April 27, 2006

NetIQ Announces Third Quarter Fiscal 2006 Results

NetIQ Corp. (Nasdaq: NTIQ), a leading provider of integrated systems and security management solutions, today announced financial results for its third quarter of fiscal 2006 ended March 31, 2006.


Press Release

SAN JOSE, Calif.

NetIQ Corp. (Nasdaq: NTIQ), a leading provider of integrated systems and security management solutions, today announced financial results for its third quarter of fiscal 2006 ended March 31, 2006.

The company also announced that it has signed a definitive agreement to be acquired by AttachmateWRQ for $12.20 per share in cash.

GAAP Financial Results

Revenue for the third quarter of fiscal 2006 ended March 31, 2006 was $46.0 million, compared with $51.1 million in revenue from continuing operations for the same quarter of the prior year, and previously provided guidance of $41 million to $45 million. GAAP net loss from continuing operations was $3.9 million or $0.10 per basic and diluted share in the third quarter of fiscal 2006, compared with GAAP net loss from continuing operations of $3.2 million or $0.06 per basic and diluted share in the third quarter of fiscal 2005, and guidance of a GAAP net loss of $0.22 to $0.32 per diluted share. Previously provided guidance did not include the income tax effect of the sale of NetIQ’s building in San Jose. Results from continuing operations do not include the results of the WebTrends business, which was sold in the fourth quarter of fiscal 2005.

Non-GAAP Operating Results

Non-GAAP net income for the third quarter was $162,000 or breakeven per diluted share, compared with non-GAAP net loss from continuing operations of $669,000 or $0.01 per diluted share for the same period in the prior fiscal year. NetIQ previously provided guidance of non-GAAP net loss of $0.02 to $0.11 per diluted share.

Non-GAAP net income or loss from continuing operations presents the Company's financial results from continuing operations adjusted to exclude the following: amortization and impairment of purchased technology and other intangible assets, employee stock-based compensation, impairment of goodwill, restructuring, impairment of or gains on sale of long-term investments and assets, other one-time non-operating gains, and related income tax effect, each as detailed under “Reconciliation of non-GAAP Information” in the attached financial statements. The exclusion of such items is not in accordance with generally accepted accounting principles, is not intended as a substitute for GAAP net income or loss or any other GAAP measure, and may not be consistent with similar measures used by other companies.

NetIQ’s management and board of directors believe that the non-GAAP information is an additional, meaningful measure of operating performance because it measures the principal operating results that can be directly influenced by management and provides more consistent comparability of the company’s financial results against historical results and the results reported by other software companies. Accordingly, it is used by NetIQ’s management and board of directors to measure the performance of the Company against its operational objectives.

The following statements are based on current expectations as of the date of this release. These statements are forward-looking, and actual results may differ materially. NetIQ does not undertake to update this information in any way or for any reason prior to disclosing actual results.

Third Quarter Continuing Operations Business Overview

The following is with respect to financial information from continuing operations.

  • Professional Services revenue has grown for eight consecutive quarters, and grew by 56% year to year.
  • Sales pipeline is flat from the same quarter one year ago with 29 fewer salespeople.
  • Sales and Marketing, Research and Development, and General and Administrative expenses excluding stock based compensation were $38.5 million, or 83.7% of revenue, compared with $45.7 million, or 89.4% of revenue, for Q3 2005.
  • NetIQ ended Q3 2006 with total cash and cash equivalents and short-term investments of $191.5 million, compared with $185.0 million held at the end of Q2 2006.
  • NetIQ spent approximately $400,000 on capital acquisitions during the quarter.
  • There was 1 deal over $1 million completed during the quarter.
  • 9 of the top 10 deals were sales to existing customers.
  • 4 of the top 10 deals were multi-product sales.
  • 9 of the top 10 deals included sales of AppManager® software licenses.
  • 4 of the top 10 deals were compliance driven.
  • Headcount was 828 at the end of Q3 2006, compared to 857 at the end of Q2 2006.

Recent Product Awards

  • NetIQ received industry recognition for its strong position in the security software market in the third quarter. IDC, a leading IT market research and advisory firm, named NetIQ the revenue and market share leader for the security and vulnerability management (SVM) software market for calendar year 2004. According to the IDC study, NetIQ led the SVM market category with a 6.9 percent market share.
  • NetIQ was named by Info Security Products Guide as a "Hot Company" winner for 2006 based on its analysis of more than 600 information security vendors from around the world. NetIQ's security solutions, best-of-breed product suites and Knowledge-Based Service Assurance strategy were among the factors that contributed to its win.

New Product Introductions

  • NetIQ introduced the NetIQ® VoIP Security Solution to address organizations’ increasing needs to assure the security of their VoIP environments. The NetIQ VoIP Security Solution enables those using Cisco IP Telephony to improve security by reducing exposure time and protecting against the loss of confidential data, and was developed through NetIQ's experience with managing more than 400,000 IP phones.
  • NetIQ introduced NetIQ Change Administrator™, a product that helps control changes on servers and that broadens the reach of NetIQ’s Operational Change Control portfolio by delivering a solution targeted at IT operations personnel rather than just the helpdesk administrator or active directory architect. NetIQ Change Administrator provides NetIQ with an opportunity to offer a change control solution to its installed base.
  • NetIQ recently purchased IntelliPolicy® for Clients from FullArmor Corporation, including both the IntelliPolicy brand name and product technology. IntelliPolicy for Clients provides centralized management and deployment of policy and configuration of Windows-based servers and desktops. It helps assure known and consistent configuration of an organization's desktops and servers through centralized security and configuration management, the ability to control and enforce a wide variety of policy settings, and the ability to perform pinpoint targeting of policy settings.

NetIQ Analyst/Investor Conference Call

NetIQ will conduct a conference call at 6 a.m. Pacific time today to discuss the results of the quarter in greater detail. The dial-in number for the call is (888) 285-1136 (Domestic) and (706) 643-7520 (International) the conference ID is 7824189. A replay of the call will be available at (800) 642-1687 (Domestic) and (706) 645-9291 (International) the conference ID is 7824189. A live audio webcast of the presentation and a replay will be available on the NetIQ corporate website, www.netiq.com. The replay of the webcast will be available within 24 hours of the actual presentation.

About NetIQ

NetIQ is a leading provider of integrated systems and security management solutions that empower IT organizations with the knowledge and ability necessary to assure IT service. NetIQ's Knowledge-Based Service Assurance products and solutions include embedded knowledge and tools to implement industry best practices and to better ensure operational integrity, manage service levels and risk, and ensure policy compliance. NetIQ's modular, best-of-breed solutions for Performance & Availability Management, Security Management, Configuration & Vulnerability Management, and Operational Change Control integrate through an open, service-oriented architecture allowing for common reporting, analytics and dashboards. For more information about NetIQ, visit www.netiq.com or call (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 may differ from the results predicted and from other forward-looking statements made by the company. As well, the company’s third quarter results should not be considered as an indication of its future performance, due to variety of risks and uncertainties, including (1) the demand for the company’s software and services; (2) risks inherent in technology businesses generally, including the timing and successful development of new products, customer acceptance of new product offerings and product strategies, pricing of new products and competition in the company’s various product lines, the company’s ability to attract, retain and hire executives, technical personnel and other employees, and the company’s relationships with customers, suppliers and strategic partners; (3) the impact of consolidation and competition in the enterprise software market on the company’s product lines, pricing and commercial viability and (4) the amount of the charges and the impact of restructuring activities undertaken by the company. For a more comprehensive discussion of risks and uncertainties relating to the company’s business, please read the discussions of these risks in documents the company files from time to time with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2005. All of the information in this press release is as of April 27, 2006, and the company undertakes no responsibility to update this information.

 

 

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


Three Months
Six Months

Ended March 31,
Ended March 31,

2006
2005
2006
2005








Software license revenue $ 21,490
$ 24,745
$ 61,992
$ 86,113
Service revenue 24,513
26,353
77,330
77,000








Total revenue 46,003
51,098
139,322
163,113








Cost of software license revenue 2,000
1,128
4,304
3,611
Cost of service revenue 7,216
6,776
21,419
19,932
Amortization of purchased technology 1,521
2,953
7,064
8,860








Total cost of revenue 10,737
10,857
32,787
32,403








Gross profit 35,266
40,241
106,535
130,710








Operating expenses:






Sales and marketing 22,840
26,089
71,527
77,921
Research and development 12,728
12,159
39,955
38,522
General and administration 7,510
7,430
28,541
21,689
Employee stock-based compensation -
384
-
881
Amortization of other intangible assets -
2,147
3,737
6,406
Restructuring 700
-
22,313
19
Other -
323
-
496








Total operating expenses 43,778
48,209
166,073
145,438








Loss from operations (8,512)
(7,968)
(59,538)
(14,728)








Other income (expenses):






Interest income, net 1,822
1,582
5,120
4,126
Gain on sale of long-term investments -
-
-
4,100
Gain of sale of technology, net -
2,893
10,918
2,893
Other, net (174)
(163)
(386)
394








Total other income, net 1,648
4,312
15,652
11,513








Loss before income taxes (6,864)
(3,656)
(43,886)
(3,215)








Income tax expense (benefit) (2,992)
(426)
(2,242)
(1,120)








Loss from continuing operations (3,872)
(3,230)
(41,644)
(4,335)








Discontinued operations, net of tax:






Income from discontinued operations -
167
-
2,399
Gain on sale of discontinued operations, net 2,729
-
2,729
-








Income from discontinued operations
2,729

167

2,729

2,399








Net income (loss) $ (1,143)
$ (3,063)
$ (38,915)
$ (1,936)








Basic earnings and diluted (loss) per share:






Continuing operation $ (0.10)
$ (0.06)
$ (1.01)
$ (0.08)
Discontinued operations 0.07
-
0.07
0.04








Net earnings (loss) per share $ (0.03)
$ 0.06
$ (0.95)
$ 0.04









.













Shares used to compute basic and diluted earnings per share 38,427
54,162
41,109
54,759








RECONCILIATION OF NON-GAAP INFORMATION:














Net loss from continuing operations $ (3,872)
$ (3,230)
$ (41,644)
$ (4,335)








Adjustments:






Amortization of purchased technology 1,521
2,953
7,064
8,860
Employee stock-based compensation: -
384
-
881
Cost of service revenue 339
-
1,051
-
Sales and marketing 1,563
-
5,004
-
Research and development 1,454
-
5,107
-
General and administration 1,566
-
9,253
-
Amortization of other intangible assets 1,566
-
3,737
6,406
Restructuring 1,735
-
22,313
19
Gain on sale of long-term investments -
-
-
(4,100)
Other one-time gains -
(2,893)
(10,918)
(2,893)








Total adjustments 7,143
2,591
42,611
9,173








Income tax effect (3,109)
(30)
(1,706)
(1,096)








Non-GAAP net income (loss) $ 162
$ (669)
$ (740)
$ 3,742








Non-GAAP earnings (loss) per share $ 0.00
$ (0.01)
$ (0.02)
$ 0.07








Shares used to compute non-GAAP earnings (loss) per share 43,340
55,075
41,109
55,513

 

 

NetIQ Corporation
Condensed Consolidated Balance Sheets
(In thousands)





March 31,
June 30,

2006
2005

(Unaudited)

ASSETS






Current assets:


Cash and cash equivalents $ 53,145
$ 101,432
Short-term investments 138,361
195,311
Accounts receivable, net 24,659
25,989
Prepaid expenses and other 4,402
6,694




Total current assets 220,567
329,426




Property and equipment, net 8,784
40,594
Other intangible assets, net 16,161
15,758
Long-term investments 3,714
3,714
Other assets 942
929
Goodwill 93,153
96,034




Total assets $ 343,321
$ 486,455








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities:


Accounts payable $ 6,487
$ 9,939
Accrued compensation and related benefits 9,236
10,034
Other liabilities 9,661
12,523
Restructuring liability 706
-
Deferred revenue, current portion 44,435
50,703




Total current liabilities 70,525
83,199




Deferred revenue, net of current portion 2,056
2,621




Total liabilities 72,581
85,820




Stockholders' equity:


Common stock 2,726,778
2,835,822
Deferred employee stock-based compensation -
(17,594)
Accumulated deficit (2,454,994)
(2,416,078)
Accumulated other comprehensive loss (1,044)
(1,515)




Total stockholders' equity 270,740
400,635




Total liabilities and stockholders' equity $ 343,321
$ 486,455

 

 

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





Nine Months

Ended March 31,

2006
2005




Cash flows from operating activities:


Net loss $ (38,915)
$ (1,936)
Adjustments to reconcile net loss to net cash provided by operating activities:


Depreciation and amortization 15,901
25,872
Amortization of employee stock-based compensation 20,444
886
Loss on sale of short-term investments and property and equipment 106
196
Impairment of long-lived asset 18,675
-
Gain on sale of long term investments -
(4,100)
Gain on sale of technology (10,918)
(2,893)
Other 153
-
Changes in:


Accounts receivable 1,250
(120)
Prepaid expenses and other 3,301
534
Accounts payable (3,409)
150
Accrued compensation and related benefits 773
69
Other liabilities (2,839)
1,011
Restructuring liability 706
(844)
Deferred revenue (2,821)
529




Net cash provided by operating activities 861
19,354




Cash flows from investing activities:


Purchases of property and equipment, net (2,052)
(7,414)
Proceeds from sales of property and equipment 9,698
42
Cash used in acquisitions -
(808)
Purchases of short-term investments (91,224)
(97,590)
Proceeds from maturities of short-term investments 144,095
102,022
Proceeds from sales of long-term investments -
5,000
Proceeds from sales of short-term investments 4,139
4,912
Purchase of technology (11,274)
(300)
Proceeds from sale of technology 8,836
2,209
Other (19)
108




Net cash provided by investing activities 62,199
8,181




Cash flows from financing activities:


Proceeds from sale of common stock 14,370
3,671
Repurchase of common stock (126,266)
(23,526)
Net cash used in financing activities (111,896)
(19,855)




Effect of exchange rate changes on cash 549
692




Net increase (decrease) in cash and cash equivalents (48,287)
8,372
Cash and cash equivalents, beginning of period 101,432
57,841




Cash and cash equivalents, end of period $ 53,145
$ 66,213

 

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