NOVELL, INC. 
By WALTHAM, Mass., Aug. 27 /PRNewswire-FirstCall/ -- Novell, Inc. (Nasdaq: NOVL) today announced financial results for its third fiscal quarter ended July 31, 2009. For the quarter, Novell reported net revenue of $216 million. This compares to net revenue of $245 million for the third fiscal quarter of 2008. GAAP income from operations for the third fiscal quarter of 2009 was $21 million, compared to GAAP income from operations of $1 million for the third fiscal quarter of 2008. GAAP net income in the third fiscal quarter of 2009 was $17 million, or $0.05 per share. This compares to GAAP net loss of $15 million, or $0.04 loss per share, for the third fiscal quarter of 2008. In the third fiscal quarter of 2009, foreign currency exchange rates negatively impacted net revenue by $6 million and favorably impacted operating expenses by $8 million and income from operations by $2 million compared to the same period last year.
On a non-GAAP basis, income from operations for the third fiscal quarter of 2009 was $33 million. This compares to non-GAAP income from operations of $24 million in the year-ago quarter. Non-GAAP net income for the third fiscal quarter of 2009 was $25 million, or $0.07 per share. This compares to non-GAAP net income of $18 million, or $0.05 per share, for the third 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."
Novell reported $40 million of product revenue from Open Platform Solutions, of which $38 million was from Linux Platform Products, up 22% compared to the product revenue from Linux Platform Products from the same period last year. Product revenue from Identity and Security Management was $30 million, of which Identity, Access and Compliance Management was $28 million, down 16% compared to the product revenue from Identity, Access and Compliance Management from the same period last year. Product revenue from Systems and Resource Management was $40 million, down 15% compared to the same period last year. Workgroup product revenue of $81 million decreased 12% compared to the same period last year.
"Operating margin continued to expand year-over-year due to diligent expense management, however revenue performance was similar to many companies in the software industry," said Ron Hovsepian, President and CEO of Novell. "We remain focused on delivering strong operating margins even as we continue to invest to generate long-term revenue growth."
Cash, cash equivalents and short-term investments were $921 million at July 31, 2009, down from $1 billion last quarter due primarily to the retirement of our outstanding convertible debentures. Days sales outstanding in accounts receivable was 71 days at the end of the third fiscal quarter of 2009, improved from 78 days at the end of the year-ago quarter. Total deferred revenue was $674 million at the end of the third fiscal quarter of 2009, down from $726 million at the end of the year-ago quarter. For the third fiscal quarter of 2009, cash flow from operations was $35 million. This compares to cash flow from operations of $29 million in the third fiscal quarter of 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 remains committed to long-term sustainable profitability. Novell management expects to maintain double-digit non-GAAP operating margins in the full fiscal year 2009, barring unforeseen circumstances.
Conference Call Notification and Web Access Detail
A one-hour conference call with Novell management to discuss the quarter will be broadcast at 5:00 PM ET on August 27, 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. 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; expansion of operating margins; progress of growth businesses; profitability; 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. 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 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 site at http://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 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 Fiscal Year-to-
Ended Date
----------------- -----------------
Jul 31, Jul 31, Jul 31, Jul 31,
2009 2008 2009 2008
---- ---- ---- ----
Net revenue:
Software licenses $27,020 $53,003 $85,537 $137,621
Maintenance and subscriptions 163,699 155,898 480,843 456,837
Services (1) 25,365 36,284 80,170 117,319
------ ------ ------ -------
Total net revenue 216,084 245,185 646,550 711,777
------- ------- ------- -------
Cost of revenue:
Software licenses 2,770 5,312 7,676 12,439
Maintenance and subscriptions 13,672 13,301 38,916 36,249
Services 30,541 40,975 92,570 129,308
------ ------ ------ -------
Total cost of revenue 46,983 59,588 139,162 177,996
------ ------ ------- -------
Gross profit 169,101 185,597 507,388 533,781
------- ------- ------- -------
Operating expenses:
Sales and marketing 74,647 95,950 227,238 277,861
Product development 45,683 50,082 135,627 141,092
General and administrative 25,997 27,463 75,224 83,709
Other operating expenses (2) 1,400 11,131 16,657 20,000
----- ------ ------ ------
Total operating expenses 147,727 184,626 454,746 522,662
Income from operations 21,374 971 52,642 11,119
Operating margin % 9.9% 0.4% 8.1% 1.6%
Other income, net:
Interest income, net 2,944 7,384 12,067 33,807
Other (3,810) (16,160) (10,365) (7,575)
------ ------- ------- ------
Total other income, net (866) (8,776) 1,702 26,232
---- ------ ----- ------
Income (loss) from continuing
operations before taxes 20,508 (7,805) 54,344 37,351
Income tax expense 4,151 7,320 13,295 31,926
----- ----- ------ ------
Income (loss) from continuing
operations 16,357 (15,125) 41,049 5,425
Income from discontinued operations
before taxes 302 - 1,904 1,285
Income tax benefit on discontinued
operations - - - (836)
--- --- --- ----
Income from discontinued operations 302 - 1,904 2,121
Net income (loss) $16,659 $(15,125) $42,953 $7,546
======= ======== ======= ======
Diluted earnings per share:
Continuing operations $0.05 $(0.04) $0.12 $0.02
Net income (loss) $0.05 $(0.04) $0.12 $0.02
Weighted average shares 346,660 351,878 346,120 353,290
(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, 2009 Oct 31, 2008
------------ ------------
Assets
Current assets:
Cash and cash equivalents $536,864 $680,034
Short-term investments 384,632 387,813
Restricted cash 53,008 52,701
Receivables, net 169,638 193,088
Prepaid expenses 35,343 34,365
Current deferred tax assets 4,943 5,685
Other current assets 23,921 32,006
------ ------
Total current assets 1,208,349 1,385,692
Property, plant and equipment, net 171,266 174,978
Long-term investments 8,543 14,972
Goodwill 626,404 582,117
Intangible assets, net 50,516 53,320
Deferred income taxes 29,479 36,244
Other assets 20,801 22,026
------ ------
Total assets $2,115,358 $2,269,349
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $30,695 $36,982
Accrued compensation 94,029 102,317
Other accrued liabilities 85,952 108,929
Income taxes payable 3,583 22,563
Senior convertible debentures - 125,668
Deferred revenue 476,221 503,174
------- -------
Total current liabilities 690,480 899,633
Deferred income taxes 14,374 11,725
Other long-term liabilities 39,628 43,587
Long-term deferred revenue 198,103 226,876
------- -------
Total liabilities 942,585 1,181,821
Stockholders' equity 1,172,773 1,087,528
--------- ---------
Total liabilities and stockholders' equity $2,115,358 $2,269,349
========== ==========
Novell, Inc.
Consolidated Unaudited Condensed Statements of Cash Flows
(In thousands)
Fiscal Quarter Fiscal Year-to-
Ended Date
----------------- ------------------
Jul 31, Jul 31, Jul 31, Jul 31,
2009 2008 2009 2008
---- ---- ---- ----
Cash flows from operating
activities
Net income (loss) $16,659 $(15,125) $42,953 $7,546
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Stock-based compensation
expense 6,476 7,593 20,198 25,370
Depreciation and
amortization 9,545 11,980 31,018 30,827
Change in accounts
receivable allowances (705) (250) (364) 421
Utilization of previously
reserved acquired net
operating losses 455 1 455 5,026
Purchased in-process
research and development - - - 2,700
Loss (gain) on debenture
repurchases 57 (139) (11) (544)
Gain on discontinued
operations, before taxes (302) - (1,904) (1,180)
Impairment of investments 2,370 14,738 5,466 14,738
Gain on sale of previously
impaired long-term
investments - - - (250)
Loss (gain) on sale of
subsidiaries - 3,811 (16) 3,811
IT outsourcing transition
costs 173 - 173 -
Changes in current assets and
liabilities, excluding the
effect of acquisitions and
dispositions (205) 6,002 (76,900) (107,295)
---- ----- ------- --------
Net cash provided by (used in)
operating activities 34,523 28,611 21,068 (18,830)
------ ------ ------ -------
Cash flows from investing
activities
Purchases of property,
plant and equipment (8,181) (12,201) (14,763) (28,523)
Short-term investment
activity (121) 33,820 10,299 359,260
Long-term investment
activity 2,173 7,215 3,909 21,738
Change in restricted cash (47) (286) (307) (52,410)
Net cash proceeds
(distributions) from sale
of discontinued operations - - 1,036 (909)
Net distributions from
subsidiary sales - (6,427) - (6,427)
Cash paid for acquisitions,
net of cash acquired - 920 (48,472) (219,553)
Purchases of intangible
assets - (6,000) - (6,000)
Other 8,657 1,138 10,031 3,365
----- ----- ------ -----
Net cash provided by (used in)
investing activities 2,481 18,179 (38,267) 70,541
----- ------ ------- ------
Cash flows from financing
activities
Issuance of common stock 1,773 2,366 2,925 12,618
Excess tax benefits from
stock-based compensation - (7,186) (2,788) 16,809
Common stock repurchases/
retirements - (44,663) - (44,663)
Debt repayment (193) - (571) -
Debenture repurchases (121,668) (26,868) (125,537) (142,457)
-------- ------- -------- --------
Net cash used in financing
activities (120,088) (76,351) (125,971) (157,693)
-------- ------- -------- --------
Decrease in cash and cash
equivalents (83,084) (29,561) (143,170) (105,982)
Cash and cash equivalents -
beginning of period 619,948 1,003,398 680,034 1,079,819
------- --------- ------- ---------
Cash and cash equivalents -
end of period $536,864 $973,837 $536,864 $973,837
======== ======== ======== ========
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-to-
Ended Date
---------------- ---------------
Jul 31, Jul 31, Jul 31, Jul 31,
2009 2008 2009 2008
---- ---- ---- ----
GAAP income from operations $21,374 $971 $52,642 $11,119
------- ---- ------- -------
Adjustments:
Stock-based compensation expense:
Cost of revenue 554 871 2,137 2,695
Sales and marketing 1,243 1,953 5,356 7,400
Product development 2,817 2,543 7,611 7,900
General and administrative 1,862 2,226 5,094 7,375
----- ----- ----- -----
Sub-total 6,476 7,593 20,198 25,370
----- ----- ------ ------
Acquisition-related intangible
asset amortization:
Cost of revenue 2,398 3,184 7,886 6,035
Sales and marketing 1,478 1,341 4,590 2,429
----- ----- ------ -----
Sub-total 3,876 4,525 12,476 8,464
----- ----- ------ -----
Other operating expenses (income):
Restructuring expenses 1,227 6,570 16,500 11,329
IT outsourcing transition
costs 173 - 173 -
Litigation-related expense - 750 - 750
Purchased in-process
research and development - - - 2,700
Acquisition integration
costs - - - 1,410
Loss (gain) on sale of
subsidiaries - 3,811 (16) 3,811
--- ----- --- -----
Sub-total 1,400 11,131 16,657 20,000
----- ------ ------ ------
Total operating adjustments 11,752 23,249 49,331 53,834
Non-GAAP income from operations $33,126 $24,220 $101,973 $64,953
======= ======= ======== =======
Operating margin % 15.3% 9.9% 15.8% 9.1%
Novell, Inc.
Unaudited Non-GAAP Adjusted Net Income
(In thousands, except per share data)
Fiscal Quarter Fiscal Year-to-
Ended Date
---------------- ---------------
Jul 31, Jul 31, Jul 31, Jul 31,
2009 2008 2009 2008
---- ---- ---- ----
GAAP net income (loss) $16,659 $(15,125) $42,953 $7,546
------- -------- ------- ------
Operating adjustments (detailed
above) 11,752 23,249 49,331 53,834
Non-operating expenses (income)
adjustments:
Loss (gain) on debenture
repurchases 57 (139) (11) (544)
Impairment of investments 2,370 14,738 5,466 14,738
Gain on sale of previously
impaired long-term
investments - - - (250)
--- --- --- ----
Sub-total 2,427 14,599 5,455 13,944
----- ------ ----- ------
Total pre-tax adjustments 14,179 37,848 54,786 67,778
Income tax adjustments (5,549) (4,841) (17,089) (4,045)
Income from discontinued
operations, net of taxes (302) - (1,904) (2,121)
---- --- ------ ------
Total net adjustments 8,328 33,007 35,793 61,612
Non-GAAP net income and non-GAAP
income from continuing operations $24,987 $17,882 $78,746 $69,158
======= ======= ======= =======
GAAP net income (loss) per share $0.05 $(0.04) $0.12 $0.02
Total adjustments detailed
above 0.02 0.09 0.11 0.18
---- ---- ---- ----
Non-GAAP net income per share and
non-GAAP income from continuing
operations per share $0.07 $0.05 $0.23 $0.20
===== ===== ===== =====
GAAP weighted average shares 346,660 351,878 346,120 353,290
Change from basic to diluted
weighted average shares - 1,319 - -
--- ----- --- ---
Non-GAAP weighted average shares 346,660 353,197 346,120 353,290
======= ======= ======= =======
Revisions were made to prior period amounts in order to conform to the
current period's presentation.
SOURCE Novell, Inc.
