NOVELL, INC. 
By WALTHAM, Mass., March 3, 2011 /PRNewswire/ -- Novell, Inc. (Nasdaq: NOVL) today announced financial results for its first fiscal quarter ended January 31, 2011. For the quarter, Novell reported net revenue of $191 million. This compares to net revenue of $202 million for the first fiscal quarter of 2010. GAAP income from operations for the first fiscal quarter of 2011 was $12 million. This compares to GAAP income from operations of $21 million for the first fiscal quarter of 2010. GAAP net loss in the first fiscal quarter of 2011 was $18 million, or a $0.05 loss per share, which included a $31 million net tax charge in connection with the planned repatriation of a majority of non-U.S. cash. This compares to GAAP net income of $20 million, or $0.06 per share, for the first fiscal quarter of 2010. Foreign currency exchange rates negatively impacted revenue and positively impacted operating expenses by $1 million and did not materially impact income from operations year-over-year.
On a non-GAAP basis, income from operations for the first fiscal quarter of 2011 was $31 million. This compares to non-GAAP income from operations of $33 million in the same period last year. Non-GAAP net income for the first fiscal quarter of 2011 was $26 million, or $0.07 per share. This compares to non-GAAP net income of $25 million, or $0.07 per share, for the first fiscal quarter of 2010. A reconciliation of GAAP to non-GAAP results is provided in the financial schedules as part of this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
Cash, cash equivalents and short-term investments were $1.1 billion at January 31, 2011, consistent with last quarter. Days sales outstanding in accounts receivable was 42 days at the end of the first fiscal quarter of 2011, down from 50 days at the end of the year-ago quarter. Total deferred revenue was $593 million at the end of the first fiscal quarter of 2011, down from $646 million at the end of the year-ago quarter. For the first fiscal quarter of 2011, cash flow from operations was $9 million. This compares to cash flow from operations of $5 million for the first fiscal quarter of 2010.
Further details on Novell's reported results are included in the financial schedules that are a part of this release.
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, adjusted operating margin, adjusted net income and adjusted 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 compensation. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are excluded from most analysts' consensus estimates, that are unusual, 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, strategic alternatives review, the sale of business operations, long-term investments, property, plant and equipment, and unusual and discrete income tax effects.
Legal Notice Regarding Forward-Looking Statements
This press release may include 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 of 1995, including those related to future financial and operating results, targets, and prospects; future opportunities; market leadership and positioning; short-term and long-term trends; the macroeconomic environment; customer priorities; timing of realization of projections; functionality, characteristics, quality and performance capabilities of Novell's products and technology; and results achievable and benefits attainable through deployment of Novell's products and provision of services. Forward-looking statements forecasting growth in financial metrics are predicated on assumptions regarding improvements in the overall economy and the markets served by Novell and in which Novell operates, the timing of which are impossible to accurately predict. Actual results may differ materially from the results discussed in or implied by such forward-looking statements, which are based upon information that is currently available to us and/or management's current expectations and speak only as of the date hereof. We are subject to a number of risks, including, among others, the risk that our merger with Attachmate Corporation may be delayed or may not be consummated, the risk that the merger agreement may be terminated in circumstances that require Novell to pay Attachmate a termination fee of $60 million; risks related to the diversion of management's attention from Novell's ongoing business operations; risks regarding the failure of Attachmate to obtain the necessary financing to complete the merger; the effect of the announcement of the merger and the patent sale to CPTN Holdings LLC on Novell's business relationships (including, without limitation, partners and customers), operating results and business generally; and risks related to obtaining the requisite consents to the merger or the patent sale, including, without limitation, the timing (including possible delays) and receipt of regulatory approvals from various governmental entities (including any conditions, limitations or restrictions placed on these approvals) and the risk that one or more governmental entities may deny approval, as well as risks related to indirect sales, growth rates of our business units, renewal of SUSE® Linux Enterprise Server subscriptions with customers who have received certificates from Microsoft, decline rates of Open Enterprise Server and NetWare® revenue, development of products and services, the intelligent workload management market, software vulnerabilities, delays in product releases, reliance on open source software, adequacy of renewal rates, uncertain economic conditions, competition, rapid technological changes, failure to expand brand awareness, adequacy of technical support, pricing pressures, system failures, integration of acquisitions, industry consolidation, challenges resulting from a global business, foreign research and development operations, loss of key employees, intellectual property infringement, litigation matters, unpredictable financial results, impairments, the timing of revenue recognition, our investments and effective use of our cash.
A detailed discussion of these and other factors that could affect our results is included in our SEC filings, including, but not limited to, our Annual Report on Form 10-K for the Fiscal Year Ended October 31, 2010 filed with the SEC on December 13, 2010, which may be obtained by calling (800) 317- 3195, or at our Investor Relations web page at: www.novell.com/company/ir.
We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any forward-looking statements contained in this press release to reflect any change of expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statement is based, in whole or in part.
About Novell
Novell, Inc. (Nasdaq: NOVL), a leader in intelligent workload management, through WorkloadIQ(TM), helps organizations securely deliver and manage computing services across physical, virtual and cloud computing environments. We help customers reduce the cost, complexity, and risk associated with their IT systems through our solutions for identity and security, systems management, collaboration and Linux-based operating platforms. With our infrastructure software and ecosystem of partnerships, Novell integrates mixed IT environments, allowing people and technology to work as one. For more information, visit www.novell.com.
Copyright © 2011 Novell, Inc. All rights reserved. NetWare, Novell, the Novell Logo, the N Logo, and SUSE are registered trademarks and WorkloadIQ is a trademark of Novell, Inc. in the United States and other countries. All third party trademarks are the property of their respective owners.
Novell, Inc.
Consolidated Unaudited Condensed Statements of Operations
(In thousands, except per share data)
Fiscal Quarter Ended
--------------------
Jan 31, Jan 31,
2011 2010
-------- --------
Net revenue:
Software licenses $20,387 $21,193
Maintenance and
subscriptions 150,393 158,951
Services (1) 19,934 22,222
------ ------
Total net revenue 190,714 202,366
------- -------
Cost of revenue:
Software licenses 1,520 1,688
Maintenance and
subscriptions 20,819 22,572
Services 19,210 19,458
Total cost of revenue 41,549 43,718
------ ------
Gross profit 149,165 158,648
------- -------
Operating expenses:
Sales and marketing 67,256 68,916
Product development 38,365 39,702
General and
administrative 20,818 25,827
Other operating
expenses (2) 11,173 2,774
------ -----
Total operating
expenses 137,612 137,219
Income from operations 11,553 21,429
Operating margin % 6.1% 10.6%
Other income, net:
Interest income, net 1,964 2,899
Other income, net 1,992 3,767
Total other income,
net 3,956 6,666
----- -----
Income before taxes 15,509 28,095
Income tax expense 33,451 7,906
------ -----
Net (loss) income $(17,942) $20,189
======== =======
(Loss) income per
share $(0.05) $0.06
Weighted average
shares 352,001 349,144
(1) Services includes professional services, technical support and
training services.
(2) See Page 7 of 10 for a detail of other operating expenses.
Novell, Inc.
Consolidated Unaudited Condensed Balance Sheets
(In thousands)
Jan 31, Oct 31,
2011 2010
-------- --------
Assets
Current assets:
Cash and cash equivalents $981,426 $685,594
Short-term investments 150,009 441,096
Receivables, net 89,465 171,607
Prepaid expenses 15,280 16,233
Current deferred income taxes 36,137 49,169
Other current assets 21,126 33,725
------ ------
Total current assets 1,293,443 1,397,424
Property, plant and equipment,
net 151,378 156,033
Goodwill 353,818 353,415
Intangible assets, net 26,988 28,746
Deferred income taxes 227,363 243,583
Other assets 48,013 46,797
------ ------
Total assets $2,101,003 $2,225,998
========== ==========
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $30,102 $26,785
Accrued compensation 49,319 83,181
Other accrued liabilities 66,412 86,223
Deferred revenue 448,744 487,590
------- -------
Total current liabilities 594,577 683,779
Deferred income taxes 7,622 7,622
Other long-term liabilities 35,997 35,655
Long-term deferred revenue 144,065 163,394
------- -------
Total liabilities 782,261 890,450
Stockholders' equity 1,318,742 1,335,548
--------- ---------
Total liabilities and
stockholders' equity $2,101,003 $2,225,998
========== ==========
Novell, Inc.
Consolidated Unaudited Condensed Statements of Cash Flows
(In thousands)
Fiscal Quarter Ended
--------------------
Jan 31, Jan 31,
2011 2010
-------- --------
Cash flows from operating activities
Net (loss) income $(17,942) $20,189
Adjustments to reconcile net (loss)
income to net cash provided
by operating activities:
Stock-based compensation expense 6,060 6,450
Depreciation and amortization 7,347 7,437
Change in accounts receivable allowances 46 (1,209)
Gain on sale of previously impaired
investments - (5,228)
Deferred income taxes 29,341 4,496
Changes in assets and liabilities (15,685) (26,939)
------- -------
Net cash provided by operating
activities 9,167 5,196
----- -----
Cash flows from investing activities
Purchases of property, plant and
equipment (889) (8,128)
Short-term investment activity 284,703 11,998
Long-term investment activity - 7,303
Cash proceeds from sale of discontinued
operations - 243
Other (738) 1,142
---- -----
Net cash provided by investing
activities 283,076 12,558
------- ------
Cash flows from financing activities
Issuance of common stock 1,366 832
Excess tax effects from stock-based
compensation 181 1
--- ---
Net cash provided by financing
activities 1,547 833
----- ---
Effect of exchange rate changes on cash 2,042 (3,193)
----- ------
Increase in cash and cash equivalents 295,832 15,394
Cash and cash equivalents -beginning of
period 685,594 591,656
------- -------
Cash and cash equivalents -end of
period $981,426 $607,050
======== ========
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)
Fiscal Quarter Ended
--------------------
Jan 31, Jan 31,
2011 2010
-------- --------
GAAP income from operations $11,553 $21,429
------- -------
GAAP operating margin % 6.1% 10.6%
Adjustments:
Stock-based compensation expense:
Cost of revenue 692 559
Sales and marketing 1,891 1,840
Product development 1,735 2,064
General and administrative 1,742 1,987
----- -----
Sub-total 6,060 6,450
----- -----
Acquisition-related intangible asset
amortization:
Cost of revenue 1,129 1,090
Sales and marketing 629 1,008
--- -----
Sub-total 1,758 2,098
----- -----
Other operating expenses (income):
Restructuring expense - 2,774
Strategic alternatives review expense 10,478 -
Litigation related activity 695 -
--- ---
Sub-total 11,173 2,774
------ -----
Total operating adjustments 18,991 11,322
Non-GAAP income from operations $30,544 $32,751
======= =======
Non-GAAP operating margin % 16.0% 16.2%
Novell, Inc.
Unaudited Non-GAAP Adjusted Net Income
(In thousands, except per share data)
Fiscal Quarter Ended
--------------------
Jan 31, Jan 31,
2011 2010
-------- --------
GAAP net (loss) income $(17,942) $20,189
-------- -------
Operating adjustments (detailed above) 18,991 11,322
Non-operating expenses (income)
adjustments:
Gain on sale of previously impaired
investments - (5,228)
--- ------
Sub-total - (5,228)
--- ------
Total pre-tax adjustments 18,991 6,094
Income tax adjustments 25,124 (1,475)
------ ------
Total net adjustments 44,115 4,619
Non-GAAP net income $26,173 $24,808
======= =======
GAAP net (loss) income per share $(0.05) $0.06
Total adjustments detailed above 0.12 0.01
---- ----
Non-GAAP net income per share $0.07 $0.07
===== =====
GAAP weighted average shares 352,001 349,144
Change from basic to diluted weighted
average shares 4,326 -
----- ---
Non-GAAP weighted average shares 356,327 349,144
======= =======
SOURCE Novell, Inc.
