Merant (U.S. Headquarters)
Gerald Perkel, +1 (503) 617 2735
Gerry.Perkel@merant.com
or
Scott Hildebrandt, +1 (503) 617 2401
Scott.Hildebrandt@merant.com
or
Taylor Rafferty (London office)
Paul Scott, +44 (0) 20 7936 0400
or
Taylor Rafferty (New York office)
Brian Rafferty, +1 (212) 889 4350
Merant Announces Second Quarter Financial Results
Merant (Nasdaq:MRNT)(LSE:MRN), a leading provider of software and
services for managing code, content and other business-critical
assets, announces results for the second fiscal quarter ended 31
October 2003. Financial figures and comparisons presented below are on
the basis of continuing operations.
Highlights on Second Quarter Fiscal 2004 Results:
-- Operating profits (EBITA) grew significantly to $2.4 million (8
percent of sales) from the $0.4 million reported in the second
quarter of the prior year
-- Exceeded all independent research analysts profit expectations for
the quarter
-- Highest reported quarterly net profit after tax in over five years
-- Revenues grew 2.6 percent to $30.0 million compared to the second
quarter of fiscal 2003
-- Positive operating cash flow of $3.3 million, excluding cash
restructuring costs
-- Licence fees included 15 transactions valued at over $100,000,
including two enterprise-wide (distributed and mainframe
environment) deals
-- Licence fee transactions related to the Company's Web Content
Management product (Merant Collage) increased to 21 in the second
quarter, compared to 15 in the first quarter
-- Continued investments in R&D focused at driving future revenue
growth
-- Cash of $66.6 million, with no debt
-- Improved product positioning going into the Company's second half:
-- New release of Merant Dimensions Enterprise Edition in Q1,
extending the Dimensions product into the mainframe environment
-- New release of Merant Professional 8 in Q2, with increased
functionality and performance
US $, in millions Q2 Q2
Fiscal Fiscal
2004 2003
----------------------------------------------------------------------
Revenue 30.0 29.3
Operating Profit (EBITA)
(Earnings before interest, taxes, amortisation and
exceptional charges) 2.4 0.4
PBT (Profit before taxes including interest income)(a) 2.6 0.8
EPS (Earnings per share)(a) 0.03 0.01
Goodwill amortisation, taxes and other exceptional
charges (1.2) (7.1)
Net Profit/(Loss) 1.4 (6.3)
----------------------------------------------------------------------
(a) Before exceptional restructuring charges, taxes and goodwill
amortisation
Financial information is reported in accordance with UK GAAP
(Revenue also in accordance with U.S. GAAP)
Gerry Perkel, President and CEO of Merant commented:
"We were very pleased to see significant improvement in our second
quarter operating profits, climbing to approximately 8 percent of
sales," commented Gerry Perkel, President and CEO. "This performance
is ahead of our schedule in achieving our longer term goal of 15
percent operating profits as a percentage of sales, and represented
the highest quarterly net profit after tax for the Company in over
five years. In addition, we continue to see companies and
organisations such as AdvancePCS, the U.S. Bureau of Customs and
Border Protection, and others experience significant productivity and
quality improvements using our products in their respective software
development processes."
Second Quarter Fiscal 2004 Results:
Operating profits before interest and taxes (excluding charges for
goodwill amortisation and restructuring) in the second quarter
increased to $2.4 million compared to the $0.4 million reported in the
second quarter of fiscal 2003. Revenue for the second quarter
increased 2.6 percent to $30.0 million compared to the $29.3 million
reported in the second quarter of the previous year.
Licence fee revenue accounted for approximately 32 percent of total
revenue for the second quarter. "We were pleased to see the volume of
lower-dollar transactions increase sequentially, driven by growth in
our Professional product line sales," continued Perkel. The Company
noted that the second quarter included no licence fee transactions
valued at over $1 million, while the first quarter of the fiscal year
included one transaction valued over $1 million. Licence fee revenue
from transactions greater than $100,000 continued to be challenging as
customers continued to heavily scrutinize larger purchases and extend
buying decisions. However, licence fee revenue from transactions less
than $100,000 remained solid, increasing 10 percent sequentially, and
accounted for 74 percent of total licence fee revenue.
The Company's Web Content Management (WCM) product, Merant Collage,
showed good progress during the second quarter, with total revenue of
$1.5 million. Second quarter licence fees increased over 60 percent
sequentially to $831,000. "We continue to seek growth in WCM, while at
the same time balancing the resulting financial impacts to our overall
business," noted Perkel. The Company estimated that the WCM business
incurred an operating loss of approximately $300,000 on an incremental
basis in the second quarter.
Maintenance fee revenue grew in the second quarter, based in part on
strong renewals, and represented 56 percent of total revenue.
Consulting and training revenue represented 12 percent of total
revenue reported in the second quarter. Geographically, North American
sales for the second quarter represented 59 percent of total revenue.
European sales represented 34 percent of total revenue with
Asia-Pacific sales accounting for 7 percent.
Gross margins of 80.8 percent during the second quarter of fiscal 2004
increased approximately two percentage points compared to the 78.9
percent in the second quarter of fiscal 2003, due in part to
improvement in gross profit margins in the Company's consulting
business. Total costs associated with continuing operations, excluding
goodwill amortisation and restructuring charges, were $27.7 million,
down 4 percent from the same quarter a year ago as the Company
continued to closely manage expenses. However, the Company remained
focused on maintaining research and development investments to help
drive the product innovation necessary to fuel future revenue growth,
launching two new exciting products, Merant Dimensions for Microsoft
.NET and Merant Professional 8.
The Company's second quarter ending balance sheet continued to be very
strong. Cash and marketable securities ended at $66.6 million, while
the Company continued to maintain no debt. In addition, the Company
posted positive operating cash flow (excluding cash impacts from
previous restructuring actions) of $3.3 million during the second
quarter.
The Company ended the second quarter of fiscal 2004 with 570
employees.
Business Outlook:
For the second half of fiscal 2004, the Company expects improvement
over the first half in terms of its available product offerings as new
versions of both Professional and Dimensions are now available to the
market. In addition, the pipeline for the Company's Dimensions
Enterprise Edition product is maturing, providing additional
opportunities for the Company. However, the Company continues to feel
that a conservative outlook regarding revenue growth is prudent in the
short term, given the economic uncertainties that continue to exist.
The Company remains focused on enhancing profitability toward its
stated goals even in the face of this conservative stance on general
economic improvement. To that end, the Company will be taking actions
in its third quarter to further improve its overall cost structure and
organisational productivity moving forward. The Company remains
committed to evolving its product line through organic investments in
research and development and by pursuing strategic acquisitions and
partnerships to drive revenue growth opportunities in the future.
Conference Call
A conference call has been scheduled for today at 4:00 p.m. London
Time (11:00 a.m. US EDT) for investors, analysts and press. For those
wishing to participate in the call, the telephone numbers are UK: +44
(0)208 515 2327; US: +1 800 240 8658. The replay of the conference
call will be available for two weeks after the conference call. The
replay number is +1 303 590 3000, PIN: 560943. A web-cast of the call
will also be available. Please visit the Company's investor site at
www.merant.com for more information.
About Merant
Merant delivers the industry's most flexible and comprehensive
enterprise change management solutions. Thousands of organisations
across the globe rely on Merant's software and services to
dramatically enhance the productivity, quality and ROI of their
technology initiatives by allowing them to easily track, manage and
control modifications in business-critical information assets. For
more information, please visit www.merant.com.
Forward-Looking Statements
The following statement is made in accordance with the U.S. Private
Securities Litigation Reform Act of 1995: This release contains
forward-looking statements that include statements regarding
expectations for future financial results and results of operations,
business strategy, and prospects, including the growth and/or
performance of our software configuration management and other
businesses and related revenues. When used in this release, the words
'anticipate,' 'plan', 'believe', 'estimate', 'intend', 'expect',
'goal,' 'realize', 'likely', 'unlikely', and other similar
expressions, as they relate to Merant, its business or its management,
are intended to identify these forward-looking statements. These
forward-looking statements involve a number of risks and
uncertainties. Actual results could differ materially from those
anticipated by these forward-looking statements. Factors that could
cause actual results to differ materially include, among others, the
extent to which the current weakness and uncertainty in the economic
climate generally and in IT spending in particular continues, the
inability of Merant to effectively manage its costs against uncertain
revenue expectations and reduce costs quickly in response to a revenue
shortfall, the potential for a decrease in revenue or a slowdown in
revenue growth which may be caused by delays in the timing of sales
and the delivery of products or services, especially such delays
associated with higher dollar orders, the ability of Merant to
develop, release, market and sell products and services to customers
in the highly dynamic market for the Company's products, the potential
need for software configuration management and web content management
products to shift based on changes in technology and customer needs,
the effect of competitors' efforts to enter Merant's markets and the
possible success of new and existing competitors in those markets,
Merant's ability to recruit and retain key personnel, especially in
the sales and business units and at the management level, and Merant's
ability to manage and integrate acquired businesses or other
businesses that it may acquire in the future.
Further information on potential factors which could affect Merant's
financial results and operations are found in filings or submissions
on Form 6-K as periodically submitted to the SEC, and in Merant's
Annual Report on Form 20-F for the year ended April 30, 2003. Merant
undertakes no obligation to release publicly any updates or revisions
to any forward-looking statements contained in this release that may
reflect events or circumstances occurring after the date of this
release.
Financial Statement Information
The financial information contained in this report does not represent
the Company's full statutory accounts. The financial information
relating to fiscal 2004 and the quarterly periods within fiscal 2003
and fiscal 2004 are unaudited and no accounts have been delivered to
the U.K. Registrar of Companies. Statutory accounts dealing with
fiscal 2003 have been delivered to the U.K. Registrar of Companies and
the Company's auditors made a report under section 235 on these
accounts which was unqualified and did not contain a statement under
section 237(2) or section 237(3) of the Companies Act 1985. The
Company's financial statements are reported in UK GAAP, with the
exception of Revenue which is recorded in accordance with UK and U.S.
GAAP. Fiscal 2004 interim statements for the 6 months ending October
31, 2003 will be mailed to shareholders by December 3, 2003.
U.S. Securities Filings
Copies of Merant's Annual Report to Shareholders and Annual Report on
Form 20-F for the year ended April 30, 2003, as well as its periodic
reports on Form 6-K, are available upon request to Merant's offices in
Hillsboro, OR or St. Albans, United Kingdom and are also available on
the SEC website located at http://www.sec.gov.
Merant plc
Management Trading Statement using UK GAAP results in USD
(unaudited) Three months ending:
Oct-31 Oct-31
2003 2002
$'000 $'000
======================================================================
Revenue:
Licence fees 9,533 10,765
Maintenance subscriptions 16,765 14,899
Training and consulting 3,736 3,620
----------------------------------------------------------------------
Total revenue 30,034 29,284
======================================================================
Cost of revenue:
Cost of licence fees 727 855
Cost of maintenance
subscriptions 1,912 1,946
Cost of training and
consulting 3,130 3,390
----------------------------------------------------------------------
Total cost of revenue 5,769 6,191
======================================================================
Gross profit 24,265 23,093
======================================================================
Operating expenses
Research and development 7,174 6,989
Sales and marketing 11,444 11,979
General and administrative 3,273 3,709
----------------------------------------------------------------------
Total operating expenses, excluding amortisation 21,891 22,677
======================================================================
Operating profit before interest and amortisation 2,374 416
Interest income, net 176 337
----------------------------------------------------------------------
Profit before taxes and amortisation 2,550 753
Amortisation of goodwill (1,357) (7,066)
----------------------------------------------------------------------
Profit (Loss) before taxation 1,193 (6,313)
Taxation 243 0
----------------------------------------------------------------------
Profit (Loss) for the period from continuing
operations, after taxation 1,436 (6,313)
Earnings per share before taxes and amortisation
Earnings per ordinary share: basic $0.03 $0.01
Earnings per ordinary share: diluted $0.03 $0.01
Earnings per ADR equivalent: basic $0.13 $0.04
Earnings per ADR equivalent: diluted $0.13 $0.04
======================================================================
Net Earnings (Loss) per share for the period
Earnings (Loss) per ordinary share: basic $0.01 ($0.06)
Earnings (Loss) per ordinary share: diluted $0.01 ($0.06)
Earnings (Loss) per ADR equivalent: basic $0.07 ($0.32)
Earnings (Loss) per ADR equivalent: diluted $0.07 ($0.32)
======================================================================
Ordinary shares - basic 98,128 99,110
Ordinary shares - diluted 101,385 99,272
ADR equivalents - basic 19,626 19,822
ADR equivalents - diluted 20,277 19,854
======================================================================
The profit and loss was translated from GBP to USD using the
monthly average rates
Merant plc - CONSOLIDATED PROFIT & LOSS ACCOUNT
(unaudited) Three months ending:
Oct-31 Oct-31
2003 2002
$'000 $'000
======================================================================
Revenue:
Licence fees 9,533 10,765
Maintenance subscriptions 16,765 14,899
Training and consulting 3,736 3,620
----------------------------------------------------------------------
Total revenue 30,034 29,284
======================================================================
Cost of revenue: continuing business
Cost of licence fees 727 855
Cost of maintenance
subscriptions 1,912 1,946
Cost of training and
consulting 3,130 3,390
----------------------------------------------------------------------
Total cost of revenue 5,769 6,191
======================================================================
Gross profit 24,265 23,093
======================================================================
Operating expenses
Research and development 7,174 6,989
Sales and marketing 11,444 11,979
General and administrative 3,273 3,709
----------------------------------------------------------------------
Total operating expenses, excluding amortisation 21,891 22,677
======================================================================
Operating profit before amortisation 2,374 416
Amortisation of goodwill (1,357) (7,066)
----------------------------------------------------------------------
Operating profit (loss) 1,017 (6,650)
Interest income, net 176 337
----------------------------------------------------------------------
Profit (loss) before taxation 1,193 (6,313)
Taxation 243 0
----------------------------------------------------------------------
Profit (loss) for the period after taxation 1,436 (6,313)
======================================================================
Earnings (loss) per ordinary share: basic $0.01 ($0.06)
Earnings (loss) per ordinary share: diluted $0.01 ($0.06)
Ordinary shares - basic 98,128 99,110
Ordinary shares - diluted 101,385 99,272
======================================================================
The profit and loss was translated from GBP to USD using the
monthly average rates
Merant plc - CONSOLIDATED BALANCE SHEET
(unaudited) Oct-31 Apr-30
2003 2003
$000 $000
======================================================================
Fixed assets
Intangible fixed assets 13,233 13,754
Tangible fixed assets 4,029 3,148
Investment 16,288 11,176
----------------------------------------------------------------------
Total fixed assets 33,550 28,078
======================================================================
Current assets:
Stock 97 144
Trade debtors 23,368 25,376
Other debtors and prepaid
expenses 3,844 5,722
Cash and bank deposits 66,566 72,779
----------------------------------------------------------------------
Total current assets 93,875 104,021
----------------------------------------------------------------------
Creditors: amounts falling due within one year
Trade creditors 1,608 1,977
Accrued employee compensation 7,768 8,868
Current corporation tax 10,454 9,570
Accrued expenses and other
current liabilities 8,158 9,754
Deferred revenue 37,333 41,526
----------------------------------------------------------------------
Total current liabilities 65,321 71,695
======================================================================
Net current assets 28,554 32,326
======================================================================
Total assets less current liabilities 62,104 60,404
Provision for liabilities and charges 4,337 7,158
----------------------------------------------------------------------
Net assets 57,767 53,246
======================================================================
Capital and reserves
Called up share capital 3,571 3,321
Share premium account 344,726 322,422
Capital redemption reserve 1,590 1,498
Profit and loss account (292,120) (273,995)
----------------------------------------------------------------------
Total shareholders' equity 57,767 53,246
======================================================================
Each balance sheet account was translated from GBP to USD at the
closing rate for each period
Merant plc - CONSOLIDATED CASH FLOW STATEMENT
Oct-31
2003
$'000
======================================================================
(i) Reconciliation of operating(loss) to "Net cash
(outflow)/inflow from operating activities"
Operating profit/(loss) 1,017
Depreciation charges 474
Amortisation charges 1,377
EBT costs 215
Changes in operating assets and liabilities (581)
Exceptional items 0
Loss on disposal of fixed assets 0
----------------------------------------------------------------------
Net cash (outflow)/inflow from operating activities 2,501
======================================================================
CONSOLIDATED CASH FLOW STATEMENT UK FORMAT
Net cash (outflow)/inflow from operating activities (note i) 2,501
Returns on investments and servicing of finance 176
Taxation 454
Capital expenditure and financial investment (5,495)
Acquisitions and disposals 0
----------------------------------------------------------------------
Cash (outflow)/inflow before financing (2,364)
----------------------------------------------------------------------
Financing 1,388
----------------------------------------------------------------------
(Decrease)/increase in cash (976)
======================================================================
(ii) Reconciliation to net funds
----------------------------------------------------------------------
(Decrease) Increase in cash during the period (976)
----------------------------------------------------------------------
Translation difference 401
----------------------------------------------------------------------
Movement in cash during the period (575)
----------------------------------------------------------------------
Net funds, beginning of period 67,141
----------------------------------------------------------------------
Net funds, end of period 66,566
======================================================================