Rally Software Announces Second Quarter Fiscal Year 2015 Financial Results
BOULDER, Colo., Aug. 28, 2014 /PRNewswire/ -- Rally Software (NYSE: RALY), a leading global provider of enterprise-class software and services to drive agility, today announced financial results for its second quarter of fiscal year 2015 ended July 31, 2014.
Second quarter fiscal year 2015 results:
- Revenues of $21.5 million, an increase of 9% compared to the second quarter in the same period one year ago.
- GAAP net loss of $(8.9) million, or a loss of $(0.36) per basic and diluted share based on 25.0 million weighted average shares of common stock outstanding, as compared to a GAAP net loss of $(2.3) million, or a loss of $(0.09) per basic and diluted share based on 24.0 million weighted average shares of common stock outstanding in the same period one year ago.
- Non-GAAP net loss of $(7.4) million, or $(0.30) per basic and diluted share, as compared to a non-GAAP net loss of $(1.1) million, or $(0.05) per basic and diluted share in the same period one year ago (see the table titled "Reconciliation of GAAP to non-GAAP Financial Measures").
- Total paid seats increased to nearly 235,000, a 22% increase over the total paid seats in the same period one year ago.
Cash flow used in operations in the second quarter was $8.9 million. Cash and cash equivalents at July 31, 2014, excluding restricted cash, were $77.0 million.
"Our second quarter saw record revenue and we outperformed against our revised outlook," said Rally's Chairman and CEO, Tim Miller.
"In the second quarter, we continued to build the foundation for strong execution in the back half of the year by bringing new leadership to our R&D department. In addition, this quarter we hosted our largest and most successful RallyON! conference to date, where we announced strategic enhancements to our platform and new solutions that better support customers in their Agile journeys. We also had a strong presence at Agile2014, where we brought our new business agility messaging to market. To capture and act on the opportunity that awaits us in the back half of the year, Rally must continue to focus on strong execution and driving value for our customers as they realize the benefits of agility across their organization."
New customers welcomed by Rally during the second quarter include: Appointment-Plus, Axium, Cathay Pacific Airways Limited, Compass Learning, Digital Barriers, EBSCO Publishing, Engine Yard, Invesco, Highmark, Nexenta, PayWizard, QSR International, Rise Interactive, RMIT University, and Verizon.
Business Outlook
As of August 28, 2014, management is providing its financial outlook as follows:
Third Quarter of Fiscal 2015
- Total revenue in the range of $22.0 to $22.5 million, or 16% to 19% growth over the prior year's third quarter.
- GAAP net loss per basic and diluted share of approximately $(0.41) to $(0.44), based on 25.3 million weighted average shares of common stock outstanding.
- Non-GAAP net loss per basic and diluted share of approximately $(0.34) to $(0.37), based on 25.3 million weighted average shares of common stock outstanding, which excludes $1.6 million in stock-based compensation and amortization of acquired intangible assets.
Fiscal Year 2015
- Total revenue in the range of $87.0 to $90.0 million, or 17% to 21% growth over the prior year.
- GAAP net loss per basic and diluted share of approximately $(1.47) to $(1.52), based on 25.2 million weighted average shares of common stock outstanding.
- Non-GAAP net loss per basic and diluted share of approximately $(1.21) to $(1.26), based on 25.2 million weighted average shares of common stock outstanding, which excludes $6.4 million in stock-based compensation and amortization of acquired intangible assets.
CFO Commentary
Commentary on the quarter by Jim Lejeal, Rally Software Chief Financial Officer, is available at investors.rallydev.com.
Conference Call Today, August 28th, 2014
Rally Software will host a conference call and live webcast to discuss the financial results at 3:00 p.m. Mountain Time, 5:00 p.m. Eastern Time, on Thursday, August 28, 2014. The conference call can be accessed by dialing 1-877-870-4263, or 1-412-317-0790 (outside the U.S.). A live webcast will be available on the Investor Relations page of the Rally corporate website at www.rallydev.com and via replay beginning approximately one hour after the completion of the call. The replay will be available for 90 days. An audio replay of the call will also be available to all interested parties beginning at approximately 4:00 p.m. Mountain Time, 6:00 p.m. Eastern Time, on Thursday, August 28, 2014 until 7:00 a.m. Mountain Time, 9:00 a.m. Eastern Time, on Friday, September 5, 2014, by dialing 1-877-344-7529 or 1-412-317-0088 (outside the U.S.) and entering pass code 10050781.
About Rally Software
Rally Software is a leading global provider of enterprise-class software and services solutions that drive agility. Companies use Rally's solutions to accelerate the pace of innovation, improve performance, and respond effectively to evolving competitive markets and customer needs. Rally's SaaS platform transforms the way organizations manage the software development lifecycle by aligning software development and strategic business objectives, facilitating collaboration, and increasing transparency. Rally's consulting and training services apply Agile and Lean approaches to help organizations innovate, lead, adapt, and deliver. Learn more at http://www.rallydev.com.
©2014 Rally Software Development Corp. All rights reserved. Rally, Rally Software and the Rally logo are trademarks or registered trademarks of Rally Software Development Corp. in the United States and/or other countries. All other trade names, trademarks and service marks are properties of their respective owners.
Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), we have provided certain measures that have not been prepared in accordance with GAAP. These non-GAAP financial measures include non-GAAP results for calculated billings, subscription and support billings, cost of revenue, gross profit, operating expenses, net loss and basic and diluted net loss per share, which are in addition to, and, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
Our non-GAAP financial measures exclude stock-based compensation expense and amortization of acquired intangible assets. We believe the presentation of operating results excluding stock-based compensation expense and the amortization of acquired intangible assets provides useful supplemental information to investors and facilitates the analysis of our core operating results and comparison of operating results across reporting periods and is therefore useful to investors in analyzing and assessing our past and future operating performance.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measures to such GAAP measures can be found in the accompanying financial statements included with this press release.
Forward-looking Statements
This press release contains forward-looking statements, including statements regarding our future financial performance, market growth, the demand for our solutions, and general business conditions. Any forward-looking statements contained in this press release are based upon our historical performance and current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from our current expectations. Important factors that could cause actual results to differ materially from those anticipated in such forward-looking statements include, but are not limited to, the growth of demand for Agile software development, our ability to expand relationships with existing customers, our ability to attract and retain customers, the mix of perpetual license and subscription revenue, competitive factors, including but not limited to pricing pressures, industry consolidation, and entry of new competitors and new products, our ability to manage growth effectively, the ability of new sales personnel to become fully productive quickly and efficiently, our ability to maintain, protect and enhance our brand and intellectual property, general economic and financial conditions, and other risks and uncertainties. Further information on risk factors that could cause actual results to differ materially from forecasted results is included in our reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended January 31, 2014 filed on April 11, 2014 and our Quarterly Report on Form 10-Q that will be filed for the quarter ended July 31, 2014.
Rally Software Development Corp. Condensed Consolidated Balance Sheets (Unaudited, in thousands) July 31, January 31, 2014 2014 ASSETS Current assets: Cash and cash equivalents $ 77,005 $ 88,891 Restricted cash, short-term 16 16 Accounts receivable, net 13,761 21,771 Other receivables 179 78 Prepaid expenses and other current assets 4,201 3,310 Total current assets 95,162 114,066 Property and equipment, net 6,330 5,569 Goodwill 2,489 2,529 Intangible assets, net 1,646 1,909 Restricted cash, long-term 4,200 4,200 Other assets 888 810 Total assets $ 110,715 $ 129,083 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,657 $ 2,170 Accrued liabilities 3,405 4,812 Deferred revenue 35,245 38,352 Other current liabilities 1,809 2,054 Total current liabilities 43,116 47,388 Deferred revenue, net of current portion 1,061 2,433 Other long-term liabilities 889 888 Total liabilities 45,066 50,709 Stockholders' equity: Common stock 3 3 Additional paid-in capital 178,688 174,027 Accumulated deficit (113,047) (95,660) Accumulated other comprehensive loss 5 4 Total stockholders' equity 65,649 78,374 Total liabilities and stockholders equity $ 110,715 $ 129,083
Rally Software Development Corp. Condensed Consolidated Statements of Operations (unaudited, in thousands, except per share amounts) Three Months Ended Six Months Ended July 31, July 31, 2014 2013 2014 2013 Revenue: Subscription and support $ 17,440 $ 14,220 $ 33,544 $ 27,593 Perpetual license 1,361 2,735 2,001 3,364 Total product revenue 18,801 16,955 35,545 30,957 Professional services 2,711 2,840 5,398 4,888 Total revenue 21,512 19,795 40,943 35,845 Cost of revenue (1) (2): Product 2,840 1,800 5,236 3,485 Professional services 2,953 2,336 5,724 4,209 Total cost of revenue 5,793 4,136 10,960 7,694 Gross profit 15,719 15,659 29,983 28,151 Operating expenses (1): Sales and marketing 12,841 9,085 24,250 17,919 Research and development 6,495 5,051 12,481 10,131 General and administrative 4,974 3,782 10,163 7,636 Total operating expenses 24,310 17,918 46,894 35,686 Loss from operations (8,591) (2,259) (16,911) (7,535) Other income (expense): Interest and other income 40 36 79 49 Interest expense - (2) - (464) Loss on foreign currency transactions and other gain (loss) (70) (4) (152) (24) Loss before provision for income taxes (8,621) (2,229) (16,984) (7,974) Provision for income taxes 286 49 403 94 Net loss $ (8,907) $ (2,278) $ (17,387) $ (8,068) Net loss per share attributable to common stockholders, basic and diluted $ (0.36) $ (0.09) $ (0.70) $ (0.53) Weighted average common shares outstanding, basic and diluted 25,026 24,014 24,923 15,109 (1) Includes stock-based compensation expense as follows: Three Months Ended Six Months Ended July 31, July 31, 2014 2013 2014 2013 Cost of product revenue $ 74 $ 39 $ 169 $ 105 Cost of professional services revenue 98 46 187 65 Sales and marketing 367 302 805 407 Research and development 237 402 649 626 General and administrative 567 261 1,089 431 $ 1,343 $ 1,050 $ 2,899 $ 1,634 (2) Includes amortization expense of acquired intangible assets as follows: Cost of product revenue $ 132 $ 131 $ 264 $ 279 Rally Software Development Corp. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) Three Months Ended Six Months Ended July 31, July 31, 2014 2013 2014 2013 Cash flow from operating activities: Net loss $ (8,907) $ (2,278) $ (17,387) $ (8,068) Adjustments to reconcile net loss to net cash (used) in operating activities: Depreciation and amortization 778 664 1,503 1,302 Noncash stock-based compensation expense 1,343 1,050 2,899 1,634 Noncash interest expense - - - 462 Other 58 - 77 - Changes in operating assets and liabilities: Accounts receivable 2,268 675 8,011 5,250 Other receivables (71) (24) (101) 227 Prepaid and other current assets (23) 113 (891) (1,151) Other assets (148) (164) (112) (225) Accounts payable and accrued expenses 225 (480) (958) (110) Deferred revenue (3,404) (3,818) (4,480) (2,024) Other current liabilities (1,042) 1,019 (245) 826 Other long-term liabilities (1) (13) 1 (22) Net cash (used) in operating activities (8,924) (3,256) (11,683) (1,899) Cash flow from investing activities: Purchase of property and equipment (1,331) (537) (1,980) (2,679) Proceeds from sale of property and equipment 13 - 14 - Purchase of Flowdock Oy, net of cash received - - - (2,857) Net cash (used) in investing activities (1,318) (537) (1,966) (5,536) Cash flow from financing activities: Proceeds from exercise of common stock options 161 148 408 409 Proceeds from employee stock purchase plan 1,463 - 1,463 - Proceeds from initial public offering, net of underwriting discounts and commissions - - - 89,838 Proceeds from follow-on public offering, net of underwriting discounts and commissions - 5,884 - 5,884 Payroll taxes paid in lieu of shares issued for stock-based compensation (108) (108) Payments of offering costs - (1,233) - (1,652) Net cash provided by financing activities 1,516 4,799 1,763 94,479 Net increase (decrease) in cash and cash equivalents during period (8,726) 1,006 (11,886) 87,044 Cash and cash equivalents at beginning of period 85,731 103,647 88,891 17,609 Cash and cash equivalents at end of period $ 77,005 $ 104,653 $ 77,005 $ 104,653 Rally Software Development Corp. Reconciliation of GAAP to Non-GAAP Financial Measures (unaudited, in thousands, except per share amounts) Three Months Ended Six Months Ended July 31, 2014 July 31, 2013 July 31, 2014 July 31, 2013 GAAP product cost of revenue $ 2,840 $ 1,800 $ 5,236 $ 3,485 Amortization expense of acquired intangible assets (132) (131) (264) (279) Stock-based compensation expense (74) (39) (169) (105) Non-GAAP product cost of revenue $ 2,634 $ 1,630 $ 4,803 $ 3,101 GAAP professional services cost of revenue $ 2,953 $ 2,336 $ 5,724 $ 4,209 Stock-based compensation expense (98) (46) (187) (65) Non-GAAP professional services cost of revenue $ 2,855 $ 2,290 $ 5,537 $ 4,144 GAAP gross profit $ 15,719 $ 15,659 $ 29,983 $ 28,151 Amortization expense of acquired intangible assets 132 131 264 279 Stock-based compensation expense 172 85 356 170 Non-GAAP gross profit $ 16,023 $ 15,875 $ 30,603 $ 28,600 Gross margin: GAAP 73% 79% 73% 79% Non-GAAP 74% 80% 75% 80% Product gross margin: GAAP 85% 89% 85% 89% Non-GAAP 86% 90% 86% 90% Professional services gross margin: GAAP (9%) 18% (6%) 14% Non-GAAP (5%) 19% (3%) 15% GAAP sales and marketing expense $ 12,841 $ 9,085 $ 24,250 $ 17,919 Stock-based compensation expense (367) (302) (805) (407) Non-GAAP sales and marketing expense $ 12,474 $ 8,783 $ 23,445 $ 17,512 GAAP research and development expense $ 6,495 $ 5,051 $ 12,481 $ 10,131 Stock-based compensation expense (237) (402) (649) (626) Non-GAAP research and development expense $ 6,258 $ 4,649 $ 11,832 $ 9,505 GAAP general and administrative expense $ 4,974 $ 3,782 $ 10,163 $ 7,636 Stock-based compensation expense (567) (261) (1,089) (431) Non-GAAP general and administrative expense $ 4,407 $ 3,521 $ 9,074 $ 7,205 GAAP net loss $ (8,907) $ (2,278) $ (17,387) $ (8,068) Amortization expense of acquired intangible assets 132 131 264 279 Stock-based compensation expense 1,343 1,050 2,899 1,634 Non-GAAP net loss $ (7,432) $ (1,097) $ (14,224) $ (6,155) Basic and diluted net loss per share: GAAP basic and diluted net loss per share $ (0.36) $ (0.09) $ (0.70) $ (0.53) Amortization expense of acquired intangible assets 0.01 - 0.01 0.02 Stock-based compensation expense 0.05 0.04 0.12 0.11 Non-GAAP basic and diluted net loss per share $ (0.30) $ (0.05) $ (0.57) $ (0.40) Shares used to calculate basic and diluted net loss per share 25,026 24,014 24,923 15,109 Rally Software Development Corp. Reconciliation of Total Revenue to Calculated Billings, Subscription and Support Revenue to Subscription and Support Billings and Days Sales Outstanding (unaudited, in thousands except days sales outstanding) Three Months Ended Six Months Ended July 31, July 31, 2014 2013 2014 2013 Total revenue $ 21,512 $ 19,795 $ 40,943 $ 35,845 Deferred revenue- End of period 36,306 36,166 36,306 36,166 Beginning of period (39,711) (39,984) (40,785) (38,190) Net change (3,405) (3,818) (4,479) (2,024) Calculated billings $ 18,107 $ 15,977 $ 36,464 $ 33,821 Total subscription and support revenue $ 17,440 $ 14,220 $ 33,544 $ 27,593 Deferred revenue- End of period 36,306 36,166 36,306 36,166 Beginning of period (39,711) (39,984) (40,785) (38,190) Net change (3,405) (3,818) (4,479) (2,024) Subscription and support billings $ 14,035 $ 10,402 $ 29,065 $ 25,569 Accounts receivable $ 13,761 $ 11,068 Days Sales Outstanding (1) 70 64 (1) - Days Sales Outstanding is computed by dividing accounts receivable by calculated billings times the number of days in the quarter. Rally Software Development Corp. Reconciliation of Non-GAAP Financial Guidance The financial guidance provided below is an estimate based on information available as of August 28, 2014. The company's future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company's financial results are stated above in this press release. More information on potential factors that could affect the company's financial results is included in the company's public reports filed with the SEC, including the company's Annual Report on Form 10-K for the fiscal year ended January 31, 2014 filed on April 11, 2014, the company's Quarterly Report on Form 10-Q for the quarter ended April 30, 2014 filed on June 9, 2014 and the company's Quarterly Report on Form 10-Q for the quarter ended July 31, 2014 to be filed with the SEC. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. Three Months Ended Fiscal Year Ended Non-GAAP basic and diluted net loss per share $(0.34) - $(0.37) $(1.21) - $(1.26) Stock-based compensation expense (0.06) (0.24) Amortization of acquired intangible assets (0.01) (0.02) GAAP basic and diluted net loss per share $(0.41) - $(0.44) $(1.47) - $(1.52)
October 31, 2014
January 31, 2015
SOURCE Rally Software
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