July 25, 2001

NetIQ Announces Record Fourth Quarter and Fiscal Year Revenues

SAN JOSE, California


Press Release

SAN JOSE, California

NetIQ® Corporation (Nasdaq: NTIQ), a leading provider of e-business infrastructure management and intelligence solutions, today announced record financial results for the quarter and fiscal year-ended June 30, 2001. Revenues for the fourth quarter of fiscal 2001 were $58.6 million, compared with $20.3 million for the same period last year, an increase of 189%. Net income, excluding stock-based compensation, a restructuring charge, amortization of goodwill and other acquisition-related charges and related income tax effects was $7.5 million or $0.14 per diluted share for the fourth quarter of fiscal 2001, compared with $4.3 million or $0.14 per diluted share for the fourth quarter of fiscal 2000, an increase in net income of 73%.

For fiscal 2001, revenues were $166.9 million, compared with $47.9 million for fiscal 2000, an increase of 248%. Net income, excluding stock-based compensation, a restructuring charge, amortization of goodwill and other acquisition-related charges and related income tax effects was $28.6 million or $0.63 per diluted share for fiscal 2001, compared with $9.6 million or $0.46 per diluted share for fiscal 2000, increases of 197% and 37%, respectively.

Results, based on generally accepted accounting principles, for the fourth quarter and year ended June 30, 2001 include amortization of goodwill and other intangibles relating to acquisitions of $196.0 million and $554.7 million for the three and twelve month periods, respectively, amortization of stock-based compensation of $1.5 million and $2.0 million for the three and twelve month periods, respectively, a restructuring charge of $816,000 for the three and twelve month periods related to redundancies resulting from the WebTrends merger and the resizing of our business, and the write-off of $2.7 million for the twelve month period for acquired in-process research and development costs relating to the merger with WebTrends last quarter. Including these charges, net losses for the fourth quarter and year-ended June 30, 2001 were $187.0 million and $524.0 million and basic and diluted net losses per share were $3.55 and $12.48, respectively.

The mergers with Mission Critical Software, completed in May 2000, and WebTrends Corporation, completed in March 2001, were both accounted for as purchases. Their revenues and operating results are included in our statements of operations from the dates of acquisition forward.

"We are very pleased with our quarterly and annual results," said Ching-Fa Hwang, president and CEO of NetIQ. "The breadth and depth of our solutions and the diversity of our customer base have certainly helped us weather a challenging market. So much of our success is directly related to our ability to understand and meet our customers' requirements. We continue to win against the competition, build a strong partner base and customer loyalty because we deliver solutions that provide a high return on investment and improved infrastructure leverage."

"Our financial metrics remain strong, providing another indication of solid execution throughout the organization—deferred revenue increased 7.5% sequentially, days sales outstanding remained very good at 42 days, and working capital increased sequentially more than $14.0 million," said Jim Barth, Senior Vice President and Chief Financial Officer. "The integration of WebTrends is on track, our combined company is operating smoothly and we are very pleased with the progress."

Fourth Quarter Operating Highlights

  • The recently announced NetIQ Security Management Solution integrates the successful security products from NetIQ and WebTrends creating a unified enterprise security management platform for correlation and management of security information across multiple operating systems, applications, firewalls and anti-virus and security products.
  • The broadest library of Microsoft Operations Manager 2000 (MOM 2000) solutions was announced with the initial lineup of NetIQ Extended Management Packs (XMPs) for MOM. The first 12 XMPs support more than 25 different applications, platforms and third-party systems management products and represent an extensive library of value-added solutions to leverage and extend MOM 2000's native capabilities and enable customers to centrally manage distributed, multi-platform infrastructures.
  • The WebTrends Data Conduit for Siebel e-Business Applications introduced in June is the first integration of Web visitor data to earn Siebel Validation. The conduit integrates Web visitor data with existing customer data in Siebel Call Center creating a powerful tool for increasing customer conversion rates, satisfaction and loyalty.
  • The partnership with Compaq was expanded as the companies jointly announced a global alliance to develop, deliver and market solutions built on MOM 2000 to extend and simplify management of enterprise and e-business infrastructures running on Compaq.

"Expanding and enhancing our partnerships and product innovation remain a significant part of our strategy. The accomplishments this quarter cap a year of extremely important milestones for the company. We will continue to invest in the future and expect this momentum to continue into the new fiscal year and beyond," added Hwang.

NetIQ Analyst/Investor Conference Call

NetIQ will conduct a conference call at 2:00 p.m. Pacific daylight time today to discuss the quarter and fiscal year results in more detail and provide guidance on the next fiscal year.

Call-in numbers are 800-406-5356 and 913-981-5572 (outside the U.S.). A replay will be available through August 1, 2001 at 888-203-1112 and 719-457-0820. The confirmation code for the live call and replay is 780419.

A webcast of the call can be accessed from the company's website, www.netiq.com.

About NetIQ

NetIQ Corporation (Nasdaq: NTIQ) is a leading provider of e-business infrastructure management and intelligence for all the components of an organization's e-business infrastructure—from back-end servers, networks and directories to front-end web servers and applications. The company is headquartered in San Jose, Calif., with development and operational personnel in Houston, Texas; Raleigh, N.C.; Bellevue, Wash.; and Portland, Ore. For more information, please visit NetIQ's web site atwww.netiq.com or call (408) 856-3000.

Safe Harbor Statement

Statements in this press release other than statements of historical fact are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company's future results could differ materially from the results discussed herein. Factors that could cause or contribute to such differences include general economic conditions; risks associated with the successful integration of NetIQ and WebTrends; risks inherent in technology businesses, including the timing and successful development of new products; our ability to retain and hire technical personnel and other employees; changing relationships with customers, suppliers and strategic partners; unanticipated costs associated with development and marketing activities; customer acceptance of new product offerings; pricing of new products, and competition in our various product lines. For a more comprehensive discussion of risks and uncertainties relating to our business, please read the discussions of these risks in the documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2000, Quarterly Report on Form 10-Q for the three months ended March 31, 2001, and our Registration Statement on Form S-4 relating to the merger of NetIQ and WebTrends Corporation.

NetIQ and WebTrends are registered trademarks of NetIQ Corporation. Visitor Relationship Management and VRM are trademarks of NetIQ Corporation. All other products mentioned are trademarks or registered trademarks of their respective companies.

================================================================================
                               NetIQ Corporation
                Condensed Consolidated Statements of Operations
                   (In thousands, except per share amounts)
                                        Three Months
                                       Ended June 30,
                                        (Unaudited)         Year Ended June 30,
                                   ---------------------   ---------------------
                                      2001        2000        2001        2000
                                   ---------   ---------   ---------   ---------
Software license revenue            $43,729     $15,259    $125,670     $37,235
Service revenue                      14,895       5,054      41,267      10,685
                                   ---------   ---------   ---------   ---------
  Total revenue                      58,624      20,313     166,937      47,920
                                   ---------   ---------   ---------   ---------
Cost of software license revenue        826         234       2,114         800
Cost of service revenue               4,552         889      10,213       2,217
                                   ---------   ---------   ---------   ---------
   Total cost of revenue              5,378       1,123      12,327       3,017
                                   ---------   ---------   ---------   ---------
Gross profit                         53,246      19,190     154,610      44,903
Operating expenses:
Sales and marketing                  28,558      10,338      80,581      24,695
Research and development             12,691       4,355      35,732      10,109
General and administration            5,348       2,389      13,140       4,761
Stock-based compensation              1,466         172       2,001         696
Write-off of acquired in-process 
  research and development costs         -        9,987       2,663      10,693
Amortization of goodwill and 
  intangibles                       196,039      64,166     554,686      64,184
Restructuring charge                    816          -          816          -
                                   ---------   ---------   ---------   ---------
  Total operating expenses          244,918      91,407     689,619     115,138
                                   ---------   ---------   ---------   ---------
Loss from operations               (191,672)    (72,217)   (535,009)    (70,235)
                                   ---------   ---------   ---------   ---------
Interest income, net                  5,656       3,963      21,786       7,307
                                   ---------   ---------   ---------   ---------
Loss before income taxes           (186,016)    (68,254)   (513,223)    (62,928)
                                   ---------   ---------   ---------   ---------
Income taxes                            740       1,135      10,610       2,400
                                   ---------   ---------   ---------   ---------
Net loss                          $(186,756)   $(69,389)  $(523,833)   $(65,328)
                                   ---------   ---------   ---------   ---------
                                   ---------   ---------   ---------   ---------
Basic and diluted net
  loss per share                     $(3.55)     $(2.49)    $(12.48)     $(3.59)
                                   ---------   ---------   ---------   ---------
Shares used to compute basic
and diluted net loss per share       52,670      27,914      41,984      18,189
SUPPLEMENTAL INFORMATION:
Net income excluding stock-based 
  compensation, write-off of 
  acquired in-process research 
  and development costs, 
  amortization of goodwill and 
  intangibles, restructuring 
  charge, and related income 
  tax effects                        $7,506      $4,336     $28,635      $9,645
                                   ---------   ---------   ---------   ---------
                                   ---------   ---------   ---------   ---------
Diluted net income per share          $0.14       $0.14       $0.63       $0.46
Shares used to compute diluted
  net income per share               54,774      30,918      45,627      20,901

================================================================================
                        NetIQ Corporation   
              Condensed Consolidated Balance Sheets   
                         (In thousands)

                                       June 30,   June 30, 
                                         2001       2000
                                     ----------- -----------
ASSETS
 
Current assets:
  Cash and cash equivalents              $89,494    $187,610
  Short-term investments                 377,287     145,916
  Accounts receivable, net                27,116      10,744
  Prepaid expenses and other               2,691       3,478
                                     ----------- -----------
 
  Total current assets                   496,588     347,748
                                     ----------- -----------
 
Property and equipment, net               54,731       7,181
Goodwill and other intangibles, net    1,769,803   1,365,891
Other assets                               1,407         941
                                     ----------- -----------
  Total assets                        $2,322,529  $1,721,761
                                     ----------- -----------
                                     ----------- -----------
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable                       $5,451      $2,044
  Accrued compensation and 
    related benefits                     14,704       5,023
  Other liabilities                      19,389      11,285
  Deferred revenue                       33,093      17,687
                                     ----------- -----------
  Total current liabilities              72,637      36,039
                                     ----------- -----------
Stockholders' equity:
  Common stock                        2,849,211   1,760,396
  Deferred stock-based compensation      (3,782)     (1,286)
  Accumulated deficit                  (597,104)    (73,271)
  Accumulated other comprehensive   
    income (loss)                         1,567        (117)
                                     ----------- -----------
  Total stockholders' equity          2,249,892   1,685,722
                                     ----------- -----------
  Total liabilities and
    stockholders' equity             $2,322,529  $1,721,761
                                     ----------- -----------
                                     ----------- -----------
================================================================================

Let's Talk


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Amy Sachrison
Director
Media and Analyst Relations

Phone: (713) 418-5368
Email: amy.sachrison@netiq.com