Mercury Interactive Corporation, the global leader in business technology optimisation (BTO), today announced financial results for the fourth quarter and year ended 31 December 2004.
Revenue for the fourth quarter of 2004 was $204.3 million, an increase of 34% compared to $152 million reported in the fourth quarter of 2003. Revenue for the year ended 31 December 2004 was $685.5 million, an increase of 35% compared to $506.5 million reported for the year ended 31 December 2003.
Deferred revenue for the fourth quarter of 2004 increased by $67.7 million from the third quarter of 2004 to $414.3 million. Cash generated from operations for the fourth quarter of 2004 was $66.4 million compared to $66.9 million in the fourth quarter of 2003. Cash generated from operations for the year ended 31 December 2004 was $212.8 million, compared to $180.5 million for the year ended 31 December 2003. "2004 was our most successful year ever," said Amnon Landan, chairman and CEO at Mercury. "Our customers are expanding their investments in Mercury Optimisation Centre offerings as they take an enterprise approach to streamlining IT."
GAAP results
Net income for the fourth quarter of 2004 was $35 million, or $0.36 per diluted share, compared to $13.1 million, or $0.13 per diluted share, for the same period a year ago. Net income for the year ended 31 December 2004 was $84.6 million, or $0.83 per diluted share, compared to $41.5 million, or $0.41 per diluted share, for the year ended 31 December 2003.
Diluted earnings per share were calculated taking into consideration the recent issuance of EITF 04-08, "Effect of Contingently Convertible Debt on Diluted Earnings per Share". Net income was adjusted for debt related costs on an `as if` converted basis by $0.4 million and $1.4 million for the quarter and year ended 31 December 2004, respectively. Fully diluted shares were 98.2 million shares for the quarter and 103.2 million shares for the year ended 31 December 2004. Previously reported net income and diluted earnings per share have also been restated based on the effect of EITF 04- 08.
Non-GAAP results
Non-GAAP net income for the fourth quarter of 2004 was $40.5 million, or $0.42 per diluted share, compared to $26.2 million, or $0.25 per diluted share, for the same period a year ago. Non-GAAP results for the fourth quarter of 2004, as presented in the attached reconciliation table, exclude stock-based compensation and amortisation of intangibles of $4.1 million, a non-cash reduction to excess facility charge of approximately $0.2 million, a net loss on investments in non-consolidated companies and warrant of $0.1 million and related tax expense decrease of $1.5 million. Non-GAAP net income for the year ended 31 December 2004 was $110.6 million, or $1.09 per diluted share, compared to $86.1 million, or $0.85 per diluted share, for the year ended 31 December 2003. Non-GAAP results for the year ended 31 December 2004, as presented in the attached reconciliation table, exclude stock-based compensation and amortisation of intangibles of $16.4 million, in-process research and development of $0.9 million, integration and other acquisition related charges of $3.1 million, a net non-cash excess facilities charge of $8.9 million, a gain on sale of available-for-sale securities of $0.3 million, a net loss on investments in non-consolidated companies and warrant of $0.6 million and related tax expense increase of $3.6 million.
Based on the effect of EITF 04-08, non-GAAP net income and fully diluted shares were also adjusted in the calculation of diluted earnings per share by the same amounts GAAP diluted earnings per share were adjusted. In addition, previously reported non-GAAP net income and diluted earnings per share have been restated.
Financial outlook
The following financial outlook is provided based on information as of 2 February 2005 and management assumes no duty to update this guidance.
Management provides the following guidance for the first quarter of 2005:
* Revenue for the first quarter is expected to be in the range of $190 million to $200 million
* Net increase in deferred revenue for the first quarter is expected to be in the range of $5 million to $15 million
* GAAP diluted earnings per share for the first quarter is expected to be in the range of $0.26 to $0.32
* Non-GAAP diluted earnings per share for the first quarter is expected to be in the range of $0.28 to $0.34
* Fully diluted shares outstanding for the first quarter is expected to be in the range of 98 million to 100 million, which takes into consideration the recent issuance of EITF 04-08, "Effect of Contingently Convertible Debt on Diluted Earnings per Share".
Non-GAAP guidance for the first quarter of 2005 is adjusted from GAAP guidance by excluding stock-based compensation and amortisation of intangible assets of $4.0 million and a gain on the sale of our idle building of approximately $0.3 million.
Management provides the following guidance for the full year of 2005:
* New Order Growth (revenue plus change in deferred revenue) for the full year is expected to be in the range of 20% to 25%
* Revenue growth for the full year is expected to be in the range of 28% to 32%
* Non-GAAP operating margin for the full year is expected to be in the range of 20% to 21%
* GAAP diluted earnings per share for the full year is expected to be in the range of $1.36 to $1.46
* Non-GAAP diluted earnings per share for the full year is expected to be in the range of $1.45 to $1.55
* Cash flow from operations growth for the full year is expected to be in the range of 25% to 30% Non-GAAP guidance for 2005 is adjusted from GAAP guidance by excluding stockbased compensation and amortisation of intangible assets of $15.8 million and a gain on the sale of our idle building of approximately $0.3 million.
Quarterly conference call
Mercury will host a conference call to discuss fourth quarter results at 2pm Pacific Time today. A live Webcast of the conference call, together with supplemental financial information, can be accessed through the company`s Investor Relations Web site at http://www.mercury.com/ir. In addition, an archive of the Webcast can be accessed through the same link. An audio replay of the call will be available until midnight on 8 February 2005. The audio replay can be accessed by calling 888-203 1112 or 719 457 0820, conference call code: 390468.
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Mercury Interactive (NASDAQ: MERQ), the global leader in business technology optimisation (BTO), is committed to helping customers optimise the business value of information technology. Founded in 1989, Mercury conducts business worldwide and is one of the fastest growing enterprise software companies today. Mercury provides software and services to govern the priorities, people and processes of IT; deliver and manage applications; and integrate IT strategy and execution. Customers worldwide rely on Mercury offerings to improve quality and performance of applications and manage IT costs, risks and compliance. Mercury BTO offerings are complemented by technologies and services from global business partners. For more information, please visit www.mercury.com.
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