8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): May 10, 2007

webMethods, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-15681	54-1807654
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

3877 Fairfax Ridge Road, South Tower,
Fairfax, Virginia	22030
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 703-460-2500

Not Applicable

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

The following information, including the exhibit attached hereto, is being furnished to the Securities and Exchange Commission under Item 2.02 — Results of Operations and Financial Condition and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

On May 10, 2007, webMethods, Inc. issued a press release announcing financial results for its fiscal fourth quarter and fiscal year ended March 31, 2007. That press release is furnished as Exhibit 99.1 to this Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit 99.1 Press Release dated May 10, 2007

Exhibit Index

Exhibit No.	Description
99.1	Press release dated May 10, 2007

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	webMethods, Inc.
May 10, 2007	By:	/S/ DAVID MITCHELL
		Name: David Mitchell
		Title: President and Chief Executive Officer

EX-99.1

Contacts:

Christopher Martin, Investor Relations
703.460.6609
Christopher.Martin@webMethods.com

John Conley, Public Relations
703.460.5996
John.Conley@webMethods.com

WEBMETHODS REPORTS FISCAL FOURTH QUARTER AND YEAR END FINANCIAL RESULTS

FAIRFAX, Va. — May 10, 2007 — webMethods, Inc. (Nasdaq: WEBM), a leading provider of business integration and optimization software, today announced financial results for its fiscal fourth quarter and year ended March 31, 2007.

Total revenue for the fourth quarter was $51.2 million, compared to $59.4 million in the prior year period. License revenue for the fourth quarter was $18.4 million, compared to $27.6 million in the prior year period. Maintenance revenue for the fourth quarter was $21.1 million, compared to $19.2 million in the prior year period. Professional Services revenue for the fourth quarter was $11.7 million, compared to $12.5 million in the prior year period. Under U.S. generally accepted accounting principles (GAAP), the company’s net loss for the fourth quarter was $2.9 million, or a loss of $0.05 per share, compared to net income of $10.5 million, or earnings of $0.19 per diluted share, in the prior year period.

GAAP results for the fourth quarter reflect $2.9 million of stock-based compensation expense as a result of the company’s adoption of Financial Accounting Standard No. 123R in this fiscal year. Financial results for same period in fiscal year 2006 do not include these expenses. Fourth quarter GAAP results also include $1.4 million for amortization of acquired intangibles and $774,000 of transaction costs related to the proposed merger with Software AG. This compares to expenses of $496,000 for amortization of deferred warrant charge, $600,000 for amortization of acquired intangibles and $750,000 for a litigation settlement payment, net of insurance reimbursement, in last year’s fourth quarter GAAP results. Also included in last year’s fourth quarter was a $191,000 credit for the reduction of a previous accrual for excess facilities cost.

Income taxes for the quarters ended March 31, 2007 and 2006 include tax benefits of $2.0 million and $2.2 million, respectively, related to the reduction of valuation allowances on net operating loss carryforwards of certain foreign subsidiaries. These tax benefits were partially offset by income tax expenses related primarily to our foreign operations. In addition, the most recent fourth quarter includes a $1.2 million income tax provision related to a recent claim made by a state government.

For the fiscal year ended March 31, 2007, total revenue was $201.1 million, compared to $208.8 million in the prior year. License revenue for the year ended March 31, 2007 was $67.2 million, compared to $87.4 million in the prior year. Maintenance revenue for fiscal year 2007 was $83.0 million, compared to $74.2 million in the prior fiscal year. Professional Services revenue for the year ended March 31, 2007 was $50.9 million, compared to $47.2 million in the prior year. GAAP net loss for the year ended March 31, 2007 was $18.4 million, or a loss of $0.33 per share, compared to net income of $18.0 million, or earnings of $0.33 per diluted share, in the prior year.

GAAP results for the year ended March 31, 2007 include $11.6 million of stock-based compensation expense. Financial results for fiscal year 2006 do not include these expenses. Fiscal year 2007 GAAP results also include expenses of approximately $4.1 million for amortization of acquired intangibles, $1.3 million for restructuring costs related to the closing of an excess facility, $1.2 million for the write-off of in-process research and development costs, $1.0 million for severance and benefits costs related to the company’s cost savings initiative, and $1.2 million of transaction fees and other costs related to acquisitions and the proposed merger with Software AG. This compares to expenses of $2.5 million for amortization of deferred warrant charge, $2.4 million for amortization of acquired intangibles, and $750,000 for a litigation settlement payment, net of insurance reimbursement, in last year’s GAAP results.

“We’re pleased with our improved performance over the past half year as our efforts to achieve better sales force productivity and more consistent execution continue to take hold,” said David Mitchell, president and CEO, webMethods, Inc. “We were particularly pleased with the solid contributions of our newest BPM and SOA products in their first three and six months on the market, respectively. In conjunction with the strengths of the rest of our product portfolio, this reinforces our belief that the merger with Software AG is being undertaken from a position of strength and will prove to be a partnership for growth.”

Supplemental Financial Data

Revenue by geography (dollars in thousands):

	Three Months Ended							Fiscal Year Ended
	March 31,							March 31,
	2007		2006		Change			2007		2006		Change
North America	$	30,052	$	38,667		-22	%	$	124,592	$	131,410		-5	%
EMEA		14,554		14,772		-1	%		52,322		52,884		-1	%
Japan		1,805		1,941		-7	%		7,845		9,100		-14	%
Asia Pacific		4,792		4,036		19	%		16,323		15,424		6	%
Total revenue	$	51,203	$	59,416		-14	%	$	201,082	$	208,818		-4	%

Additional metrics for the quarter ended March 31, 2007:

• We recorded four sales transactions greater than $1 million;

• Our average sales transaction, for transactions over $100,000, was approximately $400,000;

• About 77% of the quarter’s sales transactions were existing customers;

• We added 27 new customers in the most recent quarter.

Quarterly Business Highlights: On April 5, 2007, the company and Software AG announced that they had entered into a definitive merger agreement for Software AG to acquire webMethods in a cash tender offer for $9.15 per share. The tender offer commenced on April 18, 2007 and is scheduled to expire at 12:00 midnight, New York City time, on Tuesday, May 15, 2007, unless extended by Software AG pursuant to the terms of the definitive agreement. Software AG has announced that it intends to extend the expiration of the tender offer to 12:00 midnight, New York City time, on Friday, May 25, 2007, such that the tender offer will expire after the end of the 30-day period for initial review of the transaction by the Committee on Foreign Investment in the United States (CFIUS). All regulatory approvals required to complete the transaction, other than CFIUS, have been received at this time.

Version 7.0 of the webMethods Fabric product suite became generally available during the quarter. According to leading industry research firm Current Analysis (webMethods Strengthens SOA Suite with Fabric 7.0 Release, January 11, 2007), “[w]e are taking a positive stance on webMethods’ release of Fabric 7.0. This week’s General Availability release makes good on the company’s promise to incorporate

registry and broker technologies purchased from Infravio this past September. It also marks the inclusion of two other important technologies, a semantic metadata library from the also recently acquired Cerebra and Blaze Advisor (a business rules management engine) provided by partner Fair Isaac Corp. The inclusion of these three key elements along with a series of product improvements, strongly positions Fabric 7.0 as one of the most comprehensive SOA Suites in the market.”

webMethods also unveiled during the fourth quarter webMethods Optimize for SAP, a new performance monitoring solution for SAP-based business processes.

During the fourth quarter, webMethods joined the Vendor Interop Alliance, a Microsoft-led consortium focused on improving application interoperability. webMethods also announced a new partnership with iTKO for service-oriented architecture (SOA) testing during this period as well as additional alliances with Asset Control, Logimethods, Torry Harris Business Solutions and Xpediant Solutions.

In conjunction with industry research firm ZapThink, webMethods also introduced during the quarter the SOA Master Class online (www.SOAMasterClass.com), a new educational website and online community for exchanging best practices among SOA practitioners. Members can also download evaluation copies of the webMethods Infravio X-Registry. webMethods also hosted a series of European Business Integration Forums. During these one-day events, webMethods executives shared best practices and emerging strategies for business process integration with customers, prospects and partners in a number of major European cities.

Global Customer Wins: webMethods won new and additional business during the fourth quarter with strategic customers worldwide. The following companies represent important new and follow-on business that closed during the quarter: Baker Hughes Oilfield Operations, Inc., Bank of Oklahoma N.A., Beijing Yisquare Technology Co., Ltd (for Ping An Life Insurance Company of China, Ltd), Communications Test Design, Inc., Dean Foods, DHL, Enporion, Fonterra Co-Operative Group Ltd, Kuhne & Nagel, MonierLifetile, Origin Energy Asset Management Services Pty Ltd, Parkway Hospitals Singapore Pte Ltd, Sony Electronics Inc., South Florida Water Management District, TD Banknorth, The Canadian Depository for Securities Limited, The Timberland Company, and Vodafone Portugal, among others.

About webMethods, Inc.
webMethods (NASDAQ: WEBM) provides business integration software to integrate, assemble and optimize available IT assets to drive business process productivity. webMethods delivers an innovative, enterprise-class business integration platform that incorporates proven integration technology with next generation capabilities into one interoperable set of tools that delivers a unique combination of efficiency, agility and control. webMethods combines industry leadership with a zealous commitment to customers to deliver tangible business value to more than 1,500 global customers. webMethods is headquartered in Fairfax, Va., with offices throughout the U.S., Europe, Asia Pacific and Japan. More information about the company can be found at www.webMethods.com.

###

The webMethods name and logo are registered trademarks of webMethods, Inc. in the United States and certain other countries. All other marks mentioned are trademarks or service marks of their respective companies.

webMethods, Inc. Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

	Three Months Ended						Twelve Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Revenue
License	$	18,378		$	27,628		$	67,218		$	87,449
Maintenance		21,136			19,241			82,953			74,186
Professional services		11,689			12,547			50,911			47,183
Total revenue		51,203			59,416			201,082			208,818
Cost of revenue
Amortization of intangibles		1,376			600			4,095			2,397
License		310			299			1,433			1,002
Maintenance		3,257			3,182			12,999			12,774
Professional services		10,740			12,013			47,325			42,688
Total cost of revenue		15,683			16,094			65,852			58,861
Gross profit		35,520			43,322			135,230			149,957
Operating expenses
Sales and marketing		20,309			20,209			81,482			74,084
Research and development		11,439			9,973			45,882			40,197
General and administrative		8,559			6,270			31,081			23,812
In-process research and development		—			—			1,170			—
Restructuring costs		22			(191	)		1,306			411
Total operating expenses		40,329			36,261			160,921			138,504
Operating (loss) income		(4,809	)		7,061			(25,691	)		11,453
Interest income and other, net		1,279			1,604			7,259			5,221
(Loss) income before taxes		(3,530	)		8,665			(18,432	)		16,674
Provision for income taxes		(642	)		(1,803	)		—			(1,348	)
Net (loss) income	$	(2,888	)	$	10,468		$	(18,432	)	$	18,022
Basic net (loss) and diluted net income per share	$	(0.05	)	$	0.19		$	(0.33	)	$	0.33
Shares used in computing per share amounts:
Basic		56,523			54,367			55,758			53,779
Diluted		56,523			56,550			55,758			55,045

webMethods, Inc. Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)

	March 31,		March 31,
	2007		2006
ASSETS
Current assets:
Cash and cash equivalents	$	87,117	$	82,371
Marketable securities available for sale		46,095		79,943
Accounts receivable, net		51,898		64,298
Deferred income tax assets, net		1,241		138
Prepaid expenses and other current assets		5,725		6,830
Total current assets		192,076		233,580
Marketable securities available for sale		999		—
Property and equipment, net		13,867		10,274
Goodwill		76,293		46,704
Intangibles assets, net		15,873		5,993
Long-term deferred income tax assets, net		3,166		1,961
Other assets		2,877		4,299
Total assets	$	305,151	$	302,811
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,996	$	7,323
Accrued expenses		11,335		10,866
Accrued salaries and commissions		12,227		12,694
Deferred revenue		49,619		59,168
Current portion of capital lease		20		259
Total current liabilities		83,197		90,310
Capital lease obligations, net of current portion		—		10
Other long-term liabilities		5,958		3,941
Long-term deferred revenue		1,997		1,772
Total liabilities		91,152		96,033
Total stockholders’ equity		213,999		206,778
Total liabilities and stockholders’ equity	$	305,151	$	302,811