TMSSequoia Reports Third Quarter Earnings Up 73%
PR Newswire - July 19, 1999 16:34
STILLWATER, Okla., July 19 /PRNewswire/ -- TMSSequoia(TM) (OTC Bulletin Board: TMSS) today reported total revenue of $1,360,057 and net income of $41,935, or $ .00 per share (basic and diluted), for the fiscal 1999 third quarter ending May 31, 1999. The fiscal 1999 third quarter results represented a continuation of the turn-around for TMSSequoia from the 1999 first quarter levels, resulting in a return to quarterly profitability for 2 consecutive quarters. TMSSequoia's financial strength continues to be very strong with cash as of May 31, 1999 of $721,870 and a current ratio of 4.93. This is the highest current ratio (measure of financial strength) the company has achieved in over 10 years. Total revenue of $1,360,057 for TMSSequoia's fiscal 1999 third quarter declined 21% from the $1,716,636 reported for the third quarter last year. The revenue decrease was primarily the result of the planned reduction of Document Conversion Services (accounting for 83% of total decrease). Licensing and royalties revenue of $839,360 for the 1999 third quarter decreased 19% from the $1,036,068 reported for the same period in fiscal year 1998, while revenue from software development services (Professional Services) increased 53%, to $397,352. Third quarter Document Conversion services revenue declined 71%, as expected, to $123,345, compared to the $420,413 reported for the same quarter in fiscal 1998 and the division went from being a loss in Q3 1998 to a profit in Q3 1999. Net income of $41,935 for the 1999 third quarter, compared to $24,211 for the same quarter last year resulted in basic and diluted earnings per share of $.00 for both periods. Net loss for the first nine months of fiscal year 1999 was $531,601, or negative $.04 per share on both a basic and diluted basis.
TMSSequoia Chairman and CEO Dana Allen commented, "We are pleased to report that the turnaround that started in the 1999 first quarter has continued with a second consecutive profitable quarter. The cost reduction and productivity enhancement initiatives we took earlier in the year continue to provide positive results. The profitable results in the third quarter were achieved even though we had the added expenses of our primary trade show ($46,000, AIIM'99 in April) and a $70,000 charge to increase our allowance for uncollectible receivables for one reseller customer account."
"At this point we have an approximate 75% reserve against the receivable from that reseller and an agreement that provides for a joint escrow account between the reseller and TMSSequoia for direct cash deposits to be made from current and future sales by the reseller. TMSSequoia enforced the provision under the contract, which requires an escrow account, in June of the current year, after several months of payment defaults by the reseller. Even though we have received $15,000 in payments from the reseller in the last month, we believe that it was necessary to increase our allowance for uncollectable accounts to value this reseller account to a higher level as a precaution. Without taking the additional reserve of $70,000, our net income for 1999 third quarter would have been $111,935. The worst case for the future is another approximate $70,000 reduction to our profits to fully reserve the reseller's account, and the best case is an approximate $200,000 increase to our profits if we receive full payment from the reseller," Allen continued.
"Revenue was generally flat compared to 1999 Q2 (3% decrease), but up 21% from 1999 Q1. There was a small decrease in licensing and royalties revenue in 1999 Q3 compared to 1999 Q2, mainly due to a decrease in the ViewDirector(TM) imaging viewing software, but there was a significant upswing in FormFix(R) revenue. The company has started a program to upgrade the ViewDirector technology, so as to protect that revenue source. The three new products under development in 1999 with significant revenue potential (ScanFix(R) TWAIN Filter, SpectrumFix(R), and Prizm(TM) Image Server 1.1) did not ship in 1999 Q3. The ScanFix TWAIN Filter is considerably behind schedule, but should ship in Q4. The SpectrumFix color image processing product has been well received in its pre-release versions and won Imaging and Document Solutions Magazine's "Best of AIIM 1999" award. It is now in final testing and documentation and will ship within a week. Most of the larger companies in production color scanners, forms processing, OCR (Optical Character Recognition), and scanner driving cards have requested copies of SpectrumFix when it ships. We are pleased with this interest from the opinion leaders in our industry," Allen continued.
"The latest release of Prizm Image Server 1.1 is a performance breakthrough for TMSSequoia. The initial version was only fast enough to run on corporate intranets. The new version is an average of 15 times faster and fast enough to work well over the Internet. It opens up opportunities for companies with Internet sites that want to provide superior image viewing capabilities, in particular those that need to provide the ability to view TIFF image repositories (the most popular format for document imaging, but not supported by Internet browsers.) Visitors to web sites utilizing Prizm Image Server do not need to purchase or install any special technology to display, manipulate, and annotate TIFF files. A press release on Prizm Image Server will be released next week. The new version of the product began shipping June 30, 1999," Allen continued.
"Professional Services Division (ProServices) performed much better in 1999 Q3 than in 1998 Q3, with sales up 53%. It still showed a loss, although a much smaller one. We have analyzed ProServices because of these profitability problems and have narrowed the problem to a single factor. When the division is loaded, as it is now, the only significant reason for losses is that the quoted time estimates for fixed bid projects have been smaller than the actual time required for completion. At our current scale in ProServices we estimate that $50,000+ a month profits is not unreasonable if our actuals matched our estimates. We are addressing this problem by obtaining estimation training. We have added a management review of contracts for additional quality control and to guard against estimates being pressured by Sales. Alanna Mozel our Program Manager for ProServices is doing a good job of installing controls to help us create more accurate estimates in the future. However there is a delay, due to the length of contracts, before the new practices may begin to show in our results. We expect that the revenue and profit problems will persist through Q4 as a result of this for ProServices," Allen continued.
"There have been several encouraging signs for ProServices recently. One is that we are focused on what truly effects our results. Another is that we are starting to get consulting contracts where we are paid hourly, which almost assures a profit. A third bright spot is that there have been two major initiatives for creating products out of ProServices. This may result in future service work being centered around these two products, which gives us a built-in competitive advantage. Both have significant potential," Allen continued.
"The first is to create a Corporate Knowledge Portal(TM) product that allows a single point of access to corporate data through a web browser. The second is not announced yet. Both are already producing revenue through service related work, and major industry players have been partnered with for them. If there is significant revenue for these products, it will not appear until FY 2000. I commend the creativity and business sense exhibited by ProServices in developing these two new product opportunities," Allen explained.
"With the financial strength we have and new products going to market, we have reason to be optimistic about the future. We recognize that we have to produce better results in the future for our investors than we have in the past, and are striving to that goal. I am proud of the many accomplishments by TMSSequoia team members that has made the return to profitability in the 2nd and 3rd Quarters possible," Allen concluded.
The preceding material contains forward-looking statements, dependent on certain risks and uncertainties. Among the factors that could cause actual results to differ materially are orders received and shipped, an increase in cost of services, increased competitive pressures, other unforeseen delays, and the risk factors listed from time to time in the Company's SEC reports.
TMSSequoia is a software technology company that provides image-based and Internet software solutions for businesses worldwide (www.tmssequoia.com). The company designs, develops and markets software tools and applications for image capture, enhancement, viewing, Internet viewing and forms processing, as well as offers software engineering and document conversion services. Founded in 1981 and based in Stillwater, Oklahoma, the company maintains a field sales office in the Silicon Valley area of California. The company has shipped well over 1,000,000 document imaging units worldwide. Product and service clients include BancTec, Caere, Caterpillar, Diamond Head Software, EDS, General Dynamics, General Motors, Hewlett Packard, Learjet, Minolta, PricewaterhouseCoopers, Ricoh, Toro, the U.S. Navy and Army, The World Bank, Xerox, Yamaha, and others.
TMSSequoia is a trademark of TMS, Inc.
TMSSequoia
Statements of Operations
(in thousands, except earnings per share)
Three Months Ended Nine Months Ended
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
Revenue:
Licensing and royalties $840 $1,036 $2,437 $3,460
Software development services 397 260 1,016 999
Document conversion services 123 421 439 1,309
Total revenue 1,360 1,717 3,892 5,768
Operating expenses 1,325 1,680 4,428 5,271
Operating income (loss) 35 37 (536) 497
Other income (expense), net 5 (7) 1 (27)
Income (loss) before income taxes 40 30 (535) 470
Income tax expense (benefit) (2) 6 (3) 89
Net income (loss) $42 $24 $(532) $381
Net income per share - diluted $0.00 $0.00 $(0.04) $0.03
Weighted average common
and common equivalent
shares - diluted 13,602,513 13,303,156 13,553,265 13,294,693
Cash flows from operations $(137) $532 $521 $828
Condensed Balance Sheets
(in thousands)
May 31, August 31,
1999 1998
Current assets $2,483 $2,748
Property and equipment, net 1,372 1,660
Capitalized software, net 475 621
Other assets 255 257
Total assets $4,585 $5,286
Current liabilities 511 652
Obligation under capital lease,
excluding current installments 29 79
Long - term debt, net of current
installments 291 310
Shareholders' equity 3,754 4,245
Total liabilities and shareholders'
equity $4,585 $5,286
SOURCE TMSSequoia
/CONTACT: Anita Kunneman of TMSSequoia, 405-377-0880, or fax,
405-742-1710, or email, kunneman@tmsinc.com/
/Web site: tmssequoia.com
(TMSS)
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