Pervasive Software® Inc. (NASDAQ:PVSW), a global leader in
cloud-based and on-premises data innovation, today announced
financial results for the second quarter ending December 31,
2010.
For the second quarter ended December 31, 2010:
- Revenue was $11.7 million, compared to
revenue expectations for the quarter in the range of $10.8 million
to $11.8 million communicated on October 19, 2010, and compared to
$11.6 million for the second quarter of last fiscal year.
- Net income was $0.4 million, or $0.03
diluted earnings per share, compared to diluted earnings per share
expectations for the quarter in the range of $0.00 to $0.03
communicated on October 19, 2010, and compared to net income of
$1.0 million, or $0.06 diluted earnings per share, for the second
quarter of last fiscal year.
- On a non-GAAP basis, as described
below, Pervasive realized net income of $0.8 million, or $0.05
diluted earnings per share, compared to diluted earnings per share
expectations for the quarter in the range of $0.02 to $0.05
communicated on October 19, 2010, and compared to net income of
$1.3 million, or $0.07 diluted earnings per share, in the second
quarter of last fiscal year. Non-GAAP results exclude amortization
of purchased intangibles and stock-based compensation expense, and
assume a non-GAAP effective tax rate of 34%.
Pervasive continued to generate positive cash flow from
operations with $1.5 million in the second quarter of fiscal 2011,
ending the quarter with approximately $37.2 million in cash and
marketable securities. Pervasive acquired approximately 57,000
shares of Pervasive common stock on the open market at a total cost
of approximately $294,000, or approximately $5.12 weighted average
price per share, during the quarter ended December 31, 2010. The
Company has approximately $5.4 million authorized repurchase funds
remaining under its $10.0 million stock repurchase program
announced in July 2010. Depending on market conditions and other
factors, such purchases may be commenced or suspended at any time
without prior notice. Issued and outstanding shares of common stock
as of December 31, 2010 totaled approximately 16.0 million.
“Our integration products team again delivered record revenue
for the quarter, as they have done for four of the last five
quarters, as an increasing number of partners and customers
recognize the agility, power and extensibility of our data
integration and data quality offerings,” said John Farr, president
and CEO, Pervasive Software. “We also continued to see channel
uptake of our Pervasive PSQLTM v11 database, and growing adoption
of our cloud-based offerings and Pervasive DataRushTM. Strong
execution across multiple product teams contributed to a healthy
second fiscal quarter for Pervasive.”
Business Outlook
Pervasive expects revenue for the third fiscal quarter ending
March 31, 2011 to be in the range of $11.0 million to $12.0 million
and GAAP-basis diluted earnings per share of $0.00 to $0.03,
compared to $11.7 million revenue and $0.06 diluted earnings per
share for the March quarter of the previous fiscal year. GAAP-basis
profitability is expected to include amortization of purchased
intangibles and stock-based compensation expense representing
approximately $0.6 million, pre-tax, in the third quarter of fiscal
year 2011. The company expects non-GAAP adjustments to result in
non-GAAP diluted and fully taxed earnings per share of
approximately $0.02 to $0.05 in the March quarter, compared to
$0.07 non-GAAP diluted and fully taxed earnings per share for the
March quarter of the previous fiscal year.
Regularly Scheduled Earnings Release Conference Call –
January 25, 2011
Pervasive will provide the full financial results for its second
quarter ending December 31, 2010 in its regularly scheduled
earnings release conference call on January 25, 2011 at 5:00 P.M.
Eastern time. The dial-in numbers for the call are 877-808-2426
(toll-free) or 973-200-3975 (international). The conference name is
"Pervasive Software Inc." The conference call may also be accessed
live over the Web at http://investor.pervasive.com/events.cfm.
Check the Web site before the call for login information. Replay
will be available 8:00 P.M. Eastern Tuesday, January 25, to
midnight, Tuesday, February 1, by dialing 800-642-1687 (toll-free)
or 706-645-9291 (international), and selecting Conference ID
32829035. Additionally, the Webcast will be archived on Pervasive's
website at http://investor.pervasive.com/events.cfm.
About Pervasive Software
Pervasive is a global data innovation leader, delivering
software to manage, integrate and analyze data, in the cloud or
on-premises, throughout the entire data lifecycle. Pervasive
products deliver value to tens of thousands of customers worldwide,
often embedded within partners’ software, with breakthrough
performance, flexibility, reliability and return on investment. For
additional information, go to www.pervasive.com.
About Non-GAAP Financial Information
This press release includes 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 tables
entitled “Reconciliation of GAAP Measures to Non-GAAP” and
"Reconciliation of Forward-Looking Guidance."
Cautionary Statement
This document contains forward-looking statements that involve
risks and uncertainties concerning the company, including the
company's expected performance for the third quarter ending March
31, 2011, and the company's strategy and profitability going
forward. Actual events or results may differ materially from those
described in this document due to a number of risks and
uncertainties. These risks and uncertainties include, among others,
the company's ability to attract and retain existing and/or new
customers; the company's ability to issue new products or releases
of solutions that meet customers' needs or achieve acceptance by
the company's customers; changes to current accounting policies
which may have a significant, adverse impact upon the company's
financial results; the introduction of new products by competitors
or the entry of new competitors; the company's ability to preserve
its key strategic relationships; the company's ability to hire and
retain key employees; and economic and political conditions in the
U.S. and abroad. All of these factors may result in significant
fluctuations in the company's quarterly operating results and/or
its ability to sustain or increase its profitability. Additional
information regarding these and other factors can be found in
Pervasive's reports filed with the Securities and Exchange
Commission, including its Form 10-Q for the fiscal quarter ended
September 30, 2010. Pervasive is not obligated to update these
forward-looking statements to reflect events or circumstances after
the date of this document.
All Pervasive brand and product names are trademarks or
registered trademarks of Pervasive Software Inc. in the United
States and other countries. All other marks are the property of
their respective owners.
Pervasive Software Inc. Condensed Consolidated Balance
Sheets (in thousands) December
31, June 30, 2010 2010 (Unaudited)
ASSETS Current assets: Cash and cash equivalents $ 8,278 $
7,086 Marketable securities 28,944 33,267 Trade accounts
receivable, net 8,580 8,051 Deferred tax assets, net 874 650
Prepaid expenses and other current assets 1,030 1,443
Total current assets 47,706 50,497 Property and equipment,
net 1,278 1,333 Purchased intangibles 1,877 2,140 Goodwill
38,508 38,508 Deferred tax assets, net 1,594 1,301 Other assets
599 786 Total assets $ 91,562 $ 94,565
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable and accrued liabilities $ 4,921 $
4,308 Deferred revenue 7,645 7,266 Total current
liabilities 12,566 11,574 Stockholders' equity 78,996
82,991 Total liabilities and stockholders' equity $
91,562 $ 94,565
Pervasive Software Inc. Condensed
Consolidated Statements of Operations (in thousands, except
per share data) (Unaudited)
Three months ended Six months ended December
31 December 31 2010 2009
2010 2009 Revenues: Product licenses $ 7,119 $
7,393 $ 13,773 $ 15,728 Services and other 4,538
4,215 8,875 8,080 Total
revenue 11,657 11,608 22,648 23,808 Costs and expenses: Cost
of product licenses 354 308 659 557 Cost of services and other
1,242 1,209 2,444 2,382 Sales and marketing 5,316 4,574 9,919 9,276
Research and development 2,845 2,974 5,704 5,918 General and
administrative 1,318 1,162 2,584
2,555 Total costs and expenses 11,075
10,227 21,310 20,688
Operating income 582 1,381 1,338 3,120
Interest and other income, net 14 47 24 149 Income tax provision
(174 ) (450 ) (437 ) (1,028 ) Net
income $ 422 $ 978 $ 925 $ 2,241
Diluted earnings per share $ 0.03 $ 0.06 $
0.06 $ 0.13 Shares used in computing
diluted earnings per share 15,894 17,533 16,024 17,654
Pervasive
Software Inc. Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
Three months ended Six months ended
December 31 December 31 2010
2009 2010 2009 Cash from
operations Net income $ 422 $ 978 $ 925 $ 2,241 Adjustments to
reconcile net income to net cash provided by operations:
Depreciation & amortization 336 336 671 630 Non-cash stock
compensation expense 431 435 866 870 Non-cash changes in deferred
tax assets (791 ) 37 (517 ) (186 ) Bad debt expense and other
non-cash 49 - 156 - Changes in current assets and liabilities:
Trade accounts receivable (570 ) 1,801 (678 ) 286 Prepaid expenses
and other current assets 566 (146 ) 579 101 Accounts payable and
accrued liabilities 1,193 (1,412 ) 644 (1,118 ) Deferred revenue
(93 ) 181 376 464
Net cash provided by operations 1,543 2,210 3,022 3,288
Cash from investing activities Purchase of property and
equipment (196 ) (83 ) (345 ) (170 ) Sales and purchases of
marketable securities, net (2,953 ) (2,449 ) 4,331 (7,193 )
Purchased intangibles - - - (2,611 ) Decrease in other assets
8 10 18 20
Net cash provided by (used in) investing activities (3,141 ) (2,522
) 4,004 (9,954 )
Cash from financing activities
Proceeds from exercise of stock options 236 174 407 191 Acquisition
of treasury stock (308 ) (997 ) (6,286 )
(2,317 ) Net cash used in financing activities (72 ) (823 )
(5,879 ) (2,126 ) Effect of exchange rate on cash and cash
equivalents (28 ) (19 ) 45 (3 )
Increase (decrease) in cash and cash equivalents (1,698 ) (1,154 )
1,192 (8,795 ) Cash and cash equivalents at beginning of period
9,976 10,388 7,086
18,029 Cash and cash equivalents at end of period $ 8,278
$ 9,234 $ 8,278 $ 9,234
About Non-GAAP Financial Measures
The Company provides non-GAAP measures for net income and net
income per share data as supplemental information regarding the
Company's core business operational performance. The Company
believes that these non-GAAP financial measures are useful to
investors because they exclude certain non-operating or
non-recurring charges. The Company's management excludes these
non-operating or non-recurring charges when it internally evaluates
the performance of the Company's business and makes operating
decisions, including internal budgeting, performance measurement
and the calculation of bonuses and discretionary compensation. In
addition, these non-GAAP measures more closely reflect the
essential revenue generation activities of the Company and the
direct operating expenses (resulting in or from cash expenditures)
needed to perform these revenue generating activities. Accordingly,
management excludes the amortization of purchased intangible assets
related to acquisitions and stock-based compensation related to
employee stock options.
The Company believes that providing the non-GAAP measures that
management uses is useful to investors for two primary reasons.
First, it provides a consistent basis for investors to understand
the Company's financial performance on a trended basis across many
historical periods, particularly given the adoption of ASC 718 at
the beginning of fiscal year 2006 and the changes it has introduced
for calculating stock-based compensation expenses relative to prior
periods. And second, it allows investors to evaluate the Company's
performance using the same methodology and information as that used
by the Company's management.
Non-GAAP measures are subject to material limitations as these
measures are not in accordance with, or a substitute for, US GAAP
and therefore the Company's definition or interpretation may be
different from similar non-GAAP measures used by other companies
and independent financial analysts. However, the Company's
management compensates for these limitations by providing the
relevant and detailed disclosure of the items excluded in the
calculation of non-GAAP net income and non-GAAP diluted earnings
per share, which should be supplementally considered when
evaluating the Company's results. In addition, items such as
amortization of purchased intangibles, stock compensation charges
and significant and non-recurring items that are excluded from
non-GAAP net income and non-GAAP diluted earnings per share 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. The Company has
historically provided non-GAAP measures to the investment community
as a supplement to its GAAP results, to enable investors to
evaluate the Company's core operating performance the way
management does. The non-GAAP adjustments, and the basis for
excluding them, are outlined below:
Amortization of Purchased Intangibles
The Company has recorded amortization of acquired intellectual
property intangibles, included in its GAAP financial statements,
related to the acquisitions of Data Junction and assets of
ChanneLinx, Inc. Management excludes these items for purposes of
calculating non-GAAP net income and non-GAAP diluted earnings per
share. The Company believes that eliminating this expense in
determining its non-GAAP measures is useful to investors because
doing so provides a consistent basis for investors to understand
the Company's financial performance on a trended basis across many
historical periods, it allows investors to evaluate the Company's
performance using the same methodology and information as that used
by the Company's management, and it allows a comparison with other
peer companies in the software industry, many of whom use similar
non-GAAP financial measures to supplement their GAAP results.
Finally, the Company believes that non-GAAP measures of
profitability that exclude amortization of acquired intellectual
property intangibles are widely used by analysts and investors in
the software industry.
Stock-based Compensation Expense
The Company has incurred stock-based compensation expense as
determined under ASC 718 Compensation - Stock Compensation for the
quarters ending on or after September 30, 2005, and under APB 25
for earlier comparable periods in its GAAP financial results. Since
stock-based compensation is a non-cash charge, the Company excludes
this item for the purposes of calculating non-GAAP net income and
non-GAAP diluted earnings per share. In addition, the exclusion of
stock-based compensation from the non-GAAP measures is done to
allow a consistent basis for investors to understand the Company's
financial performance on a trended basis across many historical
periods, allow investors to evaluate the Company's performance
using the same methodology and information as that used by the
Company's management, and allow a comparison with other peer
companies in the software industry, many of whom use similar
non-GAAP financial measures to supplement their GAAP results. The
very 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 core
revenue-generating operations relative to prior periods (including
prior periods following the adoption of ASC 718). Finally, the
Company believes that non-GAAP measures of profitability that
exclude stock-based compensation are widely used by analysts and
investors in the software industry.
Income Tax Adjustment
Income taxes represent a complex element of any company's income
statement and effective tax rates can vary widely from year to year
and from company to company, especially in periods in which
adjustments are made to a company's valuation reserve for deferred
tax assets. The Company uses a statutory tax rate of 34% to reflect
income tax adjustments in presentation of its non-GAAP net income
and non-GAAP diluted earnings per share. Utilization of a statutory
tax rate for presentation of the non-GAAP measures is done to allow
a consistent basis for investors to understand the Company's
financial performance on a trended basis across many historical
periods, allow investors to evaluate the Company's performance
using the same methodology and information as that used by the
Company's management, and allow a comparison with other peer
companies in the software industry, many of whom use similar
non-GAAP financial measures to supplement their GAAP results.
Finally, the Company believes that non-GAAP measures of
profitability that are based on more standardized statutory tax
rates are widely used by analysts and investors in the software
industry.
Pervasive Software Inc. Reconciliation of GAAP Measures
to Non-GAAP (in thousands, except per share data)
(Unaudited) Three months
ended Six months ended December 31,
December 31, 2010 2009 2010 2009
Net Income Net Income Net Income Net
Income GAAP $ 422 $ 978 $ 925 $ 2,241
Amortization of intangible assets - cost
of product licenses
130 130 260 217
Stock-based compensation - cost of
services and other
11 11 22 23
Stock-based compensation - sales and
marketing expense
132 135 266 263
Stock-based compensation - research and
development expense
61 58 127 113
Stock-based compensation - general and
administrative expense
227 231 451 472 Income tax adjustment for non-GAAP (219 ) (228 )
(408 ) (455 ) Non-GAAP $ 764 $
1,315 $ 1,643 $ 2,874 GAAP net income
per share - diluted $ 0.03 $ 0.06 $ 0.06 $ 0.13 Non-GAAP net
income per share - diluted $ 0.05 $ 0.07 $ 0.10 $ 0.16
Shares used to compute GAAP net income per
share - diluted
15,894 17,533 16,024 17,654
Shares used to compute non-GAAP net income
per share - diluted
16,430 18,285 16,614 18,398
Pervasive Software Inc.
Reconciliation of Forward-Looking Guidance
(Unaudited) Diluted
Earnings per Share Range Three months ended
March 31, 2011 GAAP expectation $ - $ 0.03
Adjustment to exclude amortization of purchased intangibles * *
Adjustment to exclude stock-based compensation expense $
0.02 $ 0.02 Adjustment to tax non-GAAP results at a
consistent 34% rate * * Non-GAAP expectation $ 0.02 $
0.05
* rounds to
zero
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