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Centra Reports 2004 First Quarter Results

Business Wire - April 28, 2004

Business Editors/High-Tech Writers

LEXINGTON, Mass.--(BUSINESS WIRE)--April 28, 2004

Centra Software, Inc. (NASDAQ: CTRA), a leading provider of specialized application software and services for online business collaboration, today announced financial results for the first quarter ending March 31, 2004.

First Quarter 2004 Results

Revenues for the first quarter were $8.6 million, compared with $9.7 million in the first quarter of 2003. Software license revenue for the first quarter was $2.5 million, representing 29 percent of total revenues. This compares with software license revenue of $4.4 million in the first quarter of 2003, representing 45 percent of total revenues. Both software services and professional services revenues grew in the first quarter, compared with the first quarter of 2003. Software services revenues were $2.4 million for the first quarter, or 28 percent of total revenues, representing a 29 percent increase over the same period last year. Maintenance and professional services revenues were $3.7 million in the first quarter, or 43 percent of total revenues, representing a 7 percent increase over the first quarter of 2003. Deferred revenue grew by approximately $695,000 in the first quarter of 2004 to a new high of $13.0 million.

Net loss for the first quarter of 2004 was $3.1 million, or $0.12 per share, compared with a net loss of $2.9 million, or $0.11 per share, for the first quarter a year ago. Gross margin percentage decreased by 180 basis points to 78.4 percent for the first quarter of 2004, compared with 80.2 percent in the first quarter of 2003.

Centra's cash, cash equivalents, and short- and long-term investments totaled $34.9 million as of March 31, 2004, an increase of $122,000 compared with the end of the previous quarter in 2003 of $34.8 million. The Company's days sales outstanding (DSO) was 48 days at the end of the quarter, compared to 59 days at the end of the previous quarter in 2003, reflecting strong collections on account receivables during the quarter.

CEO Comments

"We expected first-quarter revenues to follow the software industry's historical seasonal patterns and be sequentially flat to slightly down; however, the quality of our pipeline was not as strong as we thought, and the strategy and organizational changes we began to implement during the quarter had a more disruptive impact than we expected on our ability to achieve our plan for the quarter. A portion of the miss was attributed to some sales orders slipping at the end of March, several of which have already been closed in April," said Paul R. Gudonis, Centra's President and CEO.

"At the end of 2003, we conducted a thorough and critical evaluation of the collaboration marketplace and how Centra was positioned among its competitors. As a result, we began to implement a new business strategy that we believe will enable us to become a leader in our target markets, significantly grow our annual revenues and achieve profitability. In the past quarter, we restructured the sales organization to improve execution and sales consistency, began to reposition Centra as a provider of value-added specialized applications, and developed and started to implement marketing strategies that would help us differentiate Centra from the rest of the online collaboration market. We believe these changes are essential for us to successfully execute on our long-term goals," continued Mr. Gudonis.

"Although Centra's transition is well underway, we now anticipate that it will take longer than we previously thought before we begin to see significant annual revenue growth as a result of our efforts. Feedback from our customers and industry analysts indicate that our new focus on providing specialized applications is the right strategy. We believe that by increasing the size of our customer base in our target markets, broadening our relationships with existing strategic customers and transitioning to a sales model that focuses on selling solutions and emphasizes term licenses and 'software as a service,' we will be able to build a more stable foundation for long-term growth. Through the successful execution of these goals, we expect to exit 2004 in a better position - with momentum behind our specialized applications, a larger enterprise customer base and better revenue visibility due to a higher percentage of our business being based on recurring revenue. We expect revenues for the second quarter of 2004 to be in the range of $9.5 million to $10.0 million, and loss per share to be in the range of $0.13 to $0.16. Since it will take more time for our investments to bear results, we no longer expect to grow revenues in the 25 to 30 percent range for the year. As we continue to transition toward our new strategy, we will provide updates on our progress. I realize that this represents a change in our short-term outlook, but we believe this is the right strategy for our long-term success," said Mr. Gudonis.

First Quarter Highlights

-- Centra added new customers in the first quarter, including

Royal Bank of Canada, TES Franchising and the University of

California Medical School. The Company also expanded sales to

its installed customer base with additional contracts at

InfoGenesis, Sysco, Cendant and Iron Mountain as customers

continue to expand their Centra deployments to more people

within their companies.

-- Centra closed additional contracts with customers in

international markets with the help of our reseller channel.

In the first quarter, Centra signed new add-on business with

Novartis in China, Tierturi in Finland, Formez in Italy and

Ecole Veterinaire in France.

-- Centra forged new joint marketing and reseller agreements with

conferencing product, services and solution providers,

including AZ Technology, which specializes in information

technology and Internet collaboration software; BrainSell, a

leading provider of CRM applications; Corporate TeleLink

Network (CTN), the premier distance education and production

services network for the energy industry; and Internet

University, which offers Internet-based distance learning and

Web conferencing products and services. Centra announced an

integration agreement with SAP AG to integrate Centra's

real-time collaboration application with the SAP(R) Learning

Solution, a component of the mySAP(TM) Human Resources

software suite.

-- Centra announced two key additions to its executive leadership

team to help the company drive its international operations

and third-party relationships. Charles Zaiontz joined as

managing director of Centra for Europe, Middle East and

Africa, and Alan May returned to Centra as vice president of

business development.

First Quarter Conference Call

In conjunction with this release, Centra will host a conference call on Thursday, April 29, 2004 at 10:00 a.m. EST. The call will be simultaneously Webcast over the Internet. To access the Webcast, go to the Company's Web site at www.centra.com/investorrelations.

About Centra

Online business collaboration solutions from Centra create workforce efficiencies and enable organizations to share and exchange business-critical information with geographically distributed customers, partners, prospects and employees. Centra's solutions integrate real-time collaboration and departmental business processes with specialized applications that increase sales effectiveness, improve collaborative learning and accelerate enterprise application rollouts and customer acquisition initiatives. Currently available in 12 languages, Centra solutions can be deployed as on-site software or through its ASP service and are supported by an active ecosystem of value-added partners, including Siebel, PeopleSoft, SAP and Deloitte Consulting. Organizations across every major industry and market sector choose Centra, including Wyndham International, Weyerhaeuser, Underwriters Laboratories, BMW and Stanford University. Headquartered in Lexington, Massachusetts, Centra serves a worldwide customer base throughout the Americas, Europe, Asia and Australia. For more information, visit www.centra.com.

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