MTSL MER Telemanagement Solutions Ltd

MTS Reports Second Quarter 2004 Results Continues Investments in Sales, Marketing and R&D RA'ANANA, Israel, Aug. 4 /PRNewswire-FirstCall/ -- MTS - Mer Telemanagement Solutions Ltd. (NASDAQ:MTSL), a global provider of Operations Support Systems (OSS) for comprehensive Telecommunication Management and Customer Care & Billing solutions, today reported its financial results for the second quarter of 2004. Revenues for the second quarter were $2.0 million compared with $2.2 million for the second quarter of 2003. Revenues for the first six months of 2004 were relatively flat compared to the prior year's period at $4.4 million. Net loss for the quarter was $0.9 million or $(0.20) per share, compared with a net loss of $10,000, or $0.00 per share, for the second quarter of 2003. Net loss for the six-month period of 2004 was $1.1 million or $(0.24) per share compared to net income of $4,000 or $0.00 per share for the same period in 2003. Eytan Bar, MTS's President and Chief Executive Officer commented: "Although disappointing, the decrease in revenues for the quarter was a result of the continued implementation of our turnaround plan. The Company's new focus on larger and higher revenues generating enterprise and service provider solutions has extended our sales cycle. This revenue decrease and our continued investments in sales, marketing and research and development have impacted bottom line results for the quarter." The Company's gross profit for the second quarter was $1.5 million compared to $1.8 million in the second quarter of 2003. Six-month gross profit was $3.3 million compared to $3.5 million in the prior year's period. During the second quarter, the Company's investment in research and development totaled $0.6 million, an increase from $0.4 million for the second quarter of 2003. Research and development expenses for the first six-months of 2004 were $1.1 million compared to $0.8 million in the 2003 period. Selling and marketing expenses for the quarter increased to $1.4 million from $1.1 million in the prior year's quarter. Six-month selling and marketing expenses were $2.5 million compared to $2.0 million for the first six months of 2003. "We have added a total of 27 new employees across research and development, sales and professional services over the course of the quarter," noted Mr. Bar. "Our continued investments in these areas are part of our strategy to achieve a robust and comprehensive product offering, a sales force targeted to our key markets and enhanced customer service capabilities." During the quarter, MTS announced the expansion of its product offering to include billing, rating and customer care. "Integrating these new functions into our existing solutions, created a unique full-featured, cost-effective Operations Support Systems and Billing Support Systems solution for service providers and carriers" stated Mr. Bar. Operating loss for the quarter totaled $970,000 compared with $88,000 for the second quarter of 2003. Operating loss for the six-month period totaled $1.2 million compared to $0.3 million for the same period in 2003. Yossi Brikman, Corporate COO & CFO, noted that the Company ended the quarter with approximately $10.0 million in cash and cash equivalents, including marketable securities. "We continue to execute our turnaround strategy and invest in the business," concluded Mr. Bar. "We are adding to our global sales force, extending our product capabilities, building upon our professional services platform and expanding partner and reseller agreements. We remain committed to the enterprise and service provider markets and pursuing new contracts. We are optimistic as we look to the future for MTS." The Company will conduct a teleconference to discuss the results today, Wednesday, August 4th, at 11:00 AM Eastern Time (18:00 Israel Time). To participate please dial 1-800-792-0846 from the US or Canada (toll free), 1-800-945-1221 From Israel (toll free), or +1-706-634-1485 from other locations approximately 5 minutes prior to the starting time. A replay of the call will be available from 2:00pm ET on Wednesday, August 4, 2004, until 11:00pm ET on Wednesday, August 11. To access the replay please dial 1-800-642-1687 from the US or Canada (toll free), 1-800-945-8731 from Israel (toll free), or +1-706-645-9291 from other locations. About MTS Mer Telemanagement Solutions Ltd. is a global provider of operations support systems (OSS) for comprehensive telecommunication management and customer care & billing solutions. MTS' OSS is a full-featured customized solution for telecommunications management and customer care & billing. Its telecommunications enterprise resource planning (ERP) application suite is used by corporations and organizations to improve the efficiency and performance of all telecommunication and information technology (IT) operations, and to significantly reduce associated costs. Its affordable customer care and billing (CC&B) solutions are used by service providers and operators to support sophisticated billing, web-based self-provisioning and other revenue-generating applications. Headquartered in Israel, MTS markets through wholly owned subsidiaries in the U.S., Hong Kong, Holland, and Brazil, and through OEM partnerships with Siemens, Phillips, and other PABX vendors. Its legacy call accounting solutions have been installed by over 60,000 customers in 60 countries. MTS' shares are traded on the NASDAQ stock exchange (symbol MTSL). For more information please visit the MTS web site: 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. MER TELEMANAGEMENT SOLUTIONS LTD. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands June 30, December 31, 2004 2003 2003 Unaudited ASSETS CURRENT ASSETS: Cash and cash equivalents $8,461 $8,775 $8,684 Marketable securities 1,498 1,532 1,644 Trade receivables, net 1,069 1,097 1,391 Other accounts receivable and prepaid expenses 580 528 566 Inventories 193 228 193 Total current assets 11,801 12,160 12,478 LONG-TERM INVESTMENTS: Investment in an affiliate 1,760 1,528 1,859 Long-term loans, net of current maturities 73 109 95 Severance pay fund 565 607 564 Other investments 371 376 368 Total long-term investments 2,769 2,620 2,886 PROPERTY AND EQUIPMENT, NET 460 552 482 OTHER ASSETS: Goodwill 2,025 2,025 2,025 Other intangible assets, net 128 283 206 Deferred income taxes 105 173 105 Total other assets 2,258 2,481 2,336 Total assets $17,288 $17,813 $18,182 MER TELEMANAGEMENT SOLUTIONS LTD. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands (except share data) June 30, December 31, 2004 2003 2003 Unaudited LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term loans $4 $8 $8 Trade payables 311 400 393 Accrued expenses and other liabilities 1,722 1,372 1,421 Deferred revenues 1,218 1,173 1,219 Total current liabilities 3,243 2,953 3,041 LONG-TERM LIABILITIES: Long-term loans, net of current maturities - 4 - Accrued severance pay 647 785 677 Total long-term liabilities 647 789 677 SHAREHOLDERS' EQUITY: Share capital - Ordinary shares of NIS 0.01 par value - Authorized: 12,000,000 shares; Issued: 4,648,804 and 4,631,471 shares at June 30, 2004 and December 31, 2003, respectively; Outstanding: 4,641,804 and 4,624,471 shares at June 30, 2004 and December 31, 2003, respectively 14 14 14 Additional paid-in capital 12,638 12,450 12,603 Treasury shares (20) - (20) Accumulated other comprehensive income (loss) 100 (90) 87 Retained earnings 654 1,697 1,780 Total shareholders' equity 13,386 14,071 14,464 Total liabilities and shareholders' equity $17,288 $17,813 $18,182 MER TELEMANAGEMENT SOLUTIONS LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except share data) Six months Three months Year ended ended ended June 30, June 30, December 31, 2004 2003 2004 2003 2003 Unaudited Revenues from products and services $4,351 $4,433 $1,992 $2,193 $9,230 Cost of revenues from products and services 1,047 951 506 411 1,849 Gross profit 3,304 3,482 1,486 1,782 7,381 Operating expenses: Research and development 1,103 827 569 387 1,825 Selling and marketing 2,522 1,979 1,397 1,061 3,916 General and administrative 887 905 490 422 1,830 Total operating expenses 4,512 3,711 2,456 1,870 7,571 Operating loss (1,208) (229) (970) (88) (190) Financial income (expenses), net 19 38 (8) 21 124 Other income (expenses), net (30) 6 2 6 6 Loss before taxes on income (1,219) (185) (976) (61) (60) Taxes on income 2 (2) 2 (2) 198 (1,221) (183) (978) (59) (258) Equity in earnings of affiliate 95 187 49 49 345 Net income (loss) $(1,126) $4 $(929) $(10) $87 Net earnings (loss) per share: Basic and diluted net earnings (loss) per Ordinary share $(0.24) $ - $(0.20) $ - $0.02 Weighted average number of Ordinary shares used in computing basic net earning (loss) per share 4,629,082 4,633,666 4,633,471 4,619,538 4,617,099 Weighted average number of Ordinary shares used in computing diluted net earning (loss) per share 4,629,082 4,633,666 4,633,471 4,619,538 4,628,249 DATASOURCE: MTS - Mer Telemanagement Solutions Ltd. CONTACT: Company - Yossi Brikman, Corporate COO & CFO of MTS - Mer Telemanagement Solutions, Ltd., +972-9-762-1733, ; or Investor Relations - Rachel Levine of The Anne McBride Company, Inc. +1-212-983-1702, ext. 207, , for MTS - Mer Telemanagement Solutions Ltd. Web site: http://www.mtsint.com/

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