IRVINE, Calif.--(BUSINESS WIRE)--Kofax® Limited (NASDAQ: KFX), a leading provider of software to simplify and transform the First Mile™ of customer engagement, today reported unaudited financial results for its third quarter and nine months of its fiscal year 2015 ended March 31, 2015.
Non-GAAP Financial Highlights:
- Software license revenue increased 4.8% to $30.9 million (PY: $29.5 million), and for the nine months increased 2.9% to $90.8 million (PY: $88.2 million)
- Total revenues increased 4.2% to $75.3 million (PY: $72.2 million), and for the nine months increased 3.9% to $225.6 million (PY: $217.1 million)
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 14.0% to $8.6 million (PY: $7.5 million) or a 11.4% margin (PY: 10.4%), and for the nine months decreased 5.6% to $27.2 million (PY: $28.9 million) or a 12.1% margin (PY: 13.3%)
- Adjusted diluted earnings per share (EPS) was $0.07 (PY: $0.05), and for the nine months was $0.18 (PY: $0.17)
- Adjusted cash generated by operations was $12.1 million (PY: $19.7 million), and for the nine months was $19.6 million (PY: $42.8 million)
GAAP Financial Highlights:
- Software license revenue increased 7.5% to $30.2 million (PY: $28.1 million), and for the nine months increased 7.4% to $89.2 million (PY: $83.1 million)
- Total revenues increased 4.6% to $74.0 million (PY: $70.8 million), and for the nine months increased 5.6% to $222.3 million (PY: $210.5 million)
- Income from operations1 decreased to a loss of $1.7 million (PY: $0.2 million) or a -2.3% margin (PY: 0.3%), and for the nine months decreased 33.4% to $2.8 million (PY: $4.2 million) or a 1.3% margin (PY: 2.0%)
- Diluted EPS was $0.02 (PY: $0.01), and for the nine months was $0.04 (PY: $0.05)
- Cash generated by operations was $10.4 million (PY: 16.1 million), and for the nine months was $15.8 million (PY: $33.7 million)
Quarter end cash was $55.6 million (PY: $93.1 million).
A summary of Kofax’s unaudited revenues and adjusted EBITDA for its third quarter and nine months compared to the prior year on both a GAAP and non-GAAP basis is as follows:
| Non-GAAP | ||||||||||||||||||||||||||||||||
| Quarter | Nine Months | |||||||||||||||||||||||||||||||
| Y/Y | % | Y/Y | % | |||||||||||||||||||||||||||||
| $M | Change | Total | $M | Change | Total | |||||||||||||||||||||||||||
| Software Licenses | 30.9 | 4.8 | % | 41.1 | % | 90.8 | 2.9 | % | 40.2 | % | ||||||||||||||||||||||
| Maintenance Services | 34.5 | 5.2 | % | 45.8 | % | 106.2 | 7.2 | % | 47.1 | % | ||||||||||||||||||||||
| Professional Services | 9.9 | -0.6 | % | 13.1 | % | 28.6 | -3.9 | % | 12.7 | % | ||||||||||||||||||||||
| Total Revenues | 75.3 | 4.2 | % | 100.0 | % | 225.6 | 3.9 | % | 100.0 | % | ||||||||||||||||||||||
|
Adjusted EBITDA |
8.6 | 14.0 | % | 27.2 | -5.6 | % | ||||||||||||||||||||||||||
|
Margin |
11.4 | % | 12.1 | % | ||||||||||||||||||||||||||||
| GAAP | ||||||||||||||||||||||||||||||||
| Quarter | Nine Months | |||||||||||||||||||||||||||||||
| Y/Y | % | Y/Y | % | |||||||||||||||||||||||||||||
| $M | Change | Total | $M | Change | Total | |||||||||||||||||||||||||||
| Software Licenses | 30.2 | 7.5 | % | 40.8 | % | 89.2 | 7.4 | % | 40.1 | % | ||||||||||||||||||||||
| Maintenance Services | 34.0 | 4.2 | % | 45.9 | % | 104.5 | 6.3 | % | 47.0 | % | ||||||||||||||||||||||
| Professional Services | 9.8 | -2.3 | % | 13.3 | % | 28.6 | -1.8 | % | 12.9 | % | ||||||||||||||||||||||
| Total Revenues | 74.0 | 4.6 | % | 100.0 | % | 222.3 | 5.6 | % | 100.0 | % | ||||||||||||||||||||||
|
Income from Operations1 |
-1.7 | -826.7 | % | 2.8 | -33.4 | % | ||||||||||||||||||||||||||
|
Margin |
-2.3 | % | 1.3 | % | ||||||||||||||||||||||||||||
1 Includes $2.3 million of legal and other expenses related to the Company’s acquisition by Lexmark.
Commenting on the Non-GAAP financial results for the quarter, Reynolds C. Bish, Chief Executive Officer, said: “We had a solid quarter with strong growth in new and acquired software products and a continuing year over year increase in the number of six and seven figure software license transactions. Despite this, the strengthening of the U.S. dollar since we last provided guidance on January 29 again negatively impacted our revenues. On a constant currency basis, using exchange rate levels in the prior year period, software license revenue would have been approximately $1.8 million and total revenues $5.0 million higher. The effect on Adjusted EBITDA was less pronounced as a result of the global nature and distribution of our employees and expenses. We expect Lexmark’s acquisition of Kofax to close in the second calendar quarter of 2015, and look forward to working with its management to combine the two businesses.”
Operating Highlights:
- Announced a definitive agreement for Lexmark to acquire all of Kofax’s outstanding shares for $11.00 per share in cash at a total value of more than $1 billion. The acquisition is contingent on Kofax shareholder approval at a special general meeting of Kofax shareholders scheduled for May 18, 2015, applicable regulatory clearances and other customary closing conditions.
- Acquired Aia Holding BV, a provider of customer communications management (CCM) software for $19.5 million. Aia’s CCM software helps organizations manage interactive and ad hoc customer correspondence both electronically and on paper, and will be fully integrated within Kofax TotalAgility®.
- Launched Kofax Mobile ID™, a mobile capture framework that powers the capture and submittal of proof of identity documents, including U.S. and most international driver licenses, passports and national identity cards, and their content. This capability is an essential part of an account opening or other process initiated by taking a picture of such documents using a smartphone or other mobile device.
- Delisted Kofax’s shares from the London Stock Exchange effective March 31, 2015.
- Gartner’s reports on its Magic Quadrants for Intelligent Business Process Management Suites and BPM-Platform-Based Case Management Frameworks were issued and recognized Kofax for its TotalAgility Platform.
About Kofax
Kofax is a leading provider of software to simplify and transform the First Mile™ of customer engagement. Success in the First Mile can dramatically improve the customer experience, greatly reduce operating costs and increase competitiveness, growth and profitability. Kofax software and solutions provide a rapid return on investment to more than 20,000 customers in financial services, insurance, government, healthcare, supply chain, business process outsourcing and other markets. Kofax delivers these through its direct sales and service organization, and a global network of more than 800 authorized partners in more than 75 countries throughout the Americas, EMEA and Asia Pacific. For more information, visit kofax.com.
Safe Harbor Statement
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in the forward-looking statements. The Company has attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. The Company may experience significant fluctuations in future operating results due to a number of economic, competitive and other factors, including, among other things, our reliance on third-party manufacturers and suppliers, government agency budgetary and political constraints, new or increased competition, changes in market demand, our ability to consummate and the timing of the consummation of software revenue transactions and the performance or reliability of our products and the ability of the Company and Lexmark to complete the transactions contemplated by the merger agreement, including the parties’ ability to satisfy the conditions to the transaction set forth in the merger agreement (including obtaining necessary Company shareholder and regulatory approvals) and the absence of facts, circumstances, changes or events resulting in a material adverse effect on the Company. These factors and others could cause operating results to vary significantly from those in prior periods, and those projected in forward-looking statements. Additional information with respect to these and other factors, which could materially affect the Company and its operations, are included in certain forms the Company has filed with the Securities and Exchange Commission. Although the Company believes that the expectations reflected in any forward-looking statements are reasonable based on its current knowledge of the business and operations, it cannot guarantee future results, levels of activity, performance or achievements. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change.
Non-GAAP Financial Measures
Management uses financial measures, both GAAP and Non-GAAP, in analyzing and assessing the overall performance of the business and making operational decisions. The Company has provided and believes that the Non-GAAP financial measures and supplemental reconciliations to GAAP financial measures are useful to investors and other users of its financial statements because the Non-GAAP financial measures may be used as additional tools to compare our performance across peer companies, periods and financial markets. Please refer to the forms the Company has filed with the Securities and Exchange Commission for a discussion of the Non-GAAP financial measures and supplemental reconciliations to GAAP financial measures for more information regarding the Non-GAAP measures.
© 2015 Kofax Limited. Kofax, and TotalAgility are registered trademarks and Kofax Mobile ID and First Mile are trademarks of Kofax Limited.
Source: Kofax
| KOFAX LIMITED | ||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (in thousands) | ||||||||||||
| March 31, 2015 | June 30, 2014 | |||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 55,567 | $ | 89,631 | ||||||||
| Accounts receivable, net of allowances of $971 and $881, respectively | 59,431 | 58,392 | ||||||||||
| Other current assets | 9,622 | 9,690 | ||||||||||
| Income tax receivable | 7,126 | 7,209 | ||||||||||
| Deferred tax assets | 5,579 | 3,502 | ||||||||||
| Total current assets | 137,325 | 168,424 | ||||||||||
| Property and equipment, net | 6,403 | 6,753 | ||||||||||
| Goodwill | 201,925 | 186,103 | ||||||||||
| Acquired intangible assets, net | 49,883 | 36,085 | ||||||||||
| Deferred tax assets, net of current portion | 3,897 | 1,877 | ||||||||||
| Other non-current assets | 4,638 | 4,105 | ||||||||||
| Total assets | $ | 404,071 | $ | 403,347 | ||||||||
| Liabilities and shareholders’ equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable and accrued expenses | $ | 41,572 | $ | 37,445 | ||||||||
| Deferred revenue | 79,746 | 78,497 | ||||||||||
| Income taxes payable | 2,699 | 1,101 | ||||||||||
| Deferred tax liabilities | 1,301 | 217 | ||||||||||
| Contingent acquisition payables | 6,086 | 4,775 | ||||||||||
| Total current liabilities | 131,404 | 122,035 | ||||||||||
| Minimum pension liability | 5,121 | 4,078 | ||||||||||
| Deferred revenue, net of current portion | 8,143 | 8,079 | ||||||||||
| Deferred tax liabilities, net of current portion | 10,729 | 3,243 | ||||||||||
| Contingent acquisition payables, net of current portion | 2,456 | 3,927 | ||||||||||
| Other non-current liabilities | 7,148 | 7,519 | ||||||||||
| Total liabilities | 165,001 | 148,881 | ||||||||||
|
Commitments and contingencies |
||||||||||||
| Shareholders‘ equity: | ||||||||||||
| Common stock | 98 | 97 | ||||||||||
| Additional paid in capital | 65,969 | 60,695 | ||||||||||
| Employee benefit shares | (17,685 | ) | (18,207 | ) | ||||||||
| Treasury shares | (15,980 | ) | (15,980 | ) | ||||||||
| Retained earnings | 210,778 | 207,141 | ||||||||||
| Accumulated other comprehensive income (loss) | (4,110 | ) | 20,720 | |||||||||
| Total shareholders’ equity | 239,070 | 254,466 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 404,071 | $ | 403,347 | ||||||||
| KOFAX LIMITED | ||||||||||||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||
| Software licenses | $ | 30,243 | $ | 28,137 | $ | 89,215 | $ | 83,082 | ||||||||||||||||
| Maintenance services | 33,951 | 32,584 | 104,494 | 98,290 | ||||||||||||||||||||
| Professional services | 9,818 | 10,052 | 28,585 | 29,096 | ||||||||||||||||||||
| Total revenues | 74,012 | 70,773 | 222,294 | 210,468 | ||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||
| Cost of software licenses | 2,347 | 1,955 | 6,579 | 7,640 | ||||||||||||||||||||
| Cost of maintenance services | 5,497 | 5,218 | 15,894 | 15,104 | ||||||||||||||||||||
| Cost of professional services | 8,518 | 8,129 | 24,323 | 23,976 | ||||||||||||||||||||
| Amortization of intangible assets | 1,532 | 1,275 | 4,761 | 4,186 | ||||||||||||||||||||
| Total cost of revenues | 17,894 | 16,577 | 51,557 | 50,906 | ||||||||||||||||||||
| Gross profit | 56,118 | 54,196 | 170,737 | 159,562 | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Research and development | 10,383 | 10,318 | 30,258 | 29,346 | ||||||||||||||||||||
| Sales and marketing | 32,670 | 31,418 | 96,857 | 89,853 | ||||||||||||||||||||
| General and administrative | 10,417 | 10,428 | 32,010 | 29,562 | ||||||||||||||||||||
| Amortization of intangible assets | 1,253 | 889 | 3,272 | 2,542 | ||||||||||||||||||||
| Acquisition-related costs | 711 | 504 | 2,960 | 400 | ||||||||||||||||||||
| Other operating expenses | 2,392 | 404 | 2,567 | 3,638 | ||||||||||||||||||||
| Total operating expenses | 57,826 | 53,961 | 167,924 | 155,341 | ||||||||||||||||||||
| Income from operations | (1,708 | ) | 235 | 2,813 | 4,221 | |||||||||||||||||||
| Interest (expense), net | (96 | ) | (153 | ) | (367 | ) | (507 | ) | ||||||||||||||||
| Other income, net | 2,931 | 1,495 | 2,990 | 5,445 | ||||||||||||||||||||
| Income from operations, before tax | 1,127 | 1,577 | 5,436 | 9,159 | ||||||||||||||||||||
| Income tax expense (credit) | (451 | ) | 951 | 1,799 | 4,336 | |||||||||||||||||||
| Net income | $ | 1,578 | $ | 626 | $ | 3,637 | $ | 4,823 | ||||||||||||||||
| Net income per share: | ||||||||||||||||||||||||
| Basic | $ | 0.02 | $ | 0.01 | $ | 0.04 | $ | 0.05 | ||||||||||||||||
| Diluted | $ | 0.02 | $ | 0.01 | $ | 0.04 | $ | 0.05 | ||||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||||
| Basic | 88,997 | 88,948 | 88,888 | 88,729 | ||||||||||||||||||||
| Diluted | 92,694 | 92,944 | 92,449 | 92,087 | ||||||||||||||||||||
| KOFAX LIMITED | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||
| (in thousands) | ||||||||
| Nine Months Ended | ||||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 3,637 | $ | 4,823 | ||||
|
Adjustments to reconcile net income to net cash flows from operating activities: |
||||||||
| Depreciation and amortization | 10,807 | 10,817 | ||||||
| Share-based compensation expense | 4,809 | 3,253 | ||||||
| Other income | (2,990 | ) | (5,445 | ) | ||||
| Restructuring payments | − | (588 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (4,887 | ) | 13,185 | |||||
| Other assets | (584 | ) | 1,935 | |||||
| Accounts and other payables | 6,189 | (5,346 | ) | |||||
| Deferred revenue | 4,384 | 14,448 | ||||||
| Other liabilities | (1,126 | ) | (1,724 | ) | ||||
| Deferred income taxes | (4,857 | ) | (729 | ) | ||||
| Income taxes payable | 414 | (913 | ) | |||||
| Net cash inflow from operating activities | 15,796 | 33,716 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (1,979 | ) | (2,776 | ) | ||||
| Acquisitions of subsidiaries, net of cash acquired | (48,450 | ) | (45,387 | ) | ||||
| Interest received | 105 | 77 | ||||||
| Net cash used in investing activities | (50,324 | ) | (48,086 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issue of common stock | 212 | 521 | ||||||
| Excess tax benefits on share-based compensation | 536 | 208 | ||||||
| Proceeds from initial public offering in the United States | − | 12,366 | ||||||
| Proceeds from EBT shares, net | 523 | (135 | ) | |||||
| Net cash inflow from financing activities | 1,271 | 12,960 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (807 | ) | 1,048 | |||||
| Net decrease in cash and cash equivalents | (34,064 | ) | (362 | ) | ||||
| Cash and cash equivalents at the beginning of the year | 89,631 | 93,413 | ||||||
| Cash and cash equivalents at the end of the year | $ | 55,567 | $ | 93,051 | ||||
| Supplemental cash flow disclosure: | ||||||||
| Cash paid for income taxes, net | $ | 3,809 | $ | 8,447 | ||||
| Cash paid for interest | $ | 98 | $ | 437 | ||||
| KOFAX LIMITED | ||||||||||||||||||||||||
| UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES | ||||||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||||||
| Acquisition Fair Value Adjustment to Revenue | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Non-GAAP Software License | ||||||||||||||||||||||||
| Software License | $ | 30,243 | $ | 28,137 | $ | 89,215 | $ | 83,082 | ||||||||||||||||
| Acquisition Fair Value Adjustment | 698 | 1,400 | 1,544 | 5,102 | ||||||||||||||||||||
| Total Non-GAAP Software License | $ | 30,941 | $ | 29,537 | $ | 90,759 | $ | 88,184 | ||||||||||||||||
| Non-GAAP Maintenance Services | ||||||||||||||||||||||||
| Maintenance Services | $ | 33,951 | $ | 32,584 | $ | 104,494 | $ | 98,290 | ||||||||||||||||
| Acquisition Fair Value Adjustment | 524 | 197 | 1,694 | 801 | ||||||||||||||||||||
| Total Non-GAAP Maintenance Services | $ | 34,475 | $ | 32,781 | $ | 106,188 | $ | 99,091 | ||||||||||||||||
| Non-GAAP Professional Services | ||||||||||||||||||||||||
| Professional Services | $ | 9,818 | $ | 10,052 | $ | 28,585 | $ | 29,096 | ||||||||||||||||
| Acquisition Fair Value Adjustment | 39 | (136 | ) | 55 | 694 | |||||||||||||||||||
| Total Non-GAAP Professional Services | $ | 9,857 | $ | 9,916 | $ | 28,640 | $ | 29,790 | ||||||||||||||||
| Non-GAAP Total Revenue | ||||||||||||||||||||||||
| Total Revenue | $ | 74,012 | $ | 70,773 | $ | 222,294 | $ | 210,468 | ||||||||||||||||
| Acquisition Fair Value Adjustment | 1,261 | 1,461 | 3,293 | 6,597 | ||||||||||||||||||||
| Total Non-GAAP Revenue | $ | 75,273 | $ | 72,234 | $ | 225,587 | $ | 217,065 | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| Non-GAAP Income from Operations | March 31, | March 31, | ||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Income (loss) from operations | $ | (1,708 | ) | $ | 235 | $ | 2,813 | $ | 4,221 | |||||||||||||||
| Acquisition fair value adjustment to revenue | 1,261 | 1,461 | 3,293 | 6,597 | ||||||||||||||||||||
| Share-based compensation expense | 2,205 | 1,387 | 4,809 | 3,253 | ||||||||||||||||||||
| Depreciation and amortization expense | 907 | 1,349 | 2,774 | 4,020 | ||||||||||||||||||||
| Amortization of acquired intangible assets | 2,785 | 2,164 | 8,033 | 6,728 | ||||||||||||||||||||
| Acquisition-related costs | 711 | 504 | 2,960 | 400 | ||||||||||||||||||||
| Other operating expenses | 2,392 | 404 | 2,567 | 3,638 | ||||||||||||||||||||
| Non-GAAP income from operations | $ | 8,553 | $ | 7,504 | $ | 27,249 | $ | 28,857 | ||||||||||||||||
|
|
||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| Adjusted Diluted Earnings Per Share | March 31, | March 31, | ||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Net income | $ | 1,578 | $ | 626 | $ | 3,637 | $ | 4,823 | ||||||||||||||||
| Acquisition fair value adjustment to revenue | 1,261 | 1,461 | 3,293 | 6,597 | ||||||||||||||||||||
| Share-based compensation expense | 2,205 | 1,387 | 4,809 | 3,253 | ||||||||||||||||||||
| Amortization of acquired intangible assets | 2,785 | 2,164 | 8,033 | 6,728 | ||||||||||||||||||||
| Acquisition-related costs | 711 | 504 | 2,960 | 400 | ||||||||||||||||||||
| Net finance, other income and expense, net | (443 | ) | (938 | ) | (56 | ) | (1,300 | ) | ||||||||||||||||
| Tax effect of above adjustments | (2,054 | ) | (391 | ) | (6,263 | ) | (4,228 | ) | ||||||||||||||||
| Adjusted net income | $ | 6,043 | $ | 4,813 | $ | 16,413 | $ | 16,273 | ||||||||||||||||
| Adjusted diluted earnings per share | $ | 0.07 | $ | 0.05 | $ | 0.18 | $ | 0.17 | ||||||||||||||||
| Diluted shares outstanding | 92,694 | 92,944 | 92,449 | 92,087 | ||||||||||||||||||||
| Reconciliation of Adjusted Cash Flow from Operations | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Cash inflows from operations | $ | 10,380 | $ | 16,098 | $ | 15,796 | $ | 33,716 | ||||||||||||||||
| Cash paid for income taxes, net | 1,675 | 3,577 | 3,809 | 8,477 | ||||||||||||||||||||
| Payments under restructuring | − | − | − | 588 | ||||||||||||||||||||
|
Adjusted cash inflows from
operations |
$ | 12,055 | $ | 19,675 | $ | 19,605 | $ | 42,751 | ||||||||||||||||
| Income Statements - Non-GAAP | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Non-GAAP Software licenses | $ | 30,941 | $ | 29,537 | $ | 90,759 | $ | 88,184 | ||||||||||||||||
| Non-GAAP Maintenance services | 34,475 | 32,781 | 106,188 | 99,091 | ||||||||||||||||||||
| Non-GAAP Professional services | 9,857 | 9,916 | 28,640 | 29,790 | ||||||||||||||||||||
| Non-GAAP Total revenue | 75,273 | 72,234 | 225,587 | 217,065 | ||||||||||||||||||||
| Cost of software licenses (1) | 2,344 | 1,950 | 6,570 | 7,613 | ||||||||||||||||||||
| Cost of maintenance services (1) | 5,381 | 5,080 | 15,564 | 14,688 | ||||||||||||||||||||
| Cost of professional services (1) | 8,388 | 7,920 | 23,952 | 23,313 | ||||||||||||||||||||
| Research and development (1) | 9,779 | 9,617 | 28,664 | 27,486 | ||||||||||||||||||||
| Sales and marketing (1) | 31,329 | 30,282 | 93,850 | 86,978 | ||||||||||||||||||||
| General and administrative (1) | 9,499 | 9,881 | 29,738 | 28,130 | ||||||||||||||||||||
| Non-GAAP operating costs and expenses | 66,720 | 64,730 | 198,338 | 188,208 | ||||||||||||||||||||
| Non-GAAP income from operations | $ | 8,553 | $ | 7,504 | $ | 27,249 | $ | 28,857 | ||||||||||||||||
(1) Excludes depreciation, amortization and share-based compensation expenses
Definition of Non-GAAP Measures
Non-GAAP Revenue – We defined Non-GAAP revenue as revenue, as reported under GAAP, increased to include revenue that is associated with our historic acquisitions that has been excluded from reported results for a limited period due to the effects of purchase accounting. In accordance with GAAP purchase accounting, an acquired company’s deferred revenue at the date of acquisition is subject to a fair value adjustment which generally reduces the deferred amount and revenues recognized subsequent to an acquisition. We include non-GAAP revenue to allow for more complete comparisons to the financial results of our historical operations, forward looking guidance and the financial results of peer companies. We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business. Additionally, although acquisition-related revenue adjustments are nonrecurring, we may incur similar adjustments in connection with future acquisitions. At times when we are communicating with our shareholders, analysts and other parties we refer to Non-GAAP Revenue as Adjusted Revenue.
Non-GAAP Income from Operations – We define non-GAAP income from operations as income/(loss) from operations, as reported under GAAP, excluding the effect of Acquisition fair value adjustment to revenue, Share-based compensation expense, Depreciation expense, Amortization of acquired intangible assets, Acquisition-related costs, and Other operating expense, net. Share-based compensation expense, Depreciation expense and Amortization of acquired intangible assets in our non-GAAP income from operations reconciliation represent non-cash charges which are not considered by management in evaluating our operating performance. Acquisition-related costs consist of: (i) costs directly attributable to our acquisition strategy and the evaluation, consummation and integration of our acquisitions (composed substantially of professional services fees including legal, accounting and other consultants and to a lesser degree to our personnel whose responsibilities are devoted to acquisition activities), and (ii) transition compensation costs (composed substantially of contingent payments for shares that are treated as compensation expense and retention payments that are anticipated to become payable to employees, as well as severance payments to employees whose positions were made redundant). These acquisition-related costs are not considered to be related to the continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. Other operating expense, net represents items that are not necessarily related to our recurring operations and which therefore are not, under GAAP, included in other expense lines. Accordingly, we exclude those amounts when assessing non-GAAP income from operations. At times when we are communicating with our shareholders, financial analysts and other parties we refer to non-GAAP income from operations as adjusted EBITDA.
We assess non-GAAP income from operations as a percentage of total non-GAAP revenue and by doing so we are able to evaluate the relative performance of our revenue growth compared to the expense growth for those items included in non-GAAP income from operations. This measure allows management and our Board of Directors to compare our performance against that of other companies in our industry that may be of different sizes.
At times when we are communicating with our shareholders, financial analysts and other parties, we refer to adjusted income from operations as a percentage of revenues as EBITDA margin.
Non-GAAP diluted earnings per share – Non-GAAP diluted earnings per share is calculated using GAAP net income/(loss) excluding the effect of Acquisition fair value adjustment to revenue, Share-based compensation expense, Amortization of intangible assets, Acquisition-related costs, Net Interest-Other Income and Expense, and the related tax effect, divided by weighted average fully diluted shares outstanding. Therefore, we include this non-GAAP measure in order to provide a more complete comparison of our earnings per share from one period to another. At times when we are communicating with our shareholders, financial analysts and other parties we refer to Non-GAAP diluted earnings per share as Adjusted EPS.
Non-GAAP Cash Flows from Operations - We define Non-GAAP cash flows from operations as cash flows from operations as reported under GAAP, adjusted for income taxes paid or received and payments under restructurings. Income tax payments are included in this reconciliation as the timing of cash payments and receipts can vary significantly from year-to-year based on a number of factors, including the influence of acquisitions on our consolidated tax attributes. Payments for restructurings relate to a specific activity that is not part of ongoing operations. At times when we are communicating with our shareholders, financial analysts and other parties we refer to Non-GAAP cash flows from operations as Adjusted cash flows from operations.
