Pervasive Software® Inc. (NASDAQ: PVSW), a global leader in
cloud-based and on-premises data innovation, today announced
financial results for the third quarter ending March 31, 2011.
For the third quarter ended March 31, 2011:
- Revenue was $12.1 million, compared to
revenue expectations for the quarter in the range of $11.0 million
to $12.0 million communicated on January 25, 2011, and compared to
$11.7 million for the third quarter of last fiscal year.
- Net income was $0.8 million, or $0.05
diluted earnings per share, including $0.01 per share attributable
to a favorable income tax adjustment. This is compared to diluted
earnings per share expectations for the quarter in the range of
$0.00 to $0.03 communicated on January 25, 2011, and compared to
net income of $1.0 million, or $0.06 diluted earnings per share,
for the third quarter of last fiscal year.
- On a non-GAAP basis, as described
below, Pervasive realized net income of $0.9 million, or $0.06
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 January 25, 2011, and compared to net income of
$1.3 million, or $0.07 diluted earnings per share, in the third
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 $0.8 million in the third quarter of fiscal 2011,
ending the quarter with approximately $37.5 million in cash and
marketable securities. Pervasive acquired approximately 98,000
shares of Pervasive common stock on the open market at a total cost
of approximately $535,000, or approximately $5.42 weighted average
price per share, during the quarter ended March 31, 2011. The
Company has approximately $4.9 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 March 31, 2011 totaled approximately 16.1 million.
“Our integration products team delivered a record bookings
result for the quarter, resulting in record deferred revenue on our
balance sheet, as we maintain momentum from recent quarters,” said
John Farr, president and CEO, Pervasive Software. “We also
continued to see channel uptake of our Pervasive PSQL™ v11
database, and growing excitement around our cloud-based offerings
and Pervasive DataRush™.”
Business Outlook
Pervasive expects revenue for the fourth fiscal quarter ending
June 30, 2011 to be in the range of $11.2 million to $12.2 million
and GAAP-basis diluted earnings per share of $0.01 to $0.04,
compared to $11.7 million revenue and $0.05 diluted earnings per
share for the June 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 fourth 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 $0.03 to $0.06 in the June quarter, compared to $0.07
non-GAAP diluted and fully taxed earnings per share for the June
quarter of the previous fiscal year.
Regularly Scheduled Earnings Release Conference Call – April
19, 2011
Pervasive will provide the full financial results for its third
quarter ending March 31, 2011 in its regularly scheduled earnings
release conference call on April 19, 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, April 19, to midnight,
Tuesday, April 26, by dialing 800-642-1687 (toll-free) or
706-645-9291 (international), and selecting Conference ID 54392281.
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 fourth quarter ending June
30, 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
December 31, 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) March
31, June 30, 2011 2010 (Unaudited)
ASSETS Current assets: Cash and cash equivalents $ 6,775 $
7,086 Marketable securities 30,696 33,267 Trade accounts
receivable, net 9,171 8,051 Deferred tax assets, net 693 650
Prepaid expenses and other current assets 1,176 1,443
Total current assets 48,511 50,497 Property and equipment,
net 1,230 1,333 Purchased technology, net 1,745 2,140
Goodwill 38,508 38,508 Deferred tax assets, net 1,817 1,301 Other
assets 542 786 Total assets $ 92,353 $ 94,565
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable and accrued liabilities $ 4,656 $
4,308 Deferred revenue 8,031 7,266 Total current
liabilities 12,687 11,574 Stockholders' equity 79,666
82,991 Total liabilities and stockholders' equity $
92,353 $ 94,565
Pervasive Software Inc. Condensed
Consolidated Statements of Operations (in thousands, except
per share data) (Unaudited)
Three months ended Nine
months ended March 31 March 31 2011
2010 2011 2010 Revenues: Product
licenses $ 7,557 $ 7,552 $ 21,330 $ 23,280 Services and other
4,530 4,133 13,405
12,213 Total revenue 12,087 11,685 34,735 35,493
Costs and expenses: Cost of product licenses 357 317 1,016 874 Cost
of services and other 1,331 1,212 3,775 3,594 Sales and marketing
5,273 4,772 15,192 14,048 Research and development 3,015 2,895
8,719 8,813 General and administrative 1,291
1,164 3,875 3,719 Total costs
and expenses 11,267 10,360
32,577 31,048 Operating income 820
1,325 2,158 4,445 Interest and other income, net 24 33 48
182 Income tax provision (58 ) (358 ) (495 ) (1,386 )
Net income $ 786 $ 1,000 $ 1,711
$ 3,241 Diluted earnings per
share: $ 0.05 $ 0.06 $ 0.11 $ 0.18
Shares used in computing diluted earnings per share
16,036 17,484 16,027 17,653
Pervasive Software Inc.
Condensed Consolidated Statements of Cash Flows (in
thousands) (Unaudited)
Three months ended
Nine months ended March 31 March 31
2011 2010 2011 2010 Cash from
operations Net income $ 786 $ 1,000 $ 1,711 $ 3,241 Adjustments
to reconcile net income to net cash provided by operations:
Depreciation & amortization 335 334 1,006 963 Non-cash stock
compensation expense 429 445 1,295 1,315 Non-cash changes in
deferred tax assets (43 ) 100 (560 ) (86 ) Bad debt expense and
other non-cash 82 - 238 - Changes in current assets and
liabilities: Trade accounts receivable (684 ) (525 ) (1,360 ) (239
) Prepaid expenses and other current assets (86 ) 68 492 170
Accounts payable and accrued liabilities (372 ) 466 270 (652 )
Deferred revenue 378 262 754
726 Net cash provided by operations 825 2,150
3,846 5,438
Cash from investing activities Purchase
of property and equipment (155 ) (204 ) (500 ) (374 ) Sales and
purchases of marketable securities, net (1,745 ) (1,522 ) 2,586
(8,715 ) Purchased intangibles - - - (2,611 ) Decrease in other
assets 2 10 20 30
Net cash provided by (used in) investing activities (1,898 )
(1,716 ) 2,106 (11,670 )
Cash from financing
activities Proceeds from exercise of stock options 178 142 585
333 Acquisition of Treasury Stock (646 ) (1,357 )
(6,931 ) (3,675 ) Net cash used in financing
activities (468 ) (1,215 ) (6,346 ) (3,342 ) Effect of
exchange rate on cash and cash equivalents 38
(40 ) 83 (42 ) Increase (decrease) in cash and
cash equivalents (1,503 ) (821 ) (311 ) (9,616 ) Cash and cash
equivalents at beginning of period 8,278 9,234
7,086 18,029 Cash and cash
equivalents at end of period $ 6,775 $ 8,413 $ 6,775
$ 8,413
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
(formerly SFAS 123R) 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 (formerly SFAS 123R) 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, formerly SFAS
123R). 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 Nine months ended March
31, March 31, 2011 2010 2011
2010 Net Income Net Income Net Income
Net Income GAAP $ 786 $ 1,000 $ 1,711 $ 3,241
Amortization of intangible assets - cost of product licenses 130
130 390 347 Stock-based compensation - cost of services and other
15 11 37 34 Stock-based compensation - sales and marketing expense
132 138 398 401 Stock-based compensation - research and development
expense 56 62 183 175 Stock-based compensation - general and
administrative expense 226 234 677 706 Income tax adjustment for
non-GAAP $ (419 ) $ (299 ) (827 ) (754 )
Non-GAAP $ 926 $ 1,276 $ 2,569 $ 4,150
GAAP net income per share - diluted $ 0.05 $ 0.06 $
0.11 $ 0.18 Non-GAAP net income per share - diluted $ 0.06 $
0.07 $ 0.15 $ 0.23 Shares used to compute GAAP net income
per share - diluted 16,036 17,484 16,027 17,653 Shares used
to compute non-GAAP net income per share - diluted 16,592 18,160
16,606 18,319
Pervasive Software Inc.
Reconciliation of Forward-Looking Guidance
(Unaudited) Diluted
Earnings per Share Range Three months ended
June 30, 2011 GAAP expectation $ 0.01 $ 0.04
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 $
0.03 $ 0.06
* rounds to zero
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