UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
September 30,
2009
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number:
000-51461
Unica Corporation
(Exact name of registrant as
specified in its charter)
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Delaware
(State or other jurisdiction
of
incorporation or organization)
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04-3174345
(I.R.S. Employer
Identification No.)
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170 Tracer Lane
Waltham, Massachusetts
02451-1379
(Address of principal executive
offices)
(781) 839-8000
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common stock, $0.01 par value per share
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Nasdaq Global Market
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in Rule
12b-2 of the
Exchange
Act). Yes o No þ
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant as of
March 31, 2009 was approximately $48,442,000 based on the
last reported sale price of the common stock on The Nasdaq
Global Market on March 31, 2009.
The number of shares of the registrants common stock
outstanding as of December 1, 2009 was 20,855,000.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the registrants definitive Proxy Statement for
the registrants 2010 Annual Meeting of Stockholders, which
is expected to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days
of the registrants fiscal year ended September 30,
2009, are incorporated by reference into Part III of this
Annual Report on Form
10-K. With
the exceptions of the portions of the Proxy Statement expressly
incorporated by reference herein, such document shall not be
deemed filed with this Annual Report on Form
10-K.
UNICA
CORPORATION
ANNUAL REPORT ON
FORM 10-K
FOR FISCAL YEAR ENDED SEPTEMBER 30, 2009
Table of
Contents
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This Annual Report on
Form 10-K
contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933, as amended, and
section 21E of the Securities Exchange Act of 1934, as
amended. You can identify these statements by forward-looking
words such as expect, anticipate,
intend, plan, believe,
seek, estimate, may, or
similar words. You should read statements that contain these
words carefully because they discuss our future expectations,
contain projections of our future results of operations or of
our financial condition, or state other
forward-looking information. We believe that it is
important to communicate our future expectations to our
investors. However, there may be events in the future that we
are not able to accurately predict or control and that may cause
our actual results to differ materially from the expectations we
describe in our forward-looking statements. Investors are
cautioned that all forward-looking statements involve risks and
uncertainties, and actual results may differ materially from
those discussed as a result of various factors, including those
factors described in Risk Factors in Item 1A of
this Annual Report on
Form 10-K.
Readers should not place undue reliance on our forward-looking
statements, and we assume no obligation and do not intend to
update any forward-looking statements.
References to Unica, the Company,
registrant, we, us,
our, and similar pronouns refer to Unica Corporation
and its consolidated subsidiaries.
PART I
Overview
Unica Corporation was incorporated in Massachusetts in December
1992 and reincorporated in Delaware in June 2003. We are a
leading provider of software and services used to automate
marketing processes. Focused exclusively on the needs of
marketers, Unicas software streamlines the marketing
process for relationship marketing, online marketing, and
marketing operations from analysis and planning, to
budgeting, online and offline execution and measurement.
Offering one of the most comprehensive Enterprise Marketing
Management, or EMM, suites on the market, Unicas software
delivers a marketing system of record a
dedicated solution through which marketers capture, record and
easily manage marketing activity, information and assets,
rapidly design online and offline campaigns, analyze web usage
data, and report on performance. Our solutions are designed to
benefit our customers by increasing their revenue and
profitability, improving their visibility to marketing activity,
and strengthening their marketing investment accountability.
Our software products can be licensed on a perpetual or
subscription basis, and can be deployed either at the
customers location (on premise deployment model) or
managed as a remotely hosted solution by our Marketing Services
Provider partners, or MSPs, or by Unica (using on-demand
versions of our software). Our software uses an open, scalable
and flexible product architecture with built-in data access
functionality, which facilitates rapid implementation and
deployment in any deployment model.
Our worldwide, customer installed base consists of over 1,000
organizations in a wide range of industries, including financial
services, insurance, retail, telecommunications, and travel and
hospitality. Our customers include four of the top five global
telecommunications companies, 12 of the top 20 retailers in
North America, all top 10 retail banks in the U.S., seven
of the top 10 U.S. travel and hospitality companies, four
of the top five global automobile companies, eight of the top 10
global life sciences companies, five of the top 10 global
insurance companies, as well as numerous large and medium-sized
companies across other industries. We offer our software
primarily through our direct sales force, as well as through
alliances with partners, including MSPs, resellers, distributors
and systems integrators. We also provide a full range of
services to our customers, including implementation, training,
consulting, and maintenance and technical support. In addition
to reselling and deploying our products, MSPs and systems
integrators also offer a range of marketing program design,
support, and execution services on an on-demand or outsourced
basis.
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Available
Information
Our website address is www.unica.com. We make available free of
charge through our website our Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
and amendments to these reports, as soon as reasonably
practicable after we electronically file such material with, or
furnish such material to, the Securities and Exchange
Commission, or SEC. Our reports filed with the SEC are also
available at the SECs website at www.sec.gov. Our Code of
Business Conduct and Ethics, and any amendments to our Code of
Business Conduct and Ethics, are also available on our website.
We are not including the information contained on our website as
part of, or incorporating it by reference into, this Annual
Report on
Form 10-K.
Industry
Background
Despite the significant investments in media advertising,
promotions, direct marketing activities, Internet advertising
and other marketing services, most businesses have not fully
automated their marketing functions or developed capabilities to
measure and continually improve results. Other business
functions, such as sales, manufacturing, logistics and finance,
have implemented comprehensive software applications to automate
workflow, business processes, information management and
measurement. Marketing organizations, however, typically
continue to rely on a combination of manual processes,
internally developed software programs, and desktop office
productivity software such as graphics packages, word processing
and spreadsheets to conduct marketing activities, which limits
their ability to effectively manage, track and measure results
or improve productivity.
Changing
Market Dynamics
Powerful trends are reshaping businesses, driving the need for
more robust software applications that can meet the changing
needs of marketing organizations:
Growth of online channels increases marketing
complexity. The proliferation of
media particularly the rapid growth in Internet
usage, the number of radio, cable and satellite television
channels, text messaging, user-generated content, and
blogs has changed the concept of mass
media and is requiring marketers to understand, use and
measure a broader and more complex marketing mix to reach
consumers. The consumer purchasing process itself has also
become cross-channel, as consumers increasingly research
decisions on the Internet but then purchase in-store and
vice-versa. Forrester Research, Inc. estimates that almost
$400 billion of store sales or 16% of total
retail sales are directly influenced by the Internet
as consumers research products online and purchase them offline.
This figure is expected to grow at a compound annual growth rate
of 17% over the next five years, resulting in more than $1
trillion of store sales by 2012. In response to this growth,
Forresters recent US Interactive Marketing Forecast
2009 To 2014 projects that marketers will increase their
spending in interactive channels (e.g. email, search, online
video, etc.) by a compound growth rate of 17% from 2009 to 2014.
We believe marketers must use technology to understand
buyers online and offline behavior and productively market
to them across channels.
At the same time, demographic changes are leading businesses to
develop separate products and services to target distinct groups
of consumers, rather than simply developing a single product or
service to be marketed broadly to a large, but not necessarily
homogeneous, audience. Businesses now must implement more
frequent and diversified marketing programs, often targeted to
the individual consumer, with the ability for offers to be
varied based on real-time data from the Internet, call center
and other interactive channels.
Growth in consumer power. The balance of power
in the marketplace has been shifting from businesses to
consumers. Consumers today exercise unprecedented control over
the marketing and buying process through the use of new
technologies, such as Internet ad blockers, digital video
recorders, email filters, Really Simple Syndication, or RSS,
feeds and consumer-generated online content and reviews. With
todays technology, consumers can quickly research pricing,
read peer and expert reviews and take advantage of unlimited
choices in product options, as well as determine how, when, and
what marketing
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they receive. Moreover, recent privacy regulations, such as
national and local do not call registries and
anti-spam legislation, permit consumers to opt out of specific
marketing channels and restrict businesses from using personal
information for specified marketing purposes. This power-shift
requires marketers to be more adept at understanding individual
consumer preferences and needs, and puts increasing pressure on
marketers to adopt technology to automatically gather and
analyze this data, and deliver targeted marketing communications.
Proliferation of consumer data. Businesses
have access to increasingly large quantities of consumer data
that can be used to enhance the effectiveness of marketing
operations. Information about consumer preferences, attributes
and buying patterns is more readily available as a result of:
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the automation of sales force and call center operations using
customer relationship management, or CRM, applications and
back-office operations using enterprise resource planning, or
ERP, systems;
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the increased use of the Internet and other media channels that
enhance the two-way flow of information between businesses and
consumers; and
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the improved availability of consumer data aggregated by credit
agencies and other vendors.
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Marketing organizations are now able to capture these growing
volumes of consumer data because of significant technological
advances, including improvements in computing power, network
bandwidth and storage. Organizations that use this information
to better understand and serve customers can derive significant
competitive advantage.
Marketing accountability. Business management
trends such as Six Sigma and regulations such as the
Sarbanes-Oxley Act of 2002 have increased focus on process,
productivity and accountability across all facets of a business.
Marketing departments, often wielding large discretionary
budgets, have come under increasing pressure to track spending,
processes and approvals, as well as to justify investments.
To respond to these fundamental trends, marketing organizations
must capture more customer information, deliver more precise and
relevant communications, and measure and justify the
effectiveness of their marketing activities in generating
revenue. We believe marketers cannot effectively meet these
demands using manual processes, internally developed software
programs and desktop productivity software.
Enterprise
Marketing Management
Enterprise Marketing Management, or EMM, solutions help
businesses manage the complexities and processes of marketing
and achieve customer-relevancy, all while driving revenue
growth, cost efficiencies, and accountability. With EMM
solutions, marketers can manage the
end-to-end
process of marketing, from analysis to planning, creative
production management, online and offline execution and
measurement.
In response to changing market dynamics and the availability of
comprehensive marketing software suites, such as ours, marketing
executives are increasingly acknowledging a need for EMM.
According to Forrester Research, a significant and growing
majority of marketers 83% agree that
they need a more comprehensive and integrated application suite
in order to increase their effectiveness.
Based on this growing need for EMM software, a sizable market
opportunity has developed for providers who can offer a
comprehensive EMM solution. Forrester forecasted that the
worldwide market for enterprise marketing platforms, including
software license and maintenance revenues, will grow from
approximately $2.4 billion in 2009 to approximately
$5.5 billion in 2013.
Our
Enterprise Marketing Management Solutions
We believe our EMM suite is the most comprehensive solution
available on the market today. With capabilities that are both
broad and deep, our suite meets the needs of marketers in
mid-sized to large enterprises in nearly any industry, from
business-to-consumer
to
business-to-business
markets. Our suite provides capabilities to improve all facets
of marketing that help marketing become more interactive:
capable
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of engaging each customer and prospect in a cross-channel
dialog that builds upon their past and current behavior.
Unicas enterprise marketing management suite helps
marketers meet this challenge across four crucial areas:
customer awareness, centralized decisioning, cross-channel
execution, and integrated marketing operations.
Customer
Awareness
Marketers need to be aware of what their customers are saying,
through past purchase experience behavior, as well as other
interactions like website behavior. Our solutions enable
marketers to have customer awareness by offering the following
capabilities:
Customer analytics that give marketers visual
analysis of customer behavior, preferences, and opportunities;
and permit them to select customer groups for easy inclusion in
targeted marketing initiatives, moving quickly from questions to
insight to action without programming or technical
support.
Web analytics, beginning with self-service
analytics that allow marketers to improve marketing
effectiveness by rapidly testing and enhancing campaigns and web
sites; and then also providing a rich lather
of behavioral data to uncover individual customers
unspoken intentions, so marketing can converse with these
customers more effectively.
Predictive analytics designed for marketing
specialists, not statisticians: easy tools for segmenting
markets; predicting response, cross-sell and lifetime value; and
determining exactly who to target with which offers.
Event detection that can monitor each
customers transactional behavior patterns, and set off
triggers when meaningful changes occur that suggest a company
can take advantage of an opportunity if immediate action is
taken.
Centralized
Decisioning
Unica solutions allow marketers to think before they
speak to their customer, and speak based on a complete
memory of previous interactions with the customer to date. This
approach is essential in order to engage customers in an
effective dialogue. To make this happen, Unicas solution
incorporates:
Segmentation capabilities that enable marketers to
group customers by like characteristics or behavior, in order to
communicate with them in the most appropriate way.
Offer management to choose which personalized
message each customer should receive, depending on conditions.
Offer management draws on a central offer repository that
permits offers to be leveraged across all channels, ensures that
they are presented consistently, and tracks and measures their
success over time.
Real-time targeting, combining the ability to
perform segmentation dynamically during live customer
interactions while taking into account their
moment-by-moment
behavior; and learning algorithms and arbitration rules
for optimizing customer messages in real-time channels.
Interaction history that creates a two-way memory
of every marketing message delivered as well as the
customers reaction to that message.
Contact optimization designed to help manage
marketing communications over time against business objectives
and resource constraints.
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Cross-channel
Execution
Our solutions allow marketers to communicate through any
outbound or inbound channel with equal ease and manage
conversations that continue through as many interactions as
necessary to help customers reach their goals. Unicas
capabilities that support effective cross-channel execution
include:
Outbound fulfillment to support list creation for
delivering mail-ready files to letter shops and fulfillment
houses, high-volume email execution, and smooth integration with
third-party vendors for fulfilling to any outbound channel.
Inbound integration to capture real-time
contextual information from customer touchpoints
like Web sites, inbound customer service interactions, kiosks,
and even
face-to-face
point-of-sale
and create offers to be presented immediately during a current
interactive session.
Distributed marketing to provide campaign
execution capabilities to store or branch managers and their
colleagues in field marketing, which enables them to take
advantage of their relationship with the customer, all within
the framework and rules set by the central marketing
organization.
Lead management to capture, score, and rapidly
route leads and responses to marketing contacts.
Integrated
Marketing Operations
Unicas solutions simplify marketing collaboration and
cross-channel planning, design, execution, and measurement. It
achieves these goals by supporting a spectrum of marketing
functions and capabilities through one unified interface, and
integrating with other tools our customers may already own.
Unicas solution enables marketing organizations to
effectively manage:
Plans and budgets in order to provide universal
visibility, top-down budget allocations, and full tracking of
forecasts and expenses.
People and process, including a master marketing
calendar to track programs and maximize their visibility; as
well as tools for assessing resource availability, assigning
jobs and tasks, driving project schedules, managing reviews, and
improving collaboration.
Data and assets through tools that capture
re-usable information, manage project and campaign data, and
provide secure access to all creative assets.
Measurement and performance with easy-to-use
reports and full-fledged dashboards for interactive monitoring
and drill-down investigation.
Our
Strategy
Unicas mission is to Power the Success of Every
Marketing Organization. Our objective is to be the leading
global provider of EMM technology. To achieve this goal, we are
pursuing the following strategies:
Maintain product leadership in the marketing
domain. We intend to build upon our product and
technology leadership by continuing to invest in research and
development to expand our EMM offerings and increase the
functionality of our current offerings. In spite of the growing
awareness of and need for complete and integrated EMM solutions,
the purchasing of marketing solutions remains fragmented within
many large corporations, with the online marketing group acting
independently from the direct marketing or marketing
communications teams. Unica expects to maintain market
leadership through our solutions designed to meet the needs of
specific marketing challenges and teams, such as online
marketing, while attempting to lead the market to the converged
EMM solution that we believe is currently emerging. Thus, we
intend to continue to deepen capabilities within our offerings,
such as interactive marketing, while continuing to expand the
breadth of our capabilities to meet the needs of more
organizations.
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Lead in the emerging interactive marketing
market. As noted above, old marketing channels
have faded, new online channels have arisen, and all channels
are becoming more personal and addressable. Meanwhile, customers
have gained immense power and they are leveraging it to the
fullest.
Unica has developed a single solution to address these
interactive marketing trends: Unica Interactive Marketing. This
solution reflects our experience supporting the marketing
function in more than 1,000 organizations on six continents.
While many companies offer software that supports fragments of
interactive marketing (e.g., in a single channel only), we
believe we have the solution and experience required to truly
make interactive marketing a reality.
Offer flexible deployment options. To meet the
needs of the widest number of potential customers, we will
continue to offer our solutions for on-premise and on-demand
deployments, both through our partners and directly from Unica.
We believe this strategy lets us address the entire market for
EMM, from the largest enterprises to the smallest, and provides
a competitive advantage by enabling our customers to continue to
leverage our solutions even as their needs change.
Expand customer relationships. Our strong
customer relationships and broad spectrum of offerings afford us
an opportunity to continually deepen and expand our existing
customer relationships. Expansion typically occurs in three
ways: licensing additional capacity as our customers grow their
marketing teams and as they expand automation throughout their
organizations; the sale of new modules such as web analytics,
lead management or real-time recommendation capabilities; and
penetration into subsidiaries and business divisions within
large enterprises.
Penetrate new markets and market segments. The
market for EMM solutions is in its early stages. According to
Gartner, Inc.s Hype Cycle for CRM Marketing
Applications, 2009, dated June 30, 2009, only one to
five percent of the target market has currently adopted EMM. We
intend to continue to penetrate deeper into existing verticals,
reach into new industries and vertical markets and expand
geographically through investments in direct sales and partners.
Leverage strategic alliances. We have
developed strategic relationships with MSPs and systems
integrators around the world in order to increase distribution
of our products, supplement and extend our EMM offerings, and
enhance market awareness of our company and offerings. We will
continue to leverage our sales and service resources by
expanding our relationships with our existing MSPs and systems
integrators. We will selectively seek alliance opportunities
with additional MSPs, systems integrators, and distributors
particularly in countries outside the United States, to
complement or expand our business by offering configuration and
integration support, data management, and strategic marketing
services. We will leverage our global Partner Program to cost
effectively recruit and enable new partners supporting all Unica
product lines.
Selectively pursue strategic acquisitions. To
complement and accelerate our internal growth, we intend to
pursue the acquisition of businesses, technologies and products
that will complement our existing operations. For example, the
acquisition of Marketic by Unica France in May 2003 has provided
us with additional customers and a base of operations in Europe.
Our acquisitions of MarketSoft Software Corporation and Sane
Solutions, LLC in 2006 enabled us to introduce new capabilities
for event-based marketing, lead management and web analytics,
enhancing capabilities for our customers to track and analyze
cross-channel customer behavior and deliver more targeted and
precise communications to their consumers through nearly any
channel, including sales and partner channels. Finally, our
acquisition of MarketingCentral, L.L.C. in July 2007 has
provided us with a leading on-demand marketing resource
management solution.
Our
Product Lines
Our software offerings provide marketing organizations with a
comprehensive set of integrated modules that enable marketers to
manage the
end-to-end
process of marketing, from analysis to planning, production
management, execution and measurement. Through this
functionality, our suite of offerings can help businesses
increase their revenues and improve the efficiency and
measurability of their marketing operations.
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We offer a range of deployment options including fully hosted,
multi-tenant software on-demand, partner hosted and managed, and
customer hosted and managed on their premises. We can host all
or part of a solution in our facility allowing customers to
reduce IT costs and free up resources to focus on core business
activities, while gaining the reliability, security, and
scalability they require. In addition, we offer consultative
services to our on-demand customers, such as best practices for
website and online marketing measurement, report development,
and marketing process development.
Unica offers its solutions in two product lines:
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Unica Enterprise is the industry-leading software that marketers
at larger and more complex organizations rely on to increase
revenue and improve the efficiency and measurability of their
marketing. Unica Enterprise is deployed either on the
customers premises or is hosted by one of Unicas MSP
partners.
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Unica OnDemand offers the features and benefits marketers have
come to expect from Unicas industry-leading enterprise
software in a secure hosted environment. Unica OnDemand is a
software as a service offering that is quick to
deploy, cost effective, and easy to use.
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Unica
Enterprise
Our Enterprise software offerings consist of seven top-level
modules: Unica Campaign, Unica Marketing Operations, Unica
Detect, Unica Leads, Unica NetInsight, Unica CustomerInsight,
and Unica PredictiveInsight. The modular design of our offerings
provides our customers with flexibility to deploy all of our
offerings at once or to implement our software products
individually or incrementally. By deploying multiple modules, a
business can, for example, coordinate and measure all of its
direct marketing operations, act upon analytically generated
insights, and prepare consolidated reports that facilitate the
evaluation and dissemination of marketing program results.
Moreover, we have designed our modules to be integrated with
each other. In addition, through our open and flexible product
architecture, we enable data integration with existing
third-party enterprise applications as well as migration from
previous EMM implementations. As a result, our software allows
marketing objects, such as customer segment definitions, digital
assets, offers, customer treatment strategies and other
marketing content, to be created once and then shared throughout
a business, thereby increasing productivity, re-use, and
consistency across multiple channels, and creating the marketing
system of record. The consistent user interface across all of
the modules reduces training costs and speeds user adoption.
Unica Campaign allows marketing organizations to
easily create, test and execute customer interaction strategies
across outbound and inbound touch points using a common
graphical user interface. Marketers can quickly create powerful
marketing campaign logic using graphical flowcharts. Reusable
campaign templates can be adapted to deliver personalized
acquisition, retention, cross-selling and other treatment
strategies through outbound channels such as direct mail, email,
telemarketing and the web. Marketers can use Unica Campaign to
test customer interaction strategies by iteratively changing
customer selection criteria, promotional offer materials or
personalized digital marketing appearances, and then evaluate
the effectiveness of each strategy before executing a program.
We also offer several optional modules to extend Unica
Campaigns capabilities to include electronic messaging of
personalized email and mobile text messages, real-time marketing
analysis of recent interactions and historical patterns,
optimization analysis and a centralized repository of marketing
campaigns.
Unica Marketing Operations provides marketing
operations and resource management capabilities that help
marketers define, coordinate, monitor, control and measure
marketing program activities. Unica Marketing Operations
provides visibility into all marketing initiatives, thereby
enabling businesses to improve their consistent use of best
practices and execution, decision-making, management and overall
productivity for those initiatives. We also offer three optional
modules within Unica Marketing Operations that provide the
ability to centrally store marketing plans, track and analyze
results of marketing plans, create, review, approve and store
digital files and manage marketing budgets and expenses.
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Unica Detect uses patented event-detection
technology to efficiently monitor high volumes of transactional
data to identify significant changes in behavior over time that
signal a need to interact with a customer for sales or service
opportunities. Unica Detect is able to identify changes specific
to each customer such as unusually high deposits in a bank
account, significant decreases in purchases at a retailer, or
changes in calling patterns that might indicate customer
attrition for a mobile phone operator. Customers can develop
their own rules or use the over 150 pre-packaged events and
alerts offered with the software. Once detected, other modules
within our Unica Enterprise suite, such as Unica Campaign or
Unica Leads can act on the events and marketing opportunities
identified by Unica Detect.
Unica Leads enables marketers to better manage the
qualification, enrichment, distribution and maturation of leads
between marketing activities and multiple sales channels such as
telesales, channel partners, and field sales for higher closure
rates and greater revenue. Unica Leads helps automate the
analysis, prioritization and distribution of leads based on
easily defined business rules that can incorporate sophisticated
analytics, regional overlays, product group hierarchies and
channel partners. These leads can be managed within the Unica
Enterprise suites own interface or routed to existing
contact management software or sales force automation systems.
In addition, the application provides the capability to report
on lead status and results so that managers can take action to
improve closure rates, and marketers can gain a more
comprehensive view of which programs drive the most valuable
leads. In addition, we offer optional modules of Unica Leads
that provide the ability to manage and track lead referrals
across lines of business and a contact management capability.
Unica NetInsight collects, analyzes and reports on
website activity. It offers an open relational database backend
with a fully extensible data schema,
easy-to-configure
custom dashboards and reports. Using Unica NetInsight, marketers
can analyze whether their company websites and Internet
marketing are meeting the needs of their customers and driving
the behaviors desired. For example, marketers can uncover ways
to increase purchase or lead conversion, encourage customer
self-service, or improve performance of paid search-engine
marketing. With Unicas open architecture, web data is
integrated with offline purchase and customer activity to
increase the ability to measure cross-channel effectiveness,
such as the influence of the web on
in-store
purchases.
Unica CustomerInsight provides powerful analytics
for marketing performance management and cross-channel customer
analysis through an easy-to-use, visually intuitive interface
designed specifically for marketers. It allows marketers to
select and focus on the data most relevant to them with
flexible, visual exploration, unlimited drilling and seamless
integration to Unica Campaign to analyze, understand and fully
leverage the cross-channel buying experience and the performance
of their marketing efforts.
Unica PredictiveInsight enables marketing
organizations to automate the creation of accurate predictive
models to determine customer response propensities, recognize
customers at risk of attrition, identify significant customer
behaviors, analyze customer attributes and preferences, discover
cross-selling opportunities, and forecast customer value.
Accurate models can be developed and deployed quickly to target
likely responders to a particular marketing offer. The results
of Unica PredictiveInsight, such as model scoring, can be
integrated into ongoing marketing operations using Unica
Campaign and Unica Optimize.
Unica
OnDemand
Our on-demand offerings consist of Unica Interactive Marketing
OnDemand, Unica NetInsight OnDemand, and Unica Marketing
Operations OnDemand. The on-demand offerings allow customers to
take advantage of Unicas marketing technology without
incurring IT infrastructure costs or occupying valuable IT
resources.
Unica Interactive Marketing OnDemand combines
analytics, email, and web personalization in one intuitive,
on-demand application, Unica Interactive Marketing OnDemand
brings together all the data visitors are providing through web
behavior, responses to marketing, and offline
activities and incorporates that insight directly
into easy-to-use targeting and HTML authoring features. The
solution enables marketers to carry out all aspects of email and
site personalization programs themselves.
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Unica NetInsight OnDemand collects, analyzes and
reports on website activity. It offers an open relational
database backend with a fully extensible data schema, and
easy-to-configure
custom dashboards and reports. Using Unica NetInsight, marketers
can analyze whether their company websites and Internet
marketing are meeting the needs of their customers and driving
the behaviors desired. For example, marketers can uncover ways
to increase purchase or lead conversion, encourage customer
self-service, or improve performance of paid search-engine
marketing. With Unicas open architecture, web data is
integrated with offline purchase and customer activity to
increase the ability to measure cross-channel effectiveness,
such as the influence of the web on in-store purchases.
Unica MarketingOperations OnDemand is an on-demand
marketing resource management, or MRM, solution, providing
capabilities that help marketers define, coordinate, monitor,
control and measure marketing program activities. Unica
Marketing Operations OnDemand has more straight-forward
configuration options than a more complex MRM solution, allowing
customers to set up the software in a more timely manner.
Services
We provide a full range of services to our customers through two
principal services groups:
Professional Services. Our professional
services group provides implementation, training and consulting
services to our customers, MSPs, systems integrators and other
alliance partners. Implementation services include the
installation of our software, identification and sourcing of
legacy data, configuration of rules necessary to generate
marketing campaigns, distribute leads and manage marketing
processes, creation of reports, and other general services for
our software. We offer customers, MSPs and systems integrators a
full range of training and education services, including
classroom,
on-site and
web-based training. We also offer a variety of consulting
services to existing customers (such as process design and best
practice services) to help them use their licensed software more
broadly and efficiently.
Maintenance and Technical Support. We provide
maintenance on a centralized basis from our headquarters in
Waltham, Massachusetts. We provide technical support on a
centralized basis from our headquarters in the United States and
on a regional basis from centers in the United Kingdom, France
and India. We currently offer two levels of maintenance,
standard and premium, both of which generally are sold for a
term of one year. With both of these maintenance levels,
customers are provided with online access to our customer
support database, technical support and software updates and
upgrades. With premium maintenance, customers are provided
additional services such as emergency service response and
periodic
on-site
utilization reviews.
Customers
We have a worldwide installed base of over 1,000 companies
and thousands of users in a broad range of industries. A
significant number of these companies sublicense our products
from MSPs, as described under Alliances
Marketing Service Providers below. See Note 13 to our
consolidated financial statements for geographic data regarding
our revenue from customers located outside of the United States.
We target our sales and marketing efforts to a wide variety of
industries, focusing on marketing executives and the Information
Technology, or IT, staff that support them. We have focused our
sales efforts to date principally on the financial services,
insurance, retail, telecommunications and travel and hospitality
industries as these industries include significant numbers of
businesses with large numbers of customers and prospects.
No single customer accounted for 10% or more of our total
revenue in fiscal 2009, 2008 or 2007.
Sales and
Marketing
We sell and market our software primarily through our direct
sales force and in conjunction with MSPs, systems integrators
and distributors. In addition to our headquarters in Waltham,
Massachusetts, we have sales offices in several
U.S. cities. Outside the United States, our primary sales
offices are in France, the United Kingdom, Singapore and
Australia.
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Sales. Our direct sales force, which consists
of account executives, subject matter experts, technical
pre-sales engineers, inside sales account development
representatives, alliance partner managers and sales management,
is responsible for the worldwide sale of our products to
businesses across multiple industries and is organized into
named account, geographic, product and channel focus.
Marketing. Our marketing activities consist of
a variety of programs designed to generate sales leads and build
awareness of our company and our offerings. These activities
include traditional product marketing functions, such as
production of both hard copy and digital product and company
promotional material, gathering of customer and partner input
for new product features, and creation of solution
demonstrations. We build awareness of our company and generate
sales leads through online marketing, such as blogs, search
engine marketing and display ads; trade shows; seminars; direct
mail; customer and partner events; and limited print advertising.
Alliances
We enter into alliances with MSPs, systems integrators and
distributors to acquire new customers and to provide existing
customers with a full spectrum of implementation services and
training support, customer data management, and marketing
program design and support. An MSP or systems integrator
participated in selling or deploying our software in a
significant number of our perpetual and subscription license
agreements in fiscal 2009. Our alliance strategy enables us to
become part of a total marketing solution for businesses and
provides the potential, through referrals and co-marketing
opportunities, to expand our contacts with prospects in new and
existing markets. We will seek alliance opportunities with
additional MSPs, systems integrators and distributors,
particularly in additional countries outside the United States,
that can complement or expand our business by offering
configuration and integration support, data management and
strategic marketing services.
Marketing Service Providers. MSPs offer a
range of data services, marketing program design, support, and
execution services on an on-demand or outsourced basis. We
selectively establish and maintain relationships with MSPs to
resell and deploy our products. Current significant MSPs include
Acxiom, Epsilon and Harte Hanks as well as other MSPs in North
America, EMEA and Asia Pacific. We enter into subscription
arrangements with MSPs and the MSPs then enter into sublicenses
of those offerings with their own clients.
Systems Integrators. Our relationships with
systems integrators allow us to leverage our business model by
selectively subcontracting or outsourcing integration and
configuration services, thereby enabling us to focus our
resources on additional sales of software licenses. Systems
integrators also serve to provide us with leads for new business
and bundle our products into joint industry or solution
offerings. Our systems integrators help their customers develop
strategies for implementing our EMM offerings, provide
implementation support, and offer assistance with ongoing
measurement and process improvement. Strategic systems
integrators include Accenture and IBM as well as a number of
specialist providers and regional systems integrators in and
outside the United States.
Distributors. We have relationships with
select distributors outside of the United States. In addition to
representing us in their local markets and selling our
solutions, our distributors also typically offer systems
integration and consulting services, and may also serve as an
MSP in their local markets. We currently use distributors in
Latin America, Japan, India and Israel.
Technology
Our product design philosophy is to deliver products that scale
to meet the information processing volumes and computational
complexity of sophisticated global marketers, while providing
marketing process flexibility and software usability to meet the
needs of marketing organizations across a range of industries,
company sizes and marketing skill sets. Key elements of our
technology include:
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Software Architecture. Our products have been
developed using a logical multi-tier Internet architecture
consisting of presentation, application logic and data
management layers. Our products are highly scalable, enabling
expansion at each tier, support of large databases and a large
number of users.
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Powerful Data Access. Our Universal Dynamic
Interconnect, or UDI, technology enables our offerings to access
and adapt easily to multiple existing marketing data sources,
such as data warehouses and files, without requiring data
replication or imposing proprietary data structures. UDI uses
software wizards to guide the data mapping and access
configuration to enable data-level integration without
programming. UDI allows marketing organizations to dynamically
access and manipulate all available levels of marketing data
within campaigns for more accurate targeting and
on-the-fly
data aggregation and computations.
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Advanced Analytics and Optimization. Our
offerings provide a broad range of integrated analytics,
including analytical processing, data visualization, automated
data mining and optimization algorithms. We have developed a
number of analytic capabilities that enable rapid performance of
sophisticated analytic processes to improve the productivity of
marketers and the efficiency of marketing programs.
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Interoperability. Our software applications
are based on the Java 2 Enterprise Edition, or J2EE, development
framework. Our software applications can be integrated with
other standards-compliant applications, including .NET-based
applications using standards-based Application Programming
Interfaces, or APIs. The Java platform is deployable and
readily supported on most software and hardware platforms.
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Enterprise and OnDemand. Our technologies are
designed to be deployed on the customers premises (Unica
Enterprise) and to be provided as software as a service (Unica
OnDemand).
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Technology Relationships. We have formed
relationships with vendors of software and hardware technologies
to help ensure that our products are compatible with industry
standards and to take advantage of current and emerging
technologies. In particular, we maintain relationships, and
support operating systems for platforms from companies such as
Hewlett-Packard, IBM, Microsoft, Netezza, Oracle and Sun
Microsystems.
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These companies may provide us with early releases of new
products and, in some cases, access to technical resources to
facilitate compatibility with their products.
Research
and Development
Our research and development organization is responsible for
designing, developing, enhancing and supporting our software
products, performing product testing and quality assurance
activities, and ensuring the compatibility of our products with
third-party hardware and software products. Our research and
development organization is divided into teams consisting of
development engineers, product managers, quality assurance
engineers, technical writers and technical support staff. We
employ advanced software development tools including automated
testing, performance monitoring, source code control and defect
tracking systems.
Our research and development expense totaled $19.9 million
in fiscal 2009, $23.0 million in fiscal 2008, and
$22.0 million in fiscal 2007.
Competition
The market for EMM software, which has emerged only in recent
years, is intensely competitive, evolving rapidly and highly
fragmented. We believe the following factors are the principal
methods of competition in the EMM market:
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marketing focus and domain expertise;
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product functionality, performance and reliability;
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breadth and depth of product offerings;
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ability to offer integrated solutions, especially for Internet
and traditional marketing;
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services organization and post-sale support;
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total cost of ownership;
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large and referenceable customer base;
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time to market;
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product architecture, scalability and flexible deployment
options; and
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price.
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We believe our products compete with the following:
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Internally developed solutions based on horizontal workflow
applications and desktop software;
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CRM and other enterprise application vendors such as Siebel, a
division of Oracle;
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Infrastructure software, including data warehousing and business
intelligence tools, from providers such as SAS and Teradata;
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EMM software products from a number of privately-held vendors
such as Aprimo and Eloqua;
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Web analytics and Internet marketing products from Adobe (which
recently acquired Omniture), Coremetrics and WebTrends.
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We believe we effectively compete against these solutions in a
number of ways, including: our market focus and domain
expertise, which make our solutions better suited to
marketers needs, our open-architecture and flexible
deployment options, which facilitate more rapid deployment and
lower cost of ownership, the breadth and depth of our solutions,
which solve more marketing challenges and which facilitate
successful cross-channel marketing, and the analytic
capabilities of our solutions, which we believe help marketers
deliver more effective marketing and achieve higher return on
investment.
Intellectual
Property
Our success will depend in part on our ability to protect our
intellectual property and to avoid infringement of the
intellectual property of third parties. We rely on a combination
of patents, trademarks, copyrights and trade secret laws in the
United States and other jurisdictions, as well as contractual
provisions and licenses, to protect our proprietary rights and
brands.
As of September 30, 2009, we had five issued
U.S. patents and had 13 pending U.S. patent
applications. We file applications for patents on certain
inventions in the United States, and in each case consider
whether filing for protection in selected foreign jurisdictions
is appropriate. We evaluate ideas and inventions for patent
protection with a team of engineers, product managers and
internal counsel, in consultation with our outside patent
counsel. These issued patents and pending patent applications
relate to various systems and methods, including offer
management, lead management, data mining, modeling, and
optimization. The issued patents we own will expire in 2018 or
later. We anticipate filing more patent applications in the
ordinary conduct of our business.
Unica is a registered trademark in the United
States, the European Union, Australia, India, Japan, Norway,
South Korea and Singapore. The Unica &
Design (Unica with the crescent) mark is registered in the
United States, Australia, Japan, Norway, Singapore, South Korea
and Switzerland. Unica is also seeking trademark registration of
its new Unica & Design (the conversational
U) domestically and internationally. We also hold
trademarks and service marks identifying certain product and
service offerings. We seek to protect our source code for our
software, documentation and other written materials under trade
secret and other relevant laws. We also pursue foreign
copyrights, trademarks and service marks where applicable and
necessary. Although we typically consider whether filing for
patent protection in foreign jurisdictions is appropriate, we
are not currently seeking patent protection in any foreign
countries, except for one patent filing in Canada.
We have incorporated third-party licensed technology into our
current product offerings. Royalties paid for this third-party
licensed technology represented 4% of total revenue in fiscal
2009, and 2% in both fiscal 2008 and 2007, and we expect this
percentage to remain relatively constant for the foreseeable
future.
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Employees
On August 12, 2009, our Board of Directors approved a
restructuring plan to improve efficiencies, reduce costs,
streamline operations, and better allocate resources. The
restructuring plan involved various measures, including the
transfer and consolidation of certain ongoing research and
development activities previously undertaken in our Waltham,
Massachusetts office to our office in Pune, India where certain
research and development activities have already been
successfully undertaken in the past. We expect to expand our
workforce in our Pune, India office as part of the
restructuring, and we will also continue to perform research and
development activities out of our Waltham, Massachusetts office.
As a result of the restructuring, we reduced our workforce by
approximately 13% in the fourth quarter of fiscal 2009, with
approximately half of the reduction related to the transfer of
research and development activities to our Pune, India office.
The workforce reduction was substantially completed as of
September 30, 2009.
As of September 30, 2009, we had a total of
440 employees, consisting of 120 employees in sales
and marketing, 172 employees in research and development,
91 employees in services groups, and 57 employees in
general and administrative functions. A total of 164 of those
employees were located outside of the United States.
From time to time we also employ independent contractors and
temporary employees to support our operations. None of our
employees is subject to a collective bargaining agreement. We
have never experienced a work stoppage and believe that our
relations with our employees are good.
The following discussion highlights certain risks which may
affect future operating results. These are the risks and
uncertainties we believe are most important for our existing and
potential stockholders to consider. Additional risks and
uncertainties not presently known to us, which we currently deem
immaterial or which are similar to those faced by other
companies in our industry or business in general, may also
impair our business operations. If any of the following risks or
uncertainties actually occurs, our business, financial condition
and operating results would likely suffer.
If the
market for enterprise marketing management software does not
develop as we anticipate, our revenue may decline or fail to
grow and we may incur operating losses.
We derive, and expect to continue to derive, all of our revenue
from providing EMM software and services. The market for EMM
software is relatively new and still evolving, and it is
uncertain whether these products will achieve and sustain high
levels of demand and market acceptance.
Some businesses may be reluctant or unwilling to implement EMM
software for a number of reasons, including failure to perceive
the need for improved marketing processes and lack of knowledge
about the potential benefits that EMM software may provide. Even
if businesses recognize the need for improved marketing
processes, they may not select EMM software such as ours because
they previously have made investments in internally developed
solutions or marketing or infrastructure software. Some
businesses may elect to improve their marketing processes
through software obtained from their existing enterprise
software providers, whose products are designed principally to
address one or more functional areas other than marketing. These
enterprise products may appeal to customers that wish to limit
the number of software vendors on which they rely and the number
of different types of software used to run their businesses.
If businesses do not perceive the benefits of EMM software, the
EMM market may not continue to develop or may develop more
slowly than we expect, either of which would significantly
adversely affect our revenue and profitability. Because the
market for EMM software is developing and the manner of its
development is difficult to predict, we may make errors in
predicting and reacting to relevant business trends, which could
harm our operating results.
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Current
macro-economic conditions could negatively impact our results of
operations.
The current unfavorable macro-economic conditions could
negatively impact the results of operations of our current and
prospective customers, which in turn could negatively impact the
spending by our current and prospective customers on our
software and services. Given that we have numerous customers in
certain of the industries most impacted by the current
unfavorable economic conditions, including financial services
and retail, this could have an adverse effect on our business,
financial condition and results of operations. If the economic
climate in the U.S. or abroad does not improve from its
current condition or continues to deteriorate, our customers or
prospective customers could reduce or delay their purchases of
our products, which would adversely impact our revenues and our
profitability.
Our
quarterly and annual revenue and other operating results can be
difficult to predict and can fluctuate substantially, which may
result in volatility in the price of our common stock.
Our quarterly and annual revenue and other operating results
have varied in the past and are likely to continue to vary
significantly from quarter to quarter and year to year. This
variability may lead to volatility in our stock price as equity
research analysts and investors respond to these quarterly and
annual fluctuations. These fluctuations are due to numerous
factors, including:
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the timing and size of our licensing transactions;
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the mix of perpetual licenses and subscription arrangements;
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lengthy and unpredictable sales cycles;
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patterns of capital spending and changes in budgeting cycles by
our customers;
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the timing of development, introduction and market acceptance of
new products or product enhancements by us or our competitors;
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the timing of acquisitions of businesses and products by us or
our competitors;
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product and price competition;
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the mix of higher-margin license revenue and lower-margin
service revenue;
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software defects or other product quality problems;
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our ability to hire, train and retain sufficient sales, service
and other personnel;
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the geographical mix of our sales, together with fluctuations in
currency exchange rates;
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fluctuations in economic and financial market conditions;
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resolution of litigation, claims and other contingencies;
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expenses related to litigation, claims and other
contingencies; and
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complexity of the accounting rules that govern revenue
recognition.
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Because of quarterly fluctuations, we believe that quarter to
quarter comparisons of our operating results are not necessarily
meaningful. Moreover, our operating results may not meet our
announced guidance, if any, or expectations of equity research
analysts or investors, in which case the price of our common
stock could decrease significantly.
In addition, our expense levels are based, in significant part,
on our expectations as to future revenue and are largely fixed
in the short term. As a result, we may be unable to adjust
spending in a timely manner to compensate for any unexpected
shortfall in revenue. Any such revenue shortfall, and the
resulting decrease in operating income or increase in operating
loss, could lead to volatility in the price of our common stock.
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The delay
or cancellation of one or more large transactions may adversely
affect our quarterly or annual revenue.
Large license transactions from time to time account for a
substantial amount of our license revenue in a fiscal quarter.
If a potential customer does not enter into a large transaction
that we anticipate in a certain quarter, or if we are unable to
recognize license revenue from that transaction in the quarter,
our revenue may decline or fail to grow at the rate expected and
we may incur operating losses in that quarter. Moreover, a
significant portion of each quarters license revenue
historically has come from transactions agreed upon in the final
month of the quarter. Therefore, even a short delay in the
consummation of an agreement may cause our revenue to fall below
our announced guidance, if any, or expectations of equity
research analysts or investors for a quarter.
If we
fail to develop or acquire new software products or enhance
existing products, we will not be able to achieve our
anticipated level of growth.
We must introduce new software products and enhance existing
products in order to meet our business plan, keep pace with
technological developments, satisfy increasing customer
requirements, increase awareness of EMM software generally and
of our company and products in particular, and maintain our
competitive position. Any new products we develop may not be
introduced in a timely manner and may not achieve market
acceptance sufficient to generate significant revenue.
Furthermore, we expect other companies to develop and market new
products that will compete with, and may reduce the demand for,
our products. We may not be successful in developing or
otherwise acquiring, marketing and licensing new products or
product updates and upgrades that meet changing industry
standards and customer demands, and we may experience
difficulties that could delay or prevent the successful
development, marketing and licensing of these products. If we
are unable to develop or acquire new products successfully, to
enhance our existing products, or to position or price our
products to meet market demand, we may not be able to achieve
our anticipated level of growth and our revenue and other
operating results would be adversely affected.
In addition, because our software products are intended to
operate on a variety of hardware and software platforms, we must
continue to modify and enhance our products to keep pace with
changes in these platforms. Any inability of our products to
operate effectively with existing or future hardware and
software platforms could reduce the demand for our products,
result in customer dissatisfaction and limit our revenue.
A
substantial majority of our perpetual license revenue is derived
from our Unica Campaign software, and a decline in sales of
licenses of this software could materially adversely affect our
operating results.
Sales of licenses of our Unica Campaign software have
historically accounted for a substantial portion of our license
revenues. We expect to continue to derive a substantial portion
of our license revenue for the foreseeable future from current
and future versions of our Unica Campaign software, and our
operating results will depend significantly upon the level of
demand for this software. Demand for our Unica Campaign software
may decline due to a number of factors, including increased
market penetration by our competitors products or slower
growth in the EMM market than we anticipate. If demand for our
Unica Campaign software decreases significantly, our operating
results will be adversely affected and we may incur operating
losses.
Significant
defects or disruptions in our Unica OnDemand service could
diminish demand and subject us to liability.
Because our Unica OnDemand service is relatively new and rapidly
expanding, our on-demand service may have errors or defects that
users identify after they begin using it that could result in
unanticipated downtime for our subscribers and harm our
reputation and our business. Internet-based services frequently
contain undetected errors when first introduced or when new
versions or enhancements are released. We have from time to time
found defects in our service and new errors in our existing
service may be detected in the future. In addition, our
customers may use our service in unanticipated ways that may
cause a disruption in service for other customers attempting to
access their data. Since our customers use our service for
important
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aspects of their business, any errors, defects, disruptions in
service or other performance problems with our service could
hurt our reputation and may damage our customers
businesses. If that occurs, customers could elect not to renew,
or delay or withhold payment to us, we could lose future sales
or customers may make warranty claims against us, which could
result in an increase in our provision for doubtful accounts, an
increase in collection cycles for accounts receivable or the
expense and risk of litigation.
Interruptions
or delays in service from our third-party data center hosting
facilities could impair the delivery of our Unica OnDemand
service and harm our business.
We currently serve our Unica OnDemand customers from third-party
data center hosting facilities located in the United States and
Europe. Any damage to, or failure of, our systems generally
could result in interruptions in our service. As we continue to
add capacity in our existing and future data centers, we may
move or transfer data. Despite precautions taken during this
process, any unsuccessful data transfers may impair the delivery
of our service. Further, any damage to, or failure of, our
systems generally could result in interruptions in our service.
Interruptions in our service may reduce our revenue, cause us to
issue credits or pay penalties, cause customers to terminate
their subscriptions and adversely affect our renewal rates and
our ability to attract new customers. Our business will also be
harmed if our customers and potential customers believe our
service is unreliable.
We do not control the operation of any of these facilities, and
they are vulnerable to damage or interruption from earthquakes,
floods, fires, power loss, telecommunications failures and
similar events. They may also be subject to break-ins, sabotage,
intentional acts of vandalism and similar misconduct. Despite
precautions taken at these facilities, the occurrence of a
natural disaster or an act of terrorism, a decision to close the
facilities without adequate notice or other unanticipated
problems at these facilities could result in lengthy
interruptions in our service. Even with the disaster recovery
arrangements, our service could be interrupted.
If our
security measures are breached and unauthorized access is
obtained to a customers data or our data, our Unica
OnDemand service may be perceived as not being secure, customers
may curtail or stop using our service and we may incur
significant legal and financial exposure and
liabilities.
Our on-demand service involves the storage and transmission of
customers proprietary information, and security breaches
could expose us to a risk of loss of this information,
litigation and possible liability. If our security measures are
breached as a result of third-party action, employee error,
malfeasance or otherwise, during transfer of data to additional
data centers or at any time, and, as a result, someone obtains
unauthorized access to our data or our customers data, our
reputation could be damaged, our business may suffer and we
could incur significant liability. Additionally, third parties
may attempt to fraudulently induce employees or customers into
disclosing sensitive information such as user names, passwords
or other information in order to gain access to our data or our
customers data, which could result in significant legal
and financial exposure and a loss of confidence in the security
of our service that would harm our future business prospects.
Because the techniques used to obtain unauthorized access, or to
sabotage systems, change frequently and generally are not
recognized until launched against a target, we may be unable to
anticipate these techniques or to implement adequate
preventative measures. If an actual or perceived breach of our
security occurs, the market perception of the effectiveness of
our security measures could be harmed and we could lose sales
and customers.
If we
fail to protect our proprietary rights and intellectual property
adequately, our business and prospects may be harmed.
Our success depends in large part on our proprietary technology.
We rely on a combination of patents, trademarks, copyrights,
service marks, trade secret laws and contractual restrictions to
establish and protect our proprietary rights in our software
products and services. These protections may not be adequate to
prevent our competitors from copying or reverse-engineering our
products, or that our competitors will not independently develop
technologies that are substantially equivalent or superior to
our technology. As of September 30, 2009, we had five
issued U.S. patents and 13 pending U.S. patent
applications. We may, however, be unable to
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obtain additional patent protection in the future. In addition,
any current or future patents issued to us may not provide us
with any competitive advantages, or may be challenged by third
parties. Legal standards relating to the validity,
enforceability and scope of protection of intellectual property
rights are uncertain. Accordingly, we may be unable to prevent
third parties from infringing upon or misappropriating our
intellectual property. Furthermore, we cannot be sure that steps
we take to protect our proprietary rights will prevent
misappropriation of our intellectual property.
In addition, effective patent, trademark, copyright, service
mark and trade secret protection may not be available to us in
every country in which our software products are available. The
laws of some foreign countries may not be as protective of
intellectual property rights as those in the United States, and
mechanisms for enforcement of intellectual property rights may
be inadequate. To date, we have applied for a limited number of
patents outside of the United States. Therefore, to the extent
that we continue to increase our international selling
activities, our exposure to unauthorized copying and use of our
products and proprietary information will continue to increase.
We have incorporated third-party licensed technology into our
current product offerings. Royalties paid for this third-party
licensed technology have historically ranged from 1% to 4% of
license revenue and we expect this percentage to remain
relatively constant for the foreseeable future. If these
technology providers were no longer to allow us to use these
technologies for any reason, we may be required to:
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identify, license and integrate equivalent technology from
another source;
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rewrite the technology ourselves; or
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rewrite portions of our software to accommodate the change or no
longer use the technology.
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Any one of these outcomes could delay further sales or the
implementation of our products, impair the functionality of our
products, delay new product introductions, result in our
substituting inferior or more costly technologies into our
products, or injure our reputation. In addition, we may be
required to license additional third-party technology to develop
and market new products, and we cannot provide assurance that we
could license additional third-party technology on commercially
reasonable terms or at all. Because of the relative
immateriality of the additional third-party licensed technology
that we incorporate into our current product offerings, as well
as the availability of alternative equivalent technology, we do
not expect that our inability to license this technology in the
future would have a material adverse affect on our business or
operating results. Our inability to license this technology
could adversely affect our ability to compete.
We have entered into agreements with many of our customers, MSPs
and systems integrators that require us to maintain the source
code of our software products in escrow. These agreements
typically provide that these parties will have limited,
nonexclusive rights to use the source code under certain
circumstances in which we are unable or unwilling to provide
product support, including in the event of our bankruptcy. We
may be unable, however, to control the actions of our customers,
MSPs and systems integrators that have entered into these
agreements, and our business may be harmed if one or more
customers, MSPs or systems integrators use the source code for
purposes other than those permitted by the escrow provisions.
Competition
from EMM, enterprise application and infrastructure software, as
well as from internally developed solutions, could adversely
affect our ability to sell our software products and related
services and could result in pressure to price our products in a
manner that reduces our margins.
The market for EMM software, which has emerged only in recent
years, is intensely competitive, evolving and fragmented. Our
software products compete with software developed internally by
businesses as well as software offered by commercial
competitors. Our principal commercial competition consists of:
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vendors of software products addressing a range or portion of
the EMM market;
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vendors of customer relationship management and other enterprise
application software; and
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providers of infrastructure software.
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We expect additional competition from other established and
emerging companies as the EMM market continues to develop and
expand. We also expect competition to increase as a result of
software industry consolidation, including through a merger or
partnership of two or more of our competitors, and the entrance
of new competitors in the EMM market. Many of our current and
potential competitors have larger installed bases of users,
longer operating histories and greater name recognition than we
have. In addition, many of these companies have significantly
greater financial, technical, marketing, service and other
resources than we have. As a result, these companies may be able
to respond more quickly to new or emerging technologies and
changes in customer demands and to devote greater resources to
the development, promotion and sale of their products than we
can.
Competition could seriously impede our ability to sell
additional software products and related services on terms
favorable to us. Businesses may continue to enhance their
internally developed solutions, rather than investing in
commercial software such as ours. Our current and potential
commercial competitors may develop and market new technologies
that render our existing or future products obsolete,
unmarketable or less competitive. In addition, if these
competitors develop products with similar or superior
functionality to our products, we may need to decrease the
prices for our products in order to remain competitive. If we
are unable to maintain our current product, services and
maintenance pricing due to competitive pressures, our margins
will be reduced and our operating results will be negatively
affected. We may not be able to compete successfully against
current or future competitors and competitive pressures may
materially adversely affect our business, financial condition
and operating results.
If we do
not maintain and strengthen our strategic alliance
relationships, our ability to generate revenue and manage
expenses could be adversely affected.
We believe that our ability to increase revenue from our
software products and manage our expenses depends in part upon
our maintaining and strengthening our existing strategic
alliance relationships and our developing new strategic alliance
relationships, particularly in additional countries outside the
United States. We rely on established, nonexclusive
relationships with a variety of MSPs and systems integrators for
marketing, licensing, implementing and supporting our products.
Although many aspects of our strategic alliance relationships
are contractual in nature, important aspects of these
relationships depend on the continued cooperation between the
parties. Divergence in strategy, change in focus, competitive
product offerings, potential contract defaults, and changes in
ownership or management of an MSP or systems integrator may
interfere with our ability to market, license, implement or
support our products with that party, which in turn could harm
our business. Some of our competitors may have stronger
relationships with our MSPs and systems integrators than we do,
and we have limited control, if any, as to whether MSPs and
systems integrators implement our products rather than our
competitors products or whether they devote resources to
market and support our competitors products rather than
our offerings. In addition, MSPs typically have available their
own internally developed applications that they may choose to
offer and support in lieu of our software offerings.
We may not be able to maintain our strategic alliance
relationships or attract sufficient additional MSPs and systems
integrators that have the ability to market, sell, implement or
support our products effectively, particularly in additional
countries outside the United States. If we are unable to
leverage our sales resources through our strategic alliance
relationships with MSPs, we may need to hire and train
additional qualified sales personnel. Similarly, if we cannot
leverage our services resources through our strategic alliance
relationships with systems integrators, we may incur additional
costs associated with providing services. We may not be able to
hire additional qualified sales or service personnel in these
circumstances, and our failure to do so may restrict our ability
to generate revenue or implement our products on a timely basis.
Even if we are successful in hiring additional qualified sales
or service personnel, we will incur additional costs and our
operating results, including our gross margins, may be adversely
affected.
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If we
fail to retain our chief executive officer or other key
personnel or if we fail to attract additional qualified
personnel, we will not be able to achieve our anticipated level
of growth and our operating results could be adversely
affected.
Our future success depends upon the continued service of our
executive officers and other key sales, marketing, service,
engineering and technical staff. The loss of the services of our
executive officers and other key personnel would harm our
operations. In particular, Yuchun Lee, our co-founder, chief
executive officer, president and chairman, is critical to the
management of our business and operations, as well as to the
development of our strategic direction. None of our officers or
key personnel is bound by an employment agreement, and we do not
maintain key person life insurance on any of our employees. In
addition, our future success will depend in large part on our
ability to attract a sufficient number of highly qualified
personnel, and there can be no assurance that we will be able to
do so. Competition for qualified personnel in the software
industry is intense, and we compete for these personnel with
other software companies that have greater financial, technical,
marketing, service and other resources than we do. If we fail to
retain our key personnel and to attract new personnel, we will
not be able to achieve our anticipated level of growth and our
operating results could be adversely affected.
Our
international operations expose us to additional business risks,
and failure to manage these risks may adversely affect our
business and operating results.
Our primary international sales offices are in France, the
United Kingdom, Singapore and Australia. Revenue from customers
located outside of North America accounted for
$29.7 million, or 30% of total revenue in fiscal 2009,
$44.1 million, or 36% of total revenue in fiscal 2008 and
$27.3 million, or 27% of total revenue in fiscal 2007. Our
international operations are subject to a number of risks and
potential costs, including:
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lack of local recognition of our branding, which may require
that we spend significant amounts of time and money to build
brand identity;
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difficulty in establishing, staffing and managing international
operations;
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difficulty in establishing and maintaining strategic alliance
relationships;
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internationalization of our products to meet local customs or
the needs of local marketing organizations;
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different pricing environments;
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longer accounts receivable payment cycles and other collection
difficulties;
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compliance with multiple, conflicting, and changing laws and
regulations, including employment, tax, trade, privacy, and data
protection laws and regulations;
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laws and business practices, which may vary from country to
country and may favor local competitors;
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limited protection of intellectual property in some countries
outside of the United States; and
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political and economic instability.
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Our operating results and cash flows are subject to fluctuations
due to changes in foreign currency exchange rates, particularly
changes in the Euro and the British pound sterling. These
fluctuations could negatively affect our operating results and
could cause our net income or loss to vary from quarter to
quarter.
Our failure to manage the risks associated with our
international operations effectively could limit the future
growth of our business and adversely affect our operating
results. We may in the future further expand our existing
international operations by, for example, entering additional
international markets. We may be required to make a substantial
financial investment and expend significant management efforts
in connection with any such international expansion.
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New
accounting standards or interpretations of existing accounting
standards could adversely affect our operating
results.
Generally accepted accounting principles in the United States
are subject to interpretation by the Financial Accounting
Standards Board, or FASB, the American Institute of Certified
Public Accountants, the SEC and various bodies formed to
promulgate and interpret appropriate accounting principles. A
change in these principles or interpretations could have a
significant effect on our reported financial results, and could
affect the reporting of transactions completed before the
announcement of a change.
Certain factors have in the past and may in the future cause us
to defer recognition for license and subscription fees beyond
delivery. For example, the inclusion in our software
arrangements of customer acceptance testing, specified upgrades
or other material non-standard terms could require the deferral
of license revenue beyond delivery. Because of these factors and
other specific requirements under accounting principles
generally accepted in the United States for software revenue
recognition, we must have very precise terms in our software
arrangements in order to recognize revenue when we initially
deliver software or perform services. Negotiation of mutually
acceptable terms and conditions can extend our sales cycle, and
we may accept terms and conditions that do not permit revenue
recognition at the time of delivery.
Taxing
authorities could challenge our historical and future tax
positions as well as our allocation of taxable income among our
subsidiaries
The amount of income taxes we pay is subject to our
interpretation of applicable tax laws in the jurisdictions in
which we file. We have taken and will continue to take tax
positions based on our interpretation of such tax laws. While we
believe that we have complied with all applicable income tax
laws, there can be no assurance that a taxing authority will not
have a different interpretation of the law and assess us with
additional taxes. Should additional taxes be assessed, this may
result in a material adverse effect on our results of operations
or financial condition.
We conduct sales, marketing, professional services and research
and development operations through our subsidiaries located in
various tax jurisdictions around the world. While our transfer
pricing methodology is based on economic studies which we
believe are reasonable, the price charged for these services
could be challenged by the various tax authorities resulting in
additional tax liability, interest
and/or
penalties.
Our
business continues to grow rapidly in complexity which may
affect our ability to effectively comply with new and existing
regulations affecting our business.
We anticipate that we will continue to grow in complexity. We
recognize that the regulatory environment affecting our
business, particularly regulations relating to accounting
standards and principles and regulations relating to the
Sarbanes-Oxley Act compliance related to our internal controls,
continues to become more complex and burdensome. We may not be
able to scale our business infrastructure in a way that will
allow us to comply with such regulations or comply with such
regulations in a timely manner and, in particular, there is a
risk that we will not be able to effectively remedy material
internal control weaknesses or may have new material control
weaknesses in the future. Material control weaknesses or our
inability to be compliant with regulations may have a direct
negative effect on our long and short term stock performance and
may require us to devote significant resources in response to
compliance or remedial measures.
Goodwill
and other intangible assets represent a significant portion of
our assets, and any impairment of goodwill or other acquired
intangible assets would adversely impact our net
income.
At September 30, 2009, we had goodwill of
$10.9 million and other acquired intangible assets of
approximately $4.5 million, net of accumulated
amortization. Our goodwill is subject to an annual impairment
test, and both goodwill and other intangible assets are also
tested whenever events and circumstances indicate that they may
be impaired. Such events or conditions could include an economic
downturn in our customers industries, increased
competition, or other information regarding our market value,
such as a reduction in our stock price to a price at, near or
below our book value for a period of time, which could indicate
a triggering event and a possible impairment of goodwill. Any
excess goodwill resulting from the impairment test must be
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written off in the period of determination. During the quarter
ended March 31, 2009, given a change in our reporting units
as well as the decline in the Companys market
capitalization and overall operating results, we performed an
interim impairment assessment of our goodwill. As a result of
the goodwill impairment assessment, during the three months
ended March 31, 2009, we recorded a $15.3 million
charge relating to the impairment of goodwill.
During the quarter ended September 30, 2009, we performed
our annual impairment assessment of our goodwill. We determined
that our goodwill was not further impaired based on this test.
We will continue to incur non-cash charges relating to the
amortization of our intangible assets other than goodwill, over
the remaining useful lives of such assets. Future determinations
of significant write-offs of goodwill or intangible assets
resulting from an impairment test or any accelerated
amortization of intangible assets could have a significant
impact on our net income and affect our ability to achieve
profitability. Although we do not believe that any impairment of
goodwill or other intangible assets exists at this time, in the
event that such a condition or event occurs, we may record
charges which could have a material adverse effect on our
results of operations.
Our
inability to sustain our historical maintenance renewal rates
and pricing would adversely affect our operating
results.
We generate maintenance fees revenue from sales of maintenance
associated with licensed software. We generally sell maintenance
on an annual basis. In each of the last three fiscal years,
customers have renewed maintenance arrangements at a renewal
rate of greater than 85%. We may not succeed in sustaining this
rate of maintenance renewals. Moreover, we are facing
competitive and other pressures to reduce the pricing of our
maintenance arrangements. If we fail to sustain our historical
level of maintenance renewals or our historical pricing, our
maintenance fees revenue and total revenue would decrease and
our operating results would be adversely affected.
Defects
or errors in our software products could harm our reputation,
impair our ability to sell our products and result in
significant costs to us.
Our software products are complex and may contain undetected
defects or errors. We have not suffered significant harm from
any defects or errors to date, but we have from time to time
found defects in our products and we may discover additional
defects in the future. We may not be able to detect and correct
defects or errors before releasing products. Consequently, we or
our customers may discover defects or errors after our products
have been implemented. We have in the past issued, and may in
the future need to issue, corrective releases of our products to
correct defects or errors. The occurrence of any defects or
errors could result in:
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lost or delayed market acceptance and sales of our products;
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delays in payment to us by customers;
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product returns;
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injury to our reputation;
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diversion of our resources;
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legal claims, including product liability claims, against us;
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increased service and warranty expenses or financial
concessions; and
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increased insurance costs.
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Defects and errors in our software products could result in an
increase in service and warranty costs or claims for substantial
damages against us. Our license agreements with our customers
typically contain provisions designed to limit our liability for
defects and errors in our products and damages relating to such
defects and errors, but these provisions may not be enforced by
a court or otherwise effectively protect us from legal claims.
Our liability insurance may not be adequate to cover all of the
costs resulting from these
21
legal claims. Moreover, our current liability insurance coverage
may not continue to be available on acceptable terms or the
insurer may deny coverage as to any future claim. The successful
assertion against us of one or more large claims that exceeds
available insurance coverage, or the occurrence of changes in
our insurance policies, including premium increases or the
imposition of large deductible or co-insurance requirements,
could have a material adverse effect on our business and
operating results. Furthermore, even if we succeed in the
litigation, we are likely to incur substantial costs and our
managements attention will be diverted from our operations.
We intend
to increase the amount of revenue that we derive from
subscription arrangements, which may cause our quarterly revenue
and other operating results to fail to meet
expectations.
We generate recurring revenue from agreements to license our
offerings on a subscription basis, both directly and through
MSPs that provide outsourcing and on-demand solutions. Our
subscription arrangements typically have a license or service
period of one year, although the contractual term may range from
three to 36 months. We intend to seek to increase the
percentage of our total revenue derived under the subscription
model in order to diversify our revenue stream and generally
provide us with greater revenue predictability over the long
term. Since revenue from a subscription arrangement is generally
recognized ratably over the contractual term of the arrangement
rather than upon product delivery, a greater shift than
anticipated from perpetual license agreements towards
subscription arrangements will result in our recognizing less
revenue in the initial quarters of the contractual term.
Similarly, a decline in new or renewed subscription arrangements
in any one quarter will not necessarily be fully reflected in
the revenue for that quarter and may negatively affect our
revenue in future quarters. Differences in the mix of our
perpetual license revenue and our subscription fees revenue
could cause our operating results for a quarter to vary from our
announced guidance, if any, or expectations of equity research
analysts or investors, which could result in volatility in the
price of our common stock.
Privacy
and security concerns, including evolving government regulation
in the area of consumer data privacy, could adversely affect our
business and operating results.
The effectiveness of our software products relies on our
customers storage and use of data concerning their
customers, including financial, personally identifying and other
sensitive data. Our customers collection and use of these
data for consumer profiling may raise privacy and security
concerns and negatively impact the demand for our products and
services. We have implemented various features intended to
enable our customers to better comply with privacy and security
requirements, such as opt-out messaging and checking, the use of
anonymous identifiers for sensitive data, and restricted data
access, but these security measures may not be effective against
all potential privacy concerns and security threats. If a breach
of customer data security were to occur, our products may be
perceived as less desirable, which would negatively affect our
business and operating results.
In addition, governments in some jurisdictions have enacted or
are considering enacting consumer data privacy legislation,
including laws and regulations applying to the solicitation,
collection, processing and use of consumer data. This
legislation could reduce the demand for our software products if
we fail to design or enhance our products to enable our
customers to comply with the privacy and security measures
required by the legislation. Moreover, we may be exposed to
liability under existing or new consumer data privacy
legislation.
Intellectual
property litigation and infringement claims may cause us to
incur significant expenses or prevent us from selling our
software products.
The software industry is characterized by the existence of a
large number of patents, trademarks and copyrights and by
frequent litigation based on allegations of infringement or
other violations of intellectual property rights. From time to
time, we receive claims that our software products or business
infringe or misappropriate the intellectual property of third
parties.
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In the future other third parties may assert that our technology
violates their intellectual property rights or we may be the
subject of a material intellectual property dispute. EMM
software developers may become increasingly subject to
infringement claims as the number of commercially available EMM
software products increases and the functionality of these
products further overlaps.
Regardless of the merit of any particular claim that our
technology violates the intellectual property rights of others,
responding to such claims may require us to:
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incur substantial expenses and expend significant management
efforts;
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pay damages;
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cease making, licensing or using products that are alleged to
incorporate the intellectual property of others;
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enter into potentially unfavorable royalty or license agreements
in order to obtain the right to use necessary
technologies; and
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expend additional development resources to redesign our products.
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We may also be required to indemnify customers, MSPs or systems
integrators for their use of the intellectual property
associated with the current suit or for other third-party
products that are incorporated into our products and that
infringe the intellectual property rights of others. If we are
unable to resolve our legal obligations by settling or paying an
infringement claim or a related indemnification claim as
described above, we may be required to refund amounts that we
had received under the contractual arrangement with the
customers, MSPs or systems integrators.
In addition, from time to time there have been claims
challenging the ownership of open source software against
companies that incorporate open source software into their
products. We use a limited amount of open source software in our
products and may use more open source software in the future. As
a result, we could be subject to suits by parties claiming
ownership of what we believe to be open source software.
We may
enter into acquisitions that may be difficult to integrate,
disrupt our business, dilute stockholder value or divert
management attention.
We intend to continue to pursue the acquisition of businesses,
technologies and products that will complement our existing
operations. On December 20, 2005, we acquired certain
assets of MarketSoft Software Corporation and on March 22,
2006, we acquired Sane Solutions, LLC. Most recently, on
July 12, 2007, we acquired MarketingCentral L.L.C. as
described in Note 3 to our consolidated financial
statements. These acquisitions or any acquisition we make in the
future may not provide us with the benefits we anticipated in
entering into the transaction. Acquisitions are typically
accompanied by a number of risks, including:
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difficulties in integrating the operations and personnel of the
acquired companies;
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maintenance of acceptable standards, controls, procedures and
policies;
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potential disruption of ongoing business and distraction of
management;
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impairment of relationships with employees and customers as a
result of any integration of new management and other personnel;
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inability to maintain relationships with customers of the
acquired business;
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difficulties in incorporating acquired technology and rights
into products and services;
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failure to achieve the expected benefits of the acquisition;
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unexpected expenses resulting from the acquisition;
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potential unknown liabilities associated with acquired
businesses;
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unanticipated expenses related to acquired technology and its
integration into existing technology; and
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litigation.
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In addition, acquisitions may result in the incurrence of debt,
restructuring charges and large one-time write-offs, such as
write-offs for acquired in-process research and development
costs. Acquisitions may also result in goodwill and other
intangible assets that are subject to impairment tests, which
could result in future impairment charges. Furthermore, if we
finance acquisitions by issuing convertible debt or equity
securities, our existing stockholders may be diluted and
earnings per share may decrease.
From time to time, we may enter into negotiations for
acquisitions that are not ultimately consummated. Those
negotiations could result in diversion of management time and
significant
out-of-pocket
costs. If we fail to evaluate and execute acquisitions properly,
we may not be able to achieve our anticipated level of growth
and our business and operating results could be adversely
affected.
We will
continue to incur significant costs as a result of operating as
a public company, and our management will be required to devote
substantial time to new compliance initiatives.
We will continue to incur significant legal, accounting and
other expenses that we did not incur as a private company. The
Sarbanes-Oxley Act of 2002, as well as new rules subsequently
implemented by the SEC and the NASDAQ Stock Market, or NASDAQ,
has imposed various new requirements on public companies,
including requiring changes in corporate governance practices.
Our management and other personnel will need to continue to
devote a substantial amount of time to these new compliance
initiatives. Moreover, these rules and regulations will increase
our legal and financial compliance costs and will make some
activities more time-consuming and costly.
In addition, the Sarbanes-Oxley Act requires, among other
things, that we maintain effective internal controls for
financial reporting and disclosure controls and procedures. In
particular, commencing in fiscal 2006, we began system and
process evaluation and testing of our internal controls over
financial reporting to allow management and our independent
registered public accounting firm to report on the effectiveness
of our internal controls over financial reporting, as required
by Section 404 of the Sarbanes-Oxley Act. Our compliance
with Section 404 requires that we continue to incur
substantial accounting expense and expend significant management
efforts. If we are not able to comply with the requirements of
Section 404 in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our
internal controls over financial reporting that are deemed to be
material weaknesses, the market price of our stock could decline
and we could be subject to sanctions or investigations by
NASDAQ, the SEC or other regulatory authorities, which would
require additional financial and management resources.
Risks
Relating to Ownership of Our Common Stock
The price
of our common stock may be volatile.
The trading market for our common stock may fluctuate
substantially. These fluctuations could cause our investors to
lose part or all of any investment in shares of our common
stock. The following factors, most of which are outside of our
control, could cause the market price of our common stock to
decrease significantly:
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loss of any of our major customers;
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departure of key personnel;
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variations in our annual or quarterly operating results;
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announcements by our competitors of significant contracts, new
products or product enhancements, acquisitions, distribution
partnerships, joint ventures or capital commitments;
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changes in governmental regulations and standards affecting the
software industry and our products, including implementation of
additional regulations relating to consumer data privacy;
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decreases in financial estimates by equity research analysts;
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sales of common stock or other securities by us in the future;
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decreases in market valuations of software companies;
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fluctuations in stock market prices and volumes; and
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damages, settlements, legal fees and other costs related to
litigation, claims and other contingencies.
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In the past, securities class action litigation often has been
initiated against a company following a period of volatility in
the market price of the companys securities. If class
action litigation is initiated against us, we will incur
substantial costs and our managements attention will be
diverted from our operations. All of these factors could cause
the market price of our stock to decline, and our investors may
lose some or all of any investment.
Our
directors and executive officers will continue to have
substantial control over us and could limit the ability of
stockholders to influence the outcome of key transactions,
including a change in control.
We anticipate that our executive officers and directors and
entities affiliated with them will, in the aggregate, continue
to beneficially own a substantial portion of our outstanding
common stock in the near term. In particular, Yuchun Lee, our
co-founder, chief executive officer, president and chairman,
beneficially owned approximately 21% of our outstanding common
stock as of September 30, 2009. Our executive officers,
directors and affiliated entities, if acting together, would be
able to influence significantly all matters requiring approval
by our stockholders, including the election of directors and the
approval of mergers or other significant corporate transactions.
The concentration of ownership of our common stock may have the
effect of delaying, preventing or deterring a change of control
of our company, could deprive our stockholders of an opportunity
to receive a premium for their common stock as part of a sale of
our company, and may affect the market price of our common stock.
Our
corporate documents and Delaware law make a takeover of our
company more difficult, which may prevent certain changes in
control and limit the market price of our common
stock.
Our charter and by-laws and Section 203 of the Delaware
General Corporation Law contain provisions that might enable our
management to resist a takeover of our company. These provisions
might discourage, delay or prevent a change in the control of
our company or a change in our management. These provisions
could also discourage proxy contests and make it more difficult
for stockholders to elect directors and take other corporate
actions. The existence of these provisions could limit the price
that investors might be willing to pay in the future for shares
of our common stock. Some provisions in our charter and by-laws
may deter third parties from acquiring us, which may limit the
market price of our common stock.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
Our operations are conducted in leased facilities. We lease
approximately 73,000 square feet of office space in
Waltham, Massachusetts pursuant to a lease agreement that
expires in April 2015. This facility serves as our corporate
headquarters. Personnel located at this facility include members
of our senior management team, software research and development
team, consulting personnel, technical support personnel, product
marketing and management personnel, sales personnel, and finance
and administration personnel.
We also lease office space in Paris, France; Pune, India; Egham,
England; Singapore; Brussels, Belgium; Amsterdam, Netherlands;
Munich, Germany; Madrid, Spain; Melbourne, Australia and Seoul,
Korea. Our aggregate rent expense was $4.0 million in
fiscal 2009. For more information about our lease commitments,
see Note 7 to our consolidated financial statements,
Commitments and Contingencies.
25
|
|
Item 3.
|
Legal
Proceedings
|
We are not currently a party to any material litigation and we
are not aware of any pending or threatened litigation against us
that could have a material adverse effect on our business,
operating results or financial condition. However, the industry
in which we operate is characterized by frequent claims and
litigation, including claims regarding patent and other
intellectual property rights as well as improper hiring
practices. As a result, we may be involved in various legal
proceedings from time to time that arise in the ordinary course
of business.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of our security holders
through solicitation of proxies or otherwise, during the fourth
quarter of the fiscal year ended September 30, 2009.
26
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Stock
Market Information
Our common stock is listed on The Nasdaq Global Market under the
trading symbol UNCA. The following table sets forth the high and
low sales prices of our common stock, as reported by The Nasdaq
Global Market, for each quarterly period within our two most
recent fiscal years:
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Fiscal 2008
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
13.01
|
|
|
$
|
8.37
|
|
Second quarter
|
|
$
|
9.58
|
|
|
$
|
6.15
|
|
Third quarter
|
|
$
|
8.69
|
|
|
$
|
6.20
|
|
Fourth quarter
|
|
$
|
9.35
|
|
|
$
|
7.31
|
|
Fiscal 2009
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
8.29
|
|
|
$
|
3.20
|
|
Second quarter
|
|
$
|
6.05
|
|
|
$
|
3.94
|
|
Third quarter
|
|
$
|
5.62
|
|
|
$
|
4.38
|
|
Fourth quarter
|
|
$
|
8.18
|
|
|
$
|
5.06
|
|
The closing sale price of our common stock, as reported by The
Nasdaq Global Market, was $6.88 on December 1, 2009.
Holders
As of December 1, 2009 there were approximately 99
stockholders of record of our common stock based on the records
of our transfer agent.
Dividends
We did not declare or pay any cash dividends on our common stock
during the two most recent fiscal years. We currently intend to
retain earnings, if any, to fund the development and growth of
our business and do not anticipate paying other cash dividends
on our common stock in the foreseeable future. Our payment of
any future dividends will be at the discretion of our board of
directors after taking into account various factors, including
our financial condition, operating results, cash needs and
growth plans.
Securities
Authorized for Issuance Under Equity Compensation
Plans
The information required by this item is included under the
caption Equity Compensation Plan Information in our
Proxy Statement related to the 2010 Annual Meeting of
Shareholders to be filed with the Securities and Exchange
Commission no later that 120 days after the end of our
fiscal year and is incorporated herein by reference.
27
Performance
Graph
The following performance graph and related information is
furnished and not filed and shall not be
deemed to be soliciting material or subject to
Regulation 14A, shall not be deemed filed for
purposes of Section 18 of the Securities and Exchange Act
of 1934, as amended (Exchange Act), or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act except to the extent that we
specifically incorporate it by reference into such filing.
The following graph compares the cumulative total return to
stockholders of our common stock for the period from
August 3, 2005, the date of our initial public offering, to
September 30, 2009, to the cumulative total return of the
Nasdaq Stock Market (U.S.) Index and the Nasdaq
Computer & Data Processing Index for the same period.
This graph assumes the investment of $100.00 on August 3,
2005 in our common stock, the Nasdaq Stock Market (U.S.) Index
and the Nasdaq Computer & Data Processing Index and
assumes any dividends are reinvested.
COMPARATIVE
STOCK PERFORMANCE
Among Unica Corporation
The Nasdaq Stock Market (U.S.) Index and
The Nasdaq Computer & Data Processing Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 3,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
Unica Corporation
|
|
|
$
|
100.00
|
|
|
|
$
|
93.77
|
|
|
|
$
|
87.96
|
|
|
|
$
|
95.90
|
|
|
|
$
|
66.95
|
|
|
|
$
|
65.07
|
|
Nasdaq Stock Market (U.S.) Index
|
|
|
$
|
100.00
|
|
|
|
$
|
97.06
|
|
|
|
$
|
101.88
|
|
|
|
$
|
121.86
|
|
|
|
$
|
94.36
|
|
|
|
$
|
95.74
|
|
Nasdaq Computer & Data Processing Index
|
|
|
$
|
100.00
|
|
|
|
$
|
96.63
|
|
|
|
$
|
100.39
|
|
|
|
$
|
123.04
|
|
|
|
$
|
91.98
|
|
|
|
$
|
105.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Item 6.
|
Selected
Financial Data
|
The selected consolidated financial data set forth below as of
September 30, 2009, 2008 and 2007 and for the years ended
September 30, 2009, 2008 and 2007 are derived from our
financial statements audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, and included
elsewhere in this Annual Report. The selected consolidated
financial data as of September 30, 2006 and 2005 and for
the years ended September 30, 2006 and 2005 are derived
from our audited financial statements not included in this
Annual Report.
The following selected consolidated financial data should be
read in conjunction with our consolidated financial statements,
the related notes and Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Annual Report. The
historical results are not necessarily indicative of the results
to be expected for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share data)
|
|
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
$
|
18,823
|
|
|
$
|
42,877
|
|
|
$
|
38,970
|
|
|
$
|
35,023
|
|
|
$
|
26,198
|
|
Maintenance and services
|
|
|
61,787
|
|
|
|
64,511
|
|
|
|
54,318
|
|
|
|
40,876
|
|
|
|
32,697
|
|
Subscription
|
|
|
20,008
|
|
|
|
13,743
|
|
|
|
8,955
|
|
|
|
6,512
|
|
|
|
4,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
100,618
|
|
|
|
121,131
|
|
|
|
102,243
|
|
|
|
82,411
|
|
|
|
63,548
|
|
Costs of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
|
1,932
|
|
|
|
3,118
|
|
|
|
2,782
|
|
|
|
1,924
|
|
|
|
854
|
|
Maintenance and services
|
|
|
19,390
|
|
|
|
25,461
|
|
|
|
18,958
|
|
|
|
13,854
|
|
|
|
10,554
|
|
Subscription
|
|
|
4,671
|
|
|
|
2,862
|
|
|
|
692
|
|
|
|
429
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
|
25,993
|
|
|
|
31,441
|
|
|
|
22,432
|
|
|
|
16,207
|
|
|
|
11,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
74,625
|
|
|
|
89,690
|
|
|
|
79,811
|
|
|
|
66,204
|
|
|
|
51,912
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
41,773
|
|
|
|
49,747
|
|
|
|
41,068
|
|
|
|
33,446
|
|
|
|
26,802
|
|
Research and development
|
|
|
19,886
|
|
|
|
22,971
|
|
|
|
22,034
|
|
|
|
17,085
|
|
|
|
11,466
|
|
General and administrative
|
|
|
16,018
|
|
|
|
19,078
|
|
|
|
16,362
|
|
|
|
11,549
|
|
|
|
6,927
|
|
Restructuring charges (credits)
|
|
|
3,000
|
|
|
|
(286
|
)
|
|
|
1,244
|
|
|
|
255
|
|
|
|
|
|
Goodwill impairment charge
|
|
|
15,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,037
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
1,180
|
|
|
|
1,573
|
|
|
|
1,572
|
|
|
|
1,109
|
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
97,123
|
|
|
|
93,083
|
|
|
|
82,280
|
|
|
|
67,481
|
|
|
|
45,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(22,498
|
)
|
|
|
(3,393
|
)
|
|
|
(2,469
|
)
|
|
|
(1,277
|
)
|
|
|
6,257
|
|
Interest income, net
|
|
|
586
|
|
|
|
1,448
|
|
|
|
2,056
|
|
|
|
2,047
|
|
|
|
660
|
|
Other income (expense), net
|
|
|
(1,371
|
)
|
|
|
(383
|
)
|
|
|
108
|
|
|
|
(57
|
)
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(23,283
|
)
|
|
|
(2,328
|
)
|
|
|
(305
|
)
|
|
|
713
|
|
|
|
6,850
|
|
Provision for (benefit from) income taxes
|
|
|
(1,509
|
)
|
|
|
7,411
|
|
|
|
(801
|
)
|
|
|
37
|
|
|
|
2,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(21,774
|
)
|
|
$
|
(9,739
|
)
|
|
$
|
496
|
|
|
$
|
676
|
|
|
$
|
4,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.05
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.05
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,766
|
|
|
|
20,443
|
|
|
|
19,857
|
|
|
|
19,267
|
|
|
|
11,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
20,766
|
|
|
|
20,443
|
|
|
|
20,782
|
|
|
|
20,235
|
|
|
|
11,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
On October 1, 2005, the Company adopted a new accounting
standard relating to share-based compensation, which requires us
to recognize expense related to the fair value of share-based
compensation awards. We elected to use the modified prospective
transition method and therefore have not restated our financial
results for prior periods.
For the year ended September 30, 2005, net loss applicable
to common stockholders and net loss per share reflect a special
one-time preferred stock dividend of $3.1 million and a
redemption payment of $1.0 million in August 2005 in
connection with our initial public offering. In addition, as a
result of the net loss applicable to common stockholders, shares
used in computing diluted net loss per common share excludes
1,456,133 weighted-average shares of common stock issuable upon
exercise of outstanding stock options, as the effect of
including those shares would be anti-dilutive.
In the preceding table, cost of revenue and operating expenses
include share-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Share-Based Compensation Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of maintenance and services revenue
|
|
$
|
1,024
|
|
|
$
|
898
|
|
|
$
|
590
|
|
|
$
|
273
|
|
|
$
|
94
|
|
Sales and marketing expense
|
|
|
2,338
|
|
|
|
2,389
|
|
|
|
1,706
|
|
|
|
776
|
|
|
|
171
|
|
Research and development expense
|
|
|
1,020
|
|
|
|
1,294
|
|
|
|
1,151
|
|
|
|
678
|
|
|
|
68
|
|
General and administrative expense
|
|
|
1,463
|
|
|
|
2,144
|
|
|
|
2,073
|
|
|
|
1,291
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense
|
|
$
|
5,845
|
|
|
$
|
6,725
|
|
|
$
|
5,520
|
|
|
$
|
3,018
|
|
|
$
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
50,314
|
|
|
$
|
35,799
|
|
|
$
|
18,493
|
|
|
$
|
30,501
|
|
|
$
|
43,754
|
|
Short-term investments
|
|
|
|
|
|
|
11,482
|
|
|
|
19,614
|
|
|
|
9,537
|
|
|
|
16,172
|
|
Working capital
|
|
|
22,078
|
|
|
|
21,304
|
|
|
|
20,455
|
|
|
|
23,923
|
|
|
|
45,298
|
|
Total assets
|
|
|
93,881
|
|
|
|
116,909
|
|
|
|
121,348
|
|
|
|
104,647
|
|
|
|
81,604
|
|
Total deferred revenue
|
|
|
36,319
|
|
|
|
37,102
|
|
|
|
38,632
|
|
|
|
33,886
|
|
|
|
24,634
|
|
Total stockholders equity
|
|
|
42,813
|
|
|
|
60,006
|
|
|
|
62,919
|
|
|
|
54,607
|
|
|
|
46,373
|
|
On October 1, 2007, the Company adopted a new accounting
standard, which requires the Company to accrue an estimated
liability for sabbatical leave over the requisite service
period. Prior to October 1, 2007, the Company recorded a
liability for sabbatical leave upon an employee vesting in the
benefit, which occurred when an employee went on leave after
completing a six-year service period. The cumulative effect of
adopting this accounting standard was recorded to retained
earnings (accumulated deficit).
On October 1, 2007 the Company adopted a new accounting
standard which prescribes a minimum recognition threshold a tax
position is required to meet before being recognized in the
financial statements. This accounting standard also provides
guidance on derecognition, measurement, classification, interest
and penalties, accounting in interim periods, disclosure and
transition. There was no cumulative effect upon adoption of this
accounting standard.
The consolidated financial position and results of operations
data reflect our acquisitions of MarketingCentral on
July 12, 2007 for $12.9 million in cash and assumed
liabilities; Sane Solutions on March 22, 2006 for
$27.0 million in cash and assumed liabilities, and
$1.8 million in shares of the Companys common stock;
and MarketSoft on December 20, 2005 for $7.9 million
in cash and assumed liabilities. Results of operations for the
acquired businesses have been included in the consolidated
statements of operations since their acquisition dates.
During the three months ended March 31, 2009, Company
performed an interim impairment assessment of its goodwill at
March 31, 2009, and recorded a $15.3 million charge
relating to the impairment of goodwill.
30
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Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
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The information contained in this section has been derived
from our consolidated financial statements and should be read
together with our consolidated financial statements and related
notes included elsewhere in this Annual Report on
Form 10-K.
This Annual Report on
Form 10-K
contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933, as amended, and
section 21E of the Securities Exchange Act of 1934, as
amended. You can identify these statements by forward-looking
words such as expect, anticipate,
intend, plan, believe,
seek, estimate, may, or
similar words. You should read statements that contain these
words carefully because they discuss our future expectations,
contain projections of our future results of operations or of
our financial condition, or state other
forward-looking information. We believe that it is
important to communicate our future expectations to our
investors. However, there may be events in the future that we
are not able to accurately predict or control and that may cause
our actual results to differ materially from the expectations we
describe in our forward-looking statements. Investors are
cautioned that all forward-looking statements involve risks and
uncertainties, and actual results may differ materially from
those discussed as a result of various factors, including those
factors described in Risk Factors in Item 1A on
this Annual Report on
Form 10-K.
Readers should not place undue reliance on our forward-looking
statements, and we assume no obligation and do not intend to
update any forward-looking statements.
Our fiscal year ends on September 30. References to
fiscal 2009, 2008 or 2007, for example, refer to the fiscal year
ended September 30, unless otherwise indicated.
Overview
Unica Corporation is a global provider of enterprise marketing
management, or EMM software designed to help
businesses increase their revenues and improve the efficiency
and measurability of their marketing operations. Focused
exclusively on the needs of marketers, Unicas software
delivers key capabilities to track and analyze online and
offline customer behavior, generate demand and manage marketing
process, resources and assets. Our software streamlines the
entire marketing process for relationship, brand and Internet
marketing from analysis and planning, to budgeting,
production management, execution and measurement. As the most
comprehensive EMM suite on the market, our suite delivers a
marketing system of record a dedicated
solution through which marketers capture, record and easily
manage marketing activity, information and assets, rapidly
design campaigns, and report on performance.
We sell and market our software primarily through our direct
sales force as well as through alliances with MSPs, resellers,
distributors and systems integrators. In addition to reselling
and deploying our products, MSPs offer a range of marketing
program design, support, and execution services on an on-demand
or outsourced basis. We also provide a full range of services to
our customers, including implementation, training, consulting,
maintenance and technical support, and customer success
programs. We have sales offices across the United States,
including at our headquarters in Waltham, Massachusetts. Our
primary sales offices outside of the United States are in
France, the United Kingdom, Singapore and Australia. In
addition, we have a research and development office in India. We
have a worldwide installed base of over 1,000 companies in
a wide range of industries. Our current customers operate
principally in the financial services, retail,
telecommunications, and travel and hospitality industries.
Management evaluates our financial condition and operating
results based on many factors, including license revenue,
subscription revenue, maintenance revenue, service revenue,
costs of revenue, operating expenses, income from operations,
cash flow from operations, total cash and cash equivalents and
total liabilities. Management reviews these factors on an
ongoing basis and measures them quarterly. As noted below in the
Results of Operations, our license revenue has decreased
significantly from fiscal 2008 to fiscal 2009 due to, we
believe, longer sales cycles, delayed decision making and lack
of commitment to large capital expenditures by our customers as
a result of the macro-economic environment. Conversely, our
subscription revenue has grown, with one of the contributing
factors being the lower upfront operating expense needed for a
subscription license as compared to the higher upfront perpetual
license capital expenditure. We expect to
31
have diminished visibility into future license revenue and
expect subscription revenue to be an attractive licensing model
to our customers during this difficult economic environment.
Sources
of Revenue
We derive revenue from software licenses, maintenance, services
and subscriptions. License revenue is derived from the sale of
software licenses for our product offerings under perpetual
software arrangements that typically include: (a) an
end-user license fee paid for the use of our products in
perpetuity; (b) an annual maintenance arrangement that
provides for software updates and upgrades and technical
support; and (c) a services work order for implementation,
training, consulting and reimbursable expenses. Subscription
revenue is derived from arrangements for our on demand offerings
and term licenses. On demand arrangements typically include:
(a) a subscription fee for hosted services and technical
support and (b) optional professional services for
consulting, training and other services. Term license
arrangements typically include: (a) a subscription fee for
bundled software and support for a fixed period and (b) a
services work order for implementation, training, consulting and
reimbursable expenses.
License
Revenue
Perpetual Licenses. Licenses to use our
software products in perpetuity generally are priced based on
(a) either a customers database size (including
number of database records) or a platform fee and (b) a
specified number of users. With respect to our Unica NetInsight
product, licenses are generally priced based on the volume of
traffic and complexity of a website. We recognize perpetual
license revenue at the time of product delivery, provided all
other revenue recognition criteria have been met. When we
license our software on a perpetual basis through an MSP or
systems integrator, we recognize revenue upon delivery of the
licensed software to the MSP or systems integrator only if
(a) the customer of the MSP or systems integrator is
identified in a written arrangement between the MSP or systems
integrator and us and (b) all other revenue recognition
criteria have been met.
Maintenance
and Services Revenue
Maintenance and services revenue is generated from sales of
(a) maintenance, including software updates and upgrades
and technical support associated with the sale of perpetual
software licenses and (b) services, including
implementation, training, consulting, and reimbursable travel.
Maintenance. We sell maintenance on perpetual
licenses that includes technical support and software updates
and upgrades on a when and if available basis. Revenue is
deferred at the time the maintenance agreement is initiated and
is recognized ratably over the term of the maintenance agreement.
Services. We sell implementation services and
training on a
time-and-materials
basis and generally recognize revenue when the services are
performed; however, in certain circumstances these services may
be priced on a fixed-fee basis and recognized as revenue using
the proportional performance method. For services and
subscription fees combined into a single unit of accounting
where both are recognized ratably over the expected economic
life of an arrangement, we report the services portion of these
revenues separately based on vendor-specific objective evidence,
or VSOE, of fair value for those services. Services revenue also
includes billable travel, lodging and other
out-of-pocket
expenses incurred as part of delivering services to our
customers.
Subscription
Revenue
We also market our software under subscription arrangements,
typically as an on demand offering or as a term license. The
software in a term license arrangement is either installed on
the end-user customers premises or it is hosted by an MSP.
Under a subscription agreement, we typically invoice the
customer in annual or quarterly installments in advance. When
fair value of the subscription element in an arrangement cannot
be established, revenue is recognized ratably over the expected
customer relationship period commencing on the date at which all
services under related work orders are completed.
32
Cost
of Revenue
Cost of license revenue for perpetual license agreements
consists primarily of (a) salaries, other labor related
costs and share-based compensation related to documentation
personnel, (b) facilities and other related overhead,
(c) third-party royalties for licensed technology
incorporated into our current product offerings,
(d) amortization of acquired developed technology and
(e) amortization of capitalized software development costs.
Cost of maintenance and services revenue consists primarily of
(a) salaries, other labor related costs, share-based
compensation, facilities and other overhead related to
professional services and technical support personnel,
(b) expenses for services provided by subcontractors for
professional services and related
out-of-pocket
expenses, and (c) amortization of internal-use software
costs.
Cost of subscription revenue includes an allocation of labor
related and overhead costs associated with technical support,
documentation and professional services personnel as well as
costs associated with hosting-related activities.
Operating
Expenses
Sales and Marketing. Sales and marketing
expense consists primarily of (a) salaries, other
labor-related costs and share-based compensation related to
sales and marketing personnel, (b) commissions and bonuses,
(c) travel, lodging and other
out-of-pocket
expenses, (d) marketing programs such as trade shows and
advertising, and (e) facilities and other related overhead.
The total amount of commissions earned for a perpetual license,
subscription or maintenance arrangement are recorded as expense
when revenue recognition for that arrangement commences.
Research and Development. Research and
development expense consists primarily of (a) salaries,
other labor related costs and share-based compensation related
to employees working on the development of new products,
enhancement of existing products, quality assurance and testing
and (b) facilities and other related overhead. During the
years ended September 30, 2009, 2008 and 2007, we
capitalized $818,000, $477,000 and $136,000 respectively,
related to software development costs incurred.
General and Administrative. General and
administrative expense consists primarily of (a) salaries,
other labor related costs and share-based compensation related
to personnel performing general and administrative activities,
(b) accounting, legal and other professional fees, and
(c) facilities and other related overhead.
Restructuring Charges. Restructuring expense
in fiscal 2007 reflects the restructuring, initiated in the
fourth quarter of fiscal 2006, of certain of our operations in
France to realign our resources in that region. These costs
include salaries, severance and legal fees. In the first quarter
of fiscal 2009, the Company reduced its workforce by
approximately 4% and recorded a restructuring charge of $711,000
for one-time termination benefits to employees. The strategic
reduction of workforce was designed to streamline the
Companys organization and improve its corporate
performance. In the fourth quarter of fiscal 2009, the Company
approved a plan to implement a strategic reduction of its
workforce designed to streamline its organization and improve
its corporate operating performance. In connection with this
plan, in the fourth quarter of fiscal 2009, the Company reduced
its workforce by approximately 13% and recorded a restructuring
charge of $2.3 million for one-time termination benefits to
employees.
Amortization of Acquired Intangible
Assets. Cost of revenue includes the amortization
of developed core technology acquired in our recent
acquisitions. Operating expenses include the amortization of
acquired customer contracts and related customer relationships
as well as the amortization of trade names.
Share-Based Compensation. We account for
share-based compensation awards by estimating the fair value of
such employee awards and recording the related expense in the
consolidated financial statements. We selected the Black-Scholes
option-pricing model as the most appropriate fair-value model
for our awards and recognize compensation cost on a
straight-line basis over the requisite service period of the
awards.
33
Acquisitions
On July 12, 2007, we acquired by merger MarketingCentral,
L.L.C. (MarketingCentral), a provider of web-based
marketing management solutions. The merger consideration
consisted of $12.5 million in cash, as well as transaction
costs and the assumption of liabilities of MarketingCentral. The
acquisition was accounted for as a purchase transaction and our
operating results therefore include the results of
MarketingCentral beginning on the acquisition date.
Application
of Critical Accounting Policies and Use of Estimates
Our financial statements are prepared in accordance with
accounting principles generally accepted in the United States,
or GAAP. The application of GAAP requires that we make estimates
that affect our reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and
expenses during the reporting period. We base our estimates on
historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. We evaluate
our estimates and assumptions on an ongoing basis. Our actual
results may differ significantly from these estimates.
Our significant accounting policies are described in Note 2
to our consolidated financial statements. We believe that the
following accounting policies involve a greater degree of
judgment and complexity. Accordingly, these are the policies we
believe are the most critical to aid in fully understanding and
evaluating our financial condition and results of operations.
Revenue
Recognition
We sell our software products and services together in a
multiple-element arrangement under perpetual and subscription
agreements. We use the residual method to recognize revenues
from perpetual license arrangements that include one or more
elements to be delivered at a future date, when evidence of the
fair value of all undelivered elements exists. Under the
residual method, the fair value of the undelivered elements
based on VSOE is deferred and the remaining portion of the
arrangement fee is allocated to the delivered elements. Each
license arrangement requires that we analyze the individual
elements in the transaction and determine the fair value of each
undelivered element, which typically includes maintenance and
services. We allocate revenue to each undelivered element based
on its fair value, with the fair value determined by the price
charged when that element is sold separately.
For perpetual license agreements, we generally estimate the fair
value of the maintenance portion of an arrangement based on the
maintenance renewal price for that arrangement. In
multiple-element perpetual license arrangements where we sell
maintenance for less than fair value, we defer the contractual
price of the maintenance plus the difference between such
contractual price and the fair value of maintenance over the
expected life of the product. We make a corresponding reduction
in license revenue. The fair value of the professional services
portion of perpetual license arrangements is based on the rates
that we charge for these services when sold separately. If, in
our judgment, evidence of fair value cannot be established for
the undelivered elements in a multiple-element arrangement, the
entire amount of revenue from the arrangement is deferred until
evidence of fair value can be established, or until the elements
for which evidence of fair value could not be established are
delivered.
Revenue for implementation services of our software products
that are not deemed essential to the functionality of the
software products is recognized separately from license and
subscription revenue. Generally these services are priced on a
time-and-materials
basis and recognized as revenue when services are performed;
however, in certain circumstances these services may be priced
on a fixed-fee basis and recognized as revenue under the
proportional performance method. In cases where VSOE of fair
value does not exist for the undelivered elements in a software
license arrangement, services revenue is deferred and recognized
over the period of performance of the final undelivered element.
The Company also defers the direct and incremental costs of
providing the services and amortizes those costs over the period
revenue is recognized.
34
If we were to determine that services are essential to the
functionality of software in an arrangement, the license or
subscription and services revenue from the arrangement would be
recognized pursuant to the accounting for performance of
construction-type contracts and certain production-type
contracts. In such cases, we expect that we would be able to
make reasonably dependable estimates relative to the extent of
progress toward completion by comparing the total hours incurred
to the estimated total hours for the arrangement and,
accordingly, we would apply the
percentage-of-completion
method. If we were unable to make reasonably dependable
estimates of progress towards completion, then we would use the
completed-contract method, under which revenue is recognized
only upon completion of the services. If total cost estimates
exceed the anticipated revenue, then the estimated loss on the
arrangement is recorded at the inception of the arrangement or
at the time the loss becomes apparent.
We generally enter into subscription arrangements for term
licenses that include, on a bundled basis, (a) the right to
use our software for a specified period of time,
(b) updates and upgrades to our software on a when and if
available basis, and (c) technical support. In subscription
arrangements for term licenses, where services are not deemed
essential to the functionality of the software products, and
fair value has not been established for the subscription
element, revenue for both the subscription and services is
recognized ratably over the longer of the term of the
arrangement or the expected customer relationship period, once
the only remaining undelivered element to the arrangement is
post-contract customer support.
Subscription arrangements for on demand services generally
include: (a) a subscription fee for hosted services and
technical support and (b) optional professional services
for consulting, training and other services. Revenue related to
subscription fees for on demand services is recognized ratably
over the expected customer relationship period commencing at the
point when the end-user is provided access to the underlying
software. Revenue related to professional services is recognized
ratably over the expected customer relationship period
commencing at the point when such services are delivered,
provided that the end-user is given access to the underlying
software.
For all of our software arrangements, we do not recognize
revenue until we can determine that persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or
determinable and we deem collection to be probable. In making
these judgments, we evaluate these criteria as follows:
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|
|
Evidence of an arrangement. For the majority
of our arrangements, we consider a non-cancelable agreement
signed by us and the customer to be persuasive evidence of an
arrangement. In transactions below a certain dollar threshold
involving the sale of our UnicaNetInsight product, we consider a
purchase order signed by the customer to be persuasive evidence
of an arrangement.
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|
Delivery. We consider delivery to have
occurred when a CD or other medium containing the licensed
software is provided to a common carrier or, in the case of
electronic delivery, the customer is given electronic access to
the licensed software. Our typical end-user license agreement
does not include customer acceptance provisions.
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|
Fixed or determinable fee. We consider the fee
to be fixed or determinable unless the fee is subject to refund
or adjustment or is not payable within our normal payment terms.
If the fee is subject to refund or adjustment, we recognize the
revenue when the refund or adjustment right lapses. If the
payments are due beyond our normal terms, we recognize the
revenue as amounts become due and payable or as cash is
collected.
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|
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|
Collection is deemed probable. Customers are
evaluated for creditworthiness through our credit review process
at the inception of the arrangement. Collection is deemed
probable if, based upon our evaluation, we expect that the
customer will be able to pay amounts under the arrangement as
payments become due. If we cannot conclude that collection is
probable, we defer the revenue and recognize the revenue upon
cash collection.
|
When we license our software through an MSP or systems
integrator, we begin to recognize revenue upon delivery of the
licensed software to the MSP or systems integrator only if
(a) the customer of the MSP or systems integrator is
identified in a written arrangement between us and the MSP or
systems integrator and (b) all other revenue recognition
criteria have been met.
35
In our agreements with customers and MSPs, we provide a limited
warranty that our software will perform in a manner consistent
with our documentation under normal use and circumstances. In
the event of a breach of this limited warranty, we must repair
or replace the software or, if those remedies are insufficient,
provide a refund. These agreements generally do not include any
other right of return or any cancellation clause or conditions
of acceptance.
Allowance
for Doubtful Accounts
In addition to our initial credit evaluations at the inception
of arrangements, we regularly assess our ability to collect
outstanding customer invoices and in so doing must make
estimates of the collectibility of accounts receivable. We
provide an allowance for doubtful accounts when we determine
that the collection of an outstanding customer receivable is not
probable. We specifically analyze accounts receivable and
historical bad debts experience, customer creditworthiness, and
changes in our customer payment history when evaluating the
adequacy of the allowance for doubtful accounts. If any of these
factors change, our estimates may also change, which could
affect the level of our future provision for doubtful accounts.
Share-Based
Compensation
The fair value of each option to purchase common stock is
estimated on the date of grant using the Black-Scholes pricing
model, which requires us to make assumptions as to volatility,
risk-free interest rate, expected term of the awards, and
expected forfeiture rate. The computation of expected volatility
is based on a study of historical volatility rates of comparable
companies during a period comparable to the expected option
term. The estimated risk-free interest rate is based on the
U.S. Treasury risk-free interest rate in effect at the time
of grant. The computation of expected option term is based on an
average of the vesting term and the maximum contractual life of
the Companys stock options. Computation of expected
forfeitures is based on historical forfeiture rates of the
Companys stock options.
For options to purchase common stock and other share-based
compensation awards, the Company recognizes compensation expense
on a straight-line basis over the requisite service period of
the award. In addition, certain tax effects of share-based
compensation are reported as a financing activity rather than an
operating activity in the statement of cash flows.
Goodwill,
Other Intangible Assets and Long-Lived Assets
Goodwill represents the excess of the purchase price over the
fair value of net assets associated with various acquisitions
and is not subject to amortization. We allocated a portion of
each purchase price to intangible assets, including customer
contracts and related customer relationships, developed
technology, trade names and acquired licenses that are being
amortized over their estimated useful lives of one to
14 years. We also allocated a portion of each purchase
price to tangible assets and assessed the liabilities to be
recorded as part of the purchase price. The estimates we made in
allocating each purchase price to tangible and intangible
assets, and in assessing liabilities recorded as part of the
purchase, involved the application of judgment and the use of
estimates, which could significantly affect our operating
results and financial position.
We review the carrying value of goodwill for impairment annually
and whenever events or changes in circumstances indicate that
the carrying value of goodwill may exceed its fair value.
Conditions that could trigger a more frequent impairment
assessment include, but are not limited to, a significant
adverse change in certain agreements, significant
underperformance relative to historical or projected future
operating results, an economic downturn in customers
industries, increased competition, a significant reduction in
the Companys stock price for a sustained period or a
reduction of our market capitalization relative to net book
value. We evaluate impairment by comparing the estimated fair
value of each reporting unit to its carrying value. We estimate
fair value using the income approach as well as the market
approach. The income approach is based upon discounted cash
flows estimated by management for each reporting unit, while the
market approach uses trading and transaction multiples, for
companies considered comparable to Unica, to estimate fair
value. Actual results may differ materially from these
estimates. The estimates we make in determining the fair value
of each reporting unit involve the application of judgment,
including the amount and timing of future cash
36
flows, short- and long-term growth rates, and the weighted
average cost of capital, which could affect the timing and size
of any future impairment charges. Impairment of our goodwill
could significantly affect our operating results and financial
position.
We continually evaluate whether events or circumstances have
occurred that indicate that the estimated remaining useful life
of our long-lived assets, including intangible assets, may
warrant revision or that the carrying value of these assets may
be impaired. Any write-downs are treated as permanent reductions
in the carrying amount of the assets. We must use judgment in
evaluating whether events or circumstances indicate that useful
lives should change or that the carrying value of assets has
been impaired. Any resulting revision in the useful life or the
amount of an impairment also requires judgment. Any of these
judgments could affect the timing or size of any future
impairment charges. Revision of useful lives or impairment
charges could significantly affect our operating results and
financial position.
Software
Development Costs
We evaluate whether to capitalize or expense development costs
of computer software to be sold or leased in accordance with
established accounting standards. We sell products in a market
that is subject to rapid technological change, new product
development and changing customer needs. Accordingly, we have
concluded that technological feasibility is not established
until the development stage of the product is nearly complete.
We define technological feasibility as the completion of a
working model. We amortize capitalized software development
costs over their estimated useful lives of two years. During the
years ended September 30, 2009, 2008 and 2007, we
capitalized $212,000, $132,000 and $136,000, respectively, of
software development costs.
We capitalize certain costs of software developed or obtained
for internal use. The costs incurred in the preliminary stages
of development are expensed as incurred. Once an application has
reached the development stage, internal and external costs, if
direct and incremental, are capitalized until the software is
substantially complete and ready for its intended use.
Capitalization ceases upon completion of all substantial
testing. We amortize internal-use software development costs
over their estimated useful lives of three years. During the
years ended September 30, 2009, 2008 and 2007, $606,000,
$345,000 and $0, respectively, of internal-use software
development costs were capitalized.
Income
Taxes
We are subject to income taxes in the United States and foreign
jurisdictions, and we use estimates in determining our provision
for income taxes. Significant changes to these estimates could
have a material impact on our effective tax rate. Deferred tax
assets, related valuation allowances, current tax liabilities
and deferred tax liabilities are determined separately by tax
jurisdiction. In making these determinations, we estimate tax
assets, related valuation allowances, current tax liabilities
and deferred tax liabilities and assess temporary differences
resulting from differing treatment of items for tax and
accounting purposes. We assess the likelihood that deferred tax
assets will be realized, and we recognize a valuation allowance
if it is more likely than not that all or some portion of the
deferred tax assets will not be realized. This assessment
requires judgment as to the likelihood and amounts of future
taxable income by tax jurisdiction.
The accounting standards for income taxes require that deferred
tax assets be reduced by a valuation allowance if, based on the
weight of available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized. The
valuation allowance must be sufficient to reduce the deferred
tax assets to the amount that is more likely than not to be
realized. Future realization of deferred tax assets ultimately
depends on the existence of sufficient taxable income of the
appropriate character in either the carryback or carryforward
period under the tax laws. Based on the weight of all of the
available evidence, we have determined that it is more likely
than not that all of our U.S. federal and state deferred
tax assets will not be realized and as a result we provide a
full valuation allowance against all of our U.S. federal
and state deferred tax assets. As a result, we have not recorded
any tax benefit for the estimated U.S. federal and state
tax net operating losses or research and development tax credits
generated during fiscal 2009.
37
We have historically provided a full valuation allowance against
all of the deferred tax assets of our wholly owned subsidiary in
France. This was primarily due to the uncertainty of generating
sufficient future taxable income in order to realize these
assets. However, during the fourth quarter of fiscal 2009, we
restructured the operations of our subsidiary in France to a
cost plus model, and we believe this will result in future
taxable income from our operations in France. In addition, net
operating losses generated in France have no expiration date and
can be carried forward indefinitely. As a result of this
positive evidence, we believe that it is more likely than not
that all of the deferred tax assets of our subsidiary in France
will now be realized and that the valuation allowance is no
longer required. Accordingly, we reversed all of the previously
established valuation allowance on the deferred tax assets of
our subsidiary in France.
Contingencies
From time to time and in the ordinary course of business, we may
be subject to various claims, charges and litigation. In some
cases, the claimants may seek damages, as well as other relief,
which, if granted, could require significant expenditures. We
accrue the estimated costs of settlement or damages when a loss
is deemed probable and such costs are estimable. We accrue for
legal costs related to a loss contingency when a loss is
probable and such amounts are estimable. Otherwise, these costs
are expensed as incurred. If the estimate of a probable loss or
defense costs is a range and no amount within the range is more
likely, we accrue the minimum amount of the range.
Valuation
of Business Combinations
We record intangible assets acquired in business combinations
under the purchase method of accounting. We allocate the amounts
we pay for each acquisition to the assets we acquire and
liabilities we assume based on their fair values at the date of
acquisition. We then allocate the purchase price in excess of
net tangible assets acquired to identifiable intangible assets,
including developed technology, customer contracts and related
customer relationships, tradenames and in-process research and
development. The fair value of identifiable intangible assets is
based on detailed valuations that use information and
assumptions provided by management. We allocate any excess
purchase price over the fair value of the net tangible and
intangible assets acquired to goodwill. The use of alternative
purchase price allocations and alternative estimated useful life
assumptions could result in different intangible asset
amortization expense in current and future periods.
The valuation of in-process research and development represents
the estimated fair value at the dates of acquisition related to
in-process projects. Our in-process research and development
represents the value of in-process projects that have not yet
reached technological feasibility and have no alternative future
uses as of the date of acquisition. We expense the value
attributable to these in-process projects at the time of the
acquisition.
38
Results
of Operations
Comparison
of Years Ended September 30, 2009 and 2008
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
License revenue
|
|
$
|
18,823
|
|
|
|
19
|
%
|
|
$
|
42,877
|
|
|
|
35
|
%
|
|
$
|
(24,054
|
)
|
|
|
(56
|
)%
|
Maintenance and services revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance fees
|
|
|
44,719
|
|
|
|
44
|
|
|
|
44,403
|
|
|
|
37
|
|
|
|
316
|
|
|
|
1
|
|
Services
|
|
|
17,068
|
|
|
|
17
|
|
|
|
20,108
|
|
|
|
17
|
|
|
|
(3,040
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total maintenance and services revenue
|
|
|
61,787
|
|
|
|
61
|
|
|
|
64,511
|
|
|
|
54
|
|
|
|
(2,724
|
)
|
|
|
(4
|
)
|
Subscription revenue
|
|
|
20,008
|
|
|
|
20
|
|
|
|
13,743
|
|
|
|
11
|
|
|
|
6,265
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
100,618
|
|
|
|
100
|
%
|
|
$
|
121,131
|
|
|
|
100
|
%
|
|
$
|
(20,513
|
)
|
|
|
(17
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue for fiscal 2009 was $100.6 million, a
decrease of 17%, or $20.5 million, from fiscal 2008. Total
revenue decreased as a result of lower license sales relating to
our product suite, partially offset by an increase in
subscription revenue primarily related to the increased sales
through our MSP channel and increased sales of our on-demand
products.
Total license revenue for fiscal 2009 was $18.8 million, a
decrease of 56%, or $24.1 million, from fiscal 2008. This
decrease in license revenue was primarily attributable to lower
sales of our product suite, primarily related to delays in our
sales cycles and cautious buying behavior on the part of our
customers. We believe that the overall global macroeconomic
environment has caused customers to re-evaluate spending on
purchases of information technology assets. While we continue to
see demand for our products, selling cycles have nonetheless
been extended and license revenue has decreased compared to the
corresponding period in the prior year. Until we experience a
positive change in the overall global macroeconomic environment,
we anticipate the sales cycle will continue to be extended.
Maintenance fees revenue is associated with maintenance
agreements in connection with the sales of perpetual licenses to
our existing installed customer base and to new customers.
Maintenance fees revenue for fiscal 2009 was $44.7 million,
which is relatively unchanged from fiscal 2008.
Services revenue for fiscal 2009 was $17.1 million, a
decrease of $3.0 million, from fiscal 2008. The decrease in
services revenue was primarily the result of a decline in
revenue related to implementations from new license sales,
offset by $1.0 million of previously deferred revenue
recorded upon the termination of an arrangement with a customer,
to which we have no further performance obligations.
Total subscription revenue for fiscal 2009 was
$20.0 million, an increase of 46%, or $6.3 million,
from fiscal 2008. The increase in subscription revenue was
primarily attributable to higher sales of our on-demand products
and increased sales through our MSP channel, and includes
$1.4 million of previously deferred revenue recorded upon
the termination of an arrangement with a customer, to which we
have no further performance obligations. We anticipate that
subscription revenue will continue to increase in future
quarters as we enter into additional subscription agreements and
expand our on-demand product offerings, and as our customers may
prefer subscription-based licenses during the current economic
environment.
39
Recurring
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
Subscription revenue
|
|
$
|
20,008
|
|
|
|
20
|
%
|
|
$
|
13,743
|
|
|
|
11
|
%
|
|
$
|
6,265
|
|
|
|
46
|
%
|
Maintenance revenue
|
|
|
44,719
|
|
|
|
44
|
|
|
|
44,403
|
|
|
|
37
|
|
|
|
316
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recurring revenue
|
|
|
64,727
|
|
|
|
64
|
|
|
|
58,146
|
|
|
|
48
|
|
|
|
6,581
|
|
|
|
11
|
|
License revenue
|
|
|
18,823
|
|
|
|
19
|
|
|
|
42,877
|
|
|
|
35
|
|
|
|
(24,054
|
)
|
|
|
(56
|
)
|
Services revenue
|
|
|
17,068
|
|
|
|
17
|
|
|
|
20,108
|
|
|
|
17
|
|
|
|
(3,040
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
100,618
|
|
|
|
100
|
%
|
|
$
|
121,131
|
|
|
|
100
|
%
|
|
$
|
(20,513
|
)
|
|
|
(17
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We generate recurring revenue from both subscription and
maintenance agreements, which is generally recognized ratably
over the life of the arrangement.
Recurring revenue for fiscal 2009 was $64.7 million, an
increase of 11%, or $6.6 million, from fiscal 2008. The
increase in recurring revenue resulted from additional
subscription revenue related to sales through our MSP channel
and sales of our on-demand products, which includes
$1.4 million of previously deferred revenue recorded upon
the termination of an arrangement with a customer, to which we
have no further performance obligations. Recurring revenue as a
percentage of total revenue was 64% for fiscal 2009 as compared
to 48% for fiscal 2008, which is primarily the result of a
change in the mix of subscription versus license revenue.
Revenue
by Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
North America
|
|
$
|
70,901
|
|
|
|
70
|
%
|
|
$
|
77,051
|
|
|
|
64
|
%
|
|
$
|
(6,150
|
)
|
|
|
(8
|
)%
|
International
|
|
|
29,717
|
|
|
|
30
|
|
|
|
44,080
|
|
|
|
36
|
|
|
|
(14,363
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
100,618
|
|
|
|
100
|
%
|
|
$
|
121,131
|
|
|
|
100
|
%
|
|
$
|
(20,513
|
)
|
|
|
(17
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For purposes of this discussion, we designate revenue by
geographic regions based on the locations of our customers.
North America is comprised of revenue from the United States and
Canada. International is comprised of revenue from the rest of
the world. Depending on the timing of new customer contracts,
revenue mix from geographic region can vary widely from period
to period.
Total revenue for North America for the fiscal year 2009 was
$70.9 million, a decrease of 8%, or $6.2 million, from
fiscal 2008. The decrease in total revenue for North America was
primarily related to a decrease in license revenue, partially
offset by an increase in subscription revenue. Total revenue for
international for fiscal 2009 was $29.7 million, a decrease
of 33%, or $14.3 million, from fiscal 2008. The decrease in
total revenue for International was primarily related to a
decrease in license revenue.
40
Cost of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
Gross Margin
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
on Related
|
|
|
|
|
|
on Related
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
License
|
|
$
|
1,932
|
|
|
|
90
|
%
|
|
$
|
3,118
|
|
|
|
93
|
%
|
|
$
|
(1,186
|
)
|
|
|
(38
|
)%
|
Maintenance and services
|
|
|
19,390
|
|
|
|
69
|
|
|
|
25,461
|
|
|
|
61
|
|
|
|
(6,071
|
)
|
|
|
(24
|
)
|
Subscription
|
|
|
4,671
|
|
|
|
77
|
|
|
|
2,862
|
|
|
|
79
|
|
|
|
1,809
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
$
|
25,993
|
|
|
|
74
|
%
|
|
$
|
31,441
|
|
|
|
74
|
%
|
|
$
|
(5,448
|
)
|
|
|
(17
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of license revenue for fiscal 2009 was $1.9 million, a
decrease of 38%, or $1.2 million, from fiscal 2008. The
decrease in cost of license revenue was primarily due to
(a) a $532,000 decrease in labor-related costs, (b) a
$327,000 decrease in amortization of acquired technology as
certain intangible assets have become fully amortized, and
(c) a $25,000 decrease in royalties. Royalties paid for
third-party licensed technology represented 4% of total license
revenue for fiscal 2009. Royalties related to license revenue
may fluctuate based on the mix of products we sell. We expect
royalties paid for third-party licensed technology to be between
1% and 4% of total license revenue. Gross margin on license
revenue was 90% in fiscal 2009 compared to 93% in fiscal 2008.
The decrease in license gross margin is primarily the result of
decreased sales volume.
Cost of maintenance and services for fiscal 2009 was
$19.4 million, a decrease of 24%, or $6.1 million,
from fiscal 2008. The decrease in cost of maintenance and
services revenue was primarily due to (a) a
$4.2 million decrease in labor-related costs and other
direct consulting costs and (b) a $1.9 million
decrease in subcontractor costs. The reduction in labor-related
and subcontractor costs was primarily related to a decrease of
implementation services in connection with new license sales.
Gross margin on maintenance and services revenue fluctuates
based on the mix of revenues from services and maintenance and
the degree to which we use subcontractor services.
Cost of subscription revenue for fiscal year 2009 was
$4.7 million, an increase of 63%, or $1.8 million,
from fiscal 2008. The increase in cost of subscription revenue
was due to an increase in labor-related expenses and
hosting-related activities.
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
Sales and marketing
|
|
$
|
41,773
|
|
|
|
42
|
%
|
|
$
|
49,747
|
|
|
|
41
|
%
|
|
$
|
(7,974
|
)
|
|
|
(16
|
)%
|
Research and development
|
|
|
19,886
|
|
|
|
20
|
|
|
|
22,971
|
|
|
|
19
|
|
|
|
(3,085
|
)
|
|
|
(13
|
)
|
General and administrative
|
|
|
16,018
|
|
|
|
16
|
|
|
|
19,078
|
|
|
|
16
|
|
|
|
(3,060
|
)
|
|
|
(16
|
)
|
Restructuring charges (credits)
|
|
|
3,000
|
|
|
|
3
|
|
|
|
(286
|
)
|
|
|
|
|
|
|
3,286
|
|
|
|
1,149
|
|
Goodwill impairment charge
|
|
|
15,266
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
15,266
|
|
|
|
n/m
|
|
Amortization of acquired intangible assets
|
|
|
1,180
|
|
|
|
1
|
|
|
|
1,573
|
|
|
|
1
|
|
|
|
(393
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
97,123
|
|
|
|
97
|
%
|
|
$
|
93,083
|
|
|
|
77
|
%
|
|
$
|
4,040
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m not meaningful
41
Sales and Marketing. Sales and marketing
expense for fiscal 2009 was $41.8 million, a decrease of
16%, or $8.0 million, from fiscal 2008. The decrease was
primarily the result of a $7.8 million decrease in
labor-related expenses due to decreased headcount and decreased
commission expense, which was a result of a reduction in
revenues. Sales and marketing expense is expected to decrease
slightly in absolute dollars during fiscal 2010 as compared to
fiscal 2009.
Research and Development. Research and
development expense for fiscal 2009 was $19.9 million, a
decrease of 13%, or $3.1 million, from fiscal 2008. The
decrease in research and development was primarily the result of
(a) a $2.9 million decrease in labor related expenses,
principally due to decreased headcount, and (b) a $275,000
decrease in share-based compensation expense. Capitalized
software development costs were $818,000 and $477,000 for fiscal
2009 and 2008, respectively. Research and development expense is
expected to remain relatively unchanged in absolute dollars
during fiscal 2010 as compared to fiscal 2009.
General and Administrative. General and
administrative expense for fiscal 2009 was $16.0 million, a
decrease of 16%, or $3.1 million, from fiscal 2008. The
decrease in general and administrative expense was primarily the
results of (a) a $1.5 million decrease in
labor-related expenses, principally due to decreased headcount,
(b) a $681,000 decrease in share-based compensation expense
and (c) a $946,000 decrease in professional service cost.
General and administrative expense is expected to remain
relatively unchanged in absolute dollars during fiscal 2010 as
compared to fiscal 2009.
Restructuring Charges. In the first quarter of
fiscal 2009, the Company reduced its workforce by approximately
4% and recorded a restructuring charge of $711,000 for one-time
termination benefits to employees. The strategic reduction of
workforce was designed to streamline the Companys
organization and improve its corporate performance. The
restructuring accrual at September 30, 2009 was $128,000,
and is expected to be paid by the end of fiscal 2010.
The following is a rollforward of the accrual related to the
restructuring initiated in the first quarter of fiscal 2009:
|
|
|
|
|
Restructuring accrual balance at September 30, 2008
|
|
$
|
|
|
Provision for severance related costs
|
|
|
711
|
|
Cash payments
|
|
|
(583
|
)
|
|
|
|
|
|
Restructuring accrual balance at September 30, 2009
|
|
$
|
128
|
|
|
|
|
|
|
In the fourth quarter of fiscal 2009, the Company approved a
plan to implement a strategic reduction of its workforce
designed to streamline its organization and improve its
corporate operating performance. The Company reduced its
workforce by approximately 13% and recorded a restructuring
charge of $2.3 million for one-time termination benefits to
employees. The restructuring accrual at September 30, 2009
was $1.9 million, and is expected to be paid by the end of
fiscal 2010.
The following is a rollforward of the accrual related to the
restructuring initiated in the fourth quarter of fiscal 2009:
|
|
|
|
|
Restructuring accrual balance at September 30, 2008
|
|
$
|
|
|
Provision for severance related costs
|
|
|
2,289
|
|
Cash payments
|
|
|
(424
|
)
|
|
|
|
|
|
Restructuring accrual balance at September 30, 2009
|
|
$
|
1,865
|
|
|
|
|
|
|
Goodwill Impairment. In the second quarter of
fiscal 2009, the Company changed the structure of its reporting
units, which resulted in the Company having two remaining
reporting units. Two previously separate reporting units were
combined into one reporting unit. Given the change in reporting
units as well as the decline in the Companys market
capitalization and overall operating results, the Company
performed an interim impairment assessment of its goodwill at
March 31, 2009 related to the three reporting units
previously existing before the structure change. As part of this
assessment, the Company applied a weighting to the income
approach and the market approach of 60% and 40%, respectively,
for two of the reporting units and
42
90% and 10%, respectively, for the remaining reporting unit. The
weightings were determined based upon the degree of
comparability of companies and acquisitions in the marketplace.
As a result of the goodwill impairment assessment, during the
three months ended March 31, 2009, the Company recorded a
$15.3 million charge relating to the impairment of
goodwill. Of the $15.3 million goodwill impairment charge,
$5.7 million related to goodwill from the acquisition of
MarketingCentral and $9.6 million related to goodwill from
the acquisition of Sane Solutions LLC. The Company also
performed a subsequent impairment assessment on the newly
combined reporting unit after the change in structure, which did
not indicate a further impairment. The Company determined that
its other long-lived assets, including definite-lived intangible
assets, were not impaired.
During fiscal 2009, the Company performed its annual impairment
assessment of goodwill at September 30, 2009, and as a
result of this assessment there was no indication of impairment.
Amortization of Acquired Intangible
Assets. Amortization of acquired intangible
assets was $1.2 million and $1.6 million for fiscal
2009 and fiscal 2008, respectively. The reduction primarily
relates to certain acquired intangible assets becoming fully
amortized during fiscal 2009.
Other
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
$
|
586
|
|
|
|
|
%
|
|
$
|
1,448
|
|
|
|
1
|
%
|
|
$
|
(862
|
)
|
|
|
(60
|
)%
|
Other income (expense), net
|
|
|
(1,371
|
)
|
|
|
(1
|
)
|
|
|
(383
|
)
|
|
|
|
|
|
|
(988
|
)
|
|
|
(258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
$
|
(785
|
)
|
|
|
(1
|
)%
|
|
$
|
1,065
|
|
|
|
1
|
%
|
|
$
|
(1,850
|
)
|
|
|
(174
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net was $586,000 for fiscal 2009, an $862,000
decrease from fiscal 2008. Interest income is generated from the
investment of our cash balances, less related bank fees. The
decrease in interest income, net principally reflected lower
invested cash balances, due to sales and maturities of
investments in fiscal 2009, and lower interest rates in invested
cash balances.
Other expense, net consisted of foreign currency translation and
transaction gains and losses. The change in other income, net
was primarily driven by unfavorable foreign currency exchange
rates as compared to the corresponding period in the prior year.
Provision
for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Percentage of
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
Before
|
|
|
|
Before
|
|
|
|
|
|
|
|
|
Provision for
|
|
|
|
Provision for
|
|
Period-to-Period Change
|
|
|
|
|
Income
|
|
|
|
Income
|
|
|
|
Percentage
|
|
|
Amount
|
|
Taxes
|
|
Amount
|
|
Taxes
|
|
Amount
|
|
Change
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
Provision for income taxes
|
|
$
|
(1,509
|
)
|
|
|
(6
|
)%
|
|
$
|
7,411
|
|
|
|
(318
|
)%
|
|
$
|
(8,920
|
)
|
|
|
(120
|
)%
|
Benefit from income taxes was $1.5 million, or an effective
tax rate of (6.5%) for the year ended September 30, 2009,
an $8.9 million decrease from the tax provision recorded
during the year ended September 30, 2008. The decrease
primarily relates to the $7.9 million net increase in the
valuation allowance included in the fiscal 2008 tax provision
which is not included in the fiscal 2009 tax provision, and
approximately $1.8 million of tax benefits related to the
reduction in the Companys valuation allowance
43
during fiscal 2009. These tax benefits were offset by
approximately $795,000 of taxes paid in foreign tax
jurisdictions.
For the year ended September 30, 2009, our effective tax
rate was lower than the federal statutory rate primarily due to
the tax benefits recorded during the year and secondarily due to
the mix of jurisdictional earnings, foreign withholding taxes,
and adjustments to our valuation allowance recorded against
deferred tax assets. For the year ended September 30, 2008,
our effective tax rate was different from the federal statutory
rate due to the impact of recording the valuation allowance
during fiscal 2008 against the companys U.S. federal and
state deferred tax assets and accounting for share-based
compensation.
During the three months ended September 30, 2009, we
reversed all of the valuation allowance that was previously
established against the deferred tax assets of our wholly owned
subsidiary in France, which resulted in an income tax benefit of
$248,000. We had historically provided a valuation allowance
against all of these deferred tax assets due to the uncertainty
of generating sufficient taxable income in future periods.
However, during the fourth quarter of fiscal 2009, we
restructured the operations of our subsidiary in France to a
cost plus model, and we believe this will result in future
taxable income from our operations in France. In addition, net
operating losses generated in France have no expiration date and
can be carried forward indefinitely. As a result of this
positive evidence, we believe that it is more likely than not
that all of the deferred tax assets of our subsidiary in France
will now be realized and that the valuation allowance is no
longer required.
Comparison
of Years Ended September 30, 2008 and 2007
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
License revenue
|
|
$
|
42,877
|
|
|
|
35
|
%
|
|
$
|
38,970
|
|
|
|
38
|
%
|
|
$
|
3,907
|
|
|
|
10
|
%
|
Maintenance and services revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance fees
|
|
|
44,403
|
|
|
|
37
|
|
|
|
39,989
|
|
|
|
39
|
|
|
|
4,414
|
|
|
|
11
|
|
Services
|
|
|
20,108
|
|
|
|
17
|
|
|
|
14,329
|
|
|
|
14
|
|
|
|
5,779
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total maintenance and services revenue
|
|
|
64,511
|
|
|
|
54
|
|
|
|
54,318
|
|
|
|
53
|
|
|
|
10,193
|
|
|
|
19
|
|
Subscription revenue
|
|
|
13,743
|
|
|
|
11
|
|
|
|
8,955
|
|
|
|
9
|
|
|
|
4,788
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
121,131
|
|
|
|
100
|
%
|
|
$
|
102,243
|
|
|
|
100
|
%
|
|
$
|
18,888
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue for fiscal 2008 was $121.1 million, an
increase of 18%, or $18.9 million, from fiscal 2007. Total
revenue increased as a result of higher sales of our product
suite, an increase in international professional service
revenue, and higher subscription revenue primarily related to
the MarketingCentral acquisition and higher sales of Unica
NetInsight.
Total license revenue for fiscal 2008 was $42.9 million, an
increase of 10%, or $3.9 million, from fiscal 2007. This
increase in license revenue was primarily attributable to higher
sales of our enterprise products.
Maintenance fees revenue is associated with maintenance
agreements in connection with the sales of perpetual licenses to
our existing installed customer base and to new customers.
Maintenance fees revenue for fiscal 2008 was $44.4 million,
an increase of 11%, or $4.4 million from fiscal 2007. The
increase primarily reflects maintenance fees from the sale of
new licenses in fiscal 2007.
Services revenue for fiscal 2008 was $20.1 million, an
increase of 40%, or $5.8 million, from fiscal 2007. The
increase in services revenue was primarily the result of growth
in the number of implementation services performed in Europe and
Asia related to new license agreements.
44
Total subscription revenue for fiscal 2008 was
$13.7 million, an increase of 53%, or $4.8 million,
from fiscal 2007. The increase in subscription revenue was
primarily attributable to the impact of the MarketingCentral
acquisition, higher sales of Unica NetInsight and increased
sales through our MSP channel.
Recurring
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
Subscription revenue
|
|
$
|
13,743
|
|
|
|
11
|
%
|
|
$
|
8,955
|
|
|
|
9
|
%
|
|
$
|
4,788
|
|
|
|
53
|
%
|
Maintenance revenue
|
|
|
44,403
|
|
|
|
37
|
|
|
|
39,989
|
|
|
|
39
|
|
|
|
4,414
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recurring revenue
|
|
|
58,146
|
|
|
|
48
|
|
|
|
48,944
|
|
|
|
48
|
|
|
|
9,202
|
|
|
|
19
|
|
License revenue
|
|
|
42,877
|
|
|
|
35
|
|
|
|
38,970
|
|
|
|
38
|
|
|
|
3,907
|
|
|
|
10
|
|
Services revenue
|
|
|
20,108
|
|
|
|
17
|
|
|
|
14,329
|
|
|
|
14
|
|
|
|
5,779
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
121,131
|
|
|
|
100
|
%
|
|
$
|
102,243
|
|
|
|
100
|
%
|
|
$
|
18,888
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We generate recurring revenue from both subscription and
maintenance agreements, which is recognized ratably over the
life of the arrangement.
Recurring revenue for fiscal 2008 was $58.1 million, an
increase of 19%, or $9.2 million from fiscal 2007. The
increase in recurring revenue resulted from (a) an increase
in subscription revenue attributable to the impact of the
MarketingCentral acquisition, (b) an increase in
maintenance fees on sales of new license and (c) additional
subscription revenue related to sales of Unica NetInsight.
Recurring revenue as a percentage of total revenue was 48% for
both fiscal 2008 and fiscal 2007.
Revenue
by Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
77,051
|
|
|
|
64
|
%
|
|
$
|
74,953
|
|
|
|
73
|
%
|
|
$
|
2,098
|
|
|
|
3
|
%
|
International
|
|
|
44,080
|
|
|
|
36
|
|
|
|
27,290
|
|
|
|
27
|
|
|
|
16,790
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
121,131
|
|
|
|
100
|
%
|
|
$
|
102,243
|
|
|
|
100
|
%
|
|
$
|
18,888
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For purposes of this discussion, we designate revenue by
geographic regions based on the locations of our customers.
North America is comprised of revenue from the United States and
Canada. International is comprised of revenue from the rest of
the world. Depending on the timing of new customer contracts,
revenue mix from geographic region can vary widely from period
to period.
Total revenue for North America for the fiscal year 2008 was
$77.1 million, an increase of 3%, or $2.1 million from
the fiscal year 2007. The increase in total revenue for North
America was primarily related to an increase in maintenance and
subscription revenue, partially offset by a decrease in license
revenue. The increase in international revenue was primarily
related to increased license and professional services revenue
in both Europe and Asia, which is reflective of our increased
market presence in these regions.
45
Cost of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
Gross Margin
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
on Related
|
|
|
|
|
|
on Related
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
License
|
|
$
|
3,118
|
|
|
|
93
|
%
|
|
$
|
2,782
|
|
|
|
93
|
%
|
|
$
|
336
|
|
|
|
12
|
%
|
Maintenance and services
|
|
|
25,461
|
|
|
|
61
|
|
|
|
18,958
|
|
|
|
65
|
|
|
|
6,503
|
|
|
|
34
|
|
Subscription
|
|
|
2,862
|
|
|
|
79
|
|
|
|
692
|
|
|
|
92
|
|
|
|
2,170
|
|
|
|
314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
$
|
31,441
|
|
|
|
74
|
%
|
|
$
|
22,432
|
|
|
|
78
|
%
|
|
$
|
9,009
|
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of license revenue for fiscal year 2008 was
$3.1 million, an increase of 12% or $336,000 from fiscal
2007. The increase in cost of license revenue was primarily due
to an increase in labor-related costs and amortization of
capitalized software. Royalties paid for third-party licensed
technology represented 2% of total license revenue for both
fiscal year 2008 and 2007. Royalties related to license revenue
may fluctuate based on the mix of products we sell. We expect
royalties paid for third-party licensed technology to remain
between 1% and 2% of total license revenue. Gross margin on
license revenue was 93% in both fiscal 2008 and 2007.
Cost of maintenance and services for fiscal 2008 was
$25.5 million, an increase of 34%, or $6.5 million
from fiscal 2007. The increase in cost of maintenance and
services revenue was primarily due to (a) a
$3.9 million increase in labor related costs to support
increased customer implementations and a growing installed
customer base, (b) a $1.3 million increase in
subcontractor costs also related to increased customer
implementations and (c) a $308,000 increase in share-based
compensation. Gross margin on maintenance and services revenue
was 61% for fiscal 2008, down from 65% for fiscal year 2007. The
reduction in gross margin primarily related to the increase in
the mix of services revenue compared to maintenance revenue.
Gross margin on maintenance and services revenue fluctuates
based on the mix of revenues from services and maintenance and
the degree to which we use subcontractor services.
Cost of subscription revenue for fiscal year 2008 was
$2.9 million, an increase of 314% or $2.2 million,
from fiscal year 2007. The increase in cost of subscription
revenue was due to an increase in labor-related expenses,
primarily related to an increase in hosting related activities
including the impact of the MarketingCentral acquisition.
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
(Dollars in thousands)
|
|
|
Sales and marketing
|
|
$
|
49,747
|
|
|
|
41
|
%
|
|
$
|
41,068
|
|
|
|
40
|
%
|
|
$
|
8,679
|
|
|
|
21
|
%
|
Research and development
|
|
|
22,971
|
|
|
|
19
|
|
|
|
22,034
|
|
|
|
21
|
|
|
|
937
|
|
|
|
4
|
|
General and administrative
|
|
|
19,078
|
|
|
|
16
|
|
|
|
16,362
|
|
|
|
16
|
|
|
|
2,716
|
|
|
|
17
|
|
Restructuring charges (credits)
|
|
|
(286
|
)
|
|
|
|
|
|
|
1,244
|
|
|
|
1
|
|
|
|
(1,530
|
)
|
|
|
(123
|
)
|
Amortization of acquired intangible assets
|
|
|
1,573
|
|
|
|
1
|
|
|
|
1,572
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
93,083
|
|
|
|
77
|
%
|
|
$
|
82,280
|
|
|
|
80
|
%
|
|
$
|
10,803
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and Marketing. Sales and marketing
expense for fiscal 2008 was $49.7 million, an increase of
21%, or $8.7 million from fiscal 2007. The increase was
primarily the result of (a) a $6.9 million increase in
labor-related expenses due to increased headcount and increased
commission expense as a result of higher revenues and (b) a
$682,000 increase in share-based compensation expense.
46
Research and Development. Research and
development expense for fiscal 2008 was $22.9 million, an
increase of 4%, or $937,000 from fiscal 2007. The increase in
research and development was primarily the result of (a) a
$788,000 increase in labor related expenses, principally due to
an increase in personnel as we continued our investment and
development of our product suite, and (b) a $143,000
increase in share-based compensation expense. Capitalized
software development costs were $477,000 and $136,000 for fiscal
2008 and 2007, respectively.
General and Administrative. General and
administrative expense for fiscal 2008 was $19.1 million,
an increase of 17%, or $2.7 million from fiscal 2007. The
increase in general and administrative expense was primarily the
results of (a) a $1.9 million increase in
labor-related expenses in order to support the overall growth of
the company and (b) a $937,000 increase in professional
services fees primarily related to the filing of our fiscal 2007
Annual Report on
Form 10-K
and increased legal fees and tax-related services.
Restructuring charges/credits. In the fourth
quarter of fiscal 2006, we initiated the restructuring of
certain of our operations in France to realign our resources in
that region. As a result of this initiative, we terminated
several employees resulting in a restructuring charge and
accrual of $1.2 million for severance and related costs in
the first quarter of fiscal 2007. During the year ended
September 30, 2008, we reversed a portion of the
restructuring accrual and recorded a benefit of $286,000 to the
statement of operations in connection with final settlement with
an employee.
Amortization of Acquired Intangible
Assets. Amortization of acquired intangible
assets was $1.6 million for both fiscal 2008 and 2007.
Other
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
Period-to-Period Change
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Percentage
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
$
|
1,448
|
|
|
|
1
|
%
|
|
$
|
2,056
|
|
|
|
2
|
%
|
|
$
|
(608
|
)
|
|
|
(30
|
)%
|
Other income (expense), net
|
|
|
(383
|
)
|
|
|
|
|
|
|
108
|
|
|
|
|
|
|
|
(491
|
)
|
|
|
(455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
$
|
1,065
|
|
|
|
1
|
%
|
|
$
|
2,164
|
|
|
|
2
|
%
|
|
$
|
(1,099
|
)
|
|
|
(51
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net was $1.4 million for fiscal 2008, a
$608,000 decrease from fiscal 2007. Interest income is generated
from the investment of our cash balances, less related bank
fees. The decrease in interest income, net principally reflected
lower interest rates in invested cash balances.
Other expense, net consisted of foreign currency translation and
transaction gains and losses. The change in other income, net
was primarily driven by changes in foreign exchange rates as
compared to the previous fiscal year.
Provision
for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Percentage of
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
Before
|
|
|
|
Before
|
|
|
|
|
|
|
|
|
Provision for
|
|
|
|
Provision for
|
|
Period-to-Period Change
|
|
|
|
|
Income
|
|
|
|
Income
|
|
|
|
Percentage
|
|
|
Amount
|
|
Taxes
|
|
Amount
|
|
Taxes
|
|
Amount
|
|
Change
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
Provision for income taxes
|
|
$
|
7,411
|
|
|
|
(318
|
)%
|
|
$
|
(801
|
)
|
|
|
263
|
%
|
|
$
|
8,212
|
|
|
|
(1,025
|
)%
|
Provision for income taxes was $7.4 million for fiscal
2008, or an effective tax rate of (318)%, an $8.2 million
increase in the tax provision from fiscal 2007. This change in
provision for income taxes principally reflects the recording of
an $8.1 million valuation allowance against the
Companys U.S federal
47
and state deferred tax assets during the three months ended
September 30, 2008. During the year ended
September 30, 2008 and 2007, our effective tax rate is
different from the statutory tax rate due to the tax impact of
recording the valuation allowance during fiscal 2008 against the
Companys U.S. federal and state deferred tax assets
and accounting for share-based compensation.
During the three months ended September 30, 2008, we
recorded an $8.1 million valuation allowance against the
Companys U.S. federal and state deferred tax assets.
Approximately $7.9 million of the valuation allowance had a
net impact on the Companys consolidated statement of
operations. The Company considered both positive and negative
evidence in determining the likelihood of realizing its
U.S. federal and state deferred tax assets and the need for
a valuation allowance. Future realization of deferred tax assets
ultimately depends on the existence of sufficient taxable income
of the appropriate character in either the carryback or
carryforward period under the tax laws. The Company has relied
on historical earnings and its ability to accurately forecast
earnings as positive evidence that its U.S. deferred tax
assets would be realized and that a valuation allowance was not
required through the end of the third quarter of fiscal 2008,
other than the previously established valuation allowance
associated with state research and development credits. However,
negative evidence has accumulated since that time. The global
economy has deteriorated significantly since the third quarter
of fiscal 2008, which negatively impacted the Companys
fourth quarter of fiscal 2008 results. Although the Company has
adjusted its forecasts accordingly, it has determined that its
current visibility to future results is limited and there is
uncertainty as to its ability to accurately predict future
results in the current economic environment. As such, the
Company has determined that recent negative results should be
considered indicative of future results. Based on the weight of
all of the available evidence, the Company determined that it is
more likely than not that all of the U.S. federal and state
deferred tax assets may not be realized and that a valuation
allowance should be recorded against the net balance of these
deferred tax assets as of September 30, 2008.
Liquidity
and Capital Resources
Historically, we have financed our operations and met our
capital expenditure requirements primarily through funds
generated from operations and sales of our capital stock. As of
September 30, 2009, our primary source of liquidity is our
total cash and cash equivalents balance of $50.3 million.
As of September 30, 2009, we had no outstanding debt.
Our cash and cash equivalents at September 30, 2009 were
held for working capital purposes and were invested primarily in
money market funds and overnight investments. We did not have
any investment balances at September 30, 2009. We do not
enter into investments for trading or speculative purposes.
Restricted cash of $364,000 at September 30, 2009 was held
in certificates of deposit as collateral for letters of credit
related to the lease agreements for our corporate headquarters
in Waltham, Massachusetts and our sales office in France, and
for our payroll credit facility in Australia. Investments are
made in accordance with our corporate investment policy, as
approved by our Board of Directors. The primary objective of
this policy is the preservation of capital. Investments are
limited to high quality corporate debt, money market funds and
similar instruments. The policy establishes maturity limits,
liquidity requirements and concentration limits. At
September 30, 2009, we were in compliance with this
internal policy.
Net cash provided by operating activities was $4.9 million
in fiscal 2009, $14.3 million in 2008 and
$10.7 million in 2007. Net income adjusted for non-cash
charges (including depreciation, amortization of acquired
intangible assets and capitalized software development costs,
share-based compensation, goodwill impairment, foreign currency
translation loss provision for doubtful accounts, valuation
allowance for deferred tax assets and deferred tax benefits) was
$2.9 million in fiscal 2009 compared to $7.7 million
in fiscal 2008, a decrease of $4.8 million during fiscal
2009. Decreases in accounts receivable as well as in prepaid
expenses and other current assets increased our cash during
fiscal 2009. These increases in operating cash flow were offset
by reductions of cash from changes in accounts payable, accrued
expenses and deferred revenue.
Investing activities provided $11.3 million in fiscal 2009
and $2.3 million in fiscal 2008 and consumed
$25.3 million in fiscal 2007. In fiscal 2009,
$2.5 million of cash was used for purchases of property and
equipment, which primarily related to purchases of computer
equipment and software to support increased
48
investment in our on-demand offerings. In fiscal 2008, purchases
of property and equipment consumed $2.5 million. In fiscal
2009, net sales and maturities of investments was
$14.5 million compared to net sales and maturities of
investments of $5.1 million in fiscal 2008. This net change
of $9.4 million is reflective of the Company holding more
of its fiscal 2009 investments in cash equivalents compared to
that of the prior year.
Our financing activities consumed cash of $1.2 million in
2009 and provided cash of $906,000 and $2.3 million in
fiscal 2008 and 2007, respectively. In fiscal 2009,
$1.1 million of cash was generated from the issuance of
shares under the employee stock purchase and stock option plans,
as compared to $1.7 million generated in fiscal 2008. In
fiscal 2009 and 2008, $416,000 and $937,000, respectively, was
used to pay withholding taxes related to restricted stock units,
and $1.9 million and $0, respectively, was used to purchase
shares of common stock under the Companys share repurchase
program.
Requirements
Capital Expenditures. We make capital
expenditures primarily to acquire computer and other equipment,
software, furniture and leasehold improvements to support the
growth of our business. Our capital expenditures totaled
$2.5 million in fiscal 2009, $2.5 million in fiscal
2008 and $3.2 million in fiscal 2007, and related primarily
to software used for internal purposes and computer equipment.
We expect capital expenditures in fiscal 2010 to increase
compared to that of fiscal 2009.
Contractual Obligations and Requirements. The
following table sets forth our commitments to settle contractual
obligations in cash after September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 and
|
|
|
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Beyond
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Operating leases as of September 30, 2009
|
|
$
|
2,031
|
|
|
$
|
496
|
|
|
$
|
686
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,213
|
|
Open vendor purchase obligations
|
|
$
|
1,538
|
|
|
$
|
273
|
|
|
$
|
30
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,841
|
|
Our significant lease obligations relate to our corporate
headquarters in Waltham, Massachusetts as well as our facility
in the United Kingdom. In October 2009, we entered into an
amendment to our lease in Waltham, Massachusetts and extended
the lease expiration date to April 2015 while reducing the
annual lease commitment compared to current rates. The total
amended commitment for the lease in Waltham, Massachusetts is
$7.8 million through April 2015 which amends $1,367 of the
lease payments in the table above. Open vendor purchase
obligations represent contractual commitments to purchase goods
or services as of September 30, 2009.
The contractual obligations table above does not include
$816,000 of gross unrecognized tax benefits at
September 30, 2009 as the Company is unable to make
reasonably reliable estimates of the period of cash settlement
with the respective tax authorities. See Note 10 to our
consolidated financial statements for further discussion on
income taxes.
We believe that our current cash, cash equivalents, and
marketable securities will be sufficient to meet our anticipated
cash needs for working capital and capital expenditures for at
least the next 12 months following the date of this Annual
Report. Long-term cash requirements, other than normal operating
expenses, are anticipated for the continued development of new
products, financing anticipated growth and the possible
acquisition of businesses, software products or technologies
complementary to our business. On a long-term basis or to
complete acquisitions in the short term, we may require
additional external financing through credit facilities, sales
of additional equity or other financing arrangements. There can
be no assurance that such financing can be obtained on favorable
terms, if at all.
Off-Balance-Sheet
Arrangements
We do not have any special purpose entities or off-balance sheet
financing arrangements.
49
Recent
Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board, or
FASB, issued a new accounting pronouncement on business
combinations. This pronouncement will significantly change the
accounting for business combinations in a number of areas
including the treatment of contingent consideration,
contingencies, acquisition costs, IPR&D and restructuring
costs. In addition, under this pronouncement, changes in
deferred tax asset valuation allowances and acquired income tax
uncertainties in a business combination after the measurement
period will impact income tax expense. This pronouncement is
effective for fiscal years beginning after December 15,
2008 and, as such, the Company will adopt this standard in
fiscal 2010. The Company has not yet determined the impact, if
any, of this new pronouncement on its consolidated financial
statements.
In April 2008, the FASB issued a new accounting pronouncement on
determining the useful life of intangible assets, which amends
the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a
recognized intangible asset under previous accounting guidance.
This new standard is intended to improve the consistency between
the useful life of an intangible asset determined under the old
standard and the period of expected cash flows used to measure
the fair value of the asset, under accounting guidance for
business combinations and other U.S. generally accepted
accounting principles, or GAAP. This new standard is effective
for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal
years. Early adoption is not permitted. The Company is currently
evaluating the effect that the adoption of this new standard
will have on its results of operations and financial condition.
In June 2009, the FASB issued the FASB Accounting Standards
Codification, or the Codification. The Codification became the
single source for all authoritative accounting principles
recognized by the FASB to be applied for financial statements
issued for periods ending after September 15, 2009. The
Codification does not change GAAP and did not have an effect on
the Companys financial position, results of operations or
liquidity.
In September 2009, the FASBs Emerging Issues Task Force
issued authoritative guidance on revenue arrangements with
multiple deliverables. This guidance provides another
alternative for establishing fair value for a deliverable. When
vendor-specific objective evidence or third-party evidence for
deliverables in an arrangement cannot be determined, companies
will be required to develop a best estimate of the selling price
for separate deliverables and allocate arrangement consideration
using the relative selling price method. This guidance is
effective October 1, 2010, and early adoption is permitted.
We are currently evaluating the impact of this guidance on our
financial position and results of operations.
Impact of
Inflation
We believe that our revenue and results of operations have not
been significantly impacted by inflation during the past three
fiscal years. We do not believe that our revenue and results of
operations will be significantly impacted by inflation in future
periods.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Market risk represents the risk of loss that may impact our
financial position due to adverse changes in financial market
prices and rates. Our market risk exposure is primarily a result
of fluctuations in foreign exchange rates and interest rates. We
do not hold or issue financial instruments for trading purposes.
Foreign
Currency Exchange Risk
Our operating results and cash flows are subject to fluctuations
due to changes in foreign currency exchange rates, particularly
changes in the Euro and the British pound sterling. We
periodically enter into derivative transactions, specifically
foreign currency forward contracts, to manage our exposure to
fluctuations in foreign exchange rates that arise primarily from
our foreign currency-denominated receivables. When we have not
entered into foreign currency forward contracts to mitigate the
foreign currency exposure on
50
non-U.S. Dollar
denominated receivables, this may create foreign currency
exchange risks for us. At September 30, 2009, we have no
outstanding foreign currency forward contracts. Revenue
denominated in currencies other than the U.S. dollar
represented 25% of total revenue in fiscal 2009, 32% in fiscal
2008 and 22% in fiscal 2007.
As of September 30, 2009, we had $2.8 million of
receivables denominated in currencies other than the
U.S. dollar. If the foreign exchange rates fluctuated by
10% as of September 30, 2009, the fair value of our
receivables denominated in currencies other than the
U.S. dollar would have fluctuated by $281,000. In addition,
our subsidiaries have intercompany accounts that are eliminated
in consolidation, but that expose us to foreign currency
exchange rate exposure. Exchange rate fluctuations on short-term
intercompany accounts are reported in other income (expense).
Exchange rate fluctuations on long-term intercompany accounts,
which are invested indefinitely without repayment terms, are
recorded in other comprehensive income (loss) in
stockholders equity.
Interest
Rate Risk
At September 30, 2009, we had unrestricted cash and cash
equivalents totaling $50.3 million. We have no short-term
investments as of September 30, 2009. We do not enter into
investments for trading or speculative purposes. We considered
the historical volatility of short-term interest rates and
determined that, due to the size and duration of our investment
portfolio, a 100-basis-point change in interest rates at
September 30, 2009 would result in an increase or decrease
of approximately $503,000 of annual investment income.
51
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
52
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Unica Corporation:
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations,
stockholders equity and comprehensive income (loss), and
cash flows present fairly, in all material respects, the
financial position of Unica Corporation and its subsidiaries at
September 30, 2009 and 2008, and the results of their
operations and their cash flows for each of the three years in
the period ended September 30, 2009 in conformity with
accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of September 30, 2009, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements, for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in
Managements Report on Internal Control over Financial
Reporting appearing under Item 9A. Our responsibility is to
express opinions on these financial statements and on the
Companys internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and
whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
As discussed in Note 2 to the consolidated financial
statements, the Company changed the manner in which it accounts
for uncertain tax positions and sabbatical leave in fiscal 2008.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers
LLP
Boston, Massachusetts
December 10, 2009
53
UNICA
CORPORATION AND SUBSIDIARIES
(In
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
50,314
|
|
|
$
|
35,799
|
|
Short-term investments
|
|
|
|
|
|
|
11,482
|
|
Accounts receivable, net of allowance for doubtful accounts of
$361 and $87, respectively
|
|
|
16,514
|
|
|
|
21,339
|
|
Purchased customer receivables
|
|
|
|
|
|
|
765
|
|
Prepaid expenses and other current assets
|
|
|
4,731
|
|
|
|
5,351
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
71,559
|
|
|
|
74,736
|
|
Property and equipment, net
|
|
|
5,221
|
|
|
|
4,781
|
|
Long-term investment
|
|
|
|
|
|
|
2,989
|
|
Purchased customer receivables, long-term
|
|
|
|
|
|
|
173
|
|
Acquired intangible assets, net
|
|
|
4,515
|
|
|
|
6,846
|
|
Goodwill
|
|
|
10,943
|
|
|
|
26,182
|
|
Long-term deferred tax assets, net of valuation allowance
|
|
|
894
|
|
|
|
168
|
|
Other assets
|
|
|
749
|
|
|
|
1,034
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
93,881
|
|
|
$
|
116,909
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,332
|
|
|
$
|
3,536
|
|
Accrued expenses
|
|
|
13,080
|
|
|
|
14,527
|
|
Short-term deferred revenue
|
|
|
35,069
|
|
|
|
35,369
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
49,481
|
|
|
|
53,432
|
|
Long-term deferred revenue
|
|
|
1,250
|
|
|
|
1,733
|
|
Other long-term liabilities
|
|
|
337
|
|
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
51,068
|
|
|
|
56,903
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value:
|
|
|
|
|
|
|
|
|
Authorized 90,000,000 shares;
21,254,632 shares issued and 20,838,866 outstanding at
September 30, 2009; 20,758,131 shares issued and
outstanding at September 20, 2008
|
|
|
213
|
|
|
|
208
|
|
Additional paid-in capital
|
|
|
73,267
|
|
|
|
66,841
|
|
Accumulated deficit
|
|
|
(29,209
|
)
|
|
|
(7,435
|
)
|
Treasury stock, at cost 415,766 shares
|
|
|
(1,920
|
)
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
462
|
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
42,813
|
|
|
|
60,006
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
93,881
|
|
|
$
|
116,909
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
$
|
18,823
|
|
|
$
|
42,877
|
|
|
$
|
38,970
|
|
Maintenance and services
|
|
|
61,787
|
|
|
|
64,511
|
|
|
|
54,318
|
|
Subscription
|
|
|
20,008
|
|
|
|
13,743
|
|
|
|
8,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
100,618
|
|
|
|
121,131
|
|
|
|
102,243
|
|
Costs of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
|
1,932
|
|
|
|
3,118
|
|
|
|
2,782
|
|
Maintenance and services
|
|
|
19,390
|
|
|
|
25,461
|
|
|
|
18,958
|
|
Subscription
|
|
|
4,671
|
|
|
|
2,862
|
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
|
25,993
|
|
|
|
31,441
|
|
|
|
22,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
74,625
|
|
|
|
89,690
|
|
|
|
79,811
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
41,773
|
|
|
|
49,747
|
|
|
|
41,068
|
|
Research and development
|
|
|
19,886
|
|
|
|
22,971
|
|
|
|
22,034
|
|
General and administrative
|
|
|
16,018
|
|
|
|
19,078
|
|
|
|
16,362
|
|
Restructuring charges (credits)
|
|
|
3,000
|
|
|
|
(286
|
)
|
|
|
1,244
|
|
Goodwill impairment charge
|
|
|
15,266
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
1,180
|
|
|
|
1,573
|
|
|
|
1,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
97,123
|
|
|
|
93,083
|
|
|
|
82,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(22,498
|
)
|
|
|
(3,393
|
)
|
|
|
(2,469
|
)
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
586
|
|
|
|
1,448
|
|
|
|
2,056
|
|
Other income (expense), net
|
|
|
(1,371
|
)
|
|
|
(383
|
)
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
(785
|
)
|
|
|
1,065
|
|
|
|
2,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(23,283
|
)
|
|
|
(2,328
|
)
|
|
|
(305
|
)
|
Provision for (benefit from) income taxes
|
|
|
(1,509
|
)
|
|
|
7,411
|
|
|
|
(801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(21,774
|
)
|
|
$
|
(9,739
|
)
|
|
$
|
496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.05
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.05
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,766,000
|
|
|
|
20,443,000
|
|
|
|
19,857,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
20,766,000
|
|
|
|
20,443,000
|
|
|
|
20,782,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
Retained
|
|
|
Treasury Stock
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.01
|
|
|
Additional
|
|
|
Earnings
|
|
|
|
|
|
$0.01
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Par
|
|
|
Paid-In
|
|
|
(Accumulated
|
|
|
|
|
|
Par
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Shares
|
|
|
Value
|
|
|
Income
|
|
|
Equity
|
|
|
Income (Loss)
|
|
|
Balance at September 30, 2006
|
|
|
19,600,444
|
|
|
$
|
196
|
|
|
$
|
52,094
|
|
|
$
|
2,082
|
|
|
|
|
|
|
|
|
|
|
$
|
235
|
|
|
$
|
54,607
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
496
|
|
|
$
|
496
|
|
Exercise of stock options
|
|
|
320,754
|
|
|
|
3
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,264
|
|
|
|
|
|
Tax benefit on options exercised
|
|
|
|
|
|
|
|
|
|
|
950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
950
|
|
|
|
|
|
Issuance of common stock for employee stock purchase plan
|
|
|
60,866
|
|
|
|
1
|
|
|
|
626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
627
|
|
|
|
|
|
Vesting of restricted stock units, net of withholding tax
|
|
|
92,391
|
|
|
|
1
|
|
|
|
(568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(567
|
)
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
5,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,439
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
|
|
|
|
104
|
|
|
|
104
|
|
Change in unrealized gain (loss) on
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2007
|
|
|
20,074,455
|
|
|
|
201
|
|
|
|
59,802
|
|
|
|
2,578
|
|
|
|
|
|
|
|
|
|
|
|
338
|
|
|
|
62,919
|
|
|
|
|
|
Cumulative effect of adjustment based on the adoption of
sabbatical leave accounting standard, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2007, as adjusted
|
|
|
20,074,455
|
|
|
|
201
|
|
|
|
59,802
|
|
|
|
2,304
|
|
|
|
|
|
|
|
|
|
|
|
338
|
|
|
|
62,645
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,739
|
)
|
|
|
(9,739
|
)
|
Exercise of stock options
|
|
|
330,734
|
|
|
|
4
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
804
|
|
|
|
|
|
Tax shortfall on options exercised
|
|
|
|
|
|
|
|
|
|
|
(443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(443
|
)
|
|
|
|
|
Issuance of common stock for employee stock purchase plan
|
|
|
125,678
|
|
|
|
1
|
|
|
|
896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
897
|
|
|
|
|
|
Vesting of restricted stock units, net of withholding tax
|
|
|
227,264
|
|
|
|
2
|
|
|
|
(939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(937
|
)
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
6,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,725
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
|
|
|
|
81
|
|
|
|
81
|
|
Change in unrealized gain (loss) on
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
(27
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(9,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2008
|
|
|
20,758,131
|
|
|
|
208
|
|
|
|
66,841
|
|
|
|
(7,435
|
)
|
|
|
|
|
|
|
|
|
|
|
392
|
|
|
|
60,006
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,774
|
)
|
|
|
(21,774
|
)
|
Exercise of stock options
|
|
|
109,927
|
|
|
|
1
|
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
485
|
|
|
|
|
|
Tax shortfall on options exercised
|
|
|
|
|
|
|
|
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(160
|
)
|
|
|
|
|
Issuance of common stock for employee stock purchase plan
|
|
|
155,448
|
|
|
|
2
|
|
|
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
608
|
|
|
|
|
|
Vesting of restricted stock units, net of withholding tax
|
|
|
231,126
|
|
|
|
2
|
|
|
|
(418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(416
|
)
|
|
|
|
|
Purchases of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
415,766
|
|
|
|
(1,920
|
)
|
|
|
|
|
|
|
(1,920
|
)
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
5,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,914
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
(37
|
)
|
|
|
(37
|
)
|
Change in unrealized gain (loss) on
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
|
|
|
|
107
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(21,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009
|
|
|
21,254,632
|
|
|
$
|
213
|
|
|
$
|
73,267
|
|
|
$
|
(29,209
|
)
|
|
|
415,766
|
|
|
$
|
(1,920
|
)
|
|
$
|
462
|
|
|
$
|
42,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(21,774
|
)
|
|
$
|
(9,739
|
)
|
|
$
|
496
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment
|
|
|
2,685
|
|
|
|
2,349
|
|
|
|
1,428
|
|
Amortization of capitalized software development costs
|
|
|
186
|
|
|
|
87
|
|
|
|
10
|
|
Amortization of acquired intangible assets
|
|
|
2,176
|
|
|
|
2,897
|
|
|
|
2,709
|
|
Goodwill impairment charge
|
|
|
15,266
|
|
|
|
|
|
|
|
|
|
Share-based compensation charge
|
|
|
5,845
|
|
|
|
6,725
|
|
|
|
5,520
|
|
Foreign currency translation loss
|
|
|
229
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
324
|
|
|
|
117
|
|
|
|
55
|
|
Valuation allowance for deferred tax assets
|
|
|
(248
|
)
|
|
|
8,098
|
|
|
|
|
|
Deferred tax benefits
|
|
|
(1,819
|
)
|
|
|
(2,618
|
)
|
|
|
(1,152
|
)
|
Excess tax benefits from share-based compensation
|
|
|
|
|
|
|
(142
|
)
|
|
|
(950
|
)
|
Changes in operating assets and liabilities, net of assets
acquired and liabilities assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
4,373
|
|
|
|
6,559
|
|
|
|
(442
|
)
|
Prepaid expenses and other current assets
|
|
|
1,426
|
|
|
|
2,581
|
|
|
|
(5,161
|
)
|
Other assets
|
|
|
492
|
|
|
|
155
|
|
|
|
935
|
|
Accounts payable
|
|
|
(2,118
|
)
|
|
|
1,222
|
|
|
|
(292
|
)
|
Accrued expenses
|
|
|
(1,304
|
)
|
|
|
(2,820
|
)
|
|
|
3,404
|
|
Deferred revenue
|
|
|
(809
|
)
|
|
|
(1,554
|
)
|
|
|
4,120
|
|
Other long-term liabilities
|
|
|
|
|
|
|
370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
4,930
|
|
|
|
14,287
|
|
|
|
10,680
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment, net of acquisitions
|
|
|
(2,544
|
)
|
|
|
(2,481
|
)
|
|
|
(3,200
|
)
|
Capitalization of software development costs
|
|
|
(748
|
)
|
|
|
(477
|
)
|
|
|
(136
|
)
|
Net cash paid for acquisitions
|
|
|
|
|
|
|
|
|
|
|
(11,920
|
)
|
Cash collected from license acquired in acquisition
|
|
|
154
|
|
|
|
162
|
|
|
|
31
|
|
Sales and maturities of investments
|
|
|
15,404
|
|
|
|
35,749
|
|
|
|
48,974
|
|
Purchases of investments
|
|
|
(898
|
)
|
|
|
(30,605
|
)
|
|
|
(59,053
|
)
|
Increase in restricted cash
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
11,299
|
|
|
|
2,348
|
|
|
|
(25,304
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock under stock option and
employee stock purchase plans
|
|
|
1,093
|
|
|
|
1,701
|
|
|
|
1,891
|
|
Tax benefit related to exercised stock options
|
|
|
|
|
|
|
142
|
|
|
|
950
|
|
Treasury shares purchased
|
|
|
(1,920
|
)
|
|
|
|
|
|
|
|
|
Payment of withholding taxes in connection with settlement of
restricted stock units
|
|
|
(416
|
)
|
|
|
(937
|
)
|
|
|
(566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
(1,243
|
)
|
|
|
906
|
|
|
|
2,275
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(471
|
)
|
|
|
(235
|
)
|
|
|
341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
14,515
|
|
|
|
17,306
|
|
|
|
(12,008
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
35,799
|
|
|
|
18,493
|
|
|
|
30,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
50,314
|
|
|
$
|
35,799
|
|
|
$
|
18,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
845
|
|
|
$
|
829
|
|
|
$
|
2,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of share-based compensation
|
|
$
|
69
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
57
UNICA
CORPORATION AND SUBSIDIARIES
(In
thousands, except share and per share data)
Unica Corporation (the Company) is a leading global
provider of Enterprise Marketing Management (EMM) software.
Focused exclusively on the needs of marketers, Unicas
products deliver key EMM capabilities, including: web and
customer analytics, demand generation, and marketing resource
management. Our products streamline the entire marketing process
for brand, relationship and internet marketing from
planning and budgeting to project management, execution and
measurement.
The Company has a worldwide installed base serving a wide range
of industries, including financial services, insurance, retail,
telecommunications, and travel and hospitality. The Company
offers software primarily through a direct sales force, as well
as through alliances with marketing service providers (MSPs),
distributors, and systems integrators. In addition, the Company
provides a full range of services to customers, including
implementation, training, consulting, maintenance and technical
support, and customer success programs.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation and Principles of Consolidation
The Companys fiscal year end is September 30.
References to 2009, 2008 or 2007 mean the fiscal year ended
September 30, unless otherwise indicated.
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
The Company evaluates events and transactions that occur after
the balance sheet date as potential subsequent events. The
Company performed this evaluation through December 10,
2009, the date on which its financial statements were issued.
Use of
Estimates and Assumptions
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
(US GAAP) requires the Company to make estimates, judgments and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
as of the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates, judgments and
assumptions. Examples include estimates of loss contingencies,
acquisition accounting valuations, software development costs
eligible for capitalization, amortization and depreciation
period estimates, the potential outcome of future tax
consequences of events that have been recognized in the
financial statements or tax returns, estimating the fair value
of the Companys reporting units, and assumptions used in
the valuation of share-based awards. Estimates are periodically
reviewed in light of changes in circumstances, facts and
experience. The effects of material revisions in estimates are
reflected in the consolidated financial statements prospectively
from the date of the change in estimate.
Acquisition
Accounting
The purchase price of each acquired business is allocated to the
assets acquired and liabilities assumed, if any, at their
respective fair value on the date of acquisition. Any excess
purchase price over the amounts allocated to the assets acquired
and liabilities assumed is recorded as goodwill.
58
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
Revenue
Recognition
The Company sells its software products and services together in
a multiple-element arrangement under perpetual and subscription
agreements. The Company uses the residual method to recognize
revenues from perpetual license arrangements that include one or
more elements to be delivered at a future date, when evidence of
the fair value of all undelivered elements exists. Under the
residual method, the fair value of the undelivered elements
based on VSOE is deferred and the remaining portion of the
arrangement fee is allocated to the delivered elements. Each
license arrangement requires that the Company analyze the
individual elements in the transaction and determine the fair
value of each undelivered element, which typically includes
maintenance and services. Revenue is allocated to each
undelivered element based on its fair value, with the fair value
determined by the price charged when that element is sold
separately.
For perpetual license agreements, the Company generally
estimates the fair value of the maintenance portion of an
arrangement based on the maintenance renewal price for that
arrangement. In multiple-element perpetual license arrangements
where maintenance is sold for less than fair value, the Company
defers the contractual price of the maintenance plus the
difference between such contractual price and the fair value of
maintenance over the expected life of the product. A
corresponding reduction in license revenue is made. The fair
value of the professional services portion of perpetual license
arrangements is based on the rates that are charged for these
services when sold separately. If, in the Companys
judgment, evidence of fair value cannot be established for the
undelivered elements in a multiple-element arrangement, the
entire amount of revenue from the arrangement is deferred until
evidence of fair value can be established, or until the elements
for which evidence of fair value could not be established are
delivered.
Revenue for implementation services of software products that
are not deemed essential to the functionality of the software
products is recognized separately from license and subscription
revenue. Generally these services are priced on a
time-and-materials
basis and recognized as revenue when services are performed;
however, in certain circumstances these services may be priced
on a fixed-fee basis and recognized as revenue under the
proportional performance method. In cases where VSOE of fair
value does not exist for the undelivered elements in a software
license arrangement, services revenue is deferred and recognized
over the period of performance of the final undelivered element.
The Company also defers the direct and incremental costs of
providing the services and amortizes those costs over the period
revenue is recognized.
If the Company were to determine that services are essential to
the functionality of software in an arrangement, the license or
subscription and services revenue from the arrangement would be
recognized pursuant to the accounting for performance of
construction-type contracts and certain production-type
contracts. In such cases, it is expected that the Company would
be able to make reasonably dependable estimates relative to the
extent of progress toward completion by comparing the total
hours incurred to the estimated total hours for the arrangement
and, accordingly, would apply the
percentage-of-completion
method. If the Company were unable to make reasonably dependable
estimates of progress towards completion, then it would use the
completed-contract method, under which revenue is recognized
only upon completion of the services. If total cost estimates
exceed the anticipated revenue, then the estimated loss on the
arrangement is recorded at the inception of the arrangement or
at the time the loss becomes apparent.
The Company generally enters into subscription arrangements for
term licenses that include, on a bundled basis, (a) the
right to use its software for a specified period of time,
(b) updates and upgrades to its software on a when and if
available basis, and (c) technical support. In subscription
arrangements for term licenses, where services are not deemed
essential to the functionality of the software products, and
fair value has not been established for the subscription
element, revenue for both the subscription and services is
recognized ratably over the longer of the term of the
arrangement or the expected customer relationship period, once
the only remaining undelivered element to the arrangement is
post-contract customer support.
59
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
Subscription arrangements for on demand services generally
include: (a) a subscription fee for hosted services and
technical support and (b) optional professional services
for consulting, training and other services. Revenue related to
subscription fees for on demand services is recognized ratably
over the estimated customer relationship period commencing at
the point when the end-user is provided access to the underlying
software. Revenue related to professional services is recognized
ratably over the estimated customer relationship period
commencing at the point when such services are delivered,
provided that the end-user is given access to the underlying
software.
For all of our software arrangements, the Company does not
recognize revenue until it can determine that persuasive
evidence of an arrangement exists, delivery has occurred, the
fee is fixed or determinable and collection is considered
probable. In making these judgments, the Company evaluates these
criteria as follows:
|
|
|
|
|
Evidence of an arrangement. For the majority
of its arrangements, the Company considers a non-cancelable
agreement to be persuasive evidence of an arrangement. In
transactions below a certain dollar threshold involving the sale
of our UnicaNetInsight product, the Company considers a purchase
order signed by the customer to be persuasive evidence of an
arrangement.
|
|
|
|
Delivery. The Company considers delivery to
have occurred when a CD or other medium containing the licensed
software is provided to a common carrier or, in the case of
electronic delivery, the customer is given electronic access to
the licensed software. The Companys typical end-user
license agreement does not include customer acceptance
provisions.
|
|
|
|
Fixed or determinable fee. The Company
considers the fee to be fixed or determinable unless the fee is
subject to refund or adjustment or is not payable within the
Companys normal payment terms. If the fee is subject to
refund or adjustment, the Company recognizes revenue when the
refund or adjustment right lapses. If the payments are due
beyond the Companys normal terms, it recognizes the
revenue as amounts become due and payable or as cash is
collected.
|
|
|
|
Collection is deemed probable . Customers are evaluated
for creditworthiness through the Companys credit review
process at the inception of the arrangement. Collection is
deemed probable if, based upon our evaluation, the Company
expects that the customer will be able to pay amounts under the
arrangement as payments become due. If the Company cannot
conclude that collection is probable, it defers the revenue, and
recognizes the revenue upon cash collection.
|
When the Company licenses its software through a marketing
service provider (MSP) or systems integrator, the Company begins
to recognize revenue upon delivery of the licensed software to
the MSP or systems integrator only if (a) the customer of
the MSP or systems integrator is identified in a written
arrangement between the Company and the MSP or systems
integrator and (b) all other revenue recognition criteria
have been met.
In agreements with customers and MSPs, the Company provides a
limited warranty that its software will perform in a manner
consistent with our documentation under normal use and
circumstances. In the event of a breach of this limited
warranty, the Company must repair or replace the software or, if
those remedies are insufficient, provide a refund. These
agreements generally do not include any other right of return or
any cancellation clause or conditions of acceptance.
Cost
of Revenue
Cost of license revenue, for both perpetual licenses and
subscription arrangements, consists primarily of
(a) salaries, benefits and share-based compensation related
to documentation personnel, (b) facilities and other
related overhead, (c) amortization of acquired developed
technology, (d) amortization of capitalized software
development costs and (e) third-party royalties. Cost of
maintenance and services revenue consists primarily of
60
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
(a) salaries, benefits and share-based compensation related
to professional services and technical support personnel,
(b) billable and non-billable travel, lodging and other
out-of-pocket
expenses, (c) facilities and other related overhead, and
(d) cost of services provided by subcontractors for
professional services. Cost of subscription revenue includes an
allocation of labor related and overhead costs associated with
technical support, documentation and professional services
personnel as well as costs associated with hosting-related
activities.
Goodwill,
Other Intangible Assets and Long-Lived Assets
Goodwill represents the excess of the purchase price over the
fair value of net assets associated with acquisitions. Goodwill
is considered an indefinite-lived intangible asset and is not
subject to amortization. The Company allocated a portion of each
purchase price to intangible assets, including customer
contracts and developed technology, which are being amortized
over their estimated useful lives of three to 14 years. The
Company also allocates a portion of each purchase price to
tangible assets and assesses the liabilities to be recorded as
part of the purchase price.
The Company reviews the carrying value of goodwill for
impairment annually and whenever events or changes in
circumstances indicate that the carrying value of goodwill may
exceed its fair value. The Company evaluates impairment by
comparing the estimated fair value of each reporting unit to its
carrying value. The Company estimates fair value using the
income approach as well as the market approach. The income
approach is based upon discounted cash flows estimated by
management for each reporting unit, while the market approach
uses trading and transaction multiples, for companies considered
comparable to Unica, to estimate fair value. Actual results may
differ materially from these estimates. The estimates made in
determining the fair value of each reporting unit involve the
application of judgment, including the amount and timing of
future cash flows, short- and long-term growth rates, and the
weighted average cost of capital, which could affect the timing
and size of any future impairment charges. Impairment of
goodwill could significantly affect operating results and
financial position.
The Company continually evaluates whether events or
circumstances have occurred that indicate that the estimated
remaining useful life of its long-lived assets, including
intangible assets, may warrant revision or that the carrying
value of these assets may be impaired. Any write-downs are
treated as permanent reductions in the carrying amount of the
assets.
Software
Development Costs
The Company evaluates whether to capitalize or expense
development costs of computer software to be sold in accordance
with established accounting standards. The Company sells
products in a market that is subject to rapid technological
change, new product development and changing customer needs. The
Company has defined technological feasibility as the completion
of a working model. The net book value of capitalized software
development costs at September 30, 2009 and 2008 was $196
and $171, respectively. All such costs have been included in
other non-current assets in the Companys consolidated
balance sheet and are being amortized to cost of license revenue
over their estimated useful lives of two years.
Capitalized development costs of computer software to be sold or
leased are expected to be amortized as follows: $152 during the
year ending September 30, 2010 and $44 during the year
ending September 30, 2011.
The Company capitalizes certain costs of software developed or
obtained for internal use. The costs incurred in the preliminary
stages of development are expensed as incurred. Once an
application has reached the development stage, internal and
external costs, if direct and incremental, are capitalized until
the software is substantially complete and ready for its
intended use. Capitalization ceases upon completion of all
substantial testing. The Company also capitalizes costs related
to specific upgrades and enhancements when it
61
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
is probable the expenditures will result in additional
functionality. Maintenance and training cost are expensed as
incurred. Internal-use software is amortized on a straight-line
basis over its estimated useful life of three years. Management
evaluates the useful lives of these assets on an annual basis
and tests for impairments whenever events or changes in
circumstances occur that could impact the recoverability of
these assets. At September 30, 2009 and 2008, the net book
value of internal-use software costs was $884 and $345,
respectively. Prior to fiscal 2008, internal-use software costs
eligible for capitalization were immaterial. All such costs are
included in property and equipment on the Companys
consolidated balance sheet.
Advertising
and Promotional Expense
Advertising and promotional expense is expensed as incurred; as
such efforts have not met the direct-response criteria required
for capitalization. Advertising expense for the years ended
September 30, 2009, 2008 and 2007 was $344, $471 and $427,
respectively.
Foreign
Currency Translation
The functional currency of the Companys foreign
subsidiaries in the United Kingdom, Singapore, Australia and
India is the U.S. dollar. Accordingly, all assets and
liabilities of these foreign subsidiaries are remeasured into
U.S. dollars using the exchange rates in effect at the
balance sheet date, except for property and equipment, which are
remeasured into U.S. dollars at historical rates. Revenue
and expenses of these foreign subsidiaries are remeasured into
U.S. dollars at the average rates in effect during the
year. Any differences resulting from the remeasurement of
assets, liabilities and operations of the United Kingdom,
Singapore, Australia and India subsidiaries are recorded within
other income (expense) in the consolidated statement of
operations. During the years ended September 30, 2009, 2008
and 2007, remeasurement adjustments were a net gain of $242,
$291 and $200, respectively.
The functional currency of the Companys foreign subsidiary
in France is the Euro. Accordingly, all assets and liabilities
of the French subsidiary are translated to U.S. dollars
using the exchange rate in effect at the balance sheet date.
Revenue and expenses of the French subsidiary are translated to
U.S. dollars using the average rates in effect during the
period. Any differences resulting from the translation of
assets, liabilities and operations of the French subsidiary are
recorded within stockholders equity as other comprehensive
income.
Any gains or losses on foreign currency transactions, resulting
from the translation of intercompany balances, are recorded in
other income (expense) in the consolidated statement of
operations. During the years ended September 30, 2009, 2008
and 2007, net foreign currency transaction losses, resulting
from the translation of intercompany balances, were $13, $197
and $91, respectively.
Cash
and Cash Equivalents
The Company considers all highly liquid investments purchased
with original maturities of 90 days or less to be cash
equivalents. The Company invests the majority of its excess cash
in overnight investments and money market funds of accredited
financial institutions.
Investments
Investments are made in accordance with the Companys
corporate investment policy, as approved by its Board of
Directors. The primary objective of this policy is preservation
of capital. Investments are limited to high quality corporate
debt, commercial paper, government agency securities and similar
instruments. The policy establishes maturity limits, liquidity
requirements and concentration limits. At September 30,
2009, the Company was in compliance with this internal policy.
62
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
The Company considers all highly liquid investments with
maturities of between 91 and 365 days as of the balance
sheet date to be short-term investments, and investments with
maturities greater than 365 days as of the balance sheet
date to be long-term investments. The Company did not hold any
investments at September 30, 2009. The Companys
investments were classified as
available-for-sale
and were carried at fair market value at September 30,
2008. Unrealized gains (losses) on
available-for-sale
securities are recorded in accumulated other comprehensive
income. The Company reviews all investments for reductions in
fair value that are considered other than temporary. When such
reductions occur, the cost of the investment is adjusted to fair
value through other income (loss) on the consolidated statement
of operations. Gains and losses are calculated on the basis of
specific identification.
Investments were as follows at September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Fair Market
|
|
|
|
Cost
|
|
|
Loss
|
|
|
Value
|
|
|
Commercial paper
|
|
$
|
5,662
|
|
|
$
|
|
|
|
$
|
5,662
|
|
Certificates of deposit
|
|
|
500
|
|
|
|
|
|
|
|
500
|
|
Corporate debentures and other securities
|
|
|
8,344
|
|
|
|
(35
|
)
|
|
|
8,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
14,506
|
|
|
$
|
(35
|
)
|
|
$
|
14,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2008, $11,482 of investments had
contractual maturities within one year while $2,989 of
investments had contractual maturities within one to two years.
All investments were sold or matured in fiscal 2009.
Effective October 1, 2008, the Company adopted an
accounting pronouncement which establishes a framework for
measuring fair value and requires enhanced disclosures about
fair value measurements. The pronouncement clarifies that fair
value is an exchange price, representing the amount that would
be received in an orderly transaction between market
participants, upon the sale of an asset or a payment to transfer
a liability (an exit price) in the principal or most
advantageous market for such asset or liability. In February
2008, the FASB issued an accounting pronouncement that delays
the effective date of the guidance for non-financial assets and
liabilities that are not measured or disclosed on a recurring
basis until fiscal years beginning after November 15, 2008.
To date, therefore, the Company has adopted the related
accounting provisions only with respect to financial assets and
liabilities. The adoption of this accounting pronouncement did
not have a material effect on the Companys consolidated
financial statements for financial assets and liabilities
carried at fair value. The Company is currently in the process
of evaluating the impact of adopting the accounting
pronouncement for non-financial assets and liabilities.
Valuation techniques used to measure fair value are required to
maximize the use of observable inputs and minimize the use of
unobservable inputs. The accounting guidance for fair value
accounting describes a fair value hierarchy based on three
levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to
measure fair value:
Level 1 Quoted prices in active markets for
identical assets or liabilities.
Level 2 Observable inputs, other than
Level 1 prices, such as quoted prices in active markets for
similar assets and liabilities, quoted prices for identical or
similar assets and liabilities in markets that are not active,
or other inputs that are observable or can be corroborated by
observable market data.
Level 3 Unobservable inputs that are supported
by little or no market activity and that are significant to the
fair value of the assets or liabilities, including certain
pricing models, discounted cash flow methodologies and similar
techniques.
63
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
The Company uses the market approach to measure the fair value
of its financial assets by obtaining prices and other relevant
information generated by market transactions involving identical
or comparable assets. The following table details the fair value
measurements within the fair value hierarchy of the
Companys financial assets, including investments and cash
equivalents, at September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at
|
|
Fair Value Measurements
|
|
|
September 30,
|
|
at Reporting Date Using
|
|
|
2009
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Money market funds
|
|
$
|
37,444
|
|
|
$
|
37,444
|
|
|
$
|
|
|
|
$
|
|
|
Concentration
of Credit Risk and Significant Customers
Financial instruments that potentially expose the Company to
concentration of credit risk primarily consist of cash and cash
equivalents, investments and trade accounts receivable. The
Company maintains its cash and cash equivalents and investments
with accredited financial institutions. Investments are
investment grade, interest-earning securities, and are
diversified by type and industry. The Company does not have a
concentration of credit or operating risk in any one industry or
any one geographic region within or outside of the United
States. The Company reviews the credit history of its customers
(including its resellers) before extending credit. The Company
establishes its allowances based upon factors including the
credit risk of specific customers, historical trends, and other
information.
Two customers accounted for greater than 10% of the accounts
receivable balance at September 30, 2009 and no customer
accounted for greater than 10% of the accounts receivable
balance at September 30, 2008.
No customer accounted for more than 10% of the Companys
total revenue during the years ended September 30, 2009,
2008 and 2007.
Fair
Value of Financial Instruments
The carrying amounts of the Companys financial
instruments, which include accounts receivable, purchased
customer receivables and accounts payable, approximated their
fair values at September 30, 2009 and 2008, due to the
short-term nature of these instruments.
Comprehensive
Income (Loss)
Comprehensive income (loss) is defined as the change in equity
of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. Other
than reported net income (loss), comprehensive income (loss)
includes foreign currency translation adjustments and unrealized
gains and losses on
available-for-sale
investments, which are disclosed in the accompanying
consolidated statements of stockholders equity and
comprehensive income (loss).
Net
Income (Loss) Per Share
Basic earnings per share (EPS) is calculated by
dividing net income (loss) by the weighted average number of
shares outstanding during the period. Diluted EPS is calculated
by dividing net income (loss) by the weighted average number of
shares outstanding plus the dilutive effect, if any, of
outstanding stock options and
64
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
restricted stock units using the treasury stock method. The
following table presents the calculation for both basic and
diluted EPS:
A reconciliation of the numerator and denominator used in the
calculation of basic and diluted net income (loss) per share is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) basic and diluted
|
|
$
|
(21,774
|
)
|
|
$
|
(9,739
|
)
|
|
$
|
496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of common stock outstanding
|
|
|
20,766,000
|
|
|
|
20,443,000
|
|
|
|
19,857,000
|
|
Effect of potentially dilutive shares
|
|
|
|
|
|
|
|
|
|
|
925,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income (loss) per common
share
|
|
|
20,766,000
|
|
|
|
20,443,000
|
|
|
|
20,782,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(21,774
|
)
|
|
$
|
(9,739
|
)
|
|
$
|
496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding
|
|
|
20,766,000
|
|
|
|
20,443,000
|
|
|
|
19,857,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
$
|
(1.05
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(21,774
|
)
|
|
$
|
(9,739
|
)
|
|
$
|
496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income (loss) per common
share
|
|
|
20,766,000
|
|
|
|
20,443,000
|
|
|
|
20,782,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
$
|
(1.05
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of potentially dilutive shares in the table above was
computed using the treasury stock method for all periods
presented. As a result of this method, common stock equivalents
of 4,087,000, 3,529,000 and 1,104,000 were excluded from the
determination of potentially dilutive shares for the years ended
September 30, 2009, 2008 and 2007, respectively, due to
their anti-dilutive effect.
Accounting
for Share-Based Compensation
The Company recognizes compensation expense for stock option
awards on a straight-line basis over the requisite service
period of the award. In addition, the benefits of tax deductions
in excess of recognized share-based compensation are reported as
a financing activity rather than an operating activity in the
statement of cash flows.
65
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model. The
assumptions used and the resulting estimated fair value for
option grants during the applicable period are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
|
58%
|
|
|
|
50%
|
|
|
|
49% to 50%
|
|
Risk-free interest rate
|
|
|
1.11% to 1.79%
|
|
|
|
2.45% to 4.16%
|
|
|
|
4.35% to 4.78%
|
|
Weighted-average expected option term
(in years)
|
|
|
4.1
|
|
|
|
4.1
|
|
|
|
4.1
|
|
Weighted-average fair value per share of options granted
|
|
|
$1.51
|
|
|
|
$3.08
|
|
|
|
$5.15
|
|
Weighted-average fair value per share of restricted stock awards
granted
|
|
|
$4.35
|
|
|
|
$7.75
|
|
|
|
$12.18
|
|
The fair value of ESPP awards is estimated on the date of grant
using the Black-Scholes option pricing model. The assumptions
used and the resulting estimated fair value for grants during
the applicable period are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
|
50%
|
|
|
|
50%
|
|
|
|
41%
|
|
Risk-free interest rate
|
|
|
0.26% to 2.00%
|
|
|
|
2.00% to 3.49%
|
|
|
|
4.07%
|
|
Weighted-average expected option term (in years)
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Weighted-average fair value per share of options granted
|
|
|
$1.42
|
|
|
|
$2.51
|
|
|
|
$1.23
|
|
The computation of expected volatility is based on a study of
historical volatility rates of comparable companies during a
period comparable to the expected option term. The interest rate
for periods within the contractual life of the award is based on
the U.S. Treasury risk-free interest rate in effect at the
time of grant. The computation of expected option term is based
on an average of the vesting term and the maximum contractual
life of the Companys stock options. Computation of
expected forfeitures is based on historical forfeiture rates of
the Companys stock options. Share-based compensation
charges will be adjusted in future periods to reflect the
results of actual forfeitures and vesting.
The weighted-average exercise price of the options granted under
the stock option plans for the years ended September 30,
2009, 2008 and 2007 was $4.61, $7.97 and $11.63, respectively.
The components of share-based compensation expense for the years
ended September 30, 2009, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Stock options
|
|
$
|
1,931
|
|
|
$
|
2,470
|
|
|
$
|
2,508
|
|
Restricted stock units
|
|
|
3,722
|
|
|
|
3,982
|
|
|
|
2,937
|
|
Employee stock purchase plan
|
|
|
192
|
|
|
|
273
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation
|
|
$
|
5,845
|
|
|
$
|
6,725
|
|
|
$
|
5,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
Cost of revenue and operating expenses include share-based
compensation expense as follows for the years ended
September 30, 2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cost of maintenance and services revenue
|
|
$
|
1,024
|
|
|
$
|
898
|
|
|
$
|
590
|
|
Sales and marketing expense
|
|
|
2,338
|
|
|
|
2,389
|
|
|
|
1,706
|
|
Research and development expense
|
|
|
1,020
|
|
|
|
1,294
|
|
|
|
1,151
|
|
General and administrative expense
|
|
|
1,463
|
|
|
|
2,144
|
|
|
|
2,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense
|
|
$
|
5,845
|
|
|
$
|
6,725
|
|
|
$
|
5,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects to record the unamortized portion of
share-based compensation expense for existing stock options and
restricted stock awards outstanding at September 30, 2009,
over a weighted-average period of 1.93 and 1.86 years,
respectively, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
Year Ending September 30,
|
|
Stock Options
|
|
|
Awards
|
|
|
Total
|
|
|
2010
|
|
$
|
1,087
|
|
|
$
|
2,530
|
|
|
$
|
3,617
|
|
2011
|
|
|
999
|
|
|
|
1,739
|
|
|
|
2,738
|
|
2012
|
|
|
605
|
|
|
|
974
|
|
|
|
1,579
|
|
2013
|
|
|
136
|
|
|
|
381
|
|
|
|
517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected future share-based compensation expense
|
|
$
|
2,827
|
|
|
$
|
5,624
|
|
|
$
|
8,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Taxes
The Company uses the liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities
are determined based on temporary differences between the
financial statement and tax basis of assets and liabilities and
net operating loss and credit carryforwards using enacted tax
rates in effect for the year in which the differences are
expected to reverse. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in
the period that includes the enactment date. Valuation
allowances are established when it is more likely than not that
some portion of the deferred tax assets will not be realized.
Sabbatical
Leave
On October 1, 2007, the Company adopted a new accounting
pronouncement on accounting for sabbatical leave, which provides
recognition guidance on the accrual of employees rights to
compensated absences under a sabbatical or other similar benefit
arrangement. Prior to the adoption of this accounting
pronouncement, the Company recorded a liability for sabbatical
leave upon an employee vesting in the benefit, which occurred
when an employee went on leave after completing a six-year
service period. Under this new accounting pronouncement, the
Company accrues an estimated liability for sabbatical leave over
the requisite six-year service period, as employee services are
rendered. The adoption of this accounting pronouncement resulted
in an additional liability of $435, additional deferred tax
assets of $161 and a reduction to retained earnings of $274 as
of October 1, 2007.
During fiscal 2009, the Company amended its sabbatical program
by discontinuing sabbatical leave for employees who were
eligible to receive such benefit after fiscal 2010. As a result
of this amendment, the Company recorded a benefit of $155 to
operating expenses during the three months ended
December 31, 2008.
67
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
Recently
Issued Accounting Pronouncements
In December 2007, the FASB issued a new accounting pronouncement
regarding business combinations. This statement establishes
principles and requirements for how the acquirer in a business
combination (i) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree,
(ii) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and
(iii) determines what information to disclose to enable
users of the financial statements to evaluate the nature and
financial effects of the business combination. This accounting
pronouncement is effective for fiscal years beginning after
December 15, 2008 and, as such, the Company will adopt this
standard in fiscal 2010. The impact of the pronouncement on our
financial position and results of operations will be dependent
upon the number of and magnitude of the acquisitions that are
consummated once the pronouncement is effective.
In April 2008, the FASB issued a new accounting pronouncement on
determining the useful life of intangible assets, which amends
the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a
recognized intangible asset under previous accounting guidance.
This new standard is intended to improve the consistency between
the useful life of an intangible asset determined under the old
standard and the period of expected cash flows used to measure
the fair value of the asset under accounting guidance for
business combination and other U.S. generally accepted
accounting principles, or GAAP. This new standard is effective
for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal
years. Early adoption is not permitted. The Company is currently
evaluating the effect that the adoption of this new standard
will have on its results of operations and financial condition.
In June 2009, the FASB issued the FASB Accounting Standards
Codification (the Codification). The Codification
became the single source for all authoritative accounting
principles recognized by the FASB to be applied for financial
statements issued for periods ending after September 15,
2009. The Codification does not change GAAP and did not have an
effect on the Companys financial position, results of
operations or liquidity.
In September 2009, the FASBs Emerging Issues Task Force
issued authoritative guidance on revenue arrangements with
multiple deliverables. This guidance provides another
alternative for establishing fair value for a deliverable. When
vendor-specific objective evidence or third-party evidence for
deliverables in an arrangement cannot be determined, companies
will be required to develop a best estimate of the selling price
for separate deliverables and allocate arrangement consideration
using the relative selling price method. This guidance is
effective for fiscal years beginning after June 15, 2010,
and early adoption is permitted. The Company is currently
evaluating the impact of this guidance on its financial position
and results of operations.
MarketingCentral,
L.L.C.
On July 12, 2007, the Company acquired by merger
MarketingCentral L.L.C. (MarketingCentral), a software company
located in Atlanta, Georgia. The purchase price was $12,915,
which consisted of cash consideration of $12,500 and assumed
liabilities and transaction-related costs of $415. This
acquisition was accounted for as a purchase transaction. The
results of operations of the Company include the results of
MarketingCentral beginning on the date of the acquisition.
68
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
Following is a summary of the purchase price allocation of the
acquired MarketingCentral business:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
580
|
|
Accounts receivable
|
|
|
470
|
|
Purchased customer receivables
|
|
|
784
|
|
Property and equipment
|
|
|
49
|
|
Other assets
|
|
|
7
|
|
Developed technology
|
|
|
2,011
|
|
Customer relationships
|
|
|
1,948
|
|
Goodwill
|
|
|
5,662
|
|
Trade name
|
|
|
44
|
|
License agreement
|
|
|
1,360
|
|
|
|
|
|
|
Total assets
|
|
|
12,915
|
|
Deferred revenue
|
|
|
215
|
|
Transaction costs
|
|
|
130
|
|
Assumed liabilities
|
|
|
70
|
|
|
|
|
|
|
Total liabilities
|
|
|
415
|
|
|
|
|
|
|
Total cash consideration
|
|
$
|
12,500
|
|
|
|
|
|
|
The portion of the MarketingCentral purchase price allocated to
purchased customer receivables reflects the fair value of future
amounts due under customer contracts in effect as of the
acquisition date for which Unica assumed an obligation to
perform. The fair value of these receivables was determined
based on the expected discounted cash flows.
The portion of the MarketingCentral purchase price allocated to
developed technology, customer relationships, trade name and
license agreement was determined by the Company using a
discounted cash flow method. These intangible assets will be
amortized over their estimated useful lives (see Note 4).
The goodwill is not subject to amortization, but will be
evaluated for impairment at least annually. During the three
months ended March 31, 2009, the Company performed a
goodwill impairment assessment and recorded a $15,266 goodwill
impairment charge, relating to the impairment of goodwill, of
which $5,662 related to the acquisition of Marketing Central
(see Note 4). Goodwill is expected to be deductible for tax
purposes.
Various factors contributed to the establishment of goodwill,
including: MarketingCentrals assembled work force as of
the acquisition date; the synergies expected to result from
combining the infrastructures of MarketingCentral and Unica; and
the expected revenue growth and product cash flows in future
years.
The Company has estimated the fair value of deferred revenue
related to the obligation assumed from MarketingCentral in
connection with the acquisition using the cost
build-up
approach, which determines fair value by estimating the cost of
fulfilling the obligation, plus a normal profit margin. The
Company estimated the normal profit margin to be 20%.
Pro
Forma Results (Unaudited)
The unaudited pro forma combined condensed results of operations
of Unica and MarketingCentral for the year ended
September 30, 2007 presented below gives effect to the
acquisition of MarketingCentral as if the acquisition had
occurred as of the beginning of 2007. MarketingCentrals
fiscal year end prior to the acquisition was December 31.
The unaudited pro forma combined condensed results of operations
are not
69
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
necessarily indicative of future results or the actual results
that would have occurred had the acquisition been consummated as
of the beginning of each period presented.
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30, 2007
|
|
|
Pro forma revenue
|
|
$
|
104,705
|
|
Pro forma net income
|
|
|
423
|
|
Pro forma net income per share:
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.02
|
|
|
|
|
|
|
The above unaudited pro forma results include amortization of
acquired intangible assets of $2,930 for the year ended
September 30, 2007. In addition, the unaudited pro forma
results have been adjusted to reduce interest income earned by
the Company on the cash paid for each acquisition. The Company
estimated this interest income adjustment using an interest rate
of 2.5% for the year ended September 30, 2007.
|
|
4.
|
Goodwill
and Acquired Intangible Assets
|
The Company tests goodwill for impairment annually and whenever
events or changes in circumstances indicate that the carrying
amount of goodwill may exceed its fair value. The Company
determines fair value using the income approach as well as the
market approach, and applies a weighting to the result of each
approach. The income approach is based upon discounted cash
flows estimated by management for each reporting unit, while the
market approach uses trading and transaction multiples, for
companies considered comparable to Unica, to estimate fair
value. Reporting units are organized by operations with similar
economic characteristics for which discrete financial
information is available and regularly reviewed by management.
Unless changes in events or circumstances indicate that an
impairment test is required, the Company will continue to test
goodwill for impairment on an annual basis. Conditions that
could trigger a more frequent impairment assessment include, but
are not limited to, a significant adverse change in certain
agreements, significant underperformance relative to historical
or projected future operating results, an economic downturn in
customers industries, increased competition, a significant
reduction in the Companys stock price for a sustained
period or a reduction of our market capitalization relative to
net book value.
During the three months ended March 31, 2009, the Company
changed the structure of its reporting units, which resulted in
the Company having two remaining reporting units. Two previously
separate reporting units were combined into one reporting unit.
Given the change in reporting units as well as the decline in
the Companys market capitalization and overall operating
results, the Company performed an interim impairment assessment
of its goodwill at March 31, 2009 related to the three
reporting units previously existing before the structure change.
As part of this assessment, the Company applied a weighting to
the income approach and the market approach of 60% and 40%,
respectively, for two of the reporting units and 90% and 10%,
respectively, for the remaining reporting unit. The weightings
were determined based upon the degree of comparability of
companies and acquisitions in the marketplace. As a result of
the goodwill impairment assessment, during the three months
ended March 31, 2009, the Company recorded a $15,266 charge
relating to the impairment of goodwill. Of the $15,266 goodwill
impairment charge, $5,662 related to goodwill from the
acquisition of MarketingCentral and $9,604 related to goodwill
from the acquisition of Sane Solutions LLC. The Company also
performed a subsequent impairment assessment on the newly
combined reporting unit after the change in structure, which did
not indicate a further impairment. The Company determined that
its other long-lived assets, including definite-lived intangible
assets, were not impaired.
70
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
During fiscal 2009, the Company performed its annual impairment
assessment of goodwill at September 30, 2009, and as a
result of this assessment there was no indication of impairment.
During fiscal 2008, the Company performed its annual impairment
assessment of goodwill at September 30, 2008, and as a
result of this assessment there was no indication of impairment.
Intangible assets acquired in the Companys acquisitions
include goodwill, developed technology and customer contracts
and related customer relationships. All of the Companys
acquired intangible assets, except goodwill, are subject to
amortization over their estimated useful lives. A portion of the
goodwill and acquired intangible assets is recorded in the
accounts of a French subsidiary of the Company and, as such, is
subject to translation at the currency exchange rates in effect
at the balance sheet date.
The following table describes changes to goodwill:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Beginning balance
|
|
$
|
26,182
|
|
|
$
|
26,160
|
|
Additions:
|
|
|
|
|
|
|
|
|
MarketingCentral acquisition
|
|
|
|
|
|
|
(11
|
)
|
Goodwill impairment charge
|
|
|
(15,266
|
)
|
|
|
|
|
Foreign exchange
|
|
|
27
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
10,943
|
|
|
$
|
26,182
|
|
|
|
|
|
|
|
|
|
|
Acquired intangible assets subject to amortization are comprised
of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Useful Lives
|
|
|
As of September 30,
|
|
|
|
In Years
|
|
|
2009
|
|
|
2008
|
|
|
Developed technology
|
|
|
1-8
|
|
|
$
|
6,699
|
|
|
$
|
6,699
|
|
Customer contracts and related customer relationships
|
|
|
3-14
|
|
|
|
7,556
|
|
|
|
7,556
|
|
License agreement
|
|
|
14
|
|
|
|
1,360
|
|
|
|
1,360
|
|
Trade name
|
|
|
1
|
|
|
|
44
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,659
|
|
|
|
15,659
|
|
Less: Accumulated amortization of developed technology
|
|
|
|
|
|
|
(4,931
|
)
|
|
|
(3,935
|
)
|
Customer contracts and related customer relationships
|
|
|
|
|
|
|
(5,821
|
)
|
|
|
(4,640
|
)
|
License agreement
|
|
|
|
|
|
|
(348
|
)
|
|
|
(194
|
)
|
Trade name
|
|
|
|
|
|
|
(44
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated amortization
|
|
|
|
|
|
|
(11,144
|
)
|
|
|
(8,813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired intangible assets, net
|
|
|
|
|
|
$
|
4,515
|
|
|
$
|
6,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The developed technology intangible assets are being amortized
on a straight-line basis over their estimated useful lives of
one to eight years. Amortization of developed technology,
included as a component of cost of product revenue in the
consolidated statements of operations, was $996, $1,323 and
$1,135 for the years ended September 30, 2009, 2008 and
2007, respectively.
71
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
Intangible assets are expected to be amortized over a
weighted-average period of 3.80 years as follows:
|
|
|
|
|
Year ending September 30, 2010
|
|
$
|
1,201
|
|
2011
|
|
|
692
|
|
2012
|
|
|
585
|
|
2013
|
|
|
522
|
|
2014
|
|
|
471
|
|
2015 and thereafter
|
|
|
1,044
|
|
|
|
|
|
|
Total expected amortization
|
|
$
|
4,515
|
|
|
|
|
|
|
|
|
5.
|
Property
and Equipment
|
Property and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
As of September 30,
|
|
|
|
Useful Life
|
|
2009
|
|
|
2008
|
|
|
Software
|
|
2-3 years
|
|
$
|
4,635
|
|
|
$
|
3,214
|
|
Office equipment
|
|
3 years
|
|
|
5,934
|
|
|
|
5,978
|
|
Furniture and fixtures
|
|
5 years
|
|
|
783
|
|
|
|
769
|
|
Leasehold improvements
|
|
Lesser of useful
life or term of lease
|
|
|
1,512
|
|
|
|
1,447
|
|
Construction-in-progress
|
|
|
|
|
471
|
|
|
|
395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,335
|
|
|
|
11,803
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation and amortization
|
|
|
|
|
(8,114
|
)
|
|
|
(7,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,221
|
|
|
$
|
4,781
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment are stated at cost. Leasehold
improvements are depreciated over the shorter of the lease term
or their estimated useful lives. Depreciation and amortization
are computed using the straight-line method based on the
estimated useful lives of the related assets. Depreciation
expense, including amortization of internal-use software, for
the years ended September 30, 2009, 2008 and 2007 was
$2,685, $2,349 and $1,428, respectively. Repairs and maintenance
charges are expensed as incurred.
At September 30, 2009 and 2008, the Company had $364 and
$273, respectively, of restricted cash held in certificates of
deposit as collateral for letters of credit related to the
security deposits on the Companys leased facilities in
Waltham, Massachusetts and Paris, France, as well as for our
payroll credit facility in Australia. Restricted cash is
included within other assets in the consolidated balance sheet.
The restriction on cash expires upon expiration of the leases
for the facilities in Waltham, Massachusetts and Paris, France
in 2010, and for the payroll facility upon termination of the
underlying arrangement.
|
|
7.
|
Commitments
and Contingencies
|
Operating
Leases
The Company conducts its operations in leased office facilities
under various operating leases that expire through fiscal 2012.
Total rent expense under these operating leases was $3,954,
$3,679 and $3,026 for the
72
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
years ended September 30, 2009, 2008 and 2007,
respectively. Future minimum payments under operating leases as
of September 30, 2009 are as follows:
|
|
|
|
|
Year ending September 30,
|
|
|
|
|
2010
|
|
$
|
2,031
|
|
2011
|
|
|
496
|
|
2012
|
|
|
686
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
3,213
|
|
|
|
|
|
|
Obligations related to operating leases denominated in foreign
currencies were translated at exchange rates in effect at
September 30, 2009. The Company does not believe that
changes in exchange rates over the term of the lease will have a
material impact on the lease obligation. In October 2009, the
Company entered into an amendment to our lease in Waltham,
Massachusetts and extended the lease expiration date to April
2015 while reducing the annual lease commitment compared to
current rates. The total amended commitment for the lease in
Waltham, Massachusetts is $7,778 through April 2015, which
amends $1,367 of the lease payments in the table above.
The Company has open vendor purchase obligations in the amount
of $1,841, which are expected to be paid as follows: $1,538 in
2010, $273 in 2011 and $30 in 2012.
Legal
Matters
From time to time and in the ordinary course of business, the
Company may be subject to various claims, charges and
litigation. In some cases, the claimants may seek damages, as
well as other relief, which, if granted, could require
significant expenditures. The Company accrues the estimated
costs of settlement or damages when a loss is deemed probable
and such costs are estimable. The Company accrues for legal
costs associated with a loss contingency when a loss is probable
and such amounts are estimable. Otherwise, these costs are
expensed as incurred. If the estimate of a probable loss or
defense costs is a range and no amount within the range is more
likely, the Company accrues the minimum amount of the range.
Warranties
and Indemnifications
The Companys software is typically warranted to perform in
a manner consistent with the Companys documentation under
normal use and circumstances. The Companys license
agreements generally include a provision by which the Company
agrees to defend its customers against third-party claims of
intellectual property infringement under specified conditions
and to indemnify them against any damages and costs awarded in
connection with such claims. To date, the Company has not
incurred any material costs as a result of such warranties and
indemnities and has not accrued any liabilities related to such
obligations in the accompanying consolidated financial
statements.
Guarantees
The Company evaluates estimated losses for guarantees at the end
of each reporting period. The Company considers such factors as
the degree of probability of an unfavorable outcome and the
ability to make a reasonable estimate of the amount of loss. To
date, the Company has not encountered material costs as a result
of such obligations and has not accrued any liabilities related
to such guarantees in its financial statements.
As permitted under Delaware law, the Companys Certificate
of Incorporation provides that the Company indemnify each of its
officers and directors during his or her lifetime for certain
events or occurrences that happen by reason of the fact that the
officer or director is or was or has agreed to serve as an
officer or director of the Company. The maximum potential amount
of future payments the Company could be required
73
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
to make under these indemnification agreements is unlimited;
however, the Company has a Director and Officer insurance policy
that limits its exposure and would enable the Company to recover
a portion of certain future amounts paid.
The Company enters into standard indemnification agreements in
the ordinary course of business. Pursuant to these agreements,
the Company typically agrees to indemnify, hold harmless, and
reimburse the indemnified party for losses suffered or incurred
by the indemnified party, generally the Companys business
partners or customers, in connection with claims relating to
infringement of a U.S. patent, or any copyright or other
intellectual property. Subject to applicable statutes of
limitation, the term of these indemnification agreements is
generally perpetual from the time of execution of the agreement.
In certain situations the Company has agreed to indemnify its
customers for losses incurred in connection with a breach of
contract. The maximum potential amount of future payments the
Company could be required to make under these indemnification
agreements is unlimited; however, the Company carries insurance
that covers certain third party claims relating to its services
and could limit the Companys exposure.
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Accrued payroll and related
|
|
$
|
6,317
|
|
|
$
|
9,681
|
|
Accrued professional fees
|
|
|
374
|
|
|
|
740
|
|
Acquisition-related accruals
|
|
|
|
|
|
|
27
|
|
Accrued restructuring
|
|
|
1,993
|
|
|
|
|
|
Accrued other
|
|
|
4,030
|
|
|
|
3,890
|
|
State sales tax accruals
|
|
|
366
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,080
|
|
|
$
|
14,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the fourth quarter of fiscal 2006, the Company initiated the
restructuring of certain of its operations in France to realign
its resources in that region (the 2006
Restructuring). As a result of this initiative, the
Company terminated several employees resulting in restructuring
charges for severance and related costs during fiscal 2006 and
2007 and a restructuring credit in fiscal 2008. The cumulative
expense recorded relating to the restructuring in France was
$1,210.
The following is a roll forward of the 2006 Restructuring
accrual for the years ended September 30, 2008 and 2007:
|
|
|
|
|
Restructuring accrual balance at September 30, 2006
|
|
|
255
|
|
Restructuring and other related charges
|
|
|
1,240
|
|
Cash payments and foreign currency translation adjustment
|
|
|
(886
|
)
|
|
|
|
|
|
Restructuring accrual balance at September 30, 2007
|
|
|
609
|
|
Reversal of accrual in connection with final settlement with
employee
|
|
|
(286
|
)
|
Cash payments and foreign currency translation adjustment
|
|
|
(323
|
)
|
|
|
|
|
|
Restructuring accrual balance at September 30, 2008
|
|
$
|
|
|
|
|
|
|
|
74
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
In the first quarter of fiscal 2009, the Company reduced its
workforce by approximately 4% and recorded a restructuring
charge of $711 for one-time termination benefits to employees.
The strategic reduction of workforce was designed to streamline
the Companys organization and improve its corporate
performance. The remaining accrual at September 30, 2009 is
expected to be paid during fiscal 2010.
The following is a rollforward of the accrual related to the
restructuring initiated in the first quarter of fiscal 2009:
|
|
|
|
|
Restructuring accrual balance at September 30, 2008
|
|
$
|
|
|
Provision for severance related costs
|
|
|
711
|
|
Cash payments
|
|
|
(583
|
)
|
|
|
|
|
|
Restructuring accrual balance at September 30, 2009
|
|
$
|
128
|
|
|
|
|
|
|
In the fourth quarter of fiscal 2009, the Company approved a
plan to implement a strategic reduction of its workforce
designed to streamline its organization and improve its
corporate operating performance. The Company reduced its
workforce by approximately 13% and recorded a restructuring
charge of $2,289 for one-time termination benefits to employees.
The remaining accrual at September 30, 2009 is expected to
be paid during fiscal 2010.
The following is a rollforward of the accrual related to the
restructuring initiated in the fourth quarter of fiscal 2009:
|
|
|
|
|
Restructuring accrual balance at September 30, 2008
|
|
$
|
|
|
Provision for severance related costs
|
|
|
2,289
|
|
Cash payments
|
|
|
(424
|
)
|
|
|
|
|
|
Restructuring accrual balance at September 30, 2009
|
|
$
|
1,865
|
|
|
|
|
|
|
The following is a summary of the Companys loss before
provision for income taxes by geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
U.S.
|
|
$
|
(23,875
|
)
|
|
$
|
(5,124
|
)
|
|
$
|
(3,183
|
)
|
Non-U.S.
|
|
|
592
|
|
|
|
2,796
|
|
|
|
2,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(23,283
|
)
|
|
$
|
(2,328
|
)
|
|
$
|
(305
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
The following is a summary of the Companys income tax
provision (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
23
|
|
|
$
|
(98
|
)
|
|
$
|
(330
|
)
|
State
|
|
|
13
|
|
|
|
30
|
|
|
|
202
|
|
Foreign
|
|
|
941
|
|
|
|
1,377
|
|
|
|
479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current provision
|
|
|
977
|
|
|
|
1,309
|
|
|
|
351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(1,560
|
)
|
|
|
5,683
|
|
|
|
(1,158
|
)
|
State
|
|
|
(138
|
)
|
|
|
477
|
|
|
|
(31
|
)
|
Foreign
|
|
|
(788
|
)
|
|
|
(58
|
)
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred provision (benefit)
|
|
|
(2,486
|
)
|
|
|
6,102
|
|
|
|
(1,152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,509
|
)
|
|
$
|
7,411
|
|
|
$
|
(801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal reconciling items from income tax computed at the
U.S. statutory tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Statutory tax rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
Foreign taxes, net
|
|
|
(0.4
|
)
|
|
|
9.7
|
|
|
|
(4.7
|
)
|
State taxes, net
|
|
|
(3.1
|
)
|
|
|
(4.5
|
)
|
|
|
54.1
|
|
Share-based compensation
|
|
|
1.0
|
|
|
|
14.2
|
|
|
|
48.5
|
|
Meals and entertainment
|
|
|
0.4
|
|
|
|
4.4
|
|
|
|
34.3
|
|
Research and development credit
|
|
|
(1.5
|
)
|
|
|
(8.8
|
)
|
|
|
(240.3
|
)
|
Tax benefit associated with goodwill impairment charge
|
|
|
(5.4
|
)
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
36.4
|
|
|
|
339.8
|
|
|
|
(115.6
|
)
|
Other
|
|
|
0.1
|
|
|
|
(2.5
|
)
|
|
|
(4.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
(6.5
|
)%
|
|
|
318.3
|
%
|
|
|
(262.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
The principal components of the Companys deferred tax
assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
September 30, 2009
|
|
|
September 30, 2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
$
|
3,350
|
|
|
$
|
2,678
|
|
Amortization of identifiable intangible assets
|
|
|
4,020
|
|
|
|
3,548
|
|
Tax deductible goodwill
|
|
|
3,351
|
|
|
|
|
|
Depreciation
|
|
|
368
|
|
|
|
364
|
|
Accrued expenses and other
|
|
|
598
|
|
|
|
591
|
|
Net operating loss carryforwards
|
|
|
2,537
|
|
|
|
592
|
|
U.S. foreign tax credit carryforwards
|
|
|
315
|
|
|
|
314
|
|
Research and development tax credit carryforwards
|
|
|
1,514
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,053
|
|
|
|
8,869
|
|
Valuation allowance
|
|
|
(15,159
|
)
|
|
|
(8,701
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
894
|
|
|
|
168
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Amortization of goodwill
|
|
|
(151
|
)
|
|
|
(1,368
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(151
|
)
|
|
|
(1,368
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
743
|
|
|
$
|
(1,200
|
)
|
|
|
|
|
|
|
|
|
|
The accounting guidance for income taxes requires that deferred
tax assets be reduced by a valuation allowance if, based on the
weight of available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized. The
valuation allowance must be sufficient to reduce the deferred
tax assets to the amount that is more likely than not to be
realized. As of September 30, 2009, the Company continued
to record a full valuation allowance against all of its
U.S. federal and state deferred tax assets.
During the three months ended September 30, 2009, the
Company reversed all of the valuation allowance that was
previously established against the deferred tax assets of its
wholly owned subsidiary in France, which resulted in an income
tax benefit of $248. The Company had historically provided a
valuation allowance against all of these deferred tax assets due
to historical losses and the uncertainty of future taxable
income. However, during the fourth quarter of fiscal 2009, the
Company restructured the operations of its subsidiary in France
to a cost plus model, and the Company believes this will result
in future taxable income from its operations in France. In
addition, net operating losses generated in France have no
expiration date and can be carried forward indefinitely. As a
result of this positive evidence, the Company believes that it
is more likely than not that all of the deferred tax assets of
its subsidiary in France will now be realized and that the
valuation allowance is no longer required.
For tax purposes, $23,388 of the Companys goodwill is
amortizable over 15 years. For financial statement purposes,
goodwill is not amortized but is assessed annually for
impairment. The tax amortization of goodwill results in a
taxable temporary difference, which will not reverse until some
indefinite future period when the goodwill is either impaired or
written-off for financial statement purposes. Such taxable
temporary differences generally cannot be used to support the
realization of deferred tax assets relating to reversing
temporary differences.
77
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
The Company has historically recorded a deferred tax liability
for tax deductible goodwill that is not amortized for financial
statement purposes, but is assessed for impairment annually and
whenever events or changes in circumstances indicate that the
carrying amount of goodwill may exceed its fair value. During
fiscal 2009, the Company recorded a $15,266 goodwill impairment
charge, resulting in the recording of a deferred tax asset of
$5,631 for future deductible temporary differences related to
goodwill. Because of the uncertainty of realizing the future
benefit of this deferred tax asset, the Company recorded a full
valuation allowance against the deferred tax asset created by
the goodwill impairment charge. Concurrently, the Company
recorded a $1,264 tax benefit, which resulted from the reversal
of the existing deferred tax liability that was previously
recorded for temporary differences related to the goodwill
impaired.
The Companys subsidiary in Pune, India currently benefits
from a full tax exemption under the Software Technology Parks of
India program. The exemption began upon commencement of business
operations in August 2005 and was scheduled to expire on
March 31, 2010. The tax holiday period has since been
extended by one year and is now scheduled to expire on
March 31, 2011.
The Companys wholly owned subsidiary in France is
currently under audit by the tax authorities in France for the
years ended September 30, 2005 through September 30,
2007.
The Emergency Economic Stabilization Act (the Act)
was enacted in the U.S. in October, 2008. As part of the
Act, the provisions of the U.S. research and development
tax credit were extended to include qualified costs incurred
after December 31, 2007. The Company recorded additional
federal research and development credits during the quarter
ended December 31, 2008 to reflect the change in tax law
and the extension of the federal research and development
credit. A full valuation allowance has been provided against
these additional credits and no tax benefit has been recorded
for them.
As of September 30, 2009, the Company has U.S. federal
and state net operating loss carryforwards of $5,500 and $9,664
respectively. These net operating loss carryforwards will expire
at various dates through 2030. The Company has
non-U.S. net
operating loss carryforwards of $1,351 as of September 30,
2009 that do not expire. The Company also has federal and state
research and development tax credit carryforwards of $779 and
$733, respectively. These tax credits will expire at various
dates through 2030. The Company also has $314 of
U.S. foreign tax credit carryforwards and these credits
will expire in 2015.
The Company permanently reinvests the undistributed earnings of
its foreign subsidiaries. As of September 30, 2009, the
Company had approximately $5,357 of undistributed foreign
earnings. It is not practicable to compute the estimated
deferred tax liability on these earnings.
The Company adopted the provisions of a new accounting
pronouncement related to the accounting for uncertainty in
income taxes, on October 1, 2007. The Company did not
record a cumulative effect adjustment to retained earnings as a
result of the implementation of this accounting pronouncement. A
reconciliation of the beginning and ending amount of the gross
unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
Unrecognized
|
|
|
|
Tax Benefits
|
|
|
Balance at October 1, 2007
|
|
$
|
991
|
|
Decrease to prior year tax positions
|
|
|
(313
|
)
|
Increase to current year tax positions
|
|
|
222
|
|
Decrease related to settlements with taxing authorities
|
|
|
(234
|
)
|
|
|
|
|
|
Balance at September 30, 2008
|
|
$
|
666
|
|
|
|
|
|
|
78
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
|
|
|
|
|
|
|
Unrecognized
|
|
|
|
Tax Benefits
|
|
|
Balance at October 1, 2008
|
|
$
|
666
|
|
Increase to prior year tax positions
|
|
|
13
|
|
Increase to current year tax positions
|
|
|
231
|
|
Decrease related to lapse of statute of limitations
|
|
|
(94
|
)
|
|
|
|
|
|
Balance at September 30, 2009
|
|
$
|
816
|
|
|
|
|
|
|
Included in the unrecognized tax benefits at September 30,
2009 is $557 of tax benefits that, if recognized, would affect
the Companys annual effective tax rate. Of this balance,
$275 relates to deferred tax assets for which a full valuation
allowance would be recorded, offsetting any tax benefits that
would be realized.
The Company accrues potential interest and penalties relating to
unrecognized tax benefits. The Company records interest and
penalties for tax deficiencies as income tax expense. The amount
of accrued interest and penalties relating to unrecognized tax
benefits was $56 and $0, respectively, as of September 30,
2009 and $43 and $0, respectively, as of September 30,
2008. The Company recorded a net increase to accrued interest of
$13 and a net decrease to accrued interest of $26 during the
years ended September 30, 2009 and September 30, 2008,
respectively.
Due to the expiration of certain statutes of limitation, it is
reasonably possible that the Companys total liability for
unrecognized tax benefits may decrease within the next
12 months by a range of zero to $132.
The Company files federal and state income tax returns in the
United States and also files tax returns in Australia, France,
India, Singapore, and the United Kingdom. These tax returns are
generally open to examination by the relevant tax authorities
for three to six years from the date they are filed. The tax
filings related to the Companys operations in the United
States, France and India are currently open to examination for
fiscal years 2006 through 2008. The tax filings for the
Companys operations in the United Kingdom and Singapore
are currently open to examination for fiscal years 2003 through
2008.
Common
Stock
Each share of common stock entitles the holder to one vote on
all matters submitted to a vote of the Companys common
stockholders. Common stockholders are entitled to receive
dividends, if any, as declared by the Board of Directors. At
September 30, 2009, the Company had reserved
6,285,000 shares of common stock for the future exercise of
stock options and vesting of restricted stock units authorized
under its stock incentive plan as well as for stock purchases
through its employee stock purchase plan.
The Company does not have a practice of repurchasing shares to
satisfy share-based payment arrangements and does not expect to
initiate such a repurchase during fiscal 2009.
Treasury
Stock
On November 30, 2008, the Board of Directors approved a
stock repurchase program which allows the Company to repurchase
up to $5 million worth of the Companys common stock
on the open market or in privately negotiated transactions. As
of September 30, 2009, there were 415,766 shares held
as treasury stock.
79
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
Undesignated
Preferred Stock
The Board of Directors and stockholders have authorized
10,000,000 shares of undesignated preferred stock, par
value $0.01 per share. As of September 30, 2009 and 2008,
there was no preferred stock outstanding.
Accumulated
Other Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity
of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. Other
than reported net income (loss), the Companys
comprehensive income (loss) includes foreign currency
translation adjustments and unrealized gains and losses on
investments.
The following table presents the calculation of comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Net loss
|
|
$
|
(21,774
|
)
|
|
$
|
(9,739
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on short-term investments, net
of tax
|
|
|
107
|
|
|
|
(27
|
)
|
Foreign currency translation adjustments
|
|
|
(37
|
)
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
$
|
(21,704
|
)
|
|
$
|
(9,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
Equity
Compensation Plans
|
Stock
Options
In March 2005, the Board of Directors and stockholders approved
the 2005 Stock Incentive Plan (the 2005 Plan). The 2005 Plan
provides that the options shall be exercisable over a period not
to exceed 10 years. The Board of Directors is responsible for
the administration of the 2005 Plan and determines the term of
each option, the option exercise price, the number of shares for
which each option is exercisable and the vesting period. Options
generally vest over a period of four years. The Company has
reserved for issuance an aggregate of 1,500,000 shares of
common stock under the 2005 Plan. In addition, a total of
367,000 shares then available under the 2003 stock option
plan (the 2003 plan) became available for grant under the 2005
plan. An additional 5,009,000 shares were reserved under
the 2005 plan through October 1, 2009, in accordance with
the provisions of the Plan, which require an annual increase of
the shares reserved for issuance under the Plan equal to the
lesser of (a) 5,000,000 shares of common stock,
(b) 5% of the outstanding shares of common stock as of the
opening of business on such date or (c) an amount
determined by the Board of Directors.
80
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
The following is a summary of the stock option activity,
including related disclosures, during the year ended
September 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Term
|
|
|
Value(1)
|
|
|
Outstanding at September 30, 2008
|
|
|
2,452,000
|
|
|
$
|
8.85
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,674,000
|
|
|
|
4.61
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(110,000
|
)
|
|
|
4.55
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1,553,000
|
)
|
|
|
10.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2009
|
|
|
2,463,000
|
|
|
$
|
5.40
|
|
|
|
4.37
|
|
|
$
|
6,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2009
|
|
|
1,146,000
|
|
|
$
|
5.83
|
|
|
|
3.49
|
|
|
$
|
2,999
|
|
Options at September 30, 2009 vested and expected to vest
in the future
|
|
|
2,281,000
|
|
|
$
|
5.44
|
|
|
|
4.31
|
|
|
$
|
6,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The aggregate intrinsic value was calculated based on the
positive difference between the closing price of the
Companys common stock on September 30, 2009 of $7.62
per share and the exercise price of the underlying options. |
The total intrinsic value of options exercised during the years
ended September 30, 2009, 2008 and 2007 was $221, $1,952
and $2,958, respectively.
Restricted
Stock Units
The Company issues restricted stock unit awards (RSUs) as an
additional form of equity compensation to its employees and
officers, pursuant to the Companys stockholder-approved
2005 Plan. RSUs are restricted stock awards that entitle the
grantee to an issuance of stock at a nominal cost. The fair
value of these RSUs was calculated based upon the Companys
closing stock price on the date of grant, and the related
share-based compensation expense is being recorded over the
vesting period. RSUs generally vest over a four-year period and
unvested RSUs are forfeited and canceled as of the date that
employment terminates. RSUs are settled in shares of the
Companys common stock upon vesting.
The following is a summary of the status of the Companys
restricted stock units as of September 30, 2009 and the
activity during the year ended September 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Non-vested awards at September 30, 2008
|
|
|
998,000
|
|
|
$
|
10.29
|
|
Granted
|
|
|
922,000
|
|
|
|
4.35
|
|
Vested
|
|
|
(331,000
|
)
|
|
|
10.23
|
|
Forfeited
|
|
|
(321,000
|
)
|
|
|
7.52
|
|
|
|
|
|
|
|
|
|
|
Non-vested awards at September 30, 2009
|
|
|
1,268,000
|
|
|
$
|
6.68
|
|
|
|
|
|
|
|
|
|
|
The Company recorded $3,722, $3,982 and $2,937 of shared-based
compensation expense related to RSUs for the year ended
September 30, 2009, 2008 and 2007.
81
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
Employee
Stock Purchase Plan
In March 2005, the Board of Directors and stockholders approved
the 2005 Employee Stock Purchase Plan (ESPP), which is designed
to be qualified under Section 423 of the Internal Revenue Code.
The ESPP is available to all eligible employees, who, through
payroll deductions, will be able to individually purchase shares
of the Companys common stock semi-annually at a price
equal to 85% of the lower of the fair market value of the
Companys common stock at the beginning or end of the
purchase period. The Company has reserved for issuance an
aggregate of 1,000,000 shares of common stock for the ESPP.
At September 30, 2009, 625,000 shares were reserved
for future issuance under the ESPP.
Accounting pronouncements, related to reporting and disclosures
of operating segments of a business, require selected
information to be presented in interim financial reports issued
to stockholders. Operating segments are identified as components
of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating
decision-maker, or decision-making group, in making decisions on
how to allocate resources and assess performance. The Company
views and manages its business as one reporting segment.
Geographic
Data
Total assets located outside of the U.S. were 17% of total
assets as of September 30, 2009 and 2008. Long-lived assets
located outside of the U.S. were 16% and 14% of total
long-lived assets at September 30, 2009 and 2008,
respectively, or $1,096 and $1,243. Revenue for the years ended
September 30, 2009, 2008 and 2007 from customers located
outside the United States was 33%, 40% and 30%, respectively, of
total revenue.
In the following table, revenue is determined based on the
locations of customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
67,524
|
|
|
$
|
73,040
|
|
|
$
|
71,536
|
|
All other
|
|
|
33,094
|
|
|
|
48,091
|
|
|
|
30,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100,618
|
|
|
$
|
121,131
|
|
|
$
|
102,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other than the United States, no individual country represented
greater than 10% of total revenues in any year.
|
|
14.
|
Quarterly
Financial Data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Year Ended September 30, 2009
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Total revenue
|
|
$
|
26,094
|
|
|
$
|
23,256
|
|
|
$
|
26,860
|
|
|
$
|
24,408
|
|
Gross profit
|
|
|
19,224
|
|
|
|
17,231
|
|
|
|
19,802
|
|
|
|
18,368
|
|
Net loss
|
|
|
(4,098
|
)
|
|
|
(16,131
|
)
|
|
|
(292
|
)
|
|
|
(1,253
|
)
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.20
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.20
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
UNICA
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Year Ended September 30, 2008
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Total revenue
|
|
$
|
28,464
|
|
|
$
|
30,787
|
|
|
$
|
33,290
|
|
|
$
|
28,590
|
|
Gross profit
|
|
|
21,259
|
|
|
|
22,670
|
|
|
|
24,748
|
|
|
|
21,013
|
|
Net income (loss)
|
|
|
(424
|
)
|
|
|
(277
|
)
|
|
|
411
|
|
|
|
(9,449
|
)
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On October 1, 2007 the Company adopted an accounting
pronouncement related to the accounting for uncertainty in
income taxes, which prescribes a minimum recognition
threshold a tax position is required to meet before being
recognized in the financial statements. This accounting
pronouncement also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition. There was no
cumulative effect upon adoption of this accounting pronouncement.
During the three months ended March 31, 2009, Company
performed an interim impairment assessment of its goodwill at
March 31, 2009, and recorded a $15,266 charge relating to
the impairment of goodwill.
|
|
15.
|
Employee
Benefit Plans
|
On July 1, 2000, the Company adopted the Unica Corporation
401(k) Savings Plan (the 401(k) Plan). Under the 401(k) Plan,
employees may elect to reduce their current compensation by an
amount no greater than the statutorily prescribed annual limit
and may have that amount contributed to the 401(k) Plan. The
Company may make matching or additional contributions to the
401(k) Plan in amounts to be determined by management. The
Company contributed $915, $485 and $477 to the 401(k) Plan for
the years ended September 30, 2009, 2008 and 2007,
respectively.
|
|
16.
|
Allowance
for Doubtful Accounts
|
The Company offsets gross trade accounts receivable with an
allowance for doubtful accounts. The allowance for doubtful
accounts is the Companys best estimate of the amount of
probable credit losses in the Companys existing accounts
receivable. The Company reviews its allowance for doubtful
accounts on a monthly basis and all past due balances are
reviewed individually for collectibility. Account balances are
written off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered
remote. Provisions for allowance for doubtful accounts are
recorded in general and administrative expenses.
Below is a summary of the changes in the Companys
allowance for doubtful accounts for the years ended
September 30, 2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning of
|
|
|
|
|
|
|
|
|
End of
|
|
|
|
Period
|
|
|
Provision
|
|
|
Write-offs
|
|
|
Period
|
|
|
Year ended September 30, 2009
|
|
|
87
|
|
|
|
324
|
|
|
|
(50
|
)
|
|
|
361
|
|
Year ended September 30, 2008
|
|
|
77
|
|
|
|
117
|
|
|
|
(107
|
)
|
|
|
87
|
|
Year ended September 30, 2007
|
|
|
141
|
|
|
|
55
|
|
|
|
(119
|
)
|
|
|
77
|
|
83
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
An evaluation was performed by our Chief Executive Officer and
Chief Financial Officer of the effectiveness of the design and
operation of our disclosure controls and procedures,
as defined in
Rules 13a-15(e)
and
15d-15(e) of
the Securities Exchange Act of 1934, as amended, or Exchange
Act, as controls and other procedures of a company that are
designed to ensure that information required to be disclosed by
a company in the reports it files under the Exchange Act is
recorded, processed, summarized and reported within required
time periods. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure
that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow
timely decision regarding required disclosure. As a result of
this evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures
were effective as of September 30, 2009.
Managements
Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal
control over financial reporting is defined in
Rules 13a-15(f)
and
15d-15(f)
promulgated under the Exchange Act as a process designed by, or
under the supervision of, our Chief Executive Officer and Chief
Financial Officer and effected by our board of directors,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
|
|
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of the Company;
|
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made
only in accordance with authorizations of management and
directors of the Company; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on the
financial statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, assessed the effectiveness
of our internal control over financial reporting as of
September 30, 2009. In making this assessment, Our
management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control Integrated Framework.
Management concluded that, as of September 30, 2009, our
internal control over financial reporting was effective based on
criteria in Internal Control Integrated Framework
issued by the COSO.
The effectiveness of our internal control over financial
reporting as of September 30, 2009 has been audited by
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which appears on
page 53.
84
Remediation of Material Weakness in Internal Control over
Financial Reporting Related to the Accounting for Deferred
Maintenance and Subscription Revenue
As previously disclosed in the Companys Annual Report on
Form 10-K
for the year ended September 30, 2008, management concluded
that as of September 30, 2008 the Company did not maintain
effective internal control procedures to ensure the completeness
and accuracy of deferred maintenance and subscription revenue,
including the determination and reporting of deferred
maintenance and subscription revenue balances as well as the
recognition of maintenance and subscription revenue.
Specifically, we did not:
|
|
|
|
|
Properly perform an effective analysis of the maintenance and
subscription deferred revenue balances to ensure that such
balances were properly stated given the contractual terms of our
customer arrangements and the related period of performance;
|
|
|
|
Have controls and procedures in place to ensure that the
relevant terms of customer contracts were input completely and
accurately into our accounting system, both when a customer
contract was initially executed and when a customer contract was
amended;
|
|
|
|
Have processes in place to ensure that control procedures
relating to deferred maintenance and subscription revenue were
communicated to newly hired personnel responsible for performing
such control procedures; and
|
|
|
|
Have controls and procedures in place to ensure that revenue was
recognized in the appropriate period for customers where revenue
was only to be recognized when collection occurred.
|
Management has concluded that, as of September 30, 2009,
the Company has remediated the previously reported material
weakness in internal control over financial reporting relating
to the accounting for deferred maintenance and subscription
revenue. Prior to that date, the Company had taken the following
remedial actions:
|
|
|
|
|
The Company revised its quarterly review of deferred maintenance
and subscription revenue to include control procedures to ensure
that ending balances are properly stated and that revenue
recognized for a reporting period is complete and accurate.
Standard reports have been developed to facilitate the review of
maintenance and subscription revenue recognized and the
reconciliation of deferred maintenance and subscription revenue
balances;
|
|
|
|
Management has provided training to its accounting personnel on
the Companys accounting system and processes, and
completed the migration of the accounting for all new
transactions to a common process. The Company has instituted
additional procedures and reviews to ensure that the terms of
customer contracts are entered and maintained in the accounting
system completely and accurately;
|
|
|
|
The Company documented the procedures for key order entry tasks
as well as the processes related to the review and
reconciliation of deferred maintenance and subscription revenue
balances to help ensure that transactions are processed
correctly. Such documentation will also be useful in training
new personnel;
|
|
|
|
The Company revised its controls and procedures to ensure that
revenue was recognized in the appropriate period for customers
where revenue was to be recognized when collection occurred.
|
During the fourth quarter of fiscal 2009, the Company completed
testing to validate compliance with the newly implemented
policies, procedures and controls. The Company has undertaken
this testing in order to demonstrate operating effectiveness
over a period of time that is sufficient to support its
conclusion. The Company has reviewed the results from this
testing and concluded that the material weakness in its internal
control over financial reporting relating to the accounting for
deferred maintenance and subscription revenue was remediated as
of September 30, 2009. The Company will continue to monitor
the effectiveness of these procedures on a quarterly basis, and
will continue to make any enhancements or changes to control
procedures that management deems appropriate.
85
Changes
in Internal Control over Financial Reporting
As described above in the paragraph titled Remediation of
Material Weakness in Internal Control Over Financial Reporting
Related To the Accounting for Deferred Maintenance and
Subscription Revenue, there were changes in the
Companys internal control over financial reporting during
the quarter ended September 30, 2009 that have materially
affected, or are reasonably likely to materially affect, its
internal control over financial reporting. As a result of these
changes, as stated above, the Company has remediated the
previously reported material weakness relating to accounting for
deferred maintenance and subscription revenue.
|
|
Item 9B.
|
Other
Information
|
None.
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The information required by this item is set forth under the
captions Proposal 1: Election of Class I
Directors, Information About Continuing
Directors, Information About Executive
Officers, Code of Business Conduct and Ethics
and Board Committees Audit Committee in
our definitive proxy statement for the 2010 Annual Meeting of
Stockholders, and is incorporated herein by reference.
We are also required under Item 405 of
Regulation S-K
to provide information concerning delinquent filers of reports
under Section 16 of the Securities Exchange Act of 1934, as
amended. This information is listed under the caption
Section 16(a) Beneficial Ownership Reporting
Compliance in our definitive proxy statement for the 2010
Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission no later than 120 days after the
end of our fiscal year. This information is incorporated herein
by reference. The information regarding executive officers is
listed under the section captioned Information About
Executive Officers in our definitive proxy statement for
the 2010 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission no later than 120 days
after the end of our fiscal year. This information is
incorporated herein by reference.
|
|
Item 11.
|
Executive
Compensation
|
The information required by this item is set forth under the
captions Director Compensation, Executive
Officer Compensation, Compensation Committee
Report, Compensation Discussion and Analysis
and Compensation Committee Interlocks and Insider
Participation in our definitive proxy statement for the
2010 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission no later than 120 days
after the end of our fiscal year. This information is
incorporated herein by reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this item is set forth under the
captions Stock Owned by Directors, Executive Officers and
Greater-Than-5% Stockholders and Securities
Authorized for Issuance Under Equity Compensation Plans in
our definitive proxy statement for the 2010 Annual Meeting of
Stockholders to be filed with the Securities and Exchange
Commission no later than 120 days after the end of our
fiscal year. This information is incorporated herein by
reference.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by this item is set forth under the
captions Certain Relationships and Related
Transactions and Information About Corporate
Governance in our definitive proxy statement for the 2010
Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission no later than 120 days after the
end of our fiscal year. This information is incorporated herein
by reference.
86
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this item is set forth under the
caption Independent Registered Public Accountants in
our definitive proxy statement for the 2010 Annual Meeting of
Stockholders to be filed with the Securities and Exchange
Commission no later than 120 days after the end of our
fiscal year. This information is incorporated herein by
reference.
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
1. Financial Statements are filed as part of this Annual
Report on
Form 10-K.
2. The following consolidated financial statements are
included in Item 8:
|
|
|
|
|
Consolidated Balance Sheets as of September 30, 2009 and
2008
|
|
|
|
Consolidated Statements of Operations for the years ended
September 30, 2009, 2008 and 2007
|
|
|
|
Consolidated Statements of Redeemable Preferred Stock,
Stockholders Equity and Comprehensive Income for the years
ended September 30, 2009, 2008 and 2007
|
|
|
|
Consolidated Statements of Cash Flows for the years ended
September 30, 2009, 2008 and 2007
|
(b) Exhibits
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation(1)
|
|
3
|
.2
|
|
Amended and Restated By-laws(1)
|
|
4
|
.1
|
|
Specimen Certificate for shares of common stock(1)
|
|
4
|
.2
|
|
Registration Rights Agreement, dated as of November 24,
1999, by and among the Registrant and the parties named therein,
as amended(1)
|
|
10
|
.1*
|
|
Amended and Restated 1993 Stock Option Plan(1)
|
|
10
|
.2*
|
|
2003 Stock Option Plan, as amended(1)
|
|
10
|
.3*
|
|
2005 Stock Incentive Plan, as amended(4)
|
|
10
|
.4*
|
|
2005 Employee Stock Purchase Plan, as amended(10)
|
|
10
|
.5*
|
|
Standard form of Stock Option Agreement entered into with
executive officers pursuant to the 1993 Stock Option Plan(1)
|
|
10
|
.6*
|
|
Standard form of Advisers Stock Option Agreement entered
into with directors pursuant to the 1993 Stock Option Plan(1)
|
|
10
|
.7*
|
|
Standard form of Stock Option Agreement entered into with
executive officers pursuant to the 2003 Stock Option Plan(1)
|
|
10
|
.8*
|
|
Standard form of Advisers Stock Option Agreement entered
into with directors pursuant to the 2003 Stock Option Plan(1)
|
|
10
|
.9*
|
|
Standard form of Incentive Stock Option Agreement entered into
with executive officers pursuant to the 2005 Stock Incentive
Plan(1)
|
|
10
|
.10*
|
|
Standard form of Non-qualified Stock Option Agreement entered
into with directors pursuant to the 2005 Stock Incentive Plan(1)
|
|
10
|
.11*
|
|
Standard form of Restricted Stock Agreement granted under 2005
Stock Incentive Plan(2)
|
|
10
|
.12*
|
|
Standard form of Restricted Stock Unit Agreement granted under
2005 Stock Incentive Plan(3)
|
|
10
|
.13
|
|
Lease, dated as of December 20, 2002, by and between the
Registrant and Mortimer B. Zuckerman and Edward H. Linde,
Trustees of Tracer Lane Trust II, as amended(1)
|
|
10
|
.14*
|
|
Form of Indemnification Agreement entered into by and between
the Registrant and each of its executive officers and
directors(1)
|
87
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.15*
|
|
Fiscal 2009 Executive Incentive Plan(9)
|
|
10
|
.16
|
|
Letter Agreement between the Registrant and Richard Hale, dated
January 8, 2007(6)
|
|
10
|
.17
|
|
Agreement and Plan of Merger, dated July 9, 2007, by and
among the Registrant, MRB Acquisition Corp. and MarketingCentral
L.L.C.(8)
|
|
10
|
.18
|
|
Form of Executive Retention Agreement(11)
|
|
10
|
.19
|
|
Form of Performance Based Nonstatutory Stock Option Agreement
Granted Under 2005 Stock Incentive Plan(12)
|
|
10
|
.20
|
|
Transition Agreement dated April 8, 2009 between Unica
Corporation and Eric Schnadig(13)
|
|
14
|
.1
|
|
Code of Business Conduct and Ethics(1)
|
|
21
|
.1#
|
|
List of Subsidiaries
|
|
23
|
.1#
|
|
Consent of PricewaterhouseCoopers LLP
|
|
31
|
.1#
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31
|
.2#
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)
of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.1#
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
# |
|
Filed herewith |
|
* |
|
Management contract or compensatory plan or arrangement |
|
(1) |
|
Incorporated by reference to the exhibits to the
Registrants registration statement on
Form S-1
(File
No. 333-120615) |
|
(2) |
|
Incorporated by reference to the exhibits to the
Registrants annual report on
Form 10-K
filed with the SEC on December 19, 2005 (File
No. 000-51461) |
|
(3) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on February 14, 2006 (File
No. 000-51461) |
|
(4) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on May 15, 2006 (File
No. 000-51461) |
|
(5) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on August 14, 2006 (File
No. 000-51461) |
|
(6) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on February 9, 2007 (File
No. 000-51461) |
|
(7) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with the SEC on June 29, 2007 (File
No. 000-51461) |
|
(8) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with SEC on July 13, 2007 (File
No. 000-51461) |
|
(9) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with SEC on February 11, 2008 (File
No. 000-51461) |
|
(10) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with SEC on May 12, 2008 (File
No. 000-51461) |
|
(11) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with the SEC on December 17, 2008 (File
No. 000-51461) |
|
(12) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on February 2, 2009 (File
No. 000-51461) |
|
(13) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with the SEC on April 8, 2009 (File
No. 000-51461) |
88
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation(1)
|
|
3
|
.2
|
|
Amended and Restated By-laws(1)
|
|
4
|
.1
|
|
Specimen Certificate for shares of common stock(1)
|
|
4
|
.2
|
|
Registration Rights Agreement, dated as of November 24,
1999, by and among the Registrant and the parties named therein,
as amended(1)
|
|
10
|
.1*
|
|
Amended and Restated 1993 Stock Option Plan(1)
|
|
10
|
.2*
|
|
2003 Stock Option Plan, as amended(1)
|
|
10
|
.3*
|
|
2005 Stock Incentive Plan, as amended(4)
|
|
10
|
.4*
|
|
2005 Employee Stock Purchase Plan, as amended(10)
|
|
10
|
.5*
|
|
Standard form of Stock Option Agreement entered into with
executive officers pursuant to the 1993 Stock Option Plan(1)
|
|
10
|
.6*
|
|
Standard form of Advisers Stock Option Agreement entered
into with directors pursuant to the 1993 Stock Option Plan(1)
|
|
10
|
.7*
|
|
Standard form of Stock Option Agreement entered into with
executive officers pursuant to the 2003 Stock Option Plan(1)
|
|
10
|
.8*
|
|
Standard form of Advisers Stock Option Agreement entered
into with directors pursuant to the 2003 Stock Option Plan(1)
|
|
10
|
.9*
|
|
Standard form of Incentive Stock Option Agreement entered into
with executive officers pursuant to the 2005 Stock Incentive
Plan(1)
|
|
10
|
.10*
|
|
Standard form of Non-qualified Stock Option Agreement entered
into with directors pursuant to the 2005 Stock Incentive Plan(1)
|
|
10
|
.11*
|
|
Standard form of Restricted Stock Agreement granted under 2005
Stock Incentive Plan(2)
|
|
10
|
.12*
|
|
Standard form of Restricted Stock Unit Agreement granted under
2005 Stock Incentive Plan(3)
|
|
10
|
.13
|
|
Lease, dated as of December 20, 2002, by and between the
Registrant and Mortimer B. Zuckerman and Edward H. Linde,
Trustees of Tracer Lane Trust II, as amended(1)
|
|
10
|
.14
|
|
Form of Indemnification Agreement entered into by and between
the Registrant and each of its executive officers and
directors(1)
|
|
10
|
.15*
|
|
Fiscal 2009 Executive Incentive Plan(9)
|
|
10
|
.16
|
|
Letter Agreement between the Registrant and Richard Hale, dated
January 8, 2007(6)
|
|
10
|
.17
|
|
Agreement and Plan of Merger, dated July 9, 2007, by and
among the Registrant, MRB Acquisition Corp. and MarketingCentral
L.L.C.(8)
|
|
10
|
.18
|
|
Form of Executive Retention Agreement(11)
|
|
10
|
.19
|
|
Form of Performance Based Nonstatutory Stock Option Agreement
Granted Under 2005 Stock Incentive Plan(12)
|
|
10
|
.20
|
|
Transition Agreement dated April 8, 2009 between Unica
Corporation and Eric Schnadig(13)
|
|
14
|
.1
|
|
Code of Business Conduct and Ethics(1)
|
|
21
|
.1#
|
|
List of Subsidiaries
|
|
23
|
.1#
|
|
Consent of PricewaterhouseCoopers LLP
|
|
31
|
.1#
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31
|
.2#
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)
of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.1#
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
# |
|
Filed herewith |
|
* |
|
Management contract or compensatory plan or arrangement |
|
(1) |
|
Incorporated by reference to the exhibits to the
Registrants registration statement on
Form S-1
(File
No. 333-120615) |
|
|
|
(2) |
|
Incorporated by reference to the exhibits to the
Registrants annual report on
Form 10-K
filed with the SEC on December 19, 2005 (File
No. 000-51461) |
|
(3) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on February 14, 2006 (File
No. 000-51461) |
|
|
|
|
|
(4) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on May 15, 2006 (File
No. 000-51461) |
|
|
|
|
|
(5) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on August 14, 2006 (File
No. 000-51461) |
|
|
|
|
|
(6) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on February 9, 2007 (File
No. 000-51461) |
|
(7) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with the SEC on June 29, 2007 (File
No. 000-51461) |
|
(8) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with the SEC on July 13, 2007 (File
No. 000-51461) |
|
(9) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with the SEC on February 11, 2008 (File
No. 000-51461) |
|
(10) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on May 12, 2008 (File
No. 000-51461) |
|
(11) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with the SEC on December 17, 2008 (File
No. 000-51461) |
|
(12) |
|
Incorporated by reference to the exhibits to the
Registrants quarterly report on
Form 10-Q
filed with the SEC on February 2, 2009 (File
No. 000-51461) |
|
(13) |
|
Incorporated by reference to the exhibits to the
Registrants current report on
Form 8-K
filed with the SEC on April 8, 2009 (File
No. 000-51461) |