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Flexi’s Y2K: No Party
Software maker hopes diversification will fuel financial rebound
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Business New Haven
3/6/2000
By: Kristine Hansen
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SHELTON - For most of the general public, Y2K was a non-event. Except for the serving of a little too much bubbly, staying up too late or working overnight to ensure a smooth transition to the new millennium, most of the fears of the Y2K disaster proved unfounded.
But isolated incidents or aftereffects have occurred, signaling not the end of the world but some disturbance here or there in what should have been a continuation of normal operations. One such company feeling the effects of Y2K-related distress is FlexiInternational Software Inc. (OTCBB:FLEX.OB) of Shelton.
FlexiInternational Chairman and CEO Stefan R. Bothe explains that his company experienced a “significant impact from the shift or lack of purchases by customers for about one and a half years” prior to 2000. Thus, customers fearing the worst for the turn of the century decided to hold off purchasing.
How much the slowdown impacted the company's bottom line was made evident with the reporting of an operating loss and net loss for the 1998 fiscal year. In response, drastic actions were taken in 1999 to return FlexiInternational to profitability, including the closing of some regional offices and reduction in employee count.
Last year, unable to meet the financial parameters required by NASDAQ, FlexiInternational stock was removed from the NASDAQ National Market and has since been trading on the NASDAQ Bulletin Board (OTC).
How bad was the pain? Revenues for 1999 fell 36 percent to $15.6 million from the previous year's figure of $24.3 million. The company ended the year with a net loss of $18.5 million ($1.06 per share) including restructuring and write-off charges.
(It should be noted that, excluding special charges taken in 1999 and 1998, the 1999 net loss would have been narrower at $12.4 million, or 71 cents a share, a reduction from the 1998 net loss of $15.3 million, or 91 cents per share.)
However, year-end results for 1999 showed a glimmer of hope, especially in the last quarter. Bothe says FlexiInternational experienced “an increase in the fourth quarter over third quarter license revenues.” But due to the calendar, with many potential customers in the middle of year-end closings and accountings, Bothe says he is “not seeing much pickup in the first quarter” but does expect the company will break even for the period.
Its restructuring complete, FlexiInternational now can now return to its core business: its Application Products Division (APD), which provides financial software for in-house installation. It also provides for the rental or leasing of software, which is then hosted externally but allows the customer to retain the accounting function.
The company is not setting its business boundaries there. Bothe sees “business processing outsourcing” as an growing trend by which companies seek to outsource non-core operations such as back-office functions such as accounts receivable, accounts payable and general ledger.
For FlexiInternational, this represents a timely opportunity. Bothe says that this business is a “natural extension” for the company by “extending FlexiInternational from packaged software to outsourcing of accounting operations.” The product of this vision is the company's Financial Management Division (FMS), which will provide such services to customers.
Taking the company in another new direction unrelated to its software business is FlexiInternational's recently launched business-to-business portal, justaboutbiz.com, targeted toward accounting and financial professionals. The portal will provide Internet-based information and services of interest in three principal areas: financial management, enterprise management and e-commerce. Offered via the portal would be such items as business articles, access to job listings and catalogues for merchandise such as office supplies and computers.
While expanding its business scope, FlexiInternational continues to focus its endeavors in the accounting and financial fields. The company has a newly implemented game plan with preliminarily results showing a slight positive direction in performance. Flexi has taken its first steps in transforming its Y2K jeers into Y2K cheers.
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