Active Voice Corporation Announces Record Revenues for the Quarter Ended June 30, 1999 - Company Financial Information

Cambridge Telcom Report, August 9, 1999

Active Voice Corporation (Nasdaq: ACVC), a world leader in PC-based voice processing systems and Computer Telephony Integration (CTI) solutions, has announced record revenues for its first fiscal quarter ended June 30, 1999.

Revenues for the quarter were a record $18.2 million, compared to $13.4 million for the same quarter in 1998, representing an increase of 36%. Net income was $9.9 million or $2.09 per diluted share compared to a loss of $1.0 million or $0.22 per share, for the quarter ended June 30, 1998. Before one-time transactions, the operating loss for the quarter was $1.2 million, compared to $1.7 million for the same quarter in 1998, an improvement of 28%.

On June 30, 1999, Active Voice sold Internet communications technology to InfoSpace.com, Inc., a leading Internet infrastructure company for $18 million before related expenses. The technology, currently named MyAgent, enables real-time, Internet-based communication services for Web sites and Internet appliances, and provides secure, instant messaging, and multi-party chat capabilities. Active Voice retains full rights to the MyAgent technology when used within a corporation or with traditional or Internet Protocol (IP) switching for messaging, voice, or call handling.

"The MyAgent technology was created by our Advanced Products and Technology Group and was a by-product of Unity development. We saw the potential for its use within an Internet portal and developed a relationship with Infospace to encourage that. We think it will be useful in the corporate space as well, and in conjunction with messaging and telephony. Accordingly, we retain the rights to expand the technology and merge it back into Unity. The sale also enables the APT group to move forward with other works-in-progress," said Robert L. Richmond, Active Voice chairman.

"We saw strong revenue growth in our core products across all channels, especially in our strategic partner business reflecting our core strategy of increasing market share by partnering with telephone switch manufacturers to provide affordable, feature-rich in-switch and PC-based voice processing solutions. We also continue to see growth from promotions in our dealer channel to upgrade our installed base to the latest technology," said Jose S. David, Active Voice chief financial officer. "Gross margins increased to 55.3% from 54.4% from the March 31, 1999 quarter because of an increased sales mix of software-only products and reduced PC component costs. Expenses were in line with management's expectations," David added.

"We have been shipping Unity 2.0 since March 31, 1999 and our expectations have been exceeded both with the performance of the product and the incremental revenues through our dealer channel," said Frank Costa, chief executive officer. "In addition, we have been concentrating on making our switch manufacturing partners successful as they represent the widest distribution opportunity. We are pleased to announce that two of our largest partners have recently announced general availability of their branded Unity applications," he added.

Founded in 1983, Seattle-based Active Voice Corporation has offices in Australia, Canada, China, France, the Netherlands, South Africa, Sweden, and the United Kingdom. With more than 75,000 systems installed in virtually every kind of business in over 60 countries, Active Voice develops technology that helps businesses communicate better. Active Voice products are sold through a global network of independent telecommunications dealers, telephone equipment manufacturers and computer resellers. More information about Active Voice Corporation and its products is available at the Company's web site, www.activevoice.com.

                   ACTIVE VOICE CORPORATION
        CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
     (In thousands, except shares and per share amounts)

                                        Three Months Ended June 30,
                                                1999        1998

Net sales                                    $18,176      $13,404
Cost of goods sold                             8,131        5,930
Gross profit                                  10,045        7,474

Operating expenses:
 Research and development                      4,144        3,330
 Sales and marketing                           5,108        3,986
 General and administrative                    2,014        1,857
   Total operating expenses                   11,266        9,173
Operating loss                                (1,221)      (1,699)

Interest expense                                 (68)         (20)
Interest income                                   59          167
Impairment of strategic investment            (1,169)          --
Gain on sale of technology assets             16,504           --
Income (loss) before income taxes and
 minority interest                            14,105       (1,552)

Income tax benefit (provision)                (4,163)         533
Minority interest in earnings of consolidated
 subsidiary                                      (88)          (1)
Net income (loss)                             $9,854      $(1,020)

Earnings (loss) per share:
 Basic                                         $2.15      $(0.22)
 Diluted                                       $2.09      $(0.22)

Shares used in earnings (loss) per share
 calculation:
 Basic                                     4,585,246    4,664,492
 Diluted                                   4,716,558    4,664,492

                   ACTIVE VOICE CORPORATION
           CONSOLIDATED BALANCE SHEETS (Unaudited)
                (In thousands, except shares)

                                            June 30,      March 31,
ASSETS                                        1999          1999
Current assets:
 Cash and cash equivalents                   $21,018      $ 1,650
 Marketable securities                         1,179        1,113
 Accounts receivable, less allowances         14,181       13,622
 Inventories                                   5,149        5,924
 Income taxes receivable                          --          741
 Deferred tax asset                            1,594        1,650
 Prepaid expenses and other assets             2,750        3,215
   Total current assets                       45,871       27,915
Marketable securities                          1,442        1,701
Furniture and equipment, net                   4,514        4,589
Other assets                                   4,382        4,377
   Total assets                              $56,209      $38,582

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                             $2,562       $4,983
 Notes payable                                 4,522           --
 Accrued compensation and benefits             3,313        2,500
 Other accrued expenses                        2,407        2,186
 Income taxes payable                          3,378           --
   Total current liabilities                  16,182        9,669

Commitments

Minority interest                                 31          (55)

Stockholders' equity:
 Preferred stock, no par value:
  Authorized shares - 2,000,000 - none outstanding
 Common stock, no par value:
  Authorized shares - 10,000,000
  Issued shares, including repurchased shares
   - 4,976,933                                18,250       17,314
 Retained earnings                            23,756       13,907
 Accumulated other comprehensive income           49           20
 Less 368,242 repurchased shares (395,153 at
  March 31, 1999), at cost                    (2,059)      (2,273)
Total stockholders' equity                    39,996       28,968
   Total liabilities and stockholders' equity$56,209      $38,582