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April 29, 2003
Onyx Software Announces First Quarter Results
Cost Reductions Position Company for Future Profitability
"We believe that very weak economic conditions and uncertainty brought on by geopolitical events has led customers to defer license purchases," said Onyx Software Co-Founder and CEO Brent Frei. "While we are hopeful that the future business impact of these factors is short-lived, we believe that the actions we are taking in response will allow Onyx to navigate through this tough business environment, and enjoy future profitability." On April 7, 2003, the company announced cost reductions designed to reduce total costs and expenses to the range of $15 million for the second quarter of 2003, excluding the amortization of intangibles, stock-based compensation expense, restructuring-related costs and impairment of certain assets. "Our strong disappointment with first quarter license revenue is somewhat offset by the quality of global blue chip companies that continue to invest in the Onyx solution, continued strength in our professional services business, and IBM's recent announcement of Onyx On Demand CRM," Frei added. Onyx CRM is the choice of world-class companies and organizations First quarter 2003 customers came from the targeted verticals of Financial Services, Government and Healthcare, as well as a diverse representation of other industries. Representative new license customers in the first quarter of 2003 included Starbucks Coffee Company, Nuveen Investments, Reed Business Information, Kenworth Mexico, The Highland Council and the State of Illinois. Representative add-on license customers included the State of Georgia, the State of Michigan, Cambridgeshire County Council, and Geisinger Health Plan. No single customer accounted for more than 10 percent of total revenue in the quarter. Onyx direct sales accounted for 63 percent of license revenue, with the balance sold by partners. Included in partner-generated revenue were several sales to the government sector, including a sale by Fujitsu in the United Kingdom. Onyx partner IBM achieved its first Onyx sale during the quarter to a customer who will deploy Onyx Employee Portal for an Oracle database running on IBM's AIX UNIX operating system. Onyx Professional Services saw strong demand. Customers with Professional Services engagements in the quarter included The Regence Group, Kyorin Pharmaceuticals, ASB Bank, United Kingdom lottery operator Camelot, Amway Korea & Australia, Turner Sports, State Street Corporation, Netegrity, and Microsoft. The company anticipates continued strong demand for its Professional Services in Q2 2003. Onyx Software earns Leader quadrant position in Gartner Midsize CRM Suite Magic Quadrant
Onyx Software achieved Leader placement in Gartner's Magic Quadrant report on CRM Suites for North America Midsize Businesses (MSB). Gartner defines a midsize business as having annual revenues in the range of $50 million to approximately $500 million, up to 1,000 employees or midsize divisions of large enterprises. The report evaluated and positioned eighteen vendors in the MSB customer relationship management market. Onyx is one of only three CRM vendors included in both the midsize business and large enterprise Magic Quadrant reports and the only vendor of the three to be listed as a leader for MSBs. The recognition follows a showcase of Onyx customer success and innovation at the Gartner CRM Summit on March 4 and the shipment of Onyx Employee Portal 4.5 ahead of schedule on February 19. Onyx is the choice for innovative Web service-based applications
On March 25, Onyx and IBM announced a new service that makes Onyx enterprise-wide CRM functionality available as an on-demand utility through IBM's eBusiness On Demand Initiative. Onyx Software's Embedded CRM initiative made significant progress in the first quarter of 2003. Embedded CRM is a leading web services-based approach and flexible business model that enables Onyx partners to deliver CRM tailored to specific customer segments and needs. Recent accomplishments of this initiative include:
- On March 25, IBM announced the selection of Onyx to power its On Demand CRM offering.
- Reuters is embedding components of Onyx CRM in a new line of desktop products.
- A major European telecommunications provider will use Onyx to power a new hosted CRM offering for small businesses.
- Tokyo Electric Power Corporation (TEPCO) has purchased a pilot program for a new hosted CRM offering from Onyx partner NTT Comware. TEPCO's offering will target small to mid-sized businesses.
In the first quarter of 2003, Onyx shipped Onyx Employee Portal (OEP) 4.5 for Microsoft SQL and Oracle. This release delivers a host of new end user features, significant improvements in existing functionality, and a look and feel that achieves new levels of usability, personalization, and core CRM process support. OEP 4.5 is built on Onyx's component-based, web services architecture that uses XML standards for easy integration with other front- and back-office systems. "Several years ago we initiated a re-architecture that led to the release of Onyx Employee Portal (OEP) 4.0 in May of last year -- establishing our reputation for elegant architecture of unmatched scalability in the CRM arena," said Frei. "With the delivery of OEP 4.5 in the first quarter of 2003, we believe that our web functionality and usability are now industry leading as well." Business Outlook
While the outcome and timing of deals make a wide range of revenue outcomes possible, at this date the company believes it is likely that second quarter revenue will improve relative to first quarter 2003. Total costs and expenses are expected to be in the range of $15 million, depending largely on revenues received. Earnings Conference Call
Onyx will host a conference call to discuss 2003 first quarter financial results on Tuesday, April 29, 2003 after the market close. The Onyx Software earnings conference call is scheduled to start promptly at 4:30 pm Eastern (1:30 pm Pacific). We suggest that you access the call 10-15 minutes prior to the start time by signing on at http://investor.onyx.com. The call will be archived and available for replay at this same URL for one week. Alternatively, you can participate by phone.
| When: | Tuesday, April 29, 2003 |
| Time: | 4:30 pm (Eastern) / 1:30 pm (Pacific) |
| Dial-In: | 1-800-289-0494 |
| International Dial-In: | 1-913-981-5520 |
| Replay: | 1-719-457-0820 (available from 7:30 pm ET 4/29/03 through 11:45 pm ET 5/06/03) |
| Passcode: | 784064 |
Onyx Software Corp. (Nasdaq: ONXS), worldwide leader in delivering successful CRM, offers a fast, cost-effective, usable solution that shares critical information among employees, customers and partners through three role-specific, Web services-based portals. The Onyx approach delivers real-world success by aligning CRM technology with business objectives, strategies and processes. Companies rely on Onyx across multiple departments to create a superior customer experience and a profitable bottom line. Onyx serves customers worldwide in a variety of industries, including financial services, healthcare, high technology and the public sector. Customers include Amway, United Kingdom lottery operator Camelot, Delta Dental Plans of California, Microsoft Corporation, Mellon Financial Corporation, The Regence Group, State Street Corporation and Suncorp. More information can be found at (888) ASK-ONYX or info@onyx.com. Forward-Looking Statement
| Contact: | Rosemary Moothart Investor Relations Director Onyx Software (425) 519-4068 |
Onyx Software Corporation
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months
Ended
March 31,
2003 2002
-------- --------
Revenue
License $2,619 $3,054
Service 11,588 11,561
-------- --------
Total revenue 14,207 14,615
Costs of revenue
Cost of license 285 171
Amortization of acquired technology 84 138
Cost of service 5,435 5,208
-------- --------
Total cost of revenue 5,804 5,517
Gross margin 8,403 9,098
Operating Expenses
Sales and marketing 6,483 5,997
Research and development 3,129 3,953
General and administrative 2,253 2,539
Restructuring and other-related charges 340 2,617
Amortization of acquisition-related intangibles 209 209
Amortization of stock-based compensation 13 87
-------- --------
Total operating expenses 12,427 15,402
Operating loss (4,024) (6,304)
Other income (expense), net 9 (373)
Change in fair value of outstanding warrants 242 -
-------- --------
Loss before income taxes (3,773) (6,677)
Income tax provision (benefit) (214) 14
Minority interest in loss of consolidated subsidiary (157) (133)
-------- --------
Net loss $(3,402) $(6,558)
======== ========
Basic and diluted net loss per share $(0.07) $(0.14)
======== ========
Shares used in computation of basic and
diluted net loss per share 50,790 48,119
======== ========
Onyx Software Corporation
Supplemental Pro Forma Information:
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months
Ended
March 31,
2003 2002
-------- --------
Operating loss $(4,024) $(6,304)
Adjustments to reconcile operating loss in the
financial statements to pro forma operating loss:
Restructuring charges
Facilities 354 2,580
Asset impairments 87 -
Severance (101) 297
Other - (260)
-------- --------
Total restructuring charges 340 2,617
Amortization of acquired technology 84 138
Amortization of acquisition-related intangibles 209 209
Amortization of stock-based compensation 13 87
-------- --------
Pro forma operating loss $(3,378) $(3,253)
======== ========
Net loss $(3,402) $(6,558)
Adjustments to reconcile net loss in the
financial statements to pro forma net loss:
Restructuring charges
Facilities 354 2,580
Asset impairments 87 -
Severance (101) 297
Other - (260)
-------- --------
Total restructuring charges 340 2,617
Amortization of acquired technology 84 138
Amortization of acquisition-related intangibles 209 209
Amortization of stock-based compensation 13 87
Change in fair value of outstanding warrants (242) -
Deferred income tax associated with acquisitions (71) (89)
-------- --------
Pro forma net loss $(3,069) $(3,596)
======== ========
Pro forma basic and diluted net loss per share $(0.06) $(0.07)
======== ========
Shares used in computation of pro forma basic
and diluted net loss per share 50,790 48,119
======== ========
Onyx Software Corporation
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
March 31, December 31,
2003 2002
----------- ------------
Assets
Current Assets:
Cash and cash equivalents (A) $14,950 $19,279
Accounts receivable, net 11,413 14,408
Prepaid expenses and other current assets 3,235 3,374
Current deferred tax asset 240 273
----------- ------------
Total current assets 29,838 37,334
Property and equipment, net 5,874 6,474
Purchased technology, net 170 253
Other intangibles, net 1,252 1,461
Goodwill, net 8,180 8,180
Other assets 978 1,085
----------- ------------
Total Assets $46,292 $54,787
=========== ============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable 1,509 1,484
Salary and benefits payable 1,489 1,675
Accrued liabilities 2,634 3,147
Income taxes payable 712 660
Current portion long-term liabilities 182 180
Current portion of restructuring-related
liabilities 8,190 10,224
Deferred revenue 15,466 16,258
----------- ------------
Total current liabilities 30,182 33,628
Long-term liabilities 46 77
Long-term restructuring-related liabilities 1,309 2,600
Long-term restructuring-related liabilities -
warrants 678 920
Deferred tax liability 426 497
Minority interest in joint venture 78 237
Shareholders' Equity
Common stock 139,464 139,459
Deferred stock-based compensation (71) (84)
Accumulated deficit (125,463) (122,061)
Accumulated other comprehensive loss (357) (486)
----------- ------------
Total shareholders' equity 13,573 16,828
----------- ------------
Total Liabilities and Shareholders' Equity $46,292 $54,787
=========== ============
(A) Includes $3.8 million and $2.2 million in restricted cash as of
March 31, 2003 and December 31, 2002, respectively, which was
pledged in conjunction with the company's line of credit and
corporate card program.
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