DBTK Double-Take Software (MM)

Double-Take Software, Inc. (NASDAQ: DBTK), a leading provider of recovery solutions, today announced its financial results for the fourth quarter and year ended December 31, 2007. Results for the quarter and full year reflect approximately one week of operations from TimeSpring Software Corporation, Inc. (subsequently renamed Double-Take Canada), which was acquired in late December, 2007. �We are very pleased with our performance for both the fourth quarter and the whole of 2007. We met or exceeded our income and revenue growth targets each quarter throughout the year. During the year we released an important product, Double-Take 5.0: the industry's first Continuous Full-Server Protection and Recovery Technology which clearly differentiates us from our competition. Additionally, we closed the acquisition of TimeSpring which extends Double-Takes recovery approach beyond disaster recovery for catastrophic failures, to operational recovery, such as recovering from routine human errors, said Dean Goodermote, Chairman of the Board and CEO of Double-Take Software, Inc. �During 2007, we also successfully managed price increases averaging about 11.5% across our key markets. We chose the path of bundling additional features and raising prices rather than selling add-on licenses because it leads to higher maintenance revenue from the maintenance rates on higher-value products, and we believe it also gives existing customers more reason to renew their maintenance,� added Goodermote. Total revenue for the fourth quarter of 2007, which consists of software revenue, maintenance and professional services revenue, increased 23% to $23.5 million from $19.1 million in the fourth quarter of 2006. No revenue was recognized during the quarter from Double-Take Canada. Software revenue increased 16% to $14.2 million in the fourth quarter of 2007 from $12.2 million in the fourth quarter 2006. Maintenance and professional services revenue increased 36% to $9.3 million in the fourth quarter of 2007 from $6.9 million in the fourth quarter 2006. Operating expenses for the fourth quarter of 2007 increased 2% to $15.8 million from $15.5 million for the same period in 2006. Included in operating expenses in the fourth quarter of 2007 and 2006 are the following items: Stock option expense of $0.7 million in both the fourth quarter of 2007 and 2006. Amortization of intangible assets of $0.2 million for both the fourth quarter of 2007 and 2006. Additionally, the following items are included in general and administrative expense for the fourth quarter of 2006 only: Stock option expense of $0.3 million resulting from the vesting of stock options for the former Chief Executive Officer. Expense of $3.2 million resulting from the issuance of 269,845 shares to our Chief Executive Officer upon the completion of our Initial Public Offering. Expense reduction of $1.2 million resulting from cash received from our former Chief Operating Officer in December 2006 as a result of the settlement of a dispute. Expenses during the fourth quarter of 2007 from Double-Take Canada were approximately $0.1 million. Income from operations was $5.5 million in the fourth quarter of 2007 compared to $1.7 million in the fourth quarter of 2006. The Company recorded an income tax benefit of $0.3 million in the fourth quarter of 2007 compared to tax expense of $0.1 million in the fourth quarter of 2006. During the fourth quarter, the Company reversed the valuation allowance on approximately $2.4 million of deferred tax assets which related to net operating loss carryforwards available to be utilized in 2009. The reversal of the valuation allowance, which increased diluted EPS by $0.10 per share for the fourth quarter, was recorded during the fourth quarter because the Company determined that it would more likely than not generate sufficient profits in 2009 to realize the benefits associated with the net operating loss carryforwards. Net income attributable to common stockholders totaled $6.3 million, or $0.27 per diluted share including $0.10 per diluted share related to the reversal of the valuation allowance on deferred tax assets, in the fourth quarter of 2007 compared with net income attributable to common stockholders of $0.5 million, or $0.07 per diluted share, in the fourth quarter of 2006. Income from operations on an adjusted, non-GAAP basis in the fourth quarter of 2007 was $6.2 million compared with $6.0 million in fourth quarter of 2006. Adjusted, non-GAAP net income in the fourth quarter of 2007 was $6.8 million, compared with $6.0 million before accretion and dividends on preferred stock in the fourth quarter of 2006. Adjusted, non-GAAP net income per diluted share was $0.29 in the fourth quarter of 2007 and includes the effect of the reversal of the valuation allowance on deferred tax assets of $0.10 per diluted share. The company calculates these adjusted non-GAAP income measures by excluding the effects in the respective periods of the non-cash SFAS 123R and other stock-based compensation expenses described as components of Operating Expenses above, net of the related income taxes. An explanation of these non-GAAP financial measures and a reconciliation of these measures to GAAP results are provided in the tables included in this press release, and these measures should only be viewed together with the reconciliation and the further explanation given under �Non-GAAP Financial Measures� below. For the full year, total revenue increased 36% to $82.8 million for the year ended December 31, 2007, from $60.8 million for the year ended December 31, 2006. Software revenue for the full year increased 28% to $49.2 million for the year ended December 31, 2007, from $38.4 million for the year ended December 31, 2006. Maintenance and Professional Services revenue increased 50% to $33.6 million for the year ended December 31, 2007, from $22.4 million for the year ended December 31, 2006. Operating expenses for 2007 increased 25% to $58.0 million from $46.3 million in 2006. Included in operating expenses in 2007 and 2006 are the following items: Stock option expense of $2.6 million in 2007 compared to $1.0 million in 2006. Amortization of intangible assets of $0.7 million in 2007 compared to $0.4 million in 2006. Included in general and administrative expense for 2006 only are the following items: Stock option expense of $1.2 million resulting from the vesting of stock options for the former Chief Executive Officer. Expense of $3.2 million resulting from the issuance of 269,845 shares to our Chief Executive Officer upon the completion of our Initial Public Offering. Expense reduction of $1.2 million resulting from cash received from our former Chief Operating Officer in December 2006 as a result of the settlement of a dispute. Income from operations was $16.6 million for the year ended December 31, 2007 compared with $7.0 million for the same period in 2006. The Company recorded an income tax benefit of $0.8 million in 2007 compared to tax expense of $0.5 million 2006. During 2007, the Company reversed the valuation allowance on approximately $8.1 million of deferred tax assets which related to net operating loss carryforwards available to be utilized from 2007 through 2009. The first portion of the reversal of the valuation allowance of approximately $5.7 million or $0.25 per diluted share was recorded in the second quarter of 2007 when the Company determined that it would more likely than not generate sufficient profits through 2008 to utilize the benefits associated with its net operating loss carryforwards. The second portion of approximately $2.4 million or $0.10 per share was recorded during the fourth quarter when the Company determined that it would more likely than not generate sufficient profits through 2009 to realize the benefits associated with the net operating loss carryforwards. Net income attributable to common stockholders was $20.1 million, or $0.87 per diluted share including the $0.35 per diluted share related to the reversal of the valuation allowance on deferred tax assets, versus a net loss of ($0.6) million, or ($0.13) per diluted share for the year ended December 31, 2006. On an adjusted, non-GAAP basis, income from operations was $19.2 million for the year ended December 31, 2007 compared with $12.4 million for the year ended December 31, 2006. Adjusted, non-GAAP net income was $22.0 million versus $12.2 million before accretion and dividends on preferred stock for the year ended December 31, 2006. The company calculates these adjusted non-GAAP income measures by excluding the effects in the respective periods of the non-cash SFAS 123R and other stock-based compensation expenses. See �Non-GAAP Financial Measures� below. Cash and short term investments at December 31, 2007 equaled $64.7 million. The Company is providing its initial guidance for 2008 as follows: The Company has historically experienced some seasonality in its business with the first quarter being the lowest in terms of software revenue and the fourth quarter being the strongest. The Company expects revenue for the first quarter of 2008 to be in the range of $21.9 million to $22.5 million. Operating income is expected to be $3.1 million to $3.3 million and adjusted, non-GAAP income per share for the first quarter of 2008 in the range of $0.10 to $0.11 excluding the impact of stock-based compensation charges and using an effective income tax rate of approximately 38%. Weighted average diluted shares are assumed to be approximately 23.4 to 23.5 million shares. The Company expects full-year 2008 revenue to be in the range of $100.6 million to $103.0 million. Operating income is expected to be $20.6 million to $21.6 million and adjusted, non-GAAP income per share for full year 2008 in the range of $0.63 to $0.65 excluding the impact of stock based compensation charges and using an effective tax rate of approximately 38% and weighted average diluted shares assumed to be approximately 23.6 to 23.7 million. See �Non-GAAP Financial Measures� and �Important Note to Investors� below. Non-GAAP Financial Measures Double-Take Software, Inc. has provided in this press release adjusted financial information that has not been prepared in accordance with generally accepted accounting principles, or GAAP. These non-GAAP financial measures are identified above as �adjusted, non-GAAP� measures. Double-Take Software, Inc. uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to, but not as a substitute for, GAAP measures, in evaluating the Company�s operational performance. Double-Take Software, Inc. believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating operating results and trends, and in comparing its financial results with other companies in Double-Take Software, Inc.�s industry, many of which present similar non-GAAP financial measures to investors. The historical non-GAAP financial measures presented above exclude the following items required to be included by GAAP: non-cash stock-based compensation charges, and non-cash charges for stock issued to an executive officer. The Company�s expectations for adjusted, non-GAAP income and income per share for the first quarter of 2008 and full-year 2008 exclude the impact of stock-based compensation charges, the amount and significance of which, because of the information and assumptions underlying those charges, cannot readily be determined at this time. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of historic non-GAAP financial measures presented above to GAAP results has been provided in the financial statement tables included in this press release. Conference Call Information Double-Take Software, Inc. will discuss these financial results in a conference call at 4:30 p.m. EST, today. The public is invited to listen to a live web cast of Double-Take Software, Inc.�s conference call on the investor relations section of the company website at www.doubletake.com. For those who are unable to participate in the live conference call, an audio replay will be available until February 8, 2008 at 11:59 p.m. EST. To access the audio replay, dial 888-203-1112 or 719-457-0820 and enter confirmation code 6194517. A web cast replay of the call will be available on the investor relations section at www.doubletake.com approximately two hours after the conclusion of the call and will remain available for 90 days. About Double-Take� Software Headquartered in Southborough, Massachusetts, Double-Take� Software (Nasdaq: DBTK) is a leading provider of affordable software for recoverability, including continuous data replication, application availability and system state protection. Double-Take Software products and services enable customers to protect and recover business-critical data and applications such as Microsoft Exchange, SQL, and SharePoint in both physical and virtual environments. With its unparalleled partner programs, technical support, and professional services, Double-Take Software is the solution of choice for more than ten thousand customers worldwide, from SMEs to the Fortune 500. Information about Double-Take Software�s products and services can be found at www.doubletake.com. This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases that say Double-Take or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements in this release that describe the Company's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All forward-looking statements are inherently speculative, and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in forward-looking statements. These risks and uncertainties include those set forth from time to time in our filings with the Securities and Exchange Commission. We are under no obligation, and do not undertake any duty, to update these forward looking statements at any time. (C) Double-Take Software. All rights reserved. Double-Take, GeoCluster, and NSI are registered trademarks of Double-Take Software, Inc. Balance, Double-Take for Virtual Systems and Double-Take ShadowCaster are trademarks of Double-Take Software, Inc. Microsoft, Windows, and the Windows logo are trademarks or registered trademarks of Microsoft Corporation in the United States and/or other countries. Double-Take Software, Inc. Consolidated Balance Sheets (in thousands) (Unaudited) � � � � December 31, 2007 2006 � ASSETS � Current assets: Cash and cash equivalents $ � 25,748 $ � 55,170 Short term investments 38,977 - Accounts receivable, net 18,171 12,676 Inventory - 14 Prepaid expenses and other current assets 5,019 2,210 Deferred tax assets � � 3,184 � � - Total current assets 91,099 70,070 � Property and equipment, net 4,184 3,000 Customer relationships, net 1,540 1,993 Marketing relationships, net 1,593 1,842 Technology related intangibles, net 1,928 - Goodwill 11,408 - Other assets 149 121 Long-term deferred tax assets � � 2,705 � � - Total assets $ � 114,606 $ � 77,026 � LIABILITIES AND STOCKHOLDERS' EQUITY � Current liabilities: Accounts payable 1,983 2,217 Accrued expenses 7,396 6,845 Accrued purchase price payable - 1,425 Other liabilities 751 135 Deferred revenue � � 24,162 � � 16,774 Total current liabilities 34,292 27,396 � Long-term deferred revenue, less current portion 4,485 3,977 Long-term deferred rent, less current portion 272 406 Long-term capital lease obligations, less current portion 13 17 � Stockholders' equity 75,544 45,230 � � Total liabilities and stockholders' equity $ � 114,606 $ � 77,026 Double-Take Software, Inc. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) � � � � � � � Three Months Ended Twelve Months Ended December 31, December 31, � � 2007 � � � � 2006 � � � � 2007 � � � � 2006 � � Revenue: Software licenses $ � 14,176 � $ � 12,178 � $ � 49,169 � $ � 38,418 � Maintenance and professional services � � 9,348 � � � � 6,875 � � � � 33,599 � � � � 22,422 � � Total revenue 23,524 19,053 82,768 60,840 � Cost of revenue: Software licenses 195 26 411 1,355 Maintenance and professional services � � 2,035 � � � � 1,767 � � � � � 7,827 � � � � 6,193 � � Total cost of revenue 2,230 1,793 8,238 7,548 � � � � Gross profit 21,294 17,260 74,530 53,292 � Operating expenses: Sales and marketing 8,189 6,620 28,872 22,211 Research and development 3,140 2,930 11,896 10,679 General and administrative 3,856 5,453 14,863 11,824 Depreciation and amortization � � 639 � � � � 519 � � � � 2,346 � � � � 1,613 � � Total operating expenses 15,824 15,522 57,977 46,327 � � � � Income from operations 5,470 1,738 16,553 6,965 � Other income, net 612 61 2,736 284 � � � � Income before income taxes 6,082 1,799 19,289 7,249 � Income tax expense (benefit) (258 ) 91 (789 ) 494 � � � � Net income 6,340 1,708 20,078 6,755 � Less: accretion on preferred redeemable shares - (496 ) - (4,496 ) Less: dividends on preferred redeemable shares - (667 ) - (2,830 ) � � � � Net income (loss) attributable to common stockholders $ � 6,340 � � $ � 545 � � $ � 20,078 � � � � ($571 � ) � Net income (loss) attributable to common stockholders per share: Basic $ � 0.29 � � $ � 0.09 � � $ � 0.94 � � � � ($0.13 � ) Diluted $ � 0.27 � � $ � 0.07 � � $ � 0.87 � � � � ($0.13 � ) � Weighted-average number of shares used in per share amounts: Basic � � 21,865 � � � � 5,826 � � � � 21,332 � � � � 4,306 � � Diluted � � 23,231 � � � � 8,207 � � � � 23,027 � � � � 4,306 � � Double-Take Software, Inc. � � Consolidated Statements of Cash Flows (In thousands, except per share data) (Unaudited) � Year ended December 31, � � 2007 � � � � 2006 � � � Cash flows from operating activities: Net Income $ � 20,078 � $ � 6,755 � Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 1,636 1,189 Amortization of intangible assets 710 424 Provision for doubtful accounts 19 200 Stock option expense 2,621 2,215 Issuance of restricted shares - 3,241 Issuance of Series C Preferred shares to management - 103 Deferred income taxes (5,889 ) - � Changes in: Accounts receivable (4,840 ) (1,939 ) Prepaid expenses and other assets (1,128 ) (1,684 ) Inventories 14 328 Other assets (20 ) (2 ) Accounts payable and accrued expenses (349 ) (2,159 ) Other liabilities 582 (887 ) Deferred revenue � � 7,079 � � � � 5,867 � � Net cash provided by operating activities $ � 20,513 � � $ � 13,651 � � � Cash flows from investing activities: Purchase of property and equipment (2,340 ) (2,050 ) Purchase of short term investments (65,179 ) - Sales of short term investments 26,445 - Acquisition, net of cash acquired � � (16,232 � ) � � (2,073 � ) Cash flows used in investing activities (57,306 ) (4,123 ) � Cash flows from financing activities: Proceeds from public offering, net of expenses 1,125 48,319 Proceeds from exercise of stock options 1,590 453 Return of capital to Series B shareholders - (10,225 ) Repurchase of common stock from CEO - (1,343 ) Excess tax benefits from stock based compensation 4,895 - Payments on capital lease obligation � � (17 � ) � � (11 � ) Net cash provided by (used in) financing activities 7,593 37,193 � Effect of exchange rate changes on cash and cash equivalents (222 ) 108 Net increase (decrease) in cash and cash equivalents (29,200 ) 46,721 Cash and cash equivalents - beginning of period � � 55,170 � � � � 8,341 � � Cash and cash equivalents - end of period $ � 25,748 � � $ � 55,170 � � Double-Take Software, Inc. � Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share data) (Unaudited) � � � � � � Three Months Ended Twelve Months Ended December 31, December 31, � � 2007 � � 2006 � � 2007 � � 2006 � Non-GAAP financial measures and reconciliation: � GAAP income from operations $ � 5,470 $ � 1,738 $ � 16,553 $ � 6,965 Add: noncash stock option expense (1) 726 701 2,621 1,018 Add: noncash stock option expense for former CEO (2) - 329 - 1,198 Add: noncash stock granted to CEO (3) � � - � � 3,241 � � - � � 3,241 Non-GAAP income from operations $ � 6,196 $ � 6,009 $ � 19,174 $ � 12,422 � � GAAP net income prior to accretion and dividends on convertible preferred shares $ 6,340 $ 1,708 $ 20,078 $ 6,755 Add: noncash stock option expense, net of income taxes (1) 465 701 1,896 1,018 Add: noncash stock option expense for former CEO (2) - 329 - 1,198 Add: noncash stock granted to CEO (3) � � - � � 3,241 � � - � � 3,241 Non-GAAP net income prior to accretion and dividends on convertible preferred shares in 2006 $ � 6,805 $ � 5,979 $ � 21,974 $ � 12,212 � Non-GAAP income per share (4): Basic $ � 0.31 $ � 1.03 Diluted $ � 0.29 $ � 0.95 � Weighted-average number of shares used in per share amounts: Basic � � 21,865 � � 21,332 Diluted � � 23,231 � � 23,027 � � Footnotes to Adjustments � (1) Represents noncash stock compensation charge associated with stock option grants as follows: Three Months Ended Twelve Months Ended December 31, December 31, � � 2007 � � 2006 � � 2007 � � 2006 Stock option expense by line item: Cost of maintenance and professional services $ 61 $ 68 $ 190 $ 118 Sales and marketing 143 137 451 242 Research and development 97 152 280 267 General and administrative � � 425 � � 344 � � 1,700 � � 391 $ � 726 $ � 701 $ � 2,621 $ � 1,018 � � (2) Represents noncash stock-based compensation charges associated with vesting options for the former CEO. � (3) Represents noncash stock-based compensation charge associated with the grant of common shares to the CEO upon consummation of the initial public offering. � (4) Presentation of non-GAAP net loss per share prior to accretion and dividends on preferred shares for 2006 has not been made because the effect would be anti-dilutive. For the three months ended December 31, 2006, non-GAAP income per share excluding stock based compensation but including accretion and dividends on preferred shares would have been $0.59 per share. For the year ended December 31, 2006, non-GAAP income per share excluding stock based compensation but including accretion and dividends of preferred shares would have been $1.13 per share.