January 30, 2003

NetIQ Announces Second 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 second fiscal quarter and six-months ended December 31, 2002. Revenue for the quarter was $80.3 million, compared with $66.8 million for the same period last year and $77.1 million for the first quarter of fiscal 2003, representing increases of 20% year-over-year and 4% sequentially. Supplemental net income was $12.3 million or $0.23 per diluted share for the second quarter, compared with $12.3 million or $0.22 per diluted share for the second quarter of fiscal 2002 and $12.9 million or $0.25 per diluted share for the first quarter of fiscal 2003.

Revenue for the six-months ended December 31, 2002 was $157.4 million, compared with $127.5 million for the same period last year, an increase of 23%. Supplemental net income for the six month period was $25.2 million or $0.48 per diluted share, compared to $21.9 million or $0.39 per diluted share for the same period a year ago.

Supplemental net income is intended to present the company’s results of operations excluding the cumulative effect of changes in accounting principles, acquisition-related charges, restructuring charges, employee stock-based compensation, 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 income was $1.3 million or $0.02 per diluted share during the quarter ended December 31, 2002, compared to a loss of $183.0 million or $3.42 per diluted share for the December quarter in the prior year. For the six months ended December 31, 2002, the GAAP loss was $570.9 million or $10.94 per diluted share compared to $369.3 million or $6.93 per diluted share for the same period a year ago.

Revenue from the previously announced licensing agreement with Microsoft was $20.0 million in the quarter ended December 31, 2002, the same as in the year ago quarter; however, revenue from the Microsoft agreement was $45.0 million in the six month period ended December 31, 2002, compared to $35.0 million in the comparable period one year ago. Excluding license fees from this agreement, core revenue for the second quarter of fiscal year 2003 increased 16% sequentially and 29% year-over-year to $60.3 million. Excluding these license fees, revenue for the six months ended December 31, 2002 increased 22% from the year ago period to $112.4 million.

"While we completed the acquisitions of PentaSafe and Marshal Software and made excellent progress integrating the organizations, the company stayed focused on execution and delivered solid results in every business and grew core-non Microsoft revenue sequentially for the fifth straight quarter," said Chuck Boesenberg, president and CEO of NetIQ. "We were especially pleased that core revenue for each of the three Business Units, Systems Management, Security Management and Web Analytics, grew sequentially over 10% in the quarter."

"Cash and short-term investments remain strong at $302.8 million. The company used approximately $202.8 million for the acquisitions of PentaSafe and Marshal. Operating margins will decline in the Company's March 2003 quarter as a result of the scheduled decline in license revenue from the Microsoft agreement, but are expected to be positive and to increase thereafter as growth in core revenue and acquisitions add to our expanding operations," said Jim Barth, CFO of NetIQ.

Second Quarter Operating and Product Highlights:

  • Completed acquisitions of PentaSafe Security Technologies, Inc. and Marshal Software Ltd.
  • Extended our partnership with Akamai, whereby Akamai will resell both WebTrends software and hosted web analytics services from NetIQ.
  • Released 10 new Performance and Availability products including support for BEA WebLogic AppServer, Microsoft Analysis Server, Sun ONE Application Server, Sun ONE Web Server, and IBM WebSphere Application Server on Solaris.
  • Grew core revenue sequentially for the 5th consecutive quarter.
  • Increased deferred revenue 20% sequentially to over $61.5 million.

NetIQ Analyst/Investor Conference Call:

NetIQ will conduct a conference call at 1:30 p.m. pacific time today to discuss the quarter’s 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 February 6, 2003 at 1-800-642-1687 and 1-706-645-9291 (outside the U.S.). The passcode for the live call and replay is "7336254". 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.; 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 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 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 and WebTrends, 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.

Editor's 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)
                                    (Unaudited)
                                                                
                                              Three Months       Six Months
                                           Ended December 31, Ended December 31,
                                           -----------------  ------------------
                                             2002     2001      2002      2001
                                           -------   -------  --------   ------- 
Software license revenue                   $56,606   $50,210  $112,588   $95,338
Service revenue                             23,704    16,636    44,810    32,202
                                           -------   -------  --------   ------- 
  Total revenue                             80,310    66,846   157,398   127,540
                                           -------   -------  --------   ------- 
Cost of software license revenue             2,084     1,029     4,511     1,930 
Cost of service revenue                      7,168     5,359    13,667    10,744 
                                           -------   -------  --------   ------- 
  Total cost of revenue                      9,252     6,388    18,178    12,674
                                           -------   -------  --------   ------- 
Gross profit                                71,058    60,458   139,220   114,866 
                                                                
Operating expenses:                                                            
  Sales and marketing                       32,471    26,073   62,489     51,672 
  Research and development                  16,831    14,398   32,959     28,761 
  General and administration                 5,897     4,532   10,847      8,925 
  Employee stock-based compensation            197     1,107      406      2,474 
  Write-off of acquired in-process           1,396       -      1,396        -   
       research and development costs
  Amortization of other intangible assets    9,877    10,269   18,884     20,537 
  Restructuring charge                       5,280       -      5,280        -   
  Amortization of goodwill                     -     187,940       -     376,234 
                                           -------   -------  --------   ------- 
    Total operating expenses                71,949   244,319   132,261   488,603 
                                           -------   -------  --------   ------- 
                                                                
Income (loss) from operations                 (891) (183,861)    6,959  (373,737)
                                                             
Interest income, net                         3,995     4,785     7,745    10,404 
                                           -------   -------  --------   ------- 
                                                                
Income (loss) before income taxes and                      
     cumulative effect of change             3,104  (179,076)   14,704  (363,333)
     in accounting principle
Income taxes                                 1,780     3,890     6,270     6,000 
                                           -------   -------  --------   ------- 
Income (loss) before cumulative effect       1,324  (182,966)    8,434  (369,333)
     of change in accounting principle
                                                                
Cumulative effect of change in accounting       -       -     (579,338)      -   
     principle
                                           -------   -------  --------   ------- 
                                                               
Net income (loss)                           $1,324 $(182,966)$(570,904)$(369,333)
                                           -------   -------  --------   ------- 
                                           -------   -------  --------   ------- 
Basic earnings per share:                                                       
Income (loss) before cumulative effect       $0.03    $(3.42)    $0.17    $(6.93)
     of change in accounting principle
Cumulative effect of change in                  -        -      (11.34)      -   
     accounting principle
                                           -------   -------  --------   ------- 
Net income (loss)                            $0.03    $(3.42)  $(11.17)   $(6.93)
                                           -------   -------  --------   ------- 
                                           -------   -------  --------   ------- 
                                                                
Diluted earnings per share:                                                    
Income (loss) before cumulative effect       $0.02    $(3.42)    $0.16    $(6.93)
     of change in accounting principle
Cumulative effect of change in                  -        -      (11.10)      -   
     accounting principle
                                           -------   -------  --------   ------- 
Net income (loss)                            $0.02    $(3.42)  $(10.94)   $(6.93)
                                           -------   -------  --------   ------- 
                                           -------   -------  --------   ------- 
                                                                  
Shares used to compute basic                51,805    53,455    51,110    53,270 
     earnings per share
Shares used to compute diluted              52,763    53,455    52,179    53,270 
     earnings per share                                                         
SUPPLEMENTAL INFORMATION:                                                       
                                                                
Net income (loss)                           $1,324 $(182,966)$(570,904)$(369,333)
Adjustments:             
  Employee stock-based compensation            197     1,107       406     2,474 
  Write-off of acquired in-process           1,396       -       1,396       -   
       research and development costs
  Amortization of other intangible assets    9,877    10,269    18,884    20,537 
  Restructuring charge                       5,280       -       5,280       -   
  Amortization of goodwill                     -     187,940       -     376,234 
  Cumulative effect of change in               -         -     579,338       -   
       accounting principle
  Income taxes                              (5,759)   (4,010)   (9,182)   (8,011)
                                           -------   -------  --------   ------- 
Supplemental net income                    $12,315   $12,340   $25,218   $21,901 
                                           -------   -------  --------   ------- 
                                           -------   -------  --------   ------- 
                                                                
Supplemental diluted net income per share    $0.23     $0.22     $0.48     $0.39 
                                                                
Shares used to compute supplemental         52,832    55,735    52,244    55,630 
     diluted net income per share

---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
            
                                NetIQ Corporation
                      Condensed Consolidated Balance Sheets
                                  (In thousands)
                                
                                
                                                  December 31,         June 30, 
                                                      2002               2002
                                                  -----------         -----------
                                                  (Unaudited)            
ASSETS                                 
                                
Current assets:                                
  Cash and cash equivalents                           $50,343             $64,032 
  Short-term investments                              252,434             411,861 
  Accounts receivable, net                             44,062              35,095 
  Prepaid expenses and other                            7,698               4,511 
                                                  -----------         -----------
                                
    Total current assets                              354,537             515,499 
                                                  -----------         -----------
                                
Property and equipment, net                            58,208              55,518 
Other intangibles assets, net                          81,317              57,537 
Goodwill, net                                         603,661             915,813 
Long-term investments                                   7,401               2,652 
Other assets                                            1,804               1,624 
                                                  -----------         -----------
                                
    Total assets                                   $1,106,928          $1,548,643 
                                                  -----------         -----------
                                                  -----------         -----------
                                
                                
LIABILITIES AND STOCKHOLDERS' EQUITY     
                                
Current liabilities:                           
  Accounts payable                                     $9,300              $5,612 
  Accrued compensation and related benefits            20,608              17,505 
  Other liabilities                                    26,370              15,363 
  Deferred revenue, current portion                    57,801              46,603 
                                                  -----------         -----------
                                
    Total current liabilities                         114,079              85,083 
                                                  -----------         -----------
                                
Restructuring liability, net of current portion         1,505                 -   
Deferred revenue, net of current portion                3,708               2,100 
                                                  -----------         -----------
                                
    Total liabilities                                 119,292              87,183 
                                                  -----------         -----------
                                
Stockholders' equity:                          
  Common stock                                      2,921,845          2,876,462 
  Deferred employee stock-based compensation           (1,782)              (395)
  Accumulated deficit                              (1,933,608)        (1,327,592)
  Accumulated other comprehensive income                1,181              1,625 
  Less treasury stock                                     -              (88,640)
                                                  -----------         -----------
                                
    Total stockholders' equity                        987,636          1,461,460 
                                                  -----------         -----------
                                
    Total liabilities and stockholders' equity     $1,106,928         $1,548,643 
                                                  -----------         -----------
                                                  -----------         -----------


---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                NetIQ Corporation 
                  Condensed Consolidated Statement of Cash Flows
                                  (In thousands)   
                                    (Unaudited)
                                                
                                                                  Six Months
                                                               Ended December 31,
                                                              -------------------
                                                               2002         2001
                                                              ------       ------
                                                
Cash flows from operating activities:                                          
  Net loss                                                 $(570,904)    $(369,333)
  Adjustments to reconcile net loss to net cash provided                          
       by operating activities:                                     
    Depreciation and amortization                             25,080       403,110 
    Tax benefit from disqualifying dispositions                3,022        6,000 
    Amortization of employee stock-based compensation            406        2,474 
    Loss on sale of investments and property and equipment       416          747 
    Undistributed net loss in earnings of affiliate              251          -   
    Write-off of acquired in-process                           1,396          -   
         research and development costs
    Cumulative effect of change in accounting principle      579,338          -   
    Changes in:                            
      Accounts receivable                                     (3,325)       (1,067)
      Prepaid expenses and other                              (1,988)         (565)
      Accounts payable                                         1,979          (229)
      Accrued compensation and related benefits               (1,531)         (912)
      Other liabilities                                         (938)       (5,004)
      Deferred revenue                                         2,779         7,769 
                                                              ------        ------
      Net cash provided by operating activities               35,981        42,990 
                                                              ------        ------
Cash flows from investing activities:                                         
  Purchases of property and equipment                         (6,790)      (6,199)
  Proceeds from sales of property and equipment                   16           22 
  Cash used in acquisitions, net of cash received           (202,800)          -   
  Purchases of short-term investments                        (57,003)     (214,846)
  Proceeds from maturities of short-term investments         123,992       159,886 
  Proceeds from sales of short-term investments               92,467           -   
  Purchase of long-term investment                            (5,000)       (2,800)
  Other                                                          187             7  
                                                              ------        ------
    Net cash used in investing activities                    (54,931)      (63,930)
                                                              ------        ------
Net cash flows from financing activities,                      4,899         9,475  
     sale of common stock
                                                              ------        ------
Effect of exchange rate changes on cash                          362           (46) 
                                                              ------        ------
Net decrease in cash and cash equivalents                    (13,689)      (11,511)
Cash and cash equivalents, beginning of period                64,032        89,494 
Cash and cash equivalents, end of period                     $50,343       $77,983
                                                              ------        ------
                                                              ------        ------
Noncash investing activities:                                          
  Issuance of common stock and options in                    
       business combination                                  $37,663          -   
  Reissuance of treasury stock in business combination       $53,528          -    
Supplemental disclosure of cash flow information-cash                            
       paid for:
  Interest                                                       $34           $1 
  Income taxes                                                $1,045         $748

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