October 22, 2002

NetIQ Announces First Quarter Results

Revenue Increases Sequentially and Year-over-year Yielding Record Revenue


Press Release

SAN JOSE, Calif.

NetIQ Corporation (Nasdaq: NTIQ), a leading provider of Systems Management, Security Management and Web Analytics solutions, today announced financial results for the quarter ended September 30, 2002, the first quarter of its fiscal year 2003. Revenue for the quarter was $77.1 million, compared with $60.7 million for the same period last year and $76.2 million for the fourth quarter of fiscal 2002, representing increases of 27% year-over-year and 1% sequentially. Supplemental net income was $12.9 million or $0.25 per diluted share for the quarter, compared with $9.6 million or $0.17 per diluted share for the first quarter of fiscal 2002 and $13.8 million or $0.26 per diluted share for the fourth quarter of fiscal 2002. The year-over-year increase in supplemental net income and supplemental diluted earnings per share represents 35% and 47%, respectively.

Supplemental net income is intended to present the company's results of operations excluding the cumulative effect of the change in accounting principles, employee stock-based compensation, amortization of goodwill and other intangibles, and related income tax effects. The exclusion of such items is not in accordance with and is not intended as a substitute for generally accepted accounting principles, and may not be consistent with similar measures used by other companies.

Based on generally accepted accounting principles (GAAP), net loss was $572.2 million and basic and diluted net loss per share was $11.35 and $11.10, respectively, for the first quarter of fiscal 2003, compared with a net loss of $186.4 million and basic and diluted net loss per share of $3.51 for the first quarter of fiscal 2002. The company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, on July 1, 2002 and recorded a transitional impairment charge of $579.3 million in the quarter ended September 30, 2002. The charge is recorded as the cumulative effect of a change in accounting principle. Quarterly results in accordance with GAAP also included amortization of other intangibles of $9.0 million and amortization of employee stock-based compensation of $209,000 in the quarter ended September 30, 2002. GAAP results for the comparable period one year ago included amortization of goodwill of $188.3 million, amortization of other intangibles of $10.3 million and amortization of employee stock-based compensation of $1.4 million

Revenue from the previously announced licensing agreement with Microsoft was $25.0 million in the quarter ended September 30, 2002, compared with $15.0 million in the same period of fiscal year 2002. Excluding license fees from this agreement, revenue for the first quarter of fiscal year 2003 increased 14% to $52.1 compared with $45.7 million in the first quarter of 2002.

"We are very pleased to report another solid quarter. In spite of seasonality, we once again met our expectations for revenues and earnings and for the fourth quarter sequentially we grew revenues from our core business, which excludes license fees from Microsoft. Our new product suites for managing VoIP, Microsoft SQL Server, UNIX and our XMPs for Microsoft Operations Manager 2000 (MOM), introduced over the last several quarters contributed more than 5% to revenues this quarter. These new products continue to give us opportunities in new markets, new cross-selling opportunities and are generating new customers," said Chuck Boesenberg, president and CEO of NetIQ.

"The strength of our security and administration products and the security sector in general really highlight the strategic value of our recently announced acquisition of PentaSafe. The acquisition of PentaSafe, a recognized leader in integrated security management solutions, announced October 1 and expected to close in November or December 2002, will immediately accelerate NetIQ's presence and momentum in the security management market, broaden our customer base, and strengthen our security product portfolio and domain expertise," added Boesenberg.

"One of the toughest challenges in the current economy is balancing quarterly financial results and long-term strategic growth. A strong balance sheet gives us alternatives and helps us maintain a balanced focus. During the quarter cash and short-term investments increased by $22.1 million to $498.0 million or $9.66 per diluted share, deferred revenue increased 5% to $51.2 million, and days sales outstanding decreased to from 62 days to 51 days, excluding revenues from Microsoft, adding to the strength of our balance sheet," said Jim Barth, CFO of NetIQ.

First Quarter Operating and Product Highlights:

  • NetIQ products won 13 Windows and .NET Magazine 2002 Reader's Choice Awards.
  • NetIQ was recognized in a recent Gartner report as the leader in Performance and Availability Management for Windows servers.
  • David Barram, a well-recognized veteran of government and the technology industry, joined the NetIQ board of directors. Mr. Barram also serves on the Audit Committee.
  • NetIQ introduced additional solutions for managing heterogeneous infrastructures and now offers more than17 cross-platform modules designed to more effectively manage Windows, UNIX and Linux servers and applications from a single console.
  • The company also introduced new versions of NetIQ® Security Manager™, NetIQ® Security Reporting Center™, NetIQ® Security Administration Suite™, NetIQ® SQL Management Suite™ version 1.5, and NetIQ® Chariot® software for wireless environments through performance measurement agents on the Windows CE platform.

NetIQ Analyst/Investor Conference Call:

NetIQ will conduct a conference call at 1:30 p.m. pacific daylight time today to discuss the quarter's results in more detail.

Call-in numbers are 1-888-447-8321 and 1-706-634-1488 (outside the U.S.). A replay will be available through October 29, 2002 at 1-800-642-1687 and 1-706-645-9291 (outside the U.S.). The passcode for the live call and replay is "5879420". An audio webcast of the call can be accessed from the company's website,http://www.netiq.com/About_NetIQ/Investor_Relations/InvestorConferenceCall.asp.

About NetIQ

Founded in 1995, NetIQ Corporation (Nasdaq: NTIQ) is a leading provider of Systems Management, Security Management and Web Analytics solutions. Historically focused on the Windows management market, NetIQ now delivers cross-platform solutions that enhance business performance resulting in higher returns on infrastructure and Web investments. NetIQ products are sold across all continents directly and through a network of authorized NetIQ partners and resellers. 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 the company's web site at www.netiq.com or call 888-323-6768.

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 expectations discussed herein. Factors that could cause or contribute to such differences include the current uncertain business climate; risks inherent in technology businesses, including the timing and successful development of new products; risks related to the completion of the acquisition, integration of the companies and achievement of anticipated revenue and cost synergies; our ability to retain and hire technical personnel and other employees; changing relationships with customers, suppliers and strategic partners; unanticipated costs associated with integration and operating 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 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, 2002.

NetIQ, WebTrends, AppManager, AppAnalyzer, Chariot, Security Management Pack, WebTrends Reporting Center, XMP, and VoIP Manager are trademarks or registered trademarks of NetIQ Corporation in the United States and certain other countries. All other products mentioned are trademarks or registered trademarks of their respective companies.

Editors Note: If you would like additional information on NetIQ Corporation and its products, please go to NetIQ Press Room athttp://www.netiq.com/news/default.asp on NetIQ's Web site





NetIQ Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
 

    Three Months
Ended September 30,
(Unaudited)


    2002   2001
     
Software license revenue $55,982   $45,128
Service revenue 21,106   15,566
     
     Total revenue 77,088   60,694
         
Cost of software license revenue 2,427   901
Cost of service revenue 6,499   5,385
     
     Total cost of revenue 8,926   6,286
         
     
Gross profit 68,162   54,408
         
Operating expenses:      
  Sales and marketing 30,018   26,984
  Research and development 16,128   12,978
  General and administration 4,950   4,393
  Employee stock-based compensation 209   1,367
  Amortization of other intangible assets 9,007   10,269
  Amortization of goodwill -   188,293
     
     Total operating expenses 60,312   244,284
         
     
Income (loss) from operations 7,850   (189,876)
         
Interest income, net 3,750   5,619
         
     
Income (loss) before income taxes and cumulative      
   effect of change in accounting principle 11,600   (184,257)
Income taxes 4,490   2,110
     
Income (loss) before cumulative effect of
   change in accounting principle
7,110   (186,367)
         
Cumulative effect of change in accounting principle (579,338)   -
         
     
Net loss $(572,228)   $(186,367)
   

 

         
Basic earnings per share:      
Income (loss) before cumulative effect of
   change in accounting principle
$0.14   $(3.51)
Cumulative effect of change in accounting principle (11.49)   -
     
Net loss $(11.35)   $(3.51)
   

 

         
Diluted earnings per share:      
Income (loss) before cumulative effect of
   change in accounting principle
$0.14   $(3.51)
Cumulative effect of change in accounting principle (11.24)   -
     
Net loss $(11.10)   $(3.51)
   

 

         
Shares used to compute basic earnings per share 50,420   53,085
Shares used to compute diluted earnings per share 51,544   53,085
         
SUPPLEMENTAL INFORMATION:      
         
Net loss $(572,228)   $(186,367)
Adjustments:      
  Employee stock-based compensation 209   1,367
  Amortization of other intangible assets 9,007   10,269
  Amortization of goodwill -   188,293
  Cumulative effect of change in accounting principle 579,338   -
  Income taxes (3,423)   (4,001)
     
Supplemental net income $12,903   $9,561
   

 

         
Diluted net income per share $0.25   $0.17
         
Shares used to compute diluted net income per share 51,559   55,447





NetIQ Corporation
Condensed Consolidated Balance Sheets
(In thousands)
 

    September 30,
2002
  June 30,
2002
     
    (Unaudited)    
ASSETS      
         
Current assets:      
  Cash and cash equivalents $ 72,327   $ 64,032
  Short-term investments 425,659   411,861
  Accounts receivable, net 29,804   35,095
  Prepaid expenses and other 7,247   4,511
     
         
     Total current assets 535,037   515,499
     
         
Property and equipment, net 56,775   55,518
Other intangibles, net 44,703   57,537
Goodwill, net 338,652   915,813
Long-term investments 7,532   2,652
Other assets 1,464   1,624
     
         
     Total assets $ 984,163   $ 1,548,643
   

 

         
         
LIABILITIES AND STOCKHOLDERS' EQUITY      
         
Current liabilities:      
  Accounts payable $ 5,461   $ 5,612
  Accrued compensation and related benefits 19,068   17,505
  Other liabilities 15,435   15,363
  Deferred revenue, current portion 48,793   46,603
     
         
     Total current liabilities 88,757   85,083
     
         
Deferred revenue, net of current portion 2,402   2,100
         
     Total liabilities 91,159   87,183
         
Stockholders' equity:      
  Common stock 2,879,806   2,876,462
  Deferred employee stock-based compensation (167)   (395)
  Accumulated deficit (1,899,820)   (1,327,592)
  Accumulated other comprehensive income 1,825   1,625
  Less treasury stock (88,640)   (88,640)
     
         
     Total stockholders' equity 893,004   1,461,460
     
         
     Total liabilities and stockholders' equity $ 984,163   $ 1,548,643
   

 





NetIQ Corporation 
Condensed Consolidated Statement of Cash Flows 
(In thousands) 


  Three Months
Ended September 30,
(Unaudited)


  2002   2001
   
Cash flows from operating activities:      
  Net loss $ (572,228)   $ (186,367)
  Adjustments to reconcile net loss to net cash provided      
    by operating activities:      
    Depreciation and amortization 11,953   202,175
    Tax benefit from disqualifying dispositions 3,022   243
    Amortization of employee stock-based compensation 208   1,367
    Loss on sale of investments and property and equipment 92   515
    Undistributed net loss in earnings of affiliate 120   -
    Cumulative effect of change in accounting principle 579,338   -
    Changes in:      
      Accounts receivable 5,307   1,299
      Prepaid expenses and other (2,737)   3
      Accounts payable (158)   341
      Accrued compensation and related benefits 1,559   (189)
      Other liabilities 1,540   (2,555)
      Deferred revenue 2,135   4,666
   
             
      Net cash provided by operating activities 30,151   21,498
   
             
Cash flows from investing activities:      
  Purchases of property and equipment (4,292)   (2,427)
  Purchases of short-term investments (67,952)   (64,446)
  Proceeds from maturities of short-term investments 54,364   89,775
  Purchase of long-term investment (5,000)   -
  Other 161   5
   
             
      Net cash (used in) provided by investing activities (22,719)   22,907
   
             
Net cash flows from financing activities, sale of common stock 523   3,564
   
             
Effect of exchange rate changes on cash 340   (46)
   
             
Net increase in cash and cash equivalents 8,295   47,923
Cash and cash equivalents, beginning of period 64,032   89,494
   
             
Cash and cash equivalents, end of period $ 72,327   $ 137,417
 

 

             
Supplemental disclosure of cashflow information-cash paid for:      
  Interest $ 1   $ 1
  Income taxes $ 231   $ 541

Let's Talk


Welcome, Want to talk to someone? Call our Sales team or request a call and we'll get right back to you.

  • Sales: (888) 323-6768

For support information, please visit Technical Support.

Amy Sachrison
Director
Media and Analyst Relations

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