Autonomy Corporation plc Trading Update for the Quarter Ended March 31, 2011
Revenues up 13% From Q1 2010; Diluted EPS (adj. IFRS) up 13% From Q1 2010; Strong Growth in Core Business
Apr 21, 2011, 07:30 ET
CAMBRIDGE, England, April 21, 2011 /PRNewswire-FirstCall/ -- Autonomy Corporation plc (LSE: AU. or AU.L) today provided an interim trading update and management statement for the quarter ended March 31, 2011. Continuing adoption of Autonomy's industry-leading Meaning Based Computing technology by blue-chip companies is delivering strong revenues, profits and cash flow.
Highlights
- Record Q1 revenues of $220 million, up 13% from Q1 2010
- Diluted EPS (adj. IFRS) at $0.29*, up 13% from Q1 2010 (IFRS: $0.22, up 9%)
- All Q1' 11 financial metrics exceed or in line with analyst consensus estimates (Bloomberg: March 29, 2011)
- Revenues $220 million (consensus $216 million)
- PBT (adj.) $95 million (consensus $90 million)
- Op margin (adj.) 43% (consensus 42%)
- Multi-million dollar Protect and Promote deals signed in quarter
- Strong year-on-year growth in core IDOL business, including:
- IDOL OEM growth (organic) of 28%
- IDOL Cloud growth in recognised revenue (organic) of 17%
- IDOL Product growth (organic) of 17%
- Cloud signings up with commit now at $390 million
- Organic growth in core business of 19%, including deferred revenue release is 15%
- Launch of new social media monitoring and compliance products
- Gross margins (adj.) up to 88% in Q1 2011, from 86% in Q4 2010
- Deferred revenue stable at $176 million (Q4 2010: $178 million), showing usual seasonal effect
- Operating margins (adj.) in Q1 2011 at 43% compared to 44% in Q1 2010 due to increased R&D for new product launches; Strong investment in business with R&D up 17% from Q1 2010
- IAS38 R&D capitalization down in Q1 2011 with a net impact of $4.9 million (Q4 2010: $7.3 million)
- 27 seven figure deals in Q1 2011, up from 19 in Q1 2010
- Average selling price for quarter rises to $806,000 (Q1 2010: $634,000)
- Cash conversion trailing 12 months of 88% versus 81% last year
- Gross cash of $1.1 billion (Q1 2010: $0.9 billion) at quarter end and no net debt
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* Adj. IFRS adjusts for implied dilution from convert, a future event. If the share price were to be above GBP20.63 in February 2015 the convert would generate extra shares giving diluted EPS (adj.) for Q1 2011 of $0.26. See note 6.
Adjusted income statements are included on page 7, which reconcile IFRS to the adjusted measures above.
Chief Executive's Review
Commenting on performance during the period, Dr Mike Lynch, Group CEO of Autonomy, provided the following overview:
"Q1 was a strong quarter for Autonomy in which we continued to execute well with good growth in revenue, profits and other key metrics. Our core business growth has been demonstrated after the difficult comparator of the unusually strong Q4 2009, with continued strength in our IDOL OEM business, and the transition to cloud. In Q1 2011 IDOL Product revenues, driven by licence growth, increased by 17%. We are excited by the fact that the transition to the cloud has continued apace, seen in the combination of growth in recognised cloud revenues of 17% and growth in new signings evident in the rising commit number.
The beneficial effects of customers choosing the cloud option include the longer term, contracted revenue streams which provide more predictable revenues and, ultimately, higher total revenues from each customer contract. The move away from short term, less predictable licence revenue leads to, of course, a reduction in deferred revenues as a proportion of total revenues. In measuring the momentum of the cloud business one should remember to take account both of recognised revenue in a period and the rate of new signings which generate future revenues. Autonomy is one of the world leaders in this area, both in terms of customer data volumes and experience in handling our customers' most sensitive data.
During the quarter we continued to see a record number of large deals, with continuing multimillion dollar deals in our Promote and Protect areas, reflecting the continuation of the macro recovery. Our Promote business continues to show strong growth with a number of strategic multichannel deals covering web, email, social media and call centres. During the quarter we also saw continued progress in areas of expansion like Latin America and Asia, and strength in new market areas like healthcare.
In terms of broader trends, the Meaning Based Computing movement continues forward as the proliferation of, and demands on, unstructured information continue to multiply. Although the ultimate outturn for the year will be dependent upon the performance in the next three quarters, not just the first, we continue to see a gentle sustained recovery and believe current market estimates will turn out to be conservative."
Financial Review
The following Financial Review provides commentary on key trends during the quarter:
Revenue
Q1 2011 can be characterised as another quarter of significant progress for Autonomy. Revenues for Q1 2011 totalled $220 million, up 13% from $194 million for Q1 2010, as enterprises deployed Autonomy's technology to extract maximum value from rapidly expanding quantities of unstructured information. This result was achieved due to a strong performance in all of our markets.
Delivery of Autonomy's core technology is via a number of methods, depending on the demands of the customers. Sales during Q1 2011 were as follows, with the trends as discussed above:
IDOL Product. IDOL Product is normally delivered as licensed software paid for up-front with an ongoing support and maintenance stream. This model is becoming less significant with the rise of cloud computing. In Q1 2011, IDOL Product revenue totalled $54.4 million (Q1 2010: $46.5 million), up 17% and representing 25% of revenues.
IDOL Cloud. IDOL Cloud delivers Autonomy's IDOL on a Software-as-a-Service (SaaS) model for both its Promote and Protect businesses which is generally invoiced monthly in arrears and does not generate deferred revenue. There are two key drivers of cloud revenues for Autonomy: the first and most significant relates to complex processing of information delivered as a service; the second relates to the quantity of data under management. In Q1 2011 IDOL Cloud recognised revenue totalled $52.7 million (Q1 2010: $45.1 million), up 17% and representing 24% of revenues. In understanding growth in the IDOL Cloud business one must also take into account signings growth.
IDOL OEM. IDOL OEM is where Autonomy's IDOL is embedded inside other software companies' products. IDOL is now embedded in most major software companies' products addressing most software vertical markets. This is a particularly important revenue stream as it generates ongoing business across the broadest product set possible, in addition to up-front development licences. In Q1 2011 IDOL OEM revenue totalled $37.2 million (Q1 2010: $29.0 million), up 28% and representing 17% of revenues. 12 new agreements were signed during Q1 2011, including deals with Symantec and HP.
Services. Services revenues relate to third party and internal implementation consultants and training. Services revenues fell in Q1 2011 as expected given our pure software model to approximately 4% of revenues (or $9.0 million) (Q1 2010: $11.4 million or 6%). Autonomy operates a rare "pure software" model under which our goal is that most implementation work is carried out by approved partners. This optimises Autonomy's ability to address its horizontal technology to multiple vertical markets and regions in the most efficient way.
Organic Growth
In analysing organic growth Autonomy considers organic IDOL growth to be the most meaningful performance metric for understanding the momentum within the business. This excludes the contribution from acquisitions, foreign exchange impact, services revenue (not a goal of the business) and deferred revenue release (primarily maintenance income). This calculation for Q1 2011 is straight forward as the small acquisitions in 2010 (MicroLink and CA's Information Governance assets, which had a run rate on acquisition of $6 million) contributed only professional services revenues and hence do not affect the calculation below.
Table 1: Core Business Organic Revenue Growth Calculation(1)
Revenue ($ millions) Q1'11 Q1'10
Core IDOL reported revenues(1) 144.3 120.6
MicroLink/CA assets non-service revenue(2) - -
FX (0.4) -
143.9 120.6
Growth 19%
1 Autonomy's Core Business excludes professional services and deferred revenue release, ie Core IDOL is made up of IDOL Product, IDOL Cloud and IDOL OEM categories, discussed above.
2 MicroLink did not have its own product lines but only services, including in the pre-stub period in Q1 2010. CA's Information Governance original product not sold by Autonomy.
Gross Profits and Gross Margins
Gross profits (adj.) for Q1 2011 were $194.2 million, up 12% from $172.6 million for Q1 2010. Gross margins (adj.) for Q1 2011 were 88%, compared to 86% for Q4 2010 and 89% for Q1 2010. During Q1 2011 Autonomy saw expected improvements in gross margins, rising quarter-on-quarter and within the company's target range.
Profit from Operations and Operating Margins
Management continued to invest during the quarter in R&D in advance of upcoming product launches. Despite this investment, profit from operations (adj.) for Q1 2011 increased 10% to $94 million with operating margins of 43% (Q1 2010: $86 million and 44%).
Interest payable
Interest payable for Q1 2011 totalled $13.3 million, up 177% from $4.8 million in Q1 2010. The increase is a result of a charge in Q1 2011 of $11.0 million in relation to the convertible loan notes issued in March 2010 versus a charge of Q1 2010 of $3.1 million. The convertible loan notes pay a cash coupon of 3.25%. The income statement charge is notional and is based on a market rate of interest for corporate loan notes of similar term without a convertible element in accordance with IFRS. The remainder of the interest payable relates to the company's bank loan incurred in connection with the Interwoven acquisition in 2009, which has decreased during the period due to scheduled repayments.
Taxation
The effective tax rate for Q1 2011 is 27% (Q1 2010: 28%), decreasing due to a reduction in U.K. corporation tax rates, and reflects the expected rate for the full year 2011. The company has no remaining unrecognised tax losses, and thus this rate should remain stable throughout 2011.
Foreign Exchange Impact on Revenues
The effect on revenue of movements in foreign exchange rates in Q1 2011 was an increase of $0.4 million compared to Q1 2010 (i.e. if revenues were reported for each period using the same exchange rates as those prevailing in the previous year, revenues in Q1 2011 would have been $0.4 million lower, or $219.4 million). In Q1 2011 the U.S. Dollar weakened slightly versus Sterling to an average of $1.60 versus $1.56 in Q1 2010.
IAS 38 Charges and Capitalization
In Q1 2011, Autonomy expensed $32.4 million (Q4 2010: $29.8 million) on R&D relating to new products including the development of new core IDOL functionality and other ongoing development projects. Under IAS 38 the company is required to capitalize certain aspects of its research and development activities. R&D capitalization in Q1 2011 was $10.0 million down from $12.7 million in Q4 2010. R&D capitalization for Q1 2011 is offset by amortization charges of $5.1 million (Q4 2010: $5.4 million) arising from historical R&D capitalization.
The capitalization and offsetting charges resulted in a net credit (before tax) in the quarter of $4.9 million (Q4 2010: $7.3 million), and a net margin impact of 2% (Q4 2010: 3%).
Balance Sheet and Cash Flows
Cash Balance. Autonomy closed Q1 2011 with a gross cash balance of $1.1 billion, bank debt of $66 million (Q4 2010: $145 million), the sterling-denominated convertible loan note of $705 million (Q4 2010: $682 million), rising due to exchange rate fluctuations, and no net debt.
Movements. Movements of note in cash flow during Q1 2011 included:
- Positive cash flow from operating activities of $85.7 million, up 39% from $61.7 million in Q1 2010.
- Capital expenditure of $10.3 million during Q1 2011, down from $17.6 million in Q1 2010. This represents the continued investment by the company in areas of expected growth for future years.
- Expenditure on product development, resulting in a cash outflow of $10.0 million (Q1 2010: $6.6 million), as discussed above.
- There was a movement of $0.5m in acquisition of subsidiaries, net of cash acquired. This related to the settlement of provisions acquired with historic acquisitions. There were no acquisitions in the period.
- Interest paid on the convertible loan notes of $13.0 million (Q1 2010: nil).
- Scheduled bank loan repayments of $79.6 million (Q1 2010: $53.9 million).
Cash Conversion. On a trailing twelve month basis (Q2 2010 to Q1 2011), cash conversion improved to 88%, up from 81% last year.
Receivables. In Q1 2011 DSOs were 102 days (Q1 2010: 93 days), above the top end of the company's target 80-90 day range. The rise in DSOs equates to late payment of approximately $20 million, and $25 million has been received in the first few days of Q2 2011. The bad debt write off was below 1% of sales and accrued income remained below 5% of revenue.
Capex, depreciation and amortisation. After our significant investment for the future of our IDOL Cloud business in 2010, we saw capital expenditure fall significantly in Q1 2011 to $10.3 million. Depreciation and amortisation fell to $25.5 million in Q1 2011 from $26.6 million in Q1 2010. This comprised: $13.6 million (Q1 2010: $14.5 million) of amortisation of purchased intangibles; $5.1 million (Q1 2010: $3.5 million) of amortisation of capitalised R&D; and $6.8 million (Q1 2010: $8.6 million) of depreciation on other fixed assets (i.e. software licences and property, plant and equipment). The variation in quarterly depreciation on other fixed assets is affected, among other things, by acquired assets becoming fully depreciated, timing of purchases of replacement equipment and net new investment. It should be noted that the depreciation charge relates to fixed assets and software purchased for use in our data centres. There have been no changes to our depreciation policy over the last several years.
Equity Investments. The market value of the company's equity investment in blinkx plc continued to increase to $74 million (Q4 2010: $59 million). The increase in value of this investment is credited to the revaluation reserve.
ADDITIONAL MANAGEMENT COMMENTARY
As part of this interim management statement Autonomy is providing the
following additional commentary to assist in the understanding and analysis
of Autonomy's business.
Three Months Ended
(unaudited)
March 31, March 31,
$ millions - unless stated otherwise 2011 2010
Deferred Revenue Release 66.5 62.2
Average Selling Price ($ 000s) 806 634
Deferred Revenue 176.2 172.2
"Commit"* 390 340
Deals over $1 million (number) 27 19
Revenue split (%)
Americas 69% 70%
ROW 31% 30%
Repeat business 54% 51%
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The above items are provided for background information and may include qualitative estimates.
* "Commit " represents contracted revenues not yet recognised in the financial statements and includes deferred revenue.
Operations Review
Progress Towards Strategic Goals. During Q1 2011 we made significant progress on our strategic goals, including in the following areas:
- The launch of expanded offerings of our award winning products including:
- a new expertise location module and intelligence connectors for Autonomy Auminence, our powerful healthcare analysis dashboard;
- the Autonomy Chaining Console, a powerful dashboard providing corporate legal departments with greater visibility and defensibility;
- new capabilities for identifying, preserving, and collecting social media for eDiscovery; and
- the industry's most comprehensive, cloud-based Information Management platform for the legal market.
- 54% of sales during the quarter were from existing customers extending their investment in IDOL in new business areas.
Sales and Customers. During Q1 we saw deals with new and existing customers including: Deutsche Bank; HP; KPMG; Morgan Stanley; Johnson & Johnson; Allstate; Symantec; Philip Morris International; Eli Lilly; Baker Botts; HTC; the Mayo Clinic; Safeway; Toyota; and Panasonic. As expected we saw no change to the demand backdrop among our key government clients, resulting in new and extended agreements in Canada, Singapore, the U.K. and the U.S.A., amongst others.
Market Position and Penetration. Autonomy's market leadership position remained solid during Q1 2011. We saw a continuation of the "chaining" effect as customers deploy IDOL across functional areas that have traditionally been isolated and served by different software vendors. Ultimately this leads to a growing number of enterprise-wide standardisation customers.
Amongst industry analysts we remain rated number one across multiple industry analyst reports and segments, including IDC's Worldwide Search and Discovery Software 2010-2014 forecast, and the Forrester Wave 2010 for Online Testing. New accolades during Q1 2011 included being named a Leader by Forrester Research Inc for Message Archiving Software, scoring the highest in the category for message capture, range of content types supported, message management, supervision, scalability, security and deployment flexibility, as well as in the Vision and Product Strategy and Services categories.
Operations. During the quarter Autonomy was ranked the top software vendor for customer support in the annual survey jointly conducted by the International Legal Technology Association and InsideLegal magazine. Autonomy received more "unsolicited mentions for providing exceptional customer support" than any other software vendor. During the quarter we also saw expansion of our Latin American operations with key new hires.
Scheduling of Conference Call and Further Information
Autonomy's trading update conference call will be available live at http://www.autonomy.com on April 21, 2011, at 1:00 p.m. BST/8:00 a.m. EST/5:00 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.
Financial Calendar
The company publishes on its website the expected calendar for full and half year results, and interim trading updates, and associated conference calls.
Please visit http://www.autonomy.com/content/Investors/calendar/index.en.html for the current expected calendar.
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 Banking Group, 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 Ended
(unaudited)
Mar 31,
Mar 31, 2011 2010
Continuing operations $'000 $'000
Revenues (see note 3) 219,793 194,180
Cost of revenues (excl. amortization) (25,638) (21,542)
Amortization of purchased intangibles (13,593) (14,534)
Total cost of revenues (39,231) (36,076)
Gross profit 180,562 158,104
Operating expenses:
Research and development (32,415) (27,782)
Sales and marketing (52,135) (42,900)
General and administrative (17,285) (17,255)
Other costs
Post acquisition restructuring costs (674) -
Gain on foreign exchange 6,570 2,961
Total operating expenses (95,939) (84,976)
Profit from operations 84,623 73,128
Share of loss of associate (350) (338)
Interest receivable 2,975 807
Interest payable (13,301) (4,797)
Profit before income taxes 73,947 68,800
Income taxes (see note 4) (19,781) (19,086)
Net profit 54,166 49,714
Basic earnings per share (see note 6) $ 0.22 $ 0.21
Diluted earnings per share (see note 6) $ 0.22 $ 0.20
Reconciliation of Adjusted Financial Measures
Three Months Ended
(unaudited)
Mar 31,
Mar 31, 2011 2010
$'000 $'000
Gross profit 180,562 158,104
Amortization of purchased intangibles 13,593 14,534
Gross profit (adj.) 194,155 172,638
Profit before income taxes 73,947 68,800
Amortization of purchased intangibles 13,593 14,534
Share based compensation (see note 5) 2,147 1,494
Post acquisition restructuring costs 674 -
Gain on foreign exchange (6,570) (2,961)
Interest charge on convertible loan notes 11,038 3,119
Share of loss of associate 350 338
Profit before tax (adj.) 95,179 85,324
Provision for income taxes (25,341) (23,670)
Net profit (adj.) 69,838 61,654
Profit from operations 84,623 73,128
Amortization of purchased intangibles 13,593 14,534
Share based compensation (see note 5) 2,147 1,494
Post acquisition restructuring costs 674 -
Gain on foreign exchange (6,570) (2,961)
Profit from operations (adj.) 94,467 86,195
The accompanying notes are an integral part of these
consolidated financial statements
AUTONOMY CORPORATION plc
CONDENSED CONSOLIDATED BALANCE SHEET
As at
(unaudited)
Dec 31,
Mar 31, 2011 2010
$'000 $'000
ASSETS
Non-current assets:
Goodwill 1,363,966 1,361,900
Other intangible assets 398,786 400,372
Property and equipment, net 45,174 42,554
Equity and other investments 83,376 68,600
Deferred tax asset 19,131 16,263
Total non-current assets 1,910,433 1,889,689
Current assets:
Trade receivables, net 263,702 267,646
Other receivables 62,867 62,471
Total trade and other receivables 326,569 330,117
Inventory 71 116
Cash and cash equivalents 1,068,203 1,060,600
Total current assets 1,394,843 1,390,833
TOTAL ASSETS 3,305,276 3,280,522
CURRENT LIABILITIES
Trade payable (26,502) (23,443)
Other payables (40,433) (51,968)
Total trade and other payables (66,935) (75,411)
Bank loan (65,922) (78,745)
Tax liabilities (48,123) (33,210)
Deferred revenue (172,100) (170,256)
Provisions (1,466) (1,661)
Total current liabilities (354,546) (359,283)
Net current assets 1,040,297 1,031,550
NON-CURRENT LIABILITIES
Bank loan - (66,407)
Convertible loan notes (704,936) (681,791)
Deferred tax liabilities (87,179) (91,072)
Deferred revenue (4,137) (7,421)
Other payables (3,510) (3,702)
Provisions (3,275) (3,597)
Total non-current liabilities (803,037) (853,990)
Total liabilities (1,157,583) (1,213,273)
NET ASSETS 2,147,693 2,067,249
Shareholders' equity:
Ordinary shares (1) 1,346 1,344
Share premium account 1,251,080 1,247,907
Capital redemption reserve 135 135
Own shares (788) (788)
Merger reserve 27,589 27,589
Stock compensation reserve 30,028 27,881
Revaluation reserve 59,885 47,415
Translation reserve (23,771) (30,161)
Retained earnings 802,189 745,927
TOTAL EQUITY 2,147,693 2,067,249
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(1) At March 31, 2011, 600,000,000 ordinary shares of nominal value 1/3 pence each authorized, 242,841,412 issued and outstanding; as of December 31, 2010, 600,000,000 ordinary shares of nominal value 1/3 pence each authorized, 242,562,584 issued and outstanding.
The accompanying notes are an integral part of these consolidated financial statements
AUTONOMY CORPORATION plc
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended
(unaudited)
Mar 31,
Mar 31, 2011 2010
$'000 $'000
Cash flows from operating activities:
Profit from operations 84,623 73,128
Adjustments for:
Depreciation and amortization 25,499 26,631
Share based compensation 2,147 1,494
Foreign currency movements (6,570) (2,961)
Operating cash flows before movements in working
cap 105,699 98,292
Changes in operating assets and liabilities:
Receivables 6,488 1,578
Inventories 48 (9,767)
Payables (16,639) (4,627)
Cash generated by operations 95,596 85,476
Income taxes paid (9,916) (23,780)
Net cash provided by operating activities 85,680 61,696
Cash flows from investment activities:
Interest received 2,975 221
Purchase of fixed assets (10,264) (17,623)
Purchase of investments - (2,500)
Expenditure on product development (10,041) (6,573)
Acquisition of subsidiaries, net of cash acquired (517) (55,952)
Net cash used in investing activities (17,847) (82,427)
Cash flows from financing activities:
Proceeds from issuance of shares, net of issuance
costs 3,051 7,165
Proceeds from convertible loan notes, net of
issuance costs - 765,912
Interest on convertible loan notes (13,017) -
Interest on bank loan (1,473) (1,272)
Repayment of bank loan (79,553) (53,906)
Net cash (used in) provided by financing
activities (90,992) 717,899
Net (decrease) increase in cash and cash
equivalents (23,159) 697,168
Beginning cash and cash equivalents 1,060,600 242,791
Effect of foreign exchange on cash and cash
equivalents 30,762 (29,083)
Ending cash and cash equivalents 1,068,203 910,876
AUTONOMY CORPORATION plc
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Three Months Ended
(unaudited)
Mar 31,
Mar 31, 2011 2010
$'000 $'000
Net profit 54,166 49,714
Revaluation of equity investment 12,470 (2,811)
Translation of overseas operations 6,390 (14,292)
Other comprehensive income 18,860 (17,103)
Total comprehensive income 73,026 32,611
The accompanying notes are an integral part of these consolidated financial statements
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 4 7,929 - - - 7,933
EBT options
exercised - - - 42 - 42
Equity element of
convertible loan
notes - 97,815 - - - 97,815
Deferred tax on
stock options - - - - - -
At March 31, 2010 1,337 1,236,511 135 (803) 27,589 1,264,769
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
profit - - - - 49,714 49,714
Other
comprehensive
income - - (2,811) (14,292) - (17,103)
Stock
compensation - 1,494 - - - 1,494
Share options
exercised 7,933 - - - - 7,933
EBT options
exercised 42 (42) - - - -
Equity
element of
convertible
loan notes 97,815 - - - - 97,815
Deferred tax
on stock
options - - - - (1,038) (1,038)
At March 31,
2010 1,264,769 23,411 1,688 (26,324) 577,050 1,840,594
Capital
Ordinary Share redemption Own Merger
shares premium reserve shares reserve Sub-total
$'000 $'000 $'000 $'000 $'000 $'000
At January 1, 2011 1,344 1,247,907 135 (788) 27,589 1,276,187
Retained profit - - - - - -
Other comprehensive
income - - - - - -
Stock compensation - - - - - -
Share options
exercised 2 3,173 - - - 3,175
EBT options
exercised - - - - - -
Equity element of
convertible loan
notes - - - - - -
Deferred tax on
stock options - - - - - -
At March 31, 2011 1,346 1,251,080 135 (788) 27,589 1,279,362
Sub-total Stock Revaluation
comp'n Translation Retained
Forwarded reserve reserve reserve earnings Total
$'000 $'000 $'000 $'000 $'000 $'000
At January 1,
2011 1,276,187 27,881 47,415 (30,161) 745,927 2,067,249
Retained
profit - - - - 54,166 54,166
Other
comprehensive
income - - 12,470 6,390 - 18,860
Stock
compensation - 2,147 - - - 2,147
Share options
exercised 3,175 - - - - 3,175
EBT options
exercised - - - - - -
Equity
element of
convertible
loan notes - - - - - -
Deferred tax
on stock
options...... - - - - 2,096 2,096
At March 31,
2011 1,279,362 30,028 59,885 (23,771) 802,189 2,147,693
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 THREE MONTHS ENDED MARCH 31, 2011 - 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 months ended March 31, 2011 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, 2010. The information for the year ended December 31, 2010 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), 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 financial statements as applied in the group's 2010 Annual Report.
Going Concern
The group has considerable financial resources together with a significant number of customers across different geographic areas and industries. At March 31, 2011 the group has cash balances of $1.1 billion and total debt of $771 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 three 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, profit on disposal of investment, interest on convertible loan notes, post-acquisition restructuring costs and non-cash charges for the amortization of purchased intangibles, share-based compensation, 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. 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 Ended
(unaudited)
Mar 31, Mar 31,
2011 2010
Revenue by region: $'000 $'000
Americas 151,149 135,595
Rest of World 68,644 58,585
Total 219,793 194,180
Information about these geographical regions is presented below:
Three Months Ended
(unaudited)
Mar 31, 2011 Mar 31, 2010
Americas ROW Total Americas ROW Total
$'000 $'000 $'000 $'000 $'000 $'000
Result by region 56,360 22,367 78,727 55,484 14,683 70,167
Post-acq'n
restruct. costs (674) -
Gain on foreign
exch. 6,570 2,961
Operating profit 84,623 73,128
Share of loss of
associate (350) (338)
Interest receivable 2,975 807
Interest payable (13,301) (4,797)
Profit before tax 73,947 68,800
Tax (19,781) (19,086)
Profit for the
period 54,166 49,714
4. Income taxes
Three Months Ended
(unaudited)
Mar 31, Mar 31,
2011 2010
Tax charge by region: $'000 $'000
UK 15,328 13,399
Foreign 4,453 5,687
Total 19,781 19,086
5. Share based compensation
Share based compensation charges have been charged in the consolidated income statement within the following functional areas:
Three Months Ended
(unaudited)
Mar 31, Mar 31,
2011 2010
$'000 $'000
Research and development 644 401
Sales and marketing 1,138 733
General and administrative 365 360
Total share based compensation charge 2,147 1,494
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on
the following data:
Three Months Ended
(unaudited)
Mar 31, Mar 31,
2011 2010
$'000 $'000
Earnings for the purposes of basic and diluted
earnings per share being net profit (IFRS) 54,166 49,714
Earnings for the purposes of diluted earnings per
share (adjusted - see page 7) 69,838 61,654
Number of shares (in thousands)
Weighted average number of ordinary shares for the
purposes of basic earnings per share 242,694 240,888
Effect of dilutive potential ordinary shares:
Share options 2,349 3,231
Weighted average number of ordinary shares for the
purposes of diluted earnings per share (IFRS) 245,043 244,119
Convertible loan notes 24,082 7,224
Weighted average number of ordinary shares for the
purposes of diluted earnings per share (adjusted) 269,125 251,343
IFRS
Earnings per share - basic $ 0.22 $ 0.21
Earnings per share - fully diluted $ 0.22 $ 0.20
Adjusted
Earnings per share adj. - basic (IFRS) $ 0.29 $ 0.26
Earnings per share adj.- fully diluted (IFRS) $ 0.29 $ 0.25
Earnings per share adj. - fully diluted (adjusted
for conversion of loan notes) $ 0.26 $ 0.25
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 not cause dilution and hence are required to be excluded from the adjusted measure under IFRS. In order to give a fairer 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, 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 year.
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 months ended March 31, 2011, 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 (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 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
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.
Conclusion
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 Auditor
London, UK
21 April 2011
Contacts:
Financial Media Contacts:
Edward Bridges / Haya Herbert-Burns
Financial Dynamics
+44(0)20-7831-3113
Analyst and Investor Contact:
Derek Brown, Head of Investor Relations
Autonomy Corporation plc
+44(0)20-7104-5700
SOURCE Autonomy Corporation plc
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