The Acquisition of Millennium Dynamics, Inc. and Certain Management Changes
BILLERICA, Mass., Oct. 22 /PRNewswire/ -- Peritus Software Services, Inc.
(Nasdaq: PTUS) today announced results for the three months and nine months
ended September 30, 1997, the acquisition of Millennium Dynamics, Inc. and
certain management changes.
For the three months ended September 30, 1997, revenue increased to
$9,852,000, up 75% from revenue of $5,645,000 in the comparable period in
1996. Net income totaled $1,166,000, or pro forma $0.07 per share, up from a
loss of $206,000 in the comparable period in 1996.
For the nine months ended September 30, 1997, revenue increased to
$26,693,000, up 131% from revenue of $11,553,000 in the comparable period in
1996. Net income totaled $2,010,000, or pro forma $0.14 per share, up from a
loss of $5,383,000 in the comparable period in 1996.
Douglas A. Catalano, President and COO of Peritus, stated "We are very
pleased with our financial performance in the third quarter. We continued to
grow revenue significantly over the comparable periods in 1996." Summarizing
certain important developments for the quarter, Mr. Catalano noted: "During
the third quarter we brought out an enhanced version of our
AutoEnhancer/2000(TM) logic correction product. We added three new value
added integrators to our "Powered by Peritus" program. And we have recruited
and hired a number of new people to the Peritus team providing more expertise
and capability."
"In the third quarter we saw strength in both direct and indirect sales
channels. Our value added integrators have acquired additional Line of Code
usage based licenses which is an indication that they are experiencing
increased demand and throughput in their factories," said Allen Deary, Chief
Financial Officer of Peritus. Mr. Deary continued, "Investments made during
late 1996 and early 1997 are also providing momentum on the bottom line. We
completed much of our infrastructure development during the first half of 1997
and we are now seeing the benefits of these investments in improved earnings."
Acquisition of the Millennium Dynamics, Inc. Business
Peritus also announced today that it has signed an agreement to acquire
the assets and assume certain liabilities of Millennium Dynamics, Inc., a
wholly-owned subsidiary of American Premier Underwriters, Inc. based in
Cincinnati, Ohio. Peritus, with its AutoEnhancer/2000 family of products, has
become a leading choice for the dedicated factory approach to solving the Year
2000 problem. Millennium Dynamics, with its Vantage YR2000 family of
products, has become a leading mainframe-based and AS 400 renovation choice.
The acquisition, which will be accounted for as a purchase, provides for the
payment of $30 million in cash by Peritus and the issuance of up to 2,222,000
shares of Peritus common stock at the closing. Completion of the transaction
is subject to regulatory approvals.
"Both companies were pioneers in solving the Year 2000 problem in their
respective markets," said Doug Catalano, President and COO of Peritus.
"Combining them is an outstanding opportunity from both strategic and tactical
perspectives. Strategically, the combination of each company's products and
services provides the most comprehensive set of choices for performing Year
2000 renovations. Tactically, combining the operations fulfills each
company's growth plans by enhancing the expansion of R&D, marketing, sales,
and distribution channels."
"In addition to the dedicated factory solution which is Peritus' strength,
there is an enormous need for tools that can coexist on a client's mainframe
and enable in-house IT managers to apply their domain knowledge and manpower
to solving the Year 2000 problem," said Dominic Chan, Chairman of the Board at
Peritus. "That is exactly the market that Millennium Dynamics addresses so
well."
"The combined offerings of Peritus and Millennium Dynamics provide an
expanded solution to the marketplace," said Tom Hayes, Chairman of the Board
at Millennium Dynamics. "In addition, both companies have a number of
development efforts underway including extended language technologies and
platforms, test products, Euro currency conversion and other mass change
products, and feature extensions to existing products. The combined
development organizations will enhance product releases and leverage overall
R&D efficiencies," he added.
"The products, markets, cultures, technologies, and people fit well. We
believe it is a positive step for the clients and the employees of the
combined companies," said Allen Deary, Chief Financial Officer of Peritus.
Management Changes
In addition, it was announced today that Dominic K. Chan, the founder and
Chairman of Peritus, will assume the role of Chief Technology Officer and has
transitioned his role as Chief Executive Officer of the Company to Douglas A.
Catalano. Mr. Catalano, currently the President and Chief Operating Officer
of Peritus, will serve as the Company's President and Chief Executive Officer.
About Peritus
Peritus provides software products and services that enable organizations to
improve the productivity, quality, and effectiveness of their information
technology ("IT") systems maintenance or "software evolution" functions. The
Company's solutions, which employ software tools, methodologies and processes,
are designed to automate the labor-intensive processes involved in conducting
"mass change" and other software maintenance tasks. The Company licenses this
software directly to end users as well as through consultants, systems
integrators and distributors. The Company also provides software maintenance
outsourcing services to large organizations that seek to enhance the
productivity of their IT systems and application software maintenance
functions.
This press release may contain certain forward-looking statements, which
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in such statements. Certain factors
that could cause actual results to differ materially from those discussed in
such forward-looking statements include the risks described in the Company's
Registration Statement on Form S-1 filed with the SEC in connection with its
July 1997 initial public offering and Form 10-Q for the quarter ended June 30,
1997, which factors are incorporated herein by reference, as well as the
operating difficulties and expenditures associated with acquisitions.
Peritus is a registered trademark, Automate:2000 is a registered
servicemark, and AutoEnhancer/2000 is a trademark of Peritus Software
Services, Inc. Vantage YR2000 is a trademark of Millennium Dynamics, Inc.
PERITUS SOFTWARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share-related data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1997 1996 1997
Revenue:
Outsourcing services $2,611 $2,979 $7,369 $8,542
License 2,424 5,157 2,469 13,944
Other services 610 1,716 1,715 4,207
Total revenue 5,645 9,852 11,553 26,693
Cost of revenue:
Outsourcing services 1,977 2,444 6,410 6,847
License 40 155 40 430
Other services 816 1,280 1,994 3,606
Total cost of revenue 2,833 3,879 8,444 10,883
Gross profit 2,812 5,973 3,109 15,810
Operating expenses:
Sales and marketing 668 2,197 2,051 5,615
Research and development 1,506 1,975 4,267 5,578
General and administrative 763 1,053 2,218 2,853
Total operating expenses 2,937 5,225 8,536 14,046
Income (loss) from
operations (125) 748 (5,427) 1,764
Interest (expense)
income, net (77) 462 (176) 482
Income (loss) before
income taxes
and minority interest (202) 1,210 (5,603) 2,246
Provision (benefit)
for income taxes (1) 50 (205) 222
Minority interest in
consolidated subsidiary (5) 6 15 (14)
Net income (loss) $(206) $1,166 $(5,383) $2,010
Pro forma net income
(loss) per share(1) ($0.02) $0.07 ($0.51) $0.14
Weighted average common
and common
equivalent shares
outstanding(1) 11,083 16,228 10,539 13,910
NOTE(1): The weighted average number of common and common equivalent
shares outstanding during the period includes the effect of the assumed
conversion of all convertible preferred stock as of the beginning of all
periods presented.
PERITUS SOFTWARE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(unaudited)
December 31, September 30,
1996 1997
Assets
Cash $7,388 $46,292
Accounts receivable 4,163 7,169
Costs and estimated earnings
in excess of billings
on uncompleted contracts 3,595 1,619
Prepaid expenses and other
current assets 119 570
Total current assets 15,265 55,650
Property and equipment
and other assets 2,460 3,156
$17,725 $58,806
Liabilities and Stockholders' Equity (Deficit)
Accounts payable $497 $912
Accrued expenses 2,087 2,604
Deferred revenue 3,262 1,382
Other current liabilities 1,201 1,004
Total current liabilities 7,047 5,902
Long-term debt and other
liabilities 1,693 751
Redeemable convertible preferred
stock and
common stock right 12,287 ---
Stockholders' equity (deficit)(3,302) 52,153
$17,725 $58,806
SOURCE Peritus Software Services, Inc.
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CONTACT:
Allen K. Deary, 978-670-0800,
adeary@peritus.com, or Jacqueline Crowley, 978-670-2500,
jcrowley@peritus.com, both Peritus Software Services, Inc.
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