Borland Reports Fourth Quarter and Year End 2007 Financial Results
Company Takes Impairment Charge of $26.5 Million in CodeGear Goodwill
AUSTIN, Texas - Feb 28, 2008 : Borland Software Corporation (NASDAQ:BORL), the global leader in Open Application Lifecycle Management (ALM), today announced preliminary financial results for the fourth quarter and fiscal year ended December 31, 2007.
For the fourth quarter of 2007, Borland reported total revenue of $61.5 million, GAAP net loss of $41.7 million, or $0.57 per share, and non-GAAP net loss of $2.7 million, or $0.04 per share. GAAP net loss included an impairment charge of $26.5 million in CodeGear goodwill, $1.2 million in stock-based compensation, $2.2 million in amortization of intangibles and $9.1 million in restructuring and other related expenses.
Revenue for ALM products and services for the fourth quarter of 2007 was $35.7 million. Deployment (DPG) products and services revenue was $8.9 million and CodeGear (IDE) products and services revenue was $16.9 million.
For 2007, Borland reported total revenue of $268.8 million. The enterprise segment, which consists of ALM and DPG products, reported $211.8 million in total revenue for the year. The CodeGear segment reported $57 million in total revenue for the year. Borland reported a GAAP operating loss of $61 million for the year compared to a loss of $53.1 million in the prior year and a non-GAAP operating loss of $8.4 million compared to a loss of $14.9 million in the prior year.
"Borland is in the midst of a multi-year transformation aimed at creating a growing, profitable, innovative leader in the ALM market," said Tod Nielsen, president and CEO of Borland. "It is important to judge 2007 in context of this transformation. Though ALM revenue did not show the growth of the prior year, Borland reached significant milestones each and every quarter."
"Heading into what looks to be a difficult overall IT spending environment in 2008, we maintain our focus on developing a predictable and growing revenue stream, delivering innovative products, and driving cost reductions to achieve sustainable profitability by the second half of the year," concluded Nielsen.
2008 Business OutlookManagement expects total revenue for 2008 to be in the range of $235 to $255 million. Of this, CodeGear is expected to contribute approximately $55 million in revenue. Non-GAAP net income is expected to range from a loss of $12 million to a profit of $3 million. The Non-GAAP net income excludes restructuring costs, any impairment charges, stock-based compensation, and amortization of intangibles in the period. GAAP net loss is expected to be between $26 million and $11 million.
Conference CallBorland will host a conference call and live webcast at 7:00 a.m., Central Standard Time, today. To access the conference call, dial 800-867-0448 for the US or Canada and 303-262-2131 for international callers. The webcast will be available live on the Investor Relations section of the Company's corporate website at www.borland.com, and via replay beginning approximately two hours after the completion of the call until the Company's announcement of its financial results for the next quarter. Listeners are reminded to access the webcast at least 30 minutes prior to the scheduled time to download any necessary audio or plug-in software. An audio replay of the call will also be available beginning at approximately 9:00 a.m. Central Standard Time on February 28, 2008 until 11:59 p.m. Central Standard Time on March 6, 2008, by dialing 800-405-2236, or 303-590-3000 for international callers, and entering passcode 11109147#.
About BorlandFounded in 1983, Borland (NASDAQ:BORL) is the leading vendor of Open Application Lifecycle Management (ALM) solutions - open to customers' processes, tools and platforms - providing the flexibility to manage, measure and improve the software delivery process. To learn more about maximizing the business value of software, visit http://www.borland.com.
Borland and all other Borland brand and product names are service marks, trademarks or registered trademarks of Borland Software Corporation or its subsidiaries in the United States and other countries. All other marks are the property of their respective owners.
Forward-Looking StatementsStatements made in this release that are not historical facts are "forward-looking statements" and accordingly involve risk and uncertainties that could cause actual results to differ materially from those described in this release. Forward-looking statements include, for example, all statements relating to projected financial performance (including statements involving projection of revenue, income including income (loss), earnings including earnings (loss) per share, capital expenditures, dividends, capital structure, or other financial items), the plans and objectives of management for future operations, products or services; and future performance in economic terms or other any other measures.
The potential risks and uncertainties that could cause results to differ materially include, among others, our ability to predict revenue and control expenses, and our ability to grow our ALM business or achieve profitability as planned. These and other risks are detailed in Borland's periodic reports filed with the Securities and Exchange Commission, including, its latest Annual Report on Form 10-K, and its latest quarterly report on Form 10-Q, copies of which may be obtained from www.sec.gov. Borland does not intend to update this information to reflect future events or circumstances unless required by law.
Non-GAAP Financial MeasuresThe attached press release and tables include non-GAAP financial measures. Borland's management uses non-GAAP financial measures in assessing the performance of Borland's ability to develop, sell and market products and services ("Ongoing Operations"). They are also used for planning and forecasting in future periods. Non-GAAP financial measures also facilitate internal comparisons to Borland's historical operating results. Borland has historically reported similar non-GAAP financial measures and believes that the inclusion of comparative results provides consistency in its financial reporting that benefits investors. Non-GAAP financial measures are computed using consistent methods from quarter to quarter and year to year. These non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. They should be viewed in conjunction with the consolidated financial statements prepared in accordance with GAAP.
In presenting non-GAAP financial measures, Borland has excluded the following items:
A. Restructuring and severance charges. Borland has incurred restructuring charges eliminating certain duplicative activities, focusing Borland's resources on future growth opportunities and reducing Borland's cost structure. In connection with its restructuring, Borland has recognized costs related to termination benefits for former Borland employees whose positions were eliminated and for the closure of Borland facilities. Borland excludes these items because these expenses are not reflective of Ongoing Operations and Borland believes excluding these items from its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share facilitates comparisons with prior and subsequent reporting periods as well as comparisons to the operating results of competitors in Borland's industry. Expenses related to severance and restructuring have, in some cases, had a significant cash impact and effect on Borland's results of operations, including its net income (loss) as measured in accordance with GAAP.
B. Goodwill impairment charge. Borland recorded a non-cash goodwill impairment charge in the fourth quarter of 2007 relating to its CodeGear segment due to business performance and market conditions. This type of charge has not occurred frequently and Borland believes that excluding this charge will provide investors with a basis to compare the Company's core operating results in different periods without this variability.
C. Stock compensation impact of SFAS 123R. These expenses consist of expenses for employee stock options and employee stock purchases under SFAS 123R. Prior to the adoption of SFAS 123R in fiscal 2006, Borland did not include expenses related to employee stock options and employee stock purchases directly in its financial statements, but elected, as permitted by SFAS 123R, to disclose such expenses in the footnotes to its financial statements. As Borland applies SFAS 123R, Borland believes that it is useful to investors to understand the impact of the application of SFAS 123R to Borland's operational performance in comparison to prior periods in which such expense was not included directly in its financial statements. In addition, while stock-based compensation expense calculated in accordance with SFAS 123R constitutes an ongoing and recurring expense, such expense is excluded from its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share because it is not an expense that typically requires or will require cash settlement by Borland and consequently is not used by management to assess the core profitability of Borland's Ongoing Operations. Borland believes it is useful to investors to understand the impact of the application of SFAS 123R to Borland's liquidity and its ability to invest in research and development and fund acquisitions and capital expenditures. Borland further believes its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share excluding this item are useful to investors in that excluding this item facilitates comparisons to the operating results of competitors in Borland's industry that may have different patterns of activity associated with equity compensation.
D. Amortization of purchased intangibles. In connection with its acquisitions, Borland has incurred amortization of purchased intangible assets. These purchased intangibles include: developed technology, customer lists and relationships, maintenance agreements, trade names, trademarks and service marks and non-compete agreements. For accounting purposes, Borland amortizes the fair value of the purchased intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated. Although these intangible assets generate revenue for Borland, Borland excludes the associated amortization expense because it is non-cash in nature and because Borland believes its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share excluding this item provides meaningful supplemental information regarding Borland's operational performance, liquidity and Borland's ability to invest in research and development and fund acquisitions and capital expenditures. In addition, excluding this item facilitates comparisons to Borland's historical operating results and comparisons to the operating results of competitors in Borland's industry which may have different acquisition histories.
E. Acquisition-related expenses. Borland has incurred significant acquisition-related expenses in connection with its prior acquisitions. Borland has also acquired in-process research and development that had not yet reached technological feasibility and had no alternative future use. Accordingly, these amounts were charged to operating expense upon consummation of the respective acquisitions. Borland excludes these items from its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share because these expenses are not reflective of Ongoing Operations in the current period and have no direct correlation to the operation of Borland's business either historically or on a future basis, as these are one-time charges. In addition, excluding this item facilitates comparisons to Borland's historical and future operating results and comparisons to the operating results of competitors in Borland's industry which may have different acquisition histories. Expenses related to acquisitions have, in some cases, had a significant cash impact and effect on Borland's results of operations, including its net income (loss) as measured in accordance with GAAP.
Borland also excluded the common share equivalents that would have resulted from using the "if-converted" method of calculating the non-GAAP diluted income per share relating to the common shares issuable upon conversion of the convertible senior notes.
Borland believes that non-GAAP measures have significant limitations in that they do not reflect all of the amounts associated with Borland's financial results as determined in accordance with GAAP and that these measures should only be used to evaluate Borland's financial results in conjunction with the corresponding GAAP measures. In addition, the exclusion of the charges and expenses indicated above from the non-GAAP financial measures presented does not indicate an expectation by Borland management that similar charges and expenses will not be incurred in subsequent periods.
BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts, unaudited)
ASSETS December December
31, 2007 31, 2006
---------------------------------------------- ---------- ----------
Current assets:
Cash and cash equivalents $ 90,805 $ 55,317
Short-term investments 68,061 -
Accounts receivable, net of allowances of
$6,096 and $5,413, respectively 54,640 62,154
Prepaid expenses 9,207 13,341
Other current assets 5,106 1,329
---------- ----------
Total current assets 227,819 132,141
---------- ----------
Property and equipment, net 9,996 11,176
Goodwill 226,688 253,356
Intangible assets, net 31,658 40,521
Long-term investments 37,970 -
Other non-current assets 9,886 6,705
---------- ----------
Total assets $ 544,017 $ 443,899
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------------
Current liabilities:
Accounts payable $ 7,622 $ 15,591
Accrued expenses 31,605 36,438
Short-term restructuring 9,867 9,582
Income taxes payable 2,315 14,925
Deferred revenue 51,390 58,930
Other current liabilities 7,575 7,264
---------- ----------
Total current liabilities 110,374 142,730
---------- ----------
Convertible senior notes 200,000 -
Long-term restructuring 5,823 6,231
Long-term deferred revenues 1,774 1,610
Other long-term liabilities 23,976 7,848
---------- ----------
Total liabilities 341,947 158,419
---------- ----------
Stockholders' equity:
Preferred stock; $.01 par value; 1,000,000
shares authorized; 0 shares issued and
outstanding - -
Common stock; $.01 par value; 200,000,000
shares authorized; 72,975,972 and 78,704,764
shares issued and outstanding, respectively 730 787
Additional paid-in capital 666,910 659,932
Accumulated deficit (335,478) (273,892)
Cumulative other comprehensive income 10,317 9,121
---------- ----------
342,479 395,948
Less common stock in treasury at cost,
21,158,980 and 15,275,899 shares, respectively (140,409) (110,468)
---------- ----------
Total stockholders' equity 202,070 285,480
---------- ----------
Total liabilities and stockholders' equity $ 544,017 $ 443,899
========== ==========
BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
Three Months Ended Twelve Months Ended
------------------- -------------------
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
License and other revenues $ 29,360 $ 39,362 $137,358 $165,886
Service revenues 32,097 36,410 131,423 138,774
--------- --------- --------- ---------
Total revenues 61,457 75,772 268,781 304,660
--------- --------- --------- ---------
Costs of revenues:
Cost of license and other
revenues 1,322 1,570 6,014 7,439
Cost of service revenues 9,393 13,594 40,918 55,381
Amortization of acquired
intangibles and other charges 2,100 2,120 8,445 6,972
--------- --------- --------- ---------
Cost of revenues 12,815 17,284 55,377 69,792
--------- --------- --------- ---------
Gross profit 48,642 58,488 213,404 234,868
--------- --------- --------- ---------
Selling, general and
administrative 40,391 46,582 176,206 195,710
Research and development 14,158 16,505 57,795 70,178
Restructuring, amortization of
other intangibles,
acquisition-related expenses
and other charges 9,259 6,717 13,934 22,073
Impairment of goodwill 26,509 - 26,509 -
--------- --------- --------- ---------
Total operating expenses 90,317 69,804 274,444 287,961
--------- --------- --------- ---------
Operating loss (41,675) (11,316) (61,040) (53,093)
Gain on sale of fixed assets - - - 1,658
Interest income 2,243 586 8,742 3,168
Interest expense and other
income (1,580) (171) (6,239) (1,164)
--------- --------- --------- ---------
Total other income 663 415 2,503 3,662
--------- --------- --------- ---------
Loss before income taxes (41,012) (10,901) (58,537) (49,431)
--------- --------- --------- ---------
Income tax provision 694 (78) 3,136 2,522
--------- --------- --------- ---------
Net loss $(41,706) $(10,823) $(61,673) $(51,953)
========= ========= ========= =========
Net loss per share:
Net loss per share - basic
and diluted $ (0.57) $ (0.14) $ (0.85) $ (0.67)
========= ========= ========= =========
Shares used in computing
basic and diluted net loss
per share 72,533 77,622 72,875 77,096
========= ========= ========= =========
BORLAND SOFTWARE CORPORATION
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts, unaudited)
Three Months Ended Twelve Months Ended
------------------- -------------------
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Net loss on a GAAP basis $(41,706) $(10,823) $(61,673) $(51,953)
Stock-based compensation
expenses 1,249 1,905 6,033 10,688
Restructuring and
acquisition related
expenses 9,115 4,866 11,254 13,590
Amortization of purchased
intangibles 2,171 2,277 8,858 7,529
Acquired in-process research
and development expense - - - 4,800
Impairment of goodwill 26,509 - 26,509 -
Gain on sale of fixed assets - - - (1,658)
------------------- --------- ---------
Net loss on a non-GAAP basis $ (2,662) $ (1,775) $ (9,019) $(17,004)
=================== ========= =========
Statements of Operations
Reconciliation per Share
----------------------------
--------- --------- --------- ---------
Basic and diluted net loss
per share on a GAAP basis $ (0.57) $ (0.14) $ (0.85) $ (0.67)
========= ========= ========= =========
Basic and diluted net loss
per share on a non-GAAP
basis $ (0.04) $ (0.02) $ (0.12) $ (0.22)
========= ========= ========= =========
Shares used in computing
basic and diluted net loss
per share 72,533 77,622 72,875 77,096
========= ========= ========= =========
SOURCE: Borland Software Corporation
Borland Software Corporation
Beth Pilch, 512-340-1364
Bpilch@borland.com
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