Novell Reports Financial Results for Second Fiscal Quarter 2007
Press Release
- Revenue grows year-over-year, driven by continued strength in Linux Platform Products
- Improved profitability on a non-GAAP basis
On a non-GAAP basis, which excludes stock-based compensation and certain other items, adjusted income available to common stockholders from continuing operations for the second fiscal quarter 2007 was $16 million, or $0.05 per diluted common share, which includes a $0.02 favorable tax adjustment. This compares to non-GAAP adjusted income available to common stockholders from continuing operations of $7 million, or $0.02 per diluted common share, for the second fiscal quarter 2006.
During the second fiscal quarter 2007, Novell reported $19 million of revenue from Linux* Platform Products, up 83% year-over-year, and $29 million of invoicing, up 114% year-over-year. Revenue from Identity and Access Management was $23 million, up 5% year-over-year. Revenue from Systems and Resource Management was $32 million, down 4% year-over-year. Revenue from our Workgroup business unit declined 4% from the year ago period to $84 million.
"We were pleased with the overall results this quarter. We saw continued strength in our Linux business, improvement in our Identity business and better-than-expected results in Workgroup. Additionally, we benefited from the impact of cost control measures," said Ron Hovsepian, President and CEO of Novell. "While there remains a lot of work ahead of us, our business is moving in the right direction and we believe we are on track to achieve our fiscal 2007 exit rate operating margin target."
Cash, cash equivalents and short-term investments were $1.8 billion at April 30, 2007, consistent with last quarter. Days sales outstanding in accounts receivable was 64 days at the end of the second fiscal quarter 2007, down from 66 days in the year ago quarter. Total deferred revenue was $700 million at the end of the second fiscal quarter 2007, up $354 million, or 102%, from the prior year. Cash flow from operations was a negative $29 million for the second fiscal quarter 2007, compared to a negative $24 million in the second fiscal quarter 2006.
Full details on Novell's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules that are a part of this release.
Update on Stock-Based Compensation Review
Novell recently concluded its self-initiated, voluntary review of its historical stock-based compensation practices, the results of which it announced in a press release on May 23, 2007. The associated SEC filing on Form 8-K, along with the press release, may be viewed online.
On May 25, 2007, Novell filed its Quarterly Reports on Form 10-Q for the fiscal quarters ended July 31, 2006 and January 31, 2007 and its Annual Report on Form 10-K for the fiscal year ended October 31, 2006 with the SEC. Copies of these filings may be accessed through Novell's Investor Relations web site.
Financial Outlook
Novell management issues the following financial guidance:
For the full fiscal year 2007:
- Net revenue is expected to be between $925 million and $955 million, adjusted to account for the divestment of the Salmon business consulting group during the second fiscal quarter 2007.
- On a non-GAAP basis, adjusted income from operations is expected to be between break-even and $10 million, excluding stock-based compensation and restructuring expenses.
- Novell is targeting fourth fiscal quarter 2007 exit rate operating margins, as described below, of between 5% and 7%.
For the full fiscal year 2008:
- Novell is targeting fourth fiscal quarter 2008 exit rate operating margins of between 12% and 15%.
Exit rate operating margins are defined as an annualized run rate expense level at the end of the period that, when compared to the full fiscal year's revenue, would result in a pro forma operating margin for the year.
Non-GAAP Financial Measures
To supplement Novell's consolidated unaudited condensed financial statements presented in accordance with GAAP and to better reflect comparative quarter-over-quarter and year-over-year operating performance, Novell uses non-GAAP financial measures of adjusted diluted income available to common stockholders from continuing operations and adjusted diluted income per common share from continuing operations, which reflect the exclusion of certain expenses and gains, and adjusted diluted weighted average shares outstanding. Novell's financial outlook uses a non-GAAP income from operations measure. These non-GAAP financial measures do not replace the presentation of Novell's GAAP financial results but are provided to improve overall understanding of current financial performance and prospects for the future.
Novell considers non-GAAP adjusted diluted income available to common stockholders from continuing operations to be after-tax income generated from continuing operations excluding certain non-recurring or non-core items such as, but not limited to, stock-based compensation, restructuring expenses, asset impairments, litigation judgments and settlements, the write-off of acquired in-process research and development, and gains (losses) on the sale of business operations, long-term investments and property, plant and equipment.
Novell does not provide financial guidance for GAAP financial measures because items identified as excluded from non-GAAP financial measures are difficult to forecast.
A summary of Novell's vision, mission and strategy can be accessed on the Novell web site.
Conference call notification and Web access detail
A live Webcast of a Novell conference call to discuss the quarter will be broadcast at 5:00 PM ET May 30, 2007, from Novell's Investor Relations web page. The domestic conference call dial-in number is 866-335-5255, password "Novell", and the international dial-in number is +1-706-679-2263, password "Novell".
The call will be archived on the Web site approximately two hours after its conclusion, and will be available for telephone playback through midnight ET, June 8, 2007. The domestic toll-free replay number is 800-642-1687, and the international replay number is +1-706-645-9291. Replay listeners must enter conference ID number 7709752.
A copy of this press release is posted on Novell's web site.
Legal notice regarding forward-looking statements
This press release includes statements that are not historical in nature and that may be characterized as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act, including those related to future financial and operating results, benefits and synergies of the company's brands and strategies, future opportunities and the growth of the market for Identity and Access Management and Linux Platform Products. You should be aware that Novell's actual results could differ materially from those contained in the forward-looking statements, which are based on current expectations of Novell management and are subject to a number of risks and uncertainties, including, but not limited to, Novell's ability to realize the benefits anticipated from the Microsoft transaction, Novell's ability to achieve its expense targets, Novell's success in executing its Linux Platform Products, Identity and Access Management, and Systems and Resource Management strategies, Novell's ability to take a competitive position in the Linux Platform Products, Identity and Access Management, and Systems and Resource Management industries, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand, Novell's ability to integrate acquired operations and employees, and the other factors described in Novell's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on May 25, 2007. Novell disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release except as required by the securities laws.
About Novell
Novell, Inc. (Nasdaq: NOVL) delivers infrastructure software for the Open Enterprise. Novell is a leader in enterprise-wide operating systems based on Linux and open source and provides the enterprise management services required to operate mixed IT environments. Novell helps customers minimize cost, complexity and risk, allowing them to focus on innovation and growth. For more information, visit www.novell.com.
Press Contact
Susan White
Novell, Inc.
Telephone: (781) 464-8525
Email: swhite@novell.com
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Novell, Inc. |
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| Assets | Apr 30, 2007 | Oct 31, 2006 | ||||||
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| Current assets: | ||||||||
| Cash and cash equivalents | $950,992 | $675,787 | ||||||
| Short-term investments | 840,721 | 790,500 | ||||||
| Receivables, net | 178,269 | 233,986 | ||||||
| Prepaid expenses | 37,406 | 32,328 | ||||||
| Other current assets | 30,710 | 28,524 | ||||||
| Total current assets | 2,038,098 | 1,761,125 | ||||||
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| Property, plant and equipment, net | 183,491 | 184,084 | ||||||
| Long-term investments | - | 2,263 | ||||||
| Goodwill | 415,815 | 424,701 | ||||||
| Intangible assets, net | 38,035 | 40,404 | ||||||
| Deferred income taxes | 4,805 | 4,770 | ||||||
| Other assets | 31,131 | 32,376 | ||||||
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| Total assets | $2,711,375 | $2,449,723 | ||||||
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| Liabilities and Stockholders' Equity | ||||||||
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| Current liabilities: | ||||||||
| Accounts payable | $43,386 | $44,419 | ||||||
| Accrued compensation | 90,643 | 103,710 | ||||||
| Other accrued liabilities | 97,891 | 106,837 | ||||||
| Income taxes payable | 44,837 | 49,600 | ||||||
| Deferred revenue | 412,007 | 380,979 | ||||||
| Total current liabilities | 688,764 | 685,545 | ||||||
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| Deferred income taxes | 5,004 | 4,186 | ||||||
| Long-term deferred revenue | 287,494 | 45,992 | ||||||
| Senior convertible debentures | 600,000 | 600,000 | ||||||
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| Total liabilities | 1,581,262 | 1,335,723 | ||||||
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| Preferred stock | - | 9,350 | ||||||
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| Stockholders' equity | 1,130,113 | 1,104,650 | ||||||
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| Total liabilities and stockholders' equity | $2,711,375 | $2,449,723 | ||||||
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| Reclassifications were made to the prior period amounts in order to conform to the current period's presentation. | ||||||||