Sybase 2007 second quarter results exceed consensus EPS

Sybase (NYSE: SY), a leading provider of enterprise infrastructure and mobile software, today reported financial results for the second quarter ended 30 June 2007.

Highlights: Total revenue increased 14% year-over-year, led by Sybase 365 messaging unit. Operating income on a non-GAAP basis was up 14% year-over-year; GAAP was up 10%. Non-GAAP operating margin of 20% was reported; GAAP operating margin of 15%. Non-GAAP fully-diluted EPS of $0.37; GAAP EPS of $0.28. Cash flow from operations of $53.8 million; total cash and cash investments of $709.1 million. Management raises full-year non-GAAP EPS to $1.56 and GAAP EPS to $1.19. Full-year cash flow guidance rose to a range of $195 million to $205 million. Stock repurchases of $40 million.

2007 second quarter results total revenue increased 14% to $245 million from $215.6 million in the second quarter of 2006. The company reported licence revenue of $77.4 million, services revenue of $135.2 million, and messaging revenue of $32.4 million.

Non-GAAP operating income for the quarter increased 14% year-over-year to $47.8 million, representing a 20% operating margin.

Non-GAAP net income for the quarter was $34.3 million, or earnings per diluted share (EPS) of $0.37. This compares with non-GAAP net income of $32.8 million, or EPS of $0.36 for the second quarter of 2006.

Operating income calculated in accordance with generally-accepted accounting principles (GAAP) for the quarter increased 10% year-over-year to $35.6 million, representing a 15% operating margin. GAAP net income was $26 million, or GAAP EPS of $0.28, for the quarter. This compares with GAAP net income of $26.3 million, or GAAP EPS of $0.29, for the 2006 second quarter. Included in the 2007 second quarter GAAP-based results is the impact of $2.8 million for the amortisation of purchased intangibles related to the acquisition of Mobile 365.

Non-GAAP amounts exclude the amortisation of certain purchased intangibles, stock-based compensation, and restructuring costs, and the tax effect of these and related items. Accompanying this release is a reconciliation from GAAP to non-GAAP amounts for the 2007 second quarter.

"Our Unwired Enterprise efforts in the second quarter were marked by solid performance in the iAnywhere business, robust demand for our IQ analytics server, as well as overall strong operating results for Sybase 365," stated John Chen, chairman, CEO, and president of Sybase. "Additionally, we expanded consolidated operating margin for the fifth consecutive quarter, driven by margin expansion in each of the three business segments, and we delivered strong cash flow from operations.

"Based on healthy pipelines, strong market demand, and ongoing operating efficiencies across all of our business segments, we are raising our full-year outlook for operating margin, cash flow, and earnings per share," concluded Chen.

Balance sheet and other data at 30 June 2007: Sybase reported $709.1 million in cash and cash investments, including restricted cash of $6 million. In the second quarter, the company generated $53.8 million in cash flow from operations. Sybase repurchased $40 million worth of its stock during the 2007 second quarter.

As of 30 June 2007, $191.2 million remained authorised in the company's current share repurchase programme. Days sales outstanding (DSO) for the 2007 second quarter was 72. Forward guidance for the third quarter ending 30 September 2007, management anticipates revenue in the range of $250 million to $255 million and non-GAAP fully-diluted EPS of approximately $0.40.

GAAP EPS for the third quarter is expected to be approximately $0.30, which includes $2.7 million for the amortisation of intangibles related to the acquisition of Mobile 365 in November 2006.

For full-year 2007, management is raising guidance for fully diluted non-GAAP EPS to approximately $1.56 from prior guidance of $1.52. Management anticipates revenue in the range of $1.015 billion to $1.025 billion. Management is raising guidance for GAAP EPS to approximately $1.19 from prior guidance of $1.12, which includes $10.9 million for the amortisation of intangibles related to the acquisition of Mobile 365. Management is raising guidance for full-year 2007 cash flow from operations to $195 million to $205 million, compared with prior guidance ranging from $190 million to $200 million.

Accompanying this release is a reconciliation from projected GAAP to non-GAAP amounts for the 2007 third quarter and full year.

2007 Second Quarter Company Highlights: Expanded partnership with Red Hat, the world's leading provider of open source solutions, to include the first database appliance based on Sybase ASE 15.0 and Red Hat Enterprise Linux 5. Sybase 365 and IQ selected by China Mobile and Agricultural Bank of China to meet more challenging global competition and customer demands. Released embedded extract, transform and load (ETL) capabilities in Sybase IQ 12.7 analytics server. It launched the AvantGoR client for BlackBerry smart phones, allowing access to customised content on mobile Web sites anytime, anywhere.

It launched Sybase 365 securePay, a cardholder verification system enabling mobile phones to be used to authenticate a transaction at the absence of the card or cardholder; partnered with UK's Telsecure to offer securePay to customers of financial institutions. Partnered with Just Dial Services and Spanco Telesystems to expand Sybase 365's footprint in India and expand SMS services to more enterprises and mobile subscribers. It announced a new toolkit on the Information Anywhere Suite platform to create mobile forms for field inspection and survey applications. Sybase Adaptive Server Enterprise (ASE) won the Enterprise Open Source Magazine's Readers' Choice Award for the third year; voted "Best Linux Database" by the open source community. Twenty-one Sybase customers and partners were named 2007 Computerworld Honours Laureates.