CAMBRIDGE, England, October 19, 2010 /PRNewswire-FirstCall/ -- Autonomy Corporation plc (LSE: AU. or AU.L), a global leader in infrastructure software, today reported financial results for the third quarter ended September 30, 2010.
Financial Highlights - Third quarter revenues of $211 million up 10% from Q3 2009, the highest Q3 revenues in the company's history - IDOL business grew organically at 19% during the first nine months of 2010 - IDOL business grew organically at 10% during Q3 2010 against an exceptionally strong Q3'09 comparable - Increased gross margin (adj.) to 88%, up from 86% in Q3 2009 - Increased operating margin (adj.) to 40% (Q3 2009: 34%) - Increased Q3 profit before tax (adj.) to $86.3 million, up 34% from Q3 2009 - Autonomy was recognised as the leader in Gartner's 2010 Magic Quadrant for Web Content Management, and achieved the highest score in the Forrester Wave 2010 for Online Testing; Autonomy also gained the top spot in E-mail Archiving in terms of market share and growth - Increased Q3 fully diluted EPS (adj.) to $0.25, up 25% versus Q3 2009 (IFRS: $0.18, up 21%) - R&D capitalization down from $11.7 million in Q3 2009 to $9.5 million - IDOL OEM revenue growth rate of 30% year-on-year
Commenting on the results, Dr Mike Lynch, Group CEO of Autonomy said today: "During the third quarter of 2010 we delivered revenues at the top end of the range discussed at Q2 2010, with profit before tax, gross margin, operating margin, average selling price (ASP) and EPS all showing a material increase over the prior year, despite the traditional seasonal softness. The continued strong growth in our IDOL OEM revenues is both a further endorsement of the unique capabilities of IDOL and reflects a growing network effect as more software companies choose to design their products with Autonomy inside. We saw a continued trend towards bigger deals, with a series of multimillion dollar contracts signed. The gross margin has returned to usual levels from Q2 2010, and increased year on year. We are particularly pleased with our DSO performance, down to 90 days from 97 days in Q3 2009 and underlying cash conversion remains strong at 93% after taking into account the exceptional payment of sponsorship fees amounting to $15.9 million."
Dr Lynch continued: "In addition to the usual third quarter seasonality and the usual issues around the holiday months, as previously disclosed we witnessed unexpected volatility in customers' purchasing behaviour as their views on macroeconomic conditions oscillated with each inconclusive set of economic indicators. Some expected deals did not close on time but these were balanced by some unexpected ones that did. Our full year expectations were adjusted in our Q3 2010 trading statement to reflect this observation. To be clear, we have not seen a softening of demand, which has continued to increase since the quarter end despite the unpredictability, and indeed some of the outstanding deals have now closed. Given this update it may seem very conservative to have previously changed our outlook for Q4 2010, but we felt it was safer to allow leeway should volatility continue. This 'volatility versus demand' point may seem a subtle distinction, but it is important in understanding the macro environment effects."
Dr Lynch concluded: "We have seen no change to the fundamental demand for the business and note that recently published industry analyst reports in our markets are predicting growth of 16% for the coming year as well as lauding Autonomy's leading position and market share gains in these markets. In this tricky environment we have delivered profit growth well ahead of industry peers, set against tough comparisons including markedly higher-than-trend growth in Q3 and Q4 2009 - bearing in mind that, unlike the majority of other software companies, we saw no contraction in our business during the downturn. Given all this data, our new product launches and the ability of our IDOL OEM business to capture any macro improvement, we are confident in maintaining our view of the outlook for demand and expect to continue to deliver good EPS growth in 2011, with upside to current market consensus."
Third Quarter 2010 Highlights - Average selling price for meaning-based technologies at $831,000 - Increased repeat sales to existing customers to 65% of total revenues, compared to 45% in Q3 2009 - Blue chip third quarter wins include Bank of America, Bank of Thailand, Barclays Capital, Citadel, Colgate Palmolive, Deloitte, Forrester Research, H&R Block, Herbert-Smith, Hilton Hotels, Louis Vuitton, Nationwide, Play.com, Powwownow.com, Robert Bosch and Xcel Energy, as well as significant deals with multiple government, defence and intelligence agencies around the globe including in Canada, Singapore, the UK, US and the European Commission. - 12 IDOL OEM deals signed including new deals and extensions with GE, Iron Mountain and Symantec - Q3 DSOs at 90 days down from 97 days in Q3 2009
Scheduling of Conference Call
Autonomy's results conference call will be available live at http://www.autonomy.com on October 19, 2010, at 9:00 a.m. BST/4:00 a.m. EDT/1:00 a.m. PDT.
Revenues for the three months ended September 30, 2010 totalled $210.6 million, up 10% from $191.6 million for the third quarter of 2009 due to strong organic IDOL growth. During the third quarter of 2010 there were 20 deals over $1.0 million. Several large deals which failed to close immediately prior to quarter end have now been concluded with extended scope.
Deferred Revenue Balance
As flagged in Q2 2010, deferred revenue balance decreased to $167.7 million (Q2 2010: $175.5 million) principally due to the delivery of outstanding inventory of cost approximately $6 million and its associated revenue. Adjusting for this one-off effect, deferred revenues were up, which is better than the expected seasonality that arises as a function of renewals for Interwoven support and maintenance contracts, which are largely calendarised.
Gross Profits and Gross Margins
Gross profits (adj.) for the third quarter of 2010 were $184.4 million, up 12% from $164.0 million for the third quarter of 2009. Gross margins (adj.) for the third quarter of 2010 were 88%, compared to 86% for the third quarter of 2009 due largely to changes in the sales mix. Gross profits (IFRS) for the third quarter of 2010 were $170.4 million, up 14% from $149.4 million for the third quarter of 2009.
Profit from Operations and Operating Margins
Profit from operations (adj.) for the third quarter of 2010 was $85.0 million, up 29% from $66.1 million for the third quarter of 2009. Operating margins (adj.) were 40% in the third quarter of 2010, compared to 34% in the third quarter of 2009 due to the operational gearing of the company. Profit from operations (IFRS) for the third quarter of 2010 was $67.6 million, up 33% from $50.6 million for the third quarter of 2009.
Interest payable for the third quarter ended September 30, 2010 was $12.4 million, up from $2.0 million for the third quarter of 2009. The increase is a result of a charge of $11.0 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.
The full year projected effective tax rate for 2010 is 24%, down from 28% for the full year in 2009. The decrease is the result in changes in the forecast profit mix between UK and overseas, as well as the completion of tax studies resulting in the recognition of additional tax losses. The effective tax rate for the third quarter is at 22% as a result of the change in the forecasted full year rate. The effective tax rate for 2011 will likely be in the range of 28% - 30% as the one-off benefit from recognising additional tax losses will not be repeated.
Foreign Exchange Impact
The effect on revenue in the third quarter of 2010 of movements in foreign exchange rates was a decrease of approximately $1.2 million compared to the third quarter of 2009. The U.S. Dollar strengthened versus Sterling to an average of $1.55 versus $1.64 when comparing the third quarter of 2010 to the third quarter of 2009.
Net profit (adj.) for the third quarter of 2010 was $67.2 million, or $0.25 per diluted share, compared to net profit (adj.) of $48.6 million, or $0.20 per diluted share, for the third quarter of 2009. Net profit (IFRS) for the third quarter of 2010 was $44.8 million, or $0.18 per diluted share, compared to net profit (IFRS) of $36.8 million, or $0.15 per diluted share, for the third 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 third quarter of 2010 was $9.5 million (Q3 2009: $11.7 million). R&D capitalization for the third quarter of 2010 is offset by amortization charges of $4.6 million (Q3 2009: $2.2 million) arising from historical R&D capitalization. The capitalization and offsetting charges resulted in a net credit (before tax) in the period of $4.9 million (Q3 2009: $9.5 million), and a net margin impact of 2% (Q3 2009: 5%).
Balance Sheet and Cash Flow
Cash balances were $1,027.7 million at September 30, 2010, an increase of $65.7 million from $962.0 million at June 30, 2010. Movements in cash flow during the third quarter of 2010 of note included:
- Positive cash flow from operations of $72.8 million, resulting in LTM cash conversion (cash generated by operations divided by adj EBITDA) of 80% and adjusting for one-off items, underlying LTM cash conversion was 83%; - Tax payments of $12.1 million (Q3 2009: $13.0 million); - R&D capitalised in the quarter of $9.5 million, down 19% from $11.7m on Q3 2009; - Purchases of property, plant and equipment of $9.8 million, down significantly from the $19.0 million in the same period last year; - First cash payment of $12.5 million being the coupon interest on the convertible loan notes; - Foreign exchange gain of $36.7 million due to the appreciation of Sterling against the Dollar. The proceeds from the issuance of the convertible loan note are retained in Sterling and subject to exchange rate fluctuations.
Trade receivables at September 30, 2010, were $222.5 million, compared to $211.6 million at June 30, 2010. Accounts receivable days sales outstanding were 90 days at September 30, 2010, compared to 82 days at June 30, 2010 and 97 days at September 30, 2009. Despite the difficult economic climate, bad debt write off in the quarter was less than 1% of revenues. Accrued income at September 30, 2010 was not material, at under 5% of revenues.
In the quarter, the company paid one-off sponsorship fees of $15.9 million, including VAT (the cash for the VAT will be recouped in Q4 2010). Because the fees will be amortised to the Income Statement over time while the total cash cost is paid up front, the net effect is to reduce cash conversion in the current period. This item can be seen in the negative payables movement in the cash flow statement.
- Nine month operating cash conversion on target at 89%, adjusted for above exceptional payment at 93% - Cash conversion in Q3 2010 was 80%, adjusting for the above one-off exceptional payment cash conversion was a more representative 93%
Autonomy is supplying supplemental metrics to assist in the understanding and analysis of Autonomy's business.
Three Months Ended September 30 2010 2009 ---------------------------------------------------------- Product including hosted and IDOL OEM* $137m $125m IDOL Product $59m *** IDOL Cloud $47m *** Service revenues* $10m $9m Deferred revenue release (primarily maintenance)* $64m $58m IDOL OEM derived revenues* $31m $24m IDOL OEM Dev $2m *** IDOL OEM Ongoing $29m *** Deals over $1 million 20 13 Average Selling Price (ASP) $831k *** Tax rate 22% 24% 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. *** This metric was not tracked in the comparative period and hence is not available.
Q3 2010 Corporate Developments
During the third quarter of 2010 Autonomy continued to extend its market leadership with the introduction of key new and upgraded IDOL technologies, including the launches of:
- Industry's first meaning based risk management platform for law firms; - Meaning based coding for eDiscovery; - Launch of new Healthcare Division; and - IDOL-based version of the acquired CA Message Manager product.
During the third quarter Autonomy was recognised in multiple ways for its market leadership and unmatched technology, including:
- Being positioned as leader in Gartner's 2010 Magic Quadrant for Web Content Management; and - Achieving the highest score in the Forrester Wave 2010 for Online Testing, based on current offering, product strategy, corporate strategy, and market presence.
On March 17, 2010 Autonomy announced the appointment of Mr Jonathan Bloomer to its Board of Directors. Mr Bloomer commenced his role as a Non-Executive Director during the quarter on August 1, 2010. Information required pursuant to LR 9.6.13 was set forth in an RNS announcement on March 17, 2010 and remains unchanged.
Following the commencement of Mr Bloomer's tenure and the addition of Frank Kelly to the Board in May 2010, Messrs. Richard Perle and Barry Ariko retired from their positions as Non-Executive Directors of Autonomy.
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, Deloitte, 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 IDOL 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 Ended (unaudited) Sept 30, Sept 30, 2010 2009 Continuing operations $'000 $'000 Revenues (see note 3) 210,556 191,606 Cost of revenues (excl. amortization) (26,130) (27,644) Amortization of purchased intangibles (14,055) (14,590) Total cost of revenues (40,185) (42,234) Gross profit 170,371 149,372 Operating expenses: Research and development (29,453) (23,853) Sales and marketing (53,824) (59,306) General and administrative (17,269) (16,785) Other costs Post-acquisition restructuring costs (1,557) - (Loss) profit on foreign exchange (705) 1,217 Total operating expenses (102,808) (98,727) Profit from operations 67,563 50,645 Share of loss of associate (254) (204) Interest receivable 2,697 184 Interest payable (12,447) (1,985) Profit before income taxes 57,559 48,640 Income taxes (see note 4) (12,730) (11,874) Net profit 44,829 36,766 Basic earnings per share (see note 6) $ 0.19 $0.15 Diluted earnings per share (see note 6) $ 0.18 $0.15 Cont. Nine Months Ended (unaudited) Sept 30, Sept 30, 2010 2009 Continuing operations $'000 $'000 Revenues (see note 3) 625,861 516,577 Cost of revenues (excl. amortization) (77,995) (64,061) Amortization of purchased intangibles (43,487) (35,049) Total cost of revenues (121,482) (99,110) Gross profit 504,379 417,467 Operating expenses: Research and development (84,976) (72,644) Sales and marketing (147,281) (125,176) General and administrative (51,788) (43,581) Other costs Post-acquisition restructuring costs (2,115) (846) (Loss) profit on foreign exchange (521) 90 Total operating expenses (286,681) (242,157) Profit from operations 217,698 175,310 Share of loss of associate (925) (730) Interest receivable 5,682 975 Interest payable (28,616) (5,246) Profit before income taxes 193,839 170,309 Income taxes (see note 4) (46,945) (48,152) Net profit 146,894 122,157 Basic earnings per share (see note 6) $ 0.61 $0.52 Diluted earnings per share (see note 6) $ 0.60 $0.51 Reconciliation of Adjusted Financial Measures Three Months Nine Months Ended Ended (unaudited) (unaudited) Sept 30, Sept 30, Sept 30, Sept 30, 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Gross profit 170,371 149,372 504,379 417,467 Amortization of purchased intangibles 14,055 14,590 43,487 35,049 Gross profit (adjusted) 184,426 163,962 547,866 452,516 Profit before income taxes 57,559 48,640 193,839 170,309 Amortization of purchased intangibles 14,055 14,590 43,487 35,049 Share-based compensation (see note 5) 1,168 2,048 3,935 5,179 Post-acquisition restructuring costs 1,557 - 2,115 846 Loss (profit) on foreign exchange 705 (1,217) 521 (90) Interest charge on convertible loan notes 11,020 - 24,158 - Share of loss of associate 254 204 925 730 Profit before income taxes (adjusted) 86,318 64,265 268,980 212,023 Income taxes (adjusted) (19,090) (15,688) (64,583) (59,697) Net profit (adjusted) 67,228 48,577 204,397 152,326 Profit from operations 67,563 50,645 217,698 175,310 Amortization of purchased intangibles 14,055 14,590 43,487 35,049 Share-based compensation (see note 5) 1,168 2,048 3,935 5,179 Post-acquisition restructuring costs 1,557 - 2,115 846 Loss (profit) on foreign exchange 705 (1,217) 521 (90) Profit from operations (adjusted) 85,048 66,066 267,756 216,294 AUTONOMY CORPORATION plc CONDENSED CONSOLIDATED BALANCE SHEET As at (unaudited) Sept 30, 2010 Dec. 31, 2009 $'000 $'000 ASSETS Non-current assets: Goodwill 1,361,400 1,287,042 Other intangible assets 397,360 399,277 Property and equipment, net 40,588 33,886 Equity and other investments 62,501 16,608 Deferred tax asset 17,377 24,015 Total non-current assets 1,879,226 1,760,828 Current assets: Trade receivables, net 222,493 230,219 Other receivables 56,449 45,231 Total trade and other receivables 278,942 275,450 Inventory 206 486 Cash and cash equivalents 1,027,739 242,791 Total current assets 1,306,887 518,727 TOTAL ASSETS 3,186,113 2,279,555 CURRENT LIABILITIES Trade payable (22,691) (14,926) Other payables (32,568) (54,517) Total trade and other payables (55,259) (69,443) Bank loan (78,551) (52,375) Tax liabilities (31,047) (43,338) Deferred revenue (163,785) (164,931) Provisions (1,894) (2,731) Total current liabilities (330,536) (332,818) Net current assets 976,351 185,909 NON-CURRENT LIABILITIES Bank loan (66,245) (145,152) Convertible loan notes (685,490) - Deferred tax liabilities (86,824) (85,087) Deferred revenue (3,898) (8,576) Other payables (919) (1,020) Provisions (4,022) (5,123) Total non-current liabilities (847,398) (244,958) Total liabilities (1,177,934) (577,776) NET ASSETS 2,008,179 1,701,779 Shareholders' equity: Ordinary shares (1) 1,342 1,333 Share premium account 1,245,142 1,130,767 Capital redemption reserve 135 135 Own shares (788) (845) Merger reserve 27,589 27,589 Stock compensation reserve 25,837 21,959 Revaluation reserve 47,117 4,499 Translation reserve (14,829) (12,032) Retained earnings 676,634 528,374 TOTAL EQUITY 2,008,179 1,701,779
(1) At September 30, 2010, 600,000,000 ordinary shares of nominal value 1/3 pence each authorized, 242,235,961 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 Nine Months Ended Ended (unaudited) (unaudited) Sept 30, Sept 30, Sept 30, Sept 30, 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Cash flows from operating activities: Profit from operations 67,563 50,645 217,698 175,310 Adjustments for: Depreciation and amortization 21,784 22,969 74,853 55,593 Share based compensation 1,168 2,048 3,935 5,179 Foreign currency movements 705 (1,217) 521 (90) Post-acquisition restructuring costs 341 - 698 596 Other non-cash items - 1 - 127 Operating cash flows before movements in working capital 91,561 74,446 297,705 236,715 Changes in operating assets and liabilities (net of impact of acquisitions): Receivables (13,828) (20,534) (6,976) (65,375) Inventories 5,705 98 280 268 Payables (10,641) 43,834 (27,447) 42,770 Cash generated by operations 72,797 97,844 263,562 214,378 Income taxes paid (12,098) (13,032) (48,917) (26,183) Net cash provided by operating activities 60,699 84,812 214,645 188,195 Cash flows from investment activities: Interest received 2,697 184 5,013 975 Purchase of fixed assets (9,780) (19,034) (40,363) (23,398) Purchase of investments - - (2,500) (2,152) Expenditure on product development (9,552) (11,749) (25,846) (19,148) Acquisition of subsidiaries, net of cash acquired (873) (7,607) (78,802) (628,530) Net cash used in investing activities (17,508) (38,206) (142,498) (672,253) Cash flows from financing activities: Proceeds from issuance of shares, net of issuance costs 3,523 4,335 16,353 17,196 Proceeds from share placing, net of issuance costs - - - 308,512 Proceeds from convertible loan notes, net of issuance costs (4,131) - 761,781 - Interest on convertible loan notes (12,527) - (12,527) - Interest on bank loan (1,045) (1,462) (3,297) (3,960) Repayment of bank loan - - (53,906) (37,450) Drawdown of bank loan - - - 200,000 Payment of arrangement fee - - - (3,846) Net cash (used in) provided by financing activities (14,180) 2,873 708,404 480,452 Net increase (decrease) in cash and cash equivalents 29,011 49,479 780,551 (3,606) Beginning cash and cash equivalents 961,992 152,549 242,791 199,218 Effect of foreign exchange on cash and cash equivalents 36,736 (1,296) 4,397 5,120 Ending cash and cash equivalents 1,027,739 200,732 1,027,739 200,732 AUTONOMY CORPORATION plc CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Three Months Ended Nine Months Ended (unaudited) (unaudited) Sept 30, Sept 30, Sept 30, Sept 30, 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Net profit 44,829 36,766 146,894 122,157 Revaluation of equity 30,516 1,895 42,618 2,479 investment Translation of overseas 12,514 (4,110) (2,797) 10,224 operations Other comprehensive 43,030 (2,215) 39,821 12,703 income Total comprehensive 87,859 34,551 186,715 134,860 income 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 9 16,560 - - - 16,569 EBT options - - - exercised - - - 57 - 57 Equity element of convertible loan notes - 97,815 - - - 97,815 Deferred tax on stock options..... - - - - - - At September 30, 2010 1,342 1,245,142 135 (788) 27,589 1,273,420 Sub-total Stock Revaluation comp'n Translation Retained Forwarded reserve reserve reserve earnings Total $'000 $'000 $'000 $'000 $'000 $'000 At January 1, 2010 1,158,979 21,959 4,499 (12,032) 528,374 1,701,779 Retained - - - - 146,894 146,894 profit Other comprehensive income - - 42,618 (2,797) - 39,821 Stock compensation - 3,935 - - - 3,935 Share options exercised 16,569 - - - - 16,569 EBT options exercised 57 (57) - - - - Equity element of convertible 97,815 - - - - 97,815 loan notes Deferred tax on stock options..... - - - - 1,366 1,366 At September 30, 2010 1,273,420 25,837 47,117 (14,829) 676,634 2,008,179 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 115 325,511 - - - 325,626 EBT options exercised - - - 2 - 2 Deferred tax movement - - - - - - At September 30, 2009 1,329 1,123,790 135 (903) 27,589 1,151,940 Sub-total Stock Revaluation comp'n Translation Retained Forwarded reserve reserve reserve earnings Total $'000 $'000 $'000 $'000 $'000 $'000 At January 1, 2009 826,312 14,846 2,987 (18,261) 294,016 1,119,900 Retained profit - - - - 122,157 122,157 Other comprehensive income - - 2,479 10,224 - 12,703 Stock compensation - 5,179 - - - 5,179 Issuance of shares 325,626 - - - - 325,626 EBT options exercised 2 (2) - - - - Deferred tax movement - - - - 34,725 34,725 At September 1,151,940 30, 2009 20,023 5,466 (8,037) 450,898 1,620,290
AUTONOMY CORPORATION plc
NOTES TO THE CONDENSED SET OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 - UNAUDITED
1. General information
Quarterly 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 nine months ended September 30, 2010 are not necessarily indicative of the operating results for future operating periods. The quarterly 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
Whilst the financial information included in this quarterly announcement has been computed in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, this announcement does not itself contain all of the disclosures required by IFRSs.
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.
The Group has considerable financial resources together with a significant number of customers across different geographic areas and industries. At September 30, 2010 the Group had cash balances of $1,028 million and total debt of $830 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 nine month and quarterly consolidated financial statements
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 6.
3. 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 by geographical market based upon the location of the Group's customers.
3. Segmental information (continued) Three Months Ended Nine Months Ended (unaudited) (unaudited) Sept 30, Sept 30,2009 Sept 30, Sept 30, 2010 2010 2009 Revenue by $'000 $'000 $'000 $'000 region: Americas 141,446 135,733 423,915 354,844 Rest of World 69,110 55,873 201,946 161,733 Total 210,556 191,606 625,861 516,577 Information about these geographical regions is presented below: Three Months Ended (unaudited) Sept 30, 2010 Americas ROW Total $'000 $'000 $'000 Result by region 51,238 18,587 69,825 Post-acq'n restr. costs. (1,557) (Loss) profit on foreign exch (705) Operating profit 67,563 Share of loss of associate (254) Interest receivable 2,697 Interest payable (12,447) Profit before tax 57,559 Tax (12,730) Profit for the period 44,829 Cont. Sept 30, 2009 Americas ROW Total $'000 $'000 $'000 Result by region 39,767 9,661 49,428 Post-acq'n restr. costs. - (Loss) profit on foreign exch 1,217 Operating profit 50,645 Share of loss of associate (204) Interest receivable 184 Interest payable (1,985) Profit before tax 48,640 Tax (11,874) Profit for the period 36,766 Nine Months Ended (unaudited) Sept 30, 2010 Sept 30, 2009 Americas ROW Total Americas ROW Total $'000 $'000 $'000 $'000 $'000 $'000 Result by region 163,460 56,874 220,334 136,226 39,840 176,066 Post-acq'n restr. costs. (2,115) (846) (Loss) profit on foreign exch (521) 90 Operating profit 217,698 175,310 Share of loss of associate (925) (730) Interest receivable 5,682 975 Interest payable (28,616) (5,246) Profit before tax 193,839 170,309 Tax (46,945) (48,152) Profit for the period 146,894 122,157 4. Income taxes Three Months Ended Nine Months Ended (unaudited) (unaudited) Sept 30, Sept 30, Sept 30, Sept 30, 2010 2009 2010 2009 Tax charge by $'000 $'000 $'000 $'000 region: UK 8,163 3,507 31,463 23,851 Foreign 4,567 8,367 15,482 24,301 Total 12,730 11,874 46,945 48,152 5. Share based compensation
Share based compensation charges have been charged in the consolidated income statement within the following functional areas:
Three Months Ended Nine Months Ended (unaudited) (unaudited) Sept 30, Sept 30, Sept 30, Sept 30, 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Research and development 313 550 1,056 1,391 Sales and marketing 573 1,004 1,930 2,539 General and administrative 282 494 949 1,249 Total share based 1,168 2,048 3,935 5,179 compensation charge 6. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Three Months Ended Nine Months Ended (unaudited) (unaudited) Sept 30, Sept 30, Sept 30, Sept 30, 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Earnings for purpose of basic and diluted earnings per share, being net profit (IFRS) 44,829 36,766 146,894 122,157 Earnings for the purposes of diluted earnings per share (adjusted - see page 6) 67,228 48,577 204,397 152,326 Number of shares (in thousands) Weighted average number of ordinary shares for the purposes of basic earnings per share 242,003 239,474 241,497 236,693 Share options 2,824 3,607 2,808 3,465 Weighted average number of ordinary shares for the purposes of diluted earnings per share (IFRS) 244,827 243,081 244,305 240,158 Convertible loan notes 24,082 - 18,525 - Weighted average number of ordinary shares for the purposes of diluted earnings per share (adjusted) 268,909 243,081 262,830 240,158 IFRS Earnings per share - basic $ 0.19 $ 0.15 $ 0.61 $ 0.52 Earnings per share - fully diluted $ 0.18 $ 0.15 $ 0.60 $ 0.51 Adjusted Earnings per share adj. - basic (IFRS) $ 0.28 $ 0.20 $ 0.85 $ 0.64 Earnings per share adj.- fully diluted (IFRS) $ 0.27 $ 0.20 $ 0.84 $ 0.63 Earnings per share adj. - fully diluted (adjusted for conversion of loan notes) $ 0.25 $ 0.20 $ 0.78 $ 0.63
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.
7. Related Party Transactions
There have been no related party transactions in Q3 2010, 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.
INDEPENDENT REVIEW REPORT TO AUTONOMY CORPORATION PLC
We have been engaged by the company to review the condensed set of financial statements in the quarterly financial report for the three and nine months ended September 30, 2010, which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of cash flows and related notes 1 to 7. We have read the other information contained in the quarterly 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 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.
The quarterly financial report is the responsibility of, and has been approved by, the directors.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with the recognition and measurement criteria of IFRSs as adopted by the European Union. The condensed set of financial statements included in this quarterly financial report has been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements.
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the quarterly 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 quarterly 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.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying quarterly financial information is not prepared, in all material respects, in accordance with the recognition and measurement criteria of IFRSs as adopted for use in the EU and the basis set out in note 2.
Deloitte LLP Chartered Accountants and Statutory Auditors October 19, 2010 Cambridge, UK Financial Media Contacts: Edward Bridges / Haya Herbert-Burns Financial Dynamics +44(0)20-7831-3113 Analyst and Investor Contacts: Derek Brown, Head of Investor Relations Autonomy Corporation plc +44(0)20-7907-2300
SOURCE Autonomy Corporation plc