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TIBCO Software Reports Third Quarter Financial ResultsSolid Year-Over-Year Growth in Total Revenue, License Revenue and Operating Profits
PALO ALTO, Calif., Sept. 28 /PRNewswire-FirstCall/ -- TIBCO Software Inc. (NASDAQ: TIBX) , a leading business integration and process management software company that enables real-time business, today announced results for its third fiscal quarter, which ended on September 3, 2006. Total revenue for the third quarter of fiscal 2006 was $120.4 million, and net income was $11.3 million, or $0.05 per diluted share. This compares to total revenue of $105.9 million and net income of $13.8 million, or $0.06 per diluted share, as reported for the third quarter of fiscal 2005. Net income includes employee stock-based compensation expense due to the newly adopted SFAS 123(R) of $3.5 million for the third quarter of fiscal 2006. Net income prior to fiscal 2006 did not include employee stock-based compensation expense related to SFAS 123(R). On a non-GAAP basis, net income for the third quarter of fiscal 2006 was $15.5 million or $0.07 per diluted share, compared with $10.2 million or $0.05 per diluted share for the third quarter of fiscal 2005. Non-GAAP operating income for the third quarter of fiscal 2006 was $19.8 million, resulting in non-GAAP operating margins of 16.4%. This compares to non-GAAP operating income of $15.1 million, or 14.3% in the third quarter of fiscal 2005. Non- GAAP results exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges and gains on sales of certain equity investments, and assume a non-GAAP effective tax rate of 37% for fiscal 2006 and 38% for fiscal 2005. "Our business grew at a healthy rate in the quarter, and we are seeing increased momentum across our business," said Vivek Ranadive, Chairman and CEO of TIBCO. "As we look ahead to Q4 and fiscal 2007, we will focus on expanding our customer base and deepening our presence and expertise in specific vertical markets." Highlights for TIBCO's Third Quarter of Fiscal 2006
* TIBCO closed 11 license deals over $1 million and made significant
sales to both new and existing customers, including Con-Way
Transportation Services, Comcast Media Center, Alaska Airlines,
State of Texas and Armstrong World Industries
* Solid performance across key verticals including Finance,
Telecommunications, Government, Manufacturing, Healthcare and
Consumer Packaged Goods
* Geographic year over year growth across all major regions
* Cash flow from operations for Q3 of $48.1 million; year-to-date cash
flow from operations of $93.8 million, which represents more than
all of fiscal 2005
* Broad demand across product platform with particular strength in
core service-oriented architecture (SOA) offerings
Conference Call Details
The conference call will be held at 2:00 p.m. Pacific Time. The conference call will be hosted by Thomson Financial and may be accessed over the Internet at http://www.tibco.com/ or via dial-in at (888) 857-6932 or (719) 457-2619. Please join the conference call at least 10 minutes early to register. A replay of the conference call will be available until midnight on October 28, 2006 at http://www.tibco.com/ or via dial-in at (888) 203-1112 or (719) 457-0820. The pass code for both the call and the replay is 4790427. About TIBCO TIBCO Software Inc. is a leading business integration and process management software company that enables real-time business. Real-time business is about giving organizations the ability to sense and respond to changes and opportunities as they arise. TIBCO has delivered the value of real-time business, what TIBCO calls The Power of Now(R), to over 2,500 customers around the world and in a wide variety of industries. To learn about TIBCO's solutions for service-oriented architecture (SOA), business process management (BPM) and business optimization, contact TIBCO at +1 650-846-1000 or on the Web at http://www.tibco.com/. TIBCO is headquartered in Palo Alto, California. NOTE: TIBCO, the TIBCO logo, The Power of Now, and TIBCO Software are trademarks or registered trademarks of TIBCO Software Inc. in the United States and/or other countries. All other product and company names and marks mentioned in this document are the property of their respective owners and are mentioned for identification purposes only. Non-GAAP Financial Information This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non- GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), please see the section entitled "About Non-GAAP Financial Measures" and the accompanying table entitled "Reconciliation of Non-GAAP Measures to GAAP." Legal Notice Regarding Forward-Looking Statements This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the federal securities laws, including, without limitation, TIBCO's focus on expanding its customer base and deepening its presence and expertise in specific vertical markets and TIBCO's increased momentum across its business. Because these forward-looking statements involve risks and uncertainties, important factors could cause actual results to differ materially from such forward-looking statements. These factors include: fluctuations in the demand for integration software or economic conditions affecting the market for integration software; TIBCO's ability to develop and sell products for specific vertical markets; and TIBCO's ability to compete with other enterprise software providers. Additional information regarding potential risks is provided in TIBCO's filings with the SEC, including its most recent Annual Report on Form 10-K for the year ended November 30, 2005 and Quarterly Report on Form 10-Q for the quarter ended June 4, 2006. TIBCO assumes no obligation to update the forward-looking statements included in this release. TIBCO Software Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
September 3, November 30,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $124,932 $208,756
Short-term investments 396,409 268,882
Accounts receivable, net 93,341 121,159
Accounts receivable from related parties -- 1,243
Other current assets 34,290 18,111
Total current assets 648,972 618,151
Property and equipment, net 113,372 116,457
Goodwill 268,708 261,075
Acquired intangible assets, net 57,539 64,742
Long-term deferred income tax assets 28,957 27,440
Other assets 36,015 34,559
Total assets $1,153,563 $1,122,424
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $10,501 $9,656
Accrued liabilities 56,005 59,872
Accrued restructuring and excess
facilities costs 5,049 5,840
Deferred revenue 88,472 82,300
Long-term debt, current portion 1,868 1,798
Total current liabilities 161,895 159,466
Accrued excess facilities costs, less
current portion 20,372 24,149
Deferred revenue, less current portion 4,008 --
Deferred income tax liabilities, less
current portion 11,203 13,875
Long-term debt, less current portion 46,935 48,345
Other long-term liabilities 4,133 2,970
Total long-term liabilities 86,651 89,339
Total liabilities 248,546 248,805
Total stockholders' equity 905,017 873,619
Total liabilities and stockholders'
equity $1,153,563 $1,122,424
TIBCO Software Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except net income per share)
Three Months Ended Nine Months Ended
September August September August
3, 2006 28, 2005 3, 2006 28, 2005
Revenue:
License revenue:
Non-related parties $51,076 $44,365 $151,738 $121,097
Related parties -- -- -- 16,038
Total license revenue 51,076 44,365 151,738 137,135
Service and maintenance revenue:
Non-related parties 67,620 58,488 199,112 164,082
Related parties -- 1,404 -- 5,740
Reimbursable expenses 1,707 1,688 5,380 4,522
Total service and maintenance
revenue 69,327 61,580 204,492 174,344
Total revenue 120,403 105,945 356,230 311,479
Cost of revenue:
Cost of license 3,422 2,994 10,764 9,060
Cost of service and maintenance 30,048 28,040 87,519 80,947
Total cost of
revenue 33,470 31,034 98,283 90,007
Gross Profit 86,933 74,911 257,947 221,472
Operating expenses:
Research and development 20,957 18,073 64,908 51,529
Sales and marketing 40,121 34,392 118,184 103,690
General and administrative 10,908 8,814 31,658 27,269
Restructuring charge -- 162 -- 3,905
Amortization of acquired
intangible assets 2,364 2,317 7,091 6,515
Total operating expenses 74,350 63,758 221,841 192,908
Income from operations 12,583 11,153 36,106 28,564
Interest income 5,319 3,150 14,675 9,532
Interest expense (702) (670) (2,002) (2,040)
Other income, net 1,037 (1,142) 1,145 (383)
Income before income taxes 18,237 12,491 49,924 35,673
Provision for (benefit from) income
taxes 6,987 (1,358) 8,601 (10,295)
Net income $11,250 $13,849 $41,323 $45,968
Net income per share - Basic $0.05 $0.07 $0.20 $0.21
Shares used to compute net income
per share - Basic 207,616 212,308 209,323 213,870
Net income per share - Diluted $0.05 $0.06 $0.19 $0.21
Shares used to compute net income
per share - Diluted 214,498 219,775 218,150 223,747
Net income for the three and nine months ended September 3, 2006, include stock-based compensation of $3.5 million and $11.8 million, respectively, under the recently adopted SFAS 123(R). Total stock-based compensation was $0.1 million for the first nine months of fiscal year 2005 in accordance with APB 25. TIBCO Software Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Nine Months Ended
September 3, August 28,
2006 2005
Cash flows from operating activities:
Net income $41,323 $45,968
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation of property and equipment 11,625 11,394
Amortization of acquired intangible assets 11,083 11,143
Stock-based compensation 11,751 110
Realized (gain) loss on investments, net (833) 250
Deferred income tax (10,816) (20,096)
Tax benefits related to stock options 9,675 --
Excess tax benefits from stock-based
compensation (8,814) --
Other non-cash adjustments, net (16) --
Changes in assets and liabilities:
Accounts receivable 27,840 22,109
Accounts receivable from related parties 1,243 1,779
Other assets (3,039) 1,781
Accounts payable 914 2,748
Accrued liabilities, restructuring and
excess facilities costs (8,230) (13,055)
Deferred revenue 10,126 6,570
Net cash provided by operating activities 93,832 70,701
Cash flows from investing activities:
Purchases of short-term investments (341,079) (192,260)
Proceeds from sales and maturities of
short-term investments 214,514 173,502
Purchases of private equity investments (76) (311)
Proceeds from sales of private equity
investments 1,488 --
Cash used in acquisitions, net of
cash received -- (24,849)
Purchases of property and equipment (8,667) (11,753)
Restricted cash and short-term investments
pledged as security (1,309) (546)
Net cash used for investing activities (135,129) (56,217)
Cash flows from financing activities:
Proceeds from issuance of common stock 14,627 14,344
Repurchase of common stock (66,791) (33,424)
Excess tax benefits from stock-based
compensation 8,814 --
Principal payments on long term debt (1,340) (1,273)
Net cash used for financing activities (44,690) (20,353)
Effect of exchange rate changes on cash 2,163 (3,251)
Net change in cash and cash equivalents (83,824) (9,120)
Cash and cash equivalents at beginning
of period 208,756 180,849
Cash and cash equivalents at end of period $124,932 $171,729
About Non-GAAP Financial Measures
TIBCO provides non-GAAP measures for operating income, net income and net income per share data as supplemental information regarding TIBCO's business performance. TIBCO believes that these non-GAAP financial measures are useful to investors because they exclude non-operating charges. TIBCO's management excludes these non-operating charges when it internally evaluates the performance of TIBCO's business and makes operating decisions, including internal budgeting, performance measurement and the calculation of bonuses and discretionary compensation, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non- GAAP measures reflect the essential revenue generation activities of TIBCO. Accordingly, management excludes gains and losses on equity investments, costs related to formal restructuring plans, stock-based compensation related to employee stock options, the amortization of purchased intangible assets and charges for acquired in-process research and development, and the income tax effects of the foregoing, as well as adjustments for the impact of changes in the valuation allowance recorded against TIBCO's deferred tax assets when making operational decisions. TIBCO believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. First, it provides a consistent basis for investors to understand TIBCO's financial performance on a trended basis across historical periods, particularly given the adoption of SFAS 123(R) this fiscal year and the changes it has introduced for calculating stock-based compensation expenses relative to prior periods. Second, it allows investors to evaluate TIBCO's performance using the same methodology and information as that used by TIBCO's management. And, third, the non-GAAP measures facilitate comparison with other peer companies in our industry, which use similar non-GAAP financial measures to supplement their GAAP results. Non-GAAP measures are subject to material limitations as these measures are not in accordance with, or a substitute for, GAAP and thus TIBCO's definition may be different from similar non-GAAP measures used by other companies and/or analysts. However, TIBCO's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. In addition, some items such as restructuring charges that are excluded from non-GAAP net income and non-GAAP earnings per share can have a material impact on cash flows and stock compensation charges can have a significant impact on earnings. Management compensates for these limitations by evaluating the non-GAAP measure together with the most directly comparable GAAP measure. TIBCO has historically provided non-GAAP measures to the investment community as a supplement to its GAAP results, to enable investors to evaluate TIBCO's business performance in the way that management does. The non-GAAP adjustments, and the basis for excluding them, are outlined below: Restructuring Activities TIBCO has incurred restructuring expenses, included in its GAAP presentation of operating expense, primarily due to workforce related charges such as payments for severance and benefits and estimated costs of exiting and terminating facility lease commitments related to a formal restructuring plan. TIBCO excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share, when it evaluates the continuing business performance of TIBCO. TIBCO believes that these items are not consistently recurring and do not necessarily reflect expected future operating expense, nor does TIBCO believe that they provide a meaningful evaluation of current versus past business results or the expense levels required to support TIBCO's operating plan. Investment Activities TIBCO records gains or losses on its equity investments based on its pro- rata share of gains or the net losses of the investment. These gains or net losses are included in TIBCO's GAAP presentation of operating income, net income and net income per share. TIBCO's business is not to invest in third parties, and such investments do not constitute a material portion of TIBCO's assets. The timing and magnitude of gains and losses are unpredictable, as they are inherently based on the performance of the third party subject to a particular investment. TIBCO excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share, when it evaluates the continuing business performance of TIBCO. TIBCO believes that these items do not necessarily reflect expected future operating expense or income, nor does TIBCO believe that they provide a meaningful evaluation of current versus past business results or the expense levels required to support TIBCO's operating plan. Stock-based Compensation TIBCO has incurred stock-based compensation expense as determined under SFAS 123(R) for fiscal year 2006, and under APB 25 for earlier comparable periods in its GAAP financial results. TIBCO excludes this item for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. The exclusion of stock-based compensation from the non-GAAP measures is done to allow a consistent comparison of TIBCO's relative historical financial performance, since the method for accounting for stock-based compensation changed at the beginning of fiscal 2006 per TIBCO's adoption of SFAS 123(R). The nature of the stock-based compensation expense also makes it very difficult to estimate prospectively, since the expense will vary with changes in the stock price and market conditions at the time of new grants, varying valuation methodologies, subjective assumptions and different award types, making the comparison of current results with forward looking guidance potentially difficult for investors to interpret. The tax effects of stock-based compensation expenses may also vary significantly from period to period, without any change in underlying operational performance, thereby obscuring the underlying profitability of operations relative to prior periods (including prior periods following the adoption of SFAS 123(R)). Finally, TIBCO believes that non-GAAP measures of profitability that exclude stock- based compensation are widely used by analysts and investors in the software industry. Amortization of Intangible Assets TIBCO has incurred amortization of intangible assets, included in its GAAP financial statements, related to various acquisitions TIBCO has made. Management excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. TIBCO believes that eliminating this expense from its non-GAAP measures is useful to investors, because the amortization of intangible assets is inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of TIBCO's acquisition transactions, which also vary substantially in frequency from period to period. The following table is a reconciliation of non-GAAP measures to GAAP for the third quarter and first nine months of fiscal 2006 and 2005. TIBCO Software Inc.
Reconciliation of Non-GAAP Measures to GAAP
(unaudited)
(in thousands, except net income per share)
Three Months Ended
September 3, August 28,
2006 2005
Operating Net Operating Net
Income Income Income Income
Non-GAAP $19,764 $15,548 $15,135 $10,213
Amortization of intangible assets -
cost of revenue (1,331) (1,331) (1,434) (1,434)
Amortization of intangible assets -
operating expense (2,363) (2,363) (2,317) (2,317)
Stock compensation - cost of revenue (437) (437) (4) (4)
Stock compensation - R&D expense (742) (742) (3) (3)
Stock compensation - S&M expense (1,047) (1,047) (62) (62)
Stock compensation - G&A expense (1,261) (1,261) -- --
Restructuring charge -- -- (162) (162)
Realized gain on sales of private
equity investment 738 --
Income tax adjustment for non-GAAP (1) 2,145 7,618
GAAP $12,583 $11,250 11,153 $13,849
Non-GAAP net income per share -
Diluted $0.07 $0.05
GAAP net income per share - Diluted $0.05 $0.06
Shares used to compute net income per
share - Diluted 214,498 219,775
Nine Months Ended
September 3, August 28,
2006 2005
Operating Net Operating Net
Income Income Income Income
Non-GAAP $58,940 $45,373 $43,721 $31,514
Amortization of intangible assets -
cost of revenue (3,992) (3,992) (4,628) (4,628)
Amortization of intangible assets -
operating expense (7,091) (7,091) (6,515) (6,515)
Stock compensation - cost of revenue (1,614) (1,614) (13) (13)
Stock compensation - R&D expense (2,760) (2,760) (9) (9)
Stock compensation - S&M expense (3,418) (3,418) (86) (86)
Stock compensation - G&A expense (3,959) (3,959) (1) (1)
Restructuring charge -- -- (3,905) (3,905)
Realized gain on sales of private
equity investment 738 -- --
Income tax adjustment for non-GAAP (1) 18,046 29,611
GAAP $36,106 $41,323 $28,564 $45,968
Non-GAAP net income per share -
Diluted $0.21 $0.14
GAAP net income per share - Diluted $0.19 $0.21
Shares used to compute net income per
share - Diluted 218,150 223,747
(1) The estimated non-GAAP effective tax rate was 37% and 38% for 2006
and 2005, respectively, and has been used to adjust the provision for
income taxes for non-GAAP purposes.
This non-GAAP tax rate also adjusts for the impact of changes in the
valuation allowance recorded against our deferred tax asset.
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