Hogan Revenue Up, Despite Setback
Despite the abrupt resignation of its chief executive and the loss of royalties from International Business Machines Corp., Hogan Systems Inc. held its own in the first fiscal quarter of 1991.
The Dallas-based vendor of banking software and services reported a net loss of $363,000 on revenues of $13.3 million for the quarter ended June 30, about level with its $344,000 loss a year earlier.
However, Hogan's total revenues were up $2.78 million from the year-earlier quarter. This increase was in spite of the loss of $2.4 million in royalty payments from IBM. A one-time chargeoff of just less than $1 million prevented the company from turning a profit.
Last September, IBM changed the terms of its relationship with Hogan, acquiring a 5% stake in the company but dropping annual royalty payments for the right to market and support Hogan's banking software.
CFO Is Upbeat
"We're very positive about this quarter's growth, given that the IBM royalty has been eliminated," said James M. Dunn, chief financial officer of Hogan. "The reasons for that increase are also very positive, with an increase in license fee income and, more importantly, in revenue for consulting services.
Hogan's longstanding difficulties in retaining top management continued. Patric J. Jerge, president and chief executive officer, resigned last month for personal reasons. Mr. Jerge was succeeded by Gregor G. Peterson, one of Hogan's founders and a member of its board since 1977.
Mr. Peterson is the company's fourth CEO in six years. Mr. Jerge's predecessor, Gary W. Fiedler, Fiedler, left the company in late 1989, after a three-year stint, to become chairman and CEO of Equimark Corp., Pittsburgh.
Despite the continuing turnover in its top ranks, Hogan's performance was pleasing, analysts said.
|Doing Quite Well'
Last quarter's loss "wasn't an operating loss," said Jim Poyner, a financial analyst at William K. Woodruff & Co., Dallas, an investment banking firm. "Hogan is doing quite well."
"I would have preferred [the CEO change] not to have happened," Mr. Poyner added, "but since all their growth is international, the changeover doesn't affect them that much."
About 50% of Hogan's business is overseas, said Margo Isbell, a spokeswoman for the company. Hogan recently opened an office in Frankfurt, where most of its new business is concentrated, she said.
The company does not break out growth figures for the domestic and international markets, she said.
By capitalizing on its foreign business, Hogan also was able to more than make up the shortfall caused by its loss of $2.4 million in royalty income from IBM, Mr. Poyner said.
Instead of making the royalty payments, which by contract came to at least $2.4 million annually, IBM is funding development of new banking software products.
IBM's stake in Hogan is aimed at improving sales of integrated banking applications, or IBA, the cornerstone of IBM's software for financial institutions. IBM continues to hold exclusive rights to license, market, and support IBA in North America.
Payoff Down the Road
By terms of the agreement with IBM, Hogan gets a 50% share of IBM's fee revenue from the sale of banking products. Mr. Dunn said that the financial benefits to Hogan of the new agreement were not expected to materialize for several years.
"These are large sales, and they take a long time, and the domestic industry is a tough sell right now," he said.
Also to strengthen the two companies' bonds, Hogan last month named John J. Higgins, an IBM vice president and assistant general manager of U.S. finance and planning, to its board of directors.
This fiscal year's first-quarter results included a charge of $870,000 because of default on a sublease for office space.
In a separate announcement, Hogan said that a new version of its software for processing consumer, commercial, construction, and mortgage loans was now available.
The software - version 1.2 of the integrated loans processing system - is designed to let banks bill more frequently and gain flexibility in setting up loan rates. In addition, users will find it easier to set up loans and recast them, the company said.