October 22, 2004--Borland Software Corporation (Nasdaq:BORL), the global leader in platform-independent solutions for software delivery optimization, today announced financial results for its third quarter of 2004.
Revenues for the third quarter of 2004 were $77.6 million, up 10% from $70.6 million reported in the third quarter of 2003. GAAP net loss for the third quarter of 2004 narrowed to $160,000, or $(0.00) per share, as compared to a GAAP net loss of $12.2 million, or ($0.15) per share, reported in the third quarter of 2003.
On a Non-GAAP basis, net income for the third quarter of 2004 increased to $7.5 million, or $0.09 per diluted share, as compared to net income of $148,000, or $0.00 per diluted share, reported in the third quarter of 2003.
Also on a Non-GAAP basis, Borland generated operating income of $9.4 million and delivered operating margins of 12.1%. This represents a significant increase over Non-GAAP operating income of $1.1 million and operating margins of 1.6% reported in the third quarter of 2003.
“We are pleased with our financial results for the third quarter, as we continued to improve our solution selling, converted design wins into major, multi-product ALM engagements, and extended and deepened our relationships with customers and partners,” said Borland's president and chief executive officer, Dale L. Fuller. “In our first three quarters this year, we have completed 18 transactions greater than $1 million, as compared to nine transactions greater than $1 million for all of 2003.”
"In the third quarter, we were successful at increasing the leverage in our sales model and achieving additional operating efficiencies," said Borland's senior vice president and chief financial officer, Kenneth R. Hahn. "We continue to make decisions that are steadily moving Non-GAAP operating margins toward our goal of 15% in the fourth quarter. We remain focused on further improving sales execution and enhancing our overall go-to-market effectiveness as we more closely coordinate sales, marketing, services and productsto provide our customers with real solutions for their development and infrastructure needs. We are committed to driving additional growth and expanding our market opportunity over the long-term.”
In calculating Non-GAAP net income and operating income, Borland utilizes a financial measure of operating income, net income and net income per share that exclude as applicable restructuring, amortization of intangible assets, acquisition-related expenses, in-process research and development and the related tax benefit, as applicable. Investors are encouraged to review the reconciliation of Non-GAAP financial measures to the most directly comparable GAAP measures as provided below.
Business Outlook
Management provided the following financial guidance:
For the quarter ending December 31, 2004, on a GAAP basis:
- The company expects revenues will be in the range of $80 to $85 million.
- Forecast earnings per share should be in the range of $0.04 to $0.06.
For the quarter ending December 31, 2004, on a Non-GAAP basis:
- Forecast earnings per share should be in the range of $0.09 to $0.11.
The following table shows our Non-GAAP anticipated results for the quarter ending December 31, 2004 reconciled to the GAAP anticipated results. Our Non-GAAP anticipated results exclude amortization of intangible assets and acquisition-related expenses.
Non-GAAP Financial Measures
Borland provides all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Internally, Borland uses calculations of Non-GAAP operating income, net income and net income per share, which exclude as applicable restructuring, amortization of intangible assets, acquisition-related expenses, in-process research and development, and the related tax benefit, to evaluate its ongoing operations and to allocate resources within the organization.
Borland's management does not itself, nor does it suggest that investors should, consider such Non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Borland presents such Non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Borland's operating results in a manner that focuses on what management believes to be Borland's ongoing business operations. Management believes that the inclusion of Non-GAAP financial measures provides consistency and comparability with past reports of financial results and historically provided comparability to similar companies in Borland's industry. Investors should note, however, that the Non-GAAP financial measures used by Borland may not be the same Non-GAAP financial measures as, and may not be calculated in the same manner as, that of other companies. Borland's management believes it is useful for the company and investors to review both GAAP information that includes the expenses, charges, gains, and losses mentioned below and the Non-GAAP financial measures of operating income, net income and net income per share that exclude such charges to have a better understanding of the overall performance of Borland's business and its ability to perform in subsequent periods. Whenever Borland uses such a Non-GAAP financial measure, it provides a reconciliation of Non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these Non-GAAP financial measures to their most directly comparable GAAP financial measure.
Borland excludes restructuring charges, including (i) employee severance and other termination benefits, (ii) lease termination costs and other expenses associated with exiting a facility, (iii) disposition of fixed assets, and (iv) other costs associated with terminating contracts, from its Non-GAAP operating income, net income and net income per share calculations. Expenses related to restructuring have, in some cases, had a significant cash impact and effect on net income as measured in accordance with GAAP. However, Borland's management believes such restructuring charges are periodic costs incurred to realign its operating expenses with its anticipated future revenues and, consequently, does not consider these restructuring costs as a normal component of its expenses related to ongoing operations. As a result, Borland's management believes it is useful for itself and investors to review both GAAP information that includes such charges and Non-GAAP measures of operating income and net income that exclude these charges to have a better understanding of the overall performance of Borland's ongoing business operations and its performance in the periods presented. In accordance with GAAP, Borland regularly amortizes the remaining value of certain intangible assets over various periods. However, these amortization expenses result in no ongoing cash expenditures and otherwise have no material impact on Borland's ongoing business operations. Similarly, from time to time, Borland undertakes strategic acquisitions and investments. The expenses related to such acquisitions and investments may or may not result in a significant cash impact or effect on net income as measured in accordance with GAAP, but their impact is not directly related to Borland's ongoing business activities in such periods. Consequently, Borland excludes the amortization of intangible assets, acquisition-related expenses and in-process research and development expenses from its Non-GAAP financial measures. Borland believes that examination of both GAAP information that includes such charges and Non-GAAP financial measures that exclude such expenses provide management with information valuable to allocating available resources. Borland believes that if it did not provide such Non-GAAP financial information, investors would not have all the necessary data to analyze Borland's ongoing operations.
For the complete financial results press release, please go to the Borland web site.
www.borland.com