Accelrys Announces Second Quarter 2013 Results
Accelrys Announces Second Quarter 2013 Results
SAN DIEGO--(BUSINESS WIRE)-- Accelrys, Inc. (NAS: ACCL) today reported financial results for the fiscal quarter ended June 30, 2013. Non-GAAP revenue for the quarter ended June 30, 2013 increased $0.3 million to $41.8 million from $41.6 million for the same quarter of the previous year, or an increase of one percent. Non-GAAP revenue for the six months ended June 30, 2013 increased $2.4 million to $85.8 million from $83.3 million for the same period of the previous year, or an increase of three percent.
Non-GAAP net income was $3.7 million, or $0.07 per diluted share, for the quarter ended June 30, 2013 compared to non-GAAP net income of $4.1 million, or $0.07 per diluted share, for the same quarter of the previous year. Non-GAAP net income was $7.3 million, or $0.13 per diluted share, for the six months ended June 30, 2013 compared to non-GAAP net income of $8.7 million, or $0.15 per diluted share, for the same period of the previous year.
GAAP revenue for the quarter ended June 30, 2013 increased $0.6 million to $39.0 million from $38.4 million for the same quarter of the previous year, or an increase of two percent. GAAP revenue for the six months ended June 30, 2013 increased $3.3 million to $81.2 million from $77.8 million for the same period of the previous year, or an increase of four percent.
GAAP net income was $19.8 million, or $0.35 per diluted share, for the quarter ended June 30, 2013 compared to GAAP net loss of $(0.5) million, or $(0.01) per diluted share, for the same quarter of the previous year. GAAP net income was $14.1 million, or $0.25 per diluted share, for the six months ended June 30, 2013 compared to GAAP net loss of $(2.8) million, or $(0.05) per diluted share, for the same period of the previous year. GAAP net income for the three and six months ended June 30, 2013 included a one-time gain of $25.9 million, or $0.45 per diluted share for both periods, recognized upon the payoff of the promissory note receivable from Intermolecular, Inc. ("Intermolecular") in May 2013.
"The implementation of our market segment strategy and field coverage model continued to take hold during the quarter and our execution improved across the business producing positive results overall. Orders performance for the second quarter improved from Q1 2013 and represented solid growth over the second quarter of 2012," said Max Carnecchia, President and Chief Executive Officer of Accelrys. "The teams are gaining momentum and we have added additional talent to the organization. Overall the market dynamics appear to be improving; and we remain confident that we are uniquely positioned to create a growing world-class software company and capitalize on the scientific innovation lifecycle management market opportunity. The restructuring announced today further strengthens our financial position and aligns our resources with the significant growth opportunity of our business."
Recent Business Highlights:
On July 25, 2013 we strengthened the board of directors through the addition of a new independent director, Heidi Melin, currently the chief marketing officer of Plex Systems, Inc., a cloud Enterprise Resource Planning ("ERP") technology company that delivers plant floor-focused ERP to manufacturers. Ms. Melin brings to Accelrys more than 20 years of experience in marketing in the high technology industry.
Specific business highlights from the quarter ended June 30, 2013 include the release of new products such as:
The Experiment Knowledge Base, the first informatics system for R&D that gives scientists the ability to search and mine experimentation data from almost any source
The enhanced Accelrys Process Management and Compliance Suite with Discoverant 4.3, providing new enterprise manufacturing process intelligence capabilities
The Accelrys Enterprise Platform 9.0, which has expansive capabilities for managing Big Data and the challenges associated with externalization
A cloud-based Externalized Collaboration Suite, which addresses the needs of life sciences organizations engaged in collaborative network research
In addition, Accelrys continued to enhance its relationships with partners, by:
Expanding our relationship with BT through the release of our industry-leading research and collaboration workspace, HEOS, on the BT Life Sciences R&D Cloud; and
Further strengthening our partnership with BT through the development of innovative data mining strategies using Accelrys Enterprise Platform to handle large sets of structured and unstructured data, such as BT's collations of public health data, which have previously proven difficult, if not impossible, to manage with other technologies
Realignment of Company Operations:
Separately today the Company announced the restructuring of approximately 80 employees, or about 12% of its total workforce, and the abandonment of a portion of one of its facilities in San Ramon, California. These actions are intended to reduce costs and to realign the Company's operations to focus on growth opportunities within the Company's market segments. Approximately 40 positions will be filled in different capacities or locations to rebalance the skillset as part of this realignment.
Calendar Year 2013 Outlook
For the year ending December 31, 2013, the Company expects non-GAAP revenue to be between $176 and $179 million, and non-GAAP diluted earnings per share to be between $0.32 and $0.34 per diluted share on fully diluted weighted average shares outstanding of 57 million and using an effective tax rate of 40 percent.
Non-GAAP Financial Measures:
This press release describes financial measures for non-GAAP revenue, operating income, net income, net income per diluted share and free cash flow that exclude deferred revenue fair value adjustments, acquisition-related cost of revenue, business consolidation, transaction and headquarter-relocation costs, stock-based compensation expense, purchased intangible asset amortization, royalty income fair value adjustments, amortization of note receivable discount, gain on sale of real estate, gain on sale of intellectual property, write-off of lease related assets and other non-operating expense. Additionally, our non-GAAP net income reflects an effective pro-forma tax rate of 40 percent. These financial measures are not calculated in accordance with generally accepted accounting principles (GAAP) and are not based on any comprehensive set of accounting rules or principles.
Management believes these non-GAAP financial measures provide a useful measure of the Company's operating results, a meaningful comparison with historical results and with the results of other companies, and insight into the Company's ongoing operating performance. Further, management and the Board of Directors utilize these measures, in addition to GAAP measures, when evaluating and comparing the Company's operating performance against internal financial forecasts and budgets. These non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.
For additional information on the items excluded by the Company from its non-GAAP financial measures please refer to the Form 8-K regarding this release that was furnished today to the Securities and Exchange Commission.
The following table contains a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures (unaudited, amounts in thousands, except per share amounts, including footnotes):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
GAAP revenue | $ | 39,036 | $ | 38,394 | $ | 81,174 | $ | 77,833 | ||||||||
Deferred revenue fair value adjustment1 | 2,808 | 3,158 | 4,576 | 5,515 | ||||||||||||
Non-GAAP revenue | $ | 41,844 | $ | 41,552 | $ | 85,750 | $ | 83,348 | ||||||||
GAAP operating loss | $ | (7,414 | ) | $ | (3,721 | ) | $ | (13,876 | ) | $ | (6,909 | ) | ||||
Deferred revenue fair value adjustment1 | 2,808 | 3,158 | 4,576 | 5,515 | ||||||||||||
Acquisition-related cost of revenue2 | — | (482 | ) | (124 | ) | (705 | ) | |||||||||
Business consolidation, transaction and headquarter-relocation costs3 | 2,058 | (35 | ) | 4,212 | 604 | |||||||||||
Stock-based compensation expense4 | 2,119 | 1,848 | 4,539 | 3,639 | ||||||||||||
Purchased intangible asset amortization5 | 4,624 | 4,192 | 9,273 | 8,368 | ||||||||||||
Non-GAAP operating income | $ | 4,195 | $ | 4,960 | $ | 8,600 | $ | 10,512 | ||||||||
Depreciation expense | 904 | 798 | 1,780 | 1,602 | ||||||||||||
Cash received for interest and royalty income | 2,188 | 1,881 | 4,716 | 5,171 | ||||||||||||
Cash paid for income taxes, net of refunds received | (173 | ) | (880 | ) | (1,287 | ) | (2,044 | ) | ||||||||
Capital expenditures | (6,294 | ) | (1,520 | ) | (8,547 | ) | (2,291 | ) | ||||||||
Non-GAAP free cash flow | $ | 820 | $ | 5,239 | $ | 5,262 | $ | 12,950 | ||||||||
GAAP net income (loss) | $ | 19,787 | $ | (520 | ) | $ | 14,061 | $ | (2,774 | ) | ||||||
Deferred revenue fair value adjustment1 | 2,808 | 3,158 | 4,576 | 5,515 | ||||||||||||
Acquisition-related cost of revenue2 | — | (482 | ) | (124 | ) | (705 | ) | |||||||||
Business consolidation, transaction and headquarter-relocation costs3 | 2,058 | (35 | ) | 4,212 | 604 | |||||||||||
Stock-based compensation expense4 | 2,119 | 1,848 | 4,539 | 3,639 | ||||||||||||
Purchased intangible asset amortization5 | 5,029 | 4,616 | 10,083 | 9,215 | ||||||||||||
Royalty income fair value adjustment6 | — | 200 | — | 400 | ||||||||||||
Amortization of note receivable discount7 | (481 | ) | (268 | ) | (685 | ) | (388 | ) | ||||||||
Gain on sale of real estate8 | — | (2,744 | ) | — | (2,744 | ) | ||||||||||
Gain on sale of intellectual property9 | (25,821 | ) | — | (25,895 | ) | — | ||||||||||
Write-off of lease related assets10 | — | 670 | — | 670 | ||||||||||||
Other non-operating expense11 | 114 | — | 33 | — | ||||||||||||
Income tax12 | (1,875 | ) | (2,330 | ) | (3,508 | ) | (4,707 | ) | ||||||||
Non-GAAP net income | $ | 3,738 | $ | 4,113 | $ | 7,292 | $ | 8,725 | ||||||||
GAAP diluted net income (loss) per share | $ | 0.35 | $ | (0.01 | ) | $ | 0.25 | $ | (0.05 | ) | ||||||
Deferred revenue fair value adjustment1 | 0.05 | 0.06 | 0.08 | 0.10 | ||||||||||||
Acquisition-related cost of revenue2 | — | (0.01 | ) | — | (0.01 | ) | ||||||||||
Business consolidation, transaction and headquarter-relocation costs3 | 0.04 | — | 0.07 | 0.01 | ||||||||||||
Stock-based compensation expense4 | 0.04 | 0.03 | 0.08 | 0.06 | ||||||||||||
Purchased intangible asset amortization5 | 0.09 | 0.08 | 0.18 | 0.16 | ||||||||||||
Royalty income fair value adjustment6 | — | — | — | 0.01 | ||||||||||||
Amortization of note receivable discount7 | (0.01 | ) | — | (0.01 | ) | (0.01 | ) | |||||||||
Gain on sale of real estate8 | — | (0.05 | ) | — | (0.05 | ) | ||||||||||
Gain on sale of intellectual property9 | (0.45 | ) | — | (0.45 | ) | — | ||||||||||
Write-off of lease related assets10 | — | 0.01 | — | 0.01 | ||||||||||||
Other non-operating expense11 | — | — | — | — | ||||||||||||
Income tax12 | (0.03 | ) | (0.04 | ) | (0.06 | ) | (0.08 | ) | ||||||||
Non-GAAP diluted net income per share13 | $ | 0.07 | $ | 0.07 | $ | 0.13 | $ | 0.15 | ||||||||
Weighted average shares used to compute net income per share: | ||||||||||||||||
Basic | 55,707 | 55,596 | 55,694 | 55,690 | ||||||||||||
Diluted | 56,874 | 56,456 | 56,964 | 56,484 | ||||||||||||
1Deferred revenue fair value adjustment relates to our acquisitions of Vialis, Aegis, VelQuest and Contur and our merger with Symyx, and adds back the impact of writing down the acquired historical deferred revenue to fair value as required by purchase accounting guidance.
2Acquisition-related cost of revenue relates to our acquisition of VelQuest, and adds back the impact of writing down the acquired deferred cost of revenue as required by purchase accounting guidance.
3Business consolidation, transaction and headquarter-relocation costs consist of professional services, legal, litigation, employee-related and other costs incurred in connection with our acquisition and related integration activities, as well as lease obligation exit costs, severance and other costs incurred in connection with the various restructuring activities commenced by the Company. Also included are contingent compensation costs relating to the Vialis and the Contur acquisitions as well as costs associated with our headquarter relocation in July 2013, including professional services and additional rent expense during the transition to the new facility.
4Stock-based compensation expense is included in our consolidated statements of operations as follows:
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in thousands) | |||||||||||||||
Cost of revenue | $ | 149 | $ | 147 | $ | 384 | $ | 289 | |||||||
Product development | 476 | 374 | 932 | 756 | |||||||||||
Sales and marketing | 641 | 665 | 1,496 | 1,254 | |||||||||||
General and administrative | 848 | 648 | 1,717 | 1,335 | |||||||||||
Business consolidation, transaction and headquarter-relocation costs | 5 | 14 | 10 | 5 | |||||||||||
Total stock-based compensation expense | $ | 2,119 | $ | 1,848 | $ | 4,539 | $ | 3,639 | |||||||
5Purchased intangible asset amortization is included in our consolidated statements of operations as follows:
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in thousands) | |||||||||||||||
Amortization of completed technology | $ | 2,213 | $ | 2,074 | $ | 4,429 | $ | 4,155 | |||||||
Purchased intangible asset amortization | 2,411 | 2,118 | 4,844 | 4,213 | |||||||||||
Royalty and other income, net | 405 | 424 | 810 | 847 | |||||||||||
Total purchased intangible amortization expense | $ | 5,029 | $ | 4,616 | $ | 10,083 | $ | 9,215 | |||||||
6Royalty income fair value adjustment relates to our merger with Symyx, and adds back the impact of writing down deferred royalty income to fair value as required by purchase accounting guidance.
7Amortization of note receivable discount adjusts the amortization of the discount on our promissory note receivable from Intermolecular in connection with the sale of intellectual property in November 2011.
8Gain on sale of real estate relates to the sale of real property, comprised of land and an office building located in Santa Clara, California, which we sold in June 2012. This property was acquired as a result of our merger with Symyx and was not utilized in our ongoing operations.
9Gain on sale of intellectual property to Intermolecular reflects the gain recognized upon the payoff of the promissory note receivable from Intermolecular in May 2013.
10Write-off of lease related assets relates to the write off in June 2012 of certain assets in connection with exiting the lease of a restructured facility.
11Other non-operating expense for the three months ended June 30, 2013 relates to loss on disposal of certain fixed assets as a result of the relocation of our corporate headquarters, offset by a reversal of gain on bargain purchase resulting from purchase accounting measurement period adjustments from our Vialis acquisition in January 2013. Other non-operating expense for the six months ended Jun
