Exhibit 99
TeleCommunication Systems, Inc. Reports First Quarter 2004 Results
Gross Profit Grows to $12.9 Million on $32.8 Million Revenue
in Quarter; Company Affirms Full Year Profit Expectation;
Enterprise Division Integration on Track
ANNAPOLIS, Md., April 28 /PRNewswire-FirstCall/ -- TeleCommunication
Systems, Inc. (TCS) (Nasdaq: TSYS), a global leader in wireless data technology,
today announced results for the quarter ended March 31, 2004.
The March 2004 quarter is the first period to include the operating results
of the Enterprise Segment, which was acquired from Aether Systems, Inc.
effective January 1, 2004. TCS reported total revenue for the quarter of $32.8
million, up $13.5 million from the first quarter of last year. The new
Enterprise Segment contributed $12.6 million revenue to the first quarter.
Overall gross profit of $12.9 million for the quarter was up $4.6 million or
56% from first quarter 2003's $8.2 million. The company's overall gross margin
was 39% in the most recent quarter, vs. 43% a year ago, reflecting the
Enterprise segment's lower average margins than the Carrier and Government
segment margins comprising all of Q1-03's business.
TCS reported a net loss for the quarter ended March 31, 2004 of $3.4
million, or ($0.10) per share (basic and diluted), a 15% improvement from the
first quarter 2003 net loss of $4.0 million or ($0.14) per share. Noncash
charges in Q1-04 were $3.3 million, including $0.5 million of debt financing
amortization related to the private placement completed during the first
quarter, vs. Q1-03's $3.1 million of depreciation and amortization. Management
believes that Adjusted Operating Income or Loss, computed before non-cash
charges, is a useful measure in assessing operating performance and liquidity in
addition to but not as a substitute for earnings measured in accordance with
generally accepted accounting principles, because it is indicative of the
availability of discretionary funds and the capacity to service debt. The
company's first quarter Adjusted Operating Loss was ($0.01) per share (basic and
diluted) in 2004 vs. a loss of ($0.03) per share (basic and diluted) in 2003.
"This was a busy, productive quarter for TCS management as we closed on our
acquisition of the Enterprise Division, opening major new markets to us, and we
commenced integration of Enterprise operations into TCS," commented Maurice B.
Tose, TCS' Chairman, President and CEO. "We are very pleased that in its first
quarter as part of our company, the Enterprise operations made a modest positive
cash contribution to overall results. The operating highlights summarized in
this release indicate that much was accomplished this quarter that lays a solid
foundation for the year.
"As anticipated when we reported last quarter's results, we have come to
expect lower Government spending on Solutions like ours during the first half of
the year, and this was reflected in 2004's first quarter. Looking out to the
balance of 2004, we see strong and growing demand from our Government customers,
as well as improving prospects for Carrier and Enterprise software based systems
and service bureau operations. We, therefore, continue to expect an improved
second quarter and strong second half, similar to the pattern of our experience
of the last two years, which will generate a healthy overall company profit for
the year," concluded Tose.
OPERATIONAL HIGHLIGHTS
Enterprise Segment
* TCS completed the acquisition of Enterprise Mobility Solutions Division
of Aether Systems, Inc. (which is now TCS's Enterprise Segment), bridging
wireless data solutions for carrier and enterprise requirements. The
Frost & Sullivan Strategic Acquisition Award was presented to TCS in
recognition of the merits of this transaction.
* marketStream was rolled out in Europe creating streaming quotes for
financial instruments served by GPRS networks, substantially expanding
the company's addressable market for mobile access to financial market
data.
* TCS signed an agreement with AT&T Wireless as a GPRS network data
solutions provider, supporting next generation BlackBerry(TM) handhelds.
Last week the Company announced its first major new customer in
connection with this agreement, law firm Piper Rudnick.
Carrier Segment
* The Company's relationship with Lucent Technologies was substantially
expanded after extensive mutual planning and analysis. TCS is now
Lucent's Short Message Service Center partner of choice and a reseller of
Lucent platforms to support SMSC.
* TCS was awarded 2 additional wireless patents: a wireless prepaid real
time web-based reporting patent, and a patent for technology that allows
an Overwrite Feature, which eliminates obsolete information service
messages. This brings the owned patent total (including patents purchased
as part of the Enterprise acquisition) to 17. The Company now has
submitted over 70 additional domestic and international patent
applications, and it has taken steps during the quarter to enhance
protection of its intellectual property rights.
* Centennial Wireless, one of the largest independent wireless
telecommunications service providers in the United States and the
Caribbean, signed a five year contract extension with TCS to deliver
Phase I and Phase II E9-1-1 services to Centennial's U.S. and Caribbean
customers.
* MetroPCS, a provider of wireless communications services in the greater
Miami, San Francisco, Atlanta and Sacramento metropolitan areas, began
utilizing TCS precise position-determining services.
* The Service Bureau business unit also entered into new multi-year
Enhanced 911 contracts with NTELOS, Northcoast PCS, Thumb Cellular,
Taylor Telecommunications, and Northwest Missouri Cellular, representing
over 400,000 wireless subscribers.
* The TCS Xypoint Location Platform (XLP) Assisted Global Positioning
Center (A-GPS) Server for GSM/GPRS-based systems was announced. It is
designed to enable new, revenue generating applications and services with
minimal impact on an operator's network. The precise location
capabilities available through the XLP are based on A-GPS technology and
allow mobile operators to increase revenues by enabling compelling and
accurate location based services for their subscribers such as 'Where is
my Nearest,' 'Find my Friends' and 'Route Planner.'
* The latest generation Wireless Messaging Gateway was launched, providing
expanded support for interoperable wireless applications using a single
platform.
* TCS's Voice over Internet Protocol (VoIP) E9-1-1 Service was announced
with a set of comprehensive capabilities meant to address the broad range
of challenges for emergency services which are currently posed by Voice
over IP technologies.
* A scalable solution was announced for mobile operators within the
European Union (EU) to address E112 wireless emergency services call
requirements. The EU E112 mandate requires that all mobile operators who
are technically able to offer location-based services to their
subscribers must forward the 112 emergency caller's location information
to emergency services.
Government Segment
* Our installed base of Swiftlink(TM) deployable communication systems
increased in the quarter with shipment of 40 units, and product
development efforts have continued. We anticipate launch during the
second quarter of a new model that can operate on WiFi, GPRS, Iridium and
VSAT networks, a prototype of which was demonstrated at this year's CTIA
conference in March.
* Mike Bristol joined the company with a commitment to build on the
momentum of our Government Solutions Segment's growth and margin
expansion over the last several years. His background of large and small
company leadership, and experience on both sides of the federal
procurement process qualify him well to take this business to the next
level.
* The segment's engineers completed deployment of a high-speed, redundant
international satellite connection between the U.S. Internet and Bahrain.
Commercial voice and data traffic is being transmitted to and from
Bahrain via one of TCS' International Gateway Facility teleport earth
stations in Manassas, Virginia.
FINANCIAL DETAILS
Revenue and Gross Profit (revenue minus direct cost of revenue):
Total revenue was $32.8 million in the first quarter of 2004, up 34% from
$24.4 million in the fourth quarter of 2003, and up 70% from $19.3 million in
the first quarter of 2003. The addition of $12.6 million of revenue from the
acquired Enterprise segment more than offset the expected sequential decrease in
sales resulting from reduced revenue from the seasonally strong fourth quarter
in the company's Government Network Solutions segment, and lower software
revenue.
The composition of first quarter revenue was as follows:
($ millions) Government Carrier Enterprise Total
Service bureau
and subscriber $ - $ 9.1 $11.6 $20.7
Software systems - 3.5 1.0 4.5
Network solutions 7.5 - - 7.5
Total $7.5 $12.6 $12.6 $32.8
Total gross profit (revenue minus direct cost of revenue) was $12.9 million
or 39% of revenue in the first quarter of '04, up from $12.5 million and 51% of
revenue in the fourth quarter of 2003, and up from $8.2 million and 43% of
revenue in the first quarter of last year. The average gross margin was lower
than last year's first quarter mainly because of the inclusion in the most
recent quarter's mix of the new Enterprise segment's Blackberry reseller
business, which has lower average margins than other company operations.
Service bureau and subscriber revenue, substantially all of which is
month-after-month charges to customers, was $20.7 million in the first
quarter of 2004, up $11.4 million from the preceding quarter, due to the
addition of Enterprise revenue from mobile office, finance, and asset
customers. Service bureau revenue was flat quarter-to-quarter, as higher
revenue from incremental maintenance and deployment services was offset
by the effect of a carrier customer's correction of the subscriber
counts on which its E-911 service billings are based. Service bureau
revenue growth is expected to resume in Q2-04.
The gross profit from TCS service bureau and subscriber business was
$7.7 million or 37% of revenue in the most recent quarter, up 46% or
$2.4 million from $5.3 million and 56% of revenue in Q4-03, reflecting
the addition of gross profit from the Enterprise business.
Software systems revenue was $4.5 million in the first quarter of 2004,
down from fourth quarter 2003 sales of $5.0 million, but up from first
quarter 2003 revenue of $3.6 million. The first quarter '04 revenue
includes $1 million from the Enterprise segment. Sales to carriers were
primarily messaging product related, and Enterprise revenue represents
mobile asset deployments using the company's Fusion(TM) platform, with
significant customization in deliverables to both market segments.
The gross profit from software systems was $1.9 million or 43% of
revenue in Q1-04 vs. $3.4 million or 68% of revenue in the preceding
quarter, and $1.9 million and 53% of revenue in the first quarter of
last year. The most recent quarter's revenue was comprised of a higher
proportion of lower margin custom work and maintenance than high-margin
license revenue in the prior periods.
Government Network Solutions revenue from systems integration and
digital communications projects largely for government customers was
$7.5 million in the first quarter of 2004, compared to $10.0 million in
the prior quarter, and $8.1 million in the first quarter of 2003. The
lower sequential network solutions revenue reflects the variability of
project timing and the seasonally stronger second half that the company
has experienced in this market.
The gross profit from Government Network Solutions was $3.3 million or
44% of revenue, vs. $3.9 million and 39% of revenue last quarter and
$2.8 million or 34% of revenue in the first quarter of 2003. While the
volume of business in the most recent quarter was seasonally low, the
mix of revenue was favorably affected by the growing proportion of
billings for systems with proprietary technology, including
Swiftlink(TM) systems.
Operating Expenses:
Overall cash operating expenses (R&D, sales and marketing, and G&A) for the
first quarter of 2004 were $12.7 million. This is an increase of $3.3 million
from the fourth quarter of '03, of which $2.5 million represents expenses
associated with the Enterprise segment.
Research and development expenses for the quarter were $5.0 million, of
which $0.3 million was for Enterprise projects, mainly enhancements to Mobile
Asset and Mobile Finance software, and the balance was invested primarily in
wireless carrier enhanced services technology for location-based and messaging
services. This spending level compares to R&D investments of $4.2 million in the
preceding quarter.
Sales and marketing expenses totaled $3.2 million, up from $2.2 million in
the previous quarter, with the increase all due to addition of the sales force
and resources for addressing the Enterprise market.
General and administrative expenses were $4.5 million in the first quarter
of 2004, up from $2.9 million in the previous quarter, with the increase
primarily associated with the Enterprise segment.
Net loss for the first quarter 2004 was $3.4 million, or ($0.10) per basic
and diluted share, compared to $4.0 million, or ($0.14) per basic and diluted
share in the first quarter of 2003 and a $1.4 million profit or $0.05 basic
earnings per share ($0.04 diluted) in the fourth quarter of 2003. Basic per
share figures were computed on the basis of 32.9 million, 30.2 million, and 29.6
million weighted average outstanding shares, respectively, in Q1-04, Q4- 03, and
Q1-03.
The company's cash and cash equivalents balance was approximately $20
million at March 31, 2004 versus $19 million at December 31, 2003. There were no
borrowings under the Company's $15 million bank line of credit except for the
balance on the $2.5 million term loan borrowed in December 2003.
CONFERENCE CALL
The company has scheduled a conference call for tomorrow, Thursday, April
29, 2004 at 8:30 AM EDT. During the call, Maurice B. Tose, Chairman, President
and CEO, and Tom Brandt, Senior Vice President and CFO, will discuss first
quarter results and other corporate information. Investors can call
1-877-691-0878 (domestic) and 1-973-582-2741 (international) prior to the 8:30
AM start time and ask for the TeleCommunication Systems conference call hosted
by Mr. Tose. A replay of the call will be available on Thursday, April 29, 2004
beginning at 11:30 AM EDT and will be accessible until May 10,2004 at 5:00 PM
EDT. The replay call-in number is 1-877-519-4471 for domestic callers and
1-973-341-3080 for international listeners. The access number is 4718005. The
conference call will also be broadcast simultaneously on the company's web site,
www.telecomsys.com or http://www.viavid.net/detailpage.aspx?sid=00001B5D.
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.
ABOUT TELECOMMUNICATION SYSTEMS, INC.
TeleCommunication Systems, Inc. (TCS) (Nasdaq: TSYS) is a leading provider
of mission critical wireless data solutions to carriers, enterprise and
government customers. TCS' wireless data offerings include location-based
Enhanced 9-1-1 services, and messaging and location service infrastructure for
wireless operators, real-time market data and alerts to financial institutions,
mobile asset management and mobile office solutions for enterprises, and
encrypted satellite communications to government customers. For more information
visit www.telecomsys.com.
This press release discloses the Company's net income/(loss) before non-
cash charges (depreciation, amortization, and other non-cash expenses), 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
Adjusted net income/loss 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, operating
income, cash flows, or other measures of financial performance prepared in
accordance with GAAP. The non- GAAP measure included in the Company's press
release has been reconciled to the nearest GAAP measure as is required under the
rules of the Securities and Exchange Commission regarding the use of non-GAAP
financial measures.
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' 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 comment that the Company expects
strong and growing demand from Government customers as well as improving
prospects for Carrier and Enterprise software-based systems and service bureau
operations; and Mr. Tose's comment that the Company expects to see an improved
second quarter and strong second half, which will generate a healthy profit for
the year.
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 software 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, and (x) successfully integrate the assets and
personnel of acquired entities, such as the Enterprise net assets acquired from
Aether Systems, Inc. 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)
Three months ended March 31,
2004 2003
(unaudited)
Revenue
Service bureau and subscriber $20,736 $ 7,555
Software systems 4,537 3,608
Network solutions 7,484 8,129
Total revenue 32,757 19,292
Operating costs and expenses
Direct cost of service bureau and
subscriber revenue 13,067 4,006
Direct cost of software systems revenue 2,604 1,685
Direct cost of network solutions revenue 4,199 5,360
Research and development expense 5,046 3,915
Sales and marketing expense 3,190 2,393
General and administrative expense 4,487 2,903
Non-cash stock compensation expense 357 373
Depreciation and amortization of
property and equipment 1,732 1,545
Amortization of identifiable
intangible assets 532 138
Amortization of software
development costs 87 1,030
Subtotal non-cash operating expenses 2,708 3,086
Total operating costs and expenses 35,301 23,348
Loss from operations (2,544) (4,056)
Cash interest expense (263) (232)
Non-cash financing cost (544) (44)
Other (expense) / income, net (95) 284
Net loss $(3,446) $(4,048)
Loss per share, basic and diluted $ (0.10) $ (0.14)
Weighted average shares outstanding-
basic and diluted 32,922 29,568
Management believes that Adjusted Operating Income/(Loss), excluding non-
cash charges, in conjunction with the complete Statement of Operations, is
helpful in assessing the operating performance of the Company. It is calculated
by adjusting GAAP net income/(loss) to exclude the effects of non- cash
compensation expense, depreciation and amortization, amortization of software
development costs, amortization of identifiable purchased intangible assets, and
non-cash interest expense. A reconciliation to net income/(loss) follows:
Net loss $(3,446) $(4,048)
Add back non-cash operating expenses 2,708 3,086
Add back non-cash financing cost 544 44
Total non-cash charges 3,252 3,130
Adjusted operating income/(loss),
excluding non-cash expenses $ (194) $ (918)
Adjusted operating income/(loss) per share $ (0.01) $ (0.03)
TeleCommunication Systems, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)
March 31, December 31,
2004 2003
Assets (unaudited)
Current assets:
Cash and cash equivalents $19,870 $18,785
Accounts receivable, net 23,400 20,208
Unbilled receivables 10,348 8,862
Inventory, net 2,891 451
Other current assets 4,029 1,915
Total current assets 60,538 50,221
Property and equipment, net 13,934 11,449
Software development costs, net 718 518
Identifiable purchased intangible
assets, net 6,287 -
Goodwill 13,046 -
Other assets 4,695 3,092
Total assets $99,218 $65,280
Liabilities and stockholders' equity Current liabilities:
Accounts payable and accrued expenses $21,620 $12,148
Deferred revenue 4,309 1,683
Current portion of capital
leases and notes payable 9,700 7,852
Total current liabilities 35,629 21,683
Capital leases and notes payable,
less current portion 7,379 6,746
Convertible subordinated
debentures, net 8,638 -
Total stockholders' equity 47,572 36,851
Total liabilities and
stockholders' equity $99,218 $65,280
SOURCE TeleCommunication Systems, Inc.
-0- 04/28/2004
/CONTACT: Tom Brandt, Senior Vice President & CFO, +1-410-280-1001,
brandtt@telecomsys.com, or Jeff Sim, Investor Relations, +1-410-280-1055,
simj@telecomsys.com, both of TeleCommunication Systems, Inc./
/Web site: http://www.telecomsys.com
http://www.viavid.net/detailpage.aspx?sid=00001B5D/
(TSYS)
CO: TeleCommunication Systems, Inc.
ST: Maryland
IN: TLS CPR
SU: ERN CCA