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 JULY 31, 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 August 31, 2004 was 43,565,660.
| Page | ||||
| PART I FINANCIAL INFORMATION | ||||
| Item 1 |
Financial Statements: |
|||
| Condensed Consolidated Balance Sheets as of July 31, 2004 and January 31, 2004 |
3 | |||
| Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three Months and Six Months Ended July 31, 2004 and 2003 | 4 | |||
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2004 and 2003 | 5 | |||
| 6 | ||||
| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 | ||
| Item 3 |
41 | |||
| Item 4 |
42 | |||
| PART II OTHER INFORMATION | ||||
| Item 1 |
Legal Proceedings | 44 | ||
| Item 2 |
Change in Securities, Use of Proceeds and Issuer Repurchases of Equity Securities | 44 | ||
| Item 4 |
Submission of Matters to a Vote of Security Holders | 44 | ||
| Item 5 |
Other Information | 45 | ||
| Item 6 |
Exhibits and Reports on Form 8-K | 45 | ||
| 46 | ||||
2
ITEM 1. FINANCIAL STATEMENTS
SERENA SOFTWARE, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
| July 31, 2004 |
January 31, 2004 | ||||||
| ASSETS | |||||||
| Current assets: |
|||||||
| Cash and cash equivalents |
$ | 140,530 | $ | 257,281 | |||
| Restricted cash |
3,300 | 3,300 | |||||
| Short-term investments |
41,534 | 39,214 | |||||
| Accounts receivable, net of allowance of $3,125 and $951 at July 31 and January 31, 2004, respectively |
32,847 | 15,475 | |||||
| Deferred taxes |
6,787 | 6,787 | |||||
| Prepaid expenses and other current assets |
5,918 | 1,338 | |||||
| Total current assets |
230,916 | 323,395 | |||||
| Long-term investments |
9,603 | 70,692 | |||||
| Restricted cash, non-current |
4,742 | 6,312 | |||||
| Property and equipment, net |
6,125 | 3,209 | |||||
| Goodwill, net |
321,389 | 40,471 | |||||
| Other intangible assets, net |
121,636 | 22,987 | |||||
| Other assets |
4,673 | 6,595 | |||||
| TOTAL ASSETS |
$ | 699,084 | $ | 473,661 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: |
|||||||
| Accounts payable |
$ | 1,955 | $ | 1,232 | |||
| Income taxes payable |
12,272 | 6,294 | |||||
| Accrued expenses |
29,260 | 7,782 | |||||
| Accrued interest on subordinated notes |
413 | 413 | |||||
| Deferred revenue |
57,575 | 29,496 | |||||
| Total current liabilities |
101,475 | 45,217 | |||||
| Deferred revenue, net of current portion |
13,405 | 9,683 | |||||
| Long-term liabilities |
2,819 | — | |||||
| Deferred taxes |
45,203 | 3,483 | |||||
| Subordinated notes |
220,000 | 220,000 | |||||
| Total liabilities |
382,902 | 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; 43,947,324 and 38,277,820 shares issued and outstanding at July 31 and January 31, 2004, respectively |
44 | 38 | |||||
| Additional paid-in capital |
207,580 | 78,892 | |||||
| Deferred stock-based compensation |
(1,567 | ) | — | ||||
| Accumulated other comprehensive (loss) income |
(1,933 | ) | 272 | ||||
| Retained earnings |
112,058 | 116,076 | |||||
| Total stockholders’ equity |
316,182 | 195,278 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 699,084 | $ | 473,661 | |||
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
For the Three Months and Six Months Ended July 31, 2004 and 2003
(In thousands, except per share data)
(Unaudited)
| Three Months Ended July 31, |
Six Months Ended July 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Software licenses |
$ | 19,416 | $ | 10,047 | $ | 35,256 | $ | 20,899 | ||||||||
| Maintenance |
25,732 | 12,449 | 40,497 | 24,360 | ||||||||||||
| Professional services |
6,812 | 2,417 | 9,949 | 4,021 | ||||||||||||
| Total revenue |
51,960 | 24,913 | 85,702 | 49,280 | ||||||||||||
| Cost of revenue: |
||||||||||||||||
| Software licenses |
1,025 | 171 | 1,351 | 383 | ||||||||||||
| Maintenance |
3,151 | 1,605 | 4,714 | 3,109 | ||||||||||||
| Professional services |
6,258 | 2,278 | 9,048 | 4,044 | ||||||||||||
| Amortization of acquired technology |
3,932 | 1,628 | 5,977 | 2,709 | ||||||||||||
| Total cost of revenue |
14,366 | 5,682 | 21,090 | 10,245 | ||||||||||||
| Gross profit |
37,594 | 19,231 | 64,612 | 39,035 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
18,131 | 7,014 | 27,488 | 13,667 | ||||||||||||
| Research and development |
8,875 | 3,420 | 13,824 | 6,459 | ||||||||||||
| General and administrative |
4,963 | 1,728 | 7,011 | 3,468 | ||||||||||||
| Stock-based compensation |
237 | — | 255 | — | ||||||||||||
| Amortization of intangible assets |
2,985 | 508 | 3,936 | 508 | ||||||||||||
| Acquired in-process research and development |
— | — | 10,400 | — | ||||||||||||
| Restructuring, acquisition and other charges |
1,556 | — | 1,766 | — | ||||||||||||
| Total operating expenses |
36,747 | 12,670 | 64,680 | 24,102 | ||||||||||||
| Operating income (loss) |
847 | 6,561 | (68 | ) | 14,933 | |||||||||||
| Interest income |
728 | 814 | 2,043 | 1,819 | ||||||||||||
| Interest expense |
(825 | ) | — | (1,650 | ) | — | ||||||||||
| Amortization of debt issuance costs |
(335 | ) | — | (796 | ) | — | ||||||||||
| (Loss) income before income taxes |
415 | 7,375 | (471 | ) | 16,752 | |||||||||||
| Income taxes |
157 | 2,655 | 3,547 | 6,218 | ||||||||||||
| Net income (loss) |
$ | 258 | $ | 4,720 | $ | (4,018 | ) | $ | 10,534 | |||||||
| Comprehensive income (loss): |
||||||||||||||||
| Net income (loss) |
$ | 258 | $ | 4,720 | $ | (4,018 | ) | $ | 10,534 | |||||||
| Other comprehensive (loss): |
||||||||||||||||
| Foreign currency translation adjustment |
97 | (65 | ) | (157 | ) | 45 | ||||||||||
| Unrealized loss on marketable securities |
(161 | ) | (449 | ) | (385 | ) | (517 | ) | ||||||||
| Other comprehensive (loss) |
(64 | ) | (514 | ) | (542 | ) | (472 | ) | ||||||||
| Total comprehensive income (loss) |
$ | 194 | $ | 4,206 | $ | (4,560 | ) | $ | 10,062 | |||||||
| Net income (loss) per share: |
||||||||||||||||
| Basic |
$ | 0.01 | $ | 0.12 | $ | (0.10 | ) | $ | 0.26 | |||||||
| Diluted |
$ | 0.01 | $ | 0.12 | $ | (0.10 | ) | $ | 0.26 | |||||||
| Weighted average shares used in per share calculations: |
||||||||||||||||
| Basic |
43,955 | 40,102 | 41,413 | 40,276 | ||||||||||||