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 September 30, 1998
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 17 Pages
Exhibit Index Appears on Page 13
GENTIA SOFTWARE PLC
Form 6-K
TABLE OF CONTENTS
Page
Financial Information:
Condensed Consolidated Balance Sheets as of September 30, 1998 (Unaudited)
and December 31, 1997 (Audited) 3
Condensed Consolidated Statements of Operations for the three and nine months
ended September 30, 1998 and 1997 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Management's Discussion and Analysis of Financial Condition and Results of 8
Operations.
Exhibit Index 13
Exhibit A Third Quarter Press Release 14
2
GENTIA SOFTWARE PLC
Condensed Consolidated Balance Sheets
September
30 December 31
1998 1997
----------- -----------
(unaudited) (audited)
(in thousands)
US$ US$
Assets
Current assets:
Cash and cash equivalents .................... $ 10,901 $ 20,332
Accounts receivable, net of allowance $ 1,390
(Dec 31, 1997 - $1,819) ................... 11,922 7,758
Prepaid expenses and other current assets .... 2,303 1,921
Deferred taxes ............................... 184 285
-------- --------
Total current assets .................................... $ 25,310 $ 30,296
Property and equipment, net ......................... 2,341 2,037
Goodwill on acquisition, net of amortization of $877
(Dec 31, 1997 - $494) ........................... 5,252 3,602
Deferred taxes ...................................... 459 459
-------- --------
Total assets ............................................ $ 33,362 $ 36,394
======== ========
Liabilities and shareholders' equity
Current liabilities:
Current portion of lease obligations ......... $ 63 $ 105
Accounts payable ............................. 2,374 1,743
Accrued liabilities .......................... 1,767 1,337
Deferred revenues ............................ 4,340 3,630
Other accounts payable ....................... 1,270 1,337
-------- --------
Total current liabilities ............................... $ 9,814 $ 8,152
Non current liabilities:
Deferred taxation ............................ 274 274
Long-term portion of lease obligations ....... 77 109
-------- --------
Total liabilities ....................................... $ 10,165 $ 8,535
Shareholders' equity:
Ordinary shares .............................. 2,436 2,300
Additional paid-in capital ................... 28,842 27,406
Retained earnings ............................ (7,352) (1,236)
Cumulative translation adjustment ............ (729) (611)
-------- --------
Total shareholders' equity .............................. $ 23,197 $ 27,859
-------- --------
Total liabilities and shareholders' equity .............. $ 33,362 $ 36,394
======== ========
3
GENTIA SOFTWARE PLC
Condensed Consolidated Statement of Operations
(Unaudited)
Three months ended Nine months ended
-------------------- --------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands, except per share amounts)
US$ US$ US$ US$
Revenues:
License .......................... $4,419 $3,796 $12,076 $12,770
Services and other ............... 3,588 2,745 9,587 8,878
-------- -------- -------- --------
8,007 6,541 21,663 21,648
Cost of revenues:
License .......................... 452 751 999 1,034
Services and other ............... 2,140 1,729 5,967 4,906
-------- -------- -------- --------
2,592 2,480 6,966 5,940
Gross profit .......................... 5,415 4,061 14,697 15,708
Operating expenses:
Sales and marketing .............. 4,351 3,719 12,641 10,424
Research and development ......... 1,512 1,187 5,185 3,407
General and administrative ....... 1,106 1,456 3,209 3,736
Goodwill amortization ............ 153 90 383 269
-------- -------- -------- --------
Total operating expenses .. 7,122 6,452 21,418 17,836
Loss from operations .................. (1,707) (2,391) (6,721) (2,128)
Other income .......................... 144 287 605 885
-------- -------- -------- --------
Loss before provision for taxes ....... (1,563) (2,104) (6,116) (1,243)
Provision for income taxes ....... -- (631) -- (373)
-------- -------- -------- --------
Net (loss) ............................ ($1,563) ($1,473) ($6,116) ($ 870)
======== ======== ======== ========
Basic income (loss) per share .... ($0.15) ($0.16) ($0.62) ($0.10)
Diluted income (loss) per share .. ($0.15) ($0.16) ($0.62) ($0.10)
Shares used to compute basic EPS . 10,116 9,202 9,874 9,074
Shares used to compute diluted EPS 10,116 9,202 9,874 9,074
See accompanying notes
4
GENTIA SOFTWARE PLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
---------------- -----------------
September 30, September 30,
1998 1997
---------------- -----------------
(in thousands)
US$ US$
Cash flows from operating activities
Net income (loss) $ (6,116) $ (870)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 703 604
Goodwill 383 269
Loss (gain) on disposal of assets 2 (12)
Changes in operating assets and liabilities:
Accounts receivable (3,735) (1,288)
Provision for bad debts (429) 127
Prepaid expenses and other receivables (382) (1,316)
Accounts payable 631 (108)
Accrued liabilities and other expenses 464 (844)
Deferred revenues 709 180
-------- --------
Net cash used in operating activities (7,770) (3,258)
-------- --------
Cash flows from investing activities:
Proceeds on disposal of assets 25 63
Costs of acquisition (1,032) (576)
Purchases of assets (1,060) (765)
-------- --------
Net cash used in investing activities (2,067) (1,278)
-------- --------
Cash flows from financing activities:
Net proceeds on shares issued 572 238
(Repayment) of capital lease obligations (74) (139)
-------- --------
Net cash provided by financing activities 498 99
Effect of exchange rate changes on cash (92) (331)
-------- --------
Net decrease in cash (9,431) (4,768)
Cash at beginning of period 20,332 25,228
-------- --------
Cash at end of period $ 10,901 $ 20,460
======== ========
See accompanying notes
5
GENTIA SOFTWARE PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company develops, markets and supports high performance networked business
intelligence software for business planning and decision making. The Company's
software products employ a multidimensional database and a highly flexible end
user environment which empowers business managers throughout a networked
enterprise to analyze, report and share complex business data. Gentia enables
the enterprise-wide integration of structured and unstructured data contained in
operational databases, data warehouses and external data sources and allows
users to perform on-line analytical processing through a highly integrated,
scalable, networked system. Gentia users can also employ automated agents to
analyze, update and monitor key business performance indicators, rapidly perform
scenario analyses and distribute information to users throughout the enterprise.
On December 19, 1997, the Company signed a joint development and marketing
agreement with Renaissance Solutions, Inc., the originators and leading
practitioners of "Balanced Scorecard" to jointly develop and market a software
product called "Renaissance Balanced Scorecard powered by Gentia" ("RBSC"). This
application enables the automatic deployment of balanced scorecards throughout
an organization, leveraging the distributed and scalable nature of the
underlying Gentia technology. Because corporate Balanced Scorecards are likely
to be deployed across company Intranets, the Company has produced a web enabled
version of the application which runs on Internet browsers, making extensive use
of emerging HTML and Java based technologies. The Renaissance Agreement
represents an initial step in the Company's shift to `solutions based' product
offerings.
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 September 30, 1998 and for the three and nine
months ended September 30, 1998 and 1997 is unaudited but includes 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 and nine months period ended September 30,
1998 are not necessarily indicative of results that may be expected for the
entire year. The condensed consolidated balance sheet at December 31, 1997 has
been derived from the audited consolidated financial statements at that date.
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. These condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes for the year ended December 31, 1997.
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.
6
GENTIA SOFTWARE PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Foreign Exchange
Transactions in foreign currencies are translated into U.S. dollars at the rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of exchange
ruling at the balance sheet date. All differences are taken to the consolidated
statement of operations.
Results of operations of subsidiaries which have their local currencies as the
functional currency are translated into U.S. dollars at the average rates for
the relevant period, while assets and liabilities are translated using current
rates at each balance sheet date. The resulting exchange gains or losses are
accumulated in the cumulative translation adjustment account included as a
component of shareholders' equity.
Per Share Information
Net income per share information is computed based on the weighted average
number of shares outstanding as prescribed in SFAS128.
2 LITIGATION
The Company is involved in one legal action arising in relation to patents in
the United States. While the outcome of this matter is currently not
determinable, the Company is vigorously pursuing its defense and is confident
that it will prevail in the litigation.
7
GENTIA SOFTWARE PLC
Management's Discussion and Analysis of Financial Condition and Results
of Operations
for the three and nine months ended September 30, 1998 and 1997
Three months ended September 30, 1998 and 1997
Revenues
Revenues were $8.0 million in the three months ended September 30, 1998, an
increase of 22.4% compared to revenues of $6.5 million for the three months
ended September 30, 1997. License revenues were $4.4 million in the three months
ended September 30, 1998, an increase of 16.4% over license revenues of $3.8
million for the three months ended September 30, 1997. Services and other
revenues were $3.6 million in the three months ended September 30, 1998, an
increase of 30.7% when compared to $2.7 million for the three months ended
September 30, 1997.
Gross Profit
Gross profit was $5.4 million or 67.6% for the three months ended September 30,
1998, compared to $4.1 million or 62.1% for the three months ended September 30,
1997. The increase in gross margin was primarily due to an increase in revenue.
Sales and Marketing
Sales and marketing costs were $4.4 million in the three months ended September
30, 1998, an increase of 17.0% compared to $3.7 million in the three months
ended September 30, 1997. The increase in expenditure reflects the Company's
increased investment in its sales and marketing organization. The Company does
not expect these expenses will continue to increase.
Research and Development
Research and development costs were $1.5 million in the three months ended
September 30, 1998; an increase of 27.4% compared to $1.2 million in the three
months ended September 30, 1997. The increase is primarily due to further
resources being utilized in the Company's development program, especially the
continued development of the Balanced Scorecard and the surrounding analytical
applications. It is the Company's intention to accelerate its expenditure on
research and development of new products when it considers it appropriate to do
so.
General and Administrative
General and administrative costs were $1.1 million in the three months ended
September 30, 1998; a decrease of 24.0% compared to $1.5 million in the three
months ended September 30, 1997.
Other Income
Other income was $144,000 in the three months ended September 30, 1998 compared
to $287,000 in the three months ended September 30, 1997. Other income arose
primarily due to interest income on funds received from the Company's Initial
Public Offering completed on April 30, 1996 and has decreased due to the lower
level of funds available for investment.
8
GENTIA SOFTWARE PLC
Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Nine months ended September 30, 1998 and 1997
Revenue
Revenues were $21.7 million in the nine months ended September 30, 1998, an
increase of 0.5% compared to revenues of $21.6 million for the nine months ended
September 30, 1997. License revenues were $12.1 million in the nine months ended
September 30, 1998, a decrease of 5.7% over license revenues of $12.8 million
for the nine months ended September 30, 1997. Services and other revenues were
$9.6 million in the nine months ended September 30, 1998, an increase of 8.0%
compared to $8.9 million for the nine months ended September 30, 1997. The
increase in services and other revenues is primarily due to an increase in
support and maintenance and consulting revenue, most of which is attributable to
the TCMS acquisition that closed in the second quarter of 1998.
Gross Profit
Gross profit was $14.7 million or 67.8% for the nine months ended September 30,
1998, compared to $15.7 million or 72.6% for the nine months ended September 30,
1997. The decrease in gross profit was primarily due to increased consultancy
costs from the TCMS acquisition that closed in the second quarter of 1998.
Sales and Marketing
Sales and marketing costs were $12.6 million in the nine months ended September
30, 1998, an increase of 21.2% compared to $10.4 million in the nine months
ended September 30, 1997. The increase in expenditure reflects the Company's
increased investment in its sales and marketing organization. The Company does
not expect these expenses will continue to increase.
Research and Development
Research and development costs were $5.2 million in the nine months ended
September 30, 1998, an increase of 52.2% compared to $3.4 million in the nine
months ended September 30, 1997. The increase is primarily due to further
resources being utilized in the Company's development program, especially the
continued development of the Balanced Scorecard and surrounding analytical
applications as well as legal and investigative costs relating to patents. It is
the Company's intention to accelerate its expenditure on research and
development of new products when it considers it appropriate to do so.
General and Administrative
General and administrative costs were $3.2 million in the nine months ended
September 30, 1998, a decrease of 14.1% compared to $3.7 million in the nine
months ended September 30, 1997.
Other Income
Other income was $605,000 in the nine months ended September 30, 1998 compared
to $885,000 in the nine months ended September 30, 1997. Other income arose
primarily due to interest income in funds received from the Company's Initial
Public Offering completed on April 30, 1996 and has decreased due to the lower
level of funds available for investment.
9
GENTIA SOFTWARE PLC
Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Liquidity and Capital Resources
As of September 30, 1998, the Company had cash and cash equivalents of $10.9
million.
Accounts receivable at September 30, 1998 were $11.9 million, an increase of
53.7% compared to December 31, 1997 reflecting the renewed growth in sales. In
the nine months ended September 30, 1998, the Company's operating activities
consumed cash of $7.8 million compared to $3.3 million in the nine months ended
September 30, 1997. This was primarily due to the loss for the nine months ended
September 30, 1998 and the increase in accounts receivable as described above.
Investing activities consumed cash of $2.1 million in the nine months ended
September 30, 1998 compared to $1.3 million in the nine months ended September
30, 1997. In May 1998, the Company acquired the issued share capital of
Technical and Computer Management Services Ltd and its subsidiary Technical and
Computer Management Services LLC in consideration of $1.0 million cash and
166,667 Ordinary Shares valued at approximately $1.0 million. In the nine months
ending September 30, 1998 the company had invested $1.1 million in the purchase
of assets, predominantly computer equipment.
Financing activities, including the net repayment of capital lease obligations,
generated $498,000 in the nine months ended September 30, 1998 compared to
$99,000 in the nine months ended September 30, 1997. During the nine months
ended September 30, 1998 the company received $572,000 on the exercise of share
options.
The Company believes that existing cash, cash equivalents and cash generated by
operations will be sufficient to meet the Company's working capital needs and
currently planned capital expenditure requirements for the next twelve months.
Year 2000
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements.
The Company's State of Readiness
The Company has commenced its assessment of both the readiness of its internal
business information systems and non IT systems for handling the Year 2000 and
the compliance of products sold by the Company. The Company has determined that
it will need to modify or replace portions of its internal business information
systems so that the systems will function properly with respect to dates in the
Year 2000 and beyond. The Company anticipates that it will have successfully
addressed Year 2000 issues relating to its business information and non IT
systems by the end of fiscal 1999.
The Company believes that its current products such as Gentia 4.0 and RBSC are
Year 2000 compliant. However, prior versions of Gentia, and other products
currently installed at certain customer sites will require upgrading or other
modifications to become Year 2000 compliant. The Company believes that it is not
legally responsible for costs incurred by these customers to achieve Year 2000
compliance. However, there can be no assurance that these customers will not
assert claims against the Company with respect to Year 2000 issues and, in the
event such claims are asserted and adjudicated in favor of these customers, the
Company's liability could be material. The Company has taken steps to identify
affected customers and persuaded them to upgrade to Year 2000 compliant
software.
10
GENTIA SOFTWARE PLC
Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The Company may incur increasing costs regarding customer satisfaction related
to these actions over the next few years. Since the Company's `Millenium
Compliance Project' is currently ongoing, the scope of any resulting Year 2000
issues is not fully known and potential liability resulting from these issues is
unclear, the potential impact on the Company's business, operating results and
financial condition with respect to these matters is not known at this time.
The Company has also initiated discussions with its vendors and service
providers to evaluate IT and non IT Year 2000 issues, if any, relating to the
interaction of their systems or products with the Company's internal systems.
The Company has received written compliance information from some of these third
parties and expects to receive all information on all outside system
dependencies by March 1999. At this time, despite the initiation of these
discussions, the Company does not possess all the information necessary to
estimate the full potential impact of Year 2000 compliance issues relating to
these third parties and their interaction with the Company, but expects to
possess such information prior to the end of March 1999.
Costs to Address the Company's Year 2000 Issues
To date, the Company has employed an additional consultant, but has not incurred
any material expenditure in connection with identifying or evaluating Year 2000
compliance issues. Most of its expenses have related to the opportunity cost of
time spent by employees of the Company evaluating the Company's internal
business information systems, the products sold by the Company and the
interaction of the Company's internal business information systems with the
internal systems of third parties. The Company does not expect incremental costs
relating to Year 2000 compliance to exceed $500,000, although the amount is
being regularly revised. Although the Company is not aware of any single
material operational issue or cost associated with the preparation of its
internal business information systems or its products for the Year 2000, there
can be no assurances that the Company will not experience serious unanticipated
negative consequences and/or material costs caused by undetected errors or
defects in the technology used in the Company's internal business information
systems or products the company sells. Such unanticipated negative consequences
and/or material costs, if incurred, could have a material adverse effect on the
Company's business, operating results or financial condition.
Risks of the Company's Year 2000 Issues
The Company has commenced its `Millennium Compliance Project', expected to be
completed in March 1999, in order to assess both the readiness of its internal
business information systems, as well as its non IT systems, for handling the
Year 2000, and the compliance of products sold by the Company. There can be no
assurance that the `Millennium Compliance Project' will identify all material
Year 2000 compliance issues or that remedial actions taken in connection
therewith will be successful. In the event that the Company fails successfully
to assess Year 2000 compliance issues facing it or take remedial action
necessary in connection therewith, there can be no assurance that the Company's
business, operating results or financial condition will not be adversely
effected. In addition, there can be no assurance that the ability of third
parties with which the Company interacts to comply with Year 2000 issues will
not have a material adverse effect on the Company's business, operating results
or financial condition.
The Company's Year 2000 Contingency Plan
Although the Company is not currently aware of any material remedial steps to
achieve Year 2000 compliance, the Company expects to have a contingency plan in
place by July 1999.
While the Company believes that its planning efforts are adequate to address
known or identified Year 2000 issues on a timely basis, there can be no
assurance that there will not be a delay in, or increased costs associated with
changes to third party systems, which could have a material adverse effect on
the Company's business, operating results or financial condition.
11
The information contained in Exhibit 1 hereto, consisting of the registrant's
unaudited financial statements for the nine months ended September 30, 1998, has
been distributed to its security holders and is furnished to the Commission
pursuant to Rule 13a-16 under the Securities 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 authorized.
GENTIA SOFTWARE plc
By: /s/ George F Sprenkle
George F Sprenkle
Chief Financial Officer
Date: 22nd October 1998
12
EXHIBIT INDEX
Page
Exhibit A Third Quarter Press Release - (1998) 14-17
13
EXHIBIT A
Third Quarter Press Release
GENTIA SOFTWARE
Tuition House, St. George's Road
Wimbledon
London SW19 4EU
(Nasdaq: GNTIY)
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
George Sprenkle For Analyst Info: Julie Creed (312) 640-6724
Chief Financial Officer For General Info: Kelly Lofts (212) 661-8030
44 181 971 4000 For Media Info: Alicia Nieva-Woodgate (415) 986-1591
FOR IMMEDIATE RELEASE
October 21, 1998
GENTIA REPORTS THIRD QUARTER RESULTS
LONDON, October 21, 1998 -- Gentia Software (Nasdaq: GNTIY), a developer of
analytical applications for enterprise-wide deployment, today reported results
for the third quarter ended September 30, 1998. Revenues for the third quarter
of 1998 totaled $8.0 million, compared with revenues of $6.5 million for the
third quarter ended September 30, 1997. Additionally, revenues increased for the
third consecutive quarter compared with $5.9 million and $7.7 million in the
first and second quarters of 1998, respectively. Increased licensing revenue,
attributable to both Renaissance Balanced Scorecard and core Gentia products,
has been a driving factor in the revenue growth achieved year to date. During
the third quarter, that growth was supplemented with higher service revenue.
The Company reported a net loss of $1.5 million for the most recent
quarter, or $0.15 cents per share, compared with a net loss of $1.9 million, or
$0.19 per share, in the second quarter of 1998 and a loss of $1.5 million, or
$0.16 per share, in the third quarter of 1997. The most recent quarter's results
include approximately $0.4 million in software development expenditures, made
during the quarter to further enhance the Balanced Scorecard application with a
suite of analytical solutions.
Paul Rolph, Chairman and Chief Executive Officer of Gentia, said "Our
third quarter exhibited the strongest market interest and financial trends since
we began our transition to an analytical solutions focused company late last
year. Our revenue has grown steadily year to date and our pipeline is strong.
Since many companies are directing more IT spending to Year 2000 and EMU issues
and some software makers have experienced slowing sales recently, we find the
strength of our pipeline particularly gratifying. We are also on track with the
integration of TCMS, which was acquired during the second quarter. One of the
most desirable benefits of the acquisition was our enhanced capability the
growing number of Balance Scorecard and analytical application rollouts. This
becomes more essential given our recently announced strategic alliance with
Gartner Group, whereby in addition to receiving licensing fees, Gentia will
support the GartnerGroup IT Scorecard."
"During the last several quarters, we have witnessed a flourish of market
interest surrounding our products-from Gentia 4.0 - the complete platform for
developing, deploying and managing analytical applications enterprise-wide - to
the performance measurement and strategy feedback capabilities of the
Renaissance Balanced Scorecard powered by Gentia. In many instances we have
successfully translated this market interest into strategic alliances or direct
customer relationships. Year to date, we have added 50 companies to our growing
customer base, including top `blue chip' companies such as GE Capital, BBC, Bell
Canada and Fortis Group. Additionally, our strategic relationships with leading
consulting firms serve to strengthen our leadership position in the rapidly
growing market for enterprise performance management solutions. As such, we
believe the pieces are coming together as we build momentum towards achieving
profitability," concluded Mr. Rolph.
14
Third Quarter Highlights
o Established a strategic alliance with GartnerMeasurement, a division of
GartnerGroup, Inc.--a leading IT industry research and consulting
organization--to offer IT organizations a newly packaged solution for more
effectively measuring, managing and optimizing performance. The new product,
GartnerGroup IT Scorecard, is effectively a "Balanced Scorecard for the CIO."
The product combines the IT measurement expertise of GartnerMeasurement, with
the market leading software solution for automating the Balanced Scorecard,
the Renaissance Balanced Scorecard powered by Gentia. The Gartner IT
Scorecard will be sold directly through the Gartner channel on an annual
subscription basis.
o Closed major deals during the third quarter with GE Capital, BBC, First
Tennessee Bank, Telenor, Medical Assurance of New Zealand, Midland
Electricity Board, Sistema Brasilseguridade, the majority of which were
Balanced Scorecard deals. Also, major expansion of usage at ABB, Heineken,
Reckitt & Colman, Gallaher, McDonald's Restaurants and the Department of
Energy.
o Announced an agreement with Grant Thornton, one of the world's largest
professional services organizations, to market Gentia's enterprise
performance management solutions, including the Renaissance Balanced
Scorecard and associated analytical applications. Together the companies will
provide customers with consulting services and software to create and deploy
enterprise-wide analytical applications tailored to meet their needs.
o Launched the Renaissance Balanced Scorecard version 2.5 and the Application
Framework for both client server and web enabled deployment. The new version
supports full internationalization, including templates for French, Swedish,
Norwegian and Portuguese scorecards, enabling companies to scale their
applications to thousands of users anywhere in the enterprise.
o Experienced increased market interest in automated Balanced Scorecard
solutions. Over 1,900 individuals representing companies from more than 50
countries have signed on as Balanced Scorecard Technology
(www.balancedscorecard.com) members to take part in Balanced Scorecard user
forums and a variety of quarterly activities.
About the Company
Gentia Software (Nasdaq: GNTIY) is the leading supplier of analytical
applications that enable clients to maximize their competitive position through
enterprise-wide deployment of strategy management, performance measurement and
operational analysis solutions. By leveraging the only networked Business
Intelligence solution designed for enterprise-wide deployment, Gentia enables a
new class of analytical applications, such as the Balanced Scorecard, which
ensures information delivery to key decision makers' desktops and browsers
throughout an enterprise. Gentia Software's worldwide client list of more than
500 customers includes JP Morgan and Company, Volvo, McDonald's Restaurants,
Fortis, Swiss Reinsurance and Sun Microsystems. The Company has headquarters in
Boston and London and operates in more than 20 countries worldwide.
For additional information about Gentia, visit the Company's Web site at
www.gentia.com or call 1-888-4GENTIA or 1-781-224-0750. To receive additional
information via fax at no charge, dial 1-800-PRO-INFO and enter code GNTIY.
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.
(Tables to Follow)
15
GENTIA SOFTWARE PLC
Condensed Consolidated Balance Sheets
September
30 December 31
1998 1997
----------- -----------
(unaudited) (audited)
(in thousands)
US$ US$
Assets
Current assets:
Cash and cash equivalents .................... $ 10,901 $ 20,332
Accounts receivable, net of allowance $ 1,390
(Dec 31, 1997 - $1,819) ................... 11,922 7,758
Prepaid expenses and other current assets .... 2,303 1,921
Deferred taxes ............................... 184 285
-------- --------
Total current assets .................................... $ 25,310 $ 30,296
Property and equipment, net ......................... 2,341 2,037
Goodwill on acquisition, net of amortization of $877
(Dec 31, 1997 - $494) ........................... 5,252 3,602
Deferred taxes ...................................... 459 459
-------- --------
Total assets ............................................ $ 33,362 $ 36,394
======== ========
Liabilities and shareholders' equity
Current liabilities:
Current portion of lease obligations ......... $ 63 $ 105
Accounts payable ............................. 2,374 1,743
Accrued liabilities .......................... 1,767 1,337
Deferred revenues ............................ 4,340 3,630
Other accounts payable ....................... 1,270 1,337
-------- --------
Total current liabilities ............................... $ 9,814 $ 8,152
Non current liabilities:
Deferred taxation ............................ 274 274
Long-term portion of lease obligations ....... 77 109
-------- --------
Total liabilities ....................................... $ 10,165 $ 8,535
Shareholders' equity:
Ordinary shares .............................. 2,436 2,300
Additional paid-in capital ................... 28,842 27,406
Retained earnings ............................ (7,352) (1,236)
Cumulative translation adjustment ............ (729) (611)
-------- --------
Total shareholders' equity .............................. $ 23,197 $ 27,859
-------- --------
Total liabilities and shareholders' equity .............. $ 33,362 $ 36,394
======== ========
16
GENTIA SOFTWARE PLC
Condensed Consolidated Statement of Operations
(Unaudited)
Three months ended Nine months ended
-------------------- --------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands, except per share amounts)
US$ US$ US$ US$
Revenues:
License .......................... $4,419 $3,796 $12,076 $12,770
Services and other ............... 3,588 2,745 9,587 8,878
-------- -------- -------- --------
8,007 6,541 21,663 21,648
Cost of revenues:
License .......................... 452 751 999 1,034
Services and other ............... 2,140 1,729 5,967 4,906
-------- -------- -------- --------
2,592 2,480 6,966 5,940
Gross profit .......................... 5,415 4,061 14,697 15,708
Operating expenses:
Sales and marketing .............. 4,351 3,719 12,641 10,424
Research and development ......... 1,512 1,187 5,185 3,407
General and administrative ....... 1,106 1,456 3,209 3,736
Goodwill amortization ............ 153 90 383 269
-------- -------- -------- --------
Total operating expenses .. 7,122 6,452 21,418 17,836
Loss from operations .................. (1,707) (2,391) (6,721) (2,128)
Other income .......................... 144 287 605 885
-------- -------- -------- --------
Loss before provision for taxes ....... (1,563) (2,104) (6,116) (1,243)
Provision for income taxes ....... -- (631) -- (373)
-------- -------- -------- --------
Net (loss) ............................ ($1,563) ($1,473) ($6,116) ($ 870)
======== ======== ======== ========
Basic income (loss) per share .... ($0.15) ($0.16) ($0.62) ($0.10)
Diluted income (loss) per share .. ($0.15) ($0.16) ($0.62) ($0.10)
Shares used to compute basic EPS . 10,116 9,202 9,874 9,074
Shares used to compute diluted EPS 10,116 9,202 9,874 9,074
17