Segue (NASDAQ:SEGU)
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Company Increases Profit Guidance for 2005 from $2.25 million to
$2.7 million
Segue Software, Inc. (NASDAQ-CM: SEGU), a leader in Software
Quality Optimization(TM) (SQO(TM)), today announced that net revenues
for the third quarter ended September 30, 2005, totaled $9.1 million,
an increase of 8% over the $8.4 million reported in the third quarter
of 2004. Third quarter net income applicable to common shares
increased 17% to $824,000, or $0.07 per diluted share, compared to
$703,000, or $0.07 per diluted share, for the third quarter of 2004.
Net revenues for the nine months ended September 30, 2005, totaled
$26.4 million, an increase of 8% over the $24.5 million reported for
the first nine months of 2004. Net income applicable to common shares
for the first nine months of 2005 increased 50% to $1.8 million, or
$0.16 per diluted share, compared to $1.2 million, or $0.11 per
diluted share, for the comparable period in 2004.
As of September 30, 2005, Segue posted deferred revenues of $10.5
million, had no long-term debt and enjoyed a strong cash position of
$13.0 million, up from $9.9 million one year ago and $11.0 million as
of December 31, 2004.
"Our third quarter results represent a new milestone in Segue's
history--we now have achieved seven straight quarters of profitable
revenue growth," said Joseph Krivickas, president and chief executive
officer. "This is a result of consistent execution of our corporate
strategy and continued focus on our three strategic priorities:
profitable revenue growth, market-driven product innovations and
selective partnerships and alliances.
"As we look to the remainder of 2005, we now expect net income
applicable to common shares for the year will exceed $2.7 million, or
$0.24 per diluted share, topping our previous estimate of $2.25
million, or $0.20 per diluted share. We continue to expect our 2005
revenue to grow at an annual rate equal to or exceeding the market
growth rate of 8-10% projected by analysts for the overall Automated
Software Quality market. Our long term goal of generating annual
revenue of $50-60 million and net income before tax of $5-9 million in
2006 or 2007 remains unchanged."
Conference Call and Webcast
As previously announced, the Company will hold a conference call
today at 8:00 a.m. EDT to discuss third quarter financial results and
its 2005 outlook. To access the call from within the United States,
dial 1-800-247-9979. To access the call from outside the United
States, dial +1-973-409-9254. The call will also be available via
webcast on Segue's Web site at http://www.segue.com on the About
Segue/Investor Relations/Calendar of Events page. The Internet
broadcast will be available live on Segue's site and an archived
replay will be available for one year.
About Segue Software
Segue Software, Inc. (NASDAQ-CM: SEGU) is a global expert in
delivering solutions to define, measure, manage and improve software
quality throughout the entire software application lifecycle. Segue's
Software Quality Optimization(TM) (SQO(TM)) solutions help companies
reduce business risk, ensure the deployment of high quality software
and increase return on investment. Leading businesses around the
world, including many of the Fortune 500, rely on Segue's innovative
Silk family of products to protect their business service levels,
competitive edge and brand reputation. Headquartered in Lexington,
Mass., with offices across North America and Europe, Segue can be
reached at +1-781-402-1000 or www.segue.com.
Segue and the Segue logo are registered trademarks and Software
Quality Optimization and SQO are trademarks of Segue Software, Inc.
All other marks are the property of their respective owners.
This press release may contain forward-looking statements, such as
our financial projections for 2005 and beyond. Forward-looking
statements are statements that contain predictions or projections of
future events or performance, and often contain words such as
"anticipates", "can", "estimates", "believe", "expects", "projects",
"will", "might", or other words indicating a statement about the
future. The Company notes that any such forward-looking statements are
subject to change and are not guarantees of future performance, and
that actual results may differ materially from any such predictions or
projections, based on various important factors and including, without
limitation, the ability of the Company to continue to achieve positive
cash flow and sustain profitability in this difficult economic and
business climate; the ability of the Company to close large enterprise
orders; the Company's transition to a new management team; the timing
and success of introductions of our new products; market acceptance of
recently-introduced products (including SilkCentral Test Manager 8.0)
and updated releases; the effectiveness of our additional distributors
and resellers; growth in license revenue; new products and
announcements from other companies; the Company's continued access to
capital; and changes in technology and industry standards. Additional
information on the factors that could affect the Company's business
and financial results is included in the Company's periodic reports
filed with the Securities and Exchange Commission.
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Segue Software, Inc.
Consolidated Condensed Balance Sheets
(In thousands, except per share data)
(Unaudited)
September December
30, 31,
2005 2004
--------- --------
ASSETS
Current assets:
Cash and cash equivalents $12,994 $11,028
Accounts receivable, net of allowances
of $303 and $281, respectively 7,302 6,421
Other current assets 1,168 1,013
--------- --------
Total current assets 21,464 18,462
Property and equipment, net 805 749
Goodwill, net 1,506 1,506
Other assets 486 604
--------- --------
Total assets $24,261 $21,321
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,372 $564
Accrued compensation and benefits 1,416 1,602
Accrued lease obligations on excess space 764 1,059
Accrued expenses 845 1,134
Deferred revenue 10,530 10,524
--------- --------
Total current liabilities 14,927 14,883
Stockholders' equity:
Preferred stock, par value $.01 per share;
9,000 shares authorized; 949 and 921 shares
of Series B and 605 and 570 shares of Series
C preferred stock issued and outstanding,
respectively 5,090 4,726
Common stock, par value $.01 per share;
30,000 shares authorized; 10,460 and 10,195
shares issued, respectively 104 102
Additional paid-in capital 58,279 57,959
Cumulative translation adjustment 243 429
Unearned stock-based compensation (27) (47)
Accumulated deficit (53,755) (56,131)
--------- --------
9,934 7,038
Less treasury stock, at cost, 145 shares (600) (600)
--------- --------
Total stockholders' equity 9,334 6,438
--------- --------
Total liabilities and stockholders'
equity $24,261 $21,321
========= ========
Segue Software, Inc.
Consolidated Condensed Statements of Operations
(In thousands, except per share data)
Unaudited
Three Months Nine Months
Ended Ended
September 30, September 30,
2005 2004 2005 2004
--------- ------- --------- --------
Revenue:
Software $3,936 $3,766 $11,244 $10,938
Services 5,263 4,711 15,383 13,659
--------- ------- --------- --------
Gross revenue 9,199 8,477 26,627 24,597
Less vendor consideration to
a customer (123) (46) (248) (104)
--------- ------- --------- --------
Net revenue 9,076 8,431 26,379 24,493
Cost of revenue:
Cost of software 86 82 297 259
Cost of services 1,172 1,217 3,558 3,823
--------- ------- --------- --------
Total cost of revenue 1,258 1,299 3,855 4,082
Gross margin 7,818 7,132 22,524 20,411
Operating expenses:
Sales and marketing 3,906 3,478 11,182 10,439
Research and development 1,673 1,550 5,443 4,835
General and administrative 1,323 1,176 3,767 3,404
--------- ------- --------- --------
Total operating expenses 6,902 6,204 20,392 18,678
--------- ------- --------- --------
Income from operations 916 928 2,132 1,733
Other income, net - - - 15
Interest income, net 76 23 190 60
--------- ------- --------- --------
Income before provision for
income taxes 992 951 2,322 1,808
Provision (benefit) for income
taxes (26) 61 (54) 63
--------- ------- --------- --------
Net income 1,018 890 2,376 1,745
Preferred stock dividend-in-kind (194) (187) (558) (527)
--------- ------- --------- --------
Net income applicable to common
shares $824 $703 $1,818 $1,218
========= ======= ========= ========
Net income per common share -
Basic $0.08 $0.07 $0.18 $0.12
Net income per common share -
Diluted $0.07 $0.07 $0.16 $0.11
Weighted average common shares
outstanding - Basic 10,268 9,962 10,218 9,827
Weighted average common shares
outstanding - Diluted(a) 11,334 10,604 11,361 10,622
(a) The assumed conversion of preferred shares into common shares is
not included because their inclusion would be anti-dilutive.
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