SMTK pre-announces they will not meet EARNINGS !
Are we still short Smart Talk?
Wednesday April 1, 5:18 pm Eastern Time
Company Press Release
SmarTalk Announces First Quarter Revenue and Earnings Estimates, Acquisition of Prepaid Cellular Technology and Strengthening of Management Team
COLUMBUS, Ohio--(BUSINESS WIRE)--April 1, 1998--SmarTalk TeleServices, Inc. (Nasdaq: SMTK - news) announced today that estimated first quarter revenues and earnings per fully diluted share are anticipated to be approximately $40 million and a loss of $0.05, respectively. The Company will announce earnings for the quarter ended March 31, 1998 on Tuesday, May 12th.
''We continue to anticipate significant growth in revenues and earnings year-over-year,'' stated Company CEO Erich Spangenberg. ''Estimated first quarter revenues of $40 million compare with $7.37 million for the same period last year. The estimated revenues and earnings for the quarter and the year will be impacted by a number of factors including the classification of the call center acquired in connection with the ConQuest transaction as a discontinued operation, delays and costs associated with the launch of alternative distribution, promotional revenues not achieving expected levels, the timing of revenue recognition from certain key accounts, and costs associated with the anticipated launch of prepaid cellular and international expansion. These challenges have been identified and are being addressed and are anticipated to improve as a result of consolidation in Columbus, strengthening of the management team and new technology for prepaid cellular.
''The call center is not part of our core business,'' continued Mr. Spangenberg, ''and we are evaluating alternatives for this line of business. Alternative distribution continues to demonstrate significant potential even though the technical requirements and sheer size of these accounts have taken us longer to roll out than initially expected. The Company's promotional sales efforts are being refocused to sell into accounts that meet our margin parameters for this type of business in connection with our consolidation in Columbus, which should lead to more efficient execution and increased promotional revenues.
''Our international strategy is also starting to pay off. We are seeing increasing revenues from both our UK and Canadian operations. Our relationship with D Services, the distribution arm of WH Smith, continues to be strong and initial card sales in the UK are promising,'' continued Mr. Spangenberg. ''Furthermore, we are seeing interest from other overseas prepaid companies in developing strategic alliances with us based on our dominant marketplace position and believe that the international marketplace will continue to grow through our existing business and new overseas partnerships.
Mr. Spangenberg added, ''We believe that investing in areas such as international opportunities and new technology to meet the demands of our customers in areas such as prepaid cellular is key to maintaining our leading market position and further leveraging our distribution asset.''
Prepaid Cellular
SmarTalk also announced that it has purchased through an acquisition key technology that will facilitate the completion of the launch of the Company's prepaid cellular product offering in 1998. SmarTalk now possesses the enabling technology for the purpose of providing nationwide cellular coverage for outbound and inbound calling capabilities on a prepaid basis, while minimizing the fraud risk associated with this product offering. ''This technology enables the Company to build a true inbound and outbound prepaid cellular solution unlike any other solution currently available in the marketplace. As a result of the acquisition of this technology and SmarTalk's desire to offer the best, full-featured product, the Company has postponed its launch of prepaid cellular and does not anticipate revenues until at least Q3,'' continued Mr. Spangenberg. ''We already have our distribution channel in place to sell prepaid cellular. Now we will own the technology that can deliver a true nationwide inbound and outbound prepaid cellular solution. We believe that combining our distribution and technology will provide the basis for SmarTalk to become a significant factor in the prepaid cellular marketplace. SmarTalk's strategy for prepaid cellular is a perfect example of our ability to further leverage our distribution channel to make this asset more productive. Our customers are eager to sell a quality prepaid cellular solution and SmarTalk will now be able to offer that solution.''
Strengthening of Management Team
Company President and COO Jeff Lindauer today announced key additions to SmarTalk's executive team to lead the sales, marketing, operations, legal and business development efforts of the Company. ''We are moving to the next step of management and leadership with these new executives,'' stated Mr. Lindauer. ''Each brings skill sets and expertise we need to bolster our position as the dominant player in the prepaid market. I am confident these individuals will make valuable contributions to the success of SmarTalk.''
Jack Feingold has been appointed Senior VP of Sales. Mr. Feingold has spent the past 15 years in telecom and the past eight years managing strategic accounts for MCI, most recently as Director of Global and Data Sales. Before MCI, Mr. Feingold was Regional Manager of national accounts at USTS, a division of ITT.
Joseph A. Borocz has been named to the post of Senior VP of Marketing. Mr. Borocz brings more than 15 years in advertising and marketing and packaging experience to the Company with both domestic and international packaged goods companies, including brand management and marketing positions at the Mead Corporation, Lion Nathan Brewing and Volkswagen of South Africa. Mr. Borocz comes to SmarTalk from his current position as Vice President of the Atlanta-based marketing company Atlantis Marketing.
Robert Anderson has been appointed Senior VP of Operations. Most recently he was Vice President of Oklahoma-based food distribution company Fleming Companies, Inc., where one of his key responsibilities was the sale of prepaid phone cards to the company's retail customers. Mr. Anderson brings seven years of operating experience to SmarTalk.
Thad Bereday has been appointed to the position of General Counsel and VP of Legal Affairs. Mr. Bereday comes to SmarTalk from the law office of Jones, Day, Reavis & Pogue in Cleveland, where his practice focused on mergers and acquisitions, securities and corporate finance.
Mr. Lindauer also announced the promotion of Wayne Wooddell to the position of VP of Business Development. Mr. Wooddell came to SmarTalk through the acquisition of ConQuest Telecommunication Services Corp. in December of 1997 where he was Chief Financial Officer.
Executive VP Rich Teich and CFO Andy Folck remain in their respective roles. All five of the new executives will be based in SmarTalk's new corporate headquarters in Columbus, Ohio. ''Each of these individuals brings vital experience to our operation,'' stated Jeff Lindauer. ''Joe Borocz's background in brand management, packaging and international marketing will be an important asset to the new management team. Rob Anderson has an intimate understanding of both prepaid operations and the goods distribution business. Thad Bereday brings experience with public companies and regulated industries. Jack Feingold comes to us with 15 years in telecom sales and service. Wayne Wooddell brings a strong financial background in business analysis. These additions round out our new management team and provides us the leadership and competencies we need going forward.''
''Our business plan calls for core growth, acquisitive growth and increased productivity through our existing retail and alternative distribution channels,'' continued Mr. Lindauer. ''We already maintain distribution into tens of thousands of locations throughout North America and the UK, and are now focusing on increasing sell-through at these points of sale -- which alone has the potential to significantly increase our revenues. Our distribution channel is a major asset. Increasing the number of sales of cards per store per day makes our distribution asset more productive. This new team will be key to our success.''
SmarTalk TeleServices, Inc. maintains distribution agreements with leading mass merchandisers, consumer electronics retailers, supermarkets, hotels, post offices and home office superstores such as the U.S. Postal Service, American Express Travel Service Offices, Sav-On Drug, Osco Drug, CompUSA, Office Depot, Pep Boys, ACE Cash Express, The Good Guys, Dominick's Finer Foods, Winn-Dixie, Marathon Oil, SuperAmerica, Speedway, Federated Stores, Shoppers Drug Mart, National Park Foundation, Staples, Service Merchandise, Merit Stations, Qwik Shops, Eckerd Drug, Food4Less, Ralphs Supermarkets, Lucky and Best Buy, as well as university book stores and convenience stores throughout North America and the U.K. The Company also creates promotional phone card programs for advertisers and corporate clients including Gillette, Polaroid, Hewlett-Packard, Wells Fargo Bank, Nabisco, Taco Bell, Lucent Technologies, Sony, Arm & Hammer, Pfizer and Prudential Securities. Visit our website at smartalk.com.
Management will hold a conference call for analysts on Thursday, April 2nd, at 10 AM (EST). Interested parties may participate by dialing 800-553-3734, and requesting conference ID No. 296477. Please dial in at least 10 minutes in advance. Overseas callers can dial 303-267-1002. A conference call replay will be available for 48 hours by dialing 800-696-1563.
Note: Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, anticipation of estimated levels of revenues and earnings, execution of the Company's prepaid cellular strategy, maintaining the Company's position as a dominant player in the prepaid phone card industry, reliance on newly hired executives to make valuable contributions to the Company's performance, reliance on the executives' past experience to help build future Company strength, the Company's ability to address the challenges listed, anticipation of improvements, refocus of promotional sales efforts, continued growth in the international marketplace, investment as a key to maintaining market position and further leverage, reliance on certain technology to facilitate a product launch, the combination of technology and distribution as a basis for market significance, the potential of the prepaid cellular opportunity, and plans for core growth, acquisitive growth, and increased productivity at retail. This list is not meant to be exhaustive. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, risks related to market acceptance and consumer demand for the Company's products and services, ability to achieve estimated levels of revenues and earnings, successful execution of the company's prepaid cellular strategy, the ability to maintain the Company's position as a dominant player in the prepaid phone card industry, the ability of newly hired executives to make contributions to the Company's performance, the Company's ability to address the challenges identified and to achieve significant improvements, the ability to increase promotional sales through refocusing, the ability to continue core growth, acquisitive growth and international growth, the ability to maintain market position and attain further leverage through strategic investment, the viability of certain technology necessary to facilitate the prepaid product launch, the actual market acceptance of the prepaid cellular products and services, as well as the Company's pricing dependence on third-party vendors. Investors who seek more information about the Company's business and relevant risk factors may wish to review the Company's SEC reports, including, but not limited to, its Annual Report on Form 10-K for 1996, 1997 and quarterly reports on Form 10-Q.
SmarTalk TeleServices, Inc.
William Kahn
VP, Corporate Communications
(310) 893-8133
or
Investor Relations
Seiler Martin Ekman, LLC
(310) 312-7880
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