EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

Contact:

Randy Jonkers

Chief Financial Officer

800.287.4383

investor.relations@pervasive.com

Pervasive Software Reports Results for its Fourth Quarter and Fiscal Year 2007

Company Reports 26th Consecutive Profitable Quarter

AUSTIN, TEXAS – July 24, 2007 – Pervasive Software® Inc. (NASDAQ:PVSW), a global value leader in embeddable data management and integration software, today announced financial results for the fourth quarter and fiscal year ending June 30, 2007.

Revenue was $10.3 million for the fourth quarter of fiscal year 2007, compared to $11.2 million for the fourth quarter of last fiscal year. Net income was $1.9 million, or $0.09 diluted earnings per share, for the quarter, compared to net income of $3.6 million, or $0.16 diluted earnings per share, for the fourth quarter of last fiscal year. Net income for the fourth quarter included an income tax benefit of $0.5 million, or $0.02 per share, compared to an income tax benefit of $2.3 million, or $0.10 per share, for the fourth quarter of the previous fiscal year.

On a non-GAAP basis, Pervasive realized net income of $1.4 million, or $0.07 diluted earnings per share, in the fourth quarter of fiscal year 2007, compared to net income of $1.5 million, or $0.06 diluted earnings per share, in the fourth quarter of last fiscal year. Non-GAAP results exclude amortization of purchased intangibles and stock-based compensation expense, and assume a non-GAAP effective tax rate of 34%.

“We are very pleased to report our 26th consecutive quarter of profitability,” said John Farr, president and CEO of Pervasive Software. “Our efforts in the June quarter continued to be focused on investing for the future. We continued development of the next major release of our embedded database, Pervasive PSQL Summit™ v10, which is scheduled for launch later this summer and will support the new Microsoft Windows VistaTM desktop operating system. Pervasive PSQL Summit v10 will also provide the foundation for a future update which will support the next Microsoft server operating system, Windows Server® 2008. We also continued to focus on the development of new and existing channel partner relationships for our integration products and launched version 4 of our Pervasive Data Profiler™ software. And we continue to invest in innovation with the development of products positioned to take advantage of market trends in Integration-as-a-Service and software application development for multi-core processors. Pervasive DataSynchTM, recently made available via Salesforce.com’s AppExchange, automates the synchronization of data between Intuit’s QuickBooks and Salesforce.com. Pervasive DataRushTM, presently in beta, is a Java development framework for the development of software applications to capture the parallel processing capabilities of new-generation multi-core server technologies.”

Pervasive continued to generate positive cash flow from operations with $3.0 million in the fourth quarter of fiscal 2007, ending the quarter with $46.4 million in cash and marketable securities and no debt, representing approximately $2.20 per issued and outstanding share. Issued and outstanding shares of common stock as of June 30, 2007 totaled approximately 21.1 million.

Pervasive acquired approximately 854,000 shares of Pervasive common stock on the open market at a total cost of approximately $3.7 million, or approximately $4.30 weighted average price per share, during the quarter ended June 30, 2007. The Company has approximately $9.2 million authorized repurchase funds remaining under its $10.0 million stock repurchase program announced in June 2007. Depending on market conditions and other factors, such purchases may be commenced or suspended at any time without prior notice.

Revenue for the full fiscal year ended June 30, 2007, was $40.8 million, compared to $45.6 million for the previous fiscal year. Net income was $4.0 million, or $0.19 diluted earnings per share, for the full fiscal year, compared to net income of $4.8 million, or $0.21 diluted earnings per share, for the previous fiscal year. Net income included an income tax provision of $0.4 million, or $0.02 per share, for the full fiscal year, compared to an income tax benefit of $2.2 million, or $0.09 per share, for the previous fiscal year. On a non-GAAP basis, as described below, Pervasive realized net income of $5.2 million, or $0.23 diluted earnings per share for the fiscal year ended June 30, 2007, compared to net income of $5.1 million, or $0.22 diluted earnings per share, for the previous fiscal year.

“This brings to a close our fiscal year 2007 and we look forward to fiscal 2008,” continued Farr. “Our objectives for 2008 are focused on the delivery of the next major release of our embedded database product, Pervasive PSQL Summit v10; growing the sales of our integration product line through highly leverageable and more profitable indirect channels; and the development of innovative products to take advantage of market trends in Integration-as-a-Service and new application development to capture the parallel processing capabilities of new-generation multi-core technologies. We are making strategic investments for the future, while also maintaining our intense focus on profitability.”

Business Outlook

For the first fiscal quarter ending September 30, 2007, Pervasive expects revenue to be in the range of $9.5 million to $10.5 million and GAAP-basis diluted earnings per share of $0.01 to $0.03. GAAP-basis profitability is expected to include amortization of purchased intangibles and stock-based compensation expense, together representing approximately $0.8 million in the first quarter of fiscal year 2008. The company expects non-GAAP adjustments to result in non-GAAP diluted and fully taxed earnings per share of approximately $0.03 to $0.06 in the September quarter, compared to non-GAAP diluted

earnings per share of $0.05 for the September quarter of fiscal year 2007. The expectation for revenue for the quarter ending September 30, 2007 reflects the potential for a sequential decrease from the quarter ended June 30, 2007 due primarily to the typical international seasonality associated with the summer months.

Conference Call Details

Pervasive will host a conference call to discuss these results with the investment community today at 5:00 P.M. Eastern time. The dial-in numbers for the call are 877-808-2426 (toll-free) or 706-634-9536 (international). The conference name is “Pervasive Software Inc”. The conference call may also be accessed live over the Web at www.pervasive.com/ircalendar. Check the Web site before the call for login information. Replay will be available 8 P.M Eastern Tuesday, July 24, to midnight, Tuesday, July 31, by dialing 800-642-1687 (toll-free) or 706-645-9291 (international), and selecting Conference ID 6234103. Additionally, the Webcast will be archived on Pervasive’s website at http://www.pervasive.com/ircalendar.

About Pervasive Software

Pervasive Software (NASDAQ: PVSW) provides embeddable data management and integration software to help companies grow and extend the value of their data investments. For more than two decades, Pervasive products have delivered value with a compelling combination of performance, flexibility, reliability and low total cost of ownership. Today, Pervasive is leading its chosen markets by defining and accelerating the inevitable transition from high cost to high value. Pervasive’s hallmark is the size, diversity and loyalty of its customer base, partners and channels: tens of thousands of customers in virtually every industry, in more than 150 countries, rely on Pervasive to manage, integrate, analyze and secure their critical data. 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 table entitled “Reconciliation of GAAP Measures to Non-GAAP.”

Cautionary Statement

This document contains forward-looking statements that involve risks and uncertainties concerning the company, including the company’s expected performance for the first quarter ending September 30, 2007, and the company’s strategy and profitability going forward. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties. These risks and uncertainties include, among others, the company’s ability to attract and retain existing and/or new customers; the company’s ability to issue new products or releases of solutions that meet customers’ needs or achieve acceptance by the company’s customers; changes to current

accounting policies which may have a significant, adverse impact upon the company’s financial results; the introduction of new products by competitors or the entry of new competitors; the company’s ability to preserve its key strategic relationships; the company’s ability to hire and retain key employees; and economic and political conditions in the US and abroad. All of these factors may result in significant fluctuations in the company’s quarterly operating results and/or its ability to sustain or increase its profitability. More about potential factors that could affect the company’s business and financial results is included in Pervasive’s Form 10-Q for the quarter ended March 31, 2007 and Form 10-K/A for the fiscal year ended June 30, 2006, which are on file with the SEC and available at the SEC’s website at www.sec.gov. Pervasive is not obligated to update these forward-looking statements to reflect events or circumstances after the date of this document.

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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)

 

     June 30,
2007		    June 30,
2006
     (Unaudited)     

ASSETS

      

Current assets:

      

Cash and cash equivalents

    $ 31,563    $ 31,137

Marketable securities

      14,788      12,405

Trade accounts receivable, net

      5,563      7,383

Deferred tax assets, net

      771      1,900

Prepaid expenses and other current assets

      1,507      1,773
             

Total current assets

      54,192      54,598

Property and equipment, net

      1,574      1,724

Purchased technology, net

      2,126      4,663

Goodwill

      38,508      38,953

Deferred tax assets, net

      1,071      400

Other assets

      269      300
             

Total assets

    $ 97,740    $ 100,638
             

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable and accrued liabilities

    $ 4,694    $ 5,885

Deferred revenue

      6,042      5,592
             

Total current liabilities

      10,736      11,477

Stockholders’ equity

      87,004      89,161
             

Total liabilities and stockholders’ equity

    $ 97,740    $ 100,638
             

Pervasive Software Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 

     Three months ended
June 30		    Twelve months ended
June 30
     2007    2006    2007     2006

Revenues:

           

Product licenses

    $ 7,134    $ 8,163    $ 28,851     $ 33,776

Services and other

      3,162      3,050      11,932       11,804
                            

Total revenue

      10,296      11,213      40,783       45,580

Costs and expenses:

           

Cost of product licenses

      578      600      3,437       2,407

Cost of services and other

      1,112      1,424      4,439       5,602

Sales and marketing

      4,089      4,223      15,349       18,712

Research and development

      2,489      2,535      9,819       10,320

General and administrative

      1,252      1,550      5,539       6,588

Management restructuring charges

      —        —        —         771
                            

Total costs and expenses

      9,520      10,332      38,583       44,400
                            

Operating income

      776      881      2,200       1,180

Interest and other income, net

      594      460      2,269       1,446

Income tax benefit (provision)

      517      2,250      (432 )     2,150
                            

Net income

    $ 1,887    $ 3,591    $ 4,037     $ 4,776
                            

Diluted earnings per share:

    $ 0.09    $ 0.16    $ 0.19     $ 0.21
                            

Shares used in computing diluted earnings per share

      21,197      22,679      21,744       22,687

Pervasive Software Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

     Twelve months ended
June 30		  
     2007     2006  

Cash from operations

     

Net income

    $ 4,037     $ 4,776  

Adjustments to reconcile net income to net cash provided by operations:

     

Depreciation & amortization

      2,419       2,870  

Write-off of purchased technology

      1,072       —    

Deferred income tax benefit

      —         (2,300 )

Non-cash stock compensation expense

      2,096       3,043  

Changes in current assets and liabilities:

     

Decrease in trade accounts receivable

      1,845       13  

Increase in prepaid expenses and other current assets

      (286 )     (241 )

Increase in accounts payable and accrued liabilities

      251       108  

Increase (decrease) in deferred revenue

      418       (90 )
                

Net cash provided by operations

      11,852       8,179  

Cash from investing activities

     

Purchase of property and equipment

      (705 )     (635 )

Sales and purchases of marketable securities, net

      (2,383 )     (9,100 )

Decrease in other assets

      (65 )     (45 )
                

Net cash used in investing activities

      (3,153 )     (9,780 )

Cash from financing activities

     

Proceeds from exercise of stock options

      2,550       1,849  

Acquisition of Treasury Stock

      (10,840 )     (3,151 )
                

Net cash used in financing activities

      (8,290 )     (1,302 )

Effect of exchange rate on cash and cash equivalents

      17       (46 )
                

Increase (decrease) in cash and cash equivalents

      426       (2,949 )

Cash and cash equivalents at beginning of period

      31,137       34,086  
                

Cash and cash equivalents at end of period

    $ 31,563     $ 31,137  
                

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 the Data Junction acquisition, stock-based compensation related to employee stock options, and significant and non-recurring charges.

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, particularly given the adoption of SFAS 123R at the beginning of fiscal year 2006 and the changes it has introduced for calculating stock-based compensation expenses relative to prior 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 net income 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 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 Data Junction. Management excludes these items for purposes of calculating non-GAAP net income and non-GAAP net income 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 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 net income 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 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.

Management Restructuring Charge

In the quarter ending March 31, 2006, the Company incurred significant severance and legal expenses associated with certain senior management changes, namely the departures of the Company’s President and Chief Executive Officer, the Vice President of Corporate Development and the Vice President of Marketing. These expenses which totaled approximately $0.8 million were significant and non-recurring in nature. The Company believes that these expenses are not consistently recurring and do not necessarily reflect expected future operating expense, nor does the Company believe that they provide a meaningful evaluation of current versus past business results or the expense levels required to support the Company’s operating plan.

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 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
June 30,		     Twelve months ended
June 30,		  
    

2007

Net Income

    

2006

Net Income

    

2007

Net Income

    

2006

Net Income

  

GAAP

    $ 1,887     $ 3,591     $ 4,037     $ 4,776  

Amortization of intangible assets - cost of product licenses

      317       317       1,268       1,268  

Stock-based compensation - cost of services and other

      19       23       70       113  

Stock-based compensation - sales and marketing expense

      140       184       594       946  

Stock-based compensation - research and development expense

      61       112       240       549  

Stock-based compensation - general and administrative expense

      274       327       1,192       1,434  

Management restructuring charges

      —         —         —         771  

Income tax adjustment for non-GAAP

      (1,258 )     (3,033 )     (2,233 )     (4,770 )
                                

Non-GAAP

    $ 1,440     $ 1,521     $ 5,168     $ 5,087  
                                

GAAP net income per share - diluted

    $ 0.09     $ 0.16     $ 0.19     $ 0.21  

Non-GAAP net income per share - diluted

    $ 0.07     $ 0.06     $ 0.23     $ 0.22  

Shares used to compute GAAP net income per share - diluted

      21,197       22,679       21,744       22,687  

Shares used to compute non-GAAP net income per share - diluted

      21,764       23,575       22,312       23,379