SAN FRANCISCO, May 4 /PRNewswire/ -- Leading broadband Internet services provider,
SoftNet Systems, Inc. (Nasdaq: SOFN) today announced revenue for its second fiscal quarter
ended March 31, rose 65% to $1.69 million from $1.03 million in the same period a year ago.
Net loss for the quarter was $22.12 million, or $0.93 per share, compared to a net loss of $8.06
million, or $0.87 per share, in the same period last year. Net loss per share, excluding amortization
and compensation expenses related to stock options, was $0.66, versus $0.71 in the same period
for the previous year.
The company attributed the increase in revenue primarily to an increase in subscribers for its
Internet-over-cable business, ISP Channel. Subscriptions rose 54% in the second quarter to
16,027, from 10,384 at December 31, 1999, and rose 556% from 2,445 on March 31, 1999.
Cost of sales for the quarter ended March 31, were $2.03 million versus $0.89 million recorded in
the same quarter of the previous year. Increased costs of sales for the quarter are associated with
customer gains, as well as with Intellicom's acquisition of transponder space that has not yet been
fully utilized but is expected to be utilized in the third and fourth fiscal quarter growth. Operating
expenses were $24.76 million for the quarter versus $7.23 million recorded in the same quarter of
the previous year. The increase in operating expenses is due to network costs also associated with
customer gains and employment growth across the organization, in addition to start-up business
costs for SoftNet Zone and international operations.
Depreciation and amortization was $4.34 million compared to $0.82 million in the same period last
year. Compensation expense related to stock options, a non-cash charge was $5.12 million in the
quarter versus $1.01 million in the same period last year.
As of March 31, SoftNet had $224.84 million in cash and short-term investments and $5.76 million
in long-term strategic investments.
Also in the quarter, Intellicom, SoftNet's satellite-based broadband Internet services company,
secured an agreement with TRICOM, a leading communications provider in the Dominican
Republic. This alliance will provide two-way satellite Internet access to all public high schools in the
Dominican Republic and to private companies throughout Latin and South America. Last month
alone, as part of this agreement, Intellicom shipped 28 very small aperture terminals (VSATs).
Dr. Lawrence B. Brilliant, SoftNet's chairman and chief executive officer, said, "SoftNet continues to
transform itself into a global broadband services company, with broadband operations over cable,
over satellite, and wireless, and with a global reach. A year ago SoftNet was synonymous with our
cable operations, The ISP Channel; today domestic cable operations is only one of four of our
broadband business activities. I'm proud of the success of customer acquisition of the ISP Channel
which reported 16,027 at the end of the quarter and which is expected to almost double over the
next six month. As of today, ISP Channel has nearly 18,000 residential customers. Obviously, the
rapid consolidation in the cable industry has made it impossible for the ISP Channel to sign up as
many homes passed as we would have liked, but it is praiseworthy that the ISP Channel has
nonetheless continued to hit its customer acquisition targets."
Brilliant continued, "The situation internationally is quite different. In the past weeks we have been
working in Mexico, Latin America, Japan, China, and India. In addition to our joint venture with
Pacific Century CyberWorks of Hong Kong, we expect to announce shortly a contract with
Marubeni Corporation of Japan to bring broadband Internet access to Marubeni's cable homes
passed. We have leveraged what we learned from the ISP Channel domestically to build a global
footprint, for which agreements are in various stages of completion.
"The potential of Intellicom is beginning to be realized, although the results are not apparent in the
recent quarter completed," said Brilliant. "Last month, Intellicom shipped 28 VSAT systems, and
based on purchase orders already in hand, we expect to have more than 350 revenue producing
VSAT installations by September 30, 2000, nearly quadrupling our current installed base in only six
months and with a very scalable model. Again, most of these installations are being made
internationally.
"In the wireless and mobile computing space, the past quarter has been terrific for SoftNet Zone.
Through our recent agreements with technology bellwethers CMGI and Compaq, as well as Cisco,
Nokia and most recently Delta Air Lines, to form SoftNet Zone, we plan to bring broadband
Internet access to millions of mobile business professionals around the world, as well as to the more
than 27 million Delta Sky Miles members. We also plan to have wireless operations available in a
number of Delta served airports by the end of the calendar year. In addition, we have now
completed the acquisition of Laptop Lane, which expects to have its broadband airport business
centers in 30 airport locations by the end of December."
Brilliant concluded, "I am also extremely pleased to welcome Markus Rohrbasser as SoftNet's new
chief financial officer, and Atam Lalchandani to SoftNet's Board of Directors." Both appointments to
SoftNet have been announced in separate releases.
SoftNet's year-to-date financials are included in the table at the end of this release.
About SoftNet Systems, Inc.
SoftNet Systems, Inc. is a leading broadband Internet services company.
Through its ISP Channel, the company provides a broadband Internet service solution to partnering
cable companies. Silicon Valley, CA-based ISP Channel provides to its cable affiliates cable
head-end equipment and integration for high speed two-way data services, Internet backbone
connectivity, and technical support and customer care twenty-four hours a day, seven days a week.
SoftNet's Intellicom subsidiary markets a two-way broadband satellite-based VSAT (very small
aperture terminal) Internet services to Internet Service Providers (ISPs), educational institutions and
businesses. In addition, SoftNet recently announced its SoftNet Zone joint venture with CMGI,
Compaq, and technology partners Cisco and Nokia. SoftNet Zone will bring broadband Internet
services to mobile computing business 'hot spots' including airports, hotels and convention centers
worldwide.
For further information about SoftNet Systems, Inc. and its subsidiaries, please visit
softnet.com; softnetzone.com; ispchannel.com,
vsat.net, or call 415-365-2500.
This press release contains forward-looking statements concerning the company's anticipated future
Operating results, future revenues and earnings or adequacy of future cash flow. (These
forward-looking statements include, but are not limited to, statements containing the words "expect",
"believe", "will", "may", "should", "project", "estimate, "anticipate" and like expressions, and the
negative thereof.) These statements are subject to risks and uncertainties that could cause actual
results to differ materially from the statements, including the risks attendant to a growing business in a
new industry as well as those risks described in the company's Quarterly or Annual Report.
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations and Summary Metrics
(In thousands, except per share data and summary metrics information)
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2000 1999 2000 1999
Net sales $1,691 $1,027 $2,967 $1,471
Cost of sales 2,033 891 3,543 1,298
Gross profit (loss) (342) 136 (576) 173
Operating expenses:
Selling and marketing 6,526 2,362 12,072 4,370
Engineering 5,135 730 9,256 1,469
General and
administrative 3,640 2,313 6,990 4,177
Depreciation 3,004 803 4,919 1,202
Amortization 1,337 14 2,392 725
Compensation expense
related to stock
options 5,115 1,009 11,279 1,041
Total operating
expenses 24,757 7,231 46,908 12,984
Loss from continuing
operations before other
income (expense), income
taxes and discontinued
operations (25,099) (7,095) (47,484) (12,811)
Other income (expense)
Interest expense (412) (608) (778) (1,127)
Interest income 3,421 87 5,563 240
Other (28) (29) (37) (32)
Loss from continuing
operations before income
taxes and discontinued
operations (22,118) (7,645) (42,736) (13,730)
Income taxes - - - -
Loss from continuing
operations (22,118) (7,645) (42,736) (13,730)
Loss from discontinued
operations - (246) - (384)
Gain on disposal of
discontinued
operations - - - -
Net loss (22,118) (7,891) (42,736) (14,114)
Preferred dividends - (171) - (414)
Net loss applicable
to common shares $(22,118) $(8,062) $(42,736) $(14,528)
Basic and diluted
loss per share:
Continuing
operations $(0.93) $(0.82) $(1.99) $(1.55)
Discontinued
operations - (0.03) - (0.04)
Preferred dividends - (0.02) - (0.05)
Net loss applicable
to common shares $(0.93) $(0.87) $(1.99) $(1.64)
Loss from continuing
operations excluding
amortization expense and
compensation expense
related to stock
options $(0.66) $(0.71) $(1.36) $(1.35)
Shares used to compute
basic and diluted
loss per share 23,732 9,316 21,436 8,839
March 31, December 31, March 31,
2000 1999 1999
Summary Metrics:
Cable affiliates 44 43 31
Contracted homes passed
(in thousands) 2,450 2,450 1,600
Marketable homes passed
(in thousands) 765 633 264
Cumulative cable systems
(head-ends) installed 79 73 23
Cable modem customers 16,027 10,384 2,445
Very small aperture terminals
(VSATs) installed 82 90 56
Number of employees 307 274 134
SOURCE: SoftNet System, Inc.
CONTACT: Jody P. Flynn, VP, Corporate Communications of SoftNet Systems, Inc., 415-365-2510,
jflynn@softnet.com; or Richard Stern of Stern & Co., 212-888-0044, rstern@sternco.com, for SoftNet |
