Applied Digital Access Announces Third Quarter Results - Company Financial Information

Edge: Work-Group Computing Report, Oct 25, 1999

Applied Digital Access Inc. (ADA) (Nasdaq:ADAX) announced Tuesday that revenue for the third quarter of 1999 totaled $10.5 million compared to $6.8 million in the third quarter of 1998.

Sequentially, third quarter revenue was up 18% from $8.9 million in the second quarter of 1999. ADA incurred a third quarter net loss of $0.1 million, or $0.01 per share, compared to the third quarter of 1998 when the company recorded a net loss of $3.2 million, or $0.25 per share.

Revenue for the first nine months of 1999 totaled $26.5 million, a 29% increase from $20.6 million for the same period last year. For the first nine months of 1999, the company incurred a net loss of $3.3 million, or $0.25 per share, compared to the same period last year when the company recorded a net loss of $11.0 million, or $0.87 per share.

Revenue from the company's network systems products and services totaled $7.4 million in the third quarter of 1999 compared to $3.1 million in the third quarter of 1998 and $5.8 million in the second quarter of this year. For the first nine months of 1999, revenue from network systems products and services totaled $18.0 million compared to $11.3 million in the same period last year. Revenue from the company's network management software applications and services totaled $3.1 million in the third quarter of 1999 down from $3.6 million in the third quarter of 1998 and relatively unchanged from the second quarter of this year. For the first nine months of 1999, revenue from the company's network management software applications and services totaled $8.6 million compared to $9.4 million in the same period last year.

Gross margins for the three and nine months ended Sept. 30, 1999 were 62% and 61% respectively, compared to 59% and 50%, respectively, in the same periods last year. The improvements were primarily due to improved gross margins related to the company's Remote Module and CTS product lines.

Operating expenses for the three and nine months ended Sept. 30, 1999 decreased 8% and 10%, respectively, compared to the same periods in 1998. The decreases resulted from lower research and development costs related to the termination of a joint development agreement (JDA) with Northern Telecom Inc. (Nortel) and lower travel and customer service expenses in sales and marketing partially offset by increased legal expenses.

In March 1999, the company's JDA with Nortel was terminated. Each company had contributed technology and development resources to the project conducted under the JDA. Nortel and ADA were responsible for total JDA development costs at the rate of 60% and 40%, respectively.

For the three and nine months ended Sept. 30, 1999, operating expenses included a $0.3 million and $3.5 million offset, respectively, to research and development expenses representing Nortel's proportionate share of development costs incurred under the JDA compared to $1.1 million and $2.8 million in the respective periods last year.

The $3.5 million offset to research and development expenses for the nine months ending Sept. 30, 1999, included a one-time cumulative adjustment of $1.4 million that increased Nortel's proportionate share of total JDA development costs from 50% to 60%.

The net loss for the first nine months of 1999 included a one-time charge of $1.4 million, recorded in the first quarter of 1999, to cover the costs of a restructuring program. The restructuring charge included approximately $0.6 million in cash charges for severance and benefit costs related to a reduction in workforce, the closure of an R&D facility, and associated administrative expenses. The balance of the restructuring charge related to non-cash charges for the write-down of capital assets. The majority of the restructuring charges were related to the termination of the JDA with Nortel. As of Sept. 30, 1999, ADA had substantially completed the restructuring program.

ADA's cash balance totaled $13.2 million at Sept. 30, 1999, compared to $12.5 million at Dec. 31, 1998. Inventory totaled $5.2 million at Sept. 30, 1999, compared to $5.7 million at Dec. 31, 1998.

Don Strohmeyer, president and chief executive officer of ADA stated, "We are pleased with our third quarter results. Our energies continue to be directed at improving our operations in all areas."

Applied Digital Access is a leading provider of innovative telecommunications service fulfillment and service assurance solutions that are backed by unparalleled customer support. These solutions enable a wide range of telecommunications service providers to improve network operations performance, proactively manage the quality of service, increase productivity, and lower operating expenses.

The company is headquartered in San Diego along with the unit that specializes in the design, development and delivery of its service assurance test and monitoring systems. The Carrier Operations Support Systems (OSS) software and service unit is located Vancouver, British Columbia and Terre Haute, Ind.