SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
GENTIA SOFTWARE PLC
Tuition House
St George's Road
Wimbledon
London SW19 4EU
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
82- N.A.
Page 1 of 16 Pages
Exhibit Index Appears on Page 12
GENTIA SOFTWARE PLC
FORM 6-K
TABLE OF CONTENTS
Page
Financial Information:
Condensed Consolidated Balance Sheets as of December 31, 1999 (unaudited)
and December 31, 1998 (audited) 3
Condensed Consolidated Statements of Operations for the three months and twelve
months ended December 31, 1999 (unaudited) and 1998 (audited) 4
Condensed Consolidated Statements of Cash Flows for the twelve months
ended December 31, 1999 (unaudited) and 1998 (audited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Management's Discussion and Analysis of Financial Condition and Results of Operations. 7-11
Exhibit Index 12
Exhibit A. Fourth Quarter Press Release 13
2
GENTIA SOFTWARE PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31 DECEMBER 31
1999 1998
------------- -------------
(UNAUDITED) (AUDITED)
(IN THOUSANDS)
US$ US$
ASSETS
Current assets:
Cash and cash equivalents............................... $2,968 $5,314
Accounts receivable, net of allowances $ 3,457
(Dec 31, 1998 - $3,801)................ 7,757 10,565
Prepaid expenses and other current assets............... 559 1,363
Tax recoverable......................................... - 212
------------- -------------
Total current assets............................................... $11,284 $17,454
Property and equipment, net.................................... 1,153 2,192
Purchased software, net of amortization of $609
(Dec 31, 1998 - $25)....................................... 2,000 2,585
Goodwill on acquisition, net of amortization of $2,286
(Dec 31, 1998 - $1,764).................................... 3,831 4,317
------------- -------------
Total assets....................................................... $18,268 $26,548
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of lease obligations.................... $46 $78
Accounts payable........................................ 2,784 2,203
Accrued liabilities..................................... 2,624 3,778
Deferred revenues....................................... 3,259 4,754
Other accounts payable.................................. 1,289 1,766
Short-term loans........................................ 4,442 -
------------- -------------
Total current liabilities.......................................... $14,444 $12,579
Non current liabilities:
Long-term portion of lease obligations................... 121 59
------------- -------------
Total Liabilities $14,565 $12,638
Shareholders' equity:
Ordinary shares.......................................... 2,481 2,445
Additional paid-in capital............................... 29,009 28,881
Retained (deficit)....................................... (26,695) (16,837)
Cumulative translation adjustment........................ (1,092) (579)
------------- -------------
Total shareholders' equity.......................................... $3,703 $13,910
------------- -------------
Total liabilities and shareholders' equity.......................... $18,268 $26,548
============= =============
See accompanying notes
3
GENTIA SOFTWARE PLC
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------------------- -------------------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1999 1998 1999 1998
----------- ------------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED)
US$ US$ US$ US$
Revenues:
License.............................. $3,013 $4,097 $10,433 $16,173
Services and other................... 3,072 3,772 13,682 13,359
----------- ------------- ------------ ------------
6,085 7,869 24,115 29,532
Cost of revenues:
License.............................. 396 810 1,971 1,809
Services and other................... 1,275 2,433 7,716 8,400
----------- ------------- ------------ ------------
1,671 3,243 9,687 10,209
Gross profit.............................. 4,414 4,626 14,428 19,323
Operating expenses:
Sales and marketing.................. 2,242 7,079 12,812 19,720
Research and development............. 1,115 1,646 5,197 6,831
General and administrative........... 689 1,158 3,335 4,367
Purchased research and development... - 1,037 - 1,037
Restructuring costs.................. - 2,869 1,876 2,869
Goodwill amortization................ 261 213 1,105 596
----------- ------------- ------------ ------------
Total operating expenses.......... 4,307 14,002 24,325 35,420
Income / (loss) from operations........... 107 (9,376) (9,897) (16,097)
Interest (expense) / income............... (30) 76 39 681
----------- ------------- ------------ ------------
Income / (loss) before provision for income
taxes................................. 77 (9,300) (9,858) (15,416)
Provision for income taxes - (185) - (185)
----------- ------------- ------------ ------------
Net income / (loss)....................... $77 ($9,485) ($9,858) ($15,601)
=========== ============= ============ ============
Basic income / (loss) per share........... $0.01 ($0.93) ($0.96) ($1.57)
Diluted income / (loss) per share......... $0.01 ($0.93) ($0.96) ($1.57)
Shares used to compute basic EPS.......... 10,252 10,178 10,222 9,950
Shares used to compute diluted EPS........ 14,083 10,178 10,222 9,950
See accompanying notes
4
GENTIA SOFTWARE PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWELVE MONTHS ENDED
---------------------- -- ----------------------
DECEMBER 31, DECEMBER 31,
1999 1998
---------------------- ----------------------
(IN THOUSANDS)
US$ US$
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)........................................................... ($9,858) ($15,601)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Depreciation................................................... 882 991
Goodwill amortization.......................................... 1,105 1,329
In-process research and development............................ - 1,037
Loss on disposal of assets..................................... 3 -
Loss on disposal of subsidiary................................. 2 -
Changes in operating assets and liabilities:
Accounts receivable............................................ 3,152 (4,789)
Provision for bad debts........................................ (344) 1,982
Prepaid expenses, recoverable taxes and other assets........... 1,016 346
Accounts payable............................................... 581 460
Accrued liabilities and other accounts payable................. (1,631) 3,340
Deferred revenues.............................................. (1,459) 1,124
----------------- ----------------------
Net cash (used in) operating activities.............................. (6,551) (9,781)
----------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of acquisition................................................ - (4,827)
Proceeds on sale of property and equipment......................... 87 118
Proceeds on sale of subsidiary..................................... 202 -
Purchases of property and equipment................................ (390) (1,248)
----------------- ----------------------
Net cash used in investing activities................................ (101) (5,957)
----------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds on shares issued....................................... 164 620
Short-term loan acquired............................................ 4,442 -
Generation (repayment) of capital lease
obligations....................................................... 30 (77)
----------------- ----------------------
Net cash provided by financing activities............................ 4,636 546
----------------- ----------------------
Effect of exchange rate changes on cash............................ (330) 177
----------------- ----------------------
Net (decrease) in cash........................................... (2,346) (15,018)
Cash at beginning of period........................................ 5,314 20,332
----------------- ----------------------
Cash at end of period.............................................. $2,968 $5,314
================= ======================
See accompanying notes
5
GENTIA SOFTWARE PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Gentia Software plc (the "Company") is incorporated in England and Wales. The
Company is a leading supplier of analytical applications that enable clients to
maximize their competitive position through enterprise-wide deployment of
strategic management and predictive decision making solutions.
BASIS OF PRESENTATION
The consolidated financial statements are stated in United States dollars and
are prepared under United States generally accepted accounting principles.
INTERIM FINANCIAL INFORMATION
The financial information at December 31, 1999 and the results of operations
for the three months and twelve months ended December 31, 1999 are unaudited,
but include all adjustments which the Company considers necessary for a fair
presentation of the financial position at such date and the operating results
and cash flows for those periods. Results for the three month period ended
December 31, 1999 are not necessarily indicative of results that may be
expected in the future. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with United States
generally accepted accounting principles have been condensed or omitted
pursuant to the Securities and Exchange Commission Rules and Regulations. In
accordance with SOP 98-1, the Company has capitalized computer software
obtained for internal use.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements consolidate the accounts of the Company
and its wholly and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
FOREIGN EXCHANGE
The consolidated balance sheets of the Company and its foreign subsidiaries are
translated from their respective functional currencies to United States dollars
at period-end exchange rates and the statements of operations and cash flows at
average exchange rates for the relevant periods. Gains and losses resulting from
translation are accumulated as a separate component of shareholders' equity. Net
gains and losses resulting from foreign exchange transactions, which are not
material in any of the reporting periods, are included in the consolidated
statement of operations.
PER SHARE INFORMATION
Net income per share information is computed based on the weighted average
number of shares outstanding, as described in FAS 128.
2 LITIGATION
On January 25, 2000, the Company announced with Hyperion Solutions Corporation
that they had settled their patent lawsuit, which originated in April 1996. As a
result of the settlement, the Company has agreed to remove from its software
products the ability to select the number of dense dimensions that can be
employed in its databases, and will instead provide a pre-set default value. The
Company will supply software to its customers that will bring existing
installed-base applications into compliance with the terms of this settlement.
Other terms of the agreement are confidential.
From the knowledge the Company has about how its current customer base uses the
Company's products and services, the Company has concluded that the terms of the
settlement should have little or no impact. Customers using the Company's
software and services to implement business strategy, track operational
performance or build custom applications should not be compromized. The
settlement is not expected to affect the Company's financial results for the
most recent quarter or the fiscal year.
All legal costs associated with the litigation have been written off as
incurred.
6
GENTIA SOFTWARE PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND TWELVE
MONTHS ENDED DECEMBER 31, 1999 AND 1998
THREE MONTHS ENDED DECEMBER 31, 1999 AND THREE MONTHS ENDED DECEMBER 31, 1998.
REVENUES
Revenues were $6.1 million in the three months ended December 31, 1999, a
decrease of approximately 22.7% compared to revenues of $7.9 million for the
three months ended December 31, 1998. The Company has now achieved four
consecutive quarters of $6.0 million total revenue. The decrease is attributed
to both a decline in license revenue and services sales in the three months
ended December 31, 1999. License revenues were $3.0 million in the three months
ended December 31, 1999, a decrease of 26.8% compared to license revenues of
$4.1 million for the three months ended December 31, 1998. The decrease in
license revenue is a result of the Company's global restructuring program within
world-wide sales, which commenced in December 1998. License revenues were
however up 9% for the three months ended December 31, 1999 compared to the three
months ended September 30, 1999.
Services and other revenues were $3.1 million in the three months ended December
31, 1999 a decrease of approximately 18.6% compared to $3.8 million for the
three months ended December 31, 1998. The decrease can be attributed to the sale
of the South African operation in June 1999 and the Australian operation in
August 1999. This decline was in line with our expectations and is a result of
the full quarter effects of the sale of the Australian operation combined with
the impact of additional vacation due to the millennium. Services and other
revenue comprised 50.4% of total revenues for the three months ended December
31, 1999, compared to 47.9% for the three months ended December 31, 1998. The
change is attributable to a decrease in license revenue sales relative to total
revenue.
GROSS PROFIT
Gross profit was $4.4 million or 72.5% of revenues for the three months ended
December 31, 1999, compared to $4.6 million or 58.8% revenues for the three
months ended December 31, 1998. The increase in gross margin is attributed to
the improved gross margins achieved on license revenue. Gross margins on license
revenue increased from 80.2% for the three months ended December 31, 1998 to
86.9% for the same period in 1999. The increase is attributed to the change in
the sales mix from channel sales towards direct sales. The sales mix is variable
and not representative of what maybe achieved in future quarters.
Margins on service and other revenues increased to 58.5% for the three months
ended December 31, 1999, compared to 35.5% for the same period in 1998. The
increase can be attributed to improved utilization of our consulting group as
well as the cost savings made from the changes to our support services.
SALES AND MARKETING
Sales and marketing costs were $2.2 million in the three months ended December
31, 1999 compared to $7.1 million in the three months ended December 31, 1998.
The sales and marketing costs for the three months ended December 31, 1998
included an allowance for doubtful debts of $2.0 million. Excluding the
allowance for doubtful debts, sales and marketing expenditure has decreased by
$2.9 million. The decrease in expenditure is attributed to the strategic actions
taken through the restructure program. The cost savings are attributed to the
elimination of duplicated resources, centralization of corporate functions and
the sale of the Australian and South African operations. The Company has
increased the sales staff by over 25% in the three months ended December 31,
1999. The full cost effect of this increase in head count will be reflected in
the first quarter of 2000.
RESEARCH AND DEVELOPMENT
Research and development costs were $1.1 million in the three months ended
December 31, 1999, lower than the $1.6 million recorded in the three months
ended December 31, 1998. The decrease in research and development costs can
be attributed to the costs savings as a result of a reduction in legal costs
relating to the Arbour dispute and the consolidation of research facilities.
The current research and development organization continues to focus on
building the analytical applications that surround the Scorecard combined
with developing our new Customer Relationship Analytics application suite.
The Company's research and development expenditure is predominantly incurred
in pounds sterling.
7
GENERAL AND ADMINISTRATIVE
General and administrative costs were $0.7 million in the three months ended
December 31, 1999, compared to $1.2 million for the three months ended December
31, 1998. The reduction in costs can be attributed to the centralization of the
finance function in the United Kingdom with significant savings being made
through the closure of the facilities and termination of regional staff.
OTHER INCOME
Other income reduced from $76,000 in the three months ended December 31,1998 to
an expense of $30,000 for the three months ended December 31, 1999. The interest
incurred relates to the current short term finance that will be converted to
equity on completion of the successful filing of the F-3 registration.
8
GENTIA SOFTWARE PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND TWELVE
MONTHS ENDED DECEMBER 31, 1999 AND 1998
TWELVE MONTHS ENDED DECEMBER 31, 1999 AND TWELVE MONTHS ENDED DECEMBER 31, 1998.
REVENUES
Revenues were $24.1 million in the twelve months ended December 31, 1999, a
decrease of approximately 18.3% compared to revenues of $29.5 million for the
twelve months ended December 31, 1998. The decrease in revenues is due to the
decrease in license revenue sales in 1999. License revenues were $10.4 million
in the twelve months ended December 31, 1999, a decrease of 35.5% compared to
license revenues of $16.2 million for the twelve months ended December 31, 1998.
The Company has achieved constant revenue levels in 1999 averaging $6.0 million
per quarter in 1999, down from $7.4 million average in 1998. The decrease in
license revenue sales is a result of the Company's global restructuring program
within world-wide sales, which commenced in December 1998.
Services and other revenues were $13.7 million in the twelve months ended
December 31, 1999 up from $13.4 million for the twelve months ended December 31,
1998. Last years first and second quarter results did not include the full
benefit of the acquisition of the TCMS business that was acquired in late May
1998, which is partially offset through the reduced revenue as a result of the
sale of the South African and Australian operations. Services and other revenue
comprised 56.7% of total revenues for the twelve months ended December 31,1999,
compared to 45.2% for the twelve months ended December 31, 1998. The change is
attributable to a decrease in license revenue sales relative to total revenue.
GROSS PROFIT
Gross profit was $14.4 million or 59.8% of revenues for the twelve months ended
December 31, 1999, compared to $19.3 million or 65.4% of revenues for the twelve
months ended December 31, 1998. The decrease in gross profit margin is
attributed to the lower margin percentage achieved on license revenue sales.
Gross profit margins on license revenue decreased from 88.8% for the twelve
months ended December 31, 1998 to 81.1% for the twelve months ended December 31,
1999. This decrease is attributable to a shift in sales mix towards channel
sales in the twelve months ended December 31, 1999.
Gross profit margin on service and other revenue increased from 37.1% for the
twelve months ended December 31, 1998 to 43.6% for the same period in 1999. The
increase can be attributed to improved utilization of our consulting group as
well as the cost savings made from the changes to our support services.
SALES AND MARKETING
Sales and marketing costs were $12.8 million in the twelve months ended
December 31, 1999, a decrease of 35.0% compared to $19.7 million in the
twelve months ended December 31, 1998. Excluding the provision for doubtful
accounts of $1.7 million made in the three months ended June 30, 1999 the
sales and marketing expenditure is reduced to $11.1 million for the twelve
months ended December 31, 1999. Excluding the $2.0 million provision for
doubtful accounts made in December 1998, sales and marketing costs have
decreased by $6.6 million in 1999 for the twelve month period ended December
31, 1999. The decrease in expenditure is attributed to the strategic actions
taken through the restructure program. The cost savings are attributed to the
elimination of duplicated resources, centralization of corporate functions
and the sale of the Australian and South African operation. The Company has
increased the sales staff by over 25% in the three months ended December 31,
1999. The full cost effect of this increase in head count will be reflected
in the first quarter of 2000.
RESEARCH AND DEVELOPMENT
Research and development costs were $5.2 million in the twelve months ended
December 31, 1999, lower than the $6.8 million recorded in the twelve months
ended December 31, 1998. The decrease in research and development costs can
be attributed to the reduction in legal costs relating to the Arbour dispute
and consolidation of facilities. The Company's research and development
expenditure is predominantly incurred in pounds sterling.
GENERAL AND ADMINISTRATIVE
9
General and administrative costs were $3.3 million in the twelve months ended
December 31, 1999, compared to $4.4 million for the twelve months ended December
31, 1998. The 25% reduction in costs can be attributed to the centralization of
the finance function in the United Kingdom with significant savings being made
through the closure of the facilities and termination of staff.
OTHER INCOME
Other income was $39,000 in the twelve months ended December 31, 1999 compared
to $681,000 in the twelve months ended December 31,1998. Other income was
primarily interest income earned on bank deposits. The decrease can be
attributed to the decline in cash balances and the current interest expense on
short term loans.
RESTRUCTURING COSTS AND PROVISION
In three months ended December 30, 1998 the Company wrote off $2.9 million in
restructuring costs. The restructure cost comprised employee severance of
$618,000, goodwill impairment of $733,000 and facility closure costs and costs
to exit certain businesses of $1.5 million. In the three months ended March 30,
1999 the Company provided a further $500,000 for employee severance costs. In
the three months ended June 30, 1999 the Company provided a further $1.4 million
restructure charge comprised of $1.1 million for employee severance and $300,000
for facility closure costs.
Of the provisions made $414,000 remains of the severance provision and $49,000
of the facility closure provision. The provision will be fully utilised during
2000.
NASDAQ LISTING
The Company has been notified that it will remain on the Nasdaq National Market
System.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had cash and cash equivalents of $3.0 million
compared to $5.3 million at December 31, 1998. In the twelve months ended
December 31, 1999 the Company's operating activities consumed cash of $6.6
million compared to $9.8 million in the twelve months ended December 31, 1998.
Accounts receivable at December 31, 1999 were $7.8 million, a decrease of 26.4%
compared to $10.6 million at December 31, 1998. This decrease reflects the
improved accounts receivable days, lower levels of license revenue relative to
1998 and the additional provision of $1.7 million for doubtful receivables made
in the three months ended June 30, 1999.
Investing activities utilized $101,000 in the twelve months ended December 31,
1999 compared to the utilization of $6.0 million in the twelve months ended
December 31, 1998. Investing activities primarily represent the proceeds on the
sale of the subsidiaries of $202,000 and the purchase of assets of $390,000. The
additional investing activity in 1998 related to the purchase of Compression
Science Limited and TCMS Limited.
Financing activities generated $4.6 million in the year ended December 31, 1999
compared to $543,000 in the year ended December 31, 1998. The increase in funds
from financing activities primarily represents short-term loans of $4.4
million. These loans are currently being converted to equity through the
relevant registration process.
Loan agreements totalling an aggregate of US$2.0 million have been entered into
by the Company with each of Robin W.I.Lodge, Marshall Services, Alan McGahan,
and Rhone Venture Capital Limited. These loans are convertible into shares of
the Company at a price of US$2.25 per share, in addition warrants are to be
issued in connection with the loan agreements for the number of shares into
which the loan may be converted multiplied by 1.25, at the same conversion
price.
Loan agreements totalling an aggregate of US$2.0 million have been entered into
by the Company with each of Finsbury Technology Trust PLC, Pulsar Technology
Fund, Grange Noominees Ltd. and Banco Nominees (Guernsey) Limited. These loans
are convertible into shares of the Company at a price of US$4.65 per share, in
addition warrants are to be issued in connection with the loan agreements for
the number of shares into which the loan may be converted multiplied by 0.5, at
the same conversion price.
The Company's ability to satisfy its cash requirements for the remainder of the
year is dependent on meeting certain projected revenue targets, cash collection
targets, raising additional sources of short term finance and containing
operating expenses. The Company has, at times in the past, been unable to meet
similar targets, particularly license revenue targets. There can be no
10
assurance that the Company will meet its projected revenue targets and the
failure of the Company to do so (or to obtain additional sources of financing,
which may not be available on suitable terms to the Company, if at all) will
have a material adverse effect on the Company's business and financial condition
and the value of the Company's American Depositary Shares.
This Report contains "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of
historical facts, included in this Report (or incorporated herein by reference)
regarding the Company's financial position and business strategy may constitute
forward-looking statements. Although the Company believes that the expectations
reflected in, and the assumptions underlying, such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. Important factors that could cause actual results to differ
materially from the Company's expectations are included in the documents filed
by the Company with the Securities and Exchange Commission, including the
matters contained in the caption "Business Factors" in the Company's most recent
Annual Report on Form 20-F. In light of the foregoing, readers of this Report
are cautioned not to place undue reliance on the forward-looking statements
contained or incorporated by reference herein.
The information contained in Exhibit 1 hereto, consisting of the registrant's
unaudited financial statements for the year ended December 31, 1999, has been
distributed to its security holders and is furnished to the Commission pursuant
to Rule 13a-16 under the Securities Exchange Act of 1934, as amended (the
"Act"). This report and the information furnished herewith shall not be deemed
to be "filed" for the purposes of Section 18 of the Act or otherwise subject to
the liabilities of that section.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the Report to be signed on its behalf by the
undersigned, thereunto duly authorised.
GENTIA SOFTWARE plc
By: /s/ NICHOLAS P.S. BRAY
-----------------------
Nicholas P. S. Bray
Chief Financial Officer
Date: March 6, 1999
11
EXHIBIT INDEX
Page
Exhibit A Fourth Quarter Press Release - (1999) 13
12
EXHIBIT A
CONTACT:
Nick Bray AT THE FINANCIAL RELATIONS BOARD:
Chief Financial Officer For Analyst Info: Julie Creed (312) 640-6724
Gentia Software For General Info: Kelly Lofts (212) 661-8030
+44 181 971 4000 For Media Info: Jason Rando (212) 661-8030
GENTIA REPORTS FOURTH QUARTER AND 1999 RESULTS
GENTIA ANNOUNCES SECOND CONSECUTIVE PROFITABLE QUARTER
LONDON, JANUARY 27, 2000 -- Gentia Software (Nasdaq: GNTI), a leading provider
of intelligent analytical applications for enterprise-wide deployment, today
reported its results for the fourth quarter, ended December 31, 1999. The
Company is pleased to announce a second consecutive profitable quarter since the
new Senior Management Team was appointed in May of 1999.
Gentia reported net income of $0.1 million, or $0.01 per share, for the fourth
quarter of 1999. This compares with net income of $0.1 million, or $0.01 per
share, for the third quarter of 1999 and a net loss of $9.5 million, or ($0.93)
per share, in the same quarter of 1998. The Company also reported a net loss of
$9.9 million, or ($0.96) per share, for the 1999 year, compared with a net loss
of $15.6 million, or ($1.57) per share, for the year ending December 31, 1998.
The full year losses are composed of exceptional charges and operating losses
incurred during the first and second quarters.
Revenues for the fourth quarter of 1999 totaled $6.1 million, compared with $6.1
million for the third quarter of 1999 and $7.9 million for the same quarter a
year ago. For the twelve months ended December 31, 1999 revenues totaled $24.1
million compared with revenues of $29.5 million in 1998. While revenue growth
was flat during the third and fourth quarters of 1999, license fees increased by
9% compared to the third quarter. The Company has been focused during the fourth
quarter on significantly increasing its operational capability to develop,
market and sell its applications in the future.
Gentia accomplishments during quarter four included:
- - The forming of a partnership with IBM (NYSE: IBM), the largest global
provider of business intelligence consulting and services, to make
Gentia's flagship Balanced Scorecard application available to IBM's
customers as part of IBM's Business Intelligence (BI) Services for
Balanced Scorecard.
- - Continued growth in its Scorecard business following the restructure of
the Company. Gentia continued to close significant new Scorecard
business in quarter four. Notable new customer deals include Siemens,
Ares Serono, Hewlett Packard, DHL, and Proctor & Gamble BV.
- - Completed initial development of a new suite of "Customer Relationship
Analytics" applications during the quarter. The new CRA applications
complement front office CRM systems and are the first applications to
benefit from the Company's Intelligent Applications strategy. This
strategy has led to the creation of an additional company division and
more than tripled the resources devoted wholly to development of new
and existing Intelligent Applications for sale in 2000.
- - Expanding the Company's Internet presence. The award winning
WWW.BALANCEDSCORECARD.COM membership topped 10,000 during quarter four.
Gentia also launched the redesigned WWW.GENTIA.COM web site. The
Company leveraged improved Internet presence in its marketing campaigns
to increase market awareness and drive lead generation, while
maintaining manageable costs.
- - In preparation for growth in 2000, the Company increased the capacity
of the worldwide sales, marketing and channels operations by over 25%
in the fourth quarter. As part of this expansion initiative the Company
appointed Jeff Bernard as Vice President for North America and also to
the Senior Management Team.
- - The reduction of total ongoing costs to $6.0 million per quarter during
the fourth quarter of 1999, compared with $11.3 million for the same
quarter in 1998, while opening new regional offices in the United
States, Germany and France.
"We are pleased to have achieved the quarter four and year-end expectations."
commented Nick Bray, Chief Financial Officer. "In the fourth quarter, we focused
on developing our sales operation, while maintaining tight control of costs. Our
success resulted in revenues of $6.1 million for the quarter and net income of
$0.1 million or $0.01 per share. The revenue shows a 9% growth in license fees
during the fourth quarter to $3.0 million. The reduction in service revenue
compared with the third quarter of 1999 is attributable to the sale of our South
Africa and Australia operations to distributors."
"This has been a year of two halves for Gentia," commented Steve Fluin, Chief
Executive Officer. "The new management team assembled mid-year took the decision
to rapidly restructure, resulting in our return to profitability in the second
two quarters of the
13
year and positioning Gentia for strong revenue growth in 2000. We are pleased to
have achieved a second consecutive profitable quarter despite a $10.0 million
cumulative loss at mid-year. The Company has been extremely successful in
meeting its short-term goals and Gentia is now poised for growth in 2000. We
plan to launch a new suite of applications in the first quarter for the CRM
marketplace. To prepare for this new launch our fourth quarter focus was largely
to expand our sales operation in support of planned growth, with the largest
expansion occurring in the US sales and marketing operation." Fluin continued,
"We also expect further growth in our Balanced Scorecard business during 2000.
We are pleased with the progress we have made with our Scorecard business
following the restructure."
The Company confirms that it will remain listed on the NASDAQ national market
system. Gentia also confirms it has settled the patent lawsuit with Hyperion
Solutions, which originated in April 1996, with no impact on the Company's
financial results. Gentia continues to market and sell its Balanced Scorecard
and Performance Management applications. The Company will also launch new
applications for the CRM market during 2000. For more information about the
Company and its applications visit WWW.GENTIA.COM.
ABOUT THE COMPANY
Gentia Software (Nasdaq: GNTI) is a leading supplier of intelligent analytical
applications that sustain and improve business performance. Its integrated
portfolio of software applications, incorporating the expertise of world-class
consulting partners, supports strategy management, performance measurement and
operational analysis. For more information, visit www.gentia.com or call:
1-888-4GENTIA (United States), +44 (0) 208 971 4000 (Europe).
THIS NEWS RELEASE CONTAINS STATEMENTS OF A FORWARD-LOOKING NATURE RELATING TO
THE FINANCIAL PERFORMANCE OF GENTIA SOFTWARE. SUCH STATEMENTS ARE BASED UPON THE
INFORMATION AVAILABLE TO MANAGEMENT AT THIS TIME, AND THEY NECESSARILY INVOLVE
RISK BECAUSE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM CURRENT EXPECTATIONS.
AMONG THE MANY FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THOSE SET
FORTH IN THE COMPANY'S FORWARD-LOOKING STATEMENTS ARE CHANGES IN GENERAL
ECONOMIC CONDITIONS, ACTIONS TAKEN BY CUSTOMERS OR COMPETITORS, AND THE RECEIPT
OF MORE OR FEWER ORDERS THAN EXPECTED.
14
GENTIA SOFTWARE PLC
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------------------- --------------------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1999 1998 1999 1998
------------- ---- ----------- ---- ------------- ------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED)
US$ US$ US$ US$
Revenues:
License $3,013 $4,097 $10,433 $16,173
Services and other 3,072 3,772 13,682 13,359
----------- ------------- ------------ ------------
6,085 7,869 24,115 29,532
Cost of revenues:
License 396 810 1,971 1,809
Services and other 1,275 2,433 7,716 8,400
----------- ------------- ------------ ------------
1,671 3,243 9,687 10,209
Gross profit 4,414 4,626 14,428 19,323
Operating expenses:
Sales and marketing 2,242 7,079 12,812 19,720
Research and development 1,115 1,646 5,197 6,831
General and administrative 689 1,158 3,335 4,367
Purchased research and development - 1,037 - 1,037
Restructuring costs - 2,869 1,876 2,869
Goodwill amortization 261 213 1,105 596
----------- ------------- ------------ ------------
Total operating expenses 4,307 14,002 24,325 35,420
Income / (loss) from operations 107 (9,376) (9,897) (16,097)
Interest (expense) / income (30) 76 39 681
----------- ------------- ------------ ------------
Income / (loss) before provision for income
taxes 77 (9,300) (9,858) (15,416)
Provision for income taxes - (185) - (185)
----------- ------------- ------------ ------------
Net income / (loss) $77 ($9,485) ($9,858) ($15,601)
=========== ============= ============ ============
Basic income / (loss) per share $0.01 ($0.93) ($0.96) ($1.57)
Diluted income / (loss) per share $0.01 ($0.93) ($0.96) ($1.57)
Shares used to compute basic EPS 10,252 10,178 10,222 9,950
Shares used to compute diluted EPS 14,083 10,178 10,222 9,950
15
GENTIA SOFTWARE PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31 DECEMBER 31
1999 1998
---------------- ----------------
(UNAUDITED) (AUDITED)
(IN THOUSANDS)
US$ US$
ASSETS
Current assets:
Cash and cash equivalents $2,968 $5,314
Accounts receivable, net of allowances $ 3,457
( Dec 31, 1998 - $3,801) 7,757 10,565
Prepaid expenses and other current assets 559 1,363
Tax recoverable - 212
------------- -------------
Total current assets $11,284 $17,454
Property and equipment, net 1,153 2,192
Purchased software, net of amortization of $609
(Dec 31, 1998 - $25) 2,000 2,585
Goodwill on acquisition, net of amortization of $2,286
(Dec 31, 1998 - $1,764) 3,831 4,317
------------ -------------
Total assets $18,268 $26,548
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of lease obligations $46 $78
Accounts payable 2,784 2,203
Accrued liabilities 2,624 3,778
Deferred revenues 3,259 4,754
Other accounts payable 1,289 1,766
Short Term loans 4,442 -
------------- -------------
Total current liabilities $14,444 $12,579
Non current liabilities:
Long-term portion of lease obligations 121 59
------------- -------------
Total Liabilities $14,565 $12,638
Shareholders' equity:
Ordinary shares 2,481 2,445
Additional paid-in capital 29,009 28,881
Retained (deficit) (26,695) (16,837)
Cumulative translation adjustment (1,092) (579)
------------- -------------
Total shareholders' equity $3,703 $13,910
------------- -------------
Total liabilities and shareholders' equity $18,268 $26,548
============= =============
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