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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
--------------- TO
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COMMISSION FILE NUMBER 0-25494
REMEDY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0265675
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1505 SALADO DRIVE, MOUNTAIN VIEW, CA 94043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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(650) 903-5200
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
WWW.REMEDY.COM
(REGISTRANT'S INTERNET ADDRESS)
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 [ ]
There were 31,160,886 shares of the Company's Common Stock, par value
$.00005, outstanding on April 30, 2000.
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TABLE OF CONTENTS
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PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999....................................... 3
Condensed Consolidated Statements of Income for the Three
Months Ended March 31, 2000 and March 31, 1999.............. 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and March 31, 1999........ 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........................................................ 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 19
Signature................................................... 20
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REMEDY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
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<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
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(UNAUDITED) (1)
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Current assets:
Cash and cash equivalents................................. $ 54,678 $ 47,302
Short-term investments.................................... 138,170 125,116
Accounts receivable, net.................................. 49,329 64,105
Prepaid expenses and other current assets................. 16,855 7,383
Deferred tax assets....................................... 6,831 6,831
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Total current assets.............................. 265,863 250,737
Property and equipment, net................................. 15,141 14,945
Other non-current assets.................................... 3,023 2,996
Goodwill and other intangible assets, net................... 26,906 18,809
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$310,933 $287,487
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,059 $ 1,861
Accrued compensation and related liabilities.............. 9,490 15,432
Income taxes payable...................................... 2,573 1,341
Other accrued liabilities................................. 13,959 15,395
Deferred revenue.......................................... 41,810 38,828
Current portion of obligations under capital leases....... 19 67
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Total current liabilities......................... 70,910 72,924
Noncurrent portion of obligations under capital leases...... 18 23
Stockholders' equity:
Common stock and additional paid-in capital............... 161,697 141,546
Treasury Stock (2,002,300 shares)......................... (31,267) (31,267)
Notes receivable from stockholders........................ (45) (45)
Accumulated other comprehensive income.................... (145) 9
Retained earnings......................................... 109,765 104,297
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Total stockholders' equity........................ 240,005 214,540
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$310,933 $287,487
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(1) The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date, but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes.
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REMEDY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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2000 1999
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Revenue:
Product................................................... $35,420 $23,429
Maintenance and service................................... 26,512 18,970
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Total revenue..................................... 61,932 42,399
Costs and expenses:
Cost of product revenue................................... 2,402 878
Cost of maintenance and service revenue................... 11,037 7,713
Research and development.................................. 11,286 9,214
Sales and marketing....................................... 25,772 18,008
General and administrative................................ 3,239 2,157
Amortization of goodwill and other intangibles............ 1,829 748
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Total costs and expenses.......................... 55,565 38,718
Income from operations...................................... 6,367 3,681
Interest income and other, net.............................. 1,674 1,089
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Income before provision for income taxes.................... 8,041 4,770
Provision for income taxes.................................. 2,573 1,574
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Net income.................................................. $ 5,468 $ 3,196
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Net income per share:
Basic..................................................... $ 0.18 $ 0.11
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Diluted................................................... $ 0.16 $ 0.11
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Shares used in computing per share amounts:
Basic..................................................... 30,420 28,498
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Diluted................................................... 34,085 30,047
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See accompanying notes.
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REMEDY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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THREE MONTHS ENDED
MARCH 31,
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 5,468 $ 3,196
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 2,155 1,716
Amortization of goodwill and other intangibles......... 1,829 748
Changes in assets and liabilities:
Accounts receivable.................................... 14,776 10,787
Prepaid expenses and other current assets.............. 442 (2,020)
Accounts payable....................................... 1,198 1,367
Accrued compensation and related liabilities........... (5,942) (4,380)
Income taxes payable................................... 1,232 (868)
Other accrued liabilities.............................. (1,590) 435
Deferred revenue....................................... 2,982 1,110
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Net cash provided by operating activities......... 22,550 12,091
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments......................... (101,628) (56,946)
Maturities of short-term investments........................ 88,574 45,226
Cash paid for businesses acquired, net...................... (10,280) --
Capital expenditures........................................ (1,997) (3,101)
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Net cash used in investing activities............. (25,331) (14,821)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligations.......... (53) (181)
Proceeds from issuance of common stock...................... 10,210 2,998
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Net cash provided by financing activities......... 10,157 2,817
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Net increase in cash and cash equivalents................... 7,376 87
Cash and cash equivalents at beginning of period............ 47,302 58,976
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Cash and cash equivalents at end of period.................. $ 54,678 $ 59,063
========= ========
</TABLE>
See accompanying notes.
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REMEDY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of March 31, 2000, and the
condensed consolidated statements of income for the three months ended March 31,
2000 and 1999, and the condensed consolidated statements of cash flows for the
three months ended March 31, 2000 and 1999, have been prepared by Remedy
Corporation ("Remedy" or the "Company"), without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at March 31, 2000 and for all periods presented have been made. The
condensed consolidated balance sheet at December 31, 1999 has been derived from
the audited financial statements at that date.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission's rules and regulations. These condensed financial statements should
be read in conjunction with the audited financial statements and notes thereto
included in the Company's 1999 Annual Report on Form 10-K filed with the
Securities and Exchange Commission in March 2000.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of results that may be expected for any other interim
period or for the full fiscal year.
2. REVENUE RECOGNITION
The Company recognizes revenue in accordance with Statement of Position
97-2 (SOP 97-2), "Software Revenue Recognition", as amended. The Company derives
revenue from the sale of software licenses, post-contract support ("support")
and other services. Support includes telephone technical support, bug fixes and
rights to upgrades on a when-and-if available basis for a stated term of
generally one year. Services range from training and basic consulting to
software modification to meet specific customer needs. In software arrangements
that include rights to multiple software products, specified upgrades, support
and/or other services, the Company allocates the total arrangement fee among
each deliverable based on the relative fair value of each of the deliverables
determined based on objective evidence which is specific to the Company.
Revenue from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, the fee is fixed or
determinable and collection is probable. If the fee due from the customer is not
fixed or determinable, revenue is recognized as payments become due from the
customer. If collection is not considered probable, revenue is recognized when
the fee is collected.
Revenue allocable to support is recognized on a straight-line basis over
the periods in which the support is provided.
Arrangements that include consulting services are evaluated to determine
whether those services are essential to the functionality of other elements of
the arrangement. When services are considered essential, revenue under the
arrangement is recognized using contract accounting. When services are not
considered essential, the revenue allocable to the software services is
recognized as the services are performed.
3. EARNINGS PER SHARE
Basic earnings per share is computed using the weighted-average number of
common shares outstanding. Diluted earnings per share includes the
weighted-average number of common share equivalents outstanding during the
period. Dilutive common share equivalents consist of employee stock options and
are calculated by using the treasury stock method.
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REMEDY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following table sets forth the computation of basic and diluted
earnings per share:
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THREE MONTHS ENDED
MARCH 31,
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2000 1999
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(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
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Numerator:
Net Income................................................ $ 5,468 $ 3,196
Denominator:
Denominator for basic earnings per share-weighted-average
shares................................................. 30,420 28,498
Effect of dilutive securities:
Employee stock options...................................... 3,665 1,549
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Denominator for diluted earnings per
share-weighted-average shares and dilutive
securities............................................. 34,085 30,047
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Basic earnings per share.................................. $ 0.18 $ 0.11
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Diluted earnings per share................................ $ 0.16 $ 0.11
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4. RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activity",
which was subsequently amended by Statement No. 137 (SFAS 137), "Accounting for
Derivative Instruments and Hedging Activities: Deferral of Effective Date of
FASB 133" to require adoption of SFAS 133 in years beginning after June 15,
2000. The Statement requires the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be recorded at
fair value through earnings. If the derivative qualifies as a hedge, depending
on the nature of the exposure being hedged, changes in the fair value of
derivatives are either offset against the change in fair value of hedged assets,
liabilities, or firm commitments through earnings or are recognized in other
comprehensive income until the hedged cash flow is recognized in earnings. The
ineffective portion of a derivative's change in fair value is recognized in
earnings. The Statement permits early adoption as of the beginning of any fiscal
quarter. The Company adopted SFAS 133 during the quarter ended September 30,
1999 and subsequently implemented a hedging program related to multi-currency
invoicing. The adoption of SFAS 133 did not have a material effect on the
Company's financial statements. See Note 6.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain aspects of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The Company believes that its current revenue recognition principles
comply with SAB 101.
5. BUSINESS COMBINATIONS
In February 2000, the Company acquired Axtive Software, Inc. (Axtive), a
privately held provider of web personalization software and Ostream Software,
Inc. (Ostream), a privately held software company specializing in the
development and marketing of business process automation solutions that are
companion to Remedy products. The combined purchase price for the two
acquisitions was approximately $10.3 million cash. Approximately $9.4 million of
the purchase price was allocated to goodwill, approximately $0.5 million was
allocated to acquired workforce and $0.4 million was allocated to the fair value
of fixed assets. The acquired workforce valuation was recorded representing the
cost to locate, hire and train qualified replacement employees. All intangibles
are being amortized on a straight-line basis over a period of four years from
the date of acquisition. The fixed assets are being amortized on a straight-line
basis over a period of three years.
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REMEDY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Approximately $0.4 million of intangibles have been amortized as of March 31,
2000. Total costs related to the Ostream and Axtive acquisitions are expected to
be approximately $11.2 million, which consists of the $10.3 million combined
purchase prices as well as employee related costs of $0.9 million. Employee
related costs comprised primarily of retention bonuses will be expensed over the
appropriate service period. The acquisitions were accounted for under the
purchase method and accordingly, their operating results have been included in
the Company's consolidated financial statements since the date of acquisition.
Pro forma results of operations have not been presented since the effect of
these acquisitions was not material to the Company's consolidated financial
position or results of operations.
6. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments principally to minimize
the exposures to the United States Dollar (USD) value of foreign currency
denominated sales. The Company began pricing its products in multiple currencies
during the fourth quarter of 1999, and in preparation, foreign exchange forward
and simple purchase option contracts were entered beginning in the quarter ended
September 30, 1999 to hedge the risk that the USD value of the foreign currency
denominated sales may be adversely affected by changes in foreign currency
exchange rates. As part of its overall strategy to manage the level of exposure
to the risk of foreign currency exchange rate fluctuations, the Company hedges a
portion of its foreign currency exposures anticipated over the ensuing twelve
month period. At March 31, 2000, the Company had hedged transactions via Pound
Sterling and Euro denominated cash flow hedges, using forward and simple
purchase option contracts that generally have maturities of six months or less.
The Company records these foreign exchange contracts at fair value in its
consolidated balance sheet and the related gains or losses on these contracts
are reflected, net of the related tax effect in stockholders' equity as a
component of other comprehensive income. These gains and losses are reclassified
into earnings in the period in which the sales being hedged are recognized as
revenue. However, if any of these contracts were considered to be ineffective in
offsetting the change in the forecasted cash flows relating to the sales being
hedged, any changes in fair value relating to the ineffective portion of these
contracts would be immediately recognized in earnings.
The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk-management objective and
strategy for undertaking various hedge transactions. The Company also formally
assesses, both at the hedge's inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in
offsetting changes in cash flows of hedged items. Changes in the time value of
option contracts are excluded from this effectiveness assessment and recorded
directly in earnings. During the quarter ended March 31, 2000 a total charge of
$18,000, representing the change in option time values, was recorded in
earnings.
As of March 31, 2000, the Company included the fair value of simple
purchase option contracts of $17,000 and the fair value of forward contracts of
$150,000 in prepaid expenses and other current assets in its consolidated
balance sheet.
At March 31, 2000, the Company had a balance of $30,000 in other
comprehensive income related to future revenue transactions. The other
comprehensive income balance at March 31, 2000 is expected to be recognized into
earnings within the next twelve months. A gain of $55,925 was reclassed into
earnings from other comprehensive income for the quarter ended March 31, 2000
upon recognition of the related revenue.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report on Form 10-Q contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements. The Company's quarterly
operating results have in the past and may in the future vary significantly
depending on factors including, but not limited to, those discussed in the
"Factors That May Affect Future Operating Results" section on page 13 of this
report and in the Company's 1999 Form 10-K filed with the Securities and
Exchange Commission in March 2000, such as increased competition, the timing of
new product announcements and changes in pricing policies by the Company and its
competitors, market acceptance of new and enhanced versions of the Company's
products, the size and timing of significant orders, the mix of direct and
indirect sales, changes in operating expenses, changes in Company strategy,
personnel changes, foreign currency exchange rates and general economic factors.
Furthermore, the Company has often recognized a substantial portion of its
revenue in the last month of a quarter, with this revenue frequently
concentrated in the last week of a quarter. As a result, product revenue in any
quarter is substantially dependent on orders booked and shipped in that quarter,
and revenue for any future quarter is not predictable with any degree of
certainty. Product revenue is also difficult to forecast because the market for
client/server and web-based application software products is rapidly evolving,
and the Company's sales cycle, from initial trial to multiple copy purchases and
the provision of support services, varies substantially from customer to
customer. In addition, the Company expects that sales derived through indirect
channels, which are harder to predict and have lower margins than direct sales,
may increase as a percentage of total revenue. The Company's expense levels are
based, in part, on its expectations as to future revenues. If revenue levels are
below expectations, operating results are likely to be adversely affected. Net
income may be disproportionately affected by a reduction in revenue because a
proportionately smaller amount of the Company's expenses varies with its
revenue. As a result, the Company believes that period-to-period comparisons of
its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Due to all the foregoing
factors, it is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be
materially adversely affected.
Remedy Corporation ("Remedy" or the "Company") is the world's leading
supplier of eCRM and eBusiness infrastructure solutions. With over 8,800 sites
in production, in more than 70 countries, including over 60% of the Fortune 100,
more organizations use Remedy products for eCRM and eBusiness infrastructure
management than any other solution. Remedy delivers service solutions that
accelerate an organization's move to eBusiness and raise its agility to
continually differentiate itself from competitors. Remedy's fast deployment
programs and radical adaptability enable organizations to move more quickly to
an eBusiness model, and to do so in a differentiated way. By focusing on
internal and external service as competitive differentiators, our customers
continually improve both their customer interactions and internal operations to
raise satisfaction and lower costs.
The Company was incorporated on November 20, 1990 in Delaware. The Company
maintains its executive offices and principal facilities at 1505 Salado Drive,
Mountain View, California 94043. Its telephone number is (650) 903-5200.
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RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenue, statement
of income data for the periods indicated.
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THREE MONTHS
ENDED
MARCH 31,
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2000 1999
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Revenue:
Products.................................................. 57% 55%
Maintenance and service................................... 43% 45%
--- ---
Total revenue..................................... 100% 100%
Costs and expenses:
Cost of product revenue................................... 4% 2%
Cost of maintenance and service revenue................... 18% 18%
Research and development.................................. 18% 22%
Sales and marketing....................................... 42% 42%
General and administrative................................ 5% 5%
Amortization of goodwill and other intangibles............ 3% 2%
--- ---
Total costs and expenses.......................... 90% 91%
--- ---
Income from operations...................................... 10% 9%
Interest income, net........................................ 3% 3%
--- ---
Income before provision for income taxes.................... 13% 12%
Provision for income taxes.................................. 4% 4%
--- ---
Net income.................................................. 9% 8%
--- ---
</TABLE>
REVENUE
The Company recognizes revenue in accordance with Statement of Position
97-2 (SOP 97-2), "Software Revenue Recognition", as amended. The Company derives
revenue from the sale of software licenses, post-contract support ("support")
and other services. Support includes telephone technical support, bug fixes and
rights to upgrades on a when-and-if available basis for a stated term of
generally one year. Services range from training and basic consulting to
software modification to meet specific customer needs. In software arrangements
that include rights to multiple software products, specified upgrades, support
and/or other services, the Company allocates the total arrangement fee among
each deliverable based on the relative fair value of each of the deliverables
determined based on objective evidence which is specific to the Company.
Revenue from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, the fee is fixed or
determinable and collection is probable. If the fee due from the customer is not
fixed or determinable, revenue is recognized as payments become due from the
customer. If collection is not considered probable, revenue is recognized when
the fee is collected.
Revenue allocable to support is recognized on a straight-line basis over
the periods in which the support is provided.
Arrangements that include consulting services are evaluated to determine
whether those services are essential to the functionality of other elements of
the arrangement. When services are considered essential, revenue under the
arrangement is recognized using contract accounting. When services are not
considered essential, the revenue allocable to the software services is
recognized as the services are performed.
The Company distributes the majority of its products through its direct
sales organization which is complemented by indirect sales channels, including
value added resellers (VARs), system integrators (SIs) and independent software
vendors (ISVs). Billings derived through indirect channels accounted for
approximately 46% of the Company's total billings for the quarters ended March
31, 2000 and March 31, 1999. The
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Company expects that billings derived through indirect channels, while growing
in absolute dollar amounts, will fluctuate as a percentage of total billings.
PRODUCT REVENUE. The Company currently derives substantially all of its
product revenue from licenses of the Action Request System and applications
which are built upon the AR System foundation. Revenue from product licenses
increased 51% to $35.4 million for the quarter ended March 31, 2000 from $23.4
million in the comparable quarter in 1999. The growing acceptance of the
Company's software solutions in both U.S. and international markets has been a
major factor in this increase. International sales accounted for approximately
35% and 32% of the Company's total revenue for the quarters ended March 31, 2000
and March 31, 1999, respectively. The growth of revenue in absolute dollars is
largely a result of the Company's sales and marketing efforts and the increased
acceptance of the Action Request System and related eBusiness Infrastructure
Management adaptable applications. The Company intends to continue to enhance
its current software products as well as to develop new software products. As a
result, the Company anticipates that revenue from product licenses will continue
to represent a majority of its revenue in the foreseeable future.
MAINTENANCE AND SERVICE REVENUE. Revenue from maintenance and services
increased by 40% to $26.5 million for the quarter ended March 31, 2000 from
$19.0 million in the comparable quarter in 1999. The growth of maintenance and
service revenue in absolute dollars is primarily due to the renewal of
maintenance contracts after the initial one-year term and increased licensing
activity, which has resulted in increased revenue from ancillary sources such as
maintenance, support, training and consulting services. Although prior quarters'
licensing growth has resulted in increased revenue from maintenance and support,
training and consulting services, the Company expects that prior growth rates of
the Company's installed base and, consequently, in the Company's service
revenue, may not be sustainable in the future.
COSTS AND EXPENSES
COST OF PRODUCT REVENUE. Costs of product revenue consist primarily of
costs related to product media and duplication, manuals, packaging materials,
personnel, shipping expenses and royalties paid to third-party vendors. Cost of
product revenue increased to $2.4 million for the quarter ended March 31, 2000
from $0.9 million for the comparable quarter in 1999, representing 7% and 4% of
the related product revenue in such quarters, respectively. The increase in cost
of product revenue as a percentage of product revenue and in absolute dollars
primarily relates to an increase in royalties paid to third party vendors as
well as the higher volumes of product shipped in successive quarters. Cost of
product revenue does not include amortization of capitalized software
development costs as all development costs incurred in the research and
development of new software products and enhancements to existing software
products have been expensed as incurred. The Company believes that cost of
product revenue will increase in absolute dollar amounts in the future.
COST OF MAINTENANCE AND SERVICE REVENUE. Costs of maintenance and service
revenue consist primarily of personnel related costs incurred in providing
telephone support, consulting services and training to customers. Cost of
maintenance and service revenue increased to $11.0 million for the quarter ended
March 31, 2000 from $7.7 million in the comparable quarter in 1999, representing
42% and 41% of the related maintenance and service revenue for the respective
quarters. Cost of maintenance and service revenue as a percentage of the related
revenue increased due to the higher cost associated with supporting enterprise
customers through maintenance, training and consulting. Cost of maintenance and
service revenue in absolute dollars increased significantly, primarily due to
costs from increased personnel and third-party implementation providers,
including Remedy Approved Consultants (RACs) as the Company continues to invest
in its customer support and consulting organizations. The Company believes that
cost of maintenance and service revenue will increase in absolute dollar amounts
in the future.
RESEARCH AND DEVELOPMENT. Research and development costs relate to the
personnel and equipment costs associated with maintaining and enhancing existing
product lines as well as developing new product lines to meet the expanding
range of customer requirements. Research and development expenses were $11.3
million and $9.2 million, or 18% and 22% of total revenue, for the quarters
ended March 31, 2000 and March 31, 1999, respectively. The decrease in research
and development expenses as a percentage of total revenue primarily relates to a
slower hiring rate of research and development employees in the quarter ended
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March 31, 2000 when compared to the same period in prior year. The increase in
research and development expenses in absolute dollar amounts is primarily
attributable to increased staffing, outside contractors and associated support
for software engineers necessary to expand and enhance the Company's product
line. The Company believes that research and development expenses will continue
to increase in absolute dollar amounts in the future.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses for sales and marketing personnel, as well as
promotional expenses. Sales and marketing expenses were $25.8 million and $18.0
million, for the quarters ended March 31, 2000 and March 31, 1999, respectively,
or 42% of total revenue. The increase in sales and marketing expenses in
absolute dollar amounts is primarily due to the Company increasing sales and
marketing resources and marketing activities, including trade shows and
promotional activities, to further promote the Company's new and existing
products. The Company believes that sales and marketing expenses will continue
to increase in absolute dollar amounts in the future as the Company plans to
further promote the sales of its expanding product line.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of the salaries and related expenses for executive and finance
personnel, professional fees and other corporate expenses. General and
administrative expenses were $3.2 million and $2.2 million, for the quarters
ended March 31, 2000 and March 31, 1999, respectively, or 5% of total revenue.
The increase in absolute dollar amounts is primarily the result of increased
staffing and associated expenses necessary to manage and support the Company's
growth. The Company believes that its general and administrative expenses will
increase in absolute dollar amounts in the future as the Company expands its
staffing.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles relates to the purchase of BayStone Software, Inc. in
October 1998, the purchase of Pipestream Technologies, Inc. in July 1999, the
purchase of Fortress Technologies, Inc. in September 1999 and the purchase of
Axtive Software, Inc and Ostream Software, Inc. in February 2000. Goodwill and
other intangibles, which consist of $32.0 million of goodwill and $1.3 million
of acquired workforce valuation are being amortized on a straight-line basis
over a period of four years from the date of acquisition. Amortization expense
totaled $1.8 million and $0.8 million for the quarters ended March 31, 2000 and
March 31, 1999, respectively. Amortization expense related to the acquisitions
is expected to be approximately $8.1 million and $8.3 million, for the twelve
months ended December 31, 2000 and December 31, 2001, respectively.
INTEREST INCOME AND OTHER, NET. Interest income and other, net which
consists primarily of interest income earned on the Company's cash and short
term investments, was $1.7 million and $1.1 million for the quarters ended March
31, 2000 and March 31, 1999, respectively. The increase is primarily due to
larger short term investment balances maintained in the quarter ended March 31,
2000 compared to the same period in 1999, as well as to a lesser extent,
increased interest rates over the same comparative period.
PROVISION FOR INCOME TAXES. The effective tax rate for the quarters ended
March 31, 2000 and March 31, 1999 was 32% and 33%, respectively. The effective
tax rate for 2000 is lower than the effective tax rate for 1999 primarily due to
low-taxed foreign income, partially offset by reduced research and development
credit benefits, tax exempt interest and state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $22.6 million and $12.1
million during the three months ended March 31, 2000 and March 31, 1999,
respectively. The increase in the Company's net cash provided by operations was
primarily attributable to the income generated from the current period and
collections of accounts receivable balances.
Net cash used in investing activities was $25.3 million and $14.8 million
during the three months ended March 31, 2000 and March 31, 1999, respectively.
The increase in the Company's net cash used in investing activities is primarily
due to net short-term investment purchases and cash spent on businesses acquired
net of a decrease in property and equipment expenditures.
12
<PAGE> 13
Purchases of short-term investments exceeded maturities by $13.1 million
and $11.7 million for the three months ended March 31, 2000 and March 31, 1999,
respectively.
Cash paid to acquire businesses during the three months ended March 31,
2000 amounted to $10.3 million. The $10.3 million is comprised of $7.5 million
spent to acquire Axtive Software, Inc. and $2.8 million spent to acquire Ostream
Software, Inc.
Cash used to purchase property and equipment, primarily for computer
workstations, capitalized internal use software, leasehold improvements and file
servers for the Company's growing employee base was $2.0 million and $3.1
million during the three months ended March 31, 2000 and March 31, 1999,
respectively. The Company's principal commitments consist primarily of leases on
its facilities and its telephone system.
Net cash provided by financing activities during the three months ended
March 31, 2000 increased to $10.2 million from $2.8 million during the three
months ended March 31, 1999. This comparative increase of $7.4 million is
primarily due to the increase in proceeds of $7.2 million from the issuance of
common stock under the stock purchase and stock option plans during the three
month period ended March 31, 2000, compared to the same three month period in
prior year.
At March 31, 2000, the Company had $54.7 million in cash and cash
equivalents, $138.2 million in short-term investments and $195.0 million of
working capital.
The Company believes that its current cash and short-term investments
balances and cash flow from operations will be sufficient to meet its working
capital and capital expenditure requirements for at least the next 12 months.
Although operating activities may provide cash in certain periods, to the extent
the Company experiences growth in the future, the Company anticipates that its
operating and investing activities may use cash. In addition, the Company may
utilize cash resources to fund acquisitions or investments in complementary
businesses, technologies or product lines. Consequently, significant future
growth may require the Company to obtain additional equity or debt financing.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. The Company's quarterly
operating results have in the past and may in the future vary significantly
depending on factors such as increased competition, the timing of new product
announcements and changes in pricing policies by the Company and its
competitors, market acceptance of new and enhanced versions of the Company's
products, the size and timing of significant orders, the mix of direct and
indirect sales, changes in operating expenses, changes in Company strategy,
personnel changes, foreign currency exchange rate fluctuations and general
economic factors. The Company operates with no significant order backlog because
its software products typically are shipped or electronically downloaded over
the Web shortly after orders are received. Furthermore, the Company has often
recognized a substantial portion of its revenue in the last month of a quarter,
with this revenue frequently concentrated in the last weeks of a quarter. As a
result, product revenue in any quarter is substantially dependent on orders
booked and shipped in that quarter and revenue for any future quarter is not
predictable with any significant degree of certainty. Product revenue is also
difficult to forecast because the market for software products is rapidly
evolving, and the Company's sales cycle, from initial trial to multiple copy
purchases and the provision of support services, varies substantially from
customer to customer. The Company's expense levels are based, in part, on its
expectations as to future revenue. If revenue levels are below expectations,
operating results are likely to be adversely affected. Net income may be
disproportionately affected by a reduction in revenue because a proportionately
smaller amount of the Company's expenses varies with its revenue. As a result,
the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. It is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would likely be materially adversely affected.
DEPENDENCE ON NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT
BUGS. The client/server and web-based application software market is
characterized by rapid technological change, frequent new
13
<PAGE> 14
product introductions and evolving industry standards. The introduction of
products embodying new technologies and the emergence of new industry standards
can render existing products obsolete and unmarketable. The life cycles of the
Company's products are difficult to estimate. The Company's future success will
depend upon its ability to enhance its current products and to develop
andintroduce new products on a timely basis that keep pace with technological
developments and emerging industry standards and address the increasingly
sophisticated needs of its customers. In 1999, the Company invested significant
resources into the research and development, sales and marketing of software
applications. The Company is continuing to invest heavily in these efforts in
2000. There can be no assurance that the Company will be successful in
developing and marketing product enhancements or new products that respond to
technological change, evolving industry standards and customer requirements, or
that the Company will not experience difficulties that could delay or prevent
the successful development, introduction and marketing of these products, or
that its new products and product enhancements will adequately meet the
requirements of the marketplace and achieve market acceptance. If the Company is
unable, for technological or other reasons, to develop and introduce new
products or enhancements of existing products in a timely manner in response to
changing market conditions or customer requirements, the Company's business,
operating results and financial condition will be materially adversely affected.
If the new products currently being developed by the Company do not achieve
market acceptance or are not released when expected, the Company's business,
operating results and financial condition will be materially adversely affected.
Software products as complex as those offered by the Company may contain
undetected errors or failures when first introduced or when new versions are
released. The Company has in the past discovered software errors in certain of
its new products and enhancements after their introduction and has experienced
delays or lost revenue during the period required to correct these errors.
Although the Company has not experienced material adverse effects resulting from
any such errors to date, there can be no assurance that, despite testing by the
Company and by current and potential customers, errors will not be found in new
products or releases after commencement of commercial shipments, resulting in
loss of or delay in market acceptance, which could have a material adverse
effect upon the Company's business, operating results and financial condition.
INTERNATIONAL OPERATIONS. International sales represented approximately 35%
of the Company's revenue in the three months ended March 31, 2000. The Company
currently has thirteen international wholly-owned subsidiaries, which are
primarily sales offices, and are located in the United Kingdom, Ireland, Canada,
Germany, France, Spain, Italy, The Netherlands, Sweden, Singapore, Australia,
Japan and Hong Kong. One of the Company's strategies is to continue to expand
its existing international operations and enter additional international
markets, which will require significant management attention and financial
resources. Traditionally, international operations are characterized by higher
operating expenses and lower operating margins. As a result, if international
revenues increase as a percentage of total revenue, operating margins may be
adversely affected. Costs associated with international expansion include the
establishment of additional foreign offices, the hiring of additional personnel,
the localization and marketing of its products for particular foreign markets
and the development of relationships with additional international service
providers. If international revenue is not adequate to offset the expense of
expanding foreign operations, the Company's business, operating results or
financial condition could be materially adversely affected.
The Company's international operations are subject to other risks inherent
in international business activities and generally include unexpected changes in
regulatory requirements, tariffs and other trade barriers, product acceptance in
foreign countries, longer accounts receivable payment cycles, difficulties in
managing international operations, potentially adverse tax consequences
including restrictions on the repatriation of earnings, the burdens of complying
with a wide variety of foreign laws and general economic conditions in such
countries. There can be no assurance that such factors will not have a material
adverse effect on the Company's future international sales and, consequently,
the Company's results of operations. In addition, because a substantial majority
of the Company's international sales are indirect, any material increase in the
Company's international sales as a percentage of total revenue may adversely
affect the Company's average selling prices and gross margins due to the lower
unit prices that the Company receives when selling through indirect channels.
14
<PAGE> 15
PRODUCT CONCENTRATION. The Company currently derives the majority of its
revenue from licenses of the AR System, the applications Remedy provides, which
are built upon the AR System foundation, and related services. Broad market
acceptance of the Company's products is critical to the Company's future
success. As a result, a decline in demand for or failure to achieve broad market
acceptance of the AR System foundation and applications as a result of
competition, technological change or otherwise, would have a material adverse
effect on the business, operating results and financial condition of the
Company. The Company's future financial performance will depend in part on the
successful development, introduction and customer acceptance of new and enhanced
versions of the AR System foundation and other applications, specifically eCRM
and eBusiness Infrastructure Management applications. There can be no assurance
that the Company will continue to be successful in marketing the AR System or
any new or enhanced products or applications. In 2000, the Company continues to
invest significant resources into the research and development, sales and
marketing of new software applications. However, the Company believes that its
success in expanding its product line will depend largely on new products
achieving market acceptance and technological competitiveness.
GENERAL ECONOMIC AND MARKET CONDITIONS. During recent years, segments of
the personal computer industry have experienced significant economic downturns
characterized by decreased product demand, production over-capacity, price
erosion, work slowdowns and layoffs. The Company's operations may in the future
experience substantial fluctuations from period to period as a consequence of
such industry patterns, general economic conditions affecting the timing of
orders from major customers and other factors affecting capital spending. There
can be no assurance that such factors will not have a material adverse effect on
the Company's business, operating results or financial condition.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS. From time to time the Company
may acquire or invest in companies, technologies or products that complement the
Company's business or its product offerings. Any such acquisitions may result in
the use of cash, potentially dilutive issuances of equity securities, the
write-off of software development costs or other assets, incurrence of severance
liabilities, the amortization of expenses related to goodwill and other
intangible assets and/or the incurrence of debt, any of which could have a
material adverse effect on the Company's business, financial condition, cash
flows and results of operations. Acquisitions involve numerous additional risks
including difficulties in the assimilation of operations, services, products and
personnel, the diversion of management's attention from other business concerns,
the disruption of the Company's business, and the entry into markets in which
the Company has little or no direct prior experience. In addition, potential
acquisition candidates targeted by the Company may not have audited financial
statements, detailed financial information or any degree of internal controls.
There can be no assurance that an audit subsequent to any successful completion
of an acquisition will not reveal matters of significance, including with
respect to revenues, expenses, liabilities, contingent or otherwise, and
intellectual property. There can be no assurance that the Company would be
successful in overcoming these or any other significant risks encountered and
the failure to do so could have a material adverse effect upon the Company's
business, operating results and financial condition.
RISKS ASSOCIATED WITH SELLING TO LARGE ENTERPRISE CUSTOMERS. The Company
has recently increased its efforts to sell its products to large enterprise
customers, and has devoted significant management and financial resources to
achieving this goal. If successful, large enterprise customers are expected to
deploy the Company's products in business critical operations which involve
significant capital and management commitments by such customers. Potential
large enterprise customers generally commit significant resources to an
evaluation of available enterprise software and require the Company to expend
substantial time, effort and money educating them about the value of the
Company's solutions. Sales of the Company's products to such customers require
an extensive sales effort throughout a customer's organization because decisions
to purchase such products generally involve the evaluation of the software by a
significant number of customer personnel in various functional and geographic
areas, each often having specific and conflicting requirements. A variety of
factors, including factors over which the Company has little or no control, may
cause potential large enterprise customers to favor a particular supplier or to
delay or forego a purchase. As a result of these or other factors, the sales
cycle for the Company's products is long, typically ranging between three and
nine months. As a result of the length of the sales cycle and the significant
selling expenses resulting from selling
15
<PAGE> 16
into the large enterprise, the Company's ability to forecast the timing and
amount of specific sales is limited, and the delay or failure to complete one or
more large transactions to which the Company has devoted significant resources
could have a material adverse effect on the Company's business, operating
results or financial condition and could cause significant variations in the
Company's operating results from quarter to quarter.
EXPANSION OF INDIRECT CHANNELS. An integral part of the Company's strategy
is to continue to develop the marketing channels of value-added resellers
(VARs), system integrators (SIs) and independent software vendors (ISVs). VARs,
SIs and ISVs accounted for approximately 46% of the Company's total billings in
the three month period ended March 31, 2000. If these marketing channels
increase as a percentage of sales, the Company's operating margins may be
adversely affected due to the lower unit prices that the Company receives when
selling through indirect channels. There can be no assurance that the Company
will be able to attract VARs, SIs and ISVs that will be able to market the
Company's products effectively and will be qualified to provide timely and
cost-effective customer support and service. In addition, the Company's
agreements with VARs, SIs and ISVs are not exclusive and in many cases may be
terminated by either party without cause, and many of the Company's VARs, SIs
and ISVs carry competing product lines. Therefore, there can be no assurance
that any VAR, SI or ISV will continue to represent the Company's products, and
the inability to recruit, or the loss of important VARs, SIs or ISVs could
adversely affect the Company's results of operations.
The Company intends to rely on third-party implementation providers,
including integration consulting firms and Remedy Approved Consultants (RACs),
to assist with the implementation of its products in large enterprise customers
and in the training of personnel within such enterprises, in order to meet the
demand for implementation of the Company's product from large enterprise
customers. As it is the Company's strategy to increase its sales to enterprise
customers and to use third party service providers to service such customers,
the Company's operating margins may be lower as a result of the higher expenses
associated with engaging such third party service providers.
EURO CONVERSION. The Company is aware of the issues associated with the
changes in Europe aimed at forming a European Economic and Monetary Union (EMU).
On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency (the "Euro"). On that day, the Euro became a functional
legal currency within these countries and over the next three years, business in
the EMU member states will be conducted in both the existing national currency
and the Euro. As a result, companies operating in or conducting business in EMU
member states will need to ensure that their financial and other software
systems are capable of processing transactions and properly handling these
currencies, including the Euro. No later than July 1, 2002, the participating
countries will withdraw all bills and coins denominated in the legacy
currencies, so that the legacy currencies will no longer be legal tender for any
transactions, making the conversion to the Euro complete. The Company recognizes
that by January 1, 2002, all its customers in the participating countries in
Europe will need to have converted all the values in their databases to the
Euro, having previously reflected all values in the appropriate local
currencies. At this time, it is not possible to summarize the potential costs
associated with addressing any Euro conversion issues and there can be no
assurance that these issues and their related costs will not have a materially
adverse effect on the Company's business, operating results and financial
position. However, based on progress to date, the Company believes that the use
of the Euro will not have a significant impact on the manner in which it
conducts its business. Accordingly, conversion to the Euro is not expected to
have a material effect on the Company's financial position, results of
operations or liquidity.
LIMITED OPERATING HISTORY; FUTURE OPERATING RESULTS UNCERTAIN; NEED TO
INCREASE SALES FORCE. The Company was incorporated in November 1990 and began
shipping products in December 1991. Although the Company has experienced
significant absolute dollar growth in revenue in recent years, there can be no
assurance that the prior growth rates are sustainable or indicative of future
operating results or that the Company will remain profitable on a quarterly or
annual basis. In addition, the Company's limited operating history makes the
prediction of future operating results difficult or impossible. Future operating
results will depend on many factors, including the demand for the Company's
products, the level of product and price competition, the Company's success in
expanding its direct sales organization and indirect distribution
16
<PAGE> 17
Ichannels, the ability of the Company to develop and market new products and
control costs, and the percentage of the Company's revenue derived from indirect
channels, which may have lower gross margins than direct sales. In particular,
the Company intends to hire a significant number of additional sales personnel
in 2000 and beyond, which is required if the Company is to achieve significant
revenue growth in the future. Competition for such personnel is intense, and
there can be no assurance that the Company can retain its existing sales
personnel or that it can attract, assimilate or retain additional highly
qualified sales persons in the future. The Company increased the size of its
sales organization from 157 to 189 in 1998, from 189 to 242 in 1999 and from 242
to 254 in the quarter ended March 31, 2000. In the past, the Company has
experienced difficulty in recruiting a sufficient number of qualified sales
persons. If the Company is unable to hire such personnel on a timely basis, the
Company's business, operating results and financial condition could be adversely
affected. The Company intends to invest significantly in its business in order
to maintain a competitive position and as a result, current operating margins
may not be sustainable in the future.
EMPLOYMENT MARKET. The Company's future success depends, in part, on its
continuing ability to attract and retain highly qualified technical, sales,
marketing and managerial personnel. As a majority of the Company's workforce is
located in the competitive employment market of the Silicon Valley in
California, competition for personnel is intense, and there can be no assurance
that the Company can attract, assimilate or retain adequate levels of technical,
sales, marketing and managerial personnel in the future. Any failure of the
Company to attract and retain such qualified employees could have a material
adverse effect on its business, operating results and financial condition.
YEAR 2000. The "Year 2000 problem" relates to the potential for computer
systems to improperly recognize date sensitive information in the year 2000.
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail.
In 1999, the Company spent $0.7 million for its Year 2000 remediation which
included expenditures for consulting, equipment and internal personnel.
Subsequent to the rollover to the Year 2000, the Company is not aware of any
material Year 2000 operational issues or costs associated with its internal IT
systems and non-IT systems or its products and the Company does not expect to
experience any in the future. The Company may potentially experience
unanticipated post Year 2000 problems caused by undetected errors in both
technology utilized for IT systems and vendors with whom Remedy does business.
Year 2000 compliance teams will continually monitor suppliers of systems,
software and services for any subsequent post Year 2000 effects on the Company's
internal business processes. Any post Year 2000 compliance problems of either
the Company or its vendors could materially adversely affect the Company's
business, results of operations, financial condition and prospects.
ADDITIONAL RISKS. The Company's business entails a variety of additional
risks not mentioned above, such as Management of Growth; Dependence Upon Key
Personnel, Dependence on Proprietary Technology; Risks of Infringement and
Product Liability which are set forth in the "Factors That May Affect Future
Operating Results" section of the Company's 1999 Report on Form 10-K filed with
the Securities and Exchange Commission in March 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK. The Company's exposure to market risk for changes in
interest rates primarily relates to the Company's investment portfolio. As
stated in its policy, the Company is averse to principal loss and seeks to
preserve its invested funds by limiting issuer risk, default risk, liquidity
risk and interest rate risk. The Company limits issuer risk by placing its
investments with high credit quality issuers and, by policy, limiting the amount
of credit exposure to any one issuer. The Company mitigates default and
liquidity risks by investing in only high credit quality securities and by
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. The Company mitigates interest rate risk by only allowing
suitable investments to be made in taxable and non-taxable U.S. as well as
foreign instruments. All of the Company's investments in aggregate have a
weighted average remaining maturity of less than one year at any given point in
time. For a tabular presentation of interest rate risk
17
<PAGE> 18
sensitive instruments, including the carrying value, market value and related
weighted average interest rates for the Company's investment portfolio as of
December 31, 1999 and December 31, 1998, see the Company's 1999 Form 10-K filed
with the Securities and Exchange Commission in March 2000.
FOREIGN CURRENCY RISK. The Company transacts business in various foreign
currencies, primarily in Europe. As some revenues are denominated in currencies
other than U.S. dollars, the Company will be subject to the risks associated
with foreign exchange rate fluctuations. In addition, an increase in the value
of the U.S. dollar relative to foreign currencies could make the Company's
products more expensive and, therefore, potentially less competitive in those
markets. As part of its overall strategy to manage the level of exposure to the
risk of foreign currency exchange rate fluctuations, the Company hedges a
portion of its foreign currency exposures anticipated over the ensuing twelve
month period. In the fourth quarter of 1999, the Company began invoicing in
currencies other than U.S. dollars, and as a result, the Company has entered
into hedging activities in order to minimize the exposure of the United States
Dollar (USD) value of foreign currency denominated sales. In the future, more of
the Company's revenues may be denominated in currencies other than U.S. dollars
and, as a result, the Company's exposure in the future may fluctuate depending
upon the nature and success of the hedging activities. Accordingly, due to the
substantial volatility of foreign exchange rates, the Company's business,
operating results or financial condition could be materially adversely affected.
See Note 6 of Notes to Condensed Consolidated Financial Statements.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
------ -------------------
<C> <S>
27.1.. Financial Data Schedule (Filed Electronically)
</TABLE>
(b) Reports on Form 8-K:
None
19
<PAGE> 20
SIGNATURE
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.
REMEDY CORPORATION
/s/ RON J. FIOR
--------------------------------------
Ron J. Fior
Vice President, Finance & Operations,
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial
and Accounting Officer)
Dated: May 12, 2000
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27.1 Financial Data Schedule (Filed Electronically)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REMEDY
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 54,678
<SECURITIES> 138,170
<RECEIVABLES> 50,613
<ALLOWANCES> 1,284
<INVENTORY> 0
<CURRENT-ASSETS> 265,863
<PP&E> 38,183
<DEPRECIATION> 23,042
<TOTAL-ASSETS> 310,933
<CURRENT-LIABILITIES> 70,910
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 240,003
<TOTAL-LIABILITY-AND-EQUITY> 310,933
<SALES> 35,420
<TOTAL-REVENUES> 61,932
<CGS> 2,402
<TOTAL-COSTS> 13,439
<OTHER-EXPENSES> 11,286
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 8,041
<INCOME-TAX> 2,573
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,468
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.18
</TABLE>
