<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 OCTOBER 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-23475
INFORMATION ADVANTAGE, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 41-1718445
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
7905 GOLDEN TRIANGLE DRIVE, SUITE 190
EDEN PRAIRIE, MINNESOTA, 55344-7227
(Address of Principal Executive Offices, including Zip Code)
(612) 833-3700
(Registrant's Telephone Number, including Area Code)
Check 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 November 30, 1998, there were outstanding 24,840,156 shares of Common
Stock, $ 0.01 par value.
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<PAGE>
TABLE OF CONTENTS
Page
----
PART I..................................................................... 1
ITEM 1 FINANCIAL STATEMENTS......................................... 1
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................... 6
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.................................................. 15
PART II.................................................................... 16
ITEM 1 LEGAL PROCEEDINGS............................................ 16
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS.................... 16
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.............................. 16
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......... 16
ITEM 5 OTHER INFORMATION............................................ 16
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K............................. 16
SIGNATURES................................................................. 17
EXHIBIT INDEX.............................................................. 18
i
<PAGE>
PART I
ITEM 1 FINANCIAL STATEMENTS
INFORMATION ADVANTAGE, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1998 1998
---------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........................ $ 17,958 $ 27,765
Short-term investments ........................... 16,351 9,177
Accounts receivable net .......................... 19,439 13,256
Prepaid expenses and other current assets ........ 1,539 1,492
Current deferred tax assets ...................... 5,812 --
---------- ---------
Total current assets ......................... 61,099 51,690
Furniture and equipment, net .......................... 3,764 3,856
Long-term deferred taxes and other assets ............. 3,260 3,700
---------- ---------
$ 68,123 $ 59,246
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Current portion--long-term liabilities ........... $ 229 $ 349
Accounts payable ................................. 2,552 2,200
Accrued expenses ................................. 9,330 4,178
Deferred revenue ................................. 6,489 7,707
---------- ---------
Total current liabilities .................... 18,600 14,434
Long-term liabilities, less current portion ........... 128 743
---------- ---------
Total liabilities ............................ 18,728 15,177
---------- ---------
Stockholders' equity:
Common stock, $0.01 par value;
60,000,000 shares authorized ..................... 248 247
Additional paid-in capital ....................... 60,282 59,788
Accumulated other comprehensive income ........... 78 13
Accumulated deficit .............................. (11,213) (15,979)
---------- ---------
Total stockholders' equity ................... 49,395 44,069
---------- ---------
$ 68,123 $ 59,246
---------- ---------
---------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
<PAGE>
INFORMATION ADVANTAGE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
--------------------------- ---------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
License .................................... $ 11,230 $ 7,592 $ 29,580 $ 20,165
Services ................................... 7,261 5,662 21,002 15,322
-------- -------- -------- --------
Total revenues ........................... 18,491 13,254 50,582 35,487
-------- -------- -------- --------
Cost of revenues:
License .................................... 372 350 1,363 1,091
Services ................................... 3,362 3,026 9,631 8,236
-------- -------- -------- --------
Total cost of revenues ................... 3,734 3,376 10,994 9,327
-------- -------- -------- --------
Gross margin .................................... 14,757 9,878 39,588 26,160
-------- -------- -------- --------
Operating expenses:
Sales and marketing ........................ 9,682 7,237 25,125 21,210
Research and development ................... 2,434 2,155 6,712 5,678
General and administrative ................. 1,360 1,628 4,510 4,271
Merger related expenses .................... 6,502 -- 6,502 --
-------- -------- -------- --------
Total operating expenses ................. 19,978 11,020 42,849 31,159
-------- -------- -------- --------
Loss from operations ............................ (5,221) (1,142) (3,261) (4,999)
-------- -------- -------- --------
Other income (expense):
Interest income ............................ 377 147 1,195 517
Interest expense ........................... (8) (59) (28) (177)
-------- -------- -------- --------
Total other income (expense) ............. 369 88 1,167 340
-------- -------- -------- --------
Loss before provision for income taxes .......... (4,852) (1,054) (2,094) (4,659)
Provision for (benefit from) income taxes ....... (7,577) 113 (6,860) 258
-------- -------- -------- --------
Net income (loss) ............................... $ 2,725 $ (1,167) $ 4,766 $ (4,917)
-------- -------- -------- --------
-------- -------- -------- --------
Net income (loss) per share:
Basic ...................................... $ 0.11 $ (0.11) $ 0.19 $ (0.48)
-------- -------- -------- --------
-------- -------- -------- --------
Diluted .................................... $ 0.10 $ (0.11) $ 0.18 $ (0.48)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
INFORMATION ADVANTAGE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDSS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
---------------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................... $ 4,766 $ (4,917)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization ............................. 3,208 2,732
Deferred taxes ............................................ (7,474) (40)
Changes in operating assets and liabilities:
Accounts receivable ..................................... (6,307) (2,153)
Prepaid expenses and other current assets ............... (256) (546)
Accounts payable ........................................ 359 390
Accrued expenses ........................................ 5,212 880
Deferred revenue ........................................ (1,054) 1,380
Other ................................................... 340 (112)
-------- --------
Net cash used in operating activities ............. (1,206) (2,386)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to furniture and equipment ........................ (1,706) (2,123)
Purchase of marketable securities ........................... (13,152) (3,671)
Maturities of marketable securities ......................... 6,000 --
Payment under note receivable ............................... -- 1,800
Payment in connection with the acquisition of Skribe
Software, Inc. ............................................ -- (309)
-------- --------
Net cash used in investing activities .............. (8,858) (4,303)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from line of credit .............................. -- 1,685
Proceeds from long-term liabilities ......................... -- 400
Principle payments on long-term liabilities ................. (251) (644)
Proceeds from exercise of stock options ..................... 134 338
Proceeds from exercise of stock purchase warrants and
ESPP purchase ............................................. 361 758
Proceeds from sale of convertible redeemable
preferred stock ........................................... -- 6,926
-------- --------
Net cash provided by financing activities .......... 244 9,463
-------- --------
Effect of exchange rate on cash .................................. 13 63
-------- --------
Net increase (decrease) in cash and cash equivalents ............. (9,807) 2,837
Cash and cash equivalents, beginning of period ................... 27,765 5,132
-------- --------
Cash and cash equivalents, end of period ......................... $ 17,958 $ 7,969
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
INFORMATION ADVANTAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
In September 1998, Information Advantage, Inc. (the "Company" or "IA")
completed a merger with IQ Software Corporation ("IQ") which was accounted
for as a pooling of interests. The accompanying financial statements have
been restated to reflect the balance sheets, results of operations and cash
flows of the companies as if they had been combined from the earliest date
presented.
The financial information furnished is unaudited except for the balance
sheet as of January 31, 1998, which is derived from the audited balance
sheets of IA and IQ. The unaudited consolidated financial statements as of
and for the three and nine month periods ended October 31, 1998 and 1997 have
been prepared on the same basis as the consolidated financial statements for
the year ended January 31, 1998, and include all adjustments, consisting only
of normal recurring accruals, which in the opinion of management are
necessary for the fair presentation of such information for the periods
presented.
Certain prior period amounts of IA and IQ have been reclassified to
conform to fiscal 1999 presentation. These reclassifications had no effect on
the results of operations or total stockholders' equity as previously
reported.
Certain notes normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
These financial statements should be read in conjunction with IA's and IQ's
audited financial statements and notes thereto for the three years ended
January 31, 1998, included in each Company's annual reports on Form 10-K. In
addition, the results of operations for the interim periods presented may not
be indicative of results for the entire year, and do not include any
potential synergies which may arise from the combining of the operations of
the two companies.
2. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131). SFAS No. 131 is effective for annual financial
statements for periods beginning after December 15, 1997. SFAS No. 131
establishes standards for disclosures about operating segments, products and
services, geographic areas and major customers. The Company will adopt SFAS
No. 131 effective for its annual report for the fiscal year ending January
31, 1999. Management believes the adoption of SFAS No. 131 will not have a
material effect on the Company's financial statements.
3. MERGER RELATED EXPENSES
In connection with the merger, the Company incurred direct transaction
and other related expenses of $6,502. Merger related expenses consisted of
approximately $3,250 of investment banking, legal and professional fees;
approximately $1,650 of costs to combine and reorganize the operations of IA
and IQ, principally related to lease terminations and severance;
approximately $672 of adjustments to write-off certain intangible assets not
utilized by the combined company; and approximately $930 of other one-time
merger related expenses.
4. DEFERRED TAX ASSETS
During the quarter ended October 31, 1998, the Company reversed
previously recorded deferred tax valuation allowances and recorded current
and long-term deferred tax assets of $7,378. Deferred tax assets arise
primarily from net operating loss carryforwards and other timing differences.
Based on the successful completion of the merger with IQ and the foundation
created for current and future profitable operations, management believes
that it is more likely than not that the deferred tax asset will be fully
utilized by the Company.
4
<PAGE>
4. EARNINGS PER SHARE
A reconciliation of the denominators of the basic and diluted earnings
per share computations for the three and nine month periods ended October 31
is presented below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income (Loss) .................................. $ 2,725 $ (1,167) $ 4,766 $ (4,917)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares Calculation:
Weighted average basic shares outstanding ..... 24,822,895 10,334,640 24,737,161 10,227,771
Effect of dilutive securities
Options ..................................... 1,576,411 -- 1,869,570 --
Warrants .................................... 50,111 -- 83,320 --
------------ ------------ ------------ ------------
Total shares used to compare
diluted earnings per share ............. 26,449,417 10,334,640 26,690,051 10,227,771
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net Income (Loss) per Share:
Basic ......................................... $ 0.11 $ (0.11) $ 0.19 $ (0.48)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted ....................................... $ 0.10 $ (0.11) $ 0.18 $ (0.48)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
5
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
IN SEPTEMBER 1998, INFORMATION ADVANTAGE, INC. (THE "COMPANY" OR"IA")
COMPLETED ITS MERGER WITH IQ SOFTWARE CORPORATION ("IQ"), WHICH WAS ACCOUNTED
FOR AS A POOLING OF INTERESTS. THE FOLLOWING DISCUSSION AND ANALYSIS
DESCRIBES CERTAIN FACTORS AFFECTING THE CONSOLIDATED RESULTS OF OPERATIONS OF
THE COMPANY FOR THE THREE AND NINE MONTH PERIODS ENDED OCTOBER 31, 1998 AND
ITS FINANCIAL CONDITION AS OF OCTOBER 31, 1998. THIS DISCUSSION AND ANALYSIS
SHOULD BE READ IN CONJUNCTION WITH THE ANNUAL REPORTS ON FORM 10-K FOR THE
FISCAL YEAR ENDED JANUARY 31, 1998 OF IA AND IQ, AND THE JOINT PROXY
STATEMENT OF IA AND IQ DATED AUGUST 21, 1998.
CERTAIN OF THE STATEMENTS IN THE FOLLOWING DISCUSSION CONSTITUTE
FORWARD-LOOKING STATEMENTS WHICH ARE MADE PURSUANT TO THE SAFE HARBOR
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. VARIOUS
FACTORS MAY CAUSE ACTUAL RESULTS OF OPERATIONS AND FINANCIAL CONDITION TO
VARY SIGNIFICANTLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENT MADE
HEREIN OR IN OTHER REPRESENTATIONS MADE BY THE COMPANY'S MANAGEMENT OR BY
OTHERS ON BEHALF OF THE COMPANY. PLEASE REFER TO THE ANNUAL REPORTS ON FORM
10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 1998 OF IA AND IQ, AND THE JOINT
PROXY STATEMENT OF IA AND IQ, DATED AUGUST 21, 1998 FOR A DESCRIPTION OF THE
FACTORS KNOWN TO THE COMPANY THAT MAY CAUSE ACTUAL RESULTS TO VARY.
OVERVIEW
Information Advantage, Inc. develops, markets and supports enterprise
scalable on-line, analytical processing (OLAP) software that is designed to
allow a large number of users to access and analyze large amounts of data to
make quicker and more informed business decisions. The Company's server-based
solution, DecisionSuite, provides powerful, robust and flexible analysis
processing capabilities that transform raw data into meaningful information
from a wide range of desktop and Internet platforms. Through the use of an
advanced architecture, the Company designed DecisionSuite to accommodate
terabytes of data and thousands of active users. DecisionSuite enables
organizations to push effective decision making to all levels of users
thereby creating an "intelligent enterprise," one capable of quickly
identifying and reacting to market opportunities. DecisionSuite supports many
UNIX operating systems and employs relational database technology, allowing
it to access most popular databases, data warehouses and data marts. In
addition to DecisionSuite, the Company develops, markets and supports a suite
of business intelligence software products for data access, analysis, ad hoc
query and reporting designed to facilitate decision support.
In September 1998, the Company formally introduced its first intranet
portal to business intelligence, MyEureka! MyEureka! applies the concepts of
personalized Internet portal sites, such as My Yahoo! or Excite, to offer
users an up-to-the-minute view of their organization's decision-making
information. This product represents the completion of the first phase of
integration of the IA and IQ product lines.
License revenues are derived from one-time licenses for the right to use
the Company's products in perpetuity and are determined on a per server, per
named user and database size basis. The Company's service revenues, which
have accounted for approximately 40% of the Company's total revenues for the
past three years, include fees for maintenance, training and consulting
services. The Company anticipates that service revenues will continue to
account for a significant portion of the Company's total revenues.
The American Institute of Certified Public Accountants has approved
Statement of Position (SOP) 97-2, effective for transactions entered into
after December 15, 1997, which supersedes SOP 91-1, "Software Revenue
Recognition." Management has adopted this new statement and has determined
that its adoption has not had a material effect on the timing of the
Company's revenue recognition or caused changes to its revenue recognition
policies.
Revenues derived from software licenses are recognized upon
execution of a license agreement, delivery of the software product and
fulfillment of other delivery requirements. Revenues from software provided
for demonstration or pilot purposes are not recognized until execution of a
license agreement and fulfillment of other delivery requirements. Revenues
derived from maintenance contracts, which are bundled with the initial
licenses, and all revenues from extended maintenance contracts are deferred
and recognized ratably over the term of the maintenance contract. Revenues
from maintenance contracts are included in service revenues. Revenues from
training and consulting services are recognized as the services are performed.
6
<PAGE>
The Company licenses software through its direct sales force and through
or in conjunction with solution development partners, sales affiliates and
marketing partners. Revenues from indirect sales involving strategic partners
accounted for approximately 20.9% and 31.1% of the Company's license revenues
for the quarters ended October 31, 1998 and 1997, and 21.0% and 33.6% for the
nine month periods ended October 31, 1998 and 1997. The Company intends to
expand its strategic relationships, thereby increasing the revenues generated
from indirect channels as a percentage of total license revenues. The Company
intends to expand its international operations and has committed, and
continues to commit, significant management time and financial resources to
developing direct and indirect international sales and support channels. The
Company has international sales and support offices in Toronto, Canada;
London, England; Paris, France; Cologne, Germany; and Melbourne, Australia.
To date, most of the Company's international revenues have been derived from
the United Kingdom and Canada.
Although the Company's personnel related costs are higher in Europe than
they are in the United States, and the Company's international operations are
subject to economic, fiscal and monetary policies of foreign governments, to
date, these factors have not had a material effect on the Company's results
of operations or liquidity. In addition, because all of the Company's sales
have been denominated in U.S. dollars, the Company has been able to minimize
the impact of foreign exchange rate changes. There can be no assurance that
the Company will be able to continue to denominate foreign sales in U.S.
dollars or that international operations'costs and economic, fiscal and
monetary policies of foreign governments will not in the future have a
material adverse effect on the Company's results of operations or liquidity.
The Company continues to make significant strategic investments in
building an infrastructure to support long-term growth. The Company has
increased its headcount from 226 at January 31, 1995 to 419 at October 31,
1998, reflecting personnel increases throughout the Company and personnel
increases due to the merger with IQ. As a result, although the Company's
revenues have increased in each of the last eleven quarters, the Company
incurred net losses in each quarter prior to the beginning of fiscal 1999,
and had an accumulated deficit of $11.2 million as of October 31, 1998.
The Company's limited consolidated operating history makes the
prediction of future operating results difficult and unreliable. In addition,
given its limited combined operating history and recent rapid growth,
historical growth rates in the Company's revenues should not be considered
indicative of future revenue growth rates or operating results. There can be
no assurance that any of the Company's business strategies will be successful
or that the Company will be able to achieve profitability on a consistent
quarterly or annual basis.
7
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited consolidated statement
of operations data for the eight fiscal quarters ended October 31, 1998, as
well as such data expressed as a percentage of the Company's total revenues
for those periods. All data reflects the merger with IQ which was accounted
for as a pooling of interests. This data has been derived from unaudited
combined financial statements that, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) and conforming
reclassifications necessary for a fair presentation of such information when
read in conjunction with the consolidated financial statements and notes
thereto.
<TABLE>
<CAPTION>
QUARTER ENDED
JAN. 31 APR. 30 JUL. 31 OCT. 31 JAN. 31 APR. 30 JUL. 31 OCT. 31
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Licenses ................... $ 5,746 $ 5,940 $ 6,632 $ 7,592 $ 8,805 $ 8,621 $ 9,729 $ 11,230
Services and maintenance ... 3,503 4,386 5,274 5,662 6,003 6,650 7,091 7,261
-------- -------- -------- -------- -------- -------- -------- ---------
Gross revenue ........... 9,249 10,325 11,906 13,254 14,808 15,271 16,820 18,491
COST OF REVENUE:
License .................... 410 304 437 350 473 504 487 372
Services ................... 1,923 2,422 2,788 3,026 2,876 3,153 3,116 3,362
-------- -------- -------- -------- -------- -------- -------- ---------
Cost of Revenue ......... 2,333 2,726 3,226 3,376 3,349 3,657 3,603 3,734
-------- -------- -------- -------- -------- -------- -------- ---------
Gross Margin ............ 6,917 7,599 8,681 9,878 11,459 11,614 13,217 14,757
OPERATING EXPENSES
Sales and marketing
expenses ................. 7,017 6,882 7,092 7,237 7,287 7,199 8,244 9,682
Software development costs . 1,571 1,645 1,877 2,155 1,904 2,083 2,195 2,434
General and administrative . 1,434 1,265 1,377 1,628 1,812 1,579 1,571 1,360
Merger related expenses .... -- -- -- -- -- -- -- 6,502
-------- -------- -------- -------- -------- -------- -------- ---------
Total Operating
Expenses ............... 10,022 9,793 10,346 11,020 11,003 10,861 12,010 19,978
-------- -------- -------- -------- -------- -------- -------- ---------
Operating Income (Loss) .... (3,105) (2,194) (1,666) (1,142) 456 753 1,207 (5,221)
OTHER INCOME (EXPENSE)
Interest income ............ 143 125 209 147 236 412 406 377
Interest expense ........... (63) (23) (58) (59) (70) (12) (8) (8)
-------- -------- -------- -------- -------- -------- -------- ---------
Total Other Income
(Expense) ............. 80 102 151 88 166 400 398 369
-------- -------- -------- -------- -------- -------- -------- ---------
INCOME (LOSS) BEFORE INCOME
TAX PROVISION (BENEFIT) ....... (3,025) (2,092) (1,515) (1,054) 622 1,153 1,605 (4,852)
INCOME TAX PROVISION
(BENEFIT) .................. (158) 45 100 113 248 325 392 (7,577)
-------- -------- -------- -------- -------- -------- -------- ---------
NET INCOME (LOSS) ............. $ (2,867) $ (2,137) $ (1,615) $ (1,167) $ 374 $ 828 $ 1,213 $ 2,725
-------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- ---------
UNAUDITED NET INCOME (LOSS)
PER SHARE
Basic ...................... (0.28) (0.21) (0.16) (0.11) 0.02 0.03 0.05 0.11
Diluted .................... (0.28) (0.21) (0.16) (0.11) 0.02 0.03 0.04 0.10
SHARES USED IN COMPUTING
NET INCOME (LOSS) PER SHARE
Basic ...................... 10,171 10,171 10,178 10,335 17,436 24,666 24,723 24,823
Diluted .................... 10,171 10,171 10,178 10,335 19,140 26,644 26,976 26,449
</TABLE>
8
<PAGE>
<TABLE>
AS A PERCENTAGE OF TOTAL
REVENUE:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Licenses .................. 62% 58% 56% 57% 59% 56% 58% 61%
Services and maintenance .. 38 42 44 43 41 44 42 39
----- ----- ----- ----- ----- ----- ----- ----
Total Revenue .......... 100 100 100 100 100 100 100 100
COST OF REVENUE:
License ................... 4 3 4 3 3 3 3 2
Services .................. 21 23 23 23 19 21 19 18
----- ----- ----- ----- ----- ----- ----- ----
Cost of Revenue ......., 25 26 27 26 22 24 22 20
----- ----- ----- ----- ----- ----- ----- ----
Gross Margin .........., 75 74 73 74 78 76 78 80
PERATING EXPENSES
Sales and marketing
expenses ................ 76 67 60 55 49 47 49 52
Software development
costs ................... 16 16 16 16 13 14 13 13
General and
administrative .......... 15 12 12 12 12 10 9 7
Merger related expenses ... 0 0 0 0 0 0 0 35
----- ----- ----- ----- ----- ----- ----- ----
Total Operating
Expenses ............. 107 95 88 83 74 71 71 107
----- ----- ----- ----- ----- ----- ----- ----
Operating Income (Loss) ... (34) (21) (15) (9) 4 5 7 (27)
OTHER INCOME (EXPENSE)
Interest income ........... 2 1 2 1 2 3 2 2
Interest expense .......... (1) (0) (0) (0) (0) (0) (0) (0)
----- ----- ----- ----- ----- ----- ----- ----
Total Other Income
(Expense) ............ 1 1 2 1 2 3 2 2
----- ----- ----- ----- ----- ----- ----- ----
INCOME (LOSS) BEFORE INCOME TAX
PROVISION (BENEFIT) ........ (33) (20) (13) (8) 6 8 9 (25)
----- ----- ----- ----- ----- ----- ----- ----
INCOME TAX PROVISION (BENEFIT).. (2) 0 1 1 2 2 2 (41)
NET INCOME (LOSS) .............. (31%) (20%) (14%) (9%) 4% 6% 7% 16%
----- ----- ----- ----- ----- ----- ----- ----
----- ----- ----- ----- ----- ----- ----- ----
</TABLE>
9
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenues for the three and nine month periods ended October
31:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
--------------------- -------------------
1998 1997 1998 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
Revenues
License ......................................... 60.7% 57.3% 58.5% 56.8%
Service ......................................... 39.3 42.7 41.5 43.2
------ ------ ------ ------
Total revenues .............................. 100.0 100.0 100.0 100.0
------ ------ ------ ------
Cost of Revenues:
License ......................................... 2.0 2.6 2.7 3.1
Service ......................................... 18.2 22.8 19.0 23.2
------ ------ ------ ------
Total cost of revenues ...................... 20.2 25.4 21.7 26.3
------ ------ ------ ------
Gross margin ......................................... 79.8 74.6 78.3 73.7
------ ------ ------ ------
Operating expenses:
Sales and marketing ............................. 52.4 54.6 49.7 59.8
Research and development ........................ 13.2 16.3 13.3 16.0
General and administrative ...................... 7.4 12.3 8.9 12.0
Merger related expenses ......................... 35.2 -- 12.9 --
------ ------ ------ ------
Total operating expenses .................... 108.2 83.2 84.8 87.8
------ ------ ------ ------
Loss from operations ................................. (28.4) (8.6) (6.5) (14.1)
Interest income, net ................................. 2.0 0.7 2.3 1.0
------ ------ ------ ------
Loss before provision for (benefit from) income
taxes ........................................... (26.4) (7.9) (4.2) (13.1)
Provision for (benefit from) income taxes ............ (41.0) 0.9 (13.6) 0.7
------ ------ ------ ------
Net income (loss) .................................... 14.6% (8.8)% 9.4% (13.8)%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
10
<PAGE>
The following table sets forth, for each component of revenues, the
gross margin associated with such components of revenues for the three and
nine month periods ended October 31:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
-------------------- --------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Gross Margin:
License ........... 96.7% 95.4% 95.4% 94.6%
Service ........... 53.7 46.6 54.1 46.2
</TABLE>
REVENUES
LICENSE. License revenues are recognized upon execution of a license
agreement and shipment of the product if no other significant obligations
remain and collection of the resulting receivable is probable. License
revenues increased 47.9%, to $11.2 million from $7.6 million, between the
three months ended October 31, 1998 and 1997, and 46.7%, to $29.6 million
from $20.2 million, between the nine months ended October 31, 1998 and 1997.
The increase in the Company's license revenues in each period was
attributable primarily to greater market acceptance of DecisionSuite,
Objects, Vision and SAP Server software which led to an increase in volume,
an increase in the average revenues derived from each license as the average
number of seats per customer increased, and an increase in sales headcount.
These increases were off-set, to a much lesser extent, by reduced market
acceptance of the Company's older Legacy products. To date, price increases
have not had a significant impact on revenues. The Company does not believe
that the historical percentage growth rates of license revenues will be
sustainable or are indicative of future results.
SERVICE. Service revenues include fees from maintenance contracts,
training, training materials and consulting services. Fees for maintenance,
training, training materials and consulting services are generally charged
separately from product licenses. Maintenance fees are for ongoing support
and product updates, and are recognized ratably over the life of the
contract. Revenues from training are recognized upon completion of the
related training class. Revenues from training materials are recognized upon
shipment or upon provision of the materials to attendees of training classes.
Consulting revenues are recognized when the services are performed. Service
revenues increased 28.2%, to $7.3 million from $5.7 million, between the
quarters ended October 31, 1998 and 1997, and increased 37.1%, to $21.0
million from $15.3 million, between the nine months ended October 31, 1998
and 1997. Service revenues accounted for 39.3% and 42.7% of the Company's
total revenues for the three months ended October 31, 1998 and 1997, and
41.5% and 43.2% for the nine month periods ended October 31, 1998 and 1997.
In particular, maintenance revenues accounted for 40.1% and 35.8% of service
revenues for the quarters ended October 31, 1998 and 1997, and 39.2% and
38.2% of service revenues for the nine months ended October 31, 1998 and
1997. The Company anticipates that service revenues will continue to account
for a significant percentage of the Company's total revenues and that
revenues from maintenance will increase as a percentage of service revenues
as additional licenses are sold.
INTERNATIONAL REVENUES. International revenues include all revenues
other than from the United States. International revenues from the Company's
direct sales organizations in Europe and export sales to or through strategic
partners in Europe and other areas outside of the United States accounted for
19.5% and 18.0% of total revenues for the quarters ended October 31, 1998 and
1997, and 21.1% and 20.4% of total revenues for the nine months ended October
31, 1998 and 1997. The Company expects that international license and related
service revenues will continue to account for a significant portion of its
total revenues in the future.
11
<PAGE>
COST OF REVENUES
LICENSE. Cost of license revenues consists primarily of salaries,
royalties, product packaging and shipping costs. Cost of license revenues was
$372,000 and $350,000 for the quarters ended October 31, 1998 and 1997,
representing 3.3% and 4.6% of license revenues for these periods. For the
nine months ended October 31, 1998 and 1997, cost of license revenues was
$1.4 million and $1.1 million, representing 4.6% and 5.4% of license revenues
for these periods. The decrease in cost of license revenues as a percentage
of license revenue between the nine month periods ended October 31, 1998 and
1997 reflects economies of scale associated with increased sales of
multiple-seat user licenses.
SERVICE. Cost of service revenues consists primarily of
personnel-related and facilities costs incurred in providing customer
support, training and consulting services, as well as third-party costs
incurred in providing training and consulting services. Cost of service
revenues was $3.4 million and $3.0 million for the quarters ended October 31,
1998 and 1997, and $9.6 million and $8.2 million for the nine months ended
October 31, 1998 and 1997, representing 49.0%, 51.8%, 45.9% and 52.1%, of
service revenues for these periods. The decrease in cost of service revenues
as a percentage of service revenues for the three and nine month periods
ended October 31, 1998 and 1997 was primarily due to increased productivity
from a significant number of newly hired training, support and consulting
personnel, and improved economies of scale of the technical support center.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel,
field office expenses, travel and entertainment and promotional expenses.
Sales and marketing expenses were $9.7 million and $7.2 million for the
quarters ended October 31, 1998 and 1997, and $25.1 million and $21.2 million
for the nine months ended October 31, 1998 and 1997, respectively. The
increase in sales and marketing expenses in each period was primarily due to
the hiring of additional sales and marketing personnel and, to a lesser
extent, the increase in the number of sales offices. In addition, the Company
increased its marketing efforts during the quarter ended October 31, 1998 in
order to inform and educate the market about the Company's new product
offerings. Sales and marketing expenses represented 52.4% and 54.8% of total
revenues for the quarters ended October 31, 1998 and 1997, and were 49.7% and
59.8% for the nine month periods ended October 31, 1998 and 1997.
The Company expects that sales and marketing expenses will increase as
the Company continues to hire additional sales and marketing personnel,
establish additional sales offices and increase promotional activities.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and benefits of software engineering personnel,
payments to contract programmers and expendable equipment purchases. The
Company believes that a significant level of investment for research and
development is required to remain competitive. Research and development
expenses were $2.4 million and $2.2 million for the quarters ended October
31, 1998 and 1997, and $6.7 million and $5.7 million for the nine months
ended October 31, 1998 and 1997. The increase for each period was primarily
attributable to additional hiring of research and development personnel. The
Company anticipates that it will continue to devote substantial resources to
research and development and that these expenses will increase in future
periods.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.4
million and $1.6 million for the quarters ended October 31, 1998 and 1997, and
$4.5 million and $4.3 million for the nine months ended October 31, 1998 and
1997. The increase between the nine month periods was predominantly due to
increased staffing and, to a lesser extent, associated expenses necessary to
manage and support the Company's increased scale of operations. General and
administrative expenses represented 7.4% and 12.3% of total revenues for the
quarters ended October 31, 1998 and 1997, and 8.9% and 12.0% for the nine months
ended October 31, 1998 and 1997. The Company believes that its general and
administrative expenses will increase in future periods as a result of an
anticipated expansion of the Company's administrative staff to support its
growing operations.
MERGER RELATED EXPENSES. In connection with the merger, the Company
incurred direct transaction and other
12
<PAGE>
related expenses of $6,502,000. Merger related expenses consisted of
approximately $3,250,000 of investment banking, legal and professional fees;
approximately $1,650,000 of costs to combine and reorganize the operations of
Information Advantage, Inc. and IQ Software Corporation, principally related
to lease terminations and severance; approximately $670,000 of adjustments to
write-off certain intangible assets not utilized by the combined company; and
approximately $930,000 of other one-time merger related expenses.
INTEREST INCOME. Interest income represents earnings on the Company's
cash, cash equivalents and short-term investments. Interest income was
$377,000 and $147,000 for the quarters ended October 31, 1998 and 1997, and
$1,195,000 and $517,000 for the nine months ended October 31, 1998 and 1997.
INTEREST EXPENSE. Interest expense represents interest on long-term debt
and capitalized leases, and totaled $8,000 and $59,000 for the three months
ended October 31, 1998 and 1997, and $28,000 and $177,000 for the nine months
ended October 31, 1998 and 1997.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The Company accounts for
income taxes in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." During the quarter ended October 31,
1998, the Company reversed prior period valuation allowances against its
deferred tax assets, resulting in a net tax benefit of $7,378,000. Based on
the successful completion of the merger with IQ and the foundation created
for current and future profitable operations, management believes that it is
more likely than not that the deferred tax asset will be fully utilized by
the Company. At October 31, 1998, the Company had approximately $17.8 million
in federal net operating loss carryforwards, which will begin to expire in
the year 2007 if not utilized. In addition, the Tax Reform Act of 1986
contains certain provisions that may limit the net operating loss
carryforwards available for use in any given period upon the occurrence of
certain events, including a significant change in ownership interests.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board also issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131). SFAS No.131 is effective for annual financial
statements for periods beginning after December 15, 1997. SFAS No. 131
establishes standards for disclosures about operating segments, products and
services, geographic areas and major customers. Management believes the
adoption of SFAS No. 131 will not have a material effect on the Company's
financial statements.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. Net cash used in operating activities was $1.2
million and $2.4 million for the nine months ended October 31, 1998 and 1997.
During the nine months ended October 31, 1998, cash used in operating
activities included $6.3 million in additional accounts receivable and the
recognition of a $7.5 million tax benefit. Resulting in an increase cash were
net income of $4.8 million, plus an increase in accounts payable and accrued
expenses of $5.6 million, a $1.1 million decrease in deferred revenue, and
noncash depreciation and amortization expense of $3.2 million. During the
nine months ended October 31, 1997, cash used in operating activities
resulted primarily from net operating losses of $4.9 million, and a $2.2
million increase in accounts receivable, partially offset by $2.7 million
noncash depreciation and amortization expense, a $1.4 million decrease in
deferred revenue, and an increase in accounts payable and accrued expenses of
$1.3 million.
INVESTING ACTIVITIES. Net cash of $8.9 million used in investing
activities during the nine months ended October 31, 1998 was composed of
$13.2 million for the acquisition of short-term investments and $1.7 million
in purchases of fixed assets and capitalized software costs, partially offset
by the maturities of $6.0 million in short-term investments. Net cash used in
investing activities of $4.3 million during the nine months ended October 31,
1997 included $3.7 million for the purchase of marketable securities, and
purchases of $2.1 million in fixed assets and capitalized software costs,
partially offset by the repayment of a $1.8 million note receivable.
FINANCING ACTIVITIES. Net cash provided by financing activities during
the nine months ended October 31, 1998 consisted of $495,000 in proceeds from
the exercise of stock options and purchase of shares of common stock under
the Company's employee stock purchase plan, partially offset by $251,000 in
principal payments on capital leases. Net
13
<PAGE>
cash provided by financing activities during the nine months ended October
31, 1997 of $9.5 million was generated principally by $6.9 million from the
sale of preferred stock and $1.1 million in other stock purchases, partially
offset by $644,000 in principal payments on capital leases.
COMMITMENTS AND BORROWING CAPACITY. As of October 31, 1998, the Company
had no material commitments for capital expenditures.
The Company's revolving credit line of $2.0 million expired in September
1998, and is currently under renegotiation. There were no amounts outstanding
under this facility as of October 31, 1998.
Total borrowings under the revolving credit line were limited generally
to the lesser of 70% of eligible accounts receivable or $2.0 million. The
Company's line of credit contained certain financial covenants and
restrictions as to various matters including the Company's ability to pay
cash dividends and effect mergers or acquisitions without the bank's prior
approval. The Company was currently in compliance with such financial
covenants and restrictions. The Company granted a first priority security
interest in substantially all of its assets as security for its obligations
under its credit line. The Company believes that this line will be replaced
at similar or more favorable terms.
The Company believes that the net proceeds from the December 1997
initial public offering and its existing cash, cash equivalents and
short-term investments will be adequate to meet its cash needs for at least
the next 12 months. Thereafter, the Company may require additional funds to
support its working capital requirements or for other purposes and may seek
to raise such additional funds through public or private equity financing or
from other sources. There can be no assurance that additional financing will
be available at all or that, if available, such financing will be obtainable
on terms favorable to the Company or will not be dilutive.
MERGER PROCEEDINGS. On June 29, 1998, IA announced its intent to merge
with IQ, subject to shareholder approval. The transaction was accounted for
as a pooling of interests. The merger was completed on September 24, 1998.
Merger related transaction costs of approximately $6.5 million were charged
to operations when incurred.
YEAR 2000 READINESS DISCLOSURE
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date
code fields will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, in approximately one
year, computer systems and software used by many companies may need to be
upgraded to comply with such "Year 2000" requirements.
The Company is presently assessing its Year 2000 readiness for
operations worldwide, focusing on critical operating and applications
systems, particularly the Year 2000 compliance of: (i) the product lines,
(ii) the key software/hardware vendors, and (iii) the financial accounting
systems of the newly combined Company.
Although the Company believes that its products are Year 2000 compliant,
management believes that the purchasing patterns of customers and potential
customers may be affected as companies expend a significant portion of their
limited information technology resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase software products such as those offered
by the Company, which could result in a material adverse effect on the
Company's business, operating results and financial condition.
The Company is currently performing a compliance survey of its critical
vendors, although management presently has little information concerning
their Year 2000 compliance status. In the event that any such key suppliers
do not achieve Year 2000 compliance in a timely manner, or at all, the
Company's business or operations could be adversely affected.
The Company uses outside vendors to supply its most significant
financial accounting software. Management believes its current accounting
software package is Year 2000 compliant. However, in the normal course of
business, the Company has undertaken a search for a financial accounting
software package to replace its existing system. A
14
<PAGE>
critical attribute of the system ultimately selected will be compliance with
Year 2000 requirements. The cost of replacing the existing financial software
is not anticipated to exceed $250,000.
As a part of its Year 2000 assessment, the Company intends to
demonstrate its Year 2000 readiness by simulating the Year 2000 in an
orchestrated manner for its key infrastructure components, critical business
processes and key applications systems. The Company expects that minor Year
2000 compliance issues will be identified as an outcome of the Year 2000
simulation test and intends to address these compliance issues no later than
the second quarter of calendar 1999.
The Company recognizes the need for Year 2000 contingency plans in the
event that remediation is not fully successful or that the remediation
efforts of its vendors, suppliers and governmental/regulatory agencies are
not timely completed. The Company intends to address contingency planning
during calendar 1999.
The Company intends to complete its Year 2000 remediation efforts
primarily with in-house resources, but will utilize consultants should the
need arise. The Company believes that the costs of Year 2000 remediation
described above will not be material and can be funded from operations.
The Company recognizes that issues related to Year 2000 constitute a
material known uncertainty. The Company also recognizes the importance of
ensuring its operations will not be adversely affected by Year 2000 issues.
It believes that the processes described above will be effective to manage
the risks associated with the problem. However, there can be no assurance
that the processes can be completed on the timetable described above or that
remediation will be fully effective. The failure to identify and remediate
Year 2000 issues, or the failure of customers, key vendors or other critical
third parties who do business with the Company to timely remediate their Year
2000 issues could cause system failures or errors, business interruptions
and, in a worst case scenario, the inability to engage in normal business
practices for an unknown length of time. The effect on the Company's
operations, income and financial condition could be materially adverse.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
<PAGE>
PART II
ITEM 1 LEGAL PROCEEDINGS
The Company is not currently subject to any material legal proceeding.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
From the effective date of the Registration Statement on Form S-1
through October 31, 1998, the Company had used approximately $3.3 million of
the net proceeds from its initial public offering for the repayment of
indebtedness, and $1,250,000 for the purchase of furniture and equipment.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A Special Meeting of Stockholders was held on September 23, 1998.
(b) Not applicable.
(c) One proposal was submitted for stockholder approval at the Special
Meeting of Stockholders which passed with voting results as follows:
To approve the issuance of shares of Information Advantage, Inc.
Common Stock to the stockholders of IQ Software Corporation, a Georgia
corporation, pursuant to the terms of an Agreement and Plan of Merger,
as amended, dated as of June 29, 1998, by and among Information
Advantage, Inc., IQ Software Corporation and IAC Merger Corp., a
Georgia corporation and wholly-owned subsidiary of Information
Advantage, Inc.
<TABLE>
<S> <C> <C> <C>
FOR 12,367,435 ABSTAIN 4,200
AGAINST 4,720 BROKER NON-VOTE 0
</TABLE>
(d) Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
(1) The Company's Current Report on Form 8-K filed on September 25,
1998, relating to the Company's merger with IQ Software
Corporation, a Georgia corporation.
16
<PAGE>
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 on December 14, 1998.
INFORMATION ADVANTAGE, INC.
By: /s/ Larry J. Ford
----------------------------
Larry J. Ford
President and Chief
Executive Officer
By: /s/ Donald W. Anderson
----------------------------
Donald W. Anderson
Chief Financial Officer
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 1 AND 2 OF THE COMPANY'S FORM 10Q AS OF AND FOR THE THREE AND NINE MONTHS
ENDED OCTOBER 31, 1998, AS RESTATED TO REFLECT THE SEPTEMBER 1998 POOLING OF IA
AND IQ 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> JAN-31-1999
<PERIOD-START> JAN-31-1998
<PERIOD-END> OCT-31-1998
<CASH> 17,958
<SECURITIES> 16,351
<RECEIVABLES> 20,318
<ALLOWANCES> 879
<INVENTORY> 0
<CURRENT-ASSETS> 61,099
<PP&E> 11,963
<DEPRECIATION> 8,200
<TOTAL-ASSETS> 68,123
<CURRENT-LIABILITIES> 18,600
<BONDS> 0
0
0
<COMMON> 248
<OTHER-SE> 49,147
<TOTAL-LIABILITY-AND-EQUITY> 68,123
<SALES> 0
<TOTAL-REVENUES> 50,582
<CGS> 0
<TOTAL-COSTS> 10,994
<OTHER-EXPENSES> 42,849
<LOSS-PROVISION> 242
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> (2,094)
<INCOME-TAX> (6,860)
<INCOME-CONTINUING> 4,766
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,766
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.18
</TABLE>
