Exhibit 99.1
Serena Software Reports Fourth Quarter and Fiscal 2006 Results
SAN MATEO, Calif.--(BUSINESS WIRE)--Feb. 21, 2006--Serena
Software, Inc. (NASDAQ: SRNA), the leader in Change Governance, today
announced results for the fourth quarter ending January 31, 2006.
Total revenue was $70.1 million in the fourth quarter of fiscal
2006 and represented a 7% increase over the fourth quarter of fiscal
2005. Software license revenue was $27.0 million, maintenance revenue
was $34.6 million, up 14% year over year and service revenues were
$8.5 million for the fourth quarter of fiscal 2006.
Net income and net income per diluted share computed in accordance
with generally accepted accounting principles ("GAAP") for the fourth
quarter of fiscal 2006 was $9.1 million and $0.19 compared to $9.2
million and $0.19 in the same quarter a year ago. Included in the
fourth quarter fiscal 2006 results were $4.4 million of transaction
costs related to the pending acquisition by Silver Lake Partners.
Non-GAAP net income and net income per diluted share for the
fourth quarter of fiscal 2006 increased to $19.7 million and $0.38
from $19.5 million and $0.37 in the fourth 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
January 31, 2006 was $226 million and cash flow from operations for
the fourth quarter was approximately $28 million. Total deferred
revenue was $77.9 million and days sales outstanding in the fourth
fiscal quarter was 46 days.
Acquisition by Silver Lake Partners
On November 11, 2005 Serena Software announced that it will be
acquired by Silver Lake Partners in a transaction valued at
approximately $1.2 billion. Under the terms of the agreement, Serena
stockholders will receive $24.00 in cash in exchange for each share of
stock. Any of Serena's existing $220 million of convertible notes that
are not converted to Serena common stock prior to completion of the
proposed transaction will be exchanged for cash in an amount of $24.00
for each share of Serena common stock into which the notes were
convertible. Douglas D. Troxel, founder of Serena and currently its
chairman and largest shareholder, will receive $24.00 per share in
cash in exchange for one-third of his shares and will exchange the
balance of his equity interest in Serena for shares in the resulting
privately held company. Serena president and chief executive officer
Mark Woodward, chief financial officer Robert Pender, and other senior
executives will also exchange a portion of their Serena equity
interests for equity interests in the resulting privately held
company. Both the board of directors of Serena and a special committee
of the board comprised of independent directors have approved the
merger agreement and have recommended to Serena's stockholders that
they vote in favor of the transaction. In addition, Mr. Troxel has
agreed to vote his shares in favor of the transaction.
Shareholders Meeting
A special meeting of stockholders of Serena Software, Inc. will be
held on Thursday, March 9, 2005, beginning at 1:00 p.m. local time, at
Serena's principal executive offices at 2755 Campus Drive, 3rd Floor,
San Mateo, California 94403 to vote on the proposed acquisition.
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/Q406results.
You can participate in the live conference call by dialing (866)
322-0547 or (706) 748-0596, ID# 5751512 . Also, a replay of the call
will be available through March 7, 2006 by dialing (800) 642-1687 or
(706) 645-9291, ID# 5751512.
About Serena Software, Inc.
With more than 25 years of experience in managing change
throughout the IT environment, Serena Software (NASDAQ: SRNA) provides
Change Governance software to help global 2000 organizations
visualize, orchestrate and enforce effective business processes
throughout the IT lifecycle. More than 15,000 organizations around the
world, including 96 of the Fortune 100, leverage Serena's integrated
change management framework to manage costs, ensure consistent quality
of service, mitigate business risks and ultimately profit from change.
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.
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) 2006 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 Year Ended
January 31, January 31,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenue:
Software licenses $27,044 $27,971 $90,554 $85,350
Maintenance 34,639 30,437 136,009 98,558
Professional services 8,454 7,355 29,209 24,197
-------- -------- -------- --------
Total revenue 70,137 65,763 255,772 208,105
-------- -------- -------- --------
Cost of revenue:
Software licenses 843 869 3,210 3,149
Maintenance 3,194 3,561 13,208 11,420
Professional services 7,468 6,417 26,608 21,466
Amortization of acquired
technology 4,153 4,037 16,921 14,051
Stock-based compensation 7 14 36 44
-------- -------- -------- --------
Total cost of revenue 15,665 14,898 59,983 50,130
-------- -------- -------- --------
Gross profit 54,472 50,865 195,789 157,975
-------- -------- -------- --------
Operating expenses:
Sales and marketing 20,719 18,941 73,880 64,343
Research and development 8,419 8,827 34,534 31,043
General and administrative 4,398 5,776 17,587 18,587
Stock-based compensation 587 223 1,741 686
Amortization of intangible
assets 2,560 2,836 10,516 9,608
Acquired in-process research
and development -- -- -- 10,400
Restructuring, acquisition and
other charges 4,378 175 4,894 2,351
-------- -------- -------- --------
Total operating expenses 41,061 36,778 143,152 137,018
-------- -------- -------- --------
Operating income 13,411 14,087 52,637 20,957
Interest income 2,005 1,123 6,203 3,868
Interest expense (825) (825) (3,300) (3,300)
Amortization of debt issuance
costs (335) (335) (1,340) (1,466)
-------- -------- -------- --------
Income before income taxes 14,256 14,050 54,200 20,059
Income taxes 5,167 4,822 17,943 10,573
-------- -------- -------- --------
Net income $9,089 $9,228 $36,257 $9,486
======== ======== ======== ========
Net income per share:
Basic $0.22 $0.22 $0.88 $0.23
======== ======== ======== ========
Diluted $0.19 $0.19 $0.74 $0.23
======== ======== ======== ========
Weighted average shares used in per
share calculations:
Basic 41,306 42,360 41,338 42,074
======== ======== ======== ========
Diluted 52,462 53,264 52,502 52,713
======== ======== ======== ========
Net income $9,089 $9,228 $36,257 $9,486
After tax adjustment of
convertible related
expenses 698 694 2,788 2,852
-------- -------- -------- --------
Adjusted net income for diluted
net income per share
calculation $9,787 $9,922 $39,045 $12,338
======== ======== ======== ========
Serena Software, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited GAAP)
January January
31, 31,
2006 2005
--------- ---------
Assets
Current assets
Cash and cash equivalents $148,401 $133,330
Restricted cash 3,260 3,300
Short-term investments 60,837 16,778
Accounts receivable, net 35,464 40,988
Deferred taxes 8,658 12,267
Prepaid expenses and other current assets 4,838 4,964
--------- ---------
Total current assets 261,458 211,627
Long-term investments 13,626 39,095
Restricted cash, non-current -- 3,157
Property and equipment, net 5,927 5,722
Goodwill, net 300,551 323,671
Other intangible assets, net 87,359 107,790
Other assets 2,689 4,057
--------- ---------
Total assets $671,610 $695,119
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,551 $3,415
Income taxes payable 12,591 27,667
Accrued expenses 24,267 26,103
Accrued interest on subordinated notes 413 413
Deferred revenue 67,305 63,152
--------- ---------
Total current liabilities 107,127 120,750
Deferred revenue, net of current portion 10,608 13,110
Long-term liabilities 1,953 2,660
Deferred taxes 29,926 40,983
Subordinated notes 220,000 220,000
--------- ---------
Total liabilities 369,614 397,503
Stockholders' equity:
Total stockholders' equity 301,996 297,616
--------- ---------
Total liabilities and stockholders' equity $671,610 $695,119
========= =========
The following table reconciles the GAAP financial measures to
Non-GAAP:
Three Months Year Ended
Ended January 31, January 31,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
GAAP net income $9,089 $9,228 $36,257 $9,486
Amortization of acquired
technology, intangible assets
and stock based compensation 7,307 7,110 29,214 24,389
Acquired in-process research and
development -- -- -- 10,400
Revenue impact of deferred
maintenance write-down, net of tax -- 2,359 953 10,634
Restructuring and acquisition
charges, net of tax 2,633 112 2,943 1,477
-------- -------- -------- --------
Non-GAAP net income 19,029 18,809 69,367 56,386
Add back:
After tax adjustment of
convertible related expenses 698 694 2,788 2,852
-------- -------- -------- --------
Non-GAAP net income for purposes
of computing diluted EPS $19,727 $19,503 $72,155 $59,238
======== ======== ======== ========
Diluted shares outstanding 52,462 53,264 52,502 52,713
======== ======== ======== ========
Non-GAAP net income per diluted
share $0.38 $0.37 $1.37 $1.12
======== ======== ======== ========
CONTACT: Serena Software, Inc.
Robert I. Pender, Jr., 650-522-6604
www.serena.com
or
Citigate Sard Verbinnen
Victoria Hofstad, 212-687-8080