Mercury Interactive Corporation, the global leader in business technology optimisation (BTO), today reported results for the second quarter ended 30 June 2003.
Revenue for the second quarter of 2003 was $118.1 million, an increase of 26% compared to $94 million reported in the second quarter of 2002. Revenue for the first six months of 2003 was $228.4 million, an increase of 24% compared to $184.5 million for the same period in 2002.
Deferred revenue for the second quarter of 2003 increased $12.7 million from the first quarter of 2003 to $194 million. Cash generated from operations for the second quarter of 2003 was $38.2 million compared to $35.5 million in the second quarter of 2002.
GAAP results
Net income for the second quarter of 2003 was $16.9 million, or $0.19 per diluted share, compared to $18 million, or $0.20 per diluted share, for the same period a year ago. Net income for the first six months of 2003 was $35.1 million, or $0.39 per diluted share, compared to $33.2 million, or $0.38 per diluted share, for the same period a year ago.
Non-GAAP results
Net income for the second quarter of 2003 was $19.8 million, or $0.22 per diluted share, compared to $13.3 million, or $0.15 per diluted share, for the same period a year ago. Net income for the first six months of 2003 was $38.6 million, or $0.43 per diluted share, compared to $25.4 million, or $0.29 per diluted share, for the same period a year ago. Non-GAAP results, as presented in the attached reconciliation table, exclude the following recurring items: expenses from acquisition and restructuring related charges, amortisation of unearned stock-based compensation and intangible assets, gain on early retirement of debt, as well as related income tax provisions or benefits.
"During the second quarter, Mercury Interactive achieved strong financial results as well as announced two strategic acquisitions and raised $500 million in a convertible notes offering," said Amnon Landan, chairman, CEO and president of Mercury Interactive Corporation. "Our business model is working and we continue to take share in the expanding BTO market."
Q2 2003 business highlights
* Product revenue (licence + subscription): $70.5 million, 23% increase over year ago period
* Application delivery (Testing) product revenue: $54.5 million, 17% increase over year ago period
* Application management (APM) product revenue: $16.0 million, 53% increase over year ago period
* Operating margins: 16% GAAP; 19% non-GAAP (see attached reconciliation table)
* Raised $500 million through issuance of zero coupon senior convertible notes due 2008
* Cash and investments balance: $1.2 billion
* Days sales outstanding (DSO): 64 days
* Acquired Performant to deliver and manage J2EE applications
* Signed definitive agreement to acquire Kintana and expand Optane offerings by adding IT governance product suite
Financial outlook
The following financial outlook is provided based on information as of 16 July 2003.
Management initiates the following guidance, which does not take into account the pending Kintana acquisition, for the quarter ending 30 September 2003:
* Revenue is expected to be in the range of $118 million to $125 million
* GAAP diluted earnings per share is expected to be in the range of $0.17 to $0.23
* Non-GAAP diluted earnings per share is expected to be in the range of $0.19 to $0.25
* Net increase in deferred revenue is expected to be in the range of $10 to $20 million
* Cash flow from operations is expected to be in the range of $35 to $45 million Non-GAAP guidance is adjusted from GAAP guidance by excluding recurring milestone payments associated with the Performant product integration program of approximately $0.9 million and amortisation expenses of approximately $0.9 million associated with the Freshwater and Performant acquisitions.
Management offers the following guidance, which does not take into account the pending Kintana acquisition, for the full fiscal year ending 31 December 2003:
* Revenue is expected to be in the range of $480 million to $500 million
* GAAP diluted earnings per share is expected to be in the range of $0.82 to $0.92
* Non-GAAP diluted earnings per share is expected to be in the range of $0.90 to $1.00
Non-GAAP guidance is adjusted from GAAP guidance by excluding recurring milestone payments associated with the Performant product integration program of approximately $2.7 million, amortisation expenses of approximately $3.3 million associated with the Freshwater and Performant acquisitions, and a one-time charge of $1.3 million for the Performant in-process research and development.
We expect that the Kintana acquisition will close in the third quarter of 2003. This will result in one-time charges for in-process research and development and severance of approximately $8 to $9 million, or $0.08 to $0.09 per share, in the third quarter. Further, there will be recurring quarterly amortization charges of approximately $3 to $4 million, or $0.03 to $0.04 per share, which will be pro-rated in the third quarter. We expect the effect of the acquisition will be neutral to non-GAAP diluted earnings per share in the third quarter of 2003 and accretive by $0.01 to $0.02 to non-GAAP diluted earnings per share for the full year 2003.
Quarterly conference call
Mercury Interactive will host a conference call to discuss second quarter results at 8.30am Eastern Daylight 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.mercuryinteractive.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 22 July 2003. The audio replay can be accessed by calling 888-203-1112 or 719-457-0820, conference call code: 545329.
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Mercury Interactive, the global leader in business technology optimisation (BTO), delivers Optane, a suite of integrated products for enterprise testing, production tuning and performance management, that enables customers to optimise business processes and maximise business results. Customers worldwide use Mercury Interactive solutions across their application and technology infrastructures to continuously measure, maximise and manage performance at every level of the business process and each stage of the application lifecycle to improve quality, reduce costs and align IT with business goals.
Founded in 1989, Mercury Interactive is headquartered in Sunnyvale, California, with offices in more than 25 countries. Further information is available at www.mercuryinteractive.com or by phone at US +1.408.822.5200.
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