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Southborough, Mass. - June 30, 2003- ViryaNet (NASDAQ: VRYA), a provider of integrated mobile and Web-based software applications for workforce management and the automation of field service delivery, today announced financial results of its fourth fiscal quarter and full year 2002.
Total revenue was $1.3M for the fourth quarter of 2002, compared to $1.7M in the third quarter of 2002, and compared to $5.0M in the fourth quarter of 2001.
For the fourth quarter of 2002, the Company reported a net loss of $4.3M, or $ 1.60 per basic and diluted share, compared to a net loss of $4.1M or $1.54 per basic and diluted share in the third quarter of 2002, and compared to a net loss of $0.2M or $0.01 per basic and diluted share for the fourth quarter of 2001. During the fourth quarter of 2002, the Company restructured its sales and support operations in
Europe from a combined direct and indirect channel structure to an exclusively indirect channel structure. This restructuring, as well as other cost reductions, resulted in a headcount reduction of 27 employees and contractors. As a result of these actions, the Company recorded one-time charges totaling $550,000, which are included in the net loss for the fourth quarter of 2002.
The Company reported gross margins of 6% for the fourth quarter of 2002, compared to 33% in the third quarter of 2002, and compared to 64% in the fourth quarter of 2001. Included in the reported gross margins for the fourth quarter of 2002 was approximately $185,000 of the one-time charges related to the restructuring of the Company's European operations. Excluding the one-time charge, the gross margins
for the fourth quarter of 2002 were approximately 20%.
Operating expenses for the fourth quarter of 2002 were $4.2M, compared to $4.6 M in the third quarter of 2002, and compared to $3.3M in the fourth quarter of 2001. Excluding charges related to provisions for doubtful accounts, restructuring, and stock-based compensation, operating expenses for the fourth quarter of 2002 were $2.7M, compared to $3.5M in the third quarter of 2002, and compared to $2.8M in the
fourth quarter of 2001.
The Company's cash position on December 31, 2002 was $3.2M, compared to $7.2M at the end of the third quarter of 2002. The reduction in the Company's cash position includes a re-payment of $2.3M of its short-term bank credit, which decreased its short-term bank credit from $6.2M as of September 30, 2002 to $3.9M as of December 31, 2002. Excluding the repayment of its short-term bank credit, the
reduction in cash in the fourth quarter was $1.7M, compared to a reduction of $2.4M in the third quarter of 2002, excluding changes in bank debt.
For the fiscal year 2002, revenue was $8.7M, a decrease of 57% from $20.0M in fiscal year 2001. License revenue was $3.5M, a decrease of 72% from $12.5M in 2001. Services revenue was $5.2M, a decrease of 31% from $7.5M in 2001. The net loss for fiscal year 2002 was $11.4M or $4.38 per basic and diluted share compared to a net loss of $14.6M or $6.71 per basic and diluted share in fiscal year 2001.
During 2002, the Company took decisive action to lower operating costs; restructure its sales and distribution strategy, increasing its emphasis on reseller channels and partner-led sales; and revise its vertical market strategy to include providing industry-focused applications for utilities, retail, facilities management, and HVAC. In the fourth quarter, European sales and distribution operations were fully
transitioned to an indirect channel model, taking advantage of the strong reseller, systems implementation, and support operations of ViryaNet's partners in Europe, including Aspective, BT, and Telvent. Operating costs were reduced from an average quarterly breakeven level of approximately $4.1M at the beginning of the year to approximately $3.2M by the end of the fourth quarter.
"Our fourth quarter results, and our 2002 overall results, reflect difficult market conditions," said Win Burke, president and CEO, ViryaNet. "However, in 2003, we will realize the benefits of the restructuring we accomplished in 2002 in operations, sales, distribution, and new vertical markets, with steadily improving financial results over the first half of 2003," said Win Burke.
"We expect to report total revenue for the first six months of 2003 in the range of $4.5M to $5M. The effects of the cost cuts taken in the fourth quarter of 2002 will be reflected in improved cash flow during this period, with an expectation of approximately breakeven cash flow by the end of the second quarter of 2003."
Year 2002 in Review
Despite the challenges felt throughout the industry during the last year, ViryaNet realized significant accomplishments:
Acquisition -ViryaNet's acquisition of Georgia-based iMedeon in February 2002 initiated the Company's penetration of the utilities sector, strengthened its product offerings with expanded wireless capabilities and specific features for the utility sector, increased its customer base, and added important partnerships with GE Power Systems and Aspective.
Product - During the year, the Company released ViryaNet Service Hub 7, which completed the merging of iMedeon's iM:Work suite of products with ViryaNet Service Hub. ViryaNet Service Hub 7 is a powerful field service application that offers new best practices for utility companies as well as a wide range of other industries, and includes mobile and wireless capabilities that support online and offline work, workflow technologies, a universal Service Scheduler for the
continuum of work order requirements, and a set of easy-to-modify configuration tools.
New Customers - The Company gained a number of new end-user customers during 2002, including:
T-Mobile, a major telecommunications company in Europe, uses ViryaNet Service Hub to capture workforce and labor activity; monitor, report, and measure field activity; and unite the many constituents of the company's service community through Web browsers and other wireless devices.
Leslie's Pools, the world's largest swimming pool chemical, equipment and supplies retail chain, uses ViryaNet Service Hub to manage the installation, replacement, and onsite maintenance (and preventive maintenance) of pumps, filters, heaters and other devices and equipment for public and private swimming pools.
LoJack Corporation, a recognized world leader in stolen vehicle tracking and recovery, uses ViryaNet Service Hub to streamline the installation of its recovery systems, and support its rapidly expanding sales and installation channel strategy.
Publix Super Markets, Inc., the largest employee-owned supermarket chain and one of the 10 largest-volume supermarket chains in the United States, uses ViryaNet Service Hub to automate its maintenance and facilities operations, including the activities associated with workforce management and asset and repair management.
Ricoh Technosystems, a subsidiary of Ricoh Company Ltd. (OTC: RICOY), the 66-year-old leading service supplier of office automation equipment and electronics, uses ViryaNet Service Hub to automate its workforce management, maintenance, and service operations.
Customers' Expanded Use of Service Hub - During the year, a number of customers purchased additional ViryaNet licenses to accommodate their expansion of ViryaNet's solutions throughout their respective organizations, including:
JEA, the eighth largest municipal utility in the United States with more than 500 technicians servicing 500,000 meters, expanded its use of the ViryaNet Service Hub to include managing its workforce responsible for water meter installations.
Lockheed Martin. Under a new, expanded license agreement, Lockheed Martin NE&SS will use ViryaNet Service Scheduler and ViryaNet Service Workflow, in conjunction with existing Service Hub components, to optimize resource scheduling, track work orders, and communicate with field resources. In addition, the companies agreed to expand their relationship and work as partners in targeting new outsourced
maintenance management opportunities in the commercial and defense markets.
Successful Project Implementations - the Company completed major project implementations with eight customers, including BGE Home, CAL-AIR, Frontier, Ionex Telecommunications, JEA, Switch and Data Corporation, T-Mobile, and Verizon Avenue.
Partnerships - During the year 2002, ViryaNet benefited from an important partnership with GE Power Systems through its acquisition of iMedeon, through which GE became the second largest shareholder in ViryaNet and now includes the ViryaNet product in its solution set. Also a result of the acquisition of iMedeon, the Company expanded the existing relationship with Aspective (UK). The Company initiated new
relationships with BT (UK), BT Syntegra (United States), and Hitachi Systems & Services (Japan) - in which these partners market, sell, deploy, and support customers using the ViryaNet product in their geographies.
About ViryaNet
ViryaNet is a provider of software applications that improve the quality and efficiency of an organization's service operations. ViryaNet's flagship product - the award-winning ViryaNet Service Hub - combines the power of the Internet, the freedom of wireless technologies, and the resources of ViryaNet's deep service expertise to help companies improve workforce scheduling, dispatching, and
activity reporting; customer contract and entitlement automation; and asset, logistics, and depot repair management.
Customers in the telecommunications, utility, high-technology manufacturing, grocery and retail, HVAC, and other industries use ViryaNet Service Hub to transition complex service business processes into a manageable, scalable Internet operation, with the goal of increasing service revenues, decreasing service costs, and maximizing customer satisfaction.
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 including integration of other businesses, its future business prospects, its future financial performance, its future cash position, 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 include market acceptance of and demand for the Company's products, risks associated with a slow-down in the economy, risks associated with the financial condition of the company's customers, risks associated with competition and competitive pricing pressures, risks
associated with increases in costs and operating expenses, risks in technology development and commercialization, the risk of operating losses, risks in product development, risks associated with international sales, and other risks that 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. Reported results should not be considered an indication of
future performance. You should not place undue reliance on these forward-looking statements, which speak only as the date hereof. ViryaNet disclaims any obligation to publicly update or revise any such forward-looking statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.