Rally Software Announces Second Quarter Fiscal Year 2015 Financial Results - WFLA News Channel 8

Rally Software Announces Second Quarter Fiscal Year 2015 Financial Results

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SOURCE Rally Software

BOULDER, Colo., Aug. 28, 2014 /PRNewswire/ -- Rally Software (NYSE: RALY), a leading global provider of enterprise-class software and services to drive agility, today announced financial results for its second quarter of fiscal year 2015 ended July 31, 2014.

Second quarter fiscal year 2015 results:

  • Revenues of $21.5 million, an increase of 9% compared to the second quarter in the same period one year ago.
  • GAAP net loss of $(8.9) million, or a loss of $(0.36) per basic and diluted share based on 25.0 million weighted average shares of common stock outstanding, as compared to a GAAP net loss of $(2.3) million, or a loss of $(0.09) per basic and diluted share based on 24.0 million weighted average shares of common stock outstanding in the same period one year ago.
  • Non-GAAP net loss of $(7.4) million, or $(0.30) per basic and diluted share, as compared to a non-GAAP net loss of $(1.1) million, or $(0.05) per basic and diluted share in the same period one year ago (see the table titled "Reconciliation of GAAP to non-GAAP Financial Measures").
  • Total paid seats increased to nearly 235,000, a 22% increase over the total paid seats in the same period one year ago.

Cash flow used in operations in the second quarter was $8.9 million. Cash and cash equivalents at July 31, 2014, excluding restricted cash, were $77.0 million.

"Our second quarter saw record revenue and we outperformed against our revised outlook," said Rally's Chairman and CEO, Tim Miller.

"In the second quarter, we continued to build the foundation for strong execution in the back half of the year by bringing new leadership to our R&D department. In addition, this quarter we hosted our largest and most successful RallyON! conference to date, where we announced strategic enhancements to our platform and new solutions that better support customers in their Agile journeys. We also had a strong presence at Agile2014, where we brought our new business agility messaging to market. To capture and act on the opportunity that awaits us in the back half of the year, Rally must continue to focus on strong execution and driving value for our customers as they realize the benefits of agility across their organization."

New customers welcomed by Rally during the second quarter include: Appointment-Plus, Axium, Cathay Pacific Airways Limited, Compass Learning, Digital Barriers, EBSCO Publishing, Engine Yard, Invesco, Highmark, Nexenta, PayWizard, QSR International, Rise Interactive, RMIT University, and Verizon.

Business Outlook

As of August 28, 2014, management is providing its financial outlook as follows:  

Third Quarter of Fiscal 2015

  • Total revenue in the range of $22.0 to $22.5 million, or 16% to 19% growth over the prior year's third quarter.
  • GAAP net loss per basic and diluted share of approximately $(0.41) to $(0.44), based on 25.3 million weighted average shares of common stock outstanding.
  • Non-GAAP net loss per basic and diluted share of approximately $(0.34) to $(0.37), based on 25.3 million weighted average shares of common stock outstanding, which excludes $1.6 million in stock-based compensation and amortization of acquired intangible assets.

Fiscal Year 2015

  • Total revenue in the range of $87.0 to $90.0 million, or 17% to 21% growth over the prior year.
  • GAAP net loss per basic and diluted share of approximately $(1.47) to $(1.52), based on 25.2 million weighted average shares of common stock outstanding. 
  • Non-GAAP net loss per basic and diluted share of approximately $(1.21) to $(1.26), based on 25.2 million weighted average shares of common stock outstanding, which excludes $6.4 million in stock-based compensation and amortization of acquired intangible assets.

CFO Commentary

Commentary on the quarter by Jim Lejeal, Rally Software Chief Financial Officer, is available at investors.rallydev.com.

Conference Call Today, August 28th, 2014

Rally Software will host a conference call and live webcast to discuss the financial results at 3:00 p.m. Mountain Time, 5:00 p.m. Eastern Time, on Thursday, August 28, 2014. The conference call can be accessed by dialing 1-877-870-4263, or 1-412-317-0790 (outside the U.S.). A live webcast will be available on the Investor Relations page of the Rally corporate website at www.rallydev.com and via replay beginning approximately one hour after the completion of the call. The replay will be available for 90 days. An audio replay of the call will also be available to all interested parties beginning at approximately 4:00 p.m. Mountain Time, 6:00 p.m. Eastern Time, on Thursday, August 28, 2014 until 7:00 a.m. Mountain Time, 9:00 a.m. Eastern Time, on Friday, September 5, 2014, by dialing 1-877-344-7529 or 1-412-317-0088 (outside the U.S.) and entering pass code 10050781.

About Rally Software

Rally Software is a leading global provider of enterprise-class software and services solutions that drive agility. Companies use Rally's solutions to accelerate the pace of innovation, improve performance, and respond effectively to evolving competitive markets and customer needs. Rally's SaaS platform transforms the way organizations manage the software development lifecycle by aligning software development and strategic business objectives, facilitating collaboration, and increasing transparency. Rally's consulting and training services apply Agile and Lean approaches to help organizations innovate, lead, adapt, and deliver. Learn more at http://www.rallydev.com.

©2014 Rally Software Development Corp.  All rights reserved.  Rally, Rally Software and the Rally logo are trademarks or registered trademarks of Rally Software Development Corp. in the United States and/or other countries. All other trade names, trademarks and service marks are properties of their respective owners.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), we have provided certain measures that have not been prepared in accordance with GAAP. These non-GAAP financial measures include non-GAAP results for calculated billings, subscription and support billings, cost of revenue, gross profit, operating expenses, net loss and basic and diluted net loss per share, which are in addition to, and, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Our non-GAAP financial measures exclude stock-based compensation expense and amortization of acquired intangible assets. We believe the presentation of operating results excluding stock-based compensation expense and the amortization of acquired intangible assets provides useful supplemental information to investors and facilitates the analysis of our core operating results and comparison of operating results across reporting periods and is therefore useful to investors in analyzing and assessing our past and future operating performance.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measures to such GAAP measures can be found in the accompanying financial statements included with this press release.

Forward-looking Statements

This press release contains forward-looking statements, including statements regarding our future financial performance, market growth, the demand for our solutions, and general business conditions. Any forward-looking statements contained in this press release are based upon our historical performance and current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from our current expectations. Important factors that could cause actual results to differ materially from those anticipated in such forward-looking statements include, but are not limited to, the growth of demand for Agile software development, our ability to expand relationships with existing customers, our ability to attract and retain customers, the mix of perpetual license and subscription revenue, competitive factors, including but not limited to pricing pressures, industry consolidation, and entry of new competitors and new products, our ability to manage growth effectively, the ability of new sales personnel to become fully productive quickly and efficiently, our ability to maintain, protect and enhance our brand and intellectual property, general economic and financial conditions, and other risks and uncertainties. Further information on risk factors that could cause actual results to differ materially from forecasted results is included in our reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended January 31, 2014 filed on April 11, 2014 and our Quarterly Report on Form 10-Q that will be filed for the quarter ended July 31, 2014.  

Rally Software Development Corp. 

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)








July 31,


January 31,


2014


2014

ASSETS








Current assets:




Cash and cash equivalents

$         77,005


$         88,891

Restricted cash, short-term

16


16

Accounts receivable, net

13,761


21,771

Other receivables

179


78

Prepaid expenses and other current assets

4,201


3,310

Total current assets

95,162


114,066





Property and equipment, net

6,330


5,569

Goodwill

2,489


2,529

Intangible assets, net

1,646


1,909

Restricted cash, long-term

4,200


4,200

Other assets

888


810





Total assets

$       110,715


$       129,083









LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:




Accounts payable

$           2,657


$           2,170

Accrued liabilities

3,405


4,812

Deferred revenue

35,245


38,352

Other current liabilities

1,809


2,054

Total current liabilities

43,116


47,388





Deferred revenue, net of current portion

1,061


2,433

Other long-term liabilities

889


888





Total liabilities

45,066


50,709





Stockholders' equity:




Common stock

3


3

Additional paid-in capital

178,688


174,027

Accumulated deficit

(113,047)


(95,660)

Accumulated other comprehensive loss

5


4

Total stockholders' equity 

65,649


78,374





Total liabilities and stockholders equity 

$       110,715


$       129,083

 

 

Rally Software Development Corp. 

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)










Three Months Ended


Six Months Ended


July 31,


July 31,


2014


2013


2014


2013

Revenue:








Subscription and support

$         17,440


$         14,220


$         33,544


$         27,593

Perpetual license

1,361


2,735


2,001


3,364

Total product revenue

18,801


16,955


35,545


30,957









Professional services

2,711


2,840


5,398


4,888









Total revenue

21,512


19,795


40,943


35,845









Cost of revenue (1) (2):








Product 

2,840


1,800


5,236


3,485

Professional services

2,953


2,336


5,724


4,209

Total cost of revenue

5,793


4,136


10,960


7,694









Gross profit

15,719


15,659


29,983


28,151









Operating expenses (1):








Sales and marketing

12,841


9,085


24,250


17,919

Research and development

6,495


5,051


12,481


10,131

General and administrative

4,974


3,782


10,163


7,636

Total operating expenses

24,310


17,918


46,894


35,686









Loss from operations

(8,591)


(2,259)


(16,911)


(7,535)









Other income (expense):








Interest and other income

40


36


79


49

Interest expense

-


(2)


-


(464)

Loss on foreign currency transactions and other








 gain (loss)

(70)


(4)


(152)


(24)









Loss before provision for income taxes

(8,621)


(2,229)


(16,984)


(7,974)

Provision for income taxes

286


49


403


94

Net loss 

$         (8,907)


$         (2,278)


$       (17,387)


$         (8,068)









Net loss per share attributable to common stockholders,








 basic and diluted

$           (0.36)


$           (0.09)


$           (0.70)


$           (0.53)









Weighted average common shares outstanding, basic








 and diluted

25,026


24,014


24,923


15,109









(1) Includes stock-based compensation expense as follows:





Three Months Ended


Six Months Ended


July 31,


July 31,


2014


2013


2014


2013

Cost of product revenue

$                74


$                39


$              169


$              105

Cost of professional services revenue

98


46


187


65

Sales and marketing

367


302


805


407

Research and development

237


402


649


626

General and administrative

567


261


1,089


431










$           1,343


$           1,050


$           2,899


$           1,634









(2) Includes amortization expense of acquired intangible assets as follows:




Cost of product revenue

$              132


$              131


$              264


$              279









 

 

Rally Software Development Corp. 

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)













Three Months Ended


Six Months Ended



July 31, 


July 31, 



2014


2013


2014


2013

Cash flow from operating activities:








Net loss


$         (8,907)


$         (2,278)


$       (17,387)


$         (8,068)










Adjustments to reconcile net loss to net cash (used) in operating activities:








Depreciation and amortization

778


664


1,503


1,302

Noncash stock-based compensation expense

1,343


1,050


2,899


1,634

Noncash interest expense

-


-


-


462

Other


58


-


77


-

Changes in operating assets and liabilities: 








Accounts receivable

2,268


675


8,011


5,250

Other receivables

(71)


(24)


(101)


227

Prepaid and other current assets

(23)


113


(891)


(1,151)

Other assets

(148)


(164)


(112)


(225)

Accounts payable and accrued expenses

225


(480)


(958)


(110)

Deferred revenue

(3,404)


(3,818)


(4,480)


(2,024)

Other current liabilities

(1,042)


1,019


(245)


826

Other long-term liabilities

(1)


(13)


1


(22)











Net cash (used) in operating activities

(8,924)


(3,256)


(11,683)


(1,899)










Cash flow from investing activities:








Purchase of property and equipment

(1,331)


(537)


(1,980)


(2,679)

Proceeds from sale of property and equipment

13


-


14


-

Purchase of Flowdock Oy, net of cash received

-


-


-


(2,857)











Net cash (used) in investing activities

(1,318)


(537)


(1,966)


(5,536)










Cash flow from financing activities:








Proceeds from exercise of common stock options

161


148


408


409

Proceeds from employee stock purchase plan

1,463


-


1,463


-

Proceeds from initial public offering, net of underwriting discounts and commissions

-


-


-


89,838

Proceeds from follow-on public offering, net of underwriting discounts and commissions

-


5,884


-


5,884

Payroll taxes paid in lieu of shares issued for stock-based compensation

(108)




(108)



Payments of offering costs

-


(1,233)


-


(1,652)











Net cash provided by financing activities

1,516


4,799


1,763


94,479











Net increase (decrease) in cash and cash equivalents during period

(8,726)


1,006


(11,886)


87,044










Cash and cash equivalents at beginning of period

85,731


103,647


88,891


17,609

Cash and cash equivalents at end of period

$         77,005


$       104,653


$         77,005


$       104,653

 

 

Rally Software Development Corp.

Reconciliation of GAAP to Non-GAAP Financial Measures

(unaudited, in thousands, except per share amounts)



Three Months Ended


Six Months Ended


July 31, 2014


July 31, 2013


July 31, 2014


July 31, 2013









GAAP product cost of revenue

$          2,840


$          1,800


$          5,236


$          3,485

Amortization expense of acquired intangible assets

(132)


(131)


(264)


(279)

Stock-based compensation expense

(74)


(39)


(169)


(105)

Non-GAAP product cost of revenue

$           2,634


$           1,630


$           4,803


$           3,101









GAAP professional services cost of revenue

$           2,953


$           2,336


$           5,724


$           4,209

Stock-based compensation expense

(98)


(46)


(187)


(65)

Non-GAAP professional services cost of revenue

$           2,855


$           2,290


$           5,537


$           4,144









GAAP gross profit 

$         15,719


$         15,659


$         29,983


$         28,151

Amortization expense of acquired intangible assets

132


131


264


279

Stock-based compensation expense

172


85


356


170

Non-GAAP gross profit

$         16,023


$         15,875


$         30,603


$         28,600









Gross margin: 








 GAAP

73%


79%


73%


79%

 Non-GAAP

74%


80%


75%


80%









Product gross margin: 








 GAAP

85%


89%


85%


89%

 Non-GAAP

86%


90%


86%


90%









Professional services gross margin: 








 GAAP

(9%)


18%


(6%)


14%

 Non-GAAP

(5%)


19%


(3%)


15%









GAAP sales and marketing expense

$         12,841


$           9,085


$         24,250


$         17,919

Stock-based compensation expense

(367)


(302)


(805)


(407)

Non-GAAP sales and marketing expense

$         12,474


$           8,783


$         23,445


$         17,512









GAAP research and development expense

$           6,495


$           5,051


$         12,481


$         10,131

Stock-based compensation expense

(237)


(402)


(649)


(626)

Non-GAAP research and development expense

$           6,258


$           4,649


$         11,832


$           9,505









GAAP general and administrative expense

$           4,974


$           3,782


$         10,163


$           7,636

Stock-based compensation expense

(567)


(261)


(1,089)


(431)

Non-GAAP general and administrative expense

$           4,407


$           3,521


$           9,074


$           7,205









GAAP net loss 

$         (8,907)


$         (2,278)


$       (17,387)


$         (8,068)

Amortization expense of acquired intangible assets

132


131


264


279

Stock-based compensation expense

1,343


1,050


2,899


1,634

Non-GAAP net loss

$         (7,432)


$         (1,097)


$       (14,224)


$         (6,155)









Basic and diluted net loss per share: 








 GAAP basic and diluted net loss per share

$           (0.36)


$           (0.09)


$           (0.70)


$           (0.53)

Amortization expense of acquired intangible assets

0.01


-


0.01


0.02

Stock-based compensation expense

0.05


0.04


0.12


0.11

 Non-GAAP basic and diluted net loss per share

$           (0.30)


$           (0.05)


$           (0.57)


$           (0.40)









Shares used to calculate basic and diluted net loss per share

25,026


24,014


24,923


15,109









 

Rally Software Development Corp. 

Reconciliation of Total Revenue to Calculated Billings, Subscription and Support  

Revenue to Subscription and Support Billings and Days Sales Outstanding

(unaudited, in thousands except days sales outstanding)










Three Months Ended


Six Months Ended


July 31,


July 31,


2014


2013


2014


2013









Total revenue

$         21,512


$         19,795


$         40,943


$         35,845

Deferred revenue-








End of period

36,306


36,166


36,306


36,166

Beginning of period

(39,711)


(39,984)


(40,785)


(38,190)









Net change

(3,405)


(3,818)


(4,479)


(2,024)









Calculated billings

$         18,107


$         15,977


$         36,464


$         33,821

















Total subscription and support revenue

$         17,440


$         14,220


$         33,544


$         27,593

Deferred revenue-








End of period

36,306


36,166


36,306


36,166

Beginning of period

(39,711)


(39,984)


(40,785)


(38,190)









Net change

(3,405)


(3,818)


(4,479)


(2,024)









Subscription and support billings

$         14,035


$         10,402


$         29,065


$         25,569

















Accounts receivable

$         13,761


$         11,068













Days Sales Outstanding (1)

70


64








(1) - Days Sales Outstanding is computed by dividing accounts receivable by calculated billings times the number of days in the quarter.

 

 

Rally Software Development Corp. 

Reconciliation of Non-GAAP Financial Guidance


The financial guidance provided below is an estimate based on information available as of August 28, 2014. The company's future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company's financial results are stated above in this press release. More information on potential factors that could affect the company's financial results is included in the company's public reports filed with the SEC, including the company's Annual Report on Form 10-K for the fiscal year ended January 31, 2014 filed on April 11, 2014, the company's Quarterly Report on Form 10-Q for the quarter ended April 30, 2014 filed on June 9, 2014 and the company's Quarterly Report on Form 10-Q for the quarter ended July 31, 2014 to be filed with the SEC. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.



Three Months Ended
October 31, 2014


Fiscal Year Ended
January 31, 2015









Non-GAAP basic and diluted net loss per share

$(0.34) - $(0.37)


$(1.21) - $(1.26)









Stock-based compensation expense

(0.06)


(0.24)









Amortization of acquired intangible assets

(0.01)


(0.02)









GAAP basic and diluted net loss per share

$(0.41) - $(0.44)


$(1.47) - $(1.52)









 

 

 

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