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October 28, 2002 Onyx Software Third Quarter Operating Results Show Pro-Forma Profit
Customer Success and Technology Leadership Drive Sequential Quarter Improvement BELLEVUE, Wash. -- Onyx® Software Corp. (NASDAQ: ONXS)), worldwide leader in successful CRM, announced today financial results for the quarter ended September 30, 2002. Third quarter financial performance highlights include:
- Revenue of $19.0 million, up from $18.5 million in the second quarter of 2002
- License revenue of $7.3 million, up from $6.5 million in the second quarter of 2002
- Improvement in profitability compared to the second quarter of 2002
Revenue for the third quarter of 2002 was $19.0 million, compared to $21.3 million in the third quarter of 2001. Net loss for the third quarter of 2002 including restructuring charges was $884,000, or $0.02 per share, compared with a net loss of $55.9 million, or $1.37 per share in the third quarter of 2001. Pro-forma net income for the third quarter of 2002, excluding the amortization of intangibles, stock-based compensation expense, restructuring-related costs and impairment of certain assets, was $613,000, or $0.01 per share, compared to pro-forma net loss of $6.7 million, or $0.16 per share in the third quarter of 2001. On September 30, 2002, Onyx Software had $25.5 million in cash, cash equivalents and short-term marketable securities. Business Summary
A diverse group of global businesses and leading organizations purchased Onyx Software licenses in the third quarter. New customer wins included the operator of the UK National lottery -- Camelot PLC, Construction Market Data (now known as Reed Construction Data), Spherion, and financial services companies Riggs Bank and PIMCO Advisors. Financial services companies that purchased additional licenses to expand their existing Onyx deployments included U.S. Bancorp Piper Jaffray, American Express Financial Advisors, Strong Financial Corporation, and Fisher Investment. Add-on license customers in the healthcare sector included VHA and Medical Staffing Network. Other add-on license customers included Airborne Express, Internet Security Systems, Captaris, Corbis, and the State of Georgia. Of the 39 companies that purchased Onyx software licenses in the third quarter, 27 are existing customers expanding their deployments through add-on purchases, including one customer that represented 15 percent of total revenue. More than 120 customers engaged Onyx for professional services other than maintenance in the second quarter. The geographic distribution of third quarter license revenue was 56 percent in North America and 44 percent in international regions. Partner Momentum
Onyx's direct sales force delivered 76 percent of license revenue. The remaining license revenue was sold directly or influenced by partners, which included Accenture, IBM Global Services, and Crowe-Chizek - all of whom will also be involved in customer deployments. New relationships enhanced Onyx Software's Asian presence in the third quarter. The company announced a master reseller agreement with North 22 Solutions in mainland China. Additionally, Onyx named enterprise software veteran Andie Rees as the new VP of Onyx Software Asia. By offering a full-suite CRM application with Unicode support in all architecture tiers, Onyx provides customers the ability to save and display multilingual text on a single server and database that is vital to address the unique system demands of Asian languages. Earlier today Onyx and Microsoft announced that the two companies are expanding their multiyear global alliance to include three additional vertical markets. As a result of the expanded relationship, Onyx and Microsoft will jointly pursue CRM opportunities in healthcare, telecommunications and government, in addition to financial services. The collaboration between the two companies consists of joint marketing and sales of Onyx's CRM solution on the Microsoft platform. A key tenet of the offering is Onyx's completely Web services-based architecture, which allows greater ease of integration and enhanced interoperability among disparate platforms and applications. Onyx Enterprise CRM is optimized for Microsoft® .NET, and the offering is available today and implemented at joint Onyx and Microsoft customers. Recognition and Technology Leadership
UPMC Health Plan's deployment of Onyx Software was recognized for excellence in its CRM initiative at Gartner Inc.'s Fall CRM Summit Conference. UPMC was one of six deployments selected by a panel of Gartner analysts from over 200 entries submitted. Onyx customer ASB Bank Ltd. was rated the leader among New Zealand's five major banks, in terms of customer satisfaction for the fifth consecutive year, according to the University of Auckland's banking survey. Onyx continues to hold the record for scalability of any CRM application on the Microsoft platform with 40,000 concurrent users and sustained sub-second user response. That record was validated by the Microsoft Partner Solution Center and Enterprise Computing Lab and announced in December 2001. In June 2002, Onyx announced another record-setting CRM enterprise application benchmark by scaling to more than 57,000 concurrent users and sustained sub-second user response on a Unisys ES7000 32-processor machine. Earnings Conference Call
The Onyx Software earnings conference call is scheduled to start promptly today, Monday October 28, 2002 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: | Monday, October 28, 2002 |
| 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 through midnight, Monday, November 4) |
| Passcode: | 322495 |
About Onyx Software
Onyx Software Corp., 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 Agile Software Corp., Credit Suisse, Delta Dental Plans of California and Pennsylvania, Dreyfus Corp., Fluke Networks Inc., Ingenix Health Intelligence, The Regence Group, The Seattle Mariners and Suncorp. More information can be found at (888) ASK-ONYX or info@onyx.com.
Forward-looking statement
This press release contains forward-looking statements, including statements about the competitive advantages of our products, statements about out presence in the Asian enterprise software market, statements about the expansion of our relationship with Microsoft and other statements about our plans, objectives, intentions and expectations. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Factors that could affect our actual results include, but are not limited to, the risk that we are unable to compete effectively in the enterprise software market, the risk that we are not able to expand our presence in the Asian enterprise software market, and the "Important Factors That May Affect Our Business, Our Results of Operations and Our Stock Price" described in our quarterly report on form 10-Q for the period ended June 30, 2002. Readers are cautioned not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. We undertake no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
| Contact: | Rosemary Moothart Investor Relations Director Onyx Software (425) 519-4068 |
Bob Craig Onyx Software 617-314-6846 |
Onyx Software Corporation
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------------ -------------------
Revenue
License $7,265 $6,263 $16,828 $31,030
Service (A) 11,763 15,080 35,325 49,023
-------- --------- --------- ---------
Total revenue 19,028 21,343 52,153 80,053
-------- --------- --------- ---------
Costs of revenue
Cost of license 270 169 667 1,657
Amortization of acquired
technology 138 205 414 613
Cost of service 4,922 8,444 15,181 29,320
-------- --------- --------- ---------
Total cost of revenue 5,330 8,818 16,262 31,590
-------- --------- --------- ---------
Gross margin 13,698 12,525 35,891 48,463
Operating Expenses
Sales and marketing 7,882 11,224 20,941 46,608
Research and development 3,530 4,902 11,506 17,975
General and administrative 2,382 3,455 7,358 12,120
Restructuring and other-related
charges 1,171 40,075 7,729 43,664
Amortization and impairment
of goodwill & other
acquisition-related
intangibles (B) 209 8,830 627 12,076
Amortization of stock-based
compensation 51 164 203 700
-------- --------- --------- ---------
Total operating expenses 15,225 68,650 48,364 133,143
-------- --------- --------- ---------
Operating loss (1,527) (56,125) (12,473) (84,680)
Other income (expense), net 269 48 (73) 405
Equity investment losses and
impairment - (500) - (2,500)
------------------ -------------------
Loss before income taxes (1,258) (56,577) (12,546) (86,775)
Income tax provision (benefit) (29) (279) 383 (381)
Minority interest in loss of
consolidated
subsidiary (345) (349) (817) (1,017)
-------- --------- --------- ---------
Net loss $(884) $(55,949) $(12,112) $(85,377)
======== ========= ========= =========
Basic and diluted net loss per
share $(0.02) $(1.37) $(0.24) $(2.17)
======== ========= ========= =========
Shares used in computation of
basic and
diluted net loss per share 50,564 40,987 49,709 39,351
======== ========= ========= =========
(A) Pursuant to the Financial Accounting Standards Board staff
announcement (Topic No. D-103), reimbursable expenses have been
reclassified into revenue, with a corresponding increase in cost
of revenue. The impact of the reclassification was to increase
service revenue by $388, or 3%, and $625, or 4%, in the third
quarter of 2002 and 2001, respectively. The impact of the
reclassification for the nine months ended September 30, 2002 and
2001 was to increase service revenue by $1.3 million, or 4%, and
$2.1 million, or 5%, respectively.
(B) Effective January 1, 2002, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 142 "Goodwill and
Other Intangible Assets" (SFAS 142). Under SFAS 142, goodwill is
no longer amortized, beginning January 1, 2002. If the
non-amortization provisions of SFAS 142 had been effective in
2001, net loss and basic and diluted net loss per share for the
three months ended September 30, 2001, would have been a loss of
$55.2 million and $1.35, respectively. For the nine months ended
September 30, 2001, net loss and basic and diluted net loss per
share would have been a loss of $81.9 million and $2.08,
respectively.
Onyx Software Corporation
Supplemental Pro Forma Information:
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------------ -------------------
Operating loss $(1,527) $(56,125) $(12,473) $(84,680)
Adjustments to reconcile
operating loss in the
financial statements to pro forma
operating income (loss):
Restructuring charges
Facilities 1,051 39,028 7,511 40,255
Severance 120 479 478 1,812
Other - 568 (260) 1,597
-------- --------- --------- ---------
Total restructuring charges 1,171 40,075 7,729 43,664
Amortization of acquired
technology 138 205 414 613
Amortization and impairment of
goodwill and
other acquisition-related
intangibles 209 8,830 627 12,076
Amortization of stock-based
compensation 51 164 203 700
-------- --------- --------- ---------
Pro forma operating (income)
loss $42 $(6,851) $(3,500) $(27,627)
======== ========= ========= =========
Net loss $(884) $(55,949) $(12,112) $(85,377)
Adjustments to reconcile net
loss in the financial
statements to pro forma net
income (loss):
Restructuring charges
Facilities 1,051 39,028 7,511 40,255
Severance 120 479 478 1,812
Other - 568 (260) 1,597
-------- --------- --------- ---------
Total restructuring charges 1,171 40,075 7,729 43,664
Amortization of acquired
technology 138 205 414 613
Amortization and impairment of
goodwill and other acquisition-
related intangibles 209 8,830 627 12,076
Amortization of stock-based
compensation 51 164 203 700
Equity investment losses and
impairment - 500 - 2,500
Deferred income tax associated
with acquisitions (72) (551) (279) (844)
-------- --------- --------- ---------
Pro forma net income (loss) $613 $(6,726) $(3,418) $(26,668)
======== ========= ========= =========
Pro forma basic and diluted net
income (loss) per share $0.01 $(0.16) $(0.07) $(0.68)
======== ========= ========= =========
Shares used in computation of
pro forma basic net income
(loss) per share 50,564 40,987 49,709 39,351
======== ========= ========= =========
Shares used in computation of
pro forma diluted net income
(loss) per share 51,268 40,987 49,709 39,351
======== ========= ========= =========
Onyx Software Corporation
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
September 30, December 31,
2002 2001
------------- ------------
Assets
Current Assets:
Cash and cash equivalents (C) $25,484 $15,868
Accounts receivable, net 12,349 20,029
Prepaid expenses and other current assets 4,057 2,596
------------- ------------
Total current assets 41,890 38,493
Property and equipment, net 8,543 12,884
Purchased technology, net 337 751
Other intangibles, net 1,670 3,467
Goodwill, net 8,180 7,396
Other assets 1,435 1,520
------------- ------------
Total Assets 62,055 64,511
============= ============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable 1,517 2,826
Salary and benefits payable 2,151 1,833
Accrued liabilities 2,912 3,260
Income taxes payable 313 695
Current portion long-term liabilities 156 173
Current portion of restructuring-related
liabilities 14,247 15,384
Deferred revenue 15,197 19,191
------------- ------------
Total current liabilities 36,493 43,362
Long-term liabilities 123 248
Long-term restructuring-related liabilities 6,528 9,930
Deferred tax liability 568 1,223
Minority interest in joint venture 444 1,613
Shareholders' Equity
Common stock 139,170 118,557
Deferred stock-based compensation (129) (809)
Accumulated deficit (120,403) (108,291)
Accumulated other comprehensive loss (739) (1,322)
------------- ------------
Total shareholders' equity 17,899 8,135
------------- ------------
Total Liabilities and Shareholders' Equity $62,055 $64,511
============= ============
(C) Includes $4.7 million in restricted cash as of September 30, 2002,
which was pledged in connection with outstanding financing
arrangements.
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