Financial: Segue Software Announces Record Fourth Quarter And Year End Revenues; e-Business License Revenue Grew 4X to $15 million for the Year - Company Business and Marketing - Company Financial Information

Edge: Work-Group Computing Report, Feb 15, 1999

Segue Software, Inc. (NASDAQ:SEGU), the e-Business Management Company, Tuesday announced consolidated revenues and earnings for the fourth quarter and year ended December 31, 1998. The historical results of the Company have been restated to reflect the Company's pooling-of-interest mergers with Eventus Software, Inc. and Black & White Software, Inc., each of which were closed in December, 1998. Consolidated revenues for the quarter were $12.0 million, a 67% increase over consolidated revenues of $7.2 million for the comparable quarter in the prior year. Excluding the one-time acquisition-related charge of $1.5 million for the acquisitions of Eventus Software, Inc. and Black & White Software, Inc., the pro forma loss for the quarter was $175,000, or a loss of 2 cents a share compared to a pro forma loss of $1.3 million, or a loss of 17 cents per share, excluding a one-time charge of $9.8 million, for the year earlier period. The one-time charge for 1998 included financial advisory, legal and accounting fees related to the merger. The one-time charge for 1997 included purchased research and development and severance charges. The Company reported consolidated revenues for the year ended December 31, 1998 of $42.0 million, a 52 percent increase over consolidated revenues of $27.6 million for the prior year. Excluding the one-time acquisition-related charge of $1.5 million - for the acquisitions of Eventus Software, Inc. and Black & White Software, Inc., the pro forma profit for the year was $309,000 or 3 cents a share compared to a pro forma loss of $1.7 million or a loss of 21 cents per share, excluding a one-time charge of $9.8 million, for the year earlier period. A reconciliation of revenue and income of the Segue, Eventus Software, Inc. and Black & White Software, Inc. is as follows:

                        Fourth Quarter             Year End
                       1998         1997       1998         1997
Revenues:
  Segue Software     $ 10,793    $  6,004    $ 37,279    $ 21,794
  Black&White           1,039         672       3,892       3,648
  Eventus                 130         492         789       2,197
Combined             $ 11,962    $  7,168    $ 41,960    $ 27,639

Pro forma income (loss)(a)
 Segue Software      $     12    $    (19)   $  1,938    $    225
 Black&White              135        (906)        580      (1,159)
 Eventus                 (322)       (412)     (2,209)       (730)
Combined             $   (175)   $ (1,337)   $    309    $ (1,664)

(a) Excludes non-recurring costs for both 1998 and 1997.

Steve Butler, president and CEO, Segue Software commented, "We are pleased with the continuing strength of our e-business management products, which grew to 59% of product revenue. However, we do not believe we have reached our full potential in the fourth quarter." "In the fourth quarter, with the signing of channel partner agreements with IONA Technologies, Netscape Communications and Arthur Andersen, we accelerated the investment in our channel organization by adding territory channel staff, increased outsourcing to new system integrators and accelerated joint marketing efforts with our new and existing partners, however, the corresponding revenue growth did not materialize as rapidly as we had expected," Butler noted. "While channel investments lowered our net margins in the fourth quarter, it has enabled Segue to broaden our reach with marquis system integrators, consulting partners and resellers to capitalize on this booming e-business market and channel revenue opportunities anticipated in 1999," Butler continued. "We completed two significant acquisitions in the fourth quarter that now give Segue a unique solution to the challenges that all companies have in attempting to deliver successful e-business," said Butler. "As we enter 1999, we believe Segue now has the technology solution and corresponding internal infrastructure, combined with a multi-level distribution in place to help us realize our long-term growth strategy and satisfy the growing industry demand for e-business management systems," added Butler. The completed acquisitions of Eventus and Black&White paved the way for an organizational restructure around functional business units. In light of this, management is planning to take a restructuring charge of approximately $1 million in the first quarter of 1999 resulting in a reduction in Segue's operating cost for the remainder of the year. Fourth Quarter Highlights: Completion of the industry's first and only E-Business Management System (EBMS) o Acquisitions of Eventus Software and Black & White Software, two leading Internet infrastructure companies o Availability of the industry's first system level scenario testing solution for PeopleSoft implementations with more than $300,000 booked in the fourth quarter Expansion of our Channel's distribution o Added IONA, Netscape and Arthur Andersen to our Global Channel Partner Program o Increased Channel Sales organization from 11 to 24 New Customers and Increased Interaction with Customer Base o Added many new e-business customers including Bertelsmann AG, Cisco Systems, Intel Corporation, Tech Data, @Home Networks, Disney Online, eBay, GeoCities, Monster.com, BroadVision and InfoSeek o Increased e-business customer base to exceed 900 distinct sites (pre-acquisition) o Sales force accomplished 27 competitive wins in e-business Extended Geographical Reach o Expanded global presence and improved customer service initiatives through the announcement of a new Global Call Center in Belfast, Northern Ireland Segue Software Inc. (NASDAQ:SEGU), the leader in e-business management, creates and delivers breakthrough technologies that redefine the way companies deliver reliable software. Segue is the preferred vendor in the market that address the six key areas of e-business management: assembly; testing; modeling; deployment; monitoring and analysis. Segue is committed to providing its customers worldwide with a comprehensive, integrated solution for e-business management that ensures that their software meets the expectations of the continuous deployment model it was designed to support. Headquartered in Lexington, Mass., with offices across North America and Europe, Segue can be reached at 1-800-287-1329 or at www.segue.com.