Financial: Tekelec Reports Third Quarter and Nine-Month Results - Company Financial Information

EDGE, On & About AT&T, Nov 2, 1998

Tekelec (Nasdaq/NM: TKLC) Tuesday reported financial results for the third quarter and nine months ended September 30, 1998. Revenues for the third quarter of 1998 increased 38% to $49,658,000 from $36,112,000 in the third quarter of 1997 and consisted of $34,969,000 of switching products and $14,689,000 of diagnostic products.

Net income for the quarter amounted to $10,372,000, or $0.18 per share, and represented a 70% increase over income of $6,101,000, or $0.11 per share, before the effect of a one-time tax benefit of $8,960,000 resulting from a reduction in the Company's valuation allowance for deferred taxes in the third quarter of 1997. Net income in the third quarter of 1997 including such one-time tax benefit amounted to $15,061,000, or $0.26 per share. Orders for the Company's products in the third quarter were $49,975,000 and consisted of $35,624,000 of switching products and $14,351,000 of diagnostic products. This compares with orders of $47,068,000 in the third quarter of 1997 which included a $15 million order for switching products from Daewoo Telecom Ltd. under an exclusive multi-year distribution agreement with the Company. The Company's backlog at the end of the third quarter was approximately $65,100,000. Revenues for the nine months grew 56% to $127,515,000 from $81,766,000 reported in the same period last year. Net income for the nine months amounted to $25,393,000, or $0.43 per share, and included a one-time after-tax gain of $1,031,000 recorded in the first quarter from the settlement of an insurance claim. Net income for the nine-month period last year amounted to $20,059,000, or $0.36 per share, including the one-time tax benefit. Income for the nine-month period in 1998 before the one-time gain amounted to $24,362,000, or $0.41 per share, and represented a 119% increase over income of $11,099,000, or $0.20 per share, before the effect of the one-time tax benefit in the nine-month period last year. All earnings per share amounts referenced above represent diluted earnings per share as defined within Statement of Financial Accounting Standards No. 128. Michael Margolis, President and Chief Executive Officer, commented, "The increase in revenues, both for the quarter and the nine-month period, reflect the broadened customer base for our EAGLE platform, the growing contribution from sales of upgrades and enhancements to our expanding installed base, and the continued strength of our MGTS products including the rapid acceptance of our MGTS 2000 network monitoring/surveillance system. "Third quarter highlights included: o New product introduction (MGTS Companion) o Major new software enhancements for MGTS o Receipt of final EAGLE Type approval from Telkom S.A. in South Africa o Orders and revenues for the recently introduced MGTS 2000 system o The opening of our European sales office "This quarter we received switching products orders from more than 25 customers and for a total of 28 EAGLE STP nodes (14 pairs) from eight of these customers including AT&T Wireless, Bell Atlantic and Sprint. This brings our cumulative total to 361 EAGLE STP nodes (176 pairs and 9 individual nodes)," Margolis continued. "Local Number Portability (LNP) revenues this quarter amounted to $8.3 million. We benefited from an environment in which wireless carriers' LNP orders were driven primarily by market rather than regulatory demands (i.e., customers ordered LNP despite the FCC implementation delay.) Our LNP outlook remains unchanged: we expect to see LNP opportunities both domestically and internationally, over the next two to three years. "We have recently been asked by a number of industry analysts whether we are seeing the same reduction in operators' capital expenditures, as reported by several telecommunications equipment suppliers. "We are pleased to report that we have not seen indications of such reduction in the capital spending patterns for our products. "Looking forward, our overall growth will be fueled by the integral role the Signaling System No. 7 (SS7) protocol plays in the wireline, wireless and Internet Protocol (IP)-based networks. Our European sales force is now established and we will continue our drive to expand into new market segments both domestically and internationally. We are delighted by the volume and variety of business opportunities being presented to us," Margolis concluded. Tekelec is a leading supplier of innovative network switching solutions and advanced diagnostic systems that enable rapid delivery of advanced communication products and services for the global communications marketplace. Tekelec's Eagle platform is designed to meet the complex requirements of the converged IP/SS7 network and traditional SS7 networks, enabling wireline, wireless and IP network operators to deliver intelligent network services. Tekelec's diagnostic systems are used by communication suppliers and service providers to design, install and maintain their communications equipment and networks.