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ViryaNet Reports Strong Sequential Results in Second Fiscal Quarter 2001
Company's Path to Profitability Clearly Defined
SOUTHBOROUGH, Mass.--Aug. 1, 2001--ViryaNet (NASDAQ: VRYA - news), a leading provider of wireless workforce management solutions for field service communities,
today announced financial results for its second fiscal quarter 2001.
Total revenues were $5.2 million for the second fiscal quarter, ended June 30, 2001. This was an increase of 14 percent from $4.6 million recorded in the first quarter ended
March 31, 2001, and a decrease of 17 percent from $6.3 million recorded in the second quarter of 2000, due largely to the change in business climate and overall economic
conditions.
Software license revenues for the second quarter of 2001 were $3.2 million, an 11 percent increase from $2.9 million in the previous quarter. Revenues from services and
maintenance increased to $2.0 million, a 20 percent increase from $1.7 million in the previous quarter.
The Company reported gross margins of 54 percent for the second quarter of 2001, compared with 48 percent in the first quarter of 2001. Overall, the sequential improvement
in gross margins is primarily attributable to the growth in overall revenues of 14 percent and reduction in the use of contractors to deliver professional services, offset by
higher royalty costs due to an increase in third-party software license content.
The Company reported a net loss for the second quarter of $4.9 million, or a net loss of $0.23 per basic and diluted share, compared with a net loss of $7.6 million, or a net
loss of $0.35 per basic and diluted share in the first quarter of 2001, and a net loss of $3.0 million, or a net loss of $1.10 per basic and diluted share in the second quarter of
2000.
The sequential improvement in net loss for Q2 2001 compared with Q1 2001 is attributable to the improvement in gross margins and reductions in operating expenses of
$1.3 million, excluding one-time charges. The operating expense savings are attributable to the significant headcount actions taken in April along with a reduction in program
spending and other discretionary expenses.
During the second quarter of 2001, the Company incurred an additional one-time charge of approximately $500,000 for severance expenses related to further headcount
reductions taken at the end of Q2 of approximately 20 percent. Excluding these one-time charges, net loss for the second quarter of 2001 was $4.4 million or a net loss of
$0.20 per basic and diluted share.
``The ViryaNet team has refused to give in to today's difficult market conditions, unlike competitors in our space that have closed few, if any, new sales. We fought hard,
and, with great determination, brought in new deals and sold additional offerings to existing customers,'' said Win Burke, president and CEO, ViryaNet. ``In Q2, we attained
sequential quarter revenue growth of 14 percent over Q1 2001. In addition, we are reporting financial results that are consistent with the guidance that we provided during our
last earnings call, and which exceeded analyst expectations.''
``In the second quarter, we adjusted our business plan,'' continued Mr. Burke. ``We reduced costs, we restructured our workforce, we posted strong results, and we brought
forward our goal to achieve break-even profitability from Q1 of 2002 to Q4 of 2001.''
Second Quarter Accomplishments
The second quarter included strategic deals with several new companies, including Viasource, which selected ViryaNet Service Hub to extend the range of installation and
maintenance services that it provides to its telecommunications and high-technology clients and improve the quality and efficiency of its operations; CAL-AIR, an HVAC
facilities contractor, which selected ViryaNet Service Hub to transition its service business to the Internet, increase the productivity and responsiveness of its field service
organization, and deliver Internet-based, next-generation customer service; Abentel, a company in Spain that performs installation and maintenance services for
telecommunication and utility companies; and EZ Analysis, a reseller and systems integration firm and a ViryaNet partner in Europe that services the workforce
management market.
The Company also received follow-on orders from several of its existing customers, including Verizon Avenue, which purchased ViryaNet Service Supply Chain application to
add to its live implementation of Service Hub; Teraoka, in Japan, which purchased license upgrades for its installation; and Citizens Communications, the Company's largest
customer for wireless workforce management, which booked additional licenses for their expanding installation.
This quarter also saw developments in the Company's strategic partnerships, including Amdocs, Micromuse, EZ Analysis, and Xelus.
Amdocs, a major player in the telecommunications industry has become a ViryaNet reseller and systems integrator; Amdocs and ViryaNet have co-developed an interface
between ViryaNet Service Hub and Amdocs' Ensemble customer care and billing platform. Micromuse, the leading vendor of network management applications for the
telecommunications industry, and ViryaNet have entered into a marketing alliance and developed an interface between ViryaNet Service Hub and Micromuse's Netcool®
application. EZ Analysis is a European reseller and systems integration firm, mentioned earlier. The Company's relationship with Xelus, which was established in Q1, saw
significant accomplishment during the quarter as both companies began investing in integrating their respective solutions, training staff, and preparing joint marketing
programs around Xelus' new Enterprise Service Management (ESM) initiative; with Xelus, the Company's goal is to expand its reach into other markets, such as aviation and
automotive.
ViryaNet experienced multiple ``go live'' implementations during the quarter, including Citizens Communications, ITC^DeltaCom, Lockheed, and Verizon Avenue. ``These
successful implementations underscore our commitment to the highest level of customer satisfaction, leading to showcase accounts to which we can reference our
prospects,'' continued Mr. Burke.
Workforce Reduction and Reassignment
The Company took efforts to reduce its costs in both April and June. The combination of these actions has reduced headcount, including contractors, by approximately 40
percent since the end of the first quarter of 2001.
``The result of these actions and other expense reductions will provide a combined savings of approximately $3.5 million on a quarterly basis, with the full benefit of these
savings occurring in the fourth quarter of 2001,'' stated ViryaNet CFO Al Gabrielli.
``These actions were driven by our goal to bring forward break-even operating profitability from Q1 2002, as indicated in our previous guidance, to Q4 2001, and ensure that
our future cash requirements could be met without the use of external funds,'' said Al Gabrielli, CFO, ViryaNet.
Business Outlook
ViryaNet's review of the business outlook indicates that revenue for the third quarter of 2001 is expected within a range of $5.5 million and $6.0 million, with expectations for
the fourth quarter within a range of $6.5 million and $7.0 million. Net loss per share in the third quarter is expected within a range of $0.07 and $0.09, while earnings per
share in the fourth quarter are expected to be approximately at the break-even level.
The Company's cash position at June 30, 2001 was $14.2 million, including drawdowns on the Company's line of credit. Excluding the drawdowns on the line of credit, the
Company's cash position was $10.6 million. ``Our cash management this quarter was better than expected because second quarter expense controls were achieved sooner
than planned and our cash collections progress was facilitated by the number of successful ''go live`` events during the quarter,'' said Gabrielli. ``With these additional cost
reductions and headcount actions taken at the end of the quarter, we believe that we will have sufficient cash to take us through to profitability without the use of external
funds.''
About ViryaNet
ViryaNet is a provider of enterprise and mid-market wireless workforce management solutions for field service communities. These solutions enable field service
organizations to efficiently schedule and dispatch field service personnel, capture and record logistics and labor activity, and monitor, report, and measure this activity --
meeting an organization's installation, preventative maintenance, and break-fix obligations. ViryaNet's wireless workforce management solution supports wireless devices
over standard wireless networks.
ViryaNet's solutions integrate with popular front- and back-office applications. ViryaNet's professional services team and implementation partners enable deployment of the
Company's solutions for wireless workforce management.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this press release that are not purely historical are forward-
looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, including statements regarding ViryaNet's expectations,
beliefs, intentions, or strategies regarding the capabilities of its products, its relationships with its customers, its customer purchases, its future operational plans and
objectives, its future business prospects, its future financial performance, and its future prospects for profitability. All forward-looking statements included in this document
are based upon information available to ViryaNet Ltd. as of the date hereof, and ViryaNet Ltd. assumes no obligation to update any such forward-looking statements.
Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to
ViryaNet's business are set forth in ViryaNet's Form F-1, as amended, declared effective by the SEC on September 19, 2000, and the other reports filed from time to time
with the Securities and Exchange Commission.
Editorial Contact:
Beth Bryant
Sterling Hager, Inc.
617.926.6665
beth@sterlinghager.com
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