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, 2005
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, 2005 was 41,313,475.
| Page | ||||
| PART I FINANCIAL INFORMATION | ||||
| Item 1 |
||||
| Condensed Consolidated Balance Sheets as of April 30, 2005 and January 31, 2005 |
3 | |||
| Condensed Consolidated Statements of Operations for the Three Months Ended April 30, 2005 and 2004 | 4 | |||
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2005 and 2004 | 5 | |||
| 6 | ||||
| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | ||
| Item 3 |
42 | |||
| Item 4 |
42 | |||
| PART II OTHER INFORMATION | ||||
| Item 1 |
44 | |||
| Item 2 |
44 | |||
| Item 3 |
44 | |||
| Item 4 |
44 | |||
| Item 5 |
44 | |||
| Item 6 |
45 | |||
| 46 | ||||
2
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
| April 30, 2005 |
January 31, 2005 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 93,284 | $ | 133,330 | ||||
| Restricted cash |
3,300 | 3,300 | ||||||
| Short-term investments |
31,849 | 16,778 | ||||||
| Accounts receivable, net of allowance of $1,119 and $1,700 at April 30 and January 31, 2005, respectively |
47,135 | 40,988 | ||||||
| Deferred taxes |
12,267 | 12,267 | ||||||
| Prepaid expenses and other current assets |
5,307 | 4,964 | ||||||
| Total current assets |
193,142 | 211,627 | ||||||
| Long-term investments |
41,837 | 39,095 | ||||||
| Restricted cash, non-current |
3,189 | 3,157 | ||||||
| Property and equipment, net |
5,711 | 5,722 | ||||||
| Goodwill |
321,435 | 323,671 | ||||||
| Other intangible assets, net |
107,823 | 107,790 | ||||||
| Other assets |
3,723 | 4,057 | ||||||
| TOTAL ASSETS |
$ | 676,860 | $ | 695,119 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 934 | $ | 3,415 | ||||
| Income taxes payable |
27,741 | 27,667 | ||||||
| Accrued expenses |
22,485 | 26,103 | ||||||
| Accrued interest on subordinated notes |
1,238 | 413 | ||||||
| Deferred revenue |
70,309 | 63,152 | ||||||
| Total current liabilities |
122,707 | 120,750 | ||||||
| Deferred revenue, net of current portion |
13,329 | 13,110 | ||||||
| Long-term liabilities |
2,508 | 2,660 | ||||||
| Deferred taxes |
41,185 | 40,983 | ||||||
| Subordinated notes |
220,000 | 220,000 | ||||||
| Total liabilities |
399,729 | 397,503 | ||||||
| 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; 41,183,609 and 42,266,206 shares issued and outstanding at April 30 and January 31, 2005, respectively |
41 | 42 | ||||||
| Additional paid-in capital |
149,165 | 177,750 | ||||||
| Deferred stock-based compensation |
(864 | ) | (1,092 | ) | ||||
| Accumulated other comprehensive loss |
(4,912 | ) | (4,646 | ) | ||||
| Retained earnings |
133,701 | 125,562 | ||||||
| Total stockholders’ equity |
277,131 | 297,616 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 676,860 | $ | 695,119 | ||||
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Statements of Operations
For the Three Months Ended April 30, 2005 and 2004
(In thousands, except per share data)
(Unaudited)
| Three Months Ended April 30, |
||||||||
| 2005 |
2004 |
|||||||
| Revenue: |
||||||||
| Software licenses |
$ | 22,178 | $ | 15,839 | ||||
| Maintenance |
32,996 | 14,765 | ||||||
| Professional services |
6,135 | 3,137 | ||||||
| Total revenue |
61,309 | 33,741 | ||||||
| Cost of revenue: |
||||||||
| Software licenses |
603 | 326 | ||||||
| Maintenance |
3,419 | 1,563 | ||||||
| Professional services |
5,846 | 2,789 | ||||||
| Amortization of acquired technology |
4,167 | 2,045 | ||||||
| Stock-based compensation (*) |
14 | 1 | ||||||
| Total cost of revenue |
14,049 | 6,724 | ||||||
| Gross profit |
47,260 | 27,017 | ||||||
| Operating expenses: |
||||||||
| Sales and marketing |
17,778 | 9,357 | ||||||
| Research and development |
8,856 | 4,949 | ||||||
| General and administrative |
4,630 | 2,048 | ||||||
| Stock-based compensation (*) |
215 | 17 | ||||||
| Amortization of intangible assets |
2,814 | 950 | ||||||
| Acquired in-process research and development |
— | 10,400 | ||||||
| Restructuring, acquisition and other charges |
— | 210 | ||||||
| Total operating expenses |
34,293 | 27,931 | ||||||
| Operating income (loss) |
12,967 | (914 | ) | |||||
| Interest income |
1,112 | 1,315 | ||||||
| Interest expense |
(825 | ) | (825 | ) | ||||
| Amortization of debt issuance costs |
(335 | ) | (461 | ) | ||||
| Income (loss) before income taxes |
12,919 | (885 | ) | |||||
| Income taxes |
4,780 | 3,390 | ||||||
| Net income (loss) |
$ | 8,139 | $ | (4,275 | ) | |||
| Net income (loss) per share: |
||||||||
| Basic |
$ | 0.20 | $ | (0.11 | ) | |||
| Diluted |
$ | 0.17 | $ | (0.11 | ) | |||
| Weighted average shares used in per share calculations: |
||||||||
| Basic |
41,725 | 38,871 | ||||||
| Diluted |
52,789 | 38,871 | ||||||
| Net income (loss) |
$ | 8,139 | $ | (4,275 | ) | |||
| Plus: Income impact of assumed conversions: |
||||||||
| Tax effected interest, including amortization of debt issuance costs, on 1.5% convertible debentures |
697 | N/A | ||||||
| Adjusted net income (loss) for diluted net income per share calculation |
$ | 8,836 | $ | (4,275 | ) | |||
| (*) Stock-based compensation: |
||||||||
| Cost of maintenance |
$ | 7 | $ | — | ||||
| Cost of professional services |
7 | 1 | ||||||
| Stock-based compensation in cost of revenue |
14 | 1 | ||||||
| Sales and marketing |
121 | 10 | ||||||
| Research and development |
55 | 4 | ||||||
| General and administrative |
39 | 3 | ||||||
| Stock-based compensation in operating expenses |
215 | 17 | ||||||
| Total stock-based compensation |
$ | 229 | $ | 18 | ||||
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended April 30, 2005 and 2004
(In thousands)
(Unaudited)
| Three Months Ended April 30, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 8,139 | $ | (4,275 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation |
693 | 521 | ||||||
| Deferred income taxes |
(2,591 | ) | — | |||||
| Provision for doubtful accounts |
66 | 150 | ||||||
| Accrued interest income, net of cash received |
(31 | ) | (40 | ) | ||||
| Accrued interest expense on subordinated notes |
825 | 825 | ||||||
| Amortization of debt issuance costs |
335 | 461 | ||||||
| Amortization of deferred stock-based compensation |
229 | 18 | ||||||
| Amortization of acquired technology |
4,167 | 2,045 | ||||||
| Amortization of intangible assets |
2,814 | 950 | ||||||
| Acquired in-process research and development |
— | 10,400 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(6,213 | ) | (2,131 | ) | ||||
| Prepaid expenses and other assets |
(345 | ) | (764 | ) | ||||
| Accounts payable |
(2,481 | ) | 735 | |||||
| Income taxes payable |
74 | 982 | ||||||
| Accrued expenses |
(478 | ) | (3,206 | ) | ||||
| Deferred revenue |
7,378 | 10,431 | ||||||
| Net cash provided by operating activities |
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