KANATA, ONTARIO--(BUSINESS WIRE)--Feb. 25, 1999--
CROSSKEYS(NASDAQ:CKEYF.O) (TSE:CKY.) CrossKeys Systems Corporation
(NASDAQ: CKEYF.O; TSE: CKY), a leading supplier of software for
telecommunication service providers, today announced financial results
for its third quarter of fiscal year 1999, ended January 31, 1999.
Revenue for the third quarter of fiscal 1999 was $13.5 million,
up 37 per cent from the $9.9 million achieved in the third quarter of
fiscal 1998. Net earnings for the quarter were $1.4 million, compared
with $1.3 million for the third quarter of fiscal 1998.
As previously announced, CrossKeys recorded a one-time charge of
Cdn $1.0 million in its third quarter results. Following quarter
close, CrossKeys learned that one of its customers filed for
bankruptcy. As a result, CrossKeys was unable to secure payment for
amounts due under a software development agreement. The value of this
charge was approximately Cdn $1.0 million before tax and approximately
Cdn $0.7 million after tax, in accordance with U.S. GAAP. On a fully
diluted earnings per share basis, this charge translated to Cdn $0.04
or US $0.02. The customer was not considered a significant ongoing
source of business and does not influence CrossKeys revenue forecasts
for future quarters.
Fully diluted earnings per share for the third quarter of fiscal
1999 were Cdn $0.07 or US $0.05 translated at the average exchange
rate for the quarter of $0.6547, as reported by the Federal Reserve
Bank of New York. In the absence of the one-time charge, fully diluted
earnings per share for the third quarter would have been Cdn $0.11 or
US $0.07. The comparable figure for the third quarter of fiscal 1998
was Cdn $0.07 or US $0.05.
Revenue for the first nine months of fiscal 1999 ended January
31, 1999 was $38.7 million, up 40 per cent from the $27.5 million for
the same period in fiscal 1998. Net earnings for the nine months ended
January 31, 1999 were $5.4 million, compared to earnings of $3.1
million for the same period in fiscal 1998. Fully diluted earnings per
share for the three quarters of fiscal 1999 ended January 31, 1999
were $0.28 Cdn based on 19.2 million average shares outstanding,
compared to $0.19 Cdn per share in the three quarters of fiscal 1998
ended February 1, 1998, based on 16.3 million average shares
outstanding. Fully diluted earnings per share for the first three
quarters of fiscal 1999 were $0.19 US translated at the average
exchange rate for the three quarters of $0.6600 as reported by the
Federal Reserve Bank of New York.
I am pleased that CrossKeys continues to develop additional
partner prospects around the world," said Terry Matthews, Chairman,
CrossKeys Board of Directors about the activities of the third quarter
of fiscal year 1999. "Partnerships will be one of the key elements in
CrossKeys future success."
In his comments on the quarter, CrossKeys President and CEO John
Selwyn said: "In Q3, CrossKeys completed three major milestones in its
strategic plan. Of primary significance, we added performance
management capability for Internet Protocol (IP) -- the underlying
fabric of every application on the Internet. The ability to manage IP
complements our existing multi-technology expertise in ATM, Frame
Relay and TDM for carrier-class networks. Our IP capability has also
greatly expanded the variety of multivendor equipment CrossKeys can
manage. These vendors include Cisco, Bay Networks (Nortel), Cabletron,
3Com, and Fore, as well as Newbridge, Siemens and Ascend."
"A second achievement was bringing keener focus to our product
strategy. We have squarely focused our research and product
development activity on performance management, the new frontier in
telecommunications. We will continue to invest in this area above the
industry average," said Mr. Selwyn.
"Third, we have increased our support for multiple channels to
sell and distribute our products. We restructured regional operations
into distinct groups. Service provider account teams will create
awareness and demand for CrossKeys products and build relationships
with strategic telcos, and Channel teams will drive product sales
though our existing partners as well as recruit additional channels,"
Mr. Selwyn said.
"While we have made significant progress in our product
portfolio, support and channel development, we are experiencing
continued slow-down in the Asian market, sales weakness in our Compaq
channel, and the concluding of development work on the Siemens 36190
ATM switch. CrossKeys moves into its final quarter of fiscal 1999 with
over 170 of the world's largest service providers as customers, four
new marketing partner prospects and an exciting performance management
portfolio," Mr. Selwyn said. "CrossKeys is well-positioned to
transform this dynamic mix of products and partnerships into business
opportunities."
CrossKeys Systems Corporation (www.crosskeys.com) is a leading
developer of service, network, and element management solutions for
the world's leading telecommunication service providers, helping them
gain a competitive advantage in deregulated markets. CrossKeys
combines a commitment to research and development with experience in
the world's most demanding telecommunication markets to deliver highly
advanced software applications. A partner of Newbridge Networks
Corporation, Compaq, Siemens AG and Ascend Communications, CrossKeys
products help service providers deliver differentiated services,
implement new technologies, and manage multiple vendor networks.
CrossKeys has been ISO 9001 certified since 1995.
CrossKeys Systems Corporation is a public company whose common
shares are listed for trading on NASDAQ (CKEYF) in the United States
and on The Toronto Stock Exchange (CKY) in Canada.
CrossKeys and logo are registered trade marks of CrossKeys
Systems Corporation. All other trade marks are the property of their
respective holders and are acknowledged by CrossKeys Systems
Corporation.
The terms "partner" and "alliance" mean that CrossKeys and the
other party have agreed to cooperate to achieve certain objectives;
however, no agency relationship, partnership, or joint ownership of a
legal entity is to be inferred or implied by these terms.
This announcement may contain forward-looking statements as
defined by the US Private Securities Litigation Reform Act of 1995,
such as statements related to the industry motivators, market and
partnership opportunities. The Company cautions that these statements
are based on current expectations that are subject to risks and
uncertainties. Actual results may differ due to factors such as
customer demand, product shipping schedules, product mix, competitive
products and pricing pressures, and changes in the service, network
and element management software applications market specifically.
Additional information identifying risks and uncertainties is
contained in the Company's filings with the Ontario Securities
Commission and the Securities and Exchange Commission.
*T
Summary of financials to follow:
CROSSKEYS SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Canadian dollars, amounts in thousands, except per share data, US
GAAP)
Fiscal quarter ended Three fiscal quarters ended
January 31, February 1, January 31, February 1,
1999 1998 1999 1998
----------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Product revenue $ 11,094 $ 7,489 $ 32,107 $ 20,013
Service revenue 2,436 2,383 6,543 7,525
---------------------------------------------------
Total revenue 13,530 9,872 38,650 27,538
Product costs 2,711 1,700 7,795 4,787
Service costs 915 1,160 2,837 3,414
---------------------------------------------------
Total cost of sales 3,626 2,860 10,632 8,201
---------------------------------------------------
Gross margin 9,904 7,012 28,018 19,337
---------------------------------------------------
Expenses
Research and
development 2,287 1,757 6,557 4,988
Selling, general and
administration 5,281 3,998 14,868 10,704
Provision for uncollectable
amounts 1,000 - 1,000 -
---------------------------------------------------
Total expenses 8,568 5,755 22,425 15,692
---------------------------------------------------
Income from
operations 1,336 1,257 5,593 3,645
Interest income, net 722 350 2,097 459
---------------------------------------------------
Income before income
taxes 2,058 1,607 7,690 4,104
Income tax provision (652) (324) (2,301) (958)
---------------------------------------------------
Net income 1,406 1,283 5,389 3,146
---------------------------------------------------
---------------------------------------------------
Earnings per share
Basic $ 0.08 $ 0.08 $ 0.29 $ 0.21
Diluted $ 0.07 $ 0.07 $ 0.28 $ 0.19
Weighted average number of common
shares outstanding
Basic 18,397 16,426 18,348 15,053
Diluted 19,181 17,507 19,161 16,286
CROSSKEYS SYSTEMS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Canadian dollars, amounts in thousands, except per share data, US
GAAP)
January 31, April 30,
1999 1998
------------------------------------
(unaudited)
ASSETS
Cash and short-term investments $ 62,130 $ 54,567
Accounts receivable 4,929 12,010
Unbilled receivables 5,978 3,540
Fixed assets 6,482 6,930
Other assets 6,622 4,015
-----------------------------------
$ 86,141 $ 81,062
-----------------------------------
-----------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued
liabilities $ 4,614 $ 5,316
Deferred revenue 1,878 3,036
Income taxes payable 509 -
Deferred income taxes 509 -
-----------------------------------
7,510 8,352
Shareholders' equity 78,631 72,710
-----------------------------------
$ 86,141 $ 81,062
-----------------------------------
-----------------------------------
*T
--30--ajk/cgo*
CONTACT: CrossKeys Systems Corporation
00, ext. 8936
613/599-2290 (FAX)
E-Mail: jblackmore@crosskeys.com
Web Site: www.crosskeys.com
or
CrossKeys Systems Corporation
Shelley Moorhead, 613/ 591-1600, ext. 8336
613/599-2350 (FAX)
E-Mail: moorhead@crosskeys.com
KEYWORD: NEW YORK
INDUSTRY KEYWORD: TELECOMMUNICATIONS EARNINGS
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