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CENTRINITY REPORTS THIRD QUARTER FISCAL 2001 FINANCIAL RESULTS
Third quarter revenue increases 21% year over year
Markham, ON, CANADA – August 15, 2001 - Centrinity Inc. (TSE: CTI), which develops and markets FirstClass Unified Communications and Collaborative Groupware technologies, today announced its financial results for the three-month and nine-month periods ended June 30, 2001. All figures are in Canadian dollars unless otherwise stated.
For the three-month period ended June 30, 2001, revenue was $4.1 million, an increase of 21% from $3.4 million for the same period last year and relatively unchanged from the second quarter of this year.
Revenue from the company’s Collaborative Groupware products was $3.3 million, an increase of 3% from $3.2 million for the same period last year and a decrease of 6% from $3.5 million for the second quarter of this year.
Revenue from the company’s Unified Communications solution from enterprise customers was $190,000, an increase of 23% from $154,000 for the same quarter last year and a decrease of 54% from $412,000 for the second quarter of this year.
Revenue from the company’s Unified Communications solution from service provider customers increased to $578,000 from $50,000 for the second quarter of this year. The company had not launched its Unified Communications solution to the service provider market in the third quarter last year.
“While we continued to experience delays in buying decisions by customers across the business in the third quarter, we were pleased with the contribution to revenue from the service provider market, which included a portion of the initial licensing fee from our agreement with TELUS Enterprise Solutions,” said Myles McGovern, president and chief executive officer, Centrinity Inc. ”Revenue from our offerings to the enterprise market, however, continued to be impacted by the general macroeconomic slowdown and its impact on corporate spending.”
Invoiced orders for all products for the third quarter increased 29% to $4.7 million compared to the same quarter last year. Invoiced orders for all products for the nine-month period ended June 30, 2001 increased 78% to $15.4 million compared to the same period last year. The increases were attributable to orders for Centrinity’s Unified Communications solution as well as increased new sales and support and maintenance renewals for our Collaborative Groupware product. Invoiced orders include support and maintenance that is deferred and recognized as revenue over the life of the contract. Deferred revenue increased by 257% to $4.2 million from September 2000 to June 2001.
Gross margin for the third quarter of fiscal 2001 was 92% compared to 91% for same period last year and 96% for the second quarter of fiscal 2001.
Sales and marketing expenses for the third quarter were $10.7 million, an increase of 198% from $3.6 million for the same quarter last year and an increase of 30% from $8.2 million in the second quarter of fiscal 2001. Approximately $1.4 million of the total for the quarter was the result of expenses not necessarily representative of ongoing expenditures. The remainder was primarily the result of a planned ramp-up in expenditures to support the sales and marketing strategy for the company’s Unified Communications solution.
Research and development expenses for the third quarter were $1.7 million, an increase of 54% from $1.1 million for both the same quarter last year and the second quarter of this year. Both the year over year and quarter over quarter increases were primarily attributable to new staff and related expenses to support the ongoing development of the company’s Unified Communications solution. A portion of the quarter over quarter increase was specifically related to deployment of the company’s Unified Communications solution to service providers and international customers. The quarter over quarter increase also included costs for language translation related to the development of the latest version of Centrinity’s core technology, FirstClass 6.
General and administrative expenses for the third quarter were $5.6 million, an increase of 143% from $2.3 million for the same period last year and an increase of 107% from $2.7 million for the second quarter of fiscal 2001. Approximately $2.7 million of the total for the quarter was the result of expenses not necessarily representative of ongoing expenditures. The remainder was primarily related to building corporate infrastructure to support the company’s anticipated growth.
Interest income for the quarter was $337,000 compared to $407,000 for the same period last year and $494,000 for the second quarter of this year. Both the year over year and quarter over quarter decreases are the result of lower cash balances and lower interest rates during the periods.
Net loss for the third quarter of fiscal 2001 was $17.2 million, or $0.72 per share, compared to a net loss of $5.5 million, or $0.28 per share, for the third quarter last year and $8.2 million, or $0.34 per share, for the second quarter of this year. Loss before the amortization of goodwill for the quarter was $16.2 million, or $0.68 per share, compared to $4.5 million, or $0.24 per share, for the third quarter last year and $7.2 million, or $0.30 per share, for the second quarter of this year.
Mr. McGovern said, “Since we announced our intention in early 2000 to enter the unified communications marketplace, we have continued to invest in building our employee base and infrastructure to support our anticipated growth. As sales growth did not materialize, expenses began to fall out of line with revenue. Accordingly, in the third quarter, we commenced initiatives designed to bring our cost structure back in line with revenue.”
In June, Centrinity initiated a corporate realignment, including the immediate elimination of 30 positions followed by another 30 positions in August, to ensure that the company’s resources are focused on its best and most immediate opportunities. At that time, the company appointed Jane Mowat as executive vice president and chief financial officer. “With an extensive financial and operational background, Ms. Mowat will play a significant role in the day-to-day operations of the company,” said Mr. McGovern. “She has already made valuable contributions, undertaking a comprehensive review of our organization from a financial perspective and leading the company’s ongoing cost management activities.”
“Moving ahead, we will continue to focus on reducing costs while ensuring that we have the resources in place to execute our strategy,” said Mr. McGovern. “We expect our combined initiatives to date, along with other elements of a comprehensive cost management program, to result in notably lower operating expenses in future quarters.”
Cash and cash equivalents at June 30, 2001 were $27.4 million compared to $36.4 million at March 31, 2001. Working capital at the end of the third quarter was $22.0 million compared to $37.4 million at the end of the second quarter of fiscal 2001. Mr. McGovern said, “Preservation of cash is and will remain a top priority for management. Through our expense management initiatives, we have set our burn rate on a downward path. While we expect a similar overall decline in our cash balance for the fourth quarter as the company incurs additional one-time cash outflows related to these initiatives, we anticipate cash used in ongoing operations will decrease throughout the quarter.”
For the nine-month period ended June 30, 2001, revenue was $12.7 million, an increase of 57% from $8.1 million for the same period last year. Revenue from the company’s Unified Communications solution for the first nine months of fiscal 2001 totaled $2.4 million. Year over year changes in the company’s nine-month results primarily reflect the impact of the company’s Unified Communications solution.
Gross margin for the nine-month period was 94% compared to 92% for the same period last year.
Sales and marketing expenses for the nine-month period were $25.2 million, an increase of 249% from $7.2 million for the first nine months of fiscal 2000.
Research and development expenses for the nine-month period were $3.9 million, an increase of 74% from $2.3 million for the same period in fiscal 2000.
General and administrative expenses for the nine-month period were $10.9 million, an increase of 158% from $4.2 million for the same period last year.
Interest income for the nine-month period was $1.5 million compared to $555,000 for the same period last year.
Net loss for the first nine months of fiscal 2001 was $32.4 million, or $1.36 per share, compared to a net loss of $10.8 million, or $0.63 per share, for the first nine months of fiscal 2000. Loss before the amortization of goodwill for the first nine months of this year was $29.5 million, or $1.23 per share, compared to $8.3 million, or $0.48 per share, for the first nine months of last year.
In developments during the quarter, Centrinity signed a definitive agreement with TELUS Enterprise Solutions, the e-business division of TELUS Corporation’s large enterprise customer business unit, to provide the technology for TELUS’ unified communications offering to small, medium, and large business customers across Canada. Mr. McGovern said, “Our goal is to work with TELUS toward maximizing the success of their offering in the marketplace.”
Centrinity continued to work with BellZinc.ca, Bell Canada’s business-to-business portal for small and medium-sized enterprise, toward the implementation and launch of their unified communications offering. BellZinc.ca plans to launch its unified communications offering in Fall 2001 as part of its value-added services for business customers.
The company also continued to work with Sprint Canada, which launched its unified communications offering in February, toward building its subscriber base. Mr. McGovern said, “Sprint Canada’s offering is still in its early stages. We expect adoption to be gradual over the foreseeable future as Sprint builds awareness of both the availability and benefits of the service.”
Subsequent to quarter end, Centrinity and GoAmerica Communications Corp. agreed to terminate the agreement signed by the companies in September 2000. It was felt that current conditions would not support a successful offering at this time. Mr. McGovern said, “While cancellation of the agreement resulted in a third quarter write-down of pre-paid marketing expenses intended to support the launch of GoAmerica’s offering, it frees up resources within Centrinity that can be deployed to other projects.”
Also subsequent to quarter end, Centrinity began shipping the latest version of its technology platform, FirstClass 6. FirstClass 6 offers Centrinity’s customers enhanced performance and scalability, supporting five times as many concurrent users per server than the previous version. Other enhancements include advanced customization abilities that provide consistency of features and functionality for users accessing messages and content via the web interface, new editor tools that provide users with enhanced messaging flexibility, and security upgrades including SSL encryption, ensuring that users can access their messages and content via a secure network.
“Looking ahead, while the unified communications industry remains a tremendous opportunity for Centrinity, we recognize that the market has slowed and it will take longer than anticipated to see significant results from our investment in unified communications,” said Mr. McGovern. “Accordingly, we expect flat to moderate revenue growth in the fourth quarter.”
“We are, however, taking appropriate actions to ensure the company is well positioned to succeed in the current environment. We have a solid foundation in our Collaborative Groupware business, which we will continue to support and grow. We will continue to implement and accelerate expense management initiatives to bring our costs in line with revenue and we are ensuring that our resources are focused on our best and most immediate opportunities. Furthermore, we continue to look at strategies that will provide additional near-term revenue streams.”
Conference Call Reminder
Centrinity will host a conference call tomorrow, Thursday, August 16, 2001, at 10:00 a.m. (ET) to discuss its second quarter fiscal 2001 financial results. Participants can access the conference call on the Internet at www.centrinity.com by clicking on “Investors”.
For those unable to participate in the conference call at the scheduled time, it will be available for replay via both the telephone and the Centrinity website. The replay will be available via telephone approximately one hour after the end of the call until Thursday, August 23, 2001 at midnight. The telephone replay can be accessed by dialing 416-695-5800 and entering pass code 871932. The Internet replay can be accessed at www.centrinity.com by clicking on “Investors”.
About Centrinity Inc.
Centrinity is a leading provider of unified communications and collaborative software solutions to telecommunications and data service providers, enterprises and learning organizations. Our award-winning software solutions are designed to enhance productivity and efficiency by simplifying and facilitating the management of communications and information among individuals and groups. Centrinity is listed under the symbol “CTI” on the Toronto Stock Exchange. Website: www.centrinity.com.
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For more information please contact:
Investor Relations
Lawrence Chamberlain
Manager, Investor Relations
Tel: 905.762.6014
Email: lawrence_chamberlain@centrinity.com
Media Relations
Margaret Williamson
Manager, Public Relations
Tel: 905.762.6234
This news release may include statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. The company cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Future events and results may vary substantially from what the company currently foresees.
FirstClass is a registered trademark of a Centrinity Inc. subsidiary used under license. Centrinity and the Centrinity logo are trademarks of Centrinity Inc. All other trademarks are the property of their respective owners.
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