looking
statements. The risks and uncertainties which may affect the company's
actual results include the ability to increase revenues and margins during
the second quarter of 1999 to their recent historical levels; the ability
to achieve profitability during the remainder of the fiscal year; timely
development, introduction and success of new and enhanced products in existing
and new markets; the acceptance of new technologies by the market place;
the impact of competitive products; the impact of competitive pricing;
with respect to the company's international sales, currency exchange risks
and governmental developments affecting international economic trends;
and as to Vertel's and its customers' the ability to identify, conclude
and integrate acquisitions on a timely basis; and the ability to retain
and attract key personnel. Readers are cautioned not to place undue reliance
upon these forward-looking statements. The company undertakes no obligation
to publicly update or revise any of its forward-looking statements, whether
as a result of new information, future events or otherwise.
VERTEL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Thousands, except per share amounts) (Unaudited) Three months ended, March 31 March 28 1999 1998 Net revenues: License $ 3,162 $ 2,953 License - related party -- 704 Service and other 1,360 1,261 Net revenues 4,522 4,918 Cost of revenues: License 570 200 Service and other 1,414 1,128 Total cost of revenues 1,984 1,328 Gross profit 2,538 3,590 Operating expenses: Research and development 1,636 1,435 Sales and marketing 1,557 1,487 General and administrative 1,052 657 Total 4,245 3,579 Operating (loss) income (1,707) 11 Other income, net 249 461 (Loss) income before provision for income taxes (1,458) 472 Provision for income taxes -- 132 Net (loss) income (1,458) 340 Other comprehensive loss (30) (31) Comprehensive (loss) income $ (1,488) $ 309 Basic net (loss) income per common share $ (0.06) $ 0.02 Diluted net (loss) income per common share $ (0.06) $ 0.01 Weighted average shares outstanding used in net (loss) income per common share calculations: Basic 25,016 22,548 Diluted 25,016 23,289 VERTEL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands, except share amounts) March 31, Dec. 31, 1999 1998 (unaudited) Current assets: Cash and cash equivalents $10,041 $19,495 Short-term investments 7,768 978 Trade accounts receivable (net of allowances of $621 as of March 31, 1999 and $556 as of December 31, 1998) 4,452 3,883 Prepaid expenses and other current assets 1,211 1,134 Total current assets 23,472 25,490 Property and equipment, net 1,325 1,025 Investments 1,437 1,437 Goodwill 4,702 -- Other assets 384 365 $31,320 $28,317 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt $ 142 $ -- Accounts payable 815 426 Accrued wages and related liabilities 1,433 1,351 Capital lease obligations 215 -- Accrued restructuring expenses 224 224 Accrued taxes payable 926 1,087 Other accrued liabilities 4,670 1,942 Deferred revenue 1,882 1,115 Total liabilities 10,307 6,145 Shareholders' equity: Preferred stock, par value $.01, 2,000,000 shares authorized; none issued and outstanding Common stock, par value $.01, 50,000,000 shares authorized; Shares issued and outstanding: 1999 -- 25,128,362; 1998 -- 24,954,545 251 249 Additional paid-in capital 79,880 79,553 Accumulated deficit (58,941) (57,483) Accumulated comprehensive deficit (177) (147) Total shareholders' equity 21,013 22,172 $ 31,320 $ 28,317
Virginia St. John-Needham (General Inquiries)
email: vsn@la.frbd.com
Marjorie Ornston (Media Inquiries)
email: mjo@la.frbd.com
Jill Fukuhara, (Investor Inquiries)
email: jsf@la.frb.com
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