AXO Axos Financial Inc

AXS-One Reports Second Quarter Financial Results * License revenue up 33% YTD - down $350,000 versus Q2 '03 RUTHERFORD, N.J., July 29 /PRNewswire-FirstCall/ -- AXS-One Inc. (AMEX:AXO), a leading provider of Records Compliance Management (RCM) software solutions today announced its financial results for the second quarter and six-month period ended June 30, 2004. The Company also announced significant restructuring during the second quarter, designed to improve the organization's competitive position by aligning its operations for future growth in the RCM market while servicing existing enterprise customers worldwide more effectively. Financial results for the quarter were impacted by restructuring and other costs of $1.1 million related to severance and retirement related costs to the former CEO. In addition, the quarter was impacted by costs associated with implementing the infrastructure to exploit the growing RCM market. Revenues for the quarter were $9.5 million, a slight decrease from the $9.6 million reported in the corresponding prior year period. License revenues were $1.0 million, including $0.8 million (80 percent) related to e-mail management and archiving products, a decrease of 26 percent from the $1.3 million in total license revenues reported in the same quarter last year. Operating expenses, including the $1.1 million in restructuring and other costs, increased 28 percent as management focused on improving key aspects of the organization, including sales, marketing and research and development, with the goal of rationalizing its product mix and revenue opportunities. Sales and marketing expenses increased 16 percent and R&D expenses increased 29 percent. The Company reported an operating loss of $2.5 million versus operating income of $157,000 in the second quarter of 2003. The Company reported a net loss of $2.6 million, or ($0.09) per diluted share, versus net income of $155,000, or $0.01 per diluted share last year. For the quarter, 65 percent of the license revenue recognized was with customers inside the United States, while 35 percent was recognized internationally. For the first six months of 2004, revenues increased 7.3 percent to $20.4 million, compared to $19.0 million reported for the first six months of 2003. License fees increased 33 percent to $3.5 million compared to license fees of $2.6 million for the first six months of 2003. Total operating expenses, including the restructuring and other costs, increased 21 percent to $22.1 million compared to $18.4 million for the first six months of 2003. The Company reported an operating loss of $1.7 million compared to operating income of $677,000 for the first six months of 2003. The net loss for the six-month period was $1.8 million, or ($0.07) per diluted share, compared to net income of $582,000, or $0.02 per diluted share, for the first six months of 2003. The Company's balance sheet reported $9.2 million in cash as of June 30, 2004, compared to cash of $2.9 million as of December 31, 2003, the result of the $7.7 million private placement completed in April 2004. The Company carries no long-term debt. During the quarter, management embarked on a restructuring effort, eliminating 36 positions around the world and reorganizing to focus on higher growth products within its Records Compliance Management solutions. As a result of these initiatives, the Company incurred $0.8 million of severance costs which are included in the $1.1 million total restructuring and other costs. Management believes the restructuring will provide approximately $3.2 million in annual working capital savings which will be used to invest in the growth of its Records Compliance Management solutions and ensure the Company's long-term profitability. "AXS-One is uniquely positioned from a technology standpoint, with a comprehensive compliance offering, including e-mail management, that satisfies the growing and much publicized need for corporate governance and regulatory compliance worldwide," commented Bill Lyons, AXS-One's Chief Executive Offer. "My first goal was to package our product offering so it is suitable for the reseller channel. In order to accomplish this we conducted a reorganization of our Company, aligning our workforce with our needs both from a product development, as well as a marketing standpoint. I firmly believe that the Company is now in an excellent position to capitalize on the opportunities which are before us." The Company executed two significant partnerships during the quarter and made progress on other channel initiatives: * An alliance was entered into with Sun Microsystems, whereby Sun will resell the AXS-One(R) Compliance Platform to its existing enterprise customers and new customers in targeted markets. As an accredited Sun iForce(SM) partner, AXS-One has collaborated with Sun to test and optimize its compliance solution for the Sun platform. * AXS-One signed an agreement with RedFile, a digital risk and information management solution provider, to collaboratively develop and offer a comprehensive hosted active archival solution designed to help corporations meet evolving regulations, expedite legal discovery and streamline Records Management. Under the terms of the agreement, RedFile will resell the AXS-One(R) Compliance Platform as well as provide a hosted option for organizations to outsource their records retention needs. * At the end of Q1, AXS-One announced a strategic alliance with Sector, a leading managed services provider to the financial services industry. During Q2 four new accounts, including one of the 25 largest banks in the world, chose the AXS-One/Sector solution to address regulatory compliance, operational efficiency and Records Management of all electronic communication. * The AXS-Link(TM) for SAP product, announced during the first quarter, received significant acclaim at SAP's Sapphire Asia Pacific conference at the beginning of June. The Company expects to finalize reseller agreements for this product as well as complete sales in multiple geographies through the remainder of 2004. * The AXS-One e-delivery solution has been implemented by one of the largest travel agencies in the UK. AXS-One will begin monthly revenue recognition of this solution and expect to gain wider traction in this market in Q3. In addition, AXS-One has signed a 3 year deal with one of the major European ferry companies. Mr. Lyons continues, "We believe these partnerships validate the competitive position of our software-based solutions, and demonstrate that large, established companies are interested in partnering with AXS-One to market our software to their customers and prospects. Based on my success forging high profile partnerships in previous assignments, I recognize the immense leverage these relationships can provide. Aligning with such companies as Sun, SAP, Sector and RedFile provide an established base of potential customers and increase our visibility without the substantial increases in infrastructure typically required in a direct selling model." Mr. Lyons concludes, "We now have a streamlined organization and are positioned to successfully grow revenues with an emphasis on profitability. Clearly, this was a challenging quarter for our organization, but I am extremely confident about our ability to capitalize on future opportunities." About AXS-One Inc. AXS-One (AMEX:AXO) is a leading provider of Records Compliance Management software. The AXS-One Compliance solutions provide a platform for regulatory compliance, corporate governance and operational efficiency. AXS-One's Web Services-based technology has been critically acclaimed as best of class. AXS-One's high-volume, interoperable, scalable and secure business solutions have been implemented by the global 2000. AXS-One has offices worldwide, including United States, Australia, Singapore, United Kingdom and South Africa. AXS-One was founded in 1978, and is headquartered in Rutherford, New Jersey, U.S.A. For further information, visit the AXS-One web site at http://www.axsone.com/. AXS-One, the AXS-One logo, "Access Tomorrow Today," AXSPoint and TransAXS are registered trademarks of, and e-Cellerator, AXS Desk, "AXS-One Collaboration FrameWorks," SMART, AXS-Link and Tivity are trademarks of, AXS-One Inc. in the U.S. All other company and product names are trademarks or registered trademarks of their respective companies. Special Note Regarding Forward-Looking Statements: A number of statements contained in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. These risks and uncertainties include, but are not limited to: potential vulnerability to technological obsolescence; the risks that its current and future products may contain errors or defects that would be difficult and costly to detect and correct; potential difficulties in managing growth; dependence on key personnel; the possible impact of competitive products and pricing; and other risks described in more detail in AXO's Securities and Exchange Commission filings. For further information, please contact William Levering of AXS-One Inc., +1-201-935-3400, ; or IR contact, Matthew Hayden of Hayden Communications, +1-858-456-4533, . AXS-ONE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2004 2003 2004 2003 Revenues: License fees $1,004 $1,354 $3,464 $2,595 Services 8,451 8,160 16,862 16,249 Other - related parties 50 74 101 189 Total revenues 9,505 9,588 20,427 19,033 Operating expenses: Cost of license fees 375 378 786 719 Cost of services 4,528 4,003 8,797 7,967 Sales and marketing 2,455 2,124 4,425 3,755 Research and development 2,037 1,578 3,936 3,252 General and administrative 1,530 1,348 3,097 2,663 Restructuring and other costs 1,103 -- 1,103 -- Total operating expenses 12,028 9,431 22,144 18,356 Operating income (loss) (2,523) 157 (1,717) 677 Other income (expense): Interest income 40 20 65 32 Interest expense (2) (46) (14) (119) Gain on sale of subsidiary -- -- -- 71 Equity in income (losses) of joint venture (49) 134 (82) 115 Other expense, net (18) (82) (51) (166) Other income (expense), net (29) 26 (82) (67) Net income (loss) before income taxes (2,552) 183 (1,799) 610 Income tax expense (28) (28) (28) (28) Net income (loss) $(2,580) $155 $(1,827) $582 Basic net income (loss) per common share $(0.09) $0.01 $(0.07) $0.02 Weighted average basic common shares outstanding 27,915 24,960 26,582 24,913 Diluted net income (loss) per common share $(0.09) $0.01 $(0.07) $0.02 Weighted average diluted common shares outstanding 27,915 25,462 26,582 25,773 The unaudited financial information included in this document is intended only as summary provided for your convenience, and should be read in conjunction with the complete consolidated financial statements of the Company (including the Notes thereto, which set forth important information) contained in its Reports on Form 10-K and 10-Q filed by the Company with the U.S. Securities and Exchange Commission (SEC). Such reports are available on the public EDGAR electronic filing system maintained by the SEC. This press release contains forward-looking statements. Such statements are only predictions, and actual events or results may differ materially. All forward-looking statements involve risks and uncertainties, including, without limitation, the risks detailed in the Company's documents and reports filed from time to time with the Securities and Exchange Commission. AXS-ONE INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) June 30, December 31, 2004 2003 ASSETS (Unaudited) Current assets: Cash and cash equivalents $9,216 $2,946 Accounts receivable, net of allowance for doubtful accounts 7,549 5,541 Due from joint venture 96 107 Prepaid expenses and other current assets 773 659 Total current assets 17,634 9,253 Equipment and leasehold improvements, net of accumulated depreciation 412 336 Capitalized software development costs, net of accumulated amortization 2,348 2,364 Other assets 199 197 Total assets $20,593 $12,150 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current portion of long-term debt $-- $547 Accounts payable and accrued expenses 6,208 4,848 Due to joint venture 62 4 Deferred revenue 10,879 8,946 Total current liabilities 17,149 14,345 Long-term deferred revenue 915 1,504 Stockholders' equity (deficit): 2,529 (3,699) Total liabilities and stockholders' equity (deficit) $20,593 $12,150 The unaudited financial information included in this document is intended only as summary provided for your convenience, and should be read in conjunction with the complete consolidated financial statements of the Company (including the Notes thereto, which set forth important Reports on Form 10-K and 10-Q filed by the Company with the U.S. Securities and Exchange Commission (SEC). Such reports are available on the public EDGAR electronic filing system maintained by the SEC. This press release contains forward-looking statements. Such statements are only predictions, and actual events or results may differ materially. All forward-looking statements involve risks and uncertainties, including, without limitation, the risks detailed in the Company's documents and reports filed from time to time with the Securities and Exchange Commission. DATASOURCE: AXS-One Inc. CONTACT: William Levering of AXS-One Inc., +1-201-935-3400, ; or IR contact, Matthew Hayden of Hayden Communications, +1-858-456-4533, Web site: http://www.axsone.com/

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