Verity Reports Fourth-Quarter and Fiscal 2005 Results
Fourth Quarter Revenues Increase 7% Over Previous Quarter; Fiscal Year 2005 Revenues Increase 15% Year-Over-Year
SUNNYVALE, Calif., June 30 -- Financial Highlights:
-- Q4 Revenues: $36.5 million
-- Q4 Operating Income (Loss) as a % of Total Revenues: (2.6%) GAAP; 6.1% Non-GAAP
-- Q4 Earnings Per Share: $0.00 GAAP; $0.06 Non-GAAP
-- Q4 End of Quarter Cash and Investments Balance: $195.1 million
-- FY 2005 Revenues: $142.6 million
-- FY 2005 Operating Income as a % of Total Revenues: 4.5% GAAP; 11.4% Non-GAAP
-- FY 2005 Earnings Per Share: $0.20 GAAP; $0.34 Non-GAAP
-- Announced $50 million stock repurchase program for fiscal year 2006
Strategic Highlights:
Fiscal Year 2005
-- Launched Verity(R) LiquidOffice(TM) v4, first BPM software with integrated enterprise-class search capability
-- Introduced Verity(R) LiquidBPM Software Developers Kit
-- Announced Verity(R) TeleForm(R) v9.1 with Web-based scanning and document capture feature
-- Named to "Silicon Valley 150" for fourth consecutive year
-- Selected as one of KMWorld`s `100 Companies that Matter` for fifth time
June 2005
-- Launched new and simplified pricing approach for the award-winning Ultraseek enterprise search software
-- Acquired enterprise-ready desktop search technology from 80-20 Software
-- Appointed Nicole Eagan to the position of Senior Vice President and
Chief Marketing Officer
-- Verity President and CEO Wins Ernst & Young Entrepreneur of the Year 2005 Award in Northern California in the Technology and Software category
Verity Inc. (NASDAQ:VRTY) , a leading provider of enterprise search software that enables organizations to discover, analyze and process all of the digital information within their enterprises, today reported its financial results for the fourth quarter and fiscal year ended May 31, 2005.
Revenues
Revenues for the fourth quarter of fiscal 2005 were $36.5 million, an increase of 7 percent compared to $33.9 million reported in the third quarter of fiscal 2005 and a 5 percent decrease over the prior year`s fourth quarter. Revenues for fiscal year 2005 were $142.6 million, an increase of 15 percent compared to $124.3 million for fiscal year 2004.
GAAP Operating Results
For the fourth quarter, operating loss was $1.0 million or 3 percent of total revenue compared to operating income of $3.6 million or 10 percent of total revenue for the fourth quarter of fiscal 2004. For fiscal year 2005, operating income was $6.5 million or 5 percent of total revenue compared to operating income of $17.1 million or 14 percent of total revenue for fiscal year 2004.
For the fourth quarter, net income was $0.1 million, or $0.00 per fully diluted share compared to net income of $1.4 million, or $0.04 per fully diluted share for the fourth quarter of fiscal 2004. For fiscal year 2005, net income was $7.5 million, or $0.20 per fully diluted share compared to net income of $11.6 million, or $0.29 per fully diluted share for fiscal year 2004. The GAAP effective tax rate was 32.0 percent for fiscal year 2005.
Non-GAAP Operating Results
For the fourth quarter, non-GAAP operating income was $2.2 million or 6 percent of total revenue compared to non-GAAP operating income of $8.9 million or 23 percent of total revenue for the fourth quarter of fiscal 2004. For fiscal year 2005, non-GAAP operating income was $16.3 million or 11 percent of total revenue compared to non-GAAP operating income of $25.3 million or 20 percent of total revenue for fiscal year 2004.
For the fourth quarter, non-GAAP net income was $2.1 million, or $0.06 per fully diluted share compared to non-GAAP net income of $5.7 million, or $0.15 per fully diluted share for the fourth quarter of fiscal 2004. For fiscal year 2005, non-GAAP net income was $13.0 million, or $0.34 per fully diluted share compared to non-GAAP net income of $17.7 million, or $0.44 per fully diluted share for fiscal year 2004. The fourth quarter and fiscal year 2005 non-GAAP results and related reconciliation, as set forth in the financial tables at the end of this release, exclude the amortization of acquired intangible assets and restructuring charges, and the write-off of in-process research and development. See "Use of GAAP and Non-GAAP Results" below.
"Verity has recorded its seventh consecutive fiscal year of profitability, an accomplishment that takes on greater meaning in the face of a global economic environment that continues to be extremely challenging," said Anthony J. Bettencourt, president and chief executive officer. "Looking ahead, Verity is doing much more than weathering the storm. The company continues on its strategic growth path, making strategic acquisitions, bringing innovative software to market, and taking bold marketing and sales actions to extend its leadership and serve more customers in more ways."
At May 31, 2005, Verity`s strong balance sheet included cash and cash equivalents, short-term investments, and long-term investments totaling $195.1 million. Days sales outstanding for the quarter were 76 days.
During the fourth quarter, Verity repurchased approximately 1,577,890 shares of its common stock at an average price of $8.86 per share, for a total investment of approximately $14.0 million. For fiscal year 2005, Verity repurchased approximately 3.5 million shares of its common stock at an average price of $10.90 per share, for a total investment of approximately $37.7 million of the $50 million Board approved Fiscal 2005 stock buyback program.
Customer Activity
During the fourth quarter, Verity recorded customer sales transactions with a wide range of leading companies in the consumer products, defense, financial services, government, healthcare, high-technology, manufacturing, professional services, media, and telecommunications industries. Customer wins included Allianz Life Insurance Co., America Online, Dow Chemical Company, Draeger Medical, Federal Express, Gevity, Napster, Nissan North America, Inc., Siemens Westinghouse Power Co., Sony Corporation of America and Toyota Motor. The company also extended its position in the OEM market for enterprise search, categorization and recommendation software technology through new or extended agreements with existing customers, including Sun Microsystems, and a leading global provider of email archiving software.
Business Outlook
The following financial outlook is provided based on information as of June 30, 2005.
Management`s projections for the first fiscal quarter ending August 31, 2005 are:
-- Total revenues are expected to be in the range of $32 million to $35 million
-- GAAP earnings per fully diluted share are expected to be in the range of ($0.01) to $0.01
-- Non-GAAP earnings per fully diluted share are expected to be in the range of $0.03 to $0.05
-- Per-share calculations are based on projections of 36.0 million fully diluted shares
First quarter non-GAAP guidance is adjusted from GAAP guidance by excluding estimated amortization of acquired intangible assets of approximately $2.1 million associated with previous acquisitions, and approximately $0.1 million for the write-off of acquired in-process research and development associated with the acquisition of 80-20 Software, which after adjusting for the tax effects of these exclusions using an effective tax rate of 38.5 percent, results in approximately $0.04 per share based on the projected fully diluted shares.
Management`s projections for the full fiscal year ending May 31, 2006 are:
-- Total revenues are expected to be in the range of $145 million to $150 million
-- GAAP earnings per fully diluted share are expected to be in the range of $0.18 to $ 0.21
-- Non-GAAP earnings per fully diluted share are expected to be in the range of $0.32 to $0.36
-- Per-share calculations are based on projections of 35.8 million fully diluted shares
Fiscal 2006 non-GAAP guidance is adjusted from GAAP guidance by excluding estimated amortization of acquired intangible assets of approximately $8.3 million associated with previous acquisitions, and approximately $0.1 million for the write-off of acquired in-process research and development associated with the acquisition of 80-20 Software, which after adjusting for the tax effects of these exclusions using an effective tax rate of 38.5 percent, results in approximately $0.15 per share based on the projected fully diluted shares.
Use of GAAP and Non-GAAP Results
Although GAAP disclosure provides investors and management with an overall view of Verity`s financial performance, Verity believes that it is important for investors to also understand the performance of its ongoing operational business. Consequently, the non-GAAP results exclude charges and benefits management believes are not reflective of Verity`s ongoing operational business, namely, charges for the amortization of acquired intangible assets, in-process research and development write-off, and restructuring charges, as set forth in the financial tables at the end of this news release. Management uses the non-GAAP results to assess the financial performance of Verity`s ongoing operational business.
About Verity
With headquarters in Sunnyvale, California, Verity provides enterprise search software that enables organizations to discover, analyze and process all of the digital information within their enterprises. The company`s solutions provide integrated search, classification, recommendation, monitoring and analytics across the real-time flow of enterprise information, along with self-service Q & A. In addition, Verity`s business process management and content capture solutions activate information and accelerate its flow from person to person and between systems. Verity technology also serves as a core component of more than 260 applications from leading independent software vendors.
Around the world, more than 11,500 organizations of all sizes and types rely on Verity to manage their intellectual capital. In the private sector, these include ABB, AT&T, AXA, Bristol-Myers Squibb, Capgemini, Capital One, Deloitte Consulting, EDGAR Online, Ford, GMAC, Hewlett-Packard, Kaiser Permanente, Mayo Foundation, PricewaterhouseCoopers, SAP, UBS and Verizon. In the public sector, customers come from all levels and branches of government, including the U.S. General Services Administration, the U.S. Air Force and Army, the U.S. Department of Defense, including the armed forces units, and the U.S. Departments of Energy and Justice. Independent software vendors that integrate Verity include EMC Documentum, FileNet, Lotus, Oracle, Stellent, TIBCO and Xerox DocuShare.
Forward-Looking Statements
The statements in this news release under the heading "Business Outlook" are forward-looking statements. These forward-looking statements are expectations and beliefs based on assumptions that may or may not prove to be accurate, and actual financial results could differ materially as a result of many factors. These include: future demand for Verity`s products may not be as strong as Verity predicts; many of Verity`s product orders are large, and a delay in closing a large sale during any quarter could materially reduce Verity`s revenues for that period; transactions accounting for a disproportionate percentage of Verity`s quarterly revenues are frequently closed in the last few weeks or days of a quarter and, accordingly, even a slight delay in the closing of some of these transactions could materially reduce Verity`s revenues for that period; Verity incurs expenses based upon anticipated revenues and, consequently, if the revenues are less than anticipated, Verity will have lower gross margins and operating results; if competitors develop new products that compete favorably against Verity`s products, sales of Verity`s products will be less than projected; a portion of Verity`s sales are in the international market, which exposes Verity to currency fluctuation and other risks; and the effect of any of the foregoing factors may cause Verity to change its business plan. These and other risks relating to Verity and its business and products are set forth under the caption "Risks Relating to Our Operations" in Item 2 of Part I of Verity`s latest Form 10-Q, filed with the Securities and Exchange Commission on April 11, 2005.
For more information, contact Verity at info@verity.com or at World Wide Web site http://www.verity.com/ or call 408-541-1500.
NOTE: Verity and the Verity LiquidOffice, TeleForm, LiquidBPM logos are registered trademarks of Verity, Inc.
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