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November 1, 2001 Onyx Software Third Quarter Final Results Best Preliminary
Aggressive cost containment supports goal of fourth quarter profitability
BELLEVUE, Wash. - Onyx® Software Corporation (NASDAQ: ONXS) a global provider of customer relationship management (CRM) enterprise applications, announced today financial results for the quarter and nine-month period ended September 30, 2001.
Financial Results
Revenue for the nine-month period ended September 30, 2001 totaled $77.9 million, compared to $83.6 million in the nine-month period ended September 30, 2000. Pro-forma net loss for the nine-month period ended September 30, 2001, excluding the amortization of intangibles, stock-based compensation expense, restructuring-related costs and impairment of certain assets, was $26.7 million, or $0.68 per share, compared to pro-forma net income of $2.2 million, or $0.05 per share in the nine-month period ended September 30, 2000. Reported operating results for the nine-month period ended September 30, 2001 including restructuring charges were a net loss of $85.4 million, or $2.17 per share, compared with a net loss of $1.9 million, or $0.06 per share in the nine-month period ended September 30, 2000.
Pro-forma third quarter cost of sales and operating expenses of $27.6 million were $4.4 million less than the $32 million target identified by the company on August 8, 2001. These expenses include an unusual item of $0.6 million for accounting and legal expenses. Third quarter revenue and expenses reported today were modestly better than the preliminary results reported on October 8, 2001."Our effective control of expenses throughout the third quarter partially offset the negative earnings impact of unexpected events," said Brent Frei, CEO of Onyx Software. "Going forward, we have dramatically increased the probability of achieving our goal of pro-forma profitability in the fourth quarter as a result of reducing our breakeven point to approximately $19 million."
As previously announced, Onyx has enacted a restructuring program that reduced expenses while preserving strategic initiatives, including key product delivery schedules and global customer and partner support capabilities.
Reported third quarter results include a $40.1 million restructuring charge that was largely related to excess facilities previously identified. The charge includes third quarter cash expenses of $0.5 million for severance and $3.0 million for facilities. Reported third quarter results also included $8.8 million in amortization and impairment of goodwill and other acquisition-related intangibles and $0.2 million amortization of acquired technology in cost of revenues. These charges had no impact on third quarter cash. The company expects that it will incur charges in the fourth quarter related to the October 2001 workforce reduction.
On September 30, 2001, Onyx Software had $17.8 million in cash, cash equivalents and short-term marketable securities. As previously reported, Silicon Valley Bank has renewed a $15 million credit line under more flexible terms.
Business Summary
New third quarter customers include Suncorp-Metway Ltd. (ASX: SUN.AX), IMS Health (NYSE: RX), Quadrem, Visual Networks, Inc. (NASDAQ: VNWK), Otter Tail Power (NASDAQ: OTTR) and PACCAR Parts, a division of PACCAR Inc (NasdaqNM: PCAR). Existing customers with add-on business include Dentegra, formerly known as Delta Dental Plans of California and Pennsylvania, and Internet Security Systems (ISS) (NASDAQ: ISSX).
Commenting on the customer wins, Frei said "Speed to benefit, affordable implementation, operating efficiencies, and support for the distributed enterprise are important to many companies today. We see customers selecting the Onyx advanced, web-enabled CRM technology that has been proven in the field over the promises of recent market entrants with early-stage Internet products. This same technology leadership is driving our strengthening partnership relationships with industry leaders, such as Microsoft and IBM," Frei added.
Onyx remains the only CRM vendor to-date certified for Microsoft Windows 2000 Advanced Server and Microsoft Windows 2000 Datacenter Server. Recently Onyx and Avanade jointly announced a partnership to take advantage of Microsoft .NET technology as part of the Microsoft .NET My Services early adopter program. Onyx continues to hold the record for scalability of any CRM application on the Microsoft platform.
During the quarter, Onyx expanded its relationship with IBM to include IBM Global Services CRM Solution Services. IBM and Onyx will initially focus on providing enterprise CRM solutions that deliver rapid ROI to mid-market customers - defined by IBM as companies with annual revenue up to $2 billion. The expanded relationship will leverage IBM's deep industry, analytical and integration expertise to provide CRM solutions based on Onyx's third-generation Internet architecture application suite.
Onyx added a new hosting partnership with The TriZetto Group (Nasdaq: TZIX), a Vertical Service Provider (VSP) that targets the Healthcare vertical, thereby expanding upon Onyx success with VSPs in Financial Services -- such as Metavante, Encompys and Crowe Chizek.
Onyx Software was listed as a leader in Gartner Inc.'s 2H01 Mid-Market CRM Magic Quadrant. Citing Onyx's vision and ability to execute, Gartner announced its latest findings at its Fall 2001 CRM Summit in Orlando, Florida.
Earnings Conference Call
About Onyx Software
Revenue for the third quarter of 2001 was $20.7 million, compared to $32.8 million in the third quarter of 2000. Pro-forma net loss for the third quarter of 2001, excluding the amortization of intangibles, stock-based compensation expense, restructuring-related costs and impairment of certain assets, was $6.7 million, or $0.16 per share, compared to pro-forma net income of $0.9 million, or $0.02 per share in the third quarter of 2000. Reported operating results for the third quarter of 2001 including restructuring charges were a net loss of $55.9 million, or $1.37 per share, compared with a net loss of $0.7 million, or $0.02 per share in the third quarter of 2000.
Onyx added 24 new customers during the third quarter for a total of more than 800 worldwide. International operations contributed 31 percent of total revenue. A diverse group of companies and industry sectors contributed to third quarter revenue, and no customer represented more than 8 percent of the total.
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. Alternatively, you can participate by phone.
When:
Thursday, November 1, 2001
Time:
4:30 pm (Eastern) / 1:30 pm (Pacific)
Dial-In:
1-888-515-2781
International Dial-In:
1-719-457-2605
Replay:
1-719-457-0820 (available through midnight, November 6, 2001)
Passcode:
535718
Onyx Software Corp. (Nasdaq: ONXS) is a global supplier of customer relationship management (CRM) enterprise applications that power a company's entire business world, connecting sales, marketing and service organizations with customers, prospects and partners. Through an innovative mix of Internet technology, strategic services and customer commitment, Onyx helps companies create the seamless, branded customer experiences they need to forge competitive advantage and build real business value. Its reliable, scalable, flexible, holistic solutions enable companies to attract, acquire and retain customers and partners across all channels and touch points. Onyx customers include American Express, Broadwing, Commerce One, Credit Suisse, Dreyfus, FirstWorld Communications, Portland Trail Blazers, Prudential Investments and The Regence Group. Get more information at 888-ASK-ONYX, info@onyx.com.
Onyx Software Corporation
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
Revenues
License $ 6,263 $20,403 $31,030 $51,359
Service 14,455 12,367 46,900 32,230
--------- ------ ------ ------
Total revenues 20,718 32,770 77,930 83,589
Costs of revenues
Cost of license 169 877 1,657 2,368
Cost of service 7,819 6,377 27,197 16,525
Amortization of
acquired
technology 205 205 613 615
--------- ------ ------ ------
Total cost of
revenues 8,193 7,459 29,467 19,508
--------- ------ ------ ------
Gross margin 12,525 25,311 48,463 64,081
Operating Expenses
Sales and
marketing 11,224 15,446 46,608 40,247
Research and
development 4,902 6,136 17,975 14,678
General and
administrative 3,505 2,979 12,255 7,556
Restructuring
and other-related
charges 40,075 - 43,664 -
Amortization and
impairment of
goodwill and
other acquisition
-related
intangibles 8,830 1,346 12,076 2,903
Amortization of
stock-based
Compensation 164 105 700 457
--------- ------ ------ ------
Total operating expenses 68,700 26,012 133,278 65,841
Operating loss
including
amortization,
impairments and
restructuring charges (56,175) (701) (84,815) (1,760)
Interest income, net 98 181 540 664
Equity investment
losses and impairment (500) (63) (2,500) (500)
--------- ------ ------ ------
Loss before income
taxes (56,577) (583) (86,775) (1,596)
Income tax provision
(benefit) (279) 108 (381) 320
Minority interest in
loss of consolidated
Subsidiary (349) - (1,017) -
--------- ------ ------ ------
Net loss $(55,949) $ (691) $(85,377) $ (1,916)
========= ======= ========= =========
Basic and diluted net
loss per share $ (1.37) $(0.02) $ (2.17) $ (0.06)
======== ======= ======== ========
Shares used in
computation of basic
and diluted net loss
per share 40,987 35,084 39,351 34,670
======== ======= ======== ========
Onyx Software Corporation
(In Thousands, Except Per Share Data)
Supplemental Pro-Forma Information:
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
Net loss $(55,949) $ (691) $(85,377) $ (1,916)
Adjustments to
reconcile net loss
in the financial
statements to
pro-forma net loss:
Restructuring
charges
Excess
facilities
and impaired
assets 39,028 40,215
Severance 479 1,812
Other 568 1,637
------ ------
Total
restructuring
charges 40,075 -- 43,664 --
Amortization of
acquired
technology 205 205 613 615
Amortization
and impairment
of acquisition
-related
intangibles 8,830 1,346 12,076 2,903
Amortization of
stock-based
compensation 164 105 700 457
Equity
investment
losses and
impairment 500 63 2,500 500
Deferred income
tax associated
with
acquisitions (551) (134) (844) (402)
------ ------- ------ ---------
Pro-forma net
income (loss) $(6,726) $ 894 $(26,668) $ 2,157
------ ------- ------ ---------
Pro-forma net
income (loss) per
share:
Basic $(0.16) $ 0.03 $ (0.68) $ 0.06
======= ====== ======== ======
Diluted $(0.16) $ 0.02 $ (0.68) $ 0.05
======= ====== ======== ======
Shares used in
computation of
pro-forma net
income (loss) per
share:
Basic 40,987 35,084 39,351 34,670
====== ======= ====== ======
Diluted 40,987 40,912 39,351 41,058
====== ======= ====== ======
Shares outstanding
if profitable 43,005 43,081
====== ======
Onyx Software Corporation
Condensed Consolidated Balance Sheets
(In Thousands)
September 30, December 31,
2001 2000
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $15,380 $ 11,492
Short-term marketable securities 2,400 5,522
----- -----
Cash, equivalents and short-term
marketable securities 17,780 17,014
Accounts receivable, net 23,287 41,135
Prepaid expenses and other
current assets 4,904 4,533
----- -----
Total current assets 45,971 62,682
Property and equipment, net 14,625 20,848
Purchased technology, net 889 1,958
Other intangibles, net 12,513 19,674
Other assets 1,433 3,878
----- -----
Total Assets $ 75,431 $109,040
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 3,634 $6,792
Salary and benefits payable 2,722 5,778
Accrued liabilities 5,389 4,691
Income taxes payable 492 808
Deferred revenues 18,387 19,119
Current portion of capital
lease obligations 170 242
Current portion of
restructuring-related
liabilities 13,417 --
------ ------
Total current liabilities 44,211 37,430
Capital lease obligations 293 428
Deferred tax liability 1,357 2,201
Minority Interest in joint venture 1,879 2,895
Long-term restructuring-related
liabilities 9,543 --
Shareholders' Equity
Common stock 113,824 75,416
Notes payable to shareholders in
the form of equity 4,320 4,320
Notes receivable from officers -- (157)
Deferred stock-based compensation (1,013) (413)
Accumulated deficit (98,153) (12,776)
Accumulated other comprehensive loss (830) (304)
----- -----
Total shareholders' equity 18,148 66,086
------ ------
Total Liabilities and
Shareholders' Equity $75,431 $109,040
======= ========
| Contact: | Rosemary Moothart Investor Relations Director Onyx Software (425) 519-4068 |
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