Business Objects the world`s leading provider of business intelligence (BI) solutions, today announced results for the second quarter ended June 30, 2005.
For the second quarter of 2005, the company reported total revenues of $262.4 million, an increase of 18 percent year over year. US GAAP diluted earnings per share were $0.25 and non-GAAP diluted earnings per share were $0.32 in the second quarter of 2005. The US GAAP and non-GAAP diluted earnings per share exceeded the high end of the company`s guidance for the quarter of US GAAP $0.20 to $0.22 per share and non-GAAP $0.26 to $0.28 per share.
Operating income improved significantly on both a US GAAP and non-GAAP basis during the second quarter of 2005. On a US GAAP basis, income from operations was $34.9 million or 13 percent of total revenues, up 91 percent year over year. On a non- GAAP basis, income from operations was $43.9 million or 17 percent of total revenues, up 51 percent from the second quarter of 2004.
All figures referred to herein are stated in US Dollars unless otherwise indicated. Second quarter 2005 non-GAAP results as defined in the section "Use of Non-GAAP Financial Measures" below differ from results measured under US GAAP as they exclude $7.9 million of amortization of intangible assets and $1.1 million of deferred stock-based compensation expense, all primarily associated with the acquisition of Crystal Decisions. Reconciliations of US GAAP to non-GAAP results are included at the end of this press release.
"Second quarter results highlight our momentum since the launch of BusinessObjects XI," said Bernard Liautaud, chairman and chief executive officer. "The newest release of our flagship product suite has allowed us to develop strategic relationships with more customers, increasing license deals over $1 million to 13 in the quarter. We accelerated revenue growth across all major geographies, with particularly strong success in the Americas, up 19 percent year over year. At the same time, we have been focusing on operating income which increased 91 percent in the quarter versus the second quarter of last year." "Going forward," Liautaud continued, "we remain focused on our core strategy of expanding our footprint in the enterprise, leveraging our strength in the mid market and growing performance management across new markets. We believe that our planned acquisition of SRC Software, Inc. fits well with these three objectives and with our ultimate goal of driving increased standardization of Business Objects."
Large Deals Increase Versus the Previous Year Business Objects Reports Second Quarter 2005 Results
* There were 13 transactions over $1 million in license revenues in the second quarter, up from 8 transactions over $1 million in the year ago quarter.
* Notable customer wins included Australia Post, FedEx Corp., ING Nederland N.V., Minist`ere de l`Economie, des Finances et de l`Industrie (French Ministry of Economy, Finance and Industry) and U.S. General Services Administration (GSA), many of which were driven by BusinessObjects XI.
All Major Geographies Reported Double Digit Growth
* Revenues in the Americas reached $123.6 million in the second quarter of 2005, up 19 percent year over year with 7 transactions over $1 million in license revenue.
* Revenues in EMEA (Europe, Middle East, and Africa) totaled $116.5 million, up 17 percent year over year (up 11 percent at 92.2 million in Euros), with 6 transactions over $1 million in license revenues.
* Revenues in Asia Pacific, including Japan, rose to $22.3 million, up 21 percent year over year.
Software License and Services Revenues up Year Over Year
* Software license revenues totaled $124.9 million in the second quarter of 2005, up 7 percent year over year.
* The company reported growth in each major product area, with 36 percent growth year over year in Enterprise Performance Management Applications.
* Sales of core business intelligence products including query, reporting and analysis resulted in $109.3 million in license revenues, representing 88 percent of total license revenues.
* Enterprise Performance Management Applications reached $8.9 million in license revenues, representing 7 percent of total license revenues.
* Data Integration products reached $6.7 million in license revenues, representing 5 percent of total license revenues.
* Services revenues totaled $137.5 million in the second quarter, up 31 percent year over year.
Earnings per Share Up Year over Year
* On a US GAAP basis, operating income was $34.9 million in the second quarter of 2005, up 91 percent year over year, representing a US GAAP operating margin of 13 percent. In the second quarter, US GAAP net income was $23.1 million and US GAAP diluted earnings per share were $0.25 per share.
* On a non-GAAP basis, operating income was $43.9 million in the second quarter of 2005, up 51 percent year over year, representing a non-GAAP operating margin of 17 percent. In the second quarter, non-GAAP net income was $29.7 million and non-GAAP diluted earnings per share were $0.32 per share.
Balance Sheet Remains Strong
* Total cash and investments (cash, cash equivalents, restricted cash and short-term investments) were $383.9 million at June 30, 2005.
* Deferred and long-term deferred revenues totaled $207.2 million at June 30, 2005.
* Days Sales Outstanding (DSOs) increased slightly to 72 days as of June 30, 2005, which is within the Company`s target range of 60 to 75 days.
Business Objects Reports Second Quarter 2005 Results
BusinessObjects XI Momentum Accelerates
* Customer acceptance of BusinessObjects XI continued to accelerate throughout the second quarter of 2005.
* BusinessObjects XI license revenues totaled more than $50 million in the second quarter of 2005, more than tripling sequentially.
* BusinessObjects XI performed well in the Americas and with new customers overall in the second quarter.
Business Objects to Acquire SRC Software, Inc.
* On July 20, 2005 Business Objects announced that it entered into a definitive agreement to acquire privately held SRC Software, Inc., a leading vendor of financial planning and performance management software.
* The acquisition will be an all cash transaction of approximately $100 million US and will be accounted for under the purchase method of accounting.
* The transaction is subject to regulatory approvals and other customary closing conditions, and is expected to close in September 2005.
Business Outlook Since the guidance issued in April 2005, the US Dollar to euro exchange rate declined significantly, moving the company`s exchange rate assumption for guidance from $1.30 to $1.22 per EUR1.00.
This exchange rate decline resulted in a negative impact of approximately $12 million in total revenues for the second half of fiscal 2005. Despite the negative currency impact, the company is raising its guidance for the full year, indicating that the strength in the overall business substantially offsets the currency change.
Business Objects offers the following guidance for the quarter ending September 30, 2005:
* Total revenues are expected to range from $248 million to $253 million.
* US GAAP diluted earnings per share are expected to range from $0.19 to $0.22.
* Non-GAAP diluted earnings per share are expected to range from $0.25 to $0.28.
* This guidance does not include the impact of the proposed SRC Software, Inc. acquisition which is expected to close in September 2005.
The non-GAAP diluted earnings per share guidance for the quarter ending September 30, 2005 excludes amortization of intangible assets and deferred stock-based compensation expense of approximately $9 million, which is an increase of approximately $0.06 per share. Assumptions for the third quarter guidance assume a US GAAP tax rate of 37% and a US Dollar to Euro exchange rate of $1.22 per EUR1.00.
Business Objects offers the following updated guidance for the year ending December 31, 2005:
* Total revenues are expected to range from $1.025 billion to $1.040 billion.
* US GAAP diluted earnings per share are expected to range from $0.89 to $0.97.
* Non-GAAP diluted earnings per share are expected to range from $1.16 to $1.24.
* This guidance does not include the impact of the proposed SRC Software, Inc. acquisition which is expected to close in September 2005. Business Objects Reports Second Quarter 2005 Results
The non-GAAP diluted earnings per share guidance for the year ending December 31, 2005 excludes amortization of intangible assets and deferred stock-based compensation expense of approximately $37.0 million, which represents an increase of approximately $0.27 per share. The outlook for the full year 2005 assumes a US Dollar to euro exchange rate of $1.22 per EUR1.00 and an effective US GAAP tax rate of 38 percent for the full year 2005.
The above information concerning our forecast for the third quarter and full year 2005 represents our outlook only as of the date hereof, and we undertake no obligation to update or revise any financial forecast or other forward looking statements, as a result of new developments or otherwise.
Conference Call
Business Objects will hold a conference call to discuss its financial results for the second quarter of 2005. The call will begin at 2:00 p.m. PT (5:00 p.m. New York, 11:00 p.m. Paris, 10:00 p.m., London). The call-in numbers are 800-399-7988 for North America and 706- 634-5428 for Europe and Asia with ID #7636234. The conference call also will be webcast live, and can be accessed on the company`s website - www.businessobjects.com. A replay of the webcast will be available on the site approximately two hours after the end of the live call.
Accounting Principles
Business Objects prepares its financial statements in accordance with US GAAP. Because the company is listed on both the Eurolist by EuronextTM in France and the Nasdaq National Market in the United States, it is required to separately report consolidated financial statements prepared in accordance with US GAAP and International Financial Reporting Standards ("IFRS"). The most significant identified differences between the two reporting standards for Business Objects relate to the treatment of stock-based compensation expense and the accounting for treasury shares related to a prior acquisition.
In accordance with French regulations and IFRS, Business Objects will report its consolidated financial statements for the first half of 2005 on or before October 31, 2005. In addition, Business Objects expects to report its consolidated financial statements for the full year 2005 in April 2006. Business Objects filed with the Autorit'e des March'es Financiers in France its 2004 Document de R'ef'erence which included the opening balance sheet of the Company as of January 1, 2004 prepared in accordance with IFRS. In addition, the Company will publish net sales for its second quarter in accordance with IFRS in the Bulletin des Annonces L'egales Obligatoires in France by August 15, 2005. Use of Non-GAAP Financial Measures The non-GAAP financial measures such as operating income, net income and earnings per share information for the second quarters of 2005 and 2004 included in this press release are different from those otherwise presented under US GAAP as these non- GAAP measures excluded certain charges. These charges include amortization of intangible assets, deferred stock-based compensation expense and restructuring charges, all of which are primarily associated with the acquisition of Crystal Decisions. Business Objects has provided these measures in addition to US GAAP financial results because management believes these non-GAAP measures provide a consistent basis for comparison between quarters and of growth rates year-over-year that are not influenced by certain non-cash charges or impacts of prior period acquisitions, and therefore are helpful in understanding Business Objects` underlying operating results. In addition,
Business Objects Reports Second Quarter 2005 Results
This press release also includes non-GAAP measures that use a constant currency to separate the impact of conversion from other foreign currencies to US dollars from other changes in our business. These non-GAAP measures are some of the primary measures Business Objects` management uses for planning and forecasting. These measures are not in accordance with, or an alternative to US GAAP and these non-GAAP measures may not be comparable to information provided by other companies. Reconciliations of US GAAP to non-GAAP results are presented at the end of this press release. About Business Objects Business Objects is the world`s leading business intelligence (BI) software company. With over 30,000 customers worldwide, including over 80 percent of the Fortune 500, Business Objects helps organizations gain better insight into their business, improve decision making, and optimize enterprise performance. The company`s business intelligence platform, BusinessObjects XI, offers the BI industry`s most complete and trusted platform for query, reporting and analysis, performance management, and data integration. BusinessObjects XI includes Crystal Reports(R), the industry standard for enterprise reporting. Business Objects has built the industry`s strongest and most diverse partner community, and also offers consulting and education services to help customers effectively deploy their business intelligence projects. Business Objects has headquarters in San Jose, Calif., and Paris, France. The company`s stock is traded on both the Nasdaq (BOBJ) and Euronext Paris (ISIN: FR0004026250 - BOB) stock exchanges. More information about Business Objects can be found at www.businessobjects.com.
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