webMethods Reports Fiscal First Quarter Financial Results Announces
Fourth Consecutive Quarter of Pro Forma Profitability FAIRFAX, Va.,
Aug. 1 /PRNewswire-FirstCall/ -- webMethods, Inc. (NASDAQ:WEBM), a
leading provider of business integration and optimization software,
today announced financial results for its fiscal first quarter
ended June 30, 2005. Total revenue for the fiscal first quarter was
approximately $47.7 million, compared to $41.9 million in the prior
year period. License revenue for the quarter was approximately
$18.5 million, compared to $14.8 million in the prior year period.
Under U.S. generally accepted accounting principles (GAAP), the
company's net loss for the June 2005 quarter was $514,000, or a
loss of $0.01 per share, compared to net loss of $10.8 million, or
a loss of $0.20 per share, in the prior year period. Excluding
certain charges that are described below in "Non-GAAP Financial
Measures," the company reported pro forma net income of $764,000,
or pro forma earnings of $0.01 per share in the June 2005 quarter,
compared to a pro forma net loss of $9.6 million, or a pro forma
loss of $0.18 per share, in the prior year period. Important
information regarding these pro forma results is provided below
under "Non-GAAP Financial Measures" and should be read to better
understand the charges excluded in pro forma results and why pro
forma information is presented. "Our results represent the first
time webMethods has generated a pro forma profit in our fiscal
first quarter and signify the fourth consecutive quarter of pro
forma profitability," said David Mitchell, president and CEO,
webMethods, Inc. "We continue to show consistent improvement on
both a GAAP and a pro forma basis," continued Mr. Mitchell. "Our
continued focus on expense efficiencies, coupled with our ability
to grow total quarterly revenue by 14% and quarterly license
revenue by 25% year over year during what historically has been our
most challenging quarter, reflect our continued commitment to
sustained pro forma profitability and total revenue growth."
Additional June 2005 Quarterly Financial Highlights: * Cash and
marketable securities at June 30, 2005 decreased by approximately
$6.4 million to approximately $143.7 million from $150.1 million at
March 31, 2005. * Days Sales Outstanding (DSOs) increased by 3 days
from the prior quarter to 83 days. * Total deferred revenue at June
30, 2005 decreased by $3.2 million to $46.2 million from $49.4
million at March 31, 2005. * International revenue accounted for
approximately 37% of total revenue, compared to 43% in the prior
quarter. Financial Outlook: Based on currently available
information, webMethods anticipates total revenue in the quarter
ending September 30, 2005 will be in the range of $47 million to
$50 million. Pro forma net income per share for the September 2005
quarter is anticipated to be in the range of $0.01 to $0.04. Pro
forma net income for the September 2005 quarter is expected to
exclude amortization of deferred stock compensation and warrant
charges and amortization of intangible assets, which are expected
to total approximately $1.3 million, and restructuring charges that
have not been finalized. Technology Highlights: webMethods was
recognized as a Leader in a recently released Forrester WAVE(TM)
analysis of Integration Suites [The Forrester WAVE: Integration
Suites, Q3 2005 -- Evaluation of Top Integration Suite Vendors
Across More Than 125 Key Criteria by Ken Vollmer and Henry Peyret
(July 28, 2005)]. The report also gave top marks to webMethods
under the 'strategy' criteria, which evaluated each company's
product strategy and vision, strategic alliances, and executive
vision. Only one other vendor scored equally well along this
dimension of the WAVE. In addition, webMethods received the highest
or was tied for the highest score within six of 12 underlying
sub-categories, including Executive Vision, Monitoring and
Reporting, Strategic Alliances, and Partner Management. During the
June 2005 quarter, webMethods was named the ebizQ Buyers' Choice
Award Winner for Enterprise Application Integration (EAI). The
award was presented by ebizQ, a leading publisher of print and
online publications serving the business integration market. The
award was based on an evaluation of the leading EAI vendors against
specific business and IT requirements that ebizQ audiences had
previously identified of greatest strategic importance to their
companies. Based on the voting of these registered end-users
against criteria including technical excellence, flexibility,
ease-of-use and return on investment (ROI), webMethods was
recognized as the inaugural winner of the award. In addition,
webMethods was recognized by the Integration Consortium (IC) as the
winning recipient of their IC Integration Solution Provider Award
for Excellence -- Premier Solution Provider of 2005(TM) award,
which was presented during the 2005 Global Integration Summit in
Banff, Alberta, Canada. Produced in conjunction with the
conference's SOA Integration Showcase, the awards program
recognized webMethods' superior achievement in the real-time
development and deployment of a customized business solution
leveraging a Service-Oriented Architecture (SOA) to best address a
supply chain business integration scenario using web services.
Global Customer Wins: webMethods won new and additional business in
the June 2005 quarter with strategic customers worldwide. The
company continued momentum in several vertical industries, with
particular strength in financial services and government. The
following companies represent important new and follow-on business
that closed during the June 2005 quarter: ACH Food Companies,
Adobe, Aeroxchange, Agilysys, Alcatel, American Association of
Motor Vehicles Administrators (AAMVA), Avnet, Cabela's, Cable &
Wireless, Cadence Design System, Caxton Associates, Charter
Communications, Cooper Cameron Corporation, Corus Staal B.V.,
E*Trade Financial Corporation, Eastman Kodak Company, Electricite
de France (EDF), ExxonMobil Global Services Company, Fisher
Scientific Company, GE Commercial Finance, Genentech, Georgia
Pacific Corporation, Glaxo Smith Kline Australia Pty Ltd., Hibernia
National Bank, ICI Paints, Internal Revenue Service, JPMorgan Chase
Bank, N.A., Landesbank Rheinland-Pfaltz, Lapeyre, Nokia
Corporation, Office Depot, Shinko Electric Industries, Solectron,
Sony Pictures Entertainment, Taleo, Inc., Tchibo GmbH, Western
Power Corporation and University of California, Berkeley, among
others. Record Number of Customer Projects Move Into Production: In
the June 2005 quarter, webMethods documented over 165 global
customer projects that moved into production, including: ABN Amro
Bank N.V., Actebis Holding GmbH, AEP Energy Services, Baxter
Healthcare, Canadian National Railway, Carnival Corporation,
Johnson & Johnson, Juniper Networks, Lafarge North America,
Logitech, Medtronic, Motorola, National City Corporation, National
Foods Holdings Ltd., Panasonic UK, Solectron, Standard Register
Company, Toshiba American Financial Systems, Inc., Unique Zurich
Airport, Videotron Telecom, Woolworths Ltd. and World Wide
Technologies, among others. Conference Call Information: webMethods
will host a conference call at 5:00 p.m. Eastern Daylight Time
today to discuss the company's fiscal first quarter financial
results and its future guidance. The conference call will be
available via webcast at http://www.webmethods.com/investors. A
replay of this call will be available through August 5, 2005.
Please dial 1-(800) 642-1687 in North America and 1-(706) 645-9291
outside North America, confirmation number 7783540. Non-GAAP
Financial Measures This press release contains pro forma operating
results that are not in accordance with GAAP because they exclude
certain non-cash or non-recurring items and include a provision for
income taxes in the June 2005 quarter. Pro forma results for the
June 2005 and 2004 quarters exclude amortization of deferred
warrant charges and amortization of intangible asset charges; pro
forma results for the June 2005 quarter also exclude charges
related to restructuring. The financial information attached to
this press release reconciles the pro forma operating results given
above for the June 2005 and 2004 quarters to GAAP. Investors are
encouraged to review that reconciliation of pro forma operating
results to the most directly comparable GAAP financial measures
provided in the attached financial information. Pro forma operating
results should not be considered as a substitute for, or superior
to, measures of financial performance prepared in accordance with
GAAP, and may be different from non-GAAP financial measures used by
others. webMethods' management uses these pro forma operating
results in evaluating the potential impact of certain operating
decisions on projected financial results, in comparisons of the
company's historical results of operations and in comparisons to
competitors' operating results. webMethods includes these pro forma
operating results in this press release because it believes they
enhance comparability of webMethods' results of operations to those
of other enterprise software companies, to pro forma operating
results webMethods historically has reported, to financial guidance
provided by webMethods and to financial models and expectations of
certain investors and securities analysts. About webMethods, Inc.
webMethods (NASDAQ:WEBM) provides business integration software to
integrate, assemble and optimize available IT assets to drive
business process productivity. webMethods delivers an innovative,
enterprise-class business integration platform that incorporates
proven integration technology with next generation capabilities
into one interoperable set of tools that delivers a unique
combination of efficiency, agility and control. webMethods combines
industry leadership with a zealous commitment to customers to
deliver tangible business value to more than 1,330 global
customers. webMethods is headquartered in Fairfax, Va., with
offices throughout the U.S., Europe, Asia Pacific and Japan. More
information about the company can be found at
http://www.webmethods.com/. The webMethods name and logo are
registered trademarks of webMethods, Inc. in the United States and
certain other countries. All other marks mentioned are trademarks
or service marks of their respective companies. This press release
and the conference call announced in it may contain various remarks
about the future expectations, plans and prospects of webMethods
that constitute forward-looking statements for purposes of the safe
harbor provisions of U.S. securities laws. Specific forward-looking
statements relate to future market opportunities for webMethods'
solutions, webMethods' products and services and their performance,
the size and strength of our markets, the size and quality of our
pipeline, expected future financial performance (including total
revenue, license revenue, level of cash and marketable securities,
non-cash or non-recurring charges, expenses, net earnings or loss,
pro forma earnings or loss per share), expected financial metrics,
webMethods' future cost savings and expense levels, the anticipated
result of marketing and selling models and approaches, the
anticipated contributions to webMethods' future financial
performance of certain products or geographic regions of its
business, demand for some or all of its products and the
contribution to webMethods' revenue of business partners or
webMethods' products or services. Actual results of webMethods may
differ materially from those indicated by these forward-looking
statements as a result of various risks and uncertainties,
including the impact of economic conditions, geopolitical factors,
seasonal factors, terrorism and related uncertainties in the U.S.
and abroad on the company's customers and prospects and their IT
spending budgets and priorities; impact upon operations of legal
compliance matters or internal controls review, improvement and
remediation; difficulties in achieving or maintaining anticipated
expense levels and controlling major expenses; variations in the
size and timing of customer orders and demand for software offered
by webMethods; impact of compliance programs and claims for alleged
violations of requirements and duties; impact of competitive and
pricing pressures; impact of changes in management or staff levels;
variations in revenue influenced by software vendor or systems
integrator partners; impact of rapid technological change; and
these and other risks and uncertainties discussed more fully in
webMethods' SEC filings, including those discussed under the
heading "Factors That May Affect Future Operating Results" in the
Business section of webMethods' Form 10-K for the year ended March
31, 2005 which is on file with the U.S. Securities and Exchange
Commission and may be accessed at http://www.sec.gov/ or
webMethods' investor relations web page at
http://www.webmethods.com/investors/. webMethods disclaims any
obligation to update or correct any forward-looking statements made
herein due to the occurrence of events after the issuance of this
press release. webMethods, Inc. Pro Forma Condensed Consolidated
Income Statements Impact of Pro Forma Adjustments on Reported Net
Loss (in thousands, except shares and per share data) (Unaudited)
Three Months Ended June 30, 2005 As As Reported Adjustments*
Adjusted Revenues License $18,467 $- $18,467 Professional services
11,683 - 11,683 Maintenance 17,585 - 17,585 Total revenues 47,735 -
47,735 Cost of revenues Amortization of intangibles 599 (599) -
License 214 - 214 Professional services and maintenance 13,554 -
13,554 Total cost of revenues 14,367 (599) 13,768 Gross profit
33,368 599 33,967 Operating expenses Sales and marketing 17,275
(661) 16,614 Research and development 11,118 - 11,118 General and
administrative 6,214 - 6,214 Restructuring costs 288 (288) - Total
operating expenses 34,895 (949) 33,946 Operating income (loss)
(1,527) 1,548 21 Interest income and other, net 1,155 - 1,155 Net
income (loss) before taxes (372) 1,548 1,176 Provision for income
taxes (1) 142 270 412 Net income (loss) $(514) $1,278 $764 Net
income (loss) per share Basic $0.01 Fully Diluted $0.01 Shares used
in computing per share amount Basic 53,375,463 Fully Diluted
53,661,958 Three Months Ended June 30, 2004 As As Reported
Adjustments* Adjusted Revenues License $14,806 $- $14,806
Professional services 12,524 - 12,524 Maintenance 14,607 - 14,607
Total revenues 41,937 - 41,937 Cost of revenues Amortization of
intangibles 599 (599) - License 620 - 620 Professional services and
maintenance 14,273 - 14,273 Total cost of revenues 15,492 (599)
14,893 Gross profit 26,445 599 27,044 Operating expenses Sales and
marketing 21,775 (661) 21,114 Research and development 11,050 -
11,050 General and administrative 5,073 - 5,073 Total operating
expenses 37,898 (661) 37,237 Operating loss (11,453) 1,260 (10,193)
Interest income and other, net 638 - 638 Net loss before taxes
(10,815) 1,260 (9,555) Provision for income taxes (1) 4 - 4 Net
loss $(10,819) $1,260 $(9,559) Net income (loss) per share Basic
$(0.18) Fully Diluted $(0.18) Shares used in computing per share
amount Basic 52,827,120 Fully Diluted 52,827,120 * Excludes
amortization of intangibles, warrant charge, restructuring costs,
and includes projected pro forma tax expense. 1) The projected pro
forma effective tax rate for the three months ended June 30, 2005
of 35% has been used to adjust the provision for income taxes for
pro forma purposes. webMethods, Inc. Condensed Consolidated Income
Statements (in thousands, except shares and per share data)
(Unaudited) Three Months Ended June 30, 2005 2004 Revenue License
$18,467 $14,806 Professional services 11,683 12,524 Maintenance
17,585 14,607 Total revenue 47,735 41,937 Cost of revenue
Amortization of intangibles 599 599 License 214 620 Professional
services and maintenance 13,554 14,273 Total cost of revenue 14,367
15,492 Gross profit 33,368 26,445 Operating expenses Sales and
marketing: Warrant charge 661 661 Other sales and marketing costs
16,614 21,114 Research and development costs 11,118 11,050 General
and administrative costs 6,214 5,073 Restructuring costs 288 -
Total operating expenses 34,895 37,898 Operating loss (1,527)
(11,453) Interest income and other, net 1,155 638 Net loss before
taxes $(372) $(10,815) Provision for income taxes 142 4 Net loss
$(514) $(10,819) Basic and fully diluted net loss per share $(0.01)
$(0.20) Shares used in computing per share amount Basic 53,375,463
52,827,120 Fully Diluted 53,375,463 52,827,120 Pro forma net income
(loss) per share excluding certain expenses* Net income (loss)
excluding certain expenses 764 (9,559) Net income (loss) per share
Basic $0.01 $(0.18) Fully Diluted $0.01 $(0.18) Shares used in
computing per share amount Basic 53,375,463 52,827,120 Fully
Diluted 53,661,958 52,827,120 * Excludes amortization of
intangibles, warrant charge, restructuring costs, and includes
projected pro forma tax expense. The projected pro forma effective
tax rate for the three months ended June 30, 2005, of 35% has been
used to adjust the provision of income taxes for pro forma
purposes. webMethods, Inc. Condensed Consolidated Balance Sheets
(in thousands) (Unaudited) June 30, March 31, 2005 2005 ASSETS
Current assets: Cash and cash equivalents $62,506 $57,209
Marketable securities available for sale 79,956 78,332 Accounts
receivable, net 43,777 47,326 Prepaid expenses and other current
assets 6,067 6,401 Total current assets 192,306 189,268 Marketable
securities available for sale 1,232 14,513 Property and equipment,
net 10,615 10,342 Goodwill 46,704 46,704 Intangibles assets, net
7,791 8,390 Other assets 5,561 6,127 Total assets $264,209 $275,344
LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $8,325 $8,673 Accrued expenses 12,422 16,506
Accrued salaries and commissions 9,804 12,219 Deferred revenue
40,916 43,055 Current portion of capital lease 408 475 Total
current liabilities 71,875 80,928 Capital lease obligations, net of
current portion 269 139 Other long term liabilities 3,214 3,374
Long term deferred revenue 5,324 6,371 Total liabilities 80,682
90,812 Total stockholders' equity 183,527 184,532 Total liabilities
and stockholders' equity $264,209 $275,344 webMethods, Inc.
Condensed Consolidated Statements of Cash Flows (in thousands)
(unaudited) Three Months Ended June 30, 2005 2004 Cash flows from
operating activities: Net loss $(514) $(10,819) Adjustments to
reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,392 1,704 (Recovery of) provision
for doubtful accounts (117) 228 Amortization of warrant charge 661
661 Amortization of acquired intangibles 599 599 Amortization of
deferred rent (114) - Increase (decrease) in cash resulting from
changes in assets and liabilities: Accounts receivable 2,806 9,003
Prepaid expenses and other current assets 251 (1,317) Other assets
476 397 Accounts payable (81) (2,117) Accrued expenses and other
liabilities (4,007) (1,962) Accrued salaries and commissions
(2,225) (2,659) Deferred revenue (2,282) (1,077) Net cash used in
operating activities (3,155) (7,359) Cash flows from investing
activities: Purchases of property and equipment (1,497) (1,647) Net
maturities (purchases) of marketable securities available for sale
11,795 (3,831) Net cash provided by/(used in) investing activities
10,298 (5,478) Cash flows from financing activities: Short-term
borrowings - 2,627 Payments on short-term borrowings - (2,461)
Payments on capital leases (178) (311) Proceeds from exercise of
stock options and stock issued under the ESPP 819 1,821 Net cash
provided by financing activities 641 1,676 Effect of the exchange
rate on cash (2,487) (858) Net increase/(decrease) in cash and cash
equivalents 5,297 (12,019) Cash and cash equivalents at beginning
of period 57,209 75,462 Cash and cash equivalents at end of period
$62,506 $63,443 DATASOURCE: webMethods, Inc. CONTACT: Christopher
Martin, Investor Relations, +1-703-460-6609, , or John Conley,
Public Relations, +1-703-460-5996, , both of webMethods, Inc. Web
site: http://www.webmethods.com/
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