Exhibit 99.1
Serena Software Reports First Quarter Fiscal 2006 Results;
GAAP EPS of $0.17;
Non-GAAP EPS of $0.32 up 52% year over year
SAN MATEO, Calif.--(BUSINESS WIRE)--May 19, 2005--Serena Software
(NASDAQ: SRNA), the largest company solely focused on managing change
in the IT environment, announced today results for the first quarter
ending April 30, 2005.
Total revenue computed in accordance with generally accepted
accounting principles ("GAAP") of $61.3 million in the first quarter
of fiscal 2006 represented an 82% increase over the first quarter of
fiscal 2005. Total revenue on a non-GAAP basis for the first quarter
was $62.8 million. Non-GAAP revenue differs from GAAP revenue because
it includes a $1.5 million add-back of maintenance revenue written
down in the Merant acquisition purchase accounting. Software license
revenue was $22.2 million for the first quarter of fiscal 2006, up 40%
over the same quarter a year ago. On a GAAP basis, maintenance revenue
increased to $33.0 million for the first quarter, up 123% year over
year and service revenues were $6.1 million. License revenue for the
first quarter from software change management was 88% of total license
revenue, with 68% of total license revenue coming from distributed
systems platforms.
Net income and net income per diluted share computed in accordance
with GAAP for the first quarter of fiscal 2006 increased to $8.1
million and $0.17 from a net loss of $(4.3) million and $(0.11) in the
same quarter a year ago.
Non-GAAP net income and net income per diluted share for the first
quarter of fiscal 2006 increased 63% and 52%, respectively, to $17.0
million and $0.32 from $10.4 million and $0.21 in the first quarter of
fiscal 2005.
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 the tax effected debt related costs on an "as converted"
basis by $0.7 million for the quarter ended April 30, 2005. Fully
diluted shares were 52.8 million shares for the first quarter of
fiscal 2006. In the first 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 not
been restated based on the effect of EITF 04-08 because its effect
would have been anti-dilutive.
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 acquired technology and
other intangible assets, restructuring, acquisition and other 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 and equivalents, restricted cash and investments as of
April 30, 2005 was $173 million and cash flow from operations for the
first quarter was approximately $17 million. Current deferred revenue
increased 11% sequentially to $70.3 million and total deferred revenue
increased 10% sequentially to $83.6 million. Days sales outstanding on
a GAAP basis were 69 days and 68 days on a non-GAAP basis. The Company
repurchased 1.5 million shares of its common stock in the open market
during the first quarter of fiscal 2006 for an aggregate price of
$34.4 million. Additionally, the Company's board of directors
authorized the future repurchase of up to 1.5 million shares.
"We continue to execute well in what was a more challenging IT
spending environment in the first quarter than we anticipated", said
Mark Woodward, President and CEO. "I am pleased that we are able to
exceed earnings expectations by expanding targeted operating margins
through improved productivity. I believe we remain well positioned as
a market leader and will continue to focus on both revenue growth and
margin expansion going forward."
The Company also announced its financial outlook for the second
quarter of fiscal 2006. Second quarter total revenues on a GAAP basis
are expected to be in the range of $64 million to $66 million and
non-GAAP net income per fully diluted share is expected to be between
$0.32 and $0.33. GAAP net income per fully diluted share is expected
to be between $0.19 and $0.20. 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."
First Quarter Highlights
-- Announced that Serena supports SAFE for the mainframe with new
TeamTrack for ChangeMan release. The latest version provides
companies with a common process foundation for mainframe
software changes to improve productivity and collaboration.
-- Appointed Matthew DiMaria as Vice President of Marketing. Mr.
DiMaria's broad experience as a marketing and business
development strategist will be invaluable in driving Serena's
marketing strategy to further Serena's strategic approach for
managing change across IT.
-- Filed Form 10-K with full Sarbanes-Oxley Section 404
certification on April 8, 2006. In the filing, the Company's
auditors affirmed management's assessment that internal
controls over financial reporting were effective and affirmed
that, in all material respects, the company maintained
effective internal control over financial reporting as of
January 31, 2005.
-- Announced that Serena dominates ratings in new industry report
on configuration management solutions from analyst firm Ovum.
-- Announced that Serena streamlines web content management by
integrating Macromedia Contribute 3.1 with Serena Collage to
provide customers with a powerful way to manage and update
website content.
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 net income per share. Collectively, we refer to these
non-GAAP financial measures as "non-GAAP measures." We have outlined
below the type and scope of the amounts excluded in calculating these
non-GAAP measures and the limitations on the use of these non-GAAP
measures as a result of these exclusions. These non-GAAP measures are
not an alternative to revenue or net income as calculated in
accordance with GAAP. Investors and potential investors in our
securities should not rely on the use of these non-GAAP measures as a
substitute for any GAAP financial measure. In addition, our
calculation of these non-GAAP measures may or may not be consistent
with that of other companies. We strongly urge investors and potential
investors to review the reconciliations to the comparable GAAP
financial measures that are included below and not to rely on any
single financial measure to evaluate our business.
Serena views non-GAAP revenue, non-GAAP net income and non-GAAP
earnings per share as operating performance measures, and as such it
believes that the GAAP financial measures most directly comparable to
them are revenue, net income and net income per share, respectively.
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
acquired technology and intangible assets, stock based compensation,
restructuring, acquisition and other 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 costs not related to current operations.
Non-GAAP revenue and non-GAAP net income are helpful in more clearly
reflecting the sales of Serena's products and services, as well as
highlighting trends in its core business that may not otherwise be
apparent when relying solely on GAAP financial measures, because these
non-GAAP measures eliminate from revenue and net income financial
items that have less bearing on Serena's operating performance. The
Merant acquisition was a particularly large acquisition in Serena's
history, and management believes the impact of charges relating to the
acquisition can make it more difficult to evaluate the trends of
Serena's underlying business, including the performance of its
products, maintenance and services operations. Serena believes it is
useful to investors to see how management separates initial
transaction costs from its view of Serena's current and future
continuing operations. Management also believes that these non GAAP
measures facilitate comparison of the current operating performance of
the combined Serena and Merant operations to the past performance of
Serena and Merant as separate companies, as it permits the comparison
of operating results of the separate companies, viewed together, to
Serena's current operating results without the impact of charges
relating to the acquisition process rather than the underlying
operations of the two companies.
Serena's management uses these non-GAAP measures as supplemental
financial measures to evaluate the performance of Serena's business
that, viewed with Serena's GAAP results and the accompanying
reconciliations, it believes provide a more complete understanding of
factors and trends affecting its business than GAAP results alone.
Serena uses these measures to make forecasting, budgeting and
operating decisions such as establishment of operating targets,
budgets and bonus compensation.
Serena communicates these non-GAAP measures to the public through
its earnings releases because we understand that they are financial
measures commonly used by analysts that cover our industry and our
investor base to evaluate our performance. For example, based on
communications with analysts and investors, Serena understands that
some analysts and investors may value companies based on a measure of
discounted future cash flows and that Serena's non-GAAP financial
measures can be useful to such analysts in performing such valuations.
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.
Non-GAAP measures should not be considered a substitute for
measures of financial performance prepared in accordance with GAAP.
Investors are encouraged to look at GAAP results as the best measure
of financial performance. For example, amortization of acquired
technology and intangible assets are important to consider because
they may represent initial expenditures that under GAAP are reported
across future fiscal periods. Stock based compensation and
restructuring and acquisition related charges are important because
they may represent obligations of Serena that should be considered.
All of these metrics are important to financial performance generally.
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 revenue, net income and net income per
share calculated in accordance with GAAP. Management compensates for
the above-described limitations of using a non-GAAP measure by using
these non-GAAP measures to supplement Serena's GAAP results to provide
a more complete understanding of the factors and trends affecting our
business.
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/Q106results. A
replay of the call will be available through June 2, 2005 by dialing
800-340-2806 or 303-745-7501.
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(TM)
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, 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; our ability to successfully
integrate our acquisition of Merant plc.; changes in revenue mix and
seasonality; dependence on revenues from our installed base; the
expansion of our international organizations; continued demand for
additional mainframe MIPS capacity; our ability to complete the
assessment of internal controls over financial reporting as of January
31, 2006, 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; 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 10K filed on April
8, 2005. 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 Operations
(In thousands, except per share data)
(Unaudited GAAP)
Three Months
Ended
April 30,
------------------
2005 2004
-------- --------
Revenue:
Software licenses $ 22,178 $ 15,839
Maintenance 32,996 14,765
Professional services 6,135 3,137
-------- --------
Total revenue 61,309 33,741
-------- --------
Cost of revenue:
Software licenses 603 326
Maintenance 3,419 1,563
Professional services 5,846 2,789
Amortization of acquired technology 4,167 2,045
Stock-based compensation 14 1
-------- --------
Total cost of revenue 14,049 6,724
-------- --------
Gross profit 47,260 27,017
-------- --------
Operating expenses:
Sales and marketing 17,778 9,357
Research and development 8,856 4,949
General and administrative 4,630 2,048
Stock-based compensation 215 17
Amortization of intangible assets 2,814 950
Acquired in-process research and development - 10,400
Restructuring, acquisition and other charges - 210
-------- --------
Total operating expenses 34,293 27,931
-------- --------
Operating income (loss) 12,967 (914)
Interest Income 1,112 1,315
Interest Expense (825) (825)
Amortization of debt issuance costs (335) (461)
-------- --------
Income (loss) before income taxes 12,919 (885)
Income taxes 4,780 3,390
-------- --------
Net income (loss) $ 8,139 $ (4,275)
======== ========
Net income (loss) per share:
Basic $ 0.20 $ (0.11)
======== ========
Diluted $ 0.17 $ (0.11)
======== ========
Weighted average shares used in per share
calculations:
Basic 41,725 38,871
======== ========
Diluted 52,789 38,871
======== ========
Net income (loss) $ 8,139 $ (4,275)
After tax adjustment of convertible related
expenses 697 N/A
-------- --------
Adjusted net income (loss) for diluted net
income (loss) per share calculation $ 8,836 $ (4,275)
======== ========
SERENA Software, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited GAAP)
April 30, Jan. 31,
2005 2005
-------- --------
Assets
Current assets
Cash and cash equivalents $ 93,284 $133,330
Restricted cash 3,300 3,300
Short-term investments 31,849 16,778
Accounts receivable, net 47,135 40,988
Deferred taxes 12,267 12,267
Prepaid expenses and other current assets 5,307 4,964
-------- --------
Total current assets 193,142 211,627
Long-term investments 41,837 39,095
Restricted cash, non-current 3,189 3,157
Property and equipment, net 5,711 5,722
Goodwill, net 321,435 323,671
Other intangible assets, net 107,823 107,790
Other assets 3,723 4,057
-------- --------
Total assets $676,860 $695,119
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 934 $ 3,415
Income taxes payable 27,741 27,667
Accrued expenses 22,485 26,103
Accrued interest on subordinated notes 1,238 413
Deferred revenue 70,309 63,152
-------- --------
Total current liabilities 122,707 120,750
Deferred revenue, net of current portion 13,329 13,110
Long-term liabilities 2,508 2,660
Deferred taxes 41,185 40,983
Subordinated notes 220,000 220,000
-------- --------
Total liabilities 399,729 397,503
Stockholders' equity:
Total stockholders' equity 277,131 297,616
-------- --------
Total liabilities and stockholders' equity $676,860 $695,119
======== ========
The following table reconciles the GAAP financial measures to
Non-GAAP:
Three months
ended
April 30,
------------------
2005 2004
-------- --------
Reconciliation of GAAP Financial Measures to Non-
GAAP
GAAP net income (loss) $ 8,139 $ (4,275)
Amortization of acquired technology,
intangible assets and stock based compensation 7,210 3,013
Acquired in-process research and development -- 10,400
Revenue impact of deferred maintenance
write-down, net of tax 950 403
Restructuring, acquisition and other charges,
net of tax -- 134
-------- --------
Non-GAAP net income 16,299 9,675
After tax adjustment of convertible related
expenses 697 770
-------- --------
Non-GAAP net income for purposes of computing
fully diluted EPS $ 16,996 $ 10,445
======== ========
Fully diluted shares outstanding 52,789 49,617
======== ========
Non-GAAP net income per fully diluted share $ 0.32 $ 0.21
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CONTACT: SERENA Software, Inc.
Robert I. Pender, Jr., 650-522-6604