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Onyx Software Reports Q4 and 2005 Results; 26% Year Over Year License Revenue Growth.

BELLEVUE, Wash. -- Onyx(R) Software Corporation (NASDAQ:ONXS) today announced results for the fourth quarter and full year ended December 31, 2005.

2005 Fourth Quarter

Total revenue in the fourth quarter of 2005 was $15.4 million, compared with $14.9 million in the fourth quarter last year and $15.5 million in the third quarter of 2005. License revenue in the fourth quarter of 2005 was $4.7 million, compared with $4.1 million in the fourth quarter last year. License revenue in the third quarter of 2005 was $4.4 million.

For the fourth quarter of 2005, the company reported a net loss of $143,000, or a loss of $0.01 per share, compared with net loss of $1.4 million, or a loss of $0.10 per share, in the same period last year. The 2005 fourth quarter results include an income tax expense of approximately $300,000 which provides for a 100 percent allowance of deferred tax assets in one of the company's foreign subsidiaries.

For the fourth quarter of 2005, non-GAAP net income, which excludes the amortization of acquired technology, was $113,000, or $0.01 per share. For the fourth quarter of 2004, non-GAAP net loss, which excluded severance, loss on impairment of assets and valuation adjustments of outstanding warrants, was $202,000, or a loss of $0.01 per share.

Onyx believes that supplementary disclosure regarding non-GAAP operating results assists in comparing current operating results with those of past periods. A reconciliation of non-GAAP operating income (loss) to GAAP operating income (loss) is included with the financial tables that follow this release. Use of non-GAAP results should not be considered a substitute for Onyx's GAAP financial results.

On December 31, 2005, Onyx had cash and cash equivalents of $21.6 million compared with $14.4 million on December 31, 2004. The December 2005 balance includes net proceeds of $7.9 million from the company's private placement announced in May 2005 as well as positive cash flow from operations in the second, third and fourth quarters.

Business Summary

"We are pleased with our achievements in 2005, the first profitable year in the company's history," said Janice P. Anderson, chair and chief executive officer of Onyx. "We outpaced industry growth rates with our 26 percent year-over-year increase in license revenue. We believe our unique integration of customer management and process solutions differentiates Onyx and creates additional opportunities for growth in this consolidating marketplace.

"We are focused on increasing our market share by expanding our marketing and partner programs. The early results of these initiatives are encouraging and we expect to see the revenue benefit in the second half of 2006."

Anderson said, "2005 was also our most prolific year in terms of product releases as we enhanced our portfolio to fulfill more of our customers' needs. In addition, we feel we made significant progress in raising awareness of Onyx as a provider of customer management and process solutions. We are gratified by the validation we have received from leading industry analysts, trade publications and customers. Major firms including Gartner, Forrester, AMR, Yankee Group, the451 and Ventana Research have all characterized Onyx as an alternative that companies should consider."

In the fourth quarter, 52 customers representing organizations in each of Onyx's key segments -- financial services, insurance, health care, government, and business and customer services -- made license purchases. Existing Onyx customers accounted for approximately three quarters of license revenue. New customers included AIG Edison, American Home Assurance Company (Singapore), AIG Imperial -- A.I. Credit Corp., Lifeline Systems, Scan Health and Tyler Technologies.

Geographically, 64 percent of total revenue in the fourth quarter was generated in the Americas and 36 percent internationally.

2005 Financial Summary

Total revenue for 2005 was $60.4 million compared with $57.6 million in 2004. License revenue for 2005 was $17.2 million compared with $13.7 in 2004.

Net income for 2005 was $991,000, or $0.06 per diluted share. This compares with a net loss for 2004 of $2.8 million, or a loss of $0.19 per share.

Recent Highlights

--Onyx introduced Onyx Process Manager 5.1 with new and enhanced features including Process Cloning, Process Migration, enhanced Service Level Agreement (SLA) enforcement and support for Onyx Process Manager in international markets.

--During the fourth quarter, Onyx added two new partners to its Global Alliance Program. Metric One, a provider of CRM implementation and development services, joined in October. WCI Consulting, a business intelligence and systems integration solutions provider, became an Onyx Global Alliance Partner in December to provide complete customer management and analytics solutions in Onyx's key market segments -- financial services, insurance, health care, government, and business and customer services companies.

--Onyx initiated the Onyx Migration program for Siebel, PeopleSoft, J.D. Edwards or Vantive CRM systems customers and secured its first major sale, to a large international life insurance company that selected Onyx to support its ongoing Customer Relationship Management (CRM) strategy and business growth, replacing a Siebel implementation.

Business Outlook

While a wide range of outcomes are possible Onyx currently expects to generate revenue growth in 2006, however, total revenue in the first quarter of 2006 is expected to be down approximately 20 percent sequentially. The company expects total expenses for the first quarter of 2006 will be approximately the same as the fourth quarter of 2005, except for an estimated additional $500,000 in stock compensation expense resulting from the adoption of FAS 123R.

Onyx Software Conference Call

Onyx will host its quarterly call to discuss fourth quarter results today at 4:30 p.m. ET (1:30 p.m. PT). Investors may participate in the call by telephone at 800-591-2731 (domestic) or 617-614-3528 (international). The passcode is 83677484.

Additionally, a live broadcast of the call will be available online at www.onyx.com and www.earnings.com, where it will be archived for approximately 30 days. A telephonic replay of the call will be available at 617-801-6888 from 6:30 p.m. ET, February 14, 2006 to 11:59 p.m. ET, March 7, 2006. The passcode for the replay is 53525953.

About Onyx Software

Onyx Software Corporation (NASDAQ:ONXS) is a worldwide leader in customer management and process software for enterprise-caliber customers. Onyx provides flexible solutions that enable organizations to automate, manage, and evolve their customer processes quickly and cost-effectively for strategic advantage. By providing an integrated suite of customer process automation applications encompassing customer management, process management, and analytics capabilities, Onyx enables enterprises to reduce costs, increase productivity and grow revenue. Major companies are aligning their customer-facing departments and managing their customer processes with Onyx software -- companies such as Amway Corporation, Delta Dental, Mellon Financial Corporation, The Regence Group and State Street Corporation. More information can be found at (888) ASK-ONYX, info@onyx.com or http://www.onyx.com.

Forward-Looking Statement

This press release contains forward-looking statements, including statements about the potential benefits of our products and services and our expectations for future financial performance and growth. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. The words "predict," "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Factors that could affect Onyx's actual results include, but are not limited to, the success of our ongoing marketing programs, our ability to generate sufficient sales pipeline, our sales effectiveness, our ability to control expenses, our ability to retain customers on our maintenance and product support program, the expansion of our partner network and the ability of these partners to effectively sell our products and the "Important Factors That May Affect Our Business, Our Results of Operations and Our Stock Price" described in our quarterly report on form 10-Q for the period ended September 30, 2005. Readers are cautioned not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. Onyx undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

Onyx is a registered trademark of Onyx Software Corporation in the United States and other countries.

Other product or service names mentioned herein are the trademarks of their respective owners.
FINANCIAL TABLES FOLLOW


 Onyx Software Corporation
 Condensed Consolidated Statements of Operations
 (In Thousands, Except Per Share Data)
 (Unaudited)


 Three Months Twelve Months
 Ended Ended
 December 31, December 31,
 2005 2004 2005 2004
 ------- ------- ------- -------
Revenue
License $ 4,682 $ 4,087 $17,224 $13,666
Service 10,710 10,837 43,173 43,968
 ------- ------- ------- -------
Total revenue 15,392 14,924 60,397 57,634
Costs of revenue
Cost of license 417 371 1,579 984
Amortization of acquired technology 256 - 1,024 -
Cost of service 4,561 4,969 17,876 18,614
 ------- ------- ------- -------
Total cost of revenue 5,234 5,340 20,479 19,598
Gross margin 10,158 9,584 39,918 38,036
Operating Expenses
Sales and marketing 4,875 5,017 19,261 19,354
Research and development 2,405 2,640 9,813 10,613
General and administrative 2,725 2,239 9,956 8,600
Restructuring and other-related
 charges - - - 442
Amortization of other acquisition-
 related intangibles - - - 627
Severance Charges - 996 - 996
 ------- ------- ------- -------
Total operating expenses 10,005 10,892 39,030 40,632
 ------- ------- ------- -------

Operating income (loss) 153 (1,308) 888 (2,596)

Other income (expense), net 76 15 107 (340)
Investment losses and impairment - (403) - (403)
Change in fair value of outstanding
 warrants - 199 (2) 513
 ------- ------- ------- -------
Income (loss) before income taxes 229 (1,497) 993 (2,826)
Income tax provision (benefit) 372 (145) 108 (57)
Minority interest in consolidated
 subsidiary - 50 (106) (15)
 ------- ------- ------- -------
Net income (loss) $ (143) $(1,402) $ 991 $(2,754)
 ======= ======= ======= =======
Basic and diluted net income (loss)
 per share $ (0.01) $ (0.10) $ 0.06 $ (0.19)
 ======= ======= ======= =======
Shares used in computation of basic
 net income
 (loss) per share 17,967 14,554 16,725 14,364
 ======= ======= ======= =======
Shares used in computation of
 diluted net income
 (loss) per share 17,967 14,554 16,846 14,364
 ======= ======= ======= =======



 Onyx Software Corporation
 Supplemental Non-GAAP Information:
 (In Thousands, Except Per Share Data)
 (Unaudited)


 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2005 2004 2005 2004
 -------- ------- --------- -------
Operating income (loss) $ 153 $(1,308) $ 888 $(2,596)
Adjustments to reconcile
 operating income (loss)
 in the financial
 statements to non-GAAP
 operating income (loss):
Restructuring and other-related
 charges
 Facilities - - - 155
 Severance - - - 287
 -------- ------- --------- -------
Total restructuring and other-
 related charges - - - 442
Amortization of acquired
 technology 256 - 1,024 -
Amortization of other
 acquisition-related
 intangibles - - - 627
Severance - 996 - 996
 -------- ------- --------- -------
Non-GAAP operating income
 (loss) $ 409 $ (312) $ 1,912 $ (531)
 ======== ======= ========= =======

Net income (loss) $ (143) $(1,402) $ 991 $(2,754)
Adjustments to reconcile net
 income (loss) in the
 financial statements to non-
 GAAP net income (loss):
Restructuring and other-related
 charges
 Facilities - - - 155
 Severance - - - 287
 -------- ------- --------- -------
Total restructuring and other-
 related charges - - - 442
Amortization of acquired
 technology 256 - 1,024 -
Amortization of other
 acquisition-related
 intangibles
 Intangibles - - - 627
Severance - 996 - 996
Investment losses and
 impairment - 403 - 403
Change in fair value of
 outstanding warrants - (199) 2 (513)
Deferred income tax associated
 with acquisitions - - - (213)
 -------- ------- --------- -------
Non-GAAP net income (loss) $ 113 $ (202) $ 2,017 $(1,012)
 ======== ======= ========= =======

Non-GAAP basic and diluted net
 income (loss)
 per share $ 0.01 $ (0.01) $ 0.12 $ (0.07)
 ======== ======= ========= =======
Shares used in computation of
 non-GAAP basic
 net income (loss) per
 share 17,967 14,554 16,725 14,317
 ======== ======= ========= =======
Shares used in computation of
 non-GAAP diluted
 net income (loss) per share 18,126 14,554 16,846 14,317
 ======== ======= ========= =======



 Onyx Software Corporation
 Condensed Consolidated Balance Sheets
 (In Thousands)
 (Unaudited)


 December 31, December 31,
 2005 2004
 ----------- ------------
Assets
Current Assets:
 Cash and cash equivalents $ 21,574 $ 14,393
 Accounts receivable, net 11,533 10,509
 Prepaid expenses and other current assets 2,015 1,968
 Current deferred tax asset - 89
 ----------- ------------
 Total current assets 35,122 26,959

 Property and equipment, net 2,709 3,711
 Purchased technology, net 3,071 4,095
 Goodwill, net 9,204 10,306
 Deferred tax asset - 35
 Other assets 556 450
 ----------- ------------
Total Assets $ 50,662 $ 45,556
 =========== ============

Liabilities and Shareholders' Equity
Current Liabilities:
 Accounts payable $ 2,054 $ 1,205
 Salary and benefits payable 1,760 1,937
 Accrued liabilities 3,118 2,453
 Income taxes payable 87 217
 Current portion of restructuring-related
 liabilities 208 731
 Current portion of term loan 167 167
 Deferred revenue 15,211 17,050
 ----------- ------------
 Total current liabilities 22,605 23,760

Long-term deferred revenue 1,032 1,923
Long-term restructuring-related liabilities
 - warrants - 52
Long-term purchased technology obligation 908 1,842
Long-term deferred rent 639 914
Term loan 56 222
Minority interest in joint venture - 106

Shareholders' Equity
 Common stock 154,277 144,736
 Accumulated deficit (129,978) (130,969)
 Accumulated other comprehensive income 1,123 2,970
 ----------- ------------
 Total shareholders' equity 25,422 16,737
 ----------- ------------
Total Liabilities and Shareholders' Equity $ 50,662 $ 45,556
 =========== ============
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Date:Feb 14, 2006
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