NetSolve, Incorporated Announces Third Quarter Results; Growth in IP Telephony Management Contributes to Record New Orders.Business Editors/High-Tech Writers AUSTIN Austin. 1 City (1990 pop. 21,907), seat of Mower co., SE Minn., on the Cedar River, near the Iowa line; inc. 1868. The commercial and industrial center of a rich farm region, it is noted as home to the Hormel meatpacking company, whose Spam Town museum , Texas--(BUSINESS WIRE)--Jan. 14, 2004 NetSolve, Incorporated (Nasdaq:NTSL NTSL Nonintegrated Two-Stage Liquid ), a premier provider of IT infrastructure management services, today announced financial results for its third quarter ended December December: see month. 31, 2003. As anticipated, total revenues declined by $1.9 million compared to the same quarter a year ago as a result of declining carrier business, specifically the planned transition by AT&T of services under two contracts to internal AT&T centers. While the AT&T transition reduced the backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of the company's IT infrastructure management services revenues by 17% in calendar year 2003, 78% of those losses were replaced by growth in non-carrier channels. Total revenues from non-carrier sources increased $1 million, or 16%, as compared to the same quarter a year ago. Third Quarter Highlights: -- Recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. revenues from non-WAN (wide area network) services at the end of the third quarter grew 4% over the end of the prior quarter and 54% over the end of the same quarter a year ago. These services now represent 24% of the total recurring IT infrastructure management revenues, up from 14% at the end of the same period a year ago. -- Recurring revenues from customers purchasing multiple services at the end of the third quarter were flat when compared to the prior quarter and increased 33% over the same quarter a year ago. Multiple services customers now represent 44% of the total recurring IT infrastructure management revenues, up from 29% for the same quarter a year ago. -- Non-carrier new orders set a new record with strong growth of 56% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . -- Customer renewal efforts were strong with the value under expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. service terms being reduced from 14% to 6% during the quarter. -- Non-carrier total backlog grew 11% sequentially and 25% over last year. -- IP Telephony The two-way transmission of voice over a packet-switched IP network, which is part of the TCP/IP protocol suite. The terms "IP telephony" and "voice over IP" (VoIP) are synonymous. momentum continued with 25,000 IP phones under management worldwide and an additional 20,000 phones in the backlog. This continues the company's leadership in remote IP Telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. management. -- Leadership team strengthened with the addition of Rick Hamilton Hamilton, city, Bermuda Hamilton, city (1990 est. pop. 3,100), capital of Bermuda, on Bermuda Island. It is a port at the head of Great Sound, a huge lagoon and deepwater harbor protected by coral reefs. as vice president of service delivery and the promotion of Julie JULIE Joint Utility Locating Information for Excavators JULIE Jena University Language and Information Engineering (Germany) Guillot to vice president of operations. "I am pleased that we met our earnings and revenue guidance," stated David Hood David Hood is a world class bassist from Muscle Shoals, Alabama. He also plays the trombone and is a member of the Alabama Music Hall of Fame. Hood started his career as a back-up musician at FAME Studios, then went on to found Muscle Shoals Sound Studio where he produced , the company's president and chief executive officer. "While we are making good progress, the top-line results will not be apparent for a few quarters as we continue to transition the business to multiple services and more diverse channels. Our growth strategy continues to gain traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. in the market. This is evidenced by record non-carrier new orders, NetSolve's position as a global leader for remote IP Telephony management, continued success with selling additional services to our existing customers, and by increased interest by several Fortune 1000 companies in NetSolve's services." Hood HOOD - Hierarchical Object Oriented Design: a method for Architectural Design primarily for software to be developed in Ada, leading to automated checking, documentation and source code generation. added, "I am also excited to have Rick Hamilton Rick Hamilton (born April 19, 1970 in Inverness, Florida) was an American football linebacker in the NFL for the Washington Redskins, Kansas City Chiefs, and the New York Jets. He played college football for the University of Central Florida. join us as our new vice president of service delivery and to name Julie Guillot as our vice president of operations, reporting to Rick. He brings unquestioned expertise and a unique perspective of a CIO CIO: see American Federation of Labor and Congress of Industrial Organizations. (Chief Information Officer) The executive officer in charge of information processing in an organization. who has successfully outsourced IT infrastructure management. When combined with Julie's disciplined results and process orientation, our service delivery organization will be well positioned for growth and the evolving needs of our customers." Financial Results Quarterly Results Recurring IT infrastructure management services revenues were $8.2M, a decrease of 7.2% from the prior year quarter and 5.4% sequentially as a result of the planned AT&T transition. Total IT infrastructure management services revenues were $9.3M, down 11.1% from the prior year quarter and 4.9% sequentially. Total revenues for the quarter were $11.1M, down 6.5% sequentially and 14.9% below the prior year. Revenues were impacted as a result of the planned migration of the AT&T Home Depot The Home Depot (NYSE: HD) is an American retailer of home improvement and construction products and services. Headquartered in Vinings, just outside Atlanta in unincorporated Cobb County, Georgia, Home Depot employs more than 355,000 people and operates 2,164 big-box and Managed Router router Portable electric power tool used in carpentry and furniture making that consists of an electric motor, a base, two handle knobs, and bits (cutting tools). A router can cut fancy edges for shelving, grooves for storm windows and weather stripping, circles and ovals Service Business to AT&T centers and to planned lower levels of implementation revenue in the AT&T Frame Relay A high-speed packet switching protocol used in wide area networks (WANs). Providing a granular service of up to DS3 speed (45 Mbps), it has become popular for LAN to LAN connections across remote distances, and services are offered by most major carriers. Plus business. The $295,000 operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in the third quarter of fiscal 2004 was in line with our expectations. This compares with operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $719,000 in the same quarter a year ago. An operating loss was planned as part of the previously announced growth strategy that includes investing in sales, marketing and our services platform. Spending in development, sales and marketing were up by 17% over the prior year as the company executed its strategy to accelerate development, and diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. and growth in channels and services. Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net loss per share for the quarter was $0.01 per share compared to net income of $0.05 per share for the same quarter a year ago. Cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments at December 31, 2003 were $40.4M and the company generated $163,000 in cash from operations year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. . Collections of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying met internal expectations resulting in average days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). of 33 days. The company repurchased 106,000 additional shares during the quarter at an aggregate cost of $822,000. At quarter end, the company had repurchased 4.5M shares of the 6.0M shares authorized Shares authorized The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding. shares authorized See authorized capital stock. by the board of directors. Year to Date Results For the nine months ended December 31, 2003, recurring IT infrastructure management services revenues were at $25.7M, relatively flat as compared to the prior year period, while total IT infrastructure management services revenues declined slightly to $29.1M. Total revenues for the nine months ended December 31, 2003 declined slightly to $35.5M. Revenues were impacted as a result of the planned migration of the AT&T Home Depot and Managed Router Service Business to AT&T centers and by planned lower levels of implementation revenue in the AT&T Frame Relay Plus business. Primarily as a result of planned initiatives to implement our growth strategy, including investing in our development, sales and marketing capabilities, the operating loss for the first nine months of fiscal 2004 was $1.1M. As expected, net loss equaled $0.04 per share for the first nine months of fiscal 2004, as compared to diluted net income of $0.18 per share for the same period a year ago. Business Outlook Industry analysts anticipate that the market for outsourced IT infrastructure services will expand significantly over the next few years and the market for IP Telephony products will nearly double within one to two years. The company believes that it is well positioned to take advantage of these market trends and expects top line growth after completing the transition of the AT&T business. In the near term, the timing of new orders and customer installation cycles coupled with the continuing AT&T transition is anticipated to result in a slight sequential One after the other in some consecutive order such as by name or number. decline in IT infrastructure management services revenues for the March quarter. With respect to guidance for the fourth fiscal quarter, the company expects: -- IT infrastructure management revenues will be $9.1 - $9.2M. -- An operating loss of $300,000 - $400,000. About NetSolve NetSolve is a leading provider of IT infrastructure management services for the enterprise. Using dynamic tools, an "own the problem" process and top-caliber engineers, NetSolve remotely monitors, diagnoses and solves a range of critical IT infrastructure issues. Offering proven remote management solutions since 1994, NetSolve provides remote operational management to nearly 1,000 companies in 50 countries. NetSolve: www.netsolve.com or 800-NETSOLVE. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This earnings release includes "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . We sometimes identify forward-looking statements with such words as "intends," "believes," "expects," "views," "anticipates" or similar words indicating future events. Such statements include all of the section entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: , "Business Outlook," as well as the success of our AIIMS AIIMS All-India Institute of Medical Sciences AIIMS Australasian Inter-service Incident Management System (Australasian Fire Authorities Council) platform; our ability to implement our growth strategy, including our ability to integrate management across the IT infrastructure faster, more accurately and more cost effectively than companies can do on their own; industry trends; market opportunities; and our expected future results. Further, the Company's actual results could differ materially from those discussed. Factors that could contribute to such differences include, but are not limited to, general economic and business conditions, conditions affecting the industries served by the Company, the size and growth of the industry, conditions affecting the Company's customers, resellers, partners and suppliers, the effect of national and international political and economic conditions, the ability and willingness of resellers and other partners to devote their resources to sales of our services, the ability of our sales force to increase sales, competition, the market acceptance of the Company's services including any expanded service offerings, and other factors disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the Company's filings with the Securities and Exchange Commission, which are incorporated herein by this reference. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Any forward-looking statement speaks only as of the date on which such statement was made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date on which such statement was made, or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for us to predict all of such factors, nor can we assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. NetSolve, Incorporated (Nasdaq:NTSL) Conference Call Announcement: Fiscal Quarter ended December 31, 2003 You are invited to participate in a conference call to review NetSolve's third quarter results for fiscal year 2004. The conference call will be held on Thursday Thursday: see week. , January January: see month. 15, 2004 at 10:00 a.m. CT/11:00 a.m. ET. Mr. David Hood, president and chief executive officer will serve as the chairperson chairperson Chairman The head of an academic department. See 'Chair.', Cf Chief. and Mr. Ken Kieley, vice president and chief financial officer and secretary will present financial information. Prepared remarks will take approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 30 minutes and will be followed by a brief question and answer period. You can participate in the conference call by dialing 800-644-8660. The conference code is 4784861. Additionally, you can listen to the conference call simultaneously via Webcast at http://www.netsolve.com/investor/audiovideo.html. A replay of the call will be available by dialing 800-642-1687 or 706-645-9291. The conference code, 4784861, will be operational from Thursday, January 15, 2004 to Thursday, January 22, 2004. Worksheets that provide additional operating metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. will be available in advance of the call on Wednesday Wednesday: see week. , January 14, 2004 after earnings have been announced at http://phx.corporate-ir.net/phoenix.zhtml?c=63854&p=irol-irhome
NetSolve, Incorporated
Condensed Consolidated Balance Sheets
(in thousands, except share data)
3/31/2003 12/31/2003
---------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 28,073 $ 19,161
Short-term investments 15,431 21,228
Restricted cash 354 356
Accounts receivable, net of allowance for
doubtful accounts of $130 at March 31,
2003 and $182 at December 31, 2003 6,061 3,658
Prepaid expenses and other assets 1,883 4,118
Deferred tax assets 1,487 1,487
----------- -------------
Total current assets 53,289 50,008
Property and Equipment:
Computer equipment and software 11,466 12,682
Furniture, fixtures and leasehold
improvements 5,073 5,116
Other equipment 373 446
----------- -------------
16,912 18,244
Less accumulated depreciation and
amortization (10,690) (11,457)
----------- -------------
Net property and equipment 6,222 6,787
Deferred tax assets, net of current portion 1,375 1,385
Other assets 104 -
----------- -------------
Total assets $ 60,990 $ 58,180
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,839 $ 1,064
Accrued liabilities 3,098 3,256
Future obligations for idle facility 1,138 87
Deferred revenue 1,055 801
----------- -------------
Total current liabilities 7,130 5,208
Deferred revenue, net of current portion 247 -
Stockholders' equity:
Common stock, $.01 par value; 25,000,000
shares authorized at March 31, 2003 and
December 31, 2003; 15,613,690 issued and
11,455,204 outstanding at March 31, 2003
and 15,970,916 issued and 11,513,430
outstanding at December 31, 2003 156 159
Additional paid-in capital 81,732 83,554
Treasury stock (28,891) (30,888)
Retained earnings 616 147
----------- -------------
Total stockholders' equity 53,613 52,972
----------- -------------
Total liabilities and stockholders' equity $ 60,990 $ 58,180
=========== =============
NetSolve, Incorporated
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
------------------------- ------------------------
12/31/2002 12/31/2003 12/31/2002 12/31/2003
------------ ------------ ------------ -----------
(unaudited) (unaudited)
Revenues:
IT infrastructure
management
services $ 10,434 $ 9,278 $ 30,606 $ 29,087
Maintenance and
equipment 2,607 1,823 7,126 6,422
------------ ------------ ------------ -----------
Total revenues 13,041 11,101 37,732 35,509
------------ ------------ ------------ -----------
Costs of revenues:
IT infrastructure
management
services 6,089 5,703 18,110 17,506
Maintenance and
equipment 1,859 1,117 4,877 4,435
------------ ------------ ------------ -----------
Total costs of
revenues 7,948 6,820 22,987 21,941
------------ ------------ ------------ -----------
Gross profits:
IT infrastructure
management
services 4,345 3,575 12,496 11,581
Maintenance and
equipment 748 706 2,249 1,987
------------ ------------ ------------ -----------
5,093 4,281 14,745 13,568
Operating expenses:
Development 1,050 1,231 2,801 3,995
Selling and
marketing 1,867 2,196 5,386 6,634
General and
administrative 1,457 1,149 3,605 4,009
------------ ------------ ------------ -----------
Total operating
expenses 4,374 4,576 11,792 14,638
------------ ------------ ------------ -----------
Operating income
(loss) 719 (295) 2,953 (1,070)
Other income
(expense):
Interest income 186 133 604 363
Interest expense - (1) (1) (1)
Other, net 5 (2) 20 (2)
------------ ------------ ------------ -----------
Total other
income
(expense) 191 130 623 360
------------ ------------ ------------ -----------
Income (loss)
before income
taxes 910 (165) 3,576 (710)
Income tax expense
(benefit) 346 (33) 1,306 (241)
------------ ------------ ------------ -----------
Net income (loss) $ 564 $ (132)$ 2,270 $ (469)
============ ============ ============ ===========
Basic net income
(loss) per share $ 0.05 $ (0.01) $ 0.19 $ (0.04)
Weighted average
shares used in
basic per share
calculation 11,747 11,141 11,919 11,381
Diluted net income
(loss) per share $ 0.05 $ (0.01) $ 0.18 $ (0.04)
Weighted average
shares used in
diluted per share
calculation 12,372 11,141 12,630 11,381
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