Opsware Inc. Exceeds Q2 Revenue and EPS Guidance; Company Turns Profitable Excluding Non-Cash Charges.SUNNYVALE Sunnyvale, city (1990 pop. 117,229), Santa Clara co., W Calif., near San Francisco; settled 1849, inc. 1912. A city in Silicon Valley, its many manufactures include semiconductors; machinery and instruments; electrical, electronic, and aerospace products; , Calif. -- Opsware (Opsware Inc., Sunnyvale, CA, www.opsware.com) A software company specializing in software that automates managed services. Founded in 2000 as Loudcloud by Marc Andreessen, Ben Horowitz, Tim Howes and In Sik Rhee, it initially offered managed services and used its own Opsware software to Inc. (Nasdaq:OPSW): --Q2 non-EDS revenue totals $19.9 million, up 121% year-over-year --Q2 revenue grows to $25.1 million, up 78% year-over-year --Annual revenue growth rate accelerating to 67% this year vs. 62% last year Opsware Inc. (Nasdaq:OPSW), the leading provider of IT automation software, today reported results for its second quarter ended July July: see month. 31, 2006, highlighted by 121% year-over-year growth in non-EDS revenue. Net revenue for the second quarter ended July 31, 2006, totaled $25.1 million, up 78% from the same quarter last year and above the company's previous guidance of $23.0 to $23.5 million. Non-EDS revenue grew to $19.9 million in the second quarter, a 121% increase over the same quarter last year. A chart depicting Opsware's historical non-EDS revenue growth is included in this release. Non-EDS Derived Bookings (which equals net revenue, plus the change in deferred revenue, plus the change in advances from customers, all excluding the impact of EDS (Electronic Data Systems, Plano, TX, www.eds.com) Founded in 1962 by H. Ross Perot (independent candidate for the President of the U.S. in 1992), EDS is the largest outsourcing and data processing services organization in the country. ) totaled $17.0 million in the second quarter, a 59% increase from the same quarter last year. Non-EDS Derived Bookings increased 14% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . A chart depicting Opsware's historical non-EDS derived bookings growth is included in this release. Non-GAAP net income in the second quarter was $1.0 million or $0.01 per share, above the company's guidance of $0.00 per share. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net loss in the second quarter was $(3.8) million or $(0.04) per share. Non-GAAP net income in the second quarter excludes non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of approximately $0.7 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc previous acquisitions and $4.0 million of non-cash stock-based compensation. A reconciliation between net income (loss) on GAAP and non-GAAP bases is provided in a table immediately following the Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statements of Operations attached to this release. The company raised its full year revenue expectation to $102 million. "Q2 was a strong quarter and I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in pleased with our results. We grew non-EDS revenue by 121%, far outpacing the competition, and we reached the key milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. of non-GAAP profitability," said Ben Horowitz Ho·ro·witz , Vladimir 1904-1989. Russian-born American pianist noted for his interpretations of Chopin and Liszt. Noun 1. Horowitz - Russian concert pianist who was a leading international virtuoso (1904-1989) , president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Opsware Inc. "During Q2 we also shipped the Opsware System 6 suite, the most important release in our company's history." Financial Outlook Management provides the following guidance for its third quarter ending October October: see month. 31, 2006: --Net revenue is expected to range between $25 and $26 million. --Non-GAAP EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. is expected to be $0.00. Management provides the following guidance for its fiscal year ending January January: see month. 31, 2007: --Net revenue is expected to be $102 million. --Non-GAAP EPS is expected to be $0.03. The company will provide additional detail on its financial results on the conference call referenced below. About the Conference Call and Webcast Opsware management will host a conference call today, August 24, 2006, beginning at 5:00 a.m. PT (8:00 a.m. ET) to discuss today's announcement. Interested parties may access the conference call by dialing (800) 810-0924. A live audio version and replay of the conference call will be available on the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of Opsware's web site at http://investor.opsware.com. About Non-GAAP Financial Information When used in connection with historical results or forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. guidance, non-GAAP net income (loss), non-GAAP profitability and non-GAAP EPS each exclude non-cash stock-based compensation expense and non-cash charges relating to past acquisitions. With respect to historical results, a reconciliation between both net income (loss) and net income (loss) per share on GAAP and non-GAAP bases is provided in a table immediately following the Condensed Consolidated Statement of Operations See Income statement. attached to this release. With respect to forward-looking guidance, a reconciliation between EPS on GAAP and non-GAAP bases has not been provided because EPS on a GAAP basis depends in part upon the amount of stock based compensation expense, which expense is dependent upon our future stock price and other factors that cannot be determined at this time. To supplement our consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge presented on a GAAP basis, we believe that these non-GAAP measures better reflect our core operating results and thus are appropriate to enhance the overall understanding of our past financial performance and our prospects for the future. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of our underlying operational results and trends and our performance. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The presentation of additional information is not meant to be considered in isolation or as a substitute for net loss or net loss per share prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. About Opsware Inc. (Nasdaq:OPSW) Opsware Inc. is the world's leading IT automation and utility computing (1) Pay-per-usage processing provided by a service organization that uses its own computers and facilities. Customers access the computers via a private network or over the Internet and are charged according to how much computing time they use, such as CPU seconds, minutes or hours. software company. The growth of the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the is driving a shift from client/server An architecture in which the user's PC (the client) is the requesting machine and the server is the supplying machine, both of which are connected via a local area network (LAN) or wide area network (WAN). computing computing - computer to Web architecture. With this shift comes an overwhelming proliferation proliferation /pro·lif·er·a·tion/ (pro-lif?er-a´shun) the reproduction or multiplication of similar forms, especially of cells.prolif´erativeprolif´erous pro·lif·er·a·tion n. of servers, network devices and applications, creating massive complexity that makes an automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. IT model a necessity. The Opsware System automates the complete IT lifecycle and delivers utility computing by enabling IT to automatically provision, patch, configure See configuration. (software) configure - A program by Richard Stallman to discover properties of the current platform and to set up make to compile and install gcc. Cygnus configure was a similar system developed by K. , secure, change, scale, audit, recover, consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. , migrate, and reallocate Verb 1. reallocate - allocate, distribute, or apportion anew; "Congressional seats are reapportioned on the basis of census data" reapportion allocate, apportion - distribute according to a plan or set apart for a special purpose; "I am allocating a loaf of servers, network devices and applications. Over 350 of the world's largest companies, outsourcers and government agencies use Opsware to deliver this new, automated model of IT. For more information on Opsware Inc., please visit our web site at www.opsware.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the federal securities laws, including forecasts of our expected revenue and earnings per share and the "Financial Outlook" section. These forward-looking statements are based on current information and expectations, and are subject to risks and uncertainties that could cause actual events or results to differ materially from these statements, including without limitation: that the IT automation software market is relatively new and may not develop as we expect, that our market is highly competitive and subject to rapid and significant change, that enterprise software spending and budgets may fluctuate depending on economic conditions and that our revenue and operating results may vary significantly from period to period, including due to the timing of signing contracts with customers, delays in product releases, and our dependence on closing a small number of relatively large transactions each quarter. In addition, please see the section entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Risk Factors" and "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations" in our Form 10-Q Form 10-Q See 10-Q. for the quarter ended April 30, 2006 that we filed with the Securities and Exchange Commission, and subsequent filings with the SEC. We assume no obligation to update the information in this press release or to revise any forward-looking statements. The graphics displaying non-EDS revenue and derived bookings in this press release solely present historical data, and are not necessarily indicative of results in future periods. Continued growth is subject to several risks and uncertainties, including those described in our SEC filings as referenced in the preceding paragraph. Opsware is a service mark and trademark of Opsware Inc.
OPSWARE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
July January
31, 2006 31, 2006
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 96,765 $ 101,898
Accounts receivable, net 21,058 17,867
Prepaid expenses and other current assets 5,997 6,546
--------- ---------
Total current assets 123,820 126,311
Property and equipment, net 5,208 3,944
Restricted cash 2,274 2,296
Prepaid rent 1,190 1,540
Other assets 433 380
Intangibles, net 6,135 7,613
Goodwill 27,523 27,668
--------- ---------
Total assets $ 166,583 $ 169,752
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,381 $ 1,217
Other accrued liabilities 13,108 11,389
Advances from customers -- 721
Deferred revenue, current portion 25,126 29,473
Accrued restructuring costs, current portion 298 298
Capital lease obligations, current portion 16 14
--------- ---------
Total current liabilities 40,929 43,112
Capital lease obligations, net of current
portion 65 74
Deferred revenue, net of current portion 1,117 1,838
Accrued restructuring costs, net of current
portion 1,029 1,190
--------- ---------
Total liabilities 43,140 46,214
--------- ---------
Stockholders' equity:
Common stock 100 100
Additional paid-in capital 616,414 609,455
Deferred stock compensation -- (2,606)
Accumulated deficit (492,835) (483,270)
Accumulated other comprehensive loss (236) (141)
--------- ---------
Total stockholders' equity 123,443 123,538
--------- ---------
Total liabilities and stockholders'
equity $ 166,583 $ 169,752
========= =========
OPSWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
Three Months Six Months
Ended Ended
July 31, July 31,
----------------- -------------------
2006 2005 2006 2005
-------- -------- --------- ---------
Revenue:
License revenue $17,907 $ 9,888 $ 33,268 $ 18,037
Services revenue 7,227 4,235 13,862 8,701
-------- -------- --------- ---------
Net revenue 25,134 14,123 47,130 26,738
-------- -------- --------- ---------
Cost and expenses:
Cost of license revenue 360 260 866 340
Cost of services revenue(a) 5,096 3,222 10,079 6,164
Cost of developed technology 412 412 824 816
Research and development(a) 7,614 5,644 14,956 11,336
Sales and marketing(a) 11,946 5,747 22,852 10,824
General and administrative(a) 4,457 3,100 8,703 5,767
Restructuring recoveries, net -- -- -- (18)
Amortization of other
acquisition-related
intangibles 327 327 654 648
In-process research and
development charges -- -- -- 1,190
-------- -------- --------- ---------
Total cost and expenses 30,212 18,712 58,934 37,067
-------- -------- --------- ---------
Loss from operations (5,078) (4,589) (11,804) (10,329)
Loss on sale of assets and
liabilities from Managed
Services Business -- (11) -- (44)
Interest and other income, net 1,311 686 2,293 1,332
-------- -------- --------- ---------
Loss before income taxes (3,767) (3,914) (9,511) (9,041)
Provision for income taxes -- 10 54 12
-------- -------- --------- ---------
Net loss $(3,767) $(3,924) $ (9,565) $ (9,053)
======== ======== ========= =========
Basic and diluted net loss per
share $ (0.04) $ (0.04) $ (0.10) $ (0.09)
======== ======== ========= =========
Shares used in computing basic
and diluted net loss per share 99,686 97,912 99,525 97,729
======== ======== ========= =========
(a) Includes stock-based compensation expense of the following:
Cost of services revenue $ 366 $ 2 $ 702 $ 5
Research and development 1,287 274 2,494 592
Sales and marketing 1,311 58 2,492 151
General and administrative 1,079 288 2,001 28
-------- -------- --------- ---------
Total stock-based compensation
expense $ 4,043 $ 622 $ 7,689 $ 776
======== ======== ========= =========
A reconciliation between GAAP and non-GAAP net income (loss) is as
follows: (unaudited)
Three Months Six Months
Ended Ended
July 31, 2006 July 31, 2006
------------- -------------
GAAP net loss $ (3,767) $ (9,565)
Non-cash charge related to equity
transactions 4,043 7,689
Cost of developed technology 412 824
Amortization of other acquisition-
related intangibles 327 654
------------- -------------
Non-GAAP net income (loss) $ 1,015 $ (398)
============= =============
GAAP diluted net loss per share $ (0.04) $ (0.10)
============= =============
Non-GAAP diluted net income per share $ 0.01 $ 0.00
============= =============
Shares used in computing non-GAAP diluted
net income per share 106,214 99,525
============= =============
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