Exhibit 99.1
For Financial Inquiries:
Sybase Investor Relations
Charlie Chen
(925) 236-6015
charlie@sybase.com
Lynne Farris
(925) 236-8797
lynne.farris@sybase.com
For Press Inquiries:
Sybase Public Relations
Crystal Lu
(925) 236-6431
crystal.lu@sybase.com
SYBASE REPORTS RECORD SECOND QUARTER RESULTS, DRIVEN BY 15% REVENUE GROWTH
Database License Revenue Up 38% Year over Year
Messaging Revenue Up 41% Year over Year
Management Raises Full-Year Revenue, Earnings, and Cash Flow Guidance
DUBLIN, Calif. — July 23, 2008— Sybase, Inc. (NYSE: SY), the largest enterprise software and services company exclusively focused on managing and mobilizing information, today reported financial results for the second quarter ended June 30, 2008.
Highlights:
| w | | Total revenue of $282.7 million, up 15% year over year |
| |
| w | | License revenue increased 17% year over year |
| |
| w | | Services revenue increased 8% year over year |
| |
| w | | Database license revenue increased 38% year over year |
| |
| w | | Messaging revenue increased 41% year over year |
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| w | | GAAP operating margin of 18%, versus 15% a year ago; non-GAAP operating margin of 23%, versus 20% a year ago |
| |
| w | | GAAP net income of $32.4 million, up 24% year over year; GAAP EPS up 31% year over year |
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| w | | Non-GAAP net income of $43.0 million, up 26% year over year; non-GAAP EPS up 33% year over year |
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| w | | Cash flow from operations of $62.7 million, up 16% year over year |
| |
| w | | Management raises full-year guidance for revenue, earnings, and cash flow from operations |
2008 Second Quarter Results
Total revenue for the second quarter of 2008 increased 15% to $282.7 million from $245.0 million in the second quarter of 2007. License revenue grew 17% to $90.5 million from $77.4 million in the second quarter of 2007. Services revenue increased 8% to $146.6 million from $135.2 million a year ago. Messaging revenue grew 41% to $45.6 million from $32.4 million a year ago.
For the second quarter, operating income calculated in accordance with generally accepted accounting principles (GAAP) increased 44% year over year to $51.1 million, representing an operating margin of 18%. This compares with GAAP operating income of $35.6 million and an operating margin of 15% a year ago.
GAAP net income increased 24% year over year to $32.4 million from $26.0 million a year ago. GAAP earnings per diluted share (EPS) increased 31% to $0.37 for the 2008 second quarter from $0.28 for the second quarter of 2007.
Non-GAAP operating income for the second quarter increased 33% year over year to $63.7 million, representing a 23% operating margin. This compares with non-GAAP operating income of $47.8 million, representing a 20% operating margin, in the 2007 second quarter.
Non-GAAP net income for the 2008 second quarter increased 26% to $43.0 million from $34.3 million for the second quarter of 2007. Non-GAAP EPS for the 2008 second quarter increased 33% to $0.49 from $0.37 for the second quarter of 2007.
Non-GAAP amounts exclude the amortization of certain purchased intangibles, stock-based compensation, restructuring costs, charges related to the impairment of auction rate securities, and the tax effect of these and related items. Accompanying this release is a reconciliation from GAAP to non-GAAP amounts for the second quarter of 2008.
“I am extremely pleased with our strong performance in the second quarter of 2008,” stated John Chen, chairman, CEO and president of Sybase. “We have now delivered three consecutive record quarters, four consecutive quarters exceeding Street consensus revenue, and 16 consecutive quarters exceeding consensus earnings.”
Added Mr. Chen, “Our ongoing success is attributable to growing market acceptance of our Unwired Enterprise strategy. We are excited about our prospects for continued growth, driven by our flagship enterprise database, IQ analytics server, mobile middleware, and mobile messaging. Additional growth catalysts expected to enhance
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our momentum include new offerings such as risk analytics, data clustering, Mobile Office, mobile banking, and next-generation mobile messaging.
“Notwithstanding the macro-economic cross-currents, our business pipeline remains healthy, and we are confident in our team’s ability to execute. As a result, we are again raising our 2008 revenue, earnings, and cash flow targets, which put us on track to deliver yet another record full-year performance,” concluded Mr. Chen.
Balance Sheet and Other Data
At June 30, 2008, Sybase reported $606.4 million in cash and cash investments, including long-term cash investments of $22.7 million and restricted cash of $3.7 million. In the second quarter, the company generated $62.7 million in cash flow from operations.
There remains $82.9 million authorized under the company’s current share repurchase program.
Days sales outstanding (DSO) for the second quarter was 75.
Guidance
For the third quarter ending September 30, 2008, management anticipates total revenue in the range of $270 million to $275 million. Management anticipates non-GAAP fully diluted EPS in the range of $0.48 to $0.50 and GAAP EPS in the range of $0.38 to $0.40.
Management is raising guidance for full-year 2008 revenue, earnings, and cash flow from operations due to the company’s stronger-than-expected performance in the second quarter of 2008. Management now anticipates total revenue of approximately $1.11 billion. Non-GAAP EPS is now anticipated in the range of $1.98 to $2.00, and GAAP EPS is anticipated in the range of $1.53 to $1.55. Management now anticipates cash flow from operations of approximately $250 million.
A reconciliation from the company’s previous full-year 2008 EPS guidance range to the current guidance range is as follows:
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Reconciliation of 2008 EPS Guidance Range
| | | | | | | | | | | | | | | | | |
| | | GAAP | | | Non-GAAP | |
| 2008 EPS guidance range on April 24, 2008 | | $ | 1.51 | | | $ | 1.56 | | | $ | 1.94 | | | $ | 1.99 | |
| | | | | | | | | | | | | | | | | |
| Increase due to operations | | | 0.09 | | | | 0.06 | | | | 0.09 | | | | 0.06 | |
| Decrease due to auction rate securities | | | (0.03 | ) | | | (0.03 | ) | | | 0.00 | | | | 0.00 | |
| Decrease due to convert dilution from higher share price | | | (0.04 | ) | | | (0.04 | ) | | | (0.05 | ) | | | (0.05 | ) |
| | | | | | | | | | | | | |
| 2008 EPS guidance range on July 23, 2008 | | $ | 1.53 | | | $ | 1.55 | | | $ | 1.98 | | | $ | 2.00 | |
| | | | | | | | | | | | | |
Please see “Note Regarding Non-GAAP Financial Measures” for important information regarding Non-GAAP Financial Measures.
Accompanying this release is a reconciliation from projected GAAP to non-GAAP amounts for the estimated 2008 third quarter and full year results.
Conference Call and Webcast Information
The Sybase 2008 second quarter conference call and simultaneous Webcast is scheduled to begin at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time on Wednesday, July 23, 2008. To access the live Webcast, please visit www.fulldisclosure.com or Sybase’s Website at www.sybase.com at least 20 minutes prior to the call to download any necessary audio or plug-in software. A telephone replay will be available approximately two hours after the conference call ends and will be available until 10:00 p.m. Pacific Time on July 30, 2008. To access the replay, please dial (888) 203-1112 for domestic access and (719) 457-0820 for international callers; the access code for the telephone replay is 2984621. Additionally, the archived Webcast will be available through October 23, 2008 at http://www.sybase.com/about_sybase/investorrelations.
About Sybase, Inc.
Sybase is the largest enterprise software and services company exclusively focused on managing and mobilizing information. With our global solutions, enterprises can extend their information securely and make it useful for people anywhere using any device. The world’s most critical data in commerce, finance, government, and healthcare runs on Sybase. For more information, visit the Sybase Website athttp://www.sybase.com.
Forward-Looking Statements
Certain statements in this release concerning Sybase, Inc. and its prospects and future growth are forward-looking and involve a number of uncertainties and risks. Factors that could cause actual events or results to differ materially from those suggested by
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these forward-looking statements include, but are not limited to, the performance of the global economy and growth in software industry sales; market acceptance of the company’s products and services; customer and industry analyst perception of the company and its technology vision and future prospects; the success of certain business combinations engaged in by the company or by competitors; political unrest or acts of war; possible disruptive effects of organizational or personnel changes; and other factors described in Sybase, Inc.’s reports filed with the U.S. Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2007 and its quarterly report on Form 10-Q for the period ended March 31, 2008.
Note Regarding Non-GAAP Financial Measures
In addition to our GAAP results, Sybase discloses adjusted operating income, net income and net income per share, referred to respectively as “non-GAAP operating income”, “non-GAAP net income”, and “non-GAAP net income per diluted share”. These items, which are collectively referred to as “Non-GAAP Measures”, exclude the impact of stock-based compensation, the amortization of acquisition-related intangible assets, restructuring costs, non-cash charges related to the impairment of auction rate securities (“ARS”), and the tax effect of these and related items. From time to time, subject to the review and approval of the audit committee of the Board of Directors, we may make other adjustments for expenses and gains that we do not consider reflective of core operating performance in a particular period and may modify the Non-GAAP Measures by excluding these expenses and gains. The Non-GAAP Measures for our Q2 2008 results and full-year 2008 guidance exclude impairment charges for reductions in the carrying value of our auction rate securities.
We define our core operating performance to be the revenues recorded in a particular period and the expenses incurred within that period which management has the capability of directly affecting in order to drive operating income. Non-cash stock-based compensation, amortization of acquisition-related intangible assets, restructuring charges and impairment charges to our ARS are excluded from our core operating performance because the decisions which gave rise to these expenses were not made to drive revenue in a particular period, but rather were made for our long-term benefit over multiple periods. While strategic decisions, such as the decisions to issue stock-based compensation, to acquire a company or to restructure the organization, are made to further our long-term strategic objectives and do impact our income statement under GAAP, these items affect multiple periods and management is not able to change or affect these items within any particular period. As such, supplementing GAAP disclosure with non-GAAP disclosure using the Non-GAAP Measures provides management with an additional view of operational performance by excluding expenses that are not directly related to performance in any particular period.
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Therefore, we exclude these impacts in our planning, monitoring, evaluation and reporting of our underlying revenue-generating operations for a particular period.
Prior to the adoption of Financial Accounting Standards Board Statement 123 Revised “Share-based Payment” (“FAS 123R”) on January 1, 2006, our practice was to exclude stock-based compensation internally to evaluate performance and we presented investors with certain Non-GAAP Measures. With the adoption of FAS 123R, we continue to believe that Non-GAAP Measures can provide relevant disclosure to investors as contemplated by Staff Accounting Bulletin 107 (“SAB 107”) and we have presented Non-GAAP Measures that exclude stock-based compensation, amortization of acquisition-related intangible assets, impairment charges to ARS, restructuring costs and the related tax effects. While these items (other than restructuring) are recurring and affect GAAP net income, we do not use them to assess our operational performance for any particular period because (a) these items affect multiple periods and are unrelated to business performance in a particular period; (b) we are not able to change these items in any particular period; and (c) these items do not contribute to the operational performance of our business for any particular period.
We also use Non-GAAP Measures to operate the business because the excluded expenses are not under the control of, and accordingly are not used in evaluating the performance of, operations personnel within their respective areas of responsibility. In the case of stock-based compensation expense, the award of stock options is governed by the stock committee of the Board of Directors and, in the case of acquisition-related intangible assets; acquisitions arise from strategic decisions which are not the responsibility of most levels of operational management. The restructuring charges, like our stock-based compensation charges, amortization of acquisition-related intangible assets and write-downs to ARS, are excluded in management’s internal evaluations of our operating results and are not considered for management compensation purposes.
In the case of stock-based compensation, our compensation strategy is to use stock-based compensation to attract and retain key employees and executives. It is principally aimed at long term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational performance in any particular period. We use annual cash incentive payouts for executives and other employees to motivate and reward the achievement of short-term operational objectives.
We view amortization of acquisition-related intangible assets, such as the amortization of an acquired company’s research and development efforts, customer lists and customer relationships, as items arising from pre-acquisition activities. These are costs
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that are determined at the time of an acquisition. While it is continually viewed for impairment, amortization of the cost is a static expense, one that is typically not affected by operations during any particular period and does not contribute to operational performance for any particular period.
The cost of restructure charges are excluded in our Non-GAAP Measures because they are significantly different in magnitude and character from routine personnel and facility adjustments that management makes when monitoring and conducting the Company’s core operations during any particular period. We have not undertaken restructuring since 2004 and amounts included in cost of restructure in 2006 and subsequently reflect lease termination costs from previously announced restructuring efforts. Our previous restructuring activities and related expenses were not related to operating performance for any particular period, and were not subject to change by management in any particular period. Instead, the prior restructuring was intended to align our business model and expense structure to our position in the market.
The liquidity and fair value of our investments in marketable securities, including auction rate securities, have been negatively impacted by the uncertainty in the credit markets and failed auctions due to a lack of marketability of these securities. As a result, we recorded impairment charges to reduce the carrying value of our ARS investments. The impairment charges related to our ARS investments have been excluded from our non-GAAP results of operations. These impairment charges are excluded from management’s assessment of our operating performance because management believes that they are not indicative of our ongoing business operations. We believe that the exclusion of these unique charges provide investors an enhanced view of our operations and facilitates comparisons with the results of other periods that do not reflect such charges.
Our historical non-GAAP effective tax rates differ from our GAAP effective tax rates because of (i) the exclusion of the amortization of acquisition-related intangible assets, stock-based compensation expenses and restructuring costs described above, (ii) the exclusion of certain acquired tax attributes, and (iii) the resulting impact on the realization of the Company’s other tax assets. We exclude the impact of these discrete tax items from our non-GAAP income tax provision or benefit because management believes that they are not indicative of our ongoing business operations.
Because the Non-GAAP Measures are not calculated in accordance with GAAP, they are used by our management as a supplement to, and not an alternative to, or superior to, financial measures calculated in accordance with GAAP. There are a number of limitations on the Non-GAAP Measures, including the following:
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| | • | | These Non-GAAP Measures do not have standardized meanings and may not be comparable to similar non-GAAP measures used or reported by other software or technology companies. |
| |
| | • | | The Non-GAAP Measures do not reflect all costs associated with our operations determined in accordance with GAAP. For example: |
Non-GAAP operating margin performance and non-GAAP net income do not include stock compensation expense related to equity awards granted to our workforce. Our stock incentive plans are important components of our employee incentive compensation arrangements and are reflected as expenses in our GAAP results under FAS 123R. While we include the dilutive impact of such equity awards in weighted average shares outstanding, the expense associated with stock-based awards is excluded from our non-GAAP measures.
Although amortization of acquisition-related intangible assets does not directly impact our current cash position, such expense represents the declining value of the technology or other intangible assets that we have acquired. These assets are amortized over their respective expected economic lives or impaired, if appropriate. The expense associated with this decline in value is excluded from our non-GAAP measures and therefore non-GAAP measures do not include the costs of acquired intangible assets that supplement our research and development.
Restructuring charges in 2006 and subsequently primarily represent lease termination costs associated with restructuring activities that commenced in 2004 and before. Most of the charges are cash expenditures, which are excluded from our Non-GAAP Measures.
| | • | | Excluded expenses for stock-based compensation and amortization of acquisition-related intangible assets will continue to recur and impact the Company’s GAAP results. While restructuring costs are non-recurring activities, their occasional occurrence will impact GAAP results. As such, the Non-GAAP Measures should not be construed as an inference that the excluded items are unusual, infrequent or non-recurring. |
Management compensates for these limitations by relying on these Non-GAAP Measures only as a supplement to the Company’s GAAP results.
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SYBASE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | | |
| | | June 30, | | | December 31, | |
| (In thousands, except share and per share data) | | 2008 | | | 2007 | |
| | | (Unaudited) | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 575,148 | | | $ | 604,808 | |
| Short-term investments | | | 4,815 | | | | 93,462 | |
| | | | | | | |
| Total cash, cash equivalents and short-term cash investments | | | 579,963 | | | | 698,270 | |
| | | | | | | | | |
| Restricted cash | | | 3,733 | | | | 3,424 | |
| Accounts receivable, net | | | 234,447 | | | | 245,267 | |
| Deferred income taxes | | | 42,088 | | | | 37,979 | |
| Prepaid income taxes | | | — | | | | 17,604 | |
| Other current assets | | | 32,145 | | | | 25,182 | |
| | | | | | | |
| | | | | | | | | |
| Total current assets | | | 892,376 | | | | 1,027,726 | |
| | | | | | | | | |
| Long-term cash investments | | | 22,674 | | | | 36,637 | |
| Property, equipment and improvements, net | | | 66,186 | | | | 64,841 | |
| Deferred income taxes | | | 5,475 | | | | 10,038 | |
| Capitalized software, net | | | 81,496 | | | | 74,278 | |
| Goodwill, net | | | 534,110 | | | | 533,339 | |
| Other purchased intangibles, net | | | 119,606 | | | | 130,608 | |
| Other assets | | | 35,648 | | | | 36,016 | |
| | | | | | | |
| | | | | | | | | |
| Total assets | | $ | 1,757,571 | | | $ | 1,913,483 | |
| | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 33,947 | | | $ | 30,290 | |
| Accrued compensation and related expenses | | | 58,338 | | | | 63,852 | |
| Accrued income taxes | | | 7,284 | | | | 273 | |
| Other accrued liabilities | | | 118,654 | | | | 124,849 | |
| Deferred revenue | | | 225,944 | | | | 203,734 | |
| | | | | | | |
| | | | | | | | | |
| Total current liabilities | | | 444,167 | | | | 422,998 | |
| | | | | | | | | |
| Other liabilities | | | 46,471 | | | | 44,669 | |
| Deferred income taxes | | | 13,920 | | | | 14,115 | |
| Long-term tax liability | | | 30,807 | | | | 30,807 | |
| Long-term deferred revenue | | | 4,716 | | | | 4,937 | |
| Minority interest | | | 5,119 | | | | 5,147 | |
| Convertible subordinated notes | | | 460,000 | | | | 460,000 | |
| | | | | | | | | |
| Total stockholders’ equity | | | 752,371 | | | | 930,810 | |
| | | | | | | |
| | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 1,757,571 | | | $ | 1,913,483 | |
| | | | | | | |
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SYBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| (In thousands, except per share data) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Revenues: | | | | | | | | | | | | | | | | |
| License fees | | $ | 90,515 | | | $ | 77,435 | | | $ | 168,639 | | | $ | 146,800 | |
| Services | | | 146,594 | | | | 135,230 | | | | 285,991 | | | | 264,881 | |
| Messaging | | | 45,604 | | | | 32,358 | | | | 88,231 | | | | 63,379 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Total revenues | | | 282,713 | | | | 245,023 | | | | 542,861 | | | | 475,060 | |
| | | | | | | | | | | | | | | | | |
| Costs and expenses: | | | | | | | | | | | | | | | | |
| Cost of license fees | | | 15,129 | | | | 13,083 | | | | 29,666 | | | | 25,836 | |
| Cost of services | | | 41,080 | | | | 39,539 | | | | 81,960 | | | | 78,281 | |
| Cost of messaging | | | 27,403 | | | | 18,906 | | | | 52,511 | | | | 37,795 | |
| Sales and marketing | | | 74,272 | | | | 64,916 | | | | 142,565 | | | | 129,491 | |
| Product development and engineering | | | 36,046 | | | | 36,920 | | | | 71,608 | | | | 75,673 | |
| General and administrative | | | 34,077 | | | | 32,680 | | | | 70,138 | | | | 64,176 | |
| Amortization of other purchased intangibles | | | 3,573 | | | | 3,436 | | | | 7,089 | | | | 6,846 | |
| Cost (Reversal) of restructure | | | (8 | ) | | | (51 | ) | | | 19 | | | | (47 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Total costs and expenses | | | 231,572 | | | | 209,429 | | | | 455,556 | | | | 418,051 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Operating income | | | 51,141 | | | | 35,594 | | | | 87,305 | | | | 57,009 | |
| | | | | | | | | | | | | | | | | |
| Interest income and expense and other, net | | | (876 | ) | | | 5,142 | | | | 2,639 | | | | 10,146 | |
| Minority interest | | | 37 | | | | — | | | | 28 | | | | (20 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 50,302 | | | | 40,736 | | | | 89,972 | | | | 67,135 | |
| | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | 17,948 | | | | 14,708 | | | | 33,427 | | | | 25,959 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 32,354 | | | $ | 26,028 | | | $ | 56,545 | | | $ | 41,176 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Basic net income per share | | $ | 0.40 | | | $ | 0.29 | | | $ | 0.67 | | | $ | 0.45 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Shares used in computing basic net income per share | | | 81,688 | | | | 90,891 | | | | 84,680 | | | | 91,020 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Diluted net income per share | | $ | 0.37 | | | $ | 0.28 | | | $ | 0.62 | | | $ | 0.44 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Shares used in computing diluted net income per share | | | 88,033 | | | | 92,972 | | | | 90,977 | | | | 93,294 | |
| | | | | | | | | | | | | |
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NON-GAAP RESULTS RECONCILED TO GAAP RESULTS
The following tables reflect selected Sybase non-GAAP results reconciled to GAAP results (in 000s except percentage and per share amounts) :
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| |
Operating Income | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| GAAP operating income | | | 51,141 | | | | 35,594 | | | | 87,305 | | | | 57,009 | |
| Plus: | | | | | | | | | | | | | | | | |
| Amortization of acquisition-related intangible assets | | | 7,162 | | | | 6,773 | | | | 14,225 | | | | 13,504 | |
| Stock-based compensation expense | | | 5,382 | | | | 5,483 | | | | 11,093 | | | | 11,233 | |
| Cost (Reversal) of restructure | | | (8 | ) | | | (51 | ) | | | 19 | | | | (47 | ) |
| | | | | | | | | | | | | | | | | |
| |
| Non-GAAP operating income | | $ | 63,677 | | | $ | 47,799 | | | $ | 112,642 | | | $ | 81,699 | |
| |
| | | | | | | | | | | | | | | | | |
Net Income | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| GAAP net income | | | 32,354 | | | | 26,028 | | | | 56,545 | | | | 41,176 | |
| Plus: | | | | | | | | | | | | | | | | |
| Amortization of acquisition-related intangible assets | | | 7,162 | | | | 6,773 | | | | 14,225 | | | | 13,504 | |
| Stock-based compensation expense | | | 5,382 | | | | 5,483 | | | | 11,093 | | | | 11,233 | |
| Cost (Reversal) of restructure | | | (8 | ) | | | (51 | ) | | | 19 | | | | (47 | ) |
| Impairment loss on auction rate securities | | | 3,015 | | | | 0 | | | | 6,285 | | | | 0 | |
| Less: | | | | | | | | | | | | | | | | |
| Incremental income taxes associated with certain Non-GAAP items | | | (4,868 | ) | | | (3,983 | ) | | | (9,792 | ) | | | (6,731 | ) |
| | | | | | | | | | | | | | | | | |
| |
| Non-GAAP net income | | $ | 43,037 | | | $ | 34,250 | | | $ | 78,375 | | | $ | 59,135 | |
| |
| | | | | | | | | | | | | | | | | |
Net Income Per Diluted Share | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| GAAP net income per diluted share | | $ | 0.37 | | | $ | 0.28 | | | $ | 0.62 | | | $ | 0.44 | |
| Plus: | | | | | | | | | | | | | | | | |
| Amortization of acquisition-related intangible assets | | $ | 0.08 | | | | 0.07 | | | | 0.16 | | | | 0.14 | |
| Stock-based compensation expense | | $ | 0.06 | | | | 0.06 | | | | 0.12 | | | | 0.12 | |
| Cost (Reversal) of restructure | ( | $ | 0.00 | ) | | | (0.00 | ) | | | 0.00 | | | | (0.00 | ) |
| Impairment loss on auction rate securities | | $ | 0.03 | | | | — | | | | 0.07 | | | | — | |
| Less: | | | | | | | | | | | | | | | | |
| Incremental income taxes associated with certain Non-GAAP items | ( | $ | 0.06 | ) | | | (0.04 | ) | | | (0.11 | ) | | | (0.07 | ) |
| | | | | | | | | | | | | | | | | |
| |
| Non-GAAP net income per diluted share | | $ | 0.49 | | | $ | 0.37 | | | $ | 0.86 | | | $ | 0.63 | |
| |
| |
| Shares used in computing diluted net income per share | | | 88,033 | | | | 92,972 | | | | 90,977 | | | | 93,294 | |
CLASSIFICATION OF STOCK-BASED COMPENSATION EXPENSE
The following table shows the classification of stock-based compensation expense (in 000s):
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| |
| Cost of services | | | 306 | | | | 376 | | | | 665 | | | | 715 | |
| Cost of messaging | | | 127 | | | | 124 | | | | 218 | | | | 310 | |
| Sales and marketing | | | 1,360 | | | | 1,206 | | | | 2,716 | | | | 2,472 | |
| Product development and engineering | | | 733 | | | | 656 | | | | 1,397 | | | | 1,342 | |
| General and administrative | | | 2,856 | | | | 3,121 | | | | 6,097 | | | | 6,394 | |
| | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | | | | | | | | |
Total | | $ | 5,382 | | | $ | 5,483 | | | $ | 11,093 | | | $ | 11,233 | |
CLASSIFICATION OF AMORTIZATION OF PURCHASED INTANGIBLES
The following table shows the classification of amortization of purchased intangibles expense (in 000s):
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| |
| Cost of license fees | | | 2,562 | | | | 2,406 | | | | 5,116 | | | | 4,811 | |
| Cost of messaging | | | 1,027 | | | | 931 | | | | 2,020 | | | | 1,847 | |
| Amortization of other purchased intangibles | | | 3,573 | | | | 3,436 | | | | 7,089 | | | | 6,846 | |
| | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | | | | | | | | |
Total | | $ | 7,162 | | | $ | 6,773 | | | $ | 14,225 | | | $ | 13,504 | |
11
SYBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | |
| | | Six Months Ended | |
| | | June 30, | |
| (Dollars in thousands) | | 2008 | | | 2007 | |
Cash flows from operating activities: | | | | | | | | |
| Net income | | $ | 56,545 | | | $ | 41,176 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 48,859 | | | | 43,238 | |
| Minority interest in income of subsidiaries | | | (28 | ) | | | 20 | |
| (Gain) Loss on disposal of assets | | | (18 | ) | | | 45 | |
| Impairment of investment in auction rate securities | | | 6,285 | | | | — | |
| Deferred income taxes | | | 259 | | | | (2,262 | ) |
| Stock-based compensation — restricted stock | | | 4,835 | | | | 4,185 | |
| Stock-based compensation — all other | | | 6,258 | | | | 7,048 | |
| Excess tax benefit from stock-based compensation plans | | | (6,233 | ) | | | (2,855 | ) |
| Amortization of note issuance costs | | | 985 | | | | 985 | |
| Changes in assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 6,315 | | | | 22,522 | |
| Prepaid income taxes | | | 17,604 | | | | — | |
| Other current assets | | | (6,960 | ) | | | (5,258 | ) |
| Other assets — operating | | | (696 | ) | | | 2,572 | |
| Accounts payable | | | 3,657 | | | | (669 | ) |
| Accrued compensation and related expenses | | | (5,514 | ) | | | (9,360 | ) |
| Accrued income taxes | | | 6,429 | | | | 8,510 | |
| Other accrued liabilities | | | (5,704 | ) | | | (7,786 | ) |
| Deferred revenues | | | 21,989 | | | | 21,902 | |
| Other liabilities | | | 2,385 | | | | (552 | ) |
| | | | | | | |
| Net cash provided by operating activities | | | 157,252 | | | | 123,461 | |
| | | | | | | |
Cash flows from investing activities: | | | | | | | | |
| Increase in restricted cash | | | (309 | ) | | | (10 | ) |
| Purchases of available-for-sale cash investments | | | (14,767 | ) | | | (165,136 | ) |
| Maturities of available-for-sale cash investments | | | 32,027 | | | | 99,487 | |
| Sales of available-for-sale cash investments | | | 80,982 | | | | 81,984 | |
| Business combinations, net of cash acquired | | | — | | | | (1,531 | ) |
| Purchases of property, equipment and improvements | | | (16,123 | ) | | | (11,225 | ) |
| Proceeds from sale of property, equipment, and improvements | | | 7 | | | | 40 | |
| Capitalized software development costs | | | (27,219 | ) | | | (17,228 | ) |
| (Increase) Decrease in other assets — investing | | | 75 | | | | (61 | ) |
| | | | | | | |
| Net cash provided by (used for) investing activities | | | 54,673 | | | | (13,680 | ) |
| | | | | | | |
Cash flows from financing activities: | | | | | | | | |
| Repayments of long-term obligations | | | (378 | ) | | | (33 | ) |
| Payments on capital lease | | | (220 | ) | | | (879 | ) |
| Net proceeds from the issuance of common stock and reissuance of treasury stock | | | 33,279 | | | | 19,221 | |
| Purchases of treasury stock | | | (300,601 | ) | | | (58,600 | ) |
| Excess tax benefit from stock-based compensation plans | | | 6,233 | | | | 2,855 | |
| | | | | | | |
| Net cash used for financing activities | | | (261,687 | ) | | | (37,436 | ) |
| | | | | | | |
| Effect of exchange rate changes on cash | | | 20,102 | | | | 9,155 | |
| | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | (29,660 | ) | | | 81,500 | |
| Cash and cash equivalents, beginning of year | | | 604,808 | | | | 355,303 | |
| | | | | | | |
| Cash and cash equivalents, end of period | | $ | 575,148 | | | $ | 436,803 | |
| | | | | | | |
12
SYBASE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS BY SEGMENT
FOR THE THREE MONTHS ENDED JUNE 30, 2008
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | |
| | | Infrastructure | | | iAnywhere | | | | | | | | | | | Consolidated | |
| (In thousands, except per share data) | | Platform Group | | | Solutions | | | Sybase 365 | | | Eliminations | | | Total | |
| Revenues: | | | | | | | | | | | | | | | | | | | | |
| License fees | | | | | | | | | | | | | | | | | | | | |
| Infrastructure | | $ | 64,228 | | | $ | 53 | | | $ | 54 | | | $ | — | | | $ | 64,335 | |
| Mobile and Embedded | | | 7,920 | | | | 18,260 | | | | — | | | | — | | | | 26,180 | |
| | | | | | | | | | | | | | | | |
| Subtotal license fees | | | 72,148 | | | | 18,313 | | | | 54 | | | | — | | | | 90,515 | |
| Intersegment license revenues | | | 103 | | | | 6,600 | | | | — | | | | (6,703 | ) | | | — | |
| | | | | | | | | | | | | | | | |
| Total license fees | | | 72,251 | | | | 24,913 | | | | 54 | | | | (6,703 | ) | | | 90,515 | |
| | | | | | | | | | | | | | | | | | | | | |
| Services | | | | | | | | | | | | | | | | | | | | |
| Direct service revenue | | | 135,469 | | | | 10,619 | | | | 506 | | | | — | | | | 146,594 | |
| Intersegment service revenues | | | 58 | | | | 8,600 | | | | — | | | | (8,658 | ) | | | — | |
| | | | | | | | | | | | | | | | |
| Total services | | | 135,527 | | | | 19,219 | | | | 506 | | | | (8,658 | ) | | | 146,594 | |
| | | | | | | | | | | | | | | | | | | | | |
| Messaging | | | | | | | | | | | | | | | | | | | | |
| Direct messaging revenue | | | 6 | | | | — | | | | 45,598 | | | | — | | | | 45,604 | |
| Intersegment messaging revenues | | | — | | | | — | | | | 12 | | | | (12 | ) | | | — | |
| | | | | | | | | | | | | | | | |
| Total messaging | | | 6 | | | | — | | | | 45,610 | | | | (12 | ) | | | 45,604 | |
| |
| | | | | | | | | | | | | | | | |
| Total revenues | | | 207,784 | | | | 44,132 | | | | 46,170 | | | | (15,373 | ) | | | 282,713 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total allocated costs and expenses before cost of restructure and amortization of other purchased intangibles and purchased technology | | | 158,429 | | | | 34,634 | | | | 41,346 | | | | (15,373 | ) | | | 219,036 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating income before cost of restructure and amortization of other purchased intangibles and purchased technology | | | 49,355 | | | | 9,498 | | | | 4,824 | | | | — | | | | 63,677 | |
| | | | | | | | | | | | | | | | | | | | | |
| Cost of restructure - 2008 Activity | | | 33 | | | | — | | | | — | | | | — | | | | 33 | |
| Amortization of other purchased intangibles | | | 527 | | | | 1,023 | | | | 2,023 | | | | — | | | | 3,573 | |
| Amortization of purchased technology | | | 403 | | | | 2,159 | | | | 1,027 | | | | — | | | | 3,589 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating income before unallocated costs | | $ | 48,392 | | | $ | 6,316 | | | $ | 1,774 | | | $ | — | | | $ | 56,482 | |
| |
| Other unallocated costs | | | | | | | | | | | | | | | | | | | 5,341 | |
| | | | | | | | | | | | | | | | | | | | |
| Operating income after unallocated costs | | | | | | | | | | | | | | | | | | | 51,141 | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest income and expense and other, net | | | | | | | | | | | | | | | | | | | (876 | ) |
| Minority interest | | | | | | | | | | | | | | | | | | | 37 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | | | | | | | | | | | | | | | | | 50,302 | |
| | | | | | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | | | | | | | | | | | | | | | | | 17,948 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | | | | $ | 32,354 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic net income per share | | | | | | | | | | | | | | | | | | $ | 0.40 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in computing basic net income per share | | | | | | | | | | | | | | | | | | | 81,688 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Diluted net income per share | | | | | | | | | | | | | | | | | | $ | 0.37 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in computing diluted net income per share | | | | | | | | | | | | | | | | | | | 88,033 | |
| | | | | | | | | | | | | | | | | | | | |
13
SYBASE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS BY SEGMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2008
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | |
| | | Infrastructure | | | iAnywhere | | | | | | | | | | | Consolidated | |
| (In thousands, except per share data) | | Platform Group | | | Solutions | | | Sybase 365 | | | Eliminations | | | Total | |
| Revenues: | | | | | | | | | | | | | | | | | | | | |
| License fees | | | | | | | | | | | | | | | | | | | | |
| Infrastructure | | $ | 120,606 | | | $ | 111 | | | $ | 67 | | | $ | — | | | $ | 120,784 | |
| Mobile and Embedded | | | 14,158 | | | | 33,697 | | | | — | | | | — | | | | 47,855 | |
| | | | | | | | | | | | | | | | |
| Subtotal license fees | | | 134,764 | | | | 33,808 | | | | 67 | | | | — | | | | 168,639 | |
| Intersegment license revenues | | | 165 | | | | 11,799 | | | | — | | | | (11,964 | ) | | | — | |
| | | | | | | | | | | | | | | | |
| Total license fees | | | 134,929 | | | | 45,607 | | | | 67 | | | | (11,964 | ) | | | 168,639 | |
| | | | | | | | | | | | | | | | | | | | | |
| Services | | | | | | | | | | | | | | | | | | | | |
| Direct service revenue | | | 263,602 | | | | 21,312 | | | | 1,077 | | | | — | | | | 285,991 | |
| Intersegment service revenues | | | 64 | | | | 16,725 | | | | — | | | | (16,789 | ) | | | — | |
| | | | | | | | | | | | | | | | |
| Total services | | | 263,666 | | | | 38,037 | | | | 1,077 | | | | (16,789 | ) | | | 285,991 | |
| | | | | | | | | | | | | | | | | | | | | |
| Messaging | | | | | | | | | | | | | | | | | | | | |
| Direct messaging revenue | | | 14 | | | | — | | | | 88,217 | | | | — | | | | 88,231 | |
| Intersegment messaging revenues | | | — | | | | — | | | | 12 | | | | (12 | ) | | | — | |
| | | | | | | | | | | | | | | | |
| Total messaging | | | 14 | | | | — | | | | 88,229 | | | | (12 | ) | | | 88,231 | |
| |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total revenues | | | 398,609 | | | | 83,644 | | | | 89,373 | | | | (28,765) | | | | 542,861 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total allocated costs and expenses before cost of restructure and amortization of other purchased intangibles and purchased technology | | | 309,293 | | | | 69,281 | | | | 80,410 | | | | (28,765 | ) | | | 430,219 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating income before cost of restructure and amortization of other purchased intangibles and purchased technology | | | 89,316 | | | | 14,363 | | | | 8,963 | | | | — | | | | 112,642 | |
| | | | | | | | | | | | | | | | | | | | | |
| Cost of restructure - 2008 Activity | | | 60 | | | | — | | | | — | | | | — | | | | 60 | |
| Amortization of other purchased intangibles | | | 1,054 | | | | 2,046 | | | | 3,989 | | | | — | | | | 7,089 | |
| Amortization of purchased technology | | | 806 | | | | 4,310 | | | | 2,020 | | | | — | | | | 7,136 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating income before unallocated costs | | $ | 87,396 | | | $ | 8,007 | | | $ | 2,954 | | | $ | — | | | $ | 98,357 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other unallocated costs | | | | | | | | | | | | | | | | | | | 11,052 | |
| | | | | | | | | | | | | | | | | | | | |
| Operating income after unallocated costs | | | | | | | | | | | | | | | | | | | 87,305 | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest income and expense and other, net | | | | | | | | | | | | | | | | | | | 2,639 | |
| Minority interest | | | | | | | | | | | | | | | | | | | 28 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | | | | | | | | | | | | | | | | | 89,972 | |
| | | | | | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | | | | | | | | | | | | | | | | | 33,427 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | | | | $ | 56,545 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic net income per share | | | | | | | | | | | | | | | | | | $ | 0.67 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in computing basic net income per share | | | | | | | | | | | | | | | | | | | 84,680 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Diluted net income per share | | | | | | | | | | | | | | | | | | $ | 0.62 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in computing diluted net income per share | | | | | | | | | | | | | | | | | | | 90,977 | |
| | | | | | | | | | | | | | | | | | | | |
14
NON-GAAP RESULTS RECONCILED TO GAAP RESULTS — SEGMENTS
The following table reflects non-GAAP operating income before unallocated costs reconciled to GAAP results for each Sybase segment ( in 000s except percentage and per share amounts ) :
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30, 2008 | | June 30, 2008 |
| | | Infrastructure | | iAnywhere | | | | Infrastructure | | iAnywhere | | |
| | | Platform Group | | Solutions | | Sybase 365 | | Platform Group | | Solutions | | Sybase 365 |
| |
Operating Income Before Unallocated Costs | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| GAAP operating income before unallocated costs | | | 48,392 | | | | 6,316 | | | | 1,774 | | | | 87,396 | | | | 8,007 | | | | 2,954 | |
| Plus: | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of acquisition-related
intangible assets | | | 930 | | | | 3,182 | | | | 3,050 | | | | 1,860 | | | | 6,356 | | | | 6,009 | |
| Cost of restructure | | | 33 | | | | 0 | | | | 0 | | | | 60 | | | | 0 | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| Non-GAAP operating income before unallocated costs | | $ | 49,355 | | | $ | 9,498 | | | $ | 4,824 | | | $ | 89,316 | | | $ | 14,363 | | | $ | 8,963 | |
| |
15
SYBASE, INC.
Reconciliation of GAAP-based EPS to Non-GAAP EPS
for the three months ended September 30, 2008
(unaudited)
| | | | | | | | | |
| GAAP — based EPS | | $ | 0.38 | | | $ | 0.40 | |
| | | | | | | | | |
| Amortization of purchased intangibles | | | 0.09 | | | | 0.09 | |
| Amortization of stock compensation expense | | | 0.06 | | | | 0.06 | |
| Income tax effect of above adjustments | | | (0.05 | ) | | | (0.05 | ) |
| Income tax effect due to differences between the GAAP and non-GAAP effective tax rate | | | 0.00 | | | | 0.00 | |
| | | | | | | |
| Non-GAAP EPS | | $ | 0.48 | | | $ | 0.50 | |
| | | | | | | |
Please see “Note Regarding Non-GAAP Financial Measures” for important information regarding Non-GAAP Financial Measures.
SYBASE, INC.
Reconciliation of GAAP-based EPS to Non-GAAP EPS
for the twelve months ended December 31, 2008
(unaudited)
| | | | | | | | | |
| GAAP — based EPS | | $ | 1.53 | | | $ | 1.55 | |
| | | | | | | | | |
| Amortization of purchased intangibles | | | 0.35 | | | | 0.35 | |
| Amortization of stock compensation expense | | | 0.25 | | | | 0.25 | |
| Impairment of Auction Rate Securities | | | 0.07 | | | | 0.07 | |
| Income tax effect of above adjustments | | | (0.20 | ) | | | (0.20 | ) |
| Income tax effect due to differences between the GAAP and non-GAAP effective tax rate | | | (0.02 | ) | | | (0.02 | ) |
| | | | | | | |
| Non-GAAP EPS | | $ | 1.98 | | | $ | 2.00 | |
| | | | | | | |
Please see “Note Regarding Non-GAAP Financial Measures” for important information regarding Non-GAAP Financial Measures.
16
