FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-
EXE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 751719817
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
8787 Stemmons Freeway
Dallas, Texas 75247
(Address including zip code of principal executive offices)
(214) 775-6000
(Registrant'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 Securities Exchange Act of 1934 during
the preceding 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 NO X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 16, 2000.
Common Stock, $0.01 par value, 42,982,550 shares outstanding
1
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 20
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 23
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF AS OF
DECEMBER 31, JUNE 30,
1999 2000
------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 8,932,073 $ 9,753,708
Accounts receivable, net of allowance for doubtful accounts,
returns and adjustments of approximately $5,534,000 and
$7,534,000 at December 31, 1999 and June 30, 2000, respectively 30,617,523 32,638,881
Other receivables and advances 757,140 254,828
Prepaid and other current assets 1,717,855 3,170,753
------------ ------------
Total current assets 42,024,591 45,818,170
Property and equipment, net 9,996,453 8,758,699
Other assets 1,002,844 1,126,675
Intangible assets, net of amortization of $10,701,000 and $12,981,000
at December 31, 1999 and June 30, 2000, respectively 14,646,410 12,451,986
------------ ------------
Total assets $ 67,670,298 $ 68,155,530
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,260,922 $ 7,548,073
Accrued expenses 8,673,369 9,491,956
Accrued payroll and benefits 3,459,531 3,240,047
Deferred revenue 14,115,533 12,147,605
Revolving credit line and current portion of long-term debt 9,595,201 12,508,857
------------ ------------
Total current liabilities 41,104,556 44,936,538
Long-term debt, net of current portion 5,333,136 5,201,993
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, Series A through D, $.01 par value:
shares authorized - 22,000,000; shares issued and outstanding -
17,687,562 at December 31, 1999 and June 30, 2000;
aggregate liquidation value - $52,000,000 at December 31,
1999 and June 30, 2000 52,000,000 52,000,000
Common stock, Class A voting, $.01 par value: shares authorized -
75,000,000; shares issued - 16,766,529 at December 31, 1999 and
June 30, 2000 167,665 167,665
Common stock, Class B non-voting, $.01 par value: shares authorized -
12,000,000; shares issued - 380,022 and 479,055 at December 31,
1999 and June 30, 2000, respectively 3,800 4,791
Additional paid-in capital 26,355,416 31,989,154
Treasury stock, at cost, 924,071 shares and 999,483 shares of Class
A and B at December 31, 1999 and June 30, 2000, respectively (3,208,912) (3,431,464)
Accumulated deficit (52,345,661) (57,843,110)
Deferred compensation (973,260) (4,478,313)
Other comprehensive loss (766,442) (391,724)
------------ ------------
Total stockholders' equity 21,232,606 18,016,999
------------ ------------
Total liabilities and stockholders' equity $ 67,670,298 $ 68,155,530
============ ============
SEE ACCOMPANYING NOTES.
3
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1999 2000 1999 2000
Revenue:
Software license $ 4,191,211 $ 8,701,167 $ 10,582,870 $ 16,596,642
Services and maintenance 16,525,330 17,631,991 33,844,024 33,666,301
Resale software and equipment 2,271,697 1,744,930 4,176,400 3,293,332
------------ ------------ ------------ ------------
Total revenue 22,988,238 28,078,088 48,603,294 53,556,275
Costs and expenses:
Cost of software licenses 42,663 87,012 105,090 165,967
Cost of services and maintenance 14,259,628 14,280,374 27,053,206 27,386,089
Cost of resale software and equipment 1,908,508 1,444,020 3,373,718 2,781,831
Sales and marketing 6,257,492 6,520,536 12,715,129 12,492,959
Research and development 3,486,442 2,277,450 7,495,364 4,131,413
General and administrative 4,143,069 3,419,835 7,740,751 6,782,620
Amortization of intangibles 1,204,668 1,139,829 2,409,334 2,279,658
Warrant and stock compensation expense
allocated to:
Cost of services and maintenance -- 195,616 -- 498,947
Sales and marketing 186,600 475,732 213,150 976,992
Research and development -- 5,486 -- 7,772
General and administrative 26,550 181,887 53,100 439,773
------------ ------------ ------------ ------------
Total costs and expenses 31,515,620 30,027,777 61,158,842 57,944,021
------------ ------------ ------------ ------------
Operating loss (8,527,382) (1,949,689) (12,555,548) (4,387,746)
Other income (expense):
Interest income 12,651 117,846 18,366 223,165
Interest expense (456,217) (524,365) (758,380) (936,173)
Other (195,326) (253,373) (193,168) (396,695)
------------ ------------ ------------ ------------
Total other expense (638,892) (659,892) (933,182) (1,109,703)
------------ ------------ ------------ ------------
Loss before taxes (9,166,274) (2,609,581) (13,488,730) (5,497,449)
Income tax -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (9,166,274) $ (2,609,581) $(13,488,730) $ (5,497,449)
============ ============ ============ ============
Net loss per common share - basic and diluted $ (0.57) $ (0.16) $ (0.84) $ (0.34)
============ ============ ============ ============
Weighted average number of common shares
outstanding 16,072,514 16,266,531 16,032,737 16,261,059
============ ============ ============ ============
SEE ACCOMPANYING NOTES.
4
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
--------------------------------
1999 2000
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(13,488,730) $ (5,497,449)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 4,195,558 4,335,388
Provision for losses on receivables 2,571,169 4,379,857
Amortization of deferred compensation 106,200 1,096,072
Deferred income taxes (35,688) --
Issuance of warrants for services 160,050 827,412
Changes in operating assets and liabilities:
Accounts receivable (9,253,996) (6,401,215)
Other receivables and advances 90,708 502,312
Prepaids and other assets (9,387) (1,452,898)
Other long-term assets (38,407) (123,831)
Accounts payable 1,788,261 2,287,151
Accrued payroll and benefits 895,254 (219,484)
Deferred revenue and accrual for acquired contract obligations 3,142,749 (1,967,928)
Income tax payable 457,964 124,087
Accrued expenses 1,635,289 694,500
Other (128,597) 301,516
--------------------------------
Net cash used in operating activities (7,911,603) (1,114,510)
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property and equipment (4,987,918) (830,007)
Net proceeds from sale of fixed assets 48,089 --
--------------------------------
Net cash used in investing activities (4,939,829) (830,007)
5
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
--------------------------------
1999 2000
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of common stock $ 302,310 $ 206,191
Payments on long-term debt (4,948,541) (131,143)
Proceeds from long-term debt 5,000,000 --
Proceeds on revolving line of credit 14,072,158 2,913,656
Purchase of treasury stock (35,295) (222,552)
--------------------------------
Net cash provided by financing activities 14,390,632 2,766,152
--------------------------------
Net increase in cash and cash equivalents 1,539,200 821,635
Cash and cash equivalents at beginning of period 779,896 8,932,073
--------------------------------
Cash and cash equivalents at end of period $ 2,319,096 $ 9,753,708
================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 779,197 $ 905,775
================================
Cash paid for income taxes $ -- $ 1,968
================================
SEE ACCOMPANYING NOTES.
6
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of EXE Technologies, Inc. and our wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for fiscal year
end financial statements. In the opinion of management, all adjustments
(consisting of normally recurring entries) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 2000 are not necessarily indicative of the results that
may be expected for any other interim period or for the year ending December 31,
2000. These statements should be read in conjunction with the Company's audited
financial statements for the year ended December 31, 1999.
2. EARNINGS PER SHARE
The Company computes net income (loss) per share in accordance with the
provisions of SFAS No. 128, "Earnings per Share." Basic net income (loss) per
common share is computed using the weighted average number of shares of common
stock outstanding during each period. Diluted net income (loss) per common share
is computed using the weighted average number of shares of common stock
outstanding during each period and common equivalent shares consisting of
preferred stock and stock options (using the treasury stock method), if
dilutive. Diluted loss per share is the same as basic loss per share for all
periods presented since the potentially dilutive effect of 5,313,212 shares of
common stock resulting from the exercise of stock options, 865,000 shares of
common stock resulting from the exercise of stock warrants and the conversion of
17,687,562 shares of Convertible Preferred Stock, Series A through D, are
anti-dilutive for all periods presented.
7
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. COMPREHENSIVE LOSS
Comprehensive loss includes foreign currency translation gains and losses. The
following table sets forth the calculation of comprehensive loss for the periods
presented:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 2000 1999 2000
Net loss $(9,166,274) $(2,609,581) $(13,488,730) $(5,497,449)
Foreign currency translation gains
(losses) (34,499) 444,325 (240,392) 374,718
Total comprehensive loss $(9,200,773) $(2,165,256) $(13,729,122) $(5,122,731)
4. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective for quarters beginning after June
15, 2000. The Company does not currently utilize derivative financial
instruments. Therefore, the Company does not expect that the adoption of the new
statement will have a material impact on our results of operations, financial
position or liquidity.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The effective date of SAB 101 for the Company is the fourth quarter
of fiscal year 2000. The Company continues to evaluate the impact that SAB 101
will have on the timing of revenue recognition in future periods. Although
management is currently evaluating the impact, if any, of SAB 101, management
does not presently believe it will have a material impact on the Company's
results operations, financial position or liquidity.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation - An
Interpretation of APB Opinion No. 25". This interpretation clarifies the
definition of employee for purposes of applying APB 25, the criteria for
determining whether a plan qualifies as a noncompensatory plan, the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and the accounting for an exchange of stock compensation awards
in a business combination. This interpretation is effective July 1,
8
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
2000, but certain conclusions in this interpretation cover specific events that
occur after either December 15, 1998 or January 15, 2000. To the extent that
this interpretation covers events occurring during the period after December 15,
1998, or January 15, 2000, but before the effective date of July 1, 2000, the
effects of applying this interpretation are recognized on a prospective basis
from July 1, 2000. Although management is currently evaluating the impact, if
any, of this interpretation, management does not presently believe it will have
a material impact on the Company's results of operations, financial position, or
liquidity.
5. SEGMENTS
The Company is engaged in the design, development, marketing and support of
fulfillment, warehousing and distribution software for e-commerce and
traditional sales channels. All financial information is reviewed on a
consolidated basis with additional information by geographic region used to make
operating decisions and assess the results of the Company. The Company's
geographic information as of and for the three and six months ended June 30,
1999 and 2000 is as follows:
EUROPE
UNITED AND THE ASIA
STATES MIDDLE EAST PACIFIC ELIMINATIONS TOTAL
Three months ended June 30, 1999
Revenue $ 15,289,107 $ 4,100,123 $ 3,599,008 $ -- $ 22,988,238
Amortization of intangibles 1,204,668 -- -- -- 1,204,668
Warrant and stock
compensation expense 213,150 -- -- -- 213,150
Operating loss (6,829,676) (754,007) (943,699) -- (8,527,382)
Six months ended June 30, 1999
Revenue 33,686,133 8,431,661 6,485,500 -- 48,603,294
Amortization of intangibles 2,409,334 -- -- -- 2,409,334
Warrant and stock
compensation expense 266,250 -- -- -- 266,250
Operating loss (9,578,700) (1,148,884) (1,827,964) -- (12,555,548)
As of June 30, 1999
Property and equipment, net 9,471,908 929,764 1,311,900 -- 11,713,572
Total assets 60,478,898 5,854,057 2,359,815 (2,782,604) 65,910,166
9
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. SEGMENTS (CONTINUED)
EUROPE
UNITED AND THE ASIA
STATES MIDDLE EAST PACIFIC ELIMINATIONS TOTAL
Three months ended June 30, 2000
Revenue 17,062,292 5,387,573 5,628,223 -- 28,078,088
Amortization of intangibles 1,139,829 -- -- -- 1,139,829
Warrant and stock
compensation expense 858,721 -- -- -- 858,721
Operating loss (1,534,816) (903,276) 488,403 -- (1,949,689)
Six months ended June 30, 2000
Revenue 31,538,055 11,480,598 10,537,622 -- 53,556,275
Amortization of intangibles 2,279,658 -- -- -- 2,279,658
Warrant and stock
compensation expense 1,923,484 -- -- -- 1,923,484
Operating loss (3,814,043) (907,794) 334,091 -- (4,387,746)
As of June 30, 2000
Property and equipment, net 6,882,826 856,444 1,019,429 -- 8,758,699
Total assets 59,627,292 9,259,622 2,615,368 (3,346,752) 68,155,530
6. RESTRUCTURING
In August 1999, the Company implemented a restructuring plan to reduce costs and
improve operating efficiency. The Company recorded a pretax charge of $1,952,256
for its restructuring plan. The Company recorded liabilities associated with the
restructuring in the amounts of approximately $709,000 for severance and other
employee related costs for the termination of 97 services, sales, development
and administrative employees, $803,000 for the abandonment of certain leased
office space less estimated sublease rentals at the Company's North American and
Australian facilities, $179,000 for the abandonment of leased equipment and
$261,000 for the disposal of other fixed assets. The Company recorded
approximately $1,325,000 and $266,000 of cash charges against the original
restructuring reserve during 1999 and 2000, respectively. The remaining
liability at June 30, 2000 is approximately $361,000 and is expected to be paid
out through the end of 2003.
10
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. SUBSEQUENT EVENTS
The Company completed its initial public offering of 8.0 million shares of its
common stock pursuant to a Registration Statement on Form S-1 (Registration No.
333-35106) on August 9, 2000. Additionally, the underwriters exercised a portion
of their over-allotment option to purchase an additional 840,000 shares of the
Company's common stock, at $8.00 per share, on August 16, 2000. Total proceeds
from this offering, including the exercise of the over-allotment option, were
approximately $64.0 million, net of underwriting fees and estimated offering
expenses of approximately $6.7 million. The Company used a portion of these
proceeds to pay off its revolving line of credit and term loan.
As a result of the offering, all outstanding shares of Series A through D
preferred stock automatically converted into 17,687,562 shares of common
stock. Additionally, all Class A common stock was renamed to "common stock"
and all Class B common stock converted into shares of common stock on a
one-for-one basis as a result of closing the offering. The Company is now
authorized to issue 150,000,000 shares of common stock and 20,000,000 shares
of preferred stock.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
EXE Technologies, Inc. is a leading provider of fulfillment, warehousing
and distribution software for e-commerce and traditional distribution
channels. e-Commerce fulfillment, or e-fulfillment, is the process of
picking, configuring, packing, and shipping products ordered by customers
over the Internet. Our EXceed eFulfillment System (eFS) software allows
companies to use the Internet and traditional communication methods to
efficiently manage and control the flow of inventory throughout the supply
chain. Companies use our software to reduce distribution costs and increase
customer loyalty and satisfaction. We provide global service and support for
our software from established facilities in North America, Europe, the Middle
East, Asia, and Australia.
We derive our revenue from the sale of software licenses; product related
consulting, training, maintenance and support (collectively, "services and
maintenance" ); and the resale of hardware and software.
We recognize revenue under Statement of Position (SOP) No. 97-2,
"Software Revenue Recognition," as amended by SOP 98-9, "Software Revenue
Recognition With Respect To Certain Transactions." Under SOP No. 97-2,
software license revenue is recognized upon execution of a contract and
delivery of the software, provided that the license fee is fixed and
determinable; no significant production, modification or customization of the
software is required; vendor-specific objective evidence of fair value exists
to allow for the allocation of the total fee to elements of the arrangement;
and collection of the license fee is considered probable by management.
Maintenance revenue is recognized ratably over the term of the contract, which
is typically one year, and revenue from services is recognized as such
services are provided.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1999
REVENUE
TOTAL REVENUE. Total revenue increased by $5.1 million, or 22.1%, to
$28.1 million for the three months ended June 30, 2000, from $23.0 million
for the three months ended June 30, 1999. International revenue accounted for
39.2% of total revenue during the three months ended June 30, 2000 and 33.5%
of total revenue during the three months ended June 30, 1999. No single
customer accounted for more than 10.0% of total revenue during the three
months ended June 30, 2000 or 1999.
12
SOFTWARE LICENSE. Our license revenue increased $4.5 million, or 107.6%,
to $8.7 million for the three months ended June 30, 2000, from $4.2 million
for the three months ended June 30, 1999. This increase was due to continued
growth in the sales of our eFS and predecessor products. Sales of our eFS and
predecessor products increased by $4.7 million for the three months ended June
30, 2000, as compared to the three months ended June 30, 1999. This increase
was offset by a $0.2 million decline in sales from our EXceed 2000 warehouse
management system product. Software license revenue as a percentage of total
revenue was 31.0% for the three months ended June 30, 2000 versus 18.2% for
the three months ended June 30, 1999. Our eFS and predecessor products
accounted for 85.7% of total software license revenue during the three months
ended June 30, 2000 and 66.7% of total software license revenue during the
three months ended June 30, 1999.
SERVICES AND MAINTENANCE. Services and maintenance revenue increased $1.1
million, or 6.7%, to $17.6 million for the three months ended June 30, 2000
from $16.5 million for the three months ended June 30, 1999. Services and
maintenance revenue from our eFS and predecessor products increased $4.0
million, while services and maintenance revenue from our EXceed 2000 warehouse
management system declined $2.2 million for the three months ended June 30,
2000. Additionally, in January 2000 we sold our mainframe services and
maintenance practice in exchange for a royalty that will be received on future
revenue generated by these mainframe customers, resulting in a $1.1 million
decline in services and maintenance revenue for the three months ended June
30, 2000. Services and maintenance revenue as a percentage of total revenue
was 62.8% for the three months ended June 30, 2000 versus 71.9% for the three
months ended June 30, 1999. The decline was due to the increasing portion of
our revenue derived from our eFS products, which are more easily deployable
and require less services and maintenance personnel to install than our EXceed
2000 warehouse management system, and the disposition of our mainframe
business. Our eFS and predecessor products accounted for 55.4% of total
services and maintenance revenue for the three months ended June 30, 2000
versus 34.9% of total services and maintenance revenue for the three months
ended June 30, 1999.
RESALE SOFTWARE AND EQUIPMENT. Resale software and equipment revenue
decreased $0.5 million, or 23.2%, to $1.8 million for the three months ended
June 30, 2000, from $2.3 million for the three months ended June 30, 1999. The
decline reflects the continued shift in demand to our eFS products, which have
a lower opportunity for resale of software and equipment than provided by the
EXceed 2000 warehouse management system and mainframe products. Resale
software and equipment as a percentage of total revenue was 6.2% for the three
months ended June 30, 2000 and 9.9% for the three months ended June 30, 1999.
13
COSTS AND EXPENSES
COST OF SOFTWARE LICENSES. Cost of software licenses consists primarily
of the cost of royalties associated with tools used to develop our software
products and the cost of reproduction. Cost of software licenses represented
1.0% of software license revenue for the three months ended June 30, 2000 and
1999.
COST OF SERVICES AND MAINTENANCE. Cost of services and maintenance
consists primarily of salaries of professional staff, cost associated with
implementation, consulting, training services, hotline telephone support, new
releases of software, bug fixes and updated user documentation. Our cost of
services and maintenance was $14.3 million for the three months ended June 30,
2000 and 1999. As a percentage of services and maintenance revenue, cost of
services and maintenance decreased to 81.0% for the three months ended June
30, 2000, from 86.3% for the three months ended June 30, 1999. The decrease in
cost as a percentage of services and maintenance revenue was due to revenue
increasing while costs remained constant.
COST OF RESALE SOFTWARE AND EQUIPMENT. Cost of resale software and
equipment consists primarily of the costs of the software and hardware we
purchase to resell to our customers. Cost of resale software and equipment
decreased $0.5 million, or 24.3%, to $1.4 million for the three months ended
June 30, 2000, from $1.9 million for the three months ended June 30, 1999. The
decrease during the three months ended June 30, 2000 reflects lower volume of
resale software and equipment resulting from the continued shift in demand to
our eFS products. Our eFS products have a lower opportunity for resale of
software and equipment than our EXceed 2000 warehouse management system and
mainframe products. As a percentage of resale software and equipment revenue,
cost of resale software and equipment decreased to 82.8% for the three months
ended June 30, 2000, from 84.0% for the three months ended June 30, 1999.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions, bonuses, recruiting costs, travel, marketing materials
and trade shows. Sales and marketing expenses increased $0.3 million, or 4.2%,
to $6.5 million for the three months ended June 30, 2000, from $6.2 million
for the three months ended June 30, 1999. An increase in sales and marketing
expenses of $0.9 million was due to higher commissions resulting from higher
software license sales, as well as an increase in promotional activities
relating to the release of our eFS products. This increase was partially
offset by a $0.6 million reduction in sales and marketing staff and related
staff expenses. As a percentage of total revenue, sales and marketing expenses
decreased to 23.2% for the three months ended June 30, 2000, from 27.2% for
the three months ended June 30, 1999.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and other personnel-related costs for our product
development activities. Research
14
and development expenses decreased $1.2 million, or 34.7%, to $2.3 million for
the three months ended June 30, 2000, from $3.5 million for the three months
ended June 30, 1999. The decrease in research and development expenses was
related primarily to a reduction in the number of employees used to develop
our products. As a percentage of total revenue, research and development
expenses decreased to 8.1% for the three months ended June 30, 2000, from
15.2% for the three months ended June 30, 1999. This decline in spending for
the three months ended June 30, 2000 was due to the completion of the initial
releases and testing of the new eFS product core. We expect to continue to
invest in research and development activities to complete additional modules
and enhancements for the EXceed eFS Fulfill and EXceed eFS Collaborate Suites.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and other personnel-related costs of our finance, human
resources, information systems, administrative, legal and executive
departments, insurance costs and the costs associated with legal, accounting,
and other administrative services. General and administrative costs decreased
$0.7 million, or 17.5%, to $3.4 million for the three months ended June 30,
2000, from $4.1 million for the three months ended June 30, 1999. The decrease
in general and administrative expenses was due to a reduction in personnel
expenses and outside legal fees. As a percentage of total revenue, general and
administrative expenses declined to 12.2% for the three months ended June 30,
2000, from 18.0% for the three months ended June 30, 1999. We expect that as a
percentage of total revenue, our general and administrative expenses will
continue to decline because we believe that we have the infrastructure in
place to support our future growth.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles declined $0.1
million to $1.1 million for the three months ended June 30, 2000, from $1.2
million for the three months ended June 30, 1999. The amortization primarily
relates to intangibles acquired in connection with the acquisition of Dallas
Systems.
NON-CASH WARRANT AND STOCK COMPENSATION. Non-cash warrant and stock
compensation expense increased $0.7 million to $0.9 million for the three
months ended June 30, 2000, from $0.2 million for the three months ended June
30, 1999. An increase of $0.4 million was due to the amortization of deferred
compensation recorded in connection with stock options granted to employees
from October 1999 to June 2000. The deferred compensation recorded
represented the difference between the exercise price and the deemed fair
value of our Class B common stock on the date of grant of these options. The
deferred compensation recorded for options granted during the three months
ended June 30, 2000 was $0.4 million. The additional $0.3 million increase in
non-cash warrant and stock compensation expense for the three months ended
June 30, 2000 relates to warrants that were issued to purchase our Class B
common stock in connection with a sales and marketing agreement with an
independent third party.
OTHER INCOME (EXPENSE). Other income (expense) consists of gains and
losses from currency fluctuations, interest expense and loan cost amortization
on outstanding debt, offset
15
by interest income on short-term investments. Other expense was substantially
the same for the three months ended June 30, 2000 and 1999.
INCOME TAX. No income tax benefit was recorded during the three months
ended June 30, 2000 and 1999 due to the uncertainty of the timing and amount
of future taxable income.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999
REVENUE
TOTAL REVENUE. Total revenue increased by $5.0 million , or 10.2%, to
$53.6 million for the six months ended June 30, 2000, from $48.6 million for
the six months ended June 30, 1999. International revenue accounted for 41.1%
of total revenue during the six months ended June 30, 2000 and 30.7% of total
revenue during the six months ended June 30, 1999. No single customer
accounted for more than 10.0% of total revenue during the six months ended
June 30, 2000 or 1999.
SOFTWARE LICENSE. License revenue increased $6.0 million, or 56.8%, to
$16.6 million for the six months ended June 30, 2000, from $10.6 million for
the six months ended June 30, 1999. This increase was due to continued growth
in the sales of our eFS and predecessor products. Sales of our eFS and
predecessor products increased by $8.1 million for the six months ended June
30, 2000, as compared to the six months ended June 30, 1999. This increase was
offset by a $2.1 million decline in sales from our EXceed 2000 warehouse
management system product. Software license revenue as a percentage of total
revenue was 31.0% for the six months ended June 30, 2000 versus 21.8% for the
six months ended June 30, 1999. Our eFS and predecessor products accounted for
87.6% of total software license revenue during the six months ended June 30,
2000 and 61.1% of total software license revenue during the six months ended
June 30, 1999.
SERVICES AND MAINTENANCE. Services and maintenance revenue decreased $0.2
million, or 0.5%, to $33.7 million for the six months ended June 30, 2000 from
$33.9 million for the six months ended June 30, 1999. The decline was due to
the increasing portion of our revenue derived from our eFS products, which are
more easily deployable and require less services and maintenance personnel to
install than our EXceed 2000 warehouse management system, and the disposition
of a segment of our services business. Services and maintenance revenue from
our eFS and predecessor products increased $7.5 million, while services and
maintenance revenue from our EXceed 2000 warehouse management system declined
$6.1 million for the six months ended June 30, 2000. Additionally, in January
2000 we sold our mainframe services and maintenance practice in exchange for a
royalty that will be received on future revenue generated by these mainframe
customers, resulting in a $2.3 million decline in services and maintenance
revenue for the six months ended June 30, 2000. This decrease was partially
offset by an increase of $0.7 million in product related training for the same
time period. Services and maintenance revenue as a percentage of total revenue
was 62.9% for the
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six months ended June 30, 2000 versus 69.6% for the six months ended June 30,
1999. Our eFS and predecessor products accounted for 52.3% of total services
and maintenance revenue for the six months ended June 30, 2000 versus 30.0% of
total services and maintenance revenue for the six months ended June 30, 1999.
RESALE SOFTWARE AND EQUIPMENT. Resale software and equipment revenue
decreased $0.9 million, or 21.1%, to $3.3 million for the six months ended
June 30, 2000, from $4.2 million for the six months ended June 30, 1999. The
decline reflects the continued shift in demand to our eFS products, which have
a lower opportunity for resale of software and equipment than provided by the
EXceed 2000 warehouse management system and mainframe products. Resale
software and equipment as a percentage of total revenue was 6.1% for the six
months ended June 30, 2000 and 8.6% for the six months ended June 30, 1999.
COSTS AND EXPENSES
COST OF SOFTWARE LICENSES. Cost of software licenses represented 1.0% of
software license revenue for the six months ended June 30, 2000 and 1999.
COST OF SERVICES AND MAINTENANCE. Cost of services and maintenance
increased $0.3 million, or 1.2%, to $27.4 million for the six months ended
June 30, 2000, from $27.1 million for the six months ended June 30, 1999. The
increase in cost of services and maintenance was due to increased training and
use of implementation partners primarily related to our expansion in Japan,
Korea, and Europe. These cost increases were partially offset by a decrease in
services and maintenance personnel cost caused by the decline in sales of
licenses of the EXceed 2000 warehouse management system and from the
disposition of the mainframe services and maintenance practice in January
2000. As a percentage of services and maintenance revenue, cost of services
and maintenance increased to 81.3% for the six months ended June 30, 2000,
from 79.9% for the six months ended June 30, 1999.
COST OF RESALE SOFTWARE AND EQUIPMENT. Cost of resale software and
equipment decreased $0.6 million, or 17.5%, to $2.8 million for the six months
ended June 30, 2000, from $3.4 million for the six months ended June 30, 2000.
As a percentage of resale software and equipment revenue, cost of resale
software and equipment increased to 84.5% for the six months ended June 30,
2000, from 80.8% for the six months ended June 30, 1999. The increase in the
cost of resale software and equipment, as a percentage of resale software and
equipment revenue, was due to the shift in demand to our eFS products which
provide less opportunity for obtaining pricing discounts from suppliers of
software and equipment than the EXceed 2000 warehouse management system and
mainframe products provided.
SALES AND MARKETING. Sales and marketing expenses decreased $0.2 million,
or 1.7%, to $12.5 million for the six months ended June 30, 2000, from $12.7
million for the six months ended June 30, 1999. A decrease in sales and
marketing expenses of $2.0 million was due to a reduction in sales and
marketing staff and related expenses. This decrease was partially
17
offset by an increase in sales and marketing expenses of $1.8 million due to
higher commission expenses resulting from higher software license sales, as
well as an increase in promotional activities relating to the release of our
eFS products. As a percentage of total revenue, sales and marketing expenses
decreased to 23.3% for the six months ended June 30, 2000, from 26.2% for the
six months ended June 30, 1999.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased
$3.4 million, or 44.9%, to $4.1 million for the six months ended June 30,
2000, from $7.5 million for the six months ended June 30, 1999. The decrease
in research and development expenses was related primarily to a reduction in
the number of employees used to develop our products. As a percentage of total
revenue, research and development expenses decreased to 7.7% for the six
months ended June 30, 2000, from 15.4% for the six months ended June 30, 1999.
This decline in spending for the six months ended June 30, 2000 was due to the
completion of the initial releases and testing of the new eFS product core.
GENERAL AND ADMINISTRATIVE. General and administrative costs decreased
$1.0 million, or 12.4%, to $6.8 million for the six months ended June 30,
2000, from $7.8 million for the six months ended June 30, 1999. The decrease
in general and administrative expenses was due to a reduction in personnel
expenses and outside legal fees. As a percentage of total revenue, general and
administrative expenses declined to 12.7% for the six months ended June 30,
2000, from 15.9% for the six months ended June 30, 1999.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles declined $0.1
million to $2.3 million for the six months ended June 30, 2000, from $2.4
million for the six months ended June 30, 1999. The amortization primarily
relates to intangibles acquired in connection with the acquisition of Dallas
Systems.
NON-CASH WARRANT AND STOCK COMPENSATION. Non-cash warrant and stock
compensation expense increased $1.6 million to $1.9 million for the six
months ended June 30, 2000, from $0.3 million for the six months ended June
30, 1999. An increase of $1.0 million was due to the amortization of deferred
compensation recorded in connection with stock options granted to employees
between October 1999 and June 2000. The deferred compensation recorded
represented the difference between the exercise price and the deemed fair
value of our Class B common stock on the date of grant of these options. The
deferred compensation recorded for options granted during the six months
ended June 30, 2000 was $4.6 million. The additional $0.6 million increase in
non-cash warrant and stock compensation expense for the six months ended June
30, 2000 relates to warrants that were issued to purchase our Class B common
stock in connection with a sales and marketing agreement with an independent
third party.
OTHER INCOME (EXPENSE). Other expense increased $0.2 million to $1.1
million for the six months ended June 30, 2000, from $0.9 million for the six
months ended June 30, 1999. The increase in other expense is due primarily to
higher foreign currency transaction losses resulting from our international
operations.
18
INCOME TAX. No income tax benefit was recorded during the six months
ended June 30, 2000 and 1999 due to the uncertainty of the timing and amount
of future taxable income.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations through the issuance of our preferred and
common stock, bank borrowings and cash flow from operations. As of June 30,
2000 we had $9.8 million in cash and cash equivalents and $0.9 million in
working capital.
Net cash used in operating activities was $1.1 million for the six months
ended June 30, 2000. Cash used in operating activities arose primarily from
net losses, increases in accounts receivable, prepaid expenses, and deferred
revenue, offset by non-cash charges for depreciation, amortization, provision
for losses on receivables, and warrant and stock compensation expense, as well
as increases in accounts payable. Net cash used for operating activities was
$7.9 million for the comparable six months ended June 30, 1999.
Net cash used in investing activities was $0.8 million for the six months
ended June 30, 2000 and $4.9 million for the six months ended June 30, 1999.
We used cash primarily for the purchase of capital equipment, such as computer
equipment and furniture and fixtures, to support our growth.
Net cash provided by financing activities was $2.8 million for the six
months ended June 30, 2000 and $14.4 million for the six months ended June 30,
1999. The principal source of cash in each of these periods was from the
issuance of debt.
We believe that the net proceeds of approximately $64.0 million from our
August 2000 initial public offering of 8,840,000 shares of common stock,
which includes the exercise of a portion of the underwriters' over-allotment
option, together with our existing working capital immediately prior to the
offering, will be sufficient to fund our operations for at least the next 18
months. However, there can be no assurance that we will not require
additional financing in the future. We cannot be sure that we will be able to
obtain this additional financing, or that, if we can, the terms will be
acceptable to us.
FORWARD LOOKING STATEMENTS
Statements contained or referenced in this filing that are not historical
facts may be forward-looking statements, as the term is defined in the Private
Litigation Reform Act of 1995. In some cases, you can identify forward-looking
statements by terminology such as "anticipate", "estimate", "expect",
"project", "intend", "plan", "believe" and other words and terms of similar
meaning in connection with any discussion of future operating or financial
performance. Many factors, including the risks outlined in our Registration
Statement on Form S-1 filed with the Securities and Exchange Commission, will
be important in determining future results. The forward-looking statements
contained in this
19
filing or in our Registration Statement on Form S-1 include, among other
things, statements relating to our e-commerce strategy, growth strategy,
global expansion, use of proceeds, dividend policy, projected capital
expenditures, sales and marketing expenses, research and development
expenditures, other costs and expenses, revenue, profitability, liquidity and
capital resources, development and maintenance of alliances, the e-commerce
and e-fulfillment markets, market acceptance of the Internet, market
acceptance of our eFS products, personnel expansion, technological
advancement, competition and the capabilities of our software.
Any and all of our forward-looking statements can be affected by inaccurate
assumptions we might make or by known or unknown risks and uncertainties. Our
actual future results may vary materially.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We develop products in the United States and market our products in North
America, Europe, the Middle East, Asia, and Australia. As a result, our
financial results could be affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. Some
of our revenue is denominated in currencies other than the U.S. dollar, in
particular the Japanese yen and the Singapore dollar. However, most of our
sales are currently made in U.S. dollars and a strengthening of the dollar
could make our products less competitive in foreign markets.
We have used a portion of the proceeds obtained from our August 2000
initial public offering to repay and terminate our loan agreement and thus we
are not subject to any exposure based on fluctuations in interest rates.
Therefore, no quantitative tabular disclosures are required. To the extent
that we enter into a new credit facility in the future, future interest
expense could be subject to fluctuations based on the general level of U.S.
interest rates.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the quarter ended June 30, 2000, we sold the securities set forth
below which were not registered under the Securities Act of 1933:
1. We issued an aggregate of 31,200 shares of Class B Common stock upon
the exercise of stock options at exercise prices per share ranging from
$2.00 to $4.50.
2. We issued options to purchase 430,475 shares of Class B Common Stock
under our Amended and Restated 1997 Incentive and Non-Qualified Stock
Option Plan.
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We believe that the transactions described above were exempt from registration
under Section 3(b) or 4(2) of the Securities Act because the subject
securities were issued pursuant to a compensatory benefit plan pursuant to
Rule 701 under the Securities Act or because the subject securities were sold
to a limited group of persons, each of whom was believed to be a sophisticated
investor or to have had a pre-existing business or personal relationship with
us or our management and to have been purchasing for investment without a view
to further distribution. In addition, the recipients of securities in each
such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the certificates
issued in such transactions. All recipients had adequate access, though their
relationships with us, to information about us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on May 10, 2000, at which
the Company's stockholders voted to elect members of the Board of Directors.
The following directors were elected by the stockholders at this meeting: Lyle
A. Baack, Adam C. Belsky, Klaus P. Besier, J. Michael Cline, Steven A.
Denning, Jay C. Hoag, Raymond R. Hood, John C. Phelan and Jeffrey R. Rodek.
Messrs. Belsky, Phelan and Rodek were elected to serve until their successors
are duly elected and qualified at the 2001 annual meeting, Messrs. Baack,
Cline and Hoag were elected to serve until their successors are duly elected
and qualified at the 2002 annual meeting, and Messrs. Besier, Denning and Hood
were elected to serve until their successors are duly elected and qualified at
the 2003 annual meeting. There is currently one vacancy on the board of
directors, resulting from Mr. Phelan's previously agreed upon departure upon
completion of the initial public offering, which we currently intend to fill
prior to the end of 2000.
There were 31,588,789 votes cast for the election of each of the
following nominees: Messrs. Belsky, Besier, Denning, Hoag, Hood, Phelan and
Rodek. There were 31,544,373 votes cast for Mr. Baack and 4,573,519 votes
cast for J. Michael Cline (who was elected by the holders of Series B
Preferred Stock voting as a class). There were 44,416 votes withheld from Mr.
Baack. The stockholders also voted to approve a Second Amended and Restated
Certificate of Incorporation, which became effective upon the closing of the
Company's initial public offering. There were 31,538,490 votes cast for the
approval of the Second Amended and Restated Certificate of Incorporation,
44,416 votes cast against it and 5,883 votes abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
1.1 Underwriting Agreement
3.1b Second Amended and Restated Certificate of Incorporation of the Company
21
3.2b Amended and Restated By-Laws of the Company
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXE TECHNOLOGIES, INC.
Date: August 21, 2000 By: /s/ RAYMOND R. HOOD
-----------------------------------------------
Raymond R. Hood
President, Chief Executive Officer, and Director
Date: August 21, 2000 By: /s/ MICHAEL A. BURSTEIN
-----------------------------------------------
Senior Vice President, Finance, Chief Financial
Officer and Treasurer
23
INDEX TO EXHIBITS
1.1 Underwriting Agreement
3.1b Second Amended and Restated Certificate of Incorporation of the
Company
3.2b Amended and Restated By-Laws of the Company
27.1 Financial Data Schedule
24