CKCM Click Commerce

Click Commerce, Inc. (Nasdaq:CKCM), a leading provider of on-demand supply chain management solutions, today announced results for its second quarter ended June 30, 2006. Total second quarter 2006 revenues were $19.7 million, representing a 48% growth from second quarter 2005 revenues of $13.3 million. Net income on a GAAP basis was $3.2 million, or $0.24 per share for the quarter ended June 30, 2006. Because of significant net operating loss carryforwards, the Company had an effective tax rate of 0% in the prior year quarter. If the Company had been taxed in the prior year quarter at the current quarters' tax rate of 33%, the prior year net income would have been $2.1 million or $0.18 per share for the quarter ended June 30, 2005 on a GAAP basis. The Company, however, was not taxed at that effective tax rate in the prior year quarter and thus reported net income of $3.2 million or $.27 per share on a GAAP basis. The Company's second quarter results represent its twelfth consecutive profitable quarter. As compared to the first quarter of 2006, the Company incurred additional expenses of approximately $0.4 million including increased spending on marketing, Sarbanes Oxley compliance and legal fees related to building our intellectual property portfolio. The Company reduced its effective tax rate from 41% in the first quarter of 2006 to 33% for the second quarter of 2006 due to an estimated credit for research and development costs. The Company estimates its effective tax rate will be 37% for the remainder of the year. On a fully-taxed non-GAAP basis, excluding certain charges as described below, net income was $4.6 million, or $0.36 per share on a diluted basis. This represents an improvement of approximately $1.7 million over Q2 2005's non-GAAP net income of $2.9 million, or $0.24 per share on a diluted basis. Non-GAAP adjustments comprise non-cash charges related to the amortization of intangible assets and stock-based compensation, net of related income taxes calculated at a 33% effective tax rate. The Company's cash and cash equivalents were $12.7 million as of June 30, 2006 compared to $22.3 million as of March 31, 2006. The decrease of $9.6 million primarily related to the use of $8.0 million of cash to repurchase shares originally issued in connection with its acquisition of certain business assets from Elance and the purchase of property and equipment of $0.8 million. Cash flow from operations in the quarter was a net use of $0.4 million. In addition, the Company repaid a short-term note of $0.4 million. For the six months ended June 30, 2006, the Company generated $7.7 million of cash flow from operations. Second quarter days sales outstanding were 102 days as compared to first quarter 2006 days sales outstanding of 101 days. Deferred revenue was $14.3 million as of June 30, 2006. Conference Call The Company will hold a conference call to discuss the results today, July 27, immediately following the issue of this release with remarks from Chairman and CEO Michael W. Ferro, Jr. and CFO David Arney. Nancy Koenig, executive vice president of operations, will be joining the call for Q&A. The call will also be broadcast live over the Internet. Investors interested in listening to the Webcast should go to the "Investor Center" on Click Commerce's Web site, located at www.clickcommerce.com, at least 15 minutes prior to the call. Information Concerning Forward-Looking Statements Information contained in this release that are not historical facts and refer to the Company's future operations are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Such statements involve expectations, estimates, assumptions, beliefs, hopes, plans or strategies regarding the future. These statements are subject to risks and uncertainties and actual results may differ materially from those indicated by these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to: the ability of the Company to integrate acquisitions or investments in other companies, the extent of customer acceptance and utilization of channel management products and services, the impact of competitive products and services, the volume and timing of customer contracts, changes in technology, deployment delays or errors associated with Click Commerce products and the ability to protect Click Commerce's intellectual property rights. We refer you to the risk factors listed in our annual report on Form 10-K for the year ended December 31, 2005, quarterly reports on Form 10-Q and other filings, which are on file with the Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or to reflect any change in any event, condition or circumstance on which such forward-looking statement is based, in whole or in part. Non-GAAP Financial Measures The non-GAAP financial measures contained in this earnings press release exclude amortization of intangible assets, stock based compensation expense and an adjustment to present the prior year net income as if such results had been fully taxed. The Company uses these measures for planning and forecasting its future business as well as analyzing such forecasts against past performance. In addition, excluding these charges and including prior year tax expense enhances the Company's understanding of trends developing in its operations as well as its performance in its market and against its competitors. The Company believes that providing specific financial information on the cost of such expenses, as well as providing non-GAAP net income measures that exclude such items, best allows investors to understand the Company's ongoing business activities during the quarter. The Company believes that inclusion of certain non-GAAP financial measures provides comparability to similar companies in the Company's industry, many of which present similar non-GAAP financial measures to investors. The non-GAAP financial measures should not be considered as a substitute for, or preferable to, measures of financial performance prepared in accordance with GAAP and may be different from non-GAAP financial measures used by others. The Company believes that these non-GAAP financial measures provide an additional tool for investors to evaluate its ongoing operating results and trends. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as detailed below (in thousands, except earnings per share and margins): -0- *T Reconciliation of Non-GAAP Financial Measures (unaudited) Three months ended June 30, 2006 ---------------------------------------- Basic Diluted Net Earnings Earnings Profit income per share per share Margin ---------------------------------------- As reported GAAP financial measures $3,160 $0.26 $0.24 16% Adjustments Amortization of intangible assets presented in: Cost of revenues, Product License 488 0.04 0.04 2% Operating expense 961 0.08 0.08 5% Stock-based compensation 129 0.01 0.01 1% Income tax effect of non-GAAP adjustments and applying the same current year effective tax rate to prior year (148) (0.01) (0.01) -1% ---------------------------------------- Total adjustments 1,431 0.12 0.12 7% ---------------------------------------- Non-GAAP financial measures $4,591 $0.38 $0.36 23% ======================================== Three months ended June 30, 2005 ---------------------------------------- Basic Diluted Net Earnings Earnings Profit income per share per share Margin ---------------------------------------- As reported GAAP financial measures $3,212 $0.29 $0.27 24% Adjustments Amortization of intangible assets presented in: Cost of revenues, Product License 279 0.03 0.02 2% Operating expense 505 0.05 0.04 4% Stock-based compensation - - - 0% Income tax effect of non-GAAP adjustments and applying the same current year effective tax rate to prior year (1,063) (0.10) (0.09) -8% ---------------------------------------- Total adjustments (279) (0.02) (0.03) -2% ---------------------------------------- Non-GAAP financial measures $2,933 $0.27 $0.24 22% ======================================== Six months ended June 30, 2006 ---------------------------------------- Basic Diluted Net Earnings Earnings Profit income per share per share Margin ---------------------------------------- As reported GAAP financial measures $6,077 $0.51 $0.47 15% Adjustments Amortization of intangible assets presented in: Cost of revenues, Product License 919 0.08 0.07 2% Operating expense 1,947 0.16 0.15 5% Stock-based compensation 210 0.02 0.02 1% Income tax effect of non-GAAP adjustments and applying the same current year effective tax rate to prior year (299) (0.02) (0.02) -1% ---------------------------------------- Total adjustments 2,778 0.24 0.22 7% ---------------------------------------- Non-GAAP financial measures $8,855 $0.75 $0.69 22% ======================================== Six months ended June 30, 2005 ---------------------------------------- Basic Diluted Net Earnings Earnings Profit income per share per share Margin ---------------------------------------- As reported GAAP financial measures $5,842 $0.54 $0.50 24% Adjustments Amortization of intangible assets presented in: Cost of revenues, Product License 481 0.04 0.04 2% Operating expense 1,225 0.11 0.10 5% Stock-based compensation - - - 0% Income tax effect of non-GAAP adjustments and applying the same current year effective tax rate to prior year (2,175) (0.20) (0.18) -9% ---------------------------------------- Total adjustments (469) (0.05) (0.04) -2% ---------------------------------------- Non-GAAP financial measures $5,373 $0.49 $0.46 22% ======================================== March 31, 2006 income tax effect of non-GAAP adjustments has been adjusted due to a change in estimate *T About Click Commerce, Inc. Click Commerce, Inc., (Nasdaq:CKCM), a leading provider of on-demand supply chain management solutions, enables millions of users in 70 countries to collaborate, in real time, with business partners across the extended enterprise. Click Commerce solutions support the unique business processes of multiple industry segments such as manufacturing, aerospace and defense, high-tech, and research and healthcare. Click Commerce enables corporations including Alaska Airlines, BASF, Citibank, Delphi, Eastman Kodak Company, Jabil Global Services, Lockheed Martin, Microsoft, Pier 1, Ryder, and Verizon to coordinate and optimize business processes, accelerate revenue, lower costs, and improve customer service. More information can be found at www.clickcommerce.com. -0- *T CLICK COMMERCE, INC. Condensed Consolidated Balance Sheets (Dollars in thousands, except per share data) June 30, December 31, 2006 2005 ------------------------- (unaudited) ASSETS Current Assets: Cash, cash equivalents, and short-term investments $12,696 $17,498 Trade accounts receivable, net 22,514 25,336 Revenue earned on contracts in progress in excess of billings 1,054 481 Other current assets 4,311 1,879 ------------ ------------ Total current assets 40,575 45,194 Property and equipment, net 3,411 2,765 Intangibles 23,880 22,129 Goodwill 60,303 48,782 Deferred tax asset 3,239 7,116 Other assets 1,719 1,673 ------------ ------------ Total assets $133,127 $127,659 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $1,010 $1,454 Billings in excess of revenues earned on contracts in progress 15 177 Deferred revenue 14,331 16,421 Accrued compensation 1,351 3,190 Accrued rent 1,834 2,610 Accrued expenses and other current liabilities 4,416 4,552 Short-term notes payable - 829 ------------ ------------ Total current liabilities 22,957 29,233 Long-term debt 6,417 6,464 Other liabilities 1,177 846 ------------ ------------ Total liabilities 30,551 36,543 Preferred stock - - Common stock 13 12 Additional paid-in capital 133,898 120,589 Accumulated other comprehensive income 249 194 Treasury stock (10,905) (2,923) Accumulated deficit (20,679) (26,756) ------------ ------------ Total shareholders' equity 102,576 91,116 ------------ ------------ Total liabilities and shareholders' equity $133,127 $127,659 ============ ============ Click Commerce, Inc. Condensed Consolidated Statements of Income (Dollars in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Revenues Product license and hardware Product license $2,288 $1,841 $4,964 $3,804 Hardware $350 - $726 - ----------- ----------- ----------- ----------- Total product license and hardware $2,638 $1,841 $5,690 $3,804 Service Maintenance and hosting 9,098 5,729 18,105 9,543 Consulting and implementation service 6,017 3,849 11,660 7,346 Subscription 1,989 1,930 3,975 3,581 ----------- ----------- ----------- ----------- Total service 17,104 11,508 33,740 20,470 ----------- ----------- ----------- ----------- Total revenues 19,742 13,349 39,430 24,274 Cost of revenues Product license and hardware 818 344 1,636 542 Service 6,102 4,827 12,185 8,816 ----------- ----------- ----------- ----------- Total cost of revenues 6,920 5,171 13,821 9,358 Gross profit 12,822 8,178 25,609 14,916 Operating expenses Sales and marketing 2,179 1,602 4,270 2,748 Research and development 2,309 1,666 4,748 2,875 General and administrative 2,629 1,282 4,993 2,288 Amortization of intangible assets 961 505 1,947 1,225 Stock-based compensation 129 - 210 - ----------- ----------- ----------- ----------- Total operating expenses 8,207 5,055 16,168 9,136 Operating income 4,615 3,123 9,441 5,780 Other income 109 89 240 62 ----------- ----------- ----------- ----------- Income before income taxes 4,724 3,212 9,681 5,842 Income tax expense 1,564 - 3,604 - ----------- ----------- ----------- ----------- Net income $3,160 $3,212 $6,077 $5,842 =========== =========== =========== =========== Basic net income per common share $0.26 $0.29 $0.51 $0.54 ----------- ----------- ----------- ----------- Diluted net income per common share $0.24 $0.27 0.47 $0.50 ----------- ----------- ----------- ----------- Weighted average common shares outstanding - basic 12,041,614 11,008,162 11,969,504 10,720,961 Weighted average common shares outstanding - diluted 12,912,929 12,116,806 12,927,854 11,766,721 CLICK COMMERCE, INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (unaudited) Six months ended June 30, 2006 2005 -------- -------- Cash flows from operating activities: Net income $6,077 $5,842 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Income tax expense 2,995 -- Amortization of stock-based compensation 210 -- Depreciation 704 470 Amortization of intangibles 2,866 1,706 Provision for doubtful accounts (1) 60 Gain on disposal of assets (6) -- Changes in operating assets and liabilities, net of effect of acquisitions: Trade accounts receivable 3,065 (1,033) Prepaids and other current assets (2,440) 673 Accounts payable (451) (1,726) Billings in excess of revenues earned on contracts in progress (162) 276 Deferred revenue (3,432) (3,374) Accrued compensation (1,881) (3,922) Accrued expenses and other current liabilities 227 (284) Other, net -- 465 -------- -------- Net cash provided by (used in) operating activities 7,771 (847) Cash flows from investing activities: Purchase of property and equipment (1,148) (247) Payments for acquisitions, net of transaction costs and cash acquired (3,935) (1,774) Other investing activities 22 -- -------- -------- Net cash used in investing activities (5,061) (2,021) Cash flows from financing activities: Proceeds from exercise of stock options 1,349 219 Payments on stock repurchase (7,982) -- Proceeds from long-term debt -- 6,368 Payments on long-term and short-term debt (879) (5,270) Payments under capital lease obligations -- (3) -------- -------- Net cash (used in) provided by financing activities (7,512) 1,314 Net decrease in cash and cash equivalents (4,802) (1,554) Cash and cash equivalents at beginning of period 17,498 13,382 -------- -------- Cash and cash equivalents at end of period $12,696 $11,828 -------- ======== *T