<PAGE>
EXHIBIT 1
---------
Corporate Headquarters:
[NETPLEX LOGO] 1800 Robert Fulton Drive, Second Floor
Reston, VA 20191
Tel: 703-716-4777 Fax: 703-716-1110
<TABLE>
<S> <C>
Netplex Contact: Investor Contact:
Peter Russo, The Netplex Group, Inc. Joe Zappulla, Wall Street Investor Relations Corp.
703-716-4777 301-907-4090
[email protected] [email protected]
------------------------ --------------------------
</TABLE>
For Immediate Release
Netplex Reports Third Quarter Results
Company Realigns Operations to Focus on Two Strategic Business
Units, Eliminates More Than $6 Million in Annual Expenses
RESTON, Va. - November 13, 2000 - The Netplex Group, Inc. (Nasdaq: NTPL) today
announced the financial results for its third quarter ended September 30, 2000.
The Company's results reflect a change in the manner in which Netplex reports
revenue from its Contractors Resources subsidiary. Revenue of that subsidiary
will reflect only the fee income charged by the Company, whereas in prior
periods it included the gross billings provided by its members to clients. This
change is consistent with industry practice and recent pronouncements from the
accounting profession. As a result, Netplex has restated prior periods for
comparative purposes.
In addition, the financial results of the third quarter exclude all revenue from
its discontinued operations and operations planned to become discontinued, in
conjunction with the Company's previously announced restructuring program.
After giving effect to these changes, Netplex's consolidated revenue and gross
profit margins for the quarter ended September 30, 2000 were $4,531,000 and 49.1
percent respectively, compared to $4,490,000 and 46.9 percent for the previous
quarter and $4,486,000 and 42.2 percent for the same period of the previous
year. Consolidated services revenue, net of product sales and inter-company
revenue transactions, was $4,112,000--up 10 percent from the previous quarter's
$3,728,000 and up 8 percent from $3,815,000 for the same period last year.
Consolidated service gross margins increased to 50.7 percent in the third
quarter from 50.5 percent in the second quarter and 44.3 percent for the same
period last year.
"This change in the way we report revenue better demonstrates Netplex's high
value service offerings, which now can be more clearly portrayed through the
reporting of our high gross profit margins," said Netplex Chairman, President,
and CEO Gene Zaino. "We believe this will enable investors and analysts to more
easily evaluate our business and identify the value we have created."
Page 1
<PAGE>
The consolidated financial results reflect the operations of Netplex's two
distinct companies after the elimination of all inter-company revenue
transactions:
o Netplex's e-Solutions practice, an industry-focused e-Business
consultancy that has shown consistent revenue and profit margin growth,
and
o Contractors Resources, which operates the well-positioned and high-
potential MyBizOffice(TM) service for independent professionals.
During the third quarter, Netplex began the implementation of several
initiatives to establish cost efficiencies relative to current revenue levels.
These initiatives are intended to accelerate profitability and focus on the
growth and development of these two companies. As a result, Netplex has
accomplished the following objectives during the third quarter and early part of
the fourth quarter:
o Sold its Onion Peel Solutions (OPS) subsidiary, an operation not
considered strategic to the Company's higher margin e-Solutions
business.
o Combined the Technical Consulting Services (TCS) division with its
Contractors Resources subsidiary, enabling the MyBizOffice service to
leverage the thousands of consultants and dozens of customer
relationships that have been established over the past six years, while
eliminating the overhead costs to operate the division.
o Re-engineered various corporate and administrative functions, resulting
in a cost savings of approximately $1.2 million.
o Closed its Roseland, N.J. office and reduced related, corporate and
administrative overhead costs by $3.0 million.
o Announced its intention to sell the Company's Systems Integration
division, which it anticipates will take place by the first quarter of
next year.
o Streamlined its e-Solutions operation by combining its Business
Protection Services (BPS) group with its core retail consulting,
creative design, and e- application development practices. The combined
operation extends the scope of its security expertise to its expansive
retail customer base.
"We are quickly realizing the benefits of the cost cutting and streamlining
initiatives implemented during the third quarter," said Netplex Chief Financial
Officer Peter Russo. "We believe these measures will reduce operating and
corporate overhead costs by over $6 million annually. Our employees have seized
these initiatives with renewed enthusiasm and are excited about the Company's
future prospects."
"Our employees' entrepreneurial spirit has kicked in and we have not had a
single voluntary termination, at any level, since we launched our cost-reduction
plan," added Gene Zaino. "I extend my sincere appreciation to all Netplex
employees for their continuing dedication and drive toward making our Company a
success." Further evidence of employee-heightened
Page 2
<PAGE>
morale is an increase in ownership of Netplex's common shares by the Company's
management and employees by approximately 500,000 shares.
e-Solutions Overview
The Netplex e-Solutions business is focused on delivering industry-specific
consulting, creative design, application development, and information security
services. The sale of OPS, the anticipated sale of the Systems Integration
division, and the migration of TCS to Contractors Resources results in a pure e-
Solutions consulting business with a track record of rapid growth and high
margins.
The Netplex e-Solutions practice's staff--which includes about 100 highly
skilled professionals with an average of 10 years Retail industry and
information security experience--concentrates on delivering high-value business
strategy, creative interactive marketing, and secure technology solutions.
Netplex's e-Solutions consultancy is now led by Larry Davenport, Senior Vice
President and General Manager, who has been instrumental in the rapid growth and
success of Netplex's retail-related consulting business during the last two
years.
"We are focused on reinforcing our position as the consultant of choice
throughout the entire life-cycle for the retail and consumer products
manufacturer industry, and we have established the appropriate leadership
infrastructure to do so," said Davenport. "With increasing frequency, our
traditional retail customers, which had once only called on Netplex for Point-
of-Sales systems and retail software integration, are coming to us to help
create, deploy, and secure their site and store (`clicks-and-bricks')
integration strategies. As a result, we are providing our retail customer base,
and recently an increasing number of consumer products manufacturers-- well over
300 companies--with a wider variety of our high value consulting, creative, and
development services."
Including inter-company activity, the e-Solutions business reported third-
quarter consulting services revenue of $4,040,000, compared to $3,883,000 last
quarter and $3,809,000 for the third quarter of last year. Operating profit for
this segment was $854,000 in the third quarter, compared to $644,000 last
quarter and $1,025,000 for the third quarter of last year.
The following table presents the pro forma results of the e-Solutions business,
giving effect to the expense reduction and streamlining activities that took
place in September, but estimating the effect of these changes as if they took
place at the beginning of the reporting period for third quarter ended September
30, 2000. Also, revenue is shown before the elimination of inter-company
transactions to present the complete operations of the segment. These pro forma
results are intended to estimate how the current operations are performing after
the execution of our restructuring plan.
Page 3
<PAGE>
e-Solutions Pro Forma Segment Data
All dollar amounts in thousands.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
Revenue 3Q00 2Q00 %Chg. 3Q99 %Chg.
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
e-Solutions: Services $4,040 3,883 4% 3,809 6%
----------------------------------------------------------------------------------------------
Product resales 419 762 -- 671 --
----------------------------------------------------------------------------------------------
TOTAL 4,459 4,645 -- 4,480 --
----------------------------------------------------------------------------------------------
Gross Profit
----------------------------------------------------------------------------------------------
e-Solutions: Services $2,046 $ 1,955 5% 1,746 17%
----------------------------------------------------------------------------------------------
Product resales 81 164 -- 113 --
----------------------------------------------------------------------------------------------
TOTAL 2,127 2,119 -- 1,859 14%
----------------------------------------------------------------------------------------------
Gross Profit Margin Percent
----------------------------------------------------------------------------------------------
e-Solutions: Services 50.6% 50.3% -- 45.8% --
----------------------------------------------------------------------------------------------
Product resales 19.3% 21.5% -- 16.8% --
----------------------------------------------------------------------------------------------
TOTAL 47.7% 45.6% -- 41.5% --
----------------------------------------------------------------------------------------------
Operating Income $ 854 644 33% 1,025 (17%)
----------------------------------------------------------------------------------------------
Corporate Expenses* 1,200 2,000 (40%) 1,051 14%
----------------------------------------------------------------------------------------------
EBITDA (346) (1,356) -- (26) --
----------------------------------------------------------------------------------------------
</TABLE>
*Estimated allocation of general corporate expense
As of September 30, 2000 the e-Solutions business consisted of 65 billable
professionals.
The average billable rate was $165 an hour and the annualized service revenue
per billable professional was $240,000. The utilization rate for the period was
69 percent The estimated total business backlog and near term business pipeline
is approximately $28 million. Voluntary turnover for the period was less than 5
percent Average project size was approximately $600,000. Exposure to start-up
dotcom entity customer revenue and/or accounts receivable is less than 5 percent
of total business.
Contractors Resources (MyBizOffice) Overview
Netplex's Contractors Resources subsidiary, which operates the MyBizOffice
online service, provides business management, administrative, and advisory
services for independent professionals. Contractors Resources leads its industry
with the most comprehensive suite of services and superior member satisfaction.
Through our recently announced partnership with TheBancorp.com, MyBizOffice will
be the first consultant services company to add online banking services to its
offering. As a result, members will soon be able to establish a line of credit
through which they can receive funds before their clients provide payment.
Contractors Resources completed the transition of its inside sales force to its
Reston, Va., headquarters during the third quarter. "We have a new qualified
sales team and we've developed new tools and processes that help this team
better communicate the many benefits
Page 4
<PAGE>
and advantages MyBizOffice offers to the independent work style," added Zaino.
"As a result, we are now signing new members at a significantly faster rate than
at any point in our history."
During the last several months, Contractors Resources focused on bolstering its
corporate sales initiatives. "In addition to incorporating new value-added
services for our members, we've formalized various service offerings that target
the companies and government agencies that use these professionals," Zaino said.
"Through these new `Consultant Management Services,' organizations now have
several different ways they can leverage the MyBizOffice service to improve how
they position themselves to accommodate the consultant work force. These new
services benefit both our membership and the businesses that use them: we
provide our members easy access to premier organizations while helping our
corporate customers become more attractive to talented consultants."
Contractors Resources also fortified its development and operational teams
during recent months. Key additions to the MyBizOffice team include David North,
who has transitioned from Netplex's e-Solutions practice to serve as Senior Vice
President and CTO, and Elizabeth Fleischer, who was an executive officer of a
similar business and now joins Contractors Resources as Director of Contracts
and Membership Policies.
The Contractors Resources financial information presented in this release
reflects a change in the manner in which the Company recognizes revenue.
Previously, Contractors Resources was required to recognize its members' gross
billings as revenue. Beginning with the current third quarter, the Company now
recognizes only the fees it charges to its members, which, on average, represent
four percent of its members' billings. For comparability, Netplex has restated
Contractors Resources' results for all periods presented. This change is
consistent with industry practice and is in compliance with new financial
guidelines.1
"Contractors Resources began requesting such a change in 1998. We applaud the
accounting profession for enacting this modification to its established
accounting practices," said Peter Russo. "While this new accounting methodology
will change the amount of revenue reported from a "gross billing" to a "fee
income" basis, it properly reports revenue consistent with the substance of our
business model and correctly presents the Company's gross profit margins."
Netplex's Contractors Resources subsidiary reported revenue from member
consultants of $430,000 for the third quarter, compared to $425,000 in the
second quarter of this year and $328,000 from the third quarter of 1999.
Netplex reported an operating loss for CR of $1,157,000 for the third quarter,
compared to $1,056,000 for the previous quarter and $420,000 for the same period
last year.
The following table presents the pro forma results of Contractors Resources,
giving effect to the expense reduction and streamlining activities that took
place in September, but estimating the effect of these changes as if they took
place before the reporting period for third quarter ended September 30, 2000.
Also, revenue is shown before the elimination of inter-company transactions to
present the complete operations of the segment. These pro forma results are
intended to estimate how the current operations are performing after the
execution of our restructuring plan.
---------------
1 EFIT 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent"
and the Securities and Exchange Commission's view on revenue recognition as
issued in Staff Accounting Bulletin No. 101.
Page 5
<PAGE>
Contractors Resources Segment Data
All dollar amounts in thousands
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
3Q00 2Q00 3Q99
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Fees (Revenue) 430(1) 425 328
-----------------------------------------------------------------------------------------
Gross Profit on Service Fees 286 274 236
-----------------------------------------------------------------------------------------
Gross Profit % 67% 65% 72%
-----------------------------------------------------------------------------------------
Development and Systems expense 299 98 50
-----------------------------------------------------------------------------------------
Sales and Marketing expense 829 653 25
-----------------------------------------------------------------------------------------
General and Administrative expense 315 579 581
Operating Loss $(1,157) (1,056) (420)
-----------------------------------------------------------------------------------------
Corporate Expenses (allocated)* 248 278 200
-----------------------------------------------------------------------------------------
EBITDA $(1,405) (1,334) (620)
-----------------------------------------------------------------------------------------
</TABLE>
(1) Includes $58,000 in fees for consultants formerly part of Netplex's
Technical Consulting Services division.
*Estimated allocation of general corporate expense
Restructuring of Recent Financing
As announced in a Company press release earlier today, Netplex has restructured
its Series D financing arrangement. This resulted in the retirement of the $10
million face amount of their security, along with the cancellation of all
related warrants from this March 2000 investment, in exchange for $3.5 million
in cash, payable over the next six months, and 5.1 million shares of the
Company's common stock, issued over time at the holders' request and based on
certain conditions.
Under the terms of the restructured agreement, Netplex paid the Series D
Preferred stockholders $500,000 in cash, and will provide them with 5.1 million
common shares and a total of $3 million in Series E Callable Preferred
Securities. Netplex has the right to redeem the Series E Preferred Securities in
two payments of $1.5 million each on January 31 and April 30, 2001. If Netplex
chooses not to redeem the preferred security on either payment date, the Series
E holders may convert that portion of the security into 3.2 million Netplex
shares, for a total of 6.4 million shares.
About The Netplex Group, Inc.
The Netplex Group, Inc. (Nasdaq: NTPL) (www.netplexgroup.com) creates e-business
--------------------
solutions that combine industry-specific business strategies; interactive
digital marketing; user-centric applications and data systems; and secure, high-
performance Internet systems infrastructure. Netplex's complete spectrum of
"industrial-strength" e-solutions positions customers to confidently take
advantage of the new digital economy.
Page 6
<PAGE>
About MyBizOffice
MyBizOffice, the online service of Netplex's subsidiary, Contractors Resources,
Inc., is a Business Services Provider (BSP) designed to provide the financial
infrastructure, resources, and business services that help professionals build
careers as independent contractors. MyBizOffice serves as a "virtual corporate
office" (e-office) for its member contractors by providing the services of a
corporate administration staff--such as contract review, time sheet
administration, billing and collections, health benefits, retirement plans,
wealth-building financial strategies, and tax administration--while helping them
keep abreast of developments that affect their independent life and work style.
Netplex, MyBizOffice, the Netplex logo, and the MyBizOffice logo
are trademarks of The Netplex Group, Inc.
Except for historical information, all of the statements, expectations and
assumptions contained in the foregoing are "forward-looking statements" (within
the meaning of the Private Securities Litigation Reform Act of 1995) that
involve a number of risks and uncertainties. It is possible that the assumptions
made by management--including, but not limited to, those relating to service
offerings, market opportunities, results, performance or expectations--may not
materialize. Actual results may differ materially from those projected or
implied in any forward-looking statements. In addition to the above factors,
other important factors include the risks associated with unforeseen technical
difficulties, changes in technology and standards, dependencies on key
employees, completion of acquisitions, successful integration of acquisitions,
availability of technical talent, dependencies on certain technologies, delays,
market acceptance and competition, as well as other risks described from time to
time in the Company's filings with the Securities and Exchange Commission, press
releases, and other communications.
# # #
Page 7
<PAGE>
THE NETPLEX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
Assets 2000 1999
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,731 $ 4,239
Accounts receivable, net of allowance for doubtful
accounts of $358,345 and $342,000, respectively 6,733 6,765
Prepaid expenses and other current assets 659 826
-------- --------
Total current assets 15,123 11,830
Property and equipment, net 1,477 1,590
Other assets 1,340 204
Goodwill and other intangible assets, net 3,474 4,437
Net assets of discontinued operations 5,915 8,356
-------- --------
Total assets $ 27,329 $ 26,417
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,685 $ 3,294
Line of credit 4,386 5,126
Accrued expenses and other current liabilities 10,893 7,883
Capital lease obligation, current portion 13 108
Deferred revenues 58 33
-------- --------
Total current liabilities 18,035 16,444
Capital lease obligations, net of current portion 168 168
Net liabilities of discontinued operations 1,674 2,459
Total liabilities 19,877 19,073
-------- --------
Commitments and contingencies
Minority interest in subsidiary 60 482
-------- --------
Stockholders' equity:
Preferred Stock:
Class A Cumulative, $.01 par value, liquidation preference of 1 1
$4.00 per share; 2,000,000 shares authorized; 80,597 and
109,961 shares issued and outstanding at September 30, 2000
and December 31, 1999, respectively
Class C Cumulative, $.01 par value; liquidation preference of 15 15
$3.50 per share; 2,500,000 shares authorized; 1,500,000
shares issued and outstanding at September 30, 2000 and
December 31, 1999, respectively
Class D Cumulative, $.01 par value; 15,000 shares authorized; 1 0
10,000 and no shares issued and outstanding at September 30,
2000 and December 31, 1999, respectively
Common Stock: $.001 par value, 100,000,000 shares authorized; 18
18,493,975 and 16,137,250 shares issued and outstanding at 16
September 30, 2000 and December 31, 1999, respectively
Additional paid in capital 34,815 21,762
Accumulated deficit (27,458) (14,932)
-------- --------
Total stockholders' equity 7,392 6,862
-------- --------
Total liabilities and stockholders' equity $ 27,329 $ 26,417
======== ========
</TABLE>
Page 8
<PAGE>
THE NETPLEX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
2000 1999 2000 1999
------- ------ -------- --------
------------ (Unaudited)----------------
<S> <C> <C> <C> <C>
Revenue
Services $ 4,112 $ 3,815 $ 10,731 $10,250
Product 419 671 2,091 1,542
------- ------- -------- -------
4,531 4,486 12,822 11,792
------- ------- -------- -------
Cost of revenues
Services 1,968 2,033 5,630 5,015
Product 338 558 1,559 1,100
------- ------- -------- -------
2,306 2,591 7,189 6,115
------- ------- -------- -------
Gross profit 2,225 1,895 5,633 5,677
Selling, general and administrative expenses 5,840 3,149 16,652 7,691
Restructure charges 1,512 0 1,512 0
------- ------- -------- -------
Operating loss (5,011) (1,254) (12,341) (2,014)
Interest expense (income), net 17 116 (22) 319
------- ------- -------- -------
Net loss before income taxes (5,145) (1,370) (12,509) (2,333)
Provision for (benefit from) income taxes -- -- -- --
------- ------- -------- -------
Loss from continuing operations (5,145) (1,370) (12,509) (2,333)
Income (loss) from discontinued operations
(net of income taxes) - Note B (429) (97) (951) 1,117
Gain on sale of discontinued operations (net
of income taxes) - Note B 513 -- 513 --
------- ------- -------- -------
Loss before minority interest (5,061) (1,467) (12,947) (1,216)
Minority interest 170 -- 422 --
------- ------- -------- -------
Net loss (4,891) (1,467) (12,525) (1,216)
Preferred Stock dividend (285) (118) (774) (356)
------- ------- -------- -------
Loss applicable to common shareholders $(5,176) $(1,585) $(13,299) $(1,572)
======= ======= ======== =======
Basic and diluted loss per common share $ (0.28) $ (0.12) $ (0.74) $ (0.13)
======= ======= ======== =======
Weighted average common shares outstanding:
Basic and diluted 18,299 12,932 17,870 11,747
======= ======= ======== =======
</TABLE>
Page 9
