Total revenue for the first quarter was $69.4 million, an increase of 11% from the first quarter of 2007. License revenue for the first quarter was $17.0 million, a decrease of 14% from the prior year period, while consulting services revenue increased 31% to $24.3 million, and maintenance and support revenue increased 17% to $28.1 million.
GAAP net income for the first quarter of 2008 was $4.0 million, or $0.09 per diluted share, compared to $5.1 million, or $0.12 per diluted share, in the first quarter of 2007. Non-cash stock-based compensation expenses increased $1.4 million from the prior year period and were a significant contributor to the decrease in Q1 2008 GAAP net income from the prior year.
Non-GAAP net income for the first quarter of 2008 was $6.1 million, or $0.14 per diluted share, compared to $6.5 million, or $0.16 per diluted share, in the first quarter of 2007. Non-GAAP net income excludes the net-of-tax impact of stock-based compensation, retention payments associated with the Company’s 2005 recapitalization, amortization of acquired intangible assets and New Mountain Capital fees.
“While we were pleased with our strong consulting services and maintenance revenues and our ability to deliver strong non-GAAP operating income, our Q1 license revenue was below our expectations,” said Kevin Parker, president and CEO of Deltek. “Although our overall government contracting business met our objectives for the quarter, the changing U.S. macroeconomic environment resulted in purchasing delays and elongated sales cycles with our A&E and professional services customers as the quarter ended. We also experienced some execution challenges that adversely impacted our license revenue during the quarter.”
“We are actively managing the execution issues and our outlook for the remainder of 2008 remains optimistic. We believe our license revenue will be positively impacted by our new reseller partners, the implementation of Vision incentive programs and our continued momentum in the government contracting market.”
Key Developments
- Since the beginning of the year, Deltek has added more than 20 new reseller business partners as we continue to grow our reseller partner network in order to expand our market presence. New partnership agreements include: Aktion Associates, Banks-Hill Systems, Bredet Services, Clifton Gunderson Solutions, FCA Technologies, The Fitzgerald Group, Forepoint, Anglin, Reichmann, Snellgrove & Armstrong, PD Enterprises, RICA Consulting Services Corporation, Tech BizSolutions, Rose Financial Services, Saggar & Rosenberg, Incorporating Technology, The Progressive Group, Information Systems Management, Noryan Consulting Services, RSM McGladrey, Software Link, Solution Strategists, SouthTech Solutions, Strategies Group and Synergy Plus Solutions.
- In Q1, Deltek announced two significant wins in the European market with RMJM, one of the world's largest architectural practices, and Buro Four, a rapidly growing property and construction project management consultancy. RMJM will implement Deltek's Vision product across fifteen locations in Europe, Asia, the Middle East and the US – replacing all current systems. Buro Four is utilizing Vision to gain real-time access to project data and cash flow information, so that it can better manage project risk and facilitate its plans for continued rapid expansion.
- In the first quarter, Deltek released the newest versions of its Costpoint product family - Costpoint 6.1, Time & Expense 8.0 and GovWin 5.1 - to further strengthen its industry-leading solution designed for complex project-driven organizations. New functionality added to the Costpoint product family includes multi-currency enhancements, improved management of performance based award fees, out-of-the-box credit card expense imports and automation of the processes for the pursuit of new business. In addition to offering new functionality, these new releases will help project-focused organizations drive compliance, increase profitability, improve decision making and win new business.
- Deltek also recently announced the Consulting Edition of Vision, which contains new features and capabilities designed specifically for the unique project-focused needs of consulting firms. This product was developed by utilizing Deltek’s more than 25 years of experience and gathering extensive input from hundreds of consulting services firms. The Consulting Edition of Vision brings to market mission-critical functionality for the consulting industry by adding new resource planning capabilities, workforce optimization solutions and industry specific analytical capabilities to its broad suite of products.
Conference Call Information
Deltek will host a conference call at 5:00 p.m. Eastern Time today to discuss the Company’s first quarter results. To access this call, dial 1-877-381-6419 in North America and 1-706-643-9496 outside North America. The conference call also will be available via webcast at http://investor.deltek.com. Those unable to participate in the live call may hear a rebroadcast by dialing 1-800-642-1687 in North America and 1-706-645-9291 outside North America. The confirmation number is 43441906. The rebroadcast and the webcast will be available for replay through May 15, 2008.
About Deltek
Deltek (NASDAQ: PROJ) is the leading provider of enterprise applications software designed specifically for project-focused businesses. For more than two decades, our software applications have enabled organizations to automate mission-critical business processes around the engagement, execution and delivery of projects. More than 12,000 customers worldwide rely on Deltek to measure business results, optimize performance, streamline operations and win new business. For more information, visit www.deltek.com.
Use of Non-GAAP Financial Measures
This press release and the related conference call described above contain certain non-GAAP financial measures, including non-GAAP net income, non-GAAP operating income and adjusted EBITDA. The Company defines non-GAAP net income as GAAP net income before the net-of-tax impact of stock-based compensation, retention payments associated with the Company’s 2005 recapitalization, amortization of acquired intangible assets and New Mountain Capital fees. Non-GAAP operating income is defined as GAAP operating income before the pre-tax impact of stock-based compensation, retention payments associated with the Company’s 2005 recapitalization, amortization of acquired intangible assets and New Mountain Capital fees. Adjusted EBITDA is defined as GAAP net income before interest expenses (net of interest income), provision for income taxes, depreciation, amortization, stock-based compensation, retention payments associated with the Company’s 2005 recapitalization and New Mountain Capital fees.
The Company believes that the presentation of these non-GAAP financial measures provides useful information to its investors and lenders because these measures enhance their overall understanding of the Company’s financial performance and the prospects for the future of the Company’s ongoing business operations. The Company believes that by reporting these measures, it provides insight and consistency in its financial reporting and presents a basis for comparison of its business operations between current, past and future periods. In addition, the measures provide a basis for the Company to compare its financial results to those of other comparable publicly traded companies and are used by its management team to plan and forecast its business.
Adjusted EBITDA is also used as the basis for the Company’s calculations to determine compliance with its debt covenants and to assess its ability to borrow additional funds to finance or expand its operations.
Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance which are prepared in accordance with U.S. GAAP and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review the reconciliations of our GAAP to non-GAAP net income and adjusted EBITDA, which are set forth below.
Forward-Looking Statements
This press release and related conference call contain forward-looking statements that involve substantial risks and uncertainties. You can identify forward-looking statements by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “should,” “will,” “would” or similar words. You should consider these statements carefully because they discuss our plans, targets, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. There will be events in the future, however, that we are not able to predict accurately or control. Our actual results may differ materially from the expectations we describe in our forward-looking statements. Factors or events that could cause our actual results to materially differ may emerge from time to time, and it is not possible for us to accurately predict all of them. Before you invest in our common stock, you should be aware that the occurrence of any such event or of any of the additional events described as risk factors in the Company’s filings with the Securities and Exchange Commission could have a material adverse effect on our business, results of operation and financial position. Any forward-looking statement made by us in this press release or related conference call speaks only as of the date on which we make it. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
| DELTEK, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2008 | 2007 | |||||||
| REVENUES: | ||||||||
| Software license fees | $ | 17,007 | $ | 19,810 | ||||
| Consulting services | 24,266 | 18,489 | ||||||
| Maintenance and support services | 28,065 | 23,969 | ||||||
| Other revenues | 16 | 197 | ||||||
| Total revenues | 69,354 | 62,465 | ||||||
| COST OF REVENUES: | ||||||||
| Cost of software license fees | 1,580 | 2,219 | ||||||
| Cost of consulting services | 20,163 | 15,498 | ||||||
| Cost of maintenance and support services | 5,627 | 3,866 | ||||||
| Cost of other revenues | 232 | 178 | ||||||
| Total cost of revenues | 27,602 | 21,761 | ||||||
| GROSS PROFIT | 41,752 | 40,704 | ||||||
| Research and development | 11,391 | 10,236 | ||||||
| Sales and marketing | 12,303 | 10,528 | ||||||
| General and administrative | 7,561 | 7,119 | ||||||
| Operating expenses | 31,255 | 27,883 | ||||||
| INCOME FROM OPERATIONS | 10,497 | 12,821 | ||||||
| Interest income | 257 | 92 | ||||||
| Interest expense | (3,474 | ) | (4,598 | ) | ||||
| Other (expense) income, net | (37 | ) | 86 | |||||
| INCOME BEFORE INCOME TAXES | 7,243 | 8,401 | ||||||
| Income tax expense | 3,222 | 3,297 | ||||||
| NET INCOME | $ | 4,021 | $ | 5,104 | ||||
| EARNINGS PER SHARE | ||||||||
| Basic | $ | 0.09 | $ | 0.13 | ||||
| Diluted | $ | 0.09 | $ | 0.12 | ||||
| COMMON SHARES AND EQUIVALENTS OUTSTANDING | ||||||||
| Basic weighted average shares | 43,058 | 39,408 | ||||||
| Diluted weighted average shares | 44,406 | 40,904 | ||||||
| DELTEK, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands, except share data) | ||||||||
| (unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2008 | 2007 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 35,364 | $ | 17,091 | ||||
|
Accounts receivable, net of allowance of $2,421 and $2,866 at March 31, 2008 and December 31, 2007, respectively |
47,305 | 55,663 | ||||||
| Deferred income taxes | 4,934 | 5,027 | ||||||
| Prepaid expenses and other current assets | 6,435 | 7,104 | ||||||
| TOTAL CURRENT ASSETS | 94,038 | 84,885 | ||||||
| PROPERTY AND EQUIPMENT, NET | 15,149 | 13,575 | ||||||
| CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET | 2,080 | 2,399 | ||||||
| LONG-TERM DEFERRED INCOME TAXES | 1,987 | 354 | ||||||
| INTANGIBLE ASSETS, NET | 12,142 | 13,132 | ||||||
| GOODWILL | 50,572 | 50,082 | ||||||
| OTHER ASSETS | 3,107 | 3,253 | ||||||
| TOTAL ASSETS | $ | 179,075 | $ | 167,680 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current portion of long-term debt | $ | 996 | $ | 498 | ||||
| Accounts payable and accrued expenses | 31,208 | 33,310 | ||||||
| Accrued liability for redemption of stock in recapitalization | 569 | 569 | ||||||
| Deferred revenues | 25,865 | 22,046 | ||||||
| Income taxes payable | 3,241 | 729 | ||||||
| TOTAL CURRENT LIABILITIES | 61,879 | 57,152 | ||||||
| LONG-TERM DEBT | 192,317 | 192,815 | ||||||
| OTHER TAX LIABILITIES | 744 | 551 | ||||||
| OTHER LONG-TERM LIABILITIES | 3,558 | 3,350 | ||||||
| TOTAL LIABILITIES | 258,498 | 253,868 | ||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
|
Preferred stock, $0.001 par value—authorized, 5,000,000 shares; issued and outstanding, 0 and 100 shares at March 31, 2008 and December 31, 2007, respectively |
– |
– | ||||||
|
Common stock, $0.001 par value—authorized, 200,000,000 shares; issued and outstanding, 43,079,835 and 43,046,523 shares at March 31, 2008 and December 31, 2007, respectively |
43 | 43 | ||||||
|
Class A common stock, $0.001 par value—authorized, 100 shares; issued and outstanding, 100 and 100 shares at March 31, 2008 and December 31, 2007, respectively |
– |
– | ||||||
| Additional paid-in capital | 170,257 | 167,527 | ||||||
| Accumulated deficit | (249,403 | ) | (253,424 | ) | ||||
| Accumulated other comprehensive income | (320 | ) | (334 | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | (79,423 | ) | (86,188 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 179,075 | $ | 167,680 | ||||
| DELTEK, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2008 | 2007 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 4,021 | $ | 5,104 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Provision for doubtful accounts | 48 | 608 | ||||||
| Depreciation and amortization | 2,343 | 2,110 | ||||||
| Amortization of debt issuance costs | 198 | 220 | ||||||
| Stock-based compensation expense | 2,297 | 905 | ||||||
| Employee stock purchase plan expense | 67 | – | ||||||
| Loss on disposal of fixed assets | 64 | – | ||||||
| Deferred income taxes | (1,538 | ) | (593 | ) | ||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable, net | 8,338 | (28 | ) | |||||
| Prepaid expenses and other assets | (896 | ) | (2,288 | ) | ||||
| Accounts payable and accrued expenses | (1,426 | ) | (1,690 | ) | ||||
| Income taxes payable/receivable | 2,522 | 633 | ||||||
| Other tax liabilities | 193 | – | ||||||
| Other long-term liabilities | (110 | ) | (34 | ) | ||||
| Deferred revenues | 4,111 | 2,440 | ||||||
| Net Cash Provided by Operating Activities | 20,232 | 7,387 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisitions, net of cash acquired | - | (500 | ) | |||||
| Purchase of property and equipment | (2,066 | ) | (702 | ) | ||||
| Capitalized software development costs | - | (208 | ) | |||||
| Net Cash (Used in) Investing Activities | (2,066 | ) | (1,410 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Issuance of common stock | – | 37 | ||||||
| Proceeds from exercise of stock options | 72 | – | ||||||
| Proceeds from issuance of stock under employee stock purchase plan | 305 | – | ||||||
| Offering costs paid for 2007 sale of common stock in initial public offering | (275 | ) | – | |||||
| Redemption of stock and stockholder payments in recapitalization | – | (4,780 | ) | |||||
| Proceeds from the issuance of debt | – | 7,500 | ||||||
| Repayment of debt | – | (8,537 | ) | |||||
| Net Cash Provided by (Used in) Financing Activities | 102 | (5,780 | ) | |||||
| IMPACT OF FOREIGN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 5 | (8 | ) | |||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 18,273 | 189 | ||||||
| CASH AND CASH EQUIVALENTS––Beginning of period | 17,091 | 6,667 | ||||||
| CASH AND CASH EQUIVALENTS––End of period | $ | 35,364 | $ | 6,856 | ||||
| DELTEK, INC. | ||||||
| RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME | ||||||
| (in thousands, except per share amounts) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, | ||||||
| 2008 | 2007 | |||||
| Net Income (GAAP Basis) | $ | 4,021 | $ | 5,104 | ||
| Income Tax Expense | 3,222 | 3,297 | ||||
| Pre-Tax Income (GAAP Basis) | $ | 7,243 | $ | 8,401 | ||
| Adjustments: | ||||||
| NMC Advisory and Transaction Fees | - | 125 | ||||
| Stock-based Compensation | 2,297 | 905 | ||||
| Recapitalization Retention Expense | 169 | 206 | ||||
| Amortization of Acquired Intangibles | 1,004 | 1,018 | ||||
| Adjusted Pre-Tax Income | 10,713 | 10,655 | ||||
| Less: Adjusted Income Tax Expense | 4,589 | 4,185 | ||||
| Non-GAAP Net Income | $ | 6,124 | $ | 6,470 | ||
| Non-GAAP Earnings Per Share (diluted) | $ | 0.14 | $ | 0.16 | ||
| Weighted Average Shares | 44,406 | 40,904 | ||||
| RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME | ||||||
| (in thousands) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, | ||||||
| 2008 | 2007 | |||||
| Operating Income - GAAP | $ | 10,497 | $ | 12,821 | ||
| Plus: Stock-based Compensation and Recapitalization Retention Expense | 2,466 | 1,111 | ||||
| Plus: Amortization of Acquired Intangibles | 1,004 | 1,018 | ||||
| Plus: NMC Advisory and Transaction Fees | - | 125 | ||||
| Operating Income - Non-GAAP | $ | 13,967 | $ | 15,075 | ||
| RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA | ||||||
| (in thousands) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, | ||||||
| 2008 | 2007 | |||||
| Net Income (GAAP Basis) | $ | 4,021 | $ | 5,104 | ||
| NMC Advisory and Transaction Fees | - | 125 | ||||
| Stock-based Compensation | 2,297 | 905 | ||||
| Recapitalization Retention Expense | 169 | 206 | ||||
| Depreciation | 1,020 | 701 | ||||
| Amortization | 1,323 | 1,409 | ||||
| Interest Expense, net | 3,217 | 4,506 | ||||
| Income Tax Expense | 3,222 | 3,297 | ||||
| Adjusted EBITDA | $ | 15,269 | $ | 16,253 | ||
| STOCK-BASED COMPENSATION AND RECAPITALIZATION RETENTION EXPENSES | ||||||
| (in thousands) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, | ||||||
| 2008 | 2007 | |||||
| Cost of Software License Fees | $ | 1 | $ | 1 | ||
| Cost of Consulting Services | 402 | 198 | ||||
| Cost of Maintenance and Support Services | 261 | 31 | ||||
| Research and Development | 534 | 277 | ||||
| Sales and Marketing | 464 | 204 | ||||
| General and Administrative | 804 | 400 | ||||
| Total | $ | 2,466 | $ | 1,111 | ||
| AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS | ||||||
| (in thousands) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, | ||||||
| 2008 | 2007 | |||||
| Cost of Software License Fees | $ | 430 | $ | 426 | ||
| Cost of Consulting Services | 19 | - | ||||
| Cost of Maintenance and Support Services | - | - | ||||
| Research and Development | - | - | ||||
| Sales and Marketing | 537 | 574 | ||||
| General and Administrative | 18 | 18 | ||||
| Total | $ | 1,004 | $ | 1,018 | ||
| AMORTIZATION AND DEPRECIATION EXPENSES | ||||||
| (in thousands) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, | ||||||
| 2008 | 2007 | |||||
| Cost of Software License Fees | $ | 751 | $ | 819 | ||
| Cost of Consulting Services | 358 | 226 | ||||
| Cost of Maintenance and Support Services | 129 | 77 | ||||
| Research and Development | 256 | 195 | ||||
| Sales and Marketing | 731 | 702 | ||||
| General and Administrative | 118 | 91 | ||||
| Total | $ | 2,343 | $ | 2,110 | ||
Contact:
Deltek, Inc.
Investor Relations Contact:
Dave
Spille
VP, Investor Relations
703-885-9423
Email Contact
or
Media
Relations Contact:
Warren Brown
VP, Strategic
Communications
703-885-9746
Email Contact