GXS Reports Preliminary Second Quarter 2013 Financial Results
Gaithersburg, MD — July 21, 2013 — GXS, a leading provider of B2B integration services, today announced certain preliminary financial results for the second quarter ended June 30, 2013 and updated financial guidance for the third quarter and full year 2013. All results in this release are preliminary and remain subject to the completion of normal quarter-end accounting procedures and adjustments, which could result in changes to these preliminary results.
PRELIMINARY FINANCIAL HIGHLIGHTS FROM THE QUARTER
| · | Total Revenue: $120.8 million, flat versus 2Q12, up 2% adjusting for currency |
| · | Managed Services Revenue: $48.4 million, up 10% versus 2Q12, up 12% adjusting for currency |
| · | Messaging Services Revenue: $50.3 million, down 6% versus 2Q12, down 4% adjusting for currency |
| · | Adjusted EBITDA: $37.2 million, up 2% versus 2Q12, up 4% adjusting for currency |
| · | Adjusted EBITDA Margin: 30.8%, up 53 basis points versus 2Q12, up 78 basis points adjusting for currency |
| · | Net Loss: $2.4 million, improved by $3.3 million versus 2Q12 |
| · | Minimum Contracted Value (MCV): $52.4 million, down 21% versus 2Q12 (the all-time record high MCV quarter for GXS) and up 11% versus 1Q13 |
| · | Results at the high end of Total Revenue guidance and above the range of Adjusted EBITDA guidance for 2Q13 |
PRELIMINARY FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2013
Preliminary Revenue
Total revenue for 2Q13 is expected to be $120.8 million, unchanged as compared to 2Q12 (up 2%, adjusting for currency) and at the high end of our guidance of $120 to $121 million. Managed Services revenue is expected to be $48.4 million in 2Q13, up 10% as compared to $43.8 million in 2Q12 (up 12%, adjusting for currency) and Messaging Services revenue is expected to be $50.3 million in 2Q13, down 6% from $53.7 million in 2Q12 (down 4%, adjusting for currency). B2B Software and Services, Data Synchronization, and Custom Outsourcing revenues are expected to be $22.1 million in the aggregate for 2Q13, down 5% as compared to $23.3 million in 2Q12 (down 4%, adjusting for currency).
| | | Second Quarter | | | | |
| | | 2013 | | | 2012 | | | % change | |
| (in $ millions) | | preliminary | | | | |
| Revenue | | | | | | | | | |
| Managed Services | | $ | 48.4 | | | $ | 43.8 | | | | 10 | % |
| Messaging Services | | $ | 50.3 | | | $ | 53.7 | | | | -6 | % |
| B2B Software and Services, Data Synchronization, and Custom Outsourcing | | $ | 22.1 | | | $ | 23.3 | | | | -5 | % |
| Total Revenue | | $ | 120.8 | | | $ | 120.8 | | | | 0 | % |
| | | | | | | | | | | | | |
| Note: Some calculations may differ due to rounding | | | | | | | | | | | | |
Preliminary Expenses and Net Loss
Cost of revenues, sales and marketing, and general and administrative expenses for 2Q13 are expected to be $100.1 million, as compared to $100.3 million in 2Q12. Operating income in 2Q13 is expected to be $20.6 million, as compared to $20.5 million in 2Q12. Net interest expense and net other expense is expected to be ($22.3) million for 2Q13, as compared to ($24.8) million in 2Q12, resulting in loss before income taxes of ($1.6) million and ($4.3) million in 2Q13 and 2Q12, respectively. Net loss is expected to be ($2.4) million in 2Q13 after $0.7 million of expected income tax expense, as compared to ($5.7) million in 2Q12 after $1.4 million of income tax expense.
| | | Second Quarter | |
| | | 2013 | | | 2012 | |
| (in $ millions) | | preliminary | | | | |
| Expenses | | | | | | |
| Cost of revenues | | $ | 65.7 | | | $ | 66.9 | |
| Sales and marketing | | $ | 17.1 | | | $ | 16.5 | |
| General and administrative | | $ | 17.3 | | | $ | 17.0 | |
| Total expenses | | $ | 100.1 | | | $ | 100.3 | |
| | | | | | | | | |
| Operating income | | $ | 20.6 | | | $ | 20.5 | |
| | | | | | | | | |
| Other expenses | | | | | | | | |
| Interest expense, net | | $ | ( 21.0 | ) | | $ | ( 21.1 | ) |
| Other expense, net | | $ | ( 1.3 | ) | | $ | ( 3.7 | ) |
| Total other expenses | | $ | ( 22.3 | ) | | $ | ( 24.8 | ) |
| | | | | | | | | |
| Loss before income taxes | | $ | ( 1.6 | ) | | $ | ( 4.3 | ) |
| Income tax expense | | $ | 0.7 | | | $ | 1.4 | |
| Net loss | | $ | ( 2.4 | ) | | $ | ( 5.7 | ) |
| | | | | | | | | |
| Note: Some calculations may differ due to rounding | | | | | | | | |
Preliminary Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation and amortization, and certain other charges (“Adjusted EBITDA”, a non-GAAP measure) for 2Q13 is expected to be $37.2 million, up 2% as compared to $36.6 million in 2Q12 (up 4% when adjusted for currency) and higher than second quarter guidance of $34 to $35 million. Based upon these expected results, Adjusted EBITDA margin would be 30.8% in 2Q13, 53 basis points higher than in 2Q12 (78 basis points higher when adjusted for currency).
Management relies upon Adjusted EBITDA as a primary measure to review and assess operating performance of its business and management team. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as (i) an alternative to net income (loss), (ii) a measure of operating income, or cash flows from operating, investing and financing activities, or (iii) a measure of liquidity. Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures presented by other companies. The table below reconciles net loss to Adjusted EBITDA for the periods presented.
| | | Second Quarter | |
| | | 2013 | | | 2012 | |
| (in $ millions) | | preliminary | |
| Net loss | | $ | ( 2.4 | ) | | $ | ( 5.7 | ) |
| Adjustments: | | | | | | | | |
| Income tax expense | | $ | 0.7 | | | $ | 1.4 | |
| Interest expense, net | | $ | 21.0 | | | $ | 21.1 | |
| Depreciation and amortization | | $ | 14.1 | | | $ | 14.4 | |
| Stock compensation expense | | $ | 0.3 | | | $ | 0.2 | |
| Other expense, net | | $ | 1.3 | | | $ | 3.7 | |
| Restructuring charges | | $ | 1.1 | | | $ | 0.6 | |
| Management fees | | $ | 1.0 | | | $ | 1.0 | |
| Total adjustments | | $ | 39.6 | | | $ | 42.3 | |
| Adjusted EBITDA | | $ | 37.2 | | | $ | 36.6 | |
| | | | | | | | | |
| Note: Some calculations may differ due to rounding | | | | | |
PRELIMINARY LIQUIDITY AND CAPITAL EXPENDITURES
Cash and cash equivalents are expected to total $37.3 million at the end of 2Q13, as compared to $17.0 million at the end of 2Q12. There were no amounts outstanding under the revolving credit facility at the end of 2Q13 or at the end of 2Q12. At the end of 2Q13 and 2Q12, $10.9 million and $11.7 million, respectively, of the $50 million of revolving credit facility capacity were pledged as security for certain letters of credit. Therefore, total available cash liquidity, including cash and cash equivalents and total revolving credit facility capacity less outstanding borrowings and letters of credit secured by the revolving credit facility, is expected to be $76.4 million and was $55.3 million at the end of 2Q13 and 2Q12, respectively.
Capital expenditures (“CAPEX”) are expected to be $10.7 million in 2Q13, as compared to $9.2 million in 2Q12.
CUSTOMER ACQUISITION ACTIVITY
Total MCV for 2Q13 was $52.4 million, down 21% as compared to $66.7 million in 2Q12 (the all-time record high quarter for the company) and up 11% as compared to $47.1 million in 1Q13. Sales activity in 2Q13 continued to be focused primarily on new Managed Services contracts which comprised 79% of total MCV in the quarter as compared to 82% in 2Q12 and flat with 1Q13. Messaging contracts comprised 10% and 8% of total MCV in 2Q13 and 2Q12, respectively.
MCV is the incremental future minimum committed revenue of new sales agreements signed in the current period by customers. If the new contract signed is to replace an existing revenue stream, the MCV is adjusted to reflect only the incremental value from the sale. The MCV calculations are not reflected or recorded within the condensed consolidated financial statements. MCV is not a measure of financial condition or financial performance under GAAP and should not be considered as an alternative to deferred income or revenues, or as a measure of financial condition or operating performance.
FINANCIAL GUIDANCE
The company is providing financial guidance for 3Q13 and updating its FY13 financial guidance previously provided on May 14, 2013. For 3Q13, Revenue and Adjusted EBITDA are expected to be in the range of $121 to $122 million and $38 to $39 million, respectively. This represents Revenue change of (0.2%) to 0.6% as compared to 3Q12 (1.4% to 2.2% adjusted for current forecasted currency impact) and Adjusted EBITDA growth of 2.0% to 4.7% as compared to 3Q12 (2.5% to 5.2% adjusted for current forecasted currency impact). This implies an Adjusted EBITDA margin of between 31.1% and 32.2%, an increase of 44 to 153 basis points over the Adjusted EBITDA margin in 3Q12.
For FY13, Revenue and Adjusted EBITDA is expected to be in the range of $486 to $489 million and $147 to $150 million, respectively. This represents Revenue change of (0.3%) to 0.3% as compared to FY12 (1.5% to 2.1% adjusted for current forecasted currency impact) and Adjusted EBITDA growth of 0.4% to 2.4% as compared to FY12 (2.0% to 4.0% adjusted for current forecasted currency impact). CAPEX and MCV remain unchanged at $40 to $45 million, and $220 to $230 million, respectively.
Achieving this guidance is subject to a number of risks and uncertainties as described in the Company’s filings with the Securities and Exchange Commission (“SEC”). As a result, there can be no assurance that such guidance can be achieved.
| | | Third Quarter 2013 | | | Full Year 2013 | |
| (in $ millions) | | | | | | | | | | | | | | |
| Revenue | | $ | 121.0 | | to | | $ | 122.0 | | | $ | 486.0 | | to | | $ | 489.0 | |
| Adjusted EBITDA | | $ | 38.0 | | to | | $ | 39.0 | | | $ | 147.0 | | to | | $ | 150.0 | |
| CAPEX | | | n/a | | | | | n/a | | | $ | 40 | | to | | $ | 45 | |
| MCV | | | n/a | | | | | n/a | | | $ | 220 | | to | | $ | 230 | |
| Third Quarter and Full Year 2013 Adjusted EBITDA Guidance - Reconciliation to GAAP |
| ($ millions) | | Third Quarter 2013 | | Full Year 2013 |
| Adjusted EBITDA | | $ 38.0 | to | $ 39.0 | | $ 147.0 | to | $ 150.0 |
| Income tax expense | | ($ 1.0) | to | ($ 0.8) | | ($ 3.5) | to | ($ 3.1) |
| Interest expense, net | ($ 21.2) | to | ($ 21.1) | | ($ 84.5) | to | ($ 84.3) |
| Depreciation and amortization | ($ 14.2) | to | ($ 14.0) | | ($ 55.9) | to | ($ 55.5) |
| Stock compensation expense | ($ 0.3) | to | ($ 0.2) | | ($ 1.2) | to | ($ 1.0) |
| Other income, net | | ($ 1.2) | to | ($ 0.8) | | ($ 6.1) | to | ($ 5.3) |
| Restructuring charges | ($ 0.3) | to | ($ 0.2) | | ($ 1.8) | to | ($ 1.6) |
| Management fees | | | ($ 1.0) | | | | ($ 4.0) | |
| Total adjustments | | ($ 39.2) | to | ($ 38.1) | | ($ 157.1) | to | ($ 154.9) |
| Net income (loss) | | ($ 1.2) | to | $ 0.9 | | ($ 10.1) | to | ($ 4.9) |
ABOUT GXS
GXS is a leading B2B integration services provider and operates the world’s largest integration cloud, GXS Trading Grid®. Our software and services help more than 550,000 businesses, including 22 of the top 25 supply chains, extend their partner networks, automate receiving processes, manage electronic payments, and improve supply chain visibility. GXS Managed Services, our unique approach to improving B2B integration operations, combines GXS Trading Grid® with our process orchestration services and global team to manage a company’s multi-enterprise processes. Based in Gaithersburg, Maryland, GXS has direct operations in 20 countries, employing more than 2,800 professionals. You can access our public filings with the SEC at http://www.sec.gov/edgar.shtml.
FORWARD-LOOKING STATEMENTS
This press release may contain "forward-looking statements." All statements, other than statements of historical facts, that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future, including the discussion under “Financial Guidance,” are forward-looking statements. These forward-looking statements are affected by risks, uncertainties and assumptions, including but not limited to those set forth in the company's public filings with the SEC, including its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Accordingly, actual results or outcomes may differ materially from those expressed in the forward-looking statements. You should not place undue reliance on these statements and the company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise.
NON-GAAP MEASURES
This press release contains certain supplemental measures of performance (including the Supplemental Financial Information – Unaudited) that are not required by, or presented in accordance with, GAAP. Such measures should not be considered as alternatives to any GAAP measures.
INVESTOR RELATIONS:
Gregg Clevenger
Executive Vice President and Chief Financial Officer
GXS Worldwide, Inc.
301-340-5188
gregg.clevenger@gxs.com
MEDIA RELATIONS:
Robin Lane
PR Manager
GXS Worldwide, Inc.
301-340-4277
robin.lane@gxs.com
SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED
Pro Forma Constant Currency2
| | | | | | | | | |
| | 2009 | 2010 |
| in $ millions | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q |
| Messaging | $ 66.1 | $ 65.6 | $ 63.7 | $ 64.4 | $ 60.3 | $ 60.7 | $ 59.3 | $ 60.2 |
| Managed Services | 26.2 | 28.5 | 31.7 | 29.8 | 28.5 | 32.8 | 31.6 | 34.1 |
| Datasync | 10.1 | 9.9 | 9.7 | 9.1 | 9.4 | 9.0 | 8.7 | 7.9 |
| B2B Software and Services | 12.5 | 12.7 | 12.5 | 13.2 | 12.0 | 13.0 | 11.7 | 15.0 |
| Custom | 6.4 | 6.5 | 6.8 | 6.8 | 6.0 | 6.2 | 5.1 | 5.2 |
| Pro Forma Constant Currency Revenue | $ 121.3 | $ 123.0 | $ 124.5 | $ 123.4 | $ 116.1 | $ 121.7 | $ 116.5 | $ 122.5 |
| Pro Forma Adjustments | - | - | - | - | - | - | - | - |
| Currency Impact | (4.2) | ($ 3.0) | $ 0.3 | $ 1.9 | $ 0.6 | ($ 1.2) | ($ 0.9) | $ 1.4 |
| Reported Revenue | $ 117.2 | $ 120.0 | $ 124.9 | $ 125.2 | $ 116.7 | $ 120.5 | $ 115.6 | $ 123.9 |
| | | | | | | | | |
| | 2011 | 2012 |
| in $ millions | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q |
| Messaging | $ 56.5 | $ 55.8 | $ 56.1 | $ 54.9 | $ 53.3 | $ 53.1 | $ 52.3 | $ 53.9 |
| Managed Services | 32.5 | 35.8 | 38.9 | 42.7 | 41.5 | 43.9 | 45.3 | 48.8 |
| Datasync | 8.1 | 8.3 | 8.5 | 8.5 | 8.5 | 8.0 | 7.9 | 7.8 |
| B2B Software and Services | 11.6 | 11.9 | 11.6 | 12.7 | 10.7 | 11.5 | 12.3 | 12.1 |
| Custom | 4.8 | 4.3 | 4.1 | 4.1 | 3.8 | 3.7 | 3.8 | 3.4 |
| Pro Forma Constant Currency Revenue | $ 113.5 | $ 116.1 | $ 119.1 | $ 122.9 | $ 117.9 | $ 120.3 | $ 121.6 | $ 126.0 |
| Pro Forma Adjustments | - | - | - | - | - | - | - | - |
| Currency Impact | 1.4 | 3.1 | 3.7 | 1.4 | 1.1 | 0.5 | (0.3) | 0.5 |
| Reported Revenue | $ 115.0 | $ 119.3 | $ 122.8 | $ 124.3 | $ 118.9 | $ 120.8 | $ 121.3 | $ 126.5 |
| | | | | | | | | |
| | 2013 | | | | | | |
| in $ millions | 1Q | 2Q3 | | | | | | |
| Messaging | $ 51.5 | $ 51.2 | | | | | | |
| Managed Services | 45.2 | 49.1 | | | | | | |
| Datasync | 8.0 | 7.8 | | | | | | |
| B2B Software and Services | 10.8 | 11.0 | | | | | | |
| Custom | 3.4 | 3.5 | | | | | | |
| Pro Forma Constant Currency Revenue | $ 118.9 | $ 122.5 | | | | | | |
| Pro Forma Adjustments | - | - | | | | | | |
| Currency Impact | (0.2) | (1.7) | | | | | | |
| Reported Revenue | $ 118.7 | $ 120.8 | | | | | | |
| Notes: |
| |
| 1. All figures are unaudited and some may differ due to rounding. |
| |
| 2. Pro forma Constant Currency Revenue includes revenue from Inovis and Rollstream as if the companies had been combined with GXS for all periods presented and excludes the impact of any deferred revenue adjustments from accounting for the purchase of Inovis and Rollstream (together, the "Pro Forma Adjustments"). The difference between (a) the sum of Reported Revenue and the Pro Forma Adjustments as calculated in each period using the actual currency rates in each period, and (b) the sum of Reported Revenue and the Pro Forma Adjustments calculated using the constant currency rates in each period shown in the following table (the "Constant Currency Rates - 2013") is equal to the currency impact in each period (the "Currency Impact"). Reported Revenue is equal to the sum of (i) Pro Forma Constant Currency Revenue, (ii) Pro Forma Adjustments, and (iii) Currency Impact. |
| |
| 3. 2Q 2013 figures are preliminary. |
| Constant Currency Rates – 2013 |
| Currency | Currency per US$ |
| Australian Dollar | 1.0348 |
| Brazilian Real | 0.4764 |
| British Pound | 1.6213 |
| Canadian Dollar | 1.0100 |
| Chinese Renminbi | 0.1600 |
| Danish Krone | 0.1740 |
| Euro | 1.3166 |
| Hong Kong Dollar | 0.1290 |
| Indian Rupee | 0.0185 |
| Indonesian Rupiah | 0.0001 |
| Japanese Yen | 0.0115 |
| Malaysian Ringgit | 0.3273 |
| Mexican Peso | 0.0767 |
| New Taiwan Dollar | 0.0343 |
| New Zealand Dollar | 0.8198 |
| Norwegian Krone | 0.1760 |
| Philippine Peso | 0.0243 |
| Singapore Dollar | 0.8177 |
| South Korea Won | 0.0009 |
| Swedish Krona | 0.1504 |
| Swiss Franc | 1.0917 |
| Thai Baht | 0.0326 |
