Autonomy Corporation Plc Announces Interim Results for the Six Months Ended June 30, 2010
Record Six Month Results In-Line With Analyst Expectations, With Revenue Growth of 28%; EPS (adj.) up 22%; Net Profit (adj.) up 32%
CAMBRIDGE, England, July 22, 2010 /PRNewswire-FirstCall/ -- Autonomy Corporation plc (LSE: AU. or AU.L), a global leader in infrastructure software, today reported financial results for the six months ended June 30, 2010.
QUARTERLY REPORT AND INTERIM RESULTS
Financial Highlights
- Record six month revenues of $415.3 million (within the
range of analyst expectations of $412-417m), up 28% from H1 2009 with
overall organic growth at 14%
- Six months organic IDOL revenue growth at 24%; organic
growth excluding professional services at 18%
- Gross profits (adj.) at $363.4 million, up 26% from H1 2009;
gross margins (adj.) at 88%
- H1 2010 operating margins (adj.) at 44%
- Record H1 profit before tax (adj.) at $182.7 million, up 24%
from H1 2009
- Record H1 fully diluted EPS (adj.) of $0.53 (within the
range of analyst expectations of $0.52-0.55), up 22% from H1 2009
(IFRS: $0.42, up 17%)
- Q2 DSOs decreased to 82 days (Q1 2010: 93 days, Q4 2009: 88 days)
- Cash conversion for the second quarter was 98% (Q2 2009:
66%), and for the first half of 2010 was 93% (H1 2009: 72%)
Commenting on the results, Dr Mike Lynch, Group CEO of Autonomy said today: "The first half of 2010 continued to show a gentle recovery with discretionary spend continuing. In considering the macro environment our customers are positive but still cautious. We saw continued positive moves in the 'Power' and OEM parts of our business. The 'Promote' area is starting to convert its great promise into sales as a lot of pre-recovery work is being undertaken by our customers and the 'Protect' part of the business has seen a number of high profile corporate and regulatory events underpin its continuing strength. The ability to understand the meaning of information and breadth of capabilities IDOL offers on a single platform meant that our competitive position remains strong and was recently recognised by independent analysts at IDC, who acknowledged Autonomy to be the world's leading provider of archiving, search and discovery solutions."
Dr Lynch continued: "The OEM business continues to be our fastest growing revenue stream, and we see a powerful networking effect underway as IDOL further penetrates the entire spectrum of enterprise software applications. The shift to new delivery models is ongoing and Autonomy continues to operate the world's largest private cloud computing platform, with SaaS contributing over a quarter of Group revenues in the first half of 2010. We also continue to see a growing interest in our "Promote" solutions and we now see multi-million dollar deals in the pipeline for Meaning Based Marketing, where we believe there is pent-up demand. The strategic success of the recent MicroLink acquisition has already become apparent with a multi-million dollar contract signed directly with a US federal customer during the second quarter. Our government business, which is mainly focused on national security, has proved robust in the current climate of curtailed government expenditure and we do not expect to see any deterioration in this area."
Dr Lynch concluded: "Given the continuation in the improvement of the macro environment, we took advantage of opportunities to improve the brand reach of the company by entering into new marketing arrangements. The robust demand backdrop and solid execution led to record revenues and EPS in the second quarter and first half of 2010, with strong cash generation. As in previous years, we expect to see the usual seasonality and unpredictability of the split of revenues between Q3 and Q4. Overall we face the rest of the year with a strong balance sheet, and in light of the continuing macro recovery, we are confident in our ability to continue to deliver strong growth for the full year."
Six Month 2010 Highlights
- Record revenue of $415.3 million, up 28% from H1 2009
- Gross margins (adj.) in targeted range at 88%
- Record profit before tax (adj.) of $182.7 million, up 24%
from H1 2009 (IFRS: $136.3 million, up 12%)
- Operating margins (adj.) stable at 44% (H1 2009: 46%)
- Fully diluted EPS (adj.) of $0.53, up 22% from H1 2009
(IFRS: $0.42, up 17%)
- Positive cash flow generated by operations of $190.8 million
(H1 2009: $116.5 million), up 64%
- Six month cash conversion at 93%, above our target range
Second Quarter 2010 Highlights
- Record Q2 revenues of $221.1 million, up 13% from Q2 2009
despite negative FX effect of $0.8 million
- At constant currency, overall organic growth at 13%; organic
growth excluding professional services at 15%; and organic IDOL revenue
growth at 19%;
- Average selling price for meaning-based technologies at
$876,000 (Q2 2009: $722,000)
- Blue chip second quarter wins include Air Liquide, Amgen,
BNP Paribas, BP, Charles Schwab, Fortis Bank, HBO, Kraft, LG, Liberty
Mutual, Metlife, Michelin, Morgan Stanley, Precise, RWE, Sainsburys,
Starwood Hotels, Talk Talk, Ubisoft and Verizon, as well as significant
deals with multiple government, defence and intelligence agencies
around the globe including in Australia, the UK, USA and the
Netherlands
- Nine OEM deals signed including new deals and extensions
with Dassault Systemes, IBM, OpenText and Oracle
- Repeat business accounted for 49% of revenue in Q2 2010 (Q2
2009: 50%)
- Record Q2 profit before tax (adj.) of $97.3 million, up 9%
from Q2 2009
- Operating margins (adj.) stable at 44% (Q2 2009: 47%)
- Record Q2 fully diluted EPS (adj.) of $0.28, up 7% from Q2
2009 (IFRS: $0.21, up 2%)
- Deferred revenue increased to $175.5 million (Q1 2010:
$172.2 million, Q4 2009: $173.5 million)
- DSOs decreased significantly to 82 days (Q1 2010: 93 days,
Q4 2009: 88 days)
Revenues
Revenues for the six months ended June 30, 2010 totalled $415.3 million, up 28% from $325.0 million for the first six months of 2009 due to strong organic growth. During the first half of 2010 there were 44 deals over $1.0 million. In the first half of 2010, Americas revenues of $282.5 million represented 68% of total revenues, and Rest of World revenues of $132.8 million represented 32% of total revenues. Revenues for the second quarter of 2010 totalled $221.1 million, up 13% from $195.2 million for the second quarter of 2009 also due to strong organic growth.
Gross Profits and Gross Margins
Gross profits (adj.) for the six months ended June 30, 2010 were $363.4 million, up 26% from $288.6 million for the first six months of 2009. Gross margins (adj.) for the six months ended June 30, 2010 were 88%, compared to 89% for the first six months of 2009. Gross profits (IFRS) for the first six months of 2010 were $334.0 million, up 25% from $268.1 million for the first six months of 2009. Gross profits (adj.) for the second quarter of 2010 were $190.8 million, up 11% from $171.6 million for the second quarter of 2009. Gross margins (adj.) for the second quarter of 2010 were 86%, compared to 88% for the second quarter of 2009. Gross profits (IFRS) for the second quarter of 2010 were $175.9 million, up 12% from $156.5 million for the second quarter of 2009. The small variation in gross margins in Q2 2010 was in line with our expectations due to the sales mix including appliances as discussed last quarter.
Profit from Operations and Operating Margins
Profit from operations (adj.) for the six months ended June 30, 2010 was $182.7 million, up 22% from $150.2 million for the six months ended June 30, 2009. Operating margins (adj.) were 44% in the first half of 2010, compared to 46% in the first half of 2009. Profit from operations (IFRS) for the six months ended June 30, 2010 was $150.1 million, up 20% from $124.7 million for the six months ended June 30, 2009. Profit from operations (adj.) for the second quarter of 2010 was $96.5 million, up 5% from $92.2 million for the second quarter of 2009. Operating margins (adj.) were 44% in the second quarter of 2010, compared to 47% in the second quarter of 2009. Profit from operations (IFRS) for the second quarter of 2010 was $77.0 million, up 4% from $74.4 million for the second quarter of 2009.
Interest payable
Interest payable for the six months ended June 30, 2010 was $16.2 million, up from $3.3 million for the six months ended June 30, 2009. The increase is a result of a charge of $13.1 million in relation to the convertible loan notes issued in March 2010. The convertible loan notes pay a cash interest rate of 3.25%. However, the income statement charge is based on a market rate of interest for corporate loan notes of similar term without a convertible element in accordance with IFRS. This charge is excluded from the calculation of EPS in accordance with IFRS.
Interest payable for the quarter ended June 30, 2010 was $11.4 million, up from $2.8 million for the quarter ended June 30, 2009. The increase is primarily a result of a charge of $10.0 million in relation to the convertible loan notes.
Taxation
The full year effective tax rate for 2010 is 25%, down from 28% for the full year in 2009. The decrease follows the completion of the certain tax studies - as discussed last quarter - which has resulted in additional tax losses which will be utilised. The effective tax rate for the second quarter has fallen to 22% as a result of the change in the full year rate.
Foreign Exchange Impact
The effect on revenue in the first half of 2010 of movements in foreign exchange rates was negligible, a tailwind in the first quarter of 2010 was offset by a headwind in the second quarter of 2010.
The effect on revenue in the second quarter of 2010 of movements in foreign exchange rates was a decrease of approximately $0.8 million compared to the second quarter of 2009. In the second quarter of 2010 the U.S. Dollar strengthened slightly versus Sterling to an average of $1.49 versus $1.55 in the second quarter of 2009.
Net Profits
Net profit (adj.) for the six months ended June 30, 2010 was $137.2 million, or $0.53 per diluted share, compared to net profit (adj.) of $103.7 million, or $0.43 per diluted share, for the six months ended June 30, 2009. Net profit (IFRS) for the six months ended June 30, 2010 was $102.1 million, or $0.42 per diluted share, compared to net profit (IFRS) of $85.4 million, or $0.36 per diluted share, for the first half of 2009.
Net profit (adj.) for the second quarter of 2010 was $75.5 million, or $0.28 per diluted share, compared to net profit (adj.) of $63.6 million, or $0.26 per diluted share, for the second quarter of 2009. Net profit (IFRS) for the second quarter of 2010 was $52.4 million, or $0.21 per diluted share, compared to net profit (IFRS) of $50.9 million, or $0.21 per diluted share, for the second quarter of 2009.
IAS 38 Charges and Capitalization
Under IAS 38 the company is required to capitalize certain aspects of its research and development activities. R&D capitalization in the first half of 2010 was $16.3 million (H2 2009: $17.3 million) as a specific new product initiative moves towards launch earlier than anticipated. R&D capitalization for the first half of 2010 is offset by amortization charges of $7.4 million (H2 2009: $5.4 million) arising from historical R&D capitalization. The capitalization and offsetting charges resulted in a net credit (before tax) in the period of $8.9 million (H2 2009: $11.9 million), and a net margin impact of 2% (H2 2009: 3%).
Balance Sheet and Cash Flow
Cash balances were $962.0 million at June 30, 2010, an increase of $719.2 million from $242.8 million at December 31, 2009. Movements in cash flow during the first half year of 2010 of note included:
- Positive cash flow from operations of $190.8 million, up 64% from the
same period last year
- Tax payments of $36.8 million (H1 2009: $13.2 million), up sharply due
to the increased profitability of the Group
- Acquisition of MicroLink LLC and CA's Information Governance Business
for combined consideration of $76.3 million;
- Purchase of fixed assets of $30.6 million due to continued expansion of
the Group's data centres;
- Raising of $765.9 million from the convertible loan notes issue in
March 2010; and
- Repayment of $53.9 million of the Barclays term loan facility also in
March 2010.
Cash conversion for the six months ended June 30, 2010 was 93% (H1 2009: 72%). Trade receivables at June 30, 2010, were $211.6 million, compared to $230.2 million at December 31, 2010. Accounts receivable days sales outstanding were 82 days at June 30, 2010, compared to 88 days at December 31, 2009. $5.9 million of inventory from the beginning of the quarter was still to be delivered by the end of the quarter. Deferred revenues were $175.5 million at June 30, 2010, compared to $173.5 million at December 31, 2009 showing normal seasonality. Despite the difficult economic climate, bad debt write off in the quarter was less than 1% of revenues. Accrued income at June 30, 2010 was not material, at under 5% of revenues.
Supplemental Metrics
Autonomy is supplying supplemental metrics to assist in the understanding and analysis of Autonomy's business.
Six Months Ended June 30, 2010
Cash conversion (H1 CFFO/H1 adj EBITDA**)........................ 93%
Cash conversion (LTM CFFO/LTM adj EBITDA**)...................... 89%
Product including hosted and OEM*...............................$268m
IDOL Product $109m
IDOL Cloud $92m
Service revenues*................................................$22m
Deferred revenue release (primarily maintenance)*...............$125m
OEM derived revenues*................... $67m
OEM Dev...........................................................$6m
OEM Ongoing......................................................$61m
Deals over $1 million..............................................44
Tax rate..........................................................25%
Available tax losses*......................................... $148m
LTM revenue with terms >365 days in normal range (<2% of revenues)
Accrued income in normal range (<5% of revenues)
Three Months Ended June 30, 2010
Cash conversion (Q2 CFFO/Q2 adj EBITDA**)........................ 98%
Cash conversion (Q2 CFFO/Q1 adj EBITDA**)........................107%
Product including hosted and OEM*...............................$147m
IDOL Product.....................................................$62m
IDOL Cloud.......................................................$47m
Service revenues*................................................$11m
Deferred revenue release (primarily maintenance)*................$63m
OEM derived revenues*............................................$38m
OEM Dev.........................................................$3m
OEM Ongoing....................................................$35m
Deals over $1 million..............................................25
Tax rate..........................................................22%
LTM revenue with terms >365 days in normal range (<2% of revenues)
Accrued income in normal range (<5% of revenues)
--------
* The above items are provided for background information and may
include qualitative estimates.
** Adj. EBITDA is defined as operating cash flow before movements in
working capital.
Q2 2010 Corporate Developments
During the second quarter of 2010 Autonomy continued to extend its market leadership with the introduction of key new and upgraded IDOL technologies, including the launches of:
- World's first Social Media Governance platform, protecting
organisations across all social media channels;
- Industry's first Meaning Based Rich Media Management platform; and
- Industry leading Meaning Based Multichannel Customer Interaction
Analytics Platform.
During the second quarter Autonomy was recognised in multiple ways for its market leadership and unmatched technology, including:
- Receiving Her Majesty The Queen's Award for Enterprise in the category
of continuous achievement in international trade;
- Sushovan Hussain, CFO, was presented with FTSE 100 FD of the Year Award
at the FD's Excellence Awards supported by the CBI; and
- Being rated by IDC as fastest-growing archiving software company and
the leading provider of search and discovery software.
Scheduling of Conference Call and Further Information
Autonomy's results conference call will be available live at http://www.autonomy.com on July 22, 2010, at 9:30 a.m. BST/4:30 a.m. EST/1:30 a.m. PST.
From time to time the company answers investors' questions on its website which may include information supplemental to that set forth above. Questions and answers can be found at: http://www.autonomy.com/investors/questions.
Risk Factors as Required by DTR 4.2.7(2)
As with all businesses, the Group is affected by certain risks, not wholly within our control, which could have a material impact on the Group's long term performance and could cause actual results to differ materially from forecast and historic results.
The principal risks and uncertainties facing the Group have not changed from those set out in the company's most recent prospectus, which does not form part of these interim statements. These include: dependence on our core technology; competition; levels of operational spending versus revenues; average selling price; economic and market conditions; reliance on value added resellers; continued service of our executive directors; hiring and retention of qualified personnel; product errors or defects; problems encountered in connection with potential acquisitions; and intellectual property claims.
In addition to the foregoing, the primary risk and uncertainty related to the Group's performance for the remainder of the year is the continuing uncertain macro economic environment, which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. This effect has been offset during the first six months of the year to some extent by emerging signs of economic stability and continuing legal, regulatory and compliance issues which have arisen for enterprises in connection with the current economic environment.
About Autonomy Corporation plc
Autonomy Corporation plc (LSE: AU. or AU.L), a global leader in infrastructure software for the enterprise, spearheads the Meaning Based Computing movement. IDC recently recognized Autonomy as having the largest market share and fastest growth in the worldwide search and discovery market. Autonomy's technology allows computers to harness the full richness of human information, forming a conceptual and contextual understanding of any piece of electronic data, including unstructured information, such as text, email, web pages, voice, or video. Autonomy's software powers the full spectrum of mission-critical enterprise applications including pan-enterprise search, customer interaction solutions, information governance, end-to-end eDiscovery, records management, archiving, business process management, web content management, web optimization, rich media management and video and audio analysis.
Autonomy's customer base is comprised of more than 20,000 global companies, law firms and federal agencies including: AOL, BAE Systems, BBC, Bloomberg, Boeing, CitiGroup, Coca Cola, Daimler AG, Deutsche Bank, DLA Piper, Ericsson, FedEx, Ford, GlaxoSmithKline, Lloyds Bank, NASA, Nestle, the New York Stock Exchange, Reuters, Shell, Tesco, T-Mobile, the U.S. Department of Energy, the U.S. Department of Homeland Security and the U.S. Securities and Exchange Commission. More than 400 companies OEM Autonomy technology, including Symantec, Citrix, HP, Novell, Oracle, Sybase and TIBCO. The company has offices worldwide. Please visit http://www.autonomy.com to find out more.
Autonomy and the Autonomy logo are registered trademarks or trademarks of
Autonomy Corporation plc. All other trademarks are the property of their
respective owners.
AUTONOMY CORPORATION plc
CONDENSED CONSOLIDATED INCOME STATEMENT
(in thousands, except per share amounts)
Three Months Six Months Ended
Ended
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Continuing operations $'000 $'000 $'000 $'000
Revenues (see note 4)...............221,125 195,192 415,305 324,971
Cost of revenues (excl.
amortization). (30,323) (23,628) (51,865) (36,417)
Amortization of purchased
intangibles (14,898) (15,105) (29,432) (20,459)
Total cost of revenues..............(45,221) (38,733) (81,297) (56,876)
Gross profit....................... 175,904 156,459 334,008 268,095
Operating expenses:
Research and development............(27,741) (28,781) (55,523) (48,791)
Sales and marketing.................(50,557) (37,110) (93,457) (65,870)
General and administrative .........(17,264) (15,508) (34,519) (26,796)
Other costs.........................
Post-acquisition restructuring
costs.............................. (558) - (558) (846)
(Loss) profit on foreign exchange..(2,777) (694) 184 (1,127)
Total operating expenses............(98,897) (82,093) (183,873) (143,430)
Profit from operations...............77,007 74,366 150,135 124,665
Share of loss of associate........... (333) (85) (671) (526)
Interest receivable...................2,178 168 2,985 791
Interest payable....................(11,372) (2,757) (16,169) (3,261)
Profit before income taxes...........67,480 71,692 136,280 121,669
Income taxes (see note 5)...........(15,129) (20,817) (34,215) (36,278)
Net profit...........................52,351 50,875 102,065 85,391
Basic earnings per share
(see note 7)........................$ 0.22 $ 0.21 $ 0.42 $ 0.36
Diluted earnings per share
(see note 7).........................$ 0.21 $ 0.21 $ 0.42 $ 0.36
Reconciliation of Adjusted Financial Measures
Three Months Six Months Ended
Ended
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Gross profit .........................175,904 156,459 334,008 268,095
Amortization of purchased intangibles 14,898 15,105 29,432 20,459
Gross profit (adjusted)...............190,802 171,564 363,440 288,554
Profit before income taxes.............67,480 71,692 136,280 121,669
Amortization of purchased intangibles 14,898 15,105 29,432 20,459
Share-based compensation (see note 6)...1,273 2,007 2,767 3,131
Post-acquisition restructuring costs.... 558 - 558 846
Loss (profit) on foreign exchange.......2,777 694 (184) 1,127
Interest payable on convertible
loan notes.............................10,019 - 13,138 -
Share of loss of associate.............. 333 85 671 526
Profit before income taxes (adjusted)..97,338 89,583 182,662 147,758
Income taxes (adjusted)...............(21,823) (26,012) (45,493) (44,009)
Net profit (adjusted)..................75,515 63,571 137,169 103,749
Profit from operations.................77,007 74,366 150,135 124,665
Amortization of purchased intangibles 14,898 15,105 29,432 20,459
Share-based compensation (see note 6).. 1,273 2,007 2,767 3,131
Post-acquisition restructuring costs.... 558 - 558 846
Loss (profit) on foreign exchange.......2,777 694 (184) 1,127
Profit from operations (adjusted)......96,513 92,172 182,708 150,228
AUTONOMY CORPORATION plc
CONDENSED CONSOLIDATED BALANCE SHEET
As at
(unaudited)
June 30, Dec. 31,
2010 2009
$'000 $'000
ASSETS
Non-current assets:
Goodwill........................................... 1,358,397 1,287,042
Other intangible assets............................ 407,475 399,277
Property and equipment, net........................ 28,918 33,886
Equity and other investments....................... 29,944 16,608
Deferred tax asset................................. 19,705 24,015
Total non-current assets........................... 1,844,439 1,760,828
Current assets:
Trade receivables, net............................. 211,616 230,219
Other receivables.................................. 54,442 45,231
Total trade and other receivables 266,058 275,450
Inventory.......................................... 5,908 486
Cash and cash equivalents.......................... 961,992 242,791
Total current assets............................... 1,233,958 518,727
TOTAL ASSETS....................................... 3,078,397 2,279,555
CURRENT LIABILITIES
Trade payable...................................... (22,643) (14,926)
Other payables..................................... (36,822) (54,517)
Total trade and other payables.... (59,465) (69,443)
Bank loan.......................................... (78,358) (52,375)
Tax liabilities.................................... (44,901) (43,338)
Deferred revenue................................... (170,718) (164,931)
Provisions......................................... (2,113) (2,731)
Total current liabilities.......................... (355,555) (332,818)
Net current assets................................. 878,403 185,909
NON-CURRENT LIABILITIES
Bank loan.......................................... (66,083) (145,152)
Convertible loan notes............................. (654,954) -
Deferred tax liabilities........................... (74,609) (85,087)
Deferred revenue................................... (4,751) (8,576)
Other payables..................................... (1,693) (1,020)
Provisions......................................... (4,450) (5,123)
Total non-current liabilities...................... (806,540) (244,958)
Total liabilities.................................. (1,162,095) (577,776)
NET ASSETS......................................... 1,916,302 1,701,779
Shareholders' equity:
Ordinary shares (1)................................ 1,339 1,333
Share premium account.............................. 1,241,809 1,130,767
Capital redemption reserve......................... 135 135
Own shares......................................... (788) (845)
Merger reserve..................................... 27,589 27,589
Stock compensation reserve......................... 24,669 21,959
Revaluation reserve................................ 16,601 4,499
Translation reserve................................ (27,343) (12,032)
Retained earnings.................................. 632,291 528,374
TOTAL EQUITY....................................... 1,916,302 1,701,779
------------
(1) At June 30, 2010, 600,000,000 ordinary shares of nominal value 1/3
pence each authorized, 241,833,190 issued and outstanding; as of
December 31, 2009, 600,000,000 ordinary shares of nominal value 1/3
pence each authorized, 240,574,304 issued and outstanding.
AUTONOMY CORPORATION plc
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Six Months Ended
Ended
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Cash flows from operating activities:
Profit from operations...............77,007 74,366 150,135 124,665
Adjustments for:
Depreciation and amortization........26,438 22,081 53,069 32,624
Share based compensation............. 1,273 2,007 2,767 3,131
Foreign currency movements........... 2,777 694 (184) 1,127
Post-acquisition restructuring costs. 357 - 357 596
Other non-cash items................. - - - 126
Operating cash flows before
movements in working capital........107,852 99,148 206,144 162,269
Changes in operating assets and
liabilities (net of impact of
acquisitions):
Receivables........................ 5,274 (36,349) 6,852 (44,841)
Inventories........................ 4,342 (77) (5,425) 170
Payables..........................(12,179) 2,671 (16,806) (1,064)
Cash generated by operations........105,289 65,393 190,765 116,534
Income taxes paid...................(13,039) (2,370) (36,819) (13,151)
Net cash provided by operating
activities.......................... 92,250 63,023 153,946 103,383
Cash flows from investment activities:
Interest received.................... 2,095 168 2,316 791
Purchase of fixed assets............(12,960) (291) (30,583) (4,364)
Purchase of investments.............. - (1,172) (2,500) (2,152)
Expenditure on product development...(9,721) (4,115) (16,294) (7,399)
Acquisition of subsidiaries,
net of cash acquired................(21,977) (10,160) (77,929) (620,923)
Net cash used in investing
activities..... (42,563) (15,570) (124,990) (634,047)
Cash flows from financing activities:
Proceeds from issuance of shares,
net of issuance costs................ 5,665 5,106 12,830 12,861
Proceeds from share placing,
net of issuance costs................ - - - 308,512
Proceeds from convertible loan
notes, net of issuance costs......... - - 765,912
Interest on bank loan................ (980) (2,297) (2,252) (2,498)
Repayment of bank loan............... - (37,450) (53,906) (37,450)
Drawdown of bank loan................ - - - 200,000
Payment of arrangement fee........... - (346) - (3,846)
Net cash provided by (used in)
financing activities................. 4,685 (34,987) 722,584 477,579
Net increase (decrease) in cash
and cash equivalents.................54,372 12,466 751,540 (53,085)
Beginning cash and cash
equivalents.........................910,876 132,315 242,791 199,218
Effect of foreign exchange
on cash and cash equivalents........ (3,256) 7,768 (32,339) 6,416
Ending cash and cash equivalents....961,992 152,549 961,992 152,549
AUTONOMY CORPORATION plc
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Three Months Six Months
Ended Ended
(unaudited) (unaudited)
June June June June
30, 30, 30, 30,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Net profit...............................52,351 50,875 102,065 85,391
Revaluation of equity investment........ 14,913 (810) 12,102 584
Translation of overseas operations... (1,019) 14,272 (15,311) 14,334
Other comprehensive income............. 13,894 13,462 (3,209) 14,918
Total comprehensive income.............. 66,245 64,337 98,856 100,309
AUTONOMY CORPORATION plc
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital
Ordinary Share redemption Own Merger
shares premium reserve shares reserve Sub-total
$'000 $'000 $'000 $'000 $'000 $'000
At January 1, 2010....1,333 1,130,767 135 (845) 27,589 1,158,979
Retained profit...........- - - - - -
Other comprehensive
income....................- - - - - -
Stock compensation........- - - - - -
Share options exercised...6 13,227 - - - 13,233
EBT options exercised.....- - - 57 - 57
Equity element of
convertible loan notes....- 97,815 - - - 97,815
Deferred tax on
stock options.............- - - - - -
At June 30, 2010......1,339 1,241,809 135 (788) 27,589 1,270,084
Stock
Sub-total comp'n Revaluation
Forwarded reserve reserve
$'000 $'000 $'000
At January 1, 2010..........................1,158,979 21,959 4,499
Retained profit............................. - - -
Other comprehensive income.................. - - 12,102
Stock compensation.......................... - 2,767 -
Share options exercised..................... 13,233 - -
EBT options exercised....................... 57 (57) -
Equity element of convertible loan
notes....................................... 97,815 - -
Deferred tax on stock options............... - - -
At June 30, 2010............................1,270,084 24,669 16,601
(table continued)
Translation Retained
reserve earnings Total
$'000 $'000 $'000
At January 1, 2010.......................... (12,032) 528,374 1,701,779
Retained profit............................. - 102,065 102,065
Other comprehensive income.................. (15,311) - (3,209)
Stock compensation.......................... - - 2,767
Share options exercised..................... - - 13,233
EBT options exercised....................... - - -
Equity element of convertible loan notes.... - - 97,815
Deferred tax on stock options............... - 1,852 1,852
At June 30, 2010............................ (27,343) 632,291 1,916,302
Capital
Ordinary Share redemption Own Merger
shares premium reserve shares reserve Sub-total
$'000 $'000 $'000 $'000 $'000 $'000
At January 1, 2009....1,214 798,279 135 (905) 27,589 826,312
Retained profit...........- - - - - -
Other comprehensive
income....................- - - - - -
Stock compensation........- - - - - -
Issuance of shares......111 321,010 - - - 321,121
EBT options exercised.....- - - 2 - 2
Deferred tax movement.....- - - - - -
At June 30, 2009......1,325 1,119,289 135 (903) 27,589 1,147,435
Sub-total Stock comp'n Revaluation
Forwarded reserve reserve
$'000 $'000 $'000
At January 1, 2009.................. 826,312 14,846 2,987
Retained profit..................... - - -
Other comprehensive income.......... - - 584
Stock compensation.................. - 3,131 -
Issuance of shares.................. 321,121 - -
EBT options exercised............... 2 (2) -
Deferred tax movement............... - - -
At June 30, 2009....................1,147,435 17,975 3,571
(table continued)
Translation Retained
reserve earnings Total
$'000 $'000 $'000
At January 1, 2009......................(18,261) 294,016 1,119,900
Retained profit......................... - 85,391 85,391
Other comprehensive income.............. 14,334 - 14,918
Stock compensation...................... - - 3,131
Issuance of shares...................... - - 321,121
EBT options exercised................... - - -
Deferred tax movement................... - 18,291 18,291
At June 30, 2009........................ (3,927) 397,698 1,562,752
The accompanying notes are an integral part of these consolidated financial statements
AUTONOMY CORPORATION plc
NOTES TO THE CONDENSED SET OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE
SIX MONTHS ENDED JUNE 30, 2010 - UNAUDITED
1. General information
Interim information is unaudited, but reflects all normal adjustments which are, in the opinion of management, necessary to provide a fair statement of results and the company's financial position for and as at the periods presented. The results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of the operating results for future operating periods. The interim financial statements should be read in connection with the company's audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2009. The information for the year ended December 31, 2009 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
The annual financial statements of Autonomy Corporation plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half yearly report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.
Basis of preparation
The same accounting policies, presentation and methods of computation are followed in the condensed set of consolidated financial statements as applied in the Group's 2009 Annual Report, except for certain reclassifications between cost categories to ensure consistency across the Group, and as described below.
Adoption of new and current standards
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2009, except for the adoption of new standards and interpretations. In the current financial year, the Group has adopted International Financial Reporting Standard 3 (Revised 2008) "Business Combinations" and International Accounting Standard 27 (Revised 2008) "Consolidated and Separate Financial Statements" as required, and will apply these principles throughout the year. Adoption of these standards did not have any significant effect on the financial position or performance of the Group.
Going Concern
The Group has considerable financial resources together with a significant number of customers across different geographic areas and industries. At June 30, 2010 the Group had cash balances of $962 million and total debt of $799 million. The Group has no net debt. As a consequence, the directors believe that the Group is well placed to manage business risks successfully despite the current uncertain economic outlook.
After making enquiries and considering the cash flow forecasts of the Group the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the six month and quarterly consolidated financial statements
Adjusted Results
Although IFRS disclosure provides investors and management with an overall view of the company's financial performance, Autonomy believes that it is important for investors to also understand the performance of the company's fundamental business without giving effect to certain specific, non-recurring and non-cash charges. Consequently, the non-IFRS (adj.) results exclude share of profit/loss of associates, post-acquisition restructuring costs and non-cash charges for the amortization of purchased intangibles, share-based compensation, interest on convertible loan notes, non-cash translational foreign exchange gains and losses and associated tax effects. Management uses the adjusted results to assess the financial performance of the company's operational business activities.
See reconciliations on page 7.
3. Acquisitions of MicroLink and Information Governance business
During the first half of 2010 we have completed the acquisitions of MicroLink LLC (100% of share capital acquired) and CA's Information Governance business (asset purchase). The acquisition of MicroLink LLC is intended to accelerate the adoption of Autonomy technology in the important and growing area of US government expenditure. The acquisition of CA's Information Governance business strengthens Autonomy's position of the leader in Meaning Based Governance.
Total consideration paid was $76 million, all of which was paid in cash. Net assets acquired were $1 million, giving rise to goodwill of $75 million. Acquisition costs for each acquisition have been included as costs in the income statement in accordance with IFRS 3 Revised.
The purchase price allocation has not yet been finalised although we expect the independent valuation reports to be completed during the second half of 2010. Management's provisional purchase price allocation has attributed a value of $12 million to purchased intangibles based on comparable transactions. It is not practicable to determine the effect of the acquisitions for the period from acquisition to the end of the financial period. The company's core products and those of the acquired entities have been integrated and the operations merged such that it is not practicable to determine the portion of the result that specifically relates to the acquired entities on a stand-alone basis.
4. Segmental information
The Company is organized internally along Group function lines with each line reporting to the Group's chief operating decision maker, the Chief Executive Officer. The primary Group function lines include: finance; operations, including legal, HR and operations; marketing; sales; and technology. Each of these functions supports the overall business activities, however they do not engage in activities from which they earn revenues or incur expenditure in their operations with each other. No discrete financial information is produced for these function lines. The company integrates acquired businesses and products into the Autonomy model such that separate financial data on these entities is not maintained post acquisition.
The Group has operations in various geographic locations however no discrete financial information is maintained on a regional basis. Decisions around the allocation of resources are not determined on a regional basis and the chief operating decision maker does not assess the Group's performance on a geographic basis.
The Group is a software business that utilises its single technology in a set of standard products to address unique business problems associated with unstructured data. The Group offers over 500 different functions and connectors to over 400 different data repositories as part of its product suite. Each customer selects from a list of options, but underneath from a single unit of the proprietary core technology platform. As a result, no analysis of revenues by product type can be provided.
Each of the Group's virtual brands is founded on the Group's unique Intelligent Data Operating Layer (IDOL), the Group's core infrastructure for automating the handling of all forms of unstructured information. Separate financial information is not prepared for each virtual brand to assess its performance for the purpose of resource allocation decisions. The pervasive nature of the Group's technology across each brand requires decisions to be taken at the Group level and financial information is prepared on that basis.
A significant proportion of the Group's cost base is fixed and represents payroll and property costs which relate to the multiple function lines of the Group. As a result the business model drives enhanced performance though growing sales and accordingly Group wide revenue generation is the key performance metric that is monitored by the chief operating decision maker. The revenue financial data used to monitor performance is prepared and compiled on a Group wide basis. No separate revenue financial analysis is maintained on revenues from any of the virtual brands.
The Company's chief operating decision maker is the Group's Chief Executive Officer, who evaluates the performance of the Company on a Group wide basis and any elements within it on the basis of information from junior executives and Group financial information and is ultimately responsible for entity-wide resource allocation decisions.
As a consequence of the above factors the Group has one operating segment in accordance with IFRS 8 "Operating Segments". IFRS 8 also requires information on a geographic basis and that information is shown below. The Group's operations are located primarily in the United Kingdom, the US and Canada. The company also has a significant presence in a number of other European countries as well as China, Japan, Singapore and Australia. The following tables provide an analysis of the Group's sales and net assets by geographical market based upon the location of the Group's customers.
Three Months Six Months
Ended Ended
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Revenue by region: $'000 $'000 $'000 $'000
Americas..............................146,874 133,928 282,469 219,111
Rest of World..........................74,251 61,264 132,836 105,860
Total.................................221,125 195,192 415,305 324,971
Information about these geographical regions is presented below:
Three Months Ended
(unaudited)
June 30, 2010 June 30, 2009
Americas ROW Total Americas ROW Total
$'000 $'000 $'000 $'000 $'000 $'000
Result by region.........56,738 23,604 80,342 57,930 17,130 75,060
Post-acq'n restr. costs.. (558) -
Profit (loss) on foreign
exch..................... (2,777) (694)
Operating profit......... 77,007 74,366
Share of loss of
associate................ (333) (85)
Interest receivable...... 2,178 168
Interest payable......... (11,372) (2,757)
Profit before tax........ 67,480 71,692
Tax...................... (15,129) (20,817)
Profit for the period.... 52,351 50,875
Six Months Ended
(unaudited)
June 30, 2010 June 30, 2009
Americas ROW Total Americas ROW Total
$'000 $'000 $'000 $'000 $'000 $'000
Result by region........112,222 38,287 150,509 96,459 30,179 126,638
Post-acq'n restr. costs. (558) (846)
Profit (loss) on foreign
exch.................... 184 (1,127)
Operating profit........ 150,135 124,665
Share of loss of
associate............... (671) (526)
Interest receivable..... 2,985 791
Interest payable........ (16,169) (3,261)
Profit before tax....... 136,280 121,669
Tax..................... (34,215) (36,278)
Profit for the period... 102,065 85,391
5. Income taxes
Three Months Six Months
Ended Ended
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Tax charge by region: $'000 $'000 $'000 $'000
UK..................................... 9,901 12,901 23,300 20,344
Foreign................................ 5,228 7,916 10,915 15,934
Total................................15,129 20,817 34,215 36,278
6. Share based compensation
Share based compensation charges have been charged in the consolidated
income statement within the following functional areas:
Three Months Six Months
Ended Ended
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Research and development............... 342 539 743 841
Sales and marketing.................... 624 984 1,357 1,535
General and administra ................ 307 484 667 755
Total share based compensation charge.. 1,273 2,007 2,767 3,131
7. Earnings per share
The calculation of the basic and diluted earnings per share is based on
the following data:
Three Months Six Months
Ended Ended
(unaudited) (unaudited)
June June June June
30, 30, 30, 30,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Earnings for purpose of basic and
diluted earnings per share, being
net profit (IFRS).........................52,351 50,875 102,065 85,391
Earnings for the purposes of diluted
earnings per share (adjusted -
see page 7)...............................75,515 63,571 137,169 103,749
Number of shares (in thousands)
Weighted average number of ordinary
shares for the purposes of basic
earnings per share.......................241,587 238,815 241,239 235,279
Share options..............................3,308 4,094 3,114 3,707
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share (IFRS)............. 244,895 242,909 244,353 238,986
Convertible loan notes....................24,082 - 15,700 -
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share (adjusted)...... 268,977 242,909 260,053 238,986
IFRS
Earnings per share - basic................$ 0.22 $ 0.21 $ 0.42 $ 0.36
Earnings per share - fully diluted........$ 0.21 $ 0.21 $ 0.42 $ 0.36
Adjusted
Earnings per share adj. - basic (IFRS)....$ 0.31 $ 0.27 $ 0.57 $ 0.44
Earnings per share adj.- fully
diluted (IFRS) ...........................$ 0.31 $ 0.26 $ 0.56 $ 0.43
Earnings per share adj. - fully diluted
(adjusted for conversion of loan notes)...$ 0.28 $ 0.26 $ 0.53 $ 0.43
Because in our adjusted measure of profits, we exclude the interest payable on the convertible loan notes, the inclusion of the potential shares for the convertible loan notes does cause dilution. In order to give a fair presentation of our adjusted diluted earnings per share, we have elected to reflect the impact of the convertible shares within our adjusted diluted earnings per share measures.
8. Related Party Transactions
There have been no related party transactions, or changes in related party transactions described in the latest annual report, that could have a material effect on the financial position or performance of the Group in the financial period.
------------------------------------------------
Statement of Directors' Responsibility
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in
accordance with IAS 34 "Interim Financial Reporting";
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7 (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8 (disclosure of related parties'
transactions and changes therein).
By order of the Board
Dr Michael R Lynch Sushovan T Hussain
Chief Executive Officer Chief Financial Officer
July 22, 2010 July 22, 2010
INDEPENDENT REVIEW REPORT TO AUTONOMY CORPORATION PLC
We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the three and six months ended June 30, 2010 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flow and related notes 1 to 8. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2 the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three and six months ended June 30, 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditors
Cambridge, UK
July 22, 2010
Financial Media Contacts:
Edward Bridges / Haya Herbert-Burns
Financial Dynamics
+44(0)20-7831-3113
Analyst and Investor Contacts:
Derek Brown, Head of IR
Autonomy Corporation plc
+44(0)207-907-2300
SOURCE Autonomy Corporation plc
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