Netezza Announces Second Quarter Fiscal 2010 Financial Results

MARLBOROUGH, Mass.--(Business Wire)--
Netezza Corporation (NYSE: NZ), the global leader in data warehouse and analytic
appliances, today reported its financial results for the second fiscal quarter
ended July 31, 2009.

"Our second quarter was an extremely significant quarter for Netezza," said Jim
Baum, Netezza`s President and Chief Executive Officer. "Not only did we deliver
respectable results despite continued economic malaise, we released what we
believe will prove to be our most significant product since we first defined the
data warehouse appliance in 2003. Our new TwinFin appliance, which we released
late in the quarter, is extremely well positioned in our market and creates a
platform for continued rapid innovation."

Total revenue for the second quarter of fiscal 2010 (fiscal year ending January
31, 2010) was $43.9 million, compared to $47.0 million for the second quarter of
fiscal 2009. Total revenue for the six months ended July 31, 2009 was $89.3
million, compared to $86.6 million for the same period one year ago.

GAAP net income for the second quarter of fiscal 2010 was $0.7 million, or $0.01
per diluted share, compared to GAAP net income of $3.1 million, or $0.05 per
diluted share, for the second quarter of fiscal 2009. GAAP net income for the
six months ended July 31, 2009 was $0.5 million, or $0.01 per diluted share,
compared to GAAP net income of $5.3 million, or $0.08 per diluted share, for the
same period one year ago.

Non-GAAP net income for the second quarter of fiscal 2010 was $2.3 million, or
$0.04 per diluted share, compared to non-GAAP net income of $5.2 million, or
$0.08 per diluted share, for the second quarter of fiscal 2009. Non-GAAP net
income for the six months ended July 31, 2009 was $3.8 million, or $0.06 per
diluted share, compared to non-GAAP net income of $9.0 million, or $0.13 per
diluted share, for the same period one year ago.

Non-GAAP net income and non-GAAP diluted net income per share exclude non-cash
stock-based compensation, amortization of acquired intangible assets, gain on
bargain purchase and the related income tax effect of excluding these expenses.
A reconciliation of GAAP to non-GAAP results has been provided in the financial
statements included in this press release. An explanation of these measures is
also included below under the heading "Use of Non-GAAP Financial Measures."

Financial Commentary

"From a macro perspective, our second quarter performance was reasonable given
the economic uncertainties," said Patrick Scannell, Netezza`s Senior Vice
President and Chief Financial Officer. "Our visibility is improving and we will
continue to invest in research and development and in our go to market
initiatives to take advantage of the opportunities that are in front of us."

Conference Call Information

Date: August 27, 2009
Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)
Toll-free North America: +1-800-901-5248
International dial-in number: +1-617-786-4512
Passcode: 42737331

A telephonic replay of the conference call will also be available two hours
after the call and will run for two weeks. The replay can be accessed by dialing
+1-888-286-8010 for participants in the United States and by dialing
+1-617-801-6888 for participants outside the United States. The passcode for the
replay is 65003200.

The webcast will be accessible from the "Investor Relations" section of
Netezza's Web site (http://www.netezza.com). The webcast will be archived on
Netezza's Web site for a period of one year.

About Netezza Corporation (NYSE: NZ)

Netezza Corporation is the global leader in data warehouse and analytic
appliances that dramatically simplify high-performance analytics across an
extended enterprise. Netezza`s technology enables organizations to process
enormous amounts of captured data at exceptional speed, providing a significant
competitive and operational advantage in today`s data-intensive industries,
including digital media, energy, financial services, government, health and life
sciences, retail and telecommunications. Netezza is headquartered in
Marlborough, Massachusetts and has offices in Northern Virginia, Canada, the
United Kingdom, Germany, France, Japan, Korea, Australia and Singapore. For more
information about Netezza, please visit www.netezza.com.

Forward Looking Statements

The statements set forth above include forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements relate to Netezza`s future financial performance and
Netezza's business prospects. These statements involve risk and uncertainties,
including: market demand for our products; our limited operating history and
history of losses; quarterly fluctuation of our business; our ability to attract
and retain key personnel; our ability to develop and introduce new products and
manage product transitions; competition in the data warehouse market; our
dependence on certain key customers; our ability to protect our patents and
intellectual property; our ability to defend against third party infringement
claims, other litigation and contingent liabilities; and risks relating to
operating internationally. For a further list and description of risks and
uncertainties that could cause actual results to differ materially from those
contained in the forward-looking statements in this release, we refer you to the
"Risk Factors" section of Netezza's Annual Report on Form 10-K for the year
ended January 31, 2009 which is on file with the SEC and available in the
investor relations section of Netezza's Web site at http://www.netezza.com and
on the SEC Web site at http://www.sec.gov. In addition, any forward-looking
statements included in this press release represent our views as of August 27,
2009. We anticipate that subsequent events and developments will cause our views
to change. However, while we may elect to update these forward-looking
statements at some point in the future, we specifically disclaim any obligation
to do so. These forward-looking statements should not be relied upon as
representing our views as of any date subsequent to August 27, 2009.

Use of Non-GAAP Financial Measures

To supplement Netezza`s unaudited condensed consolidated financial statements
presented in accordance with GAAP, Netezza is presenting certain non-GAAP
measures of financial performance. Netezza believes that these non-GAAP
financial measures, when taken together with the corresponding GAAP financial
measures, provide meaningful supplemental information regarding Netezza`s
performance by excluding certain non-cash items that may not be indicative of
Netezza`s core business or future outlook. The presentation of these non-GAAP
measures is not intended to be considered in isolation from, as a substitute
for, or superior to, the financial information prepared and presented in
accordance with GAAP, and may be different from non-GAAP measures used by other
companies. In addition, these non-GAAP measures have limitations in that they do
not reflect all of the amounts associated with Netezza`s results of operations
as determined in accordance with GAAP.

The non-GAAP financial measures presented by Netezza exclude non-cash
stock-based compensation, amortization of acquired intangible assets, gain on
bargain purchase and the related income tax effect of excluding these expenses.
Because of the varying valuation methodologies and assumptions that companies
use under FAS123(R), Netezza`s management believes that excluding non-cash
stock-based compensation allows investors to analyze Netezza`s recurring
business over multiple periods and provide more meaningful comparisons with
other companies. Because the amount of amortization of acquired intangible
assets varies in amount and frequency and is significantly affected by the
timing and size of our acquisitions, Netezza`s management believes that
excluding amortization of acquired intangible assets allows investors to analyze
Netezza`s recurring business over multiple periods. The gain on bargain purchase
in the three months ended July 31, 2009 resulted from the value of identifiable
net assets acquired exceeding the value of the purchase price for Netezza`s
acquisition of Tizor Systems, Inc. Since Netezza had no gain on bargain purchase
in any prior periods and due to the one-time nature of this charge, Netezza is
presenting its operating results without this gain to allow for a more
meaningful comparison of current periods to prior year periods. Investors are
encouraged to review the reconciliation of these non-GAAP measures to their most
directly comparable GAAP financial measures provided in the financial statements
included in this press release.

Netezza, TwinFin and the Netezza logo are either registered trademarks or
trademarks of Netezza Corporation.

Other names may be trademarks of their respective owners.

Netezza Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

July 31, January 31,
2009 2009

Assets

Current assets
Cash and cash equivalents $ 109,697 $ 111,635
Accounts receivable 31,450 34,457
Inventory 17,477 18,409
Deferred tax assets, net 12,752 12,723
Restricted cash 160 379
Prepaid expenses and other current assets 3,185 3,160
Total current assets 174,721 180,763

Property and equipment, net 9,538 9,586
Deferred tax assets, net 10,222 9,415
Goodwill 2,000 2,000
Intangible assets, net 4,595 2,935
Long-term marketable securities 49,004 49,222
Restricted cash 639 739
Other long-term assets 3,621 4,199

Total assets $ 254,340 $ 258,859

Liabilities and stockholders' equity

Current liabilities
Accounts payable $ 6,470 $ 8,424
Accrued expenses 6,193 6,301
Accrued compensation and benefits 5,581 6,352
Current portion of deferred revenue 40,774 46,356
Total current liabilities 59,018 67,433

Long-term deferred revenue 8,485 11,979
Other long-term liabilities 2,825 2,825

Total liabilities 70,328 82,237

Stockholders' equity 184,012 176,622

Total liabilities and stockholders' equity $ 254,340 $ 258,859

Netezza Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

For the three months ended For the six months ended
July 31, July 31,
2009 2008 2009 2008

Revenue
Product $ 29,969 $ 35,134 $ 62,671 $ 66,460
Services 13,965 11,901 26,630 20,151
Total revenue 43,934 47,035 89,301 86,611

Cost of revenue
Product 11,123 14,005 23,467 26,599
Services 3,420 2,888 6,895 4,992
Total cost of revenue 14,543 16,893 30,362 31,591

Gross margin 29,391 30,142 58,939 55,020

Operating expenses
Sales and marketing 15,729 15,292 30,405 28,622
Research and development 9,297 8,014 20,917 15,262
General and administrative 3,974 3,669 7,950 6,782
Total operating expenses 29,000 26,975 59,272 50,666

Operating income (loss) 391 3,167 (333 ) 4,354

Interest income 197 1,036 507 2,779
Interest expense 25 - 50 -
Other income (expense), net 247 (86 ) 378 (219 )

Income before income tax expense 810 4,117 502 6,914

Income tax expense 80 976 9 1,641

Net income $ 730 $ 3,141 $ 493 $ 5,273

Net income per common share:
Basic $ 0.01 $ 0.05 $ 0.01 $ 0.09
Diluted $ 0.01 $ 0.05 $ 0.01 $ 0.08

Shares used in per common share calculations:
Basic 60,232 58,720 60,104 58,350
Diluted 62,847 66,569 62,675 66,936

Netezza Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)

For the three months ended For the six months ended
July 31, July 31,
2009 2008 2009 2008

Non-GAAP financial measures and reconciliation:

GAAP cost of product revenue $ 11,123 $ 14,005 $ 23,467 $ 26,599
Non-cash stock-based compensation (1) 11 43 22 86
Amortization of acquired intangible assets (2) 97 4 166 4
Non-GAAP cost of product revenue $ 11,015 $ 13,958 $ 23,279 $ 26,509

GAAP cost of service revenue $ 3,420 $ 2,888 $ 6,895 $ 4,992
Non-cash stock-based compensation (1) 98 66 195 111
Amortization of acquired intangible assets (2) 88 79 170 79
Non-GAAP cost of service revenue $ 3,234 $ 2,743 $ 6,530 $ 4,802

GAAP gross margin $ 29,391 $ 30,142 $ 58,939 $ 55,020
Non-cash stock-based compensation (1) 109 109 217 197
Amortization of acquired intangible assets (2) 185 83 336 83
Non-GAAP gross margin $ 29,685 $ 30,334 $ 59,492 $ 55,300

GAAP sales and marketing expenses $ 15,729 $ 15,292 $ 30,405 $ 28,622
Non-cash stock-based compensation (1) 816 601 1,566 1,172
Amortization of acquired intangible assets (2) 72 9 140 9
Non-GAAP sales and marketing expenses $ 14,841 $ 14,682 $ 28,699 $ 27,441

GAAP research and development expenses $ 9,297 $ 8,014 $ 20,917 $ 15,262
Non-cash stock-based compensation (1) 683 559 1,317 1,000
Amortization of acquired intangible assets (2) 10 45 20 45
Non-GAAP research and development expenses $ 8,604 $ 7,410 $ 19,580 $ 14,217

GAAP general and administrative expenses $ 3,974 $ 3,669 $ 7,950 $ 6,782
Non-cash stock-based compensation (1) 839 673 1,582 1,233
Amortization of acquired intangible assets (2) 2 12 4 12
Non-GAAP general and administrative expenses $ 3,133 $ 2,984 $ 6,364 $ 5,537

GAAP operating expenses $ 29,000 $ 26,975 $ 59,272 $ 50,666
Non-cash stock-based compensation (1) 2,338 1,833 4,465 3,405
Amortization of acquired intangible assets (2) 84 66 164 66
Non-GAAP operating expenses $ 26,578 $ 25,076 $ 54,643 $ 47,195

GAAP operating income (loss) $ 391 $ 3,167 $ (333 ) $ 4,354
Non-cash stock-based compensation (1) 2,447 1,942 4,682 3,602
Amortization of acquired intangible assets (2) 269 149 500 149
Non-GAAP operating income $ 3,107 $ 5,258 $ 4,849 $ 8,105

GAAP other income (expense), net $ 247 $ (86 ) $ 378 $ (219 )
Gain on bargain purchase (4) (365 ) - (365 ) -
Non-GAAP other income (expense), net $ (118 ) $ (86 ) $ 13 $ (219 )

GAAP income tax expense $ 80 $ 976 $ 9 $ 1,641
Income tax effect (3) 803 - 1,465 -
Non-GAAP income tax expense $ 883 $ 976 $ 1,474 $ 1,641

GAAP net income $ 730 $ 3,141 $ 493 $ 5,273
Non-cash stock-based compensation (1) 2,447 1,942 4,682 3,602
Amortization of acquired intangible assets (2) 269 149 500 149
Income tax effect (3) (803 ) - (1,465 ) -
Gain on bargain purchase (4) (365 ) - (365 ) -
Non-GAAP net income $ 2,278 $ 5,232 $ 3,845 $ 9,024

GAAP net income per common share - basic $ 0.01 $ 0.05 $ 0.01 $ 0.09
Non-cash stock-based compensation (1) 0.05 0.04 0.07 0.06
Amortization of acquired intangible assets (2) 0.00 0.00 0.01 0.00
Income tax effect (3) (0.01 ) - (0.02 ) -
Gain on bargain purchase (4) (0.01 ) - (0.01 ) -
Non-GAAP net income per common share - basic $ 0.04 $ 0.09 $ 0.06 $ 0.15

GAAP net income per common share - diluted $ 0.01 $ 0.05 $ 0.01 $ 0.08
Non-cash stock-based compensation (1) 0.05 0.03 0.07 0.05
Amortization of acquired intangible assets (2) 0.00 0.00 0.01 0.00
Income tax effect (3) (0.01 ) - (0.02 ) -
Gain on bargain purchase (4) (0.01 ) - (0.01 ) -
Non-GAAP net income per common share - diluted $ 0.04 $ 0.08 $ 0.06 $ 0.13

Shares used in per common share calculations:
Basic 60,232 58,720 60,104 58,350
Diluted 62,847 66,569 62,675 66,936

Footnotes - Adjustments

(1) Represents non-cash compensation charges associated with stock options granted and accounted for in accordance with the fair market provisions of Statement of Financial Accounting Standards No. 123(R) as follows:

For the three months ended For the six months ended
July 31, July 31,
2009 2008 2009 2008

Cost of product revenue $ 11 $ 43 $ 22 $ 86
Cost of services revenue 98 66 195 111
Sales and marketing 816 601 1,566 1,172
Research and development 683 559 1,317 1,000
General and administrative 839 673 1,582 1,233
Total non-cash stock-based compensation expense $ 2,447 $ 1,942 $ 4,682 $ 3,602

(2) Represents amortization of acquired intangible assets:

For the three months ended For the six months ended
July 31, July 31,
2009 2008 2009 2008

Cost of product revenue $ 97 $ 4 $ 166 $ 4
Cost of services revenue 88 79 170 79
Sales and marketing 72 9 140 9
Research and development 10 45 20 45
General and administrative 2 12 4 12
Total amortization expense $ 269 $ 149 $ 500 $ 149

(3) Income tax effect of excluding stock-based compensation, amortization of acquired intangible assets and gain on bargain purchase. There was no adjustment for the comparable period in FY2009.

(4) Represents gain on bargain purchase resulting from the value of identifiable net assets acquired exceeding the value of the purchase price for Netezza's acquisition of Tizor Systems, Inc.

Netezza Corporation
Investor Contact:
Patrick J. Scannell, Jr., +1 508-382-8200
Senior Vice President & Chief Financial Officer
ir@netezza.com
or
Media Contact:
Glen Zimmerman, +1 508-382-8267
Director, Public Relations
gzimmerman@netezza.com

Copyright Business Wire 2009

http://www.businesswire.com/news/home/20090827005920/en