4Front Technologies Announces Third Quarter and Nine Months Results
4Front Posts Another Record Quarter
LONDON, England--(BUSINESS WIRE)--Dec. 2, 1998--4Front Technologies, Inc.(''4Front'')(NASDAQ NM/EASDAQ Symbol: FFTI) announced its results for the third quarter and nine months ended Oct. 31, 1998.
HIGHLIGHTS(a)
(in $'000's, except share and per share data)
Third Quarter Ended Oct. 31, 1998
1998 1997 % Increase
(unaudited) (unaudited)
Service revenues $ 22,982 $ 12,947 78%
Product revenues $ 14,664 $ 8,491 73%
Total revenues $ 37,646 $ 21,438 76%
Operating income $ 2,392 $ 1,293 85%
Net income $ 1,618 $ 822 97%
Net income
per share (basic) $ 0.16 $ 0.13 23%
Net income
per share (diluted) $ 0.14 $ 0.11 27%
Fully diluted
shares outstanding 11,817,022 7,637426
Nine Months Ended Oct. 31, 1998
1998 1997 % Increase
(unaudited) (unaudited)
Service revenues $ 56,096 $ 29,456 90%
Product revenues $ 35,669 $ 29,426 21%
Total revenues $ 91,765 $ 58,882 56%
Operating income $ 6,243 $ 3,085 102%
Net income $ 3,946 $ 2,129 85%
Net income
per share (basic) $ 0.46 $ 0.33 39%
Net income
per share (diluted) $ 0.39 $ 0.31 26%
Fully diluted
shares outstanding 9,993,299 6,939,030
(a) A substantial part of the company's growth in the past three years has been achieved through acquisition. Accordingly, the results of operations from period to period are not necessarily comparable.
For the third quarter ended Oct. 31, 1998, total revenues increased 76% to $37.6 million versus $21.4 million reported for the comparable year-ago quarter. Net income for the quarter increased 97% to 1.6 million, or $0.14 per share fully-diluted (based on 11,817,022 shares), versus net income of $0.8 million, or $0.11 per share fully-diluted (based on 7,637,426 shares), for the comparable year-ago quarter. The impact of the company's secondary offering of Common Stock, which was completed towards the end of the second quarter, is reflected in the increased fully-diluted shares outstanding.
For the nine months ended Oct. 31, 1998, total revenues increased 56% to $91.8 million versus $58.9 million for the comparable year-ago period. Net income for the period increased 85% to $3.9 million, or $0.39 per share fully-diluted (based on 9,993,299 shares), versus net income of $2.1 million or $0.31 per share fully-diluted (based on 6,939,030 shares) for the comparable year-ago period.
Anil Doshi, Chairman and Chief Executive of 4Front said:
Overall Performance
''We continue to see strong growth in the UK and European computer services and outsourcing markets and the third quarter was yet another record revenue and profit quarter for 4Front. Earnings comfortably exceeded target and both service and product revenues were well ahead of budget reflecting continued strong internal growth as well as the impact of acquisitions.
Achievement of Targets
4Front has made very significant progress towards the achievement of new operating targets we set ourselves at the time of our offering in July. Two of the three key targets established then were the achievement of an annual revenue run-rate of $250 million and the attainment of a 75/25 service/product revenue mix in calendar year 2000. With the imminent completion of our recently announced acquisition of I-NEA, Siemens' French computer on-site service subsidiary, both targets will be well within our sights. The completion of the I-NEA acquisition combined with our already significantly improved revenues, should bring 4Front to an approximate $200 million revenue run rate with an approximate 70/30 service/product revenue mix. Our third key target for calendar 2000 relates to margin improvements and we aim for targeted margin improvements to follow the successful integration of the acquisitions made.
Pan-European Strategy
4Front's overall aim is to become a leading pan-European computer service provider and again we have made significant progress towards achieving this aim. Our overall position in the UK market continues to strengthen and through our acquisition of Penagen Training Ltd we have now established ourselves firmly in the rapidly growing UK training market. Our profile in Continental Europe continues to rise rapidly. Following the acquisition of I-NEA, 4Front will be one of the top 3 independent hardware maintenance and support companies in France and will have a strong presence in the French networking market. Through the acquisition of Memorex Telex S.p.a., 4Front has established itself as one of the top 10 independent hardware maintainers in Italy and has a strong presence in the Italian networking market, and a similar position has been established in the Belgian market. We are now increasingly well-placed to offer pan-European services to our customers and anticipate further strengthening of our European network in 1999.
Cash
Notwithstanding the substantial acquisition activity, 4Front retains a strong cash position, with cash in hand at the end of the third quarter standing at $26.8 million or $2.53 per share.''
Mark Ellis, Vice Chairman and President of 4Front said:
Operating Performance and Outlook
''The third quarter saw a robust performance in all operating areas. Hardware maintenance, help desk, networking and software operations were all strong. In networking, a major $3 million contract was won from health industry specialist EMIS, boosting 4Front's already strong presence in the growing healthcare marketplace, and this contract became 4Front's 23rd contract worth $1 million or more annually.
The third quarter also saw a strong performance from our storage solution and product business where operating performance was significantly higher than budgeted. 4Front led the world in sales of Seagate's new fibre channel storage technology in the quarter and this was one particularly important contributory factor to the strong sales performance.
Operating margins in the quarter and the nine month period rose again on a year-on-year basis, with EBITDA for the nine months rising to 9.4% from 7.7% in the comparable year-ago period, and the operating income margin rising to 6.8% from 5.2% in the comparable year-ago period. Third quarter margins -- EBITDA at 8.9% and the operating income margin at 6.4% -- were a little below second quarter margins, reflecting the anticipated impact of acquisitions and integration costs in the quarter. As an overall perspective on the successful growth record of the company, the EBITDA generated in the quarter exceeded 4Front's total annual revenues for fiscal year 1994.
The overall outlook in all areas of our business remains healthy. In the last five months, in addition to maintaining strong internal growth, 4Front has acquired three companies and agreed to acquire another. All four acquisitions are expected to be earnings accretive in calendar 1999, notwithstanding the costs of integration necessarily to be incurred. When the acquisitions are fully integrated, and when margins within the acquisitions have benefited from improved operating efficiencies, we would expect to see further overall margin improvement in 2000 as targeted at the time of the offering.''
4Front Technologies, Inc., is a leading provider of information technology solutions, which consist of specialised computer services and complementary products, primarily to blue-chip corporations in the United Kingdom and, to a growing extent, Continental Europe. 4Front's services include hardware maintenance, help desk support, network services, specialised software services and products and the supply of high-end storage systems. Customers of 4Front include British Petroleum, British Telecom, Italia Telecom, Computer Sciences Corp., Dupont, IBM, Reuters, Renault, ADP, Pfizer, NatWest Capital Markets, JP Morgan and the UK Ministry of Defence. Additional information on 4Front can be found on the Company's website at www.4fti.com.
4Front Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three Months Ended For The Nine Months Ended
Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998
$ '000's $ '000's $ '000's $ '000's
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES
Services $ 12,947 $ 22,982 $ 29,456 $ 56,096
Products 8,491 14,664 29,426 35,669
21,438 37,646 58,882 91,765
Cost of Services 6,623 10,423 14,561 25,723
Cost of Products 6,913 12,332 24,727 29,786
13,536 22,755 39,288 55,509
GROSS PROFIT
Services 6,324 12,559 14,895 30,373
Products 1,578 2,332 4,699 5,883
7,902 14,891 19,594 36,256
OPERATING EXPENSES
Selling, general and
and administrative
expenses 6,041 11,550 15,082 27,628
Depreciation 251 411 669 997
Amortization 317 538 758 1,388
Total operating
expenses 6,609 12,499 16,509 30,013
INCOME BEFORE
INTEREST AND
INCOME TAXES: 1,293 2,392 3,085 6,243
Interest income 47 351 209 527
Interest expense (244) (186) (455) (605)
INCOME BEFORE
INCOME TAXES: 1,096 2,557 2,839 6,165
INCOME TAXES 274 939 710 2,219
NET INCOME $ 822 $ 1,618 $ 2,129 $ 3,946
NET INCOME PER
COMMON SHARE
(Basic) $ 0.13 $ 0.16 $ 0.33 $ 0.46
NET INCOME PER
COMMON SHARE
(Diluted) $ 0.11 $ 0.14 $ 0.31 $ 0.39
4Front Technologies, Inc. Selected Balance Sheet Information
Oct. 31, 1998 Jan. 31, 1998
(unaudited) (audited)
$ '000's $ '000's
Current assets $ 86,363 $ 36,915
Current liabilities 57,998 35,974
Total assets 115,867 59,208
Long-term debt 611 1,640
Stockholders' equity $ 57,258 $ 21,594
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Contact:
Investor Relations Contact:
Abernathy MacGregor Frank, New York
Jason Thompson (U.S. Investor Relations)
Tel: 212/371-5999
or
Shandwick Consultants
Matthew Hooper (U.K. Investor Relations)
Tel: 011-44-171-329-0096
or
Company Contact:
4Front Technologies, Inc.
Mark Ellis or Ken Newell
Tel: 011-44-171-269-5848 |
