Original Source: FD (FAIR DISCLOSURE) WIRE
. Brenly Johnson (Phonetic), Borland Software Corp., IR . Dale Fuller, Borland Software Corp., President & CEO . Kenneth Hahn, Borland Software Corp., SVP & CFO . Scott Arnold, Borland Software Corp., EVP & COO
BORL reported total revenues of $82.5m and a non-GAAP EPS of $0.14 in 4Q04. The Co.'s growth is a result of translating initial design wins into major enterprise deployments. The Co. is pleased to announce a strategic alliance with Cap Gemini; the European-based global systems integrator. Expects 1Q05 revenue to be in the range of $77-81m with corresponding non-GAAP EPS in the range of $0.07-0.09. Q&A Focus: Cap Gemini, deals, and ALM solutions.
A. Key Data From Call 1. 4Q04 revenue = $82.5m. 2. 4Q04 GAAP net income = $8m or $0.10 per share. 3. 4Q04 non-GAAP net income = $11.4m or $0.14 per share. 4. Expects 1Q05 revenues = $77-81m. 5. Expects 1Q05 non-GAAP EPS = $0.07-0.09.
S1. Opening Comments (D.F.) 1. 4Q04 Financial Highlights: 1. 4Q04 was the nineteenth consecutive qtr. of profitability on a
non-GAAP basis. 2. Total revenues were $82.5m and a non-GAAP EPS of $0.14. 3. The Co. continues to achieve operating efficiencies and reached operating margins of more than 15%, as told in the
last conference call. 1. This 15% margin is double the Co.'s 7% in the prior year, and above 12% in 3Q04. 4. 4Q04 marks the close of a strong 2004, in which BORL achieved total revenues of almost $310m, up nearly 5% over 2003. 5. Non-GAAP net income for 2004 increased nearly fourfold to approx. $30m or $0.37 per share vs. non-GAAP net income for 2003 of $8.5m or $0.10 per share. 6. The Co.'s growth is a result of translating initial design wins into major enterprise deployments. 7. In 4Q04, BORL closed eight transactions greater than $1m bringing the Co. to a total of 26 transactions greater than $1m in 2004 vs. nine in all of 2003. 2. Operational Review: 1. Major ALM customers in 4Q04 included CISCO, Oracle, Siemens, Telcordia, Unisys.
2. The Co. has seen an increase in orders from its biggest
customers: 1. Evidence of both the Co.'s success in deploying its best-in-class technology. 2. The attractiveness of software delivery optimization. 3. Software delivery optimization aligns the people, processes, and technologies needed to transform software into the biggest leverage point in differentiator for a co. today. 1. These customers understand that while package software applications do deliver some value, they will ultimately
achieve only parity at best from packaged products that are available from any or two any other competitors. 4. Leading companies continuously deliver unique, differentiated or custom software that provides the highest value and competitive advantage. 5. In Nov., The Economist Magazine published an article discussing the dysfunctions of corporate software organizations. 1. It reported that businesses are wasting more than $55b per year trying to get software right. 3. Software Development Optimization (SDO): 1. BORL's software delivery optimization vision addresses these challenges by transforming the chaotic art of software development into a managed business process. 2. SDO articulates how software development can deliver organizational productivity and competitive advantage for business, linking business stakeholders with the technology
organization that serves them. 3. SDO is the natural extension of the Co.'s Application lifecycle management (ALM) strategy and builds upon the roots of BORL's companies individual developer productivity softwares. 4. TeraQuest Acquisition: 1. BORL recently advanced its capabilities with the acquisition of TeraQuest.
2. TeraQuest is the pioneer of the highly sought after CMMI
process for improving the efficiencies of corporate and government software organizations. 3. The Co. believes that the marrying of process expertise from TeraQuest with the best-in-class technologies from BORL is a game changer for every organization struggling to be competitive and to improve their process of delivering high quality software. 5. Process Optimization Program: 1. Over the period of the last several years, a global defense contractor embarked on a process optimization program meant to improve the predictability and efficiency of the overall
software organization. 1. They Focused on measuring rework and were able to lower the time that developers spent recoding and redoing code by 85%. 2. Financially, this process improvement equated to $4m per year in cost savings for every 100 developers.
1. This is significant savings for the co. that employs literally tens of thousands of developers around the world. 3. The value of marrying process with technology also has echoed at the Co.'s 2005 sales kickoff, two weeks ago. 6. Cap Gemini Alliance: 1. Furthering BORL's ability to serve these customers at the highest level, the Co. is pleased to announce a strategic alliance with Cap Gemini; the European-based global systems integrator.
2. BORL's ALM solution will now become a cornerstone technology
of their accelerated delivery organizations. 3. The Co. is excited about the potential for this relationship. 7. Summary:
1. BORL took critical steps in 2004 towards deepening both its
customer and partner relationships. 2. The Co. focuses relentlessly on execution and operational improvement within the Co. and rallied the industry around software delivery optimization.
S2. 4Q04 Financial Review (K.H.) 1. Revenue & EPS: 1. 4Q04 was strong with revenue of $82.5m and GAAP net income of $8m or $0.10 per share. 2. Non-GAAP net income increased 145% over the prior year to $11.4m or $0.14 per share. 3. BORL continued to improve operating efficiencies and reached non-GAAP operating margins of 15% for 4Q04 vs. 7% in 4Q03, achieving the target discussed on the last earnings call. 4. Total revenue was up 11% vs. 4Q03. 5. License revenue was solid at $56m, up 4% over the prior year. 6. Service revenue increased 33% over the prior year to $26.5m. 7. In 4Q04, the Co. closed 120 transactions, greater than $100,000 and eight deals greater than $1m. 8. BORL increased revenue every qtr. 9. The Co. was effective in managing costs and brought much of the revenue growth to the operating and bottom lines. 10. Annual revenues increased 5% in total from $295m to nearly $310m. 1. BORL did this despite the expected declines in its Java products. 11. Non-GAAP EPS in 2004 was $0.37 vs. $0.10 in 2003. 12. Operating income increased from $11m or 4% of revenue in 2003 to $38m or 12% of revenue in 2004. 2. Deals: 1. BORL is shifting its sales model towards a solution selling
approach more focused on customers, which has had the effect
of increasing the number of large deals, each qtr., especially
million-dollar plus transactions. 2. For the year, the Co. nearly tripled the number of seven-figure deals, from nine in 2003 to 26 million-dollar plus transactions in 2004. 1. This is a record number of large deals for BORL. 3. The Co. is progressing on a planned shift in revenue away from single products into smaller IDE sales to …