NETEZZA ANNOUNCES SECOND QUARTER FISCAL YEAR 2011 FINANCIAL RESULTS

 

Marlborough, MA—August 26, 2010— 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, 2010.

“The momentum we are experiencing this year has resulted in strong financial results for Netezza this quarter, with record revenues and operating income,” said Jim Baum, Netezza’s President and Chief Executive Officer. “Our customers and partners continue to embrace our value proposition and technology. We are excited about our opportunities as we continue to help organizations maximize their use of high-performance data analytics to make critical time-sensitive decisions, predict future events, and dramatically enhance the way they do business.”

Total revenue for the second quarter of fiscal 2011 (fiscal year ending January 31, 2011) increased 45% to $63.8 million compared to $43.9 million for the second quarter of fiscal 2010. Total revenue for the six months ended July 31, 2010 increased 37% to $122.0 million compared to $89.3 million for the same period one year ago.

GAAP net income for the second quarter of fiscal 2011 was $3.2 million, or $0.05 per diluted share, compared to GAAP net income of $0.7 million, or $0.01 per diluted share, for the second quarter of fiscal 2010. GAAP net income for the six months ended July 31, 2010 was $5.9 million, or $0.09 per diluted share, compared to GAAP net income of $0.5 million, or $0.01 per diluted share, for the same period one year ago.

Non-GAAP net income for the second quarter of fiscal 2011 was $5.8 million, or $0.09 per diluted share, compared to non-GAAP net income of $2.3 million, or $0.04 per diluted share, for the second quarter of fiscal 2010. Non-GAAP net income for the six months ended July 31, 2010 was $10.7 million, or $0.16 per diluted share, compared to non-GAAP net income of $3.8 million, or $0.06 per diluted share, for the same period one year ago.

Non-GAAP net income and non-GAAP net income per diluted 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

“We are very pleased with the results for our second fiscal quarter,” said Patrick Scannell, Netezza’s Senior Vice President and Chief Financial Officer. “Our performance in the first half of the fiscal year reflected strength in our business across all verticals, and we expect to see this continue. As a result, we are increasing our guidance for the full fiscal year to approximately 30% annual revenue growth. We will continue to invest across the organization during the second half of the year and expect operating margin improvement year over year.”

Conference Call Information

Date: August 26, 2010

Time: 4:30 p.m. Eastern Time

Toll-free North America: +1-866-730-5763

International dial-in number: +1-857-350-1587

Passcode: 25643884

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 41876413.

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, analytic and monitoring 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, the United Kingdom, Germany, France, Poland, Japan, Korea, Australia and Singapore. For more information about Netezza, please visit www.netezza.com.

Forward Looking Statements

The statements set forth in this press release 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, among others: market demand for and acceptance of our products; adverse changes in economic conditions; quarterly fluctuation of our business; our limited history of profitability; our dependence on a single product family for nearly all of our revenue; 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” sections of Netezza's Annual Report on Form 10-K for the year ended January 31, 2010, and Netezza’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2010, each of 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 26, 2010. 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 26, 2010.

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 to measure stock-based compensation expense, 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 consideration transferred for Netezza’s acquisition of Tizor Systems, Inc. Since Netezza had no gain on bargain purchase in any other 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® and the Netezza “N” 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
(Unaudited)
(In thousands)
     
 
July 31, January 31,
2010 2010
 
ASSETS
 
Current assets
Cash and cash equivalents $ 66,567 $ 40,638
Short-term marketable securities 69,777 64,020
Accounts receivable 32,376 53,450
Inventory 32,160 28,708
Deferred tax assets, net 17,168 14,490
Restricted cash 60 60
Prepaid expenses and other current assets   9,456   4,675
Total current assets 227,564 206,041
 
Property and equipment, net 11,012 8,469
Deferred tax assets, net 10,290 12,048
Goodwill 2,000 2,000
Intangible assets, net 3,561 4,056
Long-term marketable securities 42,224 49,769
Restricted cash 439 639
Other long-term assets   906   575
 
 
Total assets $ 297,996 $ 283,597
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities
Accounts payable $ 6,537 $ 12,604
Accrued expenses 9,767 5,906
Accrued compensation and benefits 7,906 6,776
Current portion of deferred revenue   44,799   49,665
Total current liabilities 69,009 74,951
 
Long-term deferred revenue 11,665 8,727
Other long-term liabilities   2,332   2,326
 
Total liabilities 83,006 86,004
 
Stockholders' equity   214,990   197,593
 
 
Total liabilities and stockholders' equity $ 297,996 $ 283,597

 

Netezza Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
       
 
 
Three months ended Six months ended
July 31, July 31,
2010 2009 2010 2009
 
Revenue
Product $ 47,276 $ 29,969 $ 90,113 $ 62,671
Services   16,531     13,965   31,868     26,630  
Total revenue 63,807 43,934 121,981 89,301
 
Cost of revenue
Product 17,259 11,123 32,704 23,467
Services   5,316     3,420   9,646     6,895  
Total cost of revenue   22,575     14,543   42,350     30,362  
 
Gross margin 41,232 29,391 79,631 58,939
 
Operating expenses
Sales and marketing 20,922 15,729 40,072 30,405
Research and development 10,951 9,297 21,780 20,917
General and administrative   4,408     3,974   8,958     7,950  
Total operating expenses 36,281 29,000 70,810 59,272
       
Operating income (loss) 4,951 391 8,821 (333 )
 
Interest income 243 197 529 507
Interest expense - 25 - 50
Other income (expense), net   (87 )   247   (133 )   378  
 
Income before income tax expense 5,107 810 9,217 502
 
Income tax expense   1,923     80   3,361     9  
 
Net income $ 3,184   $ 730 $ 5,856   $ 493  
 
 
Net income per share
Basic $ 0.05 $ 0.01 $ 0.10 $ 0.01
Diluted $ 0.05 $ 0.01 $ 0.09 $ 0.01
 
Weighted average common shares outstanding
Basic 61,941 60,232 61,569 60,104
Diluted 65,938 62,847 65,283 62,675

 

Netezza Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(In thousands, except per share amounts)
       
 
Three months ended Six months ended
July 31, July 31,
2010 2009 2010 2009
 
Non-GAAP financial measures and reconciliation:
 
GAAP cost of product revenue $ 17,259 $ 11,123 $ 32,704 $ 23,467
Non-cash stock-based compensation (1) 30 11 53 22
Amortization of acquired intangible assets (2)   97     97     191     166  
Non-GAAP cost of product revenue $ 17,132   $ 11,015   $ 32,460   $ 23,279  
 
GAAP cost of services revenue $ 5,316 $ 3,420 $ 9,646 $ 6,895
Non-cash stock-based compensation (1) 185 98 331 195
Amortization of acquired intangible assets (2)   53     88     138     170  
Non-GAAP cost of services revenue $ 5,078   $ 3,234   $ 9,177   $ 6,530  
 
GAAP gross margin $ 41,232 $ 29,391 $ 79,631 $ 58,939
Non-cash stock-based compensation (1) 215 109 384 217
Amortization of acquired intangible assets (2)   150     185     329     336  
Non-GAAP gross margin $ 41,597   $ 29,685   $ 80,344   $ 59,492  
 
GAAP sales and marketing expenses $ 20,922 $ 15,729 $ 40,072 $ 30,405
Non-cash stock-based compensation (1) 1,172 816 2,194 1,566
Amortization of acquired intangible assets (2)   74     72     144     140  
Non-GAAP sales and marketing expenses $ 19,676   $ 14,841   $ 37,734   $ 28,699  
 
GAAP research and development expenses $ 10,951 $ 9,297 $ 21,780 $ 20,917
Non-cash stock-based compensation (1) 892 683 1,720 1,317
Amortization of acquired intangible assets (2)   9     10     18     20  
Non-GAAP research and development expenses $ 10,050   $ 8,604   $ 20,042   $ 19,580  
 
GAAP general and administrative expenses $ 4,408 $ 3,974 $ 8,958 $ 7,950
Non-cash stock-based compensation (1) 1,150 839 2,110 1,582
Amortization of acquired intangible assets (2)   2     2     4     4  
Non-GAAP general and administrative expenses $ 3,256   $ 3,133   $ 6,844   $ 6,364  
 
GAAP operating expenses $ 36,281 $ 29,000 $ 70,810 $ 59,272
Non-cash stock-based compensation (1) 3,214 2,338 6,024 4,465
Amortization of acquired intangible assets (2)   85     84     166     164  
Non-GAAP operating expenses $ 32,982   $ 26,578   $ 64,620   $ 54,643  
 
GAAP operating income (loss) $ 4,951 $ 391 $ 8,821 $ (333 )
Non-cash stock-based compensation (1) 3,429 2,447 6,408 4,682
Amortization of acquired intangible assets (2)   235     269     495     500  
Non-GAAP operating income $ 8,615   $ 3,107   $ 15,724   $ 4,849  
 
GAAP other income (expense), net $ (87 ) $ 247 $ (133 ) $ 378
Gain on bargain purchase (4)   -     (365 )   -     (365 )
Non-GAAP other income (expense), net $ (87 ) $ (118 ) $ (133 ) $ 13  
 
GAAP income tax expense $ 1,923 $ 80 $ 3,361 $ 9
Income tax effect (3)   1,056     803     2,108     1,465  
Non-GAAP income tax expense $ 2,979   $ 883   $ 5,469   $ 1,474  
 
GAAP net income $ 3,184 $ 730 $ 5,856 $ 493
Non-cash stock-based compensation (1) 3,429 2,447 6,408 4,682
Amortization of acquired intangible assets (2) 235 269 495 500
Income tax effect (3) (1,056 ) (803 ) (2,108 ) (1,465 )
Gain on bargain purchase (4)   -     (365 )   -     (365 )
Non-GAAP net income $ 5,792   $ 2,278   $ 10,651   $ 3,845  
 
 
GAAP net income per share - basic $ 0.05 $ 0.01 $ 0.10 $ 0.01
Non-cash stock-based compensation (1) 0.06 0.05 0.10 0.07
Amortization of acquired intangible assets (2) 0.00 0.00 0.01 0.01
Income tax effect (3) (0.02 ) (0.01 ) (0.04 ) (0.02 )
Gain on bargain purchase (4)   -     (0.01 )   -     (0.01 )
Non-GAAP net income per share - basic $ 0.09   $ 0.04   $ 0.17   $ 0.06  
 
GAAP net income per share - diluted $ 0.05 $ 0.01 $ 0.09 $ 0.01
Non-cash stock-based compensation (1) 0.06 0.05 0.10 0.07
Amortization of acquired intangible assets (2) 0.00 0.00 0.01 0.01
Income tax effect (3) (0.02 ) (0.01 ) (0.04 ) (0.02 )
Gain on bargain purchase (4)   -     (0.01 )   -     (0.01 )
Non-GAAP net income per share - diluted $ 0.09   $ 0.04   $ 0.16   $ 0.06  
 
Weighted average common shares outstanding
Basic 61,941 60,232 61,569 60,104
Diluted 65,938 62,847 65,283 62,675
 
 
Footnotes - Adjustments
 
(1) Represents non-cash stock-based compensation expense as follows:
 
Three months ended Six months ended
July 31, July 31,
2010 2009 2010 2009
 
Cost of product revenue $ 30 $ 11 $ 53 $ 22
Cost of services revenue 185 98 331 195
Sales and marketing 1,172 816 2,194 1,566
Research and development 892 683 1,720 1,317
General and administrative   1,150     839     2,110     1,582  
Total non-cash stock-based compensation expense $ 3,429   $ 2,447   $ 6,408   $ 4,682  
 
 
(2) Represents amortization of acquired intangible assets:
 
Three months ended Six months ended
July 31, July 31,
2010 2009 2010 2009
 
Cost of product revenue $ 97 $ 97 $ 191 $ 166
Cost of services revenue 53 88 138 170
Sales and marketing 74 72 144 140
Research and development 9 10 18 20
General and administrative   2     2     4     4  
Total amortization expense $ 235   $ 269   $ 495   $ 500  
 
 
(3) Income tax effect of excluding stock-based compensation, amortization of acquired intangible assets and gain on bargain purchase.
 
 
(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