MetaSolv Reports 11% Increase in Fourth Quarter Total Revenues on 39% Growth in License Revenues

MetaSolv Reports 11% Increase in Fourth Quarter Total Revenues on 39% Growth in License Revenues

PLANO, Texas, Feb. 9 /PRNewswire-FirstCall/ -- MetaSolv, Inc. (NASDAQ:MSLV), a global leader in comprehensive service fulfillment solutions for next-generation communications service providers, today announced financial results for the fourth quarter and year ended December 31, 2004.

Revenues for the quarter increased 11% to $21.5 million, compared to fourth quarter 2003 revenues of $19.4 million. MetaSolv reported a net loss for the fourth quarter of $2.4 million, or $0.06 per share, compared to a net loss of $28.0 million, or $0.73 per share, in the fourth quarter of 2003. On a pro forma basis, the company's fourth quarter net loss was $1.6 million, or $0.04 per share, a 65% improvement compared to a pro forma net loss of $4.5 million, or $0.12 per share, in the fourth quarter of 2003. Adjusted EBITDA for the quarter was a negative $0.3 million, compared to a negative $2.9 million for the same period in the prior year.

For the twelve months ended December 31, 2004, revenues increased 2% to $81.2 million, compared to 2003 revenues of $79.5 million. MetaSolv reported a net loss for the year of $16.0 million, or $0.40 per share, compared to a net loss of $56.6 million, or $1.48 per share, in 2003. On a pro forma basis, the company's 2004 net loss was $7.1 million, or $0.18 per share, a 67% improvement compared to a pro forma net loss of $21.7 million, or $0.57 per share, in 2003. Adjusted EBITDA for the year was a negative $1.8 million, compared to a negative $18.2 million in the prior year.

Pro forma results exclude amortization of intangible assets, restructuring and other costs, purchased in process research and development write-offs, stock compensation expense, goodwill impairment, gain or loss on investments, and write-off of deferred tax assets. Adjusted EBITDA represents pro forma net loss excluding income tax expense (benefit), interest and other income, and depreciation and amortization (please see page 8 for a complete reconciliation of pro forma net loss and adjusted EBITDA to net loss reported under Generally Accepted Accounting Principles).

"We are pleased to announce our fifth consecutive quarter of sequential- quarter revenue growth and our second consecutive quarter of comparable- quarter revenue growth, which has been driven by key contracts with new and existing customers as they deploy next-generation mobile, IP and VoIP services," said T. Curtis Holmes, MetaSolv's President and Chief Executive Officer. "Our results for the fourth quarter and full-year 2004 reflect our ongoing focus on expense management, which enabled us to increase revenues while reducing operating expenses for both periods. With this combination of expanding revenues and strong expense management, our fourth quarter results represented our fourth consecutive quarter of narrowing pro forma net loss on a comparable-quarter basis and reflect our commitment to returning to profitability."

Highlights of MetaSolv's fourth quarter operating and financial results include:

* The addition of three new IP VPN customers during the quarter,
validating our market leadership in enabling cost-efficient delivery
of multi-vendor IP VPN services;
* Significant progress and focus on enabling VoIP services with numerous
operators worldwide. A recent industry analyst report on VoIP
activation from OSS Observer stated, "MetaSolv is the leader in the
early phases of this market development.";
* Significant transactions during the quarter include new customer wins
and additional sales to existing customers, including:
* A network inventory license extension and a new win with our
activation solution at a large North-American ILEC customer;
* Continuing license and service revenues from enabling VoIP at a key
tier-one, North America-based global provider of voice and data
services, following a contract we announced during the third
quarter of 2004;
* A new inventory management win at VSNL in India, a leading
telecommunications operator, which validates the key functionality
in M6, our next-generation inventory management solution;
* A license extension with a multi-region cable operator in Europe to
enable their VoIP services across numerous European countries;
* A network mediation win with BSNL in India, to enable 2.5 and 3G
wireless data services to approximately 7 million subscribers; and
* The second sequential-quarter improvement in cash and marketable
securities, to a total of $35.2 million at year-end from $33.4 million
at the end of the third quarter of 2004, while maintaining a debt-free
balance sheet.



"MetaSolv successfully increased revenues in high-growth markets in 2004, notably in Europe where revenue grew 15% from the previous year and in Asia- Pacific where revenues increased 13% from 2003," said Holmes. "In addition, we continued to grow and leverage our substantial installed customer base of global service providers, by enabling their mobile, IP and VoIP service deployments."

Holmes continued, "VoIP accounted for over 10% of our total revenue in 2004, further validating our strategy and leadership position in enabling voice transformation. We intend to build upon our 2004 success and anticipate growth in VoIP consistent with growth in the overall VoIP market as operators transform their networks and services."

"After an extraordinary multi-year downturn in the telecommunications industry, 2004 represented a succession of tangible steps toward regaining our revenue momentum and profitability," concluded Holmes. "Throughout this period, we have evolved into a company with stronger long-term growth prospects by expanding our product line to enable efficient delivery of high growth mobile, IP and VoIP services. With the ongoing improvement in the telecommunications environment, we expect to achieve further revenue growth and profitability on a pro forma basis in 2005."

Based on the company's results for the fourth quarter, the pipeline of potential contracts, and expectations concerning the business environment, MetaSolv today established its guidance for revenues for the first quarter of 2005 in a range of $20.5 million to $22.5 million, compared with $19.6 million for the first quarter of 2004. MetaSolv anticipates that it will adopt the provisions of FASB 123 R in the first quarter of 2005, but is unable to quantify the impact of this adoption on its income statement at this time, and therefore, is unable to estimate its net income or loss under Generally Accepted Accounting Principles. Excluding stock compensation charges as a result of adopting FASB 123 R, as well as charges related to the amortization of intangible assets of approximately $0.5 million, the company expects pro forma net income (loss) per share of between ($0.03) and $0.01 for the first quarter of 2005.

Conference call notice

MetaSolv will hold a conference call to discuss this press release today at 5:00 p.m. Eastern time. Investors may listen to the conference call over the Internet by going to http://www.metasolv.com/ and clicking Investors, or by going to http://www.streetevents.com/ . Please visit the Web site at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and through the end of the business day on Wednesday, February 16, 2005, at (719) 457-0820 (confirmation number: 4853935) and at the Web sites referenced above.

About MetaSolv

MetaSolv, Inc is a global leader in comprehensive service fulfillment software solutions for communications service providers. MetaSolv's multi- service order management, inventory management, and service activation capabilities automate the order-to-activate provisioning process for traditional and next-generation IP-based wireline and mobile service providers. More than 180 global service providers -- including Brasil Telecom, BT, Cable & Wireless, Nextel, O2, T-Mobile, Vodafone, and others -- use MetaSolv's solutions to achieve increased revenues, reduced costs, and enhanced customer service. MetaSolv is a global company, headquartered in Plano, Texas.

MetaSolv is a registered trademark. The MetaSolv logo is a trademark of MetaSolv Software, Inc. All other trademarks are property of their respective owners.

This press release contains forward-looking statements that are based upon current expectations and assumptions and involve a number of risks and uncertainties. Actual results could differ materially from MetaSolv's current expectations. MetaSolv assumes no obligation to update any such forward- looking statement. Using the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, MetaSolv cautions you that these statements may be affected by the important factors, among others, described in the documents and reports filed by MetaSolv from time to time with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for 2003 and subsequent Quarterly Reports on Form 10-Q, as well as by other factors, including, but not limited to: the variance of quarterly operating results; the Company's ability to successfully manage and integrate acquisitions; the Company's reliance on sales of its software; the need to expand sales and distribution capabilities; the need to expand to new customer markets; the Company's continued use of strategic relationships; its ability to manage growth; the Company's international operations; its ability to meet customer expectations; the quality of the Company's software delivered; competition; consolidation within the telecommunications industry; limitations on the ability of customers to obtain adequate financing; and the Company's ability to reduce its cost structure.

METASOLV, INC.
Summary Financial Information
(In thousands, except per share data)
(Unaudited)

Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
Revenues $21,498 $ 19,422 $ 81,161 $ 79,506
Loss from operations $(1,885) $(11,607) $(15,205) $(43,599)
Net loss $(2,441) $(27,998) $(15,987) $(56,610)
Basic and diluted loss
per share $ (0.06) $ (0.73) $ (0.40) $ (1.48)
Basic and diluted
weighted average
shares outstanding 40,581 38,416 39,674 38,177

Pro forma (A)
Net loss $(1,577) $ (4,493) $ (7,107) $(21,720)
Basic and diluted loss
per share $ (0.04) $ (0.12) $ (0.18) $ (0.57)

(A) See page 8 for a complete reconciliation of pro forma results with
those reported under Generally Accepted Accounting Principles.



METASOLV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
Revenues:
License $ 6,572 $ 4,721 $ 24,017 $ 22,182
Service 14,926 14,701 57,144 57,324
Total revenues 21,498 19,422 81,161 79,506

Cost of revenues:
License 377 286 919 1,275
Service 8,018 8,505 30,022 33,156
Amortization of
intangible assets 846 1,635 3,686 6,483
Total cost of
revenue 9,241 10,426 34,627 40,914

Gross profit 12,257 8,996 46,534 38,592

Operating expenses:
Research and
development 5,795 5,979 23,661 29,599
Sales and marketing 5,812 6,054 22,566 25,315
General and
administrative 2,931 2,997 11,012 14,711
Restructuring and
other costs (396) 5,573 4,500 8,558
In process R&D write-off --- --- --- 1,781
Goodwill impairment --- --- --- 2,227
Total operating
expenses 14,142 20,603 61,739 82,191

Loss from operations (1,885) (11,607) (15,205) (43,599)
Interest and other
income, net 150 223 468 1,075
Loss on investments (332) --- (317) 32
Loss before taxes (2,067) (11,384) (15,054) (42,492)
Income tax expense 374 16,614 933 14,396
Minority interest --- --- --- 278
Net loss $(2,441) $(27,998) $(15,987) $(56,610)

Basic and diluted loss
per share $ (0.06) $ (0.73) $ (0.40) $ (1.48)
Basic and diluted
weighted average
shares outstanding 40,581 38,416 39,674 38,177



METASOLV, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
Revenues:
License $ 6,572 $ 4,721 $24,017 $ 22,182
Service 14,926 14,701 57,144 57,324
Total revenues 21,498 19,422 81,161 79,506

Cost of revenues:
License 377 286 919 1,275
Service 8,014 8,505 30,008 33,156
Total cost of
revenue 8,391 8,791 30,927 34,431

Gross profit 13,107 10,631 50,234 45,075

Operating expenses:
Research and development 5,785 5,979 23,617 29,598
Sales and marketing 5,806 6,054 22,543 25,315
General and
administrative 2,869 2,957 10,716 14,788
Total operating
expenses 14,460 14,990 56,876 69,701

Loss from operations (1,353) (4,359) (6,642) (24,626)
Interest and other
income, net 150 223 468 1,075
Loss before income
taxes (1,203) (4,136) (6,174) (23,551)
Income tax expense
(benefit) 374 356 933 (1,553)
Minority interest --- --- --- 278
Net loss $(1,577) $(4,492) $(7,107) $(21,720)

Basic and diluted loss
per share $ (0.04) $ (0.12) $ (0.18) $ (0.57)
Basic and diluted
weighted average shares
outstanding 40,581 38,416 39,674 38,177



METASOLV, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

December 31, December 31,
2004 2003
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $11,858 $17,870
Marketable securities 23,354 23,993
Trade accounts receivable, less
allowance for doubtful accounts of
$2,110 in 2004 and $3,327 in 2003 12,482 11,330
Unbilled receivables 1,156 1,622
Prepaid expenses 2,842 2,307
Other current assets 657 1,493
Total current assets 52,349 58,615

Property and equipment, net 5,924 13,118
Intangible assets 2,787 6,473
Other assets 945 1,238
Total assets $62,005 $79,444

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,780 $ 4,748
Accrued expenses 18,883 22,625
Deferred revenue 7,350 8,374
Total current liabilities 31,013 35,747
Stockholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized, no shares
issued or outstanding --- ---
Common stock, $.005 par value,
100,000,000 shares authorized, shares
issued and outstanding: 40,937,985 in 2004,
and 38,576,708 in 2003 205 193
Additional paid-in capital 148,772 145,260
Deferred compensation (229) (18)
Accumulated other comprehensive income 370 401
Accumulated deficit (118,126) (102,139)
Total stockholders' equity 30,992 43,697
Total liabilities and stockholders'
equity $62,005 $79,444



METASOLV, INC.
RECONCILIATION OF PRO FORMA NET LOSS AND ADJUSTED EBITDA TO NET LOSS
(In thousands)
(Unaudited)

Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003

Net loss as reported
under Generally Accepted
Accounting Principles $(2,441) $(27,998) $(15,987) $(56,610)

Amortization of intangible
assets 846 1,635 3,686 6,483
Restructuring and other costs (396) 5,573 4,500 8,558
In process R&D write-off --- --- --- 1,781
Stock compensation 82 40 377 (76)
Goodwill impairment --- --- --- 2,227
Loss (gain) on investments 332 --- 317 (32)
Income tax expense --- 16,258 --- 15,949
Pro forma net loss $(1,577) $ (4,492) $ (7,107) $(21,720)

Pro forma net loss $(1,577) $ (4,492) $ (7,107) $(21,720)
Depreciation and amortization 1,091 1,477 4,845 6,180
Interest and other income, net (150) (223) (468) (1,075)
Income tax expense (benefit) 374 356 933 (1,553)

Adjusted EBITDA $ (262) $ (2,882) $ (1,797) $(18,168)





The company's pro forma results should not be considered a measure of financial performance under generally accepted accounting principles. Items excluded from these results are significant components in understanding and assessing financial performance. Pro forma results are an analytical indicator used by management to evaluate company performance and allocate resources. Pro forma results should not be considered in isolation or as alternatives to net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because pro forma results are not a measurement determined in accordance with generally accepted accounting principles and are thus susceptible to varying calculations, they may not be comparable, as presented, to other similarly titled measures of other companies. Net loss is the financial measure calculated and presented in accordance with generally accepted accounting principles that is most comparable to MetaSolv's pro forma results, as defined.

Contacts:
Investor Relations Media Relations
Glenn Etherington David Sharpley
Chief Financial Officer SVP, Marketing
(972) 403-8501 (613) 287-8200
getherington@metasolv.comdsharpley@metasolv.com


Source: MetaSolv, Inc.

CONTACT: investor relations, Glenn Etherington, Chief Financial Officer,
+1-972-403-8501, or getherington@metasolv.com , or media relations, David
Sharpley, SVP, Marketing, +1-613-287-8200, or dsharpley@metasolv.com , both of
MetaSolv, Inc.

Web site: http://www.metasolv.com/


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