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ATG Reports First Quarter 2007 ResultsCAMBRIDGE, Mass. --(Business Wire)-- Art Technology Group, Inc. (NASDAQ: ARTG), the leading eCommerce platform provider, today reported financial results for the first quarter ended March 31, 2007. Revenue for the first quarter of 2007 grew 22% to $29.2 million, compared with first quarter 2006 revenue of $24.0 million. Services revenue for the first quarter of 2007 grew 43% to $22.6 million, compared with first quarter 2006 services revenue of $15.9 million. eStara revenue for the first quarter of 2007 grew to $5.2 million. Given the evolution of its business model, ATG considers product license bookings, which it defines as product license revenue recognized plus net change in deferred license revenue during the period, to be an important indicator of growth in its software license business. Product license bookings grew 10% year-over-year to $8.9 million for the quarter. As previously communicated, the business model of ATG is evolving from primarily product license focused to recurring revenue. ATG customers are leveraging more ATG solutions, specifically On Demand and eStara services. This trend increases recurring revenue streams and the portion of license transactions that are recognized on a ratable basis. In the first quarter of 2007, $2.3 million or approximately 25% of license transactions booked will be recognized ratably. The change in the timing of recognition of revenue associated with these transactions affected ATG's short-term revenue and profitability. Net loss in accordance with United States Generally Accepted Accounting Principles (GAAP), for the first quarter of 2007 was $1.5 million, or $(0.01) per share. This compares with net income of $2.6 million, or $0.02 per diluted share, in the first quarter of 2006. Non-GAAP net income(1) was $781,000 for the first quarter of 2007, or $0.01 per diluted share, compared with non-GAAP net income of $3.7 million, or $0.03 per diluted share for the first quarter of 2006. Cash, cash equivalents, and marketable securities as of March 31, 2007 increased $6.3 million to $37.5 million from $31.2 million as of December 31, 2006. Cash flow from operations for the first quarter of 2007 increased 191% year-over-year to $8.1 million. Total deferred revenue increased $6.2 million to $30.4 million compared with deferred revenue of $24.2 million on December 31, 2006. ATG generated business from new and repeat customers during the first quarter including Chico's, Diane von Furstenburg, J. Crew, Liverpool, Natural Wellness, Newell Rubbermaid, Nutrisystem, Personal Shopper, Premier Farnell, and Progress Software. In addition, eStara signed on several new customers including CitySearch, La Poste, Ritz Carlton, Singapore Yellow Pages and Unreal Marketing. "ATG had a great first quarter marked by strong revenue growth and cash flow from operations," said Bob Burke, ATG's president and CEO. "As evidenced by the quality of new customers we signed during the quarter, the market continues to demand highly scalable e-commerce solutions in order to achieve long-term online revenue goals. We are very pleased with our fast start to 2007 and expect to carry this momentum into the second quarter and remainder of the year." ATG also announced that the company's Board of Directors has authorized a stock repurchase program. The stock repurchase program authorizes the company to repurchase shares of its common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by the company depending upon prevailing market conditions and other corporate considerations. The program limits the company to an aggregate purchase of $20 million. As of April 19, 2007, ATG had approximately 127.7 million shares outstanding. "The stock repurchase program is a reflection of the company's strong cash flow and ongoing commitment to increasing shareholder value," said Julie Bradley, ATG's senior vice president and CFO. "The program also demonstrates the confidence we have in our current operational strengths and prospects for the future." Financial Guidance and Business Outlook "We are very pleased by eStara's strong performance this past quarter. We believe eStara is on target to achieve the earn-out threshold of $25 million in revenue for 2007," said Bradley. "As the business model evolves towards an increasing amount of license revenue being recognized on a ratable basis, we remain confident that revenue recognized plus net change in license deferred revenue will grow at least 25% in 2007. Since the number of product license transactions that will be deferred may vary, we are reaffirming our original revenue guidance including the eStara earn-out achievement." Assuming eStara achieves the earn-out threshold of $25 million, $1.4 million of the $2 million earn-out will be recognized as acquisition-related compensation expense and reduce GAAP net income. GAAP net income guidance has been adjusted to reflect this additional expense attributable to eStara's employee shareholders. Non-GAAP net income guidance remains unchanged, as the earn-out is an acquisition-related expense. Revenue for 2007 is expected to be in the range of $117 million to $123 million. GAAP net income for the year ending December 31, 2007 is expected to be in the range of a loss of $5.4 million to $1.4 million. This guidance includes an estimated $5.0 - $6.0 million of non-cash equity-related compensation expense, amortization of acquired intangibles of $5 million, and compensation expense related to the eStara acquisition of $1.4 million.
Forward-Looking Guidance Reconciliation
(In millions except per share data)
Year Ending December 31, 2007
GAAP Guidance Non-GAAP Guidance
FROM TO Adjustment FROM TO
Revenue $ 117 $ 123 $ - $ 117 $ 123
Net Income (5.4) (1.4) $11.4 - 12.4 (a) 6 11
Diluted EPS (0.04) (0.01) $ 0.09 (b) 0.05 0.08
(a) Estimated annual amortization of acquired
intangibles of $5.0 million and estimated stock
based compensation expense of $5.0 - $6.0 million
to be recorded for the periods indicated in
accordance with Statement of Financial Accounting
Standards No. 123R, Share-Based Payments, ("SFAS
123R") and, compensation expense of $1.4 million
related to the eStara acquisition.
(b) Estimated per diluted share effect of amortization
and stock-based compensated noted in (a).
Quarterly Conference Call ATG management will discuss the company's first quarter 2007 financial results, recent highlights, and business outlook for the remainder of 2007 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 "For 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. 4851464. A replay of the call will be available on the company's website later in the day.
ART TECHNOLOGY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(UNAUDITED)
March 31, December 31, March 31,
2007 2006 2006
------------- ------------- ------------
ASSETS
Current Assets:
Cash, cash equivalents and
marketable securities $ 37,467 $ 31,223 $36,155
Accounts receivable, net 29,949 34,554 20,425
Prepaid expenses and other
current assets 4,335 2,501 1,618
------------- ------------- ------------
Total current assets 71,751 68,278 58,198
Property and equipment, net 6,094 5,326 3,458
Intangible assets, net 14,787 16,013 4,346
Other assets 1,311 1,036 1,274
Goodwill 59,328 59,328 27,347
------------- ------------- ------------
Total long-term assets 81,520 81,703 36,425
Total assets $153,271 $149,981 $94,623
============= ============= ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable $ 2,996 $ 2,607 $ 3,210
Accrued expenses 12,827 15,791 11,279
Deferred revenue 27,744 23,708 21,549
Accrued restructuring,
current portion 1,050 1,213 2,113
Notes payable - - 182
Capital lease obligations 39 56 56
------------- ------------- ------------
Total current liabilities 44,656 43,375 38,389
Accrued restructuring, less
current portion 866 1,031 1,938
Long term lease obligation - - 42
Deferred revenue 2,688 501 -
------------- ------------- ------------
Total long-term liabilities 3,554 1,532 1,980
Stockholders' equity 105,061 105,074 54,254
Total liabilities and
stockholders' equity $153,271 $149,981 $94,623
============= ============= ============
ART TECHNOLOGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
Three months ended
-----------------------------------------
March 31, December 31, March 31,
2007 2006 2006
------------- ------------- -------------
Revenues:
Product licenses $ 6,609 $ 10,788 $ 8,100
Services 22,623 21,419 15,856
------------- ------------- -------------
Total revenues 29,232 32,207 23,956
Cost of Revenues:
Product licenses 540 329 498
Services 10,741 9,970 6,665
------------- ------------- -------------
Total cost of revenues 11,281 10,299 7,163
------------- ------------- -------------
Gross Profit 17,951 21,908 16,793
Operating Expenses:
Research and development 5,385 5,202 4,827
Sales and marketing 9,940 10,595 6,923
General and administrative 4,603 4,201 2,680
Restructuring charge
(benefit) (68) (385) -
------------- ------------- -------------
Total operating expenses 19,860 19,613 14,430
------------- ------------- -------------
Income (loss) from operations (1,909) 2,295 2,363
Interest and other income,
net 448 152 278
------------- ------------- -------------
Income (loss) before
provision for income taxes (1,461) 2,447 2,641
Provision (benefit) for
income taxes - (2,617) -
------------- ------------- -------------
Net income (loss) $ (1,461) $ 5,064 $ 2,641
============= ============= =============
Basic net income (loss) per
share $ (0.01) $ 0.04 $ 0.02
============= ============= =============
Diluted net income (loss) per
share $ (0.01) $ 0.04 $ 0.02
============= ============= =============
Basic weighted average common
shares outstanding 127,194 126,483 110,928
============= ============= =============
Diluted weighted average
common shares outstanding 127,194 130,449 113,945
============= ============= =============
Art Technology Group, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(UNAUDITED)
Three Months Ended
---------------------------------------
March 31, December 31, March 31,
------------ ------------- ------------
2007 2006 2006
------------ ------------- ------------
Cash Flows from Operating
Activities:
Net income (loss) $(1,461) $ 5,064 $ 2,641
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and
amortization 1,854 1,905 1,050
Non-cash stock-based
compensation expense 1,084 1,219 594
Changes in current assets and
liabilities:
Accounts receivable, net 4,605 (8,299) 1,034
Prepaid expenses and other
current assets (1,834) 518 (488)
Deferred costs (284) - -
Deferred rent - 139 141
Accounts payable 389 463 491
Accrued expenses (2,171) (812) (2,080)
Deferred revenues 6,223 2,153 436
Accrued restructuring (328) (781) (1,046)
------------ ------------- ------------
Net cash provided by operating
activities 8,077 1,569 2,773
------------ ------------- ------------
Cash Flows from Investing
Activities:
Purchases of marketable
securities (1,678) (6,627) (3,643)
Maturities of marketable
securities 4,650 3,925 5,851
Purchases of property and
equipment (1,399) (608) (1,001)
Payment of acquisition costs (793) (7,153) -
Decrease in other assets 9 460 (9)
------------ ------------- ------------
Net cash provided by in
investing activities 789 (10,003) 1,198
------------ ------------- ------------
Cash Flows from Financing
Activities:
Proceeds from exercise of
stock options 234 210 713
Proceeds from employee stock
purchase plan 202 196 150
Principal payments on notes
payable - - (16)
Payments on capital leases (17) (10) (21)
------------ ------------- ------------
Net cash provided by
financing activities 419 396 826
------------ ------------- ------------
Effect of foreign exchange
rate changes on cash and cash
equivalents (68) (38) (3)
Net increase in cash and cash
equivalents 9,217 (8,076) 4,794
Cash and cash equivalents,
beginning of period 17,911 25,987 24,060
------------ ------------- ------------
Cash and cash equivalents, end
of period $27,128 $ 17,911 $28,854
============ ============= ============
ART TECHNOLOGY GROUP, INC.
STATEMENTS OF OPERATIONS DATA
(In thousands, except end-of-period and per share data)
(UNAUDITED)
Three months ended
--------------------------------
March 31, December 31, March 31,
2007 2006 2006
--------- ------------ ---------
Equity-Related Compensation:
Cost of revenues $ 200 $ 213 $ 137
Research and development 233 273 154
Sales and marketing 339 316 173
General and administrative 312 417 130
--------- ------------ ---------
Total equity-related compensation $1,084 $1,219 $ 594
========= ============ =========
Depreciation and Amortization:
Depreciation 628 599 537
Amortization 1,226 1,306 513
--------- ------------ ---------
Total depreciation and amortization $1,854 $1,905 $1,050
========= ============ =========
Capital Expenditures:
Purchases of property and equipment $1,399 $ 608 $1,001
End of Period Statistics:
Number of Employees 387 378 321
Number of Hosted Sites 73 70 48
RECONCILIATION OF GAAP TO NON-GAAP STATEMENT OF OPERATIONS DATA
(In thousands except per share data)
Three months ended
-----------------------------------------
March 31, December 31, March 31,
2007 2006 2006
------------- ------------- -------------
Net income (loss) GAAP $ (1,461) $ 5,064 $ 2,641
Amortization of Acquired
Intangibles 1,226 1,306 513
Net Restructuring (68) (385) -
Equity Related Compensation 1,084 1,219 594
Income Tax (Benefit) - (2,617) -
------------- ------------- -------------
Net Income (non-GAAP) $ 781 $ 4,587 $ 3,748
============= ============= =============
Net Income (non-GAAP) per
share:
Basic $ 0.01 $ 0.04 $ 0.03
============= ============= =============
Diluted $ 0.01 $ 0.04 $ 0.03
============= ============= =============
Shares used in per share
calculations:
Basic 127,194 126,483 110,928
============= ============= =============
Diluted 131,134 130,449 113,945
============= ============= =============
About ATG ATG (Art Technology Group, Inc., NASDAQ: ARTG) makes the software and delivers the on-demand solutions that the world's most customer-conscious companies use to power their e-commerce web sites, attract prospects, convert them to buyers and ensure their satisfaction so they become loyal, repeat, profitable customers. Our B2C e-commerce suite is ranked the #1 current offering by Forrester Research, #1 in strategy by the industry's largest analyst firm, and powers more of the top 300 internet retailers than any other vendor. Our eStara brand provides customer interaction solutions to enhance conversions and customer support, and delivers the world's most widely used click-to-call service. ATG's solutions are used by over 900 major brands, including Amazon, American Eagle Outfitters, AOL, AT&T, Best Buy, B&Q Cabela's, Carrefour, Cingular, Continental Airlines, CVS, Dell, DirecTV, El Corte Ingles, Expedia, France Telecom, Harvard Business School Publishing, Hewlett-Packard, Hilton, HSBC, Intuit, J. Crew, Macy's, Meredith, Microsoft, Neiman Marcus, New York & Company, Nike, Nokia, OfficeMax, PayPal, Philips, Procter & Gamble, Sears, Sony, Symantec, Target, T-Mobile, Urban Outfitters, Verizon, Viacom, Vodafone and Walgreens. The company is headquartered in Cambridge, Massachusetts, with additional locations throughout North America and Europe. For more information about ATG, please visit www.atg.com. (C) 2007 Art Technology Group, Inc. ATG and Art Technology Group are registered trademarks and ATG Wisdom is a trademark of Art Technology Group, Inc. All other product names, service marks, and trademarks mentioned herein are trademarks of their respective owners. (1)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 non-cash income tax benefits. 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. The company uses the normalized 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 table above presents the most directly comparable GAAP financial measure and reconciles the normalized non-GAAP financial metrics 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, 2006, as filed with the SEC. These filings are available free of charge on a website maintained by the SEC at http://www.sec.gov. |
