Press Release
- Date:
- Tuesday, July 29, 2003
- Contact:
- Mark Funston
- Phone:
- (301) 731-2300
- Email:
- mark_funston@g1.com
Group 1 Software Announces Record First Quarter Results
Operating Income Up 69% to $2.5 Million; Net Income Up 114% to $2.1 Million; EPS Increases to $0.13 vs. $0.07 Prior Year
Lanham, MD — Group 1 Software (Nasdaq: GSOF) today reported results for its first fiscal quarter ended June 30, 2003. The Company reported record first quarter net income of $2.1 million, a 114% increase compared with the prior year. Fully diluted earnings per share, also a record for the first quarter, were $0.13 vs. $0.07 the prior year, despite a substantially higher diluted share count.
Operating income totaled $2.5 million, a new record as well and up 69% over the prior year. Non-operating income totaled $777,000, primarily the result of gain from the sale of intellectual property no longer needed by the Company plus favorable currency exchange.
The Company reported record first quarter revenue of $24.3 million, up 4% from the strong revenue performance reported in the prior year's first quarter. Total revenue for the quarter from Enterprise Solutions software and services was $17.4 million compared with $16.1 million in the prior year's first quarter. Total revenue from DOC1 Customer Communications Management software and services was $6.9 million compared with $7.3 million in the prior year's first quarter.
First quarter license fee revenue for the Company increased to $10.5 million from $9.9 million reported the prior year. License fees in the Enterprise Solutions division were $8.3 million, up 16% vs. the $7.1 million reported the prior year. License fees in the DOC1 division were $2.2 million compared with $2.8 million reported the prior year.
Group 1's cash position remained strong. Even after disbursing $7.0 million for the secured bridge loan to Sagent Technology, cash and short-term investments totaled $57.8 million at June 30, 2003 compared with $64.2 million at March 31, 2003 and $51.6 million at June 30, 2002.
“Regarding our pending acquisition of the key assets of Sagent Technology, Inc., we were informed today that a quorum was not present at Sagent's special stockholder's meeting,” said Bob Bowen, CEO of Group 1 Software. “Sagent also notified Group 1 that it wishes to modify our bridge loan to them, allowing Sagent to operate while resetting the record date and again seeking shareholder approval. The votes cast were 36 to1 in favor of the transaction, but unfortunately, not enough votes were cast. While these results were disappointing, we remain fully committed to adding Sagent's talented individuals, powerful technology, strong customers, and global distribution channels to the Group 1 family.”
“We are pleased with our first quarter earnings, given that this is historically our softest quarter for both revenue and earnings,” continued Bowen. “In the Enterprise Solutions division, customers continue to expand their use of our core data quality technology. Despite the decline in license revenue in the DOC1 division, we continue to see strong demand for DOC1 Archive in the Americas and worldwide.”
“In spite of the somewhat softer than projected revenue reported today, we remain confident in our fiscal year guidance,” said Mark Funston, CFO of Group 1 Software. “We project full year revenue growth in the range of 10% to 12% and net earnings growth in the range of 24% to 28% over fiscal year 2003, prior to the effect of the Sagent transaction. We continue to project that the Sagent acquisition will contribute approximately $30 million in revenue the first year. The acquisition is expected to become accretive to earnings within twelve months following its completion, with first year earnings per share dilution in the range of $0.08 to $0.10 excluding one time transaction related costs.”
The Company will hold a conference call at 4:30 PM EDT today to discuss these results. Interested parties are invited to listen to the call, which will be broadcast via the Internet at www.g1.com or by dialing 800-374-0565. For a replay of the call, please dial (800) 642-1687 and enter passcode 1771347.
Group 1 Software (Nasdaq: GSOF) is a leading provider of software solutions for data quality, customer communications management and direct marketing applications. Group 1's software systems and services enable over 2,000 customers worldwide to market smarter by helping them find, reach and keep customers. Founded in 1982 and headquartered in Lanham, Maryland, Group 1's solutions are utilized by leaders in the financial services, banking, retail, telecommunications, utilities, e-commerce, and insurance industries. The company's customer base includes such recognized names as Charles Schwab, Entergy, GEICO, L.L. Bean, QVC and Wal-Mart. For more information about Group 1, visit the company's Web site at .
GROUP 1 SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
(unaudited) For the Three Month Period Ended June 30, 2003 2002 Revenue: Software license and related revenue $ 10,468 $ 9,877 Maintenance and services 13,788 13,502 Total revenue 24,256 23,379 Cost of revenue: Software license expense 3,799 4,071 Maintenance and service expense 4,450 4,274 Total cost of revenue 8,249 8,345
Gross profit 16,007 15,034
Operating expenses: Research and development 2,769 2,742 Sales and marketing 7,580 7,510 General and administrative 3,200 3,330 Total operating expenses 13,549 13,582 Income from operations 2,458 1,452
Non-operating income 777 105
Income from operations before provision for income taxes 3,235 1,557
Provision for income taxes 1,182 584 Net income 2,053 973
Preferred stock dividend requirements - - - (14) Net income available to common stockholders $ 2,053 $ 959
Basic earnings per share $ 0.15 $ 0.08
Diluted earnings per share $ 0.13 $ 0.07
Basic weighted average shares outstanding 13,724 12,616
Diluted weighted average shares outstanding 15,862 13,886
GROUP 1 SOFTWARE, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value)
June 30, March 31, 2003 2003 (unaudited)
ASSETS Current assets: Cash and cash equivalents $ 49,420 $ 56,475 Short-term investments, available- for-sale 8,422 7,712 Trade and installment accounts receivable, less allowance of $1,484 and $1,755 13,929 18,834 Notes receivable 7,000 - - - Deferred income taxes 1,715 2,130 Prepaid expenses and other current assets 3,603 4,067 Total current assets 84,089 89,218
Installment accounts receivable, long-term 30 39 Property and equipment, net 4,864 4,707 Computer software, net 23,600 23,490 Goodwill 12,722 12,716 Other assets 220 206 Total assets $ 125,525 $ 130,376
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,345 $ 1,358 Current portion of note payable 347 371 Accrued expenses 5,836 7,033 Accrued compensation 4,837 9,454 Current deferred revenues 28,203 31,241 Total current liabilities 40,568 49,457
Note payable, net of current portion 350 350 Deferred revenues, long-term 386 315 Deferred income taxes 4,402 4,694 Total liabilities 45,706 54,816 Commitments and contingencies - - - - - -
Stockholders' equity: 6% cumulative convertible preferred stock $0.25 par value; 1,200 shares authorized; no shares issued (aggregate involuntary liquidation preference $950) - - - - - - Common stock $0.50 par value; 50,000 shares authorized; 15,041 and 14,902 shares issued 7,521 7,451 Additional paid in capital 36,333 34,951 Retained earnings 39,672 37,619 Accumulated other comprehensive income 938 184 Less treasury stock, 1,246 shares, at cost (4,645) (4,645) Total stockholders' equity 79,819 75,560 Total liabilities and stockholders' equity $ 125,525 $ 130,376