Mr. Wille continued, “We experienced strong growth in our database and development software business. We added 63 new customers, bringing the total new customers for the first half of our fiscal year to 142. We had nearly 350 attendees at our developer conferences compared to 135 at the conferences last year, validating the growing interest we are experiencing for our database and development products from both brand new customers as well as existing customers. In addition, we launched two new products during the quarter, SQLBase 11 and TeamDeveloper 5.1, which are driving new customer acquisition and further penetration into our customer base, as well as sustaining a solid maintenance stream.
“In our application modernization business, we formed a significant partnership with EMC Corp., a world leader in information infrastructure solutions. EMC has a strategic practice focused on transitioning Lotus Notes customers to Microsoft technologies. Through this partnership, Unify and EMC will now be able to provide application migration services to large global companies looking to migrate custom, complex, legacy Lotus Notes applications to the Microsoft platform.
“Also in our second quarter, we were selected as a strategic partner for the Microsoft Global Seminar Series for Lotus Notes Customers, a road show focused on educating Microsoft partners and the world's largest IT customers about transitioning to the Microsoft framework. Thru today, we have presented to over a hundred Microsoft field and partner sales executives who are focused on the Lotus Notes migration initiative and several dozen Lotus Notes customers looking for ways to transition off of Notes. We see both of these partnerships as significant steps in growing our application modernization service offering,” commented Wille.
Financial Results:
The company reported total revenues in the second quarter of fiscal 2008 of $4.9 million, up 126% as a result of organic and acquisition related growth when compared to $2.2 million in the second quarter of fiscal 2007. Software licenses revenue increased 146%, to $1.9 million, compared to $785,000 for the fiscal second quarter in 2007. Services revenue was up 115%, to $3.0 million for the quarter, compared to $1.4 million for the same quarter of fiscal 2007.
Net income was $692,000 or $0.10 per share compared to a net loss of $187,000 or $0.03 loss per share in the second quarter of fiscal 2007.
For the six month period of fiscal 2008, the Company reported total revenues of $8.9 million, up 127 percent as a result of organic and acquisition related growth, compared to $2.2 million for the same period of fiscal 2007. Software licenses revenue for the six month period increased 189 percent to $3.4 million, compared to $1.2 million for the same period of fiscal 2007. Services revenue was up 101 percent, to $5.5 million, compared to $2.7 million for the same period last year.
Net income for the six month period of fiscal 2008 was $473,000 or $0.07 per share, compared to a net loss of $941,000 or $0.16 loss per share for the same period of fiscal 2007.
Adjusted EBITDA for the second quarter was $1.3 million compared to $255,000 last year. Adjusted EBITDA for the first six months of fiscal 2008 was $1.65 million compared to a negative $5,000 for the same period last year. Adjusted EBITDA is calculated by taking the Company’s operating income and adjusting for depreciation and amortization, non-cash stock-based compensation and other charges. The Company believes that this non-GAAP measure, viewed in addition to and not in lieu of the Company's reported GAAP results, provides useful information to investors because it is an integral part of the Company's internal evaluation of operating results.
Unify ended its fiscal 2008 second quarter with total cash and cash equivalents of $1.7 million, compared to $1.4 million at October 31, 2006 and $2.1 million at April 30, 2007.
During the first six months of fiscal 2008, the Company made over $650,000 of acquisition- related payments, which impacted the second quarter ended cash balance. Fully diluted share count used for GAAP earnings per share calculations in the fiscal second quarter was 2008 was 6.6 million.
Fiscal 2008 Annual Guidance Update
Wille concluded, “As a result of the momentum we are seeing in our software business, we are increasing our annual guidance for fiscal 2008 as follows: revenue is expected to be in the range of $17 million to $18 million and EBITDA is expected to be in the range of $2.75 million to $3.25 million.”
6
Fiscal 2007
In conjunction with the sale of the Company’s insurance division in November 2006 last year, the Company accrued $734,000 as additional consideration for the original purchase of the insurance division. As a part of routine discussions with the Company’s auditors during the quarterly review of the second quarter ended October 31, 2007, the auditors informed the Company this additional consideration paid for the original purchase of the insurance division should be categorized as expense during the third quarter of fiscal 2007, instead of as additional consideration. Based on this information, the Company may need to restate fiscal 2007 results to re-categorize the $734,000 as an expense which would increase last year’s audited net loss of $2.4 million to $3.2 million. There is no change to the April 30, 2007 total stockholder’s equity balance or any other impact on the Company’s fiscal 2007 audited financial statements. The $734,000 in accrued additional consideration has been fully paid. Additionally, the anticipated revision will have no impact on the Company’s fiscal 2008 operations or results.
Investor Conference Call:
Unify management will host a conference call today, November 29, 2007, at 2:00 p.m. PT (5:00 p.m. ET) to review the fiscal second quarter 2008 financial results.
The call can be accessed by dialing (800) 218-8862 or (303) 262-2190, and giving the pass code “UNIFY.” Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. In addition, the conference call will be available over the Internet at www.unify.com in the Investor Relations section of the site.
About Unify
Unify is a global provider of application modernization software that enables Service-Oriented Architecture (SOA). Unify allows an organization to modernize mission critical applications while maximizing its legacy investments throughout the enterprise. Unify’s enterprise software portfolio enhances SOA environments by improving application time-to-market metrics, increasing collaboration and service-enabling legacy information. Headquartered in Sacramento, Calif., Unify has offices in London, Munich, Paris and Sydney. Visit www.unify.com or email us at info@unify.com.
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company. We wish to caution you that these statements involve risks and uncertainties and actual events or results may differ materially. Among the important factors which could cause actual results to differ materially from those in the forward-looking statements are general market conditions, unfavorable economic conditions, our ability to execute our business strategy, the effectiveness of our sales team and approach, our ability to target, analyze and forecast the revenue to be derived from a client and the costs associated with providing services to that client, the date during the course of a calendar year that a new client is acquired, the length of the integration cycle for new clients and the timing of revenues and costs associated therewith, our client concentration given that the Company is currently dependent on a few large client relationships, potential competition in the marketplace, the ability to retain and attract employees, market acceptance of our product and service programs and pricing options, our ability to maintain our existing technology platform and to deploy new technology, our ability to sign new clients and control expenses, the possibility of the discontinuation of some client relationships, the financial condition of our clients' business and other factors detailed in the Company's filings with the Securities and Exchange Commission, including our recent filings on Forms 10-K and 10-Q.
7
| UNIFY CORPORATION AND SUBSIDIARIES |
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (In thousands, except per share data) |
| |
| |
| | Three Months Ended | | Six Months Ended |
| | October 31, | | October 31, |
| | 2007 | | 2006 | | 2007 | | 2006 |
| Revenues: | | | | | | | |
| Software licenses | $ | 1,932 | | | $ | 785 | | | $ | 3,396 | | | $ | 1,176 | |
| Services | | 3,017 | | | | 1,405 | | | | 5,514 | | | | 2,748 | |
| Total revenues | | 4,949 | | | | 2,190 | | | | 8,910 | | | | 3,924 | |
| |
| Cost of Revenues: | | | | | | | | | | | | | | | |
| Software licenses | | 46 | | | | 31 | | | | 93 | | | | 69 | |
| Services | | 296 | | | | 256 | | | | 491 | | | | 532 | |
| Total cost of revenues | | 342 | | | | 287 | | | | 584 | | | | 601 | |
| Gross profit | | 4,607 | | | | 1,903 | | | | 8,326 | | | | 3,323 | |
| |
| Operating Expenses: | | | | | | | | | | | | | | | |
| Product development | | 796 | | | | 391 | | | | 1,708 | | | | 767 | |
| Selling, general and administrative | | 2,857 | | | | 1,307 | | | | 5,556 | | | | 2,665 | |
| Total operating expenses | | 3,653 | | | | 1,698 | | | | 7,264 | | | | 3,432 | |
| Income (loss) from operations | | 954 | | | | 205 | | | | 1,062 | | | | (109 | ) |
| Other income (expense), net | | (163 | ) | | | 86 | | | | (480 | ) | | | 109 | |
| |
| Income from continuing operations before income taxes | | 791 | | | | 291 | | | | 582 | | | | - | |
| Provision for income taxes | | 99 | | | | - | | | | 109 | | | | - | |
| Income from continuing operations | | 692 | | | | 291 | | | | 473 | | | | - | |
| Loss from discontinued operations | | - | | | | (478 | ) | | | - | | | | (941 | ) |
| Net income (loss) | $ | 692 | | | $ | (187 | ) | | $ | 473 | | | $ | (941 | ) |
| |
| Net income (loss) per share: | | | | | | | | | | | | | | | |
| Basic earnings per share: | | | | | | | | | | | | | | | |
| Continuing operations | $ | 0.11 | | | $ | 0.05 | | | $ | 0.08 | | | $ | - | |
| Discontinued operations | | — | | | | (0.08 | ) | | | — | | | | (0.16 | ) |
| Net income (loss) | $ | 0.11 | | | $ | (0.03 | ) | | $ | 0.08 | | | $ | (0.16 | ) |
| |
| Dilutive earnings per share: | | | | | | | | | | | | | | | |
| Continuing operations | $ | 0.10 | | | $ | 0.05 | | | $ | 0.07 | | | $ | - | |
| Discontinued operations | | — | | | | (0.08 | ) | | | — | | | | (0.16 | ) |
| Net income (loss) | $ | 0.10 | | | $ | (0.03 | ) | | $ | 0.07 | | | $ | (0.16 | ) |
| |
| Shares used in computing net income (loss) per share: | | | | | | | | | | | | | | | |
| Basic | | 6,100 | | | | 5,905 | | | | 6,068 | | | | 5,905 | |
| Dilutive | | 6,627 | | | | 5,905 | | | | 6,502 | | | | 5,905 | |
8
| RECONCILIATION OF GAAP TO NON-GAAP |
| (In thousands) |
| |
| | Three Months Ended | | Six Months Ended |
| | October 31, | | October 31, |
| | 2007 | | 2006 | | 2007 | | 2006 |
| GAAP operating income (loss) | $ | 954 | | $ | 205 | | $ | 1,062 | | $ | (109 | ) |
| |
| Amortization of intangible assets | | 219 | | | - | | | 403 | | | - | |
| Depreciation | | 44 | | | 37 | | | 96 | | | 75 | |
| Stock based compensation expenses | | 44 | | | 13 | | | 87 | | | 29 | |
| Total adjustments to GAAP operating income | | 307 | | | 50 | | | 586 | | | 104 | |
| | | | | | | | | | | | |
| Non-GAAP operating income (loss) - Adjusted EBITDA | $ | 1,261 | | $ | 255 | | $ | 1,648 | | $ | (5 | ) |
9
| UNIFY CORPORATION AND SUBSIDIARIES |
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
| (In thousands) |
| |
| |
| |
| | October 31, | | April 30, |
| | 2007 | | 2007 |
| ASSETS | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | $ | 1,694 | | $ | 2,064 |
| Accounts receivable, net | | 3,925 | | | 4,227 |
| Prepaid expenses and other current assets | | 444 | | | 520 |
| Assets of discontinued operations held for sale | | 6,063 | | | 6,811 |
| Total current assets | | | | | |
| |
| Property and equipment, net | | 189 | | | 229 |
| Other investments | | 39 | | | 214 |
| Goodwill | | 6,019 | | | 5,667 |
| Intangibles, net | | 2,564 | | | 2,643 |
| Other assets, net | | 297 | | | 474 |
| Total assets | $ | 15,171 | | $ | 16,038 |
| |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | |
| Current liabilities: | | | | | |
| Accounts payable | $ | 519 | | $ | 620 |
| Current portion of long term debt | | 1,211 | | | 1,361 |
| Accrued compensation and related expenses | | 939 | | | 804 |
| Other accrued liabilities | | 1,119 | | | 1,792 |
| Deferred revenue | | 4,611 | | | 5,577 |
| Total current liabilities | | 8,399 | | | 10,154 |
| |
| Long term debt, net | | 4,300 | | | 4,910 |
| Other long term liabilities | | 114 | | | 121 |
| |
| Commitments and contingencies | | — | | | — |
| |
| Total stockholders’ equity | | 2,358 | | | 853 |
| Total liabilities and stockholders’ equity | $ | 15,171 | | $ | 16,038 |
10
