MSLV Metasolv

MetaSolv, Inc. (Nasdaq:MSLV), a global leader in comprehensive operations support system solutions for next-generation communications service providers, today announced financial results for the first quarter ended March 31, 2006. Revenues for the quarter increased 6% to $22.6 million, compared to first quarter 2005 revenues of $21.4 million. License revenues for the quarter increased 20% to $7.2 million compared to $6.0 million in the first quarter of 2005, and Professional Services revenue increased 17% to $6.2 million compared to $5.3 million. Maintenance revenues for the quarter declined 9% to $9.2 million compared to $10.1 million in the first quarter of 2005. MetaSolv reported a net loss for the first quarter of $388 thousand, or $0.01 per share, an 81% improvement compared to a net loss of $2.1 million, or $0.05 per share, in the first quarter of 2005. The net loss under Generally Accepted Accounting Principles ("GAAP") for the first quarter of 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. Net loss for the first quarter of 2005 includes stock-based compensation expense computed under APB 25. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter were $1.4 million, compared to negative EBITDA in the first quarter of 2005 of $488 thousand. Non-GAAP net income for the quarter was $852 thousand, or $0.02 per share, excluding $1.2 million in non-cash charges, comprised of $1.0 million in stock-based compensation expense and $230 thousand in amortization of intangible assets. Non-GAAP net loss for the first quarter of 2005 was $1.3 million, or $0.03 per share, excluding $297 thousand in stock-based compensation expense and $423 thousand in amortization of intangible assets. Please see the final table below for a complete reconciliation of non-GAAP net income (loss) and EBITDA to net income (loss) reported under GAAP and an explanation of these measures. "Our first quarter results represent solid performance with continued revenue growth, positive EBITDA and non-GAAP net income," said T. Curtis Holmes, MetaSolv's President and Chief Executive Officer. "Service providers worldwide continue to place their confidence in MetaSolv to support their next-generation service delivery, driving our third consecutive quarter of growth in license revenues at a rate in the high teens or above." Highlights of MetaSolv's first quarter operating and financial results include: -- License revenue growth of 20% over first quarter 2005; -- Record revenues from Europe, including a license extension with a tier 1 operator in the U.K to enable the consolidation of their global IP VPN networks and to enable VoIP service delivery; -- The selection of Provisioning 5 by an incumbent Tier 1 operator in the U.K. to facilitate the deployment and coordination of their transport infrastructure to enable global optical and IP service delivery; -- A new customer win with M6, MetaSolv's next-generation order and inventory management solution, with a U.S-based regional carrier to enable Ethernet, optical and IP services; -- A new customer win with a Tier 1 mobile operator in Greece to support the provisioning of next-generation mobile IP services; -- A license extension with a leading Tier 1 operator to facilitate their IP VPN services growth worldwide; and -- A new license extension with a customer in our Caribbean and Latin America region to support automated provisioning of broadband DSL services. "Our first quarter serves as a solid foundation as we continue to expect double-digit revenue growth and double-digit operating margins in 2006. Our growth strategy is underscored by our leading market position, our sound balance sheet and our global customer base of some 170 operators worldwide. In addition, we continue to witness large, IP-centric network transformation projects underway on a global basis, which represent a significant market opportunity for MetaSolv," concluded Holmes. Based on the company's results for the first quarter, the pipeline of potential contracts, and expectations concerning the business environment, MetaSolv today established its guidance for revenues for the second quarter of 2006 in a range of $23.5 million to $25.5 million, compared with $23.4 million for the second quarter of 2005. The company also established guidance for its net income for the period of between $0.00 and $0.03 per share. Net income guidance for the second quarter of 2006 includes approximately $1.2 million in stock compensation expense computed under SFAS 123R. Excluding stock compensation expense, the company expects to report non-GAAP net income of between $0.02 and $0.05 per share for the second 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 and clicking Investors, or by going to www.streetevents.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, April 27, through Thursday, May 4. The dial-in replay number is 719-457-0820, and the confirmation number is 4158940. About MetaSolv MetaSolv, Inc. (Nasdaq:MSLV) is a global leader in comprehensive operational 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. More than 170 global service providers -- including Brasil Telecom, BT, Cable & Wireless, Nextel, 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 March 31, ----------------- 2006 2005 -------- -------- Revenues $22,598 $21,360 Loss from operations $(498) $(2,057) Net loss $(388) $(2,055) Basic and diluted loss per share $(0.01) $(0.05) Basic and diluted weighted average shares outstanding 49,749 40,829 Non-GAAP information(1) Net income (loss) $852 $(1,335) Basic and diluted income (loss) per share $0.02 $(0.03) (1) See the final table below for a complete reconciliation of non-GAAP results with those reported under Generally Accepted Accounting Principles. METASOLV, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended March 31, -------------------- 2006 2005 ---------- --------- Revenues: License $7,158 $5,951 Services 6,203 5,294 Maintenance 9,237 10,115 ---------- --------- Total revenues 22,598 21,360 Cost of revenues: License 195 59 Services and maintenance (1) 9,527 9,598 Amortization of intangible assets 230 423 ---------- --------- Total cost of revenue 9,952 10,080 ---------- --------- Gross profit 12,646 11,280 Operating expenses: Research and development (1) 4,553 5,320 Sales and marketing (1) 5,465 5,529 General and administrative (1) 3,126 2,488 ---------- --------- Total operating expenses 13,144 13,337 ---------- --------- Loss from operations (498) (2,057) Interest and other income, net 366 251 ---------- --------- Loss before taxes (132) (1,806) Income tax expense 256 249 ---------- --------- Net loss $(388) $(2,055) ========== ========= Basic and diluted loss per share $(0.01) $(0.05) Basic and diluted weighted average shares outstanding 49,749 40,829 (1) Includes amortization of stock compensation expense as follows: Cost of revenues - services and maintenance $214 $57 Research and Development 229 101 Sales and marketing 207 34 General and administrative 360 105 ---------- --------- Total stock compensation expense $1,010 $297 ========== ========= METASOLV, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 31, December 31, 2006 2005 ------------ ------------ (Unaudited) Assets Current assets: Cash and cash equivalents $12,007 $13,314 Marketable securities 43,879 44,839 Trade accounts receivable, less allowance for doubtful accounts of $1,894 in 2006 and $1,805 in 2005 15,368 13,582 Unbilled receivables 2,663 2,461 Prepaid expenses 1,892 1,847 Other current assets 588 669 ------------ ------------ Total current assets 76,397 76,712 Property and equipment, net 5,538 5,529 Intangible assets 860 1,090 Other assets 807 786 ------------ ------------ Total assets $83,602 $84,117 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable $3,808 $4,775 Accrued expenses 18,445 20,512 Deferred revenue 9,899 8,068 ------------ ------------ Total current liabilities 32,152 33,355 Fair value of warrants to purchase common stock -- 3,442 Temporary equity - Unregistered common stock, $.005 par value, 7,666,667 shares issued and outstanding -- 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: 50,002,123 in 2006, and 49,961,132 in 2005 251 213 Additional paid-in capital 173,219 151,443 Deferred compensation -- (328) Accumulated other comprehensive income 799 560 Accumulated deficit (122,819) (122,431) ------------ ------------ Total stockholders' equity 51,450 29,457 ------------ ------------ Total liabilities and stockholders' equity $83,602 $84,117 ============ ============ METASOLV, INC. RECONCILIATION OF NET LOSS TO NON-GAAP NET INCOME (LOSS) AND EBITDA (Unaudited) (In thousands) Three Months Ended March 31, ------------------- 2006 2005 --------- --------- Net loss $(388) $(2,055) Amortization of intangible assets 230 423 Stock compensation expense 1,010 297 --------- --------- Non-GAAP net income (loss) $852 $(1,335) ========= ========= Net loss $(388) $(2,055) Depreciation expense 637 849 Amortization of intangible assets 230 423 Amortization of stock compensation expense 1,010 297 Interest and other income, net (366) (251) Income tax expense 256 249 --------- --------- EBITDA $1,379 $(488) ========= ========= *T 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 share, and EBITDA. Non-GAAP net income (loss), and Non-GAAP net income (loss) per share are adjusted to exclude non-cash expenses for stock compensation expense and amortization of purchased intangible assets. 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. In addition, MetaSolv has excluded the effects of amortization of purchased intangible assets because these amounts have declined from period to period as certain asset classifications become fully amortized. 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, and there are material limitations associated with the use of this data, including the fact that the amortization of intangible assets results from the purchase of assets that constitute a material portion of MetaSolv's revenue. 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.