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Mercator Software reported a 4th quarter pro-forma profit of $0.06 per share, a penny above the First Call estimate, vs year-ago profit of $0.05. The company's revenues increased 109% to $31 million.

The earnings report follows....


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Mercator Software Announces Record Fourth Quarter and Full Year Financial Results; E-business Drives Triple Digit Revenue Growth


WILTON, Conn.--(BUSINESS WIRE)--Feb. 2, 2000--Mercator(R) Software (NASDAQ: TSFW), the e-business transformation company, today announced record financial results for the fourth quarter and year ended December 31, 1999.

Revenues for the fourth quarter of 1999 increased 109% to a record $31.0 million from $14.9 million for the fourth quarter of 1998. On a pro forma basis, excluding amortization of intangibles, Mercator had operating income for the fourth quarter of $2,740,300, up 71% from $1,604,500 in the prior year's fourth quarter. Net income on a pro forma basis for the fourth quarter of 1999 rose 28% to $1,777,700 from $1,394,000 for the fourth quarter of 1998.

For the 3 For the 12

Months Ended Months Ended

December 31, December 31,

(In thousands, except

per share data) 1999 1998 1999 1998



Revenues $31,013 $14,872 $98,625 $45,316

Operating income (a) 2,740 1,605 10,206 4,766

Operating margin (a) 8.8% 10.8% 10.3% 10.5%

Pro forma net income (a) (b) 1,778 1,394 6,939 4,204

Pro forma income per fully

diluted Share (a) (b) $ 0.06 $ 0.05 $ 0.24 $ 0.18

Shares outstanding,

Fully diluted (a) 31,562 25,486 28,360 23,816

(a) Adjusted to exclude amortization of intangible assets (see

below). Including amortization, net (loss) is ($8,045,000) for

the three months ending December 31, 1999 and net (loss) per

share is ($.29). For the twelve months ended December 31, 1999,

including amortization, net (loss) is ($16,268,000) and ($.64)

per share. (b) Amounts presented on a pro forma basis, assuming a tax rate of

38%.

Mercator net income per share, on a pro forma basis, was $0.06 for the fourth quarter of 1999 versus $0.05 per share from the prior fourth quarter.

Revenues for the twelve months ended December 31, 1999 increased 118% to $98.6 million from $45.3 million for the twelve month period in the prior year. On a pro forma basis, excluding amortization of intangibles, as illustrated in the table above, Mercator had operating income for the twelve months ended December 31, 1999 of $10,206,000, up 114% from $4,766,400 in the prior year. Net income on a pro forma basis for the first 12 months of 1999 rose 65% to $6,939,000 from $4,204,200 for 1998.

Mercator net income per share, on a pro forma basis was $0.24 for the twelve months ended December 31, 1999 versus $0.18 per share in the prior year. The impact of amortization is summarized in the accompanying pro forma statements.

For full details on the Mercator reported results, see the financial tables accompanying this release.

Quarterly Highlights

"Our momentum as a leading provider of software essential for e-business transformation continued this quarter," remarked Connie Galley, president and CEO. "For the first time, over half of our license revenue was driven by the move to e-business. Internet commerce is firmly in the driver's seat of our business. We are proud to report triple digit revenue growth for the fourth quarter and the year, with license revenue growing a hefty 32% sequentially - a strong indicator of the accelerating demand for e-business integration software.

"The unique qualities of Mercator make it an essential component of e-business transformation - a challenge that faces companies of all shapes, sizes and industries. We have a rich prospect base of thousands of existing customers that can leverage their current investment in Mercator to extend their business to the Web. We believe the opportunities are vast."

The fourth quarter brought new customers and partners from e-marketplaces, dotcoms, and clicks-and-mortar businesses, all evidence of the key role that Mercator plays in the e-business architecture of companies across all industries. In addition, Mercator generated significant follow-on sales from existing customers and partners that adopted Mercator as the platform for their e-business transformation.

In total, Mercator recorded well over 140 transactions during the fourth quarter, with more than half of its revenue coming from existing customers, including Chevron Chemical, Dell Computer, Dixie Group, Eastman Kodak, eGM, Eli Lilly, Fujitsu Network Communications, Home Life, Phillip Morris, Sotheby's, and Skulogix, among many others.

E-business Integration at Mercator

Mercator's success comes from customers and partners choosing Mercator to address the full spectrum of integration requirements in support of e-business including business-to-business (B2B) integration with partners, consumer-to-business (C2B) integration with customers, or application-to-application (A2A) integration within the enterprise. Transactions in the quarter included a number of new e-business companies, including:

E-Marketplace, Purchasingcenter.com, an internet-based e-procurement

service for maintenance, repair and operations (MRO) supplies

uses Mercator as part of its online catalog service to transform

XML-formatted orders from its e-marketplace into EDI formats

required by suppliers.

New application service provider, e-Com Hiways, selected Mercator

to integrate content from a diverse set of electronic supplier

catalogs for its promising online catalog business.

Internet billing and tracking software and services firm Apogee

Networks uses Mercator Web Broker to manage, track and integrate

commerce between corporations and their internal and external

ISPs.

Revenue from Mercator indirect channels was particularly strong during the quarter, capping a year of substantial growth in the number of Mercator indirect channel partners. Mercator significantly strengthened its indirect channel with the addition of new e-business resellers: Lawson Software embeds Mercator technology as part of its XML-based Collaborative Commerce Suite. ProcureNet, the leading provider of "e-partnered procurement solutions," is embedding Mercator in its OneSource online procurement product for Web-top requisitioning of MRO materials. In November, Mercator also announced a significant relationship with Oracle, which recommends Mercator to provide XML-to-any integration for customers of its Oracle Integration Server.

Over half of the revenue from Mercator indirect channels was generated from existing partners licensing additional product. Substantial repeat business in the quarter came from Allenbrook, Boston Scientific, Compaq, Erisco and ProxyMed.

Telecommunications and financial services are additional markets where Mercator is experiencing growing success. To further its presence, Mercator created specialized sales teams in the fourth quarter to focus on these markets. During the quarter, significant transactions came from telecommunications companies Bell Atlantic, Ericsson Americas, and GTE, and partners Nightfire Software and DSET. Financial services customers included Bank of Ireland, Citibank Singapore, Deutsche Bank, HSBC Bank USA, National Australia Bank, Societe General, and State Street Brokerage.

In 1999 Mercator invested in expanding its business globally. For the year, approximately one-third of Mercator total revenue was generated from outside North America, up from less than ten percent the prior year. Among many others, Dell Computer UK, DSC Consultants, Kingfisher, NSB Retail Solutions, Syntegra, United Biscuits and Shell Services licensed Mercator in the quarter. In addition, the fourth quarter marked the introduction of a completely localized version of Mercator for Japanese customers, marketed by Mercator strategic partner, Mitsui, resulting in several new Japanese customers.

Continued Galley, "The success we experienced in 1999 and the dramatic sea change in our business drivers was the impetus to the mid-January announcement of our new corporate identity. We have accelerated our ability to serve the e-business integration market with the launch of a new suite of products. We believe the Mercator E-Business Broker suite makes Mercator the only company that addresses the e-business integration requirements for B2B, C2B and A2A from a single integration product architecture. All three products leverage the unparalleled Mercator XML-to-any transformation technology. We look forward to introducing these products to our expansive base of over 5000 customers."

"Customers not only demand proven technology to meet their needs, but a proven company with a history of success. The fourth quarter of 1999 marks the 11th consecutive quarter that Mercator has recorded record revenue and growing operating profits," stated Ira Gerard, chief financial officer. "We are at the forefront of a tremendous e-business market opportunity, and are proud of our consistent and strong financial performance."

Effective February 7, 2000, Mercator Software will change its ticker symbol to NASDAQ: MCTR.

About Mercator Software

Mercator is the leading provider of e-business transformation software. Our products dramatically simplify customer migration to e-business across every industry, providing unprecedented levels of automation for the most difficult e-business integration tasks.

Mercator integration broker products address customer requirements for business-to-business (B2B), application-to-application (A2A) and consumer-to-business (C2B) integration in every industry. More than 5,000 customers use our products to accelerate their transformation to e-business and over 100 partners embed or resell our technology to enhance their product or service offerings. Additional information about Mercator can be found on the Internet at www.mercator.com.

Mercator Software is the new trade name of TSI International Software Ltd., headquartered in Wilton, Connecticut. The company will seek stockholder approval to formally change its name at an upcoming stockholder meeting.

Mercator is a registered trademark of TSI International Software Ltd., d/b/a/ Mercator Software.

Legal Notice Regarding Forward-Looking Statements:

Statements in this press release that are not purely historical are forward-looking statements, including statements regarding TSI International Software Ltd.'s, dba Mercator, (the Company) beliefs, expectations, hopes or intentions regarding the future. Forward-looking statements in this release include, but are not limited to, statements regarding the growth of the enterprise application market, the demand for the Company's application integration solutions and the speed of deployment of new products, including combined Mercator e-business integration broker products. It is important to note that actual outcomes and the Company's actual results could differ materially from those in such forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as changes in demand for application integration or e-business integration software and the Company's Mercator e-business integration broker suite of products in particular, the ability of the Company to expand its international operations, the ability of the Company to manage expanded global operations, the ability of the Company to continue to add resellers and other distribution channels, and the success of third parties in utilizing and marketing the Company's products, or seasonality in operating results. Readers should also refer to the risk disclosures outlined in the Company's reports filed with the Securities and Exchange Commission. All forward-looking statements and reasons why results might differ included in this release are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any such forward-looking statement or reason why results might differ.

TSI INTERNATIONAL SOFTWARE LTD. dba MERCATOR SOFTWARE

Consolidated Condensed Statements of Income

(In thousands, except per share data)





Quarter Ended Twelve Months Ended

December 31, December 31,

1999 1998 1999 1998

---- ---- ---- ----

Revenues:

Software licensing $ 19,626 $ 9,288 $ 56,820 $ 29,105

Maintenance 5,993 2,763 23,208 9,843

Professional

Services 5,394 2,821 18,597 6,368

-------- -------- -------- --------

Total Revenues $ 31,013 $ 14,872 $ 98,625 $ 45,316

Cost of Revenues:

Software licensing 261 371 1,286 1,482

Service,

maintenance, other 6,431 2,783 21,370 5,407

-------- -------- -------- --------

Total Cost of

Revenues $ 6,692 $ 3,154 $ 22,656 $ 6,889

-------- -------- -------- --------



Gross Profit $ 24,321 $ 11,718 $ 75,969 $ 38,427



Operating Expenses:

Product development 5,203 1,527 15,276 5,699

Selling & marketing 13,347 6,732 41,187 22,033

General & admin 3,031 1,855 9,300 5,929

Amortization of

intangibles 11,384 303 27,689 303

-------- -------- -------- --------

Total Operating

Expenses $ 32,965 $ 10,417 $ 93,452 $ 33,964

-------- -------- -------- --------



Operating Income

(Loss) (8,644)(c) 1,301 (17,483)(c) 4,463(c)



Interest Income

(Borrowing), Net 127 644 987 2,015

-------- -------- -------- --------

Income before income

taxes (8,517) 1,945 (16,496) 6,478



Provision (benefit)

for income taxes (472) (1,244) (228) (679)

-------- -------- -------- --------



Net Income (Loss) $ (8,045) $ 3,189 $(16,268) $ 7,157

======== ======== ======== ========

Net Income (Loss)

Per Share

- Basic $ (0.29) 0.14 $ (0.64) 0.35

- Diluted $ (0.29) 0.13 $ (0.64) 0.30

======== ======== ======== ========

Weighted average no.

of common and

common equivalent

shares Outstanding

- Basic 27,668 22,098 25,376 20,300

- Diluted 27,668 25,486 25,376 23,816

======== ======== ======== ========



Excluding amortization,

net of tax effect:



Net Income $ 1,778 $ 1,394 $ 6,939 $ 4,204

======== ======== ======== ========

Net Income Per

Share - Diluted $ 0.06 $ 0.05 $ 0.24 $ 0.18



(c) Excluding amortization of intangibles ($11,384,000) and

($27,689,000), operating income would have been $2,740,000 for

the quarter ended December 31, 1999, and $10,206,000 for the year

ended December 31, 1999, respectively.





TSI INTERNATIONAL SOFTWARE LTD. dba MERCATOR SOFTWARE

Consolidated Condensed Balance Sheets

(In thousands)



Dec. 31, Sept. 30, Dec. 31,

1998 1999 1999

---- ---- ----

ASSETS (Unaudited)



Current Assets:



Cash & cash equivalents $ 15,133 $ 9,410 $ 9,237

Marketable securities, at cost 32,812 7,026 5,648

Accounts receivable, net 17,966 33,427 38,270

Current portion of investment in

licensing contracts receivable, net 522 353 342

Prepaid expenses & other current

assets 729 1,884 2,643

Deferred tax asset 2,695 2,804 10,379

--------- --------- ---------

Total Current Assets $ 69,857 $ 54,904 $ 66,519



Furniture, fixtures & equip., net 2,700 6,118 6,517

Goodwill & other intangibles 5,155 168,109 153,228

Investment in licensing contracts

receivable, net 271 211 187

Other assets 204 289 364

--------- --------- ---------

Total Assets $ 78,187 $ 229,631 $ 226,815

========= ========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



Accounts payable $ 1,547 $ 4,133 $ 3,937

Accrued expenses 6,480 7,986 8,176

Current portion of deferred

revenue 8,088 14,276 14,737

--------- --------- ---------

Total Current Liabilities $ 16,115 $ 26,395 $ 26,850



Other long-term liabilities 17 16 --

Deferred tax liability -- 13,020 12,253

Deferred revenue, less current

portion 156 51 59

--------- --------- ---------

Total Liabilities $ 16,288 $ 39,482 $ 39,162



Stockholders' equity:

Common stock $ 223 $ 275 $ 278

Additional paid-in-capital 63,845 199,880 205,421

Accumulated deficit (400) (8,623) (16,668)

Cumulative foreign currency

translation adjustment (338) (367) (495)

Deferred compensation (1,431) (1,016) (883)

--------- --------- ---------



Total Stockholders' Equity $ 61,899 $ 190,149 $ 187,653

--------- --------- ---------

$ 78,187 $ 229,631 $ 226,815

========= ========= =========





TSI INTERNATIONAL SOFTWARE LTD. dba MERCATOR SOFTWARE

Pro forma Consolidated Statement of Operations

Impact of Amortization on Reported Net Income (Loss)



(In thousands, except per share data)



(Unaudited)



For the Quarter Ended December 31, 1999

As Reported Adjustments(d) As Adjusted



Revenues $31,013 $31,013

Cost of revenues 6,692 6,692

------- -------

Gross margin 24,321 24,321

Operating expenses 32,965 $(11,384) 21,581

------- -------- -------

Income (Loss) from operations (8,644) 11,384 2,740

Interest and other, net 127 -- 127

------- -------- -------

Income (Loss) before provision

for taxes (8,517) 11,384 2,867

Provision (Benefit) for income

taxes (472) 1,561 1,089

------- -------- -------

Net Income (Loss) $(8,045) $9,823 1,778

Net Income (Loss) per share-Basic $(0.29) $0.06

Net Income (Loss) per share-Fully

diluted (0.29) 0.06

Pro forma shares outstanding-

Basic 27,668 27,668

Pro forma shares outstanding-

Fully Diluted 27,668 31,562





For the Twelve Months Ended December 31, 1999

As Reported Adjustments(d) As Adjusted



Revenues $98,625 $98,625

Cost of revenues 22,656 22,656

------- -------

Gross margin 75,969 75,969

Operating expenses 93,452 $(27,689) 65,763

------- -------- -------

Income (Loss) from operations (17,483) 27,689 10,206

Interest and other, net 987 -- 987

------- -------- -------

Income (Loss) before provision

for taxes (16,496) 27,689 11,193

Provision (Benefit) for income

taxes (228) 4,482 4,254

------- -------- -------

Net Income (Loss) $(16,268) $23,207 6,939

Net Income (Loss) per share-

Basic $(0.64) $0.27

Net Income (Loss) per share-

Fully diluted (0.64) 0.24

Pro forma shares outstanding-

Basic 25,376 25,376

Pro forma shares outstanding-

Fully Diluted 25,376 28,360



(d) The adjustments to income (loss) before provision for taxes

represent the reversals of acquisition related amortization. The

adjustment to the provision for income taxes is to reflect a 38%

tax rate, although the rate is expected to exceed 38% based on

the impact of goodwill amortization.

CONTACT:

Cynthia Cronk Brockhoff

Mercator

(203) 761-8600

ccronk@mercator.com

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