EX-99.1 3 doc2.txt MERCURY INTERACTIVE NEWS RELEASE -------------------------------------------------------------------------------- www.mercuryinteractive.com Investor Relations Contact Anne Marie McCauley, 408.822.5359 [GRAPHIC OMITTED] For Immediate Release: MERCURY INTERACTIVE REPORTS FIRST QUARTER RESULTS ANNOUNCES REVENUE OF $110.4 MILLION, GAAP EPS OF $0.20, CASH FROM OPERATIONS OF $53.2 MILLION SUNNYVALE, CALIF. - APRIL 16, 2003 -Mercury Interactive Corporation (NASDAQ: MERQ), the global leader in business technology optimization (BTO), today reported results for the first quarter ended March 31, 2003. Revenue for the first quarter of 2003 was $110.4 million, an increase of 22 percent over the $90.5 million reported in the first quarter of 2002. On a GAAP basis, net income for the first quarter of 2003 was $18.1 million, an increase of 20 percent over the $15.2 million in the comparable quarter last year. Net income for the first quarter of 2003 includes amortization of unearned stock-based compensation and intangibles of $0.6 million associated with the Freshwater Software acquisition. Net income for the first quarter of 2002 included a gain of $4.6 million associated with the early retirement of debt (or $0.03 per fully diluted share), a reversal of $0.5 million in restructuring charges and amortization of $1.0 million associated with the Freshwater Software acquisition. Diluted earnings per share for the first quarter of 2003 were $0.20, an increase of 18 percent over the $0.17 diluted earnings per share in the comparable quarter last year. Deferred revenue for the first quarter of 2003 increased $21.8 million from the fourth quarter of 2002 to $181.2 million. Cash generated from operations for the first quarter of 2003 was $53.2 million compared to $27.5 million in the first quarter of 2002. "Mercury Interactive's solid first quarter results, despite a difficult IT spending environment, demonstrate the value of our application delivery and management solutions, the viability of our business model and the ability of our team to execute," said Amnon Landan, chairman, CEO and president of Mercury Interactive Corporation. "We attribute these results to the emergence of Business Technology Optimization (BTO) as a strategic agenda for IT executives, as they strive to apply quality management principles to IT in order to optimize performance, reduce costs and align business and IT objectives." Mercury Interactive Reports First Quarter Results Page 2 FINANCIAL OUTLOOK The following financial outlook is provided on a GAAP basis and is based on information as of April 16, 2003. GAAP earnings per share guidance includes on-going operating expenses and recurring amortization expenses of approximately $0.6 million per quarter associated with the Freshwater acquisition. Management initiates the following guidance for the quarter ending June 30, 2003: - Revenue is expected to be in the range of $110 million and $117 million. - Operating margin is expected to be in the range of 17% and 20%. - Diluted earnings per share is expected to be in the range of $0.16 and $0.22. Consistent with prior guidance provided, management offers the following guidance for the full fiscal year ending December 31, 2003: - Revenue is expected to be in the range of $460 million and $500 million. - Operating margin is expected to be in the range of 18% and 20%. - Diluted earnings per share is expected to be in the range of $0.82 and $0.97. ABOUT MERCURY INTERACTIVE Mercury Interactive, the global leader in business technology optimization (BTO), delivers Optane, a suite of integrated products for enterprise testing, production tuning and performance management, that enables customers to optimize business processes and maximize business results. Customers worldwide use Mercury Interactive solutions across their application and technology infrastructures to continuously measure, maximize and manage performance at every level of the business process and each stage of the application lifecycle to improve quality, reduce costs, and align IT with business goals. Founded in 1989, Mercury Interactive is headquartered in Sunnyvale, California, with offices in more than 25 countries. Further information is available at www.mercuryinteractive.com or by phone at U.S. +1.408.822.5200. -------------------------- QUARTERLY CONFERENCE CALL Mercury Interactive will host a conference call to discuss first quarter results at 2:00 p.m. Pacific Daylight Time today. A live Webcast of the conference call, together with supplemental financial Mercury Interactive Reports First Quarter Results Page 3 information, can be accessed through the company's Investor Relations Web site at http://mercuryinteractive.com/company/ir. In addition, an archive of the Webcast can be accessed through the same link. An audio replay of the call will be available until midnight on April 22, 2003. The audio replay can be accessed by calling 888-203-1112 or 719-457-0820, conference call code: 158045. FORWARD LOOKING STATEMENTS This press release contain "forward-looking statements" under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties concerning Mercury Interactive's expected financial performance (as described in the Financial Outlook section and quotations from management in this press release), as well Mercury Interactive's future business prospects and product and service offerings. Mercury Interactive's actual results may differ materially from the results predicted or from any other forward-looking statements made by, or on behalf of, Mercury Interactive and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among other things: 1) the effect of continued weak economic factors on the overall demand for software and services which could result in decreased revenues or lower revenue growth rates and increased uncertainty as to our expected revenues in future periods; 2) Mercury Interactive has historically received a substantial portion of its orders at the end of the quarter and if an order shortfall occurs at the end of a quarter it could negatively impact the company's operating results for that quarter; 3) the effect of the timing of the recognition of revenue from products sold under subscription and term licenses; 4) the dependence of Mercury Interactive's financial growth on the continued success and acceptance of its existing and new software products and services, and the success of its Business Technology Optimization (BTO) strategy; 5) the impairment of the value of investments in non-consolidated companies; 6) the ability to increase sales through our indirect channels as well as international sales; 7) intense competition for Mercury Interactive's products and services; and 8) the additional risks and important factors described in Mercury Interactive's SEC reports, including the Annual Report to Stockholders on Form 10-K for the fiscal year ended December 31, 2002, which are available at the SEC's website at www.sec.gov. Additional information will also be set forth in Mercury Interactive's Quarterly Report on Form 10-Q for the three month period ended March 31, 2003, which will be filed with the SEC in the second quarter of 2003. All of the information in this press release is as of April 16, 2003, and Mercury Interactive undertakes no duty to update this information. Mercury Interactive Reports First Quarter Results Page 4 ### EDITOR'S NOTE ------------- TABLES ATTACHED: Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows Mercury Interactive and Optane are trademarks or registered trademarks of Mercury Interactive Corporation or its subsidiaries in the United States and select foreign countries. Other product and company names are used herein for identification purposes only, and may be trademarks of their respective companies. MERCURY INTERACTIVE 1325 Borregas Avenue, Sunnyvale, CA 94089 Tel: (408) 822-5200 Fax: (408) 822-5300
Mercury Interactive Reports First Quarter Results Page 5 MERCURY INTERACTIVE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three months ended March 31, ----------------------- 2003 2002 ---------- ----------- Revenues: License fees $ 44,786 $ 44,721 Subscription fees 19,274 11,279 Maintenance fees 35,585 27,650 Professional service fees 10,740 6,850 ---------- ----------- Total revenues 110,385 90,500 ---------- ----------- Costs and expenses: Cost of license and subscription 6,550 6,345 Cost of maintenance 2,679 2,836 Cost of professional services 6,620 4,298 Marketing and selling 52,685 45,417 Research and development 11,589 10,624 General and administrative 9,100 7,443 Amortization of unearned stock-based compensation 189 364 Restructuring, integration and other related charges --- (537) Amortization of goodwill and other intangible assets 458 639 ---------- ----------- Total costs and expenses 89,870 77,429 ---------- ----------- Income from operations 20,515 13,071 Other income, net 2,327 6,130 ---------- ----------- Income before provision for income taxes 22,842 19,201 Provision for income taxes 4,698 4,041 ---------- ----------- Net income $ 18,144 $ 15,160 ========== =========== Net income per share (basic) $ 0.21 $ 0.18 ========== =========== Net income per share (diluted) $ 0.20 $ 0.17 ========== =========== Weighted average common shares (basic) 85,032 83,223 ========== =========== Weighted average common shares and equivalents (diluted) 89,349 88,296 ========== ===========
Mercury Interactive Reports First Quarter Results Page 6 MERCURY INTERACTIVE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) March 31, December 31, 2003 2002 ----------- -------------- ASSETS Current assets: Cash and cash equivalents $ 390,229 $ 349,123 Short-term investments 159,277 178,123 Trade accounts receivable, net 78,902 93,095 Prepaid expenses and other assets 42,552 46,548 ----------- -------------- Total current assets 670,960 666,889 Long-term investments 180,500 137,954 Property and equipment, net 86,717 88,516 Investments in non-consolidated companies 15,380 15,952 Debt offering costs, net 5,654 6,037 Goodwill 113,327 113,327 Intangible assets, net 2,090 2,548 Restricted cash 6,000 6,000 Interest rate swap 18,091 17,378 Other assets, net 18,971 21,133 ----------- -------------- Total assets $1,117,690 $ 1,075,734 =========== ============== TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,567 $ 12,292 Accrued liabilities 61,265 71,414 Income taxes payable 71,263 70,502 Short-term deferred revenue 147,141 135,338 ----------- -------------- Total current liabilities 289,236 289,546 Convertible subordinated notes 317,651 316,972 Long-term deferred revenue 34,081 24,048 ----------- -------------- Total liabilities 640,968 630,566 ----------- -------------- Stockholders' equity: Common stock 171 169 Additional paid-in capital 264,491 254,218 Treasury stock (16,082) (16,082) Notes receivable from issuance of stock (8,641) (11,055) Unearned stock-based compensation (695) (1,296) Accumulated other comprehensive loss (1,605) (1,725) Retained earnings 239,083 220,939 ----------- -------------- Total stockholders' equity 476,722 445,168 ----------- -------------- Total liabilities and stockholders' equity $1,117,690 $ 1,075,734 =========== ==============
Mercury Interactive Reports First Quarter Results Page 7 MERCURY INTERACTIVE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three months ended March 31, ------------------------ 2003 2002 ----------- ----------- Cash flows from operating activities: Net income $ 18,144 $ 15,160 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,879 3,815 Sales reserves 406 1,038 Unrealized gain on interest rate swap (34) --- Amortization of goodwill and other intangible assets 458 639 Amortization of unearned stock-based compensation 189 364 Gains on early retirement of debt --- (4,573) Loss on investments in non-consolidated companies 572 411 Deferred income taxes 2,422 --- Changes in assets and liabilities: Trade accounts receivable 14,176 11,369 Prepaid expenses and other assets 3,793 (1,754) Accounts payable (2,764) (1,355) Accrued liabilities (10,289) (5,997) Income taxes payable 750 3,811 Deferred revenue 21,497 4,587 ----------- ----------- Net cash provided by operating activities 53,199 27,515 ----------- ----------- Cash flows from investing activities: Maturities of investments 298,972 56,149 Purchases of investments (322,671) (71,100) Increase in restricted cash --- (13,659) Purchases of investments in non-consolidated companies --- (750) Acquisition of property and equipment (1,686) (1,760) ----------- ----------- Net cash used in investing activities (25,385) (31,120) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock under stock option and employee stock purchase plans 10,687 10,246 Collection of notes receivable from issuance of stock 2,414 --- Retirement of convertible subordinated note --- (24,723) ----------- ----------- Net cash provided by (used in) financing activities 13,101 (14,477) ----------- ----------- Effect of exchange rate changes on cash 191 640 ----------- ----------- Net increase (decrease) in cash and cash equivalents 41,106 (17,442) Cash and cash equivalents at beginning of period 349,123 248,297 ----------- ----------- Cash and cash equivalents at end of period $ 390,229 $ 230,855 =========== ===========