WALTHAM, Mass., Aug. 26 /PRNewswire-FirstCall/ -- Novell, Inc. today announced financial results for its third fiscal quarter ended July 31, 2010. For the quarter, Novell reported net revenue of $199 million. This compares to net revenue of $216 million for the third fiscal quarter of 2009. GAAP income from operations for the third fiscal quarter of 2010 was $21 million. This compares to GAAP income from operations of $21 million for the third fiscal quarter of 2009. GAAP net income in the third fiscal quarter of 2010 was $16 million, or $0.04 per share. This compares to GAAP net income of $17 million, or $0.05 per share, for the third fiscal quarter of 2009. Foreign currency exchange rates favorably impacted net revenue by $1 million, operating expenses by $1 million and income from operations by $2 million compared to the same period last year.
On a non-GAAP basis, income from operations for the third fiscal quarter of 2010 was $30 million. This compares to non-GAAP income from operations of $33 million in the same period last year. Non-GAAP net income for the third fiscal quarter of 2010 was $22 million, or $0.06 per share. This compares to non-GAAP net income of $25 million, or $0.07 per share, for the third fiscal quarter of 2009. A reconciliation of GAAP to non-GAAP results is provided in the financial schedules as part of this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
"Our third quarter revenue was below our initial expectations, which we believe is principally related to customer uncertainty associated with the Novell Board of Directors' ongoing review of various alternatives to enhance stockholder value as described in Novell's March 20, 2010 press release," said Ron Hovsepian, President and CEO of Novell. "However, I am pleased that we achieved consistent profitability levels. The growth prospects of our target markets remain strong and our focus going forward is on returning to top line growth via execution of our differentiated strategy, WorkloadIQ(TM)."
Cash, cash equivalents and short-term investments were $1 billion at July 31, 2010, up from $980 million last quarter. Days sales outstanding in accounts receivable was 66 days at the end of the third fiscal quarter of 2010, down from 71 days at the end of the year-ago quarter. Total deferred revenue was $624 million at the end of the third fiscal quarter of 2010, down from $674 million at the end of the year-ago quarter due to the recognition of deferred revenue from our agreement with Microsoft. Total deferred revenue was up from the prior year, excluding the impact of Microsoft. For the third fiscal quarter of 2010, cash flow from operations was $26 million. This compares to cash flow from operations of $30 million for the third fiscal quarter of 2009.
Further details on Novell's reported results are included in the financial schedules that are a part of this release.
Conference Call Notification and Web Access Detail
A one-hour conference call with Novell management to discuss the quarter will be broadcast at 5:00PM ET on August 26, 2010. The conference call will be available live as a listen-only webcast from Novell's Investor Relations web page at: http://www.novell.com/company/ir/qresults. The domestic toll-free dial-in number is 866-335-5255, password "Novell." The international dial-in number is +1-706-679-2263, password "Novell."
Following the live event, an archived version of the webcast will be available for twelve months on the Novell® Investor Relations web page at: http://www.novell.com/company/ir/qresults.
A copy of this press release is posted on the Novell Investor Relations web page at: http://www.novell.com/company/ir/qresults.
Non-GAAP Financial Measures
We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income from operations, adjusted operating margin, adjusted income from continuing operations, adjusted net income, adjusted income per share from continuing operations and adjusted net income per share. We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable investors to evaluate our performance in the same way that management does. Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine compensation. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are excluded from most analysts' consensus estimates, that are unusual, and/or that arise outside of the ordinary course of business, such as, but not limited to, those related to stock-based compensation, acquisition-related intangible asset amortization, restructuring, asset impairments, litigation judgments and settlements, strategic alternatives review, and the sale of business operations, long-term investments, and property, plant and equipment.
Legal Notice Regarding Forward-Looking Statements
This press release may include statements that are not historical in nature and that may be characterized as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act, including those related to future financial and operating results, targets, and prospects; future opportunities; market leadership and positioning; short-term and long-term trends; the macroeconomic environment; customer priorities; timing of realization of projections; functionality, characteristics, quality and performance capabilities of Novell's products and technology; and results achievable and benefits attainable through deployment of Novell's products and provision of services. Forward-looking statements forecasting growth in financial metrics are predicated on assumptions regarding improvements in the overall economy and the markets served by the Company and in which the Company operates, the timing of which are impossible to accurately predict. Actual results may differ materially from the results discussed in or implied by such forward-looking statements, which are based upon information that is currently available to us and/or management's current expectations and speak only as of the date hereof. We are subject to a number of risks, including, among others, risks relating to: uncertainty introduced by the review of various alternatives to enhance stockholder value authorized by our Board, indirect sales, growth rates of our business units, renewal of SUSE® Linux Enterprise Server subscriptions with customers who have received certificates from Microsoft, decline rates of Open Enterprise Server and NetWare® revenue, development of products and services, the intelligent workload management market, software vulnerabilities, delays in product releases, reliance on open source software, adequacy of renewal rates, uncertain economic conditions, competition, rapid technological changes, failure to expand brand awareness, adequacy of technical support, pricing pressures, system failures, integration of acquisitions, industry consolidation, challenges resulting from a global business, foreign research and development operations, loss of key employees, intellectual property infringement, litigation matters, unpredictable financial results, impairments, the timing of revenue recognition, our investments and effective use of our cash.
A detailed discussion of these and other factors that could affect our results is included in our SEC filings, including, but not limited to, our Quarterly Report on Form 10-Q for the period ended April 30, 2010 filed with the SEC on June 8, 2010 which may be obtained by calling (800) 317- 3195, or at our Investor Relations web page at: http://www.novell.com/company/ir.
We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any forward-looking statements contained in this press release to reflect any change of expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statement is based, in whole or in part.
About Novell
Novell, Inc. , a leader in intelligent workload management, through WorkloadIQ(TM), helps organizations securely deliver and manage computing services across physical, virtual and cloud computing environments. We help customers reduce the cost, complexity, and risk associated with their IT systems through our solutions for identity and security, systems management, collaboration and Linux-based operating platforms. With our infrastructure software and ecosystem of partnerships, Novell integrates mixed IT environments, allowing people and technology to work as one. For more information, visit http://www.novell.com/.
NetWare, Novell, the Novell logo, the N Logo, and SUSE are registered trademarks and WorkloadIQ is a trademark of Novell, Inc. in the United States and other countries. *All third party trademarks are the property of their respective owners.
Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (In thousands, except per share data) Fiscal Quarter Ended -------------------- Jul 31, Jul 31, 2010 2009 -------- -------- Net revenue: Software licenses $24,968 $27,020 Maintenance and subscriptions 152,459 163,699 Services (1) 21,553 25,365 ------ ------ Total net revenue 198,980 216,084 ------- ------- Cost of revenue: Software licenses 2,355 2,315 Maintenance and subscriptions 22,533 23,677 Services 18,619 20,991 ------ ------ Total cost of revenue 43,507 46,983 ------ ------ Gross profit 155,473 169,101 ------- ------- Operating expenses: Sales and marketing 70,792 74,647 Product development 39,400 45,683 General and administrative 23,305 25,997 Other operating expenses (2) 878 1,400 --- ----- Total operating expenses 134,375 147,727 Income from operations 21,098 21,374 Operating margin % 10.6% 9.9% Other income, net: Interest income, net 2,795 2,944 Other 62 (3,810) --- ------ Total other income, net 2,857 (866) ----- ---- Income from continuing operations before taxes 23,955 20,508 Income tax expense 8,278 4,151 ----- ----- Income from continuing operations 15,677 16,357 Income from discontinued operations - 302 --- --- Net income $15,677 $16,659 ======= ======= Diluted earnings per share: Continuing operations $0.04 $0.05 Net income $0.04 $0.05 Weighted average shares 354,826 346,660 Fiscal Year-to-Date ------------------- Jul 31, 2010 Jul 31, 2009 -------- ------------ Net revenue: Software licenses $73,852 $85,537 Maintenance and subscriptions 465,265 480,843 Services (1) 66,243 80,170 ------ ------ Total net revenue 605,360 646,550 ------- ------- Cost of revenue: Software licenses 5,968 6,207 Maintenance and subscriptions 65,930 68,337 Services 56,639 64,618 Total cost of revenue 128,537 139,162 ------- ------- Gross profit 476,823 507,388 ------- ------- Operating expenses: Sales and marketing 214,561 227,238 Product development 118,470 135,627 General and administrative 77,466 75,224 Other operating expenses (2) 3,896 16,657 ----- ------ Total operating expenses 414,393 454,746 Income from operations 62,430 52,642 Operating margin % 10.3% 8.1% Other income, net: Interest income, net 8,202 12,067 Other 6,507 (10,365) Total other income, net 14,709 1,702 ------ ----- Income from continuing operations before taxes 77,139 54,344 Income tax expense 21,361 13,295 ------ ------ Income from continuing operations 55,778 41,049 Income from discontinued operations - 1,904 --- ----- Net income $55,778 $42,953 ======= ======= Diluted earnings per share: Continuing operations $0.16 $0.12 Net income $0.16 $0.12 Weighted average shares 352,346 346,120 (1) Services includes professional services, technical support and training services. (2) See Page 8 of 11 for a detail of other operating expenses. Revisions were made to prior period amounts in order to conform to the current period's presentation. Novell, Inc. Consolidated Unaudited Condensed Balance Sheets (In thousands) Jul 31, 2010 Oct 31, 2009 ------------ ------------ Assets Current assets: Cash and cash equivalents $605,050 $591,656 Short-term investments 437,865 391,809 Restricted cash 17,723 53,033 Receivables, net 146,059 177,898 Prepaid expenses 20,105 17,708 Current deferred tax assets 4,368 5,521 Other current assets 22,640 26,747 ------ ------ Total current assets 1,253,810 1,264,372 Property, plant and equipment, net 159,820 170,459 Long-term investments - 10,303 Goodwill 353,335 356,033 Intangible assets, net 30,505 36,621 Deferred income taxes 14,973 26,717 Other assets 33,584 38,403 ------ ------ Total assets $1,846,027 $1,902,908 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $27,184 $37,628 Accrued compensation 66,979 87,928 Other accrued liabilities 76,833 97,154 Deferred revenue 462,856 495,245 Total current liabilities 633,852 717,955 Deferred income taxes 7,622 8,403 Other long-term liabilities 47,673 48,502 Long-term deferred revenue 160,860 193,526 ------- ------- Total liabilities 850,007 968,386 Stockholders' equity 996,020 934,522 ------- ------- Total liabilities and stockholders' equity $1,846,027 $1,902,908 ========== ========== Revisions were made to prior period amounts in order to conform to the current period's presentation. Novell, Inc. Consolidated Unaudited Condensed Statements of Cash Flows (In thousands) Fiscal Quarter Ended -------------- Jul 31, Jul 31, 2010 2009 -------- -------- Cash flows from operating activities Net income $15,677 $16,659 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation expense 6,083 6,476 Depreciation and amortization 7,747 9,545 Change in accounts receivable allowances (96) (719) Utilization of previously reserved acquired net operating losses - 455 Loss (gain) on debenture repurchases - 57 Income from discontinued operations - (302) Impairment of long-term investments - 2,370 Net gain on sale of previously impaired investments - - Gain on sale of subsidiaries - - Changes in current assets and liabilities, excluding the effect of acquisitions and dispositions (3,259) (4,092) ------ ------ Net cash provided by operating activities 26,152 30,449 ------ ------ Cash flows from investing activities Purchases of property, plant and equipment (1,806) (8,181) Short-term investment activity (37,844) (121) Long-term investment activity - 2,173 Change in restricted cash 35,329 (47) Cash proceeds from sale of discontinued operations 234 - Net cash paid for acquisitions - - Other 852 4,425 --- ----- Net cash used in investing activities (3,235) (1,751) ------ ------ Cash flows from financing activities Issuances of common stock 2,112 1,773 Excess tax effects from stock-based compensation (1) - Debt repayment - (193) Debenture repurchases - (121,668) --- -------- Net cash provided by (used in) financing activities 2,111 (120,088) ----- -------- Effect of exchange rate changes on cash (1,403) 8,306 ------ ----- Increase (decrease) in cash and cash equivalents 23,625 (83,084) Cash and cash equivalents -beginning of period 581,425 619,948 ------- ------- Cash and cash equivalents - end of period $605,050 $536,864 ======== ======== Fiscal Year-to- Date --------------- Jul 31, Jul 31, 2010 2009 -------- -------- Cash flows from operating activities Net income $55,778 $42,953 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation expense 20,825 20,198 Depreciation and amortization 22,402 31,018 Change in accounts receivable allowances (667) (383) Utilization of previously reserved acquired net operating losses - 455 Loss (gain) on debenture repurchases - (11) Income from discontinued operations - (1,904) Impairment of long-term investments - 5,466 Net gain on sale of previously impaired investments (7,195) - Gain on sale of subsidiaries - (16) Changes in current assets and liabilities, excluding the effect of acquisitions and dispositions (67,189) (80,424) ------- ------- Net cash provided by operating activities 23,954 17,352 ------ ------ Cash flows from investing activities Purchases of property, plant and equipment (15,238) (14,763) Short-term investment activity (40,727) 10,299 Long-term investment activity 8,629 3,909 Change in restricted cash 35,310 (307) Cash proceeds from sale of discontinued operations 705 1,036 Net cash paid for acquisitions - (48,472) Other 1,379 5,898 ----- ----- Net cash used in investing activities (9,942) (42,400) ------ ------- Cash flows from financing activities Issuances of common stock 7,648 2,925 Excess tax effects from stock-based compensation - (2,788) Debt repayment - (571) Debenture repurchases - (125,537) --- -------- Net cash provided by (used in) financing activities 7,648 (125,971) ----- -------- Effect of exchange rate changes on cash (8,266) 7,849 ------ ----- Increase (decrease) in cash and cash equivalents 13,394 (143,170) Cash and cash equivalents -beginning of period 591,656 680,034 ------- ------- Cash and cash equivalents - end of period $605,050 $536,864 ======== ======== Revisions were made to prior period amounts in order to conform to the current period's presentation. Novell, Inc. Unaudited Non-GAAP Adjusted Income From Operations (In thousands, except per share data) Fiscal Quarter Fiscal Year-to- Ended Date -------------- --------------- Jul 31, Jul 31, Jul 31, Jul 31, 2010 2009 2010 2009 -------- -------- -------- -------- GAAP income from operations $21,098 $21,374 $62,430 $52,642 ------- ------- ------- ------- Adjustments: Stock-based compensation expense: Cost of revenue 846 554 2,177 2,137 Sales and marketing 1,464 1,243 5,653 5,356 Product development 1,937 2,817 6,076 7,611 General and administrative 1,836 1,862 6,919 5,094 ----- ----- ----- ----- Sub-total 6,083 6,476 20,825 20,198 ----- ----- ------ ------ Acquisition-related intangible asset amortization: Cost of revenue 1,312 2,398 3,766 7,886 Sales and marketing 671 1,478 2,350 4,590 Sub-total 1,983 3,876 6,116 12,476 ----- ----- ----- ------ Other operating expenses (income): Restructuring expense - 1,227 2,774 16,500 Strategic alternatives review expense 1,503 - 2,997 - Litigation related activity (625) - (1,875) - Gain on sale of subsidiaries - - - (16) IT outsourcing transition costs - 173 - 173 Sub-total 878 1,400 3,896 16,657 --- ----- ----- ------ Total operating adjustments 8,944 11,752 30,837 49,331 Non-GAAP income from operations $30,042 $33,126 $93,267 $101,973 ======= ======= ======= ======== Non-GAAP operating margin % 15.1% 15.3% 15.4% 15.8% Novell, Inc. Unaudited Non-GAAP Adjusted Net Income (In thousands, except per share data) Fiscal Quarter Fiscal Year-to- Ended Date -------------- --------------- Jul 31, Jul 31, Jul 31, Jul 31, 2010 2009 2010 2009 -------- -------- -------- -------- GAAP net income $15,677 $16,659 $55,778 $42,953 ------- ------- ------- ------- Operating adjustments (detailed above) 8,944 11,752 30,837 49,331 Non-operating expenses (income) adjustments: Net gain on sale of previously impaired investments - - (7,195) - Loss (gain) on debenture repurchases - 57 - (11) Impairment of long-term investments - 2,370 - 5,466 Sub-total - 2,427 (7,195) 5,455 --- ----- ------ ----- Total pre-tax adjustments 8,944 14,179 23,642 54,786 Income tax adjustments (2,136) (5,549) (8,035) (17,089) Income from discontinued operations - (302) - (1,904) --- ---- --- ------ Total net adjustments 6,808 8,328 15,607 35,793 Non-GAAP net income and non- GAAP income from continuing operations $22,485 $24,987 $71,385 $78,746 ======= ======= ======= ======= GAAP net income per share $0.04 $0.05 $0.16 $0.12 Total adjustments detailed above 0.02 0.02 0.04 0.11 ---- ---- ---- ---- Non-GAAP net income per share and non- GAAP income from continuing operations per share $0.06 $0.07 $0.20 $0.23 ===== ===== ===== ===== Non-GAAP weighted average shares 354,826 346,660 352,346 346,120
Novell, Inc.
CONTACT: Press, Ian Bruce, +1-781-464-8034, ibruce@novell.com, or
Investor Relations, Robert Kain, 1-800-317-3195, rkain@novell.com, both of
Novell, Inc.
Web Site: http://www.novell.com/
