EPNY E.Piphany (MM)

Epiphany, Inc. (Nasdaq:EPNY) today announced results for the quarter ended June 30, 2005. For the quarter ended June 30, 2005, the company reported revenues of $16.7 million, compared to revenues of $20.4 million in the second quarter of 2004. Second quarter license revenues were $3.9 million, service revenues were $5.1 million and maintenance revenues were $7.8 million, representing 23%, 30% and 47% of total revenues, respectively. Net loss under generally accepted accounting principles ("GAAP") for the quarter was $8.3 million, or $(0.11) per share, compared to net loss under GAAP of $3.6 million, or $(0.05) per share, for the second quarter of 2004. Excluding the amortization of purchased technology, stock-based compensation and restructuring costs, on a non-GAAP basis, net loss for the quarter was $6.1 million, or $(0.08) per share, compared to non-GAAP net loss of $3.3 million, or $(0.04) per share, for the second quarter of 2004. For the six months ended June 30, 2005, the company reported revenues of $32.9 million, compared to revenues of $40.7 million in the same period of 2004. Net loss under generally accepted accounting principles ("GAAP") for the six months ended June 30, 2005 was $14.7 million, or $(0.19) per share, compared to net loss under GAAP of $7.8 million, or $(0.10) per share for the same period of 2004. Acquisition by SSA Global Technologies In a separate press release issued after the market close today, SSA Global Technologies, Inc. (Nasdaq:SSAG) announced a definitive agreement to acquire Epiphany in an all-cash transaction valued at approximately $329 million. Under the terms of the agreement, which has been approved by the boards of directors of both companies, each Epiphany stockholder will have the right to receive an amount of cash equal to $4.20 per share. The acquisition is subject to customary closing conditions, including approval of the transaction by Epiphany's stockholders and receipt of regulatory approvals. There will be a conference call to discuss the transaction today at 5:00 p.m. EST/2:00 p.m. PST. The live discussion can be accessed by dialing 1-800-706-7741 or 1-617-614-3471, passcode 65084584. A webcast of the analyst and investor conference call will also be available on the Internet at http://investor.ssaglobal.com and http://ir.epiphany.com. For those investors and analysts who are unable to listen to the live call, a replay of the webcast will be available for 90 days on each website. As a result of its pending acquisition, Epiphany has cancelled its previously scheduled earnings call for today. Forward-Looking Statements This press release contains forward-looking statements relating to our ability to complete a merger with SSA. Actual results could differ materially from such forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements include the failure to satisfy one or more conditions to the completion of the merger, including the receipt of Epiphany stockholder approval and regulatory approvals. Our proposed merger with SSA involves a high degree of risk. Whether or not the merger is completed, we will incur substantial expenses in pursuing the merger. In addition, if the merger is terminated under specified circumstances, we may be required to pay SSA a substantial termination fee. If the merger is not completed for any reason, our relationships with customers, partners and employees, and our financial results, could be harmed. Certain of these factors, and others, are described in more detail in our public reports filed with the Securities and Exchange Commission, such as those discussed in the "Risk Factors" section included in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in our prior press releases. Epiphany assumes no duty to update forward-looking statements. Non-GAAP Information This press release includes certain non-GAAP financial measures, including non-GAAP net loss and net loss per share amounts, that exclude the amortization of purchased technology, stock-based compensation and restructuring costs. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for measures of financial performance prepared in accordance with GAAP. Epiphany's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the performance of the Company's business operations. These measures also facilitate management's internal comparisons to our historical operating results and to our competitors' operating results, operational forecasting and budgeting. Epiphany has reported similar non-GAAP financial measures to our investors in the past and believes that the inclusion of comparative numbers at this time provides consistency in our financial reporting. Investors and potential investors are encouraged to review the reconciliation of the non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results. Additional Information and Where to Find It Epiphany has agreed to file a proxy statement in connection with the proposed merger and related transactions. The proxy statement will be mailed to the stockholders of Epiphany. Epiphany's stockholders are urged to read the proxy statement and other relevant materials when they become available because they will contain important information about Epiphany, the Merger and related transactions. Investors and security holders may obtain free copies of these documents (when they are available) and other documents filed with the Securities and Exchange Commission (the "SEC") at the SEC's web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Epiphany by going to Epiphany's Investor Relations page on its corporate website at www.epiphany.com or by contacting Todd Friedman at Epiphany at 475 Concar Drive, San Mateo, California 94402 or by phone at (650) 356-3800. In addition, Epiphany and its officers and directors may be deemed to be participants in the solicitation of proxies from Epiphany's stockholders with respect to the merger. A description of any interests that Epiphany's officers and directors have in the merger and related transactions will be available in the proxy statement. In addition, SSA may be deemed to have participated in the solicitation of proxies from Epiphany's stockholders in favor of the approval of the merger agreement and related transactions. Information concerning SSA's directors and executive officers is set forth in SSA's final prospectus for its initial public offering, which was filed with the SEC on May 26, 2005. This document is available free of charge at the SEC's web site at www.sec.gov or by going to SSA's Investor Relations page on its corporate website at www.ssaglobal.com. About Epiphany Epiphany(R) provides CRM software solutions that increase profitability at the largest consumer-oriented companies by making every customer interaction intelligent. With over 475 customers -- including nearly 35 percent of the Fortune 100 -- Epiphany powers deep customer insights and optimizes each relationship from both a revenue generation and customer retention viewpoint. Built on the industry's most advanced, service-oriented architecture, Epiphany software solutions address problems that span business silos, departmental functions and geographic locations, and result in rapid, measurable ROI. With a suite of blended marketing, sales and service solutions, Epiphany enables global organizations to align touch points, processes and technologies around the most valuable enterprise asset -- the customer. With worldwide headquarters in San Mateo, CA, Epiphany serves customers in more than 40 countries worldwide. For more information please visit www.epiphany.com. -0- *T EPIPHANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three Months Six Months Ended Ended June 30, June 30, --------------- ---------------- 2005 2004 2005 2004 ------- ------- -------- ------- Revenues: Product license $ 3,857 $ 7,638 $ 8,149 $14,744 Services 5,059 5,059 9,258 10,594 Maintenance 7,777 7,729 15,513 15,317 ------- ------- -------- ------- Total revenues 16,693 20,426 32,920 40,655 ------- ------- -------- ------- Cost of revenues: Product license 168 387 534 802 Services 4,344 4,352 8,295 8,850 Maintenance 1,401 1,370 2,837 2,646 Amortization of purchased technology - - - 679 ------- ------- -------- ------- Total cost of revenues 5,913 6,109 11,666 12,977 ------- ------- -------- ------- Gross profit 10,780 14,317 21,254 27,678 ------- ------- -------- ------- Operating expenses: Research and development 6,021 6,368 12,651 13,041 Sales and marketing 6,900 8,953 14,237 17,384 General and administrative 5,405 3,136 9,483 5,841 Restructuring costs 2,163 375 2,400 1,011 Stock-based compensation 77 - 154 - ------- ------- -------- ------- Total operating expenses 20,566 18,832 38,925 37,277 - - Operating income (loss) (9,786) (4,515) (17,671) (9,599) Other income, net 1,588 903 3,061 1,831 ------- ------- -------- ------- Net income (loss) before provision for taxes (8,198) (3,612) (14,610) (7,768) Provision for taxes 101 35 110 81 ------- ------- -------- ------- Net income (loss) $(8,299)$(3,647)$(14,720)$(7,849) ======= ======= ======== ======= Diluted net income (loss) per share $ (0.11)$ (0.05)$ (0.19)$ (0.10) Basic net income (loss) per share $ (0.11)$ (0.05)$ (0.19)$ (0.10) Shares used in computing basic and diluted per share calculation 77,076 75,765 76,863 75,377 ======= ======= ======== ======= EPIPHANY, INC. NON-GAAP FINANCIAL MEASURES AND RECONCILIATION (in thousands, except per share amounts) (unaudited) Three Months Six Months Ended Ended June 30, June 30, --------------- ---------------- 2005 2004 2005 2004 ------- ------- -------- ------- GAAP net income (loss) $(8,299)$(3,647)$(14,720)$(7,849) Less: Amortization of purchased technology - - - 679 Less: Restructuring costs 2,163 375 2,400 1,011 Less: Stock-based compensation 77 - 154 - ------- ------- -------- ------- Net loss excluding restructuring costs and certain non-cash items $(6,059)$(3,272)$(12,166)$(6,159) ======= ======= ======== ======= Diluted net income (loss) per share $ (0.08)$ (0.04)$ (0.16)$ (0.08) Basic net income (loss) per share $ (0.08)$ (0.04)$ (0.16)$ (0.08) Shares used in computing basic and diluted per share calculation 77,076 75,765 76,863 75,377 ======= ======= ======== ======= EPIPHANY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 31 ASSETS 2005 2004 ---------------------------------------------- ----------- ----------- (unaudited) Current assets: Cash and cash equivalents $ 18,856 $ 18,080 Short-term investments 147,382 131,090 Accounts receivable, net 7,019 11,677 Prepaid expenses and other assets 3,913 4,849 Short-term restricted cash & investments 542 266 ----------- ----------- Total current assets 177,712 165,962 Long-term investments 72,930 96,404 Long-term restricted cash & investments 4,054 5,432 Property and equipment, net 3,043 4,621 Goodwill, net 81,499 81,499 Other assets 243 301 ----------- ----------- $ 339,481 $ 354,219 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ----------------------------------------------- Current liabilities: Accounts payable $ 1,860 $ 1,194 Accrued liabilities 7,252 7,186 Accrued compensation 5,208 5,850 Current portion of restructuring costs 4,107 5,532 Deferred revenue 13,976 14,011 ----------- ----------- Total current liabilities 32,403 33,773 Restructuring costs, net of current portion 15,660 15,904 Other long-term liabilities 207 232 ----------- ----------- Total liabilities 48,270 49,909 Commitment and Contingencies Stockholders' equity: Common stock 7 7 Additional paid-in capital 3,833,250 3,831,571 Deferred Compensation (1,013) (1,166) Accumulated and other comprehensive income (loss) (2,441) (2,230) Accumulated deficit (3,538,592) (3,523,872) ----------- ----------- Total stockholders' equity 291,211 304,310 ----------- ----------- $ 339,481 $ 354,219 =========== =========== EPIPHANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended June 30, ------------------- 2005 2004 --------- --------- Cash flow from operating activities: Net loss $(14,720) $(7,849) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,646 2,163 Stock-based compensation 154 - Non-cash restructuring costs 335 - Amortization of purchased intangibles - 679 Changes in operating assets and liabilities: Accounts receivable 4,658 2,243 Prepaid expenses and other assets 994 1,500 Accounts payable 666 (291) Accrued liabilities and compensation (601) (4,149) Restructuring costs (1,633) (3,062) Deferred revenue (35) (1,175) --------- --------- Net cash used in operating activities (8,536) (9,941) --------- --------- Cash flows from (used) in investing activities: Purchases of property and equipment (573) (668) Loss on disposal of property and equipment 133 68 Restricted cash 1,102 932 Proceeds from maturities of investments 130,690 178,944 Purchases of investments (123,624) (179,349) --------- --------- Net cash provided (used) by investing activities 7,728 (73) --------- --------- Cash flows from financing activities: Proceeds from sale of common stock, net of repurchases 1,676 5,832 --------- --------- Net cash provided by financing activities 1,676 5,832 --------- --------- Effect of foreign exchange rates on cash and cash equivalents (92) (244) --------- --------- Net increase in cash and cash equivalents 776 (4,426) Cash and cash equivalents at beginning of period 18,080 30,468 --------- --------- Cash and cash equivalents at end of period $18,856 $26,042 ========= ========= *T