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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-26592
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THE VANTIVE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 77-0266662
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
2455 AUGUSTINE DRIVE
SANTA CLARA, CALIFORNIA 95054
(408) 982-5700
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
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Indicate by check mark whether 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 [ ]
The number of shares of the Registrant's $0.001 par value Common Stock
outstanding on August 4, 1997, was 24,327,681.
This report consists of 21 pages.
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THE VANTIVE CORPORATION
FORM 10-Q
TABLE OF CONTENTS
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<CAPTION>
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31,
1996....................................................................... 3
Condensed Consolidated Statements of Operations for the Three Months Ended
June 30, 1997 and 1996 and the Six Months ended June 30, 1997 and 1996..... 4
Condensed Consolidated Statements of Cash Flows for the Six Months ended
June 30, 1997 and 1996..................................................... 5
Notes to Condensed Consolidated Financial Statements....................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................. 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................... 18
Item 2. Changes in Securities...................................................... 18
Item 3. Defaults upon Senior Securities............................................ 18
Item 4. Submissions of Matters to a Vote of Security Holders....................... 18
Item 5. Other Information.......................................................... 18
Item 6. Exhibits and Reports on Form 8-K........................................... 19
Signatures......................................................................... 20
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE VANTIVE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................... $23,342 $ 26,017
Short-term investments.............................................. 9,802 6,853
Accounts receivable, net............................................ 18,103 13,775
Prepaid expenses and other current assets........................... 5,359 4,492
------- -------
Total current assets........................................ 56,606 51,137
Property and equipment, net......................................... 9,961 6,764
Other assets........................................................ 1,503 463
------- -------
TOTAL ASSETS.......................................................... $68,070 $ 58,364
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities...................... $ 9,980 $ 8,137
Commissions payable................................................. 2,804 2,395
Consulting expenses payable......................................... 1,110 835
Deferred revenues................................................... 7,943 6,811
------- -------
Total current liabilities................................... 21,837 18,178
Long-term liabilities............................................... 524 755
STOCKHOLDERS' EQUITY:
Preferred Stock: $.001 par value, 2,000,000 shares authorized; no
shares issued and outstanding at June 30, 1997................... -- --
Common Stock: $.001 par value, 50,000,000 shares authorized;
24,282,349 shares at June 30, 1997 and 24,140,441 shares at
December 31, 1996 issued and outstanding......................... 24 24
Additional paid-in-capital.......................................... 34,048 33,410
Retained earnings................................................... 11,637 5,997
------- -------
Total stockholders' equity.................................. 45,709 39,431
======= =======
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................ $68,070 $ 58,364
======= =======
</TABLE>
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THE VANTIVE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
License......................................... $16,893 $ 9,914 $31,919 $17,002
Service......................................... 9,117 5,287 16,614 9,012
------- ------- ------- -------
Total revenues.......................... 26,010 15,201 48,533 26,014
COST OF REVENUES:
License......................................... 182 97 302 153
Service......................................... 4,975 2,769 9,019 5,091
------- ------- ------- -------
Total cost of revenues.................. 5,157 2,866 9,321 5,244
------- ------- ------- -------
GROSS MARGIN...................................... 20,853 12,335 39,212 20,770
OPERATING EXPENSES:
Sales and marketing............................. 10,674 5,100 20,336 9,926
Research and development........................ 3,610 1,403 6,909 2,505
General and administrative...................... 2,037 1,136 3,756 2,215
------- ------- ------- -------
Total operating expenses................ 16,321 7,639 31,001 14,646
OPERATING INCOME.................................. 4,532 4,696 8,211 6,124
OTHER INCOME...................................... 390 287 757 559
------- ------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES.......... 4,922 4,983 8,968 6,683
PROVISION FOR INCOME TAXES........................ 1,817 1,665 3,314 2,005
------- ------- ------- -------
NET INCOME........................................ $ 3,105 $ 3,318 $ 5,654 $ 4,678
======= ======= ======= =======
NET INCOME PER SHARE.............................. $ 0.12 $ 0.13 $ 0.22 $ 0.18
======= ======= ======= =======
SHARES USED IN PER SHARE COMPUTATION.............. 26,141 25,626 26,178 25,546
======= ======= ======= =======
</TABLE>
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THE VANTIVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------
1997 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................... $ 5,654 $ 4,678
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 1,100 548
Provision for sales allowances and doubtful accounts............ 449 285
Changes in net assets and liabilities --
Increase in accounts receivable............................... (4,777) (3,506)
Increase in prepaid expenses and other current assets......... (942) (297)
Increase in other assets...................................... (1,040) (20)
Increase in accounts payable and other accrued liabilities.... 1,809 2,094
Increase/(decrease) in commissions payable.................... 409 (145)
Increase in consulting expenses payable....................... 275 371
Increase in deferred revenues................................. 1,132 2,351
Increase in long-term liabilities............................. 39 57
------- -------
Net cash provided by operating activities.................. 4,108 6,416
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments................................. (2,949) (1,916)
Purchase of property and equipment................................. (4,221) (1,985)
------- -------
Net cash used in investing activities...................... (7,170) (3,901)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock............................. 638 325
Repurchase of common stock......................................... -- (15)
Payments on capital lease obligations.............................. (237) (98)
------- -------
Net cash provided by financing activities.................. 401 212
------- -------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS................. (2,661) 2,727
EFFECT OF EXCHANGE RATE CHANGES ON CASH.............................. (14) 4
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....................... 26,017 17,614
======= =======
CASH AND CASH EQUIVALENTS, END OF PERIOD............................. $23,342 $20,345
======= =======
</TABLE>
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THE VANTIVE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
The unaudited information has been prepared on the same basis as the annual
financial statements, and in the opinion of the Company's management, reflects
all normal recurring adjustments necessary for a fair presentation of the
information for the periods presented. Operating results for any quarter are not
necessarily indicative of the results for any future periods.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
Revenues
The Company generates revenues from licensing the rights to use its
software products directly to end-users and indirectly through sublicense fees
from resellers. The Company also generates revenues from sales of post-contract
support, consulting and training services performed for customers that license
its products.
Revenues from perpetual software license agreements are recognized upon
shipment of the software if there are no significant post-delivery obligations,
if collection is probable and if payment is due within one year. If an
acceptance period is required, revenues are recognized upon the earlier of
customer acceptance or the expiration of the acceptance period. The Company
enters into reseller arrangements that typically provide for sublicense fees
payable to the Company based on a percent of the Company's list price.
Sublicense fees are generally recognized as reported by the reseller in
relicensing the Company's products to end-users.
Revenues from post-contract support services are recognized ratably over
the term of the support period. If post-contract support services are included
free or at a discount in a license agreement, such amounts are allocated out of
the license fee at their fair market value based on the value established by
independent sale of such post-contract support services to customers. Consulting
revenues are primarily related to implementation services performed on a time
and materials basis under separate service arrangements related to the
installation of the Company's software products. Revenues from consulting and
training services are recognized as services are performed. If a transaction
includes both license and service elements, license fee revenue is recognized
upon shipment of the software, provided services do not include significant
customization or modification of the base product and the payment term for
licenses are not subject to acceptance criteria. In cases where license fee
payments are contingent upon the acceptance of services, revenues from both the
license and the service elements are deferred until the acceptance criteria are
met.
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THE VANTIVE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Net Income Per Share
Net income per share is computed using the weighted average number of
outstanding shares of common stock and common stock equivalents from outstanding
stock options (when dilutive using the treasury stock method). In March 1997,
the Financial Accounting Standards Board issued Statement No. 128 (SFAS No.
128), "Earnings per Share," which the Company will be required to adopt on a
retroactive basis in the fourth quarter of 1997. The pro forma effect of SFAS
No. 128 for the three months and for the six months ended June 30, 1997 and 1996
would be as follows:
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THREE MONTHS SIX MONTHS ENDED
ENDED JUNE 30, JUNE 30,
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Reported earnings per share................. $ 0.12 $ 0.13 $ 0.22 $ 0.18
Basic earnings per share.................... $ 0.13 $ 0.14 $ 0.23 $ 0.20
Diluted earnings per share.................. $ 0.12 $ 0.13 $ 0.22 $ 0.18
</TABLE>
Software Development Costs
The Company capitalizes eligible software development costs upon the
establishment of technological feasibility, which the Company has defined as
completion of a working model. For the periods presented, costs eligible for
capitalization were insignificant and, thus, the Company has charged its
software development costs to research and development expense in the
accompanying condensed consolidated statements of operations.
Investments
The Company accounts for its investments under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." The Company classifies its
investments as held to maturity investments as defined under the provisions of
SFAS 115 and carries such investments at amortized cost in the accompanying
financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE VANTIVE CORPORATION
The Company was founded in October 1990 to develop software to enable
businesses to improve their customer service. The Company was engaged
principally in research and development from inception through December 31,
1992. The Company introduced its first product, Vantive Support, in July 1992,
and introduced Vantive Quality and the Oracle version of Vantive Support in the
fall of 1993. The Company introduced Vantive HelpDesk in August 1994, Vantive
Sales in early 1995, and Vantive FieldService in early 1996. License fees for
the Company's software products consist of (i) a per server fee based on the
specific Vantive Enterprise application(s) licensed and (ii) a fee based on the
maximum number of concurrent or named users allowed to access those
applications. Most of the Company's revenues to date have resulted from non-
recurring license fees based on sales of concurrent user licenses. The remaining
revenues are primarily attributable to service revenues, which include
post-contract support, consulting and training revenue. Of these service
revenues, only post-contract support revenues are expected to be recurring.
Post-contract support revenues accounted for approximately 12.0% and 12.5% of
total revenues, in the six months ended June 30, 1996 and 1997, respectively.
Because concurrent user fees are not application specific, the Company cannot
precisely determine the breakdown of revenues attributable to specific
applications for customers that have purchased more than one application.
However, the Company believes that most of its revenues have been derived from
fees associated with Vantive Support and, to a lesser degree, Vantive HelpDesk.
In any period, a significant portion of the Company's revenues may be derived
from large sales to a limited number of customers. During the quarter ended June
30, 1996, two customers accounted for approximately 16% and 11% of total
revenues. However, during the quarter ended June 30, 1997, no customer accounted
for 10% or more of total revenues. During the first six months of 1996 and 1997,
no customers accounted for 10% or more of total revenues. As significant sales
to a particular customer are typically non-recurring, the Company does not
believe its future results are dependent on recurring revenues from any
particular customer.
The Company's revenues are derived from software license fees and fees for
its services. License revenues consist of license fees for the Company's
products as well as fees from sublicensing third-party software products. The
Company generally recognizes license fees upon shipment of software products if
there are no significant post-delivery obligations, if collection is probable
and if the license agreement requires payment within one year. If significant
post-delivery obligations exist or if a product is subject to customer
acceptance, revenues are deferred until no significant obligations remain or
acceptance has occurred. Revenues from services have to date consisted primarily
of consulting revenues, post-contract support revenues and, to a lesser extent,
training revenues. Consulting and training revenues generally are recognized as
services are performed. Post-contract support revenues are recognized ratably
over the term of the support period, which is typically one year. If
post-contract support services are included free or at a discount in a license
agreement, such amounts are allocated out of the license fee at their fair
market value based on the value established by independent sale of such
post-contract support services to customers. If a transaction includes both
license and service elements, license fee revenue is recognized upon shipment of
the software, provided services do not include significant customization or
modification of the base product and the payment terms for licenses are not
subject to acceptance criteria. In cases where licenses fee payments are
contingent upon the acceptance of services, revenues from both the license and
the service elements are deferred until the acceptance criteria are met. See
Note 2 of Notes to Condensed Consolidated Financial Statements.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations includes a number of forward-looking statements which
reflect the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including those discussed below that could cause actual results
to differ materially from historical results or those anticipated. In this
report, the words "anticipates," "believes," "expects," "future," "intends," and
similar expressions identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof.
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RESULTS OF OPERATIONS
The following table sets forth the percentages that income statement items
are to total revenues for the three months ended and six months ended June 30,
1997 and 1996.
THE VANTIVE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
License................................... 64.9% 65.2% 65.8% 65.4%
Service................................... 35.1 34.8 34.2 34.6
----- ----- ----- -----
Total revenues.................... 100.0 100.0 100.0 100.0
COST OF REVENUES:
License................................... 0.7 0.7 0.6 0.6
Service................................... 19.1 18.2 18.6 19.6
----- ----- ----- -----
Total cost of revenues............ 19.8 18.9 19.2 20.2
----- ----- ----- -----
GROSS MARGIN................................ 80.2 81.1 80.8 79.8
OPERATING EXPENSES:
Sales and marketing....................... 41.1 33.6 41.9 38.2
Research and development.................. 13.9 9.2 14.2 9.6
General and administrative................ 7.8 7.5 7.8 8.5
----- ----- ----- -----
Total operating expenses.......... 62.8 50.3 63.9 56.3
----- ----- ----- -----
OPERATING INCOME............................ 17.4 30.8 16.9 23.5
----- ----- ----- -----
OTHER INCOME................................ 1.5 1.9 1.6 2.2
----- ----- ----- -----
INCOME BEFORE PROVISION FOR INCOME TAXES.... 18.9 32.7 18.5 25.7
PROVISION FOR INCOME TAXES.................. 7.0 10.9 6.8 7.7
----- ----- ----- -----
NET INCOME.................................. 11.9% 21.8% 11.7% 18.0%
===== ===== ===== =====
</TABLE>
REVENUES
License. License revenues increased by 70.4% from $9.9 million to $16.9
million, in the quarters ended June 30, 1996 and 1997, respectively, and by
87.7% from $17.0 million, in the first six months of 1996 to $31.9 million, in
the first six months of 1997. The increase in license revenues was primarily due
to the market's growing acceptance of the Company's products, in particular
Vantive Support and Vantive HelpDesk, the introduction of Vantive Sales, Vantive
FieldService, the introduction of the Company's products using the Microsoft SQL
server relational database management system and the Microsoft NT operating
system, and increased sales as a result of the expansion of the Company's direct
sales force. The Company does not believe that the historical growth rates of
license revenues will be sustainable or are indicative of future results.
Service. Service revenues are primarily comprised of fees from consulting,
post-contract support and, to a lesser extent, training services. Service
revenues increased by 72.4% from $5.3 million to $9.1 million, in the quarters
ended June 30, 1996 and 1997, respectively, and by 84.4% from $9.0 million, in
the first six months of 1996 to $16.6 million, in the first six months of 1997.
The increase in service revenues was primarily due to the increase in
consulting, post-contract support and, to a lesser extent, training services
associated with increased sales of the Company's applications. As the Company
implements its strategy of encouraging third-party
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organizations such as systems integrators to become proficient in implementing
the Company's products, consulting revenues as a percentage of total revenues
may decrease.
COST OF REVENUE
License. Cost of license revenues includes the cost of product media,
product duplication, manuals and royalties due on embedded third-party licenses.
Cost of license revenues was approximately $97,000, or 1.0% of the related
license revenues and $182,000, or 1.1% of the related license revenues, in the
quarters ended June 30, 1996 and 1997, respectively, and was approximately
$153,000 in the first six months of 1996 and approximately $302,000 in the first
six months of 1997, or 0.9% and 0.9% of the related license revenues,
respectively. The increase in cost of license revenues was primarily due to the
increases in volume shipments of the Company's software applications and
royalties due on embedded third-party licenses.
Service. Cost of service revenues is primarily comprised of
employee-related costs and fees for third-party consultants incurred in
providing consulting, post-contract support and training services. Cost of
service revenues was $2.8 million, or 52.4% of the related service revenues and
$5.0 million, or 54.6% of the related service revenues, in the quarters ended
June 30, 1996 and 1997, respectively, and was $5.1 million, in the first six
months of 1996 and $9.0 million, in the first six months of 1997, or 56.5% and
54.3% of the related services revenues for these periods, respectively. The
increase in absolute dollars was due primarily to increases in consulting,
support and training personnel during these periods. Cost of service revenues
decreased as a percentage of service revenues between the first six months of
June 30, 1996, and the first six months of June 30, 1997, primarily due to
economies of scale realized as a result of higher level of service activity and
due to post-contract support revenues, which has a higher margin than other
services, constituting a higher proportion of total service revenues. The cost
of services as a percentage of service revenues may vary between periods due to
the mix of services provided by the Company and the resources used to provide
these services.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased from $5.1
million, or 33.6% of revenues to $10.7 million, or 41.1% of revenues, in the
quarters ended June 30, 1996 and 1997, respectively. Sales and marketing
expenses increased by 105% from $9.9 million, or 38.2% of revenues, in the first
six months of 1996 to $20.3 million, or 41.9% of revenues, in the first six
months of 1997. The increase in absolute dollars was primarily related to the
expansion of the Company's sales and marketing resources, increased commissions
expense as a result of higher sales levels and increased marketing activities,
including direct mail, trade shows and promotional expenses.
Research and Development. Research and development expenses increased from
$1.4 million, or 9.2% of revenues to $3.6 million, or 13.9% of revenues, in the
quarters ended June 30, 1996 and 1997, respectively. Research and development
expenses increased by 176% from $2.5 million, or 9.6% of revenues, in the first
six months of 1996 to $6.9 million, or 14.2% of revenues, in the first six
months of 1997.
Research and development expenses increased in absolute dollars primarily
as a result of an increase in personnel to support the Company's product
development activities.
Research and development expenses are generally charged to operations as
incurred. In accordance with Statement of Financial Accounting Standards No. 86,
costs which were eligible for capitalization for these periods were
insignificant, and the Company charged all software development costs to
research and development expense.
General and Administrative. General and administrative expenses increased
from $1.1 million, or 7.5% of revenues to $2.0 million, or 7.8% of revenues, in
the quarters ended June 30, 1996 and 1997, respectively. General and
administrative expenses increased 70% from $2.2 million, or 8.5% of revenues, in
the first six months of 1996 to $3.8 million, or 7.8% of revenues, in the first
six months of 1997. General and administrative expenses increased in absolute
dollars during these periods primarily due to the addition of staff and
information system investments to support the growth of the Company's business
during these periods. General and administrative expenses decreased as a
percentage of total revenues between the first six months
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of June 30, 1996, and the first six months of June 30, 1997, as a result of the
ability of the Company to increase revenues without a corresponding increase in
general and administrative expenses.
Provision for Income Taxes. The Company's provision for state, federal and
foreign income taxes for the three months ended June 30, 1997, was $1.8 million,
based upon an estimated effective tax rate of approximately 37% compared to the
effective tax rate of 30% for fiscal 1996. The primary reason for the increase
in the effective tax rate is that the Company utilized its remaining domestic
net operating loss carryforwards during 1996 and had no such net operating loss
carryforwards remaining to benefit the 1997 tax rate.
BUSINESS RISKS
This report includes a number of forward-looking statements, which reflect
the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including those discussed below that could cause actual results
to differ materially from historical results or those anticipated. In this
report, the words "anticipates," "believes," "expects," "intends," "future," and
similar expressions identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof.
Future Operating Results Uncertain. The Company has experienced significant
growth in revenues in recent periods. The Company does not believe that the
historical growth rates of revenues will be sustainable or are indicative of
future results. In addition, the Company's limited operating history makes the
prediction of future operating results difficult or impossible. The Company's
future operating results will depend on many factors, including demand for the
Company's products, the level of product and price competition, the ability of
the Company to develop and market new products and to control costs, the ability
of the Company to expand its direct sales force and indirect distribution
channels and the ability to attract and retain key personnel. The Company is
currently investing, and intends to continue to invest, significant resources to
develop its sales strategy, which could adversely affect the Company's operating
margins. In this regard, the Company has recently hired and continues to hire
significant numbers of direct sales personnel and has developed relationships
with several high-end integrators and resellers, including EDS, Deloitte &
Touche, Price Waterhouse, KPMG Peat Marwick, HBO and Company and Lucent
Technologies. Competition for sales personnel is intense, and there can be no
assurance that the Company can retain its existing sales personnel or that it
can attract, assimilate and retain additional highly qualified sales personnel
in the future. The strategy also depends, in large part, on attracting and
retaining appropriate third party relationships. There also can be no assurance
that the Company will be able to attract and retain appropriate high-end
integrators, resellers and other third party distributors to market the
Company's products effectively. Further, the Company believes, based on
interactions with its customers and potential customers, that the purchase of
its products is relatively discretionary and generally involves a significant
commitment of capital. As a result, in the event of any downturn in any
potential customer's business or the economy in general, purchases of the
Company's products may be deferred or canceled, which could have a material
adverse effect on the Company's business, results of operations and financial
condition. The Company was not profitable prior to 1995, and there can be no
assurance that the Company will remain profitable on a quarterly or annual
basis.
Fluctuations in Quarterly Operating Results. The Company's quarterly
operating results have in the past varied and may in the future vary
significantly depending on factors such as the size, timing and recognition of
revenue from significant orders, increased competition, the timing of new
product releases by the Company and its competitors, market acceptance of the
Company's products, changes in the Company's and its competitors' pricing
policies, the mix of license and service revenue, budgeting cycles of its
customers, seasonality, 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. The Company is currently
investing, and intends to continue to invest, significant resources to develop
its sales strategy, which could adversely affect the Company's operating
margins. In this regard, the Company has recently hired and continues to hire
significant numbers of direct sales personnel and has developed relationships
with several high-end integrators and resellers, including EDS, Deloitte &
Touche, Price Waterhouse, KPMG Peat
11
<PAGE> 12
Marwick, HBO and Company and Lucent Technologies. Competition for sales
personnel is intense, and there can be no assurance that the Company can retain
its existing sales personnel or that it can attract, assimilate and retain
additional highly qualified sales personnel in the future. The strategy also
depends, in large part, on attracting and retaining appropriate third party
relationships. There also can be no assurance that the Company will be able to
attract and retain appropriate high-end integrators, resellers and other third
party distributors to market the Company's products effectively. Further, the
Company believes, based on interactions with its customers and potential
customers, that the purchase of its products is relatively discretionary and
generally involves a significant commitment of capital. As a result, in the
event of any downturn in any potential customer's business or the economy in
general, purchases of the Company's products may be deferred or canceled.
Significant portions of the Company's revenues in any quarter are typically
derived from non-recurring sales to a limited number of customers. Accordingly,
revenues in any one quarter are not indicative of revenues in any future period.
In addition, like many software applications businesses, the Company has
generally recognized a substantial portion of its revenues in the last month of
each quarter, with these revenues concentrated in the last weeks of the quarter.
Any significant deferral of purchases of the Company's products could have a
material adverse effect on the Company's business, results of operations and
financial condition in any particular quarter, and to the extent that
significant sales occur earlier than expected, operating results for subsequent
quarters may be adversely affected. Product revenues are also difficult to
forecast because the market for Customer Asset Management software products is
rapidly evolving. The Company's sales cycle is typically six to nine months and
varies substantially from customer to customer. The Company expects that sales
derived through indirect channels, which are harder to predict and may have
lower margins than direct sales, will increase as a percentage of total
revenues. The Company operates with little order backlog because its products
are typically shipped shortly after orders are received. As a result of these
factors, quarterly revenues for any future quarter are not predictable with any
significant degree of certainty. The Company's expense levels are based, in
part, on its expectations as to future revenues. In particular, the Company is
currently investing, and intends to continue to invest, significant resources to
develop its sales strategy, which includes hiring significant numbers of direct
sales personnel, and developing relationships with high-end integrators and
resellers. If revenues are below expectations, operating results are likely to
be adversely affected. Net income may be disproportionately affected by a
reduction in revenues, because a significant portion of the Company's expenses
do not vary with revenues. The Company may also choose to reduce prices or
increase spending in response to competition or to pursue new market
opportunities. In particular, if new competitors, technological advances by
existing competitors, or other competitive factors require the Company to invest
significantly greater resources in research and development efforts, the
Company's operating margins in the future may be adversely affected. The
foregoing statements regarding the Company's future revenues and net income are
forward-looking statements, and actual results may vary substantially depending
upon a variety of factors described in this paragraph and elsewhere in this
report.
Because of these factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and that
such comparisons should not be relied upon as indications of future performance.
Due to all of 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.
Rapid Technological Change and Product Development Risks. The customer
asset management market is subject to rapid technological change, changing
customer needs, frequent new product introductions and evolving industry
standards that may render existing products and services obsolete. As a result,
the Company's position in its existing markets or other markets that it may
enter could be eroded rapidly by product advances. The life cycles of the
Company's products are difficult to estimate. The Company's growth and future
financial performance will depend in part upon its ability to enhance existing
applications, develop and introduce new applications that keep pace with
technological advances, meet changing customer requirements, respond to
competitive products and achieve market acceptance. For example, the Company's
customers have adopted a wide variety of hardware, software, database,
Internet-based and networking platforms, and as a result, to gain broad market
acceptance, the Company must continue to support and
12
<PAGE> 13
maintain its products on a variety of such platforms. The Company's future
success will depend on its ability to address the increasingly sophisticated
needs of its customers by supporting existing and emerging hardware, software,
database, Internet-based and networking platforms and by developing and
introducing enhancements to its products and new products on a timely basis that
keep pace with technological developments, evolving industry standards and
changing customer requirements. The success of the Company's products may also
depend, in part, on the ability of the Company to effectively distribute its
products through the Internet. There can be no assurance that the Company will
be able to successfully change other aspects of its business, such as its
distribution channels or cost structure, if technological changes in its market
require such change. The Company's product development efforts are expected to
require, from time to time, substantial investments by the Company in product
development and testing. There can be no assurance that the Company will have
sufficient resources to make the necessary investments. The Company has in the
past experienced development delays, and there can be no assurance that the
Company will not experience such delays in the future. There can be no assurance
that the Company will not experience difficulties that could delay or prevent
the successful development, introduction or marketing of new or enhanced
products, including but not limited to, Vantive Version 7.0, Vantive Version 7.5
and VanWeb 3.0. In addition, there can be no assurance that such products will
meet the requirements of the marketplace and achieve market acceptance or that
the Company's current or future products will conform to industry requirements.
If the Company is unable, for technological reasons, to develop and introduce
new and enhanced products in a timely manner, the Company's business, results of
operations and financial condition could be materially adversely affected.
Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycles. The
Company has in the past discovered software errors in certain of its products
and has experienced delays in shipment of products during the period required to
correct these errors. There can be no assurance that, despite testing by the
Company and by current and potential customers, errors will not be found,
resulting in loss of, or delay in, market acceptance and sales, diversion of
development resources, injury to the Company's reputation, or increased service
and warranty costs, any of which could have a material adverse effect on the
Company's business, results of operations and financial condition.
International Operations, Foreign Currency Fluctuations. The Company
believes that its continued growth and profitability will require further
expansion of its international operations. To successfully expand international
sales, the Company must establish additional foreign operations, hire additional
personnel and recruit additional international resellers. To the extent that the
Company is unable to do so in a timely manner, the Company's growth in
international sales, if any, will be limited, and the Company's business,
results of operations and financial condition could be materially adversely
affected. As the Company continues to expand its international operations,
significant costs may be incurred ahead of any anticipated international
revenues, which could have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, future increases in
the value of the U.S. dollar could make the Company's products less competitive
in foreign markets. As the Company increases its foreign sales, it may be
materially and adversely affected by fluctuations in currency exchange rates,
increases in duty rates, exchange or price controls or other restrictions on
foreign currencies. Additional risks inherent in the Company's international
business activities generally include unexpected changes in regulatory
requirements, tariffs and other trade barriers, costs of localizing products for
foreign countries, lack of acceptance of localized products in foreign
countries, longer accounts receivable payment cycles, difficulties in managing
international operations, potentially adverse tax consequences including
restrictions on the repatriation of earnings and the burdens of complying with a
wide variety of foreign laws. 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 business, results of operations and financial
condition. As European revenues increase as a percentage of overall revenues,
the Company's results of operations and financial condition may be adversely
affected by the seasonality of European procurement cycles.
Competition. The Customer Asset Management software market is intensely
competitive, highly fragmented and subject to rapid change. Because the Company
offers multiple software applications which can be purchased separately or
integrated as part of Vantive Enterprise, the Company competes with a variety
13
<PAGE> 14
of other businesses depending on the target market for their applications
software products. These competitors include a select number of businesses
targeting the enterprise level and department level Customer Asset Management
markets, such as Aurum Software, Inc., (which was recently acquired by the Baan
Company) Clarify, Inc., Onyx Software, Scopus Technology and Siebel Systems,
Inc. some of which have only recently entered these markets. The Company also
competes with a substantial number of small private businesses and certain
public businesses which offer products targeted at one or more specific markets,
including the customer support market, the help desk market, the quality
assurance market and the sales and marketing automation market, such as Remedy
Corporation and Software Artistry, Inc. In addition, the Company believes that
existing competitors and new market entrants will attempt to develop fully
integrated customer asset management information systems. The Company also
competes with third party professional service organizations that develop custom
software and with internal information technology departments of customers,
which develop customer interaction applications. Among the Company's current and
potential competitors are also a number of large hardware and software
businesses that may develop or acquire products that compete with the Company's
products. In this regard, SAP AG, the Baan Company and Oracle have each
introduced a customer support module as part of their application suites. Oracle
has recently announced the creation of a network of third party dealers that
will sell Oracle's application suites exclusively to medium-sized businesses.
The Baan Company has also recently acquired Aurum Software, Inc. The Company
expects large software vendors in the ERP market will continue to enter the
Customer Asset Management market. These competitors have significantly greater
financial, technical, marketing and other resources than the Company.
The Company also expects that competition will increase as a result of
software industry consolidations. Current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address the needs of
the Company's prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. The Company also expects that competition may increase
as a result of both new software start ups entering the market as well as
existing software industry vendors which may be planning to enter the market for
Customer Asset Management applications. Increased competition is likely to
result in price reductions, reduced operating margins and loss of market share,
any of which could materially adversely affect the Company's business, results
of operations and financial condition. Many of the Company's current and
potential competitors have significantly greater financial, technical, marketing
and other resources than the Company. As a result, they may be able to respond
more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of their products than can the Company. There can be no assurance that the
Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, results of operations and financial
condition.
The Company believes that the principal competitive factors affecting its
market include product features such as adaptability, scalability, ability to
integrate with products produced by other vendors, functionality and ease of
use, and other factors such as product reputation, quality, performance, price,
customer service and support, the effectiveness of sales and marketing efforts
and company reputation. Although the Company believes that its products
currently compete favorably with respect to such factors, there can be no
assurance that the Company can maintain its competitive position against current
and potential competitors, especially those with significantly greater
financial, marketing, service, support, technical and other resources.
Management of Expanding Operations; Dependence Upon Key Personnel. The
Company's ability to compete effectively and to manage future growth, if any,
will require the Company to continue to improve its financial and management
controls, reporting systems and procedures on a timely basis and expand, train
and manage its employee workforce. There can be no assurance that the Company
will be able to do so successfully. The Company's failure to do so could have a
material adverse effect upon the Company's business, results of operations and
financial condition. The Company has recently hired a significant number of
employees, including senior sales, marketing, research and development, and
finance personnel, and in order to
14
<PAGE> 15
maintain its ability to grow in the future, the Company will be required to
significantly increase its total headcount.
In addition, the Company's future performance depends in significant part
upon attracting and retaining key technical, sales, senior management and
financial personnel. In particular, delays in hiring sales or research and
development personnel may have a material adverse effect on the Company's
business, results of operations and financial condition. The loss of the
services of one or more of the Company's executive officers or the inability to
recruit other additional senior management could have a material adverse effect
on the Company's business, results of operations and financial condition.
Competition for such personnel is intense, and the inability to retain its key
technical, sales, senior management and financial personnel or to attract,
assimilate or retain other highly qualified technical, sales, senior management,
and financial personnel in the future on a timely basis could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Increased Use of Third-Party Software. The Company currently markets a
proprietary application development environment for its customers to tailor its
applications. This application development environment is also used by the
Company to build and modify its applications products. While the Company
believes, based on interactions with its customers and potential customers, that
it currently derives significant competitive advantage from this proprietary
application development environment, it believes that competitive pressures,
technological changes demanded by customers, and significant advances in the
sophistication of third party application development tools such as Visual Basic
for Applications will require the Company to make greater use of third party
software in the future. In particular, the Company has recently announced that
Vantive Encyclopedia, a Web-based marketing encyclopedia based on FirstFloor's
Java-based server, and configuration capabilities, based on Calico Technology's
configuration engine, will be available with Vantive Version 7.0. The Company
has also announced that it has entered into a development partnership with
PeopleSoft with the goal of developing joint applications. The greater use of
third party software could require the Company to invest significant resources
in rewriting some or all of its software applications products utilizing third
party software and/or to enter into license arrangements with third parties
which could result in higher royalty payments and a loss of product
differentiation. There can be no assurance that the Company would be able to
successfully rewrite its applications or enter into commercially reasonable
licenses, and the costs of, or inability or delays in, doing so could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Dependence on Emerging Markets for Customer Asset Management Software;
Product Concentration. The company's future financial performance will depend in
large part on the growth in demand for individual Customer Asset Management
applications as well as the number of organizations adopting comprehensive
Customer Asset Management software information systems for their client/server
and Web computing environments. To date, much of the Company's license revenues
have resulted from sales of individual applications, particularly Vantive
Support and Vantive HelpDesk. The markets for these applications are relatively
new and undeveloped, and failure of these markets to develop would have a
material adverse effect on the Company's business, results of operations and
financial condition. Additionally, the Company is investing in the sales, field
service and quality automation markets. Should these markets fail to develop,
not accept the Company's products, or cause the company to lose new business and
or customers in its traditional markets, the Company would experience an adverse
effect on the Company's business, results of operations and financial condition.
Risks Associated with Potential Acquisitions. As part of its business
strategy, the Company expects to review acquisition prospects that would
complement its existing product offerings, augment its market coverage or
enhance its technological capabilities, or that may otherwise offer growth
opportunities. Future acquisitions by the Company could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, any of which could materially adversely affect the Company's operating
results and/or the price of the Company's Common Stock. Acquisitions entail
numerous risks, including difficulties in the assimilation of acquired
operations, technologies and products, diversion of management's attention to
other business concerns, risks of entering markets in which the Company has no
limited prior experience and potential loss of key employees of
15
<PAGE> 16
acquired organizations. No assurance can be given as to the ability of the
Company to successfully integrate any businesses, products, technologies or
personnel that might be acquired in the future, and the failure of the Company
to do so could have a material adverse effect on the business, operating results
and financial condition of the Company.
The Company believes that an important competitive advantage for its
software applications is their ability to be integrated with one another and
with other back office applications software into a Customer Asset Management
information system. If the demand for integrated suites of Customer Asset
Management applications fails to develop, or develops more slowly than the
Company currently anticipates, it could have a material adverse effect on the
demand for the Company's applications and on its business, results of operations
and financial condition. In addition, any other factor adversely affecting the
demand for the Company's existing applications, particularly Vantive Support,
Vantive HelpDesk and Vantive Quality, or newer applications such as
Vantive-On-The-Go, Vantive Sales or Vantive FieldService could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Need to Expand Distribution Channels and Successfully Leverage Third-Party
Relationships. An important element of the Company's distribution strategy is to
expand its direct sales force, to create additional relationships with third
parties and to dedicate certain direct sales resources and leverage third party
relationships toward key vertical markets. An important element of the Company's
product development strategy is to integrate with applications from ERP vendors.
The Company is currently investing, and intends to continue to invest,
significant resources toward these strategies, which could adversely affect the
Company's operating margins. In this regard, the Company has recently hired and
continues to hire significant numbers of direct sales personnel. Competition for
sales personnel is intense, and there can be no assurance that the Company can
retain its existing sales personnel or that it can attract, assimilate and
retain additional highly qualified sales personnel in the future. The strategy
also depends, in large part, on attracting and retaining beneficial third party
relationships. In this regard, the Company has developed relationships with
several high-end integrators and resellers, including EDS, Deloitte & Touche,
Price Waterhouse, KPMG Peat Marwick, HBO and Company and Lucent Technologies.,
and announced a partnership with PeopleSoft, an ERP vendor. There also can be no
assurance that the Company will be able to attract and retain appropriate
high-end integrators, resellers, other third party distributors or ERP vendors.
The Company's agreements with these third parties are not exclusive and, in many
cases, may be terminated by either party without cause. In addition, many of
these third parties sell or co-market competing product lines. Therefore, there
can be no assurance that any of these parties will continue to represent or
recommend the Company's products. There also can be no assurance that the
Company will effectively identify key vertical markets. The inability to
recruit, or the loss of, important direct sales personnel, high-end integrators,
resellers, other third party distributors or ERP vendors, or the failure to
effectively identify key vertical markets, could have a material adverse effect
on the Company's business, results of operations and financial condition.
Possible Volatility of Stock Price. Future announcements concerning the
Company or its competitors, quarterly variations in operating results,
announcements of technological innovations, the introduction of new products or
changes in product pricing policies by the Company or its competitors,
proprietary rights or other litigation, changes in earnings estimates by
analysts or other factors could cause the market price of the Common Stock to
fluctuate substantially, particularly on a quarterly basis. In addition, stock
prices for many technology companies fluctuate widely for reasons which may be
unrelated to operating results of such companies. These fluctuations, as well as
general economic, market and political conditions such as recessions or military
conflicts, may materially and adversely affect the market price of the Company's
Common Stock. In the past, following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against such companies. Such litigation could result in substantial
costs and a diversion of management's attention and resources, which could have
a material adverse effect on the Company's business, results of operations and
financial condition.
In addition to the "Business Risks" mentioned above, the Company's business
entails a variety of additional risks, which are set forth in the "Business
Risks" section of the Company's 1996 Report on Form 10-K filed with the
Securities and Exchange Commission.
16
<PAGE> 17
FINANCIAL CONDITION
Total assets as of June 30, 1997, increased $9.7 million from December 31,
1996. The increase was primarily due to increases in accounts receivable,
property and equipment, and other assets. Net accounts receivable increased $4.3
million primarily due to increased sales activity. Net property and equipment
increased $3.2 million primarily due to equipment purchases associated with
supporting the growth of the Company's business during this period. Other assets
increased $1.0 million due to purchase of intellectual property and training
materials for internal use.
Total liabilities as of June 30, 1997, increased $3.4 million from December
31, 1996. The increase was primarily due to increases in accounts payable and
other accrued liabilities and deferred revenues of $2.5 million and $1.1
million, respectively. These increases were primarily due to increased expense
levels and accruals associated with a higher transaction volume and associated
deferrals of revenues related to post-contract support.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided cash of $4.1 million, in the six months ended
June 30, 1997. The primary source of these funds was net income and an increase
in deferred revenues and accounts payable and other accrued liabilities,
partially offset by increases in accounts receivable and other assets. Operating
activities provided cash of $6.4 in the six months ended June 30, 1996,
primarily due to increases in net income, accounts payable and other accrued
liabilities, and deferred revenues.
Investing activities used cash of $7.2 million and $3.9 million, in the six
months ended June 30, 1997 and 1996, respectively, primarily for the purchase of
capital equipment and short-term, interest-bearing, investment-grade securities.
The Company does not currently have any material commitments for capital
equipment acquisitions.
Financing activities provided cash of $401,000 and $212,000, in the six
months ended June 30, 1997 and 1996, respectively. The primary source of these
funds was proceeds from the issuance of common stock, partially offset by
payments on capital lease obligations.
At June 30, 1996, the Company's principal sources of liquidity were its
cash, cash equivalents and short-term investments of $33.1 million. The Company
believes that existing cash and short-term investment balances and potential
cash flow from operations will be sufficient to meet its cash requirements for
the next twelve months. While operating activities may provide cash in certain
periods to the extent the Company experiences growth in the future, operating
and investing activities may use cash, and consequently, such growth may require
the Company to obtain additional sources of financing.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
Not Applicable.
ITEM 2. CHANGES IN SECURITIES:
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
The Company's Annual Meeting of Stockholders was held on April 4, 1997.
Proxies for the meeting were solicited pursuant to Regulation 14A. At the
meeting, management's nominees for directors were elected. A summary of the
nominees and voting results are as follows:
<TABLE>
<CAPTION>
NOMINEE SHARES VOTING FOR SHARES WITHHELD
--------------------------------------------- ----------------- ---------------
<S> <C> <C>
John R. Luongo............................... 20,324,928 7,019
Roger J. Sippl............................... 20,322,178 9,769
Aneel Bhusri................................. 20,291,937 40,010
William Davidow.............................. 20,324,928 7,019
Kevin Hall................................... 20,324,928 7,019
Raymond L. Ocampo Jr......................... 20,324,928 7,019
Peter A. Roshko.............................. 20,324,928 7,019
</TABLE>
The next order of business was to amend the Company's 1991 Stock Option
Plan to (i) increase the number of shares reserved for issuance under the plan
by 1,200,000 and (ii) limit the number of shares of the Company's underlying
options granted to any single individual per fiscal year to 800,000 shares. The
proposal to amend the Company's 1991 Stock Option Plan received 14,557,077
shares voting for approval, 5,699,833 shares voting against, and 75,037 shares
abstaining.
Additionally, the selection of Arthur Andersen LLP as independent public
accountants for the year ending December 31, 1997, was ratified with 20,318,597
shares voting in favor, 3,250 shares voting against and 10,100 shares
abstaining.
ITEM 5. OTHER INFORMATION:
Not Applicable.
18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
a. EXHIBITS
<TABLE>
<C> <S>
*3.1 Form of Agreement and Plan of Merger between The Vantive Corporation, a
California corporation, and The Vantive Corporation, a Delaware corporation.
*3.2 Bylaws.
*10.1 Form of Indemnity Agreement for officers and directors.
*10.2 1991 Stock Option Plan, as amended.
*10.3 1995 Outside Directors Stock Option Plan.
*10.4 1995 Employee Stock Purchase Plan.
*10.5 Offer Letter dated May 21, 1993 between the Company and John R. Luongo.
*10.6 Offer Letter dated April 6, 1995 between the Company and John M. Jack.
*+10.7 Value Added Reseller License Agreement dated October 5, 1993 by and between
Inference Corporation and the Company.
*+10.8 Basicscript License Agreement dated October 4, 1994 by and between Henneberry
Hill Technologies Corporation doing business as Summit Software Company and the
Company.
*+10.9 International VAR Agreement dated March 26, 1992 between Oracle Corporation and
the Company, as amended.
*10.9.1 International VAR Agreement dated June 28, 1996 between Oracle Corporation and
the Company as amended.
*+10.10 Value Added Remarketer Agreement dated December 20, 1991 between Sybase, Inc.
and the Company, as amended.
*10.11 Security and Loan Agreement dated May 12, 1995 between the Company and Imperial
Bank.
*+10.12 Application Bridge API VAR License Agreement dated January 22, 1993 between the
Company and Prospect Software, Inc.
*+10.13 Compensation Letter dated May 10, 1995 between the Company and John R. Luongo.
*+10.14 Compensation Letter dated May 10, 1995 between the Company and Steven M.
Goldsworthy.
*10.15 Lease Agreement dated January 13, 1995 between John Arrillaga, Trustee, or his
Successor Trustee, UTA dated July 20, 1977 (John Arrillaga Separate Property
Trust) as amended, and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated July 20, 1977 (Richard T. Peery Separate Property Trust) as amended, and
the Company.
#10.16 Lease Agreement dated September 4, 1996 between John Arrillaga, Trustee, or his
Successor Trustee, UTA dated July 20, 1977 (Arrillaga Family Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA dated July 20,
1977 (Richard T. Peery Separate Property Trust) as amended, and the Company.
27.1 Financial Summary Table.
</TABLE>
- ---------------
* Incorporated by reference from the Company's Registration Statement (No.
33-94244), declared effective on August 14, 1995.
+ Confidential Treatment has been granted for portions of this exhibit.
# Incorporated by reference from the Company's Report on Form 10-K for the
Fiscal Year ended December 31, 1996.
b. REPORTS OF FORM 8-K
No report of Form 8-K was filed by the Company during the three month
period ended June 30, 1997.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE VANTIVE CORPORATION
Dated: August 8, 1997 By: /s/ KATHLEEN MURPHY
------------------------------------
Kathleen Murphy
Chief Financial Officer
(Principal Financial Officer)
Dated: August 8, 1997 By: /s/ MICHAEL M. LOO
------------------------------------
Michael M. Loo
Vice President, Finance
(Principal Accounting Officer)
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 23,342,000
<SECURITIES> 9,802,000
<RECEIVABLES> 18,552,000
<ALLOWANCES> 449,000
<INVENTORY> 0
<CURRENT-ASSETS> 56,606,000
<PP&E> 13,371,000
<DEPRECIATION> 3,410,000
<TOTAL-ASSETS> 68,070,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 24,000
<OTHER-SE> 34,048,000
<TOTAL-LIABILITY-AND-EQUITY> 68,070,000
<SALES> 31,919,000
<TOTAL-REVENUES> 48,533,000
<CGS> 302,000
<TOTAL-COSTS> 9,321,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 325,000
<INTEREST-EXPENSE> 55,000
<INCOME-PRETAX> 8,968,000
<INCOME-TAX> 3,314,000
<INCOME-CONTINUING> 5,654,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,564,000
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
