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BCE Emergis Posts Sharply Higher Second Quarter Results Montreal, Quebec - Monday, July 24, 2000, 8:02 AM EDT
* Revenue triples and reaches $122 million
* Net earnings from operations at $0.09 per share
* U.S. revenue climbs from 5% to 42% of total revenue
* Healthcare segment propels revenue rise and accounts for 52% of
revenue
BCE Emergis today announced that it recorded second quarter
revenues of $122.2 million, up sharply from the previous year
when revenues stood at $40.3 million. Net earnings from
operations* for the quarter were $8.2 million, or $0.09 per
share, compared to a loss of $2.0 million, or $0.03 per share for
the same period in 1999. Including acquisition-related
amortization costs and deferred income taxes, BCE Emergis
recorded a net loss of $82.2 million, or $0.89 per share for the
second quarter ended June 30, 2000, compared to a net loss of
$17.9 million or $0.23 per share for the same period in 1999.
"We again recorded strong growth during the quarter and this,
coupled with our recent acquisition of UP&UP, had a significant
positive impact on our revenue both over last year and over the
previous quarter. In addition, our EBITDA progression over the
past four quarters demonstrates a solid overall operational
performance. Both illustrate the sharp growth curve that our
company is experiencing, fueled by the rising industry demands
for B2B solutions," said Brian Edwards, President and CEO of BCE
Emergis. "These demands are creating tremendous opportunities to
expand our customer base and our existing customer
relationships," he added.
Financial highlights
These strong second quarter financial results translated into
several milestones:
* At $122.2 million, second quarter revenue is up 203% from
the corresponding quarter in 1999 and 68% from the first
quarter of this year.
* Net earnings from operations*, a widely accepted measure for
ongoing operational profitability, reached $8.2 million,
compared to a $2.0 million loss in for the three-month
period in 1999 and a $1.5 million loss in the first quarter
2000. EBITDA reached the $20 million mark, significantly up
from a $0.9 million loss in 1999 and from $5.0 million in
the first quarter 2000.
* Cash flow from operations generated during the second
quarter totaled $19.3 million, compared to a negative $3.3
million in 1999. Cash in the bank, at the end of the quarter
stood at $86.5 million.
For the first six months, the Company recorded $194.9 million in
revenue, 152% higher than the $77.3 million for the same period
last year. Net earnings from operations were $6.8 million or
$0.08 per share, compared to a loss of $3.2 million or $0.04 per
share for the six-month period in 1999. Including
acquisition-related amortization costs and deferred income taxes,
BCE Emergis recorded a net loss of $123.3 million, or $1.36 per
share for the six months ended June 30, 2000, compared to a net
loss of $34.0 million or $0.43 per share for the same period in
1999.
Operational Highlights
Virtually all the industry segments contributed to the record
growth registered for the second quarter.
* The healthcare sector became the largest segment,
registering $63.3 million in revenue, compared to $3.6
million in comparable 1999 quarter, and $18.2 million in the
first quarter of this year. The finance and telecom segments
generated revenue of $22.7 million and $33.1 million,
respectively. Revenue in the transportation area was $3.1
million.
* The Company produced 42% of its revenue in the U.S.,
compared to 5% in the same period last year and 8% in the
first quarter of 2000.
* Included for the first time in the quarterly results, United
Payors &United Providers Inc. contributed significantly to
financial and operational growth. The Company plans to use
UP&UP as the foundation for its U.S. healthcare strategy.
During the second quarter, the Company announced some important
developments and customer sales:
* Scotiabank joined e-route, a leading electronic bill
presentment and payment corporation. BCE Emergis has a
10-year agreement with e-route - that now includes seven of
the country's largest financial institutions - to provide it
with its electronic bill presentment needs.
* BCE Emergis, through its Bell Canada sales channel,
concluded an agreement with Molson to implement and manage
a corporate electronic procurement marketplace that includes
all its suppliers. This is BCE Emergis' third major
e-procurement contract signed in just over six months.
* BCE Emergis signed a strategic alliance with ValiCert and
has become a member of the ValiCert Affiliate Program thus
further enhancing its security services offering and the
security features in business-to-business (B2B)
transactions.
Additional financial information is available on the BCE Emergis
web site at www.emergis.com.
BCE Emergis delivers network-centric e-commerce services that
significantly improve customer processes through secure B2B
exchanges. Combining e-commerce, e-payment and security services,
BCE Emergis offers clients in the healthcare, financial services,
telecommunications and transportation industries a full suite of
core and vertical-specific services that are the essential
building blocks and infrastructure required for e-commerce. BCE
Emergis is one of the top e-commerce providers in North America
and its shares are included in the TSE 100 Composite Index. For
more information, please refer to www.emergis.com.
This news release contains certain forward-looking statements
that reflect the current views and/or expectations of BCE Emergis
with respect to its performance, business and future events. Such
statements are subject to a number of risks, uncertainties and
assumptions. Actual results and events may vary significantly.
- 30 -
For information:
For media : For investors:
Sylvia Morin John Gutpell
Director, Corporate Director,
Communications Investor Relations
514 868-2358 (514) 868-2232
e-mail : e-mail:
sylvia.morin@emergis.com john.gutpell@emergis.com
Consolidated Statement of Income
(millions of dollars, except loss per share)
For the For the For the For the
three three six six
-month -month -month -month
period period period period
ended ended ended ended
June 30 June 30 June 30 June 30
2000 1999 2000 1999
(unaudited)(unaudited)(unaudited)(unaudited)
Revenue 122.2 40.3 194.9 77.3
Direct costs 18.0 12.7 37.9 24.7
----------------------------------------
Gross margin 104.2 27.6 157.0 52.6
----------------------------------------
Expenses
Operations 46.3 13.1 66.7 24.4
Sales and marketing 14.7 4.9 23.2 8.3
Development and
integration services 9.4 6.3 19.4 12.3
General and
administrative 13.8 4.2 22.7 8.4
----------------------------------------
84.2 28.5 132.0 53.4
----------------------------------------
Income (loss) before
under-noted items 20.0 (0.9) 25.0 (0.8)
Depreciation 6.2 1.4 11.8 2.8
Amortization of
intangibles 89.9 15.9 127.8 30.8
Interest income (2.1) (0.9) (2.9) (1.7)
Interest expense 4.6 0.1 5.2 0.3
Interest expense
- amortization of
option on
convertible debenture 8.2 - 8.9 -
Other expenses 0.2 0.5 1.2 1.0
---------------------------------------
Net loss before tax (87.0) (17.9) (127.0) (34.0)
Income tax expense
- current 2.9 - 2.9 -
Income tax recovery
- deferred (7.7) - (6.6) -
----------------------------------------
Net loss (82.2) (17.9) (123.3) (34.0)
=========================================
Loss per share ($) (0.89) (0.23) (1.36) (0.43)
Consolidated Balance Sheet
(millions of dollars)
As at As at As at
June 30, December 31, June 30,
2000 1999 1999
(unaudited) (audited)(unaudited)
ASSETS
Current
Cash and temporary cash
investments 86.5 76.1 64.5
Accounts receivable 86.4 47.2 30.3
Prepaid expenses 19.1 2.6 0.5
Other 35.2 7.1 8.0
----------------------------
227.2 133.0 103.3
Capital assets 127.8 126.1 74.1
Goodwill 806.5 242.8 94.6
Other assets 65.4 7.2 -
----------------------------
Future income
tax asset 35.5 - -
-----------------------------
1,262.4 509.1 272.0
-----------------------------
LIABILITIES
Current
Accounts payable and
accrued liabilities 107.9 76.8 27.2
Deferred revenue 6.4 5.6 3.9
Convertible debenture 133.6 - -
Long-term debt due
within one year 7.3 7.6 3.5
----------------------------
255.2 90.0 34.6
Deferred credits 2.2 2.2 -
Long-term debt 14.8 15.2 5.5
----------------------------
272.2 107.4 40.1
----------------------------
SHAREHOLDERS' EQUITY
Option on convertible
debenture 25.2 - -
Capital stock 1,180.1 525.8 324.0
Foreign currency
translation adjustment 0.8 - -
Deficit (215.9) (124.1) (92.1)
------------------------------
990.2 401.7 231.9
------------------------------
1,262.4 509.1 272.0
------------------------------
Consolidated Statement of Cash Flows
For the For the For the For the
three three six six
-month -month -month -month
period period period period
ended ended ended ended
June 30 June 30 June 30 June 30
2000 1999 2000 1999
(unaudited)(unaudited)(unaudited)(unaudited)
Operating activities
Net loss (82.2) (17.9) (123.3) (34.0)
Depreciation and
amortization 96.1 17.3 139.5 33.7
Amortization of
option on convertible
debenture 8.2 - 8.9 -
Income tax expense (7.7) - (6.6) -
Other (0.3) - (0.3) 0.5
Changes in working
capital items 5.2 (2.7) (23.8) (4.9)
-----------------------------------------
19.3 (3.3) (5.6) (4.7)
-----------------------------------------
Investing activities
Acquisitions - (13.7) (797.2) (14.0)
Cash acquired on
acquisition of UP&UP - - 46.3 -
Note receivable from
former majority
shareholder of UP&UP - - (11.6) -
Additions to fixed
assets (8.6) (1.6) (19.6) (3.3)
-----------------------------------------
(8.6) (15.3) (782.1) (17.3)
-----------------------------------------
Financing activities
Repayment of
long-term debt (1.5) (0.7) (3.5) (1.5)
Issue of convertible
debenture - - 150.0 -
Issue of common shares 0.9 2.3 654.3 53.1
-----------------------------------------
(0.6) 1.6 800.8 51.6
-----------------------------------------
Foreign exchange gain
(loss) on cash held in
foreign currencies (2.7) - (2.7) -
Cash position
Increase (decrease) 7.4 (17.0) 10.4 29.6
Beginning balance 79.1 81.5 76.1 34.9
----------------------------------------
Closing balance 86.5 64.5 86.5 64.5
----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible debenture
In order to provide the required financing for the acquisition of
UP&UP, BCE Inc. (our parent company) purchased, by way of private
placement, 5,517,827 common shares at a price per share of
$117.80 (being the closing price of our common shares on the TSE
on March 20, 2000) for a total cash consideration of
$650,000,000. In addition, BCE Inc. advanced $150,000,000 in the
form of a convertible debenture bearing interest at a rate of
6.84% per annum. The maturity date of the debenture is December
31, 2000 and it can be redeemed by the Company at any time. The
principal amount of the debenture is convertible into 1,273,345
common shares at a conversion price per share of $117.80. The
fair value of the conversion option associated with the
convertible debenture on the date of issuance was $25,236,000 and
is reflected as "option on convertible debenture" in
shareholders' equity. This amount will be amortized over the term
of the debenture (282 days).
Related party information
Revenues include $22.4 million and $49.2 million, for the three
month period ended March 31, 2000 and for the six month period
ended June 30, 2000 respectively, from normal course sales to
entities controlled by the Company's parent, either for their own
use or for resale to third parties.
Cash and temporary cash investments includes $25.0 million ($30.0
million at December 31, 1999) invested on a short-term basis with
an entity controlled by the Company's parent.
Accounts receivable include $75.5 million ($18.1 million at
December 31, 1999) due from entities controlled by the Company's
parent.
Accounts payable and accrued liabilities include $54.3 million
($19.4 million at December 31, 1999) due to entities controlled
by the Company's parent.
The convertible debenture of $124.8 million is owed to the
Company's parent, with an option to convert valued at $25.2
million which is included in shareholder's equity.
Operating Segment Information
The Company focuses its activities on four vertical markets
(financial services, healthcare, telecommunications, and
transportation), offering a full suite of products to companies
in these markets. The following table shows the revenues derived
from each of the four vertical markets:
Finance Health Telecom Transport Total
Q2 00 22.7 63.3 33.1 3.1 122.2
Q2 99 10.7 3.6 21.9 4.1 40.3
YTD 00 43.1 81.5 63.7 6.6 194.9
YTD 99 17.2 6.8 44.9 8.4 77.3
Contingency
On April 26, 1996, First Health Group Corporation ("First
Health"), filed a civil complaint against United Payors & United
Providers, Inc. ("UP&UP"), a subsidiary of the Company, seeking
injunctive relief and damages of $29 million to $37 million based
on claims of trademark infringement, false advertising, deceptive
trade practices, fraud, interference with contract, interference
with prospective economic relations and unfair competition. First
Health's principal contention is that representatives of UP&UP
made false and misleading statements during contract negotiations
with healthcare providers in order to cause them to join the
UP&UP provider network.
On March 21, 2000, the U.S. District Court for the Northern
District of Illinois granted summary judgment in favor of UP&UP
on the false advertising claims; and on April 10, 2000, the Court
granted summary judgment in favor of UP&UP on the contractual
interference and damages claims. An appeal of those court rulings
is expected. The Company believes First Health's claims lack
merit and that its potential liability, if any, arising from the
litigation will not be material to its consolidated financial
statements.
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