SEGU Segue Software (MM)

Segue Software, Inc. (NASDAQ-CM: SEGU), a leader in Software Quality Optimization(TM) (SQO(TM)), today announced financial results for the fourth quarter and fiscal year 2005 ended December 31, 2005. In a separate release, Segue announced that it has signed a definitive agreement to be acquired by Borland Software Corporation (NASDAQ NM: BORL). Net revenues for the fourth quarter totaled $10.1 million, an increase of 19% over $8.5 million reported in the fourth quarter of 2004. Software license revenues increased 24% over the same period to $4.7 million. Net income applicable to common shareholders was $1.1 million, or $0.09 per diluted share, as compared to $459,000, or $0.04 per diluted share for the quarter ended December 31, 2004. For fiscal year 2005 the Company recorded net revenues of $36.4 million, up 10% from 2004, and software license revenues of $15.9 million, up 9% from 2004. Net income applicable to common shareholders was $2.9 million, or $0.25 per diluted share, as compared to $1.7 million, or $0.15 per diluted share, for 2004. Segue closed fiscal year 2005 with a strong cash position of $14.5 million, up from $11.0 million at the beginning of the year, deferred revenues of $12.1 million, up from $10.5 million a year ago, and no long-term debt. Borland Conference Call Information As a result of the acquisition, Segue has cancelled its earnings conference call and webcast scheduled for today, Wednesday, February 8, 2006 at 8:30 a.m. EST. Borland will hold a conference call and webcast to discuss recent announcements today, Wednesday, February 8, 2006 at 2:00 pm EST. To access the live webcast of this conference call, please visit the Investor Relations section of Borland's website at least 30 minutes prior to the scheduled time to download any necessary audio or plug-in software. A replay will be available approximately two hours after the conference call ends and will be available until February 23, 2006, at 12:00 a.m. PST. Please dial 1.800.405.2236 or +1.303.590.3000, passcode 11050769 to access the replay. The archived webcast will also be available on Borland's website. About Segue Software Segue Software, Inc. (NASDAQ-CM: SEGU) is a global expert in delivering solutions to define, measure, manage and improve software quality throughout the entire software application lifecycle. Segue's Software Quality Optimization(TM) (SQO(TM)) solutions help companies reduce business risk, ensure the deployment of high quality software and increase return on investment. Leading businesses around the world, including many of the Fortune 500, rely on Segue's innovative Silk family of products to protect their business service levels, competitive edge and brand reputation. Headquartered in Lexington, Mass., with offices across North America, Europe and Asia, Segue can be reached at +1-781-402-1000 or www.segue.com. This press release may contain forward-looking statements,. Forward-looking statements are statements that contain predictions or projections of future events or performance, and often contain words such as "anticipates", "can", "estimates", "believe", "expects", "projects", "will", "might", or other words indicating a statement about the future. The Company notes that any such forward-looking statements are subject to change and are not guarantees of future performance, and that actual results may differ materially from any such predictions or projections, based on various important factors and including, without limitation, the Company's and Borland's ability to consummate the transaction; the conditions to the completion of the transaction may not be satisfied, or the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; and the parties' ability to meet expectations regarding the timing, completion and accounting of the merger; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected time-frames or at all and to successfully integrate the Company's operations into those of Borland's; such integration may be more difficult, time-consuming or costly than expected; revenues following the transaction may be lower than expected; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected following the transaction; the retention of certain key employees at the Company, the ability of the Company to continue to achieve positive cash flow and sustain profitability in this difficult economic and business climate; the ability of the Company to close large enterprise orders; the Company's transition to a new management team; the timing and success of introductions of our new products; market acceptance of recently-introduced products (including SilkCentral Test Manager 8.0) and updated releases; the effectiveness of our additional distributors and resellers; growth in license revenue; new products and announcements from other companies; the Company's continued access to capital; and changes in technology and industry standards. Additional information on the factors that could affect the Company's business and financial results is included in the Company's periodic reports filed with the Securities and Exchange Commission. Segue and the Segue logo are registered trademarks and Software Quality Optimization and SQO are trademarks of Segue Software, Inc. All other marks are the property of their respective owners. -0- *T Segue Software, Inc. Consolidated Condensed Balance Sheets (In thousands, except per share data) (Unaudited) December 31, December 31, 2005 2004 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 14,495 $ 11,028 Accounts receivable, net of allowances of $317 and $281, respectively 8,775 6,421 Other current assets 863 1,013 ------------- ------------- Total current assets 24,133 18,462 Property and equipment, net 753 749 Goodwill, net 1,506 1,506 Other assets 44 604 ------------- ------------- Total assets $ 26,436 $ 21,321 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 637 $ 564 Accrued compensation and benefits 1,794 1,602 Accrued lease obligations on excess space 669 1,059 Accrued expenses 817 1,134 Deferred revenue 12,055 10,524 ------------- ------------- Total current liabilities 15,972 14,883 Stockholders' equity: Preferred stock, par value $.01 per share; 9,000 shares authorized; 0 and 921 shares of Series B and 0 and 570 shares of Series C preferred stock issued and outstanding, respectively - 4,726 Common stock, par value $.01 per share; 30,000 shares authorized; 12,113 and 10,195 shares issued, respectively 120 102 Additional paid-in capital 63,643 57,959 Cumulative translation adjustment 221 429 Unearned stock-based compensation (24) (47) Accumulated deficit (52,896) (56,131) ------------- ------------- 11,064 7,038 Less treasury stock, at cost, 145 shares (600) (600) ------------- ------------- Total stockholders' equity 10,464 6,438 ------------ ------------- Total liabilities and stockholders' equity $ 26,436 $ 21,321 ============= ============= Segue Software, Inc. Consolidated Condensed Statements of Operations (In thousands, except per share data) Unaudited Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 --------- --------- --------- --------- Revenue: Software $ 4,650 $ 3,706 $ 15,894 $ 14,644 Services 5,475 4,857 20,858 18,516 --------- --------- --------- --------- Gross revenue 10,125 8,563 36,752 33,160 Less vendor consideration to a customer (66) (50) (314) (154) --------- --------- --------- --------- Net revenue 10,059 8,513 36,438 33,006 Cost of revenue: Cost of software 122 93 419 352 Cost of services 1,186 1,124 4,744 4,947 --------- --------- --------- --------- Total cost of revenue 1,308 1,217 5,163 5,299 Gross margin 8,751 7,296 31,275 27,707 Operating expenses: Sales and marketing 4,699 3,580 15,881 14,019 Research and development 1,922 1,775 7,365 6,610 General and administrative 1,345 1,307 5,112 4,711 --------- --------- --------- --------- Total operating expenses 7,966 6,662 28,358 25,340 --------- --------- --------- --------- Income from operations 785 634 2,917 2,367 Other income, net 15 - 15 15 Interest income, net 105 33 295 93 --------- --------- --------- --------- Income before provision for income taxes 905 667 3,227 2,475 Provision (benefit) for income taxes 46 (28) (8) 35 --------- --------- --------- --------- Net income 859 695 3,235 2,440 Preferred stock dividend-in- kind 194 (236) (364) (763) --------- --------- --------- --------- Net income applicable to common shares $ 1,053 $ 459 $ 2,871 $ 1,677 ========= ========= ========= ========= Net income per common share - Basic $ 0.10 $ 0.05 $ 0.28 $ 0.17 Net income per common share - Diluted $ 0.09 $ 0.04 $ 0.25 $ 0.15 Weighted average common shares outstanding - Basic 10,627 10,028 10,300 9,932 Weighted average common shares outstanding - Diluted* 11,714 10,967 11,445 10,834 * The assumed conversion of preferred shares into common shares is not included because their inclusion would be anti-dilutive. *T