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8-K - 8-K - TIBCO SOFTWARE INCd744495d8k.htm

Exhibit 99.1

 

LOGO

 

Media Contact:        Investor Contact:
Leslie Moore        Lindsay Andrews
TIBCO Software Inc.        Sard Verbinnen & Co.
(650) 846-5025        (415) 618-8750
lmoore@tibco.com        landrews@sardverb.com

TIBCO SOFTWARE REPORTS SECOND QUARTER RESULTS

Q2 Total Non-GAAP Revenue of $254 million; Non-GAAP EPS of $0.14

PALO ALTO, Calif., June 19, 2014 - TIBCO Software Inc. (NASDAQ: TIBX) today announced results for its fiscal second quarter, which ended on June 1, 2014.

On a GAAP basis, total revenue for the second quarter of fiscal 2014 was $252.3 million, up 3% from the second quarter of fiscal year 2013, and software revenue was $82.3 million, down 4%. Within software revenue, license revenue was $76.5 million, down 7%, while subscription revenue was $5.8 million, up 63% from last year. Net income was $1.6 million, or $0.01 per diluted share, compared to $8.7 million, or $0.05 per diluted share, in the second quarter of fiscal 2013.

On a non-GAAP basis, total revenue for the second quarter of fiscal 2014 was $254.0 million, up 3%, and software revenue was $84.0 million, down 2%. Subscription revenue within software revenue more than doubled to $7.5 million from last year and is adjusted by $1.7 million for the acquisition-related accounting effects on deferred revenue. Non-GAAP operating income for the second quarter of fiscal 2014 was $38.7 million, resulting in a non-GAAP operating margin of 15.2% compared to $45.3 million, or a margin of 18.4% in the second quarter of fiscal 2013. Net income was $23.0 million or $0.14 per diluted share, compared with $29.7 million or $0.18 per diluted share. Net income assumes non-GAAP effective tax rates of 32% and 26% for the second quarters of fiscal 2014 and 2013, respectively. Non-GAAP results are adjusted for acquisition-related accounting effects on deferred revenue from acquisitions and exclude amortization of acquired tangible assets, stock-based compensation expense, acquisition and other related expenses, restructuring activities and non-cash interest expense related to convertible debt.

“Although we achieved record second quarter revenue, our results fell short of our expectations and we are aggressively focusing on making strategic, operational and organizational changes to address our execution challenges and position TIBCO for sustained growth,” said Vivek Ranadivé, TIBCO’s chairman and chief executive officer. “We see a large and growing opportunity ahead of us in big data, where our technologies can integrate both static and real-time data sources to enable fast data solutions. These are systems that companies use to create more responsive and customized digital experiences for their customers, fostering greater loyalty and unlocking new avenues for revenue generation.”

Second Quarter Fiscal 2014 Highlights

 

    Total Non-GAAP revenue of $254.0 million;

 

    Non-GAAP Software revenue of $84.0 million; comprised of license revenue of $76.5 million; and subscription revenue of $7.5 million;

 

    Non-GAAP operating margin of 15.2%;

 

    Non-GAAP EPS of $0.14;

 

    Cash flow from operations of $18.0 million;

 

    Broad mix of business across major industries including financial services, telecommunications, energy, transportation & logistics, manufacturing, government, retail, and insurance;

 

    TIBCO closed 127 deals over $100k and had 13 deals over $1 million in license revenue.


Reclassifications

During the second quarter of 2014, TIBCO adopted a revised presentation, which TIBCO believes better reflects the company’s evolving product and service offerings and increases the visibility of emerging consumption models. A change was made to rename license revenue to software revenue and to present license revenue and subscription revenue as software revenue. A corresponding change was made to present cost of license revenue as cost of software revenue and to present cost of license revenue and cost of subscription revenue as cost of software revenue. This change in presentation does not affect total revenue, total cost of revenue or gross margin. Conforming changes have been made for all prior periods presented.

Conference Call Details

TIBCO has scheduled a conference call for 4:30 pm ET / 1:30 pm PT today to discuss its second quarter results. The conference call will be hosted by InterCall and may be accessed over the internet at www.tibco.com or via dial-in at 877-293-9114 or 706-679-0841. Please join the conference call at least 10 minutes early to register. A replay of the conference call will be available until midnight ET on July 19, 2014 at www.tibco.com or via dial-in at 800-585-8367 or 404-537-3406. The passcode for both the call and the replay is 54923755.

About TIBCO

TIBCO Software Inc. (NASDAQ: TIBX) is a global leader in infrastructure and business intelligence software. Whether it’s optimizing inventory, cross-selling products, or averting crisis before it happens, TIBCO uniquely delivers the Two-Second Advantage® – the ability to capture the right information at the right time and act on it preemptively for a competitive advantage. With a broad mix of innovative products and services, TIBCO is the strategic technology partner trusted by businesses around the world. Learn more about TIBCO at www.tibco.com.

TIBCO, TIBCO Software and Two-Second Advantage are trademarks or registered trademarks of TIBCO Software Inc. or its subsidiaries in the United States and/or other countries. Other product and company names and marks mentioned in this document are the property of their respective owners and are mentioned for identification purposes only.

Use of Non-GAAP Financial Information

This press release includes non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), please see the section entitled “About Non-GAAP Financial Information” and the accompanying table entitled “Reconciliation of GAAP to Non-GAAP Measures.”

Legal Notice Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the “safe harbor” provisions of the federal securities laws. The actual results for the second quarter of fiscal year 2014 included in our Quarterly Report on Form 10-Q may differ materially from the results presented in this release due to factors that include, but are not limited to, risks associated with the final review of the results and preparation of financial statements. In addition, forward-looking statements such as whether the strategic, operational and organizational changes we make will address our execution challenges and position TIBCO for sustained growth are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These risks include but are not limited to: risks arising from adverse changes and uncertainty in domestic and global economies, TIBCO’s ability to achieve improved performance and accelerate growth from its investments for growth and innovation, the impact of competition from alternative business models and new product introductions, TIBCO’s ability to offer compelling, differentiated products, and the impact of competition from companies that are larger or have greater resources than TIBCO. Additional information regarding potential risks is provided in TIBCO’s filings with the SEC, including its most recent Annual Report on Form 10-K for the year ended November 30, 2013 and Quarterly Report on Form 10-Q for the quarter ended March 2, 2014. TIBCO assumes no obligation to update the forward-looking statements included in this release.


TIBCO Software Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)

 

     June 1,
2014
     November 30,
2013
 
ASSETS      

Current assets:

     

Cash and cash equivalents

   $ 405,169       $ 662,109   

Short-term investments

     175,851         83,842   

Accounts receivable, net

     212,489         231,194   

Prepaid expenses and other current assets

     100,003         74,725   
  

 

 

    

 

 

 

Total current assets

     893,512         1,051,870   

Property and equipment, net

     107,904         101,050   

Goodwill

     712,328         582,091   

Acquired intangible assets, net

     159,626         119,418   

Long-term deferred income tax assets

     65,643         78,853   

Other assets

     67,582         72,831   
  

 

 

    

 

 

 

Total assets

   $ 2,006,595       $ 2,006,113   
  

 

 

    

 

 

 
LIABILITIES AND EQUITY      

Current liabilities:

     

Accounts payable

   $ 32,113       $ 37,701   

Accrued liabilities

     102,246         125,112   

Accrued restructuring costs

     2,716         5,819   

Deferred revenue

     279,946         258,315   
  

 

 

    

 

 

 

Total current liabilities

     417,021         426,947   

Long-term deferred revenue

     26,698         24,036   

Long-term deferred income tax liabilities

     2,979         1,334   

Long-term income tax liabilities

     57,154         55,733   

Other long-term liabilities

     7,145         4,788   

Convertible debt

     548,123         540,022   
  

 

 

    

 

 

 

Total long-term liabilities

     642,099         625,913   
  

 

 

    

 

 

 

Total liabilities

     1,059,120         1,052,860   
  

 

 

    

 

 

 

Total equity

     947,475         953,253   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 2,006,595       $ 2,006,113   
  

 

 

    

 

 

 


TIBCO Software Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except net income per share)

 

     Three Months Ended     Six Months Ended  
     June 1,
2014
    June 2,
2013
    June 1,
2014
    June 2,
2013
 

Revenue:

        

Software

   $ 82,321      $ 85,711      $ 168,828      $ 167,254   

Service and maintenance

     169,978        160,135        336,349        316,382   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     252,299        245,846        505,177        483,636   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue:

        

Software

     14,272        12,799        28,454        25,509   

Service and maintenance

     65,185        61,172        128,535        122,099   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     79,457        73,971        156,989        147,608   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     172,842        171,875        348,188        336,028   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     42,697        42,575        86,313        84,200   

Sales and marketing

     90,330        85,224        176,121        165,313   

General and administrative

     18,771        17,924        35,256        36,849   

Amortization of acquired intangible assets

     4,813        4,713        9,856        9,034   

Acquisition related and other

     873        568        908        895   

Restructuring adjustment

     1,821        (22     1,062        (15
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     159,305        150,982        309,516        296,276   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     13,537        20,893        38,672        39,752   

Interest income

     243        225        522        423   

Interest expense

     (8,566     (8,663     (17,086     (17,445

Other income (expense), net

     (684     (569     (1,007     (1,411
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes

     4,530        11,886        21,101        21,319   

Provision for income taxes

     3,000        3,100        7,400        3,000   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,530        8,786        13,701        18,319   

Less: Net income attributable to noncontrolling interest

     (22     71        —          99   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to TIBCO Software Inc.

   $ 1,552      $ 8,715      $ 13,701      $ 18,220   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share attributable to TIBCO Software Inc.:

        

Basic

   $ 0.01      $ 0.05      $ 0.08      $ 0.11   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.01      $ 0.05      $ 0.08      $ 0.11   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used to compute net income per share attributable to TIBCO Software Inc.:

        

Basic

     162,984        160,877        162,642        161,199   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     166,858        167,507        167,114        168,320   
  

 

 

   

 

 

   

 

 

   

 

 

 


TIBCO Software Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

     Six Months Ended  
     June 1,
2014
    June 2,
2013
 

Cash flows from operating activities:

    

Net income

   $ 13,701      $ 18,319   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation of property and equipment

     9,455        7,839   

Amortization of acquired intangible assets

     20,197        17,377   

Amortization of debt discount and transaction costs

     9,851        9,460   

Stock-based compensation

     23,323        31,335   

Deferred income tax

     2,171        (15,007

Tax benefits related to stock benefit plans

     3,824        5,278   

Excess tax benefits from stock-based compensation

     (8,119     (7,139

Other non-cash adjustments, net

     652        506   

Changes in assets and liabilities:

    

Accounts receivable

     22,451        43,573   

Prepaid expenses and other assets

     22,432        (2,633

Accounts payable

     (5,973     10,698   

Accrued and tax liabilities including restructuring costs

     (54,446     (17,264

Deferred revenue

     11,399        (14,264
  

 

 

   

 

 

 

Net cash provided by operating activities

     70,918        88,078   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of short-term investments

     (192,570     (38,261

Maturities and sales of short-term investments

     101,118        8,829   

Acquisitions, net of cash acquired

     (182,828     (4,261

Purchases of property and equipment

     (15,677     (5,768

Other investing activities, net

     1,381        (380
  

 

 

   

 

 

 

Net cash used in investing activities

     (288,576     (39,841
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Principal payments on debt

     —          (35,711

Proceeds from issuance of common stock

     17,289        9,255   

Repurchases of the Company’s common stock

     (56,003     (81,208

Withholding taxes related to restricted stock net share settlement

     (8,473     (9,899

Excess tax benefits from stock-based compensation

     8,119        7,139   
  

 

 

   

 

 

 

Net cash used in financing activities

     (39,068     (110,424
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

     (214     (2,353
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (256,940     (64,540

Cash and cash equivalents at beginning of period

     662,109        727,309   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 405,169      $ 662,769   
  

 

 

   

 

 

 


About Non-GAAP Financial Information

TIBCO provides non-GAAP measures for revenue, operating income, net income and net income per share data as supplemental information regarding TIBCO’s business performance. TIBCO believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand TIBCO’s financial performance on a trended basis across historical periods. In addition, it allows investors to evaluate TIBCO’s performance using the same methodology and information as used by TIBCO’s management. TIBCO’s management excludes these non-operating charges when it internally evaluates the performance of TIBCO’s business and makes operating decisions, including internal budgeting, performance measurement and the calculation of bonuses and discretionary compensation, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential revenue generation activities of TIBCO. Accordingly, management excludes from revenue the acquisition-related accounting adjustment to deferred revenue assumed in business combinations and excludes stock-based compensation related to employee stock options, amortization of acquired intangible assets, costs related to formal restructuring activities, acquisition-related and other expenses, non-cash interest expense related to convertible debt, as well as the income tax effects of the foregoing.

Non-GAAP measures are subject to material limitations as these measures are not in accordance with, or a substitute for GAAP and thus TIBCO’s definition may be different from similar non-GAAP measures used by other companies or analysts. Management compensates for these limitations by evaluating the non-GAAP measure together with the most directly comparable GAAP measure.

The non-GAAP adjustments, and the basis for excluding them, are outlined below:

Acquisition-related Revenue Adjustment

Business combination accounting rules require TIBCO to reduce the deferred revenue assumed in a business combination to the fair value of the future obligations from subscription and maintenance contracts assumed. As such, GAAP revenue subsequent to an acquisition of a business does not reflect the full amount of revenue of these assumed subscription and maintenance contracts that would have otherwise been recorded had the acquisition not occurred. This non-GAAP adjustment is intended to include, and thus reflect, the full amount of such revenue. Management includes this item, for the purposes of calculating non-GAAP revenue, non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. TIBCO’s management believes this adjustment to revenue is useful to investors as a measure of ongoing performance of its business because although it does not control if customers renew their subscription or maintenance contracts TIBCO has historically experienced high renewal rates on subscription and maintenance contracts.

Amortization of Intangible Assets

TIBCO incurs amortization expense from intangible assets, related to acquisitions TIBCO has made in the past. Management excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. The amortization of intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of TIBCO’s acquisition transactions, which also vary substantially in frequency from period to period.

Stock-based Compensation

TIBCO incurs stock-based compensation expense. TIBCO excludes this item for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share because it is a non-cash expense that can be inconsistent in amount from period to period. The stock-based compensation expense can be significantly impacted by the type of compensation instrument, the vesting conditions and judgment used to assess if these conditions will be met in the future. Finally, TIBCO believes that non-GAAP measures of profitability that exclude stock-based compensation are widely used by analysts and investors in the software industry.


Acquisition-related and Other Expenses

TIBCO incurs acquisition-related and other expenses which consist of costs incurred after the issuance of a definitive term sheet for a particular transaction (whether or not such transaction is ultimately completed, remains in process or is not completed) and include legal, banker, accounting and other advisory fees of third parties and severance costs for employees of the acquired company that are terminated within 90 days of the acquisition date. Management excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. TIBCO generally would not have otherwise incurred such expenses in the periods presented as part of its continuing operations. The acquisition-related and other expenses are not recurring with respect to past transactions, can be inconsistent in amount and frequency from period to period and are significantly impacted by the timing and magnitude of TIBCO’s acquisitions. While these expenses are not recurring with respect to past transactions, TIBCO generally will incur these expenses in connection with any future acquisitions.

Non-Cash Interest Expense Related to Convertible Debt

TIBCO is required to recognize non-cash interest expense related to its 2.25% convertible senior notes issued in April 2012 as an imputed interest expense. Management excludes this incremental non-cash interest expense for purposes of calculating non-GAAP net income and non-GAAP net income per share. Under the relevant accounting guidance, TIBCO is required to separate the conversion option as an equity component from the debt and account for the debt in a manner that reflects TIBCO’s non-convertible debt borrowing rate. This results in the debt component of the convertible notes being treated as though it was issued at a discount, with the debt discount being accreted as additional non-cash interest expense over the term of the notes using the effective interest method. TIBCO excludes this expense from its non-GAAP measures, because this incremental interest expense does not represent a cash outflow for the company and is not meaningful in evaluating current versus past business results. Finally, TIBCO believes that non-GAAP measures of profitability that exclude non-cash interest accretion expense are widely used by analysts and investors.

Restructuring Activities

TIBCO incurs restructuring expenses, included in its GAAP presentation of operating expense, primarily due to workforce related charges such as payments for severance and benefits and estimated costs of exiting and terminating facility lease commitments related to a formal restructuring plan. TIBCO excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share, when it evaluates the continuing business performance of TIBCO. TIBCO believes that these items are not consistently recurring and do not necessarily reflect expected future operating expense, nor does TIBCO believe that they provide a meaningful evaluation of current versus past business results or the expense levels required to support TIBCO’s operating plan.


TIBCO Software Inc.

Reconciliation of GAAP to Non-GAAP Measures

(unaudited)

(in thousands, except net income per share)

 

    Three Months Ended  
    June 1, 2014     June 2, 2013  
    Revenue     Operating
Income
    Net income
attributable to
TIBCO Software

Inc.
    Revenue     Operating
Income
    Net income
attributable to
TIBCO Software
Inc.
 

GAAP

  $ 252,299      $ 13,537      $ 1,552      $ 245,846      $ 20,893      $ 8,715   

Acquisition-related revenue adjustment

    1,701        1,701        1,701        —          —          —     

Amortization of intangible assets - cost of revenue

      5,353        5,353          4,246        4,246   

Amortization of intangible assets - operating expense

      4,813        4,813          4,713        4,713   

Stock-based compensation - cost of revenue

      1,639        1,639          1,869        1,869   

Stock-based compensation - R&D expense

      2,986        2,986          4,122        4,122   

Stock-based compensation - S&M expense

      2,833        2,833          4,422        4,422   

Stock-based compensation - G&A expense

      3,103        3,103          4,530        4,530   

Acquisition related and other

      873        873          568        568   

Non-cash interest expense related to convertible debt

      —          4,069          —          3,854   

Restructuring adjustment

      1,821        1,821          (22     (22

Income tax adjustment for non-GAAP

      —          (7,791       —          (7,349
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

  $ 254,000      $ 38,659      $ 22,952      $ 245,846      $ 45,341      $ 29,668   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share attributable to TIBCO Software Inc.:

           

GAAP

      $ 0.01          $ 0.05   
     

 

 

       

 

 

 

Non-GAAP

      $ 0.14          $ 0.18   
     

 

 

       

 

 

 

Shares used to compute diluted net income per share attributable to TIBCO Software Inc.:

        166,858            167,507   
     

 

 

       

 

 

 
    Six Months Ended  
    June 1, 2014     June 2, 2013  
    Revenue     Operating
Income
    Net income
attributable to
TIBCO Software
Inc.
    Revenue     Operating
Income
    Net income
attributable to
TIBCO Software
Inc.
 

GAAP

  $ 505,177      $ 38,672      $ 13,701      $ 483,636      $ 39,752      $ 18,220   

Acquisition-related revenue adjustment

    1,701        1,701        1,701        —          —          —     

Amortization of intangible assets - cost of revenue

      10,341        10,341          8,343        8,343   

Amortization of intangible assets - operating expense

      9,856        9,856          9,034        9,034   

Stock-based compensation - cost of revenue

      3,569        3,569          3,472        3,472   

Stock-based compensation - R&D expense

      7,266        7,266          8,118        8,118   

Stock-based compensation - S&M expense

      7,234        7,234          9,661        9,661   

Stock-based compensation - G&A expense

      5,254        5,254          10,084        10,084   

Acquisition related and other

      908        908          895        895   

Non-cash interest expense related to convertible debt

      —          8,101          —          7,673   

Restructuring adjustment

      1,062        1,062          (15     (15

Income tax adjustment for non-GAAP

      —          (14,485       —          (14,743
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

  $ 506,878      $ 85,863      $ 54,508      $ 483,636      $ 89,344      $ 60,742   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share attributable to TIBCO Software Inc.:

           

GAAP

      $ 0.08          $ 0.11   
     

 

 

       

 

 

 

Non-GAAP

      $ 0.33          $ 0.36   
     

 

 

       

 

 

 

Shares used to compute diluted net income per share attributable to TIBCO Software Inc.:

        167,114            168,320