Art Technology Group, Inc. (NASDAQ: ARTG), the leading e-commerce solutions provider, today reported financial results for the second quarter ended June 30, 2008.
Revenue for the second quarter of 2008 grew to $41.9 million, a 29% increase over second quarter 2007 revenue of $32.6 million.
“ATG delivered another strong quarter of revenue and bookings growth,” stated Bob Burke, ATG’s president and CEO. “We continue to see robust demand for our e-commerce solutions across a wide variety of industries.”
Product license revenue recognized in accordance with United States Generally Accepted Accounting Principles (GAAP) during the second quarter of 2008 was $12.3 million, compared to $6.5 million in the year ago quarter. Product license bookings, a non-GAAP measure which the company defines as product license revenue recognized plus net change in deferred product license revenue, grew 29% year-over-year to $15.7 million for the second quarter from $12.2 million in the year ago quarter. Approximately 62% of product license bookings in the second quarter were deferred and will be recognized ratably.
Short and long term deferred revenue grew to $54.2 million at June 30, 2008, a 37% increase over June 30, 2007.
Fifteen new customers purchased ATG commerce solutions and thirty net new customers purchased eStara e-commerce optimization services this past quarter. New and repeat business was generated from customers including Cineplex Entertainment, Conde Nast, Epson, LexisNexis, Louis Vuitton, Royal Canadian Mint, Talbots and T-Mobile.
Net income in accordance with GAAP for the second quarter of 2008 was $348 thousand, or breakeven on a per diluted share basis. This compares with a net loss of $2.7 million, or a loss of $0.02 per share, in the second quarter of 2007.
Non-GAAP net income increased to $3.4 million for the second quarter of 2008, or $0.03 per diluted share compared with a non-GAAP net loss of $81 thousand, or breakeven per share for the second quarter of 2007.
At June 30, 2008, ATG had $52.7 million in cash, cash equivalents, and short-term and long-term marketable securities. Cash flow from operations for the second quarter of 2008 was $7.3 million.
“We are very pleased with our second quarter financial performance,” said Julie Bradley, ATG’s senior vice president and CFO. “With two quarters behind us, product license bookings growth has exceeded our expectations. Based on the expected continuation of accelerating growth in e-commerce and our current pipeline our guidance and outlook for the full-year remain positive. As a result we are raising product license bookings guidance.”
Financial Guidance
Product license bookings are now expected to grow 15% – 22% for 2008, up from our previously stated guidance of 10% - 20% growth. Consistent with our business model, we expect cross-selling to remain strong which equates to greater deferrals and ratable revenue recognition.
In considering revenue guidance, we analyzed our assumptions around our estimates of product license revenue that may be deferred. Since the amount of product license bookings that are recognized ratably may vary, we concluded that our original revenue guidance range remains appropriate. Therefore, we are reiterating our full year revenue guidance. We expect revenue to be in the range of $159 to $165 million.
We are also reiterating our full year income (loss) guidance. GAAP net income (loss) for the year ending December 31, 2008 is expected to be in the range of $(4.0) million to $1.0 million. GAAP net income (loss) guidance includes an estimated $8.5 - $9.0 million of non-cash equity-related compensation expense and amortization of acquired intangibles of $4.5 - $5.0 million. Non-GAAP net income for the year ending December 31, 2008 is expected to be in the range of $9.0 million to $15.0 million. Cash flow from operations for 2008 is expected to be in the range of $28.0 million to $32.0 million.
Quarterly Conference Call
ATG management will discuss the company’s second quarter 2008 financial results, recent highlights, and business outlook for the remainder of 2008 on its quarterly conference call for investors at 10:00 a.m. ET today. The conference call will be broadcast live over the Internet. Investors interested in listening to the webcast should log on to the “Investors” section of the ATG website, www.atg.com. The live conference call also can be accessed by dialing (866) 723-3575 (or (706) 634-8872 for international calls) and using conference ID No. 50490096. A replay of the call will be available on the company’s website later in the day.
About ATG
A trusted, global specialist in e-commerce, ATG (Art Technology Group, Inc., NASDAQ: ARTG) has spent the last decade focused on helping the world’s premier brands maximize the success of their online businesses. ATG’s software and on demand solutions are used by over 900 companies to attract prospects, convert them to buyers and enhance their multi-channel experience. ATG's e-commerce suite is top ranked by the industry's most influential analyst firms. ATG powers more of the top 300 internet retailers than any other vendor. ATG is headquartered in Cambridge, Massachusetts, with additional locations throughout North America and Europe.
© 2008 Art Technology Group, Inc. ATG and Art Technology Group are registered trademarks of Art Technology Group, Inc. All other product names, service marks, and trademarks mentioned herein are trademarks of their respective owners.
*Use of Non-GAAP Financial Measures
ATG is providing the non-GAAP historical and forward-looking financial measures presented above as the company believes that these figures are helpful in allowing individuals to better assess the ongoing nature of ATG's core operations. A "non-GAAP financial measure" is a numerical measure of a company's historical or future financial performance that excludes amounts that are included in the most directly comparable measure calculated and presented in the GAAP statement of operations.
Net income (non-GAAP) and net income per share (non-GAAP), as we present them in the financial data included in this press release, have been normalized to exclude the net effects of restructuring actions, the amortization of intangible assets, acquisition-related compensation charges, and equity-related compensation. Management believes that these normalized non-GAAP financial measures excluding these items better reflect its operating performance as these non-GAAP figures exclude the effects of non-recurring or non-cash expenses. Management believes that these charges are not necessarily representative of underlying trends in the company's performance and their exclusion provides individuals with additional information to compare the company's results over multiple periods.
ATG considers “product license bookings,” a non-GAAP financial measure which the company defines as product license revenue recognized plus net change in deferred license revenue during any given period, to be an important indicator of growth in its software license business, as its business increasingly evolves toward a recurring, ratable revenue model.
The company uses these non-GAAP financial measures internally to focus management on period-to-period changes in the company's core business. Therefore, the company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the tables above present the most directly comparable GAAP financial measure and reconcile non-GAAP net income and product license bookings to the comparable GAAP measures.
ATG Statement Under Private Securities Litigation Reform Act
This press release contains forward-looking statements about the company’s estimated revenue and earnings. These statements involve known and unknown risks and uncertainties that may cause ATG’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. These risks include the effect of weakened or weakening economic conditions or perceived conditions on the level of spending by customers and prospective customers for ATG’s software and services; financial and other effects of cost control measures; quarterly fluctuations in ATG’s revenues or other operating results; customization and deployment delays or errors associated with ATG’s products; the risk of longer sales cycles for ATG’s products and ATG’s ability to conclude sales based on purchasing decisions that are delayed; satisfaction levels of customers regarding the implementation and performance of ATG’s products; ATG’s need to maintain, enhance, and leverage business relationships with resellers and other parties who may be affected by changes in the economic climate; ATG’s ability to attract and maintain qualified executives and other personnel and to motivate employees; activities by ATG and others related to the protection of intellectual property; potential adverse financial and other effects of litigation (including intellectual property infringement claims) and the release of competitive products and other activities by competitors. Further details on these risks are set forth in ATG’s filings with the Securities and Exchange Commission (SEC), including the company’s annual report on Form 10-K for the period ended December 31, 2007, and its quarterly report on Form 10-Q for the period ended March 31, 2008, as filed with the SEC. These filings are available free of charge on a website maintained by the SEC at http://www.sec.gov.
| ART TECHNOLOGY GROUP, INC. | |||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||
| (In thousands) | |||||||||||||
| (UNAUDITED) | |||||||||||||
June 30, | March 31, | December 31, | June 30, | ||||||||||
| 2008 | 2008 | 2007 | 2007 | ||||||||||
| ASSETS | |||||||||||||
| Current Assets: | |||||||||||||
| Cash, cash equivalents and marketable securities (including restricted cash of $1,669 as of June 30, 2008 and March 31, 2008) | $ | 50,573 | $ | 44,711 | $ | 50,879 | $ | 41,197 | |||||
| Accounts receivable, net | 40,501 | 36,850 | 40,443 | 34,561 | |||||||||
| Deferred costs, current | 777 | 692 | 790 | - | |||||||||
| Prepaid expenses and other current assets | 3,705 | 4,288 | 2,741 | 4,502 | |||||||||
| Total current assets | 95,556 | 86,541 | 94,853 | 80,260 | |||||||||
| Property and equipment, net | 8,611 | 8,576 | 7,208 | 6,368 | |||||||||
| Intangible assets, net | 9,938 | 11,021 | 11,109 | 13,561 | |||||||||
| Deferred costs, less current portion | 2,331 | 2,613 | 2,337 | 775 | |||||||||
| Marketable securities (including restricted cash of $419 as of June 30, 2008 and March 31, 2008) | 2,124 | 2,222 | 1,062 | - | |||||||||
| Other assets | 1,733 | 1,376 | 1,475 | 1,661 | |||||||||
| Goodwill | 67,787 | 67,522 | 59,675 | 59,358 | |||||||||
| Total long-term assets | 92,524 | 93,330 | 82,866 | 81,723 | |||||||||
| Total assets | $ | 188,080 | $ | 179,871 | $ | 177,719 | $ | 161,983 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||
| Current Liabilities: | |||||||||||||
| Accounts payable | $ | 3,823 | $ | 4,485 | $ | 3,619 | $ | 4,259 | |||||
| Accrued expenses | 19,182 | 16,711 | 19,082 | 14,283 | |||||||||
| Deferred revenue, current portion | 42,610 | 37,501 | 35,577 | 34,902 | |||||||||
| Accrued restructuring, current portion | 646 | 857 | 855 | 1,050 | |||||||||
| Capital lease obligations | - | - | - | 21 | |||||||||
| Total current liabilities | 66,261 | 59,554 | 59,133 | 54,515 | |||||||||
| Accrued restructuring, less current portion | - | - | 225 | 578 | |||||||||
| Other liabilities | 498 | 498 | 487 | - | |||||||||
| Deferred revenue, less current portion | 11,558 | 10,826 | 10,777 | 4,745 | |||||||||
| Total long-term liabilities | 12,056 | 11,324 | 11,489 | 5,323 | |||||||||
| Stockholders' equity | 109,763 | 108,993 | 107,097 | 102,145 | |||||||||
| Total liabilities and stockholders' equity | $ | 188,080 | $ | 179,871 | $ | 177,719 | $ | 161,983 | |||||
| ART TECHNOLOGY GROUP, INC. | ||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | |||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Product licenses | $ | 12,300 | $ | 9,257 | $ | 6,515 | $ | 21,557 | $ | 13,124 | ||||||||||
| Recurring services | 22,946 | 20,943 | 18,519 | 43,889 | 35,989 | |||||||||||||||
| Professional and education services | 6,674 | 6,330 | 7,582 | 13,004 | 12,735 | |||||||||||||||
| Total revenue | 41,920 | 36,530 | 32,616 | 78,450 | 61,848 | |||||||||||||||
| Cost of Revenue: | ||||||||||||||||||||
| Product licenses | 519 | 387 | 549 | 906 | 1,089 | |||||||||||||||
| Recurring services | 9,241 | 7,606 | 5,379 | 16,847 | 10,522 | |||||||||||||||
| Professional and educational services | 6,495 | 6,914 | 7,171 | 13,409 | 12,769 | |||||||||||||||
| Total cost of revenue | 16,255 | 14,907 | 13,099 | 31,162 | 24,380 | |||||||||||||||
| Gross Profit | 25,665 | 21,623 | 19,517 | 47,288 | 37,468 | |||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| Research and development | 7,373 | 7,021 | 6,270 | 14,394 | 12,051 | |||||||||||||||
| Sales and marketing | 13,156 | 11,537 | 11,773 | 24,693 | 21,317 | |||||||||||||||
| General and administrative | 4,863 | 4,329 | 4,648 | 9,192 | 9,183 | |||||||||||||||
| Total operating expenses | 25,392 | 22,887 | 22,691 | 48,279 | 42,551 | |||||||||||||||
| Income (loss) from operations | 273 | (1,264 | ) | (3,174 | ) | (991 | ) | (5,083 | ) | |||||||||||
| Interest and other income, net | 240 | 628 | 521 | 868 | 969 | |||||||||||||||
| Income (loss) before provision for income taxes | 513 | (636 | ) | (2,653 | ) | (123 | ) | (4,114 | ) | |||||||||||
| Provision for income taxes | 165 | 206 | 95 | 371 | 95 | |||||||||||||||
| Net income (loss) | $ | 348 | $ | (842 | ) | $ | (2,748 | ) | $ | (494 | ) | $ | (4,209 | ) | ||||||
| Basic net income (loss) per share | $ | 0.00 | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.03 | ) | ||||||
| Diluted net income (loss) per share | $ | 0.00 | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.03 | ) | ||||||
| Basic weighted average common shares outstanding | 128,805 | 128,435 | 127,388 | 128,620 | 127,291 | |||||||||||||||
| Diluted weighted average common shares outstanding | 135,010 | 128,435 | 127,388 | 128,620 | 127,291 | |||||||||||||||
| Art Technology Group, Inc. | |||||||||||||||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||
| Three months ended | Six Months Ended | ||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | |||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||
| Cash Flows from Operating Activities: | |||||||||||||||||||||
| Net income (loss) | $ | 348 | $ | (842 | ) | $ | (2,748 | ) | $ | (494 | ) | $ | (4,209 | ) | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||||||
| Depreciation and amortization | 2,191 | 2,028 | 1,925 | 4,219 | 3,779 | ||||||||||||||||
| Non-cash stock-based compensation expense | 2,001 | 1,830 | 1,441 | 3,831 | 2,525 | ||||||||||||||||
| Net changes in operating assets and liabilities | 2,742 | 4,079 | 5,832 | 6,821 | 12,432 | ||||||||||||||||
| Net cash provided by operating activities | 7,282 | 7,095 | 6,450 | 14,377 | 14,527 | ||||||||||||||||
| Cash Flows from Investing Activities: | |||||||||||||||||||||
| Purchases of marketable securities | (5,393 | ) | (9,197 | ) | (3,931 | ) | (14,590 | ) | (5,609 | ) | |||||||||||
| Maturities of marketable securities | 6,550 | 11,050 | 5,300 | 17,600 | 9,950 | ||||||||||||||||
| Purchases of property and equipment | (1,040 | ) | (2,375 | ) | (1,023 | ) | (3,415 | ) | (2,422 | ) | |||||||||||
| Collateralization of letters of credit | - | (2,088 | ) | - | (2,088 | ) | - | ||||||||||||||
| Payment of acquisition costs, net of cash acquired | 1,150 | (10,672 | ) | (36 | ) | (9,522 | ) | (829 | ) | ||||||||||||
| Decrease in other assets | - | - | (31 | ) | - | (22 | ) | ||||||||||||||
| Net cash provided by (used in) in investing activities | 1,267 | (13,282 | ) | 279 | (12,015 | ) | 1,068 | ||||||||||||||
| Cash Flows from Financing Activities: | |||||||||||||||||||||
| Proceeds from exercise of stock options | 147 | 509 | 413 | 656 | 647 | ||||||||||||||||
| Proceeds from employee stock purchase plan | 265 | 250 | 234 | 515 | 436 | ||||||||||||||||
| Repurchase of common stock | (1,479 | ) | - | (2,190 | ) | (1,479 | ) | (2,190 | ) | ||||||||||||
Payment of employee restricted stock tax withholdings | (478 | ) | - | - | (478 | ) | - | ||||||||||||||
| Payments on capital leases | - | - | (18 | ) | - | (35 | ) | ||||||||||||||
| Net cash (used in) provided by financing activities | (1,545 | ) | 759 | (1,561 | ) | (786 | ) | (1,142 | ) | ||||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (84 | ) | 186 | (70 | ) | 102 | (138 | ) | |||||||||||||
| Net increase (decrease) in cash and cash equivalents | 6,920 | (5,242 | ) | 5,098 | 1,678 | 14,315 | |||||||||||||||
| Cash and cash equivalents, beginning of period | 29,177 | 34,419 | 27,128 | 34,419 | 17,911 | ||||||||||||||||
| Cash and cash equivalents, end of period | $ | 36,097 | $ | 29,177 | $ | 32,226 | $ | 36,097 | $ | 32,226 | |||||||||||
| ART TECHNOLOGY GROUP, INC. | ||||||||||||||||
| STATEMENTS OF OPERATIONS DATA | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | March 31, | June 30, | June 30, | |||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
| Equity-Related Compensation: | ||||||||||||||||
| Cost of revenue | $ | 401 | $ | 344 | $ | 268 | $ | 745 | $ | 474 | ||||||
| Research and development | 332 | 405 | 324 | 737 | 545 | |||||||||||
| Sales and marketing | 608 | 570 | 393 | 1,178 | 709 | |||||||||||
| General and administrative | 660 | 511 | 456 | 1,171 | 797 | |||||||||||
| Total equity-related compensation | $ | 2,001 | $ | 1,830 | $ | 1,441 | $ | 3,831 | $ | 2,525 | ||||||
| Depreciation and Amortization: | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Cost of revenue | $ | 686 | $ | 551 | $ | 335 | $ | 1,237 | $ | 654 | ||||||
| Research and development | 223 | 213 | 178 | 436 | 334 | |||||||||||
| Sales and marketing | 131 | 128 | 128 | 259 | 239 | |||||||||||
| General and administrative | 68 | 79 | 58 | 147 | 100 | |||||||||||
| $ | 1,108 | $ | 971 | $ | 699 | $ | 2,079 | $ | 1,327 | |||||||
| Amortization | ||||||||||||||||
| Cost of revenue | $ | 406 | $ | 460 | $ | 504 | 866 | 1,008 | ||||||||
| Research and development | 81 | - | - | 81 | - | |||||||||||
| Sales and marketing | 596 | 597 | 694 | 1,193 | 1,388 | |||||||||||
| General and administrative | - | - | 28 | - | 56 | |||||||||||
| $ | 1,083 | $ | 1,057 | $ | 1,226 | $ | 2,140 | $ | 2,452 | |||||||
| Total depreciation and amortization | $ | 2,191 | $ | 2,028 | $ | 1,925 | $ | 4,219 | $ | 3,779 | ||||||
| Capital Expenditures: | ||||||||||||||||
| Purchases of property and equipment | $ | 1,040 | $ | 2,375 | $ | 1,023 | $ | 3,415 | $ | 2,422 | ||||||
| RECONCILIATION OF GAAP TO NON-GAAP NET INCOME | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Three months ended, | Six months ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
| Net income (loss) GAAP | $ | 348 | $ | (842 | ) | $ | (2,748 | ) | $ | (494 | ) | $ | (4,209 | ) | ||||||
| Amortization of acquired intangibles | 1,083 | 1,057 | 1,226 | 2,140 | 2,452 | |||||||||||||||
| Equity-related compensation | 2,001 | 1,830 | 1,441 | 3,831 | 2,525 | |||||||||||||||
| Net restructuring | - | - | - | - | (68 | ) | ||||||||||||||
| Net income (non-GAAP) | $ | 3,432 | $ | 2,045 | $ | (81 | ) | $ | 5,477 | $ | 700 | |||||||||
| Net income (non-GAAP) per share: | ||||||||||||||||||||
| Basic | $ | 0.03 | $ | 0.02 | $ | (0.00 | ) | $ | 0.04 | $ | 0.01 | |||||||||
| Diluted | $ | 0.03 | $ | 0.02 | $ | (0.00 | ) | $ | 0.04 | $ | 0.01 | |||||||||
| Shares used in per share calculations: | ||||||||||||||||||||
| Basic | 128,805 | 128,435 | 127,388 | 128,620 | 127,291 | |||||||||||||||
| Diluted | 135,010 | 134,100 | 127,388 | 134,551 | 131,576 | |||||||||||||||
| Reconciliation of Product License Bookings | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Three months ended, | Six months ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
| Product license bookings | $ | 15,693 | $ | 11,448 | $ | 12,166 | $ | 27,141 | $ | 21,087 | ||||||||||
| Increase in product license deferred revenue | (9,670 | ) | (5,693 | ) | (5,997 | ) | (15,363 | ) | (8,423 | ) | ||||||||||
| Product license deferred revenue recognized | 6,277 | 3,502 | 346 | 9,779 | 460 | |||||||||||||||
| Product license revenue | $ | 12,300 | $ | 9,257 | $ | 6,515 | $ | 21,557 | $ | 13,124 | ||||||||||
Contacts:
Julie Bradley, 617-386-1005
Chief
Financial Officer
jbradley@atg.com
or
Tucker
Walsh, 617-386-1159
twalsh@atg.com
