Rally Software Announces First Quarter Fiscal Year 2015 Financial Results

BOULDER, Colo., June 5, 2014 /PRNewswire/ -- Rally Software (NYSE: RALY), a leading global provider of cloud-based solutions for managing Agile software development, today announced financial results for its first quarter of fiscal year 2015 ended April 30, 2014.

First quarter fiscal year 2015 results:

  • Revenues of $19.4 million, an increase of 21% compared to the first quarter in the same period one year ago.
  • GAAP net loss of $(8.5) million, or a loss of $(0.34) per basic and diluted share based on 24.8 million weighted average shares of common stock outstanding, as compared to a GAAP net loss of $(5.8) million, or a loss of $(0.98) per basic and diluted share based on 5.9 million weighted average shares of common stock outstanding in the same period one year ago.
  • Non-GAAP net loss of $(6.8) million, or $(0.27) per basic and diluted share, as compared to a non-GAAP net loss of $(5.1) million, or $(0.86) 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).
  • Total paid seats increased to nearly 226,000, a 23% increase over the total paid seats one year ago and a 6% increase over total paid in seats at the end of the prior quarter.

Cash flow used in operations in the first quarter was $2.8 million. Cash and cash equivalents at April 30, 2014, excluding restricted cash, were $85.7 million.

"Fiscal year 2015 is an important year for Rally Software and this quarter, while mixed in performance, sets a foundation for executing in the second half of this year," said Rally Software's Chairman and CEO, Tim Miller.

"We continued our success in selling our solution to the large enterprise buyer and clearly enjoyed support from our largest customers.  For example, the 7,000 seat upgrade order we enjoyed from one of our top 15 customers - now at 12,000 seats under contract - underscores this aspect of our business.  We struggled slightly in selling new seats to new customers, which was due largely to fast growth in quota carrying headcount that caused some execution delay as these new team members trained and learned about their new territories and Rally Software's business."

Rally Software welcomed the following new customers, including: Black & Veatch, Core Media, the Driver and Vehicle Licensing Agency in the UK, eTouch, PowerNet Global, Smartshift Technologies, Snag-a-Job, SpiritClips and Ubiquity Broadcasting. 

Business Outlook

As of June 5, 2014, management is providing its financial outlook as follows:  

Second Quarter of Fiscal Year 2015

  • Total revenue in the range of $20.2 to $20.8 million, or 2% to 5% growth over the same period one year ago.
  • GAAP net loss per basic and diluted share of approximately $(0.45) to $(0.48), based on 25.0 million weighted average shares of common stock outstanding.
  • Non-GAAP net loss per basic and diluted share of approximately $(0.39) to $(0.42), based on 25.0 million weighted average shares of common stock outstanding, which excludes $1.6 million in stock-based compensation and amortization of acquired intangible assets.

Fiscal Year 2015

  • Total revenue in the range of $87.0 to $90.0 million, or 17% to 21% growth over the prior fiscal year.
  • GAAP net loss per basic and diluted share of approximately $(1.59) to $(1.64), based on 25.2 million weighted average shares of common stock outstanding. 
  • Non-GAAP net loss per basic and diluted share of approximately $(1.31) to $(1.36), based on 25.2 million weighted average shares of common stock outstanding, which excludes $6.5 million in stock-based compensation and amortization of acquired intangible assets.

CFO Commentary
Commentary on the quarter by Jim Lejeal, Rally Software Chief Financial Officer, is available at investors.rallydev.com.

Conference Call Today June 5, 2014
Rally Software 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, June 5, 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 Software corporate website at www.rallydev.com and, beginning approximately one hour after the completion of the call, will be available for replay for 90 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, June 5, 2014 until 7:00 a.m. Mountain Time, 9:00 a.m. Eastern Time, on Friday, June 20, 2014, by dialing 1-877-344-7529 or 1-412-317-0088 (outside the U.S. and Canada) and entering pass code 10046217#.

About Rally Software
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 Software's solutions 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 our condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), we have provided certain measures that have not been prepared in accordance with GAAP. These non-GAAP financial measures include non-GAAP results for calculated billings, normalized 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.

Our non-GAAP financial measures exclude stock-based compensation expense and amortization of acquired intangible assets. We believe 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 our core operating results and comparison of operating results across reporting periods and is therefore useful to investors in analyzing and assessing our 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 our future financial performance, market growth, the demand for our solutions, and general business conditions. Any forward-looking statements contained in this press release are based upon our historical performance and current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim 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 our 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, our ability to expand relationships with existing customers, our 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, our ability to manage growth effectively, the ability of new sales personnel to become fully productive quickly and efficiently, our ability to maintain, protect and enhance our 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 our reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended January 31, 2014 filed on April 11, 2014 and our Quarterly Report on Form 10-Q that will be filed for the quarter ended April 30, 2014.  

Investor Relations contact:
Rally Software Development Corp.
ir@rallydev.com

 

Rally Software Development Corp. 

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)








April 30,


January 31,


2014


2014

ASSETS








Current assets:




Cash and cash equivalents

$   85,731


$      88,891

Restricted cash, short-term

16


16

Accounts receivable, net

16,029


21,771

Other receivables

108


78

Prepaid expenses and other current assets

4,177


3,310

Total current assets

106,061


114,066





Property and equipment, net

5,893


5,569

Goodwill

2,572


2,529

Intangible assets, net

1,777


1,909

Restricted cash, long-term

4,200


4,200

Other assets

757


810





Total assets

$ 121,260


$    129,083









LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:




Accounts payable

$     2,605


$        2,170

Accrued liabilities

3,452


4,812

Deferred revenue

38,046


38,352

Other current liabilities

2,869


2,054

Total current liabilities

46,972


47,388





Deferred revenue, net of current portion

1,665


2,433

Deferred rent expense, net of current portion

873


888





Total liabilities

49,510


50,709





Stockholders' equity:




Common stock

3


3

Additional paid-in capital

175,829


174,027

Accumulated deficit

(104,141)


(95,660)

Accumulated other comprehensive income 

59


4

Total stockholders' equity

71,750


78,374





Total liabilities and stockholders equity

$ 121,260


$    129,083

 

Rally Software Development Corp. 

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)




Three Months Ended


April 30,


2014


2013

Revenue:




Subscription and support

$ 16,105


$ 13,373

Perpetual license

639


629

    Total product revenue

16,744


14,002





Professional services

2,687


2,047





    Total revenue

19,431


16,049





Cost of revenue (1) (2):




Product 

2,396


1,684

Professional services

2,771


1,873

    Total cost of revenue

5,167


3,557





    Gross profit

14,264


12,492





Operating expenses (1):




Sales and marketing

11,410


8,835

Research and development

5,986


5,079

General and administrative

5,188


3,854

    Total operating expenses

22,584


17,768





    Loss from operations

(8,320)


(5,276)





Other income (expense):




Interest and other income

39


13

Interest expense

-


(462)

Loss on foreign currency transactions and other




 gain (loss)

(82)


(19)





Loss before provision for income taxes

(8,363)


(5,744)

Provision for income taxes

118


46

Net loss 

$ (8,481)


$  (5,790)





Net loss per share attributable to common stockholders,




 basic and diluted

$   (0.34)


$    (0.98)





Weighted average common shares outstanding, basic




 and diluted

24,816


5,904





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





Three Months Ended


April 30,


2014


2013

Cost of product revenue

$        95


$        66

Cost of professional services revenue

89


19

Sales and marketing

438


105

Research and development

412


224

General and administrative

522


170






$   1,556


$      584





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




Cost of product revenue

$      132


$      148

 

Rally Software Development Corp. 

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)





Three Months Ended



April 30, 



2014


2013

Cash flow from operating activities:




Net loss


$ (8,481)


$   (5,790)






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




Depreciation and amortization

724


638

Noncash stock-based compensation expense

1,556


584

Noncash interest expense

-


462

Other


19


-

Changes in operating assets and liabilities: 




Accounts receivable

5,742


4,575

Other receivables

(30)


251

Prepaid and other current assets

(867)


(1,264)

Other assets

36


(61)

Accounts payable and accrued expenses

(1,183)


370

Deferred revenue

(1,075)


1,793

Other current liabilities

815


(192)

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

(15)


(9)







Net cash provided by (used) in operating activities

(2,759)


1,357






Cash flow from investing activities:




Purchase of property and equipment

(648)


(2,142)

Proceeds from sale of property and equipment

1


-

Purchase of Flowdock Oy, net of cash received

-


(2,857)







Net cash (used) in investing activities

(647)


(4,999)






Cash flow from financing activities:




Proceeds from exercise of common stock options

246


261

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

-


89,838

Payments of offering costs

-


(419)







Net cash provided by financing activities

246


89,680







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

(3,160)


86,038






Cash and cash equivalents at beginning of period

88,891


17,609

Cash and cash equivalents at end of period

$ 85,731


$ 103,647

 

Rally Software Development Corp. 

Statement of Operations GAAP to Non-GAAP Reconciliation

(unaudited, in thousands, except per share amounts)




Three Months Ended


April 30, 2014


April 30, 2013


GAAP


Adjustments


Non-GAAP


GAAP


Adjustments


Non-GAAP

Revenue:












Subscription and support

$           16,105


$                    -


$           16,105


$           13,373


$                    -


$           13,373

Perpetual license

639


-


639


629


-


629

    Total product revenue

16,744


-


16,744


14,002


-


14,002













Professional services

2,687


-


2,687


2,047


-


2,047













    Total revenue

19,431


-


19,431


16,049


-


16,049













Cost of revenue (1)(2):












Product

2,396


(227)


2,169


1,684


(214)


1,470

Professional services

2,771


(89)


2,682


1,873


(19)


1,854

    Total cost of revenue

5,167


(316)


4,851


3,557


(233)


3,324













    Gross profit (3)

14,264


316


14,580


12,492


233


12,725

    Gross margin

73%




75%


78%




79%













Operating expenses (1):












Sales and marketing

11,410


(438)


10,972


8,835


(105)


8,730

Research and development

5,986


(412)


5,574


5,079


(224)


4,855

General and administrative

5,188


(522)


4,666


3,854


(170)


3,684

    Total operating expenses

22,584


(1,372)


21,212


17,768


(499)


17,269













    Loss from operations

(8,320)


1,688


(6,632)


(5,276)


732


(4,544)













Other income (expense):












Interest and other income

39


-


39


13


-


13

Interest expense

-


-


-


(462)


-


(462)

Loss on foreign currency transactions and other












 gain (loss)

(82)


-


(82)


(19)


-


(19)













Loss before provision for income taxes

(8,363)


1,688


(6,675)


(5,744)


732


(5,012)

Provision for income taxes

118


-


118


46


-


46

Net loss 

$           (8,481)


$             1,688


$           (6,793)


$           (5,790)


$                732


$           (5,058)













Net loss per share attributable to common stockholders,












 basic and diluted

$             (0.34)


$               0.07


$             (0.27)


$             (0.98)


$               0.12


$             (0.86)













Weighted average common shares outstanding, basic












 and diluted

24,816




24,816


5,904




5,904

























(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

$           14,348


$                227


$           14,575


$           12,318


$                214


$           12,532

Product gross margin

86%




87%


88%




90%













Professional services gross profit (loss)

$                (84)


$                  89


$                    5


$                174


$                  19


$                193

Professional services gross margin

-3%




0%


9%




9%

 

Rally Software Development Corp. 

Reconciliation of Total Revenue to Calculated Billings, Normalized Billings and 

Days Sales Outstanding

(unaudited, in thousands except days sales outstanding)




Three Months Ended


April 30,


2014


2013





Total revenue

$           19,431


$           16,049





Deferred revenue-




End of period

39,711


39,984

Beginning of period

(40,785)


(38,190)





Net change

(1,074)


1,794





Calculated billings

18,357


17,843





Other adjustments (1)

597


(56)





Normalized billings

$           18,954


$           17,787





Accounts receivable

$           16,029


$           11,743





Days Sales Outstanding (2) 

78


59









(1) - Other adjustments includes adjustments for multi-year prepaid contracts, contracts that were not paid annually 

in advance and add-on orders.




(2) - Days Sales Outstanding is computed using calculated billings.




 

Rally Software Development Corp. 

Reconciliation of Non-GAAP Financial Guidance


The financial guidance provided below is an estimate based on information available as of June 5, 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 annual report on Form 10-K for the fiscal year ended January 31, 2014 filed on April 11, 2014 and the company's Form 10-Q for the quarter ended April 30, 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 July 31, 2014


Fiscal Year Ended January 31, 2015





Non-GAAP basic and diluted net loss per share

$(0.42) - $(0.39)


$(1.36) - $(1.31)





Stock-based compensation expense

$(0.05)


$(0.26)





Amortization of acquired intangible assets

$(0.01)


$(0.02)





GAAP basic and diluted net loss per share

$(0.48) - $(0.45)


$(1.64) - $(1.59)

 

SOURCE Rally Software



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