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 Quarterly Period Ended December 31, 2003
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 | 77-0405505 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) | |
| 3553 North First Street, San Jose, CA | 95134 | |
| (Address of principal executive offices) | (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, 2004, the Registrant had outstanding 52,279,290 shares of Common Stock.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2003
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
| December 31, 2003 |
June 30, 2003(1) |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 93,143 | $ | 76,095 | ||||
| Short-term investments |
245,935 | 237,281 | ||||||
| Accounts receivable, net |
33,301 | 39,016 | ||||||
| Prepaid expenses and other |
7,012 | 7,019 | ||||||
| Total current assets |
379,391 | 359,411 | ||||||
| Property and equipment, net |
54,066 | 58,042 | ||||||
| Other intangible assets, net |
36,117 | 56,245 | ||||||
| Other assets |
1,691 | 1,797 | ||||||
| Long-term investments |
1,614 | 5,714 | ||||||
| Goodwill |
120,090 | 272,561 | ||||||
| Total assets |
$ | 592,969 | $ | 753,770 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 7,030 | $ | 7,224 | ||||
| Accrued compensation and related benefits |
12,358 | 16,667 | ||||||
| Other liabilities |
11,676 | 13,124 | ||||||
| Deferred revenue, current portion |
68,257 | 55,632 | ||||||
| Restructuring liability, current portion |
887 | 2,302 | ||||||
| Total current liabilities |
100,208 | 94,949 | ||||||
| Deferred revenue, net of current portion |
4,327 | 3,082 | ||||||
| Restructuring liability, net of current portion |
— | 532 | ||||||
| Total liabilities |
104,535 | 98,563 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock-$0.001 par value; 250,000,000 shares authorized, 57,238,060 issued and outstanding at December 31, 2003; 56,540,908 issued and outstanding at June 30, 2003 |
2,934,065 | 2,927,470 | ||||||
| Deferred employee stock-based compensation |
(578 | ) | (861 | ) | ||||
| Accumulated deficit |
(2,445,306 | ) | (2,271,445 | ) | ||||
| Accumulated other comprehensive income |
253 | 43 | ||||||
| Total stockholders’ equity |
488,434 | 655,207 | ||||||
| Total liabilities and stockholders’ equity |
$ | 592,969 | $ | 753,770 | ||||
| (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, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| (As revised*) | (As revised*) | |||||||||||||||
| Software license revenue |
$ | 34,012 | $ | 56,606 | $ | 69,037 | $ | 112,588 | ||||||||
| Service revenue |
29,949 | 23,704 | 57,780 | 44,810 | ||||||||||||
| Total revenue |
63,961 | 80,310 | 126,817 | 157,398 | ||||||||||||
| Cost of software license revenue |
2,564 | 2,084 | 5,353 | 4,511 | ||||||||||||
| Cost of service revenue |
7,671 | 7,168 | 15,467 | 13,667 | ||||||||||||
| Amortization of purchased technology (*) |
5,801 | 5,737 | 11,602 | 11,095 | ||||||||||||
| Total cost of revenue |
16,036 | 14,989 | 32,422 | 29,273 | ||||||||||||
| Gross profit |
47,925 | 65,321 | 94,395 | 128,125 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
30,869 | 32,471 | 58,893 | 62,489 | ||||||||||||
| Research and development |
16,465 | 16,831 | 32,989 | 32,959 | ||||||||||||
| General and administration |
6,391 | 5,897 | 13,486 | 10,847 | ||||||||||||
| Amortization of other intangible assets |
4,263 | 4,140 | 8,526 | 7,789 | ||||||||||||
| Employee stock-based compensation |
85 | 197 | 186 | 406 | ||||||||||||
| Restructuring charge (credit) |
(138 | ) | 5,280 | (504 | ) | 5,280 | ||||||||||
| Impairment of goodwill |
— | — | 150,842 | — | ||||||||||||
| Write-off of acquired in-process research and development |
— | 1,396 | — | 1,396 | ||||||||||||
| Total operating expenses |
57,935 | 66,212 | 264,418 | 121,166 | ||||||||||||
| Income (loss) from operations |
(10,010 | ) | (891 | ) | (170,023 | ) | 6,959 | |||||||||
| Other income (expenses): |
||||||||||||||||
| Interest income |
1,395 | 3,253 | 2,767 | 7,243 | ||||||||||||
| Other income (expenses), net |
(542 | ) | 742 | (605 | ) | 502 | ||||||||||
| Impairment of long-term investment |
— | — | (4,100 | ) | — | |||||||||||
| Total other income (expenses), net |
853 | 3,995 | (1,938 | ) | 7,745 | |||||||||||
| Income (loss) before income taxes and cumulative effect of change in accounting principle |
(9,157 | ) | 3,104 | (171,961 | ) | 14,704 | ||||||||||
| Income tax expense |
1,090 | 1,780 | 1,900 | 6,270 | ||||||||||||
| Income (loss) before cumulative effect of change in accounting principle |
(10,247 | ) | 1,324 | (173,861 | ) | 8,434 | ||||||||||
| Cumulative effect of change in accounting principle, net of income taxes |
— | — | — | (579,338 | ) | |||||||||||
| Net income (loss) |
$ | (10,247 | ) | $ | 1,324 | $ | (173,861 | ) | $ | (570,904 | ) | |||||
| Other comprehensive income (loss), net of income taxes: |
||||||||||||||||
| Foreign currency translation adjustment |
192 | (31 | ) | 530 | (43 | ) | ||||||||||
| Unrealized loss on short-term investments |
(295 | ) | (613 | ) | (320 | ) | (401 | ) | ||||||||
| Comprehensive income (loss) |
$ | (10,350 | ) | $ | 680 | $ | (173,651 | ) | $ | (571,348 | ) | |||||
| Basic earnings per share: |
||||||||||||||||
| Income (loss) before cumulative effect of change in accounting principle |
$ | (0.18 | ) | $ | 0.03 | $ | (3.07 | ) | $ | 0.17 | ||||||
| Cumulative effect of change in accounting principle |
— | — | — | (11.34 | ) | |||||||||||
| Net income (loss) per share |
$ | (0.18 | ) | $ | 0.03 | $ | (3.07 | ) | $ | (11.17 | ) | |||||
| Diluted earnings per share: |
||||||||||||||||
| Income (loss) before cumulative effect of change in accounting principle |
$ | (0.18 | ) | $ | 0.02 | $ | (3.07 | ) | $ | 0.16 | ||||||
| Cumulative effect of change in accounting principle |
— | — | — | (11.10 | ) | |||||||||||