Pervasive Software® Inc. (NASDAQ: PVSW), a global leader in
cloud-based and on-premises data innovation, today announced
financial results for the second quarter ending December 31,
2012.
For the second quarter ended December 31, 2012:
- Revenue was $12.5 million, consistent
with the company's $11.8 million to $12.8 million expectations
communicated on October 23, 2012, and compared to $11.9 million for
the second quarter of last fiscal year. Domestic revenue totaled
$8.4 million or 67%, while international revenue totaled $4.1
million or 33%.
- Net income was $0.4 million, or $0.03
diluted earnings per share, net of a $0.02 negative impact from
unsolicited proposal costs, at the high end of expectations in the
range of $0.01 to $0.04 excluding unsolicited proposal costs as
communicated on October 23, 2012, and compared to net income of
$0.5 million, or $0.03 diluted earnings per share, for the second
quarter of last fiscal year.
- On a non-GAAP basis, as described
below, Pervasive realized net income of $1.1 million, or $0.06
diluted earnings per share, at the high end of expectations in the
range of $0.03 to $0.06 excluding unsolicited proposal costs as
communicated on October 23, 2012, and compared to net income of
$0.8 million, or $0.05 diluted earnings per share, in the second
quarter of last fiscal year. Non-GAAP results exclude amortization
of purchased intangibles, stock-based compensation expense and
costs associated with the unsolicited Actian Proposal and Related
Solicitation of Potential Bids ("unsolicited proposal costs"), and
assume a non-GAAP effective tax rate of 34%.
Pervasive continued to maintain a solid cash position in the
second quarter of fiscal 2013, ending the quarter with
approximately $45.7 million in cash and marketable securities.
Database and integration products represented approximately 59% and
36%, respectively, of total revenue while Pervasive Business
Xchange™ and Big Data & Analytics products made up the
remainder. The Company had 263 employees at December 31, 2012.
Pending Merger Transaction
On January 28, 2013, the Company entered into an Agreement and
Plan of Merger (the “Merger Agreement”) with Actian Corporation, a
Delaware corporation (“Actian”), and Actian Sub II, Inc., a
Delaware corporation and wholly owned subsidiary of Actian,
pursuant to which Actian will acquire, subject to certain
exceptions, all of the outstanding shares of the Company’s common
stock for a purchase price of $9.20 per share in cash. The merger
is currently expected to close in the second calendar quarter of
2013 and is subject to customary closing conditions, including
approval by Pervasive’s stockholders, Hart-Scott-Rodino anti-trust
clearance, Securities and Exchange Commission clearance and stock
exchange approvals.
TC Lending, LLC, a subsidiary of TPG Specialty Lending, Inc.,
has committed to provide debt financing for the transaction,
subject to certain terms and conditions. Shea & Company, LLC
serves as financial advisor to the Board of Directors of Pervasive
Software.
In light of this ongoing process, the company is not hosting the
customary conference call following today's earnings release.
Additional Information about the Pending Merger and Where to
Find It
This communication may be deemed to be solicitation material in
respect of the pending merger of the Company with a subsidiary of
Actian. In connection with the pending transaction, the Company
intends to file a preliminary proxy statement and other relevant
materials with the Securities and Exchange Commission (“SEC”), and
intends to file a definitive proxy statement and other relevant
materials. The definitive proxy statement will be sent or given to
the stockholders of the Company and will contain important
information about the pending transaction and related matters.
BEFORE MAKING ANY VOTING DECISION, PERVASIVE SOFTWARE STOCKHOLDERS
ARE URGED TO READ THE PROXY STATEMENT AND THOSE OTHER MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE COMPANY AND THE PENDING TRANSACTION. The
proxy statement and other relevant materials (when they become
available), and any other documents filed by Pervasive Software
with the SEC, may be obtained free of charge at the SEC’s website
at www.sec.gov. In addition, security holders will be able to
obtain free copies of the proxy statement from Pervasive Software
by contacting Pervasive Software’s Investor Relations by telephone
at 800.287.4383, or by mail at Pervasive Software Inc., 12365 Riata
Trace Pkwy, Austin, Texas 78727, Attention: Investor Relations, or
by going to Pervasive Software’s Investor Relations page on its
corporate web site at www.pervasive.com.
Participants in the Solicitation
Pervasive Software and its directors and executive officers may
be deemed to be participants in the solicitation of proxies from
the stockholders of Pervasive Software in connection with the
pending merger. Information regarding the interests of these
directors and executive officers in the transaction described
herein will be included in the proxy statement described above.
Additional information regarding these directors and executive
officers is included in Pervasive Software’s Annual Proxy Statement
on Form DEF 14A, which was filed with the SEC on October 5,
2012.
About Pervasive Software
Pervasive is a global data innovation leader, delivering
software to manage, integrate and analyze data, in the cloud or
on-premises, throughout the entire data lifecycle. Pervasive
products deliver value to tens of thousands of customers worldwide,
often embedded within partners' software, with breakthrough
performance, flexibility, reliability and return on investment. For
additional information, go to www.pervasive.com.
About Non-GAAP Financial Information
This press release includes non-GAAP financial measures. For a
description of these non-GAAP financial measures, including the
reasons management uses each measure, and reconciliations of these
non-GAAP financial measures to the most directly comparable
financial measures prepared in accordance with Generally Accepted
Accounting Principles (GAAP), please see the section entitled
"About Non-GAAP Financial Measures" and the accompanying tables
entitled "Reconciliation of GAAP Measures to Non-GAAP" and
"Reconciliation of Forward-Looking Guidance."
Cautionary Statement
This press release contains forward-looking statements within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. These statements are
based on management’s current expectations and beliefs and are
subject to a number of factors and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements. The forward-looking statements
contained in this document may include statements about future
financial and operating results, benefits to Pervasive’s customers
and the proposed transaction. These statements are not guarantees
of future performance, involve certain risks, uncertainties and
assumptions that are difficult to predict, and are based upon
assumptions as to future events that may not prove accurate.
Therefore, actual outcomes and results may differ materially from
what is expressed herein. For example, if Pervasive does not
receive required stockholder approval or fails to satisfy other
conditions to closing, the transaction will not be consummated. In
any forward-looking statement in which Pervasive expresses an
expectation or belief as to future results, such expectation or
belief is expressed in good faith and believed to have a reasonable
basis, but there can be no assurance that the statement or
expectation or belief will result or be achieved or accomplished.
The following factors, among others, could cause actual results to
differ materially from those described in the forward-looking
statements: risks associated with uncertainty as to whether the
transaction will be completed, costs and potential litigation
associated with the transaction, the failure to obtain approval
from Pervasive’s stockholders, the failure of either party to meet
the closing conditions set forth in the merger agreement, the
extent and timing of regulatory approvals and the risk factors
discussed from time to time by the company in reports filed with
the SEC. We urge you to carefully consider the risks which are
described in Pervasive’s Annual Report on Form 10-K for the year
ended June 30, 2012, Pervasive’s Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 2012 and in Pervasive’s
other SEC filings. Pervasive is under no obligation to (and
expressly disclaims any such obligation to) update or alter its
forward-looking statements whether as a result of new information,
future events, or otherwise.
All Pervasive brand and product names are
trademarks or registered trademarks of Pervasive Software Inc. in
the United States and other countries. All other marks are the
property of their respective owners.
Pervasive Software Inc. Condensed
Consolidated Balance Sheets (in thousands)
December 31, June 30,
2012 2012 (Unaudited)
ASSETS Current assets:
Cash and cash equivalents $ 27,585 $ 11,115 Marketable securities
18,089 31,609 Trade accounts receivable, net 8,396 8,528 Deferred
tax assets, net 987 1,169 Prepaid expenses and other current assets
1,952 1,240 Total current assets 57,009 53,661
Property and equipment, net 1,286 1,295 Purchased
intangibles 824 1,085 Goodwill 38,508 38,508 Deferred tax assets,
net 2,134 2,231 Other assets 232 329 Total
assets $ 99,993 $ 97,109
LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 6,343 $ 6,677 Deferred revenue 7,157
7,770 Total current liabilities 13,500 14,447
Stockholders' equity 86,493 82,662 Total
liabilities and stockholders' equity $ 99,993 $ 97,109
Pervasive Software Inc.
Condensed Consolidated Statements of Income (in
thousands, except per share data) (Unaudited)
Three months ended Six months ended
December 31 December 31 2012
2011 2012 2011 Revenues: Product
licenses $ 7,784 $ 7,229 $ 16,179 $ 14,846 Services and other
4,730 4,651 9,014
8,761 Total revenue 12,514 11,880 25,193 23,607 Costs
and expenses: Cost of product licenses 378 349 827 717 Cost of
services and other 1,761 1,491 3,490 2,848 Sales and marketing
4,886 4,933 10,004 9,865 Research and development 3,219 3,033 6,581
6,119 General and administrative 1,256 1,526 2,507 3,279
Unsolicited proposal costs 433 -
579 - Total costs and expenses 11,933
11,332 23,988 22,828
Operating income 581 548 1,205 779 Interest
and other income, net 9 18 19 34 Income tax provision (145 ) (60 )
(333 ) (124 ) Net income $ 445 $
506 $ 891 $ 689 Diluted earnings
per share $ 0.03 $ 0.03 $ 0.05 $ 0.04
Shares used in computing diluted earnings per share
16,747 16,151 16,581 16,211
Pervasive Software Inc. Condensed Consolidated Statements
of Cash Flows (in thousands) (Unaudited)
Three months ended Six months ended December
31 December 31 2012 2011
2012 2011 Cash from operations Net
income $ 445 $ 506 $ 891 $ 689 Adjustments to reconcile net income
to net cash provided by operations: Depreciation & amortization
327 327 649 684 Non-cash stock compensation expense 481 468 984 913
Non-cash changes in deferred tax assets 141 (255 ) 280 (206 ) Other
non-cash adjustments - - 150 - Changes in current assets and
liabilities: Trade accounts receivable 532 440 (13 ) 907 Prepaid
expenses and other current assets 219 (101 ) (259 ) 231 Accounts
payable and accrued liabilities (316 ) 268 (757 ) (692 ) Deferred
rent and lease related accruals (32 ) 308 (64 ) 616 Deferred
revenue 128 307 (620 )
359 Net cash provided by operations 1,925 2,268 1,241 3,501
Cash from investing activities Purchase of property
and equipment (232 ) (124 ) (376 ) (482 ) Sales and purchases of
marketable securities, net 6,239 2,514 13,514 (1,916 ) Decrease in
other assets 1 2 2
4 Net cash provided by (used in) investing activities 6,008
2,392 13,140 (2,394 )
Cash from financing activities
Proceeds from exercise of stock options 1,276 97 2,097 488
Acquisition of treasury stock - (505 )
(3 ) (693 ) Net cash used in financing activities 1,276 (408
) 2,094 (205 )
Effect of exchange rate on cash and cash
equivalents
(52 ) (30 ) (5 ) (40 ) Increase
(decrease) in cash and cash equivalents 9,157 4,222 16,470 862 Cash
and cash equivalents at beginning of period 18,428
4,920 11,115 8,280 Cash
and cash equivalents at end of period $ 27,585 $ 9,142
$ 27,585 $ 9,142
About Non-GAAP Financial Measures
The company provides non-GAAP measures for net income and net
income per share data as supplemental information regarding the
company's core business operational performance. The company
believes that these non-GAAP financial measures are useful to
investors because they exclude certain non-operating or
non-recurring charges. The company's management excludes these
non-operating or non-recurring charges when it internally evaluates
the performance of the company's business and makes operating
decisions, including internal budgeting, performance measurement
and the calculation of bonuses and discretionary compensation. In
addition, these non-GAAP measures more closely reflect the
essential revenue generation activities of the company and the
direct operating expenses (resulting in or from cash expenditures)
needed to perform these revenue generating activities. Accordingly,
management excludes the amortization of purchased intangible assets
related to acquisitions, stock-based compensation related to
employee stock options and unsolicited proposal costs.
The company believes that providing the non-GAAP measures that
management uses is useful to investors for two primary reasons.
First, it provides a consistent basis for investors to understand
the company's financial performance on a trended basis across many
historical periods. And second, it allows investors to evaluate the
company's performance using the same methodology and information as
that used by the company's management.
Non-GAAP measures are subject to material limitations as these
measures are not in accordance with, or a substitute for, US GAAP,
and therefore the company's definition or interpretation may be
different from similar non-GAAP measures used by other companies
and independent financial analysts. However, the company's
management compensates for these limitations by providing the
relevant and detailed disclosure of the items excluded in the
calculation of non-GAAP net income and non-GAAP diluted earnings
per share, which should be supplementally considered when
evaluating the company's results. In addition, items such as
amortization of purchased intangibles, stock compensation charges
and significant and non-recurring items that are excluded from
non-GAAP net income and non-GAAP diluted earnings per share can
have a significant impact on earnings. Management compensates for
these limitations by evaluating the non-GAAP measure together with
the most directly comparable GAAP measure. The company has
historically provided non-GAAP measures to the investment community
as a supplement to its GAAP results, to enable investors to
evaluate the company's core operating performance the way
management does. The non-GAAP adjustments, and the basis for
excluding them, are outlined below:
Amortization of Purchased Intangibles
The company has recorded amortization of acquired intellectual
property intangibles, included in its GAAP financial statements,
related to the acquisition of assets of ChanneLinx, Inc. Management
excludes these items for purposes of calculating non-GAAP net
income and non-GAAP diluted earnings per share. The company
believes that eliminating this expense in determining its non-GAAP
measures is useful to investors because doing so provides a
consistent basis for investors to understand the company's
financial performance on a trended basis across many historical
periods, it allows investors to evaluate the company's performance
using the same methodology and information as that used by the
company's management, and it allows a comparison with other peer
companies in the software industry, many of whom use similar
non-GAAP financial measures to supplement their GAAP results.
Finally, the company believes that non-GAAP measures of
profitability that exclude amortization of acquired intellectual
property intangibles are widely used by analysts and investors in
the software industry.
Stock-based Compensation Expense
The company has incurred stock-based compensation expense as
determined under ASC 718 (formerly SFAS 123R) for the quarters
ending on or after September 30, 2005, and under APB 25 for earlier
comparable periods in its GAAP financial results. Since stock-based
compensation is a non-cash charge, the company excludes this item
for the purposes of calculating non-GAAP net income and non-GAAP
diluted earnings per share. In addition, the exclusion of
stock-based compensation from the non-GAAP measures is done to
allow a consistent basis for investors to understand the company's
financial performance on a trended basis across many historical
periods, allow investors to evaluate the company's performance
using the same methodology and information as that used by the
company's management, and allow a comparison with other peer
companies in the software industry, many of whom use similar
non-GAAP financial measures to supplement their GAAP results. The
very nature of the stock-based compensation expense also makes it
very difficult to estimate prospectively, since the expense will
vary with changes in the stock price and market conditions at the
time of new grants, varying valuation methodologies, subjective
assumptions and different award types, making the comparison of
current results with forward-looking guidance potentially difficult
for investors to interpret. The tax effects of stock-based
compensation expenses may also vary significantly from period to
period, without any change in underlying operational performance,
thereby obscuring the underlying profitability of core
revenue-generating operations relative to prior periods (including
prior periods following the adoption of ASC 718, formerly SFAS
123R). Finally, the company believes that non-GAAP measures of
profitability that exclude stock-based compensation are widely used
by analysts and investors in the software industry.
Unsolicited Proposal Costs
The company has incurred expenses related to an unsolicited,
non-binding proposal received from Actian Corporation on August 13,
2012. Management excludes these costs for purposes of calculating
non-GAAP net income and non-GAAP diluted earnings per share. The
costs associated with this unsolicited proposal include legal fees,
financial consultation fees, M&A advisory fees and other costs
related to these services. The exclusion of unsolicited proposal
costs from the non-GAAP measures is done to allow a consistent
basis for investors to understand the company's financial
performance on a trended basis across many historical periods,
allow investors to evaluate the company's performance using the
same methodology and information as that used by the company's
management, and allow a comparison with other peer companies in the
software industry, many of whom use similar non-GAAP financial
measures to supplement their GAAP results. Finally, the company
believes that non-GAAP measures of profitability that exclude such
significant and non-recurring items are widely used by analysts and
investors in the software industry.
Income Tax Adjustment
Income taxes represent a complex element of any company's income
statement, and effective tax rates can vary widely from year to
year and from company to company, especially in periods in which
adjustments are made to a company's valuation reserve for deferred
tax assets. The company uses a statutory tax rate of 34% to reflect
income tax adjustments in presentation of its non-GAAP net income
and non-GAAP diluted earnings per share. Utilization of a statutory
tax rate for presentation of the non-GAAP measures is done to allow
a consistent basis for investors to understand the company's
financial performance on a trended basis across many historical
periods, allow investors to evaluate the company's performance
using the same methodology and information as that used by the
company's management, and allow a comparison with other peer
companies in the software industry, many of whom use similar
non-GAAP financial measures to supplement their GAAP results.
Finally, the company believes that non-GAAP measures of
profitability that are based on more standardized statutory tax
rates are widely used by analysts and investors in the software
industry.
Pervasive Software Inc.
Reconciliation of GAAP Measures to Non-GAAP (in
thousands, except per share data) (Unaudited)
Three months ended Six months ended
December 31, December 31, 2012 2011
2012 2011 Net Income Net Income Net
Income Net Income GAAP $ 445 $ 506 $ 891 $ 689
Amortization of intangible assets - cost of product licenses 130
130 260 260 Stock-based compensation - cost of services and other
20 15 39 29 Stock-based compensation - sales and marketing expense
174 148 363 281 Stock-based compensation - research and development
expense 101 75 216 149 Stock-based compensation - general and
administrative expense 186 229 366 453 Unsolicited proposal costs
433 579 Income tax adjustment for non-GAAP (411 ) (334 ) (702 )
(550 ) Non-GAAP $ 1,078 $ 769
$ 2,012 $ 1,311 GAAP net income per
share - diluted $ 0.03 $ 0.03 $ 0.05 $ 0.04 Non-GAAP net
income per share - diluted $ 0.06 $ 0.05 $ 0.12 $ 0.08
Shares used to compute GAAP net income per share - diluted 16,747
16,151 16,581 16,211 Shares used to compute non-GAAP net
income per share - diluted 17,418 16,514 17,303 16,556
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