Rally Software Announces Financial Results for Fourth Quarter and Fiscal Year 2014

20 Mar, 2014, 16:25 ET from Rally Software

BOULDER, Colo., March 20, 2014 /PRNewswire/ -- Rally (NYSE: RALY), a leading global provider of cloud-based solutions for managing Agile software development, today announced financial results for its fourth quarter and fiscal year 2014 ended January 31, 2014.

Fourth quarter 2014 results:  

  • Revenues of $19.6 million, an increase of 27% compared to the fourth quarter in the same period one year ago.
  • GAAP net loss of $(6.3) million, or a loss of $(0.26) per basic and diluted share based on 24.6 million weighted average shares of common stock outstanding, compared to a GAAP net loss of $(4.0) million, or a loss of $(1.82) per share based on 2.2 million weighted average shares of common stock outstanding in the same period one year ago.
  • Non-GAAP net loss of $(4.7) million, or $(0.19) per basic and diluted share, compared to a non-GAAP net loss of $(3.7) million, or $(1.68) per basic and diluted share in the same period one year ago (see the table titled "Statement of Operations GAAP to Non-GAAP Reconciliation" for a reconciliation of these GAAP and non-GAAP financial measures).
  • Deferred revenue of $40.8 million, a 21% increase over the $33.7 million reported at the end of the prior quarter.
  • Calculated billings were $26.7 million, a 12% increase over the $23.8 million in the same period one year ago, and a 63% increase over the $16.4 million reported in the previous quarter (see the table titled "Reconciliation of Total Revenue to Calculated Billings and Days Sales Outstanding" for a reconciliation of GAAP revenue to calculated billings).
  • Total paid seats increased to over 214,000, a 27% increase over the total paid seats in the same period one year ago and an 8% increase over total paid in seats in the prior quarter.

Fiscal 2014 results:

  • Revenues of $74.3 million, an increase of 31% compared to the prior year.
  • GAAP net loss of $(20.1) million, or a loss of $(1.01) per basic and diluted share based on 19.8 million weighted average shares of common stock outstanding, compared to a GAAP net loss of $(10.8) million, or a loss of $(5.13) per share based on 2.1 million weighted average shares of common stock outstanding in the prior year.
  • Non-GAAP net loss of $(15.1) million, or $(0.76) per basic and diluted share, compared to a non-GAAP net loss of $(9.7) million, or $(4.59) per basic and diluted share in the prior year (see the table titled "Statement of Operations GAAP to Non-GAAP Reconciliation" for a reconciliation of these GAAP and non-GAAP financial measures).
  • Calculated billings were $76.9 million, a 10% increase over the $69.9 million in the prior year (see the table titled "Reconciliation of Total Revenue to Calculated Billings and Days Sales Outstanding" for a reconciliation of GAAP revenue to calculated billings).

Cash flow used in operations in the fourth quarter was $7.9 million and cash flow used in operations in fiscal year 2014 was $18.5 million. Cash and cash equivalents at January 31, 2014, excluding restricted cash, were $88.9 million.

"This quarter marked a finish to a great year, distinguishing a continued trend of Agile acceptance in the mainstream. Large, enterprise customers are going bigger, faster with Agile and Rally to keep pace in the age of digital disruption. Today's hyper-competitive marketplace requires business leaders to recognize the benefits of their Agile teams' fast-pace delivery, and scale the process across many functions of the business. Rally is addressing the need to innovate at speed and thus supporting the Agile wave," says Rally's Chairman and CEO, Tim Miller.

"Of the deals closed during this quarter, we'd like to highlight two companies that strongly demonstrate the role of Agile in large scale enterprise transformations. One with a Fortune 500 American multinational conglomerate and one with a major American multinational semiconductor chip manufacturer representing 19,000 total aggregated seats, proving the all-in approach to Agile is a must for these large enterprise customers."

Other key customer wins this quarter include renewals, add-ons to existing subscriptions and new customers in industries ranging from media and entertainment to travel and healthcare, including: Chipotle, Jive Communications, Whole Foods Market, eHarmony, Pearson, Autodesk, Betfair, InterContinental Hotels, Financial Times, Churchill Downs, Truven Health Analytics, Western Union, National Geographic, Edmunds, and TomTom International. 

Business Outlook

As of March 20, 2014, management is providing its financial outlook as follows:  

First Quarter of Fiscal 2015

  • Total revenue in the range of $19.4 to $19.6 million, or 21% to 22% growth over the prior year's first quarter.
  • GAAP net loss per basic and diluted share of approximately $(0.60) to $(0.57), based on 24.8 million weighted average shares of common stock outstanding.
  • Non-GAAP net loss per basic and diluted share of approximately $(0.53) to $(0.50), based on 24.8 million weighted average shares of common stock outstanding, and excludes $1.6 million in stock-based compensation and amortization of acquired intangible assets.

Fiscal Year 2015

  • Total revenue in the range of $91.5 to $93.5 million, or 23% to 26% growth over the prior year.
  • GAAP net loss per basic and diluted share of approximately $(1.87) to $(1.82), based on 25.2 million weighted average shares of common stock outstanding. 
  • Non-GAAP net loss per basic and diluted share of approximately $(1.61) to $(1.56), based on 25.2 million weighted average shares of common stock outstanding, and excludes $6.5 million in stock-based compensation and amortization of acquired intangible assets.

Conference Call Today March 20, 2014 Rally will host a conference call and live webcast to discuss the financial results at 3:00 p.m. Mountain Time, 5:00 p.m. Eastern Time, today, Thursday, March 20, 2014. The conference call can be accessed by dialing 1-877-870-4263, or 1-412-317-0790 (outside the U.S. and Canada). A live webcast will be available on the Investor Relations page of the Rally corporate website at www.rallydev.com and beginning approximately one hour after the completion of the call is available for replay for 30 days. An audio replay of the call will also be available to all interested parties beginning at approximately 4:00 p.m. Mountain Time, 6:00 p.m. Eastern Time, on Thursday, March 20, 2014 until 7:00 a.m. Mountain Time, 9:00 a.m. Eastern Time, on Friday, March 28, 2014, by dialing 1-877-344-7529 or 1-412-317-0088 (outside the U.S. and Canada) and entering pass code 10041965#.

About Rally Rally Software is a leading global provider of cloud-based solutions for managing Agile software development. The Rally® Agile application lifecycle management (ALM) platform transforms the way organizations manage the software development lifecycle by closely aligning software development and strategic business objectives, facilitating collaboration, increasing transparency and automating manual processes. Companies use Rally to accelerate the pace of innovation, improve productivity and more effectively adapt to rapidly changing customer needs and competitive dynamics.

©2014 Rally Software Development Corp.  Rally, Rally Software and the Rally logo are trademarks or registered trademarks of Rally Software Development Corp. in the United States and/or other countries. All other trade names, trademarks and service marks are properties of their respective owners.

Non-GAAP Financial Measures To supplement Rally's condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), the company has provided certain measures that have not been prepared in accordance with GAAP. These non-GAAP financial measures include non-GAAP results for calculated billings, net loss and basic and diluted net loss per share, which are in addition to, and, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Rally's non-GAAP financial measures exclude stock-based compensation expense and amortization of acquired intangible assets. Management believes the presentation of operating results excluding stock-based compensation expense and the amortization of acquired intangible assets provides useful supplemental information to investors and facilitates the analysis of Rally's core operating results and comparison of operating results across reporting periods and is therefore useful to investors in analyzing and assessing the company's past and future operating performance.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measures to such GAAP measures can be found in the accompanying financial statements included with this press release.

Forward-looking Statements This press release contains forward-looking statements, including statements regarding Rally's future financial performance, market growth, the demand for Rally's solutions, and general business conditions. Any forward-looking statements contained in this press release are based upon Rally's historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Rally's expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Rally disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from Rally's current expectations. Important factors that could cause actual results to differ materially from those anticipated in such forward-looking statements include, but are not limited to, the growth of demand for Agile software development, Rally's ability to expand its relationships with existing customers, Rally's ability to attract and retain customers, the mix of perpetual license and subscription revenue, competitive factors, including but not limited to pricing pressures, industry consolidation, and entry of new competitors and new products, Rally's ability to manage growth effectively, Rally's ability to maintain, protect and enhance its brand and intellectual property, general economic and financial conditions, and other risks and uncertainties. Further information on risk factors that could cause actual results to differ materially from forecasted results is included in Rally's reports filed with the SEC, including its prospectus dated July 24, 2013 and filed with the SEC on July 25, 2013, the company's Form 10-Q for the quarter ended October 31, 2013 filed on December 11, 2013 and our Form 10-K that will be filed for the fiscal year ended January 31, 2014.  

 

Rally Software Development Corp. 

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

January 31,

January 31,

2014

2013

ASSETS

Current assets:

Cash and cash equivalents

$      88,891

$      17,609

Restricted cash, short-term

16

-

Accounts receivable, net

21,771

16,318

Other receivables

78

288

Prepaid expenses and other current assets

3,310

1,912

Total current assets

114,066

36,127

Property and equipment, net

5,569

3,789

Goodwill

2,529

-

Intangible assets, net

1,909

367

Restricted cash, long-term

4,200

-

Other assets

810

1,572

Total assets

$    129,083

$      41,855

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$        2,170

$        1,945

Accrued liabilities

4,812

3,062

Deferred revenue

38,352

32,984

Other current liabilities

2,054

727

Total current liabilities

47,388

38,718

Deferred revenue, net of current portion

2,433

5,206

Deferred rent expense, net of current portion

888

939

Warrants for redeemable convertible preferred stock, at estimated fair value

-

1,604

Total liabilities

50,709

46,467

Redeemable convertible preferred stock

-

68,410

Stockholders' equity (deficit):

Common stock

3

1

Additional paid-in capital

174,027

2,503

Accumulated deficit

(95,660)

(75,529)

Accumulated other comprehensive loss

4

3

Total stockholders' equity (deficit)

78,374

(73,022)

Total liabilities and stockholders equity (deficit)

$    129,083

$      41,855

 

Rally Software Development Corp. 

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)

Three Months Ended

Twelve Months Ended

January 31,

January 31,

2014

2013

2014

2013

Revenue:

Subscription and support

$   15,371

$   12,387

$   57,852

$   43,794

Perpetual license

1,495

1,546

5,914

5,815

    Total product revenue

16,866

13,933

63,766

49,609

Professional services

2,739

1,559

10,563

7,237

    Total revenue

19,605

15,492

74,329

56,846

Cost of revenue (1) (2):

Product 

2,085

1,426

7,567

5,242

Professional services

2,319

1,709

9,105

7,005

    Total cost of revenue

4,404

3,135

16,672

12,247

    Gross profit

15,201

12,357

57,657

44,599

Operating expenses (1):

Sales and marketing

10,876

8,676

39,628

29,445

Research and development

5,515

4,423

20,812

15,121

General and administrative

5,064

3,203

16,708

10,810

Sublease termination income

-

-

-

(839)

    Total operating expenses

21,455

16,302

77,148

54,537

    Loss from operations

(6,254)

(3,945)

(19,491)

(9,938)

Other income (expense):

Interest and other income

37

13

128

56

Interest expense

-

39

(464)

(683)

Loss on foreign currency transactions and other

 gain (loss)

(20)

(27)

(131)

(87)

Loss before provision for income taxes

(6,237)

(3,920)

(19,958)

(10,652)

Provision for income taxes

40

128

173

128

Net loss 

$   (6,277)

$   (4,048)

$  (20,131)

$  (10,780)

Net loss per share attributable to common stockholders,

 basic and diluted

$     (0.26)

$     (1.82)

$      (1.01)

$      (5.13)

Weighted average common shares outstanding, basic

 and diluted

24,592

2,219

19,841

2,101

(1) Includes stock-based compensation expense as follows:

Three Months Ended

Twelve Months Ended

January 31,

January 31,

2014

2013

2014

2013

Cost of product revenue

$          76

$            5

$        250

$          16

Cost of professional services revenue

60

11

181

27

Sales and marketing

413

56

1,316

198

Research and development

251

66

1,239

193

General and administrative

601

129

1,465

523

$     1,401

$        267

$     4,451

$        957

(2) Includes amortization expense of acquired intangible assets as follows:

Cost of product revenue

$        132

$          60

$        542

$        170

 

Rally Software Development Corp. 

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

Three Months Ended

Twelve Months Ended

January 31, 

January 31, 

2014

2013

2014

2013

Cash flow from operating activities:

Net loss

$ (6,277)

$ (4,048)

$ (20,131)

$ (10,780)

Adjustments to reconcile net loss to cash provided by (used) in

operating activities:

  Depreciation and amortization

699

547

2,686

1,893

  Noncash stock-based compensation expense

1,401

267

4,451

957

  Noncash interest expense

-

(40)

462

679

  Noncash sublease termination income

-

-

-

(839)

  Other

2

(11)

3

(15)

Changes in operating assets and liabilities: 

  Accounts receivable

(10,051)

(7,177)

(5,454)

(4,414)

  Other receivables

92

(185)

213

(246)

  Prepaid and other current assets

(624)

(586)

(1,374)

(1,091)

  Other assets

(154)

14

(427)

(106)

  Accounts payable and accrued expenses

828

1,079

1,958

1,318

  Deferred revenue

7,098

8,307

2,595

13,082

  Other current liabilities

(882)

409

806

491

  Deferred rent expense, net of current portion and other long-term liabilities

(15)

10

(50)

892

  Restricted cash

(16)

-

(4,216)

-

          Net cash provided by (used) in operating activities

(7,899)

(1,414)

(18,478)

1,821

Cash flow from investing activities:

  Purchase of property and equipment

(698)

(829)

(3,963)

(2,405)

  Proceeds from sale of property and equipment

-

3

-

12

  Purchase of Agile Advantage, Inc. assets

-

-

-

(420)

  Purchase of Flowdock Oy, net of cash received

-

-

(2,857)

-

          Net cash (used) in investing activities

(698)

(826)

(6,820)

(2,813)

Cash flow from financing activities:

  Proceeds from exercise of common stock options

769

318

1,233

451

  Proceeds from employee stock purchase plan

1,884

-

1,884

-

  Proceeds from initial public offering, net of underwriting discounts and commissions

-

-

89,838

-

  Proceeds from follow-on public offering, net of underwriting discounts and commissions

-

-

5,884

-

  Payments of offering costs

-

(72)

(2,259)

(1,271)

  Payments on capital lease liabilities

-

(1)

-

(31)

          Net cash provided by (used) in financing activities

2,653

245

96,580

(851)

          Net increase (decrease) in cash and cash equivalents during period

(5,944)

(1,995)

71,282

(1,843)

Cash and cash equivalents at beginning of period

94,835

19,604

17,609

19,452

Cash and cash equivalents at end of period

$ 88,891

$ 17,609

$  88,891

$  17,609

 

Rally Software Development Corp. 

Statement of Operations GAAP to Non-GAAP Reconciliation

(unaudited, in thousands, except per share amounts)

Three Months Ended

January 31, 2014

January 31, 2013

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Revenue:

Subscription and support

$ 15,371

$                   -

$    15,371

$ 12,387

$                   -

$    12,387

Perpetual license

1,495

-

1,495

1,546

-

1,546

    Total product revenue

16,866

-

16,866

13,933

-

13,933

Professional services

2,739

-

2,739

1,559

-

1,559

    Total revenue

19,605

-

19,605

15,492

-

15,492

Cost of revenue (1)(2):

Product

2,085

(208)

1,877

1,426

(65)

1,361

Professional services

2,319

(60)

2,259

1,709

(11)

1,698

    Total cost of revenue

4,404

(268)

4,136

3,135

(76)

3,059

    Gross profit (3)

15,201

268

15,469

12,357

76

12,433

78%

79%

80%

80%

Operating expenses (1):

Sales and marketing

10,876

(413)

10,463

8,676

(56)

8,620

Research and development

5,515

(251)

5,264

4,423

(66)

4,357

General and administrative

5,064

(601)

4,463

3,203

(129)

3,074

Sublease termination income

-

-

-

-

-

-

    Total operating expenses

21,455

(1,265)

20,190

16,302

(251)

16,051

    Loss from operations

(6,254)

1,533

(4,721)

(3,945)

327

(3,618)

Other income (expense):

Interest and other income

37

-

37

13

-

13

Interest expense

-

-

-

39

-

39

Loss on foreign currency transactions and other

 gain (loss)

(20)

-

(20)

(27)

-

(27)

Loss before provision for income taxes

(6,237)

1,533

(4,704)

(3,920)

327

(3,593)

Provision for income taxes

40

-

40

128

-

128

Net loss 

$ (6,277)

$            1,533

$    (4,744)

$ (4,048)

$               327

$    (3,721)

Net loss per share attributable to common stockholders,

 basic and diluted

$   (0.26)

$              0.07

$      (0.19)

$   (1.82)

$              0.14

$      (1.68)

Weighted average common shares outstanding, basic

 and diluted

24,592

24,592

2,219

2,219

(1) Adjustments include  stock-based compensation expense

(2) Adjustment includes amortization expense of acquired intangible assets

(3) Gross profit includes product and professional services gross profit (loss) as follows:

Product gross profit

$ 14,781

$               208

$    14,989

$ 12,507

$                 65

$    12,572

88%

89%

90%

90%

    Professional services gross profit (loss)

$      420

$                 60

$         480

$    (150)

$                 11

$       (139)

15%

18%

-10%

-9%

 

Rally Software Development Corp. 

Statement of Operations GAAP to Non-GAAP Reconciliation

(unaudited, in thousands, except per share amounts)

Twelve Months Ended

January 31, 2014

January 31, 2013

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Revenue:

Subscription and support

$  57,852

$                   -

$    57,852

$  43,794

$                   -

$    43,794

Perpetual license

5,914

-

5,914

5,815

-

5,815

    Total product revenue

63,766

-

63,766

49,609

-

49,609

Professional services

10,563

-

10,563

7,237

-

7,237

    Total revenue

74,329

-

74,329

56,846

-

56,846

Cost of revenue (1)(2):

Product

7,567

(792)

6,775

5,242

(186)

5,056

Professional services

9,105

(181)

8,924

7,005

(27)

6,978

    Total cost of revenue

16,672

(973)

15,699

12,247

(213)

12,034

    Gross profit (3)

57,657

973

58,630

44,599

213

44,812

78%

79%

78%

79%

Operating expenses (1):

Sales and marketing

39,628

(1,316)

38,312

29,445

(198)

29,247

Research and development

20,812

(1,239)

19,573

15,121

(193)

14,928

General and administrative

16,708

(1,465)

15,243

10,810

(523)

10,287

Sublease termination income

-

-

(839)

-

(839)

    Total operating expenses

77,148

(4,020)

73,128

54,537

(914)

53,623

    Loss from operations

(19,491)

4,993

(14,498)

(9,938)

1,127

(8,811)

Other income (expense):

Interest and other income

128

-

128

56

-

56

Interest expense

(464)

-

(464)

(683)

-

(683)

Loss on foreign currency transactions and other

 gain (loss)

(131)

-

(131)

(87)

-

(87)

Loss before provision for income taxes

(19,958)

4,993

(14,965)

(10,652)

1,127

(9,525)

Provision for income taxes

173

-

173

128

-

128

Net loss 

$ (20,131)

$            4,993

$  (15,138)

$ (10,780)

$            1,127

$    (9,653)

Net loss per share attributable to common stockholders,

 basic and diluted

$     (1.01)

$              0.25

$      (0.76)

$     (5.13)

$              0.54

$      (4.59)

Weighted average common shares outstanding, basic

 and diluted

19,841

19,841

2,101

2,101

(1) Adjustments include  stock-based compensation expense

(2) Adjustment includes amortization expense of acquired intangible assets

(3) Gross profit includes product and professional services gross profit as follows:

Product gross profit

$  56,199

$               792

$    56,991

$  44,367

$               186

$    44,553

88%

89%

89%

90%

    Professional services gross profit 

$    1,458

$               181

$      1,639

$       232

$                 27

$         259

14%

16%

3%

4%

 

Rally Software Development Corp. 

Reconciliation of Total Revenue to Calculated Billings and 

Days Sales Outstanding

(unaudited, in thousands except days sales outstanding)

Three Months Ended

Twelve Months Ended

January 31,

January 31,

2014

2013

2014

2013

Total revenue

$ 19,605

$ 15,492

$ 74,329

$ 56,846

Deferred revenue-

End of period

40,785

38,190

40,785

38,190

Beginning of period

(33,688)

(29,883)

(38,190)

(25,109)

Net change

7,097

8,307

2,595

13,081

Calculated billings

$ 26,702

$ 23,799

$ 76,924

$ 69,927

Accounts receivable

$ 21,771

$ 16,318

Days Sales Outstanding

75

62

 

Rally Software Development Corp. 

Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on information available as of March 20, 2014. The company's future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company's financial results are stated above in this press release. More information on potential factors that could affect the company's financial results is included in the company's public reports filed with the SEC, including the company's prospectus dated July 24, 2013, the company's Form 10-Q for the quarter ended October 31, 2013 filed on December 11, 2013 and the company's Form 10-K for the year ended January 31, 2014 to be filed with the SEC. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Three Months Ended April 30, 2014

Fiscal Year Ended January 31, 2015

Non-GAAP basic and diluted net loss per share

$(0.53) - $(0.50)

$(1.61) - $(1.56)

Stock-based compensation expense

$(0.06)

$(0.24)

Amortization of acquired intangible assets

$(0.01)

$(0.02)

GAAP basic and diluted net loss per share

$(0.60) - $(0.57)

$(1.87) - $(1.82)

SOURCE Rally Software



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