January 22, 2002

NetIQ Announces Second Quarter Results

NetIQ Corporation (Nasdaq: NTIQ), a leading provider of e-business infrastructure management and intelligence solutions, today announced financial results for the quarter ended December 31, 2001


Press Release

SAN JOSE, Calif.

NetIQ Corporation (Nasdaq: NTIQ), a leading provider of e-business infrastructure management and intelligence solutions, today announced financial results for the quarter ended December 31, 2001, the second quarter of its fiscal year 2002. Revenues for the quarter were $66.8 million, compared with $39.7 million for the same period last year and $60.7 million for the first quarter of fiscal 2002, increases of 69% year-over-year and 10% sequentially. Net income, excluding stock-based compensation, amortization of goodwill and other intangibles and related income tax effects, was $12.3 million or $0.22 per diluted share for the quarter, compared with $8.6 million or $0.20 per diluted share for the second quarter of fiscal 2001, and $9.6 million or $0.17 per diluted share for the first quarter of fiscal 2002. Net income increases were 44% year over year and 29% sequentially.

Revenues for the six months ended December 31, 2001 were $127.5 million, compared with $70.2 million for the same period last year, an increase of 82%. Net income for the six month period, excluding stock-based compensation, amortization of goodwill and other intangibles and related income tax effects, increased 45% to $21.9 million or $0.39 per diluted share, compared with $15.1 million or $0.36 per diluted share for the same period a year ago.

Based on generally accepted accounting principles, net loss for the three and six month periods was $183.0 million and $369.3 million, respectively, and basic and diluted net loss per share was $3.42 and $6.93, respectively. Amortization of goodwill and other intangibles relating to acquisitions was $198.2 million and $396.8 million, respectively, and amortization of stock-based compensation in these periods totaled $1.1 million and $2.5 million, respectively.

Revenues from the previously announced licensing agreement with Microsoft were $20.0 million and $35.0 million in the three and six month periods ended December 31, 2001, compared with $5.0 million in the three and six month periods ended December 31, 2000.

The merger with WebTrends Corporation, completed in March 2001, was accounted for under the purchase method of accounting. WebTrends' revenues and operating results have been included in NetIQ's statements of operations from the date of acquisition forward and are not included in the December 31, 2000 results.

"We are very pleased with our results this quarter, which exceeded expectations for both revenues and earnings. Enthusiasm and momentum are high throughout the company as we are starting to see improvement in sales demand," said Ching-Fa Hwang, president and CEO of NetIQ. "At the same time, we continue to invest for the long-term and are making good progress on new product developments and our corporate infrastructure."

"We saw increasing strength in the business overall," said Jim Barth, senior vice president and chief financial officer. "The combination of solid revenue and well-controlled expenses throughout the quarter resulted in higher-than-expected EPS." said Barth. "Our strong performance resulted in increasing deferred revenue by $3.0 million and cash and short-term investments by more than $20.0 million during the quarter."

Second Quarter Operating Highlights

  • NetIQ received important industry recognition and product awards this quarter. NetIQ was named to Intelligent Enterprise's List of 2002 Companies to Watch, was ranked 36th by DM Review on the 2001 DM Review 100 List, and was ranked 12th on Bloomberg's List of the 100 Fastest Growing Tech Companies. Chariot won Secure Computing Magazine's "The Pick of 2001" award, WebTrends Log Analyzer 7.0 was named "Editors' Choice" in PC Magazine; Domain Migration Administrator won the Network World "Best of the Tests" Award, and AppAnalyzer was named "Best Management Tool or Utility" in the Microsoft Exchange Conference Awards 2001.
  • During the quarter NetIQ unveiled a new family of Voice over IP (VoIP) management products, which has already garnered industry accolades. Chariot VoIP Assessor won the Internet Telephony Magazine "Product of the Year" award and was named "Best of Show" award winner at the INTERNET TELEPHONY Conference and Expo. We also introduced the WebTrends Firewall Reporting Center. Firewall Reporting Center is designed to provide large enterprise customers and managed service providers a comprehensive view of events occurring at the firewall and better management of the firewall itself.

NetIQ Analyst/Investor Conference Call:

NetIQ will conduct a conference call at 1:30 p.m. pacific standard time today to discuss the quarter's results in more detail and provide guidance on the balance of the fiscal year.

Call-in numbers are 1-888-677-5720 and 1-212-519-0806 (outside the U.S.). A replay will be available through January 29, 2002 at 1-800-755-7392 and 1-402-220-0370. The passcode for the live call and replay is "NetIQ".

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

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 the company'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 the current uncertain business climate; 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, 2001.

NetIQ, WebTrends and Chariot are registered trademarks of NetIQ Corporation in the United States and certain other countries. VoIP Assessor, Log Analyzer, Domain Migration Administrator, AppAnalyzer and Firewall Reporting Center are trademarks of NetIQ. 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)
                                   (Unaudited)                              
                               
                                      Three Months               Six Months        
                                    Ended December 31,        Ended December 31,        
                                       (Unaudited)              (Unaudited)        
                                  ---------   ---------     ---------   ---------
                                    2001        2000          2001        2000
                                  ---------   ---------     ---------   ---------
                                  ---------   ---------     ---------   ---------
Software license revenue           $50,210     $30,527       $95,338     $53,593
Service revenue                     16,636       9,126        32,202      16,589
                                  ---------   ---------     ---------   ---------
       Total revenue                66,846      39,653       127,540      70,182
                                  ---------   ---------     ---------   ---------
                      
Cost of software license revenue     1,029         511         1,930         856
Cost of service revenue              5,359       1,972        10,744       3,318
                                  ---------   ---------     ---------   ---------
       Total cost of revenue         6,388       2,483        12,674       4,174
                                  ---------   ---------     ---------   ---------
Gross profit                        60,458      37,170       114,866      66,008
                      
Operating expenses:                        
   Sales and marketing              26,073      17,007        51,672      31,268
   Research and development         14,398       8,336        28,761      15,840
   General and administration        4,532       2,675         8,925       4,887
   Stock-based compensation          1,107         170         2,474         340
   Amortization of goodwill
      and intangibles              198,209     118,819       396,771     238,213
                                  ---------   ---------     ---------   ---------
       Total operating expenses    244,319     147,007       488,603     290,548
                                  ---------   ---------     ---------   ---------
Loss from operations              (183,861)   (109,837)     (373,737)   (224,540)
                                  ---------   ---------     ---------   ---------
Interest income, net                 4,785       4,861        10,404      10,680
                                  ---------   ---------     ---------   ---------
Loss before income taxes          (179,076)   (104,976)     (363,333)   (213,860)
                      
Income taxes                         3,890       4,340         6,000       7,240
                                  ---------   ---------     ---------   ---------
Net loss                         $(182,966)  $(109,316)    $(369,333)  $(221,100)
                                  ---------   ---------     ---------   ---------
                                  ---------   ---------     ---------   ---------
Basic and diluted net
   loss per share                   $(3.42)     $(2.83)       $(6.93)     $(5.83)
                      
Shares used to compute basic                        
  and diluted net loss per share    53,455      38,596        53,270      37,942
                      
                      
SUPPLEMENTAL INFORMATION:                        
Net loss                         $(182,966)  $(109,316)    $(369,333)  $(221,100)
                      
Adjustments:                        
   Stock-based compensation          1,107         170         2,474         340
   Amortization of goodwill
      and intangibles              198,209     118,819       396,771     238,213
   Income tax effect                (4,010)     (1,120)       (8,011)     (2,389)
                                  ---------   ---------     ---------   ---------
Supplemental net income            $12,340      $8,553       $21,901     $15,064
                                  ---------   ---------     ---------   ---------
                                  ---------   ---------     ---------   ---------
Diluted net income per share         $0.22       $0.20         $0.39       $0.36
                      
Shares used to compute diluted                        
  net income per share              55,735      43,014        55,630      42,293



=================================================================================
                                NetIQ Corporation                                
                      Condensed Consolidated Balance Sheets                
                                 (In thousands)                
              
              
                                       Dec. 31,        
                                         2001       June 30,
                                     (Unaudited)      2001
                                     -----------  -----------
ASSETS

Current assets:
    Cash and cash equivalents           $77,983      $89,494
    Short-term investments              432,961      377,287
    Accounts receivable, net             28,289       27,116
    Prepaid expenses and other            3,222        2,691
                                     -----------  -----------
        Total current assets            542,455      496,588
                                     -----------  -----------

Property and equipment, net              53,531       54,731
Goodwill and other intangibles, net   1,368,453    1,769,803
Long-term investments                     2,800        -  
Other assets                              1,401        1,407
                                     -----------  -----------
        Total assets                 $1,968,640   $2,322,529
                                     -----------  -----------
                                     -----------  -----------
           
LIABILITIES AND STOCKHOLDERS' EQUITY            
           
Current liabilities:            
    Accounts payable                     $4,967       $5,451
    Accrued compensation and
       related benefits                  13,899       14,704
    Other liabilities                    13,934       19,389
    Deferred revenue                     40,802       33,093
                                     -----------  -----------
        Total current liabilities        73,602       72,637
                                     -----------  -----------

Stockholders' equity:            
    Common stock                      2,860,442    2,849,211
    Deferred stock-based
       compensation                      (1,206)      (3,782)
    Accumulated deficit                (966,437)    (597,104)
    Accumulated other comprehensive
       income                             2,239        1,567
                                     -----------  -----------
        Total stockholders' equity    1,895,038    2,249,892
                                     -----------  -----------
        Total liabilities and
        stockholders' equity         $1,968,640   $2,322,529
                                     -----------  -----------
                                     -----------  -----------

Let's Talk


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Amy Sachrison
Director
Media and Analyst Relations

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