<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 September 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-23997
----------------
BRIO TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 77-0210797
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
3460 West Bayshore Road, Palo Alto, California 94303
(Address of principal executive offices, including zip code)
(650) 856-8000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
----------------
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 November 2, 1999 there were 26,935,839 shares of the registrant's
Common Stock outstanding.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
BRIO TECHNOLOGY, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 1999 and
March 31, 1999...................................................... 3
Condensed Consolidated Statements of Operations--
Three and Six Months Ended September 30, 1999 and 1998.............. 4
Condensed Consolidated Statements of Cash Flows--
Six Months Ended September 30, 1999 and 1998........................ 5
Notes to Condensed Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 26
PART II. Other Information
Item 1. Legal Proceedings................................................ 27
Item 2. Changes in Securities and Use of Proceeds........................ 27
Item 3. Defaults Upon Senior Securities.................................. 27
Item 4. Submission of Matters to Vote of Security Holders................ 27
Item 5. Other Infomation................................................. 28
Item 6. Exhibits and Reports on Form 8-K................................. 28
Signature............................................................ 29
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
BRIO TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
------------- ---------
(Unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 12,257 $ 21,026
Short-term investments.................................... 21,253 14,285
Accounts receivable, net of allowance of $2,153 and
$1,394................................................... 22,666 20,674
Inventories............................................... 262 376
Deferred income taxes..................................... 2,544 2,095
Prepaid expenses and other current assets................. 1,621 1,458
-------- --------
Total current assets.................................. 60,603 59,914
Property and equipment, net................................. 7,015 6,540
Other assets................................................ 1,933 1,806
-------- --------
$ 69,551 $ 68,260
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable.......................................... $ 6,953 $ 4,251
Accrued liabilities--
Payroll and related benefits............................ 7,987 5,902
Other................................................... 11,984 5,716
Line of credit............................................ -- 2,000
Deferred revenue, current................................. 21,285 18,666
-------- --------
Total current liabilities............................. 48,209 36,535
Noncurrent deferred revenue................................. 2,240 2,194
Other noncurrent liabilities................................ 4,780 133
-------- --------
Total liabilities..................................... 55,229 38,862
-------- --------
Redeemable common stock..................................... -- 3,110
-------- --------
Stockholders' equity:
Convertible preferred stock............................... -- 5
Common stock.............................................. 27 26
Additional paid-in capital................................ 71,500 66,175
Notes receivable from stockholders........................ (781) (1,820)
Deferred compensation..................................... (294) (456)
Accumulated components of comprehensive income (loss)..... 373 (132)
Accumulated deficit....................................... (56,503) (37,510)
-------- --------
Total stockholders' equity............................ 14,322 (26,288)
-------- --------
$ 69,551 $ 68,260
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
BRIO TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended September Six Months Ended
30, September 30,
----------------- -----------------
1999 1998 1999 1998
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues:
License fees........................... $ 21,177 $13,440 $ 39,470 $25,005
Services............................... 9,479 6,630 18,765 12,135
-------- ------- -------- -------
Total revenues....................... 30,656 20,070 58,235 37,140
-------- ------- -------- -------
Cost of revenues:
License fees........................... 826 599 1,498 1,027
Services............................... 3,835 2,462 7,808 4,218
-------- ------- -------- -------
Total cost of revenues............... 4,661 3,061 9,306 5,245
-------- ------- -------- -------
Gross profit............................. 25,995 17,009 48,929 31,895
-------- ------- -------- -------
Operating expenses:
Research and development............... 4,856 3,058 9,515 5,929
Sales and marketing.................... 14,888 11,551 29,651 21,963
General and administrative............. 3,888 2,292 7,135 4,663
Non-recurring operating expenses....... 20,242 -- 21,401 --
-------- ------- -------- -------
Total operating expenses............. 43,874 16,901 67,702 32,555
-------- ------- -------- -------
Income (loss) from operations............ (17,879) 108 (18,773) (660)
Interest and other income, net........... 407 441 179 640
-------- ------- -------- -------
Net income (loss) before income taxes.... (17,472) 549 (18,594) (20)
Income taxes............................. -- 162 399 164
-------- ------- -------- -------
Net income (loss)........................ (17,472) 387 (18,993) (184)
Increase in redemption value of
redeemable common stock................. -- -- -- (286)
-------- ------- -------- -------
Net income (loss) applicable to common
stock................................... $(17,472) $ 387 $(18,993) $ (470)
======== ======= ======== =======
Basic net income (loss) per share........ $ (0.71) $ 0.02 $ (0.82) $ (0.02)
======== ======= ======== =======
Shares used in computing basic net income
(loss) per share ....................... 24,764 20,608 23,201 19,089
======== ======= ======== =======
Diluted net income (loss) per share...... $ (0.71) $ 0.01 $ (0.82) $ (0.02)
======== ======= ======== =======
Shares used in computing diluted net
income (loss) per share................. 24,764 26,707 23,201 19,089
======== ======= ======== =======
Proforma basic net income (loss) per
share................................... $ (0.66) $ 0.02 $ (0.72) $ (0.03)
======== ======= ======== =======
Shares used in computing proforma basic
net income (loss) per share............. 26,468 25,101 26,342 23,502
======== ======= ======== =======
Proforma diluted net income (loss) per
share................................... $ (0.66) $ 0.01 $ (0.72) $ (0.03)
======== ======= ======== =======
Shares used in computing proforma diluted
net income (loss) per share............. 26,468 26,707 26,342 23,502
======== ======= ======== =======
</TABLE>
See accompanying notes.
4
<PAGE>
BRIO TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-----------------
1999 1998
-------- -------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................... $(18,993) $ (470)
Adjustments to reconcile net loss to cash (used in)
provided by operating activities--
Depreciation and amortization............................ 1,408 382
Provision for returns and doubtful accounts.............. 759 192
Deferred compensation amortization....................... 97 70
Loss on disposal of property and equipment............... 768 17
Provision for loss on marketable securities.............. 346 --
Changes in operating assets and liabilities--
Accounts receivable.................................... (2,751) (1,487)
Inventories............................................ 114 34
Deferred income taxes.................................. (449) (231)
Prepaid expenses and other assets...................... (478) (38)
Accounts payable and accrued liabilities............... 15,702 1,200
Deferred revenue....................................... 2,665 3,714
-------- -------
Cash (used in) provided by operating activities...... (812) 3,383
-------- -------
Cash Flows from Investing Activities:
Purchases of short-term investments........................ (15,369) (5,317)
Sales of short-term investments............................ 8,472 --
Purchases of property and equipment........................ (2,463) (1,488)
-------- -------
Cash used in investing activities.................... (9,360) (6,805)
-------- -------
Cash Flows from Financing Activities:
Repayments of notes payable................................ (2,000) (3,337)
Repayments of notes payable to stockholder................. -- (368)
Proceeds from issuance of common stock, net................ 2,066 30,892
Proceeds from repayment of notes receivable from
stockholders.............................................. 998 --
Income tax benefit from exercise of options................ 251 --
-------- -------
Cash provided by financing activities................ 1,315 27,187
-------- -------
Net (decrease) increase in cash and cash equivalents....... (8,857) 23,765
Effect of exchange rate changes on cash.................... 88 (14)
Cash and cash equivalents, beginning of period............. 21,026 7,326
-------- -------
Cash and cash equivalents, end of period................... $ 12,257 $31,077
======== =======
</TABLE>
See accompanying notes.
5
<PAGE>
BRIO TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies.
Basis of Presentation
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. However, the Company
believes that the disclosures are adequate to make the information not
misleading. These condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and the notes
thereto included in the Company's annual report on Form 10-K for the fiscal
year ended March 31, 1999 and our definitive Proxy Statement on Schedule 14A
filed on July 14, 1999.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments)
that are, in the opinion of management, necessary to state fairly the results
for the periods presented. The results for such periods are not necessarily
indicative of the results to be expected for the full fiscal year.
The preparation of condensed consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the condensed consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition
The Company's revenues are derived from two sources, license fees and
services. Services include software maintenance and support, training and
system implementation consulting.
Revenue from license fees is recognized upon shipment of the software if
collection of the resulting receivable is probable, the fee is fixed or
determinable, and vendor-specific objective evidence exists to allocate the
total fee to all delivered and undelivered elements of the arrangement. Such
undelivered elements in these arrangements typically consist of services.
Allowances are established for potential product returns and credit losses. In
instances where payments are subject to extended payment terms, revenue is
deferred until the earlier of the date payments become due or the date payment
is received. If an acceptance period is required, revenue is recognized upon
the earlier of customer acceptance or the expiration of the acceptance period.
Maintenance revenue is recognized ratably over the term of the maintenance
contract. If maintenance is included in an arrangement which includes a
license agreement, amounts related to maintenance are unbundled from the
license fee based on vendor specific objective evidence. Consulting and
training revenue is recognized when the services are performed.
Cost of revenues consists primarily of third-party fees, related personnel
and overhead allocations, the cost of media, documentation, packaging and
shipping related to products sold.
Reclassifications
Certain reclassifications have been made to the prior year amounts to
conform with the current year presentation.
6
<PAGE>
Comprehensive Income (Loss)
A summary of comprehensive income (loss) follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, September 30,
-------------- ---------------
1999 1998 1999 1998
-------- ---- -------- -----
<S> <C> <C> <C> <C>
Net income (loss) applicable to common
stock....................................... $(17,472) $387 $(18,993) $(184)
Unrealized gain on short-term investments.... 174 4 225 4
Foreign currency translation adjustment...... 21 (129) 88 (166)
-------- ---- -------- -----
Comprehensive income (loss)................ $(17,277) $262 $(18,680) $(346)
======== ==== ======== =====
</TABLE>
Computation of Historical and Proforma Basic and Diluted Net Income (Loss)
Per Share
Basic net income (loss) per share is computed using the weighted average
number of shares of common stock outstanding. Diluted net income (loss) per
share information is computed using the weighted average number of shares of
common and potential common stock outstanding. For the three and six months
ended September 30, 1999 and for the six months ended September 30, 1998,
potential common shares from conversion of preferred stock, stock options and
warrants and contingently issuable shares have been excluded from the
calculation of diluted net loss per share as they are antidilutive. Potential
common shares of 2,931,000 for the three months ended September 30, 1999,
2,897,000 for the six months ended September 30, 1999 and 2,482,000 for the
six months ended September 30, 1998 were not included in the computation of
diluted loss per share because Brio incurred a loss in these periods and,
therefore, their effect would be antidilutive.
Proforma basic and diluted net income (loss) per share was computed assuming
inclusion of SQRIBE redeemable common stock and convertible preferred stock
assuming conversion to Brio common stock from the date of their issuance.
7
<PAGE>
Note 2. Acquisition of SQRIBE Technologies Corp.
In August 1999, Brio completed its merger with SQRIBE Technologies Corp., a
Delaware corporation (SQRIBE). SQRIBE develops, markets, licenses and supports
enterprise reporting software that enables organizations to improve the
quality and speed of decision making. Brio acquired all of the outstanding
shares of SQRIBE preferred and common stock in a tax-free, stock-for-stock
transaction for approximately 13.2 million shares of Brio common stock. The
acquisition was accounted for as a pooling-of-interests. In addition, Brio
assumed all outstanding stock options and warrants of SQRIBE. All prior period
condensed financial statements were restated, in accordance with required
pooling-of-interests accounting and disclosures. SQRIBE had a fiscal year that
ended on December 31 of each year. The combined financial results for the
periods ended September 30, 1998, include the results of SQRIBE for the three
and six month periods ended June 30, 1998. The results of operations for the
three months ended March 31, 1999, which reflected total revenues of $10.8
million, a net loss of $1.8 million and net loss applicable to common stock of
$3.6 million, are reflected as an adjustment to accumulated deficit in the
combined fiscal 1999 combined consolidated financial statements. For the three
months ended June 30, 1999, Brio's historical total revenues were $15.7
million and historical net income was $1.0 million. For the three months ended
June 30, 1999, SQRIBE's historical total revenues were $11.9 million and
historical net loss was $520,000. Reconciliation of the current condensed
consolidated financial statements with previously reported separate company
performance is presented below (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, September 30,
1998 1998
------------- -------------
<S> <C> <C>
Total revenues
Brio.............................................. $10,569 $19,914
SQRIBE............................................ 9,501 17,226
------- -------
Combined and restated............................... $20,070 37,140
======= =======
Net income (loss)
Brio.............................................. $ 23 $ (552)
SQRIBE............................................ 364 368
------- -------
Combined and restated............................... $387 $ (184)
======= =======
Net income (loss) applicable to common stock
Brio.............................................. $ 23 $ (552)
SQRIBE............................................ 364 82
------- -------
Combined and restated............................... $ 387 $ (470)
======= =======
</TABLE>
Note 3. Notes Payable.
At September 30, 1999, Brio had a $10,000,000 accounts receivable-based line
of credit agreement. Interest on borrowings under the accounts receivable line
accrues at the bank's prime rate (8.25% at September 30, 1999). At September
30, 1999, no amounts were outstanding under these arrangements. Borrowings
under the accounts receivable line of credit were limited to 80% of eligible
accounts receivable, in addition to up to $1.5 million in non-formula
availability. The line of credit is collateralized by substantially all of
Brio's assets, including Brio's intellectual property, accounts receivable and
property and equipment. This line of credit requires Brio to comply with
various financial covenants, including quarterly requirements to maintain a
minimum quick ratio, and minimum tangible net worth. Brio was not in
compliance with certain of these covenants at September 30, 1999. Brio
obtained a waiver from the bank in October 1999. The line expires on December
1, 1999.
Note 4. Litigation.
On January 20, 1997, Business Objects, S.A. filed a complaint against Brio
in the U.S. District Court for the Northern District of California in San
Jose, alleging that certain of Brio's products (including at least the
8
<PAGE>
BrioQuery Navigator, BrioQuery Explorer and BrioQuery Designer products)
infringe at least claims 1, 2 and 4 of U.S. Patent Number 5,555,403. On April
4, 1997, Brio filed an answer and affirmative defenses to the complaint,
denying certain of the allegations in the complaint and asserting a
counterclaim requesting declaratory relief that Brio is not infringing the
patent and that the patent is invalid and enforceable. In December 1997, venue
for the case was changed to Northern District of California in San Francisco,
California. On July 30, 1999, Brio filed an action against Business Objects,
S.A. in the U.S. District Court for the Northern District of California in San
Jose, alleging that certain of Business Objects, S.A. products infringe U.S.
Patent Number 5,915,257. On September 9, 1999, Brio and Business Objects, S.A.
executed a Memorandum of Understanding settling Business Object's pending
patent litigation against Brio involving patent number 5,555,403 pursuant to
which Brio agreed to pay to Business Objects, S.A. $10.0 million, payable
quarterly in $1.0 million payments over the next 10 quarters, with the first
payment due September 30, 1999. Settlement costs of $9.1 million, which
represent the net present value of the 10 quarterly payments, are included in
non-recurring operating expenses. The remaining $900,000 represents interest
and will be recognized over the payment term using the effective interest rate
method. As part of this settlement, Business Objects, S.A. dismissed its
pending lawsuit against Brio involving patent number 5,555,403 and Brio
dismissed its pending lawsuit against Business Objects, S.A. involving patent
number 5,915,257.
Note 5. Non-recurring Operating Expenses.
Non-recurring operating expenses in the three and six months ended September
30, 1999 are comprised of merger and restructuring costs related to the SQRIBE
acquisition and the settlement of Brio's ongoing patent litigation with
Business Objects, S.A. as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
------- ----- ------- -----
<S> <C> <C> <C> <C>
Merger and restructuring costs.................. $11,105 $ -- $12,264 $ --
Settlement costs (see Note 4)................... 9,137 -- 9,137 --
------- ----- ------- -----
Total non-recurring costs..................... $20,242 $ -- $21,401 $ --
======= ===== ======= =====
</TABLE>
Brio's merger with SQRIBE Technologies, Corp., was completed on August 3,
1999. For the three months ended September 30, 1999, merger and restructuring
costs of $11.1 million consisted of $7.2 million in transaction and related
professional fees, $107,000 in severance costs to terminate employees, $1.3
million in merger integration expenses, $387,000 in consolidation of
facilities, $697,000 in equipment retirements and $1.4 million in other
miscellaneous merger-related expenses. All termination notices and benefits
were communicated to the affected employees prior to quarter end and
substantially all of the merger-related expenses were incurred prior to period
end. Brio expects that substantially all of the merger related charges for the
quarter ended September 30, 1999, will be paid by December 1999. Brio also
expects to incur additional merger related restructuring costs during the
quarter ending December 31, 1999.
On September 9, 1999 and Business Objects, S.A. announced the settlement of
a patent infringement action, pending in the U.S. District Court for the
Northern District of California in San Jose, pursuant to which Brio agreed to
pay to Business Objects, S.A. $10.0 million, payable quarterly in $1.0 million
payments over the next 10 quarters, with the first payment due September 30,
1999. Settlement costs of $9.1 million, which represent the net present value
of the quarterly payments, are included in non-recurring operating expenses.
The remaining $900,000 represents interest and will be recognized over the
payment term using the effective interest rate method.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto, and with the audited financial
statements and notes thereto of the Company for the fiscal year
9
<PAGE>
ended March 31, 1999 included in the Company's Form 10-K and our definitive
Proxy Statement on Schedule 14A filed July 14, 1999 and the other information
included elsewhere in this Report. Certain statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" are
forward-looking statements. The forward-looking statements contained herein
are based on current expectations and entail various risks and uncertainties
that could cause actual results to differ materially from those expressed in
such forward-looking statements. For a more detailed discussion of these and
other business risks, see "Factors That May Affect Future Operating Results"
below.
Overview
Brio designs, develops, markets and supports enterprise business
intelligence software, which is software that enables organizations to
maximize the value of their corporate information through intuitive,
interactive data access and analysis. Brio had net losses of $8.6 million in
fiscal 1997, $15.7 million in fiscal 1998 and $753,000 in fiscal 1999. Brio
had an accumulated deficit of approximately $56.5 million as of September 30,
1999. See "Factors That May Affect Future Operating Results" for a description
of the risks related to Brio's operating results fluctuating in future
periods.
In August 1999, Brio completed its merger with SQRIBE Technologies Corp., a
Delaware corporation (SQRIBE). SQRIBE develops, markets, licenses and supports
enterprise reporting software that enables organizations to improve the
quality and speed of decision-making. Brio acquired all of the outstanding
shares of SQRIBE preferred and common stock in a tax-free, stock-for-stock
transaction for approximately 13.2 million shares of Brio common stock. The
acquisition was accounted for as a pooling-of-interests. In addition, Brio
assumed all outstanding stock options and warrants of SQRIBE. All prior period
condensed financial statements have been restated, in accordance with required
pooling-of-interest accounting and disclosures.
Brio's revenues consist of license fees for software products and fees for
services, including software maintenance and support, training and system
implementation consulting. Revenues in current periods are generally
attributable to the sale of the most recent version of Brio's products. Brio
generally discontinues marketing older product versions when a new product
version is introduced. The products are typically licensed on a per user basis
with the price per user varying based on the selection of products licensed.
Additionally, Brio also sells larger enterprise-wide implementations of their
products through site licenses with the price per site varying based on the
selection of
. products licensed;
. the number of authorized users for each product at each site; and
. the number of licensed sites.
Revenues from license fees are recognized upon shipment of the software if:
. collection of the resulting receivable is probable;
. the fee is fixed or determinable; and
. vendor-specific objective evidence exists to allocate the total fee to
all delivered and undelivered elements of the arrangement. If vendor-
specific objective evidence does not exist to allocate the total fee to
all delivered and undelivered elements of the arrangement, revenue is
deferred until such evidence does exist, or until all elements are
delivered, whichever is earlier.
If payments are subject to extended payment terms and are not deemed fixed
or determinable, Brio defers revenue until payments become due. If an
acceptance period is required, Brio recognizes revenue upon the earlier of
customer acceptance or the expiration of the acceptance period. Brio
establishes allowances for potential product returns and credit losses, which
have been insignificant to date. Brio charges fees for services separately
from license fees. Brio recognizes revenues from maintenance and support
services, including ongoing product
10
<PAGE>
support and periodic product updates, ratably over the term of each contract,
which is typically twelve months. Payments for maintenance and support
services are generally made in advance and are non-refundable. Brio recognizes
revenues from training and consulting services when the services are
performed.
To date, Brio has derived revenues from license fees principally from direct
sales of software products to end users through Brio's direct sales force.
Although Brio believes that such direct sales will continue to account for a
significant portion of revenues from license fees in the foreseeable future,
Brio has recently developed and intends to continue to develop reselling
relationships with value added resellers, resellers and distributors. Brio
expects that revenues from sales through value added resellers, resellers and
distributors will increase in the future as a percentage of revenues from
license fees. Revenues from value added resellers, resellers and distributors
were 21% of total revenues for fiscal 1997, 24% of total revenues for fiscal
1998 and 21% of total revenues for fiscal 1999. Brio's ability to achieve
revenue growth and improved operating margins, as well as increased worldwide
sales, in the future will depend in large part upon its success in expanding
and maintaining relationships with value added resellers, resellers and
distributors. See "Factors That May Affect Future Operating Results" for a
description of the risks related to Brio's sales strategy.
Brio is also increasing its efforts to sell customers licenses to larger,
enterprise-wide implementations of Brio's products, rather than departmental
or local network sales, which may increase the complexity and length of the
sales cycle. Brio has in the past and may in the future choose to grant
greater pricing and other concessions, such as discounted training and
consulting, for sales of site licenses. See "Factors That May Affect Future
Operating Results" for a description of the risks related to the sales cycle
of Brio's products.
Brio has, to date, sold its products internationally through direct sales
offices in the United Kingdom, France, Germany and Australia, and indirectly
through established distribution relationships in more than 20 countries,
including Belgium, Italy, Japan, The Netherlands and South Africa. Brio's
direct sales offices in the United Kingdom and Australia were formed through
the acquisition of distributors in those countries. Sales to customers outside
of the United States and Canada, including sales generated by Brio's foreign
subsidiaries, represented 11% of total revenues for fiscal 1997, 17% of total
revenues for fiscal 1998 and 18% of total revenues for fiscal 1999. A
substantial portion of Brio's international sales in the past have been
denominated and collected in foreign currencies and Brio believes that a
portion of Brio's cost of revenues and operating expenses will continue to be
incurred in foreign currencies. To date, there have been no material effects
of changes in foreign currency exchange rates on revenues or operating
expenses. During fiscal 1999, Brio incurred foreign currency transaction
losses of $13,000 resulting from intercompany receivables from its foreign
subsidiaries. Although it is impossible to predict future exchange rate
movements between the U.S. dollar and other currencies, to the extent the U.S.
dollar strengthens or weakens against other currencies, a substantial portion
of Brio'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 Brio has not historically undertaken foreign
exchange hedging transactions to cover its potential foreign currency
exposure, it may do so in the future. See "Factors That May Affect Future
Operating Results" for a description of the risks related to Brio's
international sales strategy.
Although Brio has experienced significant quarter-to-quarter revenue growth
in fiscal 1999, 1998 and 1997, the same rate of sequential quarterly revenue
growth may not be sustainable and profitability may not be attained in the
future. Brio currently intends to commit substantial financial resources to
. research and development,
. customer support,
. sales and marketing, including the expansion of its direct sales force,
third-party partnering relationships and its indirect channel sales
organization,
. increased staffing and systems infrastructure to support Brio's
expanding operations, and
. merger-related expenses and integration costs associated with the
recently completed merger with Sqribe.
As a result, Brio expects that its operating expenses will increase
significantly in fiscal 2000.
11
<PAGE>
Results of Operations
The following table includes consolidated statements of operations data as a
percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, September 30,
-------------- -------------
1999 1998 1999 1998
------- ------- ------ ------
<S> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenues:
License fees.................... 69 % 67 % 68 % 67 %
Services........................ 31 33 32 33
------- ------- ------ ------
Total revenues................ 100 100 100 100
Cost of revenues:
License fees.................... 3 3 3 3
Services........................ 12 12 13 11
------- ------- ------ ------
Total cost of revenues........ 15 15 16 14
------- ------- ------ ------
Gross profit...................... 85 85 84 86
------- ------- ------ ------
Operating expenses:
Research and development........ 16 15 16 16
Sales and marketing............. 48 58 51 59
General and administrative...... 13 11 12 13
Non-recurring operating
expenses....................... 66 -- 37 --
------- ------- ------ ------
Total operating expenses...... 143 84 116 88
------- ------- ------ ------
Income (loss) from operations..... (58) 1 (32) (2)
Interest and other income, net.... 1 2 -- 2
------- ------- ------ ------
Net income (loss) before income
taxes............................ (57) 3 (32) --
------- ------- ------ ------
Income taxes...................... -- 1 1 --
------- ------- ------ ------
Net income (loss)................. (57) 2 (33) --
------- ------- ------ ------
Increase in redemption value of
redeemable common stock.......... -- -- -- (1)
------- ------- ------ ------
Net income (loss) applicable to
common stock..................... (57)% 2 % (33)% (1)%
======= ======= ====== ======
</TABLE>
Revenues
Brio derives revenues from license fees and services, which include software
maintenance and support, training and system implementation consulting. Total
revenues increased 53% from $20.1 million for the three months ended September
30, 1998 to $30.7 million for the three months ended September 30, 1999. Total
revenues also increased by 57% from $37.1 million for the six months ended
September 30, 1998 to $58.2 million for the six months ended September 30,
1999. The increases were primarily due to increased license revenue and
related maintenance and support revenue.
Revenues by geographic location were as follows for the three and six months
ended September 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended September Ended September
30, 30,
--------------- ---------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues by Geography:
Domestic..................................... $25,003 $16,139 $46,809 $30,454
International................................ 5,653 3,931 11,426 6,686
------- ------- ------- -------
Total revenues............................. $30,656 $20,070 $58,235 $37,140
======= ======= ======= =======
</TABLE>
12
<PAGE>
Revenue from international sources increased by 44% from $3.9 million for
the three months ended September 30, 1998 to $5.7 million for the three months
ended September 30, 1999. Revenues from international sources also increased
by 71% from $6.7 million for the six months ended September 30, 1998 to $11.4
million for the six months ended September 30, 1999. The increases were
primarily due to increased license revenues.
License Fees. Revenues from license fees increased by 58% from $13.4 million
for the three months ended September 30, 1998 to $21.2 million for the three
months ended September 30, 1999. Approximately $2.6 million of the increase
was due to sales to new customers and approximately $5.2 million of the
increase was due to increased follow-on sales to existing customers. Revenues
from license fees also increased by 58% from $25.0 million for the six months
ended September 30, 1999 to $39.5 million for the six months ended September
30, 1998. Approximately $5.2 million of the increase was due to sales to new
customers and approximately $9.3 million of the increase was due to increased
follow-on sales to existing customers.
Services. Service revenues increased by 43% from $6.6 million for the three
months ended September 30, 1998 to $9.5 million for the three months ended
September 30, 1999. Approximately $2.4 million of the increase was due to an
increase in maintenance and support revenues and approximately $500,000 of the
increase was due to an increase in training and consulting revenues related to
increases in Brio's installed customer base. Service revenues also increased
by 55% from $12.1 million for the six months ended September 30, 1998 to $18.8
million for the six months ended September 30, 1999. Approximately $4.9
million of the increase was due to increases in maintenance and support
revenue and approximately $1.8 million of the increase was due to increased
training and consulting services revenues, related to increases in the
Company's installed customer base.
Cost of Revenues
License Fees. Cost of revenues from license fees consists primarily of
product packaging, shipping, media, documentation, and related personnel and
overhead allocations. Cost of revenues from license fees increased by 38% from
$599,000 for the three months ended September 30, 1998 to $826,000 for the
three months ended September 30, 1999. Cost of revenues from license fees also
increased by 46% from $1.0 million for the six months ended September 30, 1998
to $1.5 million for the six months ended September 30, 1999. The increase in
absolute dollars was due to the increase in the number of licenses sold. The
decrease as a percentage of total revenues was primarily due to an increase in
the number of customers purchasing master disks, which are less expensive to
produce and ship, as compared to "shrinkwrapped" product, and economies of
scale associated with absorbing fixed costs over a larger revenue base. Cost
of revenues from license fees may vary between periods due to the mix of
customers purchasing master disks relative to customers purchasing
"shrinkwrapped" product.
Services. Cost of revenues from services consists primarily of personnel
costs and third-party consulting fees associated with providing software
maintenance and support, training and consulting services. Cost of revenues
from services increased by 56% from $2.5 million for the three months ended
September 30, 1998 to $3.8 million for the three months ended September 30,
1999. Approximately $1.0 million was due to increases in personnel and related
costs resulting from Brio's expansion in support services in response to
increased demand for maintenance and support, training and consulting
services. Approximately $300,000 was due to increases in the use of outside
consultants for training and consulting services. Cost of service revenues
also increased by 85% from $4.2 million, for the six months ended September
30, 1998 to $7.8 million by for the six months ended September 30, 1999.
Approximately $2.7 million in absolute dollars was due to increases in
personnel and related costs resulting from the Company's expansion of its
support services. Approximately $900,000 of the increase was due to increases
in the use of outside consultants for training and consulting services and for
level one technical support services. The increases as a percentage of service
revenues were primarily due to the increased use of outside consultants, which
are generally more expensive than Company personnel. Cost of revenues from
services may vary between periods due to the mix of services provided by
Brio's personnel relative to services provided by outside consultants and to
varying levels of expenditures required to build the services organization.
13
<PAGE>
Operating Expenses
Research and Development. Research and development expenses consist
primarily of personnel and related costs associated with the development of
new products, the enhancement and localization of existing products, quality
assurance and testing. Research and development expenses increased by 59% from
$3.1 million for the three months ended September 30, 1998 to $4.9 million for
the three months ended September 30, 1999. Research and development expenses
also increased by 60% from $5.9 million for the six months ended September 30,
1998 to $9.5 million for the six months ended September 30, 1999. The
increases were primarily due to increased personnel and related costs required
to develop new products and enhance existing products. Brio believes that
significant investment for research and development is essential to product
and technical leadership and anticipates that it will continue to commit
substantial resources to research and development in the future. Brio
anticipates that research and development expenditures will continue to
increase in absolute dollars, although such expenses may vary as a percentage
of total revenues.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and other personnel related costs, commissions, bonuses and sales
incentives, travel, marketing programs such as trade shows and seminars, and
promotion costs. Sales and marketing expenses increased by 29% from $11.6
million for the three months ended September 30, 1998 to $14.9 million for the
three months ended September 30, 1999. Approximately $1.5 million of the
increase was attributable to the costs associated with the expansion of Brio's
worldwide sales organization and approximately $1.1 million of the increase
was attributable to higher sales commissions, bonuses and sales incentives
associated with increased revenues. Approximately $700,000 of the increase was
attributable to increased domestic and international marketing expenses,
including marketing activities, personnel and related costs. Sales and
marketing expenses also increased by 35% from $22.0 million for the six months
ended September 30, 1998 to $29.7 million for the six months ended September
30, 1999. Approximately $5.1 million of the increase was attributable to the
costs associated with the expansion of Brio's sales organization, including
the addition of field and telesales personnel and related costs, domestically
and internationally. Approximately $1.6 million of the increase was
attributable to higher sales commissions, bonuses and sales incentives
associated with increased revenues, and approximately $1.0 million of the
increase was attributable to increased domestic and international marketing
expenses, including marketing activities, personnel and related costs. The
decrease as a percentage of total revenues was generally attributable to
increases in revenues for the periods. Brio believes that as it continues to
expand its direct sales and pre-sales support organization and its third-party
partnering relationships and its indirect channel sales organization on a
worldwide basis, sales and marketing expenses will continue to increase in
absolute dollars. These expenses are currently intended to be funded by Brio's
working capital. In particular, Brio expects that sales compensation, travel
and related expenses will increase significantly as Brio continues to increase
the number of its direct sales personnel and its emphasis on direct field
sales efforts. Nonetheless, Brio expects sales and marketing expenses will
continue to vary as a percentage of total revenues.
General and Administrative. General and administrative expenses consist
primarily of personnel costs for finance, human resources, information
systems, and general management, as well as legal, accounting and unallocated
overhead expenses. General and administrative expenses increased by 70% from
$2.3 million for the three months ended September 30, 1998 to $3.9 million for
the three months ended September 30, 1999. Approximately $1.4 million of the
increase was attributable to legal fees related to the Business Objects, S.A.
litigation and increased professional fees necessary to manage and support
Brio's growth and facilities expansion and approximately $200,000 of the
increase was attributable to increased personnel and related costs. General
and administrative expenses also increased by 53% from $4.7 million for the
six months ended September 30, 1998 to $7.1 million for the six months ended
September 30, 1999. Approximately $1.8 million of the increase was
attributable to legal fees related to the Business Objects, S.A. litigation
and increased professional fees necessary to manage and support Brio's growth
and facilities expansion and approximately $600,000 of the increase was
attributable to increased personnel related cost. The decrease in general and
administrative expenses as a percentage of total revenues is primarily
attributable to increased efficiencies in Brio's administrative operations and
increased revenues. Brio expects that its general and administrative expenses
will increase in
14
<PAGE>
absolute dollars as Brio expands its staffing to support expanded operations
and continues its responsibilities as a public company. Brio expects that such
expenses will continue to vary as a percentage of total revenues.
Non-recurring Operating Expenses. Non-recurring operating expenses in the
three and six months ended September 30, 1999 are comprised of merger and
restructuring costs related to the SQRIBE Technologies, Corp. acquisition and
the settlement of Brio's ongoing patent litigation with Business Objects, S.A.
as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
------- ----- ------- -----
<S> <C> <C> <C> <C>
Merger and restructuring costs.................. $11,105 $ -- $12,264 $ --
Settlement costs................................ 9,137 -- 9,137 --
------- ----- ------- -----
Total non-recurring costs..................... $20,242 $ -- $21,401 $ --
======= ===== ======= =====
</TABLE>
Brio's merger with SQRIBE Technologies, Corp., was completed on August 3,
1999. For the three months ended September 30, 1999, merger and restructuring
costs of $11.1 million consisted of $7.2 million in transaction and related
professional fees, $107,000 in severance costs to terminate employees, $1.3
million in merger integration expenses, $387,000 in consolidation of
facilities, $697,000 in equipment retirements and $1.4 million in other
miscellaneous merger-related expenses. All termination notices and benefits
were communicated to the affected employees prior to quarter end and
substantially all of the merger-related expenses were incurred prior to period
end. Brio expects that substantially all of the merger related charges for the
quarter ended September 30, 1999 will be paid by December 1999. Brio also
expects to incur additional merger related restructuring costs during the
quarter ending December 31, 1999.
On September 9, 1999 Brio and Business Objects, S.A. announced the
settlement of a patent infringement action, pending in the U.S. District Court
for the Northern District of California in San Jose, pursuant to which Brio
agreed to pay to Business Objects, S.A. $10.0 million, payable quarterly in
$1.0 million payments over the next 10 quarters, with the first payment due
September 30, 1999. Settlement costs of $9.1 million, which represent the net
present value of the quarterly payments, are included in non-recurring
operating expenses. The remaining $900,000 represents interest and will be
recognized over the payment term using the effective interest rate method.
Deferred Compensation. In connection with the granting of 1,369,368 stock
options to employees during fiscal 1998, with a weighted average exercise
price of $1.49 per share and a weighted average deemed fair market value of
$1.91 per share, Brio recorded deferred compensation of $580,000, representing
the difference between the deemed value of the common stock for accounting
purposes and the option exercise price of such options at the date of grant.
In addition, Brio granted 67,419 stock options to employees during fiscal
1999, at a weighted average exercise price of $1.56 per share, with a weighted
average deemed fair market value of $4.27 per share. Brio recorded deferred
compensation of $250,500 representing the difference between the deemed value
of the common stock for accounting purposes and the option exercise price of
such options at the date of grant. Such amounts are presented as a reduction
of stockholders' equity and amortized ratably over the vesting period of the
applicable options. Approximately $35,000 was expensed during the three months
ended September 30, 1998,
15
<PAGE>
approximately $70,000 was expensed during the six months ended September 30,
1998, approximately $69,000 was expensed during the three months ended
September 30, 1999, approximately $97,000 was expensed during the six months
ended September 30, 1999 and the balance will be expensed ratably over the
next three years as the options vest.
Interest and Other Income, Net
Interest and other income, net, is comprised primarily of interest income
and foreign currency transaction gains or losses, and realized gains or losses
from the sale of investments, net of interest expense. Interest expense is
comprised of interest incurred on Brio's bank line of credit. Interest and
other income, net, decreased from $441,000 for the three months ended
September 30, 1998 to $407,000 for the three months ended September 30, 1999.
Interest and other net income also decreased from $640,000 for the six months
ended September 30, 1998 to $179,000 for the six months ended September 30,
1999. The decrease in interest and other income, net, for the six months ended
September 30, 1999, is attributable to a loss provision recorded for a
permanent impairment on a marketable security owned by Brio in the amount of
$346,000, which was recorded in the three month period ended June 30, 1999.
Income Taxes
Brio did not record a tax provision in the second quarter of fiscal 2000.
The decrease in the effective tax rate over the second quarter of fiscal 1999
relates primarily to the net loss incurred in the second quarter of fiscal
2000, as well as the utilization of Federal and state net operating loss carry
forwards in fiscal 1999.
Liquidity and Capital Resources
As of September 30, 1999, Brio had cash, cash equivalents and short-term
investments of $33.5 million. In addition, Brio maintains a bank line of
credit which provides for up to $10.0 million in borrowings, with interest at
the bank's prime rate. Brio can borrow up to 80% of eligible accounts
receivable against this line, with an additional $1.5 million in non-formula
availability. Borrowings are secured by substantially all of Brio's assets,
including Brio's copyrights and trademarks to the extent required to secure
the Bank's interest in the accounts receivables. The line of credit requires
Brio to comply with various financial covenants, including quarterly
requirements to maintain a minimum quick ratio of 2.0:1.0 and a minimum
tangible net worth covenant. The line expires on December 1, 1999, when any
amounts outstanding thereunder would be due and payable. As of September 30,
1999, there were no outstanding bank borrowings. Brio was not in compliance
with certain of these covenants at September 30, 1999. Brio obtained a waiver
from the bank in October 1999.
Net cash provided by operating activities was $3.4 million for the six
months ended September 30, 1998 and net cash used in operating activities was
$812,000 for the six months ended September 30, 1999. The decrease of $4.2
million was due to changes in operating assets and liabilities of
approximately $22.7 million, offset by increases in net losses of
approximately $18.5 million.
Net cash used in investing activities was $6.8 million for the six months
ended September 30, 1998, consisting primarily of $5.3 million for the
purchase of short-term investments and $1.5 million for purchases of property
and equipment. Net cash used in investing activities was $9.4 million for the
six months ended September 30, 1999, consisting primarily of $6.9 million for
the purchase of short-term investments, net, and approximately $2.5 million
for the purchase of property and equipment.
Net cash provided by financing activities was $27.2 million for the six
months ended September 30, 1998, consisting primarily of the net proceeds from
Brio's initial public offering and $1.3 million for the six months ended
September 30, 1999, consisting primarily of proceeds from the issuance of
common stock to employees under various incentive stock plans and proceeds
from the repayment of notes receivable from stockholders, net of repayments of
notes payable.
16
<PAGE>
Year 2000 Readiness
Background. Computer systems have traditionally used a two-digit field to
designate a year. This format will not recognize the century date change that
will take place at the end of 1999. Such systems will recognize the year 2000
as 1900, not at all, or some year other than 2000. The inability to recognize
the proper date can and will cause systems to process information incorrectly,
resulting in system failures or other serious business problems.
Risks. Although Brio has been committed to ensuring all our systems are year
2000 compliant prior to December 1999, we may experience some operational
interruptions due to the year 2000 problem. We may also experience operational
difficulties caused by undetected errors or defects in the technology we use
in our internal systems. Brio's year 2000 readiness team has developed and is
implementing a four phase approach in order to prepare the organization for
any interruption which may occur on the advent of the year 2000.
Assessment Plan. Brio's year 2000 readiness team developed a plan which
consisted of four phases.
. In phase one, Brio identified and contacted the vendors of all of Brio's
internal information systems and non-informational technology systems to
determine whether these systems could potentially present a year 2000
problem. Brio requires that all vendors who provide material hardware or
software for Brio's information technology systems, or upgrades or
replacements of those products, provide assurances of their year 2000
compliance. Brio completed phase one in December 1998.
. In phase two, Brio will identify mission critical technology systems and
proceed to test these systems for their year 2000 compliance. Testing
will include automated polling of networked client and server computers,
compilation of relevant data regarding the software used by Brio, and a
manual review of the compiled data to locate systems which may be
vulnerable to year 2000 problems. This phase will also include the
establishment of replica systems for critical software and hardware
systems, rolling forward the replica date to December 31, 1999, allowing
the system to roll over into the year 2000 and observing the results.
End users and Brio's year 2000 readiness team will then conduct
simulations, and verify and evaluate compliance and test integrated
systems for potential failure which might occur. Phase two is scheduled
to be completed in November 1999.
. In phase three, Brio's year 2000 readiness team, working with end users
and management, will develop contingency plans for mission-critical
technology systems. Phase three is scheduled to be completed in December
1999.
. In phase four, Brio's year 2000 readiness team, information technology
department staff and end users will perform tests and evaluate readiness
of mission critical technology systems on December 31, 1999. In order to
circumvent system failures resulting from any unanticipated year 2000
failures, all mission critical technology systems must be judged ready
for the start of the next business day or the steps outlined in Brio's
contingency plans will be initiated.
Cost. Brio anticipates that the total cost of the year 2000 program,
including the cost of material upgrades, purchase of replica servers, software
modifications and related consulting fees, will be approximately $150,000.
Contingency Plans. Brio has not yet finalized any contingency plans as a
result of its year 2000 readiness program, but will prepare contingency plans
upon the conclusion of its assessment of the results of our year 2000
simulation testing and third-party vendor and service provider responses.
17
<PAGE>
Factors That May Affect Future Operating Results
We desire to take advantage of the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and of Section 21B and Rule 3b-6
under the Securities Exchange Act of 1934. Specifically, we wish to alert
readers that the following important factors, as well as other factors
including, without limitation, those described elsewhere in reports we have
filed with the SEC and incorporated into this quarterly report on Form 10-Q by
reference, could in the future affect, and in the past have affected, our
actual results and could cause our results for future periods to differ
materially from those expressed in any forward-looking statements made by or
on behalf of us. We assume no obligation to update these forward-looking
statements.
Because our plans to achieve profitability in the future require us to grow
our work force, improve our infrastructure and acquire and develop new
technologies, failure to successfully do so could lower our operating results
and cause our stock price to decrease. If we cannot execute our growth
strategy, our stock price could decrease. Successfully achieving our growth
strategy depends upon the combined company's ability to:
. expand, train and manage our work force;
. continue to attract, retain and motivate qualified personnel; and
. develop or acquire new businesses, products and technologies.
In addition, if we cannot manage an expanding work force, improve our
reporting systems and customer service infrastructure and manage the
integration of acquired businesses, products or technologies, we will be
unable to continue manage the growth of our operations, which could harm our
business and financial results.
Brio has a history of net losses, and may not be profitable in the
future. Brio has a history of net losses, and cannot provide any assurance
that we will experience revenue growth or profitability on a quarterly or
annual basis in the future. In particular, Brio incurred net losses of $8.6
million in fiscal 1997, $15.7 million in fiscal 1998 and $753,000 in fiscal
1999. As of September 30, 1999, Brio had stockholders' equity of approximately
$14.3 million.
Brio anticipates increased operating expenses and a reduced rate of revenue
growth in the future. Brio currently expects to increase its expenses, and our
operating results will be harmed if increased revenues do not accompany these
increased expenses. Brio does not expect to sustain in future periods the same
rate of sequential quarterly revenue growth it has experienced in the past. In
addition, Brio will likely increase its operating expenses significantly in
fiscal 2001. Brio currently intends to commit substantial financial resources
to research and development, customer support and sales and marketing,
including the continued expansion of its domestic and international direct
sales force, third-party partnering relationships and Brio's domestic and
international indirect channel sales organization. Brio also expects to
increase staffing and systems infrastructure in order to support expanding
operations.
Our prospects for increased future revenues must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in rapidly evolving
markets. To address these risks, the combined company must:
. successfully increase the scope of its operations;
. respond to competitive developments;
. continue to attract, retain and motivate qualified personnel; and
. continue to commercialize products incorporating advanced technologies.
Brio may not be able to achieve these goals.
If Brio and SQRIBE do not effectively integrate their technologies,
operations and personnel, the combined company will not realize the expected
financial and marketing benefits of the merger. Brio expects the merger
18
<PAGE>
to result in improved cross-selling opportunities, an increased market
presence and an enhanced product line. To achieve these benefits, Brio must
effectively integrate technologies, operations and personnel in a timely and
efficient manner. If this cannot be done, the combined company may not realize
the expected benefits from the merger. In particular, if the integration is
not successful:
. the combined company may lose personnel;
. the combined company may not be able to retain SQRIBE's customer base to
the extent expected; and
. the process of integrating operations could cause an interruption of the
combined company's ongoing business activities.
Any of these factors could hurt the combined company's operating results. In
addition, the attention and effort devoted to the integration of the two
companies will significantly divert management's attention from other
important issues, which could harm the combined company's business, results of
operations or financial condition.
Brio's quarterly operating results will likely fluctuate based on factors
beyond our control. Brio has experienced and expects to continue to experience
significant fluctuations in quarterly operating results based on a number of
factors, many of which are not within its control. Among other things, Brio's
operating results have fluctuated in the past due to:
. the timing of product enhancements and new product announcements;
. the lengthy sales cycle of its products;
. market acceptance of and demand for its products;
. capital spending patterns of its customers;
. customer order deferrals in anticipation of enhancements or new
products;
. its ability to attract and retain key personnel;
. the mix of domestic and international sales;
. the mix of license and service revenues;
. personnel changes; and
. changes in the timing and level of operating expenses.
In addition, the announcement or introduction of new products by Brio or its
competitors or any change in industry standards may cause customers to defer
or cancel purchases of existing products. Furthermore, the introduction of
products with reliability, quality or compatibility problems could result in
reduced orders, delays in collecting accounts receivable and additional
service costs. Accordingly, Brio's results of operations may also fluctuate in
the future due to a number of additional factors, including but not limited to
those discussed above, as well as:
. the number and significance of product enhancements and new product
announcements by competitors;
. changes in customer buying patterns related to the year 2000 issue;
. changes in pricing policies by Brio and its competitors;
. Brio's ability to develop, introduce and market new and enhanced
versions of its products on a timely basis;
. customer order deferrals in anticipation of enhancements or new products
offered by competitors;
. nonrenewal of service agreements, software defects and other product
quality problems;
. the mix of direct and indirect sales;
19
<PAGE>
. currency fluctuations; and
. general economic conditions.
Due to these factors, quarterly revenue and operating results are difficult
to forecast and may not meet expectations.
Seasonality may affect Brio's results. Brio has experienced seasonality due
to customer capital spending patterns and the general summer slowdown in
sales. Brio expects to continue to experience seasonality as a result of these
factors. This seasonality could materially hurt results of operations,
particularly for the quarters ending June 30 or September 30.
If Brio's operating results do not meeting financial analysts' expectations,
our stock price may decline. In the future, our reported or anticipated
operating results may fail to meet or exceed the expectations of securities
analysts or investors. In that event, Brio's common stock price could be
materially reduced.
Because Brio depends on a direct sales force, any failure by Brio to attract
and retain adequate sales personnel could slow its sales and increase its
expenses, causing significant financial and operational risks. Brio may not be
able to attract and retain adequate sales personnel, despite the expenditure
of significant resources to do so, and the failure to do so could materially
harm its ability to sell its products at expected levels. Because turnover
tends to slow sales efforts until replacement personnel can be recruited and
trained, failure to retain sales personnel could seriously hamper its
business, operating results and financial condition. Competition for personnel
with a sufficient level of expertise and experience for direct sales positions
is intense, particularly among competitors who may have substantially greater
resources than the combined company or greater resources dedicated to hiring
direct sales personnel. In addition, Brio has experienced significant turnover
of its sales force.
Brio's success depends on key personnel who may not continue to work for
it. The loss of the services of any of the key personnel or the inability to
attract or retain qualified personnel in the future could harm Brio's
business, operating results and financial condition. The success of Brio will
depend to a significant degree upon the continued contributions of key
management, engineering, sales and marketing personnel, many of whom would be
difficult to retain or replace if they leave Brio. Because competition for
qualified personnel is intense, Brio may not be successful in attracting and
retaining the personnel it seeks.
Brio has recently experienced difficulties in hiring highly qualified sales
and engineering personnel, and may continue to have difficulty in attracting
employees in those categories. Brio has employment contracts with only three
members of its executive management personnel. Brio currently maintains "key
person" life insurance only on Yorgen Edholm, its President and Chief
Executive Officer, and Katherine Glassey, its Executive Vice President,
Products and Services and Chief Technology Officer. Brio does not believe its
current insurance would adequately compensate it for the loss of either Mr.
Edholm or Ms. Glassey.
Because the sales cycle for Brio's products is long, the timing of sales is
difficult to predict and Brio's quarterly revenues and earnings may fluctuate
significantly. Based in part on the lengthy sales cycle for Brio's products,
quarterly revenues and operating results could vary significantly in the
future. The sales cycle associated with the purchase of Brio's products is
typically three to nine months in length and subject to a number of
significant risks over which Brio has little or no control, including
customers' budgeting constraints and internal acceptance review procedures.
Sales transactions may be delayed during the customer acceptance process
because Brio must provide a significant level of education to prospective
customers regarding the use and benefits of its products. Further, to the
extent that potential customers divert resources and attention to issues
associated with the year 2000 issue, Brio's sales cycle could be further
lengthened. Additionally, the sales cycle for Brio's products in international
markets has historically been, and is expected to continue to be, longer than
the sales cycle in the United States and Canada. Accordingly, if Brio's
international operations expand, the average sales cycle for its products is
expected to lengthen. In addition, Brio anticipates that an increasing portion
20
<PAGE>
of its revenue could be derived from larger orders, in which case the timing
of receipt and fulfillment of those orders could cause material fluctuations
in operating results, particularly on a quarterly basis.
Because Brio expects to achieve revenue growth and increased margins through
indirect sales channels, Brio's failure to develop and manage indirect sales
channels could limit its sales growth and financial performance. Brio may not
be able to continue to attract and retain additional indirect channel partners
that will be able to market its products effectively and provide timely and
cost-effective customer support and services. Brio may not be able to manage
conflicts within its indirect channel or that its focus on increasing sales
through the indirect channels will not divert management resources and
attention from direct sales. In addition, Brio's agreements with indirect
channel partners do not restrict the channel partners from distributing
competing products, and in many cases may be terminated by either party
without cause. The ability of Brio to achieve revenue growth and improved
operating margins on product sales in the future will depend in large part
upon its success in expanding and maintaining indirect channels worldwide.
Indirect channels include value added resellers, resellers and distributors.
To date, Brio has sold its products principally through its direct sales and
service organizations and, to a lesser extent, through the indirect channel.
Revenues from Brio's indirect channel were 21% of total revenues for fiscal
1997, 24% of total revenues for fiscal 1998 and 21% for fiscal 1999.
Brio's strategy of acquiring new businesses and technologies involves
integration and transaction completion risks. As part of our business
strategy, we expect to enter into business combinations and acquisitions.
Acquisition transactions are accompanied by a number of risks, including:
. the difficulty of assimilating the operations and personnel of the
acquired companies;
. the potential disruption of our ongoing business and distraction of
management;
. the difficulty of incorporating acquired technology or content and
rights into our products;
. the correct assessment of the relative percentages of in-process
research and development expense which can be immediately written off as
compared to the amount which must be amortized over the appropriate life
of the asset;
. the failure to successfully develop an acquired in-process technology
could result in the impairment of amounts currently capitalized as
intangible assets;
. unanticipated expenses related to technology integration;
. the maintenance of uniform standards, controls, procedures and policies;
. the impairment of relationships with employees and customers as a result
of any integration of new management personnel; and
. the potential unknown liabilities associated with acquired businesses.
We may not be successful in addressing these risks or any other problems
encountered in connection with such acquisitions.
Brio is in a highly competitive industry and some of its competitors may be
more successful in attracting and retaining customers. The market in which
Brio operates is highly competitive. Brio expects that competition will
continue to intensify. Increased competition could result in:
. price reductions;
. fewer customer orders;
. reduced gross margins;
. longer sales cycles; and
. loss of market share.
21
<PAGE>
Brio or its competitors may announce enhancements to existing products, or
new products embodying new technologies, industry standards or customer
requirements that have the potential to supplant or provide lower-cost
alternatives to Brio's existing products.
Current and potential competitors offer a variety of software solutions and
generally fall within four categories:
. vendors of business intelligence software, including Cognos, Business
Objects, Hummingbird and Seagate Software;
. vendors offering alternative approaches to delivering analysis
capabilities to users, including Information Advantage, Actuate and
MicroStrategy;
. database vendors that offer products which operate specifically with
their proprietary database, including Microsoft, IBM, Arbor and Oracle;
and
. other companies that may in the future announce offerings of enterprise
business intelligence solutions.
These competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources
to the development, promotion and sales of their products than Brio. Brio
expects additional competition as other established and emerging companies
enter into the business intelligence software market and new products and
technologies are introduced. Brio will compete on the basis of the following
factors:
. product features;
. time to market;
. ease of use;
. product performance;
. product quality;
. analytical capabilities;
. user scalability;
. open architecture;
. customer support; and
. price.
Brio's failure to compete favorably in these areas could limit its ability
to attract and retain customers, which could have a material adverse affect on
our results of operations.
Market consolidation may create more formidable competitors. Alliances among
current and new competitors may emerge and rapidly gain significant market
share. The failure of Brio to compete successfully against current and future
competitors could materially harm its business, operating results and
financial condition by driving down prices and reducing revenue growth.
Current and potential competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties, thereby
increasing the ability of their products to address the needs of Brio's
prospective customers. Current or future indirect channel partners of Brio may
establish cooperative relationships with current or potential competitors,
thereby limiting Brio's ability to sell its products through particular
distribution channels. Such competition could have a material adverse effect
on Brio's ability to obtain new licenses, and maintenance and support renewals
for existing licenses, on favorable terms. Further, competitive pressures may
require Brio to reduce the price of its products, which could have a material
adverse effect on its revenues, profitability and business condition.
Brio's plans to expand internationally expose Brio to risks related to
managing international operations, currency exchange rates, tariffs and other
difficulties related to foreign operations. A key component of Brio's
22
<PAGE>
strategy is its planned expansion into additional international markets. If
the international revenues generated by these expanded operations are not
adequate to offset the expense of establishing and maintaining these foreign
operations, Brio's business, operating results and financial condition could
be materially harmed. In addition to the uncertainty as to Brio's ability to
expand its international presence, there are risks inherent in doing business
on an international level, including:
. technical difficulties associated with product localization in foreign
countries;
. increased difficulty in controlling operating expenses;
. unexpected changes in regulatory requirements;
. tariffs and other trade barriers;
. difficulties in staffing and managing foreign operations;
. longer payment cycles;
. problems in collecting accounts receivable;
. political instability;
. fluctuations in currency exchange rates;
. seasonal reductions in business activity during the summer months in
Europe; and
. potentially adverse tax consequences.
Each of these factors could adversely impact the success of Brio's
international operations and, consequently, on Brio's business, operating
results and financial condition. In particular, Brio's international sales are
generally denominated and collected in foreign currencies, and Brio has not
historically undertaken foreign exchange hedging transactions to cover
potential foreign currency exposure. Brio incurred losses on foreign currency
translations resulting from intercompany receivables from foreign subsidiaries
in an amount of approximately $227,000 in fiscal 1998 and approximately
$13,000 in fiscal 1999.
Brio's future success will depend upon successful product development in the
face of changing customer requirements and rapid technological change. Brio's
failure to develop and introduce new products and product enhancements on a
timely basis that meet changing customer requirements and technological
changes could result in reduced demand for or market acceptance of Brio's
products, which could hurt Brio's business, operating results and financial
condition. Brio's products incorporate a number of advanced technologies,
including proprietary data analysis engines, a distributed architecture, as
well as Web access and delivery technology. Brio may be required to change and
improve its products in response to changes in operating systems,
applications, networking and connectivity software, computer and
communications hardware, programming tools and computer language technology.
Brio may not successfully respond to changing technology, identify new
product opportunities or develop and bring new products to market in a timely
and cost-effective manner. In the past Brio has experienced delays in software
development. In particular, development efforts in the UNIX server environment
are complex, and in the past Brio has encountered delays in developing
products for this environment. Brio may experience delays in connection with
current or future product development activities.
Because Brio's future success will depend upon successful product
development in the face of evolving industry standards, failure to introduce
new products could hurt its growth and profitability. Brio's failure to
introduce new products or product enhancements on a timely basis that are
compatible with industry standards could delay or hinder demand for or market
acceptance of its products, which could hurt Brio's growth and profitability.
The market may not accept Brio's products, which would reduce revenues,
growth and profitability. Brio is focusing its selling efforts increasingly on
larger, enterprise-wide implementations of its products, and Brio
23
<PAGE>
expects these sales to constitute an increasing portion of any of its future
revenue growth. Failure of a significant market for enterprise business
intelligence products to develop, or failure of enterprise-wide
implementations of Brio's products to achieve broad market acceptance, could
materially harm Brio's business, operating results and financial condition. To
date, Brio's selling efforts have resulted in limited enterprise-wide
implementations of its products. Brio believes that most companies currently
are not yet aware of the benefits of enterprise-wide business intelligence
solutions or of its products and capabilities, nor have most companies
deployed business intelligence solutions on an enterprise-wide basis. Brio's
efforts to promote market awareness of its products and the problems its
products address may not be sufficient to build market awareness of the need
for enterprise business intelligence or acceptance of Brio's products.
The year 2000 problem could cause Brio's software products to malfunction
and Brio's customers to cease their purchasing of Brio's products. Brio's
computer systems and applications could fail or create erroneous results
unless corrected so that they can process data related to the year 2000 and
beyond. Brio relies on its systems, applications and devices in operating and
monitoring all major aspects of its business, including financial systems,
customer services, infrastructure, networks and telecommunications equipment.
Brio also relies, directly and indirectly, on external systems of business
enterprises including customers, suppliers, creditors, financial
organizations, and governmental entities, both domestic and international, for
accurate exchange of data. Brio has not fully identified the impact of the
year 2000 issue on its internal systems or whether it can resolve these issues
without disruption of its business and without incurring significant expense.
In addition, even if Brio's internal systems are not materially affected by
the year 2000 issue, Brio could be affected through disruption in the
operation of the enterprises with which it interacts. Furthermore, Brio
believes that the purchasing patterns of customers and potential customers may
be affected by year 2000 issues as companies expend significant resources to
correct or patch their current software systems to comply with year 2000
requirements. These expenditures may result in reduced funds available to
purchase software products like those offered by Brio, which could have a
material adverse effect on Brio's business, operating results and financial
condition.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of the impact of the year 2000 problem on
Brio's operations.
Product defects could adversely affect Brio's operating results. As a result
of their complexity, Brio's software products may contain undetected errors,
failures or viruses. Brio or its customers may discover errors in new products
or enhancements after commencement of commercial shipments, resulting in loss
of revenues, delay in market acceptance or damage to Brio's reputation, which
could have a material adverse effect upon Brio's business, operating results
and financial condition. Further, Brio's license agreements with customers
typically contain provisions designed to limit Brio's exposure for potential
claims based on errors or malfunctions of Brio's products.
The limitation of liability provisions contained in Brio's license
agreements may not be effective under the laws of all jurisdictions. Brio's
sale and support of its products entails the risk of warranty claims, and
Brio's insurance against product liability risks may not be adequate to cover
a potential claim. A product liability claim brought against Brio could have a
material adverse effect on its business, operating results and financial
condition.
Brio has one issued patent and one pending patent application. Brio's
intellectual property protection may not be adequate to prevent competitors
from entering its markets or developing competing products. Brio's limited
intellectual property protection may allow competitors to enter its market or
develop competing products, resulting in competitive harm to Brio. The methods
used by Brio to protect its proprietary rights afford only limited protection.
Brio currently relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. Brio currently has one U.S. patent and one
pending application. This patent application may not result in the issuance of
a patent. Our issued patent and any additional patents issued to us may be
invalidated, circumvented or challenged, and
24
<PAGE>
the rights granted under these patents may not provide Brio competitive
advantages. Brio may not obtain any more patents. Others may develop
technologies that are similar or superior to Brio's technology or design
around our patents or any other patent that Brio may come to own.
Despite Brio's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of Brio's products or to obtain and use
information that Brio regards as proprietary. Policing unauthorized use of
Brio's products is difficult, and while Brio is unable to determine the extent
to which piracy of its software products exists, Brio expect software piracy
to be a persistent problem. In addition, the laws of some foreign countries do
not protect proprietary rights as fully as do the laws of the U.S. Brio's
means of protecting its proprietary rights in the U.S. or abroad may not be
adequate, and competitors may independently develop similar technology.
Investment Risks
Brio's common stock has a limited trading history and a volatile
price. There has only been a public market for Brio's common stock since April
30, 1998, and an active public market may not continue. The market price of
the shares of Brio's common stock is likely to be highly volatile and may be
significantly affected by a number of factors, including:
. actual or anticipated fluctuations in our operating results;
announcement of business partnerships;
. technological innovations or new product introductions by us or our
competitors;
. changes of estimates of our future operating results by securities
analysts;
. developments with respect to copyrights or proprietary rights; or
. general market conditions.
In addition, the stock market has, from time to time, experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many technology companies. Broad market
fluctuations, as well as economic conditions generally and in the software
industry specifically, may result in material adverse effects on the market
price of Brio's common stock. In the past, following periods of volatility in
the market price of a particular company's securities, securities class action
litigation has often been brought against that company. Such litigation may
occur in the future with respect to Brio, and could result in substantial
costs and a diversion of management's attention and resources, which could
have a material adverse effect upon Brio's business, operating results and
financial condition.
Anti-takeover provisions may adversely effect Brio's stock price and make it
more difficult for a third party to acquire Brio. Provisions of Brio's charter
documents may have the effect of delaying or preventing a change in control of
Brio or its management, which could have a material adverse effect on the
market price of Brio common stock. These include provisions:
. relating to a classified board of directors and provisions eliminating
cumulative voting;
. eliminating the ability of stockholders to take actions by written
consent; and
. limiting the ability of stockholders to raise matters at a meeting of
stockholders without giving advance notice.
In addition, the Brio board of directors has authority to issue up to
2,000,000 shares of preferred stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of these shares without
any further vote or action by the stockholders. The rights of the holders of
Brio common stock will be subject to, and may be adversely affected by, the
rights of the holders of any preferred stock that Brio may issue in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of Brio's outstanding voting stock, thereby delaying, deferring or
preventing a change in control of Brio. Brio has no present plan to issue
shares of preferred stock.
25
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Brio's exposure to market risk for changes in interest rates relates
primarily to Brio's investment portfolio. Brio maintains an investment policy
which ensures the safety and preservation of its invested funds by limiting
default risk, market risk, and reinvestment risk. As of September 30, 1999,
Brio had $12.3 million of cash and cash equivalents with a weighted average
variable rate of 4.4% and $21.3 million of short-term investments with a
weighted average variable rate of 5.4%.
Brio mitigates default risk by attempting to invest in high credit quality
securities and by constantly positioning its portfolio to respond
appropriately to a significant reduction in a credit rating of any investment
issuer or guarantor. The portfolio includes only marketable securities with
active secondary or resale markets to ensure portfolio liquidity and maintains
a prudent amount of diversification.
Brio has no cash flow exposure due to rate changes for long-term debt
obligations. Brio has entered into borrowing agreements to support general
corporate purposes including capital expenditures and working capital needs,
should the need arise. Brio currently has no short-term or long-term debt
outstanding.
Brio conducts business on a global basis in international currencies. As
such, it is exposed to adverse or beneficial movements in foreign currency
exchange rates. Brio may enter into foreign currency forward contracts to
minimize the impact of exchange rate fluctuations on certain foreign currency
commitments and balance sheet positions. The realized gains and losses on
these contracts are deferred and offset against realized and unrealized gains
and losses when the transaction occurs. At September 30, 1999 there were no
outstanding foreign currency exchange contracts.
26
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On January 20, 1997, Business Objects, S.A. filed a complaint against Brio
in the U.S. District Court for the Northern District of California in San
Jose, alleging that certain of Brio's products (including at least the
BrioQuery Navigator, BrioQuery Explorer and BrioQuery Designer products)
infringed at least claims 1, 2 and 4 of U.S. Patent Number 5,555,403. On April
4, 1997, Brio filed an answer and affirmative defenses to the complaint,
denying certain of the allegations in the complaint and asserting a
counterclaim requesting declaratory relief that Brio is not infringing the
patent and that the patent is invalid and enforceable. In December 1997, venue
for the case was changed to Northern District of California in San Francisco,
California. On July 30, 1999, Brio filed an action against Business Objects,
S.A. in the U.S. District Court for the Northern District of California in San
Jose, alleging that certain of Business Objects, S.A. products infringe U.S.
Patent Number 5,915,257. On September 9, 1999 Brio and Business Objects, S.A.
executed a Memorandum of Understanding settling Business Object's pending
patent litigation against Brio involving patent number 5,555,403, pursuant to
which Brio agreed to pay Business Objects, S.A. $10.0 million. The settlement
cost is included in non-recurring operating expenses. As part of this
settlement, Business Objects, S.A. dismissed its pending lawsuit against Brio
involving patent number 5,555,403 and Brio dismissed its pending lawsuit
against Business Objects, S.A. involving patent number 5,915,257.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to Vote of Security Holders.
At the Company's Annual Meeting of Stockholders on August 3, 1999, the
Company's stockholders approved the following items:
1. The merger of Brio and SQRIBE Technologies Corp.
For: 11,680,586 Against: 41,171 Abstain: 22,686 Broker non-
votes: 1,996,005
2. The election of the following individuals as directors of the Company:
<TABLE>
<CAPTION>
Authority
For Withheld
---------- ---------
<S> <C> <C>
Michael Cline 13,704,973 35,473
Charles Federman 13,704,973 35,473
Katherine Glassey 13,659,948 80,500
Ofir J. Kedar 13,704,973 35,473
E. Floyd Kvamme 13,705,043 35,405
</TABLE>
3. The amendment of Brio's 1998 employee stock purchase plan to increase
the number of shares of common stock reserved for issuance under the plan
by 1,000,000 shares, to a total of 1,500,000 shares, and to make certain
other changes.
For: 11,475,165 Against: 265,990 Abstain: 3,288 Broker non-
votes: 1,996,005
4. The amendment to Brio's 1998 stock option plan to increase the number
of shares of common stock reserved for issuance under the plan by 2,250,000
shares, to a total of 4,500,000 shares, and to make certain other changes.
For: 10,634,415 Against: 1,106,524 Abstain: 3,304 Broker non-
votes: 1,996,205
27
<PAGE>
5. The amendment of Brio's certificate of incorporation in order to
conform the certificate to a recently modified provision of California law
with respect to the classification of the board of directors and the
election of directors.
For: 10,442,782 Against: 1,301,191 Abstain: 23,637 Broker non-
votes: 1,972,838
6. The ratification of the appointment of Arthur Andersen LLP as Brio's
independent public accountants for the fiscal year ending March 31, 2000.
For: 13,734,598 Against: 1,590 Abstain: 960 Broker non-
votes: 3,300
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
On August 4, 1999, Brio filed a Report on Form 8-K reporting the
completion of Brio's merger with SQRIBE Technologies Corp. and included
Consolidated Statements of Operations for the periods ended June 30, 1998,
September 30, 1998, December 31, 1998, March 31, 1999 and June 30, 1999 and
Condensed Consolidated Balance Sheets for the periods ended June 30, 1999
and March 31, 1999.
28
<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.
BRIO TECHNOLOGY, INC.
/s/ Karen J. Willem
By: _________________________________
Karen J. Willem
Chief Financial Officer
(Principal Financial
and Accounting Officer)
Date: November 15, 1999
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 12,257
<SECURITIES> 21,253
<RECEIVABLES> 24,819
<ALLOWANCES> (2,153)
<INVENTORY> 262
<CURRENT-ASSETS> 60,603
<PP&E> 12,357
<DEPRECIATION> (5,370)
<TOTAL-ASSETS> 69,551
<CURRENT-LIABILITIES> 48,209
<BONDS> 0
0
0
<COMMON> 71,527
<OTHER-SE> (57,205)
<TOTAL-LIABILITY-AND-EQUITY> 69,551
<SALES> 30,656
<TOTAL-REVENUES> 30,656
<CGS> 4,661
<TOTAL-COSTS> 43,058
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,656
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,656)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,018
<EPS-BASIC> .07
<EPS-DILUTED> .06
</TABLE>
