UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter ended December 31, 2002
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission File Number 000-26757
NetIQ CORPORATION
(Exact name of Registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
77-0405505 (I.R.S. Employer Identification No.) | |
| 3553 North First Street, San Jose, CA (Address of principal executive offices) |
95134 (Zip Code) |
(408) 856-3000
(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 x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of January 31, 2003, the Registrant had outstanding 55,482,562 shares of Common Stock.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED DECEMBER 31, 2002
| Page | ||||
| PART I |
FINANCIAL INFORMATION |
|||
| ITEM 1. |
3 | |||
| 3 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
4 | |||
| 5 | ||||
| 6 | ||||
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
15 | ||
| ITEM 3. |
34 | |||
| ITEM 4. |
35 | |||
| PART II |
OTHER INFORMATION |
|||
| ITEM 1. |
36 | |||
| ITEM 2. |
36 | |||
| ITEM 4. |
36 | |||
| ITEM 6. |
37 | |||
| 38 | ||||
| 39 |
2
ITEM 1. FINANCIAL STATEMENTS
NetIQ CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
| December 31, 2002 |
June 30, 2002 (1) |
|||||||
| (Unaudited) |
||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
50,343 |
|
$ |
64,032 |
| ||
| Short-term investments |
|
252,434 |
|
|
411,861 |
| ||
| Accounts receivable, net of allowance for uncollectible accounts and sales returns |
|
44,062 |
|
|
35,095 |
| ||
| Prepaid expenses and other |
|
7,698 |
|
|
4,511 |
| ||
| Total current assets |
|
354,537 |
|
|
515,499 |
| ||
| Property and equipment, net |
|
58,208 |
|
|
55,518 |
| ||
| Other intangible assets, net |
|
81,317 |
|
|
57,537 |
| ||
| Goodwill, net |
|
603,661 |
|
|
915,813 |
| ||
| Long-term investments |
|
7,401 |
|
|
2,652 |
| ||
| Other assets |
|
1,804 |
|
|
1,624 |
| ||
| Total assets |
$ |
1,106,928 |
|
$ |
1,548,643 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
9,300 |
|
$ |
5,612 |
| ||
| Accrued compensation and related benefits |
|
20,608 |
|
|
17,505 |
| ||
| Other liabilities |
|
23,734 |
|
|
15,363 |
| ||
| Restructuring liability, current portion |
|
2,636 |
|
|
— |
| ||
| Deferred revenue, current portion |
|
57,801 |
|
|
46,603 |
| ||
| Total current liabilities |
|
114,079 |
|
|
85,083 |
| ||
| Restructuring liability, net of current portion |
|
1,505 |
|
|
— |
| ||
| Deferred revenue, net of current portion |
|
3,708 |
|
|
2,100 |
| ||
| Total liabilities |
|
119,292 |
|
|
87,183 |
| ||
| Stockholders’ equity: |
||||||||
| Common stock—$0.001; 250,000,000 shares authorized; 55,441,947 issued and outstanding at December 31, 2002; and 54,588,258 issued and outstanding at June 30, 2002 |
|
2,921,845 |
|
|
2,876,462 |
| ||
| Deferred employee stock-based compensation |
|
(1,782 |
) |
|
(395 |
) | ||
| Accumulated deficit |
|
(1,933,608 |
) |
|
(1,327,592 |
) | ||
| Accumulated other comprehensive income |
|
1,181 |
|
|
1,625 |
| ||
| Less treasury stock, zero shares at December 31, 2002 and 4,003,550 shares at June 30, 2002 |
|
— |
|
|
(88,640 |
) | ||
| Total stockholders’ equity |
|
987,636 |
|
|
1,461,460 |
| ||
| Total liabilities and stockholders’ equity |
$ |
1,106,928 |
|
$ |
1,548,643 |
| ||
| (1) | Derived from audited consolidated financial statements |
See notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended December 31, |
Six Months Ended December 31, |
|||||||||||||||
| 2002 |
2001 |
2002 |
2001 |
|||||||||||||
| Software license revenue |
$ |
56,606 |
|
$ |
50,210 |
|
$ |
112,588 |
|
$ |
95,338 |
| ||||
| Service revenue |
|
23,704 |
|
|
16,636 |
|
|
44,810 |
|
|
32,202 |
| ||||
| Total revenue |
|
80,310 |
|
|
66,846 |
|
|
157,398 |
|
|
127,540 |
| ||||
| Cost of software license revenue |
|
2,084 |
|
|
1,029 |
|
|
4,511 |
|
|
1,930 |
| ||||
| Cost of service revenue |
|
7,168 |
|
|
5,359 |
|
|
13,667 |
|
|
10,744 |
| ||||
| Total cost of revenue |
|
9,252 |
|
|
6,388 |
|
|
18,178 |
|
|
12,674 |
| ||||
| Gross profit |
|
71,058 |
|
|
60,458 |
|
|
139,220 |
|
|
114,866 |
| ||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
|
32,471 |
|
|
26,073 |
|
|
62,489 |
|
|
51,672 |
| ||||
| Research and development |
|
16,831 |
|
|
14,398 |
|
|
32,959 |
|
|
28,761 |
| ||||
| General and administration |
|
5,897 |
|
|
4,532 |
|
|
10,847 |
|
|
8,925 |
| ||||
| Employee stock-based compensation |
|
197 |
|
|
1,107 |
|
|
406 |
|
|
2,474 |
| ||||
| Write-off of acquired in-process research and development |
|
1,396 |
|
|
— |
|
|
1,396 |
|
|
— |
| ||||
| Amortization of other intangible assets |
|
9,877 |
|
|
10,269 |
|
|
18,884 |
|
|
20,538 |
| ||||
| Amortization of goodwill |
|
— |
|
|
187,940 |
|
|
— |
|
|
376,233 |
| ||||
| Restructuring charge |
|
5,280 |
|
|
— |
|
|
5,280 |
|
|
— |
| ||||
| Total operating expenses |
|
71,949 |
|
|
244,319 |
|
|
132,261 |
|
|
488,603 |
| ||||
| Income (loss) from operations |
|
(891 |
) |
|
(183,861 |
) |
|
6,959 |
|
|
(373,737 |
) | ||||
| Other income (expenses): |
||||||||||||||||
| Interest income |
|
3,253 |
|
|
4,950 |
|
|
7,243 |
|
|
10,454 |
| ||||
| Other income (expenses) |
|
|||||||||||||||