<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to __________________
COMMISSION FILE NUMBER 000-28430
SS&C TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1169696
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
80 Lamberton Road
WINDSOR, CT 06095
(Address of principal executive offices, including zip code)
860-298-4500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
Number of shares outstanding of the issuer's classes of common stock as of
October 18, 1999:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, par value $.01 per share 16,020,703
Page 1
<PAGE>
SS&C TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
September 30, 1999 and December 31, 1998 3
Consolidated Condensed Statements of Operations for
the three-and nine-month periods
ended September 30, 1999 and 1998 4
Consolidated Condensed Statements of Cash Flows for
the nine-month periods ended September 30, 1999 and 1998 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
EXHIBIT INDEX 19
</TABLE>
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects" and similar
expressions are intended to identify forward-looking statements. The important
factors discussed below under the caption "Certain Factors That May Affect
Future Operating Results," among others, could cause actual results to differ
materially from those indicated by forward-looking statements made herein and
presented elsewhere by management from time to time.
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,999 $ 13,047
Restricted cash - 1,230
Investments in marketable securities 39,900 42,263
Accounts receivable, net 16,932 24,442
Note receivable - 2,250
Prepaid expenses and other current assets 4,289 1,709
Deferred income taxes 586 434
------------- ------------
Total current assets 70,706 85,375
------------- ------------
Property and equipment:
Land 106 106
Building and leasehold improvements 4,163 2,748
Equipment, furniture and fixtures 12,681 10,754
------------- ------------
16,950 13,608
Less accumulated depreciation (6,547) (5,814)
------------- ------------
Net property and equipment 10,403 7,794
------------- ------------
Accounts receivable 586 549
Deferred income taxes 5,976 6,266
Goodwill, net 403 722
Intangible and other assets, net 1,988 4,608
------------- ------------
Total assets $ 90,062 $105,314
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 131 321
Accounts payable 827 2,124
Taxes payable - 1,059
Accrued employee compensation and benefits 2,016 6,201
Other accrued expenses 1,829 3,234
Accrued litigation costs 1,330 -
Deferred maintenance and other revenue 12,853 13,302
------------- ------------
Total current liabilities 18,986 26,241
Long-term debt 138 151
------------- ------------
Total liabilities 19,124 26,392
------------- ------------
Stockholders' equity:
Common stock 158 153
Additional paid in capital 86,118 81,486
Cumulative translation adjustment (252) (121)
Accumulated deficit (15,086) (2,596)
------------- ------------
Total stockholders' equity 70,938 78,922
------------- ------------
Total liabilities and stockholders' equity $ 90,062 $105,314
============= ============
</TABLE>
See accompanying notes to Consolidated Condensed Financial Statements
Page 3
<PAGE>
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 3,029 $ 9,147 $ 15,418 $24,069
Maintenance and other recurring revenue 7,226 5,776 20,841 15,979
Professional services 4,973 4,304 15,037 10,814
---------- --------- --------- ---------
Total revenues 15,228 19,227 51,296 50,862
---------- --------- --------- ---------
Cost of revenues:
Software licenses 1,121 1,198 3,211 2,653
Maintenance and other recurring revenue 2,234 2,327 6,988 6,040
Professional services 3,708 3,259 10,958 7,901
---------- --------- --------- ---------
Total cost of revenues 7,063 6,784 21,157 16,594
---------- --------- --------- ---------
Gross profit 8,165 12,443 30,139 34,268
---------- --------- --------- ---------
Operating expenses:
Selling and marketing 4,107 3,392 13,096 10,215
Research and development 5,352 5,831 15,692 15,126
General and administrative 3,654 1,722 9,141 6,220
Write-off of purchased in-process
research and development - - - 5,878
Litigation settlement costs - - 9,330 -
---------- --------- --------- ---------
Total operating expenses 13,113 10,945 47,259 37,439
---------- --------- --------- ---------
Operating income (loss) (4,948) 1,498 (17,120) (3,171)
---------- --------- --------- ---------
Interest income, net 660 482 1,754 1,562
Other income (expenses) (49) (755) 329 (669)
---------- --------- --------- ---------
Income (loss) before income taxes (4,337) 1,225 (15,037) (2,278)
Provision (benefit) for income taxes (2,224) 851 (2,568) (194)
---------- --------- --------- ---------
Net income (loss) $(2,113) $ 374 $(12,469) $(2,084)
========== ========= ========= =========
Basic earnings (loss) per share $ (0.14) $ 0.02 $ (0.80) $ (0.14)
========== ========= ========= =========
Weighted average number of common
Shares outstanding 15,643 15,071 15,550 14,826
========== ========= ========= =========
Diluted earnings (loss) per share $ (0.14) $ 0.02 $ (0.80) $ (0.14)
========== ========= ========= =========
Weighted average number of common and
common equivalent shares outstanding 15,643 16,061 15,550 14,826
========== ========= ========= =========
</TABLE>
See accompanying notes to Consolidated Condensed Financial Statements.
Page 4
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (12,469) $ (2,084)
-------------- --------------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 4,952 4,309
Non-cash adjustment related to litigation settlement 1,300 -
Deferred income taxes 138 (2,260)
Purchased in-process research and development - 5,878
Provision for doubtful accounts 3,146 948
Changes in operating assets and liabilities, excluding effects
from acquisitions:
Accounts receivable 4,206 (6,860)
Prepaid expenses and other current assets (2,502) (1,577)
Accrued litigation costs 30 -
Accounts payable (1,381) (179)
Accrued expenses (2,532) (1,257)
Taxes payable (1,059) 764
Deferred maintenance and other revenues (450) (156)
-------------- --------------
Total adjustments 5,848 (390)
-------------- --------------
-------------- --------------
Net cash used in operating activities (6,621) (2,474)
-------------- --------------
Cash flow from investing activities:
Additions to property and equipment (4,539) (5,197)
Acquisition of Quantra, net of cash received - (5,261)
Additions to capitalized software and other intangibles (82) (2,915)
Proceeds from note receivable 2,250 -
Purchases of marketable securities (17,174) (23,602)
Sales of marketable securities 19,537 41,552
-------------- --------------
-------------- --------------
Net cash used by investing activities (8) 4,577
-------------- --------------
Cash flow from financing activities
Repayment of debt (228) (634)
Proceeds from note payable - 612
Issuance of common stock 896 647
Exercise of options 683 1,368
Transfer of cash from restricted cash equivalents 1,230 -
-------------- --------------
-------------- --------------
Net cash provided by financing activities 2,581 1,993
-------------- --------------
Net decrease in cash and cash equivalents (4,048) 4,096
Cash and cash equivalents, beginning of period 13,047 5,026
-------------- --------------
Cash and cash equivalents, end of period $ 8,999 $ 9,122
============== ==============
</TABLE>
Supplemental disclosure of non-cash investing activities:
As more fully described in Note 3, effective March 20, 1998, the Company
purchased substantially all the assets of Quantra Corporation for $15.3
million.
As more fully described in Note 3, effective March 11, 1999, the Company
acquired all the outstanding stock of HedgeWare, Inc. for 685,683 shares of
the Company's Common Stock.
See accompanying notes to Consolidated Condensed Financial Statements.
Page 5
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
1. Summary of Significant Accounting Policies:
Basis of Presentation
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments, except as noted elsewhere in the notes to the
consolidated condensed financial statements) necessary to present fairly its
financial position as of September 30, 1999 and the results of its operations
for the three and nine months ended September 30, 1999 and 1998. These
statements are condensed and therefore do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. The statements should be read in conjunction
with the consolidated financial statements and footnotes as of and for the
year ended December 31, 1998 included in the Company's Form 10-K filed with
the Securities and Exchange Commission. The December 31, 1998 consolidated
condensed balance sheet data were derived from audited financial statements,
but do not include all disclosures required by generally accepted accounting
principles. The results of operations for the three and nine months ended
September 30, 1999 are not necessarily indicative of the results to be
expected for the full year.
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share
includes no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share is computed by dividing net income by
the weighted average number of common and common equivalent shares
outstanding during the period. Common equivalent shares consist of stock
options using the treasury stock method. Common equivalent shares are excluded
from the computation if their effect is antidilutive. Outstanding options to
purchase 2.8 million and 2.9 million shares for the nine months ended September
30, 1999 and 1998, respectively, were not included in the computation of diluted
earnings per share because the effect of including the options would be
antidilutive. Income available to stockholders is the same for basic and diluted
earnings per share. A reconciliation of the shares outstanding is as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic weighted average shares
Outstanding 15,643 15,071 15,550 14,826
Weighted average common stock
Equivalents-options - 990 - -
------ ------ ------ ------
Diluted weighted average shares
Outstanding 15,643 16,061 15,550 14,826
====== ====== ====== ======
</TABLE>
Comprehensive Income (Loss )
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") requires that items defined as comprehensive income,
such as foreign currency translation adjustments, be separately classified in
the financial statements and that the accumulated balance of other
comprehensive income be reported separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet. For
the three months ended September 30, 1999, total comprehensive loss was $2.0
million and was composed of net loss of $2.1 million and foreign currency
translation profit of $0.1 million. For the nine months ended September 30,
1999, total comprehensive loss was $12.6 million and was composed of net loss of
$12.5 million and foreign currency translation loss of $0.1 million. There were
no material differences between net income (loss) and comprehensive income
(loss) for the three and nine months ended September 30, 1999 and 1998.
Page 6
<PAGE>
Reclassification of prior periods statement of operations
As a result of continued efforts to refine cost allocations and
methodologies, the classification of prior periods presented herein have been
restated to be on a comparable basis with the current period.
2. Related Party Transactions:
AEGON USA Realty Advisors, Inc. ("Aegon") is the parent company of QSC
Holding Inc. (formerly known as Quantra Corporation), which sold
substantially all of its assets to the Company in March 1998. The president
of Aegon retains a seat on the board of directors of the Company. During the
quarter ended March 1999 Aegon licensed certain of the Company's products for
$1.68 million. This amount was paid in full during the quarter ended March
31, 1999.
3. Commitments and Contingencies:
On March 18, 1997 and April 8, 1997, two separate purported class action
lawsuits ("Complaints") were filed against the Company, certain of its
officers and the two leading managers of the Company's initial public
offering. On July 8, 1997, a Consolidated Amended Class Action Complaint was
filed in the United States District Court for the District of Connecticut in
which the Complaints were consolidated and amended.
On May 7, 1999, the Company announced that it had entered into an agreement
that provides for the settlement of the consolidated securities class action
lawsuit pending against the Company. The settlement provides that all claims
against the Company, certain of its officers and directors and underwriters
will be dismissed. Under the terms of the settlement, in exchange for the
dismissal and release of all claims, the Company paid to the class $7.5
million in cash, together with shares of Common Stock of the Company valued
at $1.3 million. The Company recorded a charge for the settlement of
approximately $9.3 million, including legal fees, in the quarter ended June
30, 1999.
4. Acquisitions:
On March 20, 1998, the Company completed its acquisition (the "Quantra
Acquisition") of substantially all of the assets of Quantra Corporation
("Quantra") pursuant to an Asset Purchase Agreement, dated as of March 20,
1998, among the Company, Quantra and AEGON USA Realty Advisors, Inc. The
purchase price for the Quantra Acquisition consisted of 546,019 unregistered
shares of the Company's Common Stock valued at $8.8 million, $2.3 million in
cash and the assumption of certain liabilities of Quantra of $4.1 million,
plus the costs of effecting the transaction. The Company and Quantra also
entered into an Escrow Agreement pursuant to which an additional $1.2 million
was held in escrow to reimburse the Company in connection with certain
acquisition costs and the breaches of representations, warranties and
covenants, if any, by Quantra.
The Quantra Acquisition was accounted for as a purchase and, accordingly, the
net assets and results of operations of Quantra have been included in the
consolidated condensed financial statements from the acquisition date. The
purchase price was allocated to tangible and intangible assets based on their
fair market value on the date of the acquisition.
The following summarizes the allocation of the purchase price of the Quantra
Acquisition (in thousands):
Accounts receivable $ 4,145
Equipment and furniture 425
Other assets 63
Complete technology 5,271
Incomplete technology 5,387
-------
Total purchase price $15,291
=======
On April 9, 1998, the Company completed its acquisition (the "Savid
Acquisition") of the outstanding shares of Savid International Inc. and The
Savid Group, Inc. (together "Savid") pursuant to a Stock Purchase Agreement,
Page 7
<PAGE>
dated as of April 9, 1998, between the Company, Savid and the sole
stockholder ("Stockholder") of Savid. The purchase price of the Savid
Acquisition consisted of $739,000 in cash, net of cash received, and the
assumption of certain liabilities of Savid of $118,000, plus the costs of
effecting the transaction. A further cash payment of $750,000 shall be paid
as additional consideration provided that the aggregate revenues for the
period from and including April 15, 1998 through and including April 14, 2001
are greater than or equal to $3,000,000. The Company is required to pay 10%
of the license fees it receives for sales and licensing of the Savid product
through April 14, 2003. The results of operations of Savid prior to the
acquisition were immaterial.
The Savid Acquisition was accounted for as a purchase and, accordingly, the
net assets and results of operations of Savid have been included in the
consolidated condensed financial statements from the acquisition date. The
purchase price was allocated to tangible and intangible assets based on their
fair market value on the date of the acquisition.
The following summarizes the allocation of the purchase price for the Savid
Acquisition (in thousands):
Accounts receivable $ 30
Equipment and furniture 4
Complete technology 336
Incomplete technology 491
----
Total purchase price $861
====
For the Quantra and Savid Acquisitions, the allocation to complete technology
is based on future risk-adjusted cash flows. Complete technology has been
capitalized and included in intangible assets in the accompanying
consolidated condensed balance sheets. Complete technology will be amortized
over two to four years based on the ratio that current gross revenues of the
products bear to the total of current and anticipated future gross revenues
of the products or the straight line-method, whichever is shorter. The
allocation to incomplete technology is also based on future risk-adjusted
cash flows and has been expensed in 1998, in accordance with generally
accepted accounting principles. The incomplete technology had not achieved
technological feasibility and had no alternative uses.
For the Quantra and Savid Acquisitions, the Company developed revenue
projections over a five-to-six year period in three categories: license,
maintenance and consulting. License revenue projections were based on
expected unit sales over the projected lives of the respective product lines.
The other categories of revenues were generally estimated as a percentage of
total license revenues and ranged from 15% to 20% for maintenance and from
10% to 30% for consulting, depending on the product. Savid consulting
revenues were projected to be insignificant. Expense assumptions were based
on the imposition of the Company's cost structure on the acquired
technologies and products. The discount rates for the Quantra in-process
research and development projects were 23% and 28%; the discount rate for the
Savid in-process research and development projects was 20%.
The unaudited pro forma condensed consolidated results of operations
presented below for the nine months ended September 30, 1998, assumes the
Quantra Acquisition occurred at the beginning of the period (in thousands):
Total revenues $ 52,589
Net loss (1,923)
Basic loss per share (.13)
Diluted loss per share (.13)
These pro forma results are not necessarily indicative of results of
operations that would have actually occurred had the acquisition taken place
at the beginning of the period, or of future operations of the combined
companies.
On March 11, 1999, the Company acquired all of the outstanding stock of
HedgeWare, Inc. ("HedgeWare"), a provider of portfolio, financial,
partnership and tax accounting software and service support to hedge fund
managers and traders, for 685,683 shares of Common Stock of the Company in a
business combination accounted for as a pooling-of-interests. Accordingly,
the financial statements for all periods prior to the combination have been
restated to reflect the combined operations. The Company, HedgeWare and the
former stockholders of HedgeWare have entered into an Escrow Agreement
providing, among other things, that 89,139 shares of Common Stock will be
held
Page 8
<PAGE>
in escrow to reimburse the Company in connection with breaches of
representations, warranties or covenants, if any, as well as potential rental
obligations and sales tax liabilities of HedgeWare. The results of
operations presented below for the quarters ended September 30, 1998 and 1999
present the Company and HedgeWare as stand-alone entities. There were no
intercompany transactions and no adjustments to net assets of the combining
companies to adopt the same accounting practices.
<TABLE>
<CAPTION>
(in thousands)
-------------------------------------------
Total
Company HedgeWare Company
----------- ----------- -----------
<S> <C> <C> <C>
For the three months ended
September 30, 1998:
Revenues $ 18,356 $ 871 $ 19,227
Net income (loss) 767 (393) 374
For the nine months ended
September 30, 1998
Revenues $ 48,004 $ 2,858 $ 50,862
Net loss (1,055) (1,029) (2,084)
For the nine months ended
September 30, 1999:
Revenue $ 45,929 $ 5,367 $ 51,296
Net income (loss) (13,460) 991 (12,469)
</TABLE>
HedgeWare had elected to be treated as a Subchapter S Corporation for income
tax purposes and, as such, income taxes are provided from March 11, 1999 for
HedgeWare's results of operations. During the quarter ended March 31, 1999,
the Company issued stock valued at $3.1 million in satisfaction of certain
shareholder and employee-related accrued expenses of HedgeWare that existed
as of the effective date of the merger.
On March 31, 1999, the Company acquired all of the outstanding stock of The
Brookside Corporation, a Rhode Island corporation ("Brookside"), pursuant to
a Stock Purchase Agreement, dated as of March 31, 1999 (the "Purchase
Agreement"), by and among the Company, Brookside, and John M. Boyle (the
"Stockholder"). Pursuant to the Purchase Agreement, all of the outstanding
shares of common stock of Brookside held by the Stockholder were exchanged
for an aggregate of 27,600 shares of Common Stock of the Company. The
consolidated results of operations for the three and nine months ended
September 30, 1999 include the results of operations of Brookside from the
beginning of the respective periods. The consolidated financial statements
for prior periods have not been restated since the impact of such restatement
would not be material.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 and 1998
RESULTS OF OPERATIONS
Revenues
The Company's revenues are derived from software licenses and related
maintenance and professional services. Total revenues for the three and nine
months ended September 30, 1999 were $15.2 million and $51.3 million,
respectively, representing a decrease of 21% and an increase of 1% from the
$19.2 million and $50.9 million, respectively, reported for the comparable
periods of the prior year.
Software Licenses. Software license revenues for the three and nine months
ended September 30, 1999 were $3.0 million and $15.4 million, respectively,
representing decreases of 67% and 36% over the $9.1 million and $24.1
million, respectively, in the comparable periods of the prior year. The
decrease in license revenues for the three
Page 9
<PAGE>
months ended September 30, 1999 was primarily the result of lower CAMRA and Real
Estate product sales. The decrease for the nine months ended September 30, 1999
was also due to lower CAMRA sales compared to the prior period, offset by
increases in the Advisorware and LMS 2000 product lines. The company believes
that a large percentage of lower license revenue was due to customer deferral of
purchases while resolving their Y2K issues, as well as the Company's sales
execution and staffing requirements.
Maintenance and Other Recurring Revenues. Maintenance and other recurring
revenues for the three and nine months ended September 30, 1999 were $7.2
million and $20.8 million, respectively, representing increases of 25% and
30% from the $5.8 million and $16.0 million, respectively, in the comparable
periods of the prior year. The increase for both periods was primarily due
to growth in the Company's installed base of clients requiring maintenance
services.
Professional Services. Professional services revenues for the three and
nine months ended September 30, 1999 were $5.0 million and $15.0 million,
respectively, representing increases of 16% and 39% from the $4.3 million and
$10.8 million, respectively, in the comparable periods of the prior year. The
increase in the professional services revenue was primarily attributable to
increases in implementation, conversion and training services as a result of
higher license revenue from the quarters ended December 1998 and March 31,
1999.
Cost of Revenues
Total cost of revenues for the three and nine months ended September 30,
1999 were $7.1 million and $21.2 million, respectively, representing
increases of 4% and 28% from $6.8 million and $16.6 million, respectively, in
the comparable periods of the prior year. The gross margin decreased from 65%
and 67% for the three and nine months ended September 30, 1998 as compared to
54% and 59% for the three and nine months ended September 30, 1999. The
decreases were primarily due to the reductions in license revenue, which
historically have had higher margins than professional services revenue and
maintenance and other recurring revenues.
Cost of Software Licenses. Cost of software license revenues relates
primarily to royalties, the costs of product media, packaging, documentation
and labor involved in the distribution of the Company's software as well as
amortization of completed technology. The cost of software licenses for the
three months ended September 30, 1999 and 1998 remained approximately
constant while increasing during the nine months ended September 30, 1999
compared to the comparable period in 1998. The increase in these costs for
the nine months ended September 30, 1999 compared to the similar period in
1998, was due primarily to the amortization of completed technology related
to the Quantra and Savid acquisitions.
Cost of Maintenance and Other Recurring Revenue. Cost of maintenance and
other recurring revenue primarily consists of technical customer support and
development costs associated with product and regulatory updates. The cost of
maintenance and other recurring revenue decreased 4% for the three months
ended September 30, 1999 and increased by 16% for the nine months ended
September 30, 1999, from the comparable periods of the prior year. The
increase for the nine month period was primarily due to increased headcount
for the infrastructure to support the expanded installed client base. The
three month periods are fairly comparable since the company had started to
increase its support infrastructure in the third quarter of 1998.
Cost of Professional Services. Cost of professional service revenues
consists primarily of the cost related to personnel utilized to provide
implementation, conversion and training services to the Company's software
licensees, as well as custom programming, system integration and actuarial
consulting services. The cost of professional services revenues were $3.7
million and $11.0 million for the three and nine months ended September 30,
1999, respectively, representing increases of 14% and 39% over the comparable
periods of the prior year. The cost of professional services revenues as a
percentage of professional services revenues remained approximately the same.
The increase in the cost of professional services was primarily attributable
to the addition of personnel required to support the corresponding increase
in implementation, conversion and training services.
Operating Expenses
Selling and Marketing. Selling and marketing expenses consist primarily of
the cost of personnel associated with the selling and marketing of the
Company's products, including salaries, commissions, and travel and
entertainment. These expenses also include the cost of branch sales offices,
advertising, trade shows, marketing and promotional materials. Selling and
marketing expenses as a percentage of total revenues for the three and nine
months ended
Page 10
<PAGE>
September 30, 1999 were 27% and 26%, respectively, as compared with 18% and 20%,
respectively, in the comparable periods of 1998. These expenses were $4.1
million and $13.1 million for the three and nine months ended September 30,
1999, respectively, representing increases of 21% and 28% over the corresponding
periods of last year. The increase was largely attributable to costs associated
with the hiring of additional sales and marketing personnel, increased marketing
and advertising costs, and the expansion of international operations into Japan
and Australia, including a dedicated international sales and marketing
operation.
Research and Development. Research and development expenses consist
primarily of personnel costs attributable to the development of new software
products and the enhancement of existing products. Research and development
expenses as a percentage of total revenues, for the three and nine months
ended September 30, 1999 were 35% and 31%, respectively, as compared with 30%
for both comparable periods of the pror year. For the three and nine months
ended September 30, 1999, these expenses decreased by 8% to $5.4 million and
increased 4% to $15.7 million, respectively. The dollar increase for the nine
months ended September 30, 1999 over the comparable period last year was due
to the hiring of additional personnel. The decrease for the three months
ended September 30, 1999 over the comparable period in 1998 was primarily due
to a reduction in contract employees and consultants. The Company believes
that due to the sophistication of its products, research and development
spending should remain at these levels.
General and Administrative. General and administrative expenses are
primarily comprised of personnel costs related to management, accounting, human
resources and administration and associated overhead costs, as well as fees
for professional services. General and administrative expenses as a
percentage of total revenues, for the three and nine months ended September
30, 1999 were 24% and 18%, respectively, as compared with 9% and 12%,
respectively, in the comparable periods of the prior year. For the three and
nine months ended September 30, 1999, general and administrative expenses
increased by 112% to $3.7 million and by 47% to $9.1 million, respectively,
from $1.7 million and $6.2 million, respectively, in the comparable periods
of the prior year. The increase for the three months and the nine months
ended September 30, 1999 related primarily to an increase in the allowance
for doubtful accounts.
Write-off of Purchased In-Process Research and Development. In the first
quarter of 1998, the Company expensed $5.4 million of purchased in-process
research and development associated with the Quantra products acquired in
March 1998. In the second quarter of 1998, the Company expensed $0.5 million
of purchased in-process research and development associated with the Savid
products acquired in April 1998. Because these products had not yet reached
technological feasibility at the time of the respective acquisitions and, in
the Company's judgment, there was no alternative use for the related research
and development, such in-process research and development was charged to
expense.
Litigation settlement costs. On May 7, 1999, the Company announced that it
had entered into an agreement that provides for the settlement of the
consolidated securities class action lawsuit pending against the Company.
The settlement provides that all claims against the Company, certain of its
officers and directors and underwriters will be dismissed. Under the terms
of the settlement, in exchange for the dismissal and release of all claims,
the Company paid to the class $7.5 million in cash in the third quarter of
1999, and issued shares of Common Stock of the Company valued at $1.3 million
during the fourth quarter of 1999. The Company recorded a charge of $9.3
million, including legal fees, in the quarter ended June 30, 1999.
Interest income and income taxes. Interest income was higher in the three-
month period ended September 30, 1999 when compared to the similar period in
1998, but remained relatively constant on a year to date basis. The Company's
effective tax rate was 51% and 17% for the three months and nine months ended
September 30, 1999, respectively. The nine-month period is lower due to the
fact that no tax effect was given to the litigation settlement costs. The
Company has not recorded a tax benefit in the second quarter for the settlement
expense, since it is not determinable at that time. A tax benefit may be
recorded in future quarters when the accounting of the class participants is
finalized.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities totaled $48.9 million at
September 30, 1999 compared with $56.5 million at December 31, 1998. The
decrease in cash and cash equivalents was primarily due to the $7.5 million
payment of the litigation settlement. This payment was made in the third
quarter of 1999.
Page 11
<PAGE>
The net cash used in operating activities was $6.6 million in the nine
months ended September 30, 1999 compared with net cash used of $2.5 million
in the comparable period of 1998. The increase was primarily due to a higher
net loss, decrease in accounts payable and accrued expenses and an increase
in taxes receivable, and was offset by a reduction in accounts receivable.
The accounts receivable decreased by $4.1 million in the first nine months of
1999 compared to an increase of $6.9 million in the first nine months of
1998. The litigation settlement costs of $7.5 million were paid in the third
quarter of 1999.
Net cash used in investing activities was minimal in the nine months ended
September 30, 1999 as compared to net cash provided of $4.6 million in the
comparable period of 1998. Cash used in investing activities consisted
mainly by additions to property and equipment of $4.5 million offset by the
payment of the note receivable associated with the Caminus Energy Ventures,
LLC transaction and the net sale of marketable securities.
Net cash provided by financing activities was $2.6 million in the nine months
ended September 30, 1999 compared to $2.0 million in the comparable period of
1998. Cash provided by financing activities consisted mainly of the proceeds
from the exercise of stock options, the issuance of stock for the Employee
Stock Purchase Plan and the release of escrowed funds associated with the
Quantra acquisition offset by the repayment of debt.
The Company believes that its current cash, cash equivalents and marketable
securities will be sufficient to meet its working capital and capital
expenditure requirements for at least for the next 12 months.
YEAR 2000
ear 2000 Compliance. The information presented below related to year 2000
compliance contains forward-looking statements that are subject to risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed below and elsewhere in this Form 10-Q regarding Year 2000
compliance.
Year 2000 Issue Defined. The Year 2000 ("Y2K") issue is the result of
certain computer hardware, operating system software and software application
programs having been developed using two digits rather than four digits to
define a year. For example, the clock circuit in the hardware may be
incapable of holding a date beyond the year 1999; some operating systems
recognize a date using "00" as the year 1900 rather than 2000 and certain
applications may have limited date processing capabilities. These problems
could result in the failure of major systems or miscalculations, which could
have a material impact on companies through business interruption or
shutdown, financial loss, damage to reputation, and legal liability to third
parties.
State of Readiness. The Company formed at Y2K Review Team ("Team") in 1998
to address the potential impact of Y2K on the Company. In particular, the Y2K
Plan addresses four principal areas that may be impacted by the Y2K issue:
SS&C Technologies Products, Information Technology (IT) Systems, Third Party
Relationships and non-IT Systems. The initial phase was to organize a Team of
both IT and non-IT employees and to develop a process. The second phase was
to establish an inventory of all potential areas where Y2K problems could
exist. The inventory included: server hardware (BIOS), server operating
systems, server application software, network device hardware and software,
PC hardware (BIOS), PC operating systems, PC application software, phone and
security systems, the Company's Products and its vendors. Each area listed in
the inventory was assigned to a Team member to evaluate the current Y2K
compliance and where required, recommend a solution to correct the problem.
As of the end of the third quarter of 1999, the Company has substantially
completed both phases for both the IT and non-IT systems. The Company is
currently involved in the remediation phase and expects to be completed in
the fourth quarter of 1999. However, the Company continues to review
information developed as a result of its overall effort, which could result
in additional items being added to its Y2K inventory.
SS&C Technologies Products. The Company has utilized both in-house and outside
consultants to test whether its products are Y2K compliant. Most of the
Company's key products have already passed rigorous testing to be certified
as Y2K compliant. In the event that any Y2K-compliance issues with its
supported products arise, it is the Company's intention to rectify those
problems through the software support process. Costs associated with the
testing and modifications to make the Company's products Y2K compliant have
not had, and are not expected to have, a material adverse effect on the
Company's business, financial condition or results of operations and cash
flows.
Third Party Relationships. The Company's business operations are dependent
on third party suppliers. The Company is working with its key external
partners to identify and to mitigate the potential risks of Y2K. The failure
of external parties to resolve their own Y2K issues, in a timely manner,
could result in a material financial risk to the
Page 12
<PAGE>
Company. As part of the overall Y2K program, the Company is actively
communicating with third parties through correspondence. Because the Company's
Y2K compliance is dependant on the timely Y2K compliance of third parties, there
can be no assurance that the Company's efforts alone will resolve all Y2K
issues.
Contingency Plans. There can be no assurance that the systems of other parties
upon which the Company's business relies directly or indirectly will be Year
2000 compliant. The costs of becoming Y2K compliant, or the failure thereof
by the Company or other parties, could have a material adverse effect on the
Company's business, financial condition or results of operations. The Company's
contingency plans, which are based in part on the assessment of the magnitude
and probability of potential risks, will primarily focus on proactive steps to
prevent Y2K failures from occurring, or if they should occur, to detect them
quickly, minimize their impact and expedite their repair.
Costs to Address Year 2000 issues. The Y2K costs incurred to date have not
been material. Most software applications, BIOS and operating system upgrades
to Y2K compliance were incorporated into the Company's standard licensing
agreements. As part of the contingency planning effort we will examine
additional potential Y2K costs, where applicable.
The foregoing shall be considered a Year 2000 readiness disclosure to the
maximum extent allowed under the Year 2000 Information and Readiness
Disclosure Act.
CONVERSION TO EURO
In January 1, 1999, 11 of the 15 members of the European Union established
fixed conversion rates between their existing currencies and the "Euro." The
Euro will trade on currency exchanges and the legacy currencies will remain
legal tender for a transition period between January 1, 1999 and January 1,
2002. During the transition period, goods and services may be paid for using
the Euro or the participating country's legacy currency. Participating
countries no longer control their own monetary policies by directing
independent interest rates for their legacy currencies. Instead, the
authority to direct monetary policy, including money supply and official
interest rates, is now exercised by the new European Central Bank. No later
than July 1, 2002, the legacy currencies of the participating countries will
no longer be legal tender for any transaction, making conversion to the Euro
complete.
The Company has established plans and has begun developing the necessary
modifications for the technical adaptation of its internal information
technology and other systems to accommodate Euro-denominated transactions.
The Company expects that it will be able to process Euro-denominated
transactions on a timely basis. The Company is also assessing the business
implications of the conversion to the Euro, including long-term competitive
implications and the effect of market risk with respect to financial
instruments. The Company is currently unable to determine the ultimate
financial impact of these matters, if any, on its business, financial
condition and results of operations. However, the Company will continue to
assess the impact of Euro conversion issues as the applicable accounting,
tax, legal and regulatory guidance evolves.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Fluctuations in Quarterly Performance. The Company's revenues and operating
results historically have varied substantially from quarter to quarter. The
Company's quarterly operating results may continue to fluctuate due to a
number of factors, including the timing, size, and nature of the Company's
individual license transactions; the reluctance of many firms to purchase
enterprise software prior to the year 2000; the timing of the introduction
and the market acceptance of new products or product enhancements by the
Company or its competitors; the relative proportions of revenues derived from
license fees, maintenance, consulting, and other recurring revenues and
professional services; changes in the Company's operating expenses; personnel
changes; and fluctuations in economic and financial market conditions. The
timing, size, and nature of individual license transactions are important
factors in the Company's quarterly operating results. Many such license
transactions involve large dollar amounts, and the sales cycles for these
transactions are often lengthy and unpredictable. There can be no assurance
that the Company will be successful in closing large license transactions on
a timely basis or at all.
Dependence on Financial Services Industry. The Company's clients include a
range of organizations in the financial services industry, and the success of
such clients is intrinsically linked to the health of the financial markets.
In addition, because of the capital expenditures required in connection with
an investment in the Company's products, the Company believes that demand for
its products could be disproportionately affected by
Page 13
<PAGE>
fluctuations, disruptions, instability, or downturns in the financial markets,
which may cause clients and potential clients to exit the industry or delay,
cancel, or reduce any planned expenditures for investment management systems and
software products. Any resulting decline in demand for the Company's products
could have a material adverse effect on the Company's business, financial
condition, and results of operations.
Product Concentration. To date, substantially all of the Company's revenues
have been attributable to the licensing of its CAMRA, PTS, FILMS, REMS, MLMS,
Telesales, Antares, Total Return, and Advisorware software and the provision
of maintenance and consulting services in connection therewith. The Company
currently expects that the licensing of such software products, as well as
certain other products acquired by the Company in connection with recent
acquisitions and the provision of related services, will account for a
substantial portion of its revenues for the foreseeable future. As a result,
factors adversely affecting the pricing of or demand for such products and
services, such as competition or technological change, could have a material
adverse effect on the Company's business, financial condition, and results of
operations.
Management of Growth. The Company's business has grown significantly in size
and complexity over the past several years. The growth in the size and
complexity of the Company's business as well as its client base has placed
and is expected to continue to place a significant strain on the Company's
management and operations. The Company's ability to compete effectively and
to manage future growth, if any, will depend on its ability to continue to
implement and improve operational, financial, and management information
systems on a timely basis and to expand, train, motivate, and manage its work
force. There can be no assurance that the Company's personnel, systems,
procedures, and controls will be adequate to support the Company's
operations. If the Company's management is unable to manage growth
effectively, the quality of the Company's products and its business,
financial condition, and results of operations could be materially adversely
affected.
Integration of Operations. The Company's success is dependent in part on its
ability to complete its integration of the operations of its recent
acquisitions, including HedgeWare, in an efficient and effective manner. The
successful integration in a rapidly changing financial services industry may
be more difficult to accomplish than in other industries. The combination of
these acquired companies will require, among other things, integration of the
acquired companies' respective product offerings and coordination of their
sales and marketing and research and development efforts. There can be no
assurance that such integration will be accomplished smoothly or
successfully. The difficulties of such integration may be increased by the
necessity of coordinating geographically separated organizations. The
integration of certain operations will require the dedication of management
resources that may temporarily distract attention from the day-to-day
business of the combined Company. The inability of management to successfully
integrate the operations of acquired companies could have a material adverse
effect on the business, financial condition, and results of operations of the
Company.
Competition. The market for financial service software is competitive, rapidly
evolving, and highly sensitive to new product introductions and marketing
efforts by industry participants. Although the Company believes that none of
its competitors currently competes against the Company in all of the markets
served by the Company, there can be no assurance that such competitors will
not compete against the Company in the future in additional markets. In
addition, many of the Company's current and potential future competitors have
significantly greater financial, technical and marketing resources, generate
higher revenues, and have greater name recognition than does the Company.
Rapid Technological Change. The market for the Company's products and services
is characterized by rapidly changing technology, evolving industry standards,
and new product introductions. The Company's future success will depend in
part upon its ability to enhance its existing products and services and to
develop and introduce new products and services to meet changing client
requirements. The process of developing software products such as those
offered by the Company is extremely complex and is expected to become
increasingly complex and expensive in the future with the introduction of new
platforms and technologies. There can be no assurance that the Company will
successfully complete the development of new products in a timely fashion or
that the Company's current or future products will satisfy the needs of the
financial markets.
Dependence on Database Supplier. The relational database design in many of the
Company's software products incorporates PFXplus, a "C"-based database
management system licensed to the Company by POWERflex Corporation
Proprietary Limited, an Australian vendor ("Powerflex"). If Powerflex were to
increase its fees under the license agreement, the Company's results of
operations could be materially adversely affected. Moreover, if Powerflex
were to terminate the license agreement, the Company would have to seek an
alternative relational database for its software products. While the Company
believes that it could migrate its products to an alternative
Page 14
<PAGE>
database, there can be no assurance that the Company would be able to license in
a timely fashion a database with similar features and on terms acceptable to the
Company.
Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its proprietary technology. The Company
relies on a combination of trade secret, copyright, and trademark law,
nondisclosure agreements and technical measures to protect its proprietary
technology. There can be no assurance that the steps taken by the Company to
limit access to its proprietary technology will be adequate to deter
misappropriation or independent third-party development of such technology.
Product Defects and Product Liability. The Company's software products are
highly complex and sophisticated and could, from time to time, contain design
defects or software errors that could be difficult to detect and correct.
Errors, bugs, or viruses may result in loss of or delay in market acceptance
or loss of client data. Although the Company has not experienced material
adverse effects resulting from any software defects or errors, there can be
no assurance that, despite testing by the Company and its clients, errors
will not be found in new products, which errors could result in a delay in or
inability to achieve market acceptance and thus could have a material adverse
impact upon the Company's business, financial condition, and results of
operations.
Key Personnel. The Company's success is dependent in part upon its ability to
attract, train, and retain highly skilled technical, managerial, and sales
personnel. The loss of services of one or more of the Company's key employees
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company continues to hire a
significant number of additional sales, service, and technical personnel.
Competition for the hiring of such personnel in the software industry is
intense. Locating candidates with the appropriate qualifications,
particularly in the desired geographic location, can be difficult. Although
the Company expects to continue to attract and retain sufficient numbers of
highly skilled employees for the foreseeable future, there can be no
assurance that the Company will do so.
Risks Associated with International Operations. The Company intends to
continue to expand its international sales activity as part of its business
strategy. To accomplish such continued expansion, the Company must establish
additional foreign operations and hire additional personnel requiring
significant management attention and financial resources that could
materially adversely affect the Company's business, financial condition, or
results of operations. An increase in the value of the U.S. dollar relative
to foreign currencies could make the Company's products more expensive and,
therefore, potentially less competitive in those foreign markets. A portion
of the Company's international sales is denominated in foreign currency. The
Company occasionally hedges some of this risk; however, significant
fluctuations in the value of foreign currencies could have an adverse effect
on the earnings of the Company. In addition, the Company's international
business may be subject to a variety of risks, including difficulties in
obtaining U.S. export licenses, potentially longer payment cycles, increased
costs associated with maintaining international marketing efforts, the
introduction of non-tariff barriers and higher duty rates, and difficulties
in enforcement of contractual obligations and intellectual property rights.
There can be no assurance that such factors will not have a material adverse
effect on the Company's business, financial condition, or results of
operations.
Because of these and other factors, past financial performance should not be
considered an indication of future performance. The Company's quarterly
operating results may vary significantly, depending on factors such as the
timing, size, and nature of licensing transactions and new product
introductions by the Company or its competitors. Investors should not use
historical trends to anticipate future results and should be aware that the
trading price of the Company's common stock may be subject to wide
fluctuations in response to quarterly variations in operating results and
other factors, including those discussed above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company generally places its marketable security investments in high
credit quality instruments, primarily U.S. Government and Federal Agency
obligations, tax-exempt municipal obligations and corporate obligations. The
Company does not expect any material loss from its marketable security
investments and therefore believes that its potential interest rate exposure
is not material.
The Company invoices customers primarily in U.S. dollars and in local currency
in those countries in which the Company has branch and subsidiary operations.
The Company is exposed to foreign exchange rate fluctuations from when
customers are invoiced in local currency until collection occurs. Through
September 30, 1999, foreign
Page 15
<PAGE>
currency fluctuations have not had a material impact on the Company's financial
position or results of operation, and therefore the Company believes that its
potential foreign currency exchange rate exposure is not material. The Company
purchases from time to time forward contracts to attempt to minimize the impact
of exchange rate gains or losses from foreign currency transactions.
The foregoing risk management discussion and the effect thereof are forward-
looking statements. Actual results in the future may differ materially from
these projected results due to actual developments in global financial
markets. The analytical methods used by the Company to assess and mitigate
risk discussed above should not be considered projections of future events,
income or losses.
Page 16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 7, 1999, the Company announced that it had entered into an agreement
that provides for the settlement of the consolidated securities class action
lawsuit pending against the Company. The settlement provides that all claims
against the Company, certain of its officers and directors and underwriters
will be dismissed. Under the terms of the settlement, in exchange for the
dismissal and release of all claims, the Company paid to the class $7.5
million in cash, together with shares of Common Stock of the Company valued
at $1.3 million. The Company recorded a charge of $9.3 million, including
legal fees, in the quarter ended June 30, 1999.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The following information relates to the use of proceeds from the Company's
initial public offering of Common Stock (the "Offering").
The effective date of the Company's Registration Statement on Form S-1 File
No. 333-3094 (the "Registration Statement") relating to the Offering, for
which the following use of proceeds information is being disclosed, was May
30, 1996.
From the effective date of the Registration Statement through September 30,
1999, the Company has used the net Offering proceeds to the Company as
follows:
Corporate move and equipment purchases $11,803,000
Acquisition of other business $ 5,333,000
Repayment of indebtedness $ 3,370,000
Working capital $ 8,680,000
Marketable securities $23,614,000
All of the above listed payments were direct or indirect payments to
persons other than: directors, officers, general partners of the Company or
their associates; persons owning ten percent or more of any class of equity
securities of the Company, or affiliates of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. The exhibits listed in the Exhibit Index immediately preceding such
exhibits are filed as part of or are included in this report.
Page 17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SS&C TECHNOLOGIES, INC.
Date: November 12, 1999 By: /s/ Anthony R. Guarascio
Anthony R. Guarascio
Senior Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
Page 18
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
27.1 Financial Data Schedule for the nine months ended
September 30, 1999.
27.2 Restated Financial Data schedule for the nine months ended
September 30, 1998.
Page 19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THIS REPORT ON FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,999
<SECURITIES> 39,900
<RECEIVABLES> 16,932
<ALLOWANCES> 5,235
<INVENTORY> 0
<CURRENT-ASSETS> 70,706
<PP&E> 16,950
<DEPRECIATION> 6,547
<TOTAL-ASSETS> 90,062
<CURRENT-LIABILITIES> 18,986
<BONDS> 0
0
0
<COMMON> 158
<OTHER-SE> 70,938
<TOTAL-LIABILITY-AND-EQUITY> 90,062
<SALES> 51,296
<TOTAL-REVENUES> 51,296
<CGS> 0
<TOTAL-COSTS> 21,157
<OTHER-EXPENSES> 47,259
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15,037)
<INCOME-TAX> (2,568)
<INCOME-CONTINUING> (12,469)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,469)
<EPS-BASIC> (.80)
<EPS-DILUTED> (.80)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THIS REPORT ON FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,122
<SECURITIES> 35,767
<RECEIVABLES> 23,796
<ALLOWANCES> 2,429
<INVENTORY> 0
<CURRENT-ASSETS> 73,538
<PP&E> 13,572
<DEPRECIATION> 4,709
<TOTAL-ASSETS> 97,446
<CURRENT-LIABILITIES> 22,693
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 74,341
<TOTAL-LIABILITY-AND-EQUITY> 97,446
<SALES> 50,862
<TOTAL-REVENUES> 50,862
<CGS> 0
<TOTAL-COSTS> 16,594
<OTHER-EXPENSES> 37,439
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,278)
<INCOME-TAX> (194)
<INCOME-CONTINUING> (2,084)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,084)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
