Micromuse (NASDAQ:MUSE)
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Micromuse Inc. (Nasdaq: MUSE)
-- Q4 2005 revenues of $44.7 million for the quarter; 23% higher
than Q4 2004
-- Q4 adjusted (non-GAAP) earnings per share of $0.06; GAAP
earnings per share of $0.02
-- FY 2005 revenues of $160.8 million for the year; 10% higher
than FY 2004
-- FY 2005 adjusted (non-GAAP) earnings per share of $0.21; GAAP
loss per share of ($0.05)
Micromuse Inc. (Nasdaq: MUSE), the leading provider of
ultra-scalable, realtime business and service assurance software,
today announced that fourth quarter 2005 net revenues were $44.7
million, an increase of 23% over $36.3 million in the fourth quarter
of 2004. Adjusted (or non-GAAP) net income was $4.7 million, or $0.06
per share, versus $5.6 million, or $0.07 per share, in the fourth
quarter a year ago. Net income on a GAAP basis for the fourth quarter
of 2005 was $1.9 million, or $0.02 per share, compared to a net income
of $4.9 million, or $0.06 per share, in the fourth quarter a year ago.
Fiscal year 2005 net revenues were $160.8 million, an increase of
10% over $146.6 million in 2004. Adjusted net income was $17.1
million, or $0.21 per share, compared with adjusted net income of
$14.1 million, or $0.17 per share, in fiscal year 2004. This
represents an increase of 24% on a per share basis. Net loss on a GAAP
basis was $3.8 million, or ($0.05) per share, compared with GAAP net
income of $4.4 million, or $0.05 per share, in fiscal year 2004.
Adjusted (or non-GAAP) results, as presented in the attached
reconciliation table, exclude amortization of intangibles from
acquisitions, in-process research and development write-off,
amortization of deferred stock-based compensation and other items such
as restructuring charges and credits, restatement and forensic
accounting expenses, severance expenses, expenses related to the
settlement of securities and patent lawsuits, a non-cash facilities
expense, and related tax effects. In addition, as Micromuse begins to
apply FAS 123(R) in Fiscal 2006, adjusted (non-GAAP) results will also
exclude stock-based compensation expenses associated with the adoption
of FAS 123(R).
Cash and cash equivalents, short-term investments and long-term
investments were $159.9 million as of September 30, 2005.
"Fiscal 2005 was another year of excellent performance for
Micromuse," said Lloyd Carney, CEO of Micromuse. "We achieved double
digit revenue growth and adjusted earnings per share growth in excess
of 20% for the second consecutive year, and we increased deferred
revenues by 80%. We also accomplished our main operational goals for
the year in the areas of partnership expansion, training and
education, and product integration. We have continued confidence in
the outlook for our business in FY06, and are providing guidance for
the full fiscal year for the first time. Revenues for fiscal year 2006
are estimated to be in the $195-$200 million range, with adjusted
(non-GAAP) earnings per share of $0.27-$0.29. Revenues for the first
quarter of fiscal 2006 are estimated to be in the $44-$46 million
range, with adjusted (non-GAAP) EPS of $0.03-$0.04. We are unable to
provide earnings per share guidance on a GAAP basis as we are still
assessing the impact of adopting FAS 123R, which addresses the
accounting treatment of stock-based compensation. This guidance also
reflects continued investment in pre-sales and professional services
staff to support demand for recently acquired Quallaby and GuardedNet
products."
The Company has also decided to change its fiscal year end from
September 30 to October 31 in order to better align with the buying
patterns of its largest customers.
Q4 2005 Conference Call, Webcast, and Replay Information
Micromuse will host a conference call and simultaneous webcast on
Wednesday, November 16, 2005 at 2:00 PM PT, 5:00 PM ET to announce
adjusted and GAAP results for the fourth quarter and fiscal year 2005.
The live call will be available to the general public by dialing
866-831-5605 (domestic) or 617-213-8851 (international) and entering
access code 10159965. A live webcast of the conference call will be
available at
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=MUSE&script=210
0 (Due to its length, this URL may need to be copied/pasted into
your Internet browser's address field. Remove the extra space if one
exists.) or via a link from the Micromuse web site at
http://www.micromuse.com/.
A replay of this conference call will be available by dialing
888-286-8010 (domestic) or 617-801-6888 (international) and entering
access code 99286370. The replay will be available from Wednesday,
November 16, 2005 at 7:00 PM PT until Wednesday, November 23, 2005 at
11:59 PM PT. The replay will also be available as an archived audio
file at http://www.micromuse.com/.
About Micromuse
Micromuse Inc. (Nasdaq: MUSE) is the leading provider of
ultra-scalable, realtime business and service assurance software
solutions. The Netcool(R) software suite provides organizations with
the assurance that their IT systems are supporting and driving profits
24 hours a day. Unlike traditional infrastructure management systems,
Netcool solutions provide realtime end-to-end visibility and accurate
troubleshooting from a business perspective. Such business
intelligence allows organizations to respond to problems quickly,
streamline workflow processes and improve business uptime. Micromuse
customers include BT, Cable & Wireless, Deutsche Telekom, EarthLink,
ITC DeltaCom, JPMorgan Chase, MCI, T-Mobile, and Verizon. Headquarters
are located at 650 Townsend Street, Suite 475, San Francisco, Calif.
94103; (415) 568-9800. The Web site is at www.micromuse.com.
Micromuse and Netcool are registered trademarks of Micromuse Ltd.
All other trademarks and registered trademarks in this document are
the properties of their respective owners.
Any statements contained in this press release that do not
describe historical facts may constitute forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act
of 1995. Any forward-looking statements we make are based on current
expectations, and are subject to a number of risks and uncertainties.
Actual results could differ materially.
Factors that could cause actual future results to differ
materially from the forward-looking statements include: fluctuations
in customer demand; the Company's ability to manage its growth
(including the ability to hire sufficient sales and technical
personnel); risks associated with the expansion of the Company's
distribution channels; risk of new product introductions and customer
acceptance of new products; rapid technological change which
characterizes the Company's markets; risks associated with
competition; risks associated with international sales; and the
ability of the Company to compete successfully in the future; as well
as risks relating to pending litigation, the completed restatement of
certain of our financial statements, and other matters appearing under
the caption "Risk Factors" in the Company's most recent Quarterly
Reports on Form 10-Q and Form 10-K filed with the SEC and available on
the Company's website. The Company disclaims any obligation or
intention to update or revise any forward-looking statements.
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MICROMUSE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
ASSETS
September September
30, 30,
2005 2004
--------- ---------
Assets:
Cash and cash equivalents $ 55,657 $ 38,232
Short-term investments 87,422 24,469
Long-term investments 16,811 130,873
--------- ---------
Total cash, cash equivalents and
investments 159,890 193,574
Accounts receivable, net 39,790 19,901
Prepaid expenses and other assets 12,307 8,893
Property and equipment, net 7,396 5,002
Goodwill 95,205 50,240
Other intangible assets, net 18,250 6,743
--------- ---------
$332,838 $284,353
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 4,118 $ 4,283
Accrued expenses 32,446 20,408
Income taxes payable 7,869 6,460
Deferred revenue 78,980 43,935
--------- ---------
Total liabilities 123,413 75,086
Stockholders' equity
Preferred stock; $0.01 par value;
5,000 shares authorized; no shares issued
and outstanding - -
Common stock; $0.01 par value; 200,000 shares
authorized; 82,434 and 79,982 shares
outstanding as of September 30, 2005 and
September 30, 2004, respectively 824 800
Additional paid-in capital 232,009 216,580
Treasury stock; 3,009 and 1,400 shares as of
September 30, 2005 and 2004, respectively (17,066) (7,147)
Accumulated other comprehensive loss (3,383) (1,833)
Retained earnings (2,959) 867
--------- ---------
Total stockholders' equity $209,425 $209,267
---------- ---------
$332,838 $284,353
========== =========
MICROMUSE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three months
ended Year ended
September 30, September 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
License $24,116 $17,699 $81,097 $75,996
Maintenance and services 20,601 18,579 79,662 70,581
-------- -------- -------- --------
Total revenues 44,717 36,278 160,759 146,577
-------- -------- -------- --------
Cost of revenues:
License 1,580 848 6,615 5,203
Maintenance and services 5,132 3,527 15,956 11,983
Amortization of developed
technology 986 1,393 4,200 5,908
-------- -------- -------- --------
Total cost of revenues 7,698 5,768 26,771 23,094
-------- -------- -------- --------
Gross profit 37,019 30,510 133,988 123,483
-------- -------- -------- --------
Operating expenses:
Sales and marketing 15,767 12,073 61,991 59,254
Research and development 11,110 7,306 35,100 31,427
General and administrative 7,856 6,220 27,008 24,236
Restatement and related
litigation 196 209 643 5,634
Stock based compensation 492 - 1,419 553
Amortization of intangible
assets 432 53 893 196
In-process R&D write-off - - 2,200 -
Litigation settlement expense - - 10,900 -
Other items* - - 1,304 -
Restructuring charge (credit) - - (281) -
-------- -------- -------- --------
Total operating expenses 35,853 25,861 141,177 121,300
-------- -------- -------- --------
Income (loss) from
operations 1,166 4,649 (7,189) 2,183
Other income, net 1,388 982 5,304 3,847
-------- -------- -------- --------
Income (loss) before income
taxes 2,554 5,631 (1,885) 6,030
Income tax provision 647 704 1,941 1,642
-------- -------- -------- --------
Net income (loss) $ 1,907 $ 4,927 $(3,826) $ 4,388
======== ======== ======== ========
Per share data:
Basic net income (loss) $ 0.02 $ 0.06 $ (0.05) $ 0.06
Diluted net income (loss) $ 0.02 $ 0.06 $ (0.05) $ 0.05
Weighted average shares used in
computing:
Basic net income (loss) per
share 79,873 78,833 79,251 78,479
Diluted net income (loss) per
share 82,765 79,852 79,251 80,957
* Other items consists of executive severance and forensic
accounting expense.
MICROMUSE INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three months
ended Year ended
September 30, September 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
License $24,116 $17,699 $81,097 $75,996
Maintenance and services 20,601 18,579 79,662 70,581
-------- -------- -------- --------
Total revenues 44,717 36,278 160,759 146,577
-------- -------- -------- --------
Cost of revenues:
License 1,580 848 6,615 5,203
Maintenance and services 5,028 3,527 15,852 11,983
-------- -------- -------- --------
Total cost of revenues 6,608 4,375 22,467 17,186
-------- -------- -------- --------
Gross profit 38,109 31,903 138,292 129,391
-------- -------- -------- --------
Operating expenses:
Sales and marketing 15,525 12,073 61,749 59,254
Research and development 10,807 7,306 34,797 31,427
General and administrative 7,722 6,220 26,874 24,236
-------- -------- -------- --------
Total operating expenses 34,054 25,599 123,420 114,917
-------- -------- -------- --------
Income from operations 4,055 6,304 14,872 14,474
Other income, net 1,388 982 5,304 3,847
-------- -------- -------- --------
Income before income taxes 5,443 7,286 20,176 18,321
Income tax provision 762 1,676 3,126 4,214
-------- -------- -------- --------
Net income $ 4,681 $ 5,610 $17,050 $14,107
======== ======== ======== ========
Per share data:
Basic net income $0.06 $0.07 $0.22 $0.18
Diluted net income $0.06 $0.07 $0.21 $0.17
Weighted average shares used in
computing:
Basic net income per share 79,873 78,833 79,251 78,479
Diluted net income per share 82,765 79,852 81,794 80,957
Certain non-cash expenses for our former San Francisco facility,
which were $783, are included in the following line items in our GAAP
financial statements: $104 in cost of revenues -- maintenance and
services, $242 in sales and marketing, $303 in research and
development, and $134 in general and administrative expenses. These
costs are excluded from our non-GAAP financial statements presented
above.
MICROMUSE INC.
RECONCILIATION BETWEEN NET INCOME ON A GAAP AND NON-GAAP BASIS
(Unaudited)
(In thousands, except per share data)
Three months
ended Year ended
September 30, September 30,
-----------------------------------
2005 2004 2005 2004
-------- -------- -------- --------
GAAP net income - $ 1,907 $ 4,927 $(3,826) $ 4,388
Add:
Amortization of developed
technology and other
intangible assets 1,418 1,446 5,093 6,104
Restructuring charge (credit) - - (281) -
Restatement and related
litigation 196 209 643 5,634
Stock based compensation 492 - 1,419 553
In-process R&D write-off - - 2,200 -
Litigation settlement expense - - 10,900 -
Non-cash facilities expense 783 - 783 -
Other items - - 1,304 -
Income tax effect (115) (972) (1,185) (2,572)
-------- -------- -------- --------
NON-GAAP net income - $ 4,681 $ 5,610 $17,050 $14,107
======== ======== ======== ========
Diluted earnings per share
reconciliation:
GAAP earnings per share - $ 0.02 $ 0.06 $ (0.05) $ 0.05
Add:
Amortization of developed
technology and other intangible
assets 0.02 0.02 0.06 0.07
Restructuring charge (credit) - - - -
Restatement and related
litigation - - 0.01 0.07
Stock based compensation 0.01 - 0.02 0.01
In-process R&D write-off - - 0.03 -
Litigation settlement expense - - 0.13 -
Non-cash facilities expense 0.01 - 0.01 -
Other items - - 0.02 -
Income tax effect - (0.01) (0.02) (0.03)
-------- -------- -------- --------
NON-GAAP diluted earnings per
share - $ 0.06 $ 0.07 $ 0.21 $ 0.17
======== ======== ======== ========
Shares used in computing diluted
earnings per share - 82,765 79,852 81,794 80,957
======== ======== ======== ========
The non-GAAP condensed consolidated statement of operations and
non-GAAP earnings guidance are presented for informational purposes
only as an alternative view of the Company's operating results and
guidance. In the calculation of the Company's non-GAAP earnings
results, and in the provision of non-GAAP earnings guidance, Micromuse
excludes certain items such as the amortization of developed
technology and other intangibles assets, restructuring charges
(credits), the cost of the restatement and related litigation, certain
stock-based compensation costs, in-process research and development
write-offs, litigation settlement expenses, a non-cash facilities
expense, other items, and their related income tax effects. In
addition, as Micromuse begins to apply FAS 123(R) in Fiscal 2006,
non-GAAP results will also exclude stock-based compensation expense
associated with the adoption of FAS 123(R). Micromuse believes that
excluding these items provides investors with a representation of the
Company's core performance, and may be more meaningful in analyzing
the results of operations and income generation. The non-GAAP
condensed consolidated statement of operations should not be
considered as a substitute for financial information presented in
accordance with generally accepted accounting principles, and may be
different from non-GAAP measures used by other companies.
*T