NOVELL, INC. 
By WALTHAM, Mass., May 27 /PRNewswire-FirstCall/ -- Novell, Inc. (Nasdaq: NOVL) today announced financial results for its second fiscal quarter ended April 30, 2010. For the quarter, Novell reported net revenue of $204 million. This compares to net revenue of $216 million for the second fiscal quarter of 2009. GAAP income from operations for the second fiscal quarter of 2010 was $20 million. This compares to GAAP income from operations of $18 million for the second fiscal quarter of 2009. GAAP net income in the second fiscal quarter of 2010 was $20 million, or $0.06 per share. This compares to GAAP net income of $16 million, or $0.05 per share, for the second fiscal quarter of 2009. Foreign currency exchange rates favorably impacted net revenue by $2 million and negatively impacted operating expenses by $6 million and income from operations by $4 million compared to the same period last year.
On a non-GAAP basis, income from operations for the second fiscal quarter of 2010 was $30 million. This compares to non-GAAP income from operations of $35 million in the same period last year. Non-GAAP net income for the second fiscal quarter of 2010 was $24 million, or $0.07 per share. This compares to non-GAAP net income of $29 million, or $0.08 per share, for the second fiscal quarter of 2009. 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."
"We are experiencing good strategic momentum with the execution of our intelligent workload management strategy," said Ron Hovsepian, President and CEO of Novell. "As customers increasingly adopt virtualization and cloud computing models, they need tools to help them securely manage and optimize their computing resources. Since announcing our strategy, we have shipped several products to help customers build, secure, manage and measure workloads. In addition, we are very excited about the new partnerships we have forged with several service providers to extend Novell's reach into the market."
Cash, cash equivalents and short-term investments were $980 million at April 30, 2010, down from $991 million last quarter. Days sales outstanding in accounts receivable was 56 days at the end of the second fiscal quarter of 2010, up from 55 days at the end of the year-ago quarter. Total deferred revenue was $615 million at the end of the second fiscal quarter of 2010, down from $659 million at the end of the year-ago quarter due to the recognition of deferred revenue from our agreement with Microsoft. Total deferred revenue was up from the prior year, excluding the impact of Microsoft. For the second fiscal quarter of 2010, cash flow from operations was negative $7 million. This compares to cash flow from operations of negative $26 million for the second fiscal quarter of 2009.
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 third fiscal quarter of 2010:
-- Net revenue is expected to be between $205 million and $210 million
-- Non-GAAP operating margin is expected to be similar to second fiscal
quarter of 2010 non-GAAP operating margin levels
Conference Call Notification and Web Access Detail
A one-hour conference call with Novell management to discuss the quarter will be broadcast at 5:00PM ET on May 27, 2010. 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. 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, 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 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, 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 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 and speak only as of the date hereof. We are subject to a number of risks, including, among others, risks relating to: uncertainty introduced by the review of various alternatives to enhance stockholder value authorized by our Board, indirect sales, growth rates of our business units, renewal of SUSE Linux Enterprise Server((TM)) 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, 2009 filed with the SEC on December 22, 2009, 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, 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 .
Novell is a registered 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 Fiscal Year-to-Date
-------------------
Apr 30, Apr 30, Apr 30,
2010 Apr 30, 2009 2010 2009
--------
Net revenue:
Software
licenses $27,691 $30,250 $48,884 $58,517
Maintenance
and
subscriptions 153,855 158,329 312,806 317,144
Services (1) 22,468 27,016 44,690 54,805
------ ------ ------ ------
Total net
revenue 204,014 215,595 406,380 430,466
------- ------- ------- -------
Cost of
revenue:
Software
licenses 1,925 1,856 3,613 3,892
Maintenance
and
subscriptions 20,825 21,958 43,397 44,660
Services 18,562 21,468 38,020 43,627
------ ------ ------ ------
Total cost of
revenue 41,312 45,282 85,030 92,179
------ ------ ------ ------
Gross profit 162,702 170,313 321,350 338,287
------- ------- ------- -------
Operating
expenses:
Sales and
marketing 74,853 75,697 143,769 152,591
Product
development 39,368 44,552 79,070 89,944
General and
administrative 28,334 25,032 54,161 49,227
Other
operating
expenses (2) 244 7,408 3,018 15,257
--- ----- ----- ------
Total
operating
expenses 142,799 152,689 280,018 307,019
Income from
operations 19,903 17,624 41,332 31,268
Operating
margin % 9.8% 8.2% 10.2% 7.3%
Other income,
net:
Interest
income, net 2,508 3,333 5,407 9,123
Other 2,678 (3,129) 6,445 (6,555)
----- ------ ----- ------
Total other
income, net 5,186 204 11,852 2,568
----- --- ------ -----
Income from
continuing
operations
before taxes 25,089 17,828 53,184 33,836
Income tax
expense 5,177 2,777 13,083 9,144
----- ----- ------ -----
Income from
continuing
operations 19,912 15,051 40,101 24,692
Income from
discontinued
operations - 566 - 1,602
--- --- --- -----
Net income $19,912 $15,617 $40,101 $26,294
======= ======= ======= =======
Diluted
earnings per
share:
Continuing
operations $0.06 $0.04 $0.11 $0.07
Net income $0.06 $0.05 $0.11 $0.08
Weighted
average
shares 352,008 345,839 350,136 345,543
(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)
Apr 30, 2010 Oct 31, 2009
------------ ------------
Assets
Current assets:
Cash and cash equivalents $581,425 $591,656
Short-term investments 398,161 391,809
Restricted cash 53,052 53,033
Receivables, net 131,864 177,898
Prepaid expenses 20,300 17,708
Current deferred tax assets 4,624 5,521
Other current assets 22,648 26,747
------ ------
Total current assets 1,212,074 1,264,372
Property, plant and equipment, net 163,420 170,459
Long-term investments - 10,303
Goodwill 353,734 356,033
Intangible assets, net 32,488 36,621
Deferred income taxes 19,009 26,717
Other assets 34,033 38,403
------ ------
Total assets $1,814,758 $1,902,908
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $31,682 $37,628
Accrued compensation 58,628 87,928
Other accrued liabilities 79,308 97,154
Income taxes payable 1,059 -
Deferred revenue 441,866 495,245
Total current liabilities 612,543 717,955
Deferred income taxes 8,314 8,403
Other long-term liabilities 46,943 48,502
Long-term deferred revenue 173,170 193,526
------- -------
Total liabilities 840,970 968,386
Stockholders' equity 973,788 934,522
------- -------
Total liabilities and stockholders' equity $1,814,758 $1,902,908
========== ==========
Revisions were made to prior period amounts in order to conform to
the current period's presentation.
Novell, Inc.
Consolidated Unaudited Condensed Statements of Cash Flows
(In thousands)
Fiscal Quarter Ended Fiscal Year-to-Date
-------------------- -------------------
Apr 30, Apr 30, Apr 30, Apr 30,
2010 2009 2010 2009
-------- -------- -------- --------
Cash flows
from
operating
activities
Net income $19,912 $15,617 $40,101 $26,294
Adjustments
to reconcile
net income
to net cash
used in
operating
activities:
Stock-based
compensation
expense 8,292 5,691 14,742 13,722
Depreciation
and
amortization 7,218 10,452 14,655 21,473
Change in
accounts
receivable
allowances 638 124 (571) 336
Utilization
of
previously
reserved
acquired net
operating
losses - (1,102) - -
Gain on
debenture
repurchases - - - (68)
Income from
discontinued
operations - (566) - (1,602)
Impairment of
investments - 1,419 - 3,096
Gain on sale
of
previously
impaired
investments (2,781) - (8,009) -
Loss on sale
of long-
term
investments 814 - 814 -
Loss (gain)
on sale of
subsidiaries - 184 - (16)
Changes in
current
assets and
liabilities,
excluding
the
effect of
acquisitions
and
dispositions (41,487) (57,514) (63,930) (76,332)
------- ------- ------- -------
Net cash used
in operating
activities (7,394) (25,695) (2,198) (13,097)
------ ------- ------ -------
Cash flows
from
investing
activities
Purchases of
property,
plant and
equipment (5,304) (3,070) (13,432) (6,582)
Short-term
investment
activity (14,881) 3,877 (2,883) 10,420
Long-term
investment
activity 1,326 1,201 8,629 1,736
Change in
restricted
cash (7) (82) (19) (260)
Cash proceeds
from sale of
discontinued
operations 228 - 471 1,036
Net cash paid
for
acquisitions - (5,522) - (48,472)
Other (627) 3,823 527 1,473
---- ----- --- -----
Net cash
(used in)
provided by
investing
activities (19,265) 227 (6,707) (40,649)
------- --- ------ -------
Cash flows
from
financing
activities
Issuances of
common stock 4,704 169 5,536 1,152
Excess tax
effects from
stock-based
compensation - (2,814) 1 (2,788)
Debt
repayment - (186) - (378)
Debenture
repurchases - - - (3,869)
--- --- --- ------
Net cash
provided by
(used in)
financing
activities 4,704 (2,831) 5,537 (5,883)
----- ------ ----- ------
Effect of
exchange
rate changes
on cash (3,670) 154 (6,863) (457)
------ --- ------ ----
Decrease in
cash and
cash
equivalents (25,625) (28,145) (10,231) (60,086)
Cash and cash
equivalents
-beginning
of period 607,050 648,093 591,656 680,034
------- ------- ------- -------
Cash and cash
equivalents
-end of
period $581,425 $619,948 $581,425 $619,948
======== ======== ======== ========
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
-------------------- -------------------
Apr 30, Apr 30, Apr 30, Apr 30,
2010 2009 2010 2009
-------- -------- -------- --------
GAAP
income
from
operations $19,903 $17,624 $41,332 $31,268
------- ------- ------- -------
Adjustments:
Stock-
based
compensation
expense:
Cost of
revenue 772 671 1,331 1,583
Sales and
marketing 2,349 1,550 4,189 4,113
Product
development 2,075 2,289 4,139 4,794
General
and
administrative 3,096 1,181 5,083 3,232
----- ----- ----- -----
Sub-total 8,292 5,691 14,742 13,722
----- ----- ------ ------
Acquisition-
related
intangible
asset
amortization:
Cost of
revenue 1,364 2,735 2,454 5,488
Sales and
marketing 671 1,562 1,679 3,112
--- ----- ----- -----
Sub-total 2,035 4,297 4,133 8,600
----- ----- ----- -----
Other
operating
expenses
(income):
Restructuring
expense - 7,224 2,774 15,273
Strategic
alternatives
review
expense 1,494 - 1,494 -
Litigation
related
activity (1,250) - (1,250) -
Loss
(gain) on
sale of
subsidiaries - 184 - (16)
--- --- --- ---
Sub-total 244 7,408 3,018 15,257
--- ----- ----- ------
Total
operating
adjustments 10,571 17,396 21,893 37,579
Non-GAAP
income
from
operations $30,474 $35,020 $63,225 $68,847
======= ======= ======= =======
Non-GAAP
operating
margin % 14.9% 16.2% 15.6% 16.0%
Novell, Inc.
Unaudited Non-GAAP Adjusted Net Income
(In thousands, except per share data)
Fiscal Quarter Ended Fiscal Year-to-Date
-------------------- -------------------
Apr 30, Apr 30, Apr 30, Apr 30,
2010 2009 2010 2009
-------- -------- -------- --------
GAAP net
income $19,912 $15,617 $40,101 $26,294
------- ------- ------- -------
Operating
adjustments
(detailed
above) 10,571 17,396 21,893 37,579
Non-
operating
expenses
(income)
adjustments:
Net gain on
sale of
previously
impaired
investments (1,967) - (7,195) -
Gain on
debenture
repurchases - - - (68)
Impairment of
investments - 1,419 - 3,096
Sub-total (1,967) 1,419 (7,195) 3,028
------ ----- ------ -----
Total pre-
tax
adjustments 8,604 18,815 14,698 40,607
Income tax
adjustments (4,424) (4,517) (5,899) (11,540)
Income from
discontinued
operations - (566) - (1,602)
--- ---- --- ------
Total net
adjustments 4,180 13,732 8,799 27,465
Non-GAAP net
income and
non-GAAP
income
from
continuing
operations $24,092 $29,349 $48,900 $53,759
======= ======= ======= =======
GAAP net
income per
share $0.06 $0.05 $0.11 $0.08
Total
adjustments
detailed
above 0.01 0.03 0.03 0.08
---- ---- ---- ----
Non-GAAP net
income per
share and
non-GAAP
income from
continuing
operations
per share $0.07 $0.08 $0.14 $0.16
===== ===== ===== =====
Non-GAAP
weighted
average
shares 352,008 345,839 350,136 345,543
SOURCE Novell, Inc.
