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FILENET REPORTS INCREASED REVENUE AND NET INCOME FOR THE THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 3, 1993

 COSTA MESA, Calif., Oct. 21 /PRNewswire/ -- FileNet Corp. (NASDAQ-NMS: FILE), today reported revenue for the third quarter ended Oct. 3, 1993 was a record $40.0 million, up 8 percent from the $37.1 million reported for the third quarter of 1992. Net income was $2.2 million or 20 cents per share on 11 million shares outstanding compared to $1.1 million or 10 cents per share on 10.9 million shares outstanding for the third quarter of 1992.
 FileNet shipped 34 systems and added 24 new customers during the quarter compared to 26 systems and 19 new customers last year.
 For the nine-month period ended Oct. 3, 1993 revenue was $113.0 million, a 6 percent increase from the $106.5 million reported for the same period of 1992. Net income and net income per share were $3.8 million or 35 cents compared to $3.7 million or 33 cents per share in the prior year.
 "During the quarter FileNet shipped 17 systems in the United States, 15 to new customers, and 17 systems internationally, 9 to new customers," stated Ted Smith, president and CEO. "The $40 million in revenue is a new record for FileNet; however, our improved profitability is the most significant event of the quarter," Smith continued. "I was very encouraged by the balance between the domestic and international operations as well as by the continued growth and profitability of our new service operation.
 "Product revenue was $25 million, equal to the same quarter of the prior year. Software revenue for the quarter increased $5.2 million and amounted to 57 percent of product revenue compared to 35 percent for the same quarter of the prior year, offsetting a $5.6 million decline in hardware revenue. Included in these amounts are the first revenues recognized from our new co-marketing program with Hewlett-Packard and software revenue from the Olivetti and Unisys relationships.
 "Due primarily to the higher software content, this quarter's product gross margins increased from the first and second quarter 1993 levels of 54.7 percent and 56.3 percent respectively to 61.2 percent. Product gross margins were still lower than the 64.8 percent for the same quarter last year as those sales included higher margin propriety hardware rather than the lower gross margin industry standard hardware we are now shipping.
 "Service revenue increased 27 percent to $15.0 million reflecting higher maintenance and professional service activity. Service gross margins were 30.4 percent for the quarter compared to 22.6 percent for the same period last year.
 "Total gross margin was 49.7 percent compared to 51.5 percent for the same period of last year. For the nine month period gross margins were 46.9 percent compared to 51.8 percent in 1992.
 "Total operating expenses were 4 percent lower than the same quarter of last year as we maintained tight control on expense growth. Total headcount at the end of the quarter was approximately 900 people, down 11 percent from the end of 1992 and unchanged from the end of the prior quarter," Smith said.
 "Our continuing transition to a higher software content in our product revenue stream is beginning to show positive results," Smith stated. "Of particular note this quarter, was the first 'software only' revenue generated from our co-marketing agreement with Hewlett-Packard. The number of prospects in the pipeline being generated through this relationship continues to increase, and I expect this new revenue stream will represent a larger percentage of our overall product revenue in the periods ahead.
 "Our customers during the quarter included companies such as Syntex (installing systems both in the U.S. and in Europe), Delta Dental Plan, Goodyear, Marion Merrell Dow, Dresser-Rand, continued rollouts at Allianz in Germany, a new system to a government organization in Japan and a large system to a government organization in Belgium. We see the enterprise-wide adoption of WorkFlo and image processing continuing at an increasing number of our customers.
 "FileNet's financial condition continues to be excellent, with cash and marketable securities, net of borrowings, of $30.8 million, total shareholders' equity of $76.9 million and no significant long-term debt.
 "While our third quarter results exceeded expectations, the marketplace is highly competitive, is impacted by worldwide economic events and, as a result is unpredictable in the short term. I believe we are well positioned from a product and resource standpoint; however, we will be very conservative about adding additional expense for expected growth," Smith concluded.
 FileNet Corp. is a leader in client/server-based document imaging and business process automation solutions. The company's WorkFlo Business System software, is a set of products that manages and controls the movement of images, data, text, and other information throughout an enterprise. FileNet customers include paper-intensive organizations in many industries and levels of government. Headquartered in Costa Mesa, FileNet markets its products directly to end users through the company's sales offices in the United States, Canada, France, Germany, the United Kingdom, and Australia and through resellers in countries around the world.
 NOTE: FileNet and WorkFlo are registered trademarks of FileNet Corp.
 -0- 10/21/93 R
 /CONTACT: Mark St. Clare of FileNet, 714-966-3400; or Lise Needham or Lillian Armstrong of the Financial Relations Board, 415-986-1591, for FileNet/
 (FILE)


CO: FileNet Corp. ST: California IN: CPR SU: ERN

TM -- SF005 -- 4972 10/21/93 08:32 EDT
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Publication:PR Newswire
Date:Oct 21, 1993
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