VRYA Viryanet Ltd. (MM)

ViryaNet Limited (Nasdaq: VRYA), a leading provider of software applications that automate business processes for mobile workforce management, today announced financial results for its fourth quarter and full-year 2006. Total revenues for the fourth quarter, ended December 31, 2006, were $3.4M, a 30% increase from $2.6M of revenue recorded for the third quarter of 2006, and a 10% increase from $3.1M of revenue recorded for the fourth quarter of 2005. For the fiscal year 2006, total revenues were $13.9M, compared to $14.2M of total revenues recorded in 2005. For the fourth quarter, ended December 31, 2006, the Company reported a net loss of $41,000, or $0.02 per basic and diluted share, compared to a net loss of $1.5M, or $0.71 per basic and diluted share, for the third quarter of 2006, and compared to a net loss of $1.6M, or $1.08 per basic and diluted share, for the fourth quarter of 2005. For the fiscal year 2006, the Company reported a net loss of $1.8M, or $0.95 per basic and diluted share, compared to a net loss of $6.1M, or $4.68 per basic and diluted share, for the fiscal year 2005. Note: All per share data is reported after the effect of the 1 for 5 reverse split that occurred on January 17, 2007. Software license revenues increased substantially to $0.6M for the fourth quarter of 2006, compared to $0.1M for the third quarter of 2006, and compared to $0.2M for the fourth quarter of 2005. For the year ended 2006, software license revenues were $1.5M, compared to $1.7M for the fiscal year 2005. Professional services revenues increased by 9% to $2.8M for the fourth quarter of 2006, compared to $2.6M for the third quarter of 2006, and decreased 3% from $2.9M for the fourth quarter of 2005. For the year ended 2006, professional services revenues were $12.3M, compared to $12.5M for the fiscal year 2005. The Company reported a gross profit of $1.8M for the fourth quarter of 2006, or a gross margin of 53%, compared to a gross profit of $1.0M, or a gross margin of 37%, in the third quarter of 2006, and compared to a gross profit of $1.2M, or a gross margin of 37%, in the fourth quarter of 2005. For the fiscal year 2006, the Company reported an increase in gross profit to $6.7M, or a gross margin of 48%, compared to a gross profit of $6.0M, or a gross margin of 42% in 2005. The six point increase in annual gross margin is primarily attributable to operating efficiency improvements realized in the delivery of professional services. Operating expenses for the fourth quarter of 2006 were $2.0M, compared to $2.2M for the third quarter of 2006, and compared to $2.5M for the fourth quarter of 2005. The reduction in expenses from the third quarter to the fourth quarter of 2006 was related to the full benefit of savings realized from previous cost-reduction and organization-realignment actions taken by the Company. Operating expenses for the fiscal year 2006 decreased by 20% to $8.5M, compared to $10.7M in fiscal year 2005. Net financial income for the fourth quarter of 2006 was $0.1M, compared to net financial expenses of $0.2M for the third quarter of 2006, and net financial expenses of $0.2M for the fourth quarter of 2005. The net financial income in the fourth quarter of 2006 included $0.2M of one-time income resulting from the conversion of $0.5M of long-term convertible note held by Jerusalem High-tech Founders, Ltd. to Preferred A Shares in December 2006. The one-time income is the difference between the net carrying amount of the note before the conversion ($0.6M) and the fair value of the Preferred A Shares issued in the conversion ($0.4M). Net financial income for the fiscal year 2006 was $0.1M, compared to net financial expenses of $1.3M in fiscal year 2005. The Company's cash position on December 31, 2006 was $0.7M, compared to $0.4M on September 30, 2006, and compared to $2.0M on December 31, 2005. The Company's short-term and long-term bank debt position on December 31, 2006 was $2.5M, compared to $2.2M on December 31, 2005. The Company�s debt position, comprised of convertible notes and bank debt, was reduced by more than half from $6.2M on December 31, 2005 to $3.0M on December 31, 2006. The Days of Sales Outstanding (DSO) for the Company in the fourth quarter of 2006 was 28 days, compared to 46 days in the third quarter of 2006. �During 2006, we welcomed seven new customers, introduced our new, business-focused product vision; cut our debt in half; improved gross margin performance; and reduced our net losses by seventy one percent,� stated Memy Ish-Shalom, president and CEO, ViryaNet. �New senior management additions and swift organizational realignment in the early part of 2006 enabled us to deliver additional business value to our customers and improve our financial performance. �Our expanding customer base serves as testament to our technological leadership and powerful value proposition. Our partners became increasingly autonomous � and successful � through the year in selling, deploying, and supporting the ViryaNet products. We opened up a new market opportunity in the insurance industry by forging a VAR relationship with Mitchell International, the leading provider of software solutions to the insurance industry. And in the last twelve months, GE Energy, a significant partner in the utilities industry, closed license agreements with several tier-one utilities. �Other highlights of our fiscal year included many customer deployments, several product releases, and the Company�s inaugural customer conference that was successfully conducted in October 2006. �We enter 2007 strong and focused on our goals of continued revenue growth with sustained profitability. With the help of our partners, we will continue to expand our market presence worldwide while continuing to focus on our core target industries of utilities, telecommunications, insurance, and retail. We will invest in our sales, marketing, account management, and R&D efforts. We are well positioned to capitalize on the investments that we have made during the last 12 months.� 2006 Accomplishments 2006 saw significant accomplishments, including: New Sales � Either through its direct sales force or through the efforts of partnerships, ViryaNet welcomed many new customers, including ADS/WPS; Building Commission of Victoria, Australia; City of Lubbock, Texas; Mitchell International; and Western Water in Australia. The Company also saw follow-on sales at Duquesne, Frontier Communications, Kroger, News America Marketing, and Publix. Customer Deployments � Several of ViryaNet�s customers rolled out the complete ViryaNet product or finished significant milestone phases, including ADS, Kroger, Las Vegas Valley Water District, Mitchell International, News America Marketing, Singapore Power, and XO Communications. Product and Solutions � The Company�s Product Group introduced a new product vision as part of its product roadmap that leverages advanced technologies, such as Business Activity Monitoring (BAM), Business Process Management (BPM), and Forecasting and Planning. These technologies serve as fundamental elements in the Company�s initiatives to deliver business value through innovative, content-based solutions. New Markets, New Value Added Reseller � The Company announced during the year that Mitchell International, the leading supplier of information products, software, and e-business solutions for the insurance, property and casualty, medical claims, automotive collision repair, and glass replacement industries, chose and subsequently included the ViryaNet solution as a core component of its product suite. Mitchell is now offering that solution to its more than 16,000 existing business partners and all prospective clients. Mitchell introduced the product to the industry as Mitchell Dispatch(TM), and is ViryaNet�s first major partner offering its products as Software as a Service (SaaS). Customer Conference � Over 75 customers and business partners gathered in Orlando for ViryaVision in October 2006. This event provided attendees with the opportunity to witness new product demonstrations, listen to presentations, participate in industry forums, and discuss best service practices. About ViryaNet ViryaNet is a provider of software applications that improve the quality and efficiency of an organization�s service operations. ViryaNet�s products enable companies in the utility, telecommunications, retail, insurance, and general service sectors to manage and optimize mission-critical business processes. ViryaNet�s products improve the functions of work order management, scheduling and dispatch, business activity monitoring, and mobile field communication. Embracing a business process management architecture, the ViryaNet products intelligently guide, automate, and optimize field service work � both simple and complex. The results are improved operational performance, a better customer experience, and a higher degree of regulatory compliance. Visit ViryaNet at www.viryanet.com. 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 20-F, dated June 30, 2006, 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. � VIRYANET LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands � December 31, � 2005� � 2006� � ASSETS � CURRENT ASSETS: Cash and cash equivalents $ 2,040� $ 736� Trade and unbilled receivables ,net 1,322� 1,045� Other accounts receivable and prepaid expenses � 785� � 622� � Total current assets � 4,147� � 2,403� � SEVERANCE PAY FUND � 795� � 830� � PROPERTY AND EQUIPMENT, NET � 295� � 163� � � CUSTOMER RELATIONSHIP, NET � 1,099� � 875� � OTHER INTANGIBLE ASSETS AND DEBT ISSUANCE COST, NET � 1,072� � 660� � GOODWILL � 7,048� � 7,088� � Total assets $ 14,456� $ 12,019� VIRYANET LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands � December 31, � 2005� � 2006� � � LIABILITIES AND SHAREHOLDERS' EQUITY � CURRENT LIABILITIES: Short-term bank credit $ 253� $ 1,187� Current maturities of long-term bank loans 698� 574� Trade payables 1,074� 702� Deferred revenues 3,193� 2,361� Other accounts payable and accrued expenses 2,241� 1,834� Loan from related party 285� 115� Short-term Convertible note � 407� � -� � Total current liabilities � 8,151� � 6,773� � LONG-TERM LIABILITIES: Long-term bank loan, net of current maturities 1,293� 718� Long-term Convertible note 3,592� 568� Accrued severance pay � 1,237� � 1,276� � Total long-term liabilities � 6,122� � 2,562� � COMMITMENTS AND CONTINGENT LIABILITIES � SHAREHOLDERS' EQUITY: Share capital 1,769� 2,672� Additional paid-in capital 112,789� 115,900� Deferred stock compensation (135) -� Accumulated other comprehensive loss (435) (314) Accumulated deficit � (113,805) � (115,574) � Total shareholders' equity � 183� � 2,684� � Total liabilities and shareholders' equity $ 14,456� $ 12,019� VIRYANET LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands, except share and per share data � Three months ended December 31 � Year ended December 31 � 2005� � 2006� � 2005� � 2006� Unaudited Unaudited � � � Revenues Software licenses $ 231� $ 620� $ 1,720� $ 1,520� Maintenance and services � 2,877� � 2,790� � 12,487� � 12,340� � Total revenues � 3,108� � 3,410� � 14,207� � 13,860� � Cost of revenues: Software licenses 100� 73� 358� 356� Maintenance and services � 1,857� � 1,523� � 7,855� � 6,831� � Total cost of revenues � 1,957� � 1,596� � 8,213� � 7,187� � Gross profit � 1,151� � 1,814� � 5,994� � 6,673� Operating expenses: Research and development 513� 514� 2,504� 2,121� Selling and marketing 1,067� 821� 5,214� 3,692� General and administrative � 940� � 627� � 3,004� � 2,735� � Total operating expenses � 2,520� � 1,962� � 10,722� � 8,548� � Operating loss (1,369) (148) (4,728) (1,875) Financial income (expenses), net � (202) � 107� � (1,330) � 106� � Net loss $ (1,571) � (41) $ (6,058) $ (1,769) � Basic and diluted net loss per share $ (1.08) $ (0.02) $ (4.68) $ (0.95) � Weighted average number of shares used in computing basic and diluted net loss per Ordinary share (a) � 1,459,097� � 2,181,316� � 1,294,834� � 1,857,217� � (a) All per share data is reported after the effect of the 1 for 5 reverse split that occurred on January 17, 2007