Reports 30% Increase in Third Quarter Net Income
SAN JOSE, Calif., Oct. 15 /PRNewswire/ -- Hello Direct, Inc.
(Nasdaq: HELO), the leading developer and direct marketer of desktop telephony
productivity tools, today reported financial results for the third quarter and
nine months ended September 30, 1998.
Net sales for the quarter were $17.0 million, an increase of 1.7 percent
over net sales of $16.7 million in the third quarter of the prior year. Net
income was $664,000, or $0.13 cents per share (on 5,177,000 diluted shares
outstanding), an increase of 30.2 percent over net income of $510,000, or
$0.10 per share (on 5,133,000 diluted shares outstanding), for the same
quarter a year ago.
The Company also reported a record quarterly operating income of $907,000,
a 34.4 percent increase over operating income of $675,000 in the third quarter
of last year.
For the nine months ended September 30, 1998, net sales reached a record
$51.5 million, an increase of 7.4 percent over the same period in the prior
year. Net income for the nine months was $1.8 million, or $0.36 per share (on
5,199,000 diluted shares outstanding), a 56.4 percent increase over net income
of $1.2 million, or $0.23 per share (on 5,101,000 diluted shares outstanding),
in the first nine months of 1997.
"We are very pleased with the significant improvement in the operating and
net income results achieved in the quarter," said Alec Glover, Hello Direct's
President and CEO. "The performance is directly attributable to transitioning
to our new strategy focusing on sales of higher margin products through our
catalog, telemarketing and Internet sales channels. We had expected somewhat
lower revenue growth during this transition due to the elimination of lower
price, lower margin items representing approximately 50 percent of our
products. However, the rate of growth in net sales was somewhat lower than
anticipated. This was due primarily to a delay in the staffing increase of
our outbound telemarketing team."
According to Glover, the Company's gross margin for the quarter increased
to 54.2 percent, up from 52.7 percent in the same quarter a year ago.
Selling, general and administrative expenses declined as a percentage of net
sales to 45.7 percent, from 46.7 percent in the same quarter in the prior
year. Product development expenses increased to $547,000, up 69.9 percent
over the level in the third quarter last year.
"Our internal product development team, which recently produced
LineStein(R), the revolutionary analog-to-digital adapter, will begin
introducing new innovative corded and wireless headset models in the coming
months," said Glover. "In line with our growth strategy, we will continue to
accelerate our internal development efforts, and we are evaluating other
technologies and technology developers for possible strategic alliances or
acquisitions, as well. These efforts along with the continued ramping up of
our outbound telemarketing and Internet efforts should allow us to begin
achieving higher revenue growth rates."
Hello Direct also reported that cash and short-term investments as of
September 30, 1998 increased to $9.0 million, up from $8.2 million as of June
30, 1998, and equal to the level at December 31, 1997. Working capital as of
September 30, 1998 was $18.9 million, compared with working capital of $17.3
million at the year end.
Hello Direct, Inc. (http://www.hello-direct.com) is the leading developer
and direct marketer of telephone productivity tools including headsets,
teleconferencing, wireless and related desktop products. Through its
distinctive catalogs, Website and outbound telemarketing programs, the Company
offers a broad selection of commercial-grade brand name, proprietary and
private label products at competitive prices that provide solutions to its
customers' evolving communication needs.
This release contains forward-looking statements including, but not
limited to, statements regarding the introduction of new headset models, the
acceleration of internal development efforts, possible strategic alliances or
acquisitions, expansion of telemarketing, and Internet efforts and increased
revenue growth rates. These forward looking statements involve risks and
uncertainties that could cause actual results to differ, and such differences
could be material. Such risks and uncertainties include, but are not limited
to, the following: the uncertainty of the Company's future operating results,
the fact that the market for telecommunication products is generally
characterized by rapidly changing technology, the Company's need to
successfully develop new products, the Company's dependence on its headset
products, the Company's dependence on sole or limited source suppliers and
foreign manufacturing, the highly competitive market for telecommunications
products, risks associated with managing a growing business and the Company's
dependence on key personnel. There can be no assurance that the Company will
be successful in addressing such risks and uncertainties. Investors are
strongly encouraged to review the section entitled "Factors affecting
operating results and market price of stock" in the Company's annual report on
Form 10-K for the year ended December 31, 1997, and quarterly reports on Form
10-Q on file with the Securities and Exchange Commission for a discussion of
risks and uncertainties that could affect operating results and the market
price of the Company's stock.
HELLO DIRECT, INC.
Condensed Statements of Operations
For the Three and Nine Months Ended
September 30, 1998 and 1997
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Net sales $17,016,000$16,727,000 $51,547,000$47,981,000
Cost of goods sold 7,791,000 7,914,000 23,780,000 23,309,000
Gross profit 9,225,000 8,813,000 27,767,000 24,672,000
Selling, general and
administrative expenses 7,771,000 7,816,000 23,848,000 22,080,000
Product development expenses 547,000 322,000 1,449,000 1,103,000
Operating income 907,000 675,000 2,470,000 1,489,000
Other income -- net 198,000 177,000 605,000 498,000
Income before income taxes 1,105,000 852,000 3,075,000 1,987,000
Income taxes 441,000 342,000 1,229,000 807,000
Net income $664,000 $510,000 $1,846,000 $1,180,000
Basic per share amounts:
Net income $0.13 $0.10 $0.36 $0.23
Weighted average shares
outstanding 5,122,000 5,039,000 5,106,000 5,028,000
Diluted per share amounts:
Net income $0.13 $0.10 $0.36 $0.23
Weighted average shares
outstanding 5,177,000 5,133,000 5,199,000 5,101,000
HELLO DIRECT, INC.
Condensed Balance Sheets
September 30, December 31,
1998 1997
ASSETS
Current assets:
Cash and cash equivalents $3,286,000 $5,135,000
Short-term investments 5,711,000 3,830,000
Trade accounts receivable,
less allowance for returns
and doubtful accounts 6,717,000 5,752,000
Inventories 5,439,000 5,137,000
Deferred tax assets 765,000 821,000
Other current assets 1,111,000 1,771,000
Total current assets 23,029,000 22,446,000
Notes receivable 4,317,000 4,542,000
Property and equipment, net 5,822,000 4,819,000
Long-term deferred tax assets -- 25,000
Total assets $33,168,000 $31,832,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,385,000 $3,856,000
Accrued expenses 1,744,000 1,319,000
Total current liabilities 4,129,000 5,175,000
Non-current liabilities 262,000 --
Total liabilities 4,391,000 5,175,000
Stockholders' equity:
Common stock 5,000 5,000
Additional paid-in capital 28,319,000 28,045,000
Retained earnings (deficit) 898,000 (948,000)
Less treasury stock, at cost (445,000) (445,000)
Total stockholders' equity 28,777,000 26,657,000
Total liabilities and
stockholders' equity $33,168,000 $31,832,000
SOURCE Hello Direct, Inc.
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Related links:
http://www.hello-direct.com
CONTACT:
Raymond E. Nystrom, Vice President Operations
and Chief Financial Officer of Hello Direct, 408-363-5075; or Don
Markley, general information, or Reid Cox, analyst contact,
415-986-1591, both of The Financial Relations Board
NOTE TO EDITORS: For more information on Hello Direct, Inc. via
fax at no cost, dial 800-PRO-INFO (908-544-2850 outside the
U.S.), ticker symbol: HELO
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