TIBCO Software Reports Record Third Quarter Financial Results

Thu. September 25, 2008; Posted: 04:11 PM

Total revenue for the third quarter of fiscal 2008 was $162.3 million and net income was $11.1 million, or $0.06 per diluted share. This compares to total revenue of $135.1 million and net income of $4.6 million, or $0.02 per diluted share, as reported for the third quarter of fiscal 2007.

On a non-GAAP basis, net income for the third quarter of fiscal 2008 was $19.6 million or $0.11 per diluted share, compared with $12.1 million or $0.06 per diluted share for the third quarter of fiscal 2007. Non-GAAP operating income for the third quarter of fiscal 2008 was $28.7 million, as compared to non-GAAP operating income of $16.3 million in the third quarter of fiscal 2007. Non-GAAP results exclude stock-based compensation expense, amortization of acquired intangible assets, acquired in-process research and development, restructuring activities and investment activities and assume a non-GAAP effective tax rate of 33% for fiscal 2008 and 35% for fiscal 2007.

"We saw 20% year-over-year revenue growth in each of the Americas, EMEA and Asia-Pacific regions this quarter," said Vivek Ranadive, TIBCO's chairman and chief executive officer. "From a vertical market perspective, Government, Energy and Telecommunications did particularly well with year-over-year growth of 134%, 78% and 61%, respectively. Our products provide the infrastructure software platform for a wide and growing range of industries and business processes, and we feel well positioned to command and capture an increasing share of enterprise software spend."

Third Quarter Fiscal 2008 Highlights * Total revenue rose 20% year over year to $162.3 million. * License revenue rose 28% year over year to $67.5 million. * Services and maintenance revenue rose 15% year over year to $94.8 million. * Cash flow from operations for the quarter was $22.5 million, putting year-to-date cash flow from operations at $114.8 million. This compares to $71.9 million for the first three quarters of fiscal 2007, for an increase of 60% year over year. * The number of license deals over $100,000 rose to 101, with 14 deals over $1 million. * TIBCO expanded its business with leading companies in Q3 such as Autodesk, BMC Software, Embratel, Energy Australia, Eni S.p.A., KPN, Ontario Teachers' Pension Plan Board, State of Ohio Job Family Services, TD Ameritrade, Toshiba, and Urban Outfitters.

Conference Call Details

TIBCO has scheduled a conference call for 4:30 pm ET / 1:30 pm PT today to discuss its third quarter results.

The conference call may be accessed over the internet at http://www.tibco.com or via dial-in at 877-718-5099 or 719-325-4801. Please join the conference call at least 10 minutes early to register. A replay of the conference call will be available until midnight on October 25, 2008 at http://www.tibco.com or via dial-in at 888-203-1112 or 719-457-0820. The pass code for both the call and the replay is 4382850.

About TIBCO

TIBCO's technology digitized Wall Street in the '80s with event-driven "Information Bus" software, which helped make real-time business a strategic differentiator in the '90s. Today, TIBCO's infrastructure software gives customers the ability to constantly innovate by connecting applications and data in a service-oriented architecture, streamlining activities through business process management, and giving people the information and intelligence tools they need to make faster and smarter decisions, what we call The Power of Now(R). TIBCO serves more than 3,000 customers around the world with offices in more than 20 countries and an ecosystem of over 200 partners. Learn more at http://www.tibco.com.

TIBCO, The Power of Now, Spotfire and TIBCO Software are trademarks or registered trademarks of TIBCO Software Inc. in the United States and/or other countries. All other product and company names and marks mentioned in this document are the property of their respective owners and are mentioned for identification purposes only.

About Non-GAAP Financial Information

This press release includes non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), please see the section entitled "About Non-GAAP Financial Measures" and the accompanying table entitled "Reconciliation of GAAP to Non-GAAP Measures."

Legal Notice Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the federal securities laws. The final financial results for third quarter of fiscal year 2008 may differ materially from the preliminary results presented in this release due to factors that include, but are not limited to, risks associated with the final review of the results and preparation of financial statements. In addition, forward-looking statements such as statements regarding TIBCO's position and ability to capture an increasing share of enterprise software spend are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These risks include but are not limited to: adverse changes in general economic or market conditions resulting in delays or reductions in information technology spending; successful execution of TIBCO's business plans; and competitive factors, including but not limited to pricing pressures, industry consolidation and new product introductions. Additional information regarding potential risks is provided in TIBCO's filings with the SEC, including its most recent Annual Report on Form 10-K for the year ended November 30, 2007 and Quarterly Report on Form 10-Q for the quarter ended June 1, 2008. TIBCO assumes no obligation to update the forward- looking statements included in this release.

TIBCO Software Inc. Condensed Consolidated Balance Sheets (unaudited) (in thousands) August 31, November 30, 2008 2007 ASSETS Current assets: Cash and cash equivalents $270,154 $170,237 Short-term investments 10,269 95,534 Accounts receivable, net 110,656 161,730 Prepaid expenses and other current assets 45,418 53,540 Total current assets 436,497 481,041 Property and equipment, net 105,551 111,390 Goodwill 388,824 412,256 Acquired intangible assets, net 85,569 110,930 Long-term deferred income tax assets 42,964 35,307 Other assets 42,203 47,535 Total assets $1,101,608 $1,198,459 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $14,315 $12,076 Accrued liabilities 84,681 95,526 Accrued excess facilities costs 4,434 5,421 Deferred revenue 131,146 127,200 Current portion of long-term debt 2,005 1,924 Total current liabilities 236,581 242,147 Accrued excess facilities costs, less current portion 7,065 10,811 Long-term deferred revenue 10,261 14,319 Long-term deferred income tax liabilities 2,966 25,821 Long-term income tax liabilities 12,412 - Long-term debt, less current portion 43,043 44,558 Other long-term liabilities 4,228 5,006 Total long-term liabilities 79,975 100,515 Total liabilities 316,556 342,662 Minority interest 488 401 Total stockholders' equity 784,564 855,396 Total liabilities and stockholders' equity $1,101,608 $1,198,459 TIBCO Software Inc. Condensed Consolidated Statements of Operations (unaudited) (in thousands, except net income per share) Three Months Ended Nine Months Ended Aug. 31, Sept. 2, Aug. 31, Sept. 2, 2008 2007 2008 2007 Revenue: License revenue $67,542 $52,593 $182,991 $159,704 Service and maintenance revenue: Service and maintenance 92,256 80,608 269,164 226,233 Reimbursable expenses 2,539 1,913 6,792 5,348 Total service and maintenance revenue 94,795 82,521 275,956 231,581 Total revenue 162,337 135,114 458,947 391,285 Cost of revenue: License 7,193 6,632 21,957 15,433 Service and maintenance 38,083 34,771 111,941 97,355 Total cost of revenue 45,276 41,403 133,898 112,788 Gross profit 117,061 93,711 325,049 278,497 Operating expenses: Research and development 28,496 23,843 80,706 66,855 Sales and marketing 55,683 48,755 166,525 138,137 General and administrative 13,468 13,664 40,257 38,529 Restructuring adjustment - (1,095) - (1,095) Amortization of acquired intangible assets 4,156 4,058 12,531 9,000 Acquired in-process research and development - 1,600 - 1,600 Total operating expenses 101,803 90,825 300,019 253,026 Income from operations 15,258 2,886 25,030 25,471 Interest income 1,925 2,842 7,427 14,948 Interest expense (810) (641) (2,528) (1,654) Other income (expense), net (319) 330 (287) (1,237) Income before provision for income taxes and minority interest 16,054 5,417 29,642 37,528 Provision for income taxes 4,917 731 9,391 13,215 Minority interest, net of tax 24 52 131 70 Net income $11,113 $4,634 $20,120 $24,243 Net income per share: Basic $0.06 $0.02 $0.11 $0.12 Diluted $0.06 $0.02 $0.11 $0.12 Shares used to compute net income per share: Basic 179,094 193,817 182,496 202,263 Diluted 183,154 200,128 186,402 209,439

About Non-GAAP Financial Measures

TIBCO provides non-GAAP measures for operating income, net income and net income per share data as supplemental information regarding TIBCO's business performance. TIBCO believes that these non-GAAP financial measures are useful to investors because they exclude non-operating charges. TIBCO's management excludes these non-operating charges when it internally evaluates the performance of TIBCO's business and makes operating decisions, including internal budgeting, performance measurement and the calculation of bonuses and discretionary compensation, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non- GAAP measures reflect the essential revenue generation activities of TIBCO. Accordingly, management excludes gains and losses on equity investments, costs related to formal restructuring plans, stock-based compensation related to employee stock options, the amortization of acquired intangible assets and charges for acquired in-process research and development, and the income tax effects of the foregoing, as well as adjustments for the impact of changes in the valuation allowance recorded against TIBCO's deferred tax assets when making operational decisions.

TIBCO believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand TIBCO's financial performance on a trended basis across historical periods. In addition, it allows investors to evaluate TIBCO's performance using the same methodology and information as that used by TIBCO's management.

Non-GAAP measures are subject to material limitations as these measures are not in accordance with, or a substitute for, GAAP and thus TIBCO's definition may be different from similar non-GAAP measures used by other companies and/or analysts. However, TIBCO's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of non-GAAP operating income, non-GAAP net income and non- GAAP net income per share. In addition, some items such as restructuring charges that are excluded from non-GAAP net income and non-GAAP earnings per share can have a material impact on cash flows and stock compensation charges can have a significant impact on earnings. Management compensates for these limitations by evaluating the non-GAAP measure together with the most directly comparable GAAP measure. TIBCO has historically provided non-GAAP measures to the investment community as a supplement to its GAAP results, to enable investors to evaluate TIBCO's business performance in the way that management does.

The non-GAAP adjustments, and the basis for excluding them, are outlined below:

Stock-based Compensation

TIBCO incurs stock-based compensation expense under SFAS 123( R ). TIBCO excludes this item for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share because it is a non-cash expense that TIBCO believes is not reflective of its business performance. The nature of the stock-based compensation expense also makes it very difficult to estimate prospectively, since the expense will vary with changes in the stock price and market conditions at the time of new grants, varying valuation methodologies, subjective assumptions and different award types, making the comparison of current results with forward-looking guidance potentially difficult for investors to interpret. The tax effects of stock-based compensation expenses may also vary significantly from period to period, without any change in underlying operational performance, thereby obscuring the underlying profitability of operations relative to prior periods (including prior periods following the adoption of SFAS 123( R )). The exclusion of stock-based compensation from the non-GAAP measures also allows a consistent comparison of TIBCO's relative historical financial performance, since the method for accounting for stock-based compensation changed at the beginning of fiscal 2006 when TIBCO adopted SFAS 123( R ). Finally, TIBCO believes that non-GAAP measures of profitability that exclude stock-based compensation are widely used by analysts and investors in the software industry.

Amortization of Intangible Assets

TIBCO has incurred amortization of intangible assets, included in its GAAP financial statements, related to various acquisitions TIBCO has made. Management excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. TIBCO believes that eliminating this expense from its non-GAAP measures is useful to investors, because the amortization of intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of TIBCO's acquisition transactions, which also vary substantially in frequency from period to period.

Acquired In Process Research and Development

TIBCO recorded charges for acquired in-process research and development ("IPR&D"), included in its GAAP presentation of operating expense, in connection with its acquisitions. These amounts were expensed on the acquisition dates as the acquired technology had not yet reached technological feasibility and had no future alternative uses. There can be no assurance that acquisition of businesses, products or technologies in the future will not result in substantial charges for acquired IPR&D. Accordingly, acquired IPR&D are non-recurring and generally unpredictable. TIBCO believes that eliminating this expense, for the purposes of calculating non-GAAP operating income, non- GAAP net income and non-GAAP net income per share, is useful to investors.

Restructuring Activities

TIBCO has incurred restructuring expenses, included in its GAAP presentation of operating expense, primarily due to workforce related charges such as payments for severance and benefits and estimated costs of exiting and terminating facility lease commitments related to a formal restructuring plan. TIBCO excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share, when it evaluates the continuing business performance of TIBCO. TIBCO believes that these items are not consistently recurring and do not necessarily reflect expected future operating expense, nor does TIBCO believe that they provide a meaningful evaluation of current versus past business results or the expense levels required to support TIBCO's operating plan.

Investment Activities

TIBCO records gains or losses on its equity investments based on its pro- rata share of gains or the net losses of the investment. These gains or net losses are included in TIBCO's GAAP presentation of operating income, net income and net income per share. TIBCO's business is not to invest in third parties, and such investments do not constitute a material portion of TIBCO's assets. The timing and magnitude of gains and losses are unpredictable, as they are inherently based on the performance of the third party subject to a particular investment. TIBCO excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share, when it evaluates the continuing business performance of TIBCO. TIBCO believes that these items do not necessarily reflect expected future operating expense or income, nor does TIBCO believe that they provide a meaningful evaluation of current versus past business results or the expense levels required to support TIBCO's operating plan.

The following table is a reconciliation of GAAP measures to non-GAAP for the third quarter and first nine months of fiscal 2008 and 2007, respectively.

TIBCO Software Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands) Nine Months Ended August 31, September 2, 2008 2007 Cash flows from operating activities: Net income $20,120 $24,243 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 11,957 12,115 Amortization of acquired intangible assets 24,319 15,497 Stock-based compensation 15,618 12,825 Acquired in-process research and development - 1,600 Deferred income tax (20,484) (3,774) Tax benefits related to stock benefit plans 13,050 7,280 Excess tax benefits from stock-based compensation (10,812) (8,652) Minority interest, net of tax 131 70 Other non-cash adjustments, net 583 (1,388) Changes in assets and liabilities: Accounts receivable 49,504 41,648 Prepaid expenses and other assets 12,277 (6,852) Accounts payable 2,071 (4,270) Accrued liabilities and excess facilities costs (2,659) (21,363) Deferred revenue (855) 2,930 Net cash provided by operating activities 114,820 71,909 Cash flows from investing activities: Purchases of short-term investments (37,047) (140,928) Maturities and sales of short-term investments 121,896 430,811 Purchases of private equity investments (29) (59) Proceeds from private equity investments 347 737 Cash used in acquisition, net of cash received - (181,336) Purchases of property and equipment (6,464) (10,020) Restricted cash pledged as security 53 (275) Net cash provided by investing activities 78,756 98,930 Cash flows from financing activities: Proceeds from issuance of common stock 10,295 21,515 Repurchases of the Company's common stock (110,687) (226,932) Excess tax benefits from stock-based compensation 10,812 8,652 Principal payments on long-term debt (1,434) (5,484) Proceeds from minority investors - 189 Net cash used for financing activities (91,014) (202,060) Effect of foreign exchange rate changes on cash and cash equivalents (2,645) 1,422 Net change in cash and cash equivalents 99,917 (29,799) Cash and cash equivalents at beginning of period 170,237 138,912 Cash and cash equivalents at end of period $270,154 $109,113 TIBCO Software Inc. Reconciliation of GAAP to Non-GAAP Measures (unaudited) (in thousands, except net income per share) Three Months Ended Aug. 31, 2008 Sept. 2, 2007 Operating Net Operating Net Income Income Income Income GAAP $15,258 $11,113 $2,886 $4,634 Amortization of intangible assets - cost of revenue 3,989 3,989 3,686 3,686 Amortization of intangible assets - operating expense 4,156 4,156 4,058 4,058 Stock-based compensation - cost of revenue 645 645 760 760 Stock-based compensation - R&D expense 1,181 1,181 1,022 1,022 Stock-based compensation - S&M expense 1,682 1,682 1,732 1,732 Stock-based compensation - G&A expense 1,749 1,749 1,614 1,614 Acquired in-process research and development - - 1,600 1,600 Restructuring adjustment - - (1,095) (1,095) Realized gain on sales of private equity investment - (125) - (64) Income tax adjustment for non-GAAP (1) - (4,762) - (5,825) Non-GAAP $28,660 $19,628 $16,263 $12,122 Diluted net income per share: GAAP $0.06 $0.02 Non-GAAP $0.11 $0.06 Shares used to compute diluted net income per share 183,154 200,128 Nine Months Ended Aug. 31, 2008 Sept. 2, 2007 Operating Net Operating Net Income Income Income Income GAAP $25,030 $20,120 $25,471 $24,243 Amortization of intangible assets - cost of revenue 11,788 11,788 6,497 6,497 Amortization of intangible assets - operating expense 12,531 12,531 9,000 9,000 Stock-based compensation - cost of revenue 1,972 1,972 1,818 1,818 Stock-based compensation - R&D expense 3,456 3,456 2,815 2,815 Stock-based compensation - S&M expense 5,089 5,089 4,102 4,102 Stock-based compensation - G&A expense 5,101 5,101 4,090 4,090 Acquired in-process research and development - - 1,600 1,600 Restructuring adjustment - - (1,095) (1,095) Realized gain on sales of private equity investment - (125) - (64) Income tax adjustment for non-GAAP (1) - (13,529) - (9,987) Non-GAAP $64,967 $46,403 $54,298 $43,019 Diluted net income per share: GAAP $0.11 $0.12 Non-GAAP $0.25 $0.21 Shares used to compute diluted net income per share 186,402 209,439 (1) The estimated non-GAAP effective tax rate was 33% and 35% for fiscal 2008 and 2007, respectively, and has been used to adjust the provision for income taxes for non-GAAP purposes.

SOURCE TIBCO Software Inc.

http://www.tibco.com

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