NETEZZA ANNOUNCES SECOND QUARTER FISCAL 2010 FINANCIAL RESULTS

MARLBOROUGH, Mass., — August 27, 2009 — Netezza Corporation (NYSE: NZ), the global leader in data warehouse and analytic appliances, today reported its financial results for the second fiscal quarter ended July 31, 2009.

“Our second quarter was an extremely significant quarter for Netezza,” said Jim Baum, Netezza’s President and Chief Executive Officer. “Not only did we deliver respectable results despite continued economic malaise, we released what we believe will prove to be our most significant product since we first defined the data warehouse appliance in 2003. Our new TwinFin™ appliance, which we released late in the quarter, is extremely well positioned in our market and creates a platform for continued rapid innovation.”

Total revenue for the second quarter of fiscal 2010 (fiscal year ending January 31, 2010) was $43.9 million, compared to $47.0 million for the second quarter of fiscal 2009. Total revenue for the six months ended July 31, 2009 was $89.3 million, compared to $86.6 million for the same period one year ago.

GAAP net income for the second quarter of fiscal 2010 was $0.7 million, or $0.01 per diluted share, compared to GAAP net income of $3.1 million, or $0.05 per diluted share, for the second quarter of fiscal 2009. GAAP net income for the six months ended July 31, 2009 was $0.5 million, or $0.01 per diluted share, compared to GAAP net income of $5.3 million, or $0.08 per diluted share, for the same period one year ago.

Non-GAAP net income for the second quarter of fiscal 2010 was $2.3 million, or $0.04 per diluted share, compared to non-GAAP net income of $5.2 million, or $0.08 per diluted share, for the second quarter of fiscal 2009. Non-GAAP net income for the six months ended July 31, 2009 was $3.8 million, or $0.06 per diluted share, compared to non-GAAP net income of $9.0 million, or $0.13 per diluted share, for the same period one year ago.

Non-GAAP net income and non-GAAP diluted net income per share exclude non-cash stock-based compensation, amortization of acquired intangible assets, gain on bargain purchase and the related income tax effect of excluding these expenses. A reconciliation of GAAP to non-GAAP results has been provided in the financial statements included in this press release. An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”

Financial Commentary

“From a macro perspective, our second quarter performance was reasonable given the economic uncertainties,” said Patrick Scannell, Netezza’s Senior Vice President and Chief Financial Officer. “Our visibility is improving and we will continue to invest in research and development and in our go to market initiatives to take advantage of the opportunities that are in front of us.”

Conference Call Information

Date: August 27, 2009
Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)
Toll-free North America: +1-800-901-5248
International dial-in number: +1-617-786-4512
Passcode: 42737331

A telephonic replay of the conference call will also be available two hours after the call and will run for two weeks. The replay can be accessed by dialing +1-888-286-8010 for participants in the United States and by dialing +1-617-801-6888 for participants outside the United States. The passcode for the replay is 65003200.

The webcast will be accessible from the "Investor Relations" section of Netezza's Web site (http://www.netezza.com). The webcast will be archived on Netezza's Web site for a period of one year.

About Netezza Corporation (NYSE: NZ)

Netezza Corporation is the global leader in data warehouse and analytic appliances that dramatically simplify high-performance analytics across an extended enterprise. Netezza’s technology enables organizations to process enormous amounts of captured data at exceptional speed, providing a significant competitive and operational advantage in today’s data-intensive industries, including digital media, energy, financial services, government, health and life sciences, retail and telecommunications. Netezza is headquartered in Marlborough, Massachusetts and has offices in Northern Virginia, Canada, the United Kingdom, Germany, France, Japan, Korea, Australia and Singapore. For more information about Netezza, please visit www.netezza.com.

Forward Looking Statements

The statements set forth above include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to Netezza’s future financial performance and Netezza's business prospects. These statements involve risk and uncertainties, including: market demand for our products; our limited operating history and history of losses; quarterly fluctuation of our business; our ability to attract and retain key personnel; our ability to develop and introduce new products and manage product transitions; competition in the data warehouse market; our dependence on certain key customers; our ability to protect our patents and intellectual property; our ability to defend against third party infringement claims, other litigation and contingent liabilities; and risks relating to operating internationally. For a further list and description of risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements in this release, we refer you to the “Risk Factors” section of Netezza's Annual Report on Form 10-K for the year ended January 31, 2009 which is on file with the SEC and available in the investor relations section of Netezza's Web site at http://www.netezza.com and on the SEC Web site at http://www.sec.gov. In addition, any forward-looking statements included in this press release represent our views as of August 27, 2009. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to August 27, 2009.

Use of Non-GAAP Financial Measures

To supplement Netezza’s unaudited condensed consolidated financial statements presented in accordance with GAAP, Netezza is presenting certain non-GAAP measures of financial performance. Netezza believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding Netezza’s performance by excluding certain non-cash items that may not be indicative of Netezza’s core business or future outlook. The presentation of these non-GAAP measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Netezza’s results of operations as determined in accordance with GAAP.

The non-GAAP financial measures presented by Netezza exclude non-cash stock-based compensation, amortization of acquired intangible assets, gain on bargain purchase and the related income tax effect of excluding these expenses. Because of the varying valuation methodologies and assumptions that companies use under FAS123(R), Netezza’s management believes that excluding non-cash stock-based compensation allows investors to analyze Netezza’s recurring business over multiple periods and provide more meaningful comparisons with other companies. Because the amount of amortization of acquired intangible assets varies in amount and frequency and is significantly affected by the timing and size of our acquisitions, Netezza’s management believes that excluding amortization of acquired intangible assets allows investors to analyze Netezza’s recurring business over multiple periods. The gain on bargain purchase in the three months ended July 31, 2009 resulted from the value of identifiable net assets acquired exceeding the value of the purchase price for Netezza’s acquisition of Tizor Systems, Inc. Since Netezza had no gain on bargain purchase in any prior periods and due to the one-time nature of this charge, Netezza is presenting its operating results without this gain to allow for a more meaningful comparison of current periods to prior year periods. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures provided in the financial statements included in this press release.

Netezza®, TwinFin™ and the Netezza logo are either registered trademarks or trademarks of Netezza Corporation.

Other names may be trademarks of their respective owners.

   
 
Netezza Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
July 31, January 31,
2009 2009
 
Assets
 
Current assets
Cash and cash equivalents $ 109,697 $ 111,635
Accounts receivable 31,450 34,457
Inventory 17,477 18,409
Deferred tax assets, net 12,752 12,723
Restricted cash 160 379
Prepaid expenses and other current assets   3,185   3,160
Total current assets 174,721 180,763
 
Property and equipment, net 9,538 9,586
Deferred tax assets, net 10,222 9,415
Goodwill 2,000 2,000
Intangible assets, net 4,595 2,935
Long-term marketable securities 49,004 49,222
Restricted cash 639 739
Other long-term assets   3,621   4,199
 
 
Total assets $ 254,340 $ 258,859
 
 
 
Liabilities and stockholders' equity
 
Current liabilities
Accounts payable $ 6,470 $ 8,424
Accrued expenses 6,193 6,301
Accrued compensation and benefits 5,581 6,352
Current portion of deferred revenue   40,774   46,356
Total current liabilities 59,018 67,433
 
Long-term deferred revenue 8,485 11,979
Other long-term liabilities   2,825   2,825
 
Total liabilities 70,328 82,237
 
Stockholders' equity   184,012   176,622
 
 
Total liabilities and stockholders' equity $ 254,340 $ 258,859

 

 
 
Netezza Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
         
 
For the three months ended For the six months ended
July 31, July 31,
2009 2008   2009   2008  
 
Revenue
Product $ 29,969 $ 35,134 $ 62,671 $ 66,460
Services   13,965   11,901     26,630     20,151  
Total revenue 43,934 47,035 89,301 86,611
 
Cost of revenue
Product 11,123 14,005 23,467 26,599
Services   3,420   2,888     6,895     4,992  
Total cost of revenue   14,543   16,893     30,362     31,591  
 
Gross margin 29,391 30,142 58,939 55,020
 
Operating expenses
Sales and marketing 15,729 15,292 30,405 28,622
Research and development 9,297 8,014 20,917 15,262
General and administrative   3,974   3,669     7,950     6,782  
Total operating expenses 29,000 26,975 59,272 50,666
       
Operating income (loss) 391 3,167 (333 ) 4,354
 
Interest income 197 1,036 507 2,779
Interest expense 25 - 50 -
Other income (expense), net   247   (86 )   378     (219 )
 
Income before income tax expense 810 4,117 502 6,914
 
Income tax expense   80   976     9     1,641  
 
Net income $ 730 $ 3,141   $ 493   $ 5,273  
 
 
Net income per common share:
Basic $ 0.01 $ 0.05 $ 0.01 $ 0.09
Diluted $ 0.01 $ 0.05 $ 0.01 $ 0.08
 
Shares used in per common share calculations:
Basic 60,232 58,720 60,104 58,350
Diluted 62,847 66,569 62,675 66,936

 

Netezza Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
 
 
For the three months ended For the six months ended
July 31, July 31,
2009   2008   2009   2008  
 
Non-GAAP financial measures and reconciliation:
 
GAAP cost of product revenue $ 11,123 $ 14,005 $ 23,467 $ 26,599
Non-cash stock-based compensation (1) 11 43 22 86
Amortization of acquired intangible assets (2)   97     4     166     4  
Non-GAAP cost of product revenue $ 11,015   $ 13,958   $ 23,279   $ 26,509  
 
GAAP cost of service revenue $ 3,420 $ 2,888 $ 6,895 $ 4,992
Non-cash stock-based compensation (1) 98 66 195 111
Amortization of acquired intangible assets (2)   88     79     170     79  
Non-GAAP cost of service revenue $ 3,234   $ 2,743   $ 6,530   $ 4,802  
 
GAAP gross margin $ 29,391 $ 30,142 $ 58,939 $ 55,020
Non-cash stock-based compensation (1) 109 109 217 197
Amortization of acquired intangible assets (2)   185     83     336     83  
Non-GAAP gross margin $ 29,685   $ 30,334   $ 59,492   $ 55,300  
 
GAAP sales and marketing expenses $ 15,729 $ 15,292 $ 30,405 $ 28,622
Non-cash stock-based compensation (1) 816 601 1,566 1,172
Amortization of acquired intangible assets (2)   72     9     140     9  
Non-GAAP sales and marketing expenses $ 14,841   $ 14,682   $ 28,699   $ 27,441  
 
GAAP research and development expenses $ 9,297 $ 8,014 $ 20,917 $ 15,262
Non-cash stock-based compensation (1) 683 559 1,317 1,000
Amortization of acquired intangible assets (2)   10     45     20     45  
Non-GAAP research and development expenses $ 8,604   $ 7,410   $ 19,580   $ 14,217  
 
GAAP general and administrative expenses $ 3,974 $ 3,669 $ 7,950 $ 6,782
Non-cash stock-based compensation (1) 839 673 1,582 1,233
Amortization of acquired intangible assets (2)   2     12     4     12  
Non-GAAP general and administrative expenses $ 3,133   $ 2,984   $ 6,364   $ 5,537  
 
GAAP operating expenses $ 29,000 $ 26,975 $ 59,272 $ 50,666
Non-cash stock-based compensation (1) 2,338 1,833 4,465 3,405
Amortization of acquired intangible assets (2)   84     66     164     66  
Non-GAAP operating expenses $ 26,578   $ 25,076   $ 54,643   $ 47,195  
 
GAAP operating income (loss) $ 391 $ 3,167 $ (333 ) $ 4,354
Non-cash stock-based compensation (1) 2,447 1,942 4,682 3,602
Amortization of acquired intangible assets (2)   269     149     500     149  
Non-GAAP operating income $ 3,107   $ 5,258   $ 4,849   $ 8,105  
 
GAAP other income (expense), net $ 247 $ (86 ) $ 378 $ (219 )
Gain on bargain purchase (4)   (365 )   -     (365 )   -  
Non-GAAP other income (expense), net $ (118 ) $ (86 ) $ 13   $ (219 )
 
GAAP income tax expense $ 80 $ 976 $ 9 $ 1,641
Income tax effect (3)   803     -     1,465     -  
Non-GAAP income tax expense $ 883   $ 976   $ 1,474   $ 1,641  
 
GAAP net income $ 730 $ 3,141 $ 493 $ 5,273
Non-cash stock-based compensation (1) 2,447 1,942 4,682 3,602
Amortization of acquired intangible assets (2) 269 149 500 149
Income tax effect (3) (803 ) - (1,465 ) -
Gain on bargain purchase (4)   (365 )   -     (365 )   -  
Non-GAAP net income $ 2,278   $ 5,232   $ 3,845   $ 9,024  
 
 
GAAP net income per common share - basic $ 0.01 $ 0.05 $ 0.01 $ 0.09
Non-cash stock-based compensation (1) 0.05 0.04 0.07 0.06
Amortization of acquired intangible assets (2) 0.00 0.00 0.01 0.00
Income tax effect (3) (0.01 ) - (0.02 ) -
Gain on bargain purchase (4)   (0.01 )   -     (0.01 )   -  
Non-GAAP net income per common share - basic $ 0.04   $ 0.09   $ 0.06   $ 0.15  
 
GAAP net income per common share - diluted $ 0.01 $ 0.05 $ 0.01 $ 0.08
Non-cash stock-based compensation (1) 0.05 0.03 0.07 0.05
Amortization of acquired intangible assets (2) 0.00 0.00 0.01 0.00
Income tax effect (3) (0.01 ) - (0.02 ) -
Gain on bargain purchase (4)   (0.01 )   -     (0.01 )   -  
Non-GAAP net income per common share - diluted $ 0.04   $ 0.08   $ 0.06   $ 0.13  
 
Shares used in per common share calculations:
Basic 60,232 58,720 60,104 58,350
Diluted 62,847 66,569 62,675 66,936
 
 
Footnotes - Adjustments
 

(1) Represents non-cash compensation charges associated with stock options granted and accounted for in accordance with the fair market provisions of Statement of Financial Accounting Standards No. 123(R) as follows:

 
For the three months ended For the six months ended
July 31, July 31,
2009   2008   2009   2008  
 
Cost of product revenue $ 11 $ 43 $ 22 $ 86
Cost of services revenue 98 66 195 111
Sales and marketing 816 601 1,566 1,172
Research and development 683 559 1,317 1,000
General and administrative   839     673     1,582     1,233  
Total non-cash stock-based compensation expense $ 2,447   $ 1,942   $ 4,682   $ 3,602  
 
 
(2) Represents amortization of acquired intangible assets:
 
For the three months ended For the six months ended
July 31, July 31,
2009   2008   2009   2008  
 
Cost of product revenue $ 97 $ 4 $ 166 $ 4
Cost of services revenue 88 79 170 79
Sales and marketing 72 9 140 9
Research and development 10 45 20 45
General and administrative   2     12     4     12  
Total amortization expense $ 269   $ 149   $ 500   $ 149  
 

(3) Income tax effect of excluding stock-based compensation, amortization of acquired intangible assets and gain on bargain purchase. There was no adjustment for the comparable period in FY2009.

 

(4) Represents gain on bargain purchase resulting from the value of identifiable net assets acquired exceeding the value of the purchase price for Netezza's acquisition of Tizor Systems, Inc.

 

Contacts

Netezza Corporation
Investor Contact:
Patrick J. Scannell, Jr., +1 508-382-8200
Senior Vice President & Chief Financial Officer
ir@netezza.com
or
Media Contact:
Glen Zimmerman, +1 508-382-8267
Director, Public Relations
gzimmerman@netezza.com

 

Source: Netezza Corporation