EX-99.1 2 a4770277ex991.txt PRESS RELEASE EXHIBIT 99.1 SERENA Software Reports Record Third Quarter Results; Non-GAAP EPS up 84% to $0.35 and Licenses Revenue up 102% to $22.1 Million SAN MATEO, Calif.--(BUSINESS WIRE)--Nov. 18, 2004--SERENA Software, Inc. (Nasdaq:SRNA), an industry-leading supplier of software that manages change throughout the application lifecycle, announced today net income per diluted share on a non-GAAP basis of $0.35 for the third fiscal quarter ending October 31, 2004, up 84% over the same quarter a year ago. Total revenues on a non-GAAP basis, including the add-back of maintenance revenues written down in the Merant acquisition purchase accounting, were $62.2 million, exceeding the high end of the Company's guidance. Total GAAP revenues of $56.6 million in the third quarter of fiscal 2005 represented a 112% increase over the third quarter of fiscal 2004 and a 9% sequential increase over the second quarter. Software license revenue was $22.1 million, up 102% over the same quarter a year ago and 14% sequentially. Maintenance revenue on a GAAP basis increased to $27.6 million, up 111% over the same quarter a year ago and services revenues increased to $6.9 million. On a combined basis, license revenue from software change management was 73% of total license revenue, with 55% of license revenue coming from distributed systems platforms. Non-GAAP operating income for the third quarter ended October 31, 2004, including the add back for the deferred revenue write down, was $20.0 million and non-GAAP operating margin was 32%. Non-GAAP net income and net income per diluted share for the third quarter of fiscal 2005 increased 104% and 84%, respectively, to $15.3 million and $0.35 from $7.5 million and $0.19 in the third quarter of fiscal 2004. Net income and net income per diluted share computed in accordance with generally accepted accounting principles ("GAAP") decreased to $4.3 million and $0.10 from $4.8 million and $0.12 in the same quarter a year ago as a result of the amortization of intangibles related to the acquisition of Merant. The third quarter of fiscal 2005 non-GAAP results exclude amortization of intangible assets and charges relating to the purchase accounting adjustments for the acquisition of Merant, including stock-based compensation, the revenue impact of the deferred maintenance write-down to fair value, amortization of capitalized software and other intangible assets, and restructuring and acquisition related charges. A reconciliation of non-GAAP to GAAP financial results is included in this press release. Total cash, restricted cash, investments and equivalents as of October 31, 2004 was $177 million and cash flow from operations for the third quarter of fiscal 2005 was $6.9 million. Total deferred revenue at October 31, 2004 was $73.9 million, up 4% sequentially. Days sales outstanding on a GAAP basis were 67 days and 61 days on a non-GAAP basis. Additionally, the Company's board of directors authorized one million four hundred thousand shares eligible for repurchase going forward. "I am extremely pleased with our results this quarter," said Mark Woodward, President and CEO. "We are executing very well and we have successfully expanded our market opportunity beyond enterprise change management to become a leading provider of application lifecycle management solutions. Our ability to deliver strong organic license revenue growth in just our second quarter of combined operations since the acquisition of Merant validates our customers' acceptance of the ALM vision." The Company also announced its non-GAAP financial outlook for the fourth quarter of fiscal 2005. Fourth quarter total revenues, eliminating the reduction in maintenance revenue as a result of the purchase accounting write-down of deferred revenue, are expected to be in the range of $65 million to $67 million and non-GAAP net income per fully diluted share is expected to be between $0.38 and $0.39. Based on the recent issuance of EITF 04-08, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share," beginning in the fourth quarter of fiscal 2005 we will include 9,912,694 shares in our fourth quarter and full year weighted average share calculation. Our fourth quarter fiscal 2005 earnings per share guidance will be reduced by this increase in shares on a GAAP basis by $0.01 to $0.02 and on a non-GAAP basis by $0.05 to $0.06. Third Quarter Highlights -- Announced RTM 5.0, the first release of Serena's new acquired requirements management solution. RTM 5.0 accelerates delivery of Serena's SAFE vision by providing requirements and traceability management. -- Announced that Serena has achieved leadership status in META Group's evaluation of the enterprise software configuration management market. Serena is recognized for its solid technology, financial performance and ability to effectively adapt to evolving market conditions. -- Appointed Carl Theobald as Senior Vice President of Research and Development. Mr. Theobald will play key role in helping Serena execute on its strategic vision and increasing stronghold in the application lifecycle management market. -- Announced extended capabilities with ChangeMan Mover 2. This software deployment solution features reduce costs, errors of manual asset transfer and boost efficiency and security. -- Held its 'Xchange' Conference, addressing the first gathering of Merant, TeamShare and RTM customers since the acquisitions. The event offered customers, partners, and industry leaders a forum for learning and exchanging ideas and methods for increasing their insight, control and predictability to manage change, from business planning to operations. -- Released a new version of TeamTrack - Serena TeamTrack 6.2. This solution evolves Serena's SAFE vision and improves collaboration and IT efficiency. -- Announced that Serena earned placement on Software Magazine's 22nd Annual Software 500 Software Magazine for the sixth consecutive year. -- Announced that Serena has joined the Mainframe Migration Alliance (MMA), an organization created by Microsoft and industry partners to help customers more easily and efficiently migrate workloads off the mainframe and onto the Microsoft Windows platform. Serena provides non-GAAP operating income, net income and earnings per share data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. These measures differ from US GAAP in that they exclude the amortization of intangible assets and charges relating to the purchase accounting adjustments for the acquisition of Merant, including the revenue impact of the deferred maintenance write-down to fair value, amortization of capitalized software and intangible assets, stock based compensation and restructuring and acquisition related charges. Serena's management believes these non-GAAP measures are useful to investors because this supplemental information facilitates comparisons to prior periods and are more reflective of earnings on a cash basis. Management uses these non-GAAP measures to evaluate its financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results. The following table reconciles the non-GAAP financial measures to GAAP: Quarter Ended October 31, -------------------------------- 2004 2003 ---------------- --------------- Net Diluted Net Diluted Income EPS Income EPS -------- ------- ------- ------- Non-GAAP $15,308 $0.35 $7,514 $0.19 Amortization of capitalized software, intangible assets and stock based compensation (7,109) (0.16) (2,664) (0.07) Revenue impact of deferred maintenance write-down, net of tax (34%) (3,650) (0.08) -- -- Restructuring and acquisition charges, net of tax (34%) (271) (0.01) -- -- -------- ------- ------- ------- GAAP $ 4,278 $0.10 $4,850 $0.12 ======== ======= ======= ======= Commentary Available A conference call to discuss the preliminary results is scheduled for 2:00 p.m. Pacific time today and may be accessed live via the Internet at www.companyboardroom.com or www.serena.com/Q305results. Additionally investors can listen to the call by dialing 877-655-7651 or 706-679-5273 at least 5 minutes prior to the start time. A replay of the call will be available through December 2, 2004 by dialing 800-642-1687 or 706-605-9291 ID# 1986014. About SERENA Software, Inc. SERENA Software, Inc. is the world's largest company solely focused on managing change throughout the application lifecycle. For more than two decades, Serena has enabled companies to automate change to the applications that run their businesses. Serena's Application Framework for Enterprises (SAFE(TM)) is the unique next-generation framework for Application Lifecycle Management (ALM), providing cross-platform, cross-process and cross-organizational support across application lifecycle processes, regardless of platform. The SAFE approach helps streamline development, improve productivity and lower development costs, resulting in a highly efficient enterprise. Serena has more than 15,000 customer sites worldwide, including 49 of the Fortune 50. Serena is headquartered in San Mateo, California and has offices in more than 20 countries. For more information, please visit www.serena.com This press release contains "forward-looking statements" under the Private Securities Reform Act of 1995. There can be no assurance that future results will be achieved, and actual results could differ materially from forecasts and estimates. Factors that could cause or contribute to such differences include, but are not limited to, our ability to successfully integrate our recent acquisition of Merant plc.; the percentage of license revenue typically closed at the end of each quarter making estimation of operating results prior to the end of the quarter extremely uncertain; weak economic conditions worldwide which may continue to affect the overall demand for software and services, which has resulted in and could continue to result in decreased revenues or lower revenue growth rates; changes in revenue mix and seasonality; dependence on revenues from our installed base; continued demand for additional mainframe MIPS capacity; our ability to complete the assessment of internal controls over financial reporting as of January 31, 2005, as required by Section 404 of the Sarbanes-Oxley Act, which may impact the reliability of our internal controls over financial reporting and thus adversely affect the market price of our common stock; the expansion of our international organizations; and our ability to manage our growth. Information about potential factors that could affect the Company's financial results is included in the Company's Form 10Q filed on September 9, 2004 and Form 10K filed on April 15, 2004. Serena assumes no obligation to update the forward-looking information contained in this press release. Trademarks Serena, TeamTrack, ChangeMan, Comparex and StarTool are registered trademarks of SERENA Software Inc. SAFE is a trademark of SERENA Software Inc. All other products or company names mentioned are used for identification purposes only, and may be trademarks of their respective owners. (C) 2004 SERENA Software, Inc. All Rights Reserved. SERENA Software, Inc. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited GAAP) Three Months Nine Months Ended Ended October 31, October 31, ----------------- ----------------- 2004 2003 2004 2003 -------- -------- -------- -------- Revenue: Software licenses $22,124 $10,963 $57,379 $31,862 Maintenance 27,623 13,121 68,120 37,481 Professional services 6,894 2,571 16,843 6,593 -------- -------- -------- -------- Total revenue 56,641 26,655 142,342 75,936 -------- -------- -------- -------- Cost of revenue: Software licenses 930 129 2,280 512 Maintenance 3,145 1,606 7,859 4,715 Professional services 6,002 2,462 15,049 6,506 Amortization of acquired technology 4,037 1,902 10,014 4,611 -------- -------- -------- -------- Total cost of revenue 14,114 6,099 35,202 16,344 -------- -------- -------- -------- Gross profit 42,527 20,556 107,140 59,592 -------- -------- -------- -------- Operating expenses: Sales and marketing 17,913 7,341 45,402 21,008 Research and development 8,393 3,671 22,217 10,130 General and administrative 5,800 1,881 12,811 5,349 Stock-based compensation 237 -- 493 -- Amortization of intangible assets 2,835 762 6,771 1,270 Acquired in-process research and development -- -- 10,400 -- Restructuring, acquisition and other charges 410 -- 2,175 -- -------- -------- -------- -------- Total operating expenses 35,588 13,655 100,269 37,757 -------- -------- -------- -------- Operating income 6,939 6,901 6,871 21,835 Interest income 702 677 2,745 2,495 Interest expense (825) -- (2,475) -- Amortization of debt issuance costs (335) -- (1,131) -- -------- -------- -------- -------- Income before income taxes 6,481 7,578 6,010 24,330 Income taxes 2,203 2,728 5,751 8,946 -------- -------- -------- -------- Net income $ 4,278 $ 4,850 $ 259 $15,384 ======== ======== ======== ======== Net income per share: Basic $ 0.10 $ 0.12 $ 0.01 $ 0.38 ======== ======== ======== ======== Diluted $ 0.10 $ 0.12 $ 0.01 $ 0.38 ======== ======== ======== ======== Weighted average shares used in per share calculations: Basic 43,109 39,545 41,979 40,032 ======== ======== ======== ======== Diluted 43,519 40,173 42,616 40,706 ======== ======== ======== ======== SERENA Software, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited GAAP) October January 31, 31, 2004 2004 --------- --------- Assets Current assets Cash and cash equivalents $126,494 $257,281 Restricted cash 3,300 3,300 Short-term investments 32,618 39,214 Accounts receivable, net 42,037 15,475 Deferred taxes 6,787 6,787 Prepaid expenses and other current assets 5,995 1,338 --------- --------- Total current assets 217,231 323,395 Long-term investments 10,157 70,692 Restricted cash, non-current 4,783 6,312 Property and equipment, net 5,783 3,209 Goodwill, net 321,389 40,471 Other intangible assets, net 114,763 22,987 Other assets 4,348 6,595 --------- --------- Total assets $678,454 $473,661 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,501 $ 1,232 Income taxes payable 10,130 6,294 Accrued expenses 29,194 7,782 Accrued Interest on subordinated notes 1,238 413 Deferred revenue 59,120 29,496 --------- --------- Total current liabilities 101,183 45,217 Deferred revenue, net of current portion 14,747 9,683 Long-term liabilities 2,071 -- Deferred taxes 45,203 3,483 Subordinated notes 220,000 220,000 --------- --------- Total liabilities 383,204 278,383 Stockholders' equity: Total stockholders' equity 295,250 195,278 --------- --------- Total liabilities and stockholders' equity $678,454 $473,661 ========= ========= CONTACT: SERENA Software, Inc. Robert I. Pender, Jr., 650-522-6604