MSLV Metasolv

MetaSolv, Inc. (Nasdaq:MSLV), a global leader in comprehensive operations support systems solutions for next-generation communications service providers, today announced financial results for the second quarter ended June 30, 2006. Highlights of MetaSolv's second quarter operating and financial results include: -- A multi-year, multi-million dollar license and services contract with Telstra, Australia's leading media-communications company, to deploy MetaSolv's Activation 5 solution as part of a comprehensive network and OSS transformation for both fixed-line and mobile services; -- A multi-year, multi-million dollar contract with a tier 1 operator in India for enterprise-wide use of MetaSolv's inventory management and service activation solutions; -- A major contract win with one of the largest cable providers in the U.S. to leverage MetaSolv's inventory management system to support the growth of its nationwide IP network and digital voice services; -- A new win for the Company's provisioning order management product, Provisioning 5, with a large, U.S. based incumbent carrier to support a new service rollout; -- The market launch of two new products expected to serve as a platform for future revenue growth -- MetaSolv Configuration Management and MetaSolv Subscriber & Service Management -- both currently being deployed by global Tier 1 operators; -- A 53% increase in license revenues, which increased gross profit to 59% of total revenues; -- Net income of $649,000 or $0.01 per diluted share; adjusted EBITDA of $2.4 million, a 108% improvement over the prior year; and -- A continued solid financial position at quarter end, with $58.0 million in cash equivalents and marketable securities and no debt. Revenues for the quarter increased 8% to $25.4 million, compared to second quarter 2005 revenues of $23.4 million. MetaSolv reported net income for the second quarter of $649,000, or $0.01 per diluted share, compared to a net loss of $663,000, or $0.02 per diluted share, in the second quarter of 2005. Earnings before interest, taxes, depreciation and amortization and stock compensation expense ("adjusted EBITDA") for the quarter was $2.4 million, an increase of 108% compared to $1.1 million in the prior year. Non-GAAP net income for the quarter was $1.7 million, or $0.03 per diluted share, compared to a net loss of $113,000, or $0.00 per diluted share for the second quarter of 2005. For the six months ended June 30, 2006, revenues were $48.0 million, a 7% increase from $44.8 million for the same period in 2005. MetaSolv reported net income for the six months of $261,000, or $0.01 per diluted share, compared to a net loss of $2.7 million, or $0.07 per diluted share, for the same period in 2005. Adjusted EBITDA for the six months ended June 30, 2006 was $3.8 million, an increase of 475% compared to $653,000 for the same period in 2005. Non-GAAP net income for the six months ended June 30, 2006 was $2.3 million, or $0.04 per diluted share, compared to a Non-GAAP net loss of $1.9 million, or $0.05 per diluted share for the same period in 2005. The Company's net income for the second quarter and six months ended June 30, 2006 includes stock-based compensation expense related to the implementation of Statement of Financial Accounting Standard (SFAS) 123R which was adopted effective January 1, 2006. The Company's net loss for the second quarter and six months ended June 30, 2005 includes stock-based compensation expense computed under APB 25. The Company's non-GAAP results exclude stock based compensation expense in both periods. Please see table below for a complete reconciliation of non-GAAP net income (loss) and adjusted EBITDA to net income (loss) reported under accounting principles generally accepted in the United States. "We are pleased to report MetaSolv's continued revenue growth and increased profitability for the second quarter," said T. Curtis Holmes, MetaSolv's President and Chief Executive Officer. "This marks eight consecutive quarters of year-over-year revenue growth. More importantly, we had our strongest quarterly performance for license revenues in nearly five years. Communications providers worldwide are consolidating and converging their networks in the drive to enable next-generation mobile and IP services. We believe that MetaSolv, with a strong customer base and proven products, is well positioned to help service providers worldwide accelerate time-to-market, reduce operations costs and improve customer satisfaction." "The multi-million dollar OSS transformation projects we secured in recent months are a direct reflection of our compelling value proposition in automating the fulfillment cycle for next-generation service providers. We see continued opportunity for MetaSolv as global operators invest in transformation of their network and OSS systems," concluded Holmes. Financial Guidance Based on the Company's results for the second quarter, the pipeline of potential contracts, and expectations concerning the business environment, MetaSolv today established its guidance for revenues for the third quarter of 2006 in a range of $23.5 million to $26.5 million, compared with $23.3 million for the third quarter of 2005. The Company also established guidance for its net income for the period of between $0.00 and $0.03 per diluted share. Net income guidance for the third quarter of 2006 includes approximately $1.1 million in stock-based compensation expense computed under SFAS 123R. Excluding stock-based compensation expense, the Company expects to report non-GAAP net income of between $0.02 and $0.05 per diluted share for the third quarter of 2006. Conference Call Notice MetaSolv will hold a conference call to discuss this press release today at 5:00 p.m. Eastern time. Investors may listen to the conference call over the Internet at www.metasolv.com by clicking Investors, or by going to www.earnings.com. Please visit the web site at least 15 minutes early to register, download, and install any necessary audio software. A dial-in telephone replay of the conference call will be available from 8:00 p.m. ET on Thursday, August 3, through Thursday, August 10. The dial-in replay number is 719-457-0820, and the confirmation number is 5942108. About MetaSolv MetaSolv, Inc. (Nasdaq:MSLV) is a global leader in comprehensive operations support system solutions for communications service providers. MetaSolv's multi-service order management, inventory management, and service activation capabilities automate the order-to-activate provisioning process for traditional and next-generation IP-based wireline and mobile service providers. Many of the world's largest global service providers -- including Brasil Telecom, BT, Cable & Wireless, O2, T-Mobile, Vodafone, and others -- use MetaSolv's solutions to achieve increased revenues, reduced costs, and enhanced customer service. MetaSolv is a global company, headquartered in Plano, Texas. MetaSolv is a registered trademark. The MetaSolv logo is a trademark of MetaSolv Software, Inc. All other trademarks are property of their respective owners. This press release contains forward-looking statements, including guidance regarding future financial results that are based upon current expectations and assumptions and involve a number of risks and uncertainties. The words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," "may," "should," "guidance," and variations of such words or similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance. Actual results could differ materially from MetaSolv's current expectations. MetaSolv assumes no obligation to update any such forward-looking statement. Using the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, MetaSolv cautions you that these statements may be affected by the important factors, among others, described in the documents and reports filed by MetaSolv from time to time with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for 2005, and subsequent Quarterly Reports on Form 10-Q, as well as by other factors, including, but not limited to: the variance of quarterly operating results; the Company's ability to successfully manage and integrate acquisitions; the Company's reliance on sales of its software; the need to expand sales and distribution capabilities; the need to expand to new customer markets; the Company's continued use of strategic relationships; its ability to manage growth; the Company's international operations; its ability to meet customer expectations; the quality of the Company's software delivered; competition; consolidation within the telecommunications industry; limitations on the ability of customers to obtain adequate financing; and the Company's ability to reduce its cost structure. The Company assumes no obligation to update the information contained in this press release. -0- *T METASOLV, INC. Summary Financial Information (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2006 2005 2006 2005 --------- -------- -------- -------- Revenues $25,382 $23,408 $47,980 $44,768 Income (loss) from operations $589 $(490) $91 $(2,547) Net income (loss) $649 $(663) $261 $(2,718) Basic and diluted income (loss) per share $0.01 $(0.02) $0.01 $(0.07) Weighted average shares outstanding: Basic 50,164 41,045 49,966 40,937 Diluted 51,872 41,045 51,635 40,937 Non-GAAP(1) Net income (loss) $1,687 $(113) $2,309 $(1,871) Basic and diluted income (loss) per share $0.03 $(0.00) $0.04 $(0.05) (1) See table below for a complete reconciliation of non-GAAP results with those reported under accounting principles generally accepted in the United States. METASOLV, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2006 2005 2006 2005 ------ ------ ------- ------- Revenues: License $9,926 $6,475 $17,084 $12,426 Services 6,083 7,109 12,286 12,403 Maintenance 9,373 9,824 18,610 19,939 ------ ------ ------- ------- Total revenues 25,382 23,408 47,980 44,768 Cost of revenues: License 471 176 666 235 Services and maintenance (1) 9,826 10,785 19,353 20,383 Amortization of intangible assets 123 423 353 846 ------ ------ ------- ------- Total cost of revenues 10,420 11,384 20,372 21,464 ------ ------ ------- ------- Gross profit 14,962 12,024 27,608 23,304 Operating expenses: Research and development(1) 5,067 4,594 9,620 9,914 Sales and marketing(1) 5,943 6,102 11,408 11,631 General and administrative(1) 3,363 1,818 6,489 4,306 ------ ------ ------- ------- Total operating expenses 14,373 12,514 27,517 25,851 ------ ------ ------- ------- Income (loss) from operations 589 (490) 91 (2,547) Interest and other income, net 542 170 908 421 ------ ------ ------- ------- Income (loss) before taxes 1,131 (320) 999 (2,126) Income tax expense 482 343 738 592 ------ ------ ------- ------- Net income (loss) $649 $(663) $261 $(2,718) ====== ====== ======= ======= Basic and diluted income (loss) per share $0.01 $(0.02) $0.01 $(0.07) Weighted average shares outstanding: Basic 50,164 41,045 49,966 40,937 Diluted 51,872 41,045 51,635 40,937 (1) Includes stock-based compensation expense as follows: Cost of revenues-services and maintenance $277 $121 $491 $178 Research and development 268 211 497 312 Sales and marketing 178 53 385 87 General and administrative 315 165 675 270 ------ ------ ------- ------- Total stock-based compensation expense $1,038 $550 $2,048 $847 ====== ====== ======= ======= METASOLV, INC. RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS), AND ADJUSTED EBITDA (In thousands) (Unaudited) Three Months Six Months Ended Ended --------------- ---------------- June 30, June 30, --------------- ---------------- 2006 2005 2006 2005 ------- ------- ------- -------- Net income (loss) $649 $(663) $261 $(2,718) Stock compensation expense 1,038 550 2,048 847 ------- ------- ------- -------- Non-GAAP net income (loss) $1,687 $(113) $2,309 $(1,871) ======= ======= ======= ======== Net income (loss) $649 $(663) $261 $(2,718) Depreciation expense 627 658 1,264 1,507 Amortization of intangible assets 123 423 353 846 Stock-based compensation expense 1,038 550 2,048 847 Interest and other income, net (542) (170) (908) (421) Income tax expense 482 343 738 592 ------- ------- ------- -------- Adjusted EBITDA $2,377 $1,141 $3,756 $653 ======= ======= ======= ======== In addition to reporting its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"), MetaSolv has also provided in this release non-GAAP net income (loss), non-GAAP net income (loss) per diluted share, and earnings before interest, taxes, depreciation and amortization and stock compensation expense ("adjusted EBITDA"). Non-GAAP net income (loss), and Non-GAAP net income (loss) per diluted share are adjusted to exclude non-cash expenses for stock-based compensation expense. Management uses these non-GAAP financial measures to evaluate performance, to analyze trends in cash-based expenses and to establish operational goals and allocate resources. Stock-based compensation has been excluded when computing non-GAAP net income (loss) because the accounting treatment for stock-based compensation has changed with the adoption of SFAS 123R. Management believes that excluding stock-based compensation is useful in order to offer consistent information that is comparable to information MetaSolv has publicly disclosed in prior periods for which stock-based compensation was expensed under APB 25. Non-GAAP financial measures should not be considered a measure of financial performance under generally accepted accounting principles. Items excluded from these results are significant components in understanding and assessing financial performance. MetaSolv believes that inclusion of the non-GAAP financial measures is useful to investors in allowing for greater transparency of supplemental information used by management in its financial and operational decision-making. Non-GAAP results are not a measurement determined in accordance with generally accepted accounting principles and are thus susceptible to varying calculations, and they may not be comparable, as presented, to other similarly titled measures of other companies. Net income (loss) is the financial measure calculated and presented in accordance with generally accepted accounting principles that is most comparable to MetaSolv's non-GAAP results, as defined. METASOLV, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, December 31, 2006 2005 ----------- ------------ (Unaudited) Assets Current assets: Cash and cash equivalents $14,706 $13,314 Marketable securities 43,252 44,839 Trade accounts receivable, less allowance for doubtful accounts of $2,201 in 2006 and $1,805 in 2005 15,397 13,582 Unbilled receivables 5,582 2,461 Prepaid expenses 1,982 1,847 Other current assets 1,174 669 ----------- ------------ Total current assets 82,093 76,712 Property and equipment, net 5,266 5,529 Intangible assets 737 1,090 Other assets 854 786 ----------- ------------ Total assets $88,950 $84,117 =========== ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable $4,398 $4,775 Accrued expenses 18,947 20,512 Deferred revenue 11,441 8,068 ----------- ------------ Total current liabilities 34,786 33,355 Fair value of warrants to purchase common stock -- 3,442 Temporary equity - Unregistered shares of common stock, $0.005 par value, 7,666,667 shares issued and outstanding at December 31, 2005 -- 17,863 Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued or outstanding -- -- Common stock, $.005 par value, 100,000,000 shares authorized, shares issued and outstanding: 50,517,083 in 2006, and 49,961,132 in 2005 254 213 Additional paid-in capital 175,290 151,443 Deferred compensation -- (328) Accumulated other comprehensive income 790 560 Retained earnings (122,170) (122,431) ----------- ------------ Total stockholders' equity 54,164 29,457 ----------- ------------ Total liabilities and stockholders' equity $88,950 $84,117 =========== ============ *T