Rally Software Announces Third Quarter Fiscal Year 2015 Financial Results
BOULDER, Colo., Dec. 4, 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 third quarter of fiscal year 2015 ended October 31, 2014.
Third quarter fiscal year 2015 results:
- Revenues of $22.0 million, an increase of 17% compared to the same period one year ago.
- GAAP net loss of $(7.4) million, or a loss of $(0.29) per basic and diluted share based on 25.2 million weighted average shares of common stock outstanding, as compared to a GAAP net loss of $(5.8) million, or a loss of $(0.24) per basic and diluted share based on 24.4 million weighted average shares of common stock outstanding in the same period one year ago.
- Non-GAAP net loss of $(5.6) million, or $(0.22) per basic and diluted share, as compared to a non-GAAP net loss of $(4.2) million, or $(0.17) 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 over 240,000, a 21% increase over the total paid seats in the same period one year ago.
Cash flow used in operations in the third quarter was $6.3 million. Cash and cash equivalents and short-term investments at October 31, 2014, excluding restricted cash, were $70.5 million.
"Our record third quarter revenue results highlight the progress we've made in improving our performance across the business. While seats sold in the period were impacted by two large deals slipping into Q4, the fact both of these seven-figure, multi-year and multi-thousand seat deals with new customers have closed already in our current period, along with the steady growth of our existing Q4 pipeline, gives us the confidence our business is on solid footing." said Rally's Chairman and CEO, Tim Miller.
"During the quarter, our efforts to further our spend discipline while at the same time growing our business resulted in our ability to meaningfully exceed EPS expectations."
New customers welcomed by Rally during the third quarter include: Advance America, Ag Leader Technology, Anxebusiness, Blue Cross Blue Shield of Kansas, Booker Software, Concur, Continuum Managed Services, Peak Performance, Petsmart, Premier Designs, Pull-A-Part, Smartlogic, Taskstream, University of Texas at Austin, and Verint.
Business Outlook
As of December 4, 2014, management is providing its financial outlook as follows:
Fourth Quarter of Fiscal 2015
- Total revenue in the range of $24.0 to $24.6 million, or 22% to 25% growth over the prior year's fourth quarter.
- GAAP net loss per basic and diluted share of approximately $(0.29) to $(0.32), based on 25.4 million weighted average shares of common stock outstanding.
- Non-GAAP net loss per basic and diluted share of approximately $(0.23) to $(0.26), based on 25.4 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 $87.6 million, or 17% to 18% growth over the prior year.
- GAAP net loss per basic and diluted share of approximately $(1.28) to $(1.31), based on 25.1 million weighted average shares of common stock outstanding.
- Non-GAAP net loss per basic and diluted share of approximately $(1.02) to $(1.05), based on 25.1 million weighted average shares of common stock outstanding, which excludes $6.5 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, December 4, 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, December 4, 2014. The conference call can be accessed by dialing 1-888-346-9287, or 1-412-902-4274 (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, December 4, 2014 until 7:00 a.m. Mountain Time, 9:00 a.m. Eastern Time, on Thursday, December 11, 2014, by dialing 1-877-344-7529 or 1-412-317-0088 (outside the U.S.) and entering pass code 10055923.
About Rally Software
Rally Software is a leading global provider of enterprise-class software and services solutions that drive agility. Companies use Rally Software's solutions to accelerate the pace of innovation, improve performance, and respond effectively to evolving competitive markets and customer needs.
Rally Software'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 Software'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 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, our Quarterly Report on Form 10-Q for the quarter ended July 31, 2014 filed on September 5, 2014 and our Quarterly Report on Form 10-Q that will be filed for the quarter ended October 31, 2014.
Rally Software Development Corp. Condensed Consolidated Balance Sheets (Unaudited, in thousands) October 31, January 31, 2014 2014 ASSETS Current assets: Cash and cash equivalents $ 29,074 $ 88,891 Short-term investments 41,427 - Restricted cash 15 16 Accounts receivable, net 13,567 21,771 Other receivables 255 78 Prepaid expenses and other current assets 4,009 3,310 Total current assets 88,347 114,066 Property and equipment, net 5,827 5,569 Goodwill 2,343 2,529 Intangible assets, net 1,514 1,909 Restricted cash 4,200 4,200 Other assets 799 810 Total assets $ 103,030 $ 129,083 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,195 $ 2,170 Accrued liabilities 3,112 4,812 Deferred revenue 33,599 38,352 Other current liabilities 2,288 2,054 Total current liabilities 41,194 47,388 Deferred revenue, net of current portion 1,126 2,433 Other long-term liabilities 901 888 Total liabilities 43,221 50,709 Stockholders' equity: Common stock 3 3 Additional paid-in capital 180,407 174,027 Accumulated deficit (120,439) (95,660) Accumulated other comprehensive income (loss) (162) 4 Total stockholders' equity 59,809 78,374 Total liabilities and stockholders equity $ 103,030 $ 129,083
Rally Software Development Corp. Condensed Consolidated Statements of Operations (unaudited, in thousands, except per share amounts) Three Months Ended Nine Months Ended October 31, October 31, 2014 2013 2014 2013 Revenue: Subscription and support $ 17,653 $ 14,888 $ 51,197 $ 42,481 Perpetual license 1,040 1,055 3,041 4,419 Total product revenue 18,693 15,943 54,238 46,900 Professional services 3,316 2,936 8,714 7,824 Total revenue 22,009 18,879 62,952 54,724 Cost of revenue (1) (2): Product 3,025 1,997 8,261 5,482 Professional services 2,956 2,577 8,680 6,786 Total cost of revenue 5,981 4,574 16,941 12,268 Gross profit 16,028 14,305 46,011 42,456 Operating expenses (1): Sales and marketing 11,992 10,832 36,242 28,752 Research and development 6,838 5,167 19,319 15,297 General and administrative 4,389 4,008 14,552 11,644 Total operating expenses 23,219 20,007 70,113 55,693 Loss from operations (7,191) (5,702) (24,102) (13,237) Other income (expense): Interest and other income 37 42 115 91 Interest expense - - - (464) Loss on foreign currency transactions and other gain (loss) (111) (87) (262) (111) Loss before provision for income taxes (7,265) (5,747) (24,249) (13,721) Provision for income taxes 126 39 530 133 Net loss $ (7,391) $ (5,786) $ (24,779) $ (13,854) Net loss per share attributable to common stockholders, basic and diluted $ (0.29) $ (0.24) $ (0.99) $ (0.76) Weighted average common shares outstanding, basic and diluted 25,207 24,398 25,019 18,239 (1) Includes stock-based compensation expense as follows: Three Months Ended Nine Months Ended October 31, October 31, 2014 2013 2014 2013 Cost of product revenue $ 102 $ 69 $ 271 $ 174 Cost of professional services revenue 136 56 323 121 Sales and marketing 508 496 1,313 903 Research and development 309 362 958 988 General and administrative 588 433 1,677 864 $ 1,643 $ 1,416 $ 4,542 $ 3,050 (2) Includes amortization expense of acquired intangible assets as follows: Cost of product revenue $ 132 $ 131 $ 395 $ 410
Rally Software Development Corp. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) Three Months Ended Nine Months Ended October 31, October 31, 2014 2013 2014 2013 Cash flow from operating activities: Net loss $ (7,391) $ (5,786) $ (24,779) $ (13,854) Adjustments to reconcile net loss to net cash (used) in operating activities: Depreciation and amortization 777 685 2,280 1,987 Noncash stock-based compensation expense 1,644 1,416 4,542 3,050 Noncash interest expense - - - 462 Other 94 - 172 1 Changes in operating assets and liabilities: Accounts receivable 194 (653) 8,204 4,597 Other receivables (76) (106) (177) 121 Prepaid and other current assets 192 401 (699) (750) Other assets 72 (48) (40) (273) Accounts payable and accrued expenses (716) 1,240 (1,673) 1,130 Deferred revenue (1,581) (2,478) (6,061) (4,503) Other current liabilities 478 862 234 1,688 Other long-term liabilities 12 (13) 12 (35) Restricted cash - (4,200) - (4,200) Net cash (used) in operating activities (6,301) (8,680) (17,985) (10,579) Cash flow from investing activities: Purchase of property and equipment (289) (586) (2,268) (3,264) Purchase of investments (41,417) - (41,417) - Proceeds from sale of property and equipment 1 - 15 - Purchase of Flowdock Oy, net of cash received - - - (2,857) Net cash (used) in investing activities (41,705) (586) (43,670) (6,121) Cash flow from financing activities: Proceeds from exercise of common stock options 76 54 484 463 Proceeds from employee stock purchase plan - - 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 Payment of payroll taxes related to stock-based compensation (1) - (109) - Payments of offering costs - (606) - (2,259) Net cash provided by (used) in financing activities 75 (552) 1,838 93,926 Net increase (decrease) in cash and cash equivalents during period (47,931) (9,818) (59,817) 77,226 Cash and cash equivalents at beginning of period 77,005 104,653 88,891 17,609 Cash and cash equivalents at end of period $ 29,074 $ 94,835 $ 29,074 $ 94,835
Rally Software Development Corp. Reconciliation of GAAP to Non-GAAP Financial Measures (unaudited, in thousands, except per share amounts) Three Months Ended Nine Months Ended October 31, October 31, 2014 2013 2014 2013 GAAP product cost of revenue $ 3,025 $ 1,997 $ 8,261 $ 5,482 Amortization expense of acquired intangible assets (132) (131) (395) (410) Stock-based compensation expense (102) (69) (271) (174) Non-GAAP product cost of revenue $ 2,791 $ 1,797 $ 7,595 $ 4,898 GAAP professional services cost of revenue $ 2,956 $ 2,577 $ 8,680 $ 6,786 Stock-based compensation expense (136) (56) (323) (121) Non-GAAP professional services cost of revenue $ 2,820 $ 2,521 $ 8,357 $ 6,665 GAAP gross profit $ 16,028 $ 14,305 $ 46,011 $ 42,456 Amortization expense of acquired intangible assets 132 131 395 410 Stock-based compensation expense 238 125 594 295 Non-GAAP gross profit $ 16,398 $ 14,561 $ 47,000 $ 43,161 Gross margin: GAAP 73% 76% 73% 78% Non-GAAP 75% 77% 75% 79% Product gross margin: GAAP 84% 87% 85% 88% Non-GAAP 85% 89% 86% 90% Professional services gross margin: GAAP 11% 12% 0% 13% Non-GAAP 15% 14% 4% 15% GAAP sales and marketing expense $ 11,992 $ 10,832 $ 36,242 $ 28,752 Stock-based compensation expense (508) (496) (1,313) (903) Non-GAAP sales and marketing expense $ 11,484 $ 10,336 $ 34,929 $ 27,849 GAAP research and development expense 6,838 $ 5,167 $ 19,319 $ 15,297 Stock-based compensation expense (309) (362) (958) (988) Non-GAAP research and development expense $ 6,529 $ 4,805 $ 18,361 $ 14,309 GAAP general and administrative expense $ 4,389 $ 4,008 $ 14,552 $ 11,644 Stock-based compensation expense (588) (433) (1,677) (864) Non-GAAP general and administrative expense $ 3,801 $ 3,575 $ 12,875 $ 10,780 GAAP net loss $ (7,391) $ (5,786) $ (24,779) $ (13,854) Amortization expense of acquired intangible assets 132 131 395 410 Stock-based compensation expense 1,643 1,416 4,542 3,050 Non-GAAP net loss $ (5,616) $ (4,239) $ (19,842) $ (10,394) Basic and diluted net loss per share: GAAP basic and diluted net loss per share $ (0.29) $ (0.24) $ (0.99) $ (0.76) Amortization expense of acquired intangible assets 0.01 0.01 0.02 0.02 Stock-based compensation expense 0.06 0.06 0.18 0.17 Non-GAAP basic and diluted net loss per share $ (0.22) $ (0.17) $ (0.79) $ (0.57) Shares used to calculate basic and diluted net loss per share 25,207 24,398 25,019 18,239
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 Nine Months Ended October 31, October 31, 2014 2013 2014 2013 Total revenue $ 22,009 $ 18,879 $ 62,952 $ 54,724 Deferred revenue- End of period 34,725 33,688 34,725 33,688 Beginning of period (36,306) (36,166) (40,785) (38,190) Net change (1,581) (2,478) (6,060) (4,502) Calculated billings $ 20,428 $ 16,401 $ 56,892 $ 50,222 Total subscription and support revenue $ 17,653 $ 14,888 $ 51,197 $ 42,481 Deferred revenue- End of period 34,725 33,688 34,725 33,688 Beginning of period (36,306) (36,166) (40,785) (38,190) Net change (1,581) (2,478) (6,060) (4,502) Subscription and support billings $ 16,072 $ 12,410 $ 45,137 $ 37,979 Accounts receivable $ 13,567 $ 11,721 Days Sales Outstanding (1) 61 66
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(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 December 4, 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 July 31, 2014 filed on September 5, 2014 and the company's Quarterly Report on Form 10-Q for the quarter ended October 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 January 31, 2015 Fiscal Year Ended January 31, 2015 Non-GAAP basic and diluted net loss per share $(0.23) - $(0.26) $(1.02) - $(1.05) Stock-based compensation expense (0.06) (0.24) Amortization of acquired intangible assets - (0.02) GAAP basic and diluted net loss per share $(0.29) - $(0.32) $(1.28) - $(1.31)
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SOURCE Rally Software
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