MTSL MER Telemanagement Solutions Ltd

MTS Reports 4.1 Percent Revenue Gain for Third Quarter 2003 RAMAT GAN, Israel, Nov. 5 /PRNewswire-FirstCall/ -- MTS - Mer Telemanagement Solutions Ltd. , a leader in the enterprise communications management market, today reported results for the third quarter and nine-month periods ended September 30, 2003. Third quarter revenues increase 4.1 percent to $2.3 million from $2.2 million for the third quarter of 2002. Revenues for the first nine months decreased 7.6 percent to $6.72 million from $7.27 million for the period last year. Third quarter 2003 net income came to $3,000 compared with a net loss of $99,000 for the quarter in 2002. Net income for the first nine months was $7,000, compared with net income of $11,000 for the period in 2002. Mr. Yossi Brikman General Manager of Israel Operations & Chief Financial Officer said the third quarter and the nine-month financial results were consistent with management estimates, taking into consideration the difficult global economic environment that continues to affect the Company's revenue stream. Mr. Brikman said MTS's wholly owned US subsidiary, MTS IntegraTRAK, was responsible for generating approximately 51 percent of third quarter consolidated revenues. "In addition, our 50 percent Spanish affiliate, Jusan S.A., contributed a profit of $117,000 for the third quarter, and $304,000 for the nine months, compared to $84,000 and $206,000 for the same periods in 2002, respectively," Mr. Brikman added. On the operating front, MTS recently announced the appointment of Mr. Eytan Bar as President and CEO. Mr. Bar comes to MTS with over 15 years experience in marketing, product management, sales and management at high tech companies. Most recently he served as general manager of the CEM product division of NICE Systems. Commenting on the appointment, Chaim Mer, Chairman of MTS, said, "We are very pleased to welcome Eytan to our management team. He has built a successful track record developing profitable and high-growth operations. We consider him an invaluable addition to our team." Mr. Brikman added: "We are optimistic about the long-term future of our company. Our confidence is enhanced by the appointment of our new CEO, Mr. Eytan Bar, who strongly believes that MTS will grow through the marketing of our current technology-leading products and continuing investment in future products." Third quarter 2003 gross profit increased 6 percent to $1.8 million compared with $1.7 million for the third quarter of 2002. The third quarter gross profit percentage was approximately 80 percent. Nine-month gross profit decreased 9 percent to $5.3 million from $5.8 million for the period last year. Third quarter operating loss was reduced to $5,000, from an operating loss of $205,000 for the quarter in 2002. Operating loss for the first nine months decreased to $234,000, from an operating loss of $268,000 for the period in 2002. Total operating expenses decreased from $1.9 million for the third quarter of 2002 to $1.8 million for third quarter 2003. For the first nine months operating expenses decreased to $5.5 million from $6.0 million for the first nine-month period of 2002. During the third quarter MTS purchased a total of 3,100 shares in connection with its stock repurchase program. At September 30, 2003, 4,562,038 shares remained outstanding. MTS's net cash used in operating activities for the first nine months came to $22,000, compared with $210,000 for the same period last year. "Our cash and cash equivalents, including marketable securities, totaled $10.15 million at September 30, 2003, compared with $10.215 million at December 31, 2002," Mr. Brikman concluded. The Company will conduct a conference call today at 11:00 a.m. US Eastern. To participate please dial (719) 457-2727 about 5 minutes prior to start. MTS is a leader in the enterprise communications management market. MTS's web-based management solutions for Converged Voice, VoIP, Data, and Video answer the needs of IT professionals, systems integrators and solutions providers. The Company pioneered the integration of the PC into telemanagement solutions, and sold over 55,000 of its flagship TABS solution (Telephone Accounting & Billing System) in 22 languages in more than 60 countries. MTS's FaciliTRAK is a comprehensive software system that greatly simplifies the day-to-day task of maintaining and managing the physical layer details for any network. FaciliTRAK gives MTS's customers cable management and disaster recovery, tools to reduce costs, provide better service and enhances employee productivity. MTS supports its products worldwide through its own sales and support offices, local dealers and OEM contracts with market leaders such as Siemens, Ericsson, Philips, Lucent EMEA etc. MTS IntegraTRAKInc., the Company's North American subsidiary, has been in the business of building exceptional telemanagement software and earning a reputation for superior customer support since 1985. Today MTS IntegraTRAK is leading the evolution of traditional telemanagement toward VoIP, IP, and converged usage applications. For more information please visit the MTS web site at http://www.mtsint.com/ . Certain matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties including, but not limited to, risks in product development plans and schedules, rapid technological change, changes and delays in product approval and introduction, customer acceptance of new products, the impact of competitive products and pricing, market acceptance, the lengthy sales cycle, proprietary rights of the Company and its competitors, risk of operations in Israel, government regulations, dependence on third parties to manufacture products, general economic conditions and other risk factors detailed in the Company's filings with the United States Securities and Exchange Commission. CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands September 30, December 31, 2003 2002 2002 Unaudited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 8,328 $ 7,143 $ 9,062 Marketable securities 1,822 2,446 1,153 Trade receivables, net 1,102 1,335 1,259 Other accounts receivable and prepaid expenses 377 801 511 Inventories 220 272 240 Total current assets 11,849 11,997 12,225 LONG-TERM INVESTMENTS: Investments in affiliate 1,687 1,235 1,335 Long-term loans, net of current maturities 105 96 86 Severance pay fund 574 499 545 Other investments 369 370 368 Total long-term investments 2,735 2,200 2,334 PROPERTY AND EQUIPMENT, NET 524 667 602 GOODWILL AND OTHER ASSETS: Goodwill, net 2,025 2,024 2,025 Other intangible assets, net 245 400 360 Deferred income taxes 169 66 161 Total other assets 2,439 2,490 2,546 Total assets $17,547 $17,354 $17,707 The accompanying notes are an integral part of the consolidated financial statements. CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands (except share data) September 30, December 31, 2003 2002 2002 Unaudited LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term loans $ 8 $ 26 $ 8 Trade payables 278 511 350 Accrued expenses and other liabilities 1,206 1,313 1,439 Deferred revenues 1,131 1,057 1,184 Total current liabilities 2,623 2,907 2,981 LONG-TERM LIABILITIES: Long-term loans, net of current maturities 2 -- 8 Accrued severance pay 694 653 705 Total long-term liabilities 696 653 713 SHAREHOLDERS' EQUITY: Share capital - Ordinary shares of NIS 0.01 par value: Authorized shares - 12,000,000; Issued shares - 4,565,138 at September 30, 2003 and 4,882,748 at September 30, 2002 and December 31, 2002; Outstanding shares - 4,562,038, 4,661,148 and 4,621,648 shares at September 30, 2003, 2002 and December 31, 2002, respectively 14 15 15 Additional paid-in capital 12,603 12,846 12,846 Treasury shares (7) (299) (330) Accumulated other comprehensive loss (82) (342) (211) Retained earnings 1,700 1,574 1,693 Total shareholders' equity 14,228 13,794 14,013 Total liabilities and shareholders' equity $17,547 $17,354 $17,707 The accompanying notes are an integral part of the consolidated financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except share data) Nine months Three months Year ended ended ended September 30, September 30, December 31, 2003 2002 2003 2002 2002 Unaudited Revenues from products and services $ 6,719 $ 7,271 $ 2,286 $ 2,196 $ 9,787 Cost of revenues from products and services 1,408 1,451 457 475 1,896 Gross profit 5,311 5,820 1,829 1,721 7,891 Operating expenses: Research and development, net 1,261 1,641 434 497 2,127 Selling and marketing, net 2,917 3,055 938 970 3,954 General and administrative 1,367 1,392 462 459 1,858 Total operating expenses 5,545 6,088 1,834 1,926 7,939 Operating loss (234) (268) (5) (205) (48) Financial income (expenses), net 27 177 (11) 42 134 Other income (expenses), net 6 (90) -- (71) (140) Loss before taxes on income (201) (181) (16) (234) (54) Taxes on income 96 14 98 (51) 52 (297) (195) (114) (183) (106) Equity in earnings of affiliate 304 206 117 84 236 Net income (loss) $ 7 $ 11 $ 3 (99) 130 Basic and diluted net earnings (loss) per share $ -- $ -- $ -- $ (0.02) $ 0.03 Weighted average number of shares used in computing basic and diluted net earnings (loss) per share 4,610 4,731 4,577 4,672 4,710 The accompanying notes are an integral part of the consolidated financial statements. MER TELEMANAGEMENT SOLUTIONS LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: -- GENERAL MER Telemanagement Solutions Ltd. ("the Company" or "MTS") was incorporated on December 27, 1995. The Company designs, develops, markets and supports a comprehensive line of telecommunication management solutions that enable business organizations and other enterprises to more effectively manage their communication resources. The Company's products include call accounting and management products, fault management systems and web based management solutions for converged voice, voice over Internet Protocol or IP data and video and packaged computer software of tracking telephone calls and costs and also provides consulting and maintenance support for its services. These products are designed to provide telecommunication and information technology managers with tools to reduce communication costs, recover charges payable by third parties, detect and prevent abuse and misuse of telephone networks including fault telecommunication usage. MTS markets its products worldwide through distributors, business telephone switching systems manufacturers and vendors, PTTs (post, telephone and telegraph authorities) and its direct sales force. Several international PBX manufacturers market the Company's products as part of their PBX selling efforts or on an original equipment manufacturer ("OEM") basis. The Company is highly dependent upon the active marketing and distribution of its distributors. NOTE 2: -- SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2002, are applied consistently in these financial statements. NOTE 3: -- UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the Unites States for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements are to be read in conjunction with the audited annual financial statements of the Company as of December 31, 2002 and their accompanying notes. Operating results for the nine months ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ended December 31, 2003. NOTE 4: -- MATERIAL EVENTS In April 2000, the tax authorities in Israel issued to the Company a demand for a tax payment, for the period of 1997 - 1999, in the amount of approximately NIS 6,000 thousand ($ 1,400 thousand). The Company has appealed to the Israeli district court in respect of the abovementioned tax demand. Based on the opinion of its tax counsel, the Company believes that certain defenses can be raised against the demand of the tax authorities. The Company believes that the outcome of this matter will not have a material adverse effect on its financial position or results of operations and, therefore, no provision was provided. DATASOURCE: MTS - MER Telemanagement Solutions, Ltd. CONTACT: Yossi Brikman, GM Israel Operations & CFO of MTS - MER Telemanagement Solutions, Ltd., +972-3-671-0777, ; or Marilena LaRosa of The Anne McBride Company, Inc. for MTS, +1-212-983-1702, ext. 208, Web site: http://www.mtsint.com/

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