Operating margin improves year-over-year
Linux Platform Products revenue increases 25% year-over-year
Novell, Inc. (NASDAQ: NOVL) today announced financial results for its second fiscal quarter ended April 30, 2009. For the quarter, Novell reported net revenue of $216 million. This compares to net revenue of $236 million for the second fiscal quarter of 2008. Income from operations for the second fiscal quarter of 2009 was $18 million, compared to income from operations of $2 million for the second fiscal quarter of 2008. Net income in the second fiscal quarter of 2009 was $16 million, or $0.05 per share. This compares to net income of $6 million, or $0.02 per share, for the second fiscal quarter of 2008. In the second fiscal quarter of 2009, foreign currency exchange rates negatively impacted net revenue by $6 million and favorably impacted operating expenses by $13 million and income from operations by $7 million compared to the same period last year.
On a non-GAAP basis, income from operations for the second fiscal quarter of 2009 was $35 million. This compares to non-GAAP income from operations of $16 million in the year-ago quarter. Non-GAAP net income for the second fiscal quarter of 2009 was $29 million, or $0.08 per share. This compares to non-GAAP net income of $21 million, or $0.06 per share, for the second fiscal quarter of 2008. A reconciliation of GAAP to non-GAAP results is provided in the financial schedules as part of this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
Novell reported $39 million of product revenue from Open Platform Solutions, of which $37 million was from Linux Platform Products, up 25% compared to the product revenue from Linux Platform Products from the same period last year. Product revenue from Identity and Security was $30 million, of which Identity, Access and Compliance Management was $28 million, up 2% compared to the product revenue from Identity, Access and Compliance Management from the same period last year. Product revenue from Systems and Resource Management was $40 million, down 2% compared to the same period last year. Workgroup product revenue of $79 million decreased 14% compared to the same period last year.
"While total invoicing declined, in line with global economic trends, I am pleased with the continued expansion of our operating margin. Within our portfolio, our growth businesses – Linux, Identity and Systems and Resource Management – have strong prospects and continue to show promise," said Ron Hovsepian, President and CEO of Novell. "Our Linux and Identity businesses have the greatest potential to continue to expand operating margins, and we plan to attain profitability within these businesses no later than 12-18 months from today, barring unforeseen circumstances."
Cash, cash equivalents and short-term investments were $1 billion at April 30, 2009, consistent with last quarter. Days sales outstanding in accounts receivable was 55 days at the end of the second fiscal quarter of 2009, improved from 66 days at the end of the year-ago quarter. Total deferred revenue was $659 million at the end of the second fiscal quarter of 2009, down from $702 million at the end of the year-ago quarter. For the second fiscal quarter of 2009, cash flow from operations was negative $26 million, in line with seasonal trends. This compares to cash flow from operations of negative $19 million in the second fiscal quarter of 2008.
Further details on Novell's reported results are included in the financial schedules that are a part of this release.
Novell management remains committed to long-term sustainable profitability. Novell management expects to maintain double-digit non-GAAP operating margins in the full fiscal year 2009, barring unforeseen circumstances.
Conference Call Notification and Web Access Detail
A one-hour conference call with Novell management to discuss the quarter will be broadcast at 5:00 PM ET on May 28, 2009. The conference call will be available live as a listen-only webcast from Novell's Investor Relations web page at: www.novell.com/company/ir/qresults. The domestic toll-free dial-in number is 866-335-5255, password "Novell." The international dial-in number is +1-706-679-2263, password "Novell."
Following the live event, an archived version of the webcast will be available for twelve months on the Novell Investor Relations web page at: http://www.novell.com/company/ir/qresults.
A copy of this press release is posted on the Novell Investor Relations web page at: http://www.novell.com/company/ir/qresults.
Non-GAAP Financial Measures
We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income
from operations, adjusted operating margin, adjusted income from continuing operations, adjusted net income, adjusted income per share from continuing operations and adjusted net income per share. We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable investors to evaluate our performance in the same way that management does. Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine compensation. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are excluded from most analysts' consensus estimates, that are unusual, and/or that arise outside of the ordinary course of business, such as, but not limited to, those related to stock-based compensation, acquisition-related intangible asset amortization, restructuring, asset impairments, litigation judgments and settlements, purchased in-process research and development, and the sale of business operations, long-term investments, and property, plant and equipment.
We also present a projection of our non-GAAP operating margin. This projection is a forward-looking, non-GAAP financial measure. The corresponding GAAP financial measure of operating margin is not available and cannot be provided without undue effort because we are unable to accurately forecast information regarding expenses or gains such as, but not limited to, those listed above. We believe that the corresponding GAAP financial measure is not likely to be significant to an understanding of our business because there is likely to be substantial variability between projected and actual realization of the expenses and gains described above and/or that such expenses or gains are likely to arise outside of the ordinary course of business.
Legal Notice Regarding Forward-Looking Statements
This press release includes statements that are not historical in nature and that may be characterized as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act, including those related to future financial and operating results, targets, and prospects; future opportunities; expansion of operating margins; progress of growth businesses; profitability; the macroeconomic environment; customer priorities; timing of realization of projections; functionality, characteristics, quality and performance capabilities of Novell's products and technology; and results achievable and benefits attainable through deployment of Novell's products and provision of services. Actual results may differ materially from the results discussed in or implied by such forward-looking statements, which are based upon information that is currently available to us and/or management’s current expectations, speak only as of the date hereof, and are subject to a number of factors, including, but not limited to: difficulties, delays or unexpected costs in completing our cost reduction and sales growth strategic initiatives; our ability to attract and retain new customers through our indirect sales strategy; our reliance on an indirect sales channel for the distribution of products; our ability to renew SLES subscriptions with those customers who have received SLES certificates from Microsoft; an accelerated decline in our OES and NetWare-related revenue stream; the ability of our Open Platform Solutions, Identity and Security, and Systems and Resource Management business unit segments to grow at expected rates; our ability to successfully integrate acquired companies; our ability to compete in markets for infrastructure software services; our ability to meet customer demand for technical support services; our ability to maintain a strong brand; delays in the introduction of new products; increased foreign research and development operations; reliance on software licensed from third parties; our ability to attract and retain talented employees; claims that we have infringed the intellectual property rights of others; adverse results in legal disputes; our ability to protect our confidential information; impairment of goodwill or amortizable intangible assets causing a charge to earnings; exposure to increased economic and regulatory uncertainties from operating a global business; cancellations or reductions in the scope of our engagements with professional services clients; and uncertain economic conditions and reductions in IT spending.
A detailed discussion of these and other factors that could affect our results is included in our SEC filings, including, but not limited to, our Annual Report on Form 10-K for the Fiscal Year Ended October 31, 2008 filed with the SEC on December 23, 2008, which may be obtained by calling (800) 317- 3195, or at our Investor Relations web site at http://www.novell.com/company/ir.
We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any forward-looking statements contained in this press release to reflect any change of expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statement is based, in whole or in part.
Novell, Inc. (Nasdaq: NOVL) delivers the best engineered, most interoperable Linux platform and a portfolio of integrated IT management software that helps customers around the world reduce cost, complexity and risk. With our infrastructure software and ecosystem of partnerships, Novell harmoniously integrates mixed IT environments, allowing people and technology to work as one. For more information, visit www.novell.com.
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