Open Solutions Reports Record Third Quarter 2004 Revenues and Net Income Up 63% and 455%; Signed Contract Value for the Third Quarter Increased 95% over the Prior Year.GLASTONBURY, Conn. -- Open Solutions Inc. (Nasdaq: OPEN), a provider of integrated enabling technologies for financial institutions, today reported financial results for the three months and nine months ended September 30, 2004. Revenue for the third quarter of 2004 increased 63 percent to $28.3 million, from $17.4 million for the third quarter of 2003. Revenues for the nine months ended September 30, 2004 increased 64 percent to $71.1 million, from $43.4 million for the same period of the prior year. Net income was $4.5 million, or $0.21 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the third quarter of 2004, compared to $0.8 million, or $0.00 per diluted share, for the third quarter of 2003. Net income was $10.6 million, or $0.53 per diluted share, for the nine months ended September 30, 2004, compared to $1.7 million, or $0.00 per diluted share, for the same period of the prior year. The income per share for both the third quarter and the nine months ended September 30, 2003 have been revised from previously reported income per share as a result of the application of new accounting guidance requiring the allocation of net income to both common and participating preferred stock Participating Preferred Stock A type of preferred stock that, under certain conditions, gives holders the right to receive earnings payouts over and above the specified dividend rate. for purposes of computing computing - computer income per common share. "As we approach our one year anniversary as a publicly-traded company and we reflect upon our third quarter 2004 results, we are very pleased with the overall performance that Open Solutions continues to achieve across our key metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. ," said Open Solutions' Chairman and 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. , Louis Hernandez, Jr. "We had an impressive third quarter, and we are further encouraged by the continued interest, acceptance and demand for our industry-focused product and service offerings. Additionally, we remain diligent dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d in our ongoing efforts to improve the manner in which financial institutions can conduct business, compete and provide superior service. We believe that the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. marketplace is undergoing significant and fundamental changes that are causing financial institutions to be willing to move away from legacy based bolt-on technology. As a Company we will continue our efforts to position Open Solutions to further capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. and be on the forefront of this emerging trend." Third Quarter 2004 Highlights --Signed contracts valued at $24.7 million in the third quarter of 2004 compared to $12.7 million in the third quarter of the prior year, representing an increase of 95 percent. We define contract value as total revenues to be received over the life of the contract for all elements of the contract, including license, hardware, installation, maintenance and other services. --Completed the acquisition of re:Member Data Services, Inc., a provider of core-processing solutions for credit unions. --Completed the acquisition of Omega Systems of 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. , LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , a provider of a product line that integrates image capture remittance Money sent from one individual to another in the form of cash, check, or some other manner. Financial statements sent by a creditor to a debtor frequently refer to the process of submitting a monthly remittance. REMITTANCE, comm. law. processing with archive and retrieval. --Signed an acquisition agreement with Datawest Solutions Inc., a provider of innovative banking and payment technology solutions in Canada. Datawest's Banking Solutions Group is a provider of outsourced core data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a technology to Canadian credit unions. Datawest's Payment Solutions Group manages one of Canada's largest ATM networks and develops and delivers electronic payment products and services, including fast, secure ATM and POS (1) See point of sale and packet over SONET. (2) "Parent over shoulder." See digispeak. POS - point of sale systems and electronic funds transfer See EFT. (application, communications) electronic funds transfer - (EFT, EFTS, - system) Transfer of money initiated through electronic terminal, automated teller machine, computer, telephone, or magnetic tape. transaction processing Updating the appropriate database records as soon as a transaction (order, payment, etc.) is entered into the computer. It may also imply that confirmations are sent at the same time. Transaction processing systems are the backbone of an organization because they update constantly. , device management and monitoring. We believe this transaction will close in late October, subject to final approval by Datawest's shareholders and satisfaction of other closing conditions. --Recurring revenue for the third quarter of 2004 increased to 53 percent of total revenue from 50 percent for the third quarter of 2003, and for the nine months ended September 30, 2004 increased to 52 percent from 47 percent for the nine months ended September 30, 2003. We define recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. revenue as revenue from long-term maintenance and data center hosting contracts and the quarterly minimum payments from BISYS under the BISYS reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. agreement. --Internal revenue growth was 28 percent for the third quarter of 2004 and was 29 percent for the nine months ended September 30, 2004. Our internal revenue growth for the full year 2003 was 24 percent. Internal revenue growth percentages are measured as the increase in revenue for the current period less "acquired revenue from acquisitions" divided by revenues from the prior period plus "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 from acquisitions." 2004 Business Outlook The following statements are forward looking and actual results may differ materially. Our guidance assumes no change in the calculation of the Company's tax provision, which currently assumes a full valuation allowance against the Company's deferred tax assets. Currently, the Company only records a charge against income for certain state taxes and federal alternative minimum taxes. At the time that the valuation allowance is released the Company will report a significant income tax benefit in that period and for subsequent periods will record a tax provision against income at the effective statutory rates, however, the Company does not expect to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. significant tax payments until all anticipated net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. carry forwards and research and development tax credits are utilized. We are currently evaluating the future realization of the deferred tax asset and expect to release the valuation allowance in the near future. Fourth Quarter 2004 The Company targets revenue to be in the range of $33.5 and $34.5 million, net income to be between $5.5 and $5.8 million and earnings per diluted share to be between $0.26 and $0.28. Full year 2004 The Company targets revenue to be in the range of $104.5 and $105.5 million, net income to be between $16.1 and $16.5 million and earnings per diluted share to be between $0.80 and $0.82. The above guidance includes the impact of the Datawest acquisition on our fourth quarter and full year results assuming that the transaction closes in late October. About Open Solutions Inc. Open Solutions Inc. offers a fully featured strategic product platform that integrates core data processing applications, built on a single centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. Oracle(R) relational database relational database Database in which all data are represented in tabular form. The description of a particular entity is provided by the set of its attribute values, stored as one row or record of the table, called a tuple. , with Internet banking, cash management, CRM/business intelligence, financial accounting tools, interactive voice response, imaging, Check 21 and loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. solutions. Open Solutions' full suite of products and services allows banks, thrifts and credit unions to better compete in today's aggressive financial services marketplace, and expand and tap their trusted financial relationships, client affinity, community presence and personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. service. For more information about Open Solutions, or its financial product line, contact Mickey A unit of mouse movement typically set at 1/200th of an inch. (unit, humour) mickey - The unit of resolution of mouse movement. It has been suggested that the "disney" will become a benchmark unit for animation graphics performance. Goldwasser
Danziger Goldwasser (German: Gold water of Danzig by email at mgoldwasser@opensolutions.com, by phone at 860.652.3153 or via fax at 860.652.3156. For Investor Relations Investor relations The process by which the corporation communicates with its investors. issues please contact David Henderson David Henderson may be:
Open Solutions Inc.(R) is a registered trademark of Open Solutions Inc. All other company and product names may be trademarks of their respective owners. Copyright (C) 2004 Open Solutions Inc. All rights reserved. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Statements made in this press release that state Open Solutions Inc.'s or management's intentions, beliefs, expectations, or predictions for the future are 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. within the meaning of 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. Readers are cautioned that these statements are only predictions and may differ materially from actual future events or results. All forward looking-statements are only as of the date of this press release and Open Solutions Inc. undertakes no obligation to update or revise them. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause Open Solutions Inc.'s actual results to differ materially from those projected in such forward-looking statements. For example, we receive a portion of our revenues from relationships with strategic resellers, and if we lose one or more of these resellers or fail to add new ones it could have a negative impact on our business. Likewise, we have entered and may continue to enter into or seek to enter into business combinations and acquisitions which may be difficult to integrate, disrupt our business, dilute di·lute v. To reduce a solution or mixture in concentration, quality, strength, or purity, as by adding water. adj. Thinned or weakened by diluting. stockholder value or divert di·vert v. di·vert·ed, di·vert·ing, di·verts v.tr. 1. To turn aside from a course or direction: Traffic was diverted around the scene of the accident. 2. management attention. Other factors which could cause our actual results to differ materially from those projected in forward-looking statements include, without limitation, economic, competitive, governmental and technological factors affecting the banking and credit union industry and/or Open Solutions Inc.'s operations, markets, products, services, prices and other factors set forth under the heading "Factors Affecting Future Operating Results" in the Company's Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the three months ended June 30, 2004, as filed with the Securities and Exchange Commission.
OPEN SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
-------- --------- -------- ---------
Revenues:
Software license $ 9,412 $ 4,688 $22,768 $ 13,926
Service, maintenance and
hardware 18,920 12,739 48,334 29,442
-------- --------- -------- ---------
Total revenues 28,332 17,427 71,102 43,368
Cost of revenues:
Software license 2,008 1,278 4,552 3,602
Service, maintenance and
hardware 9,503 7,126 25,100 16,512
-------- --------- -------- ---------
Total cost of revenues 11,511 8,404 29,652 20,114
-------- --------- -------- ---------
Gross Profit 16,821 9,023 41,450 23,254
Operating expenses:
Sales and marketing 3,755 2,590 10,053 7,604
Product development 3,228 1,826 7,410 5,021
General and administrative 5,476 3,692 13,692 8,755
-------- --------- -------- ---------
Total operating
expenses 12,459 8,108 31,155 21,380
Income from operations 4,362 915 10,295 1,874
Interest income and other,
net 363 (53) 885 (18)
-------- --------- -------- ---------
Income before income taxes 4,725 862 11,180 1,856
Income tax provision (255) (56) (567) (183)
-------- --------- -------- ---------
Net income $ 4,470 $ 806 $10,613 $ 1,673
======== ========= ======== =========
Net income per common share
-- Basic $ 0.23 $0.00 (1) $ 0.59 $0.00 (1)
-- Diluted $ 0.21 $0.00 (1) $ 0.53 $0.00 (1)
Shares used to compute net
income per common share
-- Basic 19,107 2,498 17,981 2,487
-- Diluted 20,868 9,535 19,896 9,523
A[micro] (1) Adjusted for adoption of EITF 03-06 "Participating Securities
and the Two-Class Method under FASB Statement No. 128, Earnings Per
Share", which requires the two-class method of computing earnings per
share. The two-class method is an earnings allocation formula that
determines earnings per share for common stock and participating
securities based upon an allocation of earnings as if all of the
earnings for the period had been distributed in accordance with
participation rights on undistributed earnings. Since the Company's
public offering in the fourth quarter 2003, there is only one class of
stock outstanding and, accordingly, there is no impact on 2004
earnings per share.
OPEN SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(Unaudited)
September, 30 December, 31
2004 2003
--------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 86,455 $ 84,953
Accounts receivable, net 18,880 10,267
Deferred costs 1,316 1,563
Prepaid expenses and other current
assets 3,175 2,188
--------------- --------------
Total current assets 109,826 98,971
Fixed assets, net 8,833 5,500
Investments in marketable
securities 13,036 8,028
Capitalized software costs, net 4,300 2,964
Other intangible assets, net 20,059 6,421
Goodwill 34,860 11,187
--------------- --------------
Total assets $ 190,914 $ 133,071
=============== ==============
Liabilities, Redeemable Convertible
Preferred Stock and Stockholders'
Equity
Current Liabilities:
Accounts payable $ 3,193 $ 1,800
Accrued expenses 11,164 8,368
Deferred revenue, current portion 21,113 15,324
Capital lease obligations, current
portion 202 395
--------------- --------------
Total current liabilities 35,672 25,887
-------------- -------------
Capital lease obligations, less
current portion 21 64
Deferred revenue, less current
portion 1,202 1,479
Other long-term liabilities 292 222
--------------- --------------
Total liabilities 37,187 27,652
Total stockholders' equity 153,727 105,419
--------------- --------------
Total liabilities and
stockholders equity $ 190,914 $ 133,071
=============== ==============
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