Rally Software Announces Third Quarter Fiscal 2014 Financial Results

- Subscription and support revenue increased 30%

- Total revenue increased 28% to $18.9 million

- GAAP EPS loss was $(0.24) per share; Non-GAAP EPS loss was $(0.17) per share

- Total paid seat count increased to nearly 198,000, representing a 28% increase over Q3 last year

Dec 05, 2013, 16:15 ET from Rally Software

BOULDER, Colo., Dec. 5, 2013 /PRNewswire/ -- Rally (NYSE: RALY), a leading global provider of cloud-based solutions for managing Agile software development, today announced financial results for its third quarter of fiscal 2014 ended October 31, 2013.

Rally reported third quarter subscription and support revenue of $14.9 million, an increase of 30% over the same period one year ago. Total revenue increased 28% over the same period one year ago to $18.9 million.

GAAP gross margin for the quarter was 76% as compared to 78% from the same period one year ago. Excluding stock-based compensation and amortization of acquired intangible assets, non-GAAP gross margin for the quarter was 77% as compared to 78% from the same period one year ago.

The company increased total paid seats by 5,700 in the quarter, bringing total paid seat count to nearly 198,000.

Cash flow used in operations was $8.7 million, which includes $4.2 million in restricted cash which was pledged as a security deposit for the Company's new corporate headquarters. Cash and cash equivalents at October 31, 2013, excluding restricted cash, were $94.8 million. Deferred revenue increased 13% from $29.9 million in the same period one year ago to $33.7 million.

"This quarter, the trend of large, enterprise customers going bigger and faster with Agile and Rally across the business has continued. Today's business marketplace is fiercely competitive.  Business leaders realize they must become more Agile now to align people throughout their organizations to respond to change and gain competitive advantage," said Rally's Chairman and CEO, Tim Miller. "For example, Rally experienced the largest initial order in the history of our business when an American multinational financial services corporation, which accounts for approximately 24% of the total dollar volume of credit card transactions in the U.S., purchased 1,500 seats in the third quarter, citing Rally's ability to align business strategy and development as a key factor in choosing Rally's Agile ALM platform."

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: TUI Travel, Otter Products, Philadelphia Insurance Companies, Infoglobo, McKesson Automation, National Instruments, Dex Media, Heartland Payment Systems TX, Radian Group Inc., Autodesk – Enterprise Information, TomTom International, Leica Geosystems, Truven Health Analytics, and British Airways.  

GAAP net loss for the third quarter of fiscal 2014 was $(5.8) million, or $(0.24) per basic and diluted share, based on 24.4 million weighted average shares of common stock outstanding. This compares to a net loss of $(2.8) million, or $(0.52) per basic and diluted share, based on 5.3 million weighted average shares of common stock outstanding in the same period one year ago. The GAAP net loss increased as the increase in operating expenses related to the company's continued investment to drive future growth of the business was only partially offset by the increase in revenue.

The company reported a non-GAAP net loss of $(4.2) million, or $(0.17) per basic and diluted share, as compared to a non-GAAP net loss of $(2.4) million, or $(0.46) per basic and diluted share, in the prior year's third quarter, excluding $1.5 million in stock-based compensation and amortization of acquired intangible assets in the third quarter of fiscal 2014, and $0.3 million in stock-based compensation and amortization of acquired intangible assets in the third quarter of fiscal 2013. A reconciliation of GAAP to non-GAAP financial measures can be found in the accompanying financial statements included with this press release.  

Business Outlook

As of December 5, 2013, management is providing its financial outlook as follows:  

Fourth Quarter of Fiscal 2014

  • Total revenue in the range of $19.2 to $19.4 million, or 24% to 25% growth over the prior year's fourth quarter.
  • GAAP net loss per basic and diluted share of approximately $(0.32) to $(0.30), based on 24.5 million weighted average shares of common stock outstanding.
  • Non-GAAP net loss per basic and diluted share of approximately $(0.26) to $(0.24), based on 24.5 million weighted average shares of common stock outstanding, and excludes $1.5 million in stock-based compensation and amortization of acquired intangible assets.

Fiscal Year 2014

  • Total revenue in the range of $73.0 to $74.0 million, or 29% to 30% growth over the prior year.
  • GAAP net loss per basic and diluted share of approximately $(1.14) to $(1.10), based on 19.8 million weighted average shares of common stock outstanding.
  • Non-GAAP net loss per basic and diluted share of approximately $(0.89) to $(0.85), based on 19.8 million weighted average shares of common stock outstanding, and excludes $4.9 million in stock-based compensation and amortization of acquired intangible assets.

Conference Call Today December 5, 2013 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, December 5, 2013. The conference call can be accessed by dialing 1-877-941-2068, or 1-480-629-9712 (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 two hours after the completion of the call is available for replay until the company's conference call to discuss its financial results for its fourth quarter of fiscal 2014. An audio replay of the call will also be available to all interested parties beginning at approximately 6:00 p.m. Mountain Time, 8:00 p.m. Eastern Time, on Thursday, December 5, 2013 until 12:59 a.m. Mountain Time, 2:59 a.m. Eastern Time, on Thursday, December 12, 2013, by dialing 1-800-406-7325 or 1-303-590-3030 (outside the U.S. and Canada) and entering pass code 4650719#.

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.

Rally and the Rally logo are the property of Rally. Trade names, trademarks and service marks of other companies are the property of their respective holders.

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 gross profit and gross margin, 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 and our Form 10-Q that will be filed for the third quarter ended October 31, 2013.  

 

 

Rally Software Development Corp. 

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

October 31,

January 31,

2013

2013

ASSETS

Current assets:

   Cash and cash equivalents

$      94,835

$      17,609

   Accounts receivable, net

11,721

16,318

   Other receivables

169

288

   Prepaid expenses and other current assets

2,686

1,912

      Total current assets

109,411

36,127

Property and equipment, net

7,453

4,156

Goodwill

2,282

-

Restricted cash

4,200

-

Other assets

593

1,572

      Total assets

$    123,939

$      41,855

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

Current liabilities:

   Accounts payable

$        2,825

$        1,945

   Accrued liabilities

3,502

3,062

   Deferred revenue

30,221

32,984

   Other current liabilities

2,415

727

      Total current liabilities

38,963

38,718

Deferred revenue, net of current portion

3,467

5,206

Deferred rent expense, net of current portion

902

939

Warrants for redeemable convertible preferred stock, at estimated fair value

-

1,604

      Total liabilities

43,332

46,467

Redeemable convertible preferred stock

-

68,410

Stockholders' equity (deficit):

   Common stock

3

1

   Additional paid-in capital

169,975

2,503

   Accumulated deficit

(89,382)

(75,529)

   Accumulated other comprehensive loss

11

3

      Total stockholders' equity (deficit)

80,607

(73,022)

Total liabilities and stockholders equity (deficit)

$    123,939

$      41,855

 

 

Rally Software Development Corp. 

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

October 31,

October 31,

2013

2012

2013

2012

Revenue:

   Subscription and support

$ 14,888

$ 11,419

$  42,481

$ 31,406

   Perpetual license

1,055

1,252

4,419

4,270

      Total product revenue

15,943

12,671

46,900

35,676

Professional services

2,936

2,078

7,824

5,677

      Total revenue

18,879

14,749

54,724

41,353

Cost of revenue (1) (2):

   Product 

1,997

1,437

5,482

3,816

   Professional services

2,577

1,880

6,786

5,296

      Total cost of revenue

4,574

3,317

12,268

9,112

      Gross profit

14,305

11,432

42,456

32,241

Operating expenses (1):

   Sales and marketing

10,832

7,226

28,752

20,769

   Research and development

5,167

4,153

15,297

10,697

   General and administrative

4,008

2,739

11,644

7,592

   Sublease termination income

-

-

-

(839)

      Total operating expenses

20,007

14,118

55,693

38,219

      Loss from operations

(5,702)

(2,686)

(13,237)

(5,978)

Other income (expense):

   Interest and other income

42

11

91

43

   Interest expense

-

(46)

(464)

(722)

   Loss on foreign currency transactions and other

 gain (loss)

(87)

(30)

(111)

(75)

Loss before provision for income taxes

(5,747)

(2,751)

(13,721)

(6,732)

Provision for income taxes

39

-

133

-

Net loss 

$ (5,786)

$ (2,751)

$ (13,854)

$ (6,732)

Net loss per share attributable to common stockholders,

 basic and diluted

$   (0.24)

$   (0.52)

$     (0.76)

$   (1.31)

Weighted average common shares outstanding, basic

 and diluted

24,398

5,314

18,239

5,153

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

Three Months Ended

Nine Months Ended

October 31,

October 31,

2013

2012

2013

2012

Cost of product revenue

$        69

$          4

$       174

$        11

Cost of professional services revenue

56

6

121

16

Sales and marketing

496

52

903

142

Research and development

362

62

988

127

General and administrative

433

131

864

394

$   1,416

$      255

$    3,050

$      690

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

Cost of product revenue

$      131

$        60

$       410

$      110

 

 

Rally Software Development Corp. 

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

Three Months Ended

Nine Months Ended

October 31, 

October 31, 

2013

2012

2013

2012

Cash flow from operating activities:

Net loss

$ (5,786)

$ (2,751)

$ (13,854)

$ (6,732)

Adjustments to reconcile net loss to cash provided by operating activities:

   Depreciation and amortization

685

494

1,987

1,346

   Noncash stock-based compensation expense

1,416

255

3,050

690

   Noncash interest expense

-

44

462

719

   Noncash sublease termination income

-

-

-

(839)

   Other

-

(4)

1

(4)

Changes in operating assets and liabilities: 

   Accounts receivable

(653)

3,620

4,597

2,763

   Other receivables

(106)

55

121

(61)

   Prepaid and other current assets

401

56

(750)

(505)

   Other assets

(48)

(62)

(273)

(120)

   Accounts payable and accrued expenses

1,240

91

1,130

239

   Deferred revenue

(2,478)

425

(4,503)

4,775

   Other current liabilities

862

(399)

1,688

72

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

(13)

43

(35)

892

   Restricted cash

(4,200)

-

(4,200)

-

   Net cash provided by (used) in operating activities

(8,680)

1,867

(10,579)

3,235

Cash flow from investing activities:

   Purchase of property and equipment

(586)

(872)

(3,264)

(1,576)

   Proceeds from sale of property and equipment

-

4

-

9

   Purchase of Agile Advantage, Inc. assets

-

-

-

(420)

   Purchase of Flowdock Oy, net of cash received

-

-

(2,857)

-

   Net cash (used) in investing activities

(586)

(868)

(6,121)

(1,987)

Cash flow from financing activities:

   Proceeds from exercise of common stock options

54

39

463

133

   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

(606)

(1,136)

(2,259)

(1,199)

   Payments on capital lease liabilities

-

(8)

-

(30)

   Net cash provided by (used) in financing activities

(552)

(1,105)

93,926

(1,096)

   Net increase in cash and cash equivalents during period

(9,818)

(106)

77,226

152

Cash and cash equivalents at beginning of period

104,653

19,710

17,609

19,452

Cash and cash equivalents at end of period

$ 94,835

$ 19,604

$  94,835

$ 19,604

 

 

Rally Software Development Corp. 

Statement of Operations GAAP to Non-GAAP Reconciliation

(unaudited, in thousands, except per share amounts)

Three Months Ended

October 31, 2013

October 31, 2012

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Revenue:

   Subscription and support

$ 14,888

$                   -

$    14,888

$ 11,419

$                   -

$    11,419

   Perpetual license

1,055

-

1,055

1,252

-

1,252

      Total product revenue

15,943

-

15,943

12,671

-

12,671

Professional services

2,936

-

2,936

2,078

-

2,078

      Total revenue

18,879

-

18,879

14,749

-

14,749

Cost of revenue (1)(2):

   Product

1,997

(200)

1,797

1,437

(64)

1,373

   Professional services

2,577

(56)

2,521

1,880

(6)

1,874

      Total cost of revenue

4,574

(256)

4,318

3,317

(70)

3,247

      Gross profit

14,305

256

14,561

11,432

70

11,502

Operating expenses (1):

   Sales and marketing

10,832

(496)

10,336

7,226

(52)

7,174

   Research and development

5,167

(362)

4,805

4,153

(62)

4,091

   General and administrative

4,008

(433)

3,575

2,739

(131)

2,608

   Sublease termination income

-

-

-

-

-

-

      Total operating expenses

20,007

(1,291)

18,716

14,118

(245)

13,873

      Loss from operations

(5,702)

1,547

(4,155)

(2,686)

315

(2,371)

Other income (expense):

   Interest and other income

42

-

42

11

-

11

   Interest expense

-

-

-

(46)

-

(46)

   Loss on foreign currency transactions and other gain (loss)

(87)

-

(87)

(30)

-

(30)

Loss before provision for income taxes

(5,747)

1,547

(4,200)

(2,751)

315

(2,436)

Provision for income taxes

39

-

39

-

-

-

Net loss 

$ (5,786)

$            1,547

$    (4,239)

$ (2,751)

$               315

$    (2,436)

Net loss per share attributable to common stockholders, basic and diluted

$   (0.24)

$              0.07

$      (0.17)

$   (0.52)

$              0.06

$      (0.46)

Weighted average common shares outstanding, basic and diluted

24,398

24,398

5,314

5,314

(1) Adjustments include  stock-based compensation expense

(2) Adjustment includes amortization expense of acquired intangible assets

 

 

Rally Software Development Corp. 

Statement of Operations GAAP to Non-GAAP Reconciliation

(unaudited, in thousands, except per share amounts)

Nine Months Ended

October 31, 2013

October 31, 2012

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Revenue:

   Subscription and support

$  42,481

$                   -

$    42,481

$ 31,406

$                   -

$    31,406

   Perpetual license

4,419

-

4,419

4,270

-

4,270

      Total product revenue

46,900

-

46,900

35,676

-

35,676

Professional services

7,824

-

7,824

5,677

-

5,677

      Total revenue

54,724

-

54,724

41,353

-

41,353

Cost of revenue (1)(2):

   Product

5,482

(584)

4,898

3,816

(121)

3,695

   Professional services

6,786

(121)

6,665

5,296

(16)

5,280

      Total cost of revenue

12,268

(705)

11,563

9,112

(137)

8,975

      Gross profit

42,456

705

43,161

32,241

137

32,378

Operating expenses (1):

   Sales and marketing

28,752

(903)

27,849

20,769

(142)

20,627

   Research and development

15,297

(988)

14,309

10,697

(127)

10,570

   General and administrative

11,644

(864)

10,780

7,592

(394)

7,198

   Sublease termination income

-

-

(839)

-

(839)

      Total operating expenses

55,693

(2,755)

52,938

38,219

(663)

37,556

      Loss from operations

(13,237)

3,460

(9,777)

(5,978)

800

(5,178)

Other income (expense):

   Interest and other income

91

-

91

43

-

43

   Interest expense

(464)

-

(464)

(722)

-

(722)

   Loss on foreign currency transactions and other gain (loss)

(111)

-

(111)

(75)

-

(75)

Loss before provision for income taxes

(13,721)

3,460

(10,261)

(6,732)

800

(5,932)

Provision for income taxes

133

-

133

-

-

-

Net loss 

$ (13,854)

$            3,460

$  (10,394)

$ (6,732)

$               800

$    (5,932)

Net loss per share attributable to common stockholders, basic and diluted

$     (0.76)

$              0.19

$      (0.57)

$   (1.31)

$              0.16

$      (1.15)

Weighted average common shares outstanding, basic and diluted

18,239

18,239

5,153

5,153

(1) Adjustments include  stock-based compensation expense

(2) Adjustment includes amortization expense of acquired intangible assets

 

 

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

Nine Months Ended

October 31,

October 31,

2013

2012

2013

2012

Total revenue

$           18,879

$ 14,749

$ 54,724

$ 41,353

Deferred revenue-

End of period

33,688

29,883

33,688

29,883

Beginning of period

(36,166)

(29,458)

(38,190)

(25,109)

Net change

(2,478)

425

(4,502)

4,774

Calculated billings

$           16,401

$ 15,174

$ 50,222

$ 46,127

Accounts receivable

$           11,721

$   9,141

Days Sales Outstanding

65

55

 

 

Rally Software Development Corp. 

Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on information available as of December 5, 2013. 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 July 31, 2013 filed on September 10, 2013 and the company's Form 10-Q for the quarter ended October 31, 2013 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 January 31, 2014

Fiscal Year Ended January 31, 2014

Non-GAAP basic and diluted net loss per share

$(0.26) - $(0.24)

$(0.89) - $(0.85)

Stock-based compensation expense

$(0.05)

$(0.22)

Amortization of acquired intangible assets

$(0.01)

$(0.03)

GAAP basic and diluted net loss per share

$(0.32) - $(0.30)

$(1.14) - $(1.10)

 

SOURCE Rally Software



RELATED LINKS

http://www.rallydev.com