Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - GXS Worldwide, Inc. | dp32173_8k.htm |
Exhibit 99.1
GXS Reports Second Quarter 2012 Financial Results
Gaithersburg, MD — August 13, 2012 — GXS, a leading provider of B2B integration services, today announced its financial results for the quarter ended June 30, 2012.
FINANCIAL HIGHLIGHTS FROM THE QUARTER
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·
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Total Revenue: $120.8 million, up 2% versus 2Q11
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·
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Managed Services Revenue: $43.8 million, up 22% versus 2Q11
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·
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Adjusted EBITDA: $36.6 million, down 3% versus 2Q11
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·
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Net Income/Loss: Net Loss of $5.7 million as compared to Net Income of $0.1 million in 2Q11
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·
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Minimum Contracted Value (“MCV”): $66.7 million, up 53% versus 2Q11 – a record quarter for GXS
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·
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Exceeded the high end of Total Revenue and Adjusted EBITDA guidance for 2Q12
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BUSINESS HIGHLIGHTS FROM THE QUARTER
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·
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Continued international investment with a new GXS office in the Nagoya region of Japan to support local customers with dedicated and immediate support.
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·
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Invested more in security procedures to meet the increasing demands of our customer base. Received Payment Card Industry (PCI) Data Security Standard (DSS) 2.0 Attestation of Compliance, which comprises a minimum set of requirements for protecting cardholder data. Also, deployed data leakage protection (DLP) technology to help our financial services customers comply with regulatory requirements.
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·
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Introduced a new solution package for the fast-growing online retail channel. Designed for merchandise suppliers, the new offering enables retailers to forward orders received online to suppliers for direct fulfillment to the consumer. The drop ship solution enables retailers to reduce inventory carrying costs while expediting delivery.
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·
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Initiated several new programs to improve the customer experience. Completed the first phase of GXS’s Voice of the Customer program, which surveyed 500 top accounts to identify areas for improvement. Hosted Strategic Advisory Board and various customer user groups to identify product roadmap priorities and service delivery enhancements.
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·
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Achieved the first milestone on a multi-year architecture modernization project designed to shorten implementation timeframes, increase service levels and enable faster product development.
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·
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Continued to install new customers into two new Tier 4 data centers that will enable higher service levels and enhanced business continuity capabilities.
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1
“We are very pleased with the continued strength demonstrated by our financial results this quarter,” commented GXS President and Chief Executive Officer Bob Segert. “And once again we set an all-time record sales quarter with $66.7 million in new MCV sold, more than 20% higher than the previous company record in the fourth quarter of 2011.”
FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2012
Revenue
Total revenue for 2Q12 was $120.8 million, up 2% as compared to $118.8 million in 2Q11 and higher than second quarter guidance of $119 to $120 million. Managed Services revenue was $43.8 million in 2Q12, up 22% as compared to $36.0 million in 2Q11. Messaging Services revenue was $53.7 million in 2Q12, down 8% from $58.1 million in 2Q11. B2B Software and Services, Data Synchronization, and Custom Outsourcing revenues were $23.3 million in the aggregate for 2Q12, down 6% as compared to $24.7 million in 2Q11.
Total revenue for 2Q11 was negatively impacted by $0.44 million related to the Generally Accepted Accounting Principles (“GAAP”) write-down of certain deferred revenue from RollStream, Inc. (“RollStream”) which was acquired on March 28, 2011, and from Inovis International, Inc. (“Inovis”) which was acquired on June 2, 2010. Adjusting for such write-down, pro forma Total Revenue for 2Q11 was $119.3 million, pro forma Managed Services revenue was $36.2 million in 2Q11, pro forma Messaging Services revenue was $58.1 million in 2Q11, and pro forma aggregate B2B Software and Services, Data Synchronization, and Custom Outsourcing revenues were $25.0 million in 2Q11, resulting in 2Q12 growth rates of 1%, 21%, -8%, and -7%, respectively.
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As Reported
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Pro Forma 1
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|||||||
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Second Quarter
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Second Quarter
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|||||||
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2012
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2011
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% change
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2012
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2011
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% change
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|||
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(in $ millions)
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||||||||
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Revenues
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||||||||
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Managed Services
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$ 43.8
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$ 36.0
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22%
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$ 43.8
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$ 36.2
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21%
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||
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Messaging Services
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$ 53.7
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$ 58.1
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-8%
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$ 53.7
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$ 58.1
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-8%
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||
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B2B Software and Services, Data Synchronization, and Custom Outsourcing
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$ 23.3
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$ 24.7
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-6%
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$ 23.3
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$ 25.0
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-7%
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||
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Total Revenues
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$ 120.8
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$ 118.8
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2%
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$ 120.8
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$ 119.3
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1%
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||
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(1) Pro forma revenue is adjusted for the write-down of certain deferred revenue from the RollStream and Inovis acquisitions and is presented for informational purposes.
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Note: Some calculations may differ due to rounding
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Expenses and Net Income (Loss)
Cost of revenues, sales and marketing, and general and administrative expenses for 2Q12 were $99.8 million, as compared to $96.2 million in 2Q11. Restructuring charges were $0.6 million in 2Q12, as compared to $1.4
2
million in 2Q11. Operating income in 2Q12 was $20.5 million, as compared to $21.2 million in 2Q11, and was $20.5 million and $21.6 million on a pro forma basis in the same periods, respectively. Net interest expense and net other expense was $24.8 million for 2Q12, as compared to $20.7 million in 2Q11, resulting in income (loss) before income taxes of ($4.3) million and $0.5 million in 2Q12 and 2Q11, respectively, and ($4.3) million and $0.9 million on a pro forma basis in the same periods, respectively. Net income (loss) was ($5.7) million in 2Q12 after $1.4 million in income tax expense, as compared to $0.1 million in 2Q11 after $0.4 million in income tax expense, and was ($5.7) million and $0.5 million on a pro forma basis in the same periods, respectively.
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As Reported
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Pro Forma
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|||||
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Second Quarter
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Second Quarter
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|||||
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2012
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2011
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2012
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2011
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|||
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(in $ millions)
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||||||
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Expenses
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||||||
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Cost of revenues
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$ 66.9
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$ 63.9
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$ 66.9
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$ 63.9
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Sales and marketing
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$ 16.5
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$ 16.1
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$ 16.5
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$ 16.1
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General and administrative
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$ 16.4
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$ 16.2
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$ 16.4
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$ 16.2
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Restructuring charges
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$ 0.6
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$ 1.4
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$ 0.6
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$ 1.4
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Total expenses
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$ 100.3
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$ 97.6
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$ 100.3
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$ 97.6
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Operating income
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$ 20.5
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$ 21.2
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$ 20.5
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$ 21.6
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Other expenses
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||||||
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Interest expense, net
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($ 21.1)
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($ 19.6)
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($ 21.1)
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($ 19.6)
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Other expense, net
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($ 3.7)
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($ 1.1)
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($ 3.7)
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($ 1.1)
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Total other expenses
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($ 24.8)
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($ 20.7)
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($ 24.8)
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($ 20.7)
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Income (loss) before income taxes
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($ 4.3)
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$ 0.5
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($ 4.3)
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$ 0.9
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Income tax expense
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$ 1.4
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$ 0.4
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$ 1.4
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$ 0.4
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Net income (loss)
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($ 5.7)
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$ 0.1
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($ 5.7)
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$ 0.5
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Note: Some calculations may differ due to rounding
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||||||
Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation and amortization, and certain other charges (“Adjusted EBITDA”, a non-GAAP measure) for 2Q12 was $36.6 million, down 3% as compared to $37.8 million in 2Q11 and higher than second quarter guidance of $34 to $35 million.
Management relies upon Adjusted EBITDA as a primary measure to review and assess operating performance of its business and management team. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as (i) an alternative to net income (loss), (ii) as a measure of operating income, or cash flows from operating, investing and financing activities, or (iii) as a measure of liquidity. Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures presented by other companies. The table below reconciles Net income (loss) to Adjusted EBITDA for the periods presented.
3
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As Reported
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Pro Forma
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|||||
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Second Quarter
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Second Quarter
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|||||
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2012
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2011
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2012
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2011
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|||
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(in $ millions)
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||||||
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Net income (loss)
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($ 5.7)
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$ 0.1
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($ 5.7)
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$ 0.5
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Adjustments:
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||||||
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Income tax expense
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$ 1.4
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$ 0.4
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$ 1.4
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$ 0.4
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Interest expense, net
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$ 21.1
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$ 19.6
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$ 21.1
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$ 19.6
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Depreciation and amortization
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$ 14.4
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$ 13.3
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$ 14.4
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$ 13.3
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Stock compensation expense
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$ 0.2
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$ 0.3
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$ 0.2
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$ 0.3
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Other expense, net
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$ 3.7
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$ 1.1
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$ 3.7
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$ 1.1
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Restructuring charges
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$ 0.6
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$ 1.4
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$ 0.6
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$ 1.4
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Merger and acquisition fees
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$ 0.0
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$ 0.1
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$ 0.0
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$ 0.1
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Integration costs (1)
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$ 0.0
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$ 0.1
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$ 0.0
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$ 0.1
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Deferred income adjustment (2)
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$ 0.0
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$ 0.4
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$ 0.0
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$ 0.0
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Management fees
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$ 1.0
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$ 1.0
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$ 1.0
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$ 1.0
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Total adjustments
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$ 42.3
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$ 37.8
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$ 42.3
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$ 37.3
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Adjusted EBITDA
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$ 36.6
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$ 37.8
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$ 36.6
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$ 37.8
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(1) Integration costs represented certain incremental operating expenses associated with the integration of the Inovis business.
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(2) Purchase accounting requires that deferred income of an acquired business be written-down to fair value of the underlying obligations plus associated margin at the date of acquisition.
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Note: Some calculations may differ due to rounding
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LIQUIDITY AND CAPITAL EXPENDITURES
Cash and cash equivalents totaled $17.0 million at the end of 2Q12, as compared to $15.1 million at the end of 2Q11. There were no amounts outstanding under the revolving credit facility at the end of 2Q12 and there was $16.0 million outstanding at the end of 2Q11. At the end of both 2Q12 and 2Q11, $11.7 million of the $50.0 million of revolving credit facility capacity was pledged as security for certain letters of credit. Therefore, total available cash liquidity, including cash and cash equivalents and total revolving credit facility capacity less outstanding borrowings and letters of credit secured by the revolving credit facility, was $55.3 million and $37.4 million at the end of 2Q12 and 2Q11, respectively.
Capital expenditures (“CAPEX”) were $9.2 million in 2Q12, as compared to $11.6 million in 2Q11.
CUSTOMER ACQUISITION ACTIVITY
Total MCV for 2Q12 was $66.7 million, up 53% as compared to $43.5 million in 2Q11, and set an all-time record for new MCV sales for the company. Sales activity in 2Q12 continued to be focused primarily on new Managed Services contracts which comprised 82% of total MCV in the quarter as compared to 75% in 2Q11.
4
MCV is the incremental future minimum committed revenue of new sales agreements signed in the current period by customers. If the new contract signed is to replace an existing revenue stream, the MCV is adjusted to reflect only the incremental value from the sale. The MCV calculations are not reflected or recorded within the condensed consolidated financial statements. MCV is not a measure of financial condition or financial performance under U.S. GAAP and should not be considered as an alternative to deferred income or revenues, as a measure of financial condition or operating performance.
FINANCIAL GUIDANCE
The company is providing new guidance for 3Q12 as well as increasing its FY12 MCV guidance and tightening its FY12 Adjusted EBITDA guidance, both of which were previously provided on May 14, 2012. For 3Q12, Revenue is expected to be in the range of $121 to $122 million and Adjusted EBITDA is expected to be in the range of $36 to $37 million, representing between a 1.4% and a 0.6% decrease in Revenue versus 3Q11 and between a 12.7% and 10.3% decrease in Adjusted EBITDA versus 3Q11. For FY12, Revenue and CAPEX guidance remains unchanged at $485 to $490 million and $45 to $50 million, respectively. FY12 MCV is now expected to be in the range of $205 to $215 million, an increase of $15 million from the previous guidance, and Adjusted EBITDA is now expected to be in the range of $145 to $148 million, a decrease in the high end of the range by $2 million from previous guidance.
Achieving this guidance is subject to a number of risks and uncertainties as described in the company’s filings with the Securities and Exchange Commission (“SEC”). As a result, there can be no assurance that such guidance can be achieved.
| Third Quarter 2012 | Full Year 2012 | ||||||
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(in $ millions)
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|||||||
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Revenue
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$ 121
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to
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$ 122
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$ 485
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to
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$ 490
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Adjusted EBITDA
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$ 36
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to
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$ 37
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$ 145
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to
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$ 148
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CAPEX
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n/a
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n/a
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$ 45
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to
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$ 50
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||
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MCV
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n/a
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n/a
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$ 205
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to
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$ 215
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Third Quarter and Full Year 2012 Adjusted EBITDA Guidance - Reconciliation to GAAP
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(in $ millions)
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Third Quarter 2012
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Full Year 2012
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||||||
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Adjusted EBITDA
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$ 36.0
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to
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$ 37.0
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$ 145.0
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to
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$ 148.0
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||
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Income tax expense
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($ 0.8)
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($ 3.2)
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||||||
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Interest expense, net
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($ 21.5)
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($ 86.0)
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||||||
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Depreciation and amortization
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($ 15.0)
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to
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($ 14.0)
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($ 60.0)
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to
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($ 56.0)
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||
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Stock compensation expense
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($ 0.3)
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($ 1.2)
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||||||
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Restructuring charges
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($ 0.5)
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to
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($ 0.4)
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($ 2.3)
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to
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($ 2.2)
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||
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Management fees
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($ 1.0)
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($ 4.0)
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||||||
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($ 39.1)
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to
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($ 38.0)
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($ 156.7)
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to
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($ 152.6)
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|||
| Net Loss |
($ 3.1)
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to
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($ 1.0)
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($ 11.7)
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to
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($ 4.6)
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||
5
EARNINGS CONFERENCE CALL
Bob Segert and Gregg Clevenger will conduct a call to review the second quarter 2012 results on Tuesday, August 14, 2012 at 1:00 PM U.S. Eastern Time. To access the call, please dial 877-269-6740, or outside the U.S. 816-650-0840, at least 10 minutes before the start of the call (when calling in, you’ll be asked for your name and the Conference ID Number 99810653). A replay will be available for one week beginning two hours after the call ends. It can be accessed by dialing 855-859-2056 or 404-537-3406.
ABOUT GXS
GXS is a leading provider of B2B integration services and operates the world’s largest integration cloud, GXS Trading Grid®. Our software and services help more than 400,000 businesses, including 72 percent of the Fortune 500 and 22 of the top 25 supply chains, extend their partner networks, automate receiving processes, manage electronic payments, and improve supply chain visibility. GXS Managed Services, our unique approach to improving B2B integration operations, combines GXS Trading Grid® with our process orchestration services and global team to manage a company’s multi-enterprise processes. Based in Gaithersburg, Maryland, GXS has direct operations in 20 countries, employing more than 2,400 professionals. To learn more, see http://www.gxs.com, read our blog at http://www.gxsblogs.com, follow us on Twitter at http://twitter.com/gxs and join us on LinkedIn at http://www.linkedin.com/company/gxs. You can also access our public filings with the SEC at http://www.sec.gov/edgar.shtml.
FORWARD-LOOKING STATEMENTS
This press release may contain "forward-looking statements." All statements, other than statements of historical facts, that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future, including the discussion under “Financial Guidance,” are forward-looking statements. These forward-looking statements are affected by risks, uncertainties and assumptions, including but not limited to those set forth in the company's public filings with the SEC, including its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Accordingly, actual results or outcomes may differ materially from those expressed in the forward-looking statements. You should not place undue reliance on these statements and the company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise.
NON-GAAP MEASURES
This press release contains certain supplemental measures of performance that are not required by, or presented in accordance with, GAAP. Such measures should not be considered as alternatives to GAAP measures. It also contains certain “pro forma” financial information and results, which adjust for the impact of write-downs in deferred revenue in relation to the Inovis and RollStream acquisitions, as discussed above. Such pro forma information is presented for informational purposes only, as an aid to understanding the company's financial results. This pro forma information is not prepared in accordance with GAAP and should not be considered a substitute for the historical financial information presented in accordance with GAAP. The pro forma financial information used by the company may be different from pro forma financial information used by other companies and is not necessarily indicative of future results. You should not place undue reliance on such information.
6
GXS WORLDWIDE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
|
June 30,
2012
|
December 31,
2011
|
|||||||
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(Unaudited)
|
||||||||
|
Assets
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||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 16,982 | $ | 12,968 | ||||
|
Receivables, net
|
99,188 | 106,799 | ||||||
|
Prepaid expenses and other assets
|
30,390 | 28,881 | ||||||
|
Total current assets
|
146,560 | 148,648 | ||||||
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Property and equipment, net
|
105,687 | 105,049 | ||||||
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Goodwill
|
268,207 | 268,767 | ||||||
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Intangible assets, net
|
110,188 | 120,483 | ||||||
|
Deferred financing costs
|
13,230 | 15,018 | ||||||
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Other assets
|
20,787 | 23,112 | ||||||
|
Total Assets
|
$ | 664,659 | $ | 681,077 | ||||
|
Liabilities and Stockholder's Deficit
|
||||||||
|
Current liabilities:
|
||||||||
|
Borrowings under revolving credit facility
|
$ | –– | $ | 3,000 | ||||
|
Trade payables
|
15,280 | 19,640 | ||||||
|
Deferred income
|
44,094 | 46,622 | ||||||
|
Accrued expenses and other current liabilities
|
44,662 | 47,369 | ||||||
|
Total current liabilities
|
104,036 | 116,631 | ||||||
|
Long-term debt
|
773,660 | 772,068 | ||||||
|
Deferred income tax liabilities
|
11,002 | 9,961 | ||||||
|
Other liabilities
|
49,085 | 46,743 | ||||||
|
Total liabilities
|
937,783 | 945,403 | ||||||
|
GXS Worldwide, Inc. stockholder's deficit:
|
||||||||
|
Common stock $1.00 par value, 1,000 shares authorized, issued and outstanding
|
1 | 1 | ||||||
|
Additional paid-in capital
|
429,424 | 429,045 | ||||||
|
Accumulated deficit
|
(697,757 | ) | (687,446 | ) | ||||
|
Accumulated other comprehensive loss
|
(5,059 | ) | (6,208 | ) | ||||
|
Total GXS Worldwide, Inc. stockholder's deficit
|
(273,391 | ) | (264,608 | ) | ||||
|
Non-controlling interest
|
267 | 282 | ||||||
|
Total stockholder’s deficit
|
(273,124 | ) | (264,326 | ) | ||||
|
Total Liabilities and Stockholder’s Deficit
|
$ | 664,659 | $ | 681,077 | ||||
These statements should be read in conjunction with the Form 10-Q filed with the SEC on August 13, 2012.
7
GXS WORLDWIDE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
|
Three Months ended June 30,
|
Six Months ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Revenues
|
$ | 120,809 | $ | 118,815 | $ | 239,721 | $ | 232,923 | ||||||||
|
Costs and operating expenses:
|
||||||||||||||||
|
Cost of revenues
|
66,858 | 63,860 | 131,608 | 126,489 | ||||||||||||
|
Sales and marketing
|
16,530 | 16,124 | 33,680 | 31,583 | ||||||||||||
|
General and administrative
|
16,382 | 16,244 | 34,829 | 34,454 | ||||||||||||
|
Restructuring charges
|
577 | 1,418 | 958 | 1,619 | ||||||||||||
|
Operating income
|
20,462 | 21,169 | 38,646 | 38,778 | ||||||||||||
|
Other income (expense):
|
||||||||||||||||
|
Interest expense, net
|
(21,130 | ) | (19,631 | ) | (42,469 | ) | (40,580 | ) | ||||||||
|
Other income (expense), net
|
(3,658 | ) | (1,059 | ) | (4,376 | ) | (603 | ) | ||||||||
|
Income (loss) before income taxes
|
(4,326 | ) | 479 | (8,199 | ) | (2,405 | ) | |||||||||
|
Income tax expense
|
1,378 | 421 | 2,127 | 1,331 | ||||||||||||
|
Net income (loss)
|
(5,704 | ) | 58 | (10,326 | ) | (3,736 | ) | |||||||||
|
Less: Net income (loss) attributable to non-controlling interest
|
(20 | ) | 22 | (15 | ) | 32 | ||||||||||
|
Net income (loss) attributable to GXS Worldwide, Inc.
|
$ | (5,684 | ) | $ | 36 | $ | (10,311 | ) | $ | (3,768 | ) | |||||
These statements should be read in conjunction with the Form 10-Q filed with the SEC on August 13, 2012.
8
GXS WORLDWIDE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
Six Months ended June 30,
|
||||||||
|
2012
|
2011
|
|||||||
|
Cash flows from operations:
|
||||||||
|
Net loss
|
$ | (10,326 | ) | $ | (3,736 | ) | ||
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
28,213 | 26,239 | ||||||
|
Deferred income taxes
|
667 | (1,135 | ) | |||||
|
Amortization of deferred financing costs and debt discount
|
3,987 | 3,655 | ||||||
|
Unrealized gain on interest rate swap
|
–– | (2,365 | ) | |||||
|
Settlement of interest rate swap
|
–– | (2,318 | ) | |||||
|
Stock compensation expense
|
379 | 486 | ||||||
|
Changes in operating assets and liabilities, net of effect of business acquisitions:
|
||||||||
|
(Increase) decrease in receivables
|
7,611 | (14,351 | ) | |||||
|
(Increase) decrease in prepaid expenses and other assets
|
1,167 | (8,359 | ) | |||||
|
Increase (decrease) in trade payables
|
(3,496 | ) | 4,367 | |||||
|
Increase (decrease) in deferred income
|
(2,528 | ) | 5,199 | |||||
|
Increase (decrease) in accrued expenses and other liabilities
|
(550 | ) | 5,136 | |||||
|
Other
|
3,283 | 1,069 | ||||||
|
Net cash provided by operating activities
|
28,407 | 13,887 | ||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property and equipment (including capitalized interest)
|
(20,259 | ) | (22,417 | ) | ||||
|
Business acquisition, net of cash acquired ($4 for six months ended June 30, 2011)
|
–– | (1,125 | ) | |||||
|
Net cash used in investing activities
|
(20,259 | ) | (23,542 | ) | ||||
|
Cash flows from financing activities:
|
||||||||
|
Borrowings under revolving credit facility
|
17,000 | 24,000 | ||||||
|
Repayments under revolving credit facility
|
(20,000 | ) | (16,000 | ) | ||||
|
Payment of financing costs
|
(421 | ) | (2 | ) | ||||
|
Net cash provided by (used in) financing activities
|
(3,421 | ) | 7,998 | |||||
|
Effect of exchange rate changes on cash
|
(713 | ) | 467 | |||||
|
Increase (decrease) in cash and cash equivalents
|
4,014 | (1,190 | ) | |||||
|
Cash and cash equivalents, beginning of period
|
12,968 | 16,326 | ||||||
|
Cash and cash equivalents, end of period
|
$ | 16,982 | $ | 15,136 | ||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Cash paid for interest, net of amounts capitalized
|
$ | 38,903 | $ | 38,930 | ||||
|
Cash paid for interest rate swap
|
$ | –– | $ | 4,683 | ||||
|
Cash paid for income taxes
|
$ | 1,484 | $ | 1,448 | ||||
|
Noncash investing and financing activities:
|
||||||||
|
Fair value of equity securities issued in business acquisition
|
$ | –– | $ | 420 | ||||
These statements should be read in conjunction with the Form 10-Q filed with the SEC on August 13, 2012.
9
INVESTOR RELATIONS:
Gregg Clevenger
Executive Vice President and Chief Financial Officer
GXS Worldwide, Inc.
301-340-5188
gregg.clevenger@gxs.com
MEDIA RELATIONS:
Robin Lane
PR Manager
GXS Worldwide, Inc.
301-340-4277
robin.lane@gxs.com
10