KANA Reports Results for the Quarter Ended December 31, 2003; Company Reports a 23% Increase in Revenues from the Prior Quarter.Business EditorsMENLO PARK Menlo Park. 1 Residential city (1990 pop. 28,040), San Mateo co., W Calif.; inc. 1874. Electronic equipment and aerospace products are manufactured in the city. Menlo College and a Stanford Univ. research institute are there. 2 Uninc. , Calif.--(BUSINESS WIRE)--Jan. 22, 2004 KANA(R) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : KANA), a leading provider of knowledge-powered customer service applications, today announced its results for the fourth quarter and year ended December 31, 2003. Revenues were $17.0 million for the fourth quarter and $61.0 million for the year ended December 31, 2003. Net loss on a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). (Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) basis was $3.4 million or $0.13 per share for the fourth quarter. Net loss on a GAAP basis includes $1.4 million of amortization of stock-based compensation, $1.7 million of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs related to excess leased facilities, and $500,000 of impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of an investment in the fourth quarter. Net loss on a GAAP basis was $21.2 million or $0.88 per share for the year ended December 31, 2003. During the quarter, KANA's customer engagements again involved its strategic partners Accenture, BearingPoint, IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) Business Consulting Services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" and BusinessEdge Solutions. In the fourth quarter the company closed several deals in its key vertical markets in excess of $1.0 million, including SBC (1) (SBC Communications Inc., San Antonio, TX, www.sbc.com) A large, national telecommunications company that grew from a multitude of local and regional companies, including Southwestern Bell, Pacific Bell and Nevada Bell, into a single, unified brand by 2002. Communications Inc. KANA rounded out its multi-channel customer interaction suite in the fourth quarter with the execution of an agreement to acquire Hipbone hip·bone n. Either of two large flat bones formed by the fusion of ilium, ischium, and pubis, constituting the lateral half of the pelvis and articulating with its fellow, with the sacrum, and with the femur. , which provides an on-line assisted service offering. This acquisition is expected to close in February 2004. The integration of iCARE and Hipbone solutions will provide complete customer service and Web collaboration, a powerful combination that will enable Global 2000 companies to bring customer service to the next level. "We are extremely pleased with our strong performance in Q4, closing out a year in which we hit many important milestones at KANA," said Chuck Bay, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of KANA. "The enhancements to our multi-channel product offering, the success of our systems integration and outsourced development partner programs and an absolute commitment to the satisfaction of our Global 2000 customer base, position us well as we enter 2004." In addition to its product and customer success, KANA strengthened its balance sheet in the fourth quarter by raising $13.1 million through a public offering of 4,692,000 shares of common stock. "During the fourth quarter, KANA made a number of significant and exciting advances in our financial position, including growing revenues and further strengthening our balance sheet," said John Huyett, executive vice president and CFO See Chief Financial Officer. of KANA. Fourth Quarter 2003 and Calendar Year 2003 Financial Highlights Revenues: In the fourth quarter of 2003, KANA reported net revenues of $17.0 million, representing a 23% increase over net revenues of $13.8 million for the third quarter of 2003. License revenue grew 69% sequentially to $8.6 million in the fourth quarter, up from $5.1 million in the third quarter of 2003. License revenue accounted for 51% of total revenue in the fourth quarter compared to 43% of total revenue for the year. Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. revenue per employee in the fourth quarter exceeded $300,000 for the first time in KANA's history. Combined software license and maintenance revenue represented 93% of total revenues in the fourth quarter and the calendar year 2003. North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. was particularly strong in the fourth quarter, accounting for 86% of revenue in the quarter, compared to 73% for the year. The company booked three deals in excess of $1 million; all in North America. One new customer accounted for 20% and one existing customer accounted for 18% of total fourth quarter revenue. For the year, no customer accounted for more than 10% of total revenue. Operating Results: Gross margin was 80% in the fourth quarter compared to 79% for the year. Sales, marketing, research and development, and general and administrative expenses totaled $13.3 million in the fourth quarter. In the fourth quarter, sales and marketing expense was 41% of total revenue, research and development expense was 28% of revenue, and general and administrative expense was 9% of revenue. During the fourth quarter, the company reported $1.7 million in restructuring costs related to a change in evaluation of real estate market conditions in the United Kingdom, and changes in sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. estimates based on communication from current and potential subtenants in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Balance Sheet: Cash and short-term investments were $33.0 million at December 31, 2003, up from $22.3 million at September 30, 2003. Net accounts receivables accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying were $7.9 million at December 31, 2003; representing days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSO See CSO. ) of 42 days, up slightly from 40 days for the quarter ended September 30, 2003. Working capital excluding deferred revenue at December 31, 2003 was $24.7 million. Total deferred revenue at December 31, 2003, was $21.8 million. Quarterly Conference Call KANA Software Kana Software, Inc., usually rendered KANA (NASDAQ: KANA) is a software company, located in Menlo Park, California. It was founded in 1996 by Mark Gainey as Kana Communications. KANA's current CEO and chairman of the board is Michael Fields. , Inc. will hold its fourth quarter and year-end 2003 earnings conference call on Thursday, January 22, 2004 at 1:45 p.m. (PST PST Paroxysmal supraventricular tachycardia, see there ) / 4:45 p.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ). Investors are invited to listen to KANA's quarterly conference call on the investor relations Investor relations The process by which the corporation communicates with its investors. section of the Web site at www.kana.com. A replay of the Web cast will also be available at www.kana.com for a week following the completion of the call. About KANA KANA (NASDAQ: KANA) provides knowledge-powered customer service applications enabling organizations to better service, market to, and understand their customers and partners. Optimized for specific vertical industries, KANA's iCARE applications are in use at more than half of the world's largest 100 companies. An award-winning, modular suite of eCRM applications available on J2EE (Java 2 Platform, Enterprise Edition) A platform from Sun for building distributed enterprise applications. J2EE services are performed in the middle tier between the user's machine and the enterprise's databases and legacy information systems. and .Net, KANA iCARE applications enable customers to do business when, where and how they want, improving customer experiences while decreasing costs in contact centers and marketing departments. KANA's partner-centric business model includes strategic relationships with the largest systems integrators An individual or organization that builds systems from a variety of diverse components. With increasing complexity of technology, more customers want complete solutions to information problems, requiring hardware, software and networking expertise in a multivendor environment. in the world to support and sell KANA iCARE. For more information visit www.kana.com. Cautionary Note Regarding Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: Information in this release regarding KANA's forecasts, projections, expectations, beliefs, and intentions are forward-looking statements that involve risks and uncertainties. These statements include statements about KANA's pending acquisition of Hipbone, long-term prospects, new business and market position. All forward-looking statements included in this release are based upon information available to KANA as of the date of this release, which may likely change, and we assume no obligation to update any such forward-looking statement. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include, but are not limited to, competition in our marketplace, including introductions of new products or services, or reductions in prices, by competitors; risks associated with lack of market acceptance of KANA's products or services; inability to enhance and develop our products and services within budget and on schedule; inability to attract and retain qualified employees, to manage cash and expenditures or to expand sales; inability to manage our business in light of recent personnel reductions; inability to obtain the anticipated benefits of the pending Hipbone acquisition and of KANA's ongoing arrangement to outsource development activities; KANA's history of losses; the effect of potential terrorist activities; and uncertain economic conditions, particularly as they affect spending by our prospective customers on eCRM and similar enterprise software products. These and other factors are risks associated with our business that may affect our operating results and are discussed in KANA's filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and our quarterly reports on Form 10-Q Form 10-Q See 10-Q. . NOTE: KANA is a registered trademark, and KANA Software, KANA iCARE, KANA Knowledge, KANA IQ, KANA ResponseIQ, KANA Response, KANA Marketing, KANA iCARE Analytics and the KANA logo are trademarks of KANA Software, Inc. All other company and product names may be trademarks of their respective owners.
KANA SOFTWARE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2003 2002
ASSETS
Current assets:
Cash and short-term investments $32,956 $32,498
Accounts receivable, net 7,908 10,269
Prepaid expenses and other current assets 3,527 3,184
Total current assets 44,391 45,951
Restricted cash 461 448
Property and equipment, net 15,435 22,293
Intangible assets, principally goodwill 7,448 8,901
Other assets 2,143 2,957
Total assets $69,878 $80,550
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $3,427 $3,469
Accounts payable 2,238 3,908
Accrued liabilities 10,678 13,881
Accrued restructuring costs 3,336 2,834
Deferred revenue 20,544 26,392
Total current liabilities 40,223 50,484
Deferred revenue, less current portion 1,265 -
Accrued restructuring, less current portion 6,858 8,114
Total liabilities 48,346 58,598
Total stockholders' equity 21,532 21,952
Total liabilities and stockholders'
equity $69,878 $80,550
KANA SOFTWARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2003 2002 2003 2002
Revenues:
License $8,611 $9,308 $26,228 $41,530
Maintenance 7,268 7,809 30,568 30,822
Professional Services 1,130 1,613 4,210 6,738
Total revenues 17,009 18,730 61,006 79,090
Cost of revenues:
License 1,122 833 3,125 3,402
Maintenance 1,159 1,137 5,311 4,510
Professional Services 1,092 1,553 4,391 24,740
Total cost of revenues 3,373 3,523 12,827 32,652
Gross profit 13,636 15,207 48,179 46,438
Operating expenses:
Sales and marketing 7,011 7,991 29,189 37,423
Research and development 4,696 6,394 21,437 25,933
General and administrative 1,551 2,992 9,073 13,053
Amortization of intangible
assets and stock-based
compensation 1,425 2,941 7,323 21,420
Restructuring costs 1,704 (5,086) 1,704 (5,086)
Goodwill impairment - - - 55,000
Total operating expenses 16,387 15,232 68,726 147,743
Operating loss (2,751) (25) (20,547) (101,305)
Other income, net 74 143 186 913
Income tax expense (189) - (318) -
Income (loss) from continuing
operations (2,866) 118 (20,679) (100,392)
Gain on disposal of discontinued
operation - - - 381
Impairment of investment (500) - (500) -
Cumulative effect of accounting
change related to the elimination
of negative goodwill - - - 3,901
Net income (loss) $(3,366) $118 $(21,179) $(96,110)
Basic and diluted net income
(loss) per share:
Income (loss) from continuing
operations $(0.11) $0.01 $(0.86) $(4.48)
Gain on disposal of
discontinued operation - - - 0.02
Impairment of investment (0.02) - (0.02) -
Cumulative effect of
accounting change - - - 0.17
Net income (loss) $(0.13) $0.01 $(0.88) $(4.29)
Shares used in computing basic
and diluted net income
(loss) per share 26,405 22,898 24,031 22,403
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