Financial: Banyan Systems Announces 1998 Third-Quarter Results; Expansion of Network Services Revenue Drives Continued Profitability - Company Financial Information

Edge: Work-Group Computing Report, Oct 26, 1998

Banyan Systems Incorporated (NASDAQ:BNYN), a leading provider of advanced network solutions from the enterprise to the Web, Tuesday announced its financial results for the third quarter ended September 30, 1998.

For the third quarter of 1998, Banyan reported net income of $681,000, or $0.03 per share, compared with net income of $769,000, or $0.04 per share, for the same period in 1997. Revenues for the third quarter of 1998 increased to $18.9 million from $18.1 million in the second quarter of 1998, compared with $18.8 million for the third quarter of 1997.

For the first nine months of 1998, Banyan reported net income of $285,000, or $0.01 per share, which includes a one-time charge of $1.4 million, or $0.06 per share, in the second quarter for purchased research and development related to the acquisition of Lucent Technologies' Maps on Us web site and technology. Banyan's 1998 nine-month results compare with a 1997 nine-month net loss of $19,288,000, or $1.12 per share, which included a one-time restructuring and other charge of $9.7 million, or $0.56 per share, for severance costs associated with a reduction in the Company's work force, the write-off of idle assets and costs related to facility and product line consolidations. Excluding the charges for purchased research and development in 1998 and restructuring and other charges in 1997, Banyan's net income for the first nine months of 1998 would have been $1,685,000, or $0.08 per share compared with a net loss for the first nine months of 1997 of $9,588,000, or $0.55 per share. Revenues for the first nine months of 1998 were $54.7 million, compared with $55.9 million for the same period of 1997.

William P. Ferry, Banyan's chairman and chief executive officer, stated, "I am pleased with our performance this quarter as we continue to advance our business through our strategic initiatives in network services, software and Switchboard. Banyan's revenue growth and fifth consecutive quarter of profitability, excluding the one-time charge for the purchase of Maps On Us in the second quarter of 1998, have been driven by an impressive 81 percent year-over-year revenue increase in network services and continued effective management of the investments we are making in the Company. Switchboard, our majority-owned Internet directory subsidiary, also contributed to the Company's results as its revenues increased to $2.0 million in the current quarter." Network Services

In the third quarter of 1998, Banyan's network services operation achieved record results, posting revenue of $6.7 million, a 19 percent increase over the second quarter of 1998 and an 81 percent gain over 3.7 million in 1997's third-quarter. The growth in network services is due to increased demand for Banyan's network operation and management, directory and messaging and Year 2000-compliance services. During the quarter, Banyan initiated new engagements with customers such as the State Compensation Insurance Fund of California, the Office of the Currency Comptroller and Nike. To complement its recently announced Banyan SiteMinder software offering and further capitalize on its directory and messaging expertise, the Company announced a new family of service offerings, Directory Advantaged Services. These new services address directory planning, design and integration challenges for enterprise and web based development and deployment of business applications.

Network Software 1998 third-quarter networking software revenues were $10.2 million compared with $10.8 million in the second quarter of 1998 and $14.8 million in the same period one year ago. The revenue decline reflected lower demand for the Company's traditional VINES and messaging products.

In support of Banyan's plan to offer open, standards based directory and messaging solutions, the Company shipped LDAP Version 3.0 support for its enterprise directory, StreetTalk, and broadened its family of internet solutions by announcing a new software product, Banyan SiteMinder. Banyan SiteMinder is a directory-enabled user management system for the Web.

Switchboard During the third quarter of 1998, Banyan's Switchboard Incorporated subsidiary continued to be rated as the Internet's most popular directory Web site, according to Media Metrix, the PC Meter Company. Switchboard's revenue in the third quarter increased to $2.0 million from $1.7 million in the second quarter of 1998 and from $0.3 million in the third quarter of 1997. The revenue growth in the third quarter was driven by expansion of national and local advertising and increased page views on Switchboard.com and its recently acquired Maps On Us web site.

As a result of increasing its focus on expanding Switchboard.com's brand awareness and direct traffic, Switchboard is implementing new features to enhance its users experience, expand organic page views and ensure its partnering initiatives support these priorities and are financially viable. Accordingly, in September, Switchboard introduced its new neighborhood searching function which enhances integration among Switchboard's White and Yellow Pages directories, Web site searching, mapping and directions features, and a select group of partner e-commerce solutions. In addition, Switchboard continues to pursue additional strategic relationships that further extend its reach, pageviews and branding. During the quarter, Switchboard launched a White Pages partnership with Bell Atlantic's BigYellow Web site and continues to be the directory of choice for AltaVista users. Switchboard was awarded the Local Internet Service Award for the Best National Directory Service by the Kelsey Group.