Exhibit 99.1
TeleCommunication Systems, Inc. Reports Record
Third Quarter 2003 Results
Company Reports EPS of $0.02 on $28.2 Million Revenue for Quarter;
Third Quarter Service Bureau/E9-1-1 Revenue Grows to $8.8 Million;
SwiftLink Satellite-Based Systems Contribute $6.4 Million
To Record Quarterly Network Solutions Revenue
ANNAPOLIS, Md., Oct. 23 /PRNewswire-FirstCall/ -- TeleCommunication
Systems, Inc. (TCS) (Nasdaq: TSYS), a global leader in location and messaging
software and E9-1-1 services for wireless carriers, and an expert in highly
reliable and secure communications systems for government customers, today
announced results for the quarter ended September 30, 2003.
TCS reported third quarter 2003 net income of $0.5 million or $0.02 per
share, its first quarterly profit in the four years since beginning its
aggressive investment in cellular wireless data technology. Third quarter
2003 net income improved $4.9 million compared to the previous quarter's net
loss of $4.4 million (excluding the second quarter's $7.0 million additional
amortization of capitalized software development costs), and improved $3.1
million compared to the third quarter 2002 net loss of $2.6 million.
Total revenue for the quarter was a record $28.2 million, up 41% from
second quarter 2003 revenue of $20.1 million, and 22% from $23.2 million of
revenue in the third quarter of 2002. For the first nine months of 2003, TCS
reported total revenue of $67.6 million, compared to $64.0 million in the
first nine months of 2002. Third quarter 2003 revenue was comprised of 31%
Service Bureau, 56% Network Solutions, and 13% Network Software.
The Company reported its highest-ever gross profit in the third quarter of
$11.8 million, representing a 43% increase over second quarter 2003 gross
profit of $8.3 million and a 16% increase over $10.2 million of gross profit
in the third quarter of 2002. Gross margin was 42% in the quarter ended
September 30, 2003, compared to 41% in the second quarter of 2003, and 44% in
the third quarter of 2002. For the first nine months of 2003 overall gross
margin was 42% compared to 38% for the first nine months of 2002.
"We are extremely pleased to have met our goal of positive earnings for
the third quarter. Continued progress in our wireless E9-1-1 service bureau
business and impressive sales of our satellite-based data systems and
solutions in the quarter combined to produce our best quarterly revenue, gross
profit, and net income since becoming a public company," commented Maurice B.
Tose, TCS's Chairman, President and CEO. "Cost management efforts also
contributed to these results, while we continued investment in our development
of wireless carrier and government customer products and services, a strategy
we believe will deliver significant long-term returns for TCS shareholders,"
concluded Tose.
TCS ended the third quarter with $16.1 million in cash and cash
equivalents, up from $15.5 million at June 30, and the Company's $15 million
bank line of credit remains unused. Mr. Tose observed, "Further deployments
in our E9-1-1 Service Bureau business, increased wireless carrier capital
spending expectations, continued success of our SwiftLink products, and on-
going cost containment give us confidence in our goal of continuing to report
positive net income for the fourth quarter and for calendar year 2004."
TCS ended the quarter with revenue backlog of $87 million, up from $81
million as of June 30, 2003. Of the Company's total backlog, approximately
$52 million is expected to be realized over the next twelve months.
OPERATIONAL HIGHLIGHTS
Service Bureau Business
During the quarter ended September 30, 2003, TCS generated $8.8 million of
Service Bureau revenue. TCS's Service Bureau business is made up of wireless
enhanced 9-1-1 (E9-1-1) location information integration services to wireless
carriers and Public Safety Answering Points (PSAPs), and hosted inter-carrier
text messaging services provided to text message distributors including
America Online(TM). TCS is one of only two major wireless E9-1-1 service
providers in the U.S.
Steady quarter-over-quarter revenue and profit growth is projected for the
Company's E9-1-1 Service Bureau business as additional locations are deployed
under our existing long-term service contracts.
During the quarter, TCS announced that it will provide E9-1-1 Phase II
service to MoviStar Puerto Rico, allowing PSAPs to locate an emergency caller
within 50 meters or less of the caller's location. MoviStar Puerto Rico will
utilize TCS' award-winning Xypoint(R) Location Platform for its hosted Phase
II E9-1-1 solution combined with TCS' Hosted PDE (Position Determining Entity)
Service. TCS' services include the ability to determine the caller's precise
location accurately within seconds in a wide range of environments and the
ability to route the call and deliver critical data to the local PSAP. This
is the fifth carrier that has engaged TCS for its Hosted PDE solution.
TCS also announced in the quarter the launch of its PSAP E9-1-1 Readiness
Services to help state and local public safety entities accelerate preparation
and implementation of Phase I and Phase II wireless E9-1-1 services in their
communities. TCS' new PSAP E9-1-1-Readiness Services will provide a cost-
effective and time-efficient method to bring wireless emergency services to
the citizens of cities and counties across the country. TCS' suite of PSAP
E9-1-1 Readiness Services consists of project management, carrier request
management, and technical consulting services that can be selected
individually or in combination by the PSAP to assist in their E9-1-1
implementations.
TCS added a net 150 new PSAP connections during the quarter and as of
September 30, 2003, served a total of 3,630 PSAP connections, up 45% from the
2,510 PSAP connections served as of September 30, 2002. The Company is
continuing to aggressively roll out Phase I and Phase II E9-1-1 services for
its wireless carrier customers, meeting regulatory deadlines and responding to
PSAP requests for deployments as they declare themselves ready.
Network Solutions
Third quarter revenue from the Company's Network Solutions business
segment was $15.7 million, up $6.2 million or 65% from the second quarter's
$9.5 million. Year-to-date Solutions revenue was $33.3 million, up 24% from
last year's $26.9 million. TCS's Network Solutions segment designs,
furnishes, operates, and supports fixed and transportable wireless data
communications systems requiring high reliability and security to government
customers.
As of September 30, 2003, TCS had sold over 400 of its SwiftLink(R)
deployable communication systems, with 161 units sold during the third quarter
of 2003. TCS recently introduced its latest addition to the SwiftLink product
line, the SwiftLink 2300, a man-pack terminal, allowing users hands-free
carrying flexibility for encrypted or non-encrypted IP-based voice, data and
video wireless connections. The SwiftLink 2300's rugged and extremely
portable design is expected to have broad appeal to a wide range of customer
groups, including military and Intelligence personnel, and first-responders.
The Company recently announced demonstrations of the advanced technology
capabilities provided by the Cisco Systems 3200 Mobile Access Router
integrated into the TCS SwiftLink 2300 in a series of public and private
sector customer events across the country. SwiftLink systems vary in
configuration, depending on the user requirements, and can provide
connectivity for one to more than seventy users at the same time in packages
that range in size from 25 to 85 pounds.
The Solutions group performs integration and related projects in addition
to its SwiftLink business, and expects to have significant opportunities to
apply Company expertise to Homeland Security initiatives as they evolve and
are funded.
Network Software
As of September 30, 2003, TCS had deployed a total of 80 software systems
with wireless carriers, including TCS's Wireless Internet Gateways(TM), Short
Message Service Centers (SMSCs), and Xypoint(R) Location Platforms (XLPs).
During the quarter, TCS delivered on orders for its wireless products,
primarily the Company's SMSCs and Wireless Internet Gateways, resulting in
$3.7 million of Software segment revenue, of which license revenue was $2.2
million. In addition, the Company's installed base of software products
generated approximately $1 million of recurring maintenance revenue, which is
included in the reported $1.6 million of Network Software Services revenue for
the third quarter.
During the quarter, TCS introduced Xypages(TM), the Company's first
wireless software product combining both location and messaging technologies.
Xypages allows wireless subscribers to access location-specific information
delivered via SMS to the user. The hosted application offered to wireless
carriers can be used on any existing digital carrier network and requires no
network upgrades. Xypages functionality can also be extended to include more
precise location-based services such as text-based driving directions from a
user's current location to a desired destination. Xypages features marry
TCS's wireless E9-1-1 location technology with the Company's text messaging
expertise, enabling wireless carriers to generate higher revenue per user
through the delivery of value-added services to their subscribers.
FINANCIAL DETAILS
* Total revenue was $28.2 million in the third quarter of 2003, up 41%
from $20.1 million in the second quarter of 2003 and 22% from $23.2
million in the third quarter of 2002. For the first nine months of
2003, revenue totaled $67.6 million, a 6% increase over $64.0 million of
revenue in the first nine months of 2002.
In the third quarter of 2003, the Company's Network Software revenue
from carrier licenses and related software maintenance and deployment
services was $3.7 million, compared to second quarter 2003 revenue of
$2.3 million, and $9.9 million revenue in the third quarter of 2002.
Software license revenue was $2.2 million in the third quarter, up from
second quarter 2003 sales of $0.8 million, but down from third quarter
2002 revenue of $5.9 million, reflecting low spending by carriers on
enhancements to their networks.
TCS's Service Bureau revenue, which includes wireless E9-1-1 services
and hosted inter-carrier text message distribution services, totaled
$8.8 million in the quarter ended September 30, 2003. This represents a
6% increase over second quarter 2003 revenue of $8.3 million and a 50%
increase over third quarter 2002 revenue of $5.9 million, as the Company
continued to expand the number of Public Safety Answering Points served
for E9-1-1 services. For the first nine months of 2003, total Service
Bureau revenue increased 43% to $24.7 million, from $17.3 million in the
first nine months of 2002.
TCS's Network Solutions revenue from systems integration and digital
communications projects largely for government customers was a record
$15.7 million in the third quarter of 2003, up 65% from $9.5 million in
the prior quarter, and 109% from $7.5 million in the third quarter of
2002. Quarter-to-quarter Network Solutions revenue fluctuations reflect
the variability of project timing and contract durations. SwiftLink
deployable communication systems generated $6.4 million of revenue in
the third quarter, up 22% from $5.2 million in the second quarter.
Year-to-date, SwiftLink revenue was $14.8 million, a 60% increase from
the $9.2 million of revenue in the first nine months of 2002.
* Total gross profit (revenue minus direct cost of revenue excluding the
amortization of software development costs) was an all-time record $11.8
million in the third quarter of 2003, up 43% from $8.3 million in the
second quarter of 2003, and up 16% from $10.2 million in the third
quarter of 2002. Total gross profit for the first nine months of 2003
was $28.3 million, an increase of 16% from $24.4 million in the first
nine months of 2002.
As a percentage of revenue, company-wide gross profit margin was 42% in
the third quarter, up slightly from the second quarter's 41% and down
slightly from the third quarter 2002's gross profit margin of 44%.
Gross profit margin for the first three quarters of 2003 was 42%, versus
38% in the first three quarters of 2002.
The gross profit margin from Network Software in the third quarter of
2003 was 52%, up from second quarter 2003 gross margin of 41%, due to a
larger proportion of revenue from higher margin licenses versus software
services and ancillary equipment.
Service Bureau gross profit in the third quarter was $4.7 million, up 8%
from second quarter 2003 gross profit of $4.3 million and up 98% from
third quarter 2002 gross profit of $2.4 million. Service Bureau gross
margin was 53% in the third quarter, compared to 52% in the second
quarter of 2003 and 40% in the third quarter of 2002.
The gross profit for the Company's Network Solutions business segment
was $5.2 million in the third quarter of 2003, up 73% from $3.0 million
in the second quarter 2003, and up 117% from $2.4 million in the third
quarter of 2002. The gross profit margin in this segment was 33% in
the third quarter of 2003, up from 32% in the second quarter of 2003 and
32% in the third quarter of 2002.
* Operating expenses. Research and development expenses during the third
quarter were $4.1 million, compared to $4.7 million in the second
quarter and $4.2 million in the third quarter of 2002. Sales,
marketing, general and administrative expenses continued to decline as a
result of cost control measures, and totaled $4.8 million in the third
quarter, down from $4.9 million in the second quarter and $5.1 million
in third quarter 2002.
* EBITDA, (Earnings Before Interest, Taxes, Depreciation and Amortization,
a non-GAAP financial measure) was positive $2.9 million, or $0.10 per
basic share in the third quarter of 2003, compared to an EBITDA loss of
$1.3 million or ($0.04) per share in the second quarter of 2003, and
positive EBITDA of $0.9 million, or $0.03 per share in the third quarter
of 2002.
* Non-cash expenses totaled $2.4 million in the third quarter of 2003,
compared to $10.0 million (including a $7.0 million additional
amortization of capitalized software) in the second quarter of 2003, and
$3.4 million in the third quarter of 2002.
* Net income for the third quarter of 2003 was $0.5 million, or $0.02 per
share (both basic and diluted). This compares to a net loss of $11.4
million, or ($0.38) per share in the second quarter of 2003 and a net
loss of $2.6 million, or ($0.09) per share in the third quarter of 2002.
Per share figures were computed on the basis of 33.7 million weighted
average diluted shares in Q3-03, and 29.6 million shares in Q2-03, and
29.2 million shares in Q3-02.
* Cash added during the third quarter of 2003 was $0.6 million, comprised
of the $2.9 million EBITDA gain, and new equipment loans of $2.6
million, offset by $2.6 million of working capital changes, $1.0 million
for fixed asset additions, and $1.3 million in lease payments and debt
service.
* The Balance Sheet at the end of the third quarter reflected $16.1
million of cash and cash equivalents compared to $15.5 million as of
June 30, 2003. The Company's $15 million bank line of credit remains
unused.
CONFERENCE CALL
The Company has scheduled a conference call for today, Thursday, October
23, 2003 at 5:00 PM EDT. During the call, Maurice B. Tose, Chairman,
President and CEO, and Tom Brandt, Senior Vice President and CFO, will discuss
third quarter results and other corporate information. Investors can call
1-877-253-5218 (domestic) and 1-706-643-0801 (international) prior to the 5:00
PM start time and ask for the TeleCommunication Systems conference call hosted
by Mr. Tose. A replay of the call will be available on Thursday, October 23,
2003 beginning at 8:00 PM EDT and will be accessible until Friday, October 31,
2003 at 5:00 PM EDT. The replay call-in number is 1-800-642-1687 for domestic
callers and 1-706-645-9291 for international listeners. The access number is
3365790. The conference call will also be broadcast simultaneously on the
Company's web site, www.telecomsys.com. Investors should click on the
Investor Info tab and are advised to go to the web site at least 15 minutes
early to register, download, and install any necessary audio software. The
call will also be archived on the TCS website. In addition, updated
historical and forecasted financial information will be posted concurrently
with the call under the "Financial Model" selection of the Investor Relations
area of TCS's website.
ABOUT TELECOMMUNICATION SYSTEMS, INC.
TeleCommunication Systems, Inc. (TCS) (Nasdaq: TSYS) is a leading provider
of software and solutions to leading wireless telecommunication carriers
worldwide and to government customers requiring high reliability and security.
The Company's Network Software segment is a global leader in wireless location
platforms, text messaging, and alerts. The Service Bureau segment provides
enhanced 9-1-1 connections to public safety call centers for the largest US
wireless carriers, as well as hosted wireless text messaging services. The
Network Solutions segment enables rapid deployment of fixed and transportable
communications systems using wireless, satellite, and terrestrial networks.
TCS makes connections that matter. Whether connecting people with voice,
data or video in a wireless world or connecting our customers and shareholders
with long-term value, TCS delivers competitive, reliable and secure products,
services and solutions to meet these needs. For more information visit
www.telecomsys.com.
This press release discloses the Company's earnings before interest,
taxes, depreciation, amortization, and other non-cash expenses ("EBITDA"),
which may be considered a non-GAAP financial measure. As used herein, "GAAP"
refers to generally accepted accounting principles in the United States.
Generally, a non-GAAP financial measure is a numerical measure of a Company's
performance, financial position, or cash flows that either excludes or
includes amounts that are not normally excluded or included in the most
directly comparable measure calculated and presented in accordance with GAAP.
The Company believes that EBITDA is an appropriate measure of evaluating its
operating performance and liquidity because the measure is indicative of the
Company's availability of discretionary funds and its capacity to service its
debt, and thereby provides additional useful information to investors
regarding its financial condition and results of operations. This measure,
however, should be considered in addition to, and not as a substitute or
superior to, net income (loss), operating income (loss), cash flows, or other
measures of financial performance prepared in accordance with GAAP. A
reconciliation of the Company's EBITDA to the Company's net income (loss),
which we believe to be the nearest GAAP measure has been included in the
attached Consolidated Statements of Operations.
This announcement contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities and Exchange Act of 1934, as amended. These statements are
based upon TCS's current expectations and assumptions that are subject to a
number of risks and uncertainties that would cause actual results to differ
materially from those anticipated. The words, "believe," "expect," "intend,"
"anticipate," and variations of such words, and similar expressions identify
forward-looking statements, but their absence does not mean that the statement
is not forward-looking. Statements in this announcement that are forward-
looking include, but are not limited to, Mr. Tose's belief that the Company's
strategy will continue to deliver significant long-term returns for TCS
shareholders; Mr. Tose's comment that the Company has confidence in obtaining
the goal of continuing to report positive net income from operations for the
fourth quarter and for the calendar year 2004; the projection of steady
quarter-over-quarter revenue and profit growth for the Company's Service
Bureau business; the statement that SwiftLink 2003 is expected to have broad
appeal to a wide range of customer groups, including military and intelligence
personnel, first-responders, and emergency response personnel, and the
statement that approximately $52 million of the Company's backlog is expected
to be realized over the next twelve months.
The actual results realized by the Company could differ materially from
the statements made herein, depending in particular upon the risks and
uncertainties described in the Company's filings with the Securities and
Exchange Commission (SEC). These include without limitation risks and
uncertainties relating to the Company's financial results and the ability of
the Company to (i) reach profitability, (ii) continue to rely on its customers
and other third parties to provide additional products and services that
create a demand for its products and services, (iii) conduct its business in
foreign countries, (iv) adapt and integrate new technologies into its
products, (v) expand its sales and business offerings in the wireless data
industry, (vi) develop products and deliver services without any errors or
defects, (vii) have sufficient capital resources to fund the Company's
operations, (viii) protect its intellectual property rights, (ix) implement
its sales and marketing strategy, (x) successfully integrate the assets and
personnel of acquired entities , such as Otelnet, and (xi) realize its
expected revenue backlog. Existing and prospective investors are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to update or
revise the information in this press release, whether as a result of new
information, future events or circumstances, or otherwise.
TeleCommunication Systems, Inc.
Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
Revenue:
Network software:
Network software licenses $ 2,177 $ 5,920 $ 5,432 $ 11,043
Network software services 1,563 3,941 4,196 8,746
Network software total 3,740 9,861 9,628 19,789
Service bureau 8,832 5,885 24,697 17,323
Network solutions 15,675 7,499 33,294 26,915
Total revenue 28,247 23,245 67,619 64,027
Operating costs and expenses
Direct cost of network software 1,786 4,450 4,823 10,493
Direct cost of service bureau 4,138 3,518 12,105 9,385
Direct cost of network solutions 10,501 5,110 22,353 19,788
Research and development 4,109 4,234 12,688 12,719
Sales and marketing 2,068 2,221 6,674 7,625
General and administrative 2,725 2,853 8,335 9,243
EBITDA 2,920 859 641 (5,226)
Non-cash stock compensation expense 412 429 1,174 1,296
Depreciation and amortization of
property and equipment 1,710 1,593 4,945 4,758
Amortization of software
development costs 123 1,233 8,927 3,620
Amortization of Xypoint tradename 138 139 415 415
Total operating costs and
expenses 27,710 25,780 82,439 79,342
Income/(loss) from operations 537 (2,535) (14,820) (15,315)
Net interest and other
income/(expense) (31) (24) (114) (686)
Net income/(loss) $ 506 $ (2,559) $(14,934) $(16,001)
Earnings/(loss) per share, basic $ 0.02 $ (0.09) $ (0.50) $ (0.55)
Earnings/(loss) per share, diluted $ 0.02 $ (0.09) $ (0.50) $ (0.55)
EBITDA $ 2,920 $ 859 $ 641 $ (5,226)
EBITDA per share, basic $ 0.10 $ 0.03 $ 0.02 $ (0.18)
EBITDA per share, diluted $ 0.09 $ 0.03 $ 0.02 $ (0.18)
Weighted average shares
outstanding- basic 29,802 29,161 29,661 29,033
Weighted average shares
outstanding- diluted 33,706 29,161 29,661 29,033
TeleCommunication Systems, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)
September 30, December 31,
2003 2002
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 16,126 $ 27,402
Accounts receivable 21,408 22,911
Unbilled receivables, net 11,000 6,987
Other current assets 2,963 1,675
Total current assets 51,497 58,975
Property and equipment, net 10,189 11,814
Software development costs, net 626 7,688
Tradename, net 116 530
Other assets 1,875 1,457
Total assets $ 64,303 $ 80,464
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and
accrued expenses $ 16,000 $ 19,669
Deferred revenue 2,266 2,846
Current portion of capital
leases and notes payable 6,252 4,770
Total current liabilities 24,518 27,285
Capital leases and notes payable,
less current portion 5,566 5,543
Total stockholders' equity 34,219 47,636
Total liabilities and
stockholders' equity $ 64,303 $ 80,464
SOURCE TeleCommunication Systems, Inc.
-0- 10/23/2003
/CONTACT: Tom Brandt, Senior Vice President & CFO, +1-410-280-1001, or
brandtt@telecomsys.com, or Bob Bannon, Investor Relations, +1-410-280-1055, or
bannonb@telecomsys.com, both of TeleCommunication Systems, Inc./
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(TSYS)
CO: TeleCommunication Systems, Inc.
ST: Maryland
IN: CPR STW TLS
SU: CCA ERN