NOVELL, INC. 
By WALTHAM, Mass., Dec. 3 /PRNewswire-FirstCall/ -- Novell, Inc. (Nasdaq: NOVL) today announced financial results for its fourth fiscal quarter and full fiscal year ended October 31, 2009. For the quarter, Novell reported net revenue of $216 million. This compares to net revenue of $245 million for the fourth fiscal quarter of 2008. GAAP loss from operations for the fourth fiscal quarter of 2009 was $259 million, which included a $279 million non-cash impairment charge to goodwill and intangible assets. This compares to GAAP loss from operations of $6 million for the fourth fiscal quarter of 2008. GAAP net loss in the fourth fiscal quarter of 2009 was $256 million, or $0.74 loss per share. This compares to GAAP net loss of $16 million, or $0.05 loss per share, for the fourth fiscal quarter of 2008. In the fourth fiscal quarter of 2009, foreign currency exchange rates negatively impacted net revenue by $2 million, did not materially impact operating expenses and negatively impacted the loss from operations by $1 million compared to the same period last year.
On a non-GAAP basis, income from operations for the fourth fiscal quarter of 2009 was $37 million. This compares to non-GAAP income from operations of $32 million in the same period last year. Non-GAAP net income for the fourth fiscal quarter of 2009 was $38 million, or $0.11 per share. This compares to non-GAAP net income of $22 million, or $0.06 per share, for the fourth fiscal quarter of 2008. 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."
For the full fiscal year 2009, Novell reported net revenue of $862 million and GAAP loss from operations of $206 million, which included a $279 million non-cash impairment charge to goodwill and intangible assets. Comparatively, net revenue for the full fiscal year 2008 was $957 million and GAAP income from operations was $5 million. GAAP net loss for the full fiscal year 2009 was $213 million, or $0.62 loss per share, compared to a net loss of $9 million, or $0.02 loss per share, for the full fiscal year 2008. In the full fiscal year 2009, foreign currency exchange rates unfavorably impacted net revenue by $17 million, positively impacted operating expenses by $32 million and favorably impacted income from operations by $15 million compared to the prior fiscal year.
On a non-GAAP basis, income from operations for the full fiscal year 2009 was $139 million. This compares to non-GAAP income from operations of $97 million in the prior fiscal year. Non-GAAP net income for the full fiscal year 2009 was $117 million, or $0.34 per share. This compares to non-GAAP net income of $91 million, or $0.26 per share, for the full fiscal year 2008.
For the fourth fiscal quarter of 2009, Novell reported $41 million of product revenue from Open Platform Solutions, of which $39 million was from Linux Platform Products, up 14% compared to product revenue from Linux Platform Products in the same period last year. Product revenue from Identity and Security Management was $32 million, of which Identity, Access and Compliance Management was $30 million, down 14% compared to product revenue from Identity, Access and Compliance Management in the same period last year. Product revenue from Systems and Resource Management was $40 million, down 10% compared to the same period last year. Workgroup product revenue of $78 million decreased 15% compared to the same period last year.
For the full fiscal year 2009, Novell reported $157 million of product revenue from Open Platform Solutions, of which $149 million was from Linux Platform Products, up 21% compared to product revenue from Linux Platform Products in the prior fiscal year. Product revenue from Identity and Security Management was $121 million, of which Identity, Access and Compliance Management was $112 million, down 10% compared to product revenue from Identity, Access and Compliance Management in the prior fiscal year. Product revenue from Systems and Resource Management was $161 million, down 6% compared to the prior fiscal year. Workgroup product revenue of $319 million decreased 13% compared to the prior fiscal year.
"While it was a challenging year in terms of revenue, we worked hard to improve our cost structure, deliver innovative solutions, and expand our partner ecosystem while delivering a significant improvement in non-GAAP operating margin, which increased to 16% from 10% last year," said Ron Hovsepian, President and CEO of Novell. "As we move into 2010, we will focus on invoicing growth as we pursue opportunities in our current markets as well as new opportunities in the emerging market of Intelligent Workload Management."
Cash, cash equivalents and short-term investments were $983 million at October 31, 2009, up from $921 million last quarter. Days sales outstanding in accounts receivable was 75 days at the end of the fourth fiscal quarter of 2009, up from 72 days at the end of the year-ago quarter. Total deferred revenue was $689 million at the end of the fourth fiscal quarter of 2009, down from $730 million at the end of the year-ago quarter. For the full fiscal year 2009, cash flow from operations was $69 million. This compares to cash flow from operations of $56 million for the full fiscal year 2008.
Further details on Novell's reported results are included in the financial schedules that are a part of this release.
Financial Outlook
Novell management issues the following guidance:
For the first fiscal quarter of 2010:
-- Net revenue is expected to be between $200 million and $210 million
-- Non-GAAP operating margin is expected to be between 14% and 16%
-- Invoicing growth is expected to improve from first fiscal quarter 2009
levels
Conference Call Notification and Web Access Detail
A one-hour conference call with Novell management to discuss the quarter and the year will be broadcast at 5:00PM ET on December 3, 2009. The conference call will be available live as a listen-only webcast from Novell's Investor Relations web page at: www.novell.com/company/ir/qresults. The domestic toll-free dial-in number is 866-335-5255, password "Novell." The international dial-in number is +1-706-679-2263, password "Novell."
Following the live event, an archived version of the webcast will be available for twelve months on the Novell Investor Relations web page at: www.novell.com/company/ir/qresults.
A copy of this press release is posted on the Novell Investor Relations web page at: 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, adjusted operating margin, adjusted income from continuing operations, adjusted net income, adjusted income per share from continuing operations and adjusted net income per share both of which are based on an adjusted number of diluted weighted average shares. 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, purchased in-process research and development, and the sale of business operations, long-term investments, and property, plant and equipment.
We also present a projection of our non-GAAP operating margin. This projection is a forward-looking, non-GAAP financial measure. The corresponding GAAP financial measure of operating margin is not available and cannot be provided without undue effort because we are unable to accurately forecast information regarding expenses or gains such as, but not limited to, those listed above. We believe that the corresponding GAAP financial measure is not likely to be significant to an understanding of our business because there is likely to be substantial variability between projected and actual realization of the expenses and gains described above and/or that such expenses or gains are likely to arise outside of the ordinary course of business.
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, targets, and prospects; future opportunities; operating margins; progress of growth businesses; invoicing growth; profitability; 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 the Company and in which the Company 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, speak only as of the date hereof, and are subject to a number of factors, including, but not limited to: difficulties, delays or unexpected costs in completing our cost reduction and sales growth strategic initiatives; our ability to attract and retain new customers through our indirect sales strategy; our reliance on an indirect sales channel for the distribution of products; our ability to renew SLES(TM) subscriptions with those customers who have received SLES certificates from Microsoft; an accelerated decline in our OES and NetWare-related revenue stream; the ability of our Open Platform Solutions, Identity and Security Management, and Systems and Resource Management business unit segments to grow at expected rates; our ability to successfully integrate acquired companies; our ability to compete in markets for infrastructure software services; our ability to meet customer demand for technical support services; our ability to maintain a strong brand; delays in the introduction of new products; increased foreign research and development operations; reliance on software licensed from third parties; our ability to attract and retain talented employees; claims that we have infringed the intellectual property rights of others; adverse results in legal disputes; our ability to protect our confidential information; impairment of goodwill or amortizable intangible assets causing a charge to earnings; exposure to increased economic and regulatory uncertainties from operating a global business; cancellations or reductions in the scope of our engagements with professional services clients; and uncertain economic conditions and reductions in IT spending.
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, 2008 filed with the SEC on December 23, 2008, 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) delivers an interoperable Linux* platform and a portfolio of integrated IT management software designed to help 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 www.novell.com.
Novell and the Novell logo are registered trademarks and SLES is a trademark of Novell, Inc. in the United States and other countries. *All third party marks are the property of their respective owners.
Novell, Inc.
Consolidated Unaudited Condensed Statements of Operations
(In thousands, except per share data)
Fiscal Quarter Ended Fiscal Year Ended
-------------------- -----------------
Oct 31, 2009 Oct 31, 2008 Oct 31, 2009 Oct 31, 2008
------------ ------------ ------------ ------------
Net revenue:
Software
licenses $31,382 $51,362 $116,919 $188,983
Maintenance and
subscriptions 159,902 159,656 640,745 616,493
Services (1) 24,351 33,718 104,521 151,037
------ ------ ------- -------
Total net
revenue 215,635 244,736 862,185 956,513
------- ------- ------- -------
Cost of
revenue:
Software
licenses 3,464 4,791 11,140 17,230
Maintenance and
subscriptions 14,120 12,865 53,036 49,114
Services 30,085 39,587 122,655 168,895
------ ------ ------- -------
Total cost of
revenue 47,669 57,243 186,831 235,239
------ ------ ------- -------
Gross profit 167,966 187,493 675,354 721,274
------- ------- ------- -------
Operating
expenses:
Sales and
marketing 68,760 90,858 295,998 368,719
Product
development 45,756 50,455 181,383 191,547
General and
administrative 26,948 27,014 102,172 110,723
Other operating
expenses (2) 285,636 25,509 302,293 45,509
------- ------ ------- ------
Total operating
expenses 427,100 193,836 881,846 716,498
(Loss) income
from
operations (259,134) (6,343) (206,492) 4,776
Operating
margin % -120.2% -2.6% -23.9% 0.5%
Other income,
net:
Interest
income, net 3,208 7,416 15,275 41,223
Other (2,392) (15,546) (12,757) (23,121)
------ ------- ------- -------
Total other
income, net 816 (8,130) 2,518 18,102
--- ------ ----- ------
(Loss) income
from
continuing
operations
before taxes (258,318) (14,473) (203,974) 22,878
Income tax
(benefit)
expense (2,629) 3,291 10,666 35,217
------ ----- ------ ------
Loss from
continuing
operations (255,689) (17,764) (214,640) (12,339)
Income from
discontinued
operations
before taxes - 1,473 1,904 2,758
Income tax
benefit on
discontinued
operations - - - (836)
--- --- --- ----
Income from
discontinued
operations - 1,473 1,904 3,594
Net loss $(255,689) $(16,291) $(212,736) $(8,745)
========= ======== ========= =======
Basic loss
per share:
Continuing
operations $(0.74) $(0.05) $(0.62) $(0.04)
Net loss $(0.74) $(0.05) $(0.62) $(0.02)
Weighted
average
shares 347,043 345,038 345,493 350,207
(1) Services includes professional services, technical support and
training services.
(2) See Page 9 of 12 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)
Oct 31, 2009 Oct 31, 2008
------------ ------------
Assets
Current assets:
Cash and cash equivalents $591,656 $680,034
Short-term investments 391,809 387,813
Restricted cash 53,033 52,701
Receivables, net 177,898 193,088
Prepaid expenses 33,915 34,365
Current deferred tax assets 5,521 5,685
Other current assets 26,747 32,006
------ ------
Total current assets 1,280,579 1,385,692
Property, plant and equipment, net 170,459 174,978
Long-term investments 10,303 14,972
Goodwill 356,033 582,117
Intangible assets, net 36,621 53,320
Deferred income taxes 26,717 36,244
Other assets 22,196 22,026
------ ------
Total assets $1,902,908 $2,269,349
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $37,628 $36,982
Accrued compensation 101,031 102,317
Other accrued liabilities 97,154 108,929
Income taxes payable - 22,563
Senior convertible debentures - 125,668
Deferred revenue 495,245 503,174
Total current liabilities 731,058 899,633
Deferred income taxes 8,403 11,725
Other long-term liabilities 35,399 43,587
Long-term deferred revenue 193,526 226,876
------- -------
Total liabilities 968,386 1,181,821
Stockholders' equity 934,522 1,087,528
------- ---------
Total liabilities and stockholders' equity $1,902,908 $2,269,349
========== ==========
Novell, Inc.
Consolidated Unaudited Condensed Statements of Cash Flows
(In thousands)
Fiscal Fiscal
Quarter Ended Year Ended
------------- ----------
Oct 31, Oct 31, Oct 31, Oct 31,
2009 2008 2009 2008
------ ------ ------ ------
Cash flows from
operating
activities
Net loss $(255,689) $(16,291) $(212,736) $(8,745)
Adjustments to
reconcile net
loss to net cash
provided by
operating
activities:
Stock-based
compensation
expense 5,683 8,448 25,881 33,818
Depreciation and
amortization 9,657 12,065 40,675 42,892
Change in accounts
receivable
allowances 827 (649) 444 (254)
Utilization of
previously reserved
acquired net
operating losses 2,125 - 2,580 5,026
Purchased in-process
research and
development - - - 2,700
Net gain on sale of
property, plant and
equipment (2,199) - (2,199) -
Gain on debenture
repurchases - (4,062) (11) (4,606)
Gain on discontinued
operations, before
taxes - (1,473) (1,904) (2,653)
Impairment of
investments - 15,536 5,466 30,024
Gain on sale of
previously
impaired long-
term investments (300) (1,969) (300) (1,969)
Impairment of
goodwill and
intangible
assets 279,135 7,664 279,135 7,664
(Gain) loss on
sale of
subsidiaries - (117) (16) 3,694
Changes in
current assets
and liabilities,
excluding the
effect of
acquisitions and
dispositions 12,179 56,469 (68,245) (51,721)
------ ------ ------- -------
Net cash
provided by
operating
activities 51,418 75,621 68,770 55,870
------ ------ ------ ------
Cash flows from
investing
activities
Purchases of
property, plant and
equipment (7,324) (9,193) (22,087) (37,716)
Net proceeds from
the sale of
property, plant
and equipment 10,748 - 10,748 -
Short-term
investment activity (5,199) (3,337) 5,100 355,923
Long-term
investment activity 300 3,020 4,209 24,757
Change in
restricted cash (25) (291) (332) (52,701)
Net cash proceeds
from sale of
discontinued
operations - 1,473 1,036 564
Net cash proceeds
(distributions) from
subsidiary sales - 6,256 - (171)
Cash paid for
acquisitions, net of
cash acquired - - (48,472) (219,553)
Purchases of
intangible assets - (6,000) - (12,000)
Other 1,330 (9,347) 7,228 (5,793)
----- ------ ----- ------
Net cash (used
in) provided
by investing
activities (170) (17,419) (42,570) 53,310
---- ------- ------- ------
Cash flows from
financing
activities
Issuances of
common stock 641 679 3,566 13,297
Excess tax
effects from
stock-based
compensation 13 1,691 (2,775) 18,500
Common stock
repurchases/
retirements - (22,157) - (66,820)
Debt (repayment)
issuance (4,087) 4,795 (4,658) 4,795
Debenture
repurchases - (314,043) (125,537) (456,500)
- -------- -------- --------
Net cash used in
financing
activities (3,433) (329,035) (129,404) (486,728)
------ -------- -------- --------
Increase
(decrease) in
cash and cash
equivalents 47,815 (270,833) (103,204) (377,548)
Effect of foreign
currency
exchange rate
fluctuations 6,977 (22,970) 14,826 (22,237)
Cash and cash
equivalents -
beginning of
period 536,864 973,837 680,034 1,079,819
------- ------- ------- ---------
Cash and cash
equivalents - end
of period $591,656 $680,034 $591,656 $680,034
======== ======== ======== ========
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 Fiscal Year
Ended Ended
---------------- -------------
Oct 31, Oct 31, Oct 31, Oct 31,
2009 2008 2009 2008
-------- -------- -------- --------
GAAP (loss) income from
operations $(259,134) $(6,343) $(206,492) $4,776
--------- ------- --------- ------
Adjustments:
Stock-based compensation expense:
Cost of revenue 512 926 2,649 3,621
Sales and marketing 1,659 2,734 7,015 10,134
Product development 1,721 2,463 9,332 10,363
General and administrative 1,791 2,325 6,885 9,700
----- ----- ----- -----
Sub-total 5,683 8,448 25,881 33,818
----- ----- ------ ------
Acquisition-related intangible
asset amortization:
Cost of revenue 2,098 3,183 9,984 9,217
Sales and marketing 2,706 1,341 7,296 3,771
Sub-total 4,804 4,524 17,280 12,988
----- ----- ------ ------
Other operating expenses
(income):
Restructuring expenses 8,700 17,316 25,200 28,645
IT outsourcing transition
costs - - 173 -
Litigation-related expense - 500 - 1,250
Purchased in-process
research and development - - - 2,700
Acquisition integration
costs - 146 - 1,556
(Gain) loss on sale of
subsidiaries - (117) (16) 3,694
Net gain on sale of
property, plant and
equipment (2,199) - (2,199) -
Impairment of goodwill and
intangible assets 279,135 7,664 279,135 7,664
------- ----- ------- -----
Sub-total 285,636 25,509 302,293 45,509
------- ------ ------- ------
Total operating adjustments 296,123 38,481 345,454 92,315
Non-GAAP income from operations $36,989 $32,138 $138,962 $97,091
======= ======= ======== =======
Operating margin % 17.2% 13.1% 16.1% 10.2%
Novell, Inc.
Unaudited Non-GAAP Adjusted Net Income
(In thousands, except per share data)
Fiscal Quarter Fiscal Year
Ended Ended
---------------- -------------
Oct 31, Oct 31, Oct 31, Oct 31,
2009 2008 2009 2008
-------- -------- -------- --------
GAAP net loss $(255,689) $(16,291) $(212,736) $(8,745)
--------- -------- --------- -------
Operating adjustments
(detailed above) 296,123 38,481 345,454 92,315
Non-operating expenses
(income) adjustments:
Gain on debenture
repurchases - (4,062) (11) (4,606)
Impairment of investments - 15,536 5,466 30,024
Gain on sale of previously
impaired long-term
investments (300) (1,969) (300) (1,969)
---- ------ ---- ------
Sub-total (300) 9,505 5,155 23,449
---- ----- ----- ------
Total pre-tax adjustments 295,823 47,986 350,609 115,764
Income tax adjustments (2,130) (8,020) (19,219) (12,065)
Income from discontinued
operations, net of taxes - (1,473) (1,904) (3,594)
--- ------ ------ ------
Total net adjustments 293,693 38,493 329,486 100,105
Non-GAAP net income and non-GAAP
income from continuing
operations $38,004 $22,202 $116,750 $91,360
======= ======= ======== =======
GAAP net loss per share $(0.74) $(0.05) $(0.62) $(0.02)
Total adjustments detailed
above 0.85 0.11 0.96 0.28
---- ---- ---- ----
Non-GAAP net income per share and
non-GAAP income from continuing
operations per share $0.11 $0.06 $0.34 $0.26
===== ===== ===== =====
GAAP weighted average shares 347,043 345,038 345,493 350,207
Change from basic to diluted
weighted average shares 1,707 1,111 2,328 1,461
----- ----- ----- -----
Non-GAAP weighted average shares 348,750 346,149 347,821 351,668
======= ======= ======= =======
Revisions were made to prior period amounts in order to conform to the
current period's presentation.
SOURCE Novell, Inc.
