- Record Revenue of $152.0 million for the quarter and $506.5 million for 2003
- Net Increase in Deferred Revenue: $54.6 million for the quarter and $121.2 million for 2003
- Earnings Per Share for the quarter: $0.14 GAAP; $0.27 Non-GAAP
- Earnings Per Share for the year ended 2003: $0.45 GAAP; $0.93 Non-GAAP
Utrecht — JANUARY 22, 2004 — Mercury Interactive Corporation (NASDAQ:
MERQ), the global leader in business technology optimization (BTO), today reported results for the fourth quarter and year ended December 31, 2003.
Revenue for the fourth quarter of 2003 was $152.0 million, an increase of 29 percent compared to $117.8 million reported in the fourth quarter of 2002. For the year ended December 31, 2003 revenue was $506.5 million, an increase of 27 percent compared to $400.1 million reported for the year ended December 31, 2002.
Deferred revenue for the fourth quarter of 2003 increased by $54.6 million from the third quarter of 2003 to $280.6 million. Cash generated from operations for the fourth quarter of 2003 was $66.9 million compared to $40.9 million in the fourth quarter of 2002.
GAAP RESULTS
Net income for the fourth quarter of 2003 was $13.1 million, or $0.14 per diluted share, compared to $18.8 million, or $0.21 per diluted share, for the same period a year ago. GAAP results for the fourth quarter include an executive severance charge of $6.6 million, stock-based compensation and amortization of intangible assets of $4.2 million, restructuring, integration and other related charges of $1.1 million and net loss on investments in non-consolidated companies of $2.2 million. For the year ended December 31, 2003, net income was $41.5 million, or $0.45 per diluted share compared to $65.2 million, or $0.74 per diluted share, for the year ended December 31, 2002. The results for the year ended 2003 include an executive severance charge of $6.6 million, $16.9 million of non-cash impairment charges related to real estate consolidation, stock-based compensation and amortization of intangible assets of $8.4 million, acquisition, restructuring, integration and other related charges of $15.4 million and net loss on investments in non-consolidated companies of $2.2 million.
NON-GAAP RESULTS
Net income for the fourth quarter of 2003 was $26.2 million, or $0.27 per diluted share, compared to $23.4 million, or $0.27 per diluted share, for the same period a year ago. Non-GAAP earnings per share for the fourth quarter of 2003 are calculated using fully diluted shares of 97.0 million. Net income for the year ended December 31, 2003 was $86.1 million, or $0.93 per diluted share, compared to $62.9 million, or $0.72 per diluted share, for the year ended December 31, 2002. Non-GAAP results for 2003, as presented in the attached reconciliation table, exclude the following recurring items: acquisition, restructuring, integration and other related charges, asset impairment charges related to real estate, gain on early retirement of debt, stock-based compensation and amortization of intangible assets, net loss on investments in non-consolidated companies as well as related income tax provisions or benefits. Also excluded is a non-recurring charge associated with executive severance.
"The fourth quarter capped off an impressive year of growth for Mercury with record revenues, record deferred revenue growth, and record cash flow from operations," said Amnon Landan, chairman and CEO at Mercury Interactive Corporation. "Our customers are adopting the new Mercury Optimization Centers as they take an enterprise approach to Business Technology Optimization."
Q4 2003 HIGHLIGHTS
- Record 19 transactions greater than $1.0 million in the fourth quarter
- Record 51% of new product orders as term licenses
- Record net increase in deferred revenue of $54.6 million, principally from term licenses
- Record results in Application Management and Application Delivery new orders and revenue
- IT governance (formerly Kintana) orders exceeded management expectations
FINANCIAL OUTLOOK
The following financial outlook is provided based on information as of January 21, 2004.
Management provides the following guidance for the quarter ending March 31, 2004:
- New order growth is expected to be in the range of 22 percent to 27 percent
- Term licenses are expected to be in the range of 45 percent to 50 percent of new product orders
- Revenue is expected to be in the range of $145.0 million to $155.0 million
- Net increase in deferred revenue is expected to be in the range of $10.0 million to $20.0 million
- GAAP diluted earnings per share is expected to be in a range of $0.12 to $0.18
- Non-GAAP diluted earnings per share is expected to be in the range of
$0.17 to $0.23
- Cash flow from operations is expected to be in the range of $50.0 million to $60.0 million
Non-GAAP guidance is adjusted from GAAP guidance by excluding recurring acquisition, restructuring, integration and other related charges and stock-based compensation and amortization of intangible assets of approximately $5.1 million.
QUARTERLY CONFERENCE CALL
A live Webcast of the conference call, together with supplemental financial information, can be accessed through the company's Investor Relations Web site at http://www.mercuryinteractive.com/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 January 27, 2004. The audio replay can be accessed by calling 888-203-1112 or 719-457-0820, conference call code: 708793.
ABOUT MERCURY
Mercury Interactive, the global leader in business technology optimization (BTO), is committed to helping customers optimize the business value of information technology. Founded in 1989, Mercury conducts business worldwide and is one of the fastest growing enterprise software companies today. Mercury provides software and services to govern the priorities, people and practices of IT; deliver and manage applications; and integrate IT strategy and execution.
Customers worldwide rely on Mercury Optimization Centers to improve quality and performance of applications and manage IT costs, risk and compliance. Mercury BTO offerings are complemented by technologies and services from global business partners. For more information, visit www.mercuryinteractive.com.
FORWARD LOOKING STATEMENTS
This press release contains "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 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 mix of perpetual and term licenses and the effect of the timing of the recognition of revenue from products sold under term licenses; 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 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 BTO strategy; 4) uncertainties related to the integration of Kintana's products and services, employees and operations; 5) the ability to attract and retain key personnel; 6) intense competition for Mercury Interactive's products and services; and
7) 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 and the Form 10-Q for the quarter ended September 30, 2003, which are available at the SEC’s website at www.sec.gov. All of the information in this press release is as of January 21, 2004, and Mercury Interactive undertakes no duty to update this information.
NON-GAAP FINANCIAL INFORMATION
Mercury Interactive provides non-GAAP 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. Mercury Interactive's management believes these non-GAAP measures are useful to investors because this supplemental information facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which is attached to this press release.
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Editor’s Note
Tables Attached: Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Table of Reconciliations from GAAP to Non-GAAP.
Mercury Interactive and Kintana are trademarks or registered trademarks of Mercury Interactive Corporation or its subsidiaries in the United States and/or other 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