ZMAX CORPORATION ANNOUNCES FIRST QUARTER FINANCIAL RESULTS
Revenues Increase 240% as Company Reduces Reliance on Y2K Business;
Forecasts Positive EPS in Second Quarter
MAY 17, 1999
Germantown, MD -- ZMAX Corporation (NASDAQ: ZMAX) today announced
financial results for the quarter ended March 31, 1999. Revenues increased
240%, from $1.5 million in the first quarter of 1998 to $5.1 million in the
same quarter of this year. Earnings before interest, taxes, depreciation
and amortization (EBITDA) improved significantly, from a negative $393,000
in the first quarter of last year to a positive $124,000 in the same
quarter of this year. The net loss was cut from $682,000, or $0.08 per
share, to $251,000, or $0.02 per share. The Company expects the second
quarter to be profitable and anticipates a profit of between $0.18 and
$0.22 per share for the full year.
The increase in revenues was due primarily to the fact that this year's
first quarter included significant revenues from Eclipse Information
Systems, which ZMAX acquired in December 1998. In addition, the Company
generated a significant increase in its Year 2000 (Y2K) products and
services sales, although Y2K sales as a percentage of total revenues
decreased, as planned.
Gross profit for the first quarter of 1999 was approximately $2.7 million,
or 52% of revenues, an increase of approximately $1.6 million over gross
profit of nearly $1.1 million, or 69% of revenues, for the same quarter
last year. The increase in gross profitability during the quarter was a
result of increased revenues; the decrease in gross profit as a percentage
of revenue was due to increased IT consulting work from the Eclipse
acquisition. IT consulting typically has lower margins than Y2K services.
General and administrative expenses for the first quarter of this year were
approximately $1.8 million, or 36% of revenues, an increase of
approximately $769,000, compared to about $1.1 million, or 69% of revenues,
incurred by the Company for the same quarter of 1998. The increase in
general and administrative expenses for the quarter ended 1999 was
primarily attributable to expenses associated with the ongoing operations
of Eclipse, the investments associated with opening new offices in
Minneapolis and Detroit, and an increase in expenditures to build a
corporate infrastructure that will support the Company's aggressive growth
plan for both internal growth and planned acquisitions.
According to Michael C. Higgins, president and chief executive officer of
ZMAX, "There are three major priorities on our agenda for the early part of
this year, all of which are designed to dramatically increase our sales and
profitability and to reposition the Company from a purely Y2K company to an
information technology consulting firm. As we achieve these milestones, I
would expect our fundamentals to continue to improve and external interest
in the Company to accelerate."
The three priorities are:
1. Build a more centralized infrastructure, including a corporate
identity and marketing program, human resources program, a centralized
finance operation, and management information systems to achieve a
cost-efficient, central office from which to operate the Company and easily
assimilate future acquisitions.
2. Continue to reduce reliance on Y2K revenues as ZMAX transitions to
an IT consulting firm.
3. Continue to grow aggressively, achieving a 50% internal growth rate
and completing one to two acquisitions this year, as well as dramatically
improving profitability.
Explains Higgins, "We have made dramatic progress in our first priority,
the development of a corporate infrastructure, and I expect that our
operational profitability will improve in subsequent quarters as the
Company benefits from the investments that we made in this area.
"Our second priority is to reduce reliance on the Y2K business, and already
we've made a dramatic shift, as Y2K sales dropped from 100% of our total
revenues at the end of 1998 to 42% of revenues in the first quarter of this
year. Although we're continuing to see strong results in our Y2K business,
I believe that this percentage will dramatically diminish by the end of the
Year 2000.
"Finally," Higgins continues, "this quarter's results demonstrate the
progress we're making in growing the business. We expect that our revenue
run rate by year end will range between $40 million and $50 million, and
that in the second quarter, we will generate earnings. Our goal is to
achieve 1999 annual earnings per share of between $0.18 and $0.22."
The Company will host an investor conference call to review the quarter's
financial and operational results on Monday, May 17 at 4:15 p.m. EDT. The
conference call can be accessed by dialing 800-837-5468, international
callers can dial 212-676-4906. A replay of the call will be available from
6 p.m. the same day until 6 p.m. the following day. The replay phone
number is 800-633-8284, or 619-812-6440 for international callers, and the
replay reservation number is 12379617.
Headquartered in Germantown, Maryland, ZMAX Corporation is an information
technology consulting firm. The Company's IT services include enterprise
resource planning implementation, client server development, e-business,
and Y2K software and services.
Statements made in this press release that are not historical or current
facts are "forward looking statements" made pursuant to the safe harbor
provisions of federal securities laws. Forward looking statements
represent management's best judgment as to what may occur in the future,
but are subject to certain risks and uncertainties that could cause actual
results and events to differ materially from those presently anticipated or
projected. Such factors include adverse economic conditions, entry of new
and strong competitors, inadequate capital, unexpected costs, and failure
to capitalize upon access of new clientele. Specific risks and
uncertainties which may affect forward looking statements about the
business and prospects include the possibility that a competitor will
develop a more comprehensive or less expensive service or solution to
ZMAX's services or projects and delays in the market awareness of ZMAX and
its project and service solutions. These factors and others are discussed
in the "Management Discussion and Analysis" section of ZMAX's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, to which
reference should be made.
ZMAX CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Three Months Ended March 31,
----------------------------
1999 1998
------------- -------------
(unaudited)
STATEMENT OF OPERATIONS DATA:
Revenues $ 5,106,645 $ 1,524,324
Cost of revenues 2,442,571 466,808
Research and development expense 167,916 127,687
Sales and marketing expense 546,980 265,509
General & administrative expense 1,825,574 1,057,105
Depreciation & amortization expense 406,908 321,642
------------- -------------
Loss from operations (283,304) (714,427)
Other income (expenses):
Interest income 37,263 55,431
Interest expense (2,110) (6,855)
Other (2,859) (15,880)
------------- -------------
Net loss $ (251,010) $ (681,731)
------------- -------------
------------- -------------
Basic and diluted loss per share $ (0.02) $ (0.08)
------------- -------------
------------- -------------
Basic and diluted weighted
average shares outstanding 12,949,913 8,449,913
------------- -------------
------------- -------------
March 31, 1999 Dec. 31, 1998
------------- -------------
(unaudited)
BALANCE SHEET DATA:
Cash and cash equivalents $ 3,766,072 $ 4,521,126
Working capital 5,723,264 5,563,144
Total assets 17,124,011 17,446,362
Total liabilities 1,594,968 1,666,309
Total stockholders' equity 15,529,043 15,780,053
###
ZMAX CORPORATION is quoted on the NASDAQ Small Cap exchange under the
symbol of "ZMAX" and on the Frankfurt and Berlin Stock Exchanges under the
symbol of "ZMX"
For Investor Information Contact:
Investor Communications Co.
(800) 416-0811 or (800) 547-0443
iccinfo.com
The Poretz Group
Karen Vahouny 703-506-1778 x224 |
