EXHIBIT 99
[LOGO APPEARS HERE]
REPORT FOR THE THIRD QUARTER 2000 AND
THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2000
In the first nine months of 2000 INTERSHOP Communications AG continued to pursue
its strategy of expansion throughout its global markets and reinforced its
position as one of the global leaders in e-commerce software for sell-side
applications and solutions. For the first nine months of 2000 revenues grew by
244% to Euro 92.8 million, compared to Euro 27.0 million for the first nine
months of 1999. Net loss improved by 38% to Euro 6.8 million. Net loss per share
decreased from Euro 0.14 to Euro 0.08.
In addition to the highlights of the first six months which were reported in the
first and second quarter reports of 2000, INTERSHOP continued its successful
business development in the third quarter through customer wins, channel
development, new products, and organisational improvements. As a result of the
successful execution of INTERSHOP's strategy in the third quarter and the first
half year of 2000, the Company was able to report record results for the first
nine months of 2000.
HIGHLIGHTS OF THE THIRD QUARTER 2000
281 New Customer Wins
INTERSHOP continued to expand its client base through 281 new customer wins.
These new customers brought the total number of customers in the third quarter
to 567, including world class enterprises such as Bertelsmann, ABB Motors, Otto
Group, Motorola, Shell Chemical, Intel, Wella, Deutsche Telekom, Time Life,
Homebase, Playmobil, Spiegel, Vobis, Electronic Partners, Terranetworks,
Sparkasse, rooster.com and Altodigital. Repeat business from existing customers
accounted for 59 percent of revenues during the quarter which shows
INTERSHOP's solid customer base.
In particular INTERSHOP Enfinity, INTERSHOP's flagship enterprise e-commerce
solution, was again a great success in the market. Its superior architecture,
speed to market implementation and low cost of ownership helped differentiate
Enfinity from the competition during the quarter. A record number of 64
INTERSHOP Enfinity platforms were sold during the quarter bringing the
cumulative number of Enfinity platforms sold to date to 195. The average selling
price of Enfinity increased to Euro 238,000 from Euro 145,000 in the first
quarter 2000. Enfinity sales rose 39% compared to the second quarter of 2000,
with the most significant growth coming in the United States market where
Enfinity revenues increased by 159% sequentially. Enfinity contributed 78% of
total license revenues compared to 35% in the first quarter and 48% in the
second quarter of 2000.
Partner Network expanded
INTERSHOP attracted new integration and consulting partners such as EDS,
Etensity, Agility and PSI. At the same time, the Company also expanded its
existing relationships with leading e-services companies like IBM Global
Services, Hewlett-Packard, PricewaterhouseCoopers, Andersen Consulting, Unisys,
Sapient, Pixelpark and Icon Medialab. During the third quarter, revenues
generated through channel partners totaled 45% of total revenues. INTERSHOP
trained a record number of 3,840 external consultants during the quarter
compared to 2,675 in the previous quarter bringing the total number of
consultants trained to date in 2000 to 8,074. Of those, 6,244 were trained on
Enfinity.
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During the third quarter INTERSHOP successfully implemented its partnerships
with Hewlett-Packard and Intel, and expanded its global alliance with
CommerceOne to connect suppliers to e-marketplaces. As part of that agreement,
CommerceOne and INTERSHOP will jointly promote and market e-commerce solutions
in addition to aligning, educating and compensating their global sales forces to
offer complementary solutions. Enfinity Cartridges for CommerceOne MarketSite
and CommerceOne GalerieConnector have already been developed.
Ongoing Product Innovation
INTERSHOP continued the process of ongoing product innovation to ensure that it
would maintain its position at the forefront of technological development. In
July, INTERSHOP launched the new release INTERSHOP 4.2 product line for hosted
e-commerce services including the INTERSHOP Universal Marketplace Enabler for
easy integration of online storefronts into electronic marketplaces. INTERSHOP
also focused on the development of INTERSHOP Enfinity 2, which was introduced at
the INTERSHOP Open 2 event on October 30. Enfinity 2 offers further improvements
such as expanded multichannel selling capabilities including selling through
other businesses, hubs, marketplaces and exchanges, as well as peak performance
and scalability and pre-packaged integration points with leading business
systems.
Worldwide Organization Expanded
INTERSHOP continued its organizational expansion around the world with the total
number of employees increasing to 1,017 compared to 494 a year ago. INTERSHOP
also established new office locations in Seoul, Taipei, Berlin and Ilmenau
(Germany), and existing offices were expanded.
Changes in the senior management helped to strengthen and focus INTERSHOP's
global management team. Bernhard Marbach, Vice President Sales Europe & Asia,
was appointed to President Europe & Asia. Philip Oreste, Vice President of
Finance for the Americas, was promoted to Acting President of the Americas,
replacing Keith Costello who left the position in November. In addition, Knut
Foeckler, resigned as a member of the Supervisory Board.
Successful Acquisitions
Effective on July 1st, INTERSHOP acquired Owis GmbH, which added over 70
experienced engineers to INTERSHOP's workforce. Owis engineers are specialized
in object-oriented software development. In August, INTERSHOP acquired Subotnic
GmbH. Berlin-based Subotnic specializes in the development of content management
software and solutions designed to integrate with electronic commerce systems.
Subotnic's product suite will enable INTERSHOP to expand its product offering by
adding `Content Integrated Commerce' functionality to the INTERSHOP Enfinity
product suite.
Capital Structure
On August 15, the Company placed 500,000 shares (post-split) with institutional
investors and gained net proceeds of Euro 39 million. On September 29, 2000
INTERSHOP successfully completed its listing on the NASDAQ stock exchange. In
conjunction with the American Depositary Shares (ADS) listing, INTERSHOP placed
1,675,000 shares or the equivalent of 3,350,000 ADS's, yielding the Company net
proceeds of Euro 116 million. In the first nine months of the current year, a
total of 1,162,485 stock options from conditional capital were exchanged for
common bearer shares, of which 882,485 from Conditional Capital II (employee
options) and 280,000 from Conditional Capital III (for conversion of Inc.
shares). As of September 30, a total of 87,728,005 shares were outstanding. On
August 16, a 1:5 stock split through a capital increase in capital stock was
executed, following the adoption of a resolution at the Shareholders' Meeting on
June 27, 2000. All share information has been restated to reflect this stock
split.
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FINANCIAL RESULTS OF THE NINE MONTHS PERIOD 2000
License revenues in the U.S. up 280%
For the first nine months of 2000 revenues grew by 244% to Euro 92.8 million,
compared to Euro 27.0 million for the first nine months of 1999. With license
revenues up 268% to Euro 59.6 million, licensing activities represented the
driving force behind this outstanding performance. License revenues increased
from 60% to 64% of total revenues. The increase in license revenues was mainly
driven by INTERSHOP Enfinity launched in the fall of 1999. Enfinity license
sales contributed 54% of total license revenues. Service revenues including
other revenues increased by 208% to Euro 33.2 million. Increased revenues were
reported by all geographic regions. In the U.S., the most competitive market for
e-commerce software, license revenues increased above average by 280%. The
development of the business in Asia was also extremely successful; within less
than 12 months after INTERSHOP entered the Asia-Pacific market, revenues from
this region accounted already for 7% of total revenues, which exceeded
expectations. Accordingly revenue contribution from Europe and the Americas
decreased from 58% to 55% and from 42% to 39% respectively - although revenues
increased in absolute terms.
Gross Margins of License Sales reached 93%
Total gross profit increased by 224 % to Euro 62.7 million. The total gross
margin was 68%, which was lower than the comparable 1999 number of 72%. The
decrease was entirely attributable to lower margins in services, which in turn
was due to hiring new employees during the quarter who are usually not
immediately fully productive. For the licensing activities, gross profit
increased by 307%, which brought the margin to 93% compared to 84% in the
comparable period. This was due to the high revenue contribution of Enfinity
which is usually sold without third party database technology embedded which is
different from the INTERSHOP 4 product line.
Investments in Future Growth
INTERSHOP continued to significantly invest in product development, sales,
marketing and organizational resources in the first nine months of the year in
order to strengthen the Company's position for future growth. Total operating
expense was up 123% to Euro 70.1 million. Sales and marketing expense grew by
159% to Euro 48.5 million and was the main cost driver during the period. The
increase is attributable to both the increased number of employees in the sales
and marketing department and a general increase in marketing program spendings.
An advertising campaign which was launched to improve INTERSHOP's brand
awareness in the U.S accounted for approximately Euro 7 million in the third
quarter. Research and development expenses increased 31% to Euro 6.7 million
which is primarily attributable to the increased number of research and
development personnel. General and administrative costs increased 93% to Euro
14.4 million. This increase is attributable to both the larger number of
administrative personnel and the general expansion of operations. Goodwill
amortization, which was primarily attributable to the Owis acquisition, was Euro
0.5 million. In total, acquisition related costs including expenses for acquired
personnel and goodwill amortization came to Euro 1.2 million in the third
quarter.
Operating Loss Decreased
Operating loss in the first nine months 2000 decreased 39% from Euro 12.0
million to Euro 7.4 million. While the Company showed an operating profit in
each of the first two quarters of the year 2000, third quarter results came in
negative primarily due to the extraordinary costs related to the advertising
campaign and the Owis acquisition. Other income decreased from Euro 1.0 million
to Euro 0.5 million mainly due to an increase in interest expense from short
term loans. As a result net loss improved by 38% to Euro 6.8 million. Net loss
per share decreased from Euro 0.14 to Euro 0.08. The calculation of the shares
used in computing basic net loss per share has been revised to exclude shares
issuable upon conversion of INTERSHOP Communications Inc. shares from the
calculation of basic net loss per share. This change has also been reflected in
comparable 1999 information.
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Cash Flows and Cash Position
In the first nine months Euro 29.7 million was used for operating activities,
primarily attributable to higher trade receivables and an increase in prepaid
expenses. Receivables increased from Euro 23.3 million to Euro 48.0 million. The
two primary reasons were the increase in revenues and the timing of sales as
most third quarter revenues were closed towards the end of the quarter. Cash
used for investing activities, primarily capital expenditure related to the
purchase of office equipment, came to Euro 17.8 million. Cash inflow provided by
financing activities resulting mainly from a capital increase came to Euro 65.4
million. As of September 30, INTERSHOP had cash and cash equivalents of 32.7
million Euro, excluding receivables from the secondary offering proceeds of
€ 115.9 million.
OUTLOOK
Assuming similar business conditions and relatively stable currency rates for
the fourth quarter, management expects fourth quarter revenues in the range of
Euro 40 million to Euro 50 million and an improvement in operating results
compared to the third quarter. INTERSHOP's strategy of investing in prospective
growth as well as extraordinary expenses resulting from the acquisitions of
Subotnic and Owis are expected to prevent the Company from achieving break-even
for the year 2000 as a whole.
Investor Relations Europe
Dr. John Lange
INTERSHOP Communications AG
Amsinckstrasse 57, 20097 Hamburg, Germany
T. +49 (40) 23709-128, F +49 (40) 23709-111
E-mail: [email protected]
http://www.intershop.de
Investor Relations Americas
Philip L. Oreste
INTERSHOP Communications, Inc.
303 2nd Street, 10th Floor North
San Francisco, CA 94107, U.S.A.
T +1 (415) 844-1500 - main, F +1 (415) 844-3800 - fax
E-mail: [email protected]
http://www.intershop.com
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INTERSHOP Communications AG
Condensed Consolidated Balance Sheet (U.S.-GAAP)
(in thousands Euro; unaudited)
September 30, December 31,
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2000 1999
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents Euro 32.651 Euro 12.065
Restricted cash 1.485 1.437
Trade receivables, net 48.039 23.333
Receivable for secondary offering proceeds 115.857 -
Prepaid expenses and other current assets 15.022 3.870
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Total current assets 213.053 40.705
Property and equipment, net 17.496 5.610
Investments 2.470 6.222
Other assets 6.650 1.252
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Total assets Euro 239.669 Euro 53.789
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current debt and current maturities of long-term debt - Euro 33
Notes payable to shareholder 16.489 7.000
Accounts payable 6.143 5.149
Accrued liabilities 30.919 9.960
Deferred revenue 8.646 8.542
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Total current liabilities 62.198 30.685
Long-term debt - 20
Deferred revenue 37 220
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Total liabilities 62.235 30.925
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Shareholders' equity
Common stock 87.728 16.878
Paid-in capital 151.139 48.169
Notes receivable from shareholder - (141)
Deferred compensation (42) (273)
Accumulated deficit (63.426) (45.406)
Accumulated other comprehensive income 2.035 3.636
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Total shareholders' equity 177.435 22.864
Total liabilities and shareholders' equity Euro 239.669 Euro 53.789
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INTERSHOP Communications AG
Condensed Consolidated Statement of Operations (U.S.-GAAP)
(In thousands Euro, except per share amounts; Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
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2000 1999 2000 1999
REVENUES
<S> <C> <C> <C> <C>
Licences Euro 19.618 Euro 5.690 Euro 59.568 Euro 16.205
Services, maintanance and other revenue 15.594 4.812 33.186 10.767
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Total revenues 35.212 10.502 92.753 26.972
COST OF REVENUES
Licences 705 1.191 3.986 2.537
Services, maintanance and other revenue 11.825 1.764 26.031 5.069
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Total costs of revenues 12.530 2.955 30.017 7.606
Gross Profit 22.683 7.547 62.737 19.366
OPERATING EXPENSES
Research and development 3.178 2.149 6.712 5.128
Sales and marketing 23.227 6.321 48.545 18.768
General and administrative 5.047 2.537 14.356 7.448
Goodwill and intangible asset amoritization 442 24 475 56
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Total operating expenses 31.893 11.031 70.088 31.399
Operating Loss (9.211) (3.484) (7.351) (12.034)
OTHER INCOME AND EXPENSE
Interest income 213 106 438 395
Interest expense (347) (29) (486) (24)
Other income (464) 57 551 647
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Total other income (expense) (598) 134 503 1.018
Net Loss Euro (9.808) Euro (3.350) Euro (6.849) Euro (11.016)
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Basic and Diluted net loss per share Euro (0.12) Euro (0.04) Euro (0.08) Euro (0.14)
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Shares used in computing basic and
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diluted net loss per share 83.756 80.647 83.032 79.108
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INTERSHOP Communications AG
Condensed Consolidated Statement of Cash Flows (U.S.-GAAP)
(in thousands Euro; unaudited)
Nine Months Ended
September 30,
---------------------------------------
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss Euro (6.849) Euro (11.016)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 3.883 1.738
Provision for doubtful accounts 1.691 993
Amortization of deferred compensation 231 240
Change in:
Accounts receivable (26.158) (7.605)
Prepaid expenses and deposits (14.197) (3.399)
Other assets (341) (473)
Accounts payable 973 (141)
Deferred revenue (79) (1.278)
Accrued expenses and other liabilities 11.165 (1.036)
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Net cash used in operating activities (29.680) (21.978)
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CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Unaffiliated Company - (1.199)
Cash paid for acquisitions, net of cash acquired (2.424) -
Restricted cash (48) (1.203)
Purchases of equipment, net of capital leases (15.299) (2.615)
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Net cash used in investing activities (17.770) (5.017)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 56.572 1.193
Proceeds from debt issuance 10.758 939
Collection on notes receivable from stockholders 141 1.046
Repayments of indebtedness (2.033) (941)
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Net cash provided by financing activities 65.438 2.237
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Effect of change in exchange rates on cash 2.598 1.252
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Net change in cash and cash equivalents Euro 20.586 Euro (23.505)
Cash and cash equivalents, beginning of period Euro 12.065 Euro 34.185
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Cash and cash equivalents, end of period Euro 32.651 Euro 10.680
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