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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
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: 0-21601
INFINITY FINANCIAL TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0227321
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
640 CLYDE COURT
MOUNTAIN VIEW, CALIFORNIA 94043-2239
(Address of principal executive offices, including zip code)
(415) 940-6100
(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 .
---- ----
As of April 30, 1997, there were 18,511,773 outstanding shares of the
Registrant's Common Stock, par value $0.001 per share.
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INFINITY FINANCIAL TECHNOLOGY, INC.
INDEX
<TABLE>
<CAPTION>
Page
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Part I - Condensed Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996...................................................... 3
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 1997 and 1996................................. 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 and 1996................................. 5
Notes to Condensed Consolidated Financial Statements....................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................. 7
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.................................................. 24
Signatures ........................................................................... 25
Exhibit Index ........................................................................... 26
</TABLE>
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PART I - CONDENSED FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INFINITY FINANCIAL TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................. $ 43,000 $ 36,952
Receivables, net ...................................... 12,490 18,802
Deferred tax asset .................................... 887 887
Prepaid expenses and other current assets ............. 340 337
-------- --------
Total current assets ................................ 56,717 56,978
Property and equipment, net .............................. 3,107 2,896
Other assets ............................................. 393 430
-------- --------
Total assets ........................................ $ 60,217 $ 60,304
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................... $ 2,197 $ 1,739
Accrued compensation .................................. 2,996 3,959
Other accrued liabilities ............................. 2,253 2,861
Deferred revenue ...................................... 9,424 10,399
Current portion of capital lease obligations .......... 379 368
-------- --------
Total current liabilities ........................... 17,249 19,326
Long-term portion of capital lease obligations ........... 499 553
Commitments:
Stockholders' equity:
Preferred stock ....................................... -- --
Common stock .......................................... 32,240 32,207
Deferred stock compensation ........................... (469) (508)
Notes receivable from stockholders .................... (626) (826)
Cumulative translation adjustment ..................... (14) (21)
Retained earnings ..................................... 11,338 9,573
-------- --------
Total stockholders' equity .......................... 42,469 40,425
-------- --------
Total liabilities and stockholders' equity .......... $ 60,217 $ 60,304
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INFINITY FINANCIAL TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data - unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Revenues:
License revenues ........................................... $ 10,021 $ 6,435
Service revenues ........................................... 3,597 1,769
----------- -------------
Total revenues ........................................... 13,618 8,204
Costs and expenses:
Cost of revenues ........................................... 2,213 791
Sales and marketing ........................................ 5,162 2,625
Research and development ................................... 2,672 1,895
General and administrative ................................. 1,143 826
----------- -------------
Total costs and expenses ................................. 11,190 6,137
----------- -------------
Income from operations ........................................ 2,428 2,067
Other income (expense), net ................................... 330 (79)
----------- -------------
Income before provision for income taxes ...................... 2,758 1,988
Provision for income taxes .................................... 993 756
----------- -------------
Net income ............................................... 1,765 $ 1,232
=========== =============
Net income per share .......................................... $ 0.08 $ 0.06
=========== =============
Shares used in computing net income per share ................. 21,098 18,863
=========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INFINITY FINANCIAL TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands - unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income ................................................ $ 1,765 $ 1,232
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and other .................... 372 290
Changes in assets and liabilities:
Receivables ............................................. 6,312 (1,347)
Prepaid expenses and other current assets ............... 35 63
Accounts payable ........................................ 458 343
Accrued compensation .................................... (963) (354)
Payable to former stockholder ........................... -- (1,277)
Other accrued liabilities and long-term liabilities ..... (535) 852
Deferred revenue ........................................ (975) 533
-------- --------
Net cash provided by operating activities ............. 6,469 335
-------- --------
Cash flows used in investing activities:
Capital expenditures ...................................... (544) (813)
Cash flows provided by (used in) financing activities:
Payments of notes payable ................................ (67) --
Payments of notes receivable from stockholders ............ 200 (4)
Principal payments of capital lease obligations ........... (43) (47)
Proceeds from issuance of common stock .................... 33 13
-------- --------
Net cash provided by (used in) financing activities ... 123 (38)
-------- --------
Net increase (decrease) in cash and cash equivalents ........ 6,048 (516)
Cash and cash equivalents at beginning of period ............. 36,952 3,517
-------- --------
Cash and cash equivalents at end of period ................... $ 43,000 $ 3,001
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid during the period:
Income taxes paid ....................................... $ 930 $ 86
======== ========
Interest paid ........................................... $ 15 $ 21
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INFINITY FINANCIAL TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DESCRIPTION OF BUSINESS
Infinity Financial Technology, Inc. ("Infinity" or the "Company") develops,
markets and supports object-oriented, client/server software solutions for
financial trading and risk management. The Company provides a comprehensive
range of customer support services, including maintenance, training, and
consulting. Infinity's principal markets for its products and services are
primarily in North America, Western Europe and Asia/Pacific. The Company was
incorporated in California in 1989 and was reincorporated in Delaware in 1996.
The Company currently has more than 50 customers around the world,
consisting of large banks and other financial institutions with sophisticated
trading operations and risk management needs. Its primary product is the
Infinity Platform(TM), which provides customers with a foundation to rapidly
develop, deploy and modify trading and risk management systems in response to
the changing requirements of the marketplace. Infinity also offers Infinity
Derivatives(TM), software solutions for derivatives trading and Infinity
RiskView(TM), which is designed to facilitate customers' development of risk
management systems.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "Commission") and reflect all adjustments consisting of normal recurring
adjustments which, in the opinion of management, are necessary for a fair
presentation of the operating results for the periods presented. The results of
operations for the interim periods presented are not necessarily indicative of
the results that may be expected for the full fiscal year. This quarterly report
on Form 10-Q should be read in conjunction with the audited consolidated
financial statements and notes thereto for the three year period ended December
31, 1996 included in the Infinity Financial Technology, Inc. Form 10-K filed
with the Commission in March 1997.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany account balances and
transactions have been eliminated in consolidation. Certain amounts from prior
years have been reclassified to conform to current year presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates, and such
differences could affect the results of operations reported in future periods.
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REVENUE RECOGNITION
The Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position 91-1 ("SOP 91-1"), "Software
Revenue Recognition." License revenues less deferrals for warranty are
recognized upon shipment only if no significant vendor obligations remain and
collection of the resulting receivable is deemed probable. License warranty
revenues are recognized ratably over the warranty period, generally 30 to 90
days. When the Company receives payment on licenses prior to shipment and
fulfillment of significant vendor obligations, such payments are recorded as
deferred revenue. Service revenues consist primarily of maintenance and support,
training, consulting and co-development projects. Service revenues from customer
maintenance fees for ongoing customer support and product updates are recognized
ratably over the maintenance term, which is typically 12 months. Service
revenues from customer training and consulting services are recognized as the
service is performed. Service revenues from co-development agreements are
recognized upon achievement of contractual milestones or on a
percentage-of-completion basis.
NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
common shares outstanding and common equivalent shares arising from the assumed
exercise of stock options using the treasury stock method. Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common and common
equivalent shares issued during the period commencing 12 months prior to the
initial filing of an initial public offering at prices below the assumed public
offering price have been included in the calculation as if they were outstanding
for all periods presented (using the treasury stock method). Fully diluted net
income per share is computed using the weighted average common and common
equivalent shares outstanding plus other dilutive shares outstanding which are
not common equivalent shares.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options and convertible preferred stock will be
excluded. The impact is expected to result in an increase in primary earnings
per share for the first quarter ended March 31, 1997 and March 31, 1996 of
$0.02 and $0.03 per share, respectively. The impact of Statement No. 128 on the
calculation of fully diluted earnings per share for these quarters is not
expected to be material.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's operating performance each quarter is subject to various
risks and uncertainties as discussed herein and in the Company's reports on
Forms 10-K and 10-Q filed with the Securities and Exchange Commission from time
to time. This report contains
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forward-looking statements within the meaning of the Securities and Exchange Act
of 1934 and it should be read in conjunction with the section entitled "Factors
That May Affect Future Results of Operations" discussed below.
OVERVIEW
In the first quarter of fiscal 1997, Infinity continued to experience
significant growth in several aspects of its business. Total revenues of $13.6
million for the three months ended March 31, 1997 represented an increase of 66%
in the comparable period of 1996. The Company's revenue growth reflects
increased expansion business from existing customers and new accounts seeking to
enhance their trading operations and risk management capabilities. This increase
has been fueled by the growth in the Company's customer base which has grown to
more than 50 financial institutions worldwide from a total of 29 at March 31,
1996. The increase also reflects the Company's growth in service revenues
comprising maintenance and support fees as well as consulting revenues. The
service revenues increase was attributable to two primary factors: increases in
the installed base of customers receiving ongoing maintenance, training and
other support services; and expansion of the Company's professional services
staff including increased utilization of third party consultants for
implementation support services.
Income from operations of $2.4 million for the three months ended March 31,
1997 improved 17% from $2.1 million in the comparable period of 1996. Income
from operations as a percentage of total revenues was 18% versus 25% in the year
ago quarter. Income from operations was impacted by the Company's investment in
building its global infrastructure in anticipation of increased customer
requirements and to enable long-term sustainable growth of the business. The
planned increases in operating expenses during the quarter were primarily
focused in the field sales and support organization, the hiring of senior
management and technical expertise in product development, and expansion of
Infinity's implementation consulting capabilities.
In addition, Infinity's Business Partner program, consisting of independent
software developers and solution providers, grew during the first quarter of
fiscal 1997. During the quarter, the Company established a new business alliance
with DOCUMENTUM, Inc., a provider of enterprise document management solutions
for client/server and intranet environments, and extended an existing agreement
with TrueRisk Incorporated, a developer of risk management software. In
addition, the Company added its first business partners in Brazil and Korea to
support expansion into new international markets.
Additionally, during the quarter, the Company announced the appointment of
Michael A. Laven to the newly created position of President and Chief Operating
Officer and the addition of Ron M. Lang to the position of Vice President,
Marketing.
The Company believes that significant ongoing investment in several aspects
of the business will continue to be critical to its success. Consistent with the
trend in the quarter ended March 31, 1997, the Company plans to continue
expanding its sales and marketing infrastructure domestically and
internationally, devote substantial resources to research and
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development, and build the Company's customer support and service organization.
As a result of these factors, the Company plans to continue to direct a
significant percentage of its revenues towards operating expenses necessary to
keep the Company competitive and responsive to its customers' needs.
RESULTS OF OPERATIONS
The following table sets forth certain items in the Company's consolidated
statements of income as a percentage of the total revenues for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
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<S> <C> <C>
Revenues:
License revenues ....................... 74% 78%
Service revenues ....................... 26 22
---------- ----------
Total revenues ....................... 100 100
Costs and expenses:
Cost of revenues ....................... 16 10
Sales and marketing .................... 38 32
Research and development ............... 20 23
General and administrative ............. 8 10
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Total costs and expenses ............. 82 75
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Income from operations .................... 18 25
Other income (expense), net ............... 2 (1)
----------- ----------
Income before provision for income taxes .. 20 24
Provision for income taxes ................ 7 9
---------- ----------
Net income ........................... 13% 15%
========== ==========
</TABLE>
REVENUES
The Company's revenues are derived from two sources, license revenues and
service revenues. Service revenues include software maintenance and support,
training, consulting and co-development contracts. The Company's total revenues
increased 66% to $13.6 million for the three months ended March 31, 1997 from
$8.2 million in the comparable period of 1996. The increase is attributable to
an increase in the number of software licenses sold to both existing customers
and new customers and expansion of the Company's direct sales and services
organization. Additionally, the Company's growth in its customer base has
contributed to greater service revenues being generated in the quarter primarily
from increased implementation consulting and training in support of customer
installations and to a lesser extent on higher maintenance and support fees.
International revenues, which are defined by the Company as sales outside
North America, accounted for 62% and 59% of total revenues for the three months
ended March 31, 1997 and 1996, respectively. The increase in international
revenues is primarily attributable to an increase in the Company's international
sales and marketing efforts. The Company currently maintains international sales
offices in London, Paris, Sydney and Tokyo, and intends to continue to expand
its international operations. The Company expects
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that international sales will continue to represent a substantial majority of
its total revenues for the foreseeable future.
The Company currently believes that an increasing portion of the Company's
revenues, cost of revenues and operating expenses will be incurred in foreign
currencies. Although it is impossible to predict future exchange rate movements
between the U.S. dollar and other currencies, it can be anticipated that to the
extent the U.S. dollar strengthens or weakens against other currencies, a
substantial portion of the Company's revenues, cost of revenues and operating
expenses will be commensurately lower or higher than would be the case in a more
stable foreign currency environment. Although the Company from time to time
undertakes foreign exchange hedging transactions to cover a portion of its
foreign currency transaction exposure, the Company does not attempt to cover all
potential foreign currency exposure and therefore, the Company may be subject to
variations in operating results as a result of foreign exchange fluctuations. As
of March 31, 1997, there were no outstanding foreign exchange hedging contracts.
License Revenues. The Company's license revenues increased 56% to $10.0
million for the three months ended March 31, 1997 from $6.4 million in the
comparable period of 1996. Expansion sales to existing customers were the
primary factor contributing to growth in license revenues. During the quarter
ended March 31, 1997, the Company delivered on two contracts to existing
customers representing these customers' license of certain Infinity products
globally. Each of the expansion sales to these customers contributed over $1
million to revenues during the quarter. Expansion deals contributed 74% of
license revenues in the first quarter of fiscal 1997 while new licenses of
Infinity products accounted for 26% of license revenues. In addition, the
Company recorded revenues from the licensing of third-party partner products to
a small number of customers during the quarter ended March 31, 1997. The Company
doesn't expect revenue from third party products to represent a significant
portion the Company's total license revenues for the remainder of fiscal 1997.
The percentage of the Company's total revenues attributable to license revenues
declined to 74% for the three months ended March 31, 1997 from 78% in the
comparable period of 1996. This change in mix primarily resulted from the growth
of service revenues as explained below.
Service Revenues. The Company's service revenues increased 103% to $3.6
million for the three months ended March 31, 1997 from $1.8 million in the
comparable period of 1996. The percentage of the Company's total revenues
attributable to service revenues increased to 26% for the three months ended
March 31, 1997 from 22% in the comparable period of 1996. These increases were
primarily attributable to increased consulting services for implementation
support and to a lesser extent on maintenance and support fees. Consulting and
training revenues increased significantly across each of Infinity's major
geographic markets - North America, Western Europe and Asia/Pacific. The Company
has experienced fluctuations in demand for consulting services in the past and
anticipates that such fluctuations could occur in the future.
The Company historically has experienced significant renewal rates of
maintenance contracts; however, some customers have licensed the source code of
the Company's products and have, on occasion, chosen to maintain those products
in-house, while continuing to rely on the Company for providing support and
upgrades to other licensed
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product. Furthermore, the Company's service revenues have been dependent upon a
relatively small number of new and existing customers. Based on these and other
factors, there can be no assurance that previous renewal rates and prices
charged by the Company for maintenance, and corresponding revenues, will
continue in the future.
COSTS AND EXPENSES
Cost of Revenues. Cost of revenues consists primarily of personnel-related
costs, including facility and other overhead allocations incurred in providing
on-site and telephone support, royalty payments, cost of third party licensed
products, consulting services and training to customers. Cost of revenues
related to license revenues was immaterial. The Company's cost of revenues
increased 180% to $2.2 million for the three months ended March 31, 1997 from
$791,000 in the comparable period of 1996. The Company's cost of revenues as a
percentage of total revenues increased to 16% for the three month period ended
March 31, 1997 as compared to 10% in the comparable period of 1996. These
increases were primarily due to increased costs associated with an increase in
the number of customer support personnel and related overhead costs necessary to
support a larger installed customer base, and increased utilization of third
party consultants during the 1997 period.
The Company intends to commit substantial financial resources to expand its
support operations, both domestically and internationally. In addition, the
Company expects to increase its spending for consulting staff and infrastructure
in anticipation of growing demand for implementation consulting services from
its customer base. Furthermore, the Company continues to develop its business
partner program and will seek to distribute or market certain products developed
by these third-parties to the Company's customers. To the extent the Company's
license revenues reflect the sale of such products, there may be related costs
associated with the licensing of such products which will be charged to cost of
revenues during the period delivered. As a result of these factors, the Company
expects its cost of revenues to increase in the future, both in absolute dollar
amounts and possibly as a percentage of total revenues.
Sales and Marketing. Sales and marketing expenses increased 97% to $5.2
million for the three months ended March 31, 1997 from $2.6 million in the
comparable period of 1996. Sales and marketing expenses increased as a
percentage of total revenues to 38% during the three months ended March 31, 1997
from 32% in the comparable period of 1996. These increases were principally the
result of additional sales and marketing personnel, facilities expansion, higher
sales commissions associated with increased total revenues and increased
marketing activities domestically and internationally. The Company expects to
incur higher sales and marketing expenses in the future in both absolute dollar
amounts and likely as a percentage of total revenues as the Company expands its
sales and marketing staff globally.
Research and Development. Research and development costs are expensed as
incurred. Research and development expenses increased 41% to $2.7 million for
the three months
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ended March 31, 1997 from $1.9 million in the comparable period of 1996. This
increase was principally the result of the hiring of additional software
engineers and quality assurance management and technical personnel, and the
associated expenses. Research and development expenses were 20% of total
revenues during the three months ended March 31, 1997 as compared to 23% during
the comparable period of 1996. The decrease in 1997 was due primarily to growth
in the Company's total revenues. The Company plans to continue to invest in
absolute dollars in fiscal 1997 in research and development to support
enhancements to current release product and ongoing product development
initiatives, although these expenses are expected to remain relatively constant
as a percentage of total revenues. There can be no assurance, however, that
total revenues will grow at the same rate as the anticipated research and
development expenses.
General and Administrative. General and administrative expenses increased
38% to $1.1 million for the three months ended March 31, 1997 from $826,000 in
the comparable period of 1996. This increase was primarily due to increased
staffing and professional fees necessary to manage and support the Company's
recent growth. General and administrative expenses decreased as a percentage of
total revenues to 8% for the three months ended March 31, 1997 from 10% during
the comparable period of 1996 due primarily to growth in the Company's total
revenues. The Company expects to incur higher general and administrative
expenses in absolute dollars although these expenses are expected to remain
relatively constant as a percentage of total revenues. There can be no
assurance, however, that total revenues will grow at the same rate as the
anticipated general and administrative expenses.
OTHER INCOME (EXPENSE), NET
During the three months ended March 31, 1997, other income (expense), net
was $330,000 as compared to ($79,000) in the comparable period of 1996. The
amount in the first quarter of fiscal 1997 consists principally of interest
income earned on investment of the Company's cash balances. The amount in the
first quarter of fiscal 1996 consists principally of losses on disposal of
furniture and equipment associated with the Company's relocation to its current
headquarters in Mountain View, California.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes increased to $993,000 for the
three months ended March 31, 1997 from $756,000 in the comparable period of
1996. The Company's effective tax rate in 1997 is estimated to be 36% versus a
38% effective tax rate in 1996. The decrease in the effective tax rate is
primarily attributable to the benefits derived from investments in tax-exempt
instruments and increased benefits derived from its foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations primarily by cash generated from
operations, through the sale of its Common Stock in the Company's initial public
offering in October
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1996 and, in prior years, through private sales of preferred equity securities.
For the three months ended March 31, 1997, approximately $6.5 million of cash
was generated from operating activities versus $335,000 of cash generated in the
comparable period of 1996. Cash generated in the three months ended March 31,
1997 was primarily attributed to net income and a decrease in receivables
partially offset by decreases in deferred revenue and other accrued liabilities.
For the three months ended March 31, 1996, cash generated from operations was
primarily from net income and increases in other accrued liabilities offset by
increases in receivables and decreases in payable to former shareholder.
The Company's principal source of liquidity as of March 31, 1997 consisted
of $43.0 million in cash and cash equivalents. The Company believes that its
cash balance is sufficient to meet its working capital and capital expenditure
requirements for at least the next twelve months based on current plans and
trends.
The Company may utilize cash from time to time to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. On occasion, in the ordinary course of business, the Company
evaluates potential acquisitions of such businesses, products or technologies.
The Company currently has no understandings, commitments or agreements with
respect to any material acquisition of other businesses, products or
technologies.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
The statements contained in this Form 10-Q which are not purely historical are
forward-looking statements within the meaning of section 27A of the Securities
Act of 1933 and section 21E of the Securities Exchange Act of 1934, including
statements regarding the Company's beliefs, expectations, hopes, plans or
intentions regarding the future. Forward-looking statements in this document
include statements under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the Company's plans or
intentions to continue to expand its sales and marketing infrastructure
domestically and internationally, to devote substantial resources to research
and development, to build or expand its customer support and services
organization, to expand international operations, and statements under such
heading regarding Infinity's expectations regarding increased spending for
consulting staff and infrastructure in anticipation of growing demand for
implementation consulting services, the composition of revenues, cost of
revenues, expansion of sales and marketing infrastructure, use of revenues,
research and development costs, general and administrative expenses, liquidity
and anticipated cash needs and availability, among others. All forward-looking
statements included in this document are made as of the date hereof, based on
information available to the Company as of the date hereof, and Infinity assumes
no obligation to update any forward looking statement or statements. It is
important to note that the Company's actual results could differ materially from
those in such forward looking statements. The following important factors, among
others, in some cases have affected, and in the future could affect, the
Company's actual operating results and could cause the Company's actual
consolidated operating results to
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differ materially from those expressed in any forward-looking statement made by,
or on behalf of, the Company.
Significant Potential Fluctuations in Operating Results
Although the Company has experienced increased revenues and has been profitable
in each of its last six fiscal years, the Company does not believe prior growth
rates are sustainable or indicative of future operating results, and there can
be no assurance that the Company will be able to sustain revenue growth or
maintain profitability in the future. In addition, the Company intends to commit
substantial financial resources to expanding its business, including its sales
and support operations and product development infrastructure. As a result, the
Company does not expect to sustain the current level of operating margins in
future periods.
Individual licenses of the Company's products typically account for large dollar
amounts relative to quarterly revenues, so the timing of one license can cause
substantial shifts of revenue and profit between accounting periods. Because of
the large dollar commitment and the mission critical function that the Company's
products address, approval at senior levels within customer organizations is
frequently required for a purchase of the Company's products. The Company's
quarterly revenues are dependent upon a small number of individual product
sales, and any downturn in a potential customer's business, or any loss or delay
of individual orders for any other reason, would have a significant impact on
the Company's revenues and profitability on a quarterly and annual basis. The
Company has experienced significant fluctuations during prior quarters in the
average contract size for new customers and the aggregate number of contracts
with new customers. This period to period fluctuation is expected to continue.
The Company has also experienced increased demand from customers for certain
features and functionality not offered in production versions of its products,
resulting in deferral of significant revenues until completion or acceptance of
certain customized portions of software required by any individual license
transaction as well as increased costs to deliver the required services. The
Company historically has operated with little backlog because its products are
generally shipped as orders are received. As a result, license revenues in any
quarter depend on the volume and timing of, and the Company's ability to fill,
orders received in that quarter. In addition, a relatively high percentage of
the Company's expenses is fixed in the short term because the Company's expense
levels are based, in part, on its expectations as to future revenues. As a
result, if revenues fall below expectations, operating margins will be adversely
affected. In addition, historically the Company has experienced significant
renewal rates of maintenance contracts; however, many customers have licensed
the source code of the Company's products and certain customers have chosen to
terminate the maintenance contracts with the Company due to their ability to
maintain the Company's products. Furthermore, the Company's service revenues
have been dependent upon a relatively small number of new and existing customers
in each quarter. Based on these and other factors, there can be no assurance
that previous renewal rates and prices charged by the Company for maintenance,
and corresponding revenues, will continue in the future. See "Lengthy Sales
Cycle."
14
<PAGE> 15
The Company's revenues and operating results have fluctuated significantly in
the past, and are likely to continue to fluctuate significantly in the future,
on an annual and quarterly basis. Fluctuations in the Company's revenues and
results of operations may result from a number of factors, many of which are
beyond the Company's control, including (i) the relatively long sales cycle of
three months to over one year for the Company's software products, (ii) the
timing and size of the Company's individual license transactions, and, in
particular, the dependence of the Company's revenues in any quarter on the sale
of a limited number of large dollar licenses, (iii) the Company's typical
recognition of a significant portion of its quarterly revenues in the last
month, weeks or days of the quarter, (iv) the relatively high percentage of
total revenues derived from product revenues versus service revenues, (v) the
timing of the introduction of new products or product enhancements by the
Company and its competitors, (vi) the deferral of significant revenues until
completion or acceptance of certain customized portions of software required by
any individual license transaction, (vii) changes in customer budgets, (viii)
seasonality of technology purchases by customers, (ix) the mix of revenues
derived from the Company's direct sales force and various distribution and
marketing channels and between domestic and international customers, (x)
currency exchange rate fluctuations, (xi) changes in applicable government
regulations, (xii) the untimely loss of key sales personnel, (xiii) changes in
relationships with strategic partners and (xiv) general economic conditions,
particularly those which affect the Company's targeted customer base.
The Company's quarterly revenues are also subject to certain seasonal
fluctuations, particularly in the third quarter when reduced economic activity
outside North America during the summer months can negatively affect the
Company's licensing revenues. This and other seasonal factors, which the Company
believes are common to the software industry, could cause the Company's revenues
and profitability to fluctuate between quarters.
Due to the foregoing and other factors, the Company believes its quarterly and
annual revenues, expenses and operating results could vary significantly in the
future and that period-to-period comparisons should not be relied upon as
indications of future performance. Because of the above factors, it is possible
the Company's operating results will be below the expectations of stock market
analysts and investors in some future quarter, which would have a severe adverse
effect on the price of the Company's Common Stock.
Dependence on Evolving Market for Financial Trading and Risk Management
Software; No Assurance of Market Acceptance
To date, the Company has derived substantially all of its revenue from the sale
of software products for financial trading and risk management. The Company
expects revenues from such sales will account for substantially all of its
revenues for the foreseeable future. The market for financial trading and risk
management software is rapidly evolving, and the Company's operating results and
opportunity for growth in the future are highly dependent on acceptance of its
products in and the continued growth of this market. As is the case in new and
evolving industries, demand and market acceptance for recently introduced
products are subject to a high level of uncertainty and risk. A decline or
slow-down in
15
<PAGE> 16
growth in the market for, or market acceptance of, such products as a result of
increased competition, technological or regulatory change, a banking and
financial services industry downturn or other factors would have a material
adverse effect on the Company's business, financial condition and results of
operations. In particular, because the Company's customer base has historically
been limited to larger commercial banks and financial institutions, the Company
would be particularly vulnerable to a downturn in the banking and financial
services industries.
The Company currently markets and sells its products primarily to large banks
and other financial institutions, many of which rely on internally developed
software to fulfill their financial trading and risk management needs. Demand
for and acceptance of the Company's products by this customer base depends on a
number of factors, which include the products' functionality and performance
characteristics, the ability of these clients to achieve cost savings by using
third-party software, the time and cost required to internally develop software,
the willingness of these institutions to rely on third-party software to fulfill
mission critical financial trading and risk management needs and their
assessment of the Company's ability to support these products. Many of these
banks and financial institutions have made significant investments in time,
capital and human resources in developing and implementing these internal
systems and are highly dependent upon the continued use of internally developed
systems. The legacy nature of many of these internally developed systems
combined with the substantial financial costs to shift to third-party products
for these applications generally constitute the principal factors inhibiting
migration to third party products in financial trading and risk management, such
as those offered by the Company. No assurance can be made that these factors
will not inhibit growth in the market for third-party financial trading and risk
management software and, as a consequence, would materially adversely affect the
Company's business, financial condition and results of operations.
The Company is attempting to develop the Infinity Platform as an industry
standard for financial trading and risk management. No assurance can be given
that this attempt to establish an industry standard will be successful, even if
a significant market for third-party financial trading and risk management
software continues to develop. If the Company is unsuccessful in establishing
the Infinity Platform as an industry standard, widespread acceptance of its
products and its ability to market additional application programs for financial
trading and risk management will be adversely affected, and, as a consequence,
the Company's future growth, business, financial condition and results of
operations will be materially adversely affected.
Lengthy Sales Cycle
Because of the mission critical functions performed by the Company's products,
the purchase of such products is a strategic decision which generally requires
approval at senior levels of customers' organizations. In addition, the purchase
of the Company's products involves a significant commitment of customers'
financial resources. For these and other reasons, the sales cycle associated
with the purchase of the Company's products is typically complex,
16
<PAGE> 17
lengthy and subject to a number of significant risks, including changes in
customers' budgetary constraints and approval at senior levels of customers'
organizations, over which the Company has no control. The Company's sales cycle
can range from three months to over one year. Because of the lengthy sales cycle
and the dependence of the Company's quarterly revenues upon a small number of
new individual product sales for large dollar amounts, the loss or delay of a
single sale could have a material adverse effect on the Company's business,
financial condition and results of operations.
Rapid Technological Change and Dependence on New Products
The market for the Company's products is characterized by rapid technological
advances, evolving industry standards in computer hardware and software
technology, changes in customer requirements and frequent new product
introductions and enhancements. The Company's future success will depend upon
its ability to continue to enhance its current product line and to develop and
introduce new products which address technological developments, satisfy
increasingly sophisticated customer requirements and achieve market acceptance.
In particular, the failure of the Company to develop new products or enhance
existing products to (i) timely adapt to the rapidly developing computer
hardware and software technology upon which its products are based, (ii)
incorporate new functionality reflecting rapidly evolving types of derivative
securities and other financial instruments and risk management methodologies and
(iii) incorporate new functionality to facilitate customers' compliance with
changing applicable governmental regulations could cause customers to delay
their purchase of the Company's products, or to decide not to purchase such
products. In September 1995, the Company introduced its back-office modules for
Infinity Derivatives, which have been implemented on a limited basis to date by
Infinity's customers. In late 1996, the Company began shipping first production
versions of Infinity RiskView and the Windows NT version of Infinity
Derivatives, both of which are in the early stages of implementation at a small
number of customer sites. The Company has in the past experienced delays in the
introduction of product enhancements and new products, including a delay in
introducing the back-office modules for Infinity Derivatives. There can be no
assurance that the Company will not experience such delays in the future, or be
successful in developing and marketing, on a timely and cost-effective basis,
product enhancements or new products, and the failure to do so could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risks of Product Defects; Product Liability."
Small Direct Sales Force and Reliance on Strategic Relationships
The Company has a small direct sales force, which consisted of 23 persons at
March 31, 1997. Historically, most of the Company's sales have been derived
through its direct sales force, and the Company's business strategy depends on
significantly expanding this sales force. The Company has previously experienced
substantial difficulty in hiring sales personnel with expertise in sophisticated
financial instruments and is likely to experience similar difficulty as it
attempts to hire other qualified staff who have the required experience.
17
<PAGE> 18
There can be no assurance that the Company will be able to recruit, train and
retain additional qualified sales personnel with the requisite experience and
knowledge, particularly those with experience in both finance and software
development. The failure to successfully expand the Company's sale force would
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company has established strategic relationships with a number of
organizations, including IBM, that are complementary to its direct sales force
and which it believes are important to its worldwide sales, marketing and
support activities and the implementation of its products. The Company believes
that its relationships with such organizations provide an additional sales and
marketing channel and further promote the Infinity Platform to become an
industry standard. Due in part to the current small size of its direct sales
force, the Company believes such relationships are particularly important to
its sales efforts and efforts to establish an industry standard. The Company
has relationships with key third-party developers, including Axime Integration
de Systemes and Diagram S.A., and service providers, including Price Waterhouse
LLP. Third-party developers constitute a key component of Infinity's strategy
in developing products and applications for the Infinity Platform for specific
markets Infinity does not currently address. From time to time, key third party
developers may elect to discontinue their development of products and
applications for the Infinity Platform, posing a risk to Infinity's strategy.
In addition, Infinity has established the Infinity Certified Engineering program
which qualifies various software development firms to work as consultants with
Infinity customers in implementing and customizing the Infinity Platform and
other products. The failure by the Company to maintain its existing
relationships, or to establish new relationships in the future, could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's customers and potential customers
frequently rely on these third-party service providers to extend and deploy, and
manage the implementation of Infinity's products. If the Company is unable to
adequately train a sufficient number of service providers or, if for any reason
such service providers do not have or choose not to devote the resources
necessary to facilitate implementation of the Company's products or if such
service providers adopt a product or technology other than Infinity's, the
Company's business, financial condition and results of operations could be
materially adversely affected.
Management of Growth
The Company's business has grown rapidly in recent years. This growth has
placed, and may continue to place, a significant strain on the Company's
management and operations. The Company's future operating results will depend on
its ability to continue to broaden the
18
<PAGE> 19
Company's senior management group, and its ability to attract, hire and retain
skilled employees. The Company's success will also depend on the ability of its
officers and key employees to continue to implement and improve its operational
and financial control systems and to expand, train and manage its employee base.
The Company's future operating results will also depend on its ability to expand
its sales and marketing organizations, further implement a reseller and partner
channel to penetrate different and broader markets than those addressed by its
existing direct sales force and expand its support organization commensurate
with growth in its installed base. The Company's inability to effectively manage
growth could have a material adverse effect on the Company's business, financial
condition and results of operations.
Competition
The market for transaction processing and risk management systems for financial
institutions is intensely competitive. It is characterized by rapidly changing
technological requirements, as new instruments and new strategies are developed
and implemented, and a high degree of technological progress, as new software
and hardware technologies are applied to the challenge of trading and risk
management. The rapid pace of innovation and change in the market Infinity
serves necessitates an ongoing research and development effort to enhance the
features and functionality of the Infinity Platform and Infinity products.
Many of the Company's competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, greater name
recognition and a larger installed base of customers than the Company. The
Company's competitors are diverse and offer a variety of solutions directed at
the financial trading and risk management information system marketplace. These
competitors include companies offering and developing financial trading or risk
management software products that compete with products offered by the Company.
Certain of such competitors provide point solutions for particular elements of
the financial trading marketplace, including, for example, the front-office
derivative trading market, which constitutes a significant portion of the
Company's business. Certain of such point-solutions may provide greater
off-the-shelf functionality than the Company's customizable integrated system.
To the extent customers elect to pursue such point solutions targeted at the
front-office derivatives market or other elements of the financial trading
marketplace, as opposed to the Company's integrated solutions, the Company's
business, financial condition and results of operations may be materially
adversely affected. In addition, potential customers may select a competitor's
product where they believe it is easier to integrate with a product previously
purchased or where they prefer the user interface of the product. The Company
may also face competition from other business application software vendors who
may broaden their product offering by internally developing or acquiring
financial trading and risk management software products. Certain of the
Company's competitors have been acquired by, or formed alliances with, larger
entities which may enable them to more quickly expand the reach of their
existing product line into new geographic markets where the Company has
significant market presence, as well as introduce new products into markets
where the Company currently competes. In addition to competition from such
third-party companies, the Company frequently faces substantial
19
<PAGE> 20
sales resistance from the internal development groups of potential customers
that have developed or may develop systems that may substitute for those offered
by the Company. In particular, the Company has experienced significant
difficulties in persuading potential customers to purchase its products where
their internal development groups have already progressed significantly toward
completion of systems which the Company's products would augment or replace and
where the underlying technologies, such as the programming language, utilized by
such groups differ fundamentally from the Company's.
In order to be successful in the future, the Company must respond promptly and
effectively to the challenges of technological change and competitors'
innovations. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors or that competition will not have
a material adverse effect on the Company's business, financial condition and
results of operation.
Risks Associated with International Sales
The Company anticipates that a substantial majority of its revenues for the
foreseeable future will be derived from sources outside North America. The
Company sells its products through a direct sales force located in offices in
New York, London, Paris, Sydney and Tokyo as well as its headquarters in
Mountain View, California. The Company also has full-time support personnel in
Frankfurt, Santiago and Toronto. The Company intends to continue to expand its
sales and support operations outside North America and to enter additional
international markets, which will require significant management attention and
financial resources. International operations are generally subject to a number
of risks, including costs of customizing products for foreign countries,
dependence on local resellers, multiple, conflicting and changing government
regulations regarding financial transactions, longer payment cycles, import and
export restrictions, tariffs, difficulties in staffing and managing foreign
operations, greater difficulty or delay in accounts receivable collection,
potentially adverse tax consequences, the burdens of complying with a variety of
foreign laws, the impact of possible recessionary environments in economies
outside North America and political and economic instability. The Company's
total revenue is also substantially affected by seasonal fluctuations resulting
from lower sales that typically occur during the summer months in Europe and
other parts of the world.
The Company believes that an increasing portion of the Company's revenues, cost
of revenues and operating expenses will be incurred in foreign currencies.
Although it is impossible to predict future exchange rate movements between the
U.S. dollar and other currencies, it can be anticipated that to the extent the
U.S. dollar strengthens or weakens against other currencies, a substantial
portion of the Company's revenues, cost of revenues and operating expenses will
be commensurately lower or higher than would be the case in a more stable
foreign currency environment. Although the Company from time to time undertakes
foreign exchange hedging transactions to cover a portion of its foreign currency
transaction exposure, the Company does not attempt to cover all potential
foreign currency exposure and therefore, the Company may be subject to
variations in operating results as a result of foreign exchange fluctuations.
20
<PAGE> 21
In the past, the Company has benefited from increased international demand for
its risk management solutions resulting from the imposition of new capital
adequacy and regulatory reporting requirements. For example, a significant
portion of the Company's 1995 and first quarter 1996 international revenues were
attributable to new European customers who began to respond to the requirements
of the European Capital Adequacy Directive in late 1994 through implementation
of risk management systems built using the Infinity Platform. If regulatory
requirements remain unchanged or are eased, the demand for risk management
solutions will likely be reduced, which would materially adversely affect the
Company's business, financial condition and results of operations.
Dependence on Key Employees
The Company's success depends to a significant extent on the performance of a
number of senior management and sales and engineering personnel, including Roger
A. Lang, a founder of the Company and its Chief Executive Officer, and Michael
A. Laven, its President and Chief Operating Officer. The Company is currently
recruiting a Vice President of Engineering and has experienced substantial
difficulty in filling this position. The Vice President of Engineering would
oversee all product development and engineering activities of the Company,
including the development and adoption of programs and practices to improve
product quality and manage product life cycle, remote development and
reintegration of customer-developed software code. The absence of a qualified
person to fill the Vice President of Engineering is currently adversely
affecting the Company's product development efforts. The Company's Vice
President of Client Services commenced a one-year educational leave in August
1996. The Vice President of Client Services oversees all customer service and
support activities of the Company. The Company would expect difficulty in
replacing its Vice President of Client Services if the current individual in
that position chooses not to return to the Company following completion of his
one-year educational leave. These vacancies, in particular the lack of a Vice
President of Engineering, continue to place a significant burden on the other
members of the Company's management team and could materially adversely affect
the Company's business, financial condition and results of operations. Further,
given the critical role of the Company's limited engineering staff in executing
the Company's product strategies, the loss of any additional significant part of
its engineering staff would also have a material adverse effect on the Company.
The Company generally does not have long-term employment contracts with Mr.
Lang, Mr. Laven, its engineering staff or any other employees. The Company
believes that its future success also will depend in part on its ability to
attract and retain highly-skilled engineering, managerial, sales and marketing
personnel. Competition for such personnel in the software industry is intense,
and there can be no assurance that the Company will be successful in attracting
and retaining such personnel. The Company has previously experienced difficulty
in hiring sales and engineering personnel with expertise in sophisticated
financial instruments and may experience similar difficulty as it attempts to
hire other qualified staff who have the required experience levels. In
particular, the Company has experienced difficulty competing for such personnel
with large financial institutions with substantially
21
<PAGE> 22
greater financial resources. Failure to attract and retain key personnel could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Protection of Intellectual Property
The Company's success is heavily dependent upon its proprietary technology. The
Company relies primarily on a combination of copyright, trade secret and
trademark laws, nondisclosure and other contractual provisions and technical
measures to protect its proprietary rights. The Company seeks to protect its
software, documentation and other written materials through trade secret and
copyright laws, which provide only limited protection. As part of its
confidentiality procedures, the Company generally enters into nondisclosure
agreements with its employees, consultants, distributors and corporate partners.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy or otherwise obtain and use the Company's products
or technology independently. In particular, the Company customarily provides its
existing and potential distribution partners with access to its product
architecture and other proprietary information underlying the Company's licensed
software, including source code. An unauthorized publication or proliferation of
the Company's source code could materially adversely affect the Company's
business, financial condition and results of operations. Policing unauthorized
use of the Company's products is difficult, and the Company is unable to
determine the extent to which unauthorized use of its software products exists.
In addition, effective protection of intellectual property rights may be
unavailable or limited in certain countries in which the Company currently sells
products, such as Japan, and countries the Company may target to expand its
sales efforts such as Brazil, Hong Kong, Mexico, South Africa and Thailand.
Accordingly, there can be no assurance that the Company's means of protecting
its proprietary rights will be adequate or that the Company's competitors will
not independently develop similar technology.
Risks of Product Defects; Product Liability
As a result of their complexity, software products may contain undetected errors
or failures. Despite testing by the Company and use by current and potential
customers, when first introduced or as new versions are released, there can be
no assurance that errors will not be found in new products after commencement of
commercial shipments. The most recent release of Infinity Derivatives, which
included new features and functionality, contained a number of errors and
defects which the Company has substantially corrected in the normal course of
post-release development support. Although the Company has not experienced
material adverse effects resulting from any such defects and errors to date,
there can be no assurance that defects and errors will not be found in new
versions or enhancements after commencement of commercial shipments, resulting
in loss of revenues, delay in market acceptance or damage to the Company's
reputation, which could have a material adverse effect upon the Company's
business, financial condition and results of operations.
The Company recently entered into distribution and marketing agreements with a
limited number of third-party partners to distribute or market certain products
developed by these
22
<PAGE> 23
third-parties to the Company's customers. While the Company seeks to ensure that
the third-party will be responsible for any claims against the Company arising
from their products, there may be increased exposure to claims of copyright,
trade secret and other intellectual property infringement than with the
Company's internally developed products because the development of these
third-party products have not been within the Company's control. Third-party
partners may not have the financial resources to adequately indemnify the
Company for any claims arising from the use of its products, regardless of
contractual obligations to do so. The Company may be obligated to its customers
to support and maintain a third-party product in the event the third-party fails
to perform its obligations or ceases to do business. To the extent failure on
the part of third-party partners would entail a substantial redirection of
scarce internal development and support resources within the Company, such
failure could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company's license agreements with its customers typically contain provisions
designed to limit the Company's exposure for potential claims based on errors or
malfunctions of its or third-party products. It is possible, however, that the
limitation of liability provisions contained in the Company's license agreements
may not be effective under the laws of certain jurisdictions. Although the
Company has not experienced any product liability claims to date, the sale and
support of the Company's products entails the risk of such claims. The Company
currently does not have insurance against product liability risks, and, if the
Company were to elect to obtain such insurance, there can be no assurance that
such insurance will be available to the Company on commercially reasonable terms
or at all. A product liability claim brought against the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations.
23
<PAGE> 24
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith or incorporated by
reference herein.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------ -------------
<S> <C>
11.1 Statement of computation of net income per share
27.1 Financial data schedule
</TABLE>
(b) The company did not file any reports on Form 8-K during the
three months ended March 31, 1997.
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFINITY FINANCIAL TECHNOLOGY, INC.
(Registrant)
Date: May 15, 1997 /S/ TERRY H. CARLITZ
--------------------------------------
Terry H. Carlitz
Chief Financial Officer and
Vice President, Finance
(Duly Authorized Officer and Principal
Financial Officer)
25
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------ -------------
<S> <C>
11.1 Statement of Computation of Net Income Per Share
27.1 Financial Data Schedule
</TABLE>
26
<PAGE> 1
EXHIBIT 11.1
INFINITY FINANCIAL TECHNOLOGY, INC.
STATEMENT OF COMPUTATION OF NET INCOME PER SHARE (1)
(In thousands, except per share data - unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------
1997 1996
------- --------
<S> <C> <C>
Net income ............................................... $ 1,765 $ 1,232
======= =======
PRIMARY:
Weighted average common shares outstanding ............... 18,212 11,746
Common stock equivalents:
Preferred stock using the as if converted method... -- 3,083
Stock options using the treasury stock method ..... 2,871 1,992
ESPP shares using the treasury stock method ....... 15 --
Shares related to Staff Accounting Bulletin topic 4D:
Shares of common stock ............................ -- 770
Stock options ..................................... -- 1,272
------- -------
Shares used in computing net income per share ............ 21,098 18,863
======= =======
Net income per share ..................................... $ 0.08 $ 0.06
======= =======
FULLY DILUTED:
Weighted average common shares outstanding ............... 18,212 11,746
Common stock equivalents:
Preferred stock using the as if converted method .. -- 3,083
Stock options using the treasury stock method ..... 2,871 2,016
ESPP shares using the treasury stock method ....... 15 --
Shares related to Staff Accounting Bulletin topic 4D:
Shares of common stock ............................ -- 770
Stock options ..................................... -- 1,272
------- -------
Shares used in computing net income per share ............ 21,098 18,887
======= =======
Net income per share ..................................... $ .08 $ .06
======= =======
</TABLE>
(1) For an explanation of the number of shares used to compute net income per
share, see notes to consolidated financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTER ENDED MARCH 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 43,000
<SECURITIES> 0
<RECEIVABLES> 12,800
<ALLOWANCES> 310
<INVENTORY> 0
<CURRENT-ASSETS> 56,717
<PP&E> 5,108
<DEPRECIATION> 2,001
<TOTAL-ASSETS> 60,217
<CURRENT-LIABILITIES> 17,249
<BONDS> 0
0
0
<COMMON> 32,240
<OTHER-SE> 10,229
<TOTAL-LIABILITY-AND-EQUITY> 60,217
<SALES> 13,618
<TOTAL-REVENUES> 13,618
<CGS> 2,213
<TOTAL-COSTS> 2,213
<OTHER-EXPENSES> 8,977
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31
<INCOME-PRETAX> 2,758
<INCOME-TAX> 993
<INCOME-CONTINUING> 1,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,765
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
