Gaithersburg, MD — November 13, 2013 — GXS, a leading provider of B2B integration services, today announced its financial results for the third quarter ended September 30, 2013 and updated financial guidance for the fourth quarter and full year 2013.
FINANCIAL HIGHLIGHTS FROM THE QUARTER
- Total Revenue: $121.8 million, up $0.5 million versus 3Q12, up 2% adjusting for currency
- Managed Services Revenue: $50.4 million, up 12% versus 3Q12, up 13% adjusting for currency
- Messaging Services Revenue: $50.0 million, down 5% versus 3Q12, down 2% adjusting for currency
- Adjusted EBITDA: $40.0 million, up 7% versus 3Q12, up 8% adjusting for currency
- Adjusted EBITDA Margin: 32.8%, up 210 basis points versus 3Q12, up 175 basis points adjusting for currency
- Net Income: $0.5 million, up $0.7 million versus 3Q12
- Minimum Contracted Value (MCV): $65.1 million, up 30% versus 3Q12 and up 24% versus 2Q13
- Results at the high end of Total Revenue guidance and above the high end of Adjusted EBITDA guidance for 3Q13
BUSINESS HIGHLIGHTS FROM THE QUARTER
- Announced the pending acquisition of the company by Open Text Corporation for $1.165 billion which is expected to close in the first quarter of 2014, subject to antitrust review and other customary closing conditions
- Achieved its ninth consecutive quarter of constant currency pro forma revenue growth
- Reported higher Managed Services revenue than Messaging revenue for the first time
- Named the 2013 IT Supplier Quality Award (ISQA) Winner by Avago Technologies, an annual award presented to supplier partners that significantly contribute to Avago’s goals
- Announced that GXS Active Intelligence, which is delivered as a Software-as-a-Service (SaaS) solution, enables retailers operational visibility to monitor and assess the drop ship process to prevent errors before they impact the customer experience
- Partnered with Tillerman to streamline data collection for complete point-of-sale analytics; Tillerman’s Point-of-Sale (POS) Software-as-a-Service application will now integrate with GXS Trading Grid to easily collect key data and provide Tillerman’s clients with insight into their supply chains for more accurate planning and forecasting
- Held its EMEA Managed Services Customer Advisory Board (CAB) at ArcelorMittal’s headquarters in Paris, France
- Hosted a three part series with Secom Trust Systems, Japan’s largest security company, to discuss global B2B integration issues specific to Japan
- Received certification by SAP’s Integration and Certification Center (SAP ICC) that GXS integrates with the latest versions of SAP’s ERP application; the three-year Netweaver certification confirms that GXS Trading Grid is fully interoperable with SAP NetWeaver
“We are very pleased with our third quarter results, having achieved our ninth consecutive quarter of constant currency revenue growth, while generating strong margin expansion and MCV growth in the quarter,” commented GXS President and Chief Executive Officer Bob Segert. “We are also excited about the pending acquisition of GXS by OpenText. Through GXS, OpenText will strengthen its cloud services portfolio and its EIM leadership, and GXS customers will immediately benefit from an expanded suite of B2B cloud integration services and capabilities. We couldn’t think of a better home for our great company and its approximately 3,000 employees around the world.”
FINANCIAL RESULTS FOR THE THIRD QUARTER OF 2013
Total revenue for 3Q13 was $121.8 million, up $0.5 million as compared to 3Q12 (up 2%, adjusting for currency) and at the high end of our guidance of $121 to $122 million. Managed Services revenue was $50.4 million in 3Q13, up 12% as compared to $45.1 million in 3Q12 (up 13%, adjusting for currency) and Messaging Services revenue was $50.0 million in 3Q13, down 5% from $52.3 million in 3Q12 (down 2%, adjusting for currency). B2B Software and Services, Data Synchronization, and Custom Outsourcing revenues were $21.4 million in the aggregate for 3Q13, down 10% as compared to $23.8 million in 3Q12 (down 10%, adjusting for currency).
Expenses and Net Income (Loss)
Cost of revenues, sales and marketing, and general and administrative expenses for 3Q13 were $99.3 million, as compared to $99.8 million in 3Q12. Operating income in 3Q13 was $22.5 million, as compared to $21.5 million in 3Q12. Net interest expense and net other income was ($20.5) million for 3Q13, as compare d to ($20.4) million in 3Q12, resulting in income before income taxes of $1.9 million and $1.1 million in 3Q13 and 3Q12, respectively. Net income was $0.5 million in 3Q13 after $1.4 million of income tax expense, as compared to a net loss of ($0.1) million in 3Q12 after $1.3 million of income tax expense.
Adjusted earnings before interest, taxes, depreciation and amortization, and certain other charges (“Adjusted EBITDA”, a non-GAAP measure) for 3Q13 was $40.0 million, up 7% as compared to $37.2 million in 3Q12 (up 8% when adjusted for currency) and higher than third quarter guidance of $38 to $39 million. Adjusted EBITDA margin was 32.8% in 3Q13, 210 basis points higher than in 3Q12 (175 basis points higher when adjusted for currency).
Management relies upon Adjusted EBITDA as a primary measure to review and assess operating performance of its business and management team. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as (i) an alternative to net income (loss), (ii) a measure of operating income, or cash flows from operating, investing and financing activities, or (iii) a measure of liquidity. Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures presented by other companies. The table below reconciles net income (loss) to Adjusted EBITDA for the periods presented.
LIQUIDITY AND CAPITAL EXPENDITURES
Cash and cash equivalents totaled $66.5 million at the end of 3Q13, as compared to $40.8 million at the end of 3Q12. There were no amounts outstanding under the revolving credit facility at the end of 3Q13 or at the end of 3Q12. At the end of 3Q13 and 3Q12, $10.9 million and $11.7 million, respectively, of the $50 million of revolving credit facility capacity were pledged as security for certain letters of credit. Therefore, total available cash liquidity, including cash and cash equivalents and total revolving credit facility capacity less outstanding borrowings and letters of credit secured by the revolving credit facility, was $105.6 million and was $79.1 million at the end of 3Q13 and 3Q12, respectively.
Capital expenditures (“CAPEX”) were $12.4 million in 3Q13, as compared to $11.1 million in 3Q12.
CUSTOMER ACQUISITION ACTIVITY
Total MCV for 3Q13 was $65.1 million, up 30% as compared to $50.1 million in 3Q12 and up 24% as compared to $52.4 million in 2Q13. Sales activity in 3Q13 continued to be focused primarily on new Managed Services contracts which comprised 86% of total MCV in the quarter as compared to 70% in 3Q12 and 79% in 2Q13. Messaging contracts comprised 6% and 16% of total MCV in 3Q13 and 3Q12, respectively.
MCV is the incremental future minimum committed revenue of new sales agreements signed in the current period by customers. If the new contract signed is to replace an existing revenue stream, the MCV is adjusted to reflect only the incremental value from the sale. The MCV calculations are not reflected or recorded within the condensed consolidated financial statements. MCV is not a measure of financial condition or financial performance under GAAP and should not be considered as an alternative to deferred income or revenues, or as a measure of financial condition or operating performance.
The company is providing guidance for 4Q13 as well as adjusting its FY13 guidance previously provided on August 13, 2013. For 4Q13, Revenue is expected to be in the range of $126.7 to $127.7 million which would result in FY13 Revenue of $488.0 to $489.0 million, tightening the range of guidance previously provided of $485 to $490 million. This represents Revenue change of 0.1% to 0.9% as compared to 4Q12 (1.6% to 2.3% when adjusted for current forecasted currency impact) and 0.1% to 0.3% as compared to FY12 (1.6% to 1.8% when adjusted for current forecasted currency impact). For 4Q13, Adjusted EBITDA is expected to be in the range of $42 to $43 million which would result in FY13 Adjusted EBITDA of $151.0 to $152.0 million, above the high end of the range of guidance previously provided of $147 to $150 million. This represents Adjusted EBITDA change of 7.5% to 10.1% as compared to 4Q12 (7.5% to 10.0% when adjusted for current forecasted currency impact) and 3.1% to 3.8% as compared to FY12 (4.3% to 5.0% when adjusted for current forecasted currency impact). This implies an Adjusted EBITDA margin of between 32.8% and 33.9%, an increase of 202 to 307 basis points over the Adjusted EBITDA margin in 4Q12.
For 4Q13, CAPEX is expected to be in the range of $8.4 to $10.4 million which would result in FY13 CAPEX of $42 to $44 million, tightening the range of guidance previously provided of $40 to $45 million.
For 4Q13, MCV is expected to be in the range of $60.4 to $65.4 million which would result in FY13 MCV of $225 to $230 million, which is in the high end of the range of guidance previously provided of $220 to $230 million.
Achieving this guidance is subject to a number of risks and uncertainties as described in the Company’s filings with the Securities and Exchange Commission (“SEC”). As a result, there can be no assurance that such guidance can be achieved.
ABOUT GXS GXS is a leading B2B integration services provider and operates the world’s largest integration cloud, GXS Trading Grid®. Our software and services help more than 550,000 businesses, including 22 of the top 25 supply chains, extend their partner networks, automate receiving processes, manage electronic payments, and improve supply chain visibility. GXS Managed Services, our unique approach to improving B2B integration operations, combines GXS Trading Grid® with our process orchestration services and global team to manage a company’s multi-enterprise processes. Based in Gaithersburg, Maryland, GXS has direct operations in 20 countries, employing more than 2,800 professionals. You can access our public filings with the SEC at http://www.sec.gov/edgar.shtml.
This press release may contain “forward-looking statements.” All statements, other than statements of historical facts, that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future, including the discussion under “Financial Guidance,” are forward-looking statements. These forward-looking statements are affected by risks, uncertainties and assumptions, including but not limited to those set forth in the company’s public filings with the SEC, including its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q and current reports on Form 8-K. Accordingly, actual results or outcomes may differ materially from those expressed in the forward-looking statements. You should not place undue reliance on these statements and the company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise.
This press release contains certain supplemental measures of performance (including the Supplemental Financial Information – Unaudited) that are not required by, or presented in accordance with, GAAP. Such measures should not be considered as alternatives to any GAAP measures.
SUPPLEMENTAL FINANCIAL INFORMATION – UNAUDITED
Executive Vice President and Chief Financial Officer
GXS Worldwide, Inc.
GXS Worldwide, Inc.