ImageX.com Reports $6.3 Million Loss, Says Thinning Competitors Validate Model
Friday, July 27, 2001
KIRKLAND, Wash., July 26 ImageX.com, Inc. today announced revenues of $15.6 million for the quarter ended June 30, 2001, compared with revenues of $7.1 million for the same period last year -- beating analyst estimates for both revenue and cash earnings per share. The company attributes the 118% jump in revenues over the same period last year to improving market conditions for its online print solutions as well as increased print and software revenues from acquisitions. The cash operating loss decline was fueled by revenue increases paired with the three consecutive quarters of declining cash operating expenses. ImageX.com provides online management and procurement of communications materials to support corporate branding efforts for a wide range of companies. "This quarter affirmed both our staying power and the quality of our technology solution,'' said Rich Begert, ImageX.com president and CEO. "We set records in launching new products and delivering quality branded materials quickly,'' he said. Begert also said revenues increased as a result of growth in online business -- which, in turn, improved the financial picture for all the company's entities. "This quarter sees us back on track with revenue growth, quarter over quarter and year over year,'' Begert said. "Compared to the first quarter, second quarter revenues are up 6.3%, while at the same time cash operating expenses declined 19%. Against this backdrop, we remain the only proven technology for executing significant corporate re-branding. We can do it faster and more efficiently than any other print source. For that reason,'' Begert pointed out, "we continue to see persistent growth in our online solution as well as recovery in our overall print and software revenues.'' For the quarter ended June 30, 2001, the company reported a cash loss of $6.3 million, or ($0.23) per share, based on 27.3 million weighted average shares outstanding, versus the Thomson/First Call consensus estimate for the second quarter 2001 of ($0.26) per share. This compares with a cash loss of $8.0 million, or ($0.35) per share, based on 22.5 million shares outstanding for the same period last year. Including non-cash items, the company's net loss for the quarter ended June 30, 2001, was $9.9 million, or ($0.36) per share, on 27.3 million weighted average shares outstanding, compared with a net loss of $10.8 million, or ($0.48) per share, on 22.5 million weighted average shares outstanding for the period ended June 30, 2000. Financial Highlights ImageX.com reported gross profit of $5.5 million for the quarter ended June 30, 2001 compared with gross profit of $2.4 million for the same period last year. Gross margin improved from 32% in the first quarter to 36% in the second quarter reflecting improvements in operating efficiencies and several large volume projects. Total operating expenses before depreciation, amortization, loss on disposal of assets, and the write-off of IPRD were $12.1 million for the quarter ended June 30, 2001 compared with $11.8 million for the same period last year. Comparing the second quarter 2001 to the first quarter 2001, cash operating expenses fell 19%, demonstrating the company's continued focus on expense control. The company reported cash and cash equivalents of $24.3 million at June 30, 2001. Cash balances reflect cash operating losses of $6.3 million, a reduction in debt outstanding of $2.2 million, and a $5 million new equity investment, during the quarter. Chief Financial Officer, Robin L. Krueger, said the company has been focused on making decisions that will drive it toward profitability. "We are on our targeted trend line for reducing our cost structure,'' she said. "Cash operating expenses declined for the third consecutive quarter, providing further evidence that we are capable of making the management decisions that will drive us to profitability.'' She added: "We will continue to see the benefits of actions taken during this quarter in the third and fourth quarters this year.'' Operational Highlights Begert pointed out that the company's overall outlook is improving, for a number of reasons: * Long term cost structure in place. Late in the quarter, ImageX.com implemented a 10% staffing reduction, which it reinforced with a nearly 9% reduction in non-staffing- related costs. Begert said he predicts that these actions will, over the next several quarters, result in a cost structure that supports our achievement of profitability. "These actions will enable the company to achieve its financial goals,'' he said. "We not only have the products and the people to achieve success, but we can also deliver products that customers want,'' he said. As of June 30, 2001, total team members were 596. * New customers, new products, new order volume. The company added 12 new online customers during the quarter, bringing the total customers served over the past three years to 352. Order volume for the quarter ended June 30, 2001 topped 65,000 items, an increase of 39% compared to nearly 47,000 in the prior quarter and up 109% from 31,000 orders one year ago. During the second quarter, 12 new customized corporate websites went live and 688 new products were set up on customer websites. * Major re-branding for UBS Paine Webber. Second quarter online revenue received a boost from a major re-branding effort on behalf of UBS Paine Webber. Given UBS Paine Webber's over 300 offices worldwide and nearly 20,000 employees, this project was a significant example of the speed, capacity and quality of the ImageX.com solution, Begert said. * Competitive landscape brightens. "The upside to the downturn is a refreshing house cleaning of competition,'' Begert said "We have been compared with many other online solutions which were either conceptual or lacking customers and revenue. As a consequence of a number of recent business closures, the number of these competitors has fallen. Our most frequent competitor has always been the traditional printer. In spite of consolidation and weak performance in the print industry generally, we continue to add customers and revenue.'' * New software products released. The Company's Extensis software line released upgrades to two major software products: Suitcase 10, the world's best selling font manager, and Preflight Online, its patent-pending online preflighting service. The improvements to Suitcase 10 make activating, previewing and managing fonts faster and easier than ever. For Preflight Online, the latest update added functionality in French, German, and Swedish and will allow broader product adoption in important European markets. * $5 million new equity investment. Affirming the company's improving performance, an additional investment of $5 million in common equity was completed during the quarter. "Led by significant existing investors, this funding provides a backstop in the face of continuing economic sluggishness and affirms investor confidence on our business model,'' Begert said. "As has been recognized in the past, we have an enormous market opportunity, a first rate product offering, a strong balance sheet and an excellent management team. This is clearly a formula for success and these investors understand that.'' Financial Outlook Krueger said the second quarter "showed us a modest revenue recovery over the first quarter downturn.'' She added that the company's cost initiatives "will improve our financial position as we push towards profitability. Our revenue estimates for 2001 remain unchanged, ranging between $60 and $65 million, still a 20% to 30% growth over full year 2000. Cash operating expenses are expected to continue to decline and dip below 75% of revenue for the full year compared to 111% of revenue in 2000. During the second quarter, debt under our $10 million credit facility was paid down to $4.8 million which reduces interest expense. Based on the current revenue forecast and cost reductions, our cash balance remains sufficient to reach cash flow breakeven and beyond.''