Exhibit 99.1
Serena Software Reports Second Quarter Fiscal 2006 Results;
GAAP EPS of $0.18;
Non-GAAP EPS of $0.32;
$32 Million Cash Flow From Operations
SAN MATEO, Calif.--(BUSINESS WIRE)--Aug. 18, 2005--Serena Software (NASDAQ:
SRNA), the largest company solely focused on managing change in the IT
environment, announced today results for the second quarter ending July 31,
2005.
Total revenue was $59.4 million in the second quarter of fiscal 2006 and
represented a 14% increase over the second quarter of fiscal 2005. Software
license revenue was $18.8 million, maintenance revenue increased to $34.2
million, up 33% year over year and service revenues were $6.4 million for the
second quarter of fiscal 2006. License revenue for the second quarter from
software change management was 86% of total license revenue and 64% of total
license revenue came from distributed systems platforms.
Net income and net income per fully-diluted share computed in accordance
with generally accepted accounting principles ("GAAP") for the second quarter of
fiscal 2006 increased to $8.5 million and $0.18 from $0.3 million and $0.01 in
the same quarter a year ago.
Non-GAAP net income and net income per diluted share for the second quarter
of fiscal 2006 increased 24% and 33%, respectively, to $16.5 million and $0.32
from $13.3 million and $0.24 in the second quarter of fiscal 2005.
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, stock-based compensation, amortization of
acquired technology and other intangible assets, restructuring, acquisition and
other charges, and acquired in-process research and development. For periods
prior to the second quarter, reported non-GAAP net income and net income per
share also exclude the revenue impact of the deferred maintenance write-down to
fair value. 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 July 31,
2005 was $186 million and cash flow from operations for the second quarter was
$32 million. Total deferred revenue was $79.8 million. Days sales outstanding in
the second fiscal quarter were 45 days, representing a 24 day sequential
improvement from 69 days in the prior quarter. The Company repurchased 0.7
million shares of its common stock in the open market during the second quarter
of fiscal 2006 for an aggregate price of $14.2 million.
"I am pleased we achieved the preliminary results we announced earlier this
month, including delivering non-GAAP earnings per share within our original
guidance," said Mark Woodward, President and CEO. "Our solid profitability and
strong cash flows demonstrate the strength of our business model and the
satisfaction within our customer base."
The Company also announced its financial outlook for the third quarter of
fiscal 2006. Third quarter total revenues on a GAAP basis are expected to be in
the range of $60 million to $61 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 $0.18 and $0.19.
Second Quarter Highlights
-- Announced powerful new process capabilities in the world's most
popular suite for team-based application development. Serena
Professional 9 increases visibility and control over the development
process and offers enhanced support for regulatory compliance.
-- Announced that Serena was named to the SD Times 100 for third
consecutive year. Serena was recognized for the successful Merant
acquisition, propelling the company to a leadership position in
managing change across IT.
-- Announced that Serena RTM was named the top requirements management
solution by Yphise. According to Yphise, Serena RTM proved the best
requirements management product overall for lowering the cost of
application maintenance.
-- Launched Serena ProcessView software to visualize and prototype
business applications, enabling business users and IT to collaborate
for faster, more accurate development.
-- Eclipse Foundation and Serena Software announced the approval of the
Eclipse Application Lifecycle Framework project, a new Eclipse project
proposed by Serena to offer developers an open platform for
application lifecycle management.
-- Demonstrated ProcessView Composer integration with the Microsoft
Visual Studio Team System at TechEd 2005 in Orlando, Florida June
5-10, 2005, showing how it enables business users to rapidly visualize
application requirements while integrating with VSTS to collaborate
more effectively with IT architects, developers and testers.
-- Announced a new single site offering of Serena Collage, focused on the
SMB market, making web content management affordable to organizations
of any size.
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 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 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 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 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, amortization of acquired technology and intangible
assets, stock based compensation, restructuring, acquisition and other charges.
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 net income and non-GAAP earnings per share are
helpful in 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 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 because, when viewed
with Serena's GAAP results and the accompanying reconciliations, it believes
they 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
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/Q206results. A replay of the call
will be available through September 1, 2005 by dialing (800) 642-1687 or (706)
645-9291, ID# 8144874.
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 10-K filed on
April 8, 2005 and Form 10-Q filed on June 9, 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 Six Months Ended
July 31, July 31,
----------------- ------------------
2005 2004 2005 2004
-------- -------- -------- ---------
Revenue:
Software licenses $18,821 $19,416 $ 40,999 $ 35,256
Maintenance 34,218 25,732 67,214 40,497
Professional services 6,366 6,812 12,501 9,949
------- ------- -------- ---------
Total revenue 59,405 51,960 120,714 85,702
------- ------- -------- ---------
Cost of revenue:
Software licenses 919 1,025 1,522 1,351
Maintenance 3,267 3,151 6,687 4,714
Professional services 6,113 6,259 11,959 9,048
Amortization of acquired
technology 4,379 3,932 8,546 5,977
Stock-based compensation 7 14 21 15
-------- ------- -------- ---------
Total cost of revenue 14,685 14,381 28,735 21,105
------- ------- -------- ---------
Gross profit 44,720 37,579 91,979 64,597
------- ------- -------- ---------
Operating expenses:
Sales and marketing 16,694 18,131 34,472 27,488
Research and development 8,563 8,875 17,419 13,824
General and administrative 4,233 4,963 8,864 7,011
Stock-based compensation 352 223 567 240
Amortization of intangible
assets 2,582 2,986 5,396 3,936
Acquired in-process research
and development -- -- -- 10,400
Restructuring, acquisition
and other charges -- 1,556 -- 1,766
------- ------- -------- ---------
Total operating expenses 32,424 36,734 66,718 64,665
------- ------- -------- ---------
Operating income (loss) 12,296 845 25,261 (68)
Interest income 1,378 728 2,490 2,043
Interest expense (825) (825) (1,650) (1,650)
Amortization of debt issuance costs (335) (335) (670) (796)
------- ------- -------- ---------
Income (loss) before income
taxes 12,514 413 25,431 (471)
Income taxes 4,029 157 8,809 3,547
------- ------- -------- ---------
Net income (loss) $ 8,485 $ 256 $ 16,622 ($ 4,018)
======= ======= ======== =========
Net income (loss) per share:
Basic $ 0.21 $ 0.01 $ 0.40 ($ 0.10)
======= ======= ======== =========
Diluted $ 0.18 $ 0.01 $ 0.34 ($ 0.10)
======= ======= ======== =========
Weighted average shares used in
per share calculations:
Basic 41,165 43,955 41,445 41,413
======= ======= ======== =========
Diluted 51,758 43,955 52,273 41,413
======= ======= ======== =========
Net income (loss) $ 8,485 $ 256 $ 6,622 ($ 4,018)
After tax adjustment of
convertible related expenses 697 N/A 1,396 N/A
------- ------- -------- ---------
Adjusted net income (loss) for
diluted net income (loss) per
share calculation $ 9,182 $ 256 $ 18,018 ($ 4,018)
======= ======= ======== =========
Serena Software, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited GAAP)
July 31, January 31,
2005 2005
-------- --------
Assets
Current assets
Cash and cash equivalents $ 88,330 $133,330
Restricted cash 3,300 3,300
Short-term investments 43,232 16,778
Accounts receivable, net 29,876 40,988
Deferred taxes 12,267 12,267
Prepaid expenses and other current assets 6,130 4,964
-------- --------
Total current assets 183,135 211,627
Long-term investments 49,228 39,095
Restricted cash, non-current 1,565 3,157
Property and equipment, net 5,765 5,722
Goodwill, net 326,350 323,671
Other intangible assets, net 100,855 107,790
Other assets 3,397 4,057
-------- --------
Total assets $670,295 $695,119
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,948 $ 3,415
Income taxes payable 32,364 27,667
Accrued expenses 20,417 26,103
Accrued interest on subordinated notes 413 413
Deferred revenue 66,972 63,152
-------- --------
Total current liabilities 122,114 120,750
Deferred revenue, net of current portion 12,829 13,110
Long-term liabilities 2,321 2,660
Deferred taxes 38,308 40,983
Subordinated notes 220,000 220,000
-------- --------
Total liabilities 395,572 397,503
Stockholders' equity:
Total stockholders' equity 274,273 297,616
-------- --------
Total liabilities and stockholders'
equity $670,295 $695,119
======== ========
The following table reconciles the GAAP financial measures to
Non-GAAP:
Three Months Ended Six Months Ended
July 31, July 31,
----------------- -------------------
2005 2004 2005 2004
------- ------- ------- ---------
GAAP net income (loss) $ 8,485 $ 256 $16,622 ($ 4,018)
Amortization of acquired
technology, intangible assets
and stock based compensation 7,320 7,155 14,529 10,168
Acquired in-process research
and development -- -- -- 10,400
Revenue impact of deferred
maintenance write-down,
net of tax -- 4,233 953 4,637
Restructuring and acquisition
charges, net of tax -- 964 -- 1,099
-------- -------- -------- ---------
Non-GAAP net income 15,805 12,609 32,104 22,285
Add back:
After tax adjustment of
convertible related expenses 697 694 1,396 1,464
------- ------- ------- ---------
Non-GAAP net income for
purposes of computing
fully diluted EPS $16,502 $13,303 $33,500 $ 23,749
======= ======= ======= =========
Fully diluted shares
outstanding 51,758 54,539 52,273 52,078
======= ======= ======= =========
Non-GAAP net income per fully
diluted share $ 0.32 $ 0.24 $ 0.64 $ 0.46
======= ======= ======= =========
CONTACT: Serena Software, Inc.
Robert I. Pender, Jr., 650-522-6604
or
Citigate Sard Verbinnen
Victoria Hofstad, 212-687-8080