CALABASAS, Calif.--(BUSINESS WIRE)--Oct. 26, 2004--Tekelec (Nasdaq:TKLC - News) today reported financial results for its third quarter ended September 30, 2004.
Revenue for the third quarter of 2004 was $106.6 million, compared to $70.7 million in the third quarter of 2003. On a GAAP basis, Tekelec's net income was $18.7 million, or $0.27 per diluted share, for the third quarter of 2004, compared to net income of $8.5 million, or $0.13 per diluted share, in the third quarter of 2003. Third quarter 2004 net income includes a $2.4 million one-time, non-cash charge for the write-off of acquired in-process research and development related to the VocalData acquisition, a $9.9 million pre-tax gain on Tekelec's investment in Telica and a $2.2 million pre-tax gain on the settlement of the Catapult convertible notes. Third quarter 2003 net income includes a $3.3 million, or $0.05 per diluted share, gain on disposal of discontinued operations. Non-GAAP net income for the third quarter of 2004, which excludes the effects of acquisition-related amortization, the write-off of acquired in-process research and development, the restructuring charge related to our manufacturing move, the write-off of certain acquired intangibles as a result of our previously announced rebranding activities, the gain on Tekelec's investment in Telica and the gain on the settlement of the Catapult convertible notes, was $14.9 million, or $0.21 per diluted share, compared to non-GAAP net income of $7.5 million, or $0.12 per diluted share, in the third quarter of 2003. Orders received in the third quarter for Tekelec products and services were $150.8 million, compared to $74.7 million in the third quarter in 2003.
Tekelec President and CEO Fred Lax commented, "Tekelec's performance in the third quarter was excellent, reflecting the progress we are making on our strategic objectives of delivering world-class next-gen switching solutions, extending our signaling solutions leadership and expanding our value-added applications offerings, as we prudently pursue global expansion. The Company exceeded $100 million dollars of revenue for the first time in its history, with revenues increasing 12% sequentially and 51% year-over-year, and orders increasing 102% year-over-year. The $150.8 million of total orders generated during the quarter is the highest order total in the history of the Company, surpassing the previous order record of $138.1 million achieved in Q4 2003. The book-to-bill ratio of approximately 1.4 indicates the continuing strength of Tekelec's business, with all Groups achieving a book-to-bill above 1, and represents the eighth consecutive quarter in which Tekelec's book-to-bill ratio is above 1. This quarter's results, combined with the significant expansion of Tekelec's product portfolio with the additions of Steleus and VocalData, demonstrate that Tekelec continues to execute on its strategic objectives, while positioning itself for future growth opportunities.
"Regarding our next-gen switching strategic initiative, revenues increased 17% sequentially to $15.1 million, and we added 16 new next-gen customers, bringing Tekelec's next-gen switching customer total to approximately 150. In September, we announced the acquisition of VocalData, a provider of hosted IP telephony applications that enable the delivery of advanced telecom services and applications, and now part of our Switching Solutions Group. VocalData is a North American market share leader in IP Centrex and, globally, has an estimated 34 percent share of all IP Centrex lines shipped. Tekelec will leverage VocalData's hosted IP telephony application server to provide an immediate, cost-effective path to IP service delivery for wireless, wireline and cable operators and their subscribers.
"With regard to signaling solutions leadership, our Network Signaling Group significantly contributed to the Company's overall order total, generating a signaling book-to-bill even higher than the overall company book-to-bill ratio. Revenue for our Signaling Group was $81.1 million, up 43% year-over-year and the highest signaling revenue in the history of the Company, driven by robust sales in the U.S. and continued success on our global expansion efforts. To briefly highlight our continued success with the signaling hub providers, we are pleased to announce that Transaction Network Services (TNS), a provider of call signaling and database access services, has selected Tekelec's Eagle 5 Signaling Application System and integrated Sentinel business intelligence platform, as the foundation for upgrading XO Communications' signaling network. The XO deployment expands Tekelec's successful partnership with TNS, which has previously deployed two Eagle platforms in its signaling network.
"In the area of value-added applications, on October 14th we announced the acquisition of Steleus, a global supplier of real-time performance management and business intelligence communications software solutions for both fixed and mobile telecom networks. Steleus forms the cornerstone of Tekelec's new Communications Software Solutions Group, which also includes Tekelec's existing business intelligence applications, such as billing verification, and other network element-independent applications. The acquisition reinforces Tekelec's ongoing strategic commitment to offer more value-added applications to our customers and to further enhance and differentiate our next-gen switching and signaling product offerings. The Steleus solutions enable operators to monitor their service and network performance as they transition from circuit to packet technology, helping to speed up the implementation of packet networks, while lowering the risk.
"Regarding global expansion, approximately 33% of sales during the quarter were from outside the U.S., highlighting the progress we are making on our global expansion efforts. As one example of this success, we are pleased to announce that Far EasTone, the second largest mobile operator in Taiwan, has purchased Tekelec's Eagle 5 Signaling Application System and G-Port solution to provide mobile number portability for its national GSM network. The sale demonstrates the progress Tekelec is making in the Asia/Pacific region and also highlights the on-going opportunities, worldwide, for Tekelec to sell its industry-leading number portability solution.
"Finally, I am pleased to announce that Mark Floyd, the CEO of Entrisphere, a privately-held company focused on broadband solutions that offers incumbent carriers an operationally transparent pathway from today's overlay networks to tomorrow's converged multiservice networks, has joined Tekelec's Board of Directors. Mark has been serving as an advisor to Tekelec for the past year. Prior to joining Entrisphere, Mark was president and CEO of Siemens Information and Communication Networks-U.S., a leading provider of integrated voice and data networks and solutions for enterprises, carriers and service providers around the world. In 1993 he founded Efficient Networks, which Siemens acquired in April 2001. We are delighted to have a telecom industry veteran like Mark joining our Board."
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