BORLAND SOFTWARE CORPORATION 
By Borland Software Corporation (NASDAQ: BORL), the global leader in Open Application Lifecycle Management (ALM), today announced financial results for the second quarter ended June 30, 2007.
For the second quarter of 2007, Borland reported total revenue of $63.4 million, GAAP net loss of $11.2 million, or $(0.16) per share and a non-GAAP net loss of $6.1 million, or $(0.08) per share. GAAP net loss includes $1.6 million in stock-based compensation, $2.2 million in amortization of intangibles and $1.3 million in restructuring expenses.
Revenue for ALM products and services for the second quarter of 2007 was $39.0 million, or approximately 62% of total revenue. Deployment products (DPG) revenue was $10.8 million and CodeGear (IDE) products and services was $13.6 million.
The Enterprise segment, which consists of ALM and DPG products, reported GAAP operating loss of $12.2 million and non-GAAP operating loss of $7.7 million and the CodeGear segment reported GAAP operating income of $1.3 million and Non-GAAP operating income of $1.9 million for the second quarter of 2007.
Borland reduced its cash used in operating activities during the quarter to $4.4 million. The Company closed the quarter with cash and cash equivalents of $204.6 million.
?We continued to make good progress this quarter reducing costs and moving toward a healthy business focused on long-term profitable growth,? commented Tod Nielsen, president and CEO of Borland. ?ALM revenue was solid and demand is encouraging, but we continue to work through execution issues in EMEA and saw a few important deals slip into future quarters.?
?CodeGear was sequentially flat, but well below our expectations. We are focused on stabilizing this business and reducing our reliance on CodeGear to achieve ongoing growth and profitability. However, CodeGear's performance did impact our second quarter results and will affect our ability to achieve our internal goals for the fiscal year. As a result, we are reducing our annual overall revenue guidance, but we remain committed to our goal of achieving profitability in the second half of the year,? Nielsen added.
Business Outlook
Management now expects total revenue for 2007 to be in the range of $275 to $295 million, down from the previous outlook of $290 to $310 million. Management expects to achieve non-GAAP profitability during the second half of 2007.
Conference Call
Borland reports financial results for the quarter ended June 30, 2007 at 2:00 p.m. Pacific Daylight Time, today, Thursday, August 9, 2007. To access the conference call in the U.S. or Canada, dial 800-240-2430 and outside the U.S. and Canada, dial 303-262-2143. The live webcast of the call will be available on the Investor Relations section of the Company's website at www.borland.com. A replay of the webcast will be available two hours after the completion of the call. An audio replay of the call will also be available to investors beginning at 5:00pm Pacific Daylight Time on August 9, 2007 through November 7, 2007. The replay number is 800-405-2236 or 303-590-3000 and the passcode is 11093997.
About Borland
Founded in 1983, Borland (NASDAQ: BORL) is the leading vendor of Open Application Lifecycle Management (ALM) solutions ? open to customers' processes, tools and platforms ? providing the flexibility to manage, measure and improve the software delivery process. To learn more about maximizing the business value of software, visit http://www.borland.com.
Borland and all other Borland brand and product names are service marks, trademarks or registered trademarks of Borland Software Corporation or its subsidiaries in the United States and other countries. All other marks are the property of their respective owners.
Forward-Looking Statements
Statements made in this release that are not historical facts are ?forward-looking statements? and accordingly involve risk and uncertainties that could cause actual results to differ materially from those described in this release. Forward-looking statements include, for example, all statements relating to projected financial performance (including statements involving projection of revenue, income including income (loss), earnings including earnings (loss) per share, capital expenditures, dividends, capital structure, or other financial items), the plans and objectives of management for future operations, products or services; and future performance in economic terms or other any other measures.
The potential risks and uncertainties that could cause results to differ materially include, among others, our ability to predict revenue and control expenses, our ability to efficiently move our headquarters to Austin, Texas and our ability to grow our ALM business or achieve profitability as planned. These and other risks are detailed in Borland's periodic reports filed with the Securities and Exchange Commission, including, its latest Annual Report on Form 10-K, and its latest quarterly report on Form 10-Q, copies of which may be obtained from www.sec.gov. Borland does not intend to update this information to reflect future events or circumstances unless required by law.
Non-GAAP Financial Measures
The attached press release and tables include non-GAAP financial measures. Borland's management uses non-GAAP financial measures in assessing the performance of Borland's ability to develop, sell and market products and services (?Ongoing Operations?). They are also used for planning and forecasting in future periods. Non-GAAP financial measures also facilitate internal comparisons to Borland's historical operating results. Borland has historically reported similar non-GAAP financial measures and believe that the inclusion of comparative results provides consistency in its financial reporting that benefits investors. Non-GAAP financial measures are computed using consistent methods from quarter to quarter and year to year. These non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. They should be viewed in conjunction with the consolidated financial statements prepared in accordance with GAAP.
In presenting non-GAAP financial measures, Borland has excluded the following items:
A. Restructuring and severance charges. Borland has incurred restructuring charges eliminating certain duplicative activities, focusing Borland's resources on future growth opportunities and reducing Borland's cost structure. In connection with its restructuring, Borland has recognized costs related to termination benefits for former Borland employees whose positions were eliminated and for the closure of Borland facilities. Borland excludes these items because these expenses are not reflective of Ongoing Operations and Borland believes excluding these items from its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share facilitates comparisons with prior and subsequent reporting periods as well as comparisons to the operating results of competitors in Borland's industry. Expenses related to severance and restructuring have, in some cases, had a significant cash impact and effect on Borland's results of operations, including its net income (loss) as measured in accordance with GAAP.
B. Stock compensation impact of SFAS 123R. These expenses consist of expenses for employee stock options and employee stock purchases under SFAS 123R. Prior to the adoption of SFAS 123R in fiscal 2006, Borland did not include expenses related to employee stock options and employee stock purchases directly in its financial statements, but elected, as permitted by SFAS 123R, to disclose such expenses in the footnotes to its financial statements. As Borland applies SFAS 123R, Borland believes that it is useful to investors to understand the impact of the application of SFAS 123R to Borland's operational performance in comparison to prior periods in which such expense was not included directly in its financial statements. In addition, while stock-based compensation expense calculated in accordance with SFAS 123R constitutes an ongoing and recurring expense, such expense is excluded from its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share because it is not an expense that typically requires or will require cash settlement by Borland and consequently is not used by management to assess the core profitability of Borland's Ongoing Operations. Borland believe it is useful to investors to understand the impact of the application of SFAS 123R to Borland's liquidity and its ability to invest in research and development and fund acquisitions and capital expenditures. Borland further believes its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share excluding this item are useful to investors in that excluding this item facilitates comparisons to the operating results of competitors in Borland's industry that may have different patterns of activity associated with equity compensation.
C. Amortization of purchased intangibles. In connection with its acquisitions, Borland has incurred amortization of purchased intangible assets. These purchased intangibles include: developed technology, customer lists and relationships, maintenance agreements, trade names, trademarks and service marks and non-compete agreements. For accounting purposes, Borland amortizes the fair value of the purchased intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated. Although these intangible assets generate revenue for Borland, Borland excludes the associated amortization expense because it is non-cash in nature and because Borland believes its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share excluding this item provides meaningful supplemental information regarding Borland's operational performance, liquidity and Borland's ability to invest in research and development and fund acquisitions and capital expenditures. In addition, excluding this item facilitates comparisons to Borland's historical operating results and comparisons to the operating results of competitors in Borland's industry which may have different acquisition histories.
D. Acquisition-related expenses. Borland has incurred significant acquisition-related expenses in connection with its prior acquisitions. Borland has also acquired in-process research and development that had not yet reached technological feasibility and had no alternative future use. Accordingly, these amounts were charged to operating expense upon consummation of the respective acquisitions. Borland excludes these items from its measures of non-GAAP net income (loss) and non-GAAP net income (loss) per share because these expenses are not reflective of Ongoing Operations in the current period and have no direct correlation to the operation of Borland's business either historically or on a future basis, as these are one-time charges. In addition, excluding this item facilitates comparisons to Borland's historical and future operating results and comparisons to the operating results of competitors in Borland's industry which may have different acquisition histories. Expenses related to acquisitions have, in some cases, had a significant cash impact and effect on Borland's results of operations, including its net income (loss) as measured in accordance with GAAP.
Borland believes that non-GAAP measures have significant limitations in that they do not reflect all of the amounts associated with Borland's financial results as determined in accordance with GAAP and that these measures should only be used to evaluate Borland's financial results in conjunction with the corresponding GAAP measures. In addition, the exclusion of the charges and expenses indicated above from the non-GAAP financial measures presented does not indicate an expectation by Borland management that similar charges and expenses will not be incurred in subsequent periods.
| BORLAND SOFTWARE CORPORATION | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||
| (In thousands, except par value and share amounts, unaudited) | |||||||||
| ASSETS | June 30, 2007 | December 31, 2006 | |||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 204,623 | $ | 55,317 | |||||
| Accounts receivable, net of allowances of $5,848 and $5,413, respectively | 52,214 | 62,154 | |||||||
| Prepaid expenses | 12,448 | 13,341 | |||||||
| Other current assets | 2,068 | 1,329 | |||||||
| Total current assets | 271,353 | 132,141 | |||||||
| Property and equipment, net | 9,412 | 11,176 | |||||||
| Goodwill | 253,359 | 253,356 | |||||||
| Intangible assets, net | 36,023 | 40,521 | |||||||
| Other non-current assets | 12,588 | 6,705 | |||||||
| Total assets | $ | 582,735 | $ | 443,899 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 13,597 | $ | 15,591 | |||||
| Accrued expenses | 26,963 | 36,438 | |||||||
| Short-term restructuring | 6,122 | 9,582 | |||||||
| Income taxes payable | 2,097 | 14,925 | |||||||
| Deferred revenue | 55,863 | 58,930 | |||||||
| Other current liabilities | 9,688 | 7,264 | |||||||
| Total current liabilities | 114,330 | 142,730 | |||||||
| Convertible senior notes | 200,000 | - | |||||||
| Long-term restructuring | 4,906 | 6,231 | |||||||
| Long-term deferred revenues | 1,384 | 1,610 | |||||||
| Other long-term liabilities | 24,185 | 7,848 | |||||||
| Total liabilities | 344,805 | 158,419 | |||||||
| Commitments and Contingencies | |||||||||
| Stockholders' equity: | |||||||||
| Preferred stock; $.01 par value; 1,000,000 shares authorized; 0 shares issued and outstanding | - | - | |||||||
| Common stock; $.01 par value; 200,000,000 shares authorized; 72,790,644 and 78,704,764 shares issued and outstanding, respectively | 728 | 787 | |||||||
| Additional paid-in capital | 663,231 | 659,932 | |||||||
| Accumulated deficit | (294,271 | ) | (273,892 | ) | |||||
| Cumulative other comprehensive income | 8,651 | 9,121 | |||||||
| 378,339 | 395,948 | ||||||||
| Less common stock in treasury at cost, 21,158,099 and 15,275,899 shares, respectively | |||||||||
| (140,409 | ) | (110,468 | ) | ||||||
| Total stockholders' equity | 237,930 | 285,480 | |||||||
| Total liabilities and stockholders' equity | $ | 582,735 | $ | 443,899 | |||||
| BORLAND SOFTWARE CORPORATION | |||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||
| (In thousands, except per share amounts, unaudited) | |||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | ||||||||||||||||
| License and other revenues | $ | 30,439 | $ | 41,428 | $ | 67,601 | $ | 80,823 | |||||||||||
| Service revenues | 32,961 | 35,522 | 66,765 | 65,699 | |||||||||||||||
| Total revenues | 63,400 | 76,950 | 134,366 | 146,522 | |||||||||||||||
| Cost of license and other revenues | 1,364 | 1,666 | 3,070 | 3,897 | |||||||||||||||
| Cost of service revenues | 10,333 | 14,536 | 21,570 | 27,577 | |||||||||||||||
| Amortization of acquired intangibles and other charges | 2,119 | 2,208 | 4,238 | 2,733 | |||||||||||||||
| Cost of revenues | 13,816 | 18,410 | 28,878 | 34,207 | |||||||||||||||
| Gross profit | 49,584 | 58,540 | 105,488 | 112,315 | |||||||||||||||
| Selling, general and administrative | 44,597 | 50,406 | 92,428 | 96,610 | |||||||||||||||
| Research and development | 13,718 | 18,300 | 29,642 | 33,705 | |||||||||||||||
| Restructuring, amortization of other intangibles, acquisition-related expenses and other charges expenses and other charges | |||||||||||||||||||
| 2,213 | 9,246 | 3,087 | 10,296 | ||||||||||||||||
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© Business Wire - 2007
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