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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(MARK ONE)

 

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2004

 

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 NO. 000-25285

 

 

SERENA SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE   94-2669809

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

2755 CAMPUS DRIVE, 3rd FLOOR, SAN MATEO, CALIFORNIA 94403-2538

(Address of principal executive offices, including zip code)

 

650-522-6600

(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 Securities Exchange Act of 1934).    Yes  x    No  ¨

 

The number of shares of the registrant’s Common Stock, par value $0.001, outstanding as of May 31, 2004 was 44,421,235.

 

Table of Contents

INDEX

 

          Page
PART I FINANCIAL INFORMATION     

Item 1

   

Financial Statements:

     
    

Condensed Consolidated Balance Sheets as of April 30, 2004 and January 31, 2004

    3
     Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the Three Months Ended April 30, 2004 and 2003    4
     Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2004 and 2003    5
    

Notes to Condensed Consolidated Financial Statements

    6

Item 2

   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    15

Item 3

   

Quantitative and Qualitative Disclosures About Market Risk

    37

Item 4

   

Controls and Procedures

    38
PART II OTHER INFORMATION     

Item 1

   

Legal Proceedings

    39

Item 2

   

Change in Securities and Use of Proceeds

    39

Item 3

   

Defaults Upon Senior Securities

    39

Item 4

   

Submission of Matters to a Vote of Security Holders

    39

Item 5

   

Other Information

    39

Item 6

   

Exhibits and Reports on Form 8-K

    39

SIGNATURES

   41

EXHIBITS

     

 

2

Table of Contents

PART I—FINANCIAL INFORMATION

 

ITEM 1.    FINANCIAL STATEMENTS

 

SERENA SOFTWARE, INC.

 

Condensed Consolidated Balance Sheets

 

(In thousands, except share data)

 

    April 30,
2004
     January 31,
2004
    (Unaudited)      
ASSETS              

Current assets:

              

Cash and cash equivalents

   $ 423,272     $ 257,281

Restricted cash

     3,300       3,300

Short-term investments

     41,923       39,214

Accounts receivable, net of allowance of $2,753 and $951 at April 30 and January 31, 2004, respectively

     42,885       15,475

Deferred taxes

     6,787       6,787

Prepaid expenses and other current assets

     7,262       1,338
   
 

Total current assets

     525,429       323,395

Long-term investments

     17,165       70,692

Restricted cash, non-current

     6,352       6,312

Property and equipment, net

     6,552       3,209

Goodwill, net

     329,671       40,471

Other intangible assets, net

     124,287       22,987

Other assets

     5,007       6,595
   
 

TOTAL ASSETS

   $ 1,014,463     $ 473,661
   
 
LIABILITIES AND STOCKHOLDERS’ EQUITY              

Current liabilities:

              

Accounts payable

   $ 2,968     $ 1,232

Consideration payable to Merant shareholders

     274,654       —  

Income taxes payable

     18,863       6,294

Accrued expenses

     56,062       7,782

Accrued interest on subordinated notes

     1,238       413

Deferred revenue

     60,393       29,496
   
 

Total current liabilities

     414,178       45,217

Deferred revenue, net of current portion

     13,405       9,683

Long-term liabilities

     3,566       —  

Deferred taxes

     45,203       3,483

Subordinated notes

     220,000       220,000
   
 

Total liabilities

     696,352       278,383
   
 

Commitments and contingencies

              

Stockholders’ equity:

              

Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding

     —         —  

Common stock, $0.001 par value; 90,000,000 shares authorized; 38,415,328 and 38,277,820 shares issued and outstanding at April 30 and January 31, 2004, respectively

     38       38

Additional paid-in capital

     208,348       78,892

Deferred stock-based compensation

     (1,804 )     —  

Accumulated other comprehensive (loss) income

     (272 )     272

Retained earnings

     111,801       116,076
   
 

Total stockholders’ equity

     318,111       195,278
   
 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,014,463     $ 473,661
   
 

 

See accompanying notes to condensed consolidated financial statements.

 

3

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SERENA SOFTWARE, INC.

 

Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income

 

For the Three Months Ended April 30, 2004 and 2003

 

(In thousands, except per share data)

(Unaudited)

 

     Three Months
Ended April 30,
  
     2004
     2003
  

Revenue:

                 

Software licenses

    $ 15,839     $ 10,852  

Maintenance

      14,765       11,911  

Professional services

      3,137       1,604  
    
 

Total revenue

      33,741       24,367  
    
 

Cost of revenue:

                 

Software licenses

      326       212  

Maintenance

      1,563       1,504  

Professional services

      2,789       1,766  

Amortization of acquired technology

      2,045       1,081  
    
 

Total cost of revenue

      6,723       4,563  
    
 

Gross profit

      27,018       19,804  
    
 

Operating expenses:

                 

Sales and marketing

      9,357       6,653  

Research and development

      4,949       3,039  

General and administrative

      2,048       1,740  

Stock-based compensation

      18       —    

Amortization of intangible assets

      950       —    

Acquired in-process research and development

      10,400       —    

Restructuring, acquisition and other charges

      210       —    
    
 

Total operating expenses

      27,932       11,432  
    
 

Operating (loss) income

      (914 )     8,372  

Interest income

      1,315       1,005  

Interest expense

      (825 )     —    

Amortization of debt issuance costs

      (461 )     —    
    
 

(Loss) income before income taxes

      (885 )     9,377  

Income taxes

      3,390       3,563  
    
 

Net (loss) income

    $ (4,275 )   $ 5,814  
    
 

Comprehensive (loss) income:

                 

Net (loss) income

    $ (4,275 )   $ 5,814  

Other comprehensive (loss) income:

                 

Foreign currency translation adjustment

      (320 )     109  

Unrealized loss on marketable securities

      (224 )     (68 )
    
 

Other comprehensive (loss) income

      (544 )     41  
    
 

Total comprehensive (loss) income

    $ (4,819 )   $ 5,855  
    
 

Net (loss) income per share:

                 

Basic

    $ (0.11 )   $ 0.14  
    
 

Diluted

    $ (0.11 )   $ 0.14  
    
 

Weighted average shares used in per share calculations:

                 

Basic

      38,871       40,450  
    
 

Diluted

      38,871       40,918  
    
 

 

See accompanying notes to condensed consolidated financial statements.

 

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SERENA SOFTWARE, INC.

 

Condensed Consolidated Statements of Cash Flows

 

For the Three Months Ended April 30, 2004 and 2003

 

(In thousands)

(Unaudited)

 

     Three Months Ended
April 30,
  
     2004
     2003
  

Cash flows from operating activities:

                 

Net (loss) income

    $ (4,275 )   $ 5,814  

Adjustments to reconcile net income to net cash provided by operating activities:

                 

Depreciation

      521       352  

Provision in allowance for bad debts

      150       50  

Accrued interest on pledged securities

      (40 )     —    

Accrued interest on notes receivable from stockholders, net of cash received

      —         (137 )

Accrued interest expense on subordinated notes

      825       —    

Amortization of debt issuance costs

      461       —    

Amortization of deferred stock-based compensation

      18       —    

Amortization of acquired technology

      2,045       1,081  

Amortization of intangible assets

      950       —    

Acquired in-process research and development

      10,400       —    

Changes in operating assets and liabilities:

                 

Accounts receivable

      (2,131 )     2,404  

Prepaid expenses and other assets

      (764 )     (1,148 )

Accounts payable

      735       205  

Income taxes payable

      982       (135 )

Accrued expenses

      (3,206 )     (130 )

Deferred revenue

      10,431       2,709  
    
 

Net cash provided by operating activities

      17,102       11,065  
    
 

Cash flows provided by investing activities:

                 

Purchases of property and equipment

      (432 )     (105 )

Sales of short-term and long-term investments

      50,594       6,330  

Cash received in the acquisition of Merant plc

      97,208       —    
    
 

Net cash provided by investing activities

      147,370       6,225  
    
 

Cash flows from financing activities:

                 

Exercise of stock options under the employee stock option plan

      1,774       492  

Common stock repurchased under the stock repurchase plan

      —         (7,357 )
    
 

Net cash provided by (used in) financing activities

      1,774       (6,865 )