July 23, 2003

NetIQ Announces Fourth Quarter and Fiscal 2003 Results

NetIQ Corp. (Nasdaq:NTIQ), a leading provider of Systems & Security Management and Web Analytics solutions, today announced financial results for its fourth quarter and fiscal year ended June 30, 2003.


Press Release

SAN JOSE, Calif.

NetIQ Corp. (Nasdaq:NTIQ), a leading provider of Systems & Security Management and Web Analytics solutions, today announced financial results for its fourth quarter and fiscal year ended June 30, 2003.

GAAP Financial Results

Revenue for the fourth quarter of fiscal 2003 decreased 5% to $72.7 million, compared with $76.2 million for the same period last year. Net loss was $334.7 million or $6.00 per basic and diluted share compared with $180.9 million or $3.46 per basic and diluted share for the fourth quarter of fiscal 2002.

Revenue for the fiscal year ended June 30, 2003 increased 11% to $310.2 million, compared with $278.2 million for the same period last year. Net loss was $908.7 million or $17.07 per basic and diluted share compared with $730.5 million or $13.74 per basic and diluted share for fiscal 2002.

During the fourth quarter of fiscal 2003, NetIQ reclassified from operating expenses to cost of revenue the amortization of purchased technology, in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed". This reclassification was applied retroactively to all prior periods.

Core Revenue and Non-GAAP Net Income

Core revenue for the three and twelve-month periods ended June 30, 2003 was $67.7 million and $250.2 million, respectively, representing increases of 32% and 29% compared with the same periods last year. Core revenue excludes license fees from the previously announced licensing agreement with Microsoft.

Revenue from the Microsoft agreement was $5.0 million and $60.0 million during the three and twelve-month periods ended June 30, 2003, respectively, compared with $25.0 million and $85.0 million during the three and twelve-month periods ended June 30, 2002, respectively. Revenue from this agreement is expected to be $5.0 million during the first quarter of fiscal 2004, the last quarter in which revenue is expected under the agreement.

Non-GAAP net income for the fourth quarter was $3.9 million or $0.07 per diluted share, compared with non-GAAP net income of $13.8 million or $0.26 per diluted share for the same period in the prior fiscal year.

Non-GAAP net income for the fiscal year was $34.7 million or $0.64 per diluted share, compared with non-GAAP net income of $49.8 million or $0.90 per diluted share for fiscal 2002.

Non-GAAP net income presents the company's results of operations excluding amortization and impairment of purchased technology, employee stock-based compensation, amortization of other intangible assets, impairment of goodwill, impairment of long-term investment in affiliate, write-off of acquired in-process research and development, restructuring charge, cumulative effect of change in accounting principle, and related income tax effect, as detailed under "Reconciliation of Non-GAAP Information" in the attached financial statements. 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.

Presentation of non-GAAP net income, earnings per share and core revenue is intended to provide greater comparability of NetIQ's financial results against historical results as well as those of other enterprise software companies and financial models of securities analysts. Management believes that the non-GAAP information is an additional meaningful measure of operating performance and it is the principal measure of performance used by management and the board of directors.

Business Highlights and Outlook

"This has been a year of transformation and execution for NetIQ," said Chuck Boesenberg, CEO and Chairman of NetIQ. "Despite inconsistent IT spending and weakness in the federal market in the fourth quarter, we've seen strong growth in our core revenues, and have made progress in replacing the declining royalty stream from Microsoft with new product revenue. We acquired and integrated key technologies and people in the security sector from PentaSafe and Marshal Software, which we believe provides us a significant strategic advantage."

  • NetIQ anticipates revenue for its first fiscal quarter ending September 30, 2003 to be in the range of $68.0 to $72.0 million.
  • NetIQ anticipates GAAP net loss per share of $0.06 to $0.09 and non-GAAP net income per share of $0.01 to $0.04 in the first quarter of fiscal 2004. The reconciliation to non-GAAP EPS guidance is based on the following assumptions: amortization of employee stock based compensation of $106 thousand, amortization of purchased technology of $5.7 million and other intangible assets of $4.4 million.
  • NetIQ anticipates revenue for fiscal 2004 to be in the range of $285.0 to $300.0 million.
  • NetIQ anticipates GAAP net loss per share of $0.18 to $0.26 and non-GAAP net income per share of $0.12 to $0.20 in fiscal 2004.

The reconciliation to non-GAAP EPS guidance is based on the following assumptions: amortization of employee stock based compensation of $389 thousand, amortization of purchased technology of $18.7 million and other intangible assets of $15.3 million.

Fourth Quarter and fiscal 2003 Product Highlights

  • NetIQ products continue to garner industry accolades:
    • Giga report on Active Directory Management identifies NetIQ as market share leader
    • AppManager and MailMarshal won the MSD2D.com People's Choice Award for Exchange High Availability and Exchange e-mail content security categories, respectively
    • WebTrends Reporting Center received the Codie award for Best E-Commerce Solution

NetIQ Analyst/Investor Conference Call

NetIQ will conduct a conference call at 1:30 p.m. pacific time today to discuss the fourth quarter and fiscal results in more detail. Call-in numbers are 1-877-440-8703 and 1-706-645-0115 (outside the U.S.). A replay will be available through August 29, 2003 at 1-800-642-1687 and 1-706-645-9291 (outside the U.S.). The passcode for the live call and replay is "974501". An audio webcast of the call and a historical as well as "guidance" reconciliation of GAAP and non-GAAP financial data and other information can be accessed from the company's website at www.netiq.com/about_netiq/investor_relations/investorconferencecall.asp.

About NetIQ

Founded in 1995, NetIQ Corporation (Nasdaq:NTIQ) is a leading provider of Systems & 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.; Portland, Ore; and Auckland, New Zealand. For more information, please visit the company's web site at www.netiq.com or call 1-888-323-6768.

Safe Harbor Statement
Statements in this press release regarding future operating results and statements 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 integration of newly acquired 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 or revenue loss associated with integration and operating activities, or operational or systems disruption; customer acceptance of new product offerings; pricing of new products; our recent internal restructuring initiatives 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, MailMarshal and WebTrends Reporting Center 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 owners.

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                             NetIQ Corporation                         
               Condensed Consolidated Statements of Operations                         
                  (In thousands, except per share amounts)                         
                       
                                             Three Months                   
                                            Ended June 30,                   
                                             (Unaudited)     Year Ended June 30,       
                                          -------   -------  --------   ------- 
                                            2003      2002     2003       2002
                                          -------   -------  --------   ------- 
                       
Software license revenue                   $42,799   $56,705  $205,707  $207,848 
Service revenue                             29,862    19,494   104,517    70,391 
                                          -------   -------  --------   ------- 
     Total revenue                         72,661    76,199   310,224   278,239 
                                          -------   -------  --------   ------- 
                       
Cost of software license revenue             3,033     1,264    10,090     4,048 
Cost of service revenue                      7,861     6,331    29,329    23,483 
Amortization and impairment of 
 purchased technology*                      7,231     5,358    25,436    21,109 
                                          -------   -------  --------   ------- 
     Total cost of revenue                 18,125    12,953    64,855    48,640 
                                          -------   -------  --------   ------- 
                       
Gross profit                                54,536    63,246   245,369   229,599 
                       
Operating expenses:                         
  Sales and marketing                      33,015    28,848   131,912   107,713 
  Research and development                 18,226    16,343    71,105    61,016 
  General and administration                6,309     4,494    24,020    19,110 
  Employee stock-based compensation           132       344       796     3,247 
  Amortization of other intangible 
     assets                                 4,960     5,049    18,520    20,198 
  Impairment of goodwill                  330,484      -      330,484      -   
  Write-off of acquired in-process 
     research and development                -         -        1,396      -   
  Restructuring charge                       -         -        5,280      -   
  Amortization of goodwill                   -      187,884      -      751,763 
                                          -------   -------  --------   ------- 
     Total operating expenses             393,126   242,962   583,513   963,047 
                                          -------   -------  --------   ------- 
                       
Loss from operations                      (338,590) (179,716) (338,144) (733,448)
                       
Interest income, net                         1,418     3,633    10,751    18,730 
                                          -------   -------  --------   ------- 
                       
Loss before income taxes and cumulative
  effect of change in accounting 
  principle                              (337,172) (176,083) (327,393) (714,718)
Income tax expense (benefit)                (2,490)    4,780     2,010    15,770 
                                          -------   -------  --------   ------- 
Loss before cumulative effect of change
  in accounting principle                (334,682) (180,863) (329,403) (730,488)
                       
Cumulative effect of change in 
  accounting principle, net of 
  income taxes                               -         -     (579,338)     -   
                                          -------   -------  --------   ------- 
                       
Net loss                                  (334,682) (180,863) (908,741) (730,488)
                                          -------   -------  --------   ------- 
                                          -------   -------  --------   ------- 
                       
Basic and diluted earnings per share:                         
Loss before cumulative effect of change 
  in accounting principle                  $(6.00)   $(3.46)   $(6.19)  $(13.74)
Cumulative effect of change in
  accounting principle                        -         -      (10.88)      -   
                                          -------   -------  --------   ------- 
Net loss                                    $(6.00)   $(3.46)  $(17.07)  $(13.74)
                       
Shares used to compute basic earnings 
  per share                                55,797    52,255    53,253    53,155 
                       
RECONCILIATION OF NON-GAAP INFORMATION:                         
                       
Net loss                                  (334,682) (180,863) (908,741) (730,488)
Adjustments:                         
  Amortization and impairment of
     purchased technology*                  7,231     5,358    25,436    21,109 
  Employee stock-based compensation           132       344       796     3,247 
  Amortization of other intangible 
     assets                                 4,960     5,049    18,520    20,198 
  Impairment of goodwill                  330,484      -      330,484      -   
  Impairment of long-term investment in
     affiliate                                693      -        1,438      -   
  Write-off of acquired in-process 
     research and development                -         -        1,396      -   
  Restructuring charge                       -         -        5,280      -   
  Amortization of goodwill                   -      187,884      -      751,763 
  Cumulative effect of change in
     accounting principle, net of 
     income taxes                            -         -      579,338      -   
                                          -------   -------  --------   ------- 
Total adjustments                          343,500   198,635   962,688   796,317 
                                          -------   -------  --------   ------- 
Income tax effect                           (4,896)   (3,994)  (19,256)  (16,054)
                                          -------   -------  --------   ------- 
Non-GAAP net income                         $3,922   $13,778   $34,691   $49,775 
                                          -------   -------  --------   ------- 
                                          -------   -------  --------   ------- 
                       
Non-GAAP diluted net income per share        $0.07     $0.26     $0.64     $0.90 
                                          -------   -------  --------   ------- 
                       
Shares used to compute non-GAAP diluted
  net income per share                     57,028    53,578    54,560    55,109 
                       
*   Previously reported in operating expenses                     
------------------------------------------------------------------------------          
                             NetIQ Corporation             
                    Condensed Consolidated Balance Sheets             
                               (In thousands)             
          
                                                           June 30,       
                                               -----------         -----------
                                                   2003               2002
                                               -----------         -----------
          
ASSETS             
          
Current assets:             
 Cash and cash equivalents                        $81,085             $64,032 
 Short-term investments                           232,291             411,861 
 Accounts receivable, net                          39,016              35,095 
 Prepaid expenses and other                         7,019               4,511 
                                               -----------         -----------
          
    Total current assets                          359,411             515,499 
                                               -----------         -----------
          
Property and equipment, net                         58,042              55,518 
Other intangible assets, net                        56,245              57,537 
Goodwill                                           272,561             915,813 
Long-term investments                                5,714               2,652 
Other assets                                         1,797               1,624 
                                               -----------         -----------
          
    Total assets                                 $753,770          $1,548,643 
                                               -----------         -----------
                                               -----------         -----------
          
          
LIABILITIES AND STOCKHOLDERS' EQUITY             
          
Current liabilities:             
 Accounts payable                                  $7,224              $5,612 
 Accrued compensation and related benefits         16,667              17,505 
 Other liabilities                                 13,124              15,363 
 Restructuring liability, current portion           2,302                -   
 Deferred revenue, current portion                 55,632              46,603 
                                               -----------         -----------
          
    Total current liabilities                      94,949              85,083 
                                               -----------         -----------
          
Restructuring liability, net of current portion        532                -   
Deferred revenue, net of current portion             3,082               2,100 
                                               -----------         -----------
          
    Total liabilities                              98,563              87,183 
                                               -----------         -----------
          
Stockholders' equity:             
 Common stock                                    2,927,470          2,876,462 
 Deferred employee stock-based compensation           (861)              (395)
 Accumulated deficit                            (2,271,445)        (1,327,592)
 Accumulated other comprehensive income                 43              1,625 
 Less treasury stock                                 -                (88,640)
                                               -----------         -----------
          
    Total stockholders' equity                    655,207           1,461,460 
                                               -----------         -----------
          
    Total liabilities and stockholders'
       equity                                    $753,770          $1,548,643 
                                               -----------         -----------
                                               -----------         -----------
------------------------------------------------------------------------------          
                            NetIQ Corporation                   
                Condensed Consolidated Statement of Cash Flows                   
                              (In thousands)                   
                  
                                                     Year Ended June 30,       
                                               -----------         -----------
                                                   2003                2002
                                               -----------         -----------
                  
Cash flows from operating activities:                   
   Net loss                                     $(908,741)          $(730,488)
   Adjustments to reconcile net loss to net
      cash provided by operating activities:                
      Depreciation and amortization                58,250             804,921 
      Amortization of employee stock-based
         compensation                                 796               3,247 
      Loss on sale of investments and property
         and equipment                                824               1,000 
      Impairment of goodwill                      330,484                -   
      Undistributed net loss in earnings
         of affiliate                                 500                 148 
      Impairment of long-term investment 
         in affiliate                               1,438                -   
      Write-off of acquired in-process
         research and development                   1,396                -   
      Cumulative effect of change in 
        accounting principle                      579,338                -   
      Tax benefit from disqualifying
         dispositions                                 181              13,900 
      Warrant issued in lieu of compensation         -                  1,501 
      Changes in assets and liabilities, 
        net of acquisitions:             
         Accounts receivable                        3,491              (7,577)
         Prepaid expenses and other                (1,394)             (1,814)
         Accounts payable                            (245)                360 
         Accrued compensation and
            related benefits                       (5,785)              2,592 
         Other liabilities                        (15,311)             (3,525)
         Restructuring liability                    2,834                -   
         Deferred revenue                            (932)             14,998 
                                               -----------         -----------
                  
         Net cash provided by operating 
            activities                             47,124              99,263 
                                               -----------         -----------
                  
Cash flows from investing activities:                   
   Purchases of property and equipment            (15,291)            (15,609)
   Proceeds from sales of property and 
      equipment                                        20                  47 
   Cash used in acquisitions, net of 
      cash received                              (202,312)               -   
   Purchases of short-term investments           (177,977)           (305,517)
   Proceeds from maturities of short-term
      investments                                 224,521             270,901 
   Proceeds from sales of short-term
      investments                                 132,742                -   
   Purchase of long-term investment                (5,000)             (2,800)
   Other                                              201                (185)
                                               -----------         -----------
                  
      Net cash used in investing activities       (43,096)            (53,163)
                                               -----------         -----------
                  
Cash flows from financing activities:                   
    Proceeds from sale of common stock             13,803              16,456 
    Purchase of treasury stock                       -                (88,640)
                                               -----------         -----------
                  
          Net cash provided by (used in)
             financing activities                  13,803             (72,184)
                                               -----------         -----------
                  
Effect of exchange rate changes on cash              (778)                622 
                                               -----------         -----------
                  
Net increase (decrease) in cash and
   cash equivalents                                17,053             (25,462)
Cash and cash equivalents, beginning
   of year                                         64,032              89,494 
                                               -----------         -----------
                  
Cash and cash equivalents, end of year            $81,085             $64,032 
                                               -----------         -----------
                                               -----------         -----------
                  
Noncash investing activities:                   
   Issuance of common stock and options in
      business combination                        $37,754               $-   
   Issuance of treasury stock in business 
      combination                                 $53,528               $-   
                  
Supplemental disclosure of cash flow 
   information-cash paid for:                   
   Interest                                           $40                $26 
   Income taxes                                    $2,451             $1,367 

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