Novell Inc. (NOVL)
Q3 2010 Earnings Call
August 26, 2010 5:00 PM ET
Robert Kain – Vice President, Investor Relations
Ron Hovsepian – President and CEO
Dana Russell – Chief Financial Officer
Brad Zelnick – Macquarie
Mark Murphy – Piper Jaffray
Jonathan Doros – Raymond James
Richard Williams – Cross Research
James Gilman – Capstone Investments
Katherine Egbert – Jeffries
Brad Whitt – Gleacher & Company
Previous Statements by NOVL
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At this time, I would like to welcome everyone to the Novell Third Quarter 2010 Financial Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)
Thank you. I would now like to turn the call over to Robert Kain, Vice President of Investor Relations. Mr. Kain, you may begin.
Thank you. Good afternoon, everyone and thanks for joining us. I’m Rob Kain, Vice President of Investor Relations for Novell. And with me today from our executive offices in Waltham Massachusetts are Ron Hovsepian, President and Chief Executive Officer; Dana Russell, our Chief Financial Officer.
We are here this afternoon to discuss Novell’s financial results for the third fiscal quarter 2010. If you don’t yet have our press release, you can access it by visiting our Investor Relations webpage at www.novell.com/company/ir. This call is also being broadcast through our website and will be archived on our webcast for a minimum of 12 months.
But before I turn the call over to Dana, I’d like to take a moment to say that we will be providing non-GAAP financial measures during today’s call. We believe that these measures enhance our overall understanding of our current financial performance and prospects for the future and enable investors to evaluate our performance in the same way that management does.
Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine compensation. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are excluded from most analysts’ consensus estimates that are unusual and/or that arise outside of the ordinary course of business, such as, but not limited to those related stock-based compensation, acquisition related intangible asset amortization, restructuring asset impairments, litigation judgments and settlements, strategic alternative review and the sale of business operations, long-term investments and property plant and equipment.
We have included reconciliations for these non-GAAP measures to the most directly comparable GAAP measures in our earnings release. As I mentioned, a copy of that release is on our website. During our prepared remarks we will mention some non-GAAP measures. The corresponding GAAP measures are Q3 fiscal year ‘10 GAAP net income of $16 million and GAAP earnings per share of $0.04.
We may also provide information regarding Novell’s general product direction and roadmap as intended for information purposes only and may not be incorporated into any contract. Is not a commitment to deliver any material, code or functionality and should not be relied upon in making purchasing decisions. The development, release and timing of any features or functionality described for Novell’s products remains at the sole discretion of Novell.
Finally, please note that during today’s call, we may make forward-looking statements. You should be aware that the actual results could differ materially from those contained in the forward-looking statements, which are based on current management expectations and are subject to a number of risks and uncertainties, including but not limited to, factors described in our quarterly report on Form 10-Q filed with the Securities and Exchange Commission on June 8, 2010 and in the press release we issued earlier today.
Forward-looking statements do not reflect the occurrence of unplanned or unanticipated events and cannot take into account unforeseen circumstances. Actual results for future periods may differ from those projected. Any forward-looking information that we provide in this call represents our outlook as of today, August 26, 2010 and we do not undertake any obligation to update our forward-looking statements except as may be required by the law.
With that, we are ready for our CFO, Dana Russell.
Thanks Rob. Novell’s third fiscal quarter 2010 results were released short time ago. The company reported net revenue of $199 million, GAAP income from operations was $21 million, non-GAAP income from operations was $30 million, non-GAAP net income was $22 million or $0.06 per share, foreign currency exchange rates favorably impacted revenue by $1 million, operating expenses by $1 million and income from operations by $2 million on a year-over-year basis. Revenue was below expectations and non-GAAP operating margin was at the high end of our guidance.
Now, I’ll highlight some of our business unit results on pages nine and 10 of our press release. Our Security Management and Operating platforms product revenue was $108 million, down 2% year-over-year. Invoicing was down 8% year-over-year.
Linux platform products revenue in the quarter was $36 million, decreasing 7% from the year ago quarter. Linux invoicing was down 11% year-over-year.
As expected, depletion of the original Microsoft certificates this year makes for a challenging year-over-year comparison. However, this business continues to perform well even in a difficult environment, excluding Microsoft certificates, core invoicing was up 15% year-over-year and year-to-date core invoicing is up 41%.
Moving on to Identity, Access and Compliance Management, product revenue was $30 million, up 8%, while invoicing decreased 8%. Systems and Resource Management product revenue was $38 million down 4%, while invoicing declined 8%.