EXHIBIT 99.1
------------
Val Heusinkveld Amy Childress
Extended Systems Extended Systems Media Relations
208-322-7575, ext. 6276 208-287-6083
val.heusinkveld@extendedsystems.com amy.childress@extendedsystems.com
EXTENDED SYSTEMS REPORTS 13% YEAR-OVER-YEAR REVENUE GROWTH IN THIRD
QUARTER OF FISCAL 2004
COMPANY EXPECTS GAAP PROFIT FOR Q4
BOISE, Idaho--(April 27, 2004)--Extended Systems Inc. (NASDAQ: XTND), a leading
provider of mobile application solutions for the enterprise, today reported net
revenue oF $8.3 million for the third quarter of fiscal 2004 ended March 31,
2004, an increase of 13% over net revenue of $7.4 million in the third quarter
of fiscal 2003 and a 2% decrease over net revenue of $8.5 million in the second
quarter of fiscal 2004.
The Company reported a net loss of $2.1 million, or ($.14) per share, for the
third quarter of fiscal 2004 compared to a net loss of $648,000 or ($.05) per
share, in the third quarter last year, and a net income of $459,000, or $.03 per
share in the second quarter of fiscal 2004.
Pro-forma net income was $419,000, or $.03 per share for the third quarter of
fiscal 2004 compared to a pro-forma net income of $327,000, or $.02 per share in
the third quarter a year ago and $761,000, or $0.05 per share in the preceding
quarter. The adjustments to arrive at pro-forma income for the third quarter of
fiscal 2004 include restructuring charges of $117,000 related primarily to
severance, $169,000 of non-cash stock compensation, $138,000 of amortization
related to purchased intangibles and $2.1 million of expenses related to legal
fees and settlement costs for the litigation with Intellisync Corporation
(formerly Pumatech, Inc.). Loss from operations on a GAAP basis was $1.9
million. On a pro-forma basis, income from operations was $563,000 and the
Company achieved an operating margin of 6.8% on a pro-forma basis. Full details
of the Company's financial results are set forth in the attached financial
exhibits including tables with detailed reconciliations of pro-forma and GAAP
amounts.
Cash and cash equivalents were $7.8 million as of March 31, 2004, compared to
$8.8 million as of December 31, 2003 and $3.5 million at June 30, 2003. The
decrease in cash during the third quarter was primarily the result of the $2.0
million payment to settle the Intellisync Corporation lawsuit.
"Our third quarter results continued the trend of both growth over the previous
year's revenue
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and profitability on a pro-forma basis," said Charles Jepson, president and CEO.
"In the quarter we experienced an increasing trend where our customers moved
from a pilot or small trial to deploying our solutions at multiple locations."
Jepson added. "We view this as an indicator that our large customers have
confidence in Extended Systems to provide mission critical applications to
mobile workers."
"We believe that the enabling infrastructure is now in place where enterprises
can deploy mobile applications effectively," continued Jepson. "Large
organizations are rapidly becoming aware of the benefits and competitive
advantages of mobilizing corporate information. Although we expect some
fluctuation in market adoption rates, we believe our OneBridge platform is well
positioned to take advantage of the growing opportunity for mobile middleware."
OTHER HIGHLIGHTS INCLUDED:
o Mobilized product ordering systems at 315 Stewart's Shops convenience
store locations in New York and Vermont. The handheld ordering system,
based on the OneBridge Mobile Solutions platform, saves 100,000
man-hours per year.
o Licensed the company's OneBridge Mobile Solutions platform to
ThyssenKrupp Elevator, the world's third-largest elevator provider.
o Partnered with Messaging Architects to provide an enterprise-class
wireless messaging platform for Novell GroupWise users. This virtually
untapped market represents an installed base of more than 30 million
seats.
o Entered into a master alliance arrangement with HP that initiates
collaborative marketing efforts on mobile and wireless solutions.
o Designated by Rogers AT&T, Canada's leading wireless communications
service provider, as a preferred vendor to enable the delivery of
wireless application data to Rogers AT&T enterprise customers.
o Released ExtendConnect Mobile Suite, a complete out-of-the-box
PC-to-handset synchronization solution tailored specifically to meet
the needs of mobile handset manufacturers.
o Settled the Intellisync Corporation (formerly Pumatech, Inc.) lawsuit.
BUSINESS OUTLOOK
The Company said that it expects net revenue in the fourth fiscal quarter to
range between $8.0 million and $9.1 million, compared with $8.3 million for the
third quarter of fiscal 2004 and $7.4 million in the year-ago quarter. The
Company expects operating expenses, including cost of license fees and royalties
and cost of services, in a range of $7.9 million to $8.1 million for the fourth
quarter. GAAP operating profit is expected
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to range from $100,000 to $1.0 million and pro-forma operating profit for the
fourth quarter is expected to range from $490,000 to $1.4 million. GAAP basis
earnings per share is expected to be in the range of $.00 to $.05 per share and
pro-forma earnings per share is expected to be in a range of $.02 to $.07 per
share. This outlook assumes fully diluted shares outstanding of 15.5 million.
NON-GAAP DISCLOSURES
This press release includes financial measures for net income (loss), earnings
(loss) per share and operating income (loss) that exclude certain charges or
income and have not been calculated in accordance with GAAP. These measures
differ from GAAP in that they exclude restructuring charges, amortization of
certain intangibles, non-cash stock compensation, and legal expenses and
settlement costs related to the Intellisync Corporation litigation. Management
believes that pro-forma results described above are useful for understanding
ongoing operations. The Company's management refers to these non-GAAP financial
results because they provide meaningful supplemental information regarding the
Company's operational performance including the Company's ability to provide
cash flows to invest in research and development and fund acquisitions and
capital expenditures. Additionally, these non-GAAP financial measures facilitate
management's internal comparisons to the Company's historical operating results
and comparisons to competitors' operating results. Pro-forma results should not
be considered in isolation from, or as a substitute for, financial information
prepared in accordance with GAAP.
CONFERENCE CALL
Extended Systems will hold a conference call today at 5 p.m. Eastern Time to
discuss its quarterly financial results, business highlights and outlook. Those
wishing to participate should call 877-407-9205 (International dial
201-689-8054) at approximately 4:50 p.m. Eastern Time. At this time, management
may answer questions concerning business and financial developments and trends,
management's current view on revenue and earnings forecasts and other business
and financial matters affecting Extended Systems.
A simultaneous live webcast and replay of the call will be available on the
Extended Systems' Web site at www.extendedsystems.com in the Investor Relations
section on the Conference Call page and at www.vcall.com. A replay of the call
will also be available by telephone through April 29, 2004 at 877-660-6853
(International dial 201-612-7415), account number 1628 and conference ID number
101221.
ABOUT EXTENDED SYSTEMS
Extended Systems provides the expertise, strategy and solutions to help
enterprise organizations streamline their business processes through mobile
technology. The Company's OneBridge mobile solutions suite enables companies to
mobilize critical enterprise applications such as e-mail, field service, sales
force automation, enterprise resource planning and customer relationship
management. Extended Systems has
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more than 2,500 enterprise customers worldwide and key alliance relationships
with Avaya, EDS, HP, Microsoft, Motorola, Nokia, palmOne, PalmSource, Sharp,
Siemens, Software AG, Sony Ericsson, Symbian and Toshiba.
Founded in 1984, Extended Systems has offices and subsidiaries in the United
States and worldwide. For more information, call 1-800-235-7576 or visit the
Company Web site.
###
This press release contains forward-looking statements, including statements
relating to the Company's position as a leading provider of mobile solutions for
the enterprise; the Company's ability to benefit from the growing mobile
middleware market; the Company's ongoing relationships with Stewart's Shops,
ThysssenKrupp Elevator, Messaging Architects, HP, and Rogers AT&T; and the
Company's expectations for net revenue, operating expenses, operating profit
(loss), and earnings (loss) per share. These statements are subject to risks and
uncertainties. These risks and uncertainties include the success of the
Company's customer relationships and other key business relationships, overall
economic conditions and the level of information technology spending by existing
and potential customers, the timing of purchases by significant customers, the
perceived and realized benefits of mobile devices, the acceptance of specific
industry-wide standards and protocols, the timely development and acceptance of
new products and technologies, the risks associated with development of new
products and product enhancements, the impact of competitive products and
pricing, continued growth in the markets for our products, the risks associated
with international sales and operations and other risks as detailed from
time-to-time in the Company's SEC filings, including its 2003 Annual Report on
Form 10-K filed on September 29, 2003 and 2004 Quarterly Reports on Form 10-Q.
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EXTENDED SYSTEMS INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31,
------------------------------ ------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenue:
License fees and royalties ........................... $ 6,076 $ 5,696 $ 18,904 $ 16,012
Services and other ................................... 2,231 1,665 5,465 4,141
------------ ------------ ------------ ------------
Total net revenue ............................... $ 8,307 $ 7,361 $ 24,369 $ 20,153
Costs and expenses:
Cost of license fees and royalties ................... 132 99 358 317
Cost of services and other ........................... 911 785 2,704 2,311
Research and development ............................. 1,669 1,709 4,595 5,558
Acquired in-process research and development ......... -- -- -- 430
Marketing and sales .................................. 3,901 3,830 11,541 10,761
General and administrative ........................... 1,131 814 3,395 2,763
Restructuring charges ................................ 117 361 1,446 497
Patent litigation fees, license and settlement ....... 2,080 426 3,425 984
Non-cash stock compensation .......................... 169 -- 337 --
Amortization of purchased technology ................. 138 188 482 537
------------ ------------ ------------ ------------
Total costs and expenses ......................... 10,248 8,212 28,283 24,158
Income (loss) from operations .................... (1,941) (851) (3,914) (4,005)
Other income (expense), net .............................. 4 42 46 (58)
Gain on sale of land ..................................... -- -- 1,058 --
Interest expense ......................................... (139) (65) (318) (264)
------------ ------------ ------------ ------------
Income (loss) before income taxes ................ (2,076) (874) (3,128) (4,327)
Income tax provision (benefit) ........................... 9 (79) 22 (133)
------------ ------------ ------------ ------------
Income (loss) from continuing operations ......... (2,085) (795) (3,150) (4,194)
Income from discontinued operations, net of tax .......... -- 147 88 316
------------ ------------ ------------ ------------
Net income (loss) ................................ $ (2,085) $ (648) $ (3,062) $ (3,878)
============ ============ ============ ============
Earnings (loss) per share from continuing operations:
Basic ................................................ $ (0.14) $ (0.06) $ (0.22) $ (0.31)
Diluted .............................................. $ (0.14) $ (0.06) $ (0.22) $ (0.31)
Earnings per share from discontinued operations:
Basic ................................................ $ 0.00 $ 0.01 $ 0.00 $ 0.02
Diluted .............................................. $ 0.00 $ 0.01 $ 0.00 $ 0.02
Earnings (loss) per share:
Basic ................................................ $ (0.14) $ (0.05) $ (0.22) $ (0.29)
Diluted .............................................. $ (0.14) $ (0.05) $ (0.22) $ (0.29)
Number of shares used in per share calculations:
Basic ................................................ 14,601 13,821 14,236 13,221
Diluted .............................................. 14,601 13,821 14,236 13,221
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EXTENDED SYSTEMS INCORPORATED
RECONCILIATION OF GAAP TO PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------
2004 2003
--------------------------------- ---------------------------------
GAAP PRO-FORMA GAAP PRO-FORMA
RESULTS ADJUSTMENTS RESULTS RESULTS ADJUSTMENTS RESULTS
------- ----------- ------- ------- ----------- -------
Revenue:
License fees and royalties ........................... $ 6,076 $ -- $ 6,076 $ 5,696 $ -- $ 5,696
Services and other ................................... 2,231 -- 2,231 1,665 -- 1,665
-------- -------- -------- -------- -------- --------
Total net revenue ................................ 8,307 -- 8,307 7,361 -- 7,361
Costs and expenses:
Cost of license fees and royalties ............... 132 -- 132 99 -- 99
Cost of services and other ....................... 911 -- 911 785 -- 785
Research and development ......................... 1,669 -- 1,669 1,709 -- 1,709
Acquired in-process research and development ..... -- -- -- -- -- --
Marketing and sales .............................. 3,901 -- 3,901 3,830 -- 3,830
General and administrative ....................... 1,131 -- 1,131 814 -- 814
Restructuring charges ............................ 117 (117) A -- 361 (361) A --
Patent litigation fees, license and settlement ... 2,080 (2,080) B -- 426 (426) B --
Non-cash stock compensation ...................... 169 (169) C -- -- -- C --
Amortization of purchased technology ............. 138 (138) D -- 188 (188) D --
-------- -------- -------- -------- -------- --------
Total costs and expenses ..................... 10,248 (2,504) 7,744 8,212 (975) 7,237
Income (loss) from operations ................ (1,941) 2,504 563 (851) 975 124
Other income (expense), net .......................... 4 -- 4 42 -- 42
Gain on sale of land ................................. -- -- -- -- -- --
Interest expense ..................................... (139) -- (139) (65) -- (65)
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes ............ (2,076) 2,504 428 (874) 975 101
Income tax provision (benefit) ....................... 9 -- 9 (79) -- (79)
-------- -------- -------- -------- -------- --------
Income (loss) from continuing operations ..... (2,085) 2,504 419 (795) 975 180
Income from discontinued operations, net of tax ...... -- -- -- 147 -- 147
-------- -------- -------- -------- -------- --------
Net income (loss) ............................ $ (2,085) $ 2,504 $ 419 $ (648) $ 975 $ 327
======== ======== ======== ======== ======== ========
Earnings (loss) per share from continuing operations:
Basic ............................................ $ (0.14) $ 0.03 $ (0.06) $ 0.01
Diluted .......................................... $ (0.14) $ 0.03 $ (0.06) $ 0.01
Earnings per share from discontinued operations:
Basic ............................................ $ 0.00 $ 0.00 $ 0.01 $ 0.01
Diluted .......................................... $ 0.00 $ 0.00 $ 0.01 $ 0.01
Earnings (loss) per share:
Basic ............................................ $ (0.14) $ 0.03 $ (0.05) $ 0.02
Diluted .......................................... $ (0.14) $ 0.03 $ (0.05) $ 0.02
Number of shares used in per share calculations:
Basic ............................................ 14,601 14,601 13,821 13,821
Diluted .......................................... 14,601 15,347 13,821 13,825
PRO-FORMA ADJUSTMENTS:
A) Restructuring charges.
B) Litigation fees, license and settlement payment related to our lawsuit with
Intellisync Corporation.
C) Amortization of compensation expense for restricted stock awards granted to
key employees and directors.
D) Amortization of purchased technology related to our prior acquisitions of
ViaFone, Advance Systems Limited, and Rand Software Corporation.
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EXTENDED SYSTEMS INCORPORATED
RECONCILIATION OF GAAP TO PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NINE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------
2004 2003
--------------------------------- ---------------------------------
GAAP PRO-FORMA GAAP PRO-FORMA
RESULTS ADJUSTMENTS RESULTS RESULTS ADJUSTMENTS RESULTS
------- ----------- ------- ------- ----------- -------
Revenue:
License fees and royalties ........................... $ 18,904 $ -- $ 18,904 $ 16,012 $ -- $ 16,012
Services and other ................................... 5,465 -- 5,465 4,141 -- 4,141
-------- -------- -------- -------- -------- --------
Total net revenue ................................ 24,369 -- 24,369 20,153 -- 20,153
Costs and expenses:
Cost of license fees and royalties ............... 358 -- 358 317 -- 317
Cost of services and other ....................... 2,704 -- 2,704 2,311 -- 2,311
Research and development ......................... 4,595 -- 4,595 5,558 -- 5,558
Acquired in-process research and development ..... -- -- -- 430 (430) F --
Marketing and sales .............................. 11,541 -- 11,541 10,761 -- 10,761
General and administrative ....................... 3,395 (62) E 3,333 2,763 -- E 2,763
Restructuring charges ............................ 1,446 (1,446) A -- 497 (497) A --
Patent litigation fees, license and settlement ... 3,425 (3,425) B -- 984 (984) B --
Non-cash stock compensation ...................... 337 (337) C -- -- -- C --
Amortization of purchased technology ............. 482 (482) D -- 537 (537) D --
-------- -------- -------- -------- -------- --------
Total costs and expenses ..................... 28,283 (5,752) 22,531 24,158 (2,448) 21,710
Income (loss) from operations ................ (3,914) 5,752 1,838 (4,005) 2,448 (1,557)
Other income (expense), net .......................... 46 -- 46 (58) -- (58)
Gain on sale of land ................................. 1,058 (1,058) -- -- -- --
Interest expense ..................................... (318) -- (318) (264) -- (264)
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes ............ (3,128) 4,694 1,566 (4,327) 2,448 (1,879)
Income tax provision (benefit) ....................... 22 -- 22 (133) -- (133)
-------- -------- -------- -------- -------- --------
Income (loss) from continuing operations ..... (3,150) 4,694 1,544 (4,194) 2,448 (1,746)
Income from discontinued operations, net of tax ...... 88 -- 88 316 -- 316
-------- -------- -------- -------- -------- --------
Net income (loss) ............................ $ (3,062) $ 4,694 $ 1,632 $ (3,878) $ 2,448 $ (1,430)
======== ======== ======== ======== ======== ========
Earnings (loss) per share from continuing operations:
Basic ............................................ $ (0.22) $ 0.11 $ (0.31) $ (0.13)
Diluted .......................................... $ (0.22) $ 0.11 $ (0.31) $ (0.13)
Earnings per share from discontinued operations:
Basic ............................................ $ 0.00 $ 0.00 $ 0.02 $ 0.02
Diluted .......................................... $ 0.00 $ 0.00 $ 0.02 $ 0.02
Earnings (loss) per share:
Basic ............................................ $ (0.22) $ 0.11 $ (0.29) $ (0.11)
Diluted .......................................... $ (0.22) $ 0.11 $ (0.29) $ (0.11)
Number of shares used in per share calculations:
Basic ............................................ 14,236 14,236 13,221 13,221
Diluted .......................................... 14,236 14,824 13,221 13,221
PRO-FORMA ADJUSTMENTS:
A) Restructuring charges.
B) Litigation fees, license and settlement payment related to our lawsuit with
Intellisync Corporation.
C) Amortization of compensation expense for restricted stock awards granted to
key employees and directors.
D) Amortization of purchased technology related to our prior acquisitions of
ViaFone, Advance Systems Limited, and Rand Software Corporation.
E) Legal and other professional services costs of $575,000 related to failed
acquisition activities and the reversal of $513,000 of accrued professional
services costs related to the failed merger with Palm, Inc. in 2001.
F) Acquired in-process research and development incurred in connection with our
acquisition of ViaFone.
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EXTENDED SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PAR VALUE PER SHARE AMOUNTS)
(UNAUDITED)
MARCH 31, JUNE 30,
2004 2003
------------ ------------
ASSETS
Current:
Cash and cash equivalents .................................................. $ 7,756 $ 3,502
Receivables, net of allowances of $392 and $831 ............................ 6,292 5,644
Prepaid and other .......................................................... 961 966
------------ ------------
Total current assets ................................................... 15,009 10,112
Property and equipment, net .................................................... 4,362 5,293
Goodwill ....................................................................... 12,489 12,489
Intangibles, net ............................................................... 715 1,197
Other long-term assets ......................................................... 134 --
------------ ------------
Total assets ........................................................... $ 32,709 $ 29,091
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable ........................................................... $ 2,153 $ 2,314
Accrued expenses ........................................................... 3,674 2,888
Deferred revenue ........................................................... 3,168 2,961
Accrued restructuring ...................................................... 312 722
Current portion of long-term debt .......................................... 434 434
Current portion of capital leases .......................................... 24 22
------------ ------------
Total current liabilities .............................................. 9,765 9,341
------------ ------------
Non-current:
Long-term debt ............................................................. 4,800 325
Capital leases ............................................................. 24 42
Other long-term liabilities ................................................ 133 127
------------ ------------
Total non-current liabilities .......................................... 4,957 494
------------ ------------
Total liabilities ...................................................... $ 14,722 $ 9,835
Stockholders' equity:
Preferred Stock; $0.001 par value per share, 5,000 shares authorized; no
shares issued or outstanding ........................................... -- --
Common stock; $0.001 par value per share, 75,000 shares authorized;
14,665 and 13,977 shares issued and outstanding ........................ 15 14
Additional paid-in capital ................................................. 47,045 44,481
Treasury stock; $0.001 par value per share, 17 and 261 common shares ....... -- --
Accumulated deficit ........................................................ (26,945) (23,884)
Unamortized stock-based compensation ....................................... (413) --
Accumulated other comprehensive loss ....................................... (1,715) (1,355)
------------ ------------
Total stockholders' equity ............................................. 17,987 19,256
------------ ------------
Total liabilities and stockholders' equity ............................. $ 32,709 $ 29,091
============ ============
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EXTENDED SYSTEMS INCORPORATED
RECONCILATION OF GAAP TO PRO-FORMA BUSINESS OUTLOOK
(IN THOUSANDS)
(UNAUDITED)
OPERATING PROFIT
Projected Q4 FY04 GAAP operating profit: $100 - $1,000
Plus Non-GAAP items:
Non-cash stock compensation $200
Amortization of purchased technology $140
Restructuring charges $50
-----------------------
Projected Q4 FY04 Non-GAAP operating profit: $490 - $1,390
=======================
EARNINGS PER SHARE
Projected Q4 FY04 GAAP earnings per share: $0.00 - $0.05
Plus Non-GAAP items:
Non-cash stock compensation $0.01
Amortization of purchased technology $0.01
Restructuring charges $0.00
-----------------------
Projected Q4 FY04 Non-GAAP earnings per share: $0.02 - $0.07
=======================
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