Vertel Announces Year End and Fourth Quarter Financial Results

3/14/2003 - Vertel Corporation (OTCBB:VRTL), a leading provider of convergent network mediation and management solutions, today reported revenues of $2.0 million for the fourth quarter ended December 31, 2002, a 75% increase from the $1.1 million reported for the same period in 2001. Compared to the previous quarter, revenues in the fourth quarter were down 14%, from $2.3 million. The net loss for the quarter was $3.0 million, or $0.09 per share, an improvement over the $4.7 million loss, or $0.14 per share, experienced during the same period a year ago.

For the full year 2002, revenues were $8.4 million, compared to $10.6 million in 2001. The net loss for the year was $15.0 million, or $0.44 per share, compared to a net loss of $12.1 million, or $0.39 per share, a year earlier. The net loss in 2002 included a non-cash interest charge of nearly $0.7 million related to the accretion of interest on a convertible promissory note. In addition, there was a $7.8 million charge for goodwill impairment in 2002, compared to goodwill amortization of $1.8 million in 2001.

Gross profits as a percentage of sales improved to 86 percent for the fourth quarter of 2002, compared to a negative 39% for the same period a year ago. Margins were 74 percent in the third quarter of 2002 and 66 percent for the full year. "Despite a very challenging telecommunications environment, we have steadily improved margins in 2002," said Marc Maassen, President and CEO of Vertel. "Direct expenses were down $4.4 million, to $2.9 million for the year, compared to $7.3 million in 2001, a decline of 60 percent. SG&A expenses were $12.1 million, down 6.4 percent from the nearly $13.0 million reported in 2001.

"We were able to grow sales with better margins three out of four quarters in 2002, while reducing overhead and expenses. This positions us well for growth - and profitability - when there is an economic recovery in our industry," Maassen explained.

In 2002, the Company consolidated all business units and product lines around its newly branded M*Ware(TM), or Mediation Ware, the company's trademarked software mediation and management solutions. M*Ware enables the integration of existing networks and applications, as well as the development of new network and service management applications.

"Given the uncertain business environment, telecommunications companies are likely to continue to limit major capital purchases for much of 2003. We expect service providers, equipment manufacturers and system integrators -- Vertel's core customers -- to increasingly rely on convergent solutions like Vertel's M*Ware to protect their existing network investments, increase revenues, reduce their time to market and improve their operational efficiencies," Maassen stated.

"Our key strategies for 2003 include providing innovative solutions to Vertel's long-term global customers, continuing penetration into major service providers, partnering with other solution providers and integrators, and leveraging our worldwide Professional Services solutions and delivery capabilities," Maassen said.

"As of December 31, 2002, the Company had an accumulated deficit of $98.0 million and negative working capital of $252,000, including cash of $881,000," said T. James Ranney, Interim Chief Financial Officer. "In addition, since the beginning of the year, we have reduced the total number of employees by more than a quarter and have implemented a number of expense saving initiatives. We will continue to look for additional cost reduction opportunities as the year progresses." Ranney also noted that the auditor's report for 2002 would have a going-concern qualification just as it did in 2001.

About Vertel
Vertel is a leading provider of convergent network and mediation management solutions. Vertel's high-performance solutions enable customers to quickly and cost-effectively introduce new services, networks and OSSs while leveraging existing investments. Using the M*Ware(TM)-driven Development Environment, Vertel has created a suite of mediation-based applications that address protocol translation, data transformation, element and network management, OSS application integration, and OSS exchange services.

Vertel's product offerings allow seamless management in multi-technology and multi-vendor environments. Vertel also develops communications software solutions that fit individual customer requirements through its Professional Services organization.

For more information on Vertel or its products, contact Vertel at 21300 Victory Boulevard, Suite 700, Woodland Hills, California 91367; telephone: 818/227-1400; fax: 818/598-0047 or visit

Vertel and M*Ware(TM) are trademarks of Vertel Corporation.

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