Exhibit 99.1
Contacts: John R. Polchin Anna Van Lier
Chief Financial Officer Director, Corporate Communications
Convera Convera
703.761.3700 703.761.3700
jpolchin@convera.com avanlier@convera.com
CONVERA REPORTS SECOND QUARTER RESULTS
COMPANY RE-ALIGNS OPERATING FOCUS KEYING ON PROFITABILITY;
ADVANCES SOFTWARE AIMED AT FULLY INDEXING THE WORLD WIDE WEB
VIENNA, VA., AUGUST 18, 2004 - Convera Corporation (NASDAQ: CNVR), a leading
provider of search and categorization software for enterprises and government
agencies, today announced financial results for the three-month period ended
July 31, 2004.
Revenues for the second quarter of fiscal 2005 totaled $5.1 million, a $2.5
million decrease from the $7.6 million as reported for the comparable period of
the prior year. Gross profit for the three-month period ended July 31, 2004
totaled $3.4 million, resulting in a gross margin of 66%. The gross profit and
gross margin for the comparable period of the prior year were $5.2 million and
68% respectively.
The net loss for the three-month period ended July 31, 2004 was $7.0 million, or
$0.21 per share, compared to a net loss of $5.1 million, or $0.18 per share, for
the comparable year-ago quarter.
Cash and investments as of July 31, 2004 totaled $19.4 million compared to $21.5
million as of the beginning of the quarter and $30.6 million as of January 31,
2004.
"Our second quarter revenue results were impacted by the timing of decisions
from a few key prospects," said Patrick C. Condo, President and Chief Executive
Officer, Convera. "It is our belief that these opportunities remain viable, and
we are continuing our efforts to secure them. In addition, we have recently
realigned resources to focus more directly on government opportunities, the
media & publishing sector and other targeted vertical market segments, as we
believe these areas afford significant opportunities for Convera. This
realignment, including the addition of two new sales executives, coupled with
revisions to our expense structure is also expected to shorten our time to
profitability."
As the Company previously announced during its first quarter earnings conference
call, it has embarked on an advanced development effort focused on applying the
Company's existing technology to assist customers in locating contextually
relevant information from the World Wide Web. This development effort has since
progressed to a software prototype aimed at fully indexing the Web. In concert
with this effort, Convera is in the process of executing an enterprise hosting
service agreement with AT&T to host this offering and has incurred capital
outlays to date limited to equipment, personnel and general operating costs.
Upon a successful completion of the prototype, currently set for late October,
the Company will then announce a timeframe for commercial availability. The
Company is also assessing future capital requirements for this initiative and
may elect to seek funding sources over the coming quarters.
In support of the Convera's top-line objectives to reach profitability, as well
as in support of the shift in business strategy, the Company has made revisions
to its expense structure. These actions will result in annualized savings of
approximately $12 million and will begin to be realized during the fourth
quarter of fiscal 2005. The Company expects to take a restructuring charge
during the third quarter related to this effort.
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PAGE 2 - CONVERA REPORTS SECOND QUARTER RESULTS
The attached financial information compares the results of operations for the
three-month and six-month periods ended July 31, 2004 to the same periods in
2003 and the balance sheet as of July 31, 2004 to the balance sheet as of
January 31, 2004.
ABOUT CONVERA
Convera is a leading provider of mission-critical enterprise search and
categorization solutions. Convera's RetrievalWare solutions maximize return on
investment in vast stores of unstructured information by providing highly
scalable, fast, accurate and secure search across more than 200 forms of text,
video, image and audio information, in more than 45 languages. More than 900
customers in 33 countries rely on Convera's search solutions to power a broad
range of mission-critical applications including enterprise portals, knowledge
management, intelligence gathering, profiling, corporate policy compliance,
regulatory compliance, customer service and more. For more information, contact
Convera at 800-788-7758, via e-mail at info@convera.com or on the Web at
www.convera.com
----------------------
This release, including any statements from Convera personnel, contains
statements about Convera's future expectations, performance, plans, and
prospects, as well as assumptions about future events. The reader is cautioned
not to put undue reliance on these forward-looking statements, as these
statements are subject to numerous factors and uncertainties, including without
limitation, business and economic conditions and trends; continued success in
technological advances; possible disruption in commercial activities caused by
terrorist activity and armed conflict, such as changes in logistics and security
arrangements; reduced customer demand relative to expectations; competitive
factors; and other risk factors listed from time to time in the company's SEC
reports. Actual results may differ materially from our expectations as the
result of these and other important factors relating to Convera's business and
product development efforts, which are further described in Convera's filings
with the Securities and Exchange Commission. These filings can be obtained from
the SEC's website located at www.sec.gov. Any forward-looking statements are
based on information available to Convera on the date of this release, and
Convera assumes no obligation to update such statements. The Convera design logo
and the following are worldwide trademarks of Convera: Convera(TM),
RetrievalWare(R), and Screening Room(R). The names of actual companies and
products mentioned herein may be the trademarks of their respective owners.
THE CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE COMPANY APPEAR
BELOW AND ARE PRESENTED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES. ALL AMOUNTS, EXCEPT PER SHARE AMOUNTS, ARE
EXPRESSED IN THOUSANDS OF U.S. DOLLARS.
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
2004 2003 2004 2003
---- ---- ---- ----
(unaudited) (unaudited)
REVENUES:
License $ 2,197 $ 4,587 $ 8,053 $ 8,818
Services 1,041 1,467 1,624 2,666
Maintenance 1,829 1,559 3,560 3,089
---------------- --------------- --------------- ---------------
Total revenues 5,067 7,613 13,237 14,573
---------------- --------------- --------------- ---------------
COST OF REVENUES:
License 468 521 1,127 952
Services 802 1,375 1,518 2,792
Maintenance 436 503 958 966
---------------- --------------- --------------- ---------------
Total cost of revenues 1,706 2,399 3,603 4,710
---------------- --------------- --------------- ---------------
GROSS MARGIN 3,361 5,214 9,634 9,863
---------------- --------------- --------------- ---------------
OPERATING EXPENSES:
Sales and marketing 4,302 4,634 9,316 9,333
Research and product development 3,632 3,219 7,272 6,500
General and administrative 2,506 2,233 4,922 4,524
Restructuring charge - 295 - 621
---------------- --------------- --------------- ---------------
Total operating expenses 10,440 10,381 21,510 20,978
---------------- --------------- --------------- ---------------
OPERATING LOSS (7,079) (5,167) (11,876) (11,115)
INTEREST INCOME, NET 30 50 68 101
---------------- --------------- --------------- ---------------
NET LOSS $ (7,049) $ (5,117) $(11,808) $(11,014)
NET LOSS PER COMMON SHARE - BASIC & DILUTED $ (0.21) $ (0.18) $ (0.35) $ (0.38)
================ =============== =============== ===============
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC & DILUTED 34,040 29,210 33,989 29,123
THE CONDENSED, CONSOLIDATED BALANCE SHEETS FOR THE COMPANY APPEAR BELOW AND
ARE PRESENTED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN THE UNITED STATES. ALL AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS.
ASSETS JULY 31, 2004 JANUARY 31, 2004
------------- ----------------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 19,354 $ 30,530
Short term investments 71 71
Accounts receivable, net 5,212 5,464
Prepaid expenses and other 2,628 2,536
---------------------- -----------------------
Total current assets 27,265 38,601
Other assets, net 3,673 3,984
Goodwill 2,275 2,275
Other intangible assets 701 835
---------------------- -----------------------
TOTAL ASSETS $ 33,914 $ 45,695
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,942 $ 2,615
Accrued expenses 3,498 4,093
Accrued bonuses 413 745
Deferred revenues 3,777 3,720
Restructuring reserve 720 620
---------------------- -----------------------
12,350 11,793
Restructuring reserve, net of
current portion 425 887
Other long-term liabilities 756 1,647
---------------------- -----------------------
Total long-term liabilities 1,181 2,534
---------------------- -----------------------
TOTAL LIABILITIES 13,531 14,327
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SHAREHOLDERS' EQUITY 20,383 31,368
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $ 33,914 $ 45,695
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