GXS Reports Fourth Quarter and Full Year 2012 Financial Results

GXS Reports Fourth Quarter and Full Year 2012 Financial Results

GAITHERSBURG, Md.--(BUSINESS WIRE)-- GXS, a leading provider of B2B integration services, today announced its financial results for the quarter and year ended December 31, 2012.

FINANCIAL HIGHLIGHTS FROM THE FOURTH QUARTER AND FULL YEAR 2012

• Total Revenue: 4Q12 Total Revenue of $126.5 million, up 2% versus 4Q11, up 3% adjusting for currency; FY12 Total Revenue of $487.5 million, up 2% versus FY11, up 3% adjusting for currency

• Managed Services Revenue: 4Q12 Managed Services Revenue of $48.9 million, up 14% versus 4Q11, also up 14% adjusting for currency; FY12 Managed Services Revenue of $179.4 million, up 19% versus FY11, up 20% adjusting for currency

• Adjusted EBITDA: 4Q12 Adjusted EBITDA of $39.0 million, down 10% versus 4Q11; FY12 Adjusted EBITDA of $146.5 million, down 6% versus FY11

• Net Income/Loss: 4Q12 Net Income of $0.3 million as compared to a Net Income of $2.4 million in 4Q11; FY12 Net Loss of $10.1 million as compared to a Net Loss of $1.3 million in FY11

• Minimum Contracted Value (MCV): 4Q12 MCV of $49.0 million, down 11% versus 4Q11; FY12 MCV of $204.5 million, up 17% versus FY11 - a record year for GXS

• Exceeded the high end of Adjusted EBITDA guidance and achieved the midpoint of Total Revenue guidance for 4Q12 and FY12

BUSINESS HIGHLIGHTS FROM THE QUARTER

• Continued to execute on sales and marketing programs to sign Managed Services accounts; 18 new deals were signed with existing and new accounts in 4Q12, bringing the total number of new Managed Services accounts signed during 2012 to 59

• Reached a new milestone in GXS Catalog, the retail industry's leading electronic product catalogue, by offering more than 150 million items

• Announced support for the Global Transport Label (GTL) standard through the GXS Trading Grid platform, enabling automotive suppliers to improve materials management and logistics processes

• Announced planned expansion of Active Invoices with Compliance (AIC) solution to include Mexico and Brazil, which will bring this Software as a Service (SaaS) offering's global tax compliance footprint to 41 countries across 5 continents

• Hosted annual Asia Executive Summit in Beijing themed "Leveraging Cloud Computing to Manage Your B2B Integration," which included customers and prospects from key regional markets such as China, Singapore, Korea, Hong Kong, Taiwan, Thailand, and India

"We had another solid quarter to end a great year for GXS," commented GXS President and Chief Executive Officer Bob Segert. "This has been a strong year for GXS, with record new contract signings and significant improvement in our customer satisfaction metrics. The investments we have been making to achieve growth in Managed Services and improve our customer's overall experience are driving these positive results. I'm very excited about the opportunities that we have before us as we enter 2013."

FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2012

Revenue

Total Revenue for 4Q12 was $126.5 million, up 2% as compared to $124.2 million in 4Q11 (up 3%, adjusting for currency) and within the fourth quarter guidance of $126 to $127 million. Managed Services revenue was $48.9 million in 4Q12, up 14% as compared to $42.8 million in 4Q11 (also up 14%, adjusting for currency). Messaging Services revenue was $54.3 million in 4Q12, down 3% from $56.2 million in 4Q11 (down 2%, adjusting for currency). B2B Software and Services, Data Synchronization, and Custom Outsourcing revenues were $23.3 million in the aggregate for 4Q12, down 8% as compared to $25.3 million in 4Q11 (down 7%, adjusting for currency).

Total Revenue for 4Q11 was negatively impacted by $77 thousand related to the Generally Accepted Accounting Principles ("GAAP") write-down of certain deferred revenue from RollStream, Inc. ("RollStream") which was acquired on March 28, 2011. Adjusting for such write-down, pro forma Total Revenue for 4Q11 was $124.3 million, pro forma Managed Services revenue was $42.8 million in 4Q11, pro forma Messaging Services revenue was $56.2 million in 4Q11, and pro forma aggregate B2B Software and Services, Data Synchronization, and Custom Outsourcing revenues were $25.3 million in 4Q11, resulting in 4Q12 year over year change rates of 2%, 14%, -3%, and -8%, respectively (3%, 14%, -2% and -7%, adjusting for currency, respectively).

Total Revenue for the full year 2012 was $487.5 million, up 2% as compared to $479.9 million for the full year 2011 (up 3%, adjusting for currency). Managed Services revenue was $179.4 million for the full year 2012, up 19% as compared to $150.4 million for the full year 2011 (up 20%, adjusting for currency). Messaging Services revenue was $214.6 million for the full year 2012, down 7% from $230.7 million for the full year 2011 (down 5%, adjusting for currency). B2B Software and Services, Data Synchronization, and Custom Outsourcing revenues were $93.5 million in aggregate for the full year 2012, down 5% as compared to $98.8 million for the full year 2011 (down 4%, adjusting for currency).

Total Revenue for the full years 2012 and 2011 was negatively impacted by the Generally Accepted Accounting Principles ("GAAP") write-down of certain deferred revenue from RollStream and from Inovis International, Inc. ("Inovis") which was acquired on June 2, 2010. These amounts totaled $25 thousand (related to RollStream) and $1.4 million (related to Inovis and RollStream) in 2012 and 2011, respectively. Adjusting for such write-downs and assuming that the acquisitions of Inovis and RollStream occurred on January 1, 2011, pro forma Total Revenue for the full year 2012 was $487.5 million, pro forma Managed Services revenue was $179.4 million in 2012, pro forma Messaging Services revenue was $214.6 million in 2012, and pro forma aggregate B2B Software and Services, Data Synchronization, and Custom Outsourcing revenues were $93.6 million in 2012, resulting in full year growth rates of 1%, 19%, -7%, and -6%, respectively (3%, 20%, -5% and -5%, adjusting for currency, respectively).

Expenses and Net Income (Loss)

Cost of revenues, sales and marketing, and general and administrative expenses for 4Q12 were $103.0 million, as compared to $97.6 million in 4Q11. Restructuring charges were $0.2 million in 4Q12, as compared to $0.1 million in 4Q11. Operating income in 4Q12 was $23.3 million, as compared to $26.5 million in 4Q11, and was $23.3 million and $26.6 million on a pro forma basis in the same periods, respectively. Net interest expense and net other expense totaled $22.5 million for 4Q12, as compared to $19.9 million in 4Q11, resulting in income before income taxes of $0.8 million and $6.6 million in 4Q12 and 4Q11, respectively, and $0.8 million and $6.7 million on a pro forma basis in the same periods, respectively. Net income was $0.3 million in 4Q12 after $0.5 million in income tax expense, as compared to $2.4 million in 4Q11 after $4.2 million in income tax expense, and was $0.3 million and $2.5 million on a pro forma basis in the same periods, respectively.

Cost of revenues, sales and marketing, and general and administrative expenses for the full year 2012 were $402.5 million, as compared to $386.9 million for the full year 2011. Restructuring charges were $1.5 million for the full year 2012, as compared to $2.5 million for the full year 2011. Operating income for the full year 2012 was $83.5 million, as compared to $90.5 million for the full year 2011. Net interest expense and net other expense was $89.8 million for the full year 2012, as compared to $85.0 million for the full year 2011, resulting in income (loss) before income taxes of ($6.3) million and $5.5 million for the full years 2012 and 2011, respectively. Net income (loss) was ($10.1) million for the full year 2012 after $3.9 million in income tax expense, as compared to ($1.3) million for the full year 2011 after $6.8 million in income tax expense, and was ($10.1) million and $0.2 million on a pro forma basis in the same periods, respectively.