EXHIBIT 99.1
SERENA Software Reports Record Third Quarter Results;
Non-GAAP EPS up 84% to $0.35 and Licenses Revenue up 102% to
$22.1 Million
SAN MATEO, Calif.--(BUSINESS WIRE)--Nov. 18, 2004--SERENA
Software, Inc. (Nasdaq:SRNA), an industry-leading supplier of software
that manages change throughout the application lifecycle, announced
today net income per diluted share on a non-GAAP basis of $0.35 for
the third fiscal quarter ending October 31, 2004, up 84% over the same
quarter a year ago.
Total revenues on a non-GAAP basis, including the add-back of
maintenance revenues written down in the Merant acquisition purchase
accounting, were $62.2 million, exceeding the high end of the
Company's guidance. Total GAAP revenues of $56.6 million in the third
quarter of fiscal 2005 represented a 112% increase over the third
quarter of fiscal 2004 and a 9% sequential increase over the second
quarter. Software license revenue was $22.1 million, up 102% over the
same quarter a year ago and 14% sequentially. Maintenance revenue on a
GAAP basis increased to $27.6 million, up 111% over the same quarter a
year ago and services revenues increased to $6.9 million. On a
combined basis, license revenue from software change management was
73% of total license revenue, with 55% of license revenue coming from
distributed systems platforms.
Non-GAAP operating income for the third quarter ended October 31,
2004, including the add back for the deferred revenue write down, was
$20.0 million and non-GAAP operating margin was 32%. Non-GAAP net
income and net income per diluted share for the third quarter of
fiscal 2005 increased 104% and 84%, respectively, to $15.3 million and
$0.35 from $7.5 million and $0.19 in the third quarter of fiscal 2004.
Net income and net income per diluted share computed in accordance
with generally accepted accounting principles ("GAAP") decreased to
$4.3 million and $0.10 from $4.8 million and $0.12 in the same quarter
a year ago as a result of the amortization of intangibles related to
the acquisition of Merant.
The third 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
October 31, 2004 was $177 million and cash flow from operations for
the third quarter of fiscal 2005 was $6.9 million. Total deferred
revenue at October 31, 2004 was $73.9 million, up 4% sequentially.
Days sales outstanding on a GAAP basis were 67 days and 61 days on a
non-GAAP basis. Additionally, the Company's board of directors
authorized one million four hundred thousand shares eligible for
repurchase going forward.
"I am extremely pleased with our results this quarter," said Mark
Woodward, President and CEO. "We are executing very well and we have
successfully expanded our market opportunity beyond enterprise change
management to become a leading provider of application lifecycle
management solutions. Our ability to deliver strong organic license
revenue growth in just our second quarter of combined operations since
the acquisition of Merant validates our customers' acceptance of the
ALM vision."
The Company also announced its non-GAAP financial outlook for the
fourth quarter of fiscal 2005. Fourth 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 $65 million to $67 million and non-GAAP net income per
fully diluted share is expected to be between $0.38 and $0.39.
Based on the recent issuance of EITF 04-08, "The Effect of
Contingently Convertible Debt on Diluted Earnings per Share,"
beginning in the fourth quarter of fiscal 2005 we will include
9,912,694 shares in our fourth quarter and full year weighted average
share calculation. Our fourth quarter fiscal 2005 earnings per share
guidance will be reduced by this increase in shares on a GAAP basis by
$0.01 to $0.02 and on a non-GAAP basis by $0.05 to $0.06.
Third Quarter Highlights
-- Announced RTM 5.0, the first release of Serena's new acquired
requirements management solution. RTM 5.0 accelerates delivery
of Serena's SAFE vision by providing requirements and
traceability management.
-- Announced that Serena has achieved leadership status in META
Group's evaluation of the enterprise software configuration
management market. Serena is recognized for its solid
technology, financial performance and ability to effectively
adapt to evolving market conditions.
-- Appointed Carl Theobald as Senior Vice President of Research
and Development. Mr. Theobald will play key role in helping
Serena execute on its strategic vision and increasing
stronghold in the application lifecycle management market.
-- Announced extended capabilities with ChangeMan Mover 2. This
software deployment solution features reduce costs, errors of
manual asset transfer and boost efficiency and security.
-- Held its 'Xchange' Conference, addressing the first gathering
of Merant, TeamShare and RTM customers since the acquisitions.
The event offered customers, partners, and industry leaders a
forum for learning and exchanging ideas and methods for
increasing their insight, control and predictability to manage
change, from business planning to operations.
-- Released a new version of TeamTrack - Serena TeamTrack 6.2.
This solution evolves Serena's SAFE vision and improves
collaboration and IT efficiency.
-- Announced that Serena earned placement on Software Magazine's
22nd Annual Software 500 Software Magazine for the sixth
consecutive year.
-- Announced that Serena has joined the Mainframe Migration
Alliance (MMA), an organization created by Microsoft and
industry partners to help customers more easily and
efficiently migrate workloads off the mainframe and onto the
Microsoft Windows platform.
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 October 31,
--------------------------------
2004 2003
---------------- ---------------
Net Diluted Net Diluted
Income EPS Income EPS
-------- ------- ------- -------
Non-GAAP $15,308 $0.35 $7,514 $0.19
Amortization of capitalized
software, intangible assets and
stock based compensation (7,109) (0.16) (2,664) (0.07)
Revenue impact of deferred
maintenance write-down,
net of tax (34%) (3,650) (0.08) -- --
Restructuring and acquisition
charges, net of tax (34%) (271) (0.01) -- --
-------- ------- ------- -------
GAAP $ 4,278 $0.10 $4,850 $0.12
======== ======= ======= =======
Commentary Available
A conference call to discuss the preliminary results is scheduled
for 2:00 p.m. Pacific time today and may be accessed live via the
Internet at www.companyboardroom.com or www.serena.com/Q305results.
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 December 2, 2004 by dialing
800-642-1687 or 706-605-9291 ID# 1986014.
About SERENA Software, Inc.
SERENA Software, Inc. is the world's largest company solely
focused on managing change throughout the application lifecycle. For
more than two decades, Serena has enabled companies to automate change
to the applications that run their businesses. Serena's Application
Framework for Enterprises (SAFE(TM)) is the unique next-generation
framework for Application Lifecycle Management (ALM), providing
cross-platform, cross-process and cross-organizational support across
application lifecycle processes, regardless of platform. The SAFE
approach helps streamline development, improve productivity and lower
development costs, resulting in a highly efficient enterprise. Serena
has more than 15,000 customer sites worldwide, including 49 of the
Fortune 50. Serena is headquartered in San Mateo, California and has
offices in more than 20 countries. For more information, please visit
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, our
ability to successfully integrate our recent acquisition of Merant
plc.; 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; dependence on revenues from our installed base;
continued demand for additional mainframe MIPS capacity; our ability
to complete the assessment of internal controls over financial
reporting as of January 31, 2005, as required by Section 404 of the
Sarbanes-Oxley Act, which may impact the reliability of our internal
controls over financial reporting and thus adversely affect the market
price of our common stock; the 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 September 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
(In thousands, except per share data)
(Unaudited GAAP)
Three Months Nine Months
Ended Ended
October 31, October 31,
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
Revenue:
Software licenses $22,124 $10,963 $57,379 $31,862
Maintenance 27,623 13,121 68,120 37,481
Professional services 6,894 2,571 16,843 6,593
-------- -------- -------- --------
Total revenue 56,641 26,655 142,342 75,936
-------- -------- -------- --------
Cost of revenue:
Software licenses 930 129 2,280 512
Maintenance 3,145 1,606 7,859 4,715
Professional services 6,002 2,462 15,049 6,506
Amortization of acquired
technology 4,037 1,902 10,014 4,611
-------- -------- -------- --------
Total cost of revenue 14,114 6,099 35,202 16,344
-------- -------- -------- --------
Gross profit 42,527 20,556 107,140 59,592
-------- -------- -------- --------
Operating expenses:
Sales and marketing 17,913 7,341 45,402 21,008
Research and development 8,393 3,671 22,217 10,130
General and administrative 5,800 1,881 12,811 5,349
Stock-based compensation 237 -- 493 --
Amortization of intangible
assets 2,835 762 6,771 1,270
Acquired in-process research
and development -- -- 10,400 --
Restructuring, acquisition and
other charges 410 -- 2,175 --
-------- -------- -------- --------
Total operating expenses 35,588 13,655 100,269 37,757
-------- -------- -------- --------
Operating income 6,939 6,901 6,871 21,835
Interest income 702 677 2,745 2,495
Interest expense (825) -- (2,475) --
Amortization of debt issuance
costs (335) -- (1,131) --
-------- -------- -------- --------
Income before income taxes 6,481 7,578 6,010 24,330
Income taxes 2,203 2,728 5,751 8,946
-------- -------- -------- --------
Net income $ 4,278 $ 4,850 $ 259 $15,384
======== ======== ======== ========
Net income per share:
Basic $ 0.10 $ 0.12 $ 0.01 $ 0.38
======== ======== ======== ========
Diluted $ 0.10 $ 0.12 $ 0.01 $ 0.38
======== ======== ======== ========
Weighted average shares used in per
share calculations:
Basic 43,109 39,545 41,979 40,032
======== ======== ======== ========
Diluted 43,519 40,173 42,616 40,706
======== ======== ======== ========
SERENA Software, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited GAAP)
October January
31, 31,
2004 2004
--------- ---------
Assets
Current assets
Cash and cash equivalents $126,494 $257,281
Restricted cash 3,300 3,300
Short-term investments 32,618 39,214
Accounts receivable, net 42,037 15,475
Deferred taxes 6,787 6,787
Prepaid expenses and other current assets 5,995 1,338
--------- ---------
Total current assets 217,231 323,395
Long-term investments 10,157 70,692
Restricted cash, non-current 4,783 6,312
Property and equipment, net 5,783 3,209
Goodwill, net 321,389 40,471
Other intangible assets, net 114,763 22,987
Other assets 4,348 6,595
--------- ---------
Total assets $678,454 $473,661
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,501 $ 1,232
Income taxes payable 10,130 6,294
Accrued expenses 29,194 7,782
Accrued Interest on subordinated notes 1,238 413
Deferred revenue 59,120 29,496
--------- ---------
Total current liabilities 101,183 45,217
Deferred revenue, net of current portion 14,747 9,683
Long-term liabilities 2,071 --
Deferred taxes 45,203 3,483
Subordinated notes 220,000 220,000
--------- ---------
Total liabilities 383,204 278,383
Stockholders' equity:
Total stockholders' equity 295,250 195,278
--------- ---------
Total liabilities and stockholders' equity $678,454 $473,661
========= =========
CONTACT: SERENA Software, Inc.
Robert I. Pender, Jr., 650-522-6604