Business Editors
MONTREAL--(BUSINESS WIRE)--Oct. 23, 2000--BCE Emergis
Inc.(TSE:IFM.)
- Revenue tops $132 million
- Net earnings from operations at $0.16 per share
- 36th consecutive quarter of growth
BCE Emergis Inc. a leading provider of B2B e-commerce services and
exchanges, today announced record results for the third fiscal quarter
ended September 30, 2000.
Revenues for the third quarter reached $132.1 million, up 171%
from the same quarter in the previous year when revenues stood at
$48.8 million. Net earnings from operations for the quarter were $14.9
million, or $0.16 per share, compared to a profit of $0.7 million, or
$0.01 per share for the same period in 1999. These earnings, on a per
share basis are up 15 times over last year, and up 78% over the last
quarter alone.
"We achieved record revenue levels, with solid growth over the
third quarter last year as well as over the second quarter this year.
This revenue growth is supported by the high percentage of recurring
transaction revenues, which continue to exceed 85% of total revenues,
and includes U.S. revenues which continue to be an important
component. In addition, our operational performance, as measured by
net earnings from operations and EBITDA, demonstrates very significant
progress," said Brian Edwards, Vice-Chairman and CEO of BCE Emergis.
"Our focus on building valued exchanges, on establishing important
business relationships, and on delivering best-of-breed technology
solutions through key industry channels, has resulted in a strong
quarterly performance and the full impact of these moves will continue
to be felt in the coming quarters," he added.
Including acquisition-related amortization costs and future income
tax benefits, BCE Emergis recorded a net loss of $83.3 million, or
$0.90 per share for the third quarter ended September 30, 2000,
compared to a net loss of $5.5 million or $0.07 per share for the
corresponding period in 1999.
Customer highlights
During the quarter, BCE Emergis achieved the following:
Canadian Business Unit
- The launch of Procuron, one of the largest B2B on-line marketplaces
in Canada. Procuron will benefit from the substantial spending power
of the other founding shareholders, which include CIBC, Scotiabank,
Mouvement des caisses Desjardins and Bell Canada, and will cater to
over half of the small and medium-sized businesses in Canada.
- The initial roll-out of a significant e-procurement solution with
CN. This project encompasses over 100 buyers from CN being linked
on-line to six major suppliers, including Xerox Canada, GE Capital,
Motorola Canada and Grand & Toy Ltd. BCE Emergis provides CN with a
fully-managed B2B e-commerce solution, delivered through the BCE
Emergis(TM) marketplace.
- An agreement with Aliant Inc. to provide a managed B2B corporate
marketplace and e-procurement solution. This agreement will extend
to all Aliant subsidiaries and approximately 400 of their major
suppliers. Aliant expects to improve the management of its $800
million in annual purchases.
U.S. Business Unit
- A strategic alliance with Hewlett Packard to deliver a turnkey
version of the Emergis(TM) Buyer e-procurement solution to U.S. and
Canadian companies. Through this agreement, mid-market corporate
buying organizations will be able to connect over the Internet with
a multitude of suppliers, realizing significant cost savings for
purchased goods, as well as reduced time in cost and processing
cycles.
- An expanded marketing relationship with Ariba, which could pave the
way for the integration and deployment of certain Emergis
e-services, such as the Emergis Business Document Exchange, Advanced
Order Management and Electronic Invoice Presentment and Payment,
that would add depth and transaction capabilities to the Ariba
offerings.
- A strategic alliance with FNC, Inc., of Oxford, Mississippi, to
speed and enhance delivery of mortgage appraisal services to lenders
in the U.S. and Canada. BCE Emergis will support the electronic
delivery of FNC's AppraisalPort by providing and managing customer
support services, security and network management. AppraisalPort is
operating or being installed for major lenders in the U.S.,
including Bank of America, Charter One Bank, and Dime Savings Bank.
- An agreement with Microsoft Licensing Inc., under which Microsoft
will implement our electronic invoice presentment solution, for
invoicing requirements with its trading partners. The B2B solution
will enable the on-line posting and viewing of invoice data via the
Web.
eHealth Solutions, North America
- In eHealth, BCE Emergis has continued to work on expanding its
technology and services, by applying its Canadian business model in
the U.S. marketplace. An example of the progress being made is the
offering of its vision care application in the U.S. through
Coordinated Vision Care (CVC), a UnitedHealth Group Company. The BCE
Emergis electronic solution provides CVC with a virtually paperless
administration for its electronic claims processing.
- BCE Emergis has combined the Canadian and U.S. eHealth units into
one integrated unit to better and more effectively serve the North
American market. This business unit, now operating under the BCE
Emergis name, will be headquartered in Rockville, Maryland.
Acquisition highlight
During the third quarter, BCE Emergis announced :
- The acquisition of InvoiceLink Corporation of Greensboro, North
Carolina. This transaction was closed on September 20, 2000, at a
purchase price of US$88.3 million, in BCE Emergis shares and
options. InvoiceLink brings leading-edge electronic invoice
presentment and payment technology to BCE Emergis, as well as an
experienced management team, and is an important strategic step in
building a strong e-commerce presence in the U.S. B2B market.
Other financial highlights
This strong third quarter performance also translated into the
following :
- The healthcare sector remains the largest segment, registering
$63.2 million in revenue, with the finance and telecom segments
generating revenue of $32.0 million and $33.9 million, respectively.
Revenue in the transportation sector was $3.0 million.
- BCE Emergis generated 38% of its revenue in the U.S., compared
to 3% in the same period last year.
- EBITDA reached the $25 million mark, significantly up from $2.0
million in 1999.
- Cash flow generated from operations during the third quarter totaled
$5.1 million, compared to $9.3 million in 1999. Cash in the bank, at
the end of the quarter stood at $50.4 million.
For the first nine months:
- the Company recorded $327.0 million in revenue, 159% higher than the
$126.1 million for the same period last year. Net earnings from
operations were $21.7 million or $0.24 per share, compared to a loss
of $2.0 million or $0.03 per share for the nine-month period in
1999. Including acquisition-related amortization costs and future
income tax benefits, BCE Emergis recorded a net loss of $206.5
million, or $2.26 per share for the nine months ended September 30,
2000, compared to a net loss of $39.5 million or $0.50 per share for
the same period in 1999.
Finally, given the prevailing market conditions, BCE Emergis will
wait before proceeding with a public, marketed financing in the U.S.
Additional financial information is available on the BCE Emergis
web site at www.emergis.com. N.B. "Net earnings from operations" is
defined as reported net earnings before "Acquisition-related costs"
(amortization of intangibles and the option on convertible debenture)
one-time gains and charges, and future income tax benefits.
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.
Consolidated Statement of Income
(millions of
dollars, For the For the For the For the
except three-month three-month nine-month nine-month
loss per share period period period period
and number ended ended ended ended
of shares) September September September September
30, 2000 30, 1999 30, 2000 30, 1999
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 132.1 48.8 327.0 126.1
Direct costs 29.1 14.1 69.7 38.2
---------------------------------------------------------------
Gross margin 103.0 34.7 257.3 87.9
---------------------------------------------------------------
Expenses
Operations 40.4 15.9 104.3 40.4
Sales and marketing 13.6 4.2 36.8 12.7
Development and
integration services 9.5 7.9 28.9 20.7
General and
administrative 13.8 4.7 36.5 12.9
---------------------------------------------------------------
77.3 32.7 206.5 86.7
---------------------------------------------------------------
Income before
under-noted items 25.7 2.0 50.8 1.2
Depreciation 5.9 2.0 17.8 4.8
Amortization of
intangibles 92.3 17.0 220.0 47.9
Interest income (2.2) (0.8) (5.0) (2.5)
Interest expense 3.4 0.3 8.6 0.6
Interest expense -
amortization of
option on convertible
debenture 8.2 - 17.1 -
Gain on sale of
subsidiary - (10.8) - (10.8)
Other expenses 0.2 (0.2) 1.3 0.7
---------------------------------------------------------------
Net loss before tax (82.1) (5.5) (209.0) (39.5)
Income tax expense
- current 3.5 - 6.4 -
Future income tax
benefit (2.3) - (8.9) -
---------------------------------------------------------------
Net loss (83.3) (5.5) (206.5) (39.5)
===============================================================
Basic loss per
share ($) (0.90) (0.07) (2.26) (0.50)
Weighted average
number of shares
used in computing
basic loss per
share 93,033,751 80,291,466 91,187,759 78,232,714
* Fully diluted loss per share is not presented as it is
anti-dilutive.
Consolidated Statement of Deficit
As at As at As at
September December September
(millions of dollars) 30, 2000 31, 1999 30, 1999
(unaudited) (audited) (unaudited)
Deficit - beginning of period (124.1) (58.1) (58.1)
Net loss (206.5) (66.0) (39.5)
Adjustment for accounting change 31.4 - -
---------------------------------------------------------------
Deficit - end of period (299.2) (124.1) (97.6)
---------------------------------------------------------------
Consolidated Balance Sheet
As at As at As at
September December September
(millions of dollars) 30, 2000 31, 1999 30, 1999
(unaudited) (audited) (unaudited)
ASSETS
Current
Cash and temporary cash
investments 50.4 76.1 94.9
Marketable securities
(market value $30.8M and
$15.9M as at September 30,
2000 and December 31, 1999) 18.5 3.0 -
Accounts receivable 108.1 47.2 28.0
Prepaid expenses 21.4 2.6 0.8
Other 24.9 4.1 6.4
---------------------------------------------------------------
223.3 133.0 130.1
Capital assets 142.4 126.1 65.9
Goodwill 870.1 242.8 68.2
Other assets 64.5 7.2 4.6
Future income tax asset 37.7 - -
---------------------------------------------------------------
1,338.0 509.1 268.8
---------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued
liabilities 120.4 76.8 29.5
Deferred revenue 6.1 5.6 3.7
Convertible debenture due
to parent 141.8 - -
Long-term debt due within one year 6.6 7.6 1.8
---------------------------------------------------------------
274.9 90.0 35.0
Deferred credits 2.2 2.2 -
Long-term debt 19.3 15.2 7.1
---------------------------------------------------------------
296.4 107.4 42.1
---------------------------------------------------------------
SHAREHOLDERS' EQUITY
Option on convertible debenture 25.2 - -
Capital stock 1,300.6 525.8 324.3
Foreign currency translation
adjustment 15.0 - -
Deficit (299.2) (124.1) (97.6)
---------------------------------------------------------------
1,041.6 401.7 226.7
---------------------------------------------------------------
1,338.0 509.1 268.8
---------------------------------------------------------------
Consolidated Statement of Cash Flows
For the For the For the For the
(millions of three-month three-month nine-month nine-month
dollars) period period period period
ended ended ended ended
September September September September 30, 2000 30,
1999 30, 2000 30, 1999
(unaudited) (unaudited) (unaudited) (unaudited)
Operating activities
Net loss (83.3) (5.5) (206.5) (39.5)
Depreciation and
amortization 98.2 19.0 237.7 52.7
Amortization of option
on convertible
debenture 8.2 0.0 17.1 0.0
Income tax expense 1.2 0.0 (5.4) 0.0
Gain on sale of
subsidiary 0.0 (10.8) 0.0 (10.8)
Other 0.0 0.0 (0.3) 0.4
Changes in working
capital items (19.2) 6.6 (43.0) 1.8
---------------------------------------------------------------
5.1 9.3 (0.4) 4.6
---------------------------------------------------------------
Investing activities
Acquisitions (8.6) (1.5) (805.8) (15.5)
Cash acquired on
acquisition of UP&UP 0.0 0.0 46.3 0.0
Cash acquired on
acquisition of
InvoiceLink 1.1 0.0 1.1 0.0
Note receivable from
former majority
shareholder of UP&UP 0.0 0.0 (11.6) 0.0
Proceeds on sale of
subsidiary - net of
transaction costs 0.0 29.2 0.0 29.2
Advance to company
under common
control (2.3) 0.0 (2.3) 0.0
Additions to capital
assets (21.8) (5.3) (41.5) (8.6)
---------------------------------------------------------------
(31.6) 22.4 (813.8) 5.1
---------------------------------------------------------------
Financing activities
Repayment of
long-term debt (8.9) (1.5) (12.4) (3.0)
Issue of convertible
debenture 0.0 0.0 150.0 0.0
Issue of common
shares 1.3 0.2 655.6 53.3
---------------------------------------------------------------
(7.6) (1.3) 793.2 50.3
---------------------------------------------------------------
Foreign exchange loss
on cash held in
foreign currencies (2.0) 0.0 (4.7) 0.0
Cash position
Increase (decrease) (36.1) 30.4 (25.7) 60.0
Beginning balance 86.5 64.5 76.1 34.9
---------------------------------------------------------------
Closing balance 50.4 94.9 50.4 94.9
---------------------------------------------------------------
Supplemental disclosure
of cash flow information
Amount of interest
paid 0.2 0.3 4.1 0.6
Amount of income
taxes paid 0.1 0.0 2.0 0.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2000
These interim consolidated financial statements have been prepared
in accordance with Canadian generally accepted accounting principles,
using the same accounting policies as were used for the consolidated
financial statements for the year ended December 31, 1999. These
interim consolidated financial statements should be read in
conjunction with the consolidated financial statements for the year
ended December 31, 1999, as set out in the 1999 Annual Report.
Accounting Change
During the first quarter, BCE Emergis Inc., ("the Company")
adopted on a retroactive basis, the new recommendations issued by the
CICA with respect to accounting for income taxes. However, the Company
did not restate the financial statements for previous periods. The
impact of adopting the new recommendations was an increase in net loss
of $1.1 million and a decrease in the opening deficit of $31.4
million.
Acquisition
On September 15, 2000, the Company acquired all of the outstanding
shares of InvoiceLink Corporation ("InvoiceLink"), a privately held
company involved in Web-based invoicing and payment solutions for
business-to-business applications. Pursuant to the Agreement and Plan
of Merger, the shares of InvoiceLink were converted into shares of
Emergis as described below. In addition, the Company assumed the
issued and outstanding options to purchase InvoiceLink shares which
were converted into options to purchase Emergis shares.
Pursuant to the acquisition, the Company has reserved for issuance
566,824 shares valued at $49.2 million and exchanged options to
purchase 167,968 shares of Emergis valued at $14.5 million. The
balance of the purchase price will be paid in three installments on
September 15, 2001, September 15, 2002, and September 15, 2003 by the
issuance of shares, subject to certain conditions, with a value of
$65.2 million.
A maximum of 20% of the purchase price may be settled with a cash
payment at Emergis' option and is required to be settled in cash if
certain criteria are met. The Company incurred transaction costs in
the amount of approximately $1.4 million in connection with the
acquisition relating mostly to professional fees. The transaction was
accounted for using the purchase method.
An amount of $8.8 million in common shares is contingent on
InvoiceLink delivering software to Emergis' satisfaction and entering
into a definitive agreement with certain defined customer groups
reasonably satisfactory to Emergis and has not been recorded as part
of the acquisition cost since the outcome cannot be determined beyond
a reasonable doubt. An amount of $26 million of the purchase price has
been held, to be applied against indemnification claims, if any,
arising within a defined period after closing.
The results of operations of InvoiceLink have been included in the
Company's results since September 15, 2000, the date of acquisition.
The total purchase price of the acquisition was $121.5 million and
was allocated as follows:
Millions
$
--------
Current assets 1.5
Capital assets 1.2
Other assets 0.2
Current liabilities (14.7)
Deferred revenue (0.1)
Long-term debt (2.9)
Allocation of excess purchase price over net assets
Acquired technologies 3.2
Goodwill 133.1
--------
Cost of acquisition 121.5
--------
Acquired technologies and goodwill are amortized over a period of
three years. The amortization for the period ended September 30, 2000
was $1.9 million.
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 million. In addition, BCE
Inc. advanced $150 million 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 $25.2
million 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
The following transactions occurred in the normal course of
operations with companies in the BCE group, subject to common control,
during the respective periods and were measured at the exchange value:
Three-month Nine-month
period ended period ended
Sept. 30/00 Sept. 30/00
$ $
Millions Millions
---------------------------------------------------------------
Revenues (a) 32.4 81.6
---------------------------------------------------------------
Direct costs and expenses 27.6 89.1
---------------------------------------------------------------
(a) Includes services for resale to third parties and for
internal use.
The balance sheet includes the following balances with companies
in the BCE group subject to common control.
As at Sept. 30/00 As at Dec. 31/99
---------------------------------------------------------------
$ $
Millions Millions
---------------------------------------------------------------
Cash and temporary cash investments 15.0 30.0
---------------------------------------------------------------
Accounts receivable 30.5 18.1
---------------------------------------------------------------
Capital assets purchased 6.0 -
---------------------------------------------------------------
Accounts payable and accrued liabilities 31.0 19.4
---------------------------------------------------------------
The convertible debenture of $142.1 million is owed to the parent
company, with an option to convert valued at $25.2 million, which is
included in shareholders' equity.
Operating Segment Information
The Company focuses its activities in four vertical markets
(financial services, health care, 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:
For the three-month period ended
---------------------------------------------------------------
Finance Health Telecom
---------------------------------------------------------------
$ $ $
Millions Millions Millions
---------------------------------------------------------------
Sept.30 Sept.30 Sept.30 Sept.30 Sept.30 Sept.30
2000 1999 2000 1999 2000 1999
---------------------------------------------------------------
Revenue 32.0 11.5 63.2 3.6 33.9 24.9
---------------------------------------------------------------
Direct
Costs 7.1 1.5 9.8 1.0 11.7 8.4
---------------------------------------------------------------
Gross
Margin 24.9 10.0 53.4 2.6 22.2 16.5
---------------------------------------------------------------
Transport & Other Total
---------------------------------------------------------------
$ $
Millions Millions
---------------------------------------------------------------
Sept.30 Sept.30 Sept.30 Sept.30
2000 1999 2000 1999
---------------------------------------------------------------
Revenue 3.0 8.8 132.1 48.8
---------------------------------------------------------------
Direct
Costs 0.5 3.2 29.1 14.1
---------------------------------------------------------------
Gross
Margin 2.5 5.6 103.0 34.7
---------------------------------------------------------------
For the nine-month period ended
---------------------------------------------------------------
Finance Health Telecom
---------------------------------------------------------------
$ $ $
Millions Millions Millions
---------------------------------------------------------------
Sept.30 Sept.30 Sept.30 Sept.30 Sept.30 Sept.30
2000 1999 2000 1999 2000 1999
Revenue 73.6 29.4 144.6 10.3 99.4 66.4
---------------------------------------------------------------
Direct
Costs 15.3 3.7 19.9 2.9 33.2 23.0
---------------------------------------------------------------
Gross
Margin 58.3 25.7 124.7 7.4 66.2 43.4
---------------------------------------------------------------
Transport & Other Total
---------------------------------------------------------------
$ $
Millions Millions
---------------------------------------------------------------
Sept.30 Sept.30 Sept.30 Sept.30
2000 1999 2000 1999
---------------------------------------------------------------
Revenue 9.4 20.0 327.0 126.1
---------------------------------------------------------------
Direct
Costs 1.3 8.6 69.7 38.2
---------------------------------------------------------------
Gross
Margin 8.1 11.4 257.3 87.9
---------------------------------------------------------------
Capital Stock
The stated capital stock as at September 30, 2000 is detailed as
follows:
Number $
Millions
---------------------------------------------------------------
Balance beginning of year 86,773,705 525.8
Issue of common shares (a) 5,517,827 650.0
Issue of common shares (b) 616,109 4.8
Reserved for issuance (c) 566,824 49.2
---------------------------------------------------------------
93,474,465 1,229.8
Common shares to be issued (d) 56.3
Options issued in connection with the
InvoiceLink acquisition 14.5
---------------------------------------------------------------
93,474,465 1,300.6
===============================================================
Option on convertible debenture - UP&UP
acquisition 25.2
===============================================================
(a) 5,517,827 common shares at $117.80 per share for a total
consideration of $650 million were issued by way of a private
placement to the parent company in connection with the UP&UP
acquisition.
(b) 616,109 stock options were exercised to purchase 616,109 common
shares for total cash consideration of $4.8 million.
(c) 566,824 common shares are reserved for issuance for a total
consideration of $49.2 million in connection with the InvoiceLink
acquisition.
(d) The number of shares to be issued in connection with the
InvoiceLink acquisition as described under "Acquisition" is not
determinable at this time.
Debentures:
6.84%, Convertible debenture, convertible
at the holder's option into common shares
at a conversion price of $117.80 per share
up to the maturity date on December 31, 2000 $124.8 million
Stock option plans:
Stock option plans for common shares at
prices ranging from $0.44 to $172.80 per
share and expiry dates up to 2010 3,456,083 options
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 health care
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.
CONTACT:
BCE Emergis
Sylvia Morin
Director, Corporate Communications
Tel: 514/868-2358
e-mail: sylvia.morin@emergis.com
or
John Gutpell
Director, Investor Relations
Tel: 514/868-2232
e-mail:john.gutpell@emergis.com
Original article: http://www.businesswire.com/webbox/bw.102300/202970498.htm
