Intraware Announces Second Quarter Fiscal Year 2006 Financial Results; Company Beats Guidance and Posts Positive Cash Flow

Business Wire, Oct 11, 2005

ORINDA, Calif. -- Intraware, Inc. (Nasdaq:ITRAD), the leading provider of electronic software and license delivery and management solutions for enterprise technology companies, today reported second quarter fiscal year 2006 financial results. The company beat both revenue and net loss per share guidance, and grew cash and cash equivalents by $0.2 million in the second quarter.

Revenues for the second quarter of fiscal year 2006 were $3.1 million, compared to $2.8 million in total revenues for the immediately preceding quarter. Revenues for the year-earlier quarter were $2.6 million. Revenues from total Online services and technology related to the SubscribeNet(R) service increased from $2.3 million in the first quarter of fiscal year 2006 to $2.5 million in the second quarter. Alliance and reimbursement revenues increased to $0.6 million in the second quarter of fiscal year 2006 from $0.5 million in the previous quarter.

Gross profit margins in the second quarter of fiscal year 2006 were 52%, compared to 46% in the immediately preceding quarter and 57% in the year-earlier quarter. Gross profit margins related to total Online services and technology revenues were 57% in the second quarter compared to the first quarter's total Online services and technology gross profit margins of 52%. Total gross profit margins related to Alliance and reimbursement revenues increased from 20% to 31% from the first quarter of fiscal year 2006 to the second quarter.

Net loss was $(0.2) million for the second quarter of fiscal year 2006, compared to a net loss of $(0.5) million in the immediately preceding quarter and a net loss of $(0.7) million in the year-earlier quarter. Second quarter fiscal year 2006 net loss per share was $(0.03) compared to a net loss per share of $(0.09) in the first quarter and a net loss per share of $(0.11) in the year-earlier quarter. All per share results have been adjusted to reflect the one-for-ten reverse stock split that took effect on September 27, 2005.

Operating Highlights

Since the beginning of the second quarter of fiscal year 2006, Intraware has signed SubscribeNet contracts with four new customers, including Ingram Micro Inc., Avaya Inc., and Kronos Inc.; renewed, extended, or provided additional technology solutions to ten existing SubscribeNet customers including Adobe Systems Incorporated, Bankers Systems Inc., McKesson and Phoenix Technologies Ltd; and commenced seven professional services engagements with existing users of the SubscribeNet service including McKesson, Sybase Inc., and iRise Inc.

Intraware's SubscribeNet customer base currently consists of 50 customers. The total annual contract value of the SubscribeNet customer base is $8.6 million, which is an increase of $0.7 million from the first quarter of fiscal year 2006. Intraware defines total annual contract value as, on any given date, the aggregate annual service fees paid or expected to be paid by Intraware's customers for services the company has contracted to provide during the then-current annual periods of the customers' respective contracts with the company. To be included in total annual contract value, service fees must be either contractually required to be paid, or expected to be paid based on a minimum 12-month history of prior charges and payments that were not required by contractual minimums. Total annual contract value includes amounts that have been recognized as revenue as well as amounts that may be recognized as revenue in the future. Contract value is not necessarily indicative of current or future revenue in any given fiscal period.

Intraware continued to invest in research and development during the second quarter of fiscal year 2006. In addition to developing the beta environment for the company's new Digital Fastball(TM) solution, the company produced key enhancements to the SubscribeNet technology platform. The company released SubscribeNet 10.0, which gave the SubscribeNet administrative tools used by software publishers a more user-friendly interface. The release also included improved real time order processing reporting to help software publishers better manage their revenue recognition procedures, a critical feature in today's challenging regulatory environment. Lastly, to support software publishers that sell to a worldwide customer base, the engineering team added improved localization capabilities to enable those publishers to communicate using their customers' languages of choice.

"I am delighted with our results in the second quarter," stated Peter Jackson, Chairman, Chief Executive Officer and President. "We have grown our Online services and technology revenues for four sequential quarters and I believe the strength of Intraware's business model is becoming increasingly apparent. We also, once again, achieved strong results in our Sales Services team during the second quarter and added three high-profile software developers to our SubscribeNet customer base."

Business Outlook

Intraware expects third quarter of fiscal year 2006 revenues to be $2.4 million to $2.8 million. Net loss in the third quarter is expected to be $(0.3) million to $(0.8) million.