SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________________________________________________ to _________________________________________________________
Commission File Number: 0-26507
SHOWCASE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1628214
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4115 Highway 52 North, Suite 300
Rochester, Minnesota 55901-0144
(Address of principal executive offices) (Zip Code)
(507) 288-5922
(Registrants's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
--- ---NO____
----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
10,464,59310,759,019 Common Shares as of January 31,August 2, 2000.
Table of Contents
SHOWCASE CORPORATION AND SUBSIDIARIES
Report on Form 10-Q
for periodquarter ended
December 31, 1999
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations for the three and
nine months ended December 31, 1999 and 1998 ............. 2
Consolidated Balance Sheets as of December 31, 1999
and March 31, 1999 ....................................... 3
Consolidated Statements of Cash Flows for the nine
months ended December 31, 1999 and 1998 .................. 4
Notes to Consolidated Financial Statements ................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 7
Item 3. Quantitative and Qualitative Disclosure About
Market Risks ............................................. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................... 12
Item 2. Changes in Securities and Use of Proceeds ................. 13
Item 3. Defaults upon Senior Securities ........................... 13
Item 4. Submission of Matters to a Vote of Security Holders ....... 13
Item 5. Other Information ......................................... 13
Item 6. Exhibits and Reports on Form 8-K .......................... 13June 30, 2000
Page
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Statements of Operations for the three months ended
June 30, 2000 and 1999 2
Unaudited Consolidated Balance Sheets as of June 30, 2000 and March 31, 2000 3
Unaudited Consolidated Statements of Cash Flows for the three months ended
June 30, 2000 and 1999 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 3. Quantitative and Qualitative Disclosure about Market Risk 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SHOWCASE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
December 31, December 31,
------------------- --------------------June 30,
-------------------------------------------------
2000 1999
1998 1999 1998
------- ------ ------ --------------------------- ----------------------
Revenues:
License fees ................................. $ 4,9905,508 $ 5,834 $15,082 $15,0776,065
Maintenance and support ...................... 3,456 2,776 9,963 7,302fees 4,251 3,206
Professional service fees .................... 1,201 933 3,613 2,883
------- ------- ------- -------1,653 1,234
--------------------- ----------------------
Total revenues ............................. 9,647 9,543 28,658 25,262
------- ------- ------- -------11,412 10,505
--------------------- ----------------------
Cost of revenues:
License fees ................................. 985 1,077 2,820 2,894830 1,068
Maintenance and support ...................... 855 658 2,432 1,828fees 977 824
Professional service fees .................... 1,199 805 3,342 1,995
------- ------- ------- -------1,531 1,032
--------------------- ----------------------
Total cost of revenues ..................... 3,039 2,540 8,594 6,717
------- ------- ------- -------3,338 2,924
--------------------- ----------------------
Gross margin ................................... 6,608 7,003 20,064 18,545
------- ------- ------- -------8,074 7,581
--------------------- ----------------------
Operating expenses:
Sales and marketing .......................... 5,691 4,958 16,199 13,7236,161 5,275
Product development .......................... 1,457 1,038 3,866 3,2361,584 1,163
General and administrative ................... 1,160 855 3,238 2,339
------- ------- ------- -------1,249 941
--------------------- ----------------------
Total operating expenses ................... 8,308 6,851 23,303 19,298
------- ------- ------- -------8,994 7,379
--------------------- ----------------------
Operating income (loss) ........................ (1,700) 152 (3,239) (753)
------- ------- ------- -------(920) 202
--------------------- ----------------------
Other income (expense), net:
Interest expenses ............................ (4) (37) (15) (139)expense (3) (7)
Interest and investment income .............................. 396 57 867 186437 104
Other income (expense), net .................. 3 3 3 7
------- ------- ------- -------(5) 1
--------------------- ----------------------
Total other income (expense), net ....................................... 395 23 855 54
------- ------- ------- -------429 98
--------------------- ----------------------
Net income (loss) before income taxes ......................................... (1,305) 175 (2,384) (699)(491) 300
Income taxes ................................... 200 50 500 135
------- ------- ------- -------100 115
--------------------- ----------------------
Net income (loss) .............................. $(1,525) $ 125 $(2,884)(591) $ (834)
------- ------- ------- -------185
===================== ======================
Other comprehensive income (loss):
Foreign currency translation adjustment .................................. 26 (12) 54 (15)69 34
Unrealized holding gain (loss) on securities ............................... 206 (147) 279 (123)
------- ------- ------- -------(1) 32
--------------------- ----------------------
Comprehensive income (loss) .................... $(1,273) $ (34) $(2,551)(523) $ (972)
======= ======= ======= =======251
===================== ======================
Net income (loss) per share:
Basic ........................................ $ (0.15) $ 0.03 $ (0.35) $ (0.19)
======= ======= ======= =======$(.06) $0.04
===================== ======================
Diluted ...................................... $ (0.15) $ 0.02 $ (0.35) $ (0.19)
======= ======= ======= =======$(.06) $0.02
===================== ======================
Weighted average shares outstanding used in
computing basic net income (loss) per share .............................. 10,368 4,348 8,354 4,34510,572 4,542
Weighted average shares outstanding used in
computing diluted net income (loss) per share ....................... 10,368 6,906 8,354 4,34610,572 8,371
See accompanying notes to unaudited consolidated financial statements
-2-statements.
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
December 31,June 30, 2000 March 31, 1999 1999
----------- ---------2000
--------------------- --------------------
Assets (Unaudited)
Assets
Current Assets:
Cash ........................................................... $ 4,042 $ 8,900and equivalents $17,234 $11,677
Marketable securities .......................................... 26,198 13912,788 18,387
Accounts receivable, net ....................................... 8,773 7,0709,097 8,848
Prepaid expenses and other current assets ...................... 746 1,059
Income taxes receivable ........................................ 321 --
Deferred income taxes .......................................... 220 550
------- -------1,720 1,731
--------------------- --------------------
Total current assets ....................................... 40,300 17,718
------- -------40,839 40,643
--------------------- --------------------
Property and equipment, net ...................................... 2,259 2,0921,965 2,088
Goodwill, net of accumulated amortization ........................ 71 116
------- -------41 56
--------------------- --------------------
Total assets ............................................... $42,630 $19,926
======= =======$42,845 $42,787
===================== ====================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable ............................................... $ 8241,866 $ 1,3731,323
Accrued liabilities ............................................ 4,598 4,1214,070 4,333
Current portion of long-term debt .............................. 4 52 2
Current portion of obligations under capital leases ............ 107 127
Income taxes payable ........................................... 47 29548 78
Deferred revenue ............................................... 11,629 10,800
------- -------12,834 12,778
--------------------- --------------------
Total current liabilities .................................. 17,209 16,721
------- -------18,820 18,514
--------------------- --------------------
Deferred revenue, less current portion ........................... 852 846
Long-term debt, less current portion ............................. -- 2
Capital lease obligations, less current portion .................. -- 85
------- -------842 914
--------------------- --------------------
Total liabilities .......................................... 18,061 17,654
------- -------19,662 19,428
--------------------- --------------------
Commitments
Stockholders' equity:
Series A convertible preferred stock; $.01 par
value; 473,757 shares authorized, issued, and
outstanding, total liquidation preference of $2,400 ........... -- 5
Series B convertible preferred stock; $.01 par value;
1,777,500 shares authorized, 875,000 issued and
outstanding, total liquidation preference of $3,500 ........... -- 9
Common stock, $.01 par value, 50,000,000 and 10,000,000
shares authorized,
10,449,18810,749,759 and 4,502,86710,522,113 shares issued and outstanding ........................................ 104 45107 105
Additional paid-in capital ..................................... 31,388 6,45231,760 31,443
Accumulated other comprehensive income:
Cumulative translation adjustment ............................ 101 47192 123
Unrealized holding gain (loss)loss on securities ................. 98 (181)(10) (9)
Deferred compensation .......................................... (455) (322)(397) (426)
Accumulated deficit ............................................ (6,667) (3,783)
------- -------(8,469) (7,877)
--------------------- --------------------
Total stockholders' equity ................................. 24,569 2,272
------- -------23,183 23,359
--------------------- --------------------
Total liabilities and stockholders' equity.................. $42,630 $19,926
======= =======equity $42,845 $42,787
===================== ====================
See accompanying notes to unaudited consolidated financial statements
-3-statements.
SHOWCASE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
NineThree Months Ended
December 31,
----------------------June 30,
--------------------------------------
2000 1999
1998
-------- ----------------------- ----------------
Cash flows from operating activities:
Net loss .......................................................income (loss) $ (2,884)(591) $ (834)185
Adjustments to reconcile net lossincome (loss)
to cash provided by (used in)used in operating activities:
Depreciation and amortization ................................ 533 655222 197
Provision for returns and doubtful accounts, net of returns
and writeoffs.......................write-offs -- (90) 45
Deferred income taxes ........................................ 330 --
Deferred compensation amortization and expense related to
cashless exercise of warrants ............................... 158 2229 21
Loss on the disposaldisposition of property and equipment ............... 63 --
Changes in operating assets and liabilities, net of effect
of foreign exchange rate changes:
Accounts receivable ........................................ (1,613) (2,186)(249) (189)
Prepaid expenses ........................................... 313 175
Income taxes receivable .................................... (321) 251and other current assets 11 (169)
Accounts payable ........................................... (550) (75)543 (271)
Accrued liabilities ........................................ 476 1,302(263) 217
Deferred revenue ........................................... 836 3,112(16) (1,113)
Income taxes payable ....................................... (247) 130
-------- --------- (295)
---------------- ----------------
Net cash provided by (used in)used in operating activities ...... (3,053) 2,597
-------- -------(311) (1,507)
---------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment ............................. (608) (259)(22) (280)
Purchase of marketable securities .............................. (95,037)(40,747) --
SaleProceeds from maturities and maturitysale of marketable securities ..................... 69,25746,346 --
Proceeds from affiliates .......................................sale of property and equipment 2 --
12
-------- ----------------------- ----------------
Net cash used inprovided by (used in) investing activities .................... (26,388) (247)
-------- -------5,579 (280)
---------------- ----------------
Cash flows from financing activities:
Proceeds from exercise of stock options ........................ 342 111
Proceeds from initial public offering, net of expenses ......... 24,350 --319 8
Payments on long-term debt ..................................... (3) (281)-- --
Payments of capitalized lease obligations ...................... (106) (120)
-------- -------(30) (34)
---------------- ----------------
Net cash provided by (used in) financing activities ...... 24,583 (290)
-------- -------289 (26)
---------------- ----------------
Net increase (decrease) in cash .................................. (4,858) 2,0605,557 (1,813)
Cash and equivalents, beginning of period ........................................11,677 8,900
5,404
-------- ----------------------- ----------------
Cash and equivalents, end of period .............................................. $ 4,04217,234 $ 7,464
======== =======7,087
================ ================
Supplemental disclosure of cash flow information:
Cash paid during the ninethree months for interest .................. $ 153 $ 139
======== =======7
================ ================
Cash paid during the ninethree months for income taxes .............. $ 73951 $ 142
======== =======549
================ ================
Cash received during the ninethree months fromfor income tax refunds ...$ 221 $ --
$ 389
======== ======================= ================
See accompanying notes to unaudited consolidated financial statements.
-4-
SHOWCASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
The unaudited interim consolidated financial statements include the
accounts of ShowCase Corporation and its wholly owned subsidiaries
(collectively, the "Company") and have been prepared by the Company in
accordance with generally accepted accounting principles, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included
in the financial statements have been omitted or condensed pursuant to such
rules and regulations. The information furnished reflects, in the opinion
of the management of the Company, all adjustments, consisting primarily of
recurring accruals, considered necessary for a fair presentation of the
financial position and the results of operations.
In June 2000, the SEC staff issued Staff Accounting Bulletin No. 101B,
which deferred the required implementation date of Staff Accounting
Bulletin No. 101 ("SAB 101"), as amended by SAB 101A. SAB 101, as amended,
summarizes certain views of the SEC staff in applying generally accepted
accounting principles to revenue recognition in financial statements.
Implementation of SAB 101 by the Company was previously required in the
quarter beginning April 1, 2000. Subject to SAB 101B, required
implementation of SAB101 has been deferred to the quarter beginning January
1, 2001. The Company adopteddoes not expect the provisions of Statement of Position ("SOP") No.
98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use; SOP No. 98-5, Reporting on the Costs of Start-Up
Activities; and SOP No. 98-9, Modification of SOP 97-2, Software Revenue
Recognition, with RespectSAB101 to Certain Transactions, effective April 1, 1999.
The adoption of these pronouncements did not have a material effectimpact
on the
Company's operating results.
Certain amounts presented in prior periods have been reclassified to
conform to current period presentation.its financial condition or results of operation.
(2) Net Income (Loss) per Share
Basic incomeearnings (loss) per share represents net incomeearnings (loss) divided by
the weighted average number of shares of common stockshares outstanding during the period.
Diluted incomeearnings (loss) per share represents net incomeearnings (loss) divided by
the sum of the weighted average number of shares of common stockshares outstanding plus
shares derived from other potentially dilutive securities. For the Company, potentiallyPotentially
dilutive securities include "in-the-money" fixed stock options and
warrants and the amount of weighted average shares
of common stock which would be added by the conversion of outstanding
convertible preferred stock.warrants. The number of shares added for stock options and warrants is
determined by the treasury stock method, which assumes exercise of these
options and warrants and the use of any proceeds from such exercise to
repurchase a portion of these shares at the average market price for the
period. When the results of operations are a loss, other potentially
dilutive securities are not included in the calculation of loss per share.
For the three months ended December 31, 1999 and the nine months ended
December 31, 1999 and 1998,June 30, 2000, basic loss per share is the same
as diluted loss per share because the effect of the inclusion of other
potentially dilutive securities in the calculation of diluted loss per
share was antidilutive. The number of option shares excluded from the
calculation of potentially dilutive securities because either because the exercise
price exceeded the average market price or because their inclusion in a calculation
of net loss per share would have been antidilutive was 985,5381,173,343 for the three months ended
December 31, 1999 and 1,040,424 and 564,055 for the nine months ended
December 31, 1999 and 1998, respectively. The effect of conversion of the
Company's convertible preferred stock was also excluded from the
calculation of net loss per diluted share because the resulting impact
would also have been antidilutive for the nine months ended December 31,
1998.
-5-
SHOWCASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(3) Deferred Compensation
During the
three months ended June 30, 1999,2000.
(3) Related Party Transactions
In late June 2000, the Company grantedlicensed certain software to employees optionsanother
software company, an executive officer of which is also a member of the
board of directors of the Company. The company recognized $454,000 of
license revenue related to purchase 81,000 shares of common stock.this transaction in the quarter ended June 30,
2000. The Company recorded deferred compensation of approximately $153,000, representing the
difference between the deemed value of the common stock for accounting
purposes and the option exercise price of such options on the date of
grant. The Company accounts for these stock options in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and will
recognize the deferred compensation cost over the five year vesting period
of options granted. No stock options were granted during the three months
ended December 31, 1999also licensed certain software from this software
company for which the exercise price was less thanCompany paid $485,000 during the deemed valuequarter ended June
30, 2000. The Company will amortize this amount over the one-year contract
period of the common stock for accounting purposes on the date of
grant.
(4) Cashless Exercise of Warrants
During the three months ended September 30, 1999, a warrant holder
exercised a warrant to purchase shares of the Company's common stock
pursuant to a cashless exercise provision. The Company recognized an
expense of approximately $79,000 and issued an aggregate of 8,182 shares of
its common stock during the three months ended September 30, 1999 as a
result of this exercise.
(5) Initial Public Offering and Conversion of Preferred Stock
On June 29, 1999, the Company's registration statement for its initial
public offering of 3,000,000 shares of common stock at $9.00 per share was
declared effective by the Securities and Exchange Commission. The closing
of the sale of such shares occurred on July 6, 1999 at which time the
3,000,000 shares of common stock were issued and proceeds, net of the
underwriting discount, of $25,110,000 were received.
On July 6, 1999, the outstanding shares of the Company's Series A and
Series B convertible preferred stock were converted into 1,895,028 and
864,198 shares of common stock, respectively.
-6-license.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
All statements, trend analysis and other information contained in the
following discussion relative to markets for our products and trends in
revenues, gross margins and anticipated expense levels, as well as other
statements including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend" and other similar expressions constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").statements. These forward-looking statements are subject to business and
economic risks and uncertainties, including but not limited to those described
in Exhibit 99.1 to our Quarterlythe Annual Report on Form 10-Q10-K for the quarterfiscal year ended
June 30, 1999, as well as those discussed in our
Registration StatementMarch 31, 2000 on Form S-1 (File No. 333-77223) (the "Registration
Statement").file with the Securities and Exchange Commission. Our actual
results of operations may differ materially from those contained in the forward-lookingforward-
looking statements. All forward-looking statements included in this report are
based on information available to us on the date of this report, and we assume
no obligation to update these forward-looking statements, or to update the
reasons why actual results could differ from those projected in these forward-lookingforward-
looking statements.
Overview
We are the leading provider ofShowCase develops, markets and supports a fully integrated, end-to-end,
business intelligence solutionssolution for IBM AS/400 customers. Our ShowCase STRATEGY(R)STRATEGY
product suite and related services are designed to enable organizations to
rapidly implement business intelligence solutions that create increased value
from their operational and customer data. The sophisticated data warehousing
and management capabilities of our product suite providesprovide our clients with highly
scalable and tightly integrated solutions. Our products enable enterprise-wide
distribution of information and allow end-user access and analysis through
familiar applications and Internet browsers.
We have nine years of experience
delivering business intelligence solutions. Our ShowCase STRATEGY product suite,
introduced in 1996, supports ad hoc information access, enterprise reporting and
analytics.
We were incorporated in 1988, and in 1991, introduced the first
Windows-based query tool for the IBM AS/400, ShowCase VISTA. During the next
four years, we continued to broaden our family of data access products, expand
our comprehensive service and support programs, grow our telesales and indirect
sales channels and invest in marketing and administrative functions. To support
the introduction of the ShowCase STRATEGY product suite in 1996, we created a
direct field sales force and increased our global distribution presence. Our
revenues increased to $9.6 and $28.7 million for the three and nine months ended
December 31, 1999, respectively, from $9.5 and $25.3 million for the three and
nine months ended December 31, 1998, respectively. Although our revenues have
increased significantly in recent periods, this growth may not continue. We
intend to continue to invest significant resources in the development of our
product suite, sales and marketing and general and administrative functions.
Our revenues come from three principal sources: license fees, maintenance
and support and professional service fees. We adopted the provisions of
Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, as amended
by SOP No. 98-4, Deferral of the Effective Date of Certain Provisions of SOP No.
97-2, effective April 1, 1998, and SOP No. 98-9, Modification of SOP No. 97-2,
Software Revenue Recognition, with Respect to Certain Transactions, effective
April 1, 1999. Under SOP No. 97-2, we recognize license revenue when the
software product has been delivered, if a signed contract exists, the fee is
fixed and determinable, collection of resulting receivables is probable and
product returns are reasonably estimable. License fee revenues that are
contingent upon sale to an end user by distributors and other distribution
partners are recognized upon receipt of a report of delivery to the end user.
Maintenance and support revenues committed as part of new product license sales
and maintenance resulting from renewed maintenance contracts are deferred and
recognized ratably over the contract period. Professional service fee revenue is
recognized when services are performed.
-7-
We sell our products through a direct sales force and through indirect
distribution channels. Direct sales are made by our telesales organization and
direct field sales force in North American and by wholly-owned subsidiaries in
Germany, France, the United Kingdom and Belgium, including its branch office in
the Netherlands. Our distribution partners include IBM, software application
vendors, resellers and distributors located in the United States, Italy,
Switzerland, Mexico, Japan, Australia, Singapore, Hong Kong, Thailand and South
Korea. Sales through indirect channels accounted for 30.4% and 21.0% of license
fee revenues for the three months ended December 31, 1999 and 1998,
respectively, and 23.2% and 20.3% for the nine months ended December 31, 1999
and 1998, respectively.
Revenues from clients outside North America represented 43.0% and 32.3% of
total revenue for the three months ended December 31, 1999 and 1998,
respectively, and 39.5% and 37.6% for the nine months ended December 31, 1999
and 1998, respectively. A majority of these sales was derived from European
sales. We intend to continue to expand our international operations and have
committed, and will continue to commit, significant management time and
financial resources to developing direct and indirect international sales
channels.
Results of Operations For the Three Months Ended June 30, 2000 and 1999
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated.
Three Months Ended Nine Months Ended
December 31, December 31,
------------------- -------------------
1999 1998 1999 1998
------- ------- ------- -------
June 30,
---------------------------------------------
As a Percentage of Total Revenues: 2000 1999
------------------- --------------------
Revenues:
License fees .................................... 51.7% 61.1% 52.6% 59.7%48.3% 57.7%
Maintenance and support ......................... 35.8 29.1 34.8 28.937.3 30.5
Professional service fees ....................... 12.4 9.8 12.6 11.4
----- ----- ----- -----14.5 11.7
------------------- --------------------
Total revenues ................................ 100.0 100.0 100.0 100.0
Cost of revenues:
License fees ....................................7.3 10.2 11.3 9.8 11.5
Maintenance and support ......................... 8.9 6.9 8.5 7.28.6 7.8
Professional service fees ....................... 12.4 8.4 11.7 7.9
----- ----- ----- -----13.4 9.8
------------------- --------------------
Total cost of revenues ........................ 31.5 26.6 30.0 26.6
----- ----- ----- -----29.2 27.8
------------------- --------------------
Gross margin ...................................... 68.5 73.4 70.0 73.470.8 72.2
Operating expenses:
Sales and marketing ............................. 59.0 52.0 56.5 54.354.0 50.2
Product development ............................. 15.1 10.9 13.5 12.813.9 11.1
General and administrative ...................... 12.010.9 9.0
11.3 9.3
----- ----- ----- ------------------------ --------------------
Total operating expenses ...................... 86.1 71.8 81.3 76.4
----- ----- ----- -----78.8 70.2
------------------- --------------------
Operating income (loss) ........................... (17.6) 1.6 (11.3) (3.0)(8.1) 1.9
Other income (expense), net ....................... 4.1 0.2 3.0 0.2
----- ----- ----- -----3.8 0.9
------------------- --------------------
Net income (loss) before income taxes ............. (13.5) 1.8 (8.3) (2.8)(4.3) 2.9
Income taxes ...................................... 2.1 0.5 1.7 0.5
----- ----- ----- -----0.9 1.1
------------------- --------------------
Net income (loss) ................................. (15.6)(5.2)% 1.3% (10.1)% (3.3)%
===== ===== ===== =====1.8%
=================== ====================
-8-
Revenues
Total revenues. Total revenues increased to $9.6$11.4 million for the three
months ended December 31, 1999June 30, 2000 from $9.5$10.5 million for the three months ended December 31, 1998,June
30, 1999, representing an increase of 1.1%. For the nine months ended
December 31, 1999, total revenues increased to $28.7 million from $25.3 million
for the nine months ended December 31, 1998, an increase of 13.4%8.6%.
License fees. License fee revenues decreased to $5.0$5.5 million for the three
months ended December 31, 1999June 30, 2000 from $5.8$6.1 million for the three months ended December 31, 1998,June 30,
1999, representing a decrease of 14.5%9.2%. This decrease was primarily
attributable to lower license fee revenues from Asia, low volume from our IBM
distribution channel and the deferral of purchase decisions by potential clients
because of year 2000 concerns. License fee revenues were $15.1 million for each
of the nine months ended December 31, 1999 and 1998. License fee revenues as a percentage of
total revenues were 51.7%48.3% and 61.1%57.7% for the three months ended December 31,June 30, 2000 and
1999, and 1998, respectively, and 52.6% and 59.7% for the nine
months ended December 31, 1999 and 1998, respectively. LicenseThe decrease in license fee revenues is largely
attributable to a decrease in the number of licenses sold, due primarily to the
impact of clients and prospects delaying or canceling purchase decisions due to
Year 2000.
Revenues from
our Essbase/400 licenses comprise a significant percentage of
total license fee revenues. License fees for this product represented 48.0%were 37.5% and 40.6%43.6%
of our total license fee revenues for the three months ended December 31,June 30, 2000 and 1999,
respectively.
License fee revenues derived from our indirect distribution channels were
14.7% and 1998, respectively,
and 43.7% and 39.4%17.8% of license fee revenues for the ninethree months ended December 31,June 30, 2000
and 1999, and 1998, respectively.
Maintenance and support. Maintenance and support revenues increased to
$3.5$4.3 million for the three months ended December 31, 1999June 30, 2000 from $2.8$3.2 million for the
three months ended December 31, 1998,June 30, 1999, representing anand increase of 24.5%. For the
nine months ended December 31, 1999, maintenance and support revenues increased
to $10.0 million from $7.3 million for the nine months ended December 31, 1998,
an increase of 36.4%32.6%.
Maintenance and support revenues as a percentage of total revenues were 35.8%37.3%
and 29.1%30.5% for the three months ended December 31,June 30, 2000 and 1999, and
1998, respectively, and 34.8% and 28.9% for the nine months ended December 31,
1999 and 1998, respectively. These increasesThis
increase in maintenance and support revenues werewas largely a result of the renewal
of maintenance and support contracts as our installed base continued to grow, as
well as new maintenance and support contracts associated with new product
licenses.
Professional service fees. Professional service fee revenues increased to
$1.7 million for the three months ended June 30, 2000 from $1.2 million for the
three months ended December 31,June 30, 1999, from $0.9 million for
the three months ended December 31, 1998, representing an increase of 28.7%. For
the nine months ended December 31, 1999, professional service fee revenues
increased to $3.6 million from $2.9 million for the nine months ended December
31, 1998, an increase of 25.3%34.0%.
Professional service fee revenues as a percentage of total revenues were 12.4%14.5% and
9.8%11.7% for the three months ended December 31,June 30, 2000 and 1999, and 1998, respectively, and 12.6% and 11.4% for the nine
months ended December 31, 1999 and 1998, respectively. These increasesThis
increase in professional service fee revenues werewas largely a result of the service
revenues associated with the sale of new product licenses.licenses and from the
completion of an IBM service engagement.
Revenues from clients outside North America represented 36.1% and 31.3% of
our total revenues for the three months ended June 30, 2000 and 1999,
respectively. A majority of this revenue was derived from European sales.
Costs of Revenues
Cost of license fees. Cost of license fees consists primarily of the costs
of product manuals, media, packaging, shipping and royalties paid to third
parties. Cost of license fees decreased to $1.0 million$830,000 for the three months ended
December 31, 1999June 30, 2000 from $1.1 million for the three months ended December
31, 1998,June 30, 1999,
representing 19.7%15.1% and 18.5%17.6% of total license fee revenuesfees for thesesuch periods,
respectively. Cost of license fees decreased to $2.8 million for the
nine months ended December 31, 1999 from $2.9 million for the nine months ended
December 31, 1998, representing 18.7% and 19.2% of license fee revenues for
these periods, respectively. These decreasesThe decrease in cost of license fees in dollar
amount werewas primarily attributable
to lower license fee revenues. We anticipate
that cost of license fees will increasethe decrease in dollar amount in future periods
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as license fee revenues increase. Cost of license fees as athe percentage of license fee revenues may increase if we enter into additional royalty
arrangements or if sales offrom our Essbase/400 or other productsproduct, for
which carry a royalty
obligation increase as a percentage of license fee revenues.we pay royalties.
Cost of maintenance and support. Cost of maintenance and support revenues
consists primarily of personnel costs associated with providing maintenance and
support services, and payments to third parties to provide maintenance and support,
particularly with respect to Essbase/400. Cost of maintenance
and support revenues increased to $0.9$1.0 million for the three months ended December 31, 1999June
30, 2000 from $0.7
million$824,000 for the three months ended December 31, 1998,June 30, 1999, representing
24.7%23.0% and 23.7%25.7% of total maintenance and support revenues for thesesuch periods,
respectively. Cost
of maintenance and support increased to $2.4 million for the nine months ended
December 31, 1999 from $1.8 million for the nine months ended December 31, 1998,
representing 24.4% and 25.0% of maintenance and support revenues for these
periods, respectively. These increasesThe increase in cost of maintenance and support in
dollar amount wereis primarily due
to additional staffing and the hiringincrease in the payment of additional personnel. We
anticipate that cost ofthird-party
maintenance and support will increase in dollar amount
in future periods as maintenance and support revenues increase.fees with respect to Essbase/400.
Cost of professional service fees. Cost of professional service fees
consists primarily of the costscost of providing training and consulting services.
Cost of professional service fees increased to $1.2$1.5 million for the three months
ended December 31, 1999June 30, 2000 from $0.8$1.0 million for the three months ended December
31, 1998,June 30, 1999,
representing 99.8%92.6% and 86.3% of professional service fee revenues for
these periods, respectively. Cost83.6% of professional service fees increased to $3.3
million for the nine months ended December 31, 1999 from $2.0 million for the
nine months ended December 31, 1998, representing 92.5% and 69.2% of
professional service fee revenues for thesesuch periods,
respectively. These
increasesThe increase in cost of professional service fees werewas primarily
due to the expansion of our professional services staff. Cost of professional service fees
as a percentage of professional service fee revenues increased as a result of
reduced utilization of our staff due to year 2000 concerns of potential clients.
We anticipate that cost of professional service fees will increase in dollar
amount in future periods as professional service fee revenues increase.
Operating Expenses
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, bonuses, commissions and travel and promotional expenses.
Sales and marketing expenses increased to $5.7$6.2 million for the three months
ended December 31, 1999June 30, 2000 from $5.0$5.3 million for the three months ended December
31, 1998,June 30, 1999,
representing 59.0%54.0% and 52.0%50.2% of total revenues for thesesuch periods, respectively.
SalesThis increase reflects the expansion of a direct field sales force and marketing expenses increased to $16.2 million for the
nine months ended December 31, 1999 from $13.7 million for the nine months ended
December 31, 1998, representing 56.5% and 54.3% of total revenues for these
periods, respectively. These increases in sales and marketing expenses in dollar
amount reflect the
hiring of additional sales and marketing personnel and, expandedto a lesser extent, an
increase in promotional activities. Sales and marketing expenses increased as a
percentage of total revenues primarily due to slower revenue growth during the
three and nine months ended December 31, 1999. We anticipate that sales and
marketing expenses will increase in dollar amount in future periods.
Product development. Product development expenses consist primarily of
development personnel compensation and related costs associated with the
development of new products, the enhancement of existing products, quality
assurance and testing. Product development expenses increased to $1.5$1.6 million
for the three months ended December 31, 1999June 30, 2000 from $1.0$1.2 million for the threesthree months
ended December 31, 1998,June 30, 1999, representing 15.1%13.9% and 10.9%11.1% of total revenues for thesesuch
periods, respectively. Product development expenses increased to $3.9
million for the nine months ended December 31, 1999 from $3.2 million for the
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nine months ended December 31, 1998, representing 13.5% and 12.8% of total
revenues for these periods, respectively. These increases in dollar amount wereThis increase was due to expenses associated with the
development of new products and the hiring of additional personnel. We anticipate that we will continue to devote
substantial resources to product development efforts and that product
development expenses will increase in dollar amount in future periods. To date,
all productProduct
development costs have beenare expensed as incurred.
General and administrative. General and administrative expenses consist
primarily of salaries of executive, financial, human resources and information
services personnel as well as outside professional fees. General and
administrative expenses increased to $1.2 million for the three months ended
December 31, 1999June 30, 2000 from $0.9 million$941,000 for the three months ended December 31,
1998,June 30, 1999,
representing 12.0%10.9% and 9.0% of total revenues for thesesuch periods, respectively.
General and administrative expenses increased to $3.2 million for
the nine months ended December 31, 1999 from $2.3 million for the nine months
ended December 31, 1998, representing 11.3% and 9.3% of total revenues for these
periods, respectively. These increasesThis increase in dollar amount werewas primarily due to increased staffing and
related expenses necessary to manage and support the expansion of operations.
General and administrative expenses increased as a
percentage of total revenues primarily due to slower revenue growth during the
three and nine months ended December 31, 1999. We anticipate that general and
administrative expenses will increase in dollar amount in the future as a result
of increased personnel and infrastructure costs necessary to support the
expansion of operations.
Other Income
Other income for the periods ended December 31, 1999 and 1998 consistedconsists primarily of interest incomeearnings from investments and sales of
securities, net of any interest expense. Other income increased to $0.4 million$429,000 for
the three months ended December 31, 1999June 30, 2000 from $23,000$98,000 for the three months ended
December 31, 1998. OtherJune 30, 1999. The increase in other income increased to $0.9 million for
the nine months ended December 31, 1999 from $54,000 for the nine months ended
December 31, 1998. These increases wereis primarily due to interestearnings on the
investment ofproceeds from the proceeds of ourCompany's initial public offering of common stock which
closed on July 6, 1999.in fiscal 2000.
Provision for Income Taxes
Income taxes increaseddecreased to $0.2 million$100,000 for the three months ended December
31, 1999June 30, 2000
from $50,000$115,000 for the three months ended December 31, 1998. For the nine
months ended December 31,June 30, 1999, income taxes increased to $0.5 million from
$135,000 for the nine months ended December 31, 1998. These increases were primarily due to a reductionlower
foreign income taxes paid which could not be realized as tax credits in the
deferred tax asset as a result of the larger
lossUnited States due to our consolidated losses from operations.
Liquidity and Capital Resources
Historically, we have funded operations primarilyTo date, the Company has financed its business through cash provided by
operations, the sale of equity securities and bank borrowings. Operating
activities used cash of $3.1$311,000 for the three months ended June 30, 2000 and
$1.5 million for the ninethree months ended December 31, 1999
and provided cash of $2.6 million for the nine months ended December 31, 1998.June 30, 1999. This decrease in cash
from operating activitiesused in operations was due primarily to increased
accounts receivable, decreased accounts payable and a netthe loss of $2.9 million
partiallyin the quarter ended June 30,
2000 offset by an increase in deferred revenue.accounts payable.
Investing activities provided cash of $5.6 million for the three months
ended June 30, 2000 and used cash of $26.4 million and $0.2 million$280,000 for the ninethree months ended December 31, 1999June
30, 1999. The cash provided by financing activities for the three months ended
June 30, 2000 was related to the purchase and 1998, respectively.maturing of marketable securities.
The principal use of cash in investing activities for the nine months ended December 31, 1999 was the
investment of the proceeds from our initial public offering andfor capital expenditures
related to the acquisition of computer equipment and furniture required to
support the expansion of our operations.
The principal use of cash
in investing activities for the nine months ended December 31, 1998 was capital
expenditures related to the acquisition of computer equipment and furniture
required to support the expansion of our operations.
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Financing activities provided cash of $24.6 million$289,000 and used cash of $0.3
million$26,000 in
the ninethree months ended December 31,June 30, 2000 and 1999, and 1998, respectively. For the ninethree
months ended December 31, 1999,June 30, 2000, cash provided by financing activities consisted
primarily of the receipt of proceeds from our initial public offering.the exercise of stock options and the
purchase of stock under the employee stock purchase plan. For the ninethree months
ended December 31, 1998,June 30, 1999, cash used by financing activities consisted primarily of
long-term debt repayment and payments under capitalized lease obligations and the receipt of proceeds from the exercise of stock options.obligations.
Our sources of liquidity at December 31, 1999June 30, 2000 consisted principally of cash and
marketable securities of $30.2$30.0 million. Cash equivalents are comprised
primarily of investment-grade commercial paper with varying terms of three
months or less. The Company intends to continue to review potential
acquisitions and business alliances that it believes would enhance its growth or
profitability. We believe that current cash, cash equivalents, and marketable
securities, and the funds generated from our operations, existing cash and marketable securitiesif any, will be
sufficient to fund operations for at least the next twelve months.
Year 2000
Prior to January 2000, we evaluated our business and operational systems to
ensure readiness for the year 2000. As a result, we believe that all mission
critical software and hardware was assessed, and if necessary, remedied to be
ready for the year 2000. All mission critical hardware and software has
continued to function beyond January 1, 2000 without interruption. As the year
2000 progresses, however, we may experience problems associated with the year
2000 that have not yet been discovered. We are continuing to monitor both our
internal systems and transactions with customers and suppliers for any
indications of year 2000 related problems. As of February 10, 2000, we had
incurred external costs of approximately $65,000 related to year 2000 readiness,
including testing, analysis and purchase of hardware and software upgrades. We
believe this to be the overall cost of our year 2000 readiness project, however,
there can be no assurance that final costs will not exceed this level.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 established methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. SFAS No. 133 will be
effective for us in April 2001. We are currently reviewing the potential impact
of this accounting standard.
Item 3. Quantitative and Qualitative Disclosure About Market Risks
There have beenwere no material changes in our market risk during the three and
nine months ended
December 31, 1999 from that set forth on page 25 of the
Registration Statement under the heading "Quantitative and Qualitative
Disclosure About Market Risks."June 30, 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any material legal proceedings.
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Item 2. Changes in Securities and Use of Proceeds
Our registration statement, filed on Form S-1 under the Securities Act
(File No. 333-77223), for the initial public offering of our common stock became
effective June 29, 1999. We have invested the net proceeds from the offering of
approximately $24.4 million in marketable securities pending the use of such
proceeds. We expect to use the net offering proceeds for general corporate
purposes, including the expansion of our direct sales force, product development
and working capital. A portion of the proceeds may also be used to acquire
businesses or technologies that are complementary to ours. There are no current
agreements with respect to any material acquisitions.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On December 31, 1999, we entered into a licensing agreement with IntraNet
Solutions(R), Inc. pursuant to which we have the exclusive right to sell
IntraNet Solutions' Xpedio product line on the AS/400 platform and non-exclusive
rights to sell the Xpedio product line on the NT and UNIX platforms. This
licensing agreement enables us to extend our product line into the enterprise
information portal market by integrating the Xpedio product line with our
ShowCase STRATEGY product suite.None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 -- License and Distribution Agreement, dated as of
December 31, 1999, by and between ShowCase Corporation
and IntraNet Solutions Inc.*
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K:
The Company did not file any Current Report on Form 8-K during the
quarter ended December 31, 1999.
----------
* Confidential information has been omitted from such Exhibit and filed
separately with the Commission pursuant to a confidential treatment
request under Rule 24b-2 of the Exchange Act.
-13-None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SHOWCASE CORPORATION
Date: February 11,August 7, 2000 By: /s/ Craig W. Allen
--------------------------------------------------------
Craig W. Allen
Chief Financial Officer
(Duly authorized officer and
principal financial and
accounting officer)
EXHIBIT INDEX
Page
----
10.1 License and Distribution Agreement, dated as of December 31, 1999,
by and between ShowCase Corporation and IntraNet Solutions Inc.*-------------
27.1 Financial Data Schedule
- -----------
* Confidential information has been omitted from such Exhibit and filed
separately with the Commission pursuant to a confidential treatment
request under Rule 24b-2 of the Exchange Act.