CPTV Captiva Software (MM)

Total Revenues Increase 41%, Software Revenues Increase 58%, Non-GAAP Operating Income Increases 182% and Non-GAAP Diluted EPS Increases 143% Over Q3 of 2004 SAN DIEGO, Oct. 25 /PRNewswire-FirstCall/ -- Captiva Software Corporation (NASDAQ:CPTV), a leading provider of input management solutions, today announced financial results for its third quarter ended September 30, 2005. Total revenues were a Q3 record of $21.2 million, an increase of 41% compared to $15.0 million in 2004, and software revenues increased to $10.3 million, up 58% from $6.6 million in 2004. Non-GAAP operating income was $3.8 million, an increase of 182% over $1.4 million in 2004, and non-GAAP diluted earnings per share (EPS) was $0.17, an increase of 143% over $0.07 in 2004. GAAP operating income was $2.9 million, an increase of 226% over $0.9 million in 2004, and GAAP diluted EPS was $0.13, an increase of 225% over $0.04 in 2004. The non-GAAP numbers have been adjusted to exclude certain items, and a reconciliation of the specific adjustments from GAAP results is included in the table titled "Reconciliation of GAAP Net Income to Non-GAAP Net Income" below. Cash and cash equivalents were $24.6 million at September 30, 2005, an increase of $4.7 million from June 30, 2005. Third Quarter Highlights: * Total revenues increased to $21.2 million, up 41% from $15.0 million in 2004. * Software revenues increased to $10.3 million, up 58% from $6.6 million in 2004. * Non-GAAP operating income increased to $3.8 million, up 182% from $1.4 million in 2004. * Non-GAAP diluted EPS increased to $0.17, up 143% from $0.07 in 2004. * 44 new customers were acquired, including AIG United Guaranty, Country Insurance & Financial Services, Dell, Family Heritage Life Insurance and the U.S. Air Force. * Captiva was named one of San Diego's fastest growing technology companies by Deloitte & Touche. * The company hosted over 250 attendees and 25 sponsors at Capture 2005, Captiva's annual Input Management Technology Conference. * Captiva introduced Input Management Console(TM) and PixTools(R) Distributed Imaging. * Captiva's eInput(TM) was named a "Trend-Setting Product of 2005" by KMWorld magazine. * Shortly after the quarter's end, Captiva and EMC Corporation (EMC), the world leader in information management and storage, announced in a press release dated October 20, 2005 a definitive agreement for EMC to acquire Captiva, subject to customary closing conditions. "Despite our experiencing more seasonality in software revenues than we expected, we're pleased to report record third quarter financial results and that we were able to achieve significant year-over-year increases in total revenues, software revenues, operating income and earnings on both a non-GAAP and GAAP basis," said Reynolds C. Bish, Captiva's President and CEO. "Last week we were also very pleased to announce the signing of a definitive agreement under which EMC will acquire Captiva, subject to customary closing conditions. We've long shared a mutually beneficial relationship, and together we'll be able to offer more complete, end-to-end solutions for managing the entire information lifecycle, greatly expanding the value to our customers and our ability to capture additional market share. We will, however, continue to develop our input management software as an open platform in order to support existing and future partnerships with other enterprise software solution providers." "Given our achievements in the first nine months of 2005, we remain confident in our prospects for the remainder of the year," added Mr. Bish. "We expect total revenues to be between $85.0 and $86.0 million and non-GAAP diluted EPS to be in the range of $0.66 to $0.68. For the fourth quarter, we expect total revenues to be in the range of $26.0 to $27.0 million, and non-GAAP diluted EPS to be in the range of $0.20 to $0.22. This equates to GAAP diluted EPS of between $0.49 to $0.51 for the year and $0.16 to $0.18 for the fourth quarter. Use of Non-GAAP Financial Information To assist in making comparisons of current and prior period results, both non-GAAP and GAAP consolidated statements of operations are presented below. To supplement the company's results of operations presented on a GAAP basis, the company uses additional non-GAAP measures of gross profit, income from operations, net income and earnings per share adjusted to exclude certain expenses. The company's management uses these non-GAAP measures to monitor the performance of its ongoing operations as compared to prior periods, and management believes that providing these non-GAAP measures to investors will enhance investors' understanding of the company's operations, allow for potentially more meaningful comparisons of the company's operating results with prior periods, and help investors identify trends in the company's results of operations. The adjustments exclude certain one-time charges that do not relate to the company's operations, such as acquisition and restructuring costs and a charge related to the write-off of withdrawn stock offering costs. The adjustments also exclude the write-off of in-process research and development and the amortization of purchased intangible assets which are non-cash GAAP charges resulting from the company's acquisitions of businesses. These non-GAAP results are a primary indicator that management uses as a basis for planning and forecasting future periods. Each of these adjustments to the company's GAAP results are made with the intent of providing management and investors a more complete understanding of the company's core operations and the company's marketplace performance and result in excluding GAAP charges that management believes do not measure the performance of the company's current operations. By excluding these charges, management believes that it and its investors can more meaningfully compare performance of the company's current operations with historical operating results. To the extent that the adjustments exclude recurring items, such as the amortization of purchased intangible assets, the non-GAAP results may not fully account for the cost of purchased businesses over time. However, information with regard to such recurring items are provided in the GAAP results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for gross profit, income from operations, net income or earnings per share prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. Non-GAAP Results The non-GAAP consolidated condensed results of operations for the quarters and nine months ended September 30, 2005 and 2004 exclude amortization expense related to purchased intangible assets. The non-GAAP results for the nine months ended September 30, 2005 and 2004, exclude charges related to the write-off of in-process research and development. The non-GAAP results for the quarter ended September 30, 2005 exclude costs relating to the company's proposed acquisition by EMC. The non-GAAP results for the nine months ended September 30, 2005 exclude these EMC transaction-related costs and also exclude acquisition and restructuring charges related to Captiva's acquisition of SWT. The non-GAAP results for the quarter and nine months ended September 30, 2004 exclude credits related to restructuring accrual adjustments. The non-GAAP results of operations for the nine months ended September 30, 2004 exclude a charge related to the write off of withdrawn stock offering costs. A reconciliation of specific adjustments to GAAP results is included in the table below titled "Reconciliation of GAAP Net Income to Non-GAAP Net Income." Revenues for Q3 of 2005 were $21.2 million, an increase of 41% compared to revenues of $15.0 million for Q3 of 2004. Revenues for the nine months ended September 30, 2005 were $58.9 million, an increase of 24% compared to revenues of $47.7 million for the nine months ended September 30, 2004. Non-GAAP operating income for Q3 of 2005 increased to $3.8 million, compared to non-GAAP operating income of $1.4 million for Q3 of 2004. Non-GAAP operating income for the nine months ended September 30, 2005 increased to $9.7 million, compared to non-GAAP operating income of $5.0 million for the nine months ended September 30, 2004. Non-GAAP net income for Q3 of 2005 increased to $2.5 million, or $0.17 per diluted share, compared to non-GAAP net income of $0.9 million, or $0.07 per diluted share, in Q3 of 2004. Non-GAAP net income for the nine months ended September 30, 2005 increased to $6.3 million, or $0.46 per diluted share, compared to non-GAAP net income of $3.1 million, or $0.24 per diluted share, for the nine months ended September 30, 2004. GAAP Results Revenues for Q3 of 2005 were $21.2 million, an increase of 41% compared to revenues of $15.0 million for Q3 of 2005. Revenues for the nine months ended September 30, 2005 were $58.9 million, an increase of 24% compared to revenues of $47.7 million for the nine months ended September 30, 2004. Operating income for Q3 of 2005 increased to $2.9 million, compared to operating income of $0.9 million for Q3 of 2004. Operating income for the nine months ended September 30, 2005 was $6.9 million, compared to operating income of $2.9 million for the nine months ended September 30, 2004. Net income for Q3 of 2005 increased to $1.9 million, or $0.13 per diluted share, compared to net income of $0.6 million, or $0.04 per diluted share, in Q3 of 2004. Net income for the nine months ended September 30, 2005 was $4.5 million, or $0.33 per diluted share, compared to $1.9 million, or $0.15 per diluted share in the nine months ended September 30, 2004. Cash and cash equivalents totaled $24.6 million at September 30, 2005, compared to $20.0 million of cash and cash equivalents at June 30, 2005. Conference Call Captiva management will host a conference call today, October 25, at 1:30 p.m. PST (4:30 p.m. EST) to review the third quarter financial results and other corporate events. Reynolds C. Bish, President and CEO, and Rick Russo, CFO, will be on-line to discuss these results and take part in a question and answer session. The call can be accessed by dialing 1-800-240-2430 and giving the company name, "Captiva." Participants are asked to call the number approximately 10 minutes before the conference call begins. A replay of the conference call will be available two hours after the call for the following three business days by dialing 1-800-405-2236 and entering the following pass code: 11040543#. The call can also be accessed live on the web via the following link: http://phx.corporate-ir.net/playerlink.zhtml?c=77421&s=wm&e=1140713. This link will also provide an instant replay of the conference call, and can be accessed from the investor relations section of Captiva's web site at http://www.captivasoftware.com/Investors/. About Captiva Captiva Software Corporation (NASDAQ:CPTV) is a leading provider of input management solutions. Since 1989, the company's award-winning products have been used to manage business critical information from paper, faxed and electronic forms, documents and transactions into the enterprise in a more accurate, timely and cost-effective manner. These products automate the processing of billions of forms, documents and transactions annually, converting their contents into information that is usable in database, document, content and other information management systems. Captiva's technology serves thousands of users in insurance, financial services, government, business process outsourcing, manufacturing and other markets. For more information, visit http://www.captivasoftware.com/. This is not a solicitation of a proxy or a vote. Captiva will file a preliminary proxy statement and a definitive proxy statement in connection with the proposed merger with EMC Corporation with the Securities and Exchange Commission (the "SEC"). The proxy statement will be mailed to the stockholders of Captiva. CAPTIVA'S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND CAPTIVA. Investors and security holders may obtain free copies of these documents (when they are available) and other documents filed with the SEC at the SEC's web site at http://www.sec.gov/. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Captiva from Captiva's Investors page on its corporate website at http://www.captivasoftware.com/. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements regarding the expectations, beliefs, plans, intentions and strategies of Captiva. All statements in this press release that are not strictly historical are forward-looking statements. Forward-looking statements relating to expectations about future events or results are based upon information available to Captiva as of today's date. Captiva assumes no obligation to update any of these statements. The forward-looking statements are not guarantees of the future performance of Captiva and actual results may vary materially from the results and expectations discussed. The revenues and earnings of Captiva and its ability to achieve planned business objectives are subject to a number of factors that make estimation of future operating results uncertain. These factors include the possibility that the proposed merger with EMC Corporation may not close, which could cause Captiva's stock price to fall and harm the business, and that it is further possible that the pending transaction might have a negative impact on Captiva's ability to compete and close sales prior to closing, or retain key employees, such that performance prior to closing may be below expectations, which could cause Captiva's stock price to fall and harm the business. Other factors that make estimation of future operating results uncertain include increased competition; risks associated with new product strategies and the evolving and varying demand for software products; risks related to the integration of Captiva's merged businesses; the ability of Captiva to expand its operations; risks relating to litigation, including litigation over intellectual property rights; general technological and economic factors; and the other risks detailed from time to time in each of Captiva's periodic reports and other documents filed with the SEC, including, but not limited to, Captiva's report on Form 10-K for the fiscal year ended December 31, 2004, quarterly reports on Form 10-Q and current reports on Form 8-K. Captiva Software Corporation Non-GAAP Consolidated Condensed Statements of Operations (unaudited; in thousands, except per share amounts) Quarter Nine Months Ended Ended September 30, September 30, ---------------- ---------------- 2005 2004 2005 2004 ------- ------- ------- ------- Net revenues: Software $10,342 $6,562 $29,961 $21,666 Services 8,875 6,979 24,093 20,787 Hardware and other 1,939 1,466 4,885 5,218 ------- ------- ------- ------- Total revenues 21,156 15,007 58,939 47,671 Cost of revenues: Software 843 862 3,078 2,887 Services 3,434 2,591 8,854 7,762 Hardware and other 1,539 1,183 3,795 4,236 ------- ------- ------- ------- Total cost of revenues * 5,816 4,636 15,727 14,885 ------- ------- ------- ------- Gross profit * 15,340 10,371 43,212 32,786 ------- ------- ------- ------- Operating expenses: Research and development 2,933 2,242 8,174 7,439 Sales, general and administrative 8,591 6,777 25,298 20,395 ------- ------- ------- ------- Total operating expenses * 11,524 9,019 33,472 27,834 ------- ------- ------- ------- Income from operations * 3,816 1,352 9,740 4,952 Other income, net 162 62 430 191 ------- ------- ------- ------- Income before income taxes * 3,978 1,414 10,170 5,143 Provision for income taxes * 1,515 551 3,875 2,005 ------- ------- ------- ------- Net income * $2,463 $863 $6,295 $3,138 ======= ======= ======= ======= Earnings per share *: Basic $0.19 $0.07 $0.50 $0.27 Diluted $0.17 $0.07 $0.46 $0.24 Shares used in computing earnings per share: Basic 13,115 11,969 12,674 11,486 Diluted 14,326 13,225 13,782 13,116 * These line items represent non-GAAP financial measures. Accordingly, the above non-GAAP Consolidated Condensed Statement of Operations is not presented in accordance with accounting principles generally accepted in the United States of America (GAAP). This non-GAAP Consolidated Condensed Statement of Operations should be read only in conjunction with the Consolidated Condensed Statement of Operations prepared in accordance with GAAP, herein, and the following reconciliation of GAAP net income to non-GAAP net income. Captiva Software Corporation Reconciliation of GAAP Net Income to Non-GAAP Net Income (unaudited; in thousands) Quarter Nine Months Ended Ended September 30, September 30, ---------------- ---------------- 2005 2004 2005 2004 ------- ------- ------- ------- GAAP net income $1,876 $574 $4,506 $1,912 Reconciling items: Amortization of purchased intangible assets 622 654 2,026 1,919 Acquisition and restructuring charges 325 (181) 754 (181) Write-off of in-process research and development -- -- 110 66 Write-off of withdrawn stock offering costs -- -- -- 205 ------- ------- ------- ------- Total non-GAAP adjustments to earnings from operations and income before taxes 2,823 1,047 7,396 3,921 Income tax effect on reconciling items (360) (184) (1,101) (783) ------- ------- ------- ------- Non-GAAP net income $2,463 $863 $6,295 $3,138 ======= ======= ======= ======= Captiva Software Corporation GAAP Consolidated Condensed Statements of Operations (unaudited; in thousands, except per share amounts) Quarter Nine Months Ended Ended September 30, September 30, ------------------ ------------------ 2005 2004 2005 2004 -------- -------- -------- -------- Net revenues: Software $10,342 $6,562 $29,961 $21,666 Services 8,875 6,979 24,093 20,787 Hardware and other 1,939 1,466 4,885 5,218 -------- -------- -------- -------- Total revenues 21,156 15,007 58,939 47,671 Cost of revenues: Software 843 862 3,078 2,887 Services 3,434 2,591 8,854 7,762 Hardware and other 1,539 1,183 3,795 4,236 Amortization of purchased intangibles 622 654 2,026 1,919 -------- -------- -------- -------- Total cost of revenues 6,438 5,290 17,753 16,804 -------- -------- -------- -------- Gross profit 14,718 9,717 41,186 30,867 -------- -------- -------- -------- Operating expenses: Research and development 2,933 2,242 8,174 7,439 Sales, general and administrative 8,591 6,777 25,298 20,395 Acquisition and restructuring charges 325 (181) 754 (181) Write-off of in-process research and development -- -- 110 66 Write-off of withdrawn stock offering costs -- -- -- 205 -------- -------- -------- -------- Total operating expenses 11,849 8,838 34,336 27,924 -------- -------- -------- -------- Income from operations 2,869 879 6,850 2,943 Other income, net 162 62 430 191 -------- -------- -------- -------- Income before income taxes 3,031 941 7,280 3,134 Provision for income taxes 1,155 367 2,774 1,222 -------- -------- -------- -------- Net income $1,876 $574 $4,506 $1,912 ======== ======== ======== ======== Earnings per share: Basic $0.14 $0.05 $0.36 $0.17 Diluted $0.13 $0.04 $0.33 $0.15 Shares used in computing earnings per share: Basic 13,115 11,969 12,674 11,486 Diluted 14,326 13,225 13,782 13,116 Captiva Software Corporation Consolidated Condensed Balance Sheets (unaudited, in thousands) September 30, December 31, 2005 2004 ------------- ------------- Assets Current assets: Cash and cash equivalents $24,643 $27,273 Accounts receivable, net 13,902 13,612 Other current assets 2,714 3,301 ------------- ------------- Total current assets 41,259 44,186 Property and equipment, net 1,648 1,355 Goodwill and intangibles, net 32,959 13,441 Other assets 1,643 1,558 ------------- ------------- Total assets $77,509 $60,540 ============= ============= Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accruals $12,419 $9,342 Deferred revenue 13,540 13,296 ------------- ------------- Total current liabilities 25,959 22,638 Deferred revenue 530 496 Other liabilities 390 359 Total stockholders' equity 50,630 37,047 ------------- ------------- Total liabilities and stockholders' equity $77,509 $60,540 ============= ============= DATASOURCE: Captiva Software Corporation CONTACT: Rick Russo, Chief Financial Officer of Captiva Software Corporation, +1-858-320-1000, ; or Charles Messman, or Todd Kehrli, both of MKR Group, LLC, +1-626-395-9500, for Captiva Software Corporation Web site: http://www.captivasoftware.com/ http://www.captivasoftware.com/Investors

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