DSET Reports Record Sales and Earnings for
the
Fourth Quarter and the Year
Company Ends 1999 with 23 CLEC and 3 ILEC
Customers for Gateway Products
Bridgewater, NJ - February 8, 2000 - (NASDAQ: DSET) - DSET
Corporation, a leading supplier of business-to-business e-commerce
solutions for the telecom industry, today reported record
net income and revenues for the fourth quarter ended December
31, 1999. This was the company's twenty-seventh consecutive
profitable quarter. Net income and revenues for the year ended
December 31 were also at record levels.
Net income for the quarter amounted to $3.2 million, or $0.27
per share, assuming dilution, as compared with $1.9 million,
or $0.17 per share, assuming dilution, for the quarter ended
December 31, 1998. The weighted average number of fully diluted
common shares outstanding in each period was 11.8 million
and 11.4 million, respectively.
Total revenues for the quarter amounted to $15.1 million,
as compared with $9.2 million for the same period in 1998,
a 64.3% increase. Of this amount, $8.3 million or 54.7% came
from sales to competitive local exchange carriers (CLECs)
and incumbent local exchange carriers (ILECs), with the balance
coming from sales to network equipment vendors. Geographically,
revenue from North America comprised 96.0% of total revenue.
During the quarter, license revenues accounted for $8.1 million
compared to $6.4 million for the same period a year ago, a
26.7% increase. Service revenues accounted for $7.0 million
compared to $2.8 million in 1998, a 150.8% increase. The significant
increase in service revenues was mainly due to including sales
of certain DSET products for CLECs that have yet to be released
for final production. Revenues from these products, which
include DSET's ezSubscribe and ezTroubleAdmin solutions, amounted
to $4.1 million in the fourth quarter of 1999. These products
should be released in the first half of 2000 and will be sold
as licensed products to other CLECs.
Gross margin for the quarter was 82.0% versus 84.1% in the
prior year. Gross margin for license revenues increased to
92.1% in the fourth quarter from 90.2% for the comparable
1998 period. The gross margin for service revenues increased
to 70.3% in the fourth quarter of 1999 from 70.0% in the same
quarter of 1998.
Net income for the twelve months ended December 31, 1999
was $6.5 million or $0.59 per share, assuming dilution, as
compared to $4.8 million or $0.43 per share, assuming dilution,
last year.
Revenues for the twelve-month period increased 52.4% to $44.6
million as compared to $29.3 million in the prior year. License
revenues were $24.1 million, or an increase of 47.4% for the
twelve-month period, and service revenues were $20.5 million,
or an increase of 58.6% as compared to the prior year.
"Our results for the quarter, as well as for the year,
clearly demonstrate the success of DSET's strategy for transitioning
from a company that specialized in software-development tools
to one that has become a leading provider of e-commerce solutions
for the telecom industry," said Bill McHale, president
and chief executive officer of DSET.
"In the quarter, we won sales from five CLECs and an
ILEC that amounted to more than eight million dollars. This
increased the number of our customers to twenty-three CLECs
and three ILECs, with total 1999 sales to such providers reaching
almost twenty million dollars. This amounted to 44 percent
of 1999 revenues, which exceeded our own expectations of 35
to 40 percent.
"At the end of 1998, we had just four CLEC customers
and no ILEC customers. Compared to 1998, sales of our gateway
products increased over 650 percent by the close of 1999.
That's exceptional performance by any measure, and we feel
that DSET has staked out a leading position that will enable
us to generate continued growth in 2000 and beyond."
McHale highlighted various factors contributing to the results
reported by the company. He said, "In 1999, the service
providers that purchased our gateways were able to get them
up and running as an integral part of their business operations
by interconnecting with trading partners in virtually every
part of the U.S. We delivered trading-partner interfaces for
Ameritech, the Bell Atlantic North Region, the Bell Atlantic
South Region, BellSouth, GTE, Pacific Bell, and Southwestern
Bell. Other trading-partner interfaces are under development
and we anticipate their availability in the near future.
"The interconnection capability that we have worked
to provide reflects what may be our most important goal, giving
our customers maximum flexibility with regard to where and
how they operate. The majority of our CLEC customers have
taken advantage of the close integration between DSET's gateways
and MetaSolv's order-management software to quickly implement
flow-through operating capabilities.
"However, our gateways can also be efficiently integrated
with other order-management systems if a customer chooses.
An example of this is our recent success at Gabriel Communications,
where we will integrate our gateways with an order-management
system from Eftia OSS Solutions Inc. In addition, as part
of our program to partner with companies that complement DSET's
offerings, we're working with Vitria Technology to enable
interconnection between DSET gateways and an even greater
range of operations support systems."
According to McHale, the company's expanding partnering program
will yield other benefits for both DSET and its customers.
As an example, he cited the agreement finalized in the fourth
quarter between DSET and systems integrator BusinessEdge Solutions.
He explained that partnering with systems integrators trained
in the installation and testing of DSET products will accelerate
the deployment of those products for the company's customers.
In addition to the very positive results for DSET's gateway
products, the company has experienced continuing success with
its number-portability solutions. McHale stated, "Revenue
generated from DSET's Local Service Management System, which
is essential number-portability software for switch manufacturers,
was a strong complement to our gateway sales in 1999. In the
fourth quarter, we added a third major network equipment manufacturer
to the two that had already been reselling our LSMS as part
of their hardware solutions."
"DSET's success for 1999 was rooted largely in sales
to facilities-based CLECs, carriers that have their own switches.
Estimates put the number of CLECs in this category at around
two hundred. But there's a much larger group of CLECs referred
to as 'resellers.' While these carriers purchase telecom services
from trading partners and resell them at competitive prices,
the services are provided exclusively via their trading partners'
switches and phone lines. It's estimated that there are well
over a thousand companies in this group, which we are now
targeting by enhancing our gateway products with the capabilities
such companies need."
McHale stated that a new version of the DSET ezLocal ordering
gateway shipped towards the end of the quarter can be used
by resellers to process phone-service orders for customers.
He pointed out that the gateway's new support for an operating
mode known as UNE-P allows a CLEC to lease any combination
of network elements from a trading partner to provide local
phone service at an increased margin for the CLEC.
"Facilities-based CLECs across the country have already
deployed previous versions of our ezLocal gateway," McHale
said. "Now, with ezLocal 2.6, we're making that product
even more appealing to facilities-based carriers, in addition
to addressing the needs of companies in the much larger resale
segment of the market. The new UNE-P capability that we've
built into ezLocal will enable facilities-based CLECs to turn
on revenue streams in areas where they have yet to complete
connections to their switches."
Asserting that the introduction of ezLocal 2.6 is just the
beginning of DSET's response to increasingly diverse modes
of CLEC operation, McHale stated that all of the company's
pre-order, ordering, and post-order solutions will evolve
as the industry demands. "Some CLECs are deploying systems
to provide internal support for all of their operations, while
others plan to make use of service bureaus or application
service providers to facilitate business processes,"
he said. "But no matter how a CLEC chooses to operate,
DSET products will have the flexibility to interface effectively
with any operations environment and add substantial value
to that environment."
"Over the next few months, we expect to announce solutions
to support the marketing and ordering of DSL service that
can be used by providers concentrating exclusively on data
services and Internet access, as well as by CLECs expanding
into this market. The first of our DSL products will enable
a provider to identity which homes and businesses in a given
area can actually receive DSL service and at what speeds.
This is vital information for focused, profitable marketing.
Our DSL solutions are premier examples of how we are expanding
the number of products available to our customers."
Commenting on expectations for DSET's products and performance
in 2000, McHale said, "We are confident that the very
positive trends that emerged during 1999 will continue as
we enter the new year. Based on our results to date, we strongly
believe that gateway sales to CLECs, ILECs, and DLECs can
double in 2000, building to as much as 70 percent of our total
business."
 
About DSET:
DSET Corporation is a leading provider of business-to-business
e-commerce solutions for the global telecommunications marketplace.
The DSET suite of electronic-bonding gateways is designed
to interconnect the operations support systems (OSSs) of service
providers that must exchange information and share network
capabilities as trading partners to provision and maintain
a growing range of services for customers in the competitive
telecom market. DSET's local number portability solutions
play a key role in enabling business and residential customers
to change service providers without changing their local phone
numbers. DSET is headquartered in Bridgewater, New Jersey,
and the company's Web site can be viewed at www.dset.com.
Statements regarding financial matters contained
in this press release, other than historical facts, are forward-looking.
Since all statements about DSET's plans, estimates, and expectations
are based on current projections that involve risks and uncertainties,
and are subject to change at any time, the company's actual
results may differ materially from expected results. Investors
should consider these risks and uncertainties, which are discussed
in documents filed by DSET with the Securities and Exchange
Commission. These documents identify important factors that
could cause the actual results to differ materially from those
contained in the projections or forward-looking statements.
DSET expressly disclaims any obligation to update any forward-looking
statements.
x x x
DSET Contacts:
Financial: Bruce Crowell, Chief Financial Officer, 908-526-7500
Ext. 1775, e-mail bcrowell@dset.com
Media Relations: Kathy Claxton, Corporate Marketing Communications
Manager,
908-526-7500 Ext. 1280, e-mail: kclax@dset.com
Investor Relations: John P. Murphy, Westfield Investor Relations,
908-233-1558,
e-mail: westfieldir@worldnet.att.net
DSET and the DSET logo are registered trademarks of DSET
Corporation.
|
