Tekelec Reports Second Quarter Financial Results
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CALABASAS, Calif.--(BUSINESS WIRE)--July 26, 2001--Tekelec (Nasdaq:TKLC) today reported financial results for its second quarter ended June 30, 2001.
Revenues for the second quarter decreased 4 percent to $70.9 million from $74.1 million in the second quarter of 2000. Pro forma net income, which excludes the effects of acquisition-related amortization and other merger charges, declined to $2.1 million, or $0.03 per diluted share, from pro forma net income of $8.7 million, or $0.14 per diluted share, in the second quarter of 2000. The 2001 results are in line with Tekelec's revised guidance issued on July 5, 2001.
Inclusive of the merger charges, the Company recorded a net loss for the 2001 second quarter of $4.6 million, or $0.08 per share.
Orders for the Company's products in the second quarter declined 12 percent to $70.8 million from $80.4 million a year ago. Total backlog at June 30, 2001 was $202.1 million, and includes $100.5 million in product backlog and $101.6 million in multi-year service agreements.
Tekelec President and CEO, Michael L. Margolis, commented, ``As communicated in our 'revised guidance' press release earlier this month, we experienced a challenging finish to our second quarter, which was impacted by carriers' broad-reaching efforts to reduce capital expenditures. Looking behind the numbers, however, I take comfort in that each of the anticipated Q2 orders that was deferred by a carrier remains an opportunity for future quarters. None of these opportunities was awarded to competitors, or was cancelled, and these service providers continue to have real needs and remain interested in working with Tekelec towards a solution for their needs.''
Margolis continued, ``Perhaps more importantly, the key metrics that generally drive sales of our network solutions -- i.e., growth in voice traffic, particularly on signaling intensive wireless networks, and usage of enhanced services -- continue to increase. The rapid growth in network traffic was confirmed in earnings announcements from major wireless operators earlier this week. As a result, while we expect our near-term results to suffer in the current environment as carriers increasingly seek to defer their capital spending and, in some cases, revert to 'just-in-time' ordering practices, over the long-haul we believe there will be healthy demand for our solutions to support the continuing growth in network traffic.''
Second Quarter Operating Highlights
Key operating highlights of the second quarter include:
NewSouth Communications selected Tekelec's packet tandem solution, built on its VXi Media Gateway Controller, for a live network trial. Tekelec's softswitch will provide long-distance service to NewSouth customers in a nine-state coverage area, and will interwork with Tekelec IP7 Secure Gateways and Cisco Media Gateways already deployed in the NewSouth network.
Tekelec entered into a distribution agreement and partnership with Alcatel. Under the terms of the agreement, Tekelec will act as a value-added reseller of the Alcatel 7470 Multiservice Platform, an ATM-based media gateway that is interoperable with Tekelec's packet telephony solutions.
Tekelec established a partnership with Broadsoft to jointly pursue marketing and sales efforts in order to enable integrated communications providers to deliver web-enabled, enhanced telephony services over converged voice and data networks.
Tekelec announced the integration of its market-leading signaling platform, the EAGLE 5 Signaling Application System (SAS), and its sophisticated surveillance and diagnostic system, Sentinel. As the industry's only probeless, carrier-grade monitoring system that automatically re-configures with network changes, EAGLE 5 with Integrated Sentinel saves carriers considerable time and expense.
The Network Diagnostics Division introduced the MGTS Test Automation software product, which allows test engineers to preprogram and automatically run tests, enabling a reduction in staffing requirements and shorter product development cycles.
Within the IEX Contact Center Division, TRX Inc., a leading provider of automated technology to the travel industry, selected Tekelec's TotalNet Call Routing solution to increase productivity and reduce operating costs within its multi-site contact center operations.
Margolis continued, ``A key priority for Tekelec in the current period of moderated industry spending is to prudently reduce our own cost structure to enhance our profitability and protect our strong financial position. Considering our leading market position and confidence in our longer-term prospects, however, at this time we do not intend to initiate a level of action that could result in reduced product innovation, which in turn might jeopardize our ability to recover swiftly when the industry outlook improves.
``We will endeavor to strike a balance between cost reductions important to our near term outlook, while maintaining a thoughtful level of investment to ensure that Tekelec retains our market leadership and preferred vendor status with our customers during these tougher times,'' Margolis concluded. ``We will continue to regularly monitor our outlook and adjust our future investment assumptions, if necessary.''
Financial Outlook
The pro forma earnings per share assumptions noted below exclude the effects of merger-related charges and non-recurring charges and benefits.
Third Quarter 2001 Guidance
Revenue Guidance $71 million - $74 million
Pro forma EPS Guidance $0.04 - $0.05 per diluted share
Commenting on the Company's third quarter financial guidance, Tekelec Chief Financial Officer, Paul Pucino, said, ``Our visibility remains limited in the current environment, so we will provide guidance for the current quarter only. Our Q3 guidance assumes that industry capital spending continues to be guarded in the third quarter, resulting in only slight sequential growth in our top line growth expectations. Our guidance also assumes that we achieve pro forma gross margins at a level consistent with our traditional range in the mid-sixties, a decline from the exceptionally strong margins we achieved in the first half of 2001, but a prudent assumption given the current macro environment. Below the revenue line, we expect to begin to benefit from a reduced expense profile in absolute dollars when compared to the 2001 second quarter as a result of our cost cutting initiatives announced earlier this month.'' |
