Spatial Inc. Reports Third Quarter Financial Results
7 November 2000
Spatial Inc. Reports Third Quarter Financial Results
BOULDER, Colo.--Nov. 7, 2000--Spatial Inc. (AMEX:STY), a leading developer of Web-hosted engineering application services and solutions and component 3D modeling technology, today announced financial results for the third quarter of fiscal 2000.Spatial reported third quarter revenue of $3,188,000 compared with $3,775,000 in the comparable quarter a year ago. Service revenue increased 21% to $1,427,000 compared to $1,176,000 in the third quarter of 1999. Royalty revenue was $604,000 versus $1,047,000 last year. New License revenue was $1,157,000, a decline from $1,552,000 for the comparable quarter in 1999. Revenue for the third quarter includes $1,343,000 of revenue related to the PlanetCAD(TM) Division and $1,845,000 attributed to the Component Software Division. In the prior year period, all revenue was attributed to the Component Software Division.
The decline in revenue for the Component Software Division was attributed in part to increased resistance to upfront license fees by software developers in an increasingly competitive market, as well as from previously announced changes to the Spatial's pricing model for its component software products. Under the new pricing model, component licensees pay only recurring fixed and variable partner fees upon the release and shipment of a software application that incorporates Spatial's component software.
Spatial reported an overall third quarter net loss of $5,538,000, or 47 cents per share, compared with a net loss of $510,000, or 5 cents per share, in the third quarter last year. Operating expenses for the Component Software Division were approximately $3.7 million in the quarter compared to $3.2 million in the comparable quarter of 1999. The Component Software Division lost $2.2 million in the third quarter 2000.
Spatial's PlanetCAD Division had total operating expenses in the quarter of approximately $4.2 million and a loss of $3.3 million. These expenses included a charge of $332,000 related to acquired in-process research and development associated with Spatial's third quarter acquisition of Prescient Technologies, Inc., and expenses of approximately $700,000 for outside consulting services related to development of PlanetCAD's proprietary JAVA ASP Web framework. Spatial believes its proprietary Web Framework, which is designed specifically to support computationally intensive engineering software applications in a network environment, is key to its strategy of offering interoperability services as both Enterprise Solutions behind a corporate firewall and as Web-based services on its PlanetCAD.com Web site. Excluding the approximately $1 million charge for in-process research and development and outside consulting fees, the PlanetCAD Division posted a loss of approximately $2.3 million in the quarter.
"The PlanetCAD Division slightly exceeded its revenue goal for the quarter by focusing on its newly acquired PrescientQA product lines and through selling interoperability services to the Prescient customer base," said Bruce Morgan, President and CEO of Spatial. "Quarterly expenses and losses for PlanetCAD, excluding the one time outside consulting fees and the charge for in process R&D, were in line with management's expectations."
During the quarter, the PlanetCAD Division realized significant achievements including:
-- Open beta test of its Bits2PARTS.com(TM) Web-based service for
rapid creation of requests for quotation (RFQs) between custom
manufacturers and their customers.
-- Open beta test of the quote-a-part.com(TM) service for
automated cost estimation and process planning, created in
partnership with Tecnomatix Technologies Ltd.
-- More than 9,000 total PlanetCAD member registrations, with
more than 4,000 3D CAD models processed on the public
3Dshare.com(TM) interoperability web service.
-- The successful release of DesignQA version 4, the newest
release in the PrescientQA product line.
-- A first design win for an Enterprise Installation of its
3Dshare service with a major Japanese manufacturer.
PlanetCAD announced five co-branding and co-marketing agreements in the quarter with noteworthy industry vendors including: Autodesk Point A, Information Services International - Dentsu Ltd., Cadkey Corp., Cadalog.com and ANX ebusiness, a subsidiary of SAIC. The Company believes these agreements will be important drivers in building traffic and usage of PlanetCAD services including 3Dshare.com and Bits2PARTS.
PROPOSED ACQUISITION
As previously announced, Dassault Systemes signed an agreement to acquire the Component Software Division of Spatial for $25 million and related marketing, distribution and technology agreements, subject to stockholder approval at the Annual Meeting of Stockholders scheduled for November 9, 2000, in Boulder, CO. If approved, the Component Software Division will become a wholly owned subsidiary of Dassault Systemes or one of its affiliated companies. Dassault Systemes has indicated to Spatial's management that it fully supports the adoption of the new pricing plan, and understands that the move to the new pricing model is required for the long-term viability and health of the Component Software Division. While Management expects there will be a transition period to adjust to the new business model, the acceptance of such a change has been received positively by the software development market, thereby validating the benefits of this recurring revenue model.
"Adoption of the new pricing model eliminating up front charges in favor of back-end recurring revenues is the natural evolution of a process that had been impacting the component business since the second quarter of 1999," commented Morgan. "In response to the new pricing structure, Spatial has had the most successful quarter in its history in terms of new component design wins, with over 40 agreements signed. Management believes that it will take a company with the financial and technical resources comparable to Dassault Systemes to return the component business to long term health and profitability in light of the fierce price competition Spatial faced in the sector from much larger and more diversified competitors."
NINE MONTH FINANCIAL RESULTS
For the nine month period ended September 30, 2000, the Company reported a loss of $10,588,000, or 94 cents per share, compared to a loss of $1,055,000, or 11 cents per share, in 1999. Revenue decreased to $10,440,000 compared with $11,429,000 for the comparable period last year.
INCOME STATEMENT RECAP
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenue:
License fee $3,317,000 $4,508,000 $1,157,000 $1,552,000
Royalties 3,001,000 3,406,000 604,000 1,047,000
Services 4,122,000 3,515,000 1,427,000 1,176,000
---------- ---------- ---------- ----------
Total
revenue 10,440,000 11,429,000 3,188,000 3,775,000
Cost of revenue 2,193,000 840,000 900,000 305,000
---------- ---------- ---------- ----------
Gross profit 8,247,000 10,589,000 2,288,000 3,470,000
Operating expenses
excluding
acquired
in-process
R&D 18,461,000 11,052,000 7,485,000 3,981,000
Acquired
in-process R&D 332,000 500,000 332,000 -
---------- ---------- ---------- ----------
Total operating
expense 18,793,000 11,552,000 7,817,000 3,981,000
Earnings (loss)
from
operations (10,546,000) (963,000) (5,529,000) (511,000)
Other income
(expense), net (42,000) (92,000) (9,000) 1,000
---------- ---------- ---------- ----------
Net earnings
(loss) $(10,588,000) $(1,055,000) $(5,538,000) $(510,000)
=========== ========== ========== ========
Earnings (loss)
per share
Basic and diluted $(0.94) $(0.11) $(0.47) $(0.05)
Weighted average
shares outstanding
Basic and
diluted 11,206,000 9,323,000 11,784,000 9,400,000
BALANCE SHEET DATA
September 30, December 31,
2000 1999
---- ----
Working capital $ (2,188,000) $ 1,977,000
Total assets $ 13,006,000 $ 10,072,000
Stockholders' equity $ 3,568,000 $ 5,878,000
About Spatial Inc.
Spatial's Component Software Division provides the world's most widely used 3D solid modeling, visualization, 3D data translation and healing interoperability solutions that enhance software functionality and shorten product time-to-market.
Spatial's flagship product, the ACIS 3D modeling kernel is the de facto 3D solid modeling standard, which dominates the CAD/CAM/CAE market worldwide. ACIS has been adopted by more than 592 licensees and is the foundation of over 224 applications used by engineers and designers worldwide. Spatial's IntraVISION Software Developer's Kit is an OEM version of its industry-leading commercial IntraVISION enterprise-wide 2D/3D viewing solution offering access to view, markup, measure and convert over 300 2D and 3D product data file formats. The combination of products and services developed by Spatial allow licensees and end-users to capitalize on the improved integrity, advanced interoperability and rapid distribution of their design data, dramatically improving time-to-market and product development cycles across the digital manufacturing supply chain.