QUARTERLY RESULTS OF OPERATIONS
The following table presents our unaudited consolidated statement of
operations data for the eight quarters in the period ended October 31, 1999, as
well as the percentage of our total revenues represented by each item. We have
prepared this unaudited consolidated information on a basis consistent with our
audited consolidated financial statements, and in the opinion of our management,
this information reflects all normal recurring adjustments necessary for a fair
presentation of our operating results for the quarters presented.
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<TABLE>
<CAPTION>
QUARTER ENDED
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JAN. 31, APR. 30, JUL. 31, OCT. 31, JAN. 31, APR. 30, JUL. 31, OCT. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product-related revenues:
License.......................... $ 144 $ 447 $ 706 $ 591 $ 1,607 $ 2,410 $ 2,615 $ 3,145
Services and maintenance......... 1,594 1,163 944 1,271 1,296 1,950 2,359 2,999
------- ------- ------- ------- ------- ------- ------- -------
Total product-related
revenues.................... 1,738 1,610 1,650 1,862 2,903 4,360 4,974 6,144
Custom development services...... 5,255 6,888 5,399 4,600 4,283 4,066 3,712 3,843
------- ------- ------- ------- ------- ------- ------- -------
Total revenues................. 6,993 8,498 7,049 6,462 7,186 8,426 8,686 9,987
------- ------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Licenses........................... 44 46 51 51 46 47 45 100
Product-related services and
maintenance...................... 890 749 742 680 998 1,405 1,487 1,787
Custom development services........ 2,652 620 3,065 2,060 3,001 2,733 2,888 2,014
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues......... 3,586 1,415 3,858 2,791 4,045 4,185 4,420 3,901
------- ------- ------- ------- ------- ------- ------- -------
Gross profit......................... 3,407 7,083 3,191 3,671 3,141 4,241 4,266 6,086
Operating expenses:
Sales and marketing................ 3,098 3,211 3,456 3,915 4,758 6,541 5,736 6,574
Research and development........... 1,933 1,950 2,047 2,269 1,997 1,828 2,547 3,269
General and administrative......... 907 704 995 910 1,531 1,717 1,814 2,022
Stock-based compensation........... 36 36 244 356 232 423 143 1,799
Restructuring charge............... -- -- -- -- -- -- 2,625 402
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses....... 5,974 5,901 6,742 7,450 8,518 10,509 12,865 14,066
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations........ (2,567) 1,182 (3,551) (3,779) (5,377) (6,268) (8,599) (7,980)
Other expense, net................... 34 209 51 32 235 78 92 226
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss).................... $(2,601) $ 973 $(3,602) $(3,811) $(5,612) $(6,346) $(8,691) $(8,206)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
JAN. 31, APR. 30, JUL. 31, OCT. 31, JAN. 31, APR. 30, JUL. 31, OCT. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(AS A PERCENTAGE OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product-related revenues:
License............................ 2.1% 5.3% 10.0% 9.1% 22.4% 28.6% 30.1% 31.5%
Services and maintenance........... 22.8 13.6 13.4 19.7 18.0 23.1 27.2 30.0
----- ----- ----- ----- ----- ----- ----- -----
Total product-related revenues... 24.9 18.9 23.4 28.8 40.4 51.7 57.3 61.5
Custom development services........ 75.1 81.1 76.6 71.2 59.6 48.3 42.7 38.5
----- ----- ----- ----- ----- ----- ----- -----
Total revenues................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- -----
Cost of revenues:
Licenses............................. 0.6 0.5 0.8 0.8 0.6 0.6 0.5 1.0
Product-related services and
maintenance........................ 12.8 8.8 10.5 10.5 13.9 16.8 17.1 17.9
Custom development services.......... 37.9 7.3 43.5 31.9 41.8 32.4 33.2 20.2
----- ----- ----- ----- ----- ----- ----- -----
Total cost of revenues........... 51.3 16.6 54.8 43.2 56.3 49.6 50.8 39.1
----- ----- ----- ----- ----- ----- ----- -----
Gross profit........................... 48.7 83.4 45.2 56.8 43.7 50.4 49.2 60.9
Operating expenses:
Sales and marketing.................. 44.3 37.8 49.0 60.6 66.2 77.6 66.0 65.8
Research and development............. 27.6 22.9 29.0 35.1 27.8 21.7 29.3 32.7
General and administrative........... 13.0 8.3 14.1 14.1 21.3 20.4 20.9 20.2
Stock-based compensation............. 0.5 0.4 3.5 5.5 3.2 5.0 1.6 18.0
Restructuring charge................. -- -- -- -- -- -- 30.2 4.0
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses......... 85.4 69.4 95.6 115.3 118.5 124.7 148.0 140.7
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from operations.......... (36.7) 14.0 (50.4) (58.5) (74.8) (74.3) (98.8) (79.8)
Other expense, net..................... 0.5 2.5 0.7 0.5 3.3 0.9 1.1 2.3
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)...................... (37.2)% 11.5% (51.1)% (59.0)% (78.1)% (75.2)% (99.9)% (82.1)%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
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Our operating results have varied significantly from quarter to quarter in
the past and may continue to fluctuate in the future. The quarterly fluctuations
are caused by a number of factors, including demand for our products and
services, size and timing of specific sales, level of product and price
competition, timing and market acceptance of new product introductions and
product enhancements by us and our competitors, the length of our sales cycle,
personnel changes, budgeting cycles of our customers, the impact of our revenue
recognition policies, changes in technology and changes caused by the rapidly
evolving e-business market and the impact of year 2000 investments by us and our
customers. Many of these factors are beyond our control. Therefore, we believe
that results of operations for interim periods should not be relied upon as any
indication of the results to be expected in any future period.
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