Exhibit 99.1
Serena Software Reports Record Fourth Quarter and Fiscal 2005 Results
SAN MATEO, Calif.--(BUSINESS WIRE)--Feb. 24, 2005--
Q4 License Revenue up 106% year over year and 26%
sequentially to $28 Million
Serena Software (NASDAQ: SRNA), the largest company solely focused on
managing change in the IT environment, announced today strong results for both
the fourth quarter and full fiscal year ending January 31, 2005.
Total revenue computed in accordance with generally accepted accounting
principles ("GAAP") of $65.8 million in the fourth quarter of fiscal 2005
represented a 122% increase over the fourth quarter of fiscal 2004 and a 16%
sequential increase over the third quarter. Total revenue on a non-GAAP basis
for the fourth quarter was $69.4 million, significantly exceeding the high end
of the Company's guidance. Non-GAAP revenue differs from GAAP revenue because it
includes a $3.7 million add-back of maintenance revenue written down in the
Merant acquisition purchase accounting. Software license revenue was $28 million
for the fourth quarter of fiscal 2005, up 106% over the same quarter a year ago
and 26% sequentially. Maintenance revenue on a GAAP basis increased to $30.4
million for the fourth quarter, up 10% sequentially, and service revenues
increased to $7.4 million. License revenue for the fourth quarter from software
change management was 88% of total license revenue, with 72% of license revenue
coming from distributed systems platforms. Total GAAP revenue for the full
fiscal year 2005 was $208.1 million and represented a 97% increase over fiscal
2004.
Net income and net income per diluted share computed in accordance with
GAAP for the fourth quarter of fiscal 2005 increased to $9.2 million and $0.19
from $6.0 million and $0.14 in the same quarter a year ago. Net income and net
income per diluted share for the full fiscal year ending January 31, 2005
decreased to $9.5 million and $0.23 from $21.4 million and $0.52 in the prior
fiscal year.
Non-GAAP net income and net income per diluted share for the fourth quarter
of fiscal 2005 increased 118% and 85%, respectively, to $18.8 million and $0.37
from $8.6 million and $0.20 in the fourth quarter of fiscal 2005. Non-GAAP net
income and net income per diluted share for the full fiscal year ending January
31, 2005 increased 89% and 56%, respectively, to $56.4 million and $1.12 from
$29.9 million and $0.72 in the prior fiscal year.
Diluted earnings per share was calculated taking into consideration the
issuance of EITF 04-08, "Effect of Contingently Convertible Debt on Diluted
Earnings per Share." Net income was increased for tax effected debt related
costs on an 'as if' converted basis by $0.7 million and $2.9 million for the
quarter and year ended January 31, 2005, respectively. Fully diluted shares were
53.3 million shares for the fourth quarter of fiscal 2005 and 52.7 million
shares for the year ended January 31, 2005. In the fourth quarter this change
reduced GAAP and non-GAAP diluted earnings per share by $0.02 and $0.06,
respectively. Previously reported net income and diluted earnings per share have
also been restated based on the effect of EITF 04-08.
Non-GAAP net income and net income per share 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, restructuring and acquisition
related charges, and acquired in-process research and development. A
reconciliation of non-GAAP to GAAP financial results is included in this press
release.
Total cash, restricted cash, investments and equivalents as of January 31,
2005 was $196 million and cash flow from operations for the fourth quarter of
fiscal 2005 was $30.5 million. Total deferred revenue at January 31, 2005 was
$76.3 million, and current deferred revenue was up 7% sequentially to $63.2
million. Days sales outstanding on a GAAP basis were 56 days and 53 days on a
non-GAAP basis. Additionally, the Company's board of directors authorized the
future repurchase of up to 1.5 million shares.
"We successfully concluded this banner year for Serena with a record fourth
quarter", said Mark Woodward, President and CEO. "From any perspective this
quarter's performance was exceptional. We are beginning the new fiscal year with
momentum in the marketplace as our customers understand clearly the value
proposition our products offer. I am excited about our opportunities going
forward."
The Company also announced its non-GAAP financial outlook for the first
quarter of fiscal 2006. First quarter total revenues, eliminating the $1.5
million 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 $0.30 and $0.31. GAAP net income per fully diluted share is expected to
be between $0.15 and $0.16. Diluted earnings per share was calculated taking
into consideration the issuance of EITF 04-08, "Effect of Contingently
Convertible Debt on Diluted Earnings per Share."
Fourth Quarter Highlights
-- Delivered a major new version of the industry's leading Enterprise
Change Management Solution. Dimensions 9 represents a major
advancement in the Serena Application Framework for Enterprises
(SAFE(TM)).
-- Announced the latest version of Serena's requirements management
solution. RTM 5.5 features a new user interface and a customizable
homepage, enabling business and technical users to align project
requirements with business goals.
-- Appointed K. C. Yee as Vice President of Asia Pacific. Serena is
looking to drive revenue growth and market share in this key strategic
region in the future. An industry veteran with more than 20 years'
experience leading and growing IT businesses across the region, Mr.
Yee has held a variety of senior management and executive positions
with software, hardware, and professional services companies.
-- Announced that Serena was named to EContent 100 for the second
consecutive year. EContent magazine's fourth annual EContent 100 list
recognizes the leaders in the digital content market.
-- Announced that Serena's customer survey reveals that IT governance
initiatives will be top priority for the next 12 months. Customers
will focus on process improvements to ensure regulatory and audit
compliance. Serena's products will play an important role in this
effort.
GAAP to non-GAAP Reconciliation
Serena management evaluates and makes operating decisions using various
operating measures. These measures are generally based on the revenues of its
product, maintenance and services operations and certain costs of these
operations, such as cost of revenues, research and development, sales and
marketing and general and administrative expenses. Such measures include
non-GAAP revenue, non-GAAP net income and non-GAAP earnings per share. 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. Non-GAAP net income and net income per share differ from comparable
GAAP measures 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. Non-GAAP
revenue differs from GAAP revenue in that it adds back maintenance revenue
written down in the Merant acquisition pursuant to purchase accounting.
Management believes it is useful in measuring Serena's operations to
exclude amortization of intangible assets and charges relating to the purchase
accounting adjustments for the acquisition of Merant because these costs are
primarily fixed at the time of the acquisition and generally cannot be changed
by management in the short term, or represent significant non-recurring or
infrequent costs not related to current operations. Management believes that
these non-GAAP measures provide useful supplemental information to management
and investors regarding the performance of the combined business operations, are
more reflective of earnings on a cash basis, and facilitate comparisons to the
historical business operations of Serena and Merant when they were separate
companies. Management also uses this information internally for forecasting and
budgeting. Management believes that presenting these non-GAAP measures provides
investors and analysts with an additional base line for assessing the future
earnings potential of Serena. Serena prefers to allow investors to have these
supplemental measures since, with reconciliation to GAAP, they may provide
additional insight into its financial results. Investors are encouraged to
review the reconciliation of these non-GAAP financial measures to the comparable
GAAP results. Non-GAAP measures should not be considered a substitute for
measures of financial performance prepared in accordance with GAAP. For example,
amortization of intangible assets are important to consider because they may
represent initial expenditures that under GAAP are reported across future fiscal
periods. Investors and potential investors are encouraged to review the
reconciliation of non-GAAP financial measures contained within this press
release with their most directly comparable GAAP financial results. Though
Serena management finds its non-GAAP measures useful in evaluating the
performance of its business, its reliance on these measures is limited because
items excluded from such measures often have a material effect on its earnings
and earnings per share calculated in accordance with GAAP.
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/Q405results. 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
March 10, 2006 by dialing 800-642-1687 or 706-605-9291 ID# 3615560.
About SERENA Software, Inc.
Serena Software (NASDAQ: SRNA) is the largest company solely focused on
managing change in the IT environment. Serena's products and services automate
process and control change for teams managing development, web content, and IT
infrastructure. Based on 25 years of innovation in process and configuration
management, Serena's SAFE solutions enable customers at more than 15,000 sites
worldwide, including 98 of the Fortune 100, to improve IT governance, mitigate
risks, support regulatory compliance, and boost productivity and quality. Serena
is headquartered in San Mateo, California, with offices throughout the U.S.,
Europe, and Asia Pacific. 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 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 market perception of 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 December 10, 2005 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) 2005 SERENA Software, Inc. All Rights Reserved.
SERENA Software, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited GAAP)
Three Months Year
Ended Ended
January 31, January 31,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue:
Software licenses $27,971 $13,608 $85,350 $45,469
Maintenance 30,437 13,569 98,558 51,050
Professional services 7,355 2,444 24,197 9,037
-------- -------- -------- --------
Total revenue 65,763 29,621 208,105 105,556
-------- -------- -------- --------
Cost of revenue:
Software licenses 869 155 3,149 668
Maintenance 3,561 1,663 11,420 6,378
Professional services 6,417 2,224 21,466 8,730
Amortization of acquired
technology 4,037 1,902 14,051 6,513
-------- -------- -------- --------
Total cost of revenue 14,884 5,944 50,086 22,289
-------- -------- -------- --------
Gross profit 50,879 23,677 158,019 83,267
-------- -------- -------- --------
Operating expenses:
Sales and marketing 18,941 8,149 64,343 29,158
Research and development 8,827 3,896 31,043 14,025
General and administrative 5,776 1,993 18,587 7,342
Stock-based compensation 237 -- 730 --
Amortization of intangible
assets 2,836 762 9,608 2,032
Acquired in-process research
and development -- -- 10,400 --
Restructuring, acquisition and
other charges 175 -- 2,351 --
-------- -------- -------- --------
Total operating
expenses 36,792 14,800 137,062 52,557
-------- -------- -------- --------
Operating income 14,087 8,877 20,957 30,710
Interest income 1,123 903 3,868 3,399
Interest expense (825) (413) (3,300) (413)
Amortization of debt issuance
costs (335) (42) (1,466) (42)
-------- -------- -------- --------
Income before income taxes 14,050 9,325 20,059 33,654
Income taxes 4,822 3,357 10,573 12,303
-------- -------- -------- --------
Net income $9,228 $5,968 $9,486 $21,351
======== ======== ======== ========
Net income per share:
Basic $0.22 $0.15 $0.23 $0.54
======== ======== ======== ========
Diluted $0.19 $0.14 $0.23 $0.52
======== ======== ======== ========
Weighted average shares used
in per share calculations:
Basic 42,360 38,731 42,074 39,707
======== ======== ======== ========
Diluted 53,264 44,430 52,713 41,637
======== ======== ======== ========
Net income $9,228 $5,968 $9,486 $21,351
After tax adjustment of convertible
related expenses 694 272 2,852 272
-------- -------- -------- --------
Adjusted net income for diluted
net income per share calculation $9,922 $6,240 $12,338 $21,623
======== ======== ======== ========
SERENA Software, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited GAAP)
January January
31, 31,
2005 2004
--------- ---------
Assets
Current assets
Cash and cash equivalents $133,330 $257,281
Restricted cash 3,300 3,300
Short-term investments 16,778 39,214
Accounts receivable, net 40,988 15,475
Deferred taxes 12,267 6,787
Prepaid expenses and other current assets 4,964 1,338
--------- ---------
Total current assets 211,627 323,395
Long-term investments 39,095 70,692
Restricted cash, non-current 3,157 6,312
Property and equipment, net 5,722 3,209
Goodwill, net 323,671 40,471
Other intangible assets, net 107,790 22,987
Deferred taxes, non-current 1,496 --
Other assets 4,057 6,595
--------- ---------
Total assets $696,615 $473,661
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $3,415 $1,232
Income taxes payable 26,694 6,294
Accrued expenses 26,103 7,782
Accrued interest on subordinated notes 413 413
Deferred revenue 63,152 29,496
--------- ---------
Total current liabilities 119,777 45,217
Deferred revenue, net of current portion 13,110 9,683
Long-term liabilities 2,660 --
Deferred taxes 42,479 3,483
Subordinated notes 220,000 220,000
--------- ---------
Total liabilities 398,026 278,383
Stockholders' equity:
Total stockholders' equity 298,589 195,278
--------- ---------
Total liabilities and stockholders'
equity $696,615 $473,661
========= =========
The following table reconciles the GAAP financial measures
to Non-GAAP:
Three Months Year
Ended Ended
January 31 January 31
---------------- -----------------
2005 2004 2005 2004
-------- ------- -------- --------
GAAP Net income $9,228 $5,968 $9,486 $21,351
Amortization of capitalized
software, intangible assets and
stock based compensation 7,110 2,664 24,389 8,545
Acquired in-process research and
development -- -- 10,400 --
Revenue impact of deferred
maintenance write-down,
net of tax 2,359 -- 10,634 --
Restructuring and acquisition
charges, net of tax 112 -- 1,477 --
-------- ------- -------- --------
Non-GAAP Net income 18,809 8,632 56,386 29,896
After tax adjustment of
convertible related expenses 694 272 2,852 272
-------- ------- -------- --------
Non-GAAP Net income for purposes of
computing fully diluted EPS $19,503 $8,904 $59,238 $30,168
======== ======= ======== ========
Fully diluted shares outstanding 53,264 44,430 52,713 41,637
======== ======= ======== ========
Non-GAAP Net income per fully
diluted share $0.37 $0.20 $1.12 $0.72
======== ======= ======== ========
CONTACT: SERENA Software, Inc.
Robert I. Pender, Jr., 650-522-6604