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, 2004
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-23043
PERVASIVE SOFTWARE INC.
(Exact name of registrant as specified in its charter)
| Delaware | 74-2693793 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
12365 Riata Trace Parkway, Bldg. B
Austin, Texas 78727
(Address of principal executive offices)
(512) 231-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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
(1) Yes x No ¨
(2) Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). x Yes ¨ No
As of February 4, 2005 there were 22,293,078 shares of the Registrant’s common stock outstanding.
FORM 10-Q
INDEX
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| December 31, 2004 |
June 30, 2004 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 30,946 | $ | 24,705 | ||||
| Marketable securities |
3,721 | 9,914 | ||||||
| Trade accounts receivable, net |
7,563 | 9,348 | ||||||
| Prepaid expenses and other current assets |
1,605 | 1,545 | ||||||
| Total current assets |
43,835 | 45,512 | ||||||
| Property and equipment, net |
2,472 | 2,530 | ||||||
| Purchased technology, net |
5,925 | 6,616 | ||||||
| Goodwill |
39,004 | 38,955 | ||||||
| Other assets |
457 | 255 | ||||||
| Total assets |
$ | 91,693 | $ | 93,868 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 732 | $ | 1,283 | ||||
| Accrued payroll and payroll related costs |
1,612 | 2,343 | ||||||
| Deferred rent and lease related accruals |
514 | 2,290 | ||||||
| Other accrued expenses |
3,704 | 3,677 | ||||||
| Deferred revenues |
5,202 | 5,190 | ||||||
| Total current liabilities |
11,764 | 14,783 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
89,666 | 90,184 | ||||||
| Retained deficit |
(9,737 | ) | (11,099 | ) | ||||
| Total stockholders’ equity |
79,929 | 79,085 | ||||||
| Total liabilities and stockholders’ equity |
$ | 91,693 | $ | 93,868 | ||||
See accompanying notes.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
| Three months ended December 31, |
Six months ended December 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Product licenses |
$ | 8,856 | $ | 9,856 | $ | 17,839 | $ | 18,162 | ||||||||
| Services and other |
2,736 | 1,654 | 5,537 | 2,739 | ||||||||||||
| Total revenue |
11,592 | 11,510 | 23,376 | 20,901 | ||||||||||||
| Costs and expenses: |
||||||||||||||||
| Cost of product license revenues |
576 | 374 | 1,088 | 587 | ||||||||||||
| Cost of service and other revenues |
1,115 | 1,228 | 2,507 | 2,273 | ||||||||||||
| Sales and marketing |
5,475 | 3,943 | 10,873 | 7,297 | ||||||||||||
| Research and development |
2,799 | 2,330 | 5,440 | 4,387 | ||||||||||||
| General and administrative |
1,126 | 1,556 | 2,217 | 2,749 | ||||||||||||
| Write-off of acquired in-process research and development |
— | 1,084 | — | 1,084 | ||||||||||||
| Total costs and expenses |
11,091 | 10,515 | 22,125 | 18,377 | ||||||||||||
| Operating income |
501 | 995 | 1,251 | 2,524 | ||||||||||||
| Interest and other income, net |
108 | 82 | 192 | 174 | ||||||||||||
| Income tax provision |
(62 | ) | (175 | ) | (108 | ) | (350 | ) | ||||||||
| Net income |
$ | 547 | $ | 902 | $ | 1,335 | $ | 2,348 | ||||||||
| Basic earnings per share |
$ | 0.02 | $ | 0.05 | $ | 0.06 | $ | 0.13 | ||||||||
| Diluted earnings per share |
$ | 0.02 | $ | 0.04 | $ | 0.06 | $ | 0.12 | ||||||||
See accompanying notes.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Six months ended December 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash from continuing operations |
||||||||
| Net income |
$ | 1,335 | $ | 2,348 | ||||
| Adjustments to reconcile income from continuing operations to net cash provided by continuing operations: |
||||||||
| Depreciation and amortization |
1,221 | 632 | ||||||
| Write-off of acquired in-process research and development |
— | 1,084 | ||||||
| Other non cash items |
— | 76 | ||||||
| Change in current assets and liabilities: |
||||||||
| Decrease (increase) in trade accounts receivable |
1,802 | (900 | ) | |||||
| Decrease (increase) in prepaid expenses and other current assets |
(147 | ) | 393 | |||||
| Fee paid upon cancellation of office lease |
(2,290 | ) | — | |||||
| Other decrease in accounts payable and accrued liabilities |
(860 | ) | (262 | ) | ||||
| Increase in deferred revenue |
16 | 287 | ||||||
| Net cash provided by continuing operations |
1,077 | 3,658 | ||||||
| Cash from discontinued operations |
||||||||
| Decrease in liabilities of discontinued operations |
— | (2 | ) | |||||
| Net cash used in discontinued operations |
— | (2 | ) | |||||
| Cash from investing activities |
||||||||
| Purchase of property and equipment |
(430 | ) | (410 | ) | ||||
| Sales and purchases of marketable securities, net |
6,193 | 388 | ||||||
| Investment in business, net of cash acquired |
(21 | ) | (16,580 | ) | ||||
| Decrease (increase) in other assets |
(82 | ) | 11 | |||||
| Net cash provided by (used in) investing activities |
5,660 | (16,591 | ) | |||||
| Cash from financing activities |
||||||||
| Proceeds from exercise of stock options and employee stock purchase plan |
1,116 | 511 | ||||||
| Purchase of treasury stock |
(1,635 | ) | — | |||||
| Net cash provided by (used in) financing activities |
(519 | ) | 511 | |||||
| Effect of exchange rate on cash and cash equivalents |
23 | 15 | ||||||
| Increase (decrease) in cash and cash equivalents |
6,241 | (12,409 | ) | |||||
| Cash and cash equivalents at beginning of period |
24,705 | 31,352 | ||||||
| Cash and cash equivalents at end of period |
$ | 30,946 | $ | 18,944 | ||||
See accompanying notes.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004
(Unaudited)
1. General and Basis of Financial Statements
The unaudited interim condensed consolidated financial statements include the accounts of Pervasive Software Inc. and its majority-owned subsidiaries (collectively, the “Company” or “Pervasive”). All material intercompany accounts and transactions have been eliminated in consolidation.
The financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position, results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended June 30, 2004, which are contained in the Company’s Annual Report filed on Form 10-K on September 13, 2004 (File No. 000-23043). The results of operations for the three and six month periods ended December 31, 2004 and 2003 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.
On December 4, 2003, the Company completed the acquisition of Data Junction Corporation (“Data Junction”) pursuant to the Agreement and Plan of Merger dated as of August 8, 2003 (“Merger Agreement”), (see Note 7 – Business Combinations). The acquisition has been accounted for under the purchase method of accounting, and accordingly, the results of operations of Data Junction have been included in the Company’s unaudited condensed consolidated financial statements since the date of acquisition.
Certain prior period amounts have been reclassified to conform to current period presentation.
2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
| Three months ended December 31, |
Six months ended December 31, | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Numerator: |
||||||||||||
| Net income |
$ | 547 | $ | 902 | $ | 1,335 | $ | 2,348 | ||||
| Denominator: |
||||||||||||
| Denominator for basic earnings per share – weighted average shares |
22,298 | 18,328 | 22,289 | 17,546 | ||||||||
| Effect of dilutive securities - Employee stock options |
747 | 2,399 | 1,088 | 2,312 | ||||||||
| Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions |
23,045 | 20,727 | 23,377 | 19,858 | ||||||||
| Basic earnings per share |
$ | 0.02 | $ | 0.05 | $ | 0.06 | $ | 0.13 | ||||
| Diluted earnings per share |
$ | 0.02 | $ | 0.04 | $ | 0.06 | $ | 0.12 | ||||