Autonomy Corporation plc Announced Results for the Year Ended December 31, 2010
Record Full Year Results in Line With Consensus With Full Year Revenues up 18%; Full Year Diluted EPS (adj. IFRS) up 24%; Highest Revenues and Profits in Autonomy's History
CAMBRIDGE, England, February 1, 2011 /PRNewswire-FirstCall/ -- Autonomy Corporation plc (LSE: AU. or AU.L) today reported financial results for the twelve months and fourth quarter ended December 31, 2010. Continuing adoption of Autonomy's industry-leading Meaning Based Computing technology by blue-chip companies is delivering strong revenues, profits and cash flow.
Highlights
- Record full year revenues of $870 million, up 18% from 2009
- All 2010 financial metrics in line with analyst consensus
estimates (Bloomberg as at 1/11/2011)
- Revenues $870 million (consensus $868 million)
- PBT(adj.) $379 million (consensus $360 million)
- Op margin (adj.) 43% (consensus 41%)
- Strong growth in core IDOL business, including IDOL OEM
growth of 32% and strong growth in IDOL Cloud revenues (Q4 up 12%
year-on-year) with increasing contracts reflected in our "commit"
number
- Full year organic growth in core business of 17% (2009: 22%)
- Rise in deferred revenue from last quarter, up to $178
million (Q3 2010: $168 million)
- Operating margins (adj.) in Q4 at 45%; up significantly from
40% in Q3 2010
- Full year diluted EPS (adj. IFRS) at $1.20* up 24% from 2009
(IFRS: $0.89, up 12%)
- Cash conversion for 2010 at 87%, up significantly from 80%
in 2009
- 94 seven figure deals in 2010, up 42% from last year
- Average selling price for 2010 rises to $790,000
- Strong investment in business with R&D up 16% from 2009
- Positive cash flow generated by operations of $363 million
(2009: $287 million), up 27%
- Gross cash of $1,061 million at year end and no net debt
-----
* on the basis that if the share price were to be above
GBP20.63 in February 2015 the convert would generate extra shares giving
diluted EPS (adj.) at $1.11. See note 6.
Adjusted income statements are included on page 8, which reconcile IFRS to the adjusted measures above.
Chief Executive's Review
Commenting on the results, Dr Mike Lynch, Group CEO of Autonomy, provided the following overview of the year:
"2010 was a year of transition for us. During the year Autonomy's technology and its ability to extract meaning from human friendly information has spearheaded the Meaning Based Computing movement forward with new applications of the technology and mission critical usages by our customers. Human friendly information and the need to process it has continued to grow rapidly with applications in customer interaction, legal, regulatory and, as a result of new smart phone technology, mobile leading the way.
This year we have seen Autonomy become one of the leading players in cloud computing as our customers, who can choose to take up our core functionality by traditional licence, IDOL OEM or IDOL Cloud offering, have transitioned to the private cloud model faster than expected. This trend can be seen in the unexpected rise in our 'commit' metric (contracts entered into by the customer with an expected minimum spend). The IDOL OEM and IDOL Cloud routes are highly attractive to us as they turn one-off sales into multi-year committed annuity streams, and these new fast growing routes have become the dominant usage models for our technology. However there is a short-term effect of depressing growth rates as those one-off sales which were recognised immediately are replaced by longer-term but more valuable annuity streams.
Autonomy continues to be chosen to handle the world's most complex legal cases and regulatory issues, for both corporates and regulators, including the largest lawsuits in the world such as BP and as reported by industry analysts has continued to gain market share in areas such as legal and archiving. We are particularly pleased to see the very high growth rates in IDOL OEM, which is now seeing IDOL used by most major software companies across almost all sectors of the software industry.
The year saw strong investment in the future of the business with the opening of new offices in Latin America, increased R&D spend and investment in the infrastructure for this cloud capability with Autonomy now handling over 17 petabytes of critical customer information in the cloud. Whilst we continue to provide our core IDOL technology in whichever model the customer chooses, we are delighted with the transition to the cloud, and expect to reap the benefits of the now cumulative subscription revenues in years to come.
Unlike others in the sector, Autonomy's business thrived during the downturn resulting in Autonomy reporting growth on growth unlike others who are now seeing growth as a return to normal levels. In light of these tougher comparative periods due to our strong growth in 2009, and the transition to longer-term value revenue models, Autonomy continues to perform well.
In 2010 we saw transitions in the business and significant investments for which we expect to reap the rewards in coming years. We also saw in Q3 2010 volatility in customer assessment of the macro environment, which now seems to have reduced.
During the course of 2010 we saw the balance of our business shift towards IDOL Cloud and IDOL OEM being the key drivers of our business. We believe the growth rates seen across our business lines in Q4 2010 projected forward provide a solid baseline on top of which our current record pipeline and "commit" imply that current market expectations are conservative."
Operations Review
Progress Towards Strategic Goals. During 2010 we made significant progress on our strategic goals, including in the following areas:
- New standardisation agreements further cementing IDOL within
the enterprise as the core platform for processing unstructured
information, including Amgen, Bank of America, BNP Paribas, BP,
Cigna, Philip Morris International and Play.com, and continued strong
conversion of law firm customers from other suppliers.
- 57% of sales during the year were from existing customers
extending their investment in IDOL in new business areas.
- Many more third party software products are now built on
IDOL with 42 new and extended relationships with major software
providers including: Nuance, Xerox and Cisco. Growth in this area
accelerated to 32% during 2010.
- Strong growth in the IDOL Cloud business, Q4 2010 up 12%
year-on-year, increasing the level of recurring revenue and securing
lifetime customer relationships.
- Autonomy's market position remained strong with the Average
Selling Price (ASP) for IDOL technology rises to $790,000 during FY
2010 and 94 deals in excess of $1 million signed.
- $115 million invested in R&D resulting in a significant new
product offering to the Healthcare sector.
- Rated number one across multiple industry analyst reports
and segments, as discussed below.
Sales and Customers. As expected, the adoption of our technology for "Protect" usages continued strongly throughout the year driven by a whole series of new regulations coming into effect which is driving our business. We are still seeing very large deals in this area and expect this to continue for the foreseeable future across most industry sectors. We have also seen strong take-up of our technology for "Promote" usages, with customers such as Allstate, AT&T, Belgacom, Blackrock, BNP Paribas, Canadian Broadcasting Corporation, Euronews, Health Care Services Corporation, Safeway and Verizon during the year. Our multi-channel offerings including optimisation and real-time analytics have proven extremely attractive, leading to the company's largest ever deal in this area. At the close of the year, Autonomy was pleased to count virtually the entire Fortune 1000 group of companies as customers.
R&D. We continued to invest heavily in R&D during the year resulting in the launch of a major new initiative targeted at Healthcare during 2010 and another major launch imminent. The net impact of R&D capitalisation on the operating margin was in the order of 2%, the same as in 2009.
Market Position and Penetration. Autonomy's market leadership position strengthened during 2010. We saw a continuation of the "chaining" effect as customers deploy IDOL across functional areas that have traditionally been isolated and served by different software vendors. Ultimately this leads to a growing number of enterprise-wide standardisation customers. Competition during the year also became slightly more benign with major players pulling out of our market.
Amongst industry analysts we elevated our positions, being rated number one across multiple industry analyst reports and segments, including IDC's Worldwide Search and Discovery Software 2010-2014 forecast, and the Forrester Wave 2010 for Online Testing. Other accolades included:
- Rated by IDC as fastest-growing archiving software company
and the leading provider of search and discovery software
- Rated "Strong Positive" in Gartner's 2010 eDiscovery market
report
- Positioned as leader in Gartner's 2010 Magic Quadrant for
Web Content Management
- Achieved the highest score in the Forrester Wave 2010 for
Online Testing, based on current offering, product strategy, corporate
strategy and market presence
Operations. During the year we increased management breadth with the appointment and promotion of senior management across all areas of the business, including a new head of Latin American sales. We also massively expanded our data centre capacity and opened new offices in emerging markets such as Brazil.
During 2010 we welcomed two new highly-skilled individuals to the Board as Non-Executive Directors. Jonathan Bloomer, our new permanent chair of the Audit Committee, brings extensive financial and management expertise. Professor Frank Kelly brings an academic background to contribute to the extension of Autonomy's world-leading technology.
Financial Review
In 2010 Autonomy commenced providing supplemental metrics as part of its financial results to assist in the understanding and analysis of Autonomy's business.
Revenue
2010 can be characterised as another year of significant progress for Autonomy. Revenues for 2010 totalled $870 million, up 18% from $740 million for 2009, as enterprises deployed Autonomy's technology to extract maximum value from rapidly expanding quantities of unstructured information. This result was achieved due to a strong performance in all of our markets.
During 2010 Autonomy completed 94 deals over $1.0 million (2009: 66). In 2010 Americas revenues of $592 million represented 68% of total revenues, and Rest of World revenues of $278 million represented 32% of total revenues.
Autonomy's strategy to deepen the penetration of IDOL across all areas of the enterprise is proving successful, as the high level of repeat business demonstrates, with 57% of 2010 revenues from existing customers (2009: 48%). As customers return for additional technology, the scale of projects increases, with greater levels of functionality and connectivity.
Delivery of Autonomy's core technology is via a number of methods, depending on the demands of the customers. Comparative data for prior years is not available for the analysis of each line item as the information required to present the information in this manner was only captured with effect from January 1, 2010. The analysis below includes all available information.
Sales during 2010 and Q4 2010 were as follows, with the trends as discussed above:
IDOL Product. IDOL Product is normally delivered as licensed software paid for up-front with an ongoing support and maintenance stream. This model is becoming less significant with the rise of cloud computing. In 2010, IDOL Product revenue totalled $251 million. In Q4 2010 IDOL Product revenue totalled $84 million, representing 34% of revenues.
IDOL Cloud. IDOL Cloud delivers Autonomy's IDOL on a Software-as-a-Service (SaaS) model, which is generally invoiced monthly in arrears and does not generate deferred revenue. There are two key drivers of cloud revenues for Autonomy: the first and most significant relates to complex processing of information delivered as a service, the second relates to the quantity of data under management. In 2010 IDOL Cloud revenue totalled $190 million and the "commit" number rose to approximately $370 million, up from $347 million in Q3 2010. In Q4 2010 IDOL Cloud revenue totalled $51 million, representing 21% of revenues.
IDOL OEM. IDOL OEM is where Autonomy's IDOL is embedded inside other software companies' products. IDOL is now embedded in most major software companies' products addressing most software vertical markets. This is a particularly important revenue stream as it generates ongoing business across the broadest product set possible, in addition to up-front development licences. In 2010 IDOL OEM revenue totalled $132 million, up 32% from 2009. In Q4 2010 IDOL OEM revenue totalled $34 million (Q4 2009: $27 million) representing 14% of revenues. 42 new agreements were signed during 2010 with 10 new agreements signed during Q4 2010, including deals with Nuance, HP and Vericept.
Deferred Revenue Release. Deferred revenue release stems principally from support and maintenance contracts recognized in arrears. In 2010 deferred revenue release totalled $255 million (2009: $212 million), up 20%. In Q4 2010 deferred revenue release totalled $66 million (Q4 2009: $61 million), up 8%. As discussed during the company's Q3 2010 results conference call, Q4 2010 saw the expected positive seasonal effect as the calendarisation of Interwoven support and maintenance contracts unwound.
Services. Services revenues relate to third party and internal implementation consultants and training. Services revenues remained flat in 2010 at approximately 5% of revenues (or $10 million to $11 million per quarter) (2009: $9 million to $11 million per quarter). Autonomy operates a rare "pure software" model under which our goal is that most implementation work is carried out by approved partners. This optimises Autonomy's ability to address its horizontal technology to multiple vertical markets and regions in the most efficient way.
Q4 Customers
During Q4 we saw deals with new and existing customers including: Ahold, Allstate, Amazon, Amgen, AT&T, Bank of America, Belgacom, Blackrock, BNP Paribas, CIGNA, Dexia, Euronews, Goodyear, Health Care Services Corporation, Qualcomm, Repsol, Safeway, Sunlife Insurance and Verizon. As expected we saw no change to the demand backdrop among our key government clients, resulting in new and extended agreements in Australia, Canada, Italy, Kuwait, Singapore, Slovakia, the U.K. and the U.S.A.
Organic Growth
In analysing organic growth Autonomy considers organic IDOL growth to be the most meaningful performance metric for understanding the momentum within the business. This excludes the contribution from acquisitions, foreign exchange impact, services revenue (not a goal of the business) and deferred revenue release (primarily maintenance income).
Table 1: Core Business Organic Revenue Growth Calculation(1)
Revenue ($ millions) 2010 2009 Q4'10 Q4'09
Core IDOL reported revenues(2) 574 491 169 153
IWOV stub revenues(3) - 4 - -
Microlink/CA non-service revenue(4) - - - -
FX 4 - 3 -
578 495 172 153
Growth 17% 12%
1 Autonomy's Core Business above excludes services and deferred revenue.
2 Core IDOL is made up of IDOL Product, IDOL Cloud and IDOL OEM
categories, discussed above.
3 Interwoven stub revenues are for licence for the period January 1, 2009
through to March 16, 2009.
4 Microlink did not have its own product lines but only services. CA unit
original product not sold by Autonomy.
Gross Profits and Gross Margins
Gross profits (adj.) for 2010 were $759 million, up 16% from $652 million for 2009. Gross margins (adj.) for 2010 were 87%, compared to 88% for 2009, with the effects in 2010 of the slightly lower margin IDOL Cloud business being balanced by the higher margin IDOL OEM royalties. Gross profits (IFRS) for 2010 were $702 million, up 16% from $602 million for 2009. Gross margins (IFRS) for 2010 were 81%, compared to 81% for 2009. During the year Autonomy has seen success in addressing the urgent needs of a small number of customers with package solutions, constructed of services, hardware and software, such as Arcpliance. The gross margin in these cases is lower than the normal business.
Gross profits (adj.) for Q4 2010 were $211 million, up 6% from $199 million for Q4 2009. Gross margins (adj.) for Q4 2010 were 86%, compared to 89% for Q4 2009. Gross profits (IFRS) for Q4 2010 were $197 million, up 7% from $185 million for Q4 2009. Gross margins (IFRS) for Q4 2010 were 81%, compared to 83% for Q4 2009.
Operating Expenses
Management took the opportunity during this year of transition to invest in personnel, the indirect channel, discretionary marketing activities, new product launches and new offices such as Brazil to ensure the company is in an ideal position to benefit from any upturn in the global macro-economic environment.
Total operating costs in 2010 rose 17% year-on-year to $385 million (2009: $330 million). Adjusting in 2010 for acquisition restructuring costs of $3.5 million, and the effects of foreign exchange, underlying operating costs increased by 18% in 2010. This is primarily because of new marketing campaigns undertaken by Autonomy during the year, the acquisitions of Microlink and CA's Information Governance assets, as well as the additional commission expense associated with a higher level of sales.
Profit from Operations and Operating Margins
Profit from operations (adj.) for 2010 was $377 million, up 14% from $329 million for 2009. Operating margins (adj.) were 43% in 2010, down from 44% in 2009, and returned to the company's target range during Q4. Profit from operations (IFRS) for 2010 was $316 million, up 16% from $272 million for 2009. Operating margins (IFRS) were 36% in 2010 down from 37% in 2009.
During the year we did significant work on one specific acquisition target and during the fourth quarter we expensed the costs relating to this work. The transaction was delayed due to changes in the targeted asset; this asset has not transacted with any other party.
Profit from operations (adj.) for Q4 2010 was $109 million, down 3% from $113 million for Q4 2009. Operating margins (adj.) were 45% in Q4 2010, down from 50% in Q4 2009, affected by discretionary spend discussed above but within the company's target range. Profit from operations (IFRS) for Q4 2010 was $99 million, up 2% from $97 million for Q4 2009. Operating margins (IFRS) were 40% in Q4 2010 compared to 43% in Q4 2009.
Interest payable
Interest payable for 2010 totalled $41.3 million, up 486% from $7.0 million in 2009. The increase is a result of a charge of $35.2 million in relation to the convertible loan notes issued in March 2010. The convertible loan notes pay a cash coupon of 3.25%. The income statement charge is notional and is based on a market rate of interest for corporate loan notes of similar term without a convertible element in accordance with IFRS. The remainder of the interest payable relates to the company's bank loan incurred in connection with the Interwoven acquisition in 2009, which have decreased during the year due to scheduled repayments.
Taxation
The effective tax rate for 2010 was as forecast at 23%, down from 28% for 2009. The decrease from 2009 is the result of changes in the profit mix between the UK and overseas, as well as the completion of tax studies resulting in the recognition of additional tax losses. The effective tax rate for 2011 will likely be in the range of 27-29% as the one-off benefit in 2010 in relation to the utilisation of tax losses will not be repeated.
Foreign Exchange Impact on Revenues
The effect on revenue of movements in foreign exchange rates in 2010 was a decrease of $4 million compared to 2009 (i.e. if revenues were reported for each quarter using the same exchange rates as those prevailing in the previous year, revenues in 2010 would have been $4 million higher, or $874 million). In 2010 the U.S. Dollar strengthened slightly versus Sterling to an average of $1.55 versus $1.57 in 2009.
The effect on revenue in Q4 2010 of movements in foreign exchange rates was a decrease of $3 million compared to Q4 2009. In Q4 2010 the U.S. Dollar strengthened slightly versus Sterling to an average of $1.58 versus $1.63 in Q4 2009.
Net Profits
Net profit (adj.) in 2010 was $292 million compared to net profit (adj.) of $233 million for 2009. Net profit (adj.) in Q4 2010 was $88 million compared to net profit (adj.) of $80 million for Q4 2009.
Net profit (IFRS) in 2010 was $217 million compared to net profit (IFRS) of $192 million for 2009. Net profit (IFRS) in Q4 2010 was $70 million compared to net profit (IFRS) of $69 million for Q4 2009.
IAS 38 Charges and Capitalization
In 2010, Autonomy expensed $115 million (2009: $99 million) on R&D relating to new products including the development of Meaning Based Healthcare technology, new core IDOL functionality and other ongoing development projects. Under IAS 38 the company is required to capitalize certain aspects of its research and development activities. R&D capitalization in 2010 was $39 million (2009: $25 million) and in Q4 2010 was $13 million (Q4 2009: $6 million). R&D capitalization for 2010 is offset by amortization charges of $17 million (2009: $9 million) and for Q4 2010 by $5 million (Q4 2009: $3 million) arising from historical R&D capitalization.
The capitalization and offsetting charges resulted in a net credit (before tax) in the year of $21 million (2009: $16 million), and a net margin impact of 2% (2009: 2%).
EPS
EPS (adj.) for 2010 was $1.20 (2009: $0.97), which represents 24% growth over the year, and in Q4 2010 was $0.36 (Q4 2009: $0.33). If one was to assume that the convertible loan notes had already converted then EPS (adj.) for 2010 would have been $1.11 (2009: $0.97), and in Q4 2010 was $0.33 (Q4 2009: $0.33). EPS (IFRS) for 2010 was $0.89 (2009: $0.80), which represents 12% growth over the year, and in Q4 2010 was $0.29 (Q4 2009: $0.29).
This result was achieved against the unusually strong performance a year ago, and after the substantial discretionary investment in sales and marketing, research and development and new product launches.
Balance Sheet and Cash Flows
Cash Balance. Autonomy closed 2010 with a gross cash balance of $1.1 billion, bank debt of $145 million (2009: $198 million), the convertible loan note of $682 million and no net debt.
Movements. Movements of note in cash flow during 2010 included:
- Positive cash flow from operating activities of $302 million, up 21%
from $250 million in 2009.
- Capital expenditure of $60 million during 2010, up from $34 million in
2009. This represents the continued investment of the company in areas
of expected growth for future years.
- Expenditure on product development, resulting in a cash outflow of $39
million (2009: $25 million), as discussed above.
- Acquisition of Microlink and CA's Information Governance assets for
aggregate consideration of approximately $79 million.
- Proceeds of approximately $762 million through the issuance of
convertible loan notes in March 2010, offset by interest payments of
$13 million during 2010 representing the first semi-annual payment of
the coupon rate of 3.25%.
- Scheduled bank loan repayments of $54 million (2009: $37 million).
Cash Conversion. On a twelve month basis, which accounts for the seasonality of the business, cash conversion improved to 87% (2009: 80%). Given the growth profile of the Company 87% approximates to the theoretical maximum that should be achievable. Cash conversion was 84% in Q4 (Q4 2009: 58%), and within the company's target range.
Receivables. In Q4 2010 DSOs were 94 days (Q4 2009: 88 days), just above the top end of the company's target 80-90 day range but in line with normal historic fluctuations The bad debt write off was below 1% of sales and accrued income remained below 5% of revenue.
Deferred Revenue. Deferred revenue increased to $178 million at the end of Q4 2010 (Q4 2009: $174 million). This increase has been achieved despite the trend towards pay-as-you-go cloud models. It is worth noting that our IDOL Cloud and IDOL OEM revenue streams do not generate deferred revenue in the same way as the traditional models.
Five Year Financial Summary
Table 2: Five Year Financial Summary
($'000s) 2010 2009 2008 2007 2006
Revenue 870 740 503 343 251
Profit before tax 379 323 209 113 69
(adj.)
Net cash generation 363 287 179 83 47
Operating margin 43% 44% 41% 32% 27%
(adj.)*
Diluted EPS (adj. $1.20 $0.97 $0.68 $0.38 $0.26
IFRS)**
* See adjusted measures as calculated on page 8
** Diluted EPS (adj.) at $1.11, see note 6
Scheduling of Conference Call and Further Information
Autonomy's results conference call will be available live at http://www.autonomy.com on February 1, 2011, at 9:00 a.m. GMT/4:00 a.m. EST/1:00 a.m. PST.
From time to time the Company answers investors' questions on its website which may include information supplemental to that set forth above. Questions and answers can be found at: http://www.autonomy.com/investors/questions.
Financial Calendar
The company publishes on its website the expected calendar for full and half year results, and interim trading updates, and associated conference calls. Please visit www.autonomy.com/content/Investors/calendar/index.en.html for the current expected calendar.
About Autonomy Corporation plc
Autonomy Corporation plc (LSE: AU. or AU.L), a global leader in infrastructure software for the enterprise, spearheads the Meaning Based Computing movement. IDC recently recognized Autonomy as having the largest market share and fastest growth in the worldwide search and discovery market. Autonomy's technology allows computers to harness the full richness of human information, forming a conceptual and contextual understanding of any piece of electronic data, including unstructured information, such as text, email, web pages, voice, or video. Autonomy's software powers the full spectrum of mission-critical enterprise applications including pan-enterprise search, customer interaction solutions, information governance, end-to-end eDiscovery, records management, archiving, business process management, web content management, web optimization, rich media management and video and audio analysis.
Autonomy's customer base is comprised of more than 20,000 global companies, law firms and federal agencies including: AOL, BAE Systems, BBC, Bloomberg, Boeing, Citigroup, Coca Cola, Daimler AG, Deutsche Bank, DLA Piper, Ericsson, FedEx, Ford, GlaxoSmithKline, Lloyds Banking Group, NASA, Nestle, the New York Stock Exchange, Reuters, Shell, Tesco, T-Mobile, the U.S. Department of Energy, the U.S. Department of Homeland Security and the U.S. Securities and Exchange Commission. More than 400 companies IDOL OEM Autonomy technology, including Symantec, Citrix, HP, Novell, Oracle, Sybase and TIBCO. The Company has offices worldwide. Please visit www.autonomy.com to find out more.
Autonomy and the Autonomy logo are registered trademarks or trademarks of
Autonomy Corporation plc. All other trademarks are the property of their
respective owners.
Autonomy Corporation plc
Condensed Consolidated Income Statement
(in thousands, except per share amounts)
Twelve Months Ended Three Months Ended
(unaudited) (unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2010 2009 2010 2009
Continuing operations $'000 $'000 $'000 $'000
Revenues (see note 3) 870,366 739,688 244,505 223,111
Cost of revenues (excl.
amortization) (111,513) (87,747) (33,518) (23,686)
Amortization of purchased
intangibles (57,280) (49,650) (13,793) (14,601)
Total cost of revenues (168,793) (137,397) (47,311) (38,287)
Gross profit 701,573 602,291 197,194 184,824
Operating expenses:
Research and development (114,752) (98,785) (29,776) (26,141)
Sales and marketing (204,109) (170,797) (56,828) (45,621)
General and administrative (69,405) (60,627) (17,617) (17,046)
Other costs
Post-acquisition restructuring (3,468) (846) (1,353) -
costs
Gain on foreign exchange 6,576 942 7,097 852
Total operating expenses (385,158) (330,113) (98,477) (87,956)
Profit from operations 316,415 272,178 98,717 96,868
Share of (loss) profit of
associate (1,816) (273) (891) 457
Profit on disposal of investment 436 - 436 -
Interest receivable 8,458 1,205 2,776 230
Interest payable (41,299) (7,044) (12,683) (1,798)
Profit before income taxes 282,194 266,066 88,355 95,757
Income taxes (see note 4) (64,901) (74,515) (17,956) (26,363)
Net profit 217,293 191,551 70,399 69,394
Basic earnings per share (see
note 6) 0.90 0.81 0.29 0.29
Diluted earnings per share (see
note 6) 0.89 0.80 0.29 0.29
Reconciliation of Adjusted Financial Measures
Twelve Months Ended Three Months Ended
(unaudited) (unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Gross profit 701,573 602,291 197,194 184,824
Amortization of purchased
intangibles 57,280 49,650 13,793 14,601
Gross profit (adj.) 758,853 651,941 210,987 199,425
Profit before income taxes 282,194 266,066 88,355 95,757
Amortization of purchased
intangibles 57,280 49,650 13,793 14,601
Share based compensation (see
note 5) 5,979 7,173 2,044 1,994
Post-acquisition restructuring 3,468 846 1,353 -
costs
Gain on foreign exchange (6,576) (942) (7,097) (852)
Profit on disposal of investment (436) - (436) -
Interest charge on convertible
loan notes 35,196 - 11,038 -
Share of loss (profit) of
associate 1,816 273 891 (457)
Profit before tax (adj.) 378,921 323,066 109,941 111,043
Provision for income taxes (86,705) (90,268) (22,122) (30,571)
Net profit (adj.) 292,216 232,798 87,819 80,472
Profit from operations 316,415 272,178 98,717 96,868
Amortization of purchased
intangibles 57,280 49,650 13,793 14,601
Share based compensation (see
note 5) 5,979 7,173 2,044 1,994
Post-acquisition restructuring
costs 3,468 846 1,353 -
Gain on foreign exchange (6,576) (942) (7,097) (852)
Profit from operations (adj.) 376,566 328,905 108,810 112,611
Autonomy Corporation plc
Condensed Consolidated Balance Sheet
As at
(unaudited)
Dec 31, Dec 31,
2010 2009
$'000 $'000
ASSETS
Non-current assets:
Goodwill 1,361,900 1,287,042
Other intangible assets 400,372 399,277
Property and equipment, net 42,554 33,886
Equity and other investments 68,600 16,608
Deferred tax asset 16,263 24,015
Total non-current assets 1,889,689 1,760,828
Current assets:
Trade receivables, net 267,646 230,219
Other receivables 62,471 45,231
Total trade and other receivables 330,117 275,450
Inventory 116 486
Cash and cash equivalents 1,060,600 242,791
Total current assets 1,390,833 518,727
TOTAL ASSETS 3,280,522 2,279,555
CURRENT LIABILITIES
Trade payable (23,443) (14,926)
Other payables (51,968) (54,517)
Total trade and other payables (75,411) (69,443)
Bank loan (78,745) (52,375)
Tax liabilities (33,210) (43,338)
Deferred revenue (170,256) (164,931)
Provisions (1,661) (2,731)
Total current liabilities (359,283) (332,818)
Net current assets 1,031,550 185,909
NON-CURRENT LIABILITIES
Bank loan (66,407) (145,152)
Convertible loan notes (681,791) -
Deferred tax liabilities (91,072) (85,087)
Deferred revenue (7,421) (8,576)
Other payables (3,702) (1,020)
Provisions (3,597) (5,123)
Total non-current liabilities (853,990) (244,958)
Total liabilities (1,213,273) (577,776)
NET ASSETS 2,067,249 1,701,779
Shareholders' equity:
Ordinary shares (1) 1,344 1,333
Share premium account 1,247,907 1,130,767
Capital redemption reserve 135 135
Own shares (788) (845)
Merger reserve 27,589 27,589
Stock compensation reserve 27,881 21,959
Revaluation reserve 47,415 4,499
Translation reserve (30,161) (12,032)
Retained earnings 745,927 528,374
TOTAL EQUITY 2,067,249 1,701,779
------------
(1) At December 31, 2010, 600,000,000 ordinary shares of
nominal value 1/3 pence each authorized, 242,562,584 issued and
outstanding; as of December 31, 2009, 600,000,000 ordinary shares of
nominal value 1/3 pence each authorized, 240,574,304 issued and
outstanding.
Autonomy Corporation plc
Condensed Consolidated Statements of Cash Flows
Twelve Months Ended Three Months Ended
(unaudited) (unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Cash flows from operating
activities:
Profit from operations 316,415 272,178 98,717 96,868
Adjustments for:
Depreciation and amortization 99,610 81,083 24,757 25,490
Share based compensation 5,979 7,173 2,044 1,994
Foreign currency movements (6,576) (942) (7,097) (852)
Post-acquisition restructuring 698 846
costs - 250
Other non-cash items - 128 - 1
Operating cash flows before
movements in working cap 416,126 360,466 118,421 123,751
Changes in operating assets and
liabilities:
Receivables (60,983) (78,396) (54,007) (13,021)
Inventories 369 235 89 (33)
Payables 7,718 4,267 35,165 (38,503)
Cash generated by operations 363,230 286,572 99,668 72,194
Income taxes paid (60,902) (36,551) (11,985) (10,368)
Net cash provided by operating 302,328 250,021 87,683 61,826
activities
Cash flows from investment
activities:
Interest received 7,789 1,127 2,776 152
Purchase of fixed assets (59,624) (34,429) (19,261) (11,031)
Proceeds on disposal of 467 - 467 -
investments
Purchase of investments (10,676) (6,449) (8,176) (4,297)
Expenditure on product (38,542) (24,722) (12,696) (5,574)
development
Acquisition of subsidiaries, net (79,460) (630,052) (658) (1,522)
of cash acquired
Net cash used in investing (180,046) (694,525) (37,548) (22,272)
activities
Cash flows from financing
activities:
Proceeds from issuance of shares, 18,735 24,668 2,382 7,472
net of issuance costs
Proceeds from share placing, net - 308,512
of issuance costs - -
Proceeds from convertible loan
notes, net of issuance costs
761,781 - - -
Interest on convertible loan (12,527) - - -
notes
Interest on bank loan (4,501) (5,340) (1,204) (1,380)
Repayment of bank loan (53,906) (37,450) - -
Drawdown of bank loan - 200,000 - -
Payment of arrangement fee - (3,846) - -
Net cash provided by financing 709,582 486,544 1,178 6,092
activities
Net increase in cash and cash 831,864 42,040 51,313 45,646
equivalents
Beginning cash and cash 242,791 199,218 1,027,739 200,732
equivalents
Effect of foreign exchange on (14,055) 1,533 (18,452) (3,587)
cash and cash equivalents
Ending cash and cash
equivalents 1,060,600 242,791 1,060,600 242,791
Autonomy Corporation plc
Condensed Consolidated Statement of Comprehensive Income
Twelve Months Three Months Ended
Ended
(unaudited) (unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Net profit 217,293 191,551 70,399 69,394
Revaluation of equity
investment 42,916 1,512 298 (967)
Translation of overseas
operations (18,129) 6,229 (15,332) (3,995)
Other comprehensive income 24,787 7,741 (15,034) (4,962)
Total comprehensive income 242,080 199,292 55,365 64,432
Autonomy Corporation plc
Condensed Consolidated Statement of Changes in Equity
Capital
Ordinary Share redemption Own Merger
shares premium reserve shares reserve Sub-total
$'000 $'000 $'000 $'000 $'000 $'000
At January 1,
2009 1,214 798,279 135 (905) 27,589 826,312
Retained profit - - - - - -
Other
comprehensive
income - - - - - -
Stock
compensation - - - - - -
Share placing 103 308,409 - - - 308,512
Share options
exercised 16 24,079 - - - 24,095
EBT options
exercised - - - 60 - 60
Deferred tax on
stock options..... - - - - - -
At Dec 31, 2009 1,333 1,130,767 135 (845) 27,589 1,158,979
Stock Revaluation
Sub-total comp'n Translation Retained
Forwarded reserve reserve reserve earnings Total
$'000 $'000 $'000 $'000 $'000 $'000
At January 1, 826,312 14,846 2,987 (18,261) 294,016 1,119,900
2009
Retained
profit - - - - 191,551 191,551
Other
comprehensive
income - - 1,512 6,229 - 7,741
Stock
compensation - 7,173 - - - 7,173
Share placing 308,512 - - - - 308,512
Share options
exercised 24,095 - - - - 24,095
EBT options
exercised 60 (60) - - - -
Deferred tax
on stock
options - - - - 42,807 42,807
At Dec 31,
2009 1,158,979 21,959 4,499 (12,032) 528,374 1,701,779
Capital
Ordinary Share redemption Own Merger
shares premium reserve shares reserve Sub-total
$'000 $'000 $'000 $'000 $'000 $'000
At January 1,
2010 1,333 1,130,767 135 (845) 27,589 1,158,979
Retained profit - - - - - -
Other
comprehensive
income - - - - - -
Stock compensation - - - - - -
Share options
exercised 11 19,325 - - - 19,336
EBT options
exercised - - - 57 - 57
Equity element of
convertible loan
notes - 97,815 - - - 97,815
Deferred tax on
stock options - - - - - -
At Dec 31, 2010 1,344 1,247,907 135 (788) 27,589 1,276,187
Sub-total Stock Revaluation
comp'n Translation Retained
Forwarded reserve reserve reserve earnings Total
$'000 $'000 $'000 $'000 $'000 $'000
At
January 1,
2010 1,158,979 21,959 4,499 (12,032) 528,374 1,701,779
Retained
profit - - - - 217,293 217,293
Other
comprehensive
income - - 42,916 (18,129) - 24,787
Stock
compensation - 5,979 - - - 5,979
Share options
exercised 19,336 - - - - 19,336
EBT options
exercised 57 (57) - - - -
Equity
element of
convertible
loan notes 97,815 - - - - 97,815
Deferred tax
on stock
options - - - - 260 260
At Dec 31,
2010 1,276,187 27,881 47,415 (30,161) 745,927 2,067,249
AUTONOMY CORPORATION plc
NOTES TO THE CONDENSED SET OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2010 - UNAUDITED
1. General information
The accompanying quarterly and twelve month consolidated financial statements of Autonomy Corporation plc are based on the company's financial statements which are prepared in accordance with International Financial Reporting Standards as adopted for use in the EU ("IFRS"). The quarterly and twelve month consolidated financial statements have been prepared using accounting policies consistent in all material respects with those to be applied in the Company's Annual Report for the year ended December 31, 2010 and those applied in the Company's Annual Report for the year ended December 31, 2009. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in February 2011.
Quarterly and twelve month information is unaudited, but reflects all normal adjustments which are, in the opinion of management, necessary to provide a fair statement of results and the Company's financial position for and as at the periods presented. The results of operations for the three months and twelve months ended December 31, 2010, are not necessarily indicative of the operating results for future operating periods. The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended December 31, 2010 or 2009. The financial information for the year ended December 31, 2009, is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation. The quarterly and twelve month information should be read in connection with the Company's audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2009. The audit of the statutory accounts for the year ended December 31, 2010, is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting. This announcement was approved by the Board of Directors on February 1, 2011.
2. Accounting policies
Whilst the financial information included in this quarterly and twelve month announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain all of the disclosures required by IFRSs.
Basis of preparation
The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the group's 2009 Annual Report, except for as described below.
Adoption of new and current standards
The accounting policies adopted in the preparation of the preliminary announcement are consistent with those followed in the preparation of the Group's financial statements for the year ended December 31, 2009, except for the adoption of new standards and interpretations. In the current financial year, the Group has adopted International Financial Reporting Standard 3 (Revised 2008) "Business Combinations" and International Accounting Standard 27 (Revised 2008) "Consolidated and Separate Financial Statements" as required, and will apply these principles throughout the year. Adoption of these standards did not have any significant effect on the financial position or performance of the Group.
Going Concern
The group has considerable financial resources together with a significant number of customers across different geographic areas and industries. At December 31, 2010 the group has cash balances of $1,061 million and total debt of $827 million. The group has no net debt. As a consequence, the directors believe that the group is well placed to manage business risks successfully despite the current uncertain economic outlook.
After making enquiries and considering the cash flow forecasts of the group the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the twelve month and quarterly consolidated financial statements.
2. Accounting policies (continued)
Adjusted Results
Although IFRS disclosure provides investors and management with an overall view of the Company's financial performance, Autonomy believes that it is important for investors to also understand the performance of the Company's fundamental business without giving effect to certain specific, non-recurring and non-cash charges.
Consequently, the non-IFRS (adj.) results exclude share of profit/loss of associates, profit on disposal of investment, interest on convertible loan notes, post-acquisition restructuring costs and non-cash charges for the amortization of purchased intangibles, share-based compensation, non-cash translational foreign exchange gains and losses and associated tax effects. Management uses the adjusted results to assess the financial performance of the Company's operational business activities.
See reconciliations on page 8.
3. Segmental information
The Company is organized internally along group function lines with each line reporting to the group's chief operating decision maker, the Chief Executive Officer. The primary group function lines include: finance; operations, including legal, HR, and operations, marketing, sales and technology. Each of these functions supports the overall business activities, however they do not engage in activities from which they earn revenues or incur expenditure in their operations with each other. No discrete financial information is produced for these function lines. The Company integrates acquired businesses and products into the Autonomy model such that separate financial data on these entities is not maintained post acquisition.
The group has operations in various geographic locations however no discrete financial information is maintained on a regional basis. Decisions around the allocation of resources are not determined on a regional basis and the chief operating decision maker does not assess the group's performance on a geographic basis.
The group is a software business that utilises its single technology in a set of standard products to address unique business problems associated with unstructured data. The group offers over 500 different functions and connectors to over 400 different data repositories as part of its product suite. Each customer selects from a list of options, but underneath from a single unit of the proprietary core technology platform. As a result, no analysis of revenues by product type can be provided.
Each of the group's virtual brands is founded on the group's unique Intelligent Data Operating Layer (IDOL), the group's core infrastructure for automating the handling of all forms of unstructured information. Separate financial information is not prepared for each virtual brand to assess its performance for the purpose of resource allocation decisions. The pervasive nature of the group's technology across each brand requires decisions to be taken at the group level and financial information is prepared on that basis.
A significant proportion of the group's cost base is fixed and represents payroll and property costs which relate to the multiple function lines of the group. As a result the business model drives enhanced performance though growing sales and accordingly group wide revenue generation is the key performance metric that is monitored by the chief operating decision maker. The revenue financial data used to monitor performance is prepared and compiled on a group wide basis. No separate revenue financial analysis is maintained on revenues from any of the virtual brands.
The Company's chief operating decision maker is the group's Chief Executive Officer, who evaluates the performance of the Company on a group wide basis and any elements within it on the basis of information from junior executives and group financial information and is ultimately responsible for entity-wide resource allocation decisions.
As a consequence of the above factors the group has one operating segment in accordance with IFRS 8 "Operating Segments". IFRS 8 also requires information on a geographic basis and that information is shown below.
3. Segmental information (continued)
The group's operations are located primarily in the United Kingdom, the US and Canada. The Company also has a significant presence in a number of other European countries as well as China, Japan, Singapore and Australia. The following tables provide an analysis of the group's sales and net assets by geographical market based upon the location of the group's customers.
Twelve Months Ended Three Months Ended
(unaudited) (unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2010 2009 2010 2009
Revenue by region: $'000 $'000 $'000 $'000
Americas 592,358 517,185 168,443 162,341
Rest of World 278,008 222,503 76,062 60,770
Total 870,366 739,688 244,505 223,111
Information about these geographical regions is presented below:
Twelve Months Ended
(unaudited)
Dec 31, 2010 Dec 31, 2009
Americas ROW Total Americas ROW Total
$'000 $'000 $'000 $'000 $'000 $'000
Result by region 196,203 117,104 313,307 212,775 59,307 272,082
Post-acq'n
restruct. costs (3,468) (846)
Gain on foreign
exch 6,576 942
Operating profit 316,415 272,178
Share of loss of
associate (1,816) (273)
Profit on disposal
of invest 436 -
Interest receivable 8,458 1,205
Interest payable (41,299) (7,044)
Profit before tax 282,194 266,066
Tax (64,901) (74,515)
Profit for the
period 217,293 191,551
Three Months Ended
(unaudited)
Dec 31, 2010 Dec 31, 2009
Americas ROW Total Americas ROW Total
$'000 $'000 $'000 $'000 $'000 $'000
Result by region 32,743 60,230 92,973 76,549 19,467 96,016
Post-acq'n
restruct. costs (1,353) -
Gain on foreign
exch. 7,097 852
Operating profit 98,717 96,868
Share of (loss)
profit of associate (891) 457
Profit on disposal
of invest 436 -
Interest receivable 2,776 230
Interest payable (12,683) (1,798)
Profit before tax 88,355 95,757
Tax (17,956) (26,363)
Profit for the
period 70,399 69,394
4. Income taxes
Twelve Months Ended Three Months Ended
(unaudited) (unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2010 2009 2010 2009
Tax charge (credit) by region: $'000 $'000 $'000 $'000
UK 52,513 46,413 21,050 22,562
Foreign 12,388 28,102 (3,094) 3,801
Total 64,901 74,515 17,956 26,363
5. Share based compensation
Share based compensation charges have been charged in the consolidated income statement within the following functional areas:
Twelve Months Ended Three Months Ended
(unaudited) (unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Research and development 1,605 1,926 549 535
Sales and marketing 2,932 3,517 1,002 978
General and administrative 1,442 1,730 493 481
Total share based compensation 5,979 7,173 2,044 1,994
charge
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on
the following data:
Twelve Months Ended Three Months Ended
(unaudited) (unaudited)
Dec 31, Dec 31, Dec 31, Dec 31,
2010 2009 2010 2009
$'000 $'000 $'000 $'000
Earnings for the purposes of
basic and
diluted earnings per share being
net profit (IFRS) 217,293 191,551 70,399 69,394
Earnings for the purposes of
diluted earnings per share
(adjusted - see page 8) 292,216 232,798 87,819 80,472
Number of shares (in thousands)
Weighted average number of
ordinary shares for the purposes
of basic earnings per share 241,732 237,531 242,431 240,017
Effect of dilutive potential
ordinary shares:
Share options 2,741 3,024 2,143 3,401
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share
(IFRS) 244,473 240,555 244,574 243,418
Convertible loan notes 19,926 - 24,082 -
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share
(adjusted) 264,399 240,555 268,656 243,418
IFRS
Earnings per share - basic $ 0.90 $ 0.81 $ 0.29 $ 0.29
Earnings per share - fully diluted $ 0.89 $ 0.80 $ 0.29 $ 0.29
Adjusted
Earnings per share adj. -
basic (IFRS) $ 1.21 $ 0.98 $ 0.36 $ 0.34
Earnings per share adj.-
fully diluted (IFRS) $ 1.20 $ 0.97 $ 0.36 $ 0.33
Earnings per share adj. - fully
diluted (adjusted for
conversion of loan notes) $1.11 $ 0.97 $ 0.33 $ 0.33
Because, in our adjusted measure of profits, we exclude the interest payable on the convertible loan notes the inclusion of the potential shares for the convertible loan notes does not cause dilution. In order to give a fair presentation of our adjusted diluted earnings per share we have elected to reflect the impact of the convertible shares within our adjusted diluted earnings per share measures.
7. Related Party Transactions
There have been no related party transactions, or changes in related party transactions described in the latest annual report, that could have a material effect on the financial position or performance of the group in the financial year.
Contacts:
Financial Media Contacts: Analyst and Investor Contacts:
Edward Bridges / Haya Herbert-Burns Derek Brown, Head of Investor
Relations
Financial Dynamics
Autonomy Corporation plc
+44(0)20-7831-3113 +44(0)20-7104-5700
SOURCE Autonomy Corporation plc
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