4Front Software International, Inc. Announces Second Quarter and Six Months Results.
Highlights(a) Second Quarter Ended July 31, 1997 1996 % Increase Revenues $ 18,820,000 $10,060,000 87% Net income $ 677,000 $ 313,000 116% Net income per share (basic) $ 0.10 $ 0.07 43% Net income per share (diluted) $ 0.10 $ 0.06 67% Fully diluted shares outstanding 6,776,606 5,545,307 -0- Six Months Ended July 31, 1997 1996 % Increase Revenues $37,444,000 $20,611,000 82% Net income $ 1,308,000 $ 511,000 156% Net income per share (basic) $ 0.20 $ 0.14 43% Net income per share (diluted) $ 0.19 $ 0.11 73% Fully diluted shares outstanding 6,737,475 4,698,297 -0- (a) A substantial part of the company's growth in the past three years has been achieved through acquisition. Accordingly, the results of operations from period to period are not necessarily comparable. -0- For the second quarter ended July 31, 1997, revenues for 4Front increased 87% to $18,820,00 versus $10,060,000 reported for the comparable year-ago period. Net income for the most recent quarter was $677,000, or $0.10 per share fully diluted (based on 6,776,606 shares), versus $313,000, or $ $0.06 per share fully diluted (based on 5,545,307 shares), for the comparable year-ago period. The increase in shares outstanding reflects the impact of the company's secondary offering of Common Stock that was completed during the second quarter of 1996 and the assumed conversion of applicable stock and warrants for the second quarter ended July 31, 1997. For the six months ended July 31, 1997, revenues for 4Front increased 82% to $37,444,000 versus $20,611,000 for the comparable year-ago period. Net income for the period was $1,308,000, or $0.19 per share fully diluted (based on 6,737,475 shares), versus $511,000, or $0.11 per share fully diluted (based on 4,698,297 shares) for the comparable year-ago period. The increase in shares outstanding reflects the impact of the Company's secondary offering of Common Stock that was completed during the second quarter of 1996 and the assumed conversion of applicable stock and warrants for the six months ended July 31, 1997. Anil Doshi, Chairman and Chief Executive Officer of 4Front Software International, Inc., said, "The second quarter was another period of solid progress toward our goal of becoming one of the UK's leading independent computer service companies. Our record results were driven by the growth of our higher margin services activities, which resulted in overall improvement in operating margins and increased profitability. During the second quarter, our services division won a significant number of large-scale contracts. Prior to this week's acquisition, 4Front was servicing seven contracts with a current annual value of over $1 million, versus servicing no such contracts during the first half of last year. "As announced earlier this week, 4Front has now moved into the top five UK independent hardware maintenance companies (according to the most recent industry statistics) through the acquisition of Firstpoint Limited. One of our major targets in the current year was to achieve a revenue mix in which the provision of services rather than the distribution of products was the largest contributor. We expect that the Firstpoint acquisition, coupled with the internal growth of our existing service activities, will now enable us to achieve this target. The Firstpoint acquisition will not only further increase 4Front's market profile, but also give our services business its own critical mass from which to obtain additional leverage. For example, the Firstpoint acquisition will increase our number of $1 million plus contracts to 15 and will expand our geographical coverage as well as our technical expertise." Mr. Doshi concluded, "Operating margin improvement remains our primary target going forward. We have made significant progress in this area, primarily through the increased contribution of our higher margin service activities over the past year. Although we expect the cost of integration of Firstpoint to halt temporarily the trend of overall margin growth for the remainder of the current year, we expect to resume that upward trend in 1998, after Firstpoint's services business has been assimilated into 4Front. We are confident of achieving this result since the integration of Firstpoint is in the hands of the same management team that successfully integrated Datapro, acquired a year ago, which is now contributing strongly to overall profitability and which has been a significant factor in margin and service revenue growth. Mark Ellis, President of 4Front Software International, Inc., said, "The product division has historically played an important role in our business, particularly in giving us the critical mass to win increasingly larger service contracts. It was in this context that the successful acquisition of Hammer last August was of such importance. Now, revenue growth in this area is of secondary importance to overall operating margin improvement and within our storage, network computer and other product range, we are primarily seeking product that can deliver better than average distribution margins and/or offer integration or other service opportunities to us. As a result of this higher margin and value-added focus we are increasingly eliminating or reducing product distribution business that carries margins that are unacceptably low. This policy is naturally having an impact on overall product distribution revenue contrasting with significant expansion of higher margin service activities. "During the past two months, management has reorganized 4Front's operating structure in order to provide a more effective framework for margin improvement, business growth and management efficiencies. The new structure separates 4Front's higher margin service and value-added activities, previously operated as 4Front Services, into three new divisions: 4Front Services, 4Front Networks and 4Front Software. 4Front Products will remain our distribution arm. These newly organized divisions will be managed and coordinated more closely under central management in order to more effectively promote the 4Front brand and to enable greater leverage of the considerable cross-marketing opportunities within 4Front's established customer base." 4Front Software International, Inc., a UK-based specialized computer services company provides a wide range of specialized high-end information technology solutions and services principally to Financial Times UK Top 500 companies and government authorities. The company provides key elements of distributed computing, including systems development and integration, storage and client-server solutions and products, as well as extensive hardware maintenance and software support, including help desk support services. The company's customers include Mobil Oil, Royal Dutch/Shell Group, GEC/Marconi, JP Morgan, Fujitsu, Dupont, Reuters and the U.K. Ministry of Defense. 4Front's website can be found at www.4ffst.com -0- 4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended For the Six Months Ended July 31, July 31, July 31, July 31, 1997 1996 1997 1996 (unaudited) (unaudited) (unaudited) (unaudited) REVENUES Products $ 10,507,327 $ 6,867,120 $ 20,935,014 $ 14,195,459 Services 8,312,680 3,193,305 16,509,278 6,415,204 18,820,007 10,060,425 37,444,292 20,610,663 Cost of Products 8,932,880 5,451,628 17,813,749 11,454,423 Cost of Services 3,788,994 1,203,928 7,937,735 2,480,274 12,721,874 6,655,556 25,751,484 13,934,697 GROSS PROFIT Products 1,574,447 1,415,492 3,121,265 2,741,036 Services 4,523,686 1,989,377 8,571,543 3,934,930 6,098,133 3,404,869 11,692,808 6,675,966 OPERATING EXPENSES: Selling, general and admin- istrative 4,687,082 2,832,116 9,041,708 5,544,194 Depreciation 222,524 73,437 417,690 154,396 Amortization 230,611 61,870 441,092 123,740 Total operating expenses 5,140,217 2,967,423 9,900,490 5,822,330 INCOME BEFORE INTEREST, INCOME TAXES AND SHARE OF RESULTS IN EQUITY INVESTEE: 957,916 437,446 1,792,318 853,636 Interest income 84,566 77,747 162,210 81,588 Interest expense (139,777) (25,322) (210,922) (128,936) INCOME BEFORE INCOME TAXES AND SHARE OF RESULTS IN EQUITY INVESTEE: 902,705 489,871 1,743,606 806,288 SHARE OF OPERATING (LOSS) OF EQUITY INVESTEE - (72,219) - (124,392) INCOME BEFORE INCOME TAXES 902,705 417,652 1,743,606 681,896 INCOME TAXES 225,676 104,413 435,901 170,474 NET INCOME $ 677,029 $ 313,239 $ 1,307,705 $ 511,422 NET INCOME PER COMMON SHARE $ 0.10 $ 0.06 $ 0.19 $ 0.12 (In accordance with APB Op. No. 15) NET INCOME PER COMMON SHARE (Basic) $ 0.10 $ 0.07 $ 0.20 $ 0.14 (In accordance with SFAS No. 128) NET INCOME PER COMMON SHARE (Diluted) $ 0.10 $ 0.06 $ 0.19 $ 0.11 (In accordance with SFAS No. 128) -0- 4FRONT SELECT BALANCE SHEET INFORMATION July 31, 1997 January 31, 1997 (unaudited) (audited) Current assets $ 29,422,000 $ 30,349,000 Current liabilities 22,425,000 24,764,000 Total assets 40,813,000 42,021,000 Long-term debt 322,000 489,000 Shareholders' equity $ 18,066,000 $ 16,769,000
CONTACT: Investor Relations Contact: Jason Thompson
Lippert/Heilshorn & Associates, Inc.
Company Contact: Mark Ellis or Ken Newell
4Front Software International, Inc.