EXHIBIT 99.1
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DATAWATCH CORPORATION REPORTS RESULTS FOR FIRST FISCAL QUARTER OF 2005
DATAWATCH ANNOUNCES REVENUE GROWTH OF 15% AND A SUCCESSFUL
NEW PRODUCT LAUNCH - ENTERPRISE BUSINESS GROWS 35%.
LOWELL, MA - JANUARY 24, 2005 -- Datawatch Corporation (NASDAQ: DWCH), a leading
provider of business intelligence, data transformation and IT support solutions,
today announced results for its first fiscal quarter of 2005.
Revenues for the quarter ended December 31, 2004 were $5,087,000,
compared to $4,407,000 in the same period of fiscal 2004. Net loss for the first
fiscal 2005 quarter was $(154,000) or $(0.03) per diluted share, compared to net
income of $324,000, or $0.06 per diluted share, a year ago.
Commenting on the first quarter's results, president and CEO Robert
Hagger said, "We are very pleased that our recent increased investment in new
products and in sales and marketing is beginning to drive top line growth. Total
revenue increased by 15% in the first quarter of fiscal 2005 compared to the
same quarter in 2004. More significantly, revenues from Enterprise Report
Management and Service Management products increased by 35% in the same period.
New business came predominantly from the local government, healthcare and
financial services sectors.
Also, subscription sales continued to grow in the quarter. Under this
sales model customers pay a monthly subscription fee and can benefit immediately
from the savings and operational improvements derived from our unique product
suites. We now have signed 23 new customers on subscription that will provide
annual revenues in excess of $500,000. The upfront cost of selling and
implementing these projects is absorbed currently, but the recurring revenue
stream will be recognized over the period that the service is provided. We
believe this model will provide a more predictable stream of future revenue as
the customer base expands.
The downside of the investments we are making, and the increasing
subscription sales, is the front end cost. Cost of maintenance and services,
sales and marketing, and engineering and product development increased in the
first quarter by over $1.2 million or 50% from the same period last year,
resulting in a shift for the company from profit to loss in the quarter. We
managed the company conservatively during the recent economic downturn, paying
all of our debt and building up a cash position of over $6.2 million at June 30,
2004. In the face of an improving economy, we believe it is appropriate now to
invest in the future. We invested $2.6 million of cash in the August 2004
purchase of Mergence Technologies Corporation and are continuing the
expenditures referred to earlier to enhance our products, increase our market
presence and expand our base of subscription customers. At December 31, 2004 our
cash and marketable securities balance was $3.4 million.
One of the anticipated benefits of the August 2004 Mergence
Technologies acquisition, was the introduction of a new product now named
Datawatch|Researcher. Datawatch|Researcher is a content and data aggregation
solution that searches inter-related data, documents, and communications, then
merges and analyzes the results into comprehensive actionable case records and
provides an audit trail of the steps taken in the process. We have now received
the first major order for this product. The approximately $160,000 value of this
order will be recognized over the next four quarters as the product is installed
and the services associated with it are rendered. The value of the product was
immediately recognized by a major US medical school to help in their federal
grant certification process. All large institutions that apply for federal
grants need to satisfy specific regulatory standards, as detailed by the Office
of Management and Budget (OMB). Failure to track and provide accurate audit
trails of how grant money is spent on time and materials can lead to the
imposition of substantial fines and penalties. Organizations such as
universities, research & development, and defence contractors can see immediate
tangible and intangible benefits from using the Datawatch|Researcher process to
create and manage project records.
Other business issues that are being addressed by Datawatch|Researcher
are:
o Healthcare; to provide Doctors and Administrators with consolidated
patient views.
o Banking & Finance; to provide consolidated customer and product
views.
o Brokerage; to provide SEC compliance control and audit trails.
With its ability to search for inter-related data over multiple and
disparate data sources, build case records, and remember the process for future
searches, Datawatch|Researcher is a mission critical system for any organization
needing to create case records and provide audit trails. We are pleased by the
initial customer response to this new product."
Datawatch previously announced that the company will present and
discuss its first quarter of fiscal 2005 results today at 2 p.m. (EST) in a live
conference call broadcast via the Internet at
http://www.vcall.com/ClientPage.asp?ID=90174. Listeners are recommended to go to
the website at least 15 minutes early to register and download any necessary
audio software. An archived replay of the broadcast will be available for 30
days at the same location.
ABOUT DATAWATCH CORPORATION
Datawatch Corporation is a leader in business intelligence, data transformation,
and IT support solutions that help organizations increase productivity, reduce
costs and gain competitive advantage. Datawatch products are used in more than
20,000 companies, institutions and government agencies worldwide.
Datawatch works with VARs, integrators, consultants and independent
software vendors who sell and support Datawatch products. In addition, Datawatch
works with OEM customers who embed Datawatch components and technologies in
their own solutions. The corporate address for Datawatch is 175 Cabot Street,
Suite 503, Lowell, MA 01854-3633; telephone (978) 441-2200. More information on
Datawatch and its solutions can be found at http://www.datawatch.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Any statements contained in this press release that do not describe historical
facts may constitute forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Any such statements contained
herein are based on current expectations, but are subject to a number of risks
and uncertainties that may cause actual results to differ materially from
expectations. The factors that could cause actual future results to differ
materially from current expectations include the following: risks associated
with the uncertainty of the current economic climate; risks associated with
fluctuations in quarterly operating results; Datawatch's dependence on its
principal products; risks associated with the Company's recently introduced
subscription sales model; risks associated with international sales; risks
associated with distributor sales; risks associated with acquisitions; an
unfavorable result in any litigation; market acceptance of new products;
dependence on the introduction of new products and possible delays in those
introductions. Further information on factors that could cause actual results to
differ from those anticipated is detailed in various publicly-available
documents, which include, but are not limited to, filings made by Datawatch from
time to time with the Securities and Exchange Commission, including but not
limited to, those appearing in the Company's Form 10-K for the year ended
September 30, 2004. Any forward- looking statements should be considered in
light of those factors.
Datawatch Contact:
Larry Bouchie, (978) 275-8264
larry_bouchie@datawatch.com
DATAWATCH CORPORATION
Condensed Consolidated Statements of Operations
Amounts in Thousands (except per share data)
QUARTER ENDED QUARTER ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
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Revenue:
Software licenses and subscriptions .................... $ 3,217 $ 2,950
Maintenance and services ............................... 1,870 1,457
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Total Revenue .............................................. 5,087 4,407
Costs and expenses:
Cost of software licenses and subscriptions............. 594 630
Cost of maintenance and services ....................... 916 612
Sales and marketing expenses ........................... 2,178 1,539
Product development expenses ........................... 550 279
General and administration expenses .................... 1,029 1,036
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Income from operations ..................................... (180) 311
Other income (expense), net ................................ 26 18
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Income before income taxes ................................. (154) 329
Provision for income taxes ................................. -- 5
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Net income ................................................. $ (154) $ 324
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Net income per share - basic ............................... $ (0.03) $ 0.06
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Net income per share - diluted ............................. $ (0.03) $ 0.06
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Weighted average basic shares outstanding .................. 5,302 5,231
Weighted average diluted shares outstanding ................ 5,302 5,711
DATAWATCH CORPORATION
Condensed Consolidated Balance Sheets
Amounts in Thousands
DECEMBER 31, 2004 SEPTEMBER 30, 2004
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ASSETS:
Cash and investments ................................... $ 3,441 $ 4,261
Accounts receivable, net ............................... 4,076 3,672
Inventories ............................................ 48 68
Prepaid expenses ....................................... 649 614
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Total Current Assets ....................................... 8,214 8,615
Property and equipment, net ................................ 422 434
Other assets ............................................... 3,478 3,580
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Total Assets ............................................... $ 12,114 $ 12,629
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses .................. $ 2,713 $ 3,165
Deferred revenue ....................................... 2,929 2,903
Escrow for Mergence acquisition ........................ 126 --
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Total Current Liabilities .................................. 5,768 6,068
Escrow for Mergence acquisition ............................ -- 125
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Total Liabilities .......................................... 5,768 6,193
Stockholders' equity ....................................... 6,346 6,436
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Total Liabilities and Stockholders' Equity.................. $ 12,114 $ 12,629
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