NEON Reports Record Revenues
Revenues Reach Record High of $32 Million; E-Business Integration Fuels Growth
October 20, 1999 02:11 PM
ENGLEWOOD, Colo., Oct. 20 /PRNewswire/ -- New Era of Networks(TM), Inc. NEON today announced financial results for the third quarter ending September 30, 1999.
NEON achieved third-quarter revenues of $32 million, an 82 percent increase over the same quarter last year and an increase of 22 percent over the second quarter of 1999. Net of charges noted below, the company reported a net loss per share of 17 cents in the third quarter of 1999, slightly better than expectations. This compares to a net loss per share of 19 cents in the second quarter. The company ended the third quarter with $90 million in cash and liquid investments, and no long-term debt.
Previously-announced charges which are excluded from the net income and earnings per share figures on this page include approximately $7 million for restructuring, $25 million relating primarily to additional consideration provided to the former shareholders of Convoy Corporation and Microscript, and acquisition-related amortization of $7 million.
Q399 Q398 Growth Revenue ($M) 31.9 17.5 +82% Net Income (Loss)(1)($M) (5.7) 1.7 NM Per Share(1) ($0.17) $0.06 NM
(1) Adjusted for 2:1 stock split in December 1998. Excluding acquisition-related and restructuring charges, and assuming a normalized tax rate of 35%. See attached tables for complete financial details.
The company's results for the period ended September 30 include no third-quarter IBM royalty revenue. As previously announced, this revenue is now recognized on a one-quarter lag.
"We have focused our sales, marketing and R&D resources on the major growth areas of the company -- e-Business and Enterprise Application Integration (EAI) -- at the same time as we have achieved company-wide reductions in costs," said NEON CEO George F. (Rick) Adam. "In the third quarter, we also made major progress in integrating our prior acquisitions. We are particularly pleased that we accomplished that integration while generating year-over-year revenue growth in excess of 80 percent."
Third-Quarter Accomplishments
"Our primary objectives during the quarter were to continue our revenue growth, formalize our e-Business positioning, rationalize our business processes across the recently completed acquisitions, and significantly improve operational productivity," said Patrick J. Fortune, chief operating officer of NEON. "We have reduced staffing by about 12 percent since June 30 and cut operating expenses, on a run-rate basis, by approximately 15 percent. We expect these efforts to result in continuing improvements to the top and bottom lines going forward. Both our revenue and development pipelines look promising for the balance of 1999 and into 2000."
During the quarter, NEON and its channel partners signed contracts for new and add-on business with more than 90 customers including CapitalOne, Children's Hospital Chicago, Citizen's Bank, Countrywide, CS First Boston, Data General S.A., Deluxe Corporation, DePaul University, Ernst & Young, Jato Communications Corporation, Metropolitan Life Insurance Company, Pepsi Cola General Bottlers Inc., Primark Corporation, Samsung, and Woolworths.
E-business represents a major strategic opportunity for NEON. With the emerging growth market in e-Business, a corresponding growth market in Internet infrastructure also is emerging. The demands of this market include the need to connect backoffice transaction systems to Web-based front-end systems, and are directly in line with NEON's expertise in connecting older applications to new applications. The e-Business market provides significant growth opportunity to NEON in addition to the solid growth that continues in EAI.
NEON saw strong demand from the e-Business market during the third quarter, with approximately 30 percent of revenue, nearly $10 million, attributable to e-Business. E-Business initiatives in the quarter included six major customer installations. VF Corporation, manufacturer of many well-known clothing brands including Wrangler, Lee, Vanity Fair and Jantzen, completed the initial phase of a comprehensive application integration initiative that includes the company's e-Business activities. In this first phase, VF Corporation is migrating from over a dozen disparate operating environments to a common set of systems and installing Internet-ready application architecture based on NEON's E-Biz Integrator components.
Dresdner Kleinwort Benson (DrKB) uses NEON Rapport, NEON's Web-based relationship management system, as the backbone of its equities-based global client database and contact management application, ClientScape. ClientScape now operates on more than 500 desktop terminals in 16 DrKB offices throughout the United States, Europe and Asia.
In other NEON e-Business activity in the quarter, a new interactive service for digital TV in Britain, called Open, was recently launched. Open uses NEON Internet infrastructure products to allow customers to use a television screen and remote control to pay bills, buy goods from a range of stores, handle personal banking, play video games, send e-mail, or even order pizza delivery. In addition, NEON completed the first installation of My SAP, SAP's new Web-enabling application for retail and e-Business, for one of Europe's largest direct-mail businesses.
In the U.S., NEON's infrastructure is enabling e-Business for Deluxe Corporation, integrating multiple business-to-business Web-based financial services applications including fraud detection, automatic check reorders and demand deposit accounts. IBM Corporation signed a deal with NEON to replace its existing software with NEON products to Web-enable its worldwide order-entry system.
NEON announced a key partnership agreement with Hewlett-Packard in September. The combined solution offered by HP Changengine and NEON will help enterprises in all industry sectors looking to implement e-services by addressing the requirements of cross-industry process management systems. Other new partners signed in the third quarter include Meridian, Remy, Data Dimensions, Intrasolv, HiNext, and Digital Medical Systems. NEON has a total of more than 50 channel partners.
In the quarter, NEON introduced several new products and added functionality to address the growing market for e-Business and to provide more complete solutions for customers, including:
-- e-Biz Integrator - Web-enables legacy and packaged applications by providing tight integration with leading Web application servers
-- Convoy/DM Version 3.5 - New version offers substantial product enhancements for greater flexibility, heightened performance, and easier development and maintenance for interfacing key business applications
-- NEONtrack 3.1 - An enterprise software tool that allows users to monitor and control transactions and messages within queues
-- NEONadapters for SAP R/3, i2, and Siebel, and Terminals and Protocols adapters for accessing data on screens and in data streams
Other highlights of the third quarter include:
-- In August, authorization from the NEON Board of Directors for the company's repurchase of up to 10 percent of NEON's outstanding shares of common stock over a 12-month period
-- Granting of NEON's third patent, for its messaging technology
-- Award to NEON Chief Technology Officer Harold Piskiel, co-founder of the company, of the Albert Einstein Technology Medal, which is presented to outstanding individuals who have made significant accomplishments in their field
-- Appointment of Douglas Jeffrey as president of the Global Financial Services business unit
-- Formation of an Enterprise Applications and e-Business business unit
Note to Investors
The foregoing statements regarding revenue and development pipelines, top and bottom line improvements, and growth opportunities are forward-looking statements that involve risks and uncertainties. Factors that could cause actual results to differ materially include, but are not limited to, the volume and timing of customer contracts received during a given quarter, our IBM relationship, increased demand for our products, growth of EAI and e-Business markets, and competition. Other risks and uncertainties associated with the business of New Era of Networks, Inc., may be reviewed in the company's public filings, including the company's Report on Form 10-Q for its fiscal quarter ended June 30, 1999, and the company's Form 10-K Report for the fiscal year ended December 31, 1998, under the caption "Factors that may Affect Future Results."
About New Era of Networks
New Era of Networks Inc. (NEON) is the leading provider of e-Business Integration software. Its products enable companies to share information and manage end-to-end business processes across Internet-facing e-Business applications, packaged software such as ERP systems, and legacy applications. NEON has a rapidly growing base of 2,500 customers worldwide in a variety of industries including financial services, insurance, manufacturing, healthcare, telecommunications and hospitality. NEON has demonstrated that its products shorten implementations while providing performance and reliability, proven in some of the most demanding transaction processing environments in the world. NEON partners with most of the leading IT software and services providers including IBM, Sun/Forte, Cambridge Technology Partners, CIBER, Compaq, Hewlett-Packard, Logica, NIWS (Japan), PeopleSoft, and others. For more information, call 800-815-6366 or visit NEON's World Wide Web site at www.neonsoft.com.
New Era of Networks, Convoy/DM, the NEON logotype, NEONet, NEONweb, Neonsoft, NEONaccess, NEONmsgtrak, NEONenrich, NEONfix, e-Biz Integrator, Business EventManager, Enterprise ProcessExecutive, Rapport, OpenBroker, NEONimpact, NEONsecure, NEONadapter, NEON Physician Access, and NEON Trading System are trademarks and CL/7 and Transaction Distribution Manager TDM are registered trademarks of New Era of Networks, Inc. and its subsidiaries. MQSeries is a registered trademark of International Business Machines Corporation. All other trademarks and registered trademarks are the property of the respective trademark owners.
NEW ERA OF NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
ASSETS 1999 1998
(unaudited)
Current assets:
Cash and cash equivalents $49,300 $174,172
Short-term investments
in marketable securities 3,577 10,659
Accounts receivable, net 41,601 28,310
Unbilled revenue 4,489 3,125
Prepaid expenses and other 6,108 2,356
Note receivable, related party 16,504 --
Deferred income taxes, net 147 147
Total current assets 121,726 218,769
Property and equipment, net 16,207 10,556
Long-term investments in
marketable securities 37,681 11,260
Intangibles, net 177,740 51,877
Deferred income taxes, net 5,647 4,846
Other assets, net 1,315 1,370
Total assets $360,316 $298,678
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,870 $5,650
Accrued liabilities 17,247 7,857
Deferred revenue 12,382 9,407
Total current liabilities 36,499 22,914
Deferred revenue-long term 79 149
Stockholders' equity:
Common stock, $.0001 par value,
200,000,000 shares authorized,
33,563,841 and 30,333,778 shares
issued and outstanding,
respectively 3 3
Additional paid-in capital 385,523 295,571
Treasury stock (347) --
Comprehensive income (loss) (249) 58
Accumulated deficit (61,192) (20,017)
Total stockholders' equity 323,738 275,615
Total liabilities and
stockholders' equity $360,316 $298,678
NEW ERA OF NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Software licenses $12,428 $10,714 $38,660 $24,555
Software maintenance 4,077 1,664 10,876 2,504
Professional services 15,361 5,085 38,082 11,446
Total revenues 31,866 17,463 87,618 38,505
Cost of revenues:
Cost of software licenses 509 452 916 1,116
Cost of software
maintenance and
professional services 11,730 3,518 28,248 7,179
Total cost of revenues 12,239 3,970 29,164 8,295
Gross profit 19,627 13,493 58,454 30,210
Operating Expenses
Sales and marketing 16,078 5,733 39,324 13,167
Research and development 9,404 4,169 25,614 9,775
General and administrative 4,623 1,804 11,579 3,964
Restructuring charges 7,445 -- 7,445 --
Acquisition charges and
amortization of
intangibles 32,309 14,339 37,361 18,209
Total operating expenses 69,859 26,045 121,323 45,115
Loss from operations (50,232) (12,552) (62,869) (14,905)
Other income, net 1,736 896 5,680 1,683
Loss before benefit from
income taxes (48,496) (11,656) (57,189) (13,222)
Benefit from income taxes 13,560 -- 16,014 --
Net loss $(34,936) $(11,656) $(41,175) $(13,222)
Loss per common share,
basic and diluted $(1.06) $(0.49) $(1.30) $(0.63)
Weighted average shares of
common stock outstanding,
basic and diluted 33,008,293 23,958,146 31,709,627 20,981,480
Excluding restructuring
charges and acquisition
-related charges and
amortization, net of
tax effect:
Net earnings (loss) $(5,682) $1,744 $(8,049) $3,242
Earnings (loss) per common
share, diluted $(0.17) $0.06 $(0.25) $0.14
Weighted average shares
of common stock
outstanding, diluted 33,008,293 27,003,514 31,709,627 23,621,634
For further information, please contact: Cynthia King, Director of Investor Relations of New Era of Networks, Inc., 303-486-9369, cking@neonsoft.com.
SOURCE New Era of Networks
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