Financial: IMSI Announces Record Revenues for Fiscal 1998; Successful Product Releases and Market Share Gains Drive Revenue and Pre-Acquisition Earnings Growth

Edge: Work-Group Computing Report, August 10, 1998

       INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. & SUBSIDIARIES

                   CONSOLIDATED STATEMENT OF OPERATIONS

                              Three Months Ended June 30,

                                    ($ 000s)

                            1998                 1997

Net revenues            $ 16,910     100.0%  $ 11,447    100.0%

Product costs              6,149      36.4%     4,447     38.8%

Gross margin              10,761      63.6%     7,000     61.2%

Costs and expenses:

Sales and marketing        5,841      34.5%     3,355     29.3%

General and

  administrative           1,433       8.5%       920      8.0%

Research and

  development              2,360      14.0%     1,247     10.9%

In process R & D             --        --         --        --

Total operating

  expenses                 9,634      57.0%     5,522     48.2%

Operating income

  (loss)                   1,127       6.7%     1,478     12.9%

Interest income

  (expense)                 (224)     (1.3%)      (74)    (0.6%)

Income (loss)

  before income taxes        903       5.3%     1,404     12.3%

Provision (benefit)

  for income taxes           273       1.6%       545      4.8%

Net income (loss)       $    630       3.7%  $    859      7.5%

Basic earnings (loss)

  per share             $   0.11             $ 0.17

Diluted earnings

  (loss) per share      $   0.10             $ 0.15

Shares used in

  computing basic

  earnings (loss)

  per share (000s)         5,672              5,068

Shares used in

  computing diluted

  earnings (loss)

  per share (000s)         6,584               5,823

                                Twelve Months Ended June 30,

                                        ($ 000s)

                               1998                1997

Net revenues               $ 62,472     100.0% $ 41,839    100.0%

Product costs                23,382      37.4%   16,893     40.4%

Gross margin                 39,090      62.6%   24,946     59.6%

Costs and expenses:

Sales and marketing         18,611      29.8%   12,026     28.7%

General and

  administrative              5,005       8.0%    3,988      9.5%

Research and development     8,614      13.8%    4,565     10.9%

In process R & D             6,367      10.2%       --       --

  Total operating expenses   38,597      61.8%   20,579     49.2%

Operating income (loss)        493       0.8%    4,367     10.4%

Interest income (expense)      (759)     (1.2%)    (130)    (0.3%)

Income (loss) before

income taxes                  (266)     (0.4%)   4,237     10.1%

Provision (benefit)

for income taxes              (148)     (0.2%)   1,640      3.9%

Net income (loss)            $ (118)     (0.2%)$  2,597      6.2%

Basic earnings

(loss) per share            $(0.02)(1)           $0.53

Diluted earnings

(loss) per share            $(0.02)(1)           $0.46

Shares used in

computing basic

earnings (loss)

per share (000s)             5,513               4,946

Shares used in

computing diluted

earnings (loss)

per share (000s)             5,513               5,682

(1) Excluding in process research and development, and assuming a

36% tax provision and 6,436,000 shares on a diluted basis, net

income per common share, basic and diluted, would have been $.71

and $.61, respectively.

          CONDENSED CONSOLIDATED BALANCE SHEETS

                                           June 30,   June 30,

                                            1998        1997

                                           ($ 000s)   ($ 000s)

ASSETS

Cash and cash equivalents

                                            $ 2,093   $ 1,126

Receivables, less allowances for doubtful

  accounts and returns of $4,231,000 and

  $2,943,000                                 13,149     7,536

Inventories, net                              6,549     3,473

Prepaid royalties and licenses, net           2,517     1,285

Capitalized software, net                     2,101        92

Other assets                                  8,941     4,061

    Total assets                           $35,350   $17,573

LIABILITIES AND SHAREHOLDERS' EQUITY

Credit line payable                           7,948       --

Other current liabilities                    12,057     8,036

Long term debt and other obligations          1,682     2,042

Shareholders' equity:                        13,663     7,495

Total liabilities

  and shareholders' equity                  $35,350   $17,573

IMSI (NASDAQ:IMSI), publisher of software for the business productivity market, Thursday reported results for the company's fiscal year ended June 30, 1998, as well as results for its fourth fiscal quarter.

Revenues for the year were $62.4 million, representing a 49% increase over the $41.8 million reported for the comparable period last year. Excluding in-process research and development charges relating to product acquisitions of $6.4 million, IMSI would have reported net income of $3.9 million, a 50% increase over last year's reported net income of $2.6 million. Excluding these charges, earnings per share for fiscal 1998 were $0.61 on a diluted basis, compared to $0.46 per share in fiscal 1997, an increase of 33%. Including these in-process charges, the company reported a net loss of $118,000, or $.02 per share.