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Novell Reports Financial Results for First Fiscal Quarter 2011

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WALTHAM, Mass., March 3, 2011 /PRNewswire/ -- Novell, Inc. (Nasdaq: NOVL) today announced financial results for its first fiscal quarter ended January 31, 2011. For the quarter, Novell reported net revenue of $191 million. This compares to net revenue of $202 million for the first fiscal quarter of 2010. GAAP income from operations for the first fiscal quarter of 2011 was $12 million. This compares to GAAP income from operations of $21 million for the first fiscal quarter of 2010. GAAP net loss in the first fiscal quarter of 2011 was $18 million, or a $0.05 loss per share, which included a $31 million net tax charge in connection with the planned repatriation of a majority of non-U.S. cash. This compares to GAAP net income of $20 million, or $0.06 per share, for the first fiscal quarter of 2010. Foreign currency exchange rates negatively impacted revenue and positively impacted operating expenses by $1 million and did not materially impact income from operations year-over-year.

On a non-GAAP basis, income from operations for the first fiscal quarter of 2011 was $31 million. This compares to non-GAAP income from operations of $33 million in the same period last year. Non-GAAP net income for the first fiscal quarter of 2011 was $26 million, or $0.07 per share. This compares to non-GAAP net income of $25 million, or $0.07 per share, for the first fiscal quarter of 2010. A reconciliation of GAAP to non-GAAP results is provided in the financial schedules as part of this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Cash, cash equivalents and short-term investments were $1.1 billion at January 31, 2011, consistent with last quarter. Days sales outstanding in accounts receivable was 42 days at the end of the first fiscal quarter of 2011, down from 50 days at the end of the year-ago quarter. Total deferred revenue was $593 million at the end of the first fiscal quarter of 2011, down from $646 million at the end of the year-ago quarter. For the first fiscal quarter of 2011, cash flow from operations was $9 million. This compares to cash flow from operations of $5 million for the first fiscal quarter of 2010.

Further details on Novell's reported results are included in the financial schedules that are a part of this release.

Non-GAAP Financial Measures

We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income from operations, adjusted operating margin, adjusted net income and adjusted net income per share. We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable investors to evaluate our performance in the same way that management does. Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine compensation. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are excluded from most analysts' consensus estimates, that are unusual, and/or that arise outside of the ordinary course of business, such as, but not limited to, those related to stock-based compensation, acquisition-related intangible asset amortization, restructuring, asset impairments, litigation judgments and settlements, strategic alternatives review, the sale of business operations, long-term investments, property, plant and equipment, and unusual and discrete income tax effects.

Legal Notice Regarding Forward-Looking Statements

This press release may include statements that are not historical in nature and that may be characterized as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including those related to future financial and operating results, targets, and prospects; future opportunities; market leadership and positioning; short-term and long-term trends; the macroeconomic environment; customer priorities; timing of realization of projections; functionality, characteristics, quality and performance capabilities of Novell's products and technology; and results achievable and benefits attainable through deployment of Novell's products and provision of services. Forward-looking statements forecasting growth in financial metrics are predicated on assumptions regarding improvements in the overall economy and the markets served by Novell and in which Novell operates, the timing of which are impossible to accurately predict. Actual results may differ materially from the results discussed in or implied by such forward-looking statements, which are based upon information that is currently available to us and/or management's current expectations and speak only as of the date hereof. We are subject to a number of risks, including, among others, the risk that our merger with Attachmate Corporation may be delayed or may not be consummated, the risk that the merger agreement may be terminated in circumstances that require Novell to pay Attachmate a termination fee of $60 million; risks related to the diversion of management's attention from Novell's ongoing business operations; risks regarding the failure of Attachmate to obtain the necessary financing to complete the merger; the effect of the announcement of the merger and the patent sale to CPTN Holdings LLC on Novell's business relationships (including, without limitation, partners and customers), operating results and business generally; and risks related to obtaining the requisite consents to the merger or the patent sale, including, without limitation, the timing (including possible delays) and receipt of regulatory approvals from various governmental entities (including any conditions, limitations or restrictions placed on these approvals) and the risk that one or more governmental entities may deny approval, as well as risks related to indirect sales, growth rates of our business units, renewal of SUSE® Linux Enterprise Server subscriptions with customers who have received certificates from Microsoft, decline rates of Open Enterprise Server and NetWare® revenue, development of products and services, the intelligent workload management market, software vulnerabilities, delays in product releases, reliance on open source software, adequacy of renewal rates, uncertain economic conditions, competition, rapid technological changes, failure to expand brand awareness, adequacy of technical support, pricing pressures, system failures, integration of acquisitions, industry consolidation, challenges resulting from a global business, foreign research and development operations, loss of key employees, intellectual property infringement, litigation matters, unpredictable financial results, impairments, the timing of revenue recognition, our investments and effective use of our cash.

A detailed discussion of these and other factors that could affect our results is included in our SEC filings, including, but not limited to, our Annual Report on Form 10-K for the Fiscal Year Ended October 31, 2010 filed with the SEC on December 13, 2010, which may be obtained by calling (800) 317- 3195, or at our Investor Relations web page at: www.novell.com/company/ir.

We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any forward-looking statements contained in this press release to reflect any change of expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statement is based, in whole or in part.

About Novell

Novell, Inc. (Nasdaq: NOVL), a leader in intelligent workload management, through WorkloadIQ™, helps organizations securely deliver and manage computing services across physical, virtual and cloud computing environments. We help customers reduce the cost, complexity, and risk associated with their IT systems through our solutions for identity and security, systems management, collaboration and Linux-based operating platforms. With our infrastructure software and ecosystem of partnerships, Novell integrates mixed IT environments, allowing people and technology to work as one. For more information, visit www.novell.com.

Copyright © 2011 Novell, Inc.  All rights reserved.  NetWare, Novell, the Novell Logo, the N Logo, and SUSE are registered trademarks and WorkloadIQ is a trademark of Novell, Inc. in the United States and other countries. All third party trademarks are the property of their respective owners.

Novell, Inc.

Consolidated Unaudited Condensed Statements of Operations

(In thousands, except per share data)










Fiscal Quarter Ended


Jan 31, 2011


Jan 31, 2010

Net revenue:




Software licenses

$       20,387


$       21,193

Maintenance and subscriptions

150,393


158,951

Services (1)

19,934


22,222

Total net revenue

190,714


202,366





Cost of revenue:




Software licenses

1,520


1,688

Maintenance and subscriptions

20,819


22,572

Services

19,210


19,458

Total cost of revenue

41,549


43,718





Gross profit

149,165


158,648





Operating expenses:




Sales and marketing

67,256


68,916

Product development

38,365


39,702

General and administrative

20,818


25,827

Other operating expenses (2)

11,173


2,774

Total operating expenses

137,612


137,219





Income from operations

11,553


21,429

Operating margin %

6.1%


10.6%





Other income, net:




Interest income, net

1,964


2,899

Other income, net

1,992


3,767

Total other income, net

3,956


6,666





Income before taxes

15,509


28,095





Income tax expense

33,451


7,906





Net (loss) income

$     (17,942)


$       20,189





(Loss) income per share

$         (0.05)


$           0.06





Weighted average shares

352,001


349,144









(1) Services includes professional services, technical support and training services.

(2) See Page 7 of 10 for a detail of other operating expenses.



Novell, Inc.

Consolidated Unaudited Condensed Balance Sheets

(In thousands)










Jan 31, 2011


Oct 31, 2010

Assets








Current assets:




   Cash and cash equivalents

$     981,426


$    685,594

   Short-term investments

150,009


441,096

   Receivables, net

89,465


171,607

   Prepaid expenses

15,280


16,233

   Current deferred income taxes

36,137


49,169

   Other current assets

21,126


33,725

Total current assets

1,293,443


1,397,424





Property, plant and equipment, net

151,378


156,033

Goodwill

353,818


353,415

Intangible assets, net

26,988


28,746

Deferred income taxes

227,363


243,583

Other assets

48,013


46,797





Total assets

$  2,101,003


$ 2,225,998









Liabilities and Stockholders' Equity








Current liabilities:




   Accounts payable

$       30,102


$      26,785

   Accrued compensation

49,319


83,181

   Other accrued liabilities

66,412


86,223

   Deferred revenue

448,744


487,590

Total current liabilities

594,577


683,779





Deferred income taxes

7,622


7,622

Other long-term liabilities

35,997


35,655

Long-term deferred revenue

144,065


163,394





Total liabilities

782,261


890,450





Stockholders' equity

1,318,742


1,335,548





Total liabilities and stockholders' equity

$  2,101,003


$ 2,225,998



Novell, Inc.

Consolidated Unaudited Condensed Statements of Cash Flows

(In thousands)










Fiscal Quarter Ended


Jan 31, 2011


Jan 31, 2010





Cash flows from operating activities




Net (loss) income

$     (17,942)


$       20,189

Adjustments to reconcile net (loss) income to net cash provided




 by operating activities:




Stock-based compensation expense

6,060


6,450

Depreciation and amortization

7,347


7,437

Change in accounts receivable allowances

46


(1,209)

Gain on sale of previously impaired investments

-


(5,228)

Deferred income taxes

29,341


4,496

Changes in assets and liabilities

(15,685)


(26,939)





Net cash provided by operating activities

9,167


5,196





Cash flows from investing activities




Purchases of property, plant and equipment

(889)


(8,128)

Short-term investment activity

284,703


11,998

Long-term investment activity

-


7,303

Cash proceeds from sale of discontinued operations

-


243

Other

(738)


1,142





Net cash provided by investing activities

283,076


12,558





Cash flows from financing activities




Issuance of common stock

1,366


832

Excess tax effects from stock-based compensation

181


1





Net cash provided by financing activities

1,547


833





Effect of exchange rate changes on cash

2,042


(3,193)

Increase in cash and cash equivalents

295,832


15,394

Cash and cash equivalents - beginning of period

685,594


591,656





Cash and cash equivalents - end of period

$     981,426


$     607,050





Revisions were made to prior period amounts in order to conform to the current period's presentation.



Novell, Inc.

Unaudited Non-GAAP Adjusted Income From Operations

(In thousands)










Fiscal Quarter Ended


Jan 31, 2011


Jan 31, 2010





GAAP income from operations

$       11,553


$       21,429





GAAP operating margin %

6.1%


10.6%





Adjustments:




Stock-based compensation expense:




Cost of revenue

692


559

Sales and marketing

1,891


1,840

Product development

1,735


2,064

General and administrative

1,742


1,987

Sub-total

6,060


6,450





Acquisition-related intangible asset amortization:




Cost of revenue

1,129


1,090

Sales and marketing

629


1,008

Sub-total

1,758


2,098





Other operating expenses (income):




Restructuring expense

-


2,774

Strategic alternatives review expense

10,478


-

Litigation related activity

695


-

Sub-total

11,173


2,774









Total operating adjustments

18,991


11,322





Non-GAAP income from operations

$       30,544


$       32,751





Non-GAAP operating margin %

16.0%


16.2%



Novell, Inc.

Unaudited Non-GAAP Adjusted Net Income

(In thousands, except per share data)










Fiscal Quarter Ended


Jan 31, 2011


Jan 31, 2010





GAAP net (loss) income

$     (17,942)


$       20,189









Operating adjustments (detailed above)

18,991


11,322

Non-operating expenses (income) adjustments:




Gain on sale of previously impaired investments

-


(5,228)

Sub-total

-


(5,228)





Total pre-tax adjustments

18,991


6,094





Income tax adjustments

25,124


(1,475)





Total net adjustments

44,115


4,619





Non-GAAP net income

$       26,173


$       24,808









GAAP net (loss) income per share

$         (0.05)


$           0.06

Total adjustments detailed above

0.12


0.01





Non-GAAP net income per share

$           0.07


$           0.07









GAAP weighted average shares

352,001


349,144





Change from basic to diluted weighted average shares

4,326


-





Non-GAAP weighted average shares

356,327


349,144



SOURCE Novell, Inc.



RELATED LINKS
http://www.novell.com

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