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-- Total revenue was $54.6 million
-- Total costs and expenses were $42.4 million
-- Net income applicable to common stockholders was $10.0 million
-- Diluted earnings per share (GAAP) were $0.36
-- Non-GAAP diluted earnings per share were $0.39 (excluding stock option expense)
-- Cash flow from operations was $4.5 million
-- Total bookings of $53.8 million, including $8.2 million in software solutions bookings (total bookings includes $7.5 million in multi-year agreements with an average term of 2.5 years)
"We are pleased with our operating and financial results in what is typically a seasonally low quarter," stated i2 Chief Executive Officer Jackson L. Wilson, Jr. "We recorded more than $53 million in total bookings, with year-over-year growth in each of our bookings categories, including significant wins from our transportation and channel management solutions. The relationship between branded manufacturers and retailers continues to evolve and our channel management solutions address the challenges presented as a result of multi-enterprise collaboration."
"We are reporting solid financial results for the third quarter, highlighted by continued aggressive cost management, strong earnings per share and cash flow from operations that exceeded our expectations," stated i2 Executive Vice President and Chief Financial Officer Mike Berry. "We continue to manage the business very efficiently and are pleased with our strong profitability and growing cash position," concluded Berry.
Third Quarter Results
Revenue Detail
Total revenue for the third quarter was $54.6 million as compared to $64.8 million in the third quarter of 2008, a decrease of $10.1 million or 16 percent.
i2 had total third quarter software solutions revenue, which includes core and recurring license revenue and revenue to develop the licensed functionality, of $15.2 million. This compares to $10.6 million of software solutions revenue in the third quarter of 2008, an increase of $4.7 million or 44 percent year-over-year.
Services revenue in the third quarter was $21.0 million, a decrease of $12.3 million or 37 percent compared to the $33.3 million of services revenue in the third quarter of 2008. Services revenue includes fees received from consulting and training services and arrangements to customize or enhance previously purchased licensed software as well as reimbursable expenses.
Third quarter maintenance revenue was $18.4 million, a decrease of 12 percent from $20.9 million in the comparable prior year quarter.
Costs and Expenses
Costs and expenses, subtotal, excludes amounts related to the company's intellectual property patent infringement lawsuit (external litigation expenses in the 2009 period related to the Oracle litigation). Costs and expenses, subtotal for the third quarter of 2009 were $42.1 million, a 22 percent decrease compared to $54.2 million in the third quarter of 2008. Costs and expenses in the third quarter of 2009 included $2.1 million in stock-based compensation expense, which includes $1.0 million in expense related to stock options and $1.1 million in expense related to restricted stock units.
Total costs and expenses for the third quarter of 2009 were $42.4 million as compared to $54.2 million in the same period in 2008.
Net Income
The company reported third quarter 2009 net income applicable to common stockholders of $10.0 million, or $0.36 per diluted share. This compares to $1.4 million, or $0.05 per diluted share, in net income applicable to common stockholders in the third quarter of 2008.
Nine Month Results
For the nine months ended September 30, 2009, total revenues were $168.1 million, a decrease of 12 percent as compared to $192.1 million for the same period in 2008.
Software solutions revenue increased 17 percent to $40.7 million for the nine months ended September 30, 2009 compared to $34.8 million for the nine months ended September 30, 2008. Services revenue was $71.4 million for the nine months ended September 30, 2009 compared to $92.7 million in the same period in 2008, a decrease of 23 percent. Maintenance revenue decreased 13 percent to $56.0 million in the nine months ended September 30, 2009 compared to $64.6 million in the comparable period in 2008.
Costs and expenses, subtotal (excludes external litigation expenses in the 2009 period related to the Oracle litigation and external litigation expenses and settlement benefit in the 2008 period related to the SAP litigation), for the nine months ended September 30, 2009 decreased 21 percent to $136.6 million as compared to $172.0 million in the comparable period of 2008. Costs and expenses for the nine months ended September 30, 2009 included $7.2 million in stock-based compensation expense, which includes $3.9 million in expense related to stock options and $3.3 million in expense related to restricted stock units.
Total costs and expenses for the nine months ended September 30, 2009 were $137.2 million as compared to $92.1 million in the same period in 2008. The nine months ended September 30, 2008 amount reflects a benefit of $79.9 million, net of external patent litigation expenses, related to the company's intellectual property settlement with SAP.
The company reported net income applicable to common stockholders of $21.7 million or $0.80 per diluted share for the nine months ended September 30, 2009. This compares to $83.7 million or $3.15 per diluted share in net income applicable to common stockholders in the comparable period in 2008. The nine months ended September 30, 2008 amount includes $78.4 million, net of external litigation expenses and applicable taxes, from the intellectual property settlement.
Non-GAAP Diluted Earnings Per Share
The company provides non-GAAP financial measures to assist stockholders with the analysis of financial and business trends related to the company's operations. These calculations are not in accordance with, or an alternative for, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies.
Non-GAAP diluted earnings per share applicable to common stockholders in the third quarter of 2009 were $0.39, compared to $0.33 per diluted share in the comparable period last year on a non-GAAP basis. Non-GAAP diluted earnings per share applicable to common stockholders for the nine months ended September 30, 2009 were $0.98, compared to $0.54 per diluted share in the comparable period in 2008 on a non-GAAP basis. Non-GAAP diluted earnings per share excludes stock option expense; the impact of ASC 470 adoption; the net loss on the repurchase of the company's 5% senior convertible notes due to the write-off of unamortized discount and debt issuance costs partially offset by the repurchase of the notes below par value; the effect of the intellectual property settlement, net of the impact of taxes applicable to the settlement; and external expenses related to the company's proposed and subsequently terminated merger agreement in 2008.
A full reconciliation of GAAP to non-GAAP financial measures can be found in Schedule A included with this release.
Other Financial Information
On September 30, 2009, i2's total cash balance was $192.3 million (including restricted cash of $6.7 million), an increase of $10.7 million from June 30, 2009. The increase in the cash balance reflects the net proceeds from common stock issuance from exercised options as well as the positive cash flow from operations generated in the quarter.
The company generated cash flow from operations of $4.5 million in the third quarter of 2009, bringing the nine months ended September 30, 2009 cash flow from operations amount to $26.9 million.
The financial results included in this press release are preliminary and pending final review by the company and its external auditors. Financial results will not be final until the company files its third quarter 2009 Form 10-Q.
i2 Supply Chain Leader Forum
In addition, on Nov 10, i2 will host the i2 Supply Chain Leader Forum, a one-day virtual event focusing on supply chain management trends and supply chain strategies for 2010 and beyond. The i2 Supply Chain Leader Forum is free, accessible to attendees around the world via webcast, and will feature virtual presentations, panel discussions, live chats and an exhibit hall with more than 200 collateral resources available for downloading.
The i2 Supply Chain Leader Forum agenda, including presentation abstracts and presenter biographies, is available online at www.i2.com/sclforum. Registration for the i2 Supply Chain Leader Forum is also available online. To secure an all-access pass, please go to www.i2.com/sclforum and click the registration button in the upper right corner.
Earnings Conference Call and Webcast Information
Due to the proposed merger with JDA Software Group, Inc. announced earlier today, the company has cancelled its previously announced conference call to discuss the third quarter 2009 financial results.
About i2
Throughout its more than 20-year history of innovation and value delivery, i2 has dedicated itself to building successful customer partnerships. As a full-service supply chain company, i2 is uniquely positioned to help its clients achieve world-class business results through a combination of consulting, technology, and managed services. i2 solutions are pervasive in a wide cross-section of industries. Learn more at www.i2.com.
i2 is a registered trademark of i2 Technologies US, Inc. and i2 Technologies, Inc.
i2 Cautionary Language
This press release contains forward-looking statements that involve risks and uncertainties, including forward-looking statements regarding i2's ability to execute upon its internal plans and improve operational efficiencies. These forward-looking statements are based on current expectations for bookings, cash collections, revenue, expense, diluted shares outstanding and the company's proposed merger with JDA Software Group, Inc., and involve risks and uncertainties that may cause actual results to differ from those projected, including, without limitation, the risk that (i) we may experience purchasing delays or a reduction in maintenance renewals as a result of the proposed merger with JDA Software Group, Inc., (ii) the merger with JDA Software Group, Inc., as currently proposed, may not be consummated, (iii) we will be unable to develop new products or develop and generate additional demand for our existing products, (iv) we will be unable to remain competitive, (v) our strategy to sell new software solutions may not be successful, (vi) product quality, performance claims and other litigation may have a material adverse effect on our relationships with customers and our business, and (vii) key personnel leave the company or the company is unable to attract, train and retain additional personnel. For a discussion of factors which could impact i2's financial results and cause actual results to differ materially from those in forward-looking statements, please refer to i2's recent filings with the SEC, particularly the Annual Report on Form 10-K for the year ended December 31, 2008. i2 expressly disclaims any current intention to update the forward-looking information contained in this news release.
i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(unaudited)
September 30, December 31,
2009 2008
(as Restated) *
ASSETS
Current assets:
Cash and cash equivalents $ 185,513 $ 238,013
Restricted cash 6,737 5,777
Accounts receivable, net 21,127 25,846
Other current assets 8,663 9,477
Total current assets 222,040 279,113
Premises and equipment, net 3,230 4,915
Goodwill 16,684 16,684
Non-current deferred tax asset 5,624 7,289
Other non-current assets 3,842 5,024
Total assets $ 251,420 $ 313,025
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,502 $ 4,855
Accrued liabilities 13,042 15,116
Accrued compensation and related expenses 15,810 18,679
Deferred revenue 43,796 53,028
Total current liabilities 76,150 91,678
Total long-term debt, net - 64,520
Taxes payable 6,419 6,948
Total liabilities 82,569 163,146
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.001 par value, 5,000 shares authorized, none - -
issued and outstanding
Series A junior participating preferred stock, $0.001 par value, - -
2,000 shares authorized, none issued and outstanding
Series B 2.5% convertible preferred stock, $1,000 par value, 150 108,293 106,591
shares authorized 111 issued and outstanding at September 30, 2009
and 109 issued and outstanding at December 31, 2008
Common stock, $0.00025 par value, 2,000,000 shares authorized, 6 5
22,778 and 21,895 shares issued and outstanding at September 30,
2009 and December 31, 2008, respectively
Additional paid-in capital 10,492,082 10,498,453
Accumulated other comprehensive income 3,456 1,509
Accumulated deficit (10,434,986 ) (10,456,679 )
Net stockholders' equity 168,851 149,879
Total liabilities and stockholders' equity $ 251,420 $ 313,025
* 2008 period restated to reflect the adoption of ASC 470
i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three Months Ended Sept 30, Nine Months Ended Sept 30,
2009 2008 2009 2008
(as Restated) * (as Restated) *
Revenues:
Software solutions $ 15,217 $ 10,562 $ 40,689 $ 34,802
Services 21,006 33,316 71,357 92,666
Maintenance 18,413 20,875 56,021 64,588
Total revenues 54,636 64,753 168,067 192,056
Costs and expenses:
Cost of revenues:
Software solutions 2,892 2,296 7,214 7,784
Services 13,221 22,218 45,797 68,313
Maintenance 2,126 2,368 6,749 7,866
Amortization of acquired technology - - - 4
Sales and marketing 9,064 10,518 28,020 35,540
Research and development 6,360 7,384 20,124 22,558
General and administrative 8,432 9,402 25,695 29,830
Amortization of intangibles - 25 25 75
Restructuring charges and adjustments (20 ) - 2,975 -
Costs and expenses, subtotal 42,075 54,211 136,599 171,970
Intellectual property settlement, net 370 - 562 (79,860 )
Total costs and expenses (benefit) 42,445 54,211 137,161 92,110
Operating income 12,191 10,542 30,906 99,946
Non-operating income (expense), net:
Interest income 65 1,212 261 3,339
Interest expense - (1,872 ) (899 ) (5,596 )
Foreign currency hedge and transaction losses, net (97 ) (639 ) (928 ) (1,244 )
Loss on extinguishment of debt - - (892 ) -
Other income (expense), net (96 ) (5,575 ) (175 ) (5,094 )
Total non-operating (expense), net (128 ) (6,874 ) (2,633 ) (8,595 )
Income before income taxes 12,063 3,668 28,273 91,351
Income tax expense 1,219 1,508 4,180 5,349
Net income 10,844 2,160 24,093 86,002
Preferred stock dividend and accretion of discount 814 794 2,400 2,346
Net income applicable to common stockholders $ 10,030 $ 1,366 $ 21,693 $ 83,656
Net income per common share applicable to common stockholders:
Basic $ 0.37 $ 0.05 $ 0.80 $ 3.20
Diluted $ 0.36 $ 0.05 $ 0.80 $ 3.15
Weighted-average common shares outstanding:
Basic 27,305 26,337 26,951 26,175
Diluted 28,079 26,851 27,158 26,578
* 2008 period restated to reflect the adoption of ASC 470
i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months Ended September 30,
2009 2008
(as Restated) *
Cash flows from operating activities:
Net income $ 24,093 $ 86,002
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of debt issuance expense 84 516
Debt discount accretion 389 2,358
Loss on extinguishment of debt 892 -
Depreciation and amortization 2,133 2,738
Stock based compensation 7,166 8,661
Loss on disposal of premises and equipment 230 143
Provision for bad debts charged to costs and expenses 27 173
Deferred income taxes 1,539 1,526
Changes in operating assets and liabilities, excluding the effects
of acquisitions:
Accounts receivable 4,781 (2,097 )
Other assets 2,344 (8,420 )
Accounts payable (1,509 ) 559
Taxes payable 8 1,931
Accrued liabilities (2,898 ) 3,622
Accrued compensation and related expenses (3,184 ) 294
Deferred revenue (9,223 ) 929
Net cash provided by operating activities 26,872 98,935
Cash flows (used in) provided by investing activities:
Restrictions (placed) released on cash (960 ) 1,810
Purchases of premises and equipment (716 ) (848 )
Proceeds from sale of premises and equipment 72 13
Net cash (used in) provided by investing activities (1,604 ) 975
Cash flows (used in) provided by financing activities:
Repurchase of debt and equity conversion feature (84,814 ) -
Net proceeds from common stock issuance from options and employee 6,717 450
stock purchase plans
Net cash (used in) provided by financing activities (78,097 ) 450
Effect of exchange rates on cash 329 (176 )
Net change in cash and cash equivalents (52,500 ) 100,184
Cash and cash equivalents at beginning of period 238,013 120,978
Cash and cash equivalents at end of period $ 185,513 $ 221,162
Supplemental cash flow information
Interest paid $ 1,053 $ 2,156
Income taxes paid (net of refunds received) $ 4,404 $ 3,309
Schedule of non-cash financing activities
Preferred stock dividend and accretion of discount $ 2,400 $ 2,346
* 2008 period restated to reflect the adoption of ASC 470
SCHEDULE A TO PRESS RELEASE
November 5, 2009
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
($ in thousands, except per share data)
(unaudited)
Operating Income Three months ended Sept. 30, Nine months ended Sept. 30,
2009 2008 2009 2008
GAAP operating income $ 12,191 $ 10,542 $ 30,906 $ 99,946
GAAP operating margin 22.3 % 16.3 % 18.4 % 52.0 %
Add: stock option expense 1,046 1,704 3,866 5,679
Less: intellectual property settlement - - - 83,333
Non-GAAP operating income $ 13,237 $ 12,246 $ 34,772 $ 22,292
Non-GAAP operating margin 24.2 % 18.9 % 20.7 % 11.6 %
Net income applicable to common stockholders Three months ended Sept. 30, Nine months ended Sept. 30,
2009 2008 2009 2008
GAAP net income applicable to common stockholders $ 10,030 $ 1,366 $ 21,693 $ 83,656
Add: stock option expense 1,046 1,704 3,866 5,679
Less: intellectual property settlement - - - 83,333
Add: non-cash effect of incremental non-operating expense from ASC - 535 265 1,589
470 adoption
Add: external expenses related to proposed transaction in 2008 - 5,311 - 5,311
Add: loss on extinguishment of debt * - - 892 -
Add: tax effect of intellectual property settlement - - - 1,421
Non-GAAP net income applicable to common stockholders $ 11,076 $ 8,916 $ 26,716 $ 14,323
Diluted earnings per share applicable to common stockholders ** Three months ended Sept. 30, Nine months ended Sept. 30,
2009 2008 2009 2008
GAAP diluted earnings per share applicable to common stockholders $ 0.36 $ 0.05 $ 0.80 $ 3.15
Add: stock option expense $ 0.04 $ 0.06 $ 0.14 $ 0.21
Less: intellectual property settlement - - - $ 3.14
Add: non-cash effect of incremental non-operating expense from ASC - $ 0.02 $ 0.01 $ 0.06
470 adoption
Add: external expenses related to proposed transaction in 2008 - $ 0.20 - $ 0.20
Add: loss on extinguishment of debt * - - $ 0.03 -
Add: tax effect of intellectual property settlement - - - $ 0.05
Non-GAAP diluted earnings per share applicable to common stockholders $ 0.39 $ 0.33 $ 0.98 $ 0.54
Diluted share count 28,079 26,851 27,158 26,578
* Loss on extinguishment of debt represents the write-off of
unamortized discount and debt issuance costs, partially offset by
the repurchase of the notes below par value.
** Non-GAAP EPS amounts may vary from GAAP EPS amounts and
adjustments due to rounding
SCHEDULE B TO PRESS RELEASE
November 5, 2009
KEY PERFORMANCE INDICATORS
(unaudited)
3Q 08 4Q 08 1Q 09 2Q 09 3Q 09
Software solutions bookings ($ in millions) (1) $ 5.1 $ 7.8 $ 24.1 $ 14.4 $ 8.2
Services and maintenance bookings ($ in millions) $ 41.4 $ 41.7 $ 42.4 $ 47.2 $ 45.7
Total contract value of bookings ($ in millions) (2) $ 46.5 $ 49.5 $ 66.5 $ 61.6 $ 53.8
Dollar value of multi-year agreements included in total contract $ 4.2 $ 1.8 $ 8.8 $ 23.5 $ 7.5
value of bookings ($ in millions) (3)
Number of software solutions transactions booked > $500K 4 2 4 5 5
Average amount booked ($ in thousands) (4) $ 254 $ 244 $ 963 $ 552 $ 429
Software solutions revenue
Revenue from current quarter bookings ($ in millions) $ 0.9 $ 1.4 $ 2.6 $ 1.1 $ 1.2
Revenue from prior period bookings ($ in millions) $ 3.7 $ 4.9 $ 2.3 $ 9.6 $ 9.5
Subscription/recurring revenue ($ in millions) $ 6.0 $ 5.8 $ 5.3 $ 4.6 $ 4.5
Total software solutions revenue ($ in millions) $ 10.6 $ 12.1 $ 10.2 $ 15.3 $ 15.2
Total revenue recognized by region
Greater APAC 17% 20% 25% 27% 25%
EMEA 22% 21% 19% 20% 17%
Americas 61% 59% 56% 53% 58%
Total revenue 100% 100% 100% 100% 100%
Days sales outstanding 38 38 37 34 36
Total headcount 1,327 1,280 1,188 1,186 1,171
Direct sales representatives (5) 57 54 43 38 39
1. Software solutions bookings includes bookings for recurring
transactions and essential services
required to deliver the
licensed functionality.
2. Total contract value of bookings represents potential future
revenue from contracts executed in the period. However, there can
be no assurance that bookings will result in future revenue.
3. Dollar value of multi-year agreements represent the total
contract value of subscription/recurring and/or maintenance
agreements with a contractual term of greater than one (1) year
4. Average amount excludes recurring bookings less than $10K
5. Direct sales representatives includes commission-based, quota
carrying sales reps excluding sales management.
SOURCE: i2 Technologies, Inc.
i2 Investor Relations Tom Ward, 469-357-3854 tom_ward@i2.com or i2 Corporate Communications Beth Elkin, 469-357-4225 beth_elkin@i2.com
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