Verso Reports Third Quarter 2005 Results.ATLANTA Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. -- Verso ver·so n. pl. ver·sos 1. A left-hand page of a book or the reverse side of a leaf, as opposed to the recto. 2. The back of a coin or medal. Technologies, Inc. (Nasdaq: VRSOD), a leading provider of packet-based solutions, announced today its financial results for the third quarter of 2005. The company reported revenue of $8.3 million for the third quarter of 2005. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the (defined as net loss before interest, income taxes, depreciation, amortization of intangibles and amortization of deferred compensation) excluding the restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $340,000, was a negative $2.3 million. The net loss for the third quarter of 2005 was $4.6 million, or $.17 per share. Total revenue for the third quarter of 2005 was $8.3 million, an increase of 19% from the $7.0 million recorded in the third quarter of 2004. Revenue from the packet-based technologies group segment was $6.2 million, up 48% from the $4.2 million recorded in the third quarter of 2004. Sales closed and invoiced for the quarter for the Company's NetPerformer, I-Master and Softswitch A programmable network switch that can process the signaling for all types of packet protocols. Also known as a "media gateway controller," "call agent" or "call server," such devices are used by carriers that support converged communications services by integrating SS7 telephone products and services were more than 20% higher in the third quarter of 2005 than the second quarter of 2005. Revenue growth from the packet-based technologies group segment in the third quarter was not as significant as the growth in sales closed and invoiced, primarily due to I-Master revenue sold and deferred in the first quarter of 2005, but recognized as revenue in the second quarter of 2005. The advanced application services See ASP and Web services. segment revenues were $2.1 million for the third quarter of 2005, compared to $2.8 million for the third quarter of 2004, a decline of 24%. Although the company had anticipated a decline in revenue from the third quarter of 2004 to the third quarter of 2005, the decline in the third quarter of 2005 was greater than anticipated. Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. improved to 45% of sales for the third quarter of 2005 at $3.7 million, compared to 44% of sales, at $3.0 million, for the third quarter of 2004. Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the third quarter of 2005 were $7.1 million, and included reorganization costs of $340,000 related to the severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when of a senior executive. In the third quarter of 2004, operating expenses were $8.4 million. EBITDA from continuing operations, excluding reorganization costs, for the third quarter of 2005 was a loss of $2.3 million compared to the third quarter of 2004 where EBITDA from continuing operations was a loss of $4.5 million. Interest expense in the third quarter of 2005 was $1.3 million, up from $255,000 in the third quarter of 2004. The increase in the interest expense did not impact the cash flow in the quarter and is due primarily to the non-cash amortization of loan fees and the discount on convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. . The company had a net loss of $4.6 million, or $.17 per share, for the third quarter of 2005. The weighted average shares outstanding for the third quarter of 2005 were 27.0 million shares and reflect the 1 for 5 reverse stock split, which became effective on October October: see month. 11, 2005. All prior periods' per share calculations have been recalculated on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis to reflect the reverse stock split as if it had been effected at the beginning of each such period. In the third quarter of 2004, the company had a net loss of $7.3 million, or $.27 per share, which included $1.8 million, or $.06 per share, for discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . As of September September: see month. 30, 2005, the company had total cash of $6.7 million, of which $1.6 million was restricted. This compares to total cash at December December: see month. 31, 2005 of $4.2 million. As of September 30, 2005, the company's total debt, which consists of two issues of convertible debentures and a note payable, was $11.5 million, of which $2.6 million is due within the next 12 months. As of September 30, 2005 there were no outstanding borrowings on the $7.5 million line of credit. "In the quarter, we continued to see increasing demand for our packet-based solutions, the growth engine for the company, and the sales team continued to execute at a high level, gaining further penetration into the deep segments in which Verso operates," said Monty (programming, abuse) monty - /mon'tee/ Any program with a ludicrously complex user interface that performs a trivial task. An example would be a menu-driven, button clicking, pulldown, pop-up windows program for listing directories. Bannerman, Verso's chief executive officer. "Although this increasing demand created some 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. growing pains grow·ing pains pl.n. Pains in the limbs and joints of children or adolescents, frequently occurring at night and often attributed to rapid growth but arising from various unrelated causes. for us in the third quarter, the organization has demonstrated that it can respond quickly as it becomes more seasoned in delivering complex new applications to diverse operational environments in various markets throughout the world." "This quarter was also marked with many successes. We began deployment of one of the largest VoIP broadband networks  This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. in the world with our partner Aksh broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). and we won an expansion with Cable and Wireless in Panama, which is experiencing significant growth as a result of our I-Master prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. solution. Additionally, we introduced exciting
new market-driven technologies such as the Skype Peer to Peer monitoring
and control application and the Metronet bundle solution for metro
broadband networks. The Skype filter has generated a great deal of
interest from the industry as well as our carrier customers and the
Metronet bundle, despite its recent introduction, has already achieved
strong market interest as evidenced by some early wins. In conclusion,
we have the people, products and market demands to show continued growth
and reach our goal of EBITDA profitability as soon as possible."
Verso Third Quarter Earnings Call The company will hold its third quarter conference call on Monday, October 31, 2005 at 5:00 p.m. ET. During this call, Verso's senior executives will discuss the company's financial results for the third quarter of 2005 and respond to appropriate questions. Investors are invited to listen to a live webcast of the conference call which can be accessed through the investor section of the Verso website, www.verso.com. The call can also be accessed through www.streetevents.com. To listen to the call, please go to the website at least 15 minutes early to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. For those who are unable to listen to the live broadcast, the webcast will be archived on the investor section of Verso's website for 30 days. A telephone replay of the call will be available from 8:30 p.m. ET on October 31, 2005 through 11:59 p.m. on November 10, 2005 at 800.475.6701 for domestic callers and 320.365.3844 for international callers, the passcode is 799596. Forward Looking Statements Certain statements contained in this release that are not statements of historical facts are "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. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The words - "believe", "expect", "anticipate", "intend", "will", and similar expressions are examples of words that identify forward-looking statements. Forward-looking statements include, without limitation, statements regarding our future financial position, timing of future orders, business strategy and expected cost savings. These forward-looking statements are based on our current beliefs, as well as assumptions we have made based upon information currently available to us. These forward-looking statements may be affected by the risks and uncertainties in our business and are qualified in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. by the cautionary statements and risk factor disclosure contained in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2004. We do not assume, and expressly disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. , any obligation to update these forward-looking statements. Earnings Measurement Quality The company provides supplemental information regarding its operational performance using certain non-GAAP financial measures which exclude from net income various non-cash and cash charges principally related to acquisitions, restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities and financing transactions. The company uses "EBITDA from continuing operations excluding reorganization costs" to provide an indication of the company's baseline The horizontal line to which the bottoms of lowercase characters (without descenders) are aligned. See typeface. baseline - released version performance before gains, losses or other charges that are considered by management to be outside of the company's core operating results. The company believes these non-GAAP financial measures provide a good measure of performance for the company because they represent the amount realized “Amount Realized” is one of two variables in the formula used to compute gains and losses when determining gross income for tax purposes. The Amount Realized – Adjusted Basis tells the amount of Realized Gain (if positive) or Realized Loss (if negative). from revenue after all operating expenses. While non-GAAP financial measures are not an alternative for generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting used in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), the company's management uses the non-GAAP financial measures to evaluate the company's historical and prospective financial performance in the ordinary course of business. The company believes that providing to the company's investors the non-GAAP financial measures, in addition to the most comparable GAAP presentation, allows the investors to better evaluate the company's progress and its financial results over time and to compare the company's results with the results of the company's competitors. About Verso Technologies Verso is a leading provider of next generation communication solutions for service providers that want to lower their communication infrastructure costs and enhance service capabilities without sacrificing reliability, scalability and quality of service. With an extensive solutions portfolio that extends from the core to the edge of a network, Verso enables customers to leverage legacy technology investments towards converged networks The integration of the telephone system with IP-based data networks. See softswitch. (networking) converged network - A single network that can carry voice, video and data. that are faster and more cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. to deploy and easier and more flexible to manage. Verso solutions are currently deployed in customer networks in over 120 countries. For more information, contact Verso at www.verso.com or call 678.589.3500.
VERSO TECHNOLOGIES, INC.
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
For the three months For the nine months
ended September 30, ended September 30,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Revenue:
Products $ 4,697 $ 2,978 $ 12,038 $ 11,669
Services 3,584 3,988 11,363 13,027
----------- ----------- ----------- -----------
Total revenue 8,281 6,966 23,401 24,696
----------- ----------- ----------- -----------
Cost of revenue:
Products:
Product costs 2,132 1,376 5,730 4,934
Amortization of
intangibles 170 68 385 206
----------- ----------- ----------- -----------
Total cost of
products 2,302 1,444 6,115 5,140
Services 2,261 2,473 6,951 7,660
----------- ----------- ----------- -----------
Total cost of revenue 4,563 3,917 13,066 12,800
----------- ----------- ----------- -----------
Gross profit 3,718 3,049 10,335 11,896
----------- ----------- ----------- -----------
Operating expenses
General &
administrative 2,592 3,284 7,646 9,102
Sales and marketing 1,948 2,583 6,143 6,948
Research and
development 1,655 1,754 5,076 5,141
Depreciation and
amortization 527 746 1,768 2,193
Reorganization costs 340 - 464 584
Reorganization costs
- loss on sublease - - 2,550 -
Reorganization costs
- stock related - - - 570
----------- ----------- ----------- -----------
Total operating
expenses 7,062 8,367 23,647 24,538
----------- ----------- ----------- -----------
Operating loss
from
continuing
operations (3,344) (5,318) (13,312) (12,642)
Other expense, net
including $1,025,
$125, $1,869 and $400
of amortization of
loan fees and
discount on
convertible
debentures in each
period, respectively (1,255) (239) (2,621) (710)
----------- ----------- ----------- -----------
Loss from continuing
operations before
income taxes (4,599) (5,557) (15,933) (13,352)
Income taxes - - - -
----------- ----------- ----------- -----------
Loss from continuing
operations (4,599) (5,557) (15,933) (13,352)
----------- ----------- ----------- -----------
Loss from discontinued
operations - (1,764) (566) (3,986)
----------- ----------- ----------- -----------
Net loss $ (4,599)$ (7,321)$ (16,499)$ (17,338)
=========== =========== =========== ===========
Net loss per common
share- basic and
diluted:
Loss from
continuing
operations $ (0.17)$ (0.21)$ (0.59)$ (0.51)
Loss from
discontinued
operations $ - $ (0.06)$ (0.02)$ (0.15)
----------- ----------- ----------- -----------
Net loss per common
share- basic and
diluted $ (0.17)$ (0.27)$ (0.61)$ (0.66)
=========== =========== =========== ===========
Weighted average
shares outstanding -
basic and diluted 27,034,569 26,626,667 26,868,392 26,198,953
=========== =========== =========== ===========
RECONCILIATION OF LOSS FROM CONTINUING OPERATIONS TO EBITDA FROM
CONTINUING OPERATIONS EXCLUDING REORGANIZATION COSTS
For the three months For the nine months
ended September 30, ended September 30,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Loss from continuing
operations $ (4,599)$ (5,557)$ (15,933)$ (13,352)
Add back:
Interest 1,272 255 2,569 787
Income taxes - - - -
Depreciation and
amortization 527 746 1,768 2,193
Amortization of
intangibles (cost
of goods sold) 170 68 385 206
----------- ----------- ----------- -----------
EBITDA from continuing
operations (2,630) (4,488) (11,211) (10,166)
Reorganization costs 340 - 3,014 1,154
----------- ----------- ----------- -----------
EBITDA from continuing
operations excluding
reorganization costs $ (2,290)$ (4,488)$ (8,197)$ (9,012)
=========== =========== =========== ===========
SELECTED BALANCE SHEET ITEMS
Sept. 30, Dec. 31,
2005 2004
----------- ------------
Cash and cash
equivalents $ 5,055 $ 4,234
Restricted cash 1,620 -
Accounts receivable,
net 5,154 3,961
Inventories 4,429 5,362
Current portion of
assets of
discontinued
operations - 8,995
Total current assets 18,859 24,003
Note receivable, net
of current 2,919 -
Total assets 30,636 33,429
Convertible
subordinated
debentures, current 2,622 4,254
Total current
liabilities 13,361 16,388
Convertible
subordinated
debentures, long-term 6,087 -
Notes payable 2,766 2,711
Total debt 11,475 6,965
Total liabilities 24,319 20,789
Total shareholders'
equity 6,317 12,640
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