HYSL Hyperion Solutions (MM)

Hyperion Solutions (Nasdaq Global Select: HYSL), the global leader in Business Performance Management (BPM) software, today announced results for its fiscal second quarter ended December 31, 2006, which include records for Q2 license and total revenue, net income, earnings per share, and number of new customers. Total revenues for the quarter increased 20% to $222.9 million, compared to $185.5 million for the same period a year ago. Software license revenue increased 14% to $84.9 million, compared to $74.4 million for the same period a year ago, while maintenance and services revenue grew 24% to $138.0 million, compared to $111.0 million in the year-ago period. The company's second quarter net income, as reported in accordance with U.S. generally accepted accounting principles (GAAP), increased 39% to $21.5 million, or $0.36 per diluted share, compared to net income of $15.5 million, or $0.25 per diluted share, for the second quarter of fiscal 2006. Second quarter non-GAAP net income increased 34% year-over-year to a record $29.9 million, or $0.50 per diluted share, excluding the impact of charges, net of related tax, for the deferred maintenance revenue adjustments and the amortization of purchased intangible assets; and SFAS 123R equity-based compensation. These results compare to non-GAAP net income of $22.3 million, or $0.37 per diluted share, for the second quarter of fiscal 2006. Hyperion�s balance sheet reflects cash and short-term investments totaling $486.4 million at December 31, 2006, compared to $436.2 million at September 30, 2006. Cash flow from operations for the quarter was $47.4 million. The company used cash of $7.5 million to repurchase stock during the quarter, as part of a $100 million stock repurchase program announced in April 2006. Days sales outstanding (DSO) for the quarter improved six days sequentially to 58 days. �We�re pleased to report the best second fiscal quarter in Hyperion�s history,� said Godfrey R. Sullivan, Hyperion�s president and chief executive officer. �License revenue grew 14%, as customers increasingly recognize Hyperion as the management system for the global enterprise. This is our third consecutive quarter of double-digit license revenue growth, fueled by increasing demand for Hyperion System 9. We set new company records for number of transactions with new customers, net income, and earnings per share and are increasingly winning in stand-alone business intelligence transactions.� Business Outlook for Q3 FY07 Hyperion also reported today its outlook for the third quarter of fiscal year 2007. On a GAAP basis, the company currently expects total revenues in the range of $215 million to $220 million and diluted earnings per share in the range of $0.24 to $0.29. This outlook assumes an effective tax rate of 39.4%, and diluted shares outstanding of 59.9 million. Excluding the impact, net of the related tax expense, of the amortization of purchased intangible assets, equity-based compensation expense, and deferred maintenance revenue adjustments, the company expects diluted earnings per share on a non-GAAP basis for the second quarter in the range of $0.40 to $0.45, and a non-GAAP effective tax rate of 37.4%. Business Outlook for FY07 Hyperion also reported its updated outlook for fiscal year 2007. On a GAAP basis, the company currently expects total revenues in the range of $885 million to $895 million and diluted earnings per share in the range of $1.20 to $1.25. This outlook assumes an effective tax rate for Q3 and Q4 of 39.4% and diluted shares outstanding of 59.8 million. Excluding the impact, net of the related tax expense, of the amortization of purchased intangible assets, equity-based compensation expense, and deferred maintenance revenue adjustments, the company expects diluted earnings per share on a non-GAAP basis for the fiscal year in the range of $1.80 to $1.85, and a non-GAAP effective tax rate for Q3 and Q4 of 37.4%. Other Recent Developments Other recent company developments include: Won major customer contracts at: AIB Group (UK), AmBev (Brazil), BT Group plc (UK), Consorzio Operativo Gruppo MPS (Italy), EagleBurgmann Group (Germany), H.C. Starck GmbH�& Co. KG (Germany), International Flavors & Fragrances, New York University, RadioShack, Sensata Technologies, Stora Enso (Finland), Sunrise Senior Living Services, and ThyssenKrupp AG (Germany). Placed in the leaders quadrant in the �Magic Quadrant for CPM Suites, 2006� by industry analyst firm Gartner. Gartner weighed Hyperion�s completeness of vision and ability to execute in determining its position in the Magic Quadrant. Introduced Hyperion System 9 Smart Space with �always-on� business intelligence, featuring gadgets that leverage the latest innovations in Microsoft Windows XP and Vista operating systems. Unveiled powerful new features and functionality in Hyperion System 9 Release 9.3. Major new enhancements give organizations more tools for improving business performance and include a Capital Expense Planning module, BPM Architect, and Data Integration Management module. Hyperion�s Global Partner organization announced SolutionsNet, a new program that enhances support for partners who offer targeted BPM solutions built on Hyperion System 9 software. Announced today that it signed a merger agreement to acquire Decisioneering, a privately held decision analysis software company headquartered in Denver, CO. Conference Call and Webcast Hyperion�s executive management will host a conference call at 5:00 p.m. ET today to discuss these financial results. The conference call and slide presentation will be webcast live with access from the Investor Relations section of the Hyperion web site at www.hyperion.com. A replay of the webcast will also be available from the company�s web site. About Hyperion Hyperion Solutions Corporation (Nasdaq Global Select: HYSL) is the global leader in Business Performance Management software. More than 12,000 customers in 90 countries rely on Hyperion both for insight into current business performance and to drive performance improvement. With Hyperion software, businesses collect, analyze and share data across the organization, linking strategies to plans and monitoring execution against goals. Hyperion integrates financial management applications with a business intelligence platform into a single management system for the global enterprise. For more information, visit www.hyperion.com. Forward-Looking Statements Statements in this press release relating to the future, including but not limited to those related to our �Business Outlook, are forward-looking statements within the meaning of the �safe harbor� provisions of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by terminology such as �may,� �will,� �should,� �potential,� �estimated,� �projects,� �anticipate,� �plans,� �expects,� �believes� and similar expressions. These forward-looking statements are based on current plans and expectations, and involve risks and uncertainties, including important factors that could cause our actual results to differ materially from those projected in the forward-looking statements. These factors include, without limitation, our ability to increase software license revenue (by either increasing sales of newer products or reducing the decline in revenue from older and existing products), the occurrence of unexpected and significant product quality problems, our ability to maintain or increase partner revenue, lower than expected customer adoption rates for System 9, our ability to successfully integrate acquired businesses or technologies, strengthening of the dollar against key European currencies, the impact of new or existing competitive products and pricing, a decline in customer demand and technological shifts. For a more detailed discussion of factors that could affect the company's performance and cause actual results to differ materially from those anticipated in the forward-looking statements, interested parties should review the company's filings with the Securities and Exchange Commission, including the company�s annual report on Form 10-K filed on September 1, 2006 and its quarterly report on Form 10-Q filed on November 8, 2006. The results contained in this press release are preliminary and therefore subject to change as the company completes its review of the second quarter. The company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances. Although this release may remain available on the company's website or elsewhere, its continued availability does not indicate that the company is reaffirming or confirming any of the information contained herein as of a later date. �Hyperion,� the Hyperion logo, and Hyperion�s product names are trademarks of Hyperion. Hyperion Solutions Corporation Reconciliation of GAAP to Non-GAAP Results (In thousands except for per share data) � The following table reflects Hyperion�s GAAP results reconciled to non-GAAP results for its Q2 FY07 as included in this press release. � Three Months Ended December 31, 2006 December 31, 2005 Net income: GAAP net income $ 21,528� $ 15,522� � Plus: Equity-based compensation expense 9,210� 7,030� Amortization of purchased intangible assets 3,174� 2,408� Restructuring charges -� 446� Deferred maintenance revenue adjustment 369� -� Less: Income tax effect of non-GAAP adjustments � (4,342) � (3,082) Non-GAAP net income $ 29,939� $ 22,324� Three Months Ended Diluted net income per share: December 31, 2006 December 31, 2005 GAAP net income per share $ 0.36� $ 0.25� � Plus: Equity-based compensation expense 0.15� 0.12� Amortization of purchased intangible assets 0.05� 0.04� Restructuring charges -� 0.01� Deferred maintenance revenue adjustment 0.01� -� Less: Income tax effect of non-GAAP adjustments (0.07) (0.05) � � � � Non-GAAP net income per share $ 0.50� $ 0.37� � Shares used in computing diluted net income per share 59,721� 60,930� The following table reflects Hyperion�s Q3 FY07 and FY07 Business Outlook on a GAAP basis reconciled to our results on a non-GAAP basis. � Business Outlook: Diluted net income: Q3FY07 FY07 Projected GAAP net income per share $0.24 � $0.29� $1.20 � $1.25� Plus: Equity-based compensation expense 0.16� 0.62� Amortization of purchased intangible assets 0.07� 0.25� Deferred maintenance revenue adjustment 0.01� 0.04� Less: Income tax effect of non-GAAP adjustments (0.08) (0.31) Projected Non-GAAP net income per share $0.40 � $0.45� $1.80 � $1.85� � This outlook assumes a GAAP effective tax rate of 39.4% and a non-GAAP effective tax rate of 37.4%. Non-GAAP Financial Information The non-GAAP information included in this press release is not prepared in accordance with GAAP because it excludes equity-based compensation, amortization of purchased intangible assets, restructuring charges (credits), and deferred maintenance revenue adjustments. Management believes the presentation of this non-GAAP information may be useful to investors because the Company has historically provided this or similar information and understands that some investors find it helpful in analyzing the Company�s revenues and expenses and comparing them to the revenues and expenses of the Company�s competitors or others. Management uses this non-GAAP information, along with GAAP information, in evaluating the Company�s historical and projected revenues and expenses, primarily with a view to assessing ongoing revenues and expenses associated with specific, non-recurring transactions, as is the case with our deferred maintenance revenue adjustment, purchased intangible assets, and restructuring charges (credits). Management uses the non-GAAP information relating to our equity-based compensation, along with GAAP information, to compare this specific non-cash expense with similar expenses of the Company�s competitors or others. Management does so, in part, because of the divergence of opinion as to the best accounting method of equity compensation, notwithstanding the adoption of FAS 123R. The non-GAAP information is not prepared in accordance with generally accepted accounting principles and may differ from the non-GAAP information used by other companies. Non-GAAP information should not be considered in isolation from, or as a substitute for, information prepared in accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAP information. In this regard, while the specific transactions causing the non-GAAP expenses are non-recurring, the Company in the future may effect other transactions, such as acquisitions or restructurings that will trigger similar expenses. Moreover, the Company expects in the future to incur additional equity-based compensation with the granting of additional equity compensation pursuant to FAS 123R and otherwise. For these reasons, our non-GAAP information may not be as useful to investors as the GAAP information also provided. Hyperion Solutions Corporation Consolidated Balance Sheets (In thousands, except par value) � December 31, June 30, 2006� 2006� (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 209,877� $ 166,055� Short-term investments 276,557� 271,228� Accounts receivable, net of allowances of $10,000 and $10,370 142,526� 180,384� Deferred tax assets 11,103� 10,869� Prepaid expenses and other current assets � 32,297� � 35,205� TOTAL CURRENT ASSETS 672,360� 663,741� � Property and equipment, net 73,478� 76,221� Goodwill 161,238� 157,208� Other intangible assets, net 31,972� 38,525� Deferred tax assets 46,254� 40,956� Other assets � 12,247� � 5,669� TOTAL ASSETS $ 997,549� $ 982,320� � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 73,269� $ 78,014� Accrued employee compensation and benefits 54,912� 68,243� Income taxes payable 46,771� 47,009� Deferred revenue 158,733� 171,142� Restructuring liabilities � 6,832� � 6,943� TOTAL CURRENT LIABILITIES 340,517� 371,351� � Long-term restructuring liabilities and other 17,896� 21,384� � � � � TOTAL LIABILITIES � 358,413� � 392,735� � Stockholders' equity: Preferred stock - $0.001 par value; 5,000 shares authorized; none issued -� -� Common stock - $0.001 par value; 300,000 shares authorized; 58,528 and 58,301 shares issued and outstanding 59� 58� Additional paid-in capital 572,302� 534,716� Retained earnings 67,184� 57,142� Accumulated other comprehensive loss � (409) � (2,331) TOTAL STOCKHOLDERS' EQUITY � 639,136� � 589,585� TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 997,549� $ 982,320� Hyperion Solutions Corporation Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) � Three Months Ended Six Months Ended December 31, December 31, 2006� 2005� 2006� 2005� REVENUES Software licenses $ 84,879� $ 74,445� $ 153,009� $ 134,969� Maintenance and services � 138,031� � 111,049� � 268,404� � 220,750� TOTAL REVENUES � 222,910� � 185,494� � 421,413� � 355,719� � COSTS AND EXPENSES Cost of revenues: Software licenses 5,522� 4,626� 11,395� 8,465� Maintenance and services 53,169� 42,845� 103,142� 80,799� Sales and marketing 82,644� 69,807� 155,803� 136,455� Research and development 32,149� 28,360� 62,345� 56,241� General and administrative 19,325� 17,385� 42,368� 33,514� Restructuring charges (credits) � -� � 446� � (26) � 346� TOTAL COSTS AND EXPENSES � 192,809� � 163,469� � 375,027� � 315,820� � OPERATING INCOME 30,101� 22,025� 46,386� 39,899� � Interest and other income, net � 3,909� � 2,809� � 7,461� � 5,385� INCOME BEFORE INCOME TAXES 34,010� 24,834� 53,847� 45,284� � Income tax provision � 12,482� � 9,312� � 20,383� � 16,470� NET INCOME $ 21,528� $ 15,522� $ 33,464� $ 28,814� � Basic net income per share $ 0.37� $ 0.26� $ 0.58� $ 0.49� Diluted net income per share $ 0.36� $ 0.25� $ 0.56� $ 0.47� � Shares used in computing basic net income per share 58,068� 59,102� 57,784� 59,176� Shares used in computing diluted net income per share 59,721� 60,930� 59,341� 60,834� Hyperion Solutions Corporation Consolidated Statements of Cash Flows (In thousands) (Unaudited) � Six Months Ended December 31, 2006� 2005� CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 33,464� $ 28,814� Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,857� 16,430� Stock-based compensation 18,284� 14,807� Provision for accounts receivable allowances 2,707� 2,660� Deferred tax assets (3,217) (4,236) Income tax benefit from exercise of stock options 803� -� Changes in operating assets and liabilities: Accounts receivable 38,092� (7,316) Prepaid expenses and other current assets 3,249� 1,277� Other assets 285� 221� Accounts payable and accrued liabilities (8,631) 2,927� Accrued employee compensation and benefits (14,284) (3,182) Income taxes payable (387) 8,234� Deferred revenue (14,799) (14,894) Restructuring liabilities (207) (894) Long-term restructuring liabilities and other � (3,419) � (3,077) Net cash provided by operating activities � 71,797� � 41,771� � CASH FLOWS FROM INVESTING ACTIVITIES Purchases of available-for-sale and other investments (150,689) (184,661) Proceeds from sales and maturities of investments 139,139� 182,058� Purchases of property and equipment (8,107) (10,216) Purchases of other intangible assets (205) (637) Payments for acquisitions, net of cash acquired � (5,992) � -� Net cash used in investing activities � (25,854) � (13,456) � CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on capital leases (126) -� Purchases of common stock (32,460) (80,081) Proceeds from issuance of common stock 25,136� 30,406� Income tax benefit from exercise of stock options � 2,401� � 6,761� Net cash used in financing activities (5,049) (42,914) � Effect of exchange rate on cash and cash equivalents � 2,928� � (1,769) � INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 43,822� (16,368) Cash and cash equivalents at beginning of period � 166,055� � 170,740� CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 209,877� $ 154,372� � SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 44� $ 153� Cash paid for income taxes $ 19,376� $ 4,980� Hyperion Solutions Corporation Supplemental Financial Data ($ in thousands) (Unaudited) � � � � � Fiscal 2006 Fiscal 2007 % Change over�Q1 07 % Change overQ2 06 Q1 Q2 Q3 Q4 Q1 Q2 � � � � � � � � � � � � � � � � � Revenue Analysis � Software License Revenue $ 60,524� 35% $ 74,445� 40% $ 64,351� 35% $ 95,797� 43% $ 68,130� 34% $ 84,879� 38% 25% 14% Maintenance and Services Revenue: Maintenance Revenue 77,940� 46% 81,396� 44% 83,499� 45% 85,983� 38% 89,610� 45% 95,067� 43% 6% 17% Consulting and Training Revenue � 31,761� 19% � 29,653� 16% � 37,793� 20% � 42,090� 19% � 40,763� 21% � 42,964� 19% 5% 45% Total Maintenance and Services Revenue � 109,701� 65% � 111,049� 60% � 121,292� 65% � 128,073� 57% � 130,373� 66% � 138,031� 62% 6% 24% Total Revenue $ 170,225� 100% $ 185,494� 100% $ 185,643� 100% $ 223,870� 100% $ 198,503� 100% $ 222,910� 100% 12% 20% � � � � � � � � � � � � � � � Revenue by Geography � Americas $ 108,034� 63% $ 111,368� 60% $ 113,857� 61% $ 143,244� 64% $ 127,787� 64% $ 133,567� 60% 5% 20% EMEA 49,332� 29% 59,456� 32% 58,436� 32% 66,144� 30% 56,636� 29% 75,082� 34% 33% 26% APAC � 12,859� 8% � 14,670� 8% � 13,350� 7% � 14,482� 6% � 14,080� 7% � 14,261� 6% 1% -3% Total Revenue $ 170,225� 100% $ 185,494� 100% $ 185,643� 100% $ 223,870� 100% $ 198,503� 100% $ 222,910� 100% 12% 20% � � � � � � � � � � � � � � � Software License Revenue by Geography � Americas $ 36,407� 60% $ 40,683� 55% $ 35,498� 55% $ 60,210� 63% $ 40,718� 60% $ 46,240� 54% 14% 14% EMEA 18,537� 31% 25,891� 35% 22,254� 35% 27,999� 29% 20,323� 30% 32,306� 38% 59% 25% APAC � 5,580� 9% � 7,871� 10% � 6,599� 10% � 7,588� 8% � 7,089� 10% � 6,333� 8% -11% -20% Total Software License Revenue $ 60,524� 100% $ 74,445� 100% $ 64,351� 100% $ 95,797� 100% $ 68,130� 100% $ 84,879� 100% 25% 14% � � � � � � � � � � � � � � � Software License Revenue by Channel � Direct $ 44,293� 73% $ 57,960� 78% $ 49,946� 78% $ 78,504� 82% $ 56,181� 82% $ 65,379� 77% 16% 13% Indirect � 16,231� 27% � 16,485� 22% � 14,405� 22% � 17,293� 18% � 11,949� 18% � 19,500� 23% 63% 18% Total Software License Revenue $ 60,524� 100% $ 74,445� 100% $ 64,351� 100% $ 95,797� 100% $ 68,130� 100% $ 84,879� 100% 25% 14% � � � � � � � � � � � � � � � Transaction and Customer Information � Average Selling Price $ 121� $ 118� $ 119� $ 148� $ 145� $ 131� -10% 11% Number of Software Transactions > $500 15� 21� 18� 43� 27� 29� 7% 38% Number of Software Transactions > $1,000 6� 5� 5� 12� 9� 7� -22% 40% Number of New Customers 310� 292� 289� 285� 272� 407� 50% 39% Percentage of License Revenue from New Customers � 27% � � 20% � � 26% � � 17% � � 26% � � 27% � 4% 35% � � � � � � � � � � � � � � � Selected Balance Sheet and Cash Flow Information � Cash, Cash Equivalents and Short-Term Investments $ 436,468� $ 425,368� $ 445,824� $ 437,283� $ 436,175� $ 486,434� 12% 14% Cash Flow from Operations $ 36,395� $ 5,376� $ 48,887� $ 63,881� $ 24,408� $ 47,389� 94% 781% Repurchases of Common Stock $ 45,860� $ 34,221� $ 29,329� $ 35,446� $ 25,000� $ 7,460� -70% -78% Days Sales Outstanding � 63� � � 70� � � 80� � � 73� � � 64� � � 58� � -9% -17% � � � � � � � � � � � � � � � Headcount � Quota-Carrying Sales Representatives � 314� � � 324� � � 336� � � 349� � � 341� � � 350� � 3% 8% Americas Headcount 1,745� 67% 1,752� 67% 1,777� 67% 1,836� 67% 1,853� 66% 1,870� 65% 1% 7% EMEA Headcount 632� 24% 633� 24% 653� 25% 673� 25% 712� 26% 757� 27% 6% 20% APAC Headcount � 212� 9% � 217� 9% � 224� 8% � 211� 8% � 218� 8% � 237� 8% 9% 9% Total Company Headcount � 2,589� 100% � 2,602� 100% � 2,654� 100% � 2,720� 100% � 2,783� 100% � 2,864� 100% 3% 10%