================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
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
------------------------
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)
------------------------
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 May 1, 1998 was 25,569,068.
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
THE VANTIVE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $40,744 $77,583
Short-term investments 64,063 23,800
Accounts receivable, net 33,884 33,295
Prepaid expenses and other current assets 13,118 11,896
------------ ------------
Total current assets 151,809 146,574
Property and equipment, net 13,844 12,465
Other assets 3,558 3,700
------------ ------------
TOTAL ASSETS $169,211 $162,739
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $25,412 $27,818
Deferred revenues 13,836 9,827
------------ ------------
Total current liabilities 39,248 37,645
Convertible debt 69,000 69,000
Long-term liabilities 339 362
STOCKHOLDERS' EQUITY:
Common Stock 26 25
Additional paid-in-capital 57,866 56,643
Retained earnings (deficit) 2,732 (936)
------------ ------------
Total stockholders' equity 60,624 55,732
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $169,211 $162,739
============ ============
</TABLE>
See accompanying notes.
<PAGE>
THE VANTIVE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1998 1997
--------- ---------
<S> <C> <C>
REVENUES
License $22,517 $15,026
Service 13,763 7,497
--------- ---------
Total revenues 36,280 22,523
--------- ---------
COST OF REVENUES:
License 204 120
Service 7,312 4,044
--------- ---------
Total cost of revenues 7,516 4,164
--------- ---------
GROSS MARGIN 28,764 18,359
--------- ---------
OPERATING EXPENSES
Sales and marketing 14,126 9,662
Research and development 5,944 3,299
General and administrative 3,002 1,719
--------- ---------
Total operating expenses 23,072 14,680
--------- ---------
OPERATING INCOME 5,692 3,679
OTHER INCOME 211 367
--------- ---------
INCOME BEFORE PROVISION
FOR INCOME TAXES 5,903 4,046
PROVISION FOR INCOME TAXES 2,184 1,497
--------- ---------
NET INCOME $3,719 $2,549
========= =========
NET INCOME PER BASIC SHARE $0.15 $0.11
========= =========
NET INCOME PER DILUTED SHARE $0.14 $0.10
BASIC-SHARES USED IN PER SHARE COMPUTATION 25,384 24,194
========= =========
DILUTED-SHARES USED IN PER SHARE COMPUTATION 27,210 26,215
</TABLE>
See accompanying notes
<PAGE>
THE VANTIVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,719 $2,549
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,177 454
Provision for sales allowances and
and doubtful accounts 696 124
Changes in operating assets and liabilities --
Increase in accounts receivable (1,278) (3,154)
(Increase) decrease in prepaid expenses and
other current assets (1,221) 193
(Increase) decrease in other assets 109 (64)
Increase (decrease) in accounts payable and
other accrued liabilities (2,323) 2,490
Increase (decrease) in long-term liabilities (23) 132
Increase (decrease) in deferred revenues 4,009 (159)
------------ ------------
Net cash provided by operating activities 4,865 2,565
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (40,263) (10)
Purchase of property and equipment (2,522) (2,079)
------------ ------------
Net cash used in investing activities (42,785) (2,089)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,125 318
Payments on capital lease obligations (90) (120)
------------ ------------
Net cash provided by financing activities 1,035 198
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (36,885) 674
EFFECT OF EXCHANGE RATE CHANGES ON CASH 46 (32)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 77,583 26,017
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $40,744 $26,659
============ ============
</TABLE>
See accompanying notes
<PAGE>
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 the rules and regulations. The Company believes the
disclosures included in the unaudited condensed consolidated
financial statements, when 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, 1997, are
adequate to make the information presented not misleading.
The unaudited condensed consolidated financial statements
included herein reflect all adjustments which are, in the opinion
of the Company's management, necessary for a fair presentation of
the information for the periods presented. These adjustments are
of a normal, recurring nature. Operating results for the three
months ended March 31, 1998 are not necessarily indicative of the
results expected 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 intercompany
accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, the Company
considers all highly liquid investments with an original maturity
of 90 days or less to be cash equivalents. Cash equivalents
primarily consist of certificates of deposit, money market
accounts, treasury bills and commercial paper with a maturity of
less than 90 days.
Investments
The Company accounts for its investments under the provision of
Statement of Financial Accounting Standards No. 115 (SFAS 115),
"Accounting for Certain Investments in Debt and Equity
Securities." The Company has classified all marketable debt
securities and long-term debt investments as held-to-maturity and
has accounted for these investments at amortized cost.
Revenue Recognition
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 customer support, consulting and training
services performed for customers that license its products.
Revenues from software license agreements are recognized upon
shipment of the software if collection is probable, payment is due
within one year, the fee is fixed or determinable and vendor
specific evidence exists to allocate the total fee to all elements
of the arrangement. If an acceptance period is required, revenues
are recognized upon the earlier of customer acceptance or the
expiration of the acceptance period. 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, customer support
revenues and, to a lesser extent, training revenues. 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 re-licensing the Company's products to
end-users. In certain circumstances, sublicense fees are
recognized upon the initial sale if all products subject to
sublicensing are shipped in the current period, no rights of
return policy exists, collection is probable, payment is due
within one year, and fee is fixed or determinable. If these
conditions are not met, the Company does not recognize sublicense
fees until reported by the reseller in re-licensing the Company's
products to end-users.
Revenues from customer support services are recognized ratably
over the term of the support period. If customer support services
are included free or at a discount in a license agreement, these
amounts are allocated out of the license fee at their fair market
value based on the value established by independent sale of the
customer 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
terms 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.
Cost of license revenues includes the costs of product media,
product duplication and manuals. Cost of service revenues is
primarily comprised of employee-related costs and fees for third-
party consultants incurred in providing consulting, customer
support and training services.
Deferred revenues primarily relate to customer support fees,
which have been paid by the customers prior to the performance of
these services.
Software Development Costs
The Company capitalizes internally generated software
development costs under the provision of Statement of Financial
Accounting Standards No. 86 (SFAS 86), "Accounting for Costs of
Computer Software to be Sold, Leased or Otherwise Marketed."
Capitalization of computer software development costs begins upon
the establishment of technological feasibility, which the Company
has defined as completion of a working model. Internally
generated capitalizable software development costs have not been
material for the periods presented and thus, the Company has
charged its software development costs to research and development
expense in the accompanying condensed consolidated statements of
operations.
Earnings per Share:
Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings per Share," requires companies to compute net income per
share under two different methods- basic and diluted per share
data- for all periods for which an income statement is presented.
Basic earnings per share is computed by dividing net income by
the weighted average number of common shares outstanding for the
quarters ended March 31, 1998 and 1997. Diluted earnings per
share reflects the potential dilution that could occur if the
income were divided by the weighted-average number of common and
potential common shares outstanding during the period. Diluted
earnings per share is computed by dividing net income by weighted
average number of common shares and potential common shares from
outstanding stock options for the quarters ended March 31, 1998
and 1997. For the quarter ended March 31, 1998, the diluted
earnings per share calculation excludes the effects of convertible
debt securities because such inclusion would be anti-dilutive.
Potential common shares are calculated using the treasury stock
method and represent incremental shares issuable upon exercise of
the Company's outstanding options.
The following table provides a reconciliation of the numerators
and denominators used in calculating basic and diluted earnings
per share for the three months ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
(In thousands, except per share data)
For the Three Months Ended March 31,
-------------------
1998 1997
--------- ---------
<S> <C> <C>
Net income $3,719 $2,549
Basic Earnings Per Share
Income available to common shareholders $3,719 $2,549
Weighted average common shares outstanding 25,384 24,194
--------- ---------
Basic earnings per share $0.15 $0.11
========= =========
Diluted Earnings Per Share
Income available to common shareholders $3,719 $2,549
Weighted average common shares outstanding 25,384 24,194
Common stock option grants 1,826 2,021
--------- ---------
Total weighted average common shares
and equivalents 27,210 26,215
========= =========
Diluted earnings per share $0.14 $0.10
========= =========
</TABLE>
Options to purchase approximately 900,000 shares and 800,000
shares of common stock were outstanding at March 31, 1998 and
1997, respectively, but were not included in the computation of
diluted earnings per share as a result of their anti-dilutive
effect.
Convertible Subordinated Notes
On August 21, 1997, the Company sold an aggregate of $69.0
million in principal amount of convertible subordinated notes due
2002 to certain investors in the United States and outside the
United States and incurred approximately $2.4 million of offering
expenses in connection with this issuance. These notes have a
4.75% coupon over a five-year term and are convertible into the
Company's common stock at the Company's option, if and when the
share price exceeds $41.93 per share. The Company intends to use
the net proceeds of $66.6 million for working capital and other
general corporate purposes.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board
issued SFAS No. 130 (SFAS 130), "Reporting Comprehensive Income,"
which establishes standards for reporting and display of
comprehensive income and its components (revenue, expenses, gains
and losses) in a full set of general-purpose financial statements.
The following table reconciles comprehensive income under the
provisions of SFAS 130 for the three months ended March 31, 1998
and 1997.
(In thousands)
For the Three Months Ended March 31,
-------------------
1998 1997
--------- ---------
Net income $3,719 $2,549
Other Comprehensive Loss, net of tax
Unrealized Currency Loss $ (32) $ (36)
--------- ---------
Comprehensive Income $ 3,687 $2,513
========= =========
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
THE VANTIVE CORPORATION
Overview
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's suite of products
addresses the front-office automation market and is called the
Vantive Enterprise. The Vantive Enterprise consists of the
following applications: Vantive Sales, Vantive Support, Vantive
FieldService, Vantive Inventory, Vantive Procurement, Vantive
HelpDesk and Vantive Quality. The release of Vantive Enterprise 7
in the third quarter of 1997 contains significant enhancements to
all applications and a new development environment, Vantive Object
Studio, which allows for rapid customization, deployment and
administration of the Vantive Enterprise. 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, named or
mobile 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 customer support, consulting and training revenue.
Of these service revenues, only customer support revenues are
expected to be recurring. Customer support revenues accounted for
approximately 16.1% and 12.5% of total revenues, for the quarters
ended March 31, 1998 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, Vantive Sales 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.
However, no customer accounted for over 10% of total revenues
during the quarters ended March 31, 1998 and 1997. 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 collection is
probable, the license agreement requires payment within one year,
the fee is fixed or determinable and vendor specific evidence
exists to allocate the total fee to all elements of the
arrangement. 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, customer support revenues and, to a lesser
extent, training revenues. Consulting and training revenues
generally are recognized as services are performed. Customer
support revenues are recognized ratably over the term of the
support period, which is typically one year. If customer 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 customer 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
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.
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 "anticipate,"
"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. Readers
should carefully review the risk factors described in other
documents the Company files with the Securities Exchange
Commission, including the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997. See "Business Risks."
Results of Operations
The following table sets forth the percentages that income
statement items are to total revenues for the three months ended
March 31, 1998 and 1997.
Three Months Ended
March 31,
-------------------
1998 1997
--------- ---------
REVENUES
License 62.1% 66.7%
Service 37.9% 33.3%
--------- ---------
Total revenues 100.0% 100.0%
--------- ---------
COST OF REVENUES:
License 0.5% 0.5%
Service 20.2% 18.0%
--------- ---------
Total cost of revenues 20.7% 18.5%
--------- ---------
GROSS MARGIN 79.3% 81.5%
--------- ---------
OPERATING EXPENSES
Sales and marketing 38.9% 42.9%
Research and development 16.4% 14.7%
General and administrative 8.3% 7.6%
--------- ---------
Total operating expenses 63.6% 65.2%
--------- ---------
OPERATING INCOME 15.7% 16.3%
OTHER INCOME 0.6% 1.6%
--------- ---------
INCOME BEFORE PROVISION
FOR INCOME TAXES 16.3% 17.9%
PROVISION FOR INCOME TAXES 6.0% 6.6%
--------- ---------
NET INCOME 10.3% 11.3%
========= =========
Revenues
License. The Company increased its license revenues by 49.9% to
$22.5 million from $15.0 million for the quarters ended March 31,
1998 and 1997, respectively. The increase in license revenues was
due to the market's growing acceptance of the Company's products
and the release of Vantive Enterprise 7 in the third quarter of
1997. 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, customer support and, to a lesser extent, training
services. Service revenues increased by 83.6% to $13.8 million
from $7.5 million for the quarters ended March 31, 1998 and 1997,
respectively. The increase in service revenues was primarily due
to the increase in consulting, customer 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 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 and manuals. Cost of license revenues
through the quarter ended March 31,1998 has averaged less than 1%
of license revenues. Cost of license revenues increased by 70.0%
to $204,000, or 0.9% of the related license revenues from $120,000,
or 0.8% of related license revenues for the quarters ended March
31, 1998 and 1997, respectively. The increase in absolute dollars
in cost of license revenues was primarily due to the increase in
volume shipments of the Company's software applications and the
cost of sublicensing third-party software.
Service. Cost of service revenues is primarily comprised of
employee-related costs and fees for third-party consultants
incurred in providing consulting, customer support and training
services. Cost of service revenues increased by 80.8% to $7.3
million, or 53.1% of the related service revenues from $4.0
million, or 53.9% of related service revenues for the quarters
ended March 31, 1998 and 1997, respectively. The increase in
absolute dollars was due primarily to increases in consulting,
support and training personnel and third-party service providers
during these periods. The decrease in cost of service revenues as
a percentage of the related service revenues was primarily due to
the variation in the resources used during the period. 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
by 46.2% to $14.1 million, or 38.9% of total revenues from $9.7
million, or 42.9% of total revenues for the quarters ended March
31, 1998 and 1997, respectively. This increase in absolute dollars
was primarily related to the expansion of the Company's sales and
marketing resources, increased commissions expenses as a result of
higher sales levels and increased marketing activities, including
trade show, direct mail and other promotional expenses. The
Company plans to continue to invest heavily in expanding its sales
and marketing activities. Accordingly, sales and marketing
expenses are anticipated to increase both in absolute dollars and
as a percentage of revenues over the coming year.
Research and Development. Research and development expenses
increased by 80.2% to $5.9 million, or 16.4% of total revenues
from $3.3 million, or 14.7% of total revenues for the quarters
ended March 31, 1998 and 1997, respectively. Research and
development expenses increased in absolute dollars primarily as a
result of an increase in personnel and outside contractors to
support the Company's product development activities. Over the
coming years, the Company plans to continue to invest heavily in
research and development. As a result, research and development
expenses are anticipated to increase in absolute dollars over the
coming year.
Research and development expenses are generally charged to
operations as incurred. In accordance with Statement of Financial
Accounting Standards No. 86, internally-generated costs which were
eligible for capitalization for these periods were insignificant
and the Company charged all internally-generated software
development costs to research and development expense.
General and Administrative. General and administrative
expenses increased by 74.6% to $3.0 million, or 8.3% of total
revenues from $1.7 million or 7.6% of total revenues in the
quarters ended March 31,1998 and 1997, respectively. 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. The Company expects general and
administrative expenses will increase in absolute dollars over the
coming year
Provision for Income Taxes. The Company's provision for
state, federal and foreign income taxes was $2.2 million and $1.5
million for the quarters ended March 31, 1998 and 1997,
respectively based upon an estimated effective tax rate of 37% for
both periods.
Business Risks
This report includes a number of forward-looking statements,
which reflect the Company's current views on future events and
financial performance. These forward-looking statements are
subject to certain risks and uncertainties, including those
discussed below which could cause actual results to differ
materially from historical results or those anticipated. Some of
the forward-looking statements are generally applicable to emerging
growth companies or to the software industry, others are specific
to the front-office automation market and others are specific to
the Company. 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 things, 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. Competition for good salespeople and
sales managers 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 Company's strategy also depends, in
part, on relationships with third parties. There also can be no
assurance that the Company will 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 will
probably 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.
A significant portion of the Company's revenues in any quarter
is 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 front-office
automation software products is rapidly evolving. The Company's
sales cycle is typically six to nine months but varies
substantially from customer to customer. The Company expects that
sales made through indirect channels, which are harder to predict
and usually 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. Net income may be
disproportionately affected by a reduction in revenues, because
most 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 section 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. If this happens, the price of the
Company's Common Stock will likely be materially adversely
affected.
Rapid Technological Change and Product Development Risks. The
front-office automation software 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 less marketable or 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 on 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.
These are increasingly complex and costly undertakings. 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 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 Company may not 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 require substantial
investments by the Company. 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 in the future. In addition, there can be
no assurance that such products will meet the requirements of the
marketplace and achieve market acceptance. If the Company is
unable, for technological or any other 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 delayed 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.
International revenue, or revenue derived from sales to customers
in foreign countries, accounted for approximately 29% and 13% of
the Company's revenue in the quarter ended March 31, 1998 and
1997, respectively. The majority of this international revenue
has come from Europe. 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 before achieving any
additional 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. There are certain risks inherent in doing
business on an international level, such as unexpected changes in
regulatory requirements, export restrictions, tariffs and other
trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, problems in collecting accounts
receivable, political instability, changes in foreign economic
conditions, fluctuations in currency exchange rates, seasonal
reductions in business activity during the summer months in Europe
and certain other parts of the world and potentially adverse tax
consequences, any of which could adversely impact the success of
the combined company's international operations. The Company's
foreign subsidiaries operate primarily in local currencies, and
their results are translated into US dollars. If the value of the
US dollar increases relative to foreign currencies, the Company's
operating results could be materially adversely affected. In
particular, revenue from sales in the Pacific Rim could be
adversely affected by declines in the value of such currencies
against the dollar.
The Company has not been significantly affected by the recent
unfavorable economic conditions in certain Asian and Pacific Rim
countries. If the economic conditions in these markets do not
improve, this may have an adverse impact on the Company's business,
results of operations, and financial condition.
Competition. The front-office automation software market is
intensely competitive, highly fragmented and subject to rapid
change. Because the Company offers multiple applications that can
be purchased separately or integrated as part of Vantive
Enterprise, the Company competes with a variety 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
front-office markets, such as Astea International, Inc., Aurum
Software, Inc. (a subsidiary of The Baan Company), Clarify, Inc.,
Onyx Software, Scopus Technology, Inc. and Siebel Systems, Inc.
In March 1998, Siebel Systems, Inc. and Scopus Technology, Inc.
announced that they had entered into a definitive agreement for
Siebel to acquire all of the outstanding shares of Scopus
Technology, Inc.
The Company also competes with a substantial number of
businesses that 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. (which was recently acquired by the IBM subsidiary,
Tivoli Systems, Inc.). The Company believes that such point
solution providers may expand their product offerings, which could
provide increased competition for the company across its market
segments. The Company also competes with third party professional
service organizations that develop custom software and with
internal information technology departments of customers that
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, Oracle Corporation and The Baan Company have each
introduced sales automation and/or customer support modules as
part of their application suites. Oracle has announced the
creation of a network of third party dealers that will sell
Oracle's application suites exclusively to medium-sized
businesses.
The Company expects that large software vendors in the
enterprise resource planning market will continue to enter and
pursue the front-office automation market. These competitors have
significantly greater financial, marketing, service, support,
technical 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 front-office 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, marketing,
service, support, technical 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, service
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, ease of use and such
other factors 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
workforce. There can be no assurance that the Company will be able
to do so. The Company's failure to do so could have a material
adverse effect on 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 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 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 products. This application development
environment is also used by the Company to build and modify its
products. The Company believes, based on interactions with its
customers and potential customers, that it currently derives a
competitive advantage from this proprietary application development
environment. However, the Company 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 will require the
Company to make greater use of third party software in the future.
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 and any competitive advantage associated with the
proprietary development environment. 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 Front-Office Automation
Software; Product Concentration. The Company's future financial
performance will depend in large part on the growth in demand for
individual front-office automation applications as well as the
number of organizations adopting comprehensive front-office
automation software information systems. 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 expand 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, there would be an adverse
effect on the Company's business, results of operations and
financial condition.
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 software applications to
create an enterprise-wide information system. If the demand for
integrated suites of front-office automation 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 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 to cover key vertical markets. An important element
of the Company's strategy is to integrate its products with
products from enterprise resource planning ("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 salespeople. Competition for salespeople is
intense and there can be no assurance that the Company can retain
its existing salespeople or that it can attract, assimilate and
retain additional highly qualified salespeople in the future. The
strategy also depends, in large part, on attracting and retaining
beneficial third party relationships. 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. 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 changes in interest rates, 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.
Dependence on Licensed Technology. Vantive licenses technology
on a non-exclusive basis from several businesses for use with its
products and anticipates that it will continue to do so in the
future. The inability of the Company to continue to license these
products or to license other products for use with its products or
substantial increases in royalty payments under these third party
licenses could have a material adverse effect on its business,
results of operations and financial condition. In addition, the
effective implementation of the Company's products depends upon the
successful operation of these licensed products in conjunction with
the Company's products and therefore any undetected errors in such
licensed products may prevent the implementation or impair the
functionality of the Company's products, delay new product
introductions and/or injure the Company's reputation. Such
problems could have a material adverse effect on the Company's
business, results of operations and financial condition.
Dependence on Proprietary Technology; Risks of Infringement.
The Company's success is heavily dependent upon proprietary
technology. The Company relies primarily on a combination of
copyright, trademark and trade secrets laws, as well as
confidentiality procedures and contractual provisions to protect
its proprietary rights. There can be no assurance that such
measures will be adequate to protect the Company from infringement
of its technology. The Company presently has no patents or patent
applications pending. Despite the Company's efforts to protect its
proprietary rights, attempts may be made to copy aspects of the
Company's products or to obtain and use information that the
Company regards as proprietary. In particular, as the Company
provides its licensees with access to the proprietary information
underlying the Company's licensed applications, there can be no
assurance that licensees or others will not develop products which
infringe the Company's proprietary rights.
Policing unauthorized use of the Company's products is difficult
and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be
expected to be a persistent problem. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights
to as great an extent as do the laws of the United States. There
can be no assurance that the Company's means of protecting its
proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology. The
Company is not aware that any of its products infringe the
proprietary rights of third parties, although the Company has in
the past and may in the future, receive communications alleging
possible infringement of third party intellectual property rights.
The Company expects that software product developers will
increasingly be subject to infringement claims as the number of
products and competitors in the Company's target markets grows and
the functionality of products in such markets overlaps. Any such
claims, with or without merit, could be time-consuming, result in
costly litigation, cause product shipment delays or require the
Company to enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available
on terms acceptable to the Company or at all, which could have a
material adverse effect upon the Company's business, results of
operations and financial condition.
Product Liability. The Company's license agreements with its
customers typically contain provisions intended to limit the
Company's exposure to potential product liability claims. It is
possible that the limitation of liability provisions contained in
the Company's agreements may not be effective. Although the
Company has not experienced any product liability claims to date,
the sale and support of products by the Company and the
incorporation of products from other businesses may entail the risk
of such claims. A successful product liability action brought
against the Company could have a material adverse effect upon the
Company's business, results of operations and financial condition.
Year 2000 Compliance. Many currently installed computer systems
and software products are coded to accept only two digit entries in
the date code field. These date code fields will need to accept
four digit entries to distinguish 21st century dates from the 20th
century dates. As a result many companies' software and computer
systems may need to be upgraded or replaced in order to comply with
such "Year 2000" requirements. Although the Company believes that
its systems are Year 2000 compliant, the Company utilizes third-
party equipment and software that may not be Year 2000 compliant.
Failure of such third-party equipment or software to operate
properly with regard to Year 2000 and thereafter could require the
Company to incur unanticipated expenses to address any problems,
which could have a material adverse effect on the Company's
business, operating results and financial condition. The business,
operating results and financial condition of the Company's
customers could be adversely affected to the extent that they
utilize third-party software products which are not Year 2000
compliant. Furthermore, the purchasing patterns of customers or
potential customers may be affected by Year 2000 issues as
companies expend significant resources to correct their current
systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase products and services such as
those offered by the Company, which could have a material adverse
effect on the Company's business, operating results and financial
condition. The Vantive Enterprise has been designed to support
dates well into the next century and to be Year 2000 compliant.
Failure of the software to operate properly with regard to Year
2000 and thereafter could require the Company to incur
unanticipated expenses to address any problems, which could have a
material adverse effect on the Company's business, operating
results 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 or 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 which the
Company has no or limited prior experience and potential loss of
key employees of 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.
Financial Condition
Total assets as of March 31, 1998 increased by 4.0%, or
$6.5 million from December 31, 1997. The combined balance of cash
and short-term investments increased by $3.4 million primarily due
to collections of accounts receivable and operating activities.
Net property and equipment increased $1.4 million primarily due to
equipment purchases associated with supporting the growth of the
Company's business during this period.
Total current liabilities as of March 31, 1998 increased by
4.3%, or $1.6 million from December 31, 1997. The increase
primarily was due to increases in deferred revenues of $4.0
million partially offset by a decrease in accounts payable and
accrued liabilities of $2.4 million. The increase in deferred
revenues is primarily due to deferrals associated with higher
volume of revenues related to post-contract support. The decrease
in accounts payable and accrued liabilities is due to reduced
expense levels.
Liquidity and Capital Resources
Operating activities provided cash of $4.9 million in the
quarter ended March 31, 1998. The primary source of these funds
was net income and an increase in deferred revenues, partially
offset by increases in accounts receivable, prepaid and other
assets and a decrease in accounts payable and accrued liabilities.
Operating activities provided cash of $2.6 million in the quarter
ended March 31, 1997. The primary source of these funds was net
income and an increase in accounts payable and accrued
liabilities, partially offset by an increase in accounts
receivable.
Investing activities used cash of $42.8 million in the quarter
ended March 31, 1998, primarily for the purchase of short-term,
interest-bearing, investment-grade securities and for the purchase
of capital equipment. The Company does not currently have any
material commitments for capital equipment acquisitions.
Investing activities used cash of $2.1 million, in the quarter
ended March 31, 1997, primarily for purchase of capital equipment.
Financing activities provided cash of $1.0 million in the
quarter ended March 31, 1998. The primary source of these funds
was proceeds from the issuance of common stock pursuant to the
exercise of outstanding stock options, partially offset by payments
on capital lease obligations. Financing activities provided cash
of $198,000, in the quarter ended March 31, 1997. The primary
source of these funds was proceeds from the issuance of common
stock pursuant to the exercise of outstanding stock options,
partially offset by payments on capital lease obligations.
At March 31, 1998, the Company's principal sources of liquidity
were its cash, cash equivalents and short-term investments of
$104.8 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.
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:
Not Applicable.
Item 5: Other Information:
Not Applicable.
Item 6: Exhibits and Reports on Form 8-K:
A. Exhibits
* 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.
= 4.1 Declaration of Registration Rights made on August 31,
1997 by the Company for the benefit of the holders of
Common Stock of Innovative Computer Concepts, Inc.
* 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.
** 10.17 Agreement and Plan of Merger dated August 13, 1997 by
and among The Vantive Corporation, Igloo Acquisition
Corporation and Innovative Computer Concepts, Inc. as
amended.
27.1 Financial Summary Table
* Previously filed in the Company's Registration Statement (No.
33-94244), declared effective on August 14, 1995.
+ Confidential Treatment has been granted for portions of this
exhibit.
# Previously filed in the Report on Form 10-K filed on March 31,
1997.
** Previously filed in the Company's Report on Form 8-K filed on
September 26, 1997 and on Form 8-K/A filed on November 4, 1997.
= Incorporated by reference from the Company's Registration
Statement (No. 333-36547), declared effective on November 4,
1997.
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: May 12, 1998
By: /s/ KATHLEEN MURPHY
------------------------------------
Kathleen Murphy
Chief Financial Officer
(Principal Financial Officer)
Dated: May 12, 1998
By: /s/ MICHAEL M. LOO
------------------------------------
Michael M. Loo
Vice President, Finance
(Principal Accounting Officer)
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<INCOME-TAX> 2,184
<INCOME-CONTINUING> 3,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,719
<EPS-PRIMARY> $0.15
<EPS-DILUTED> $0.14
</TABLE>
