Proxicom Announces Record Revenues for Third Quarter; Company Posts $0.05 Earnings Per Share and Improved Margins - Company Financial Information

Edge: Work-Group Computing Report, Oct 25, 1999

Proxicom, Inc. (NASDAQ: PXCM), a leading Internet consulting and development company, Tuesday announced record revenues and increased operating profit and net income for the quarter ended September 30, 1999.

For the third quarter of 1999, revenues totaled $23.6 million, an 87% increase from $12.6 million the same period a year ago. On a quarterly sequential basis, revenues increased 45% over the $16.2 million for the second quarter of 1999. Operating income for the third quarter was $1,887,000, representing an operating margin of 8.0%. This figure is compared to an operating loss of $20,979,000 for the third quarter a year ago and an operating income of $819,000 or an operating margin of 5% for the second quarter of 1999. Net income for the quarter was $1,522,000, or $0.05 earnings per diluted share. This compared to a net loss of $20,913,000 for the third quarter a year ago, or $1.36 loss per diluted share, and net income of $764,000, or $0.03 earnings per diluted share for the second quarter of 1999.

"Our solid performance this quarter is a result of the continuing market demand for Proxicom's proven, best-of-breed Internet solutions and our ability to rapidly integrate and deploy the industry's leading professionals to meet our customer's needs," said Raul J. Fernandez, President & Chief Executive Officer of Proxicom.

"We added 100 service professionals during the third quarter to meet client demand, a 25% increase in our service capacity," said Mr. Fernandez. "We have seen the size and scope of our business increase as Fortune 500 companies continue to come to us to execute complex integrated Business-to-Business and Business-to-Consumer Internet solutions. Recently we have witnessed major blue-chip client wins at Merrill Lynch, General Motors Company, SBC Communications and General Electric Corporation. Our GE win continues to build on the relationship we have had with GE since 1996."

For the nine months ended September 30, 1999, the company recorded revenue of $53.1 million compared to $31.1 million for the first nine months in the previous year. Operating income for the nine months was $2.5 million, compared to an operating loss of $22.4 million in the previous year. Net income during the nine-month period, excluding an acquisition-related charge and a non-cash beneficial conversion charge, was $2.4 million or $0.10 earnings per diluted share. This compared to a net loss, excluding acquisition-related charges, in the first nine months of 1998 of $19.6 million or $1.39 loss per diluted share.

Additionally, Mr. Fernandez said, "Proxicom's recently announced strategic alliance with Intel Online Services will allow us to extend the services we offer our clients. With this partnership, we are making Intel our premier hosting partner. The collaboration also gives us the ability to use Intel facilities to simulate large transaction volume and provide us with the opportunity to actually co-author the next generation of e-commerce platforms." As part of this agreement, Intel agreed to invest approximately $5 million in Proxicom through the purchase of common shares made available during the company's recent secondary offering, which closed on October 14, 1999.

Proxicom, Inc. is a leading provider of Business-critical Internet Solutions for Global 1000 companies. Proxicom provides e-commerce solutions through four industry practices: Energy & Telecommunications; Financial Services; Retail & Manufacturing; and Service Industries. These solutions adhere to its exclusive methodology, The Proxicom Process, which integrates strategy, technology and creative design expertise to exploit the Internet's full potential.

Founded in 1991, Proxicom has completed 750 successful client engagements since 1994. Proxicom has led Internet efforts for companies such as AOL, BMW, Marriott International, Mercedes-Benz Credit Corp., Mobil Corp., GE Capital, MCI WorldCom, and others. Proxicom, headquartered in Reston, Va., employs more than 600 professionals worldwide, with offices in New York, Chicago, San Francisco, Los Angeles, Houston, Sausalito, Calif., Sacramento, Calif., Munich, Germany, Rome and Madrid, Spain. More information about Proxicom is available at www.proxicom.com.

                        PROXICOM, INC.
             CONSOLIDATED STATEMENTS OF OPERATIONS
             (in thousands, except per share data)
                          (unaudited)

                       Three Months Ended      Nine Months Ended
                          September 30,          September 30,
                        1998        1999        1998        1999
                        ----        ----        ----        ----

Revenue               $ 12,568    $ 23,592    $ 31,119    $ 53,067

Cost of revenue          7,036      12,070      17,379      28,773
                       -------     -------     -------     -------
Gross profit             5,532      11,522      13,740      24,294
                       -------     -------     -------     -------

Operating Expenses:
   General and
administrative           4,384       7,833      11,976      17,991
   Selling and marketing   916       1,696       2,279       3,133
   Research and development244           -         692           -
   Acquisition and merger
costs                    2,756           -       2,886         300
   Stock-based and other
compensation            18,211         106      18,268         331
                       -------     -------     -------     -------

   Total                26,511       9,635      36,101      21,755
                       -------     -------     -------     -------

Income (loss) from
 operations            (20,979)      1,887     (22,361)      2,539

Interest income
 (expense), net            (66)        701        (49)       1,112
                       -------     -------     -------     -------

Net income (loss) before
 income taxes          (21,045)      2,588     (22,410)      3,651

Income tax provision
 (benefit)                (132)      1,066      (1,075)      1,513
                       -------     -------     -------     -------

Net income (loss)      (20,913)      1,522     (21,335)      2,138

Dividend:
   Beneficial conversion
    of 1,218,333 shares of
    Series D convertible
preferred stock (1)          -           -           -      (4,873)
                       -------     -------     -------     -------

Net income (loss)
 available to common
 stockholders         $(20,913)   $  1,522    $(21,335)   $ (2,735)
                       =======     =======     =======     =======

Net income (loss) per
 share (2):
   Basic              $  (1.36)   $   0.06    $  (1.51)   $  (0.13)
                       =======     =======     =======     =======

   Diluted            $  (1.36)   $   0.05    $  (1.51)   $  (0.13)
                       =======     =======     =======     =======

   Weighted average
shares, basic           15,349      24,842      14,132      20,844
                       =======     =======     =======     =======

   Weighted average
shares, diluted         15,349      29,190      14,132      20,844
                       =======     =======     =======     =======

Pro forma net income
 (loss) per share:

   Diluted, excluding
acquisition and
    beneficial conversion
charges               $  (1.25)   $   0.05    $  (1.39)   $   0.10
                       =======     =======     =======     =======

   Weighted average
shares, diluted         15,349      29,190      14,132      23,985
                       =======     =======     =======     =======