InfoVista reports its third consecutive quarter of positive operating profit

Paris, France – May 6, 2008 – InfoVista (Euronext: IFV, ISIN: FR0004031649), a leading Proactive Service Assurance management software company, today announced financial results for the third quarter, ended March 31, 2008, of its 2008 fiscal year.

Total revenues for the quarter were €12.2 million, up 27% from the €9.6 million reported for the comparable quarter last year, driven primarily by growth in license revenues as well as €1.2 million in revenues from the recently acquired Accellent. On a constant exchange rate basis, total revenues would have risen 34% to the equivalent of €12.8 million as compared to the same period last year.
InfoVista completed the acquisition of Accellent on November 21, 2007 and its operations for the entire third quarter of fiscal year 2008 were consolidated in the Company’s financial results for the period.  
InfoVista reported positive operating profit of €0.2 million for the third quarter compared with an operating loss of €1.4 million for the same period last year. Reflecting a further write-down of its investment in money market funds affected by the US subprime market, InfoVista posted a net loss for the quarter of €2.2 million, as compared to a net loss of €1.4 million in the comparable quarter last year.
Commenting on the quarter, Chairman and Chief Executive Officer Alain Tingaud said: “Another quarter of solid revenue growth, ahead of the guidance we provided a quarter ago, gives further evidence that InfoVista continues to head in the right direction. Top-line performance has been particularly encouraging given our increasing level of dollar-denominated revenues, and has yielded another quarter – our third in a row – of positive operating margin. Accellent has also delivered on expectations with more than €1 million in total revenues. Business successes are already emerging, highlighting the quality of the acquisition.”

Mr. Tingaud continued: “We incurred further financial losses in the quarter as a result of the further devaluation of our investments in money market funds that were affected by the US subprime crisis. With the investment made in these funds now standing at €4.2 million, we do not expect any further depreciation and we will recover at least this amount as soon as the markets become more liquid.”

Q3 Financial Highlights

Revenues

• Total revenues for the third quarter stood at €12.2 million, an increase of 27% as compared to the comparable quarter last year. On a constant exchange rate basis, total revenues for the quarter would have increased by 34% to the equivalent of €12.8 million as compared to the same quarter last year. Accellent contributed €1.2 million to the third quarter, slightly ahead of expectations. As of April 1, 2008, the Accellent legal entity was fully merged within InfoVista SA in France. 

• License revenues for the third quarter increased sharply, to €6.9 million, representing 57% of total revenues and an increase of 50% as compared to the same quarter last year. In the quarter, license revenues from Microsoft secured from the multi-year deal announced in January 2007 totaled €1.4 million, as compared to €1.5 million in the comparable prior-year quarter. 

• Service revenues rose by 6% to €5.3 million as compared to the same period last year, contributing 43% of total revenues.  

Expenses

• Gross margin in the third quarter stood at 80.2% of total revenues, in line with InfoVista’s expectations and guidance, as compared to gross margin of 79.8% for the same quarter the previous year. 

• Operating expenses for the third quarter totaled €9.6 million.
  
  • Sales & marketing expenses stood at €5.1 million, representing 42% of total revenues as compared to €4.4 million or 46% of total revenues in the prior-year quarter. The increase in sales & marketing is primarily due to the integration of Accellent for €0.6 million, as compared to the same quarter last year.
  • General & administrative expenses totaled €1.6 million, or 13% of total revenues, a decline compared to €1.8 million, or 19% of total revenues, in the prior-year quarter.
  • Research & development expenditure totaled €2.7 million or 22% of total revenues as compared to €2.1 million, or 22% of total revenues, in the prior-year quarter. The increase is primarily attributable to the previously announced investment program in InfoVista’s product management group, along with its Extended Development Center in Bangalore. This investment underscores the Company’s commitment to product development and innovation. 

• As at March 31, 2008, InfoVista had 256 employees, including 21 employees from Accellent. 

Earnings

• InfoVista achieved a third consecutive quarter of operating profitability. Operating profit amounted to €0.2 million in the third quarter, versus an operating loss of €1.4 million in the third quarter of the previous fiscal year. 

• During the quarter, InfoVista incurred additional financial losses due to a further write-down of €2.4 million in its financial assets in money market funds affected by the US subprime market. Net loss for third quarter stood at €2.2 million, as compared to €1.4 million in the same quarter of the previous year.   

Balance Sheet

• Days Sales Outstanding (DSO) stood at an exceptionally low 70 days for the third quarter, as compared to 93 days in the third quarter of the previous fiscal year. This improvement is primarily related to two large revenue contributions that were paid within the third quarter in the Americas region. 

• As at March 31, 2008, the Company’ cash, short-term deposits and current financial assets amounted to €21.8 million, with another €4.2 million locked in non-current assets, as compared to €17.1 million and €6.6 million respectively at the end of the prior quarter. 

• As at March 31, 2008, InfoVista had a total of 19,849,829 and 18,578,308 shares issued and outstanding, respectively. The Company recently reactivated its share buyback program and purchased 192,033 shares during the third quarter of the fiscal year. 

Q3 Operational Highlights

Revenue Drivers:

• EMEA total revenues rose 45% year-on-year to €6.2 million, representing 50% of total revenues in the third quarter, mainly driven by Accellent contribution of €1.2 million. EMEA revenues were boosted in the third quarter by contributions from major service providers such as Telefonica O2 in Germany, Bouygues Telecom and France Telecom. In addition, InfoVista further expanded its activities in Africa by signing a deal with Vodafone for its Egyptian operations. 

• The Americas demonstrated solid results in the third quarter, with revenues amounting to €5.1 million, representing 42% of total revenues. InfoVista continues to capitalize on momentum generated over the last few quarters, notably through contracts signed with new service providers such as Embarq. In addition, during the quarter, InfoVista sold the Accellent solution to Microsoft, illustrating the Company’s ability to expand the reach of acquired products within the InfoVista installed base.  

• Total revenues for the Asia-Pacific region stood at €0.9 million, or 8% of the quarter’s total revenues, declining 39% as compared to the same quarter a year ago, after two consecutive quarters of significant growth. Key deals of the quarter included the telecommunications incumbents Telekom Malaysia and SingTel.

• In the third quarter, InfoVista derived the majority of its revenue from its direct sales channel and service provider market, which accounted for 58% and 66% of total revenues respectively.

Recent Events

• InfoVista’s Board of Directors, which met on April 30, 2008, has decided to cancel 500,000 of the Company’s shares and pursuant to its share buyback program, to purchase 800,000 shares, or approximately 4% of the Company’s outstanding share capital. 

• To carry out this program, InfoVista will be using the services of an outside investment service provider. 

Outlook

For the fourth quarter, InfoVista revenues objectives range between €11.5 million and €12.0 million, with positive operating margin. Consequently, the Company’s objectives for its full fiscal year will be between €45.3 million and €45.8 million. This is consistent with the Company’s previously stated guidance of €46 million that was based on a US/€ exchange rate of 1.45. At the end of March, InfoVista’s operating result had reached its full year objective of 2% operating margin or approximately €1 million operating results before amortization of acquired intangibles. Therefore, the Company expects to beat its TEP (Transformation and Execution Plan) operating margin objective for the full fiscal year.

Conference call

Download the Consolidated statement of operation and consolidated balance sheets