IINT Indus

Indus International Inc. (NASDAQ: IINT), a leading Service Delivery Management (SDM) solution provider, today announced its results of operations for the first quarter ended June 30, 2006. GAAP net loss for the quarter was $1.7 million, or $0.03 per fully diluted share, compared to net income of $1.6 million, or $0.03 per fully diluted share, in the same quarter last year and $2.1 million, or $0.03 per fully diluted share, in the prior quarter. Non-GAAP adjusted net loss, which excludes restructuring expenses and benefits and certain stock compensation expense, was $1.2 million, or $0.02 per fully diluted share, for the first quarter of fiscal 2007 compared to adjusted net income of $1.7 million, or $0.03 per fully diluted share, in the same quarter last year and adjusted net income of $1.9 million, or $0.03 per fully diluted share, in the prior quarter. A reconciliation of adjusted net income (loss) is included as a supplemental attachment to this press release. First Quarter Financial Results and Other Achievements for the Quarter: -- Total revenue for the first quarter of fiscal 2007 was $27.8 million, compared to $33.6 million in the same quarter last year and $31.9 million in the prior quarter. -- Revenue from software license fees totaled $2.6 million, compared to $6.6 million in the same period a year ago and $5.1 million in the prior quarter. -- Cash, cash equivalents and restricted cash decreased $4.1 million to $38.8 million at June 30, 2006, from $42.9 million at March 31, 2006. -- The Company secured new customers in the quarter including EDS, Eastern Municipal Water District and Defensie Telematica Organisatie ("DTO"), the internal IT organization supporting the Dutch Army. -- The Company continued to expand solutions with existing customers, including GE Plastics, BC Hydro, Charlotte County, New York City Department of Education and Portland General Electric. Executive Commentary "While we are disappointed in the timing of software license sales to certain large organizations, we continue to see positive momentum with our Service Delivery Management strategy in both the utility and non-utility markets," said Indus President and CEO Greg Dukat. "We continue to believe our comprehensive offering supporting the management of customers, assets and field service in an integrated manner brings strategic value to our customers and prospects and represents a sound strategy for Indus." Business Outlook Indus previously provided diluted earnings per share guidance for fiscal year 2007. The fiscal year 2007 GAAP diluted earnings per share includes the impact of adopting SFAS 123(R) and certain restructuring benefits and expenses. As described below, the non-GAAP adjusted diluted earning per share excludes restructuring expenses and benefits and certain stock compensation expense. A full reconciliation of GAAP to non-GAAP diluted earnings per share is included in the supplemental attachments to this release. For the fiscal year ending on March 31, 2007, the company currently projects GAAP net income to fall within a range of $0.12 to $0.18 per fully diluted share, and non-GAAP adjusted net income to fall within a range of $0.17 and $0.23 per fully diluted share. These projections assume the company will not be subject to income taxes and that there are no significant changes to the current general economic environment and the capital spending environments within our markets over the course of the year. Adoption of New Accounting Pronouncement: Indus adopted Statement of Financial Accounting Standards No. 123(R) ("SFAS 123(R)"), Share-Based Payment, in the first quarter of fiscal year 2007, using the modified prospective transition method, which does not require restatement of prior periods presented. The adoption of SFAS 123(R) increased our GAAP diluted loss per share for the first quarter of fiscal year 2007 by $0.01. The Company estimates the accounting required by SFAS 123(R) will reduce fiscal year 2007 GAAP diluted earnings per share by approximately $0.05. This estimate is dependent upon a number of variables such as the number of options awarded, cancelled or exercised and fluctuations in the Company's share price during the year. GAAP Versus Non-GAAP Presentation The information presented in this press release includes financial measures using accounting principles generally accepted in the U.S. ("GAAP") and using adjustments to GAAP. In particular, we have shown certain GAAP measures adjusted to eliminate restructuring and settlement benefits and expenses incurred under restructuring plans over the last few years by the Company to bring its operating expenses more in line with its operations, as well as stock compensation expenses incurred during the period related to our adoption of SFAS 123(R). We have presented such non-GAAP financial measures because our management believes that they provide meaningful information regarding those aspects of the Company's current operating performance that it can manage. Consequently, management uses these measures in our internal reporting, planning and compensation systems and to view trends and changes in operating performance excluding the effects of certain items that do not correlate to operating expenses of the Company's continuing operations. As a result, our public disclosure of these measures enables investors to evaluate our operating performance in a manner consistent with that used by management. We also believe that these measures are helpful for a period-to-period comparison of our results and are frequently used by securities analysts, investors and other interested parties to compare the performance of companies in our industry. These non-GAAP measures should not be used as a substitute for measures calculated in accordance with GAAP and may not be directly comparable to similarly titled measures of other companies. This release should be read in conjunction with our Form 8-K earnings release filing for this quarter ended June 30, 2006. A full reconciliation of our GAAP financial measures to non-GAAP adjustments is included in the supplemental attachment to this release. Investor Call As previously announced, Indus will conduct an investor conference call to discuss the Company's results and other matters related to the Company at 11:00 a.m. EDT today. Investors may access the conference call over the Internet via the Company's Website (investor.indus.com), or via telephone by dialing 877-412-8086 (International callers dial 973-582-2842). Those listening via the Internet should go to the site 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available through August 15, 2006, by dialing 877-519-4471 (international callers dial 973-341-3080) and entering conference ID # 7638963; or by going to the Company's Website (Investor.Indus.com). Like most companies, Indus will be taking live questions from securities analysts and institutional portfolio managers, but the complete call is open to all interested parties on a listen-only basis. Furthermore, individual investors may submit questions at any time prior to and during the call by sending an email to investorqa@indus.com. About Indus International Indus is a leading Service Delivery Management (SDM) solution provider, helping clients in a broad array of industries optimize the management of their customers, workforce, spare parts inventory, tools and documentation in order to maximize performance and customer satisfaction while achieving significant cost savings. Indus customer, asset and workforce management software products, professional services and hosted service offerings improve our clients' profitability by reducing costs, increasing capacity and competitiveness, improving service to their customers, facilitating billing for services and ensuring regulatory compliance. Indus solutions have been purchased by more than 400 companies in more than 40 countries, representing diverse industries -- including manufacturing, utilities, telecommunications, government, education, transportation, facilities and property management, high tech, consumer packaged goods and more. For more information, visit our Website at http://www.indus.com. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This press release contains statements, estimates or projections that are not historical in nature and that may constitute "forward-looking statements" as defined under U.S. federal securities laws. These statements include, but are not limited to, estimates of GAAP earnings per share and non-GAAP adjusted earnings per share for the fiscal year ending March 31, 2007, as well as statements regarding the Company's Service Delivery Management strategy. These statements, which speak only as of the date given, are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our expectations or projections. These risks include, but are not limited to, projected growth in the emerging service delivery management market, market acceptance of our service delivery management strategy, current market conditions for our products and services, our ability to close licensing transactions for which we have been selected or we are negotiating arrangements, our ability to achieve growth in our asset management, customer management and service suite offerings, market acceptance and the success of our new products and enhancements and upgrades to our existing products, the success of our product development strategy, our competitive position, the ability to establish and retain partnership arrangements, our ability to develop our indirect sales channels, changes in our executive management team, uncertainty relating to and the management of personnel changes, the ability to realize the anticipated benefits of our restructurings, timely development and introduction of new products, releases and product enhancements, current economic conditions, heightened security and war or terrorist acts in countries of the world that affect our business, and other risks identified from time-to-time in the Company's SEC filings. Investors are advised to consult the Company's filings with the SEC, including its fiscal 2006 Annual Report on Form 10-K filed with the SEC, for a further discussion of these and other risks. Indus is a registered trademark of Indus International Inc. Other company and product names may be trademarks of the respective companies with which they are associated. -0- *T INDUS INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) June 30, 2006 March 31, 2006 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 33,200 $ 37,165 Restricted cash 2,670 2,793 Billed accounts receivable, net 17,245 14,020 Unbilled accounts receivable 5,840 6,257 Other current assets 3,813 3,683 -------------- -------------- Total current assets 62,768 63,918 Property and equipment, net 26,075 26,990 Capitalized software, net 3,447 3,760 Goodwill 7,442 7,442 Acquired intangible assets, net 8,708 9,066 Restricted cash, noncurrent 2,976 2,976 Other assets 707 681 -------------- -------------- Total assets $ 112,123 $ 114,833 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 767 $ 767 Accounts payable 4,570 3,836 Accrued liabilities 13,384 14,050 Deferred revenue 28,829 30,234 -------------- -------------- Total current liabilities 47,550 48,887 Income taxes payable 2,683 2,553 Mortgage and other liabilities 12,392 13,312 Stockholders' equity: Common stock 59 59 Additional paid-in capital 163,671 163,218 Treasury stock, at cost - - Deferred compensation - (480) Accumulated deficit (114,870) (113,142) Accumulated other comprehensive income 638 426 -------------- -------------- Total stockholders' equity 49,498 50,081 -------------- -------------- Total liabilities and stockholders' equity $ 112,123 $ 114,833 ============== ============== *T -0- *T INDUS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, except per share data) Three Months Ended June 30, ----------------------------- 2006 2005 -------------- -------------- Revenue: Software license fees $ 2,646 $ 6,603 Services: Support, outsourcing and hosting 14,787 14,285 Consulting, training and other 10,336 12,733 -------------- -------------- Total revenue 27,769 33,621 -------------- -------------- Cost of revenue: Software license fees 444 680 Services: Support, outsourcing and hosting 3,514 3,452 Consulting, training and other 8,707 9,291 -------------- -------------- Total cost of revenue 12,665 13,423 -------------- -------------- Gross margin 15,104 20,198 -------------- -------------- Operating expenses: Research and development 6,557 7,836 Sales and marketing 6,863 6,942 General and administrative 3,716 3,804 Restructuring expenses 16 43 -------------- -------------- Total operating expenses 17,152 18,625 -------------- -------------- Operating (loss) income (2,048) 1,573 Other income, net 278 56 -------------- -------------- Pre-tax (loss) income (1,770) 1,629 (Benefit) provision for income taxes (42) 16 -------------- -------------- Net (loss) income $ (1,728) $ 1,613 ============== ============== Net Loss) income per share: Basic $ (0.03) $ 0.03 ============== ============== Diluted $ (0.03) $ 0.03 ============== ============== Shares used in computing per share data: Basic 58,600 57,624 Diluted 58,600 58,816 *T -0- *T INDUS INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In Thousands, except per share data) Three Months Ended June 30, --------------------------------- 2006 2006 GAAP Adjustments Non-GAAP -------- ----------- -------- Revenue: Software license fees $ 2,646 - $ 2,646 Services: Support, outsourcing and hosting 14,787 - 14,787 Consulting, training and other 10,336 - 10,336 -------- ----------- -------- Total revenue 27,769 - 27,769 -------- ----------- -------- Cost of revenue: Software license fees 444 - 444 Services: Support, outsourcing and hosting 3,514 (26) (a) 3,488 Consulting, training and other 8,707 (63) (a) 8,644 -------- ----------- -------- Total cost of revenue 12,665 (89) 12,576 -------- ----------- -------- Gross margin 15,104 89 15,193 -------- ----------- -------- Operating expenses: Research and development 6,557 (103) (a) 6,454 Sales and marketing 6,863 (151) (a) 6,712 General and administrative 3,716 (188) (a) 3,528 Restructuring expenses 16 (16) (b) - -------- ----------- -------- Total operating expenses 17,152 (458) 16,694 -------- ----------- -------- Operating (loss) income (2,048) 547 (1,501) Other income, net 278 - 278 -------- ----------- -------- Pre-tax (loss) income (1,770) 547 (1,223) (Benefit) provision for income taxes (42) - (42) -------- ----------- -------- Net (loss) income $(1,728) $ 547 $(1,181) ======== =========== ======== Net Loss) income per share: Basic $ (0.03) $ 0.01 $ (0.02) ======== =========== ======== Diluted $ (0.03) $ 0.01 $ (0.02) ======== =========== ======== Shares used in computing per share data: Basic 58,600 58,600 58,600 Diluted 58,600 58,600 58,600 *T -0- *T INDUS INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In Thousands, except per share data) Three Months Ended June 30, --------------------------------- 2005 2005 GAAP Adjustments Non-GAAP -------- ----------- -------- Revenue: Software license fees $ 6,603 - $ 6,603 Services: Support, outsourcing and hosting 14,285 - 14,285 Consulting, training and other 12,733 - 12,733 -------- ----------- -------- Total revenue 33,621 - 33,621 -------- ----------- -------- Cost of revenue: Software license fees 680 - 680 Services: Support, outsourcing and hosting 3,452 - 3,452 Consulting, training and other 9,291 - 9,291 -------- ----------- -------- Total cost of revenue 13,423 - 13,423 -------- ----------- -------- Gross margin 20,198 - 20,198 -------- ----------- -------- Operating expenses: Research and development 7,836 - 7,836 Sales and marketing 6,942 - 6,942 General and administrative 3,804 - 3,804 Restructuring expenses 43 (43) (b) - -------- ----------- -------- Total operating expenses 18,625 (43) 18,582 -------- ----------- -------- Operating (loss) income 1,573 43 1,616 Other income, net 56 - 56 -------- ----------- -------- Pre-tax (loss) income 1,629 43 1,672 (Benefit) provision for income taxes 16 - 16 -------- ----------- -------- Net (loss) income $ 1,613 $ 43 $ 1,656 ======== =========== ======== Net (loss) income per share: Basic $ 0.03 $ 0.00 $ 0.03 ======== =========== ======== Diluted $ 0.03 $ 0.00 $ 0.03 ======== =========== ======== Shares used in computing per share data: Basic 57,624 57,624 57,624 Diluted 58,816 58,816 58,816 *T -0- *T INDUS INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (a) The Company adopted SFAS 123(R) on April 1, 2006, using the modified prospective transition method. SFAS 123(R) requires us to recognize compensation costs for all share-based payments. Previously we did not record compensation expense for share-based payments, except for performance-based options and restricted stock awards which were accounted for in accordance with APB Opinion #25. The adjustments in the three month period ended June 30, 2006, to cost of services, research and development, sales and marketing and general and administrative expense represent stock compensation expense recorded during the period for time vested stock option grants and the employee stock purchase plan pursuant to SFAS 123(R). These adjustments do not include compensation expense recorded for restricted stock and performance-based options, which accounted for $70,000 in the first quarter of fiscal year 2007. The first quarter of fiscal 2006 did not include any expense for restricted stock or performance based options. Stock compensation expense increased by $0.5 million as a result of our adoption of SFAS 123(R). Actual stock option expense recorded for the first quarter of fiscal 2007 as well as proforma expense for the first quarter of fiscal 2006, as if the Company had previously adopted the new statement on April 1, 2005 is presented below. Three Months Ended June 30, 2006 2005 -------------- -------------- Stock option and employee stock purchase plan expense 531,000 868,000 Restricted stock and performance based option expense 70,000 - -------------- -------------- Total stock option expense 601,000 868,000 ============== ============== -------------- -------------- Diluted EPS impact $ 0.01 $ 0.01 ============== ============== (b) Adjustments eliminate expense for previous restructuring initiatives related to excess lease costs for our vacated office space. We have presented such non-GAAP disclosures because we believe they allow management to view trends and changes in operating performance excluding the effects of certain items, they are helpful for a period-to-period comparison of our results and they are frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of GAAP results, to compare the performance of companies. *T