NOVELL, INC. 
By
For the third fiscal quarter 2008, Novell reported
"We had another quarter of strong product revenue growth and expanding
operating margins," said
Cash, cash equivalents and short-term investments were
With regard to the Company's previously announced share repurchase
program, Novell repurchased 7 million shares of common stock at a cost of
During the quarter, Novell used
Full details on Novell's reported results, including a reconciliation of the non-GAAP results, are included in the financial schedules that are a part of this release.
Financial Outlook
Novell management issues the following financial guidance:
For the full fiscal year 2008:
-- Net revenue is expected to be between $940 million and $970 million.
-- Non-GAAP operating margin is expected to be between 8% and 10%,
exceeding previously stated guidance of between 7% to 9%.
Conference Call Notification and Web Access Detail
A live Webcast of a Novell conference call to discuss the quarter will be
broadcast at
The call will be archived on the Novell Web site approximately two hours
after its conclusion and will remain on the Web site until
A copy of this press release is posted on Novell's Web site at: http://www.novell.com/company/ir/qresults/.
Non-GAAP Financial Measures
We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income from operations, operating margin, income from continuing operations, net income, income per share from continuing operations and net income per share. We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable investors to evaluate our performance in the same way that management does. Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine bonuses. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are unusual, that are excluded from analysts' consensus estimates, and/or that arise outside of the ordinary course of business, such as, but not limited to, those related to stock-based compensation, acquisition-related intangible asset amortization, restructuring, asset impairments, litigation judgments and settlements, purchased in-process research and development, and the sale of business operations, long-term investments, and property, plant and equipment.
Legal Notice Regarding Forward-Looking Statements
This press release includes statements that are not historical in nature
and that may be characterized as "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act, including those
related to future financial and operating results, future opportunities, the
benefits and synergies of the company's brands, strategies and acquisitions,
and the growth of the Linux Platform Products, Identity and Access Management,
and Systems and Resource Management markets. You should be aware that Novell's
actual results could differ materially from those contained in the forward-
looking statements, which are based on current expectations of Novell
management and are subject to a number of risks and uncertainties, including,
but not limited to, Novell's ability to transform its business through the
implementation of its strategic plan, Novell's ability to realize the benefits
anticipated from the Microsoft transaction and other transactions, Novell's
ability to realize the benefits anticipated from its restructuring plan, and
the expected charges to be incurred and payments to be made under the
restructuring plan, Novell's ability to achieve its expense targets, Novell's
success in executing its Linux Platform Products, Identity and Access
Management, and Systems and Resource Management strategies, Novell's ability
to take a competitive position in the Linux Platform Products, Identity and
Access Management, and Systems and Resource Management industries, business
conditions and the general economy, market opportunities, potential new
business strategies, competitive factors, sales and marketing execution,
shifts in technologies or market demand, Novell's ability to integrate
acquired operations and employees, and the other factors described in Novell's
Annual Report on Form 10-K filed with the Securities and Exchange Commission
on
About Novell
Novell, Inc. (Nasdaq: NOVL) delivers the best engineered, most interoperable Linux platform and a portfolio of integrated IT management software that helps customers around the world reduce cost, complexity and risk. With our infrastructure software and ecosystem of partnerships, Novell harmoniously integrates mixed IT environments, allowing people and technology to work as one. For more information, visit http://www.novell.com.
Novell, the Novell logo, and PlateSpin are registered trademarks of
Novell, Inc. in
Novell, Inc.
Consolidated Unaudited Condensed Statements of Operations
(In thousands, except per share data)
Fiscal Quarter
Ended Fiscal Year-to-Date
Jul 31, Jul 31, Jul 31, Jul 31,
2008 2007 2008 2007
Net revenue:
Software licenses $53,408 $44,738 $138,293 $125,070
Maintenance and subscriptions 154,982 142,833 454,287 417,246
Services (1) 36,795 49,219 119,197 145,247
Total net revenue 245,185 236,790 711,777 687,563
Cost of revenue:
Software licenses 5,544 4,793 13,003 13,280
Maintenance and subscriptions 13,948 13,184 38,234 36,109
Services 40,678 48,546 128,540 146,151
Total cost of revenue 60,170 66,523 179,777 195,540
Gross profit 185,015 170,267 532,000 492,023
Operating expenses:
Sales and marketing 94,213 84,176 272,894 262,450
Product development 51,759 54,207 145,846 153,236
General and administrative 26,941 28,219 82,141 81,479
Other operating expenses (2) 11,131 13,780 20,000 37,335
Total operating expenses 184,044 180,382 520,881 534,500
Income (loss) from operations 971 (10,115) 11,119 (42,477)
Operating margin % 0.4% -4.3% 1.6% -6.2%
Other income (loss), net:
Interest income, net 7,384 16,192 33,807 45,410
Other (16,160) (739) (7,575) 1,836
Total other income (loss), net (8,776) 15,453 26,232 47,246
Income (loss) from continuing
operations, before income taxes (7,805) 5,338 37,351 4,769
Income tax expense 7,320 8,970 31,926 21,882
Income (loss) from continuing
operations (15,125) (3,632) 5,425 (17,113)
Income (loss) from discontinued
operations, before income taxes - (47) 1,285 (9,468)
Income tax benefit on discontinued
operations - - (836) (69)
Income (loss) from discontinued
operations - (47) 2,121 (9,399)
Net income (loss) $(15,125) $(3,679) $7,546 $(26,512)
Income (loss) per share:
Continuing operations $(0.04) $(0.01) $0.02 $(0.05)
Net income (loss) $(0.04) $(0.01) $0.02 $(0.08)
Weighted average shares 351,878 348,177 353,290 346,731
(1) Services includes professional services, technical support and
training services.
(2) See Page 8 of 11 for a detail of other operating expenses.
Revisions were made to prior period amounts in order to conform to the
current period's presentation.
Novell, Inc.
Consolidated Unaudited Condensed Balance Sheets
(In thousands)
Jul 31, 2008 Oct 31, 2007
Assets
Current assets:
Cash and cash equivalents $973,837 $1,079,819
Short-term investments 390,715 777,818
Restricted cash 52,410 -
Receivables, net 212,923 208,318
Prepaid expenses 50,725 53,316
Deferred income taxes 3,773 -
Other current assets 40,580 35,065
Total current assets 1,724,963 2,154,336
Property, plant and equipment, net 187,641 180,537
Long-term investments 29,586 37,304
Goodwill 593,983 404,612
Intangible assets, net 65,508 33,572
Deferred income taxes 32,729 14,518
Other assets 22,503 29,515
Total assets $2,656,913 $2,854,394
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $39,678 $45,135
Accrued compensation 100,323 112,794
Other accrued liabilities 104,469 122,850
Income taxes payable 14,772 46,724
Senior convertible debentures 451,394 -
Deferred revenue 480,765 494,615
Total current liabilities 1,191,401 822,118
Deferred income taxes 7,703 884
Other long-term liabilities 45,436 -
Long-term deferred revenue 244,876 273,066
Senior convertible debentures - 600,000
Total liabilities 1,489,416 1,696,068
Stockholders' equity 1,167,497 1,158,326
Total liabilities and stockholders'
equity $2,656,913 $2,854,394
Novell, Inc.
Consolidated Unaudited Condensed Statements of Cash Flows
(In thousands)
Fiscal Quarter Ended Fiscal Year-to-Date
Jul 31, Jul 31, Jul 31, Jul 31,
2008 2007 2008 2007
Cash flows from operating
activities
Net income (loss) $(15,125) $(3,679) $7,546 $(26,512)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Stock-based compensation
expense 7,593 8,859 25,370 23,489
Stock-based compensation
modification expense - 673 - 2,475
Depreciation and amortization 11,980 9,690 30,827 31,163
Change in accounts receivable
allowances (250) (427) 421 (878)
Utilization of previously
reserved acquired net
operating losses 1 10 5,026 4,835
Purchased in-process research
and development - - 2,700 -
Gain on debenture repurchases (139) - (544) -
(Gain) loss on discontinued
operations, before taxes - - (1,180) 10,220
(Gain) loss on impaired
long-term investments 14,738 - 14,488 (1,738)
Gain on sale of venture
capital funds - - - (3,591)
Impairment of intangible assets - 3,851 - 3,851
Loss on subsidiary sales 3,811 - 3,811 -
Changes in current assets and
liabilities, excluding the
effect of acquisitions and
dispositions 7,500 6,438 (102,323) 300,374
Net cash provided by (used
in) operating activities 30,109 25,415 (13,858) 343,688
Cash flows from financing
activities
Issuance of common stock, net 868 6,248 7,646 14,370
Excess tax effects from stock-
based compensation (7,186) 1,634 16,809 6,357
Common stock
repurchases/retirements (44,663) - (44,663) -
Debenture repurchases (26,868) - (142,457) -
Net cash (used in) provided
by financing activities (77,849) 7,882 (162,665) 20,727
Cash flows from investing
activities
Purchases of property,
plant and equipment (12,201) (4,971) (28,523) (17,479)
Short-term investment activity 33,820 (24,913) 359,260 (72,333)
Long-term investment activity 7,215 - 21,738 1,738
Cash restricted due to
litigation (286) - (52,410) -
Net (distributions) proceeds
from subsidiary sales (6,427) - (7,336) 2,749
Proceeds from sale of venture
capital funds - - - 4,964
Net cash paid for acquisitions 920 - (219,553) (9,727)
Purchases of intangible assets (6,000) (300) (6,000) (1,175)
Other 1,138 3,274 3,365 8,440
Net cash provided by (used
in) investing activities 18,179 (26,910) 70,541 (82,823)
(Decrease) increase in cash and
cash equivalents (29,561) 6,387 (105,982) 281,592
Cash and cash equivalents --
beginning of period 1,003,398 950,992 1,079,819 675,787
Cash and cash equivalents --
end of period $973,837 $957,379 $973,837 $957,379
Revisions were made to prior period amounts in order to conform to the
current period's presentation.
Novell, Inc.
Unaudited Non-GAAP Adjusted Income From Operations
(In thousands, except per share data)
Fiscal Quarter
Ended Fiscal Year-to-Date
Jul 31, Jul 31, Jul 31, Jul 31,
2008 2007 2008 2007
GAAP income (loss) from operations $971 $(10,115) $11,119 $(42,477)
Adjustments:
Stock-based compensation
expense:
Cost of revenue 881 1,257 2,724 3,241
Sales and marketing 1,953 2,831 7,400 7,091
Product development 2,543 2,684 7,900 7,370
General and administrative 2,216 2,087 7,346 5,787
Sub-total 7,593 8,859 25,370 23,489
Acquisition-related intangible
asset amortization:
Cost of revenue 3,184 1,360 6,035 3,916
Sales and marketing 1,341 511 2,429 2,390
Product development - - - 227
Sub-total 4,525 1,871 8,464 6,533
Other operating expenses
(income):
Restructuring expenses 6,570 6,024 11,329 17,891
Purchased in-process research
and development - - 2,700 -
Litigation-related expense
(income) 750 450 750 (93)
Acquisition integration costs - - 1,410 -
Loss on subsidiary sales 3,811 - 3,811 -
Impairment of intangible
assets - 3,851 - 3,851
Stock-based compensation
review expenses - 3,455 - 15,686
Sub-total 11,131 13,780 20,000 37,335
Total operating adjustments 23,249 24,510 53,834 67,357
Non-GAAP income from operations $24,220 $14,395 $64,953 $24,880
Operating margin % 9.9% 6.1% 9.1% 3.6%
Novell, Inc.
Unaudited Non-GAAP Adjusted Net Income
(In thousands, except per share data)
Fiscal Quarter
Ended Fiscal Year-to-Date
Jul 31, Jul 31, Jul 31, Jul 31,
2008 2007 2008 2007
GAAP net income (loss) $(15,125) $(3,679) $7,546 $(26,512)
Operating adjustments (detailed
above) 23,249 24,510 53,834 67,357
Non-operating expenses (income)
adjustments:
Gain on sale of venture
capital funds - - - (3,591)
Gain on debenture repurchases (139) - (544) -
(Gain) loss on impaired long-
term investments 14,738 - 14,488 (1,738)
Sub-total 14,599 - 13,944 (5,329)
Total pre-tax adjustments 37,848 24,510 67,778 62,028
Income tax adjustments (1,888) (2,121) (334) (2,462)
Income (loss) from discontinued
operations, net of taxes - 47 (2,121) 9,399
Total net adjustments 35,960 22,436 65,323 68,965
Non-GAAP net income and non-GAAP
income from continuing operations $20,835 $18,757 $72,869 $42,453
GAAP net income (loss) per share $(0.04) $(0.01) $0.02 $(0.08)
Total adjustments detailed above 0.10 0.06 0.19 0.20
Non-GAAP net income per share and
non-GAAP income from continuing
operations per share $0.06 $0.05 $0.21 $0.12
GAAP weighted average shares 351,878 348,177 353,290 346,731
Change from basic to diluted
weighted average shares 1,319 2,969 - 2,217
Non-GAAP weighted average shares 353,197 351,146 353,290 348,948
Revisions were made to prior period amounts in order to conform to the
current period's presentation.
SOURCE Novell, Inc.
