webMethods, Inc. (Nasdaq:WEBM), a leading provider of business
integration and optimization software, today announced financial
results for its fiscal fourth quarter and year ended March 31,
2007. Total revenue for the fourth quarter was $51.2 million,
compared to $59.4 million in the prior year period. License revenue
for the fourth quarter was $18.4 million, compared to $27.6 million
in the prior year period. Maintenance revenue for the fourth
quarter was $21.1 million, compared to $19.2 million in the prior
year period. Professional Services revenue for the fourth quarter
was $11.7 million, compared to $12.5 million in the prior year
period. Under U.S. generally accepted accounting principles (GAAP),
the company's net loss for the fourth quarter was $2.9 million, or
a loss of $0.05 per share, compared to net income of $10.5 million,
or earnings of $0.19 per diluted share, in the prior year period.
GAAP results for the fourth quarter reflect $2.9 million of
stock-based compensation expense as a result of the company�s
adoption of Financial Accounting Standard No. 123R in this fiscal
year. Financial results for same period in fiscal year 2006 do not
include these expenses. Fourth quarter GAAP results also include
$1.4 million for amortization of acquired intangibles and $774,000
of transaction costs related to the proposed merger with Software
AG. This compares to expenses of $496,000 for amortization of
deferred warrant charge, $600,000 for amortization of acquired
intangibles and $750,000 for a litigation settlement payment, net
of insurance reimbursement, in last year�s fourth quarter GAAP
results. Also included in last year�s fourth quarter was a $191,000
credit for the reduction of a previous accrual for excess
facilities cost. Income taxes for the quarters ended March 31, 2007
and 2006 include tax benefits of $2.0 million and $2.2 million,
respectively, related to the reduction of valuation allowances on
net operating loss carryforwards of certain foreign subsidiaries.
These tax benefits were partially offset by income tax expenses
related primarily to our foreign operations. In addition, the most
recent fourth quarter includes a $1.2 million income tax provision
related to a recent claim made by a state government. For the
fiscal year ended March 31, 2007, total revenue was $201.1 million,
compared to $208.8 million in the prior year. License revenue for
the year ended March 31, 2007 was $67.2 million, compared to $87.4
million in the prior year. Maintenance revenue for fiscal year 2007
was $83.0 million, compared to $74.2 million in the prior fiscal
year. Professional Services revenue for the year ended March 31,
2007 was $50.9 million, compared to $47.2 million in the prior
year. GAAP net loss for the year ended March 31, 2007 was $18.4
million, or a loss of $0.33 per share, compared to net income of
$18.0 million, or earnings of $0.33 per diluted share, in the prior
year. GAAP results for the year ended March 31, 2007 include $11.6
million of stock-based compensation expense. Financial results for
fiscal year 2006 do not include these expenses. Fiscal year 2007
GAAP results also include expenses of approximately $4.1 million
for amortization of acquired intangibles, $1.3 million for
restructuring costs related to the closing of an excess facility,
$1.2 million for the write-off of in-process research and
development costs, $1.0 million for severance and benefits costs
related to the company�s cost savings initiative, and $1.2 million
of transaction fees and other costs related to acquisitions and the
proposed merger with Software AG. This compares to expenses of $2.5
million for amortization of deferred warrant charge, $2.4 million
for amortization of acquired intangibles, and $750,000 for a
litigation settlement payment, net of insurance reimbursement, in
last year�s GAAP results. �We�re pleased with our improved
performance over the past half year as our efforts to achieve
better sales force productivity and more consistent execution
continue to take hold,� said David Mitchell, president and CEO,
webMethods, Inc. �We were particularly pleased with the solid
contributions of our newest BPM and SOA products in their first
three and six months on the market, respectively. In conjunction
with the strengths of the rest of our product portfolio, this
reinforces our belief that the merger with Software AG is being
undertaken from a position of strength and will prove to be a
partnership for growth.� Supplemental Financial Data Revenue by
geography (dollars in thousands): � Three Months Ended Fiscal Year
Ended March 31, March 31, 2007� 2006� Change 2007� 2006� Change
North America $ 30,052� $ 38,667� -22% $ 124,592� $ 131,410� -5%
EMEA 14,554� 14,772� -1% 52,322� 52,884� -1% Japan 1,805� 1,941�
-7% 7,845� 9,100� -14% Asia Pacific � 4,792� � 4,036� 19% � 16,323�
� 15,424� 6% Total revenue $ 51,203� $ 59,416� -14% $ 201,082� $
208,818� -4% � Additional metrics for the quarter ended March 31,
2007: We recorded four sales transactions greater than $1 million;
Our average sales transaction, for transactions over $100,000, was
approximately $400,000; About 77% of the quarter�s sales
transactions were existing customers; We added 27 new customers in
the most recent quarter. Quarterly Business Highlights: On April 5,
2007, the company and Software AG announced that they had entered
into a definitive merger agreement for Software AG to acquire
webMethods in a cash tender offer for $9.15 per share. The tender
offer commenced on April 18, 2007 and is scheduled to expire at
12:00 midnight, New York City time, on Tuesday, May 15, 2007,
unless extended by Software AG pursuant to the terms of the
definitive agreement. Software AG has announced that it intends to
extend the expiration of the tender offer to 12:00 midnight, New
York City time, on Friday, May 25, 2007, such that the tender offer
will expire after the end of the 30-day period for initial review
of the transaction by the Committee on Foreign Investment in the
United States (CFIUS). All regulatory approvals required to
complete the transaction, other than CFIUS, have been received at
this time. Version 7.0 of the webMethods Fabric product suite
became generally available during the quarter. According to leading
industry research firm Current Analysis (webMethods Strengthens SOA
Suite with Fabric 7.0 Release, January 11, 2007), �[w]e are taking
a positive stance on webMethods� release of Fabric 7.0. This week�s
General Availability release makes good on the company�s promise to
incorporate registry and broker technologies purchased from
Infravio this past September. It also marks the inclusion of two
other important technologies, a semantic metadata library from the
also recently acquired Cerebra and Blaze Advisor (a business rules
management engine) provided by partner Fair Isaac Corp. The
inclusion of these three key elements along with a series of
product improvements, strongly positions Fabric 7.0 as one of the
most comprehensive SOA Suites in the market.� webMethods also
unveiled during the fourth quarter webMethods Optimize for SAP, a
new performance monitoring solution for SAP-based business
processes. During the fourth quarter, webMethods joined the Vendor
Interop Alliance, a Microsoft-led consortium focused on improving
application interoperability. webMethods also announced a new
partnership with iTKO for service-oriented architecture (SOA)
testing during this period as well as additional alliances with
Asset Control, Logimethods, Torry Harris Business Solutions and
Xpediant Solutions. In conjunction with industry research firm
ZapThink, webMethods also introduced during the quarter the SOA
Master Class online (www.SOAMasterClass.com), a new educational
website and online community for exchanging best practices among
SOA practitioners. Members can also download evaluation copies of
the webMethods Infravio X-Registry. webMethods also hosted a series
of European Business Integration Forums. During these one-day
events, webMethods executives shared best practices and emerging
strategies for business process integration with customers,
prospects and partners in a number of major European cities. Global
Customer Wins: webMethods won new and additional business during
the fourth quarter with strategic customers worldwide. The
following companies represent important new and follow-on business
that closed during the quarter: Baker Hughes Oilfield Operations,
Inc., Bank of Oklahoma N.A., Beijing Yisquare Technology Co., Ltd
(for Ping An Life Insurance Company of China, Ltd), Communications
Test Design, Inc., Dean Foods, DHL, Enporion, Fonterra Co-Operative
Group Ltd, Kuhne & Nagel, MonierLifetile, Origin Energy Asset
Management Services Pty Ltd, Parkway Hospitals Singapore Pte Ltd,
Sony Electronics Inc., South Florida Water Management District, TD
Banknorth, The Canadian Depository for Securities Limited, The
Timberland Company, and Vodafone Portugal, among others. 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 1,500
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 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. � webMethods, Inc. Condensed Consolidated
Statements of Operations (in thousands, except per share data)
(Unaudited) � � � Three Months Ended Twelve Months Ended March 31,
March 31, � � 2007� � 2006� � 2007� � 2006� � Revenue License $
18,378� $ 27,628� $ 67,218� $ 87,449� Maintenance 21,136� 19,241�
82,953� 74,186� Professional services � � 11,689� � � 12,547� � �
50,911� � � 47,183� Total revenue � � 51,203� � � 59,416� � �
201,082� � � 208,818� � Cost of revenue Amortization of intangibles
1,376� 600� 4,095� 2,397� License 310� 299� 1,433� 1,002�
Maintenance 3,257� 3,182� 12,999� 12,774� Professional services � �
10,740� � � 12,013� � � 47,325� � � 42,688� Total cost of revenue �
� 15,683� � � 16,094� � � 65,852� � � 58,861� Gross profit � �
35,520� � � 43,322� � � 135,230� � � 149,957� � Operating expenses
Sales and marketing 20,309� 20,209� 81,482� 74,084� Research and
development 11,439� 9,973� 45,882� 40,197� General and
administrative 8,559� 6,270� 31,081� 23,812� In-process research
and development -� -� 1,170� -� Restructuring costs � � 22� � �
(191) � � 1,306� � � 411� Total operating expenses � � 40,329� � �
36,261� � � 160,921� � � 138,504� Operating (loss) income � �
(4,809) � � 7,061� � � (25,691) � � 11,453� � Interest income and
other, net � � 1,279� � � 1,604� � � 7,259� � � 5,221� (Loss)
income before taxes � � (3,530) � � 8,665� � � (18,432) � � 16,674�
Provision for income taxes � � (642) � � (1,803) � � -� � � (1,348)
Net (loss) income � $ (2,888) � $ 10,468� � $ (18,432) � $ 18,022�
� Basic net (loss) and diluted net income per share � $ (0.05) � $
0.19� � $ (0.33) � $ 0.33� Shares used in computing per share
amounts: Basic 56,523� 54,367� 55,758� 53,779� Diluted 56,523�
56,550� 55,758� 55,045� � � � webMethods, Inc. Condensed
Consolidated Balance Sheets (in thousands) (Unaudited) � � March
31, March 31, 2007� � 2006� � � � � � � ASSETS Current assets: Cash
and cash equivalents $ 87,117� $ 82,371� Marketable securities
available for sale 46,095� 79,943� Accounts receivable, net 51,898�
64,298� Deferred income tax assets, net 1,241� 138� Prepaid
expenses and other current assets � � 5,725� � � 6,830� Total
current assets � � 192,076� � � 233,580� Marketable securities
available for sale 999� -� Property and equipment, net 13,867�
10,274� Goodwill 76,293� 46,704� Intangibles assets, net 15,873�
5,993� Long-term deferred income tax assets, net 3,166� 1,961�
Other assets � � 2,877� � � 4,299� Total assets � $ 305,151� � $
302,811� � LIABILITIES & STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 9,996� $ 7,323� Accrued expenses
11,335� 10,866� Accrued salaries and commissions 12,227� 12,694�
Deferred revenue 49,619� 59,168� Current portion of capital lease �
� 20� � � 259� Total current liabilities � � 83,197� � � 90,310�
Capital lease obligations, net of current portion -� 10� Other
long-term liabilities 5,958� 3,941� Long-term deferred revenue � �
1,997� � � 1,772� Total liabilities � � 91,152� � � 96,033� Total
stockholders' equity � � 213,999� � � 206,778� Total liabilities
and stockholders' equity � $ 305,151� � $ 302,811� �
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