SLM Software Inc -
9mo earnings 47 cents per share
SLM Software Inc ESP
Shares issued 11,515,773
Wednesday Nov 25 1998
Ms. Nancy Chan-Palmateer reports
For the three months ended Sept. 30, 1998, the company posted a 136
per cent increase in revenues to $9.7-million over $4.1-million in
the comparable prior year period. Net income rose 45 per cent to $2.5-
million or 23 cents per share in 1998 over $1.8-million or 19 cents
per share in 1997. The company's long-standing relationships with
customers rewarded SLM with considerable repeat business for other
SLM product offerings in this quarter.
For the nine months ended Sept. 30, 1998, the company's total
revenues rose by 146 per cent to $22.9-million over $9.3-million from
the prior year. Net income jumped to $5.3-million or 49 cents per
share in 1998 from $3.0-million or 33 cents per share over the prior
year. Net margins continued to be solid, with net income amounting to
23 per cent of revenues for the nine month 1998 period. SLM's core
business continued to generate the highest percentage of total sales
year-to-date, about 84 per cent. Acquired companies, being
investments for the future, are expected to be greater sources of
revenues in 1999 and beyond.
SLM's expenses were reflective of the growing sales and marketing
activities of a much larger organization in 1998, with a more
comprehensive suite of products. To that end, its selling, marketing
and installation expenses have risen to $9.6-million in the nine
months ended Sept. 30, 1998 compared to $3.7-million in the same 1997
period. Similarly, general and administrative costs increased to $4.7-
million in 1998 over $1.4-million in the 1997 nine month period.
Notably, SLM continued to manage expenses, showing a decrease in its
general and administrative costs to 18 per cent of revenues in the
1998 third quarter from 21 per cent in the 1998 second quarter.
The company's balance sheet remained strong in the third quarter with
over $10.5-million in cash and approximately $1.1-million of unused
bank facility.
The integration of Milkyway Networks Corp. advanced on schedule, with
its burn rate declining significantly to under $100,000 per month.
SLM has begun to capitalize on the synergies presented by Milkyway's
security technology as part of SLM's product family. Subsequent to
the quarter end, SLM took up the small remaining balance of the
Milkyway shares outstanding for 100 per cent ownership.
The assets of Rescom Ventures acquired last quarter have also been
fully integrated into SLM. It has had a negligible effect on SLM's
third quarter earnings. SLM has started to execute its product
enhancement plan to ensure longevity of the Rescom product line,
customer support and market leadership. In particular, the Rescom
products have been made Year 2000 compliant, and are being shipped to
customers.
This progress was on track with SLM's two quarter integration model
for acquired companies, with breakeven results for these operations
expected for the end of 1998 and positive contributions in fiscal
1999. The technologies of these two entities have rounded out SLM's
product portfolio and accelerated time-to-market.
In the 1998 third quarter, SLM remained focused on its buy-build-
partner strategy to extend its solution offerings for the broadest
electronic transaction management suite.
During the quarter, SLM gained a 54.4 per cent controlling interest
in Infocorp Computer Solutions, a Winnipeg-based market leader in
retail and government point-of-sale/point-of-service systems. As its
largest and controlling shareholder, SLM elected a new board to
Infocorp and appointed Mal Anderson, SLM's CEO of western operations,
as Infocorp's new president and CEO. SLM plans to take advantage of
the synergies between the two organizations, particularly their
complementary POS technology. As a result, SLM will extend its
product portfolio to offer a complete retail transaction solution,
and add an advanced point-of-service product for the government
sector, another emerging transaction-intensive industry turning to
innovations for cost-effective e-commerce solutions. Given SLM's
interest in the company, Infocorp's balance sheet has been
consolidated with SLM, which has increased SLM's receivables.
SLM signed a letter of intent with National Informatics Corp. (the
technology arm of the Central Bank of Iran), to jointly develop the
world's first-of-a-kind electronic Islamic retail banking solution,
using SLM's ESP-Link/RBS as the building platform. The new system
will be marketable to financial institutions around the world, with
potential sales of $30-million (U.S.) over the next five years. This
multi-million joint venture represents the second SLM-NIC initiative,
and is indicative of an enriching customer relationship.
In addition to accelerated R&D through acquisitions and partnerships,
SLM invested over $4-million in internal R&D for the 1998 nine month
period.
In the 1998 third quarter, SLM followed through on its U.S. market
entry strategy. The company announced a $20-million (U.S.) cash and
stock transaction for the acquisition of Bankline Holding, Inc., a
privately-held, leading supplier of client server core banking
services and imaging technology for community banks and credit unions
in the U.S. This distribution acquisition has propelled the combined
SLM-Bankline entity into one of the top single source providers of in-
house and outsourced electronic financial service solutions for the
mid-tier U.S. market. SLM has gained strong U.S. brand equity and
channels with customers eager for a greater array of electronic
commerce offerings. Bankline is on track to generate about $20-
million (U.S.) in profitable sales for this year, with a strong
recurring revenue base. This combined with SLM's similar size and
revenue growth is expected to more than double the financial
performance and critical mass of the combined entity as well as
increase SLM's North American sales to over 60 per cent.
John French and Randy Fluitt, CEO and president of Bankline,
respectively, added strong management bandwidth to SLM's executive
team, with the expertise and shared vision to oversee SLM's expanded
U.S. operations. As major SLM shareholders with long-term employment
contracts and performance-based warrants, they are fully committed to
the expanded entity.
SLM also welcomed Mal Anderson as executive vice-president and CEO of
SLM's western operations. Mr. Anderson brought over 34 years of
business acumen, particularly in the financial services sector. He
was most recently CEO of Credit Union Central of Manitoba. Mr.
Anderson is focused on directing the integration and consolidation of
SLM's recent acquisitions in Manitoba, as well as playing a key role
in new business development and expansion of the company's Canadian
market position.
SLM is introducing its first quarterly analyst event as an
opportunity to provide a fuller presentation on the company, include
the broader management team, and speak to its future outlook.
Invitations will be forwarded shortly. This event will replace the
company's traditional analyst conference call. SLM believes this
forum will give greater perspective on the company's strategic plans
and performance.
STATEMENT OF EARNINGS
Three months ended Sept. 30
1998 1997
Revenues $ 9,714,667 $ 4,112,892
----------- -----------
Expenses
Selling,
marketing and
installation 3,829,286 1,765,581
General and
admin 1,749,117 494,704
Amortization 1,345,661 401,328
----------- -----------
6,924,064 2,661,613
----------- -----------
Income - before
income taxes and
non-controlling
interest 2,790,603 1,451,279
Non-controlling
interest 16,805 -
----------- -----------
Income - before
income taxes 2,807,408 1,451,279
Provision for
income taxes 263,473 (299,954)
----------- -----------
Net earnings $ 2,543,935 $ 1,751,233
=========== ===========
Earnings per
share 23 cents 19 cents
STATEMENT OF EARNINGS
Nine months ended Sept. 30
1998 1997
Revenues $22,929,500 $ 9,336,813
----------- -----------
Expenses
Selling,
marketing and
installation 9,647,613 3,773,334
General and
admin 4,707,587 1,385,806
Amortization 2,705,839 976,745
----------- -----------
17,061,039 6,135,885
----------- -----------
Income - before
income taxes and
non-controlling
interest 5,868,461 3,200,928
Non-controlling
interest 80,768 -
----------- -----------
Income - before
income taxes 5,949,229 3,200,928
Provision for
income taxes 649,952 241,918
----------- -----------
Net earnings $ 5,299,277 $ 2,959,010
=========== ===========
Earnings per
share 47 cents 33 cents
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