EXHIBIT 99.1
SERENA Software Reports Second Quarter Results;
Non-GAAP EPS up 65% to $0.28 and Licenses Revenue up 93%
to $19.4 Million
SAN MATEO, Calif.--(BUSINESS WIRE)--Aug. 19, 2004--SERENA
Software, Inc. (Nasdaq:SRNA), an industry-leading supplier of software
that automates change to enterprise applications, announced today net
income per diluted share on a non-GAAP basis of $0.28 for the second
fiscal quarter ending July 31, 2004, up 65% over the same quarter a
year ago. The results for the second quarter of fiscal 2005 include
the operations of Merant plc ("Merant") for the entire quarter. The
acquisition of Merant was completed April 23, 2004.
Total revenues on a non-GAAP basis, including the add back of
maintenance revenues written down in the purchase accounting for the
Merant acquisition, were $58.8 million exceeding the high end of the
Company's guidance. Total GAAP revenues of $52.0 million in the second
quarter of fiscal 2005 represented a 109% increase over the second
quarter of fiscal 2004, and a 54% sequential increase over the first
quarter. Software license revenue was $19.4 million, up 93% over the
same quarter a year ago. Maintenance revenue on a GAAP basis increased
to $25.7 million, up 107% over the same quarter a year ago and
services revenues increased to $6.8 million. On a combined basis,
license revenue from software change management was 79% of total
license revenue, with 70% of license revenue coming from distributed
systems platforms.
Non-GAAP operating income for the second quarter ended July 31,
2004, including the add back for the deferred revenue write down in
the Merant acquisition, was $16.4 million and non-GAAP operating
margin was 28%. Non-GAAP net income and net income per diluted share
for the second quarter of fiscal 2005 increased 84% and 65%,
respectively, to $12.6 million and $0.28 from $6.9 million and $0.17
in the second quarter of fiscal 2004.
Net income and net income per diluted share computed in accordance
with generally accepted accounting principles ("GAAP") decreased to
$0.3 million and $0.01 from $4.7 million and $0.12 in the same quarter
a year ago as a result of the acquisition of Merant.
The second quarter of fiscal 2005 non-GAAP results exclude
amortization of intangible assets and charges relating to the purchase
accounting adjustments for the acquisition of Merant, including
stock-based compensation, the revenue impact of the deferred
maintenance write-down to fair value, amortization of capitalized
software and other intangible assets, and restructuring and
acquisition related charges. A reconciliation of non-GAAP to GAAP
financial results is included in this press release.
Total cash, restricted cash, investments and equivalents as of
July 31, 2004 was $200 million. Total deferred revenue at July 31,
2004 was $71 million. Days sales outstanding on a GAAP basis were 57
days and 50 days on a non-GAAP basis. Additionally, the Company's
board of directors authorized 2,000,000 shares eligible for repurchase
going forward.
"I am very proud of the company's performance in our first full
quarter of combined operations," said President and CEO Mark Woodward.
"We delivered immediate earnings accretion on a cash basis and more
than doubled our size. Our customers are excited about the New Serena
and our SAFE strategy and I am very optimistic about our prospects
going forward."
The Company also announced its non-GAAP financial outlook for the
third quarter of fiscal 2005. Third quarter total revenues,
eliminating the reduction in maintenance revenue as a result of the
purchase accounting write-down of deferred revenue, are expected to be
in the range of $59 million to $62 million and non-GAAP net income per
fully diluted share is expected to be between $0.28 and $0.29.
Second Quarter Highlights
-- Announced that Serena has expanded the application lifecycle
solution with the acquisition of a leading requirements
management technology. RTM 5.0 accelerates the delivery of
Serena's SAFE vision by providing requirements and
traceability management. The new offering is key to Serena's
vision to meet customer needs for comprehensive lifecycle
management.
-- Announced that Serena entered a global strategic marketing
agreement with SAIC to meet the complex needs of the SAP
market, helping Serena strengthen its SAP solution offering
and increase its presence in SAP and federal markets.
-- Announced that Serena earned placement on the SD Times 100 for
the second year running. Serena was recognized in the
collaboration category for its SAFE strategy and recently
acquired Merant was acknowledged for its innovation in
collaboration.
-- Announced support for the Microsoft Visual Studio 2005 Team
System continuing a long tradition of working with Microsoft
helping development organizations improve collaboration, boost
productivity and reduce costs.
-- Announced that Serena extended the partnership with Software
Engineering Services to develop business process improvement
solutions helping customers advance development processes and
achieve Capability Maturity Model (CMM) Level 2 compliance.
-- Announced that Serena earned the prestigious SAP Pinnacle
Award 2003. Serena was selected from over 1,200 partners in
recognition of early support for the "Powered by SAP
NetWeaver" initiative.
-- Announced that Micro Focus and Serena partnered to leverage
and extend mainframe applications. Micro Focus and Serena will
integrate their complementary mainframe technologies to drive
down cost of change and lower development risk.
-- Announced that Change Management is recognized as essential
for IT Governance by The Butler Report. Serena Dimensions is
positioned as the core framework for closed loop change
management.
-- Announced that Serena completed a Remedy validation to deliver
the first closed-loop change management solutions for IT
service management & software development. Integrated
solutions automate communication, speed incident resolution
and ensure high levels of IT service availability.
Serena provides non-GAAP operating income, net income and earnings
per share data as additional information for its operating results.
These measures are not in accordance with, or an alternative for,
generally accepted accounting principles and may be different from
non-GAAP measures used by other companies. These measures differ from
US GAAP in that they exclude the amortization of intangible assets and
charges relating to the purchase accounting adjustments for the
acquisition of Merant, including the revenue impact of the deferred
maintenance write-down to fair value, amortization of capitalized
software and intangible assets, stock based compensation and
restructuring and acquisition related charges. Serena's management
believes these non-GAAP measures are useful to investors because this
supplemental information facilitates comparisons to prior periods and
are more reflective of earnings on a cash basis. Management uses these
non-GAAP measures to evaluate its financial results. Investors are
encouraged to review the reconciliation of these non-GAAP financial
measures to the comparable GAAP results. The following table
reconciles the non-GAAP financial measures to GAAP:
Quarter Ended July 31,
--------------------------------
2004 2003
--------------- ----------------
Net Diluted Net Diluted
Income EPS Income EPS
--------------- ----------------
Non-GAAP $12,610 $0.28 $6,856 $0.17
Amortization of capitalized
software, intangible assets and
stock-based compensation (7,154) (0.16) (2,136) (0.05)
Revenue impact of deferred
maintenance write-down, net of
tax (38%) (4,233) (0.09) -- --
Restructuring and acquisition
charges, net of tax (38%) (965) (0.02) -- --
------- ------- ------- -------
GAAP $258 $0.01 $4,720 $0.12
======= ======= ======= =======
Commentary Available A conference call to discuss the preliminary
results is scheduled for 2:00 PM Pacific time today and may be
accessed live via the Internet at www.companyboardroom.com or
www.serena.com/Q205results. Additionally investors can listen to the
call by dialing 877-655-7651 or 706-679-5273 at least 5 minutes prior
to the start time. A replay of the call will be available through
August 26, 2004 by dialing 800-642-1687 or 706-605-9291 ID# 9000796.
About SERENA Software, Inc.
SERENA Software, Inc. is the Enterprise Change Management (ECM)
industry leader. For over twenty years Serena has focused exclusively
on providing solutions that help companies automate change to the
applications that run their businesses. With its acquisition of
Merant, Serena's products are now in use at over 15,000 customer sites
- -- including 49 of the Fortune 50. Serena's Application Framework for
Enterprises (SAFETM) is the next step in ECM, providing
cross-platform, cross-process and cross-organizational support across
application life cycle processes. This approach helps streamline
development, improve productivity and lower development costs,
resulting in a highly efficient enterprise. With headquarters in San
Mateo, California, Serena serves customers worldwide through local
offices and an international network of distributors. www.serena.com.
This press release contains "forward-looking statements" under the
Private Securities Reform Act of 1995. There can be no assurance that
future results will be achieved, and actual results could differ
materially from forecasts and estimates. Factors that could cause or
contribute to such differences include, but are not limited to, the
successful integration of our recent Merant acquisition; the
percentage of license revenue typically closed at the end of each
quarter making estimation of operating results prior to the end of the
quarter extremely uncertain; weak economic conditions worldwide which
may continue to affect the overall demand for software and services,
which has resulted in and could continue to result in decreased
revenues or lower revenue growth rates; changes in revenue mix and
seasonality; our ability to deliver our products on the distributed
systems platform; our reliance on our mainframe products for revenue;
dependence on revenues from our installed base; continued demand for
additional mainframe MIPS capacity; expansion of our international
organizations; and our ability to manage our growth. Information about
potential factors that could affect the Company's financial results is
included in the Company's Form 10Q filed on June 9, 2004 and Form 10K
filed on April 15, 2004. Serena assumes no obligation to update the
forward-looking information contained in this press release.
Trademarks
Serena, TeamTrack, ChangeMan, Comparex and StarTool are registered
trademarks of SERENA Software Inc. SAFE is a trademark of SERENA
Software Inc. All other products or company names mentioned are used
for identification purposes only, and may be trademarks of their
respective owners. (C) 2004 SERENA Software, Inc. All Rights Reserved.
SERENA Software, Inc.
Condensed Consolidated Statements of Income (Loss)
(In thousands, except per share data)
(Unaudited GAAP)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Revenue:
Software licenses $19,416 $10,047 $35,256 $20,899
Maintenance 25,732 12,449 40,497 24,360
Professional services 6,812 2,417 9,949 4,021
--------- --------- --------- ---------
Total revenue 51,960 24,913 85,702 49,280
--------- --------- --------- ---------
Cost of revenue:
Software licenses 1,025 171 1,351 383
Maintenance 3,151 1,605 4,714 3,109
Professional services 6,258 2,278 9,048 4,044
Amortization of acquired
technology 3,932 1,628 5,977 2,709
--------- --------- --------- ---------
Total cost of revenue 14,366 5,682 21,090 10,245
--------- --------- --------- ---------
Gross profit 37,594 19,231 64,612 39,035
--------- --------- --------- ---------
Operating expenses:
Sales and marketing 18,131 7,014 27,488 13,667
Research and development 8,875 3,420 13,824 6,459
General and administrative 4,963 1,728 7,011 3,468
Stock-based compensation 237 -- 255 --
Amortization of intangible
assets 2,985 508 3,936 508
Acquired in-process research
and development -- -- 10,400 --
Restructuring, acquisition
and other charges 1,556 -- 1,766 --
--------- --------- --------- ---------
Total operating expenses 36,747 12,670 64,680 24,102
--------- --------- --------- ---------
Operating income (loss) 847 6,561 (68) 14,933
Interest income 728 814 2,043 1,819
Interest expense (825) -- (1,650) --
Amortization of debt issuance
costs (335) -- (796) --
Income (loss) before income
taxes 415 7,375 (471) 16,752
Income taxes 157 2,655 3,547 6,218
--------- --------- --------- ---------
Net income (loss) $258 $4,720 $(4,018) $10,534
========= ========= ========= =========
Net income (loss) per share:
Basic $0.01 $0.12 $(0.10) $0.26
========= ========= ========= =========
Diluted $0.01 $0.12 $(0.10) $0.26
========= ========= ========= =========
Weighted average shares used
in per share calculations:
Basic 43,955 40,102 41,413 40,276
========= ========= ========= =========
Diluted 44,626 41,028 41,413 40,973
========= ========= ========= =========
SERENA Software, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited GAAP)
July 31, January 31,
2004 2004
---------- ----------
Assets
Current assets
Cash and cash equivalents $140,530 $257,281
Restricted cash 3,300 3,300
Short-term investments 41,534 39,214
Accounts receivable, net 32,847 15,475
Deferred taxes 6,787 6,787
Prepaid expenses and other current
assets 5,918 1,338
---------- ----------
Total current assets 230,916 323,395
Long-term investments 9,603 70,692
Restricted cash, non-current 4,742 6,312
Property and equipment, net 6,125 3,209
Goodwill, net 379,911 40,471
Other intangible assets, net 63,114 22,987
Other assets 4,673 6,595
---------- ----------
Total assets $699,084 $473,661
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,955 $1,232
Income taxes payable 12,272 6,294
Accrued expenses 29,260 7,782
Accrued Interest on subordinated notes 413 413
Deferred revenue 57,575 29,496
---------- ----------
Total current liabilities 101,475 45,217
Deferred revenue, net of current portion 13,405 9,683
Long-term liabilities 2,819 --
Deferred taxes 45,203 3,483
Subordinated notes 220,000 220,000
---------- ----------
Total liabilities 382,902 278,383
Stockholders' equity:
Total stockholders' equity 316,182 195,278
---------- ----------
Total liabilities and stockholders'
equity $699,084 $473,661
========== ==========
CONTACT: SERENA Software, Inc.
Robert I. Pender, 650-522-6604