SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended June 30, 2002 | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Commission File Number 0-25871
Informatica Corporation
| Delaware | 77-0333710 | |
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
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2100 Seaport Blvd, Redwood City, California (Address of principal executive offices) |
94063 (Zip Code) |
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Registrant’s Telephone Number, Including Area Code:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
As of July 31, 2002, there were 79,948,843 shares of the registrant’s Common Stock outstanding.
INFORMATICA CORPORATION
FORM 10-Q
TABLE OF CONTENTS
| Page | ||||||
| PART I. FINANCIAL INFORMATION | ||||||
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Item 1.
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Condensed Consolidated Financial Statements | 2 | ||||
| Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001 | 2 | |||||
| Condensed Consolidated Statements of Operations — Three and Six Months Ended June 30, 2002 and 2001 | 3 | |||||
| Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2002 and 2001 | 4 | |||||
| Notes to Condensed Consolidated Financial Statements | 5 | |||||
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 | ||||
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk | 32 | ||||
| PART II. OTHER INFORMATION | ||||||
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Item 1.
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Legal Proceedings | 34 | ||||
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Item 4.
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Submission of Matters to a Vote of Securities Holders | 35 | ||||
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Item 6.
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Exhibits and Reports on Form 8-K | 35 | ||||
| Signature | 36 | |||||
1
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
INFORMATICA CORPORATION
| June 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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Cash and cash equivalents
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$ | 98,212 | $ | 131,264 | ||||||
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Short-term investments
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58,251 | 16,057 | ||||||||
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Accounts receivable, net of allowances of $1,563
and $2,295, respectively
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31,685 | 29,131 | ||||||||
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Prepaid expenses and other current assets
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5,494 | 7,061 | ||||||||
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Total current assets
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193,642 | 183,513 | ||||||||
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Restricted cash
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12,166 | 12,166 | ||||||||
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Property and equipment, net
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52,812 | 53,180 | ||||||||
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Long-term investments
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62,450 | 61,898 | ||||||||
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Goodwill
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29,564 | 28,760 | ||||||||
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Intangible assets, net
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1,088 | 2,461 | ||||||||
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Other assets
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584 | 925 | ||||||||
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Total assets
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$ | 352,306 | $ | 342,903 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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Accounts payable
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$ | 3,335 | $ | 2,934 | ||||||
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Accrued liabilities
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20,151 | 14,953 | ||||||||
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Accrued compensation and related expenses
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15,661 | 15,848 | ||||||||
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Income taxes payable
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2,842 | 2,874 | ||||||||
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Restructuring charges
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2,468 | 4,136 | ||||||||
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Deferred revenue
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38,707 | 36,554 | ||||||||
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Total current liabilities
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83,164 | 77,299 | ||||||||
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Restructuring charges, less current portion
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4,320 | 5,196 | ||||||||
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Stockholders’ equity
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264,822 | 260,408 | ||||||||
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Total liabilities and stockholders’ equity
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$ | 352,306 | $ | 342,903 | ||||||
See notes to condensed consolidated financial statements.
2
INFORMATICA CORPORATION
| Three Months | Six Months | |||||||||||||||||
| Ended | Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
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Revenues:
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License
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$ | 26,392 | $ | 28,213 | $ | 52,906 | $ | 63,584 | ||||||||||
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Service
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22,754 | 19,611 | 44,767 | 39,138 | ||||||||||||||
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Total revenues
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49,146 | 47,824 | 97,673 | 102,722 | ||||||||||||||
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Cost of revenues:
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License
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1,720 | 780 | 3,106 | 1,224 | ||||||||||||||
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Service
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9,727 | 10,497 | 19,598 | 21,628 | ||||||||||||||
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Total cost of revenues
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11,447 | 11,277 | 22,704 | 22,852 | ||||||||||||||
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Gross profit
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37,699 | 36,547 | 74,969 | 79,870 | ||||||||||||||
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Operating expenses:
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Research and development
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11,695 | 10,817 | 23,606 | 21,875 | ||||||||||||||
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Sales and marketing
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22,110 | 24,704 | 43,870 | 48,056 | ||||||||||||||
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General and administrative
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5,026 | 4,044 | 9,823 | 8,946 | ||||||||||||||
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Amortization of stock-based compensation
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65 | 316 | 138 | 672 | ||||||||||||||
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Amortization of goodwill and other intangible
assets
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285 | 6,795 | 570 | 13,389 | ||||||||||||||
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Total operating expenses
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39,181 | 46,676 | 78,007 | 92,938 | ||||||||||||||
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Loss from operations
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(1,482 | ) | (10,129 | ) | (3,038 | ) | (13,068 | ) | ||||||||||
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Interest income and other, net
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2,177 | 2,212 | 3,479 | 4,917 | ||||||||||||||
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Income (loss) before income taxes
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695 | (7,917 | ) | 441 | (8,151 | ) | ||||||||||||
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Income tax provision (benefit)
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261 | (375 | ) | 261 | 1,304 | |||||||||||||
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Net income (loss)
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$ | 434 | $ | (7,542 | ) | $ | 180 | $ | (9,455 | ) | ||||||||
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Net income (loss) per share:
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Basic
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$ | 0.01 | $ | (0.10 | ) | $ | 0.00 | $ | (0.12 | ) | ||||||||
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Diluted
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$ | 0.01 | $ | (0.10 | ) | $ | 0.00 | $ | (0.12 | ) | ||||||||
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Shares used in calculation of net income
(loss) per share:
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Basic
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79,308 | 77,307 | 79,137 | 76,969 | ||||||||||||||
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Diluted
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82,796 | 77,307 | 83,760 | 76,969 | ||||||||||||||
See notes to condensed consolidated financial statements.
3
INFORMATICA CORPORATION
| Six Months | |||||||||||
| Ended | |||||||||||
| June 30, | |||||||||||
| 2002 | 2001 | ||||||||||
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Operating activities
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Net income (loss)
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$ | 180 | $ | (9,455 | ) | ||||||
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Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
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Depreciation and amortization
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4,725 | 1,732 | |||||||||
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Provision for doubtful accounts
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236 | 208 | |||||||||
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Amortization of stock-based compensation
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138 | 672 | |||||||||
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Amortization of goodwill and intangible assets
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570 | 13,389 | |||||||||
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Gain on the sale of investments
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(154 | ) | — | ||||||||
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Loss on disposal of property and equipment
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357 | — | |||||||||
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Changes in operating assets and liabilities:
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Accounts receivable
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(2,790 | ) | 945 | ||||||||
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Prepaid expenses and other current assets
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1,567 | (3,685 | ) | ||||||||
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Other assets
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341 | (1,073 | ) | ||||||||
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Accounts payable
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401 | 1,883 | |||||||||
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Accrued liabilities
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5,198 | (3,898 | ) | ||||||||
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Accrued compensation and related expenses
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(187 | ) | 1,338 | ||||||||
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Income taxes payable
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(32 | ) | 555 | ||||||||
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Restructuring charges
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(2,544 | ) | — | ||||||||
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Deferred revenue
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2,153 | 5,436 | |||||||||
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Net cash provided by operating activities
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10,159 | 8,047 | |||||||||
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Investing activities
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Purchases of property and equipment, net
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(4,715 | ) | (14,152 | ) | |||||||
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Purchases of investments
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(128,980 | ) | (202,908 | ) | |||||||
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Sales and maturities of investments
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86,313 | 90,200 | |||||||||
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Acquisitions, net of cash acquired
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— | (13,737 | ) | ||||||||
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Net cash used in investing activities
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(47,382 | ) | (140,597 | ) | |||||||
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Financing activities
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Proceeds from issuance of common stock, net of
payments for repurchases
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3,794 | 7,474 | |||||||||
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Payments on capital lease obligations
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— | (83 | ) | ||||||||
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Net cash provided by financing activities
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3,794 | 7,391 | |||||||||
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Effect of foreign currency translation
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377 | 120 | |||||||||
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Decrease in cash and cash equivalents
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(33,052 | ) | (125,039 | ) | |||||||
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Cash and cash equivalents at beginning of period
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131,264 | 217,713 | |||||||||
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Cash and cash equivalents at end of period
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$ | 98,212 | $ | 92,674 | |||||||
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Supplemental disclosures:
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Income taxes paid
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$ | 450 | $ | 255 | |||||||
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Supplemental disclosures of noncash investing
and financing activities:
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Deferred stock-based compensation related to
common stock options granted
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$ | (4 | ) | $ | (219 | ) | |||||
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Common stock issued in connection with
acquisitions
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$ | — | $ | 2,351 | |||||||
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Unrealized gain (loss) on available-for-sale
securities
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$ | (75 | ) | $ | 357 | ||||||
See notes to condensed consolidated financial statements.
4
INFORMATICA CORPORATION
1. Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. All the amounts included in this report related to the financial statements as of June 30, 2002 and the three and six months ended June 30, 2002 and 2001 are unaudited. The interim results presented are not necessarily indicative of results for any subsequent quarter, the year ended December 31, 2002 or any future period.
These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2001 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission in March 2002. The condensed consolidated balance sheet as of December 31, 2001 has been prepared from the audited 2001 consolidated financial statements of the Company.
Certain amounts in the Company’s 2001 condensed consolidated statements of operations were reclassified to conform with the current year presentation. Reimbursements received for out-of-pocket expenses have been reported as service revenues as a result of the adoption of Financial Accounting Standards Board (“FASB”) Staff Announcement Topic No. D-103, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred” (“Topic D-103”). In prior periods, the out-of-pocket expenses were reported as a reduction of cost of service revenues. As a result, the following amounts were reclassified for the three and six months ended June 30, 2001 (in thousands):
| Three Months | Six Months | |||||||
| Ended | Ended | |||||||
| June 30, | June 30, | |||||||
| 2001 | 2001 | |||||||
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Service revenues, as previously reported
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$ | 18,928 | $ | 37,602 | ||||
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Add: reimbursements for out-of-pocket expenses
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683 | 1,536 | ||||||
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Service revenues, reclassified
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$ | 19,611 | $ | 39,138 | ||||
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Cost of service revenues, as previously reported
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$ | 9,814 | $ | 20,092 | ||||
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Add: reimbursements for out-of-pocket expenses
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683 | 1,536 | ||||||
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Cost of service revenues, reclassified
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$ | 10,497 | $ | 21,628 | ||||
2. Revenue Recognition
The Company recognizes revenue in accordance with AICPA Statement of Position (“SOP”) 97-2, as amended by SOP 98-4, “Software Revenue Recognition.”
The Company generates revenues from sales of software licenses and services. The Company’s license revenues are derived from its business analytic software, which consists of data integration, and to a lesser extent, analytic applications and analytics delivery products. The Company receives software license revenues from licensing its products directly to end users and indirectly through resellers, distributors and original equipment manufacturers (“OEMs”). Service revenues are derived from maintenance contracts and training and consulting services performed for customers that license the Company’s products either directly from the Company or indirectly through resellers, distributors and OEMs.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
License revenues are recognized when a noncancelable license agreement has been signed, the product has been shipped, the fees are fixed or determinable, collectibility is probable and vendor-specific objective evidence exists to allocate the total fee to elements of the arrangement. Vendor-specific objective evidence of fair value is based on the price charged when an element is sold separately. In the case of an element not yet sold separately, the price is established by the Company’s authorized management. If an acceptance period is required, revenue is recognized upon customer acceptance or the expiration of the acceptance period. For the data integration and analytics delivery products sold directly to end users, revenue is recognized upon shipment and when collectibility is probable. For the analytic applications, the Company recognizes the bundled license and maintenance revenue ratably over the maintenance period, generally one year. Support for the analytic applications for the first year is never sold separately and in consideration of the complexities of the implementation the customer is entitled to receive support services that are different than the standard annual support services. The Company also enters into reseller arrangements that typically provide for sublicense fees based on a percentage of list prices. Based on limited credit history, for sales to OEMs, specific resellers, distributors and specific international customers, the Company recognizes revenue at the time payment is received for the Company’s products, rather than at the time of sale. The Company’s standard agreements do not contain product return rights.
Maintenance revenues, which consist of fees for ongoing support and product updates, are recognized ratably over the term of the contract, typically one year. Consulting revenues are primarily related to implementation services and product enhancements performed on a time-and-materials basis or a fixed fee arrangement under separate service arrangements related to the installation and implementation of the Company’s software products. Training revenues are generated from classes offered at the Company’s headquarters, sales offices and customer locations. Revenues from consulting and training services are recognized as the services are performed. When a contract includes both license and service elements, the license fee is recognized on delivery of the software or cash collections, provided services do not include significant customization or modification of the base product, and are not otherwise essential to the functionality of the software and the payment terms for licenses are not dependent on additional acceptance criteria.
Deferred revenue includes deferred license, maintenance, training and consulting revenue. Deferred revenue amounts do not include items which are both deferred and unbilled. The Company’s practice is to net unpaid deferred items against the related receivables balances from those OEMs, specific resellers, distributors and specific international customers for which the Company defers revenue until payment is received.
3. Goodwill and intangible assets