EXHIBIT 99.1
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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
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EXTENDED SYSTEMS REPORTS PROFITABILITY ON 17% YEAR-OVER-YEAR REVENUE
GROWTH IN SECOND QUARTER OF FISCAL 2005
NET INCOME OF $.07 PER SHARE REPORTED FOR THE QUARTER
BOISE, Idaho--(January 25, 2005)--Extended Systems Incorporated (NASDAQ: XTNDE),
a leading provider of mobile application solutions for the enterprise, today
reported net revenue of $9.94 million for the second quarter of fiscal 2005
ended December 31, 2004. This represents increases of 17% over net revenue of
$8.51 million for the second quarter of fiscal 2004 and 27% over net revenue of
$7.85 million for the first quarter of fiscal 2005. The Company attributed the
revenue growth to a combination of factors including completion of a significant
OEM agreement, device manufacturer customers reporting additional royalties
related to prior quarters, and favorable currency exchange rates on revenue
generated in Europe.
The Company reported net income of $1.1 million, or $0.07 per share, for the
second quarter of fiscal 2005, compared to net income of $459,000, or $0.03 per
share, for the same quarter last year, and net income of $47,000, or breakeven
per share, for the first quarter of fiscal 2005. Net income for the second
quarter of the last fiscal year included a one-time gain of $1.1 million, or
$0.07 cents per share, from the sale of land. Income from operations was $1.33
million for the second fiscal quarter of 2005 compared to a loss from operations
of $474,000 for the same quarter last year and income from operations of
$202,000 for the first quarter of fiscal 2005. Cash and cash equivalents were
$5.14 million as of December 31, 2004, compared to $7.12 million as of September
30, 2004 and $7.23 million at June 30, 2004. The decline in cash is the result
of a higher investment in working capital at the end of the quarter.
"Our financial performance in the second quarter recognizes the many months of
hard work by our people and our partners. Our profit levels exceeded
expectations and I am optimistic about the Company's prospects going forward,"
said Charles Jepson, President and CEO. "License revenue from our enterprise
mobility product line grew 22% over the year-ago quarter. In addition to
benefiting from exchange rates on European sales, revenue growth from these
products resulted from a major groupware provider purchasing our technology for
incorporation into its product, as well as from growing demand from our
installed customer base and new successes with Global 2000 companies," Jepson
continued.
"Our professional services group experienced revenue growth as a result of
projects from both current and new customers. Our services group is a key
competitive advantage to enable our customers to implement complex mobile
applications. We are optimistic that the project success of our professional
services group will lead to increased license sales of Extended Systems'
products in the future," said Jepson.
As previously announced, on December 29, 2004 the Company engaged Grant Thornton
LLP as its independent registered public accounting firm for the fiscal year
ended June 30, 2005. The Company expects to file an amended Form 10-Q/A for the
first quarter of fiscal 2005 on January 26, 2005. The Company believes filing
the amended Form 10-Q/A will bring the Company into compliance with the Nasdaq
National Market continued listing requirements and the Company will immediately
petition the Nasdaq Listing Qualifications Panel for a determination that the
Company has remedied its filing delinquency and that it is in compliance with
all other requirements for continued listing. The fifth character "E" will
remain appended to the Company's trading symbol pending such a determination.
OTHER HIGHLIGHTS INCLUDED:
o Announced that the OneBridge Mobile Platform is the underlying
enabling technology for Weight Watchers On-the-Go - the industry's
first mobile weight-loss application that synchronizes with a
subscriber account on WeightWatchers.com.
o Announced the availability of XTNDAccess Device Management SDK, a
full-featured toolkit that enables manufacturers to embed
industry-standard device management client protocols into cell phones.
As part of an overall device management strategy, XTNDAccess Device
Management SDK enables carriers to perform firmware patch upgrades
over-the-air. Quanta, an ODM handset manufacturer based in Taiwan, has
licensed XTNDAccess Device Management SDK.
o Released a new module for OneBridge Mobile Platform, enabling
enterprises to extend business-critical enterprise applications to
Java-based BlackBerry Wireless Handhelds(TM) via the Mobile Data
Service feature oF BlackBerry Enterprise Server(TM). OneBridge's
support for Java-based BlackBerry(R) devices means that BlackBErry
users will be able to access OneBridge Mobile Solutions' range of
wireless business applications.
o Provided several enhancements to the OneBridge Mobile Platform with
notable new features including extended administrator provisioning
controls for managing devices, optimized Palm OS(R) synchronization,
and expanded device support.
o Filed a lawsuit against Agilent Technologies Singapore Pte. Ltd., a
subsidiary of Agilent Technologies, Inc. (NYSE: A), in the United
States District Court for the District of Idaho. The lawsuit asserts
Agilent has failed to provide complete or accurate reports of the
number of royalty bearing units shipped and failed to make royalty
payments required under the terms of a July 2002 agreement with
Agilent. Under the agreement, Agilent agreed to pay Extended Systems
specific royalties for its IrDA and IrFM software used with Agilent
transceivers in Samsung telephones.
o Appointed Neal Benz, who brings over 25 years of software development
experience to the Company, to direct worldwide research and
development efforts. Kerrin Pease, who previously held the vice
president of research and development position, left to pursue other
interests. In January 2005 Jeffrey Siegel, the Company's former chief
marketing officer, left to pursue other interests.
BUSINESS OUTLOOK
The Company said that it expects net revenue for the third fiscal quarter of
2005 to range between $8.5 million and $9.5 million, compared with $8.3 million
for the same quarter last year. The Company expects operating expenses,
including cost of license fees and royalties and cost of services, to range
between $8.2 million and $8.3 million for the third quarter, which would result
in operating income ranging between $300,000 and $1.2 million, and net income
per fully diluted share ranging between breakeven and $0.06. This outlook
assumes diluted outstanding shares of 15.3 million. The Company also said this
preliminary guidance could be positively impacted if large opportunities already
in the pipeline develop and close in the quarter.
CONFERENCE CALL
Extended Systems will hold a conference call today at 5 p.m. Eastern 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.
A simultaneous live webcast and replay of the call will be available on Extended
Systems' web site at www.extendedsystems.com/q2call and at www.vcall.com. A
replay of the call will also be available by telephone through January 26, 2005
at 877-660-6853 (International dial 201-612-7415), account number 1628 and
conference ID number 134618.
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 (SFA), enterprise resource planning (ERP) and customer
relationship management (CRM). Extended Systems has more than 2,500 enterprise
customers worldwide and key alliance relationships. 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.
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This press release contains forward-looking statements, including statements
relating to the Company's position as a leading provider of mobile application
solutions for the enterprise; the Company's future prospects; the success of the
Company's professional services group; filing an amended Form 10-Q/A for the
first quarter of fiscal 2005; the Company's continued listing on the Nasdaq
National Market; the ongoing success of the Company's OneBridge and XTNDAccess
products; the Company's ongoing relationships with WeightWatchers.com and
Quanta; the outcome of the Company's lawsuit filed against Agilent Technologies
Singapore Pte. Ltd.; and the Company's expectations concerning revenue,
operating expenses, operating income, and earnings per share for the third
quarter of fiscal 2005. 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 risk that The Nasdaq Listing Qualifications Panel may determine
the Company remains noncompliant with requirements for continued listing, 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, 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 2004 Annual Report
on Form 10-K filed on September 29, 2004 and its 2005 Quarterly Reports on Form
10-Q.
EXTENDED SYSTEMS INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PAR VALUE PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
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2004 2003 2004 2003
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Revenue:
License fees and royalties ....................... $ 7,640 $ 7,057 $ 13,441 $ 12,828
Services and other ............................... 2,301 1,450 4,346 3,234
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Total net revenue ........................... 9,941 8,507 17,787 16,062
Costs and expenses:
Cost of license fees and royalties ............... 129 144 196 226
Cost of services and other ....................... 1,060 1,033 1,945 2,136
Amortization of identifiable intangibles ......... 43 155 117 344
Research and development ......................... 1,918 1,496 3,628 3,164
Marketing and sales .............................. 3,819 3,490 7,203 6,684
General and administrative ....................... 1,354 1,458 2,730 2,639
Restructuring charges ............................ -- 261 -- 1,329
Patent litigation fees, license and settlement ... -- 776 -- 1,345
Non-cash stock compensation ...................... 291 168 439 168
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Total costs and expenses .................... 8,614 8,981 16,258 18,035
Income (loss) from operations ............... 1,327 (474) 1,529 (1,973)
Other income (expense), net ......................... (91) (18) (88) 42
Gain on sale of land ................................ -- 1,058 -- 1,058
Interest expense .................................... (133) (145) (266) (179)
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Income (loss) before income taxes ........... 1,103 421 1,175 (1,052)
Income tax provision ................................ 7 9 32 13
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Income (loss) from continuing operations .... 1,096 412 1,143 (1,065)
Income from discontinued operations, net of tax ..... -- 47 -- 88
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Net income (loss) ........................... $ 1,096 $ 459 $ 1,143 $ (977)
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Earnings (loss) per share from continuing operations:
Basic ............................................ $ 0.07 $ 0.03 $ 0.07 $ (0.08)
Diluted .......................................... $ 0.07 $ 0.03 $ 0.07 $ (0.08)
Earnings per share from discontinued operations:
Basic ............................................ $ 0.00 $ 0.00 $ 0.00 $ 0.01
Diluted .......................................... $ 0.00 $ 0.00 $ 0.00 $ 0.01
Earnings (loss) per share:
Basic ............................................ $ 0.07 $ 0.03 $ 0.07 $ (0.07)
Diluted .......................................... $ 0.07 $ 0.03 $ 0.07 $ (0.07)
Number of shares used in per share calculations:
Basic ............................................ 15,119 14,083 15,104 14,036
Diluted .......................................... 15,207 14,597 15,264 14,036
EXTENDED SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PAR VALUE PER SHARE AMOUNTS)
(UNAUDITED)
DECEMBER 31, JUNE 30,
2004 2004
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ASSETS
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Current:
Cash and cash equivalents .............................................. $ 5,140 $ 7,225
Receivables, net of allowances of $633 and $446 ........................ 9,819 6,772
Prepaid and other ...................................................... 1,077 1,449
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Total current assets .............................................. 16,036 15,446
Property and equipment, net ............................................... 4,142 4,331
Construction in progress .................................................. 911 384
Goodwill .................................................................. 12,489 12,489
Intangibles, net .......................................................... 459 576
Other long-term assets .................................................... 122 130
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Total assets ...................................................... $ 34,159 $ 33,356
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current:
Accounts payable ....................................................... $ 1,675 $ 1,664
Accrued expenses ....................................................... 4,283 3,531
Deferred revenue ....................................................... 3,169 3,569
Accrued restructuring .................................................. -- 116
Current portion of long-term debt ...................................... 108 325
Current portion of capital leases ...................................... 20 25
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Total current liabilities ......................................... 9,255 9,230
Non-current:
Long-term debt ......................................................... 4,800 4,800
Capital leases ......................................................... 11 17
Other long-term liabilities ............................................ 153 153
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Total non-current liabilities ..................................... 4,964 4,970
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Total liabilities ................................................. 14,219 14,200
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;
15,170 and 15,078 shares issued and outstanding ..................... 15 15
Additional paid-in capital ............................................. 48,453 48,005
Treasury stock; $0.001 par value per share, 4 and 0 common shares ...... -- --
Accumulated deficit .................................................... (25,991) (27,134)
Unamortized stock-based compensation ................................... (139) (231)
Accumulated other comprehensive loss ................................... (2,398) (1,499)
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Total stockholders' equity ........................................ 19,940 19,156
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Total liabilities and stockholders' equity ........................ $ 34,159 $ 33,356
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