Accelrys Announces Fourth Quarter and Full Year 2012 Results

Tue Feb 26, 2013 4:05pm EST

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Non-GAAP Revenue up 16% to $47.5 million in the Fourth Quarter
SAN DIEGO--(Business Wire)--
Accelrys, Inc. (NASDAQ: ACCL) today reported financial results for the fiscal
quarter and year ended December 31, 2012, including a 16% year-over-year
increase in Non-GAAP revenue in the fourth quarter. 

Non-GAAP revenue for the quarter ended December 31, 2012 increased $6.7 million
to $47.5 million from $40.8 million for the same quarter of the previous year,
or an increase of 16%. Non-GAAP revenue for the year ended December 31, 2012
increased $19.3 million to $174.3 million from $155.0 million for the year ended
December 31, 2011, or an increase of 12%. 

Non-GAAP net income was $4.5 million, or $0.08 per diluted share, for the
quarter ended December 31, 2012 compared to non-GAAP net income of $4.6 million,
or $0.08 per diluted share, for the same quarter of the previous year. Non-GAAP
net income was $19.6 million, or $0.35 per diluted share, for the year ended
December 31, 2012 compared to non-GAAP net income of $19.0 million, or $0.34 per
diluted share, for the year ended December 31, 2011. 

GAAP revenue for the quarter ended December 31, 2012 increased $4.4 million to
$44.2 million from $39.8 million for the same quarter of the previous year, or
an increase of 11%. GAAP revenue for the year ended December 31, 2012 increased
$18.2 million to $162.5 million from $144.3 million for the year ended December
31, 2011, or an increase of 13%. 

GAAP net loss was $(8.2) million, or $(0.15) per diluted share, for the quarter
ended December 31, 2012 compared to GAAP net income of $14.2 million, or $0.25
per diluted share, for the same quarter of the previous year. GAAP net loss was
$(10.4) million, or $(0.19) per diluted share, for the year ended December 31,
2012 compared to GAAP net income of $1.8 million, or $0.03 per diluted share,
for the same period of the previous year. 

"We are pleased with our performance in both 2012 and against the three-year
plan we developed for our business following our 2010 merger with Symyx. We
achieved both market momentum and acknowledgment of our position as the leading
provider of scientific innovation lifecycle management software," said Max
Carnecchia, President and CEO. "Performance in the fourth quarter of 2012 was
strong as our revenues grew 16% over the prior year. In addition, we completed
and are integrating three acquisitions key to our strategy of optimizing the
lab-to-market value chain. We remain enthusiastic about the market opportunity
in front of us and in our ability to continue to grow orders, revenue and
profits both organically and inorganically in 2013." 

Recent Business Highlights:

* Completed three acquisitions that add important domain expertise and
technology capabilities that further our strategy to optimize the innovation
lifecycle from research through commercialization.

* HEOS, a secure Cloud-based information management workspace for scientific
collaboration, accelerates and streamlines collaborative drug-discovery. 
* Aegis Analytical Corporation (Aegis), the leading provider of process
management informatics software, further expands the footprint in downstream
operation with solutions that help aggregate, contextualize and analyze
manufacturing, quality and product development data. 
* Vialis AG, a leading systems integrator with deep experience implementing and
supporting paperless laboratory solutions, further strengthening Accelrys'
position in the laboratory informatics software market.

* Delivered new product releases in the core product lines and significantly
progressed the integration roadmap for the solutions acquired into the
portfolio, including:

* New Accelrys Enterprise Platform (AEP), the industry's first scientifically
aware, service-oriented architecture (SOA) that enables integration and
deployment of broad scientific solutions (Platform) 
* New biology capabilities from screening through pre-clinical development in
the Accelrys Electronic Laboratory Notebook (Enterprise Lab Management) 
* New Process Management and Compliance suite, a unified approach to product
development and process management which combines the capabilities of the
Accelrys ELN, Accelrys Lab Execution System (LES), Accelrys Electronic Batch
Records (EBR) and the Accelrys Enterprise Platform (Enterprise Lab Management) 
* New integration between Accelrys Materials Studio and AEP, enabling
computational scientists to collaborate across the enterprise; deepened
biotherapeutics capabilities in Accelrys Discovery Studio (Modeling and
Simulation)

Non-GAAP results for the quarter and year ended December 31, 2012 exclude the
impact of business combination activities associated with the acquisitions of
Aegis on October 23, 2012 and Contur Industry Holding AB and Contur Software AB
(collectively, "Contur") and VelQuest Corporation ("VelQuest"), both in 2011,
and the merger with Symyx Technologies, Inc. ("Symyx") in 2010, and other
nonrecurring items. 

Non-GAAP revenue, non-GAAP operating income, and non-GAAP net income for the
quarter and year ended December 31, 2012 include fair value adjustments to
deferred revenue ($3.3 million and $11.8 million, respectively). Non-GAAP
operating income for such three and twelve-month periods also excludes
stock-based compensation expense ($2.5 million and $8.1 million, respectively),
business consolidation, transaction and restructuring costs ($6.6 million and
$7.8 million, respectively) and purchased intangible asset amortization ($5.2
million and $17.8 million, respectively), offset by an adjustment to include
acquisition-related cost of revenue related to VelQuest non-GAAP revenue
recognized during such periods ($0.8 million and $1.9 million, respectively).
Non-GAAP net income for the quarter and year ended December 31, 2012 also
excludes additional purchased intangible asset amortization ($0.4 million and
$1.7 million, respectively) offset by removing the impact of the amortization of
note receivable discount related to our promissory note receivable from
Intermolecular, Inc. ("Intermolecular") ($0.3 million and $0.9 million,
respectively). In addition to the aforementioned items, non-GAAP net income for
the year ended December 31, 2012 includes fair value adjustments to deferred
royalty income of $0.6 million and excludes $2.1 million in other non-operating
income resulting from our real estate related activities. 

Calendar Year 2013 Outlook

For the year ending December 31, 2013, the Company expects non-GAAP revenue to
be between $185 and $190 million, and non-GAAP diluted earnings per share to be
between $0.36 and $0.39 per diluted share on fully diluted weighted average
shares outstanding of 56.6 million and using an effective tax rate of 40%. 

Non-GAAP Financial Measures:

This press release describes financial measures for revenue, operating income,
net income, net income per diluted share and free cash flow that exclude
deferred revenue fair value adjustments, acquisition-related cost of revenue,
business consolidation, transaction and restructuring costs, stock-based
compensation expense, purchased intangible asset amortization, royalty income
fair value adjustments, amortization of note receivable discount, gain on sale
of real estate, gain on sale of equity investments, sale of intangible assets,
other non-operating expense and income tax adjustments. These financial measures
are not calculated in accordance with generally accepted accounting principles
(GAAP) and are not based on any comprehensive set of accounting rules or
principles. 

Management believes these non-GAAP financial measures provide a useful measure
of the Company's operating results, a meaningful comparison with historical
results and with the results of other companies, and insight into the Company's
ongoing operating performance. Further, management and the Board of Directors
utilize these measures, in addition to GAAP measures, when evaluating and
comparing the Company's operating performance against internal financial
forecasts and budgets. These non-GAAP financial measures should not be
considered as a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. In addition, these non-GAAP
financial measures may be different from non-GAAP financial measures used by
other companies. 

For additional information on the items excluded by the Company from its
non-GAAP financial measures please refer to the Form 8-K regarding this release
that was furnished today to the Securities and Exchange Commission. 

The following table contains a reconciliation of the non-GAAP financial measures
to the most directly comparable GAAP financial measures (unaudited, amounts in
thousands, except per share amounts, including footnotes):

                                                                  Three Months Ended                           Year Ended                                
                                                                  December 31,                                 December 31,                              
                                                                  2012                    2011                 2012                   2011               
 GAAP revenue                                                     $     44,194            $     39,762         $     162,526          $     144,339      
 Deferred revenue fair value adjustment1                          3,332                   1,081                11,758                 10,652             
 Non-GAAP revenue                                                 $     47,526            $     40,843         $     174,284          $     154,991      
                                                                                                                                                         
 GAAP operating loss                                              (11,203       )         (2,926        )      (19,054        )       (19,701        )   
 Deferred revenue fair value adjustment1                          3,332                   1,081                11,758                 10,652             
 Acquisition-related cost of revenue2                             (762          )         -                    (1,921         )       -                  
 Business consolidation, transaction and restructuring costs3     6,583                   1,538                7,845                  7,772              
 Stock-based compensation expense4                                2,505                   1,424                8,115                  5,572              
 Purchased intangible asset amortization5                         5,199                   4,638                17,782                 18,239             
 Non-GAAP operating income                                        $     5,654             $     5,755          $     24,525           $     22,534       
 Depreciation expense                                             872                     923                  3,325                  3,800              
 Cash received for interest and royalty income                    2,002                   2,269                9,265                  9,574              
 Cash (paid) for income taxes, net of refunds received            (198          )         (153          )      (2,690         )       1,182              
 Capital expenditures                                             (3,043        )         (934          )      (6,332         )       (3,908         )   
 Non-GAAP free cash flow                                          5,287                   7,860                28,093                 33,182             
                                                                                                                                                         
 GAAP net income (loss)                                           $     (8,229  )         $     14,205         $     (10,402  )       $     1,765        
 Deferred revenue fair value adjustment1                          3,332                   1,081                11,758                 10,652             
 Acquisition-related cost of revenue2                             (762          )         -                    (1,921         )       -                  
 Business consolidation, transaction and restructuring costs 3    6,583                   1,538                7,845                  7,772              
 Stock-based compensation expense4                                2,505                   1,424                8,115                  5,572              
 Purchased intangible asset amortization5                         5,623                   5,230                19,477                 20,604             
 Royalty income fair value adjustment6                            -                       200                  600                    803                
 Amortization of note receivable discount7                        (270          )         -                    (932           )       -                  
 Gain on sale of real estate8                                     -                       -                    (2,744         )       -                  
 Gain on sale of equity method investment9                        -                       (18,970       )      -                      (18,970        )   
 Sale of intangible assets10                                      -                       4,303                -                      4,303              
 Other non-operating expense11                                    -                       -                    670                    -                  
 Income tax12                                                     (4,239        )         (4,456        )      (12,855        )       (13,454        )   
 Non-GAAP net income                                              $     4,543             $     4,555          $     19,611           $     19,047       
                                                                                                                                                         
 GAAP diluted net income (loss) per share                         $     (0.15   )         $     0.25           $     (0.19    )       $     0.03         
 Deferred revenue fair value adjustment1                          0.06                    0.02                 0.21                   0.19               
 Acquisition-related cost of revenue2                             (0.01         )         -                    (0.03          )       -                  
 Business consolidation, transaction and restructuring costs3     0.12                    0.03                 0.14                   0.14               
 Stock-based compensation expense4                                0.04                    0.03                 0.14                   0.10               
 Purchased intangible asset amortization5                         0.10                    0.09                 0.34                   0.37               
 Royalty income fair value adjustment6                            -                       -                    0.01                   0.01               
 Amortization of note receivable discount7                        -                       -                    (0.02          )       -                  
 Gain on sale of real estate8                                     -                       -                    (0.05          )       -                  
 Gain on sale of equity method investment9                        -                       (0.34         )      -                      (0.34          )   
 Sale of intangible assets10                                      -                       0.08                 -                      0.08               
 Other non-operating expense11                                    -                       -                    0.01                   -                  
 Income tax12                                                     (0.07         )         (0.08         )      (0.23          )       (0.24          )   
 Non-GAAP diluted net income per share13                          $     0.08              $     0.08           $     0.35             $     0.34         
 Weighted average shares used to compute net income per share:                                                                                           
 Basic                                                            55,713                  55,587               55,696                 55,489             
 Diluted                                                          56,848                  55,933               56,563                 56,037             


1Deferred revenue fair value adjustment relates to our acquisitions of Aegis,
VelQuest and Contur and our merger with Symyx, and adds back the impact of
writing down the acquired historical deferred revenue to fair value as required
by purchase accounting guidance. 

2Acquisition-related cost of revenue relates to our acquisition of VelQuest, and
adds back the impact of writing down the acquired deferred cost of revenue as
required by purchase accounting guidance. 

3Business consolidation, transaction and restructuring costs are included in the
business consolidation, transaction and restructuring costs line in our
consolidated statements of operations and consist of accounting, legal,
litigation and other costs incurred in connection with our acquisition
activities, including our merger with Symyx and acquisitions of Contur, VelQuest
and Aegis, as well as integration costs incurred in connection with such
transactions, including consultant and employee related costs incurred during
integration and transition periods. Also included are contingent compensation
costs relating to the Contur acquisition as well as lease obligation exit costs,
facility closure costs and severance and other related costs incurred in
connection with the various restructuring activities commenced by the Company. 

4Stock-based compensation expense is included in our consolidated statements of
operations as follows:

                                                                Three Months Ended                       Year Ended                        
                                                                December 31,                             December 31,                      
                                                                2012                  2011               2012                  2011        
 Cost of revenue                                                $    262              $    117           $    755              $    333    
 Product development                                            517                   313                1,763                 1,136       
 Sales and marketing                                            853                   362                2,545                 1,672       
 General and administrative                                     867                   620                3,093                 2,428       
 Business consolidation, transaction and restructuring costs    6                     12                 (41         )         3           
 Total stock-based compensation expense                         $    2,505            $    1,424         $    8,115            $    5,572  


5Purchased intangible asset amortization is included in our consolidated
statements of operations as follows:

                                                    Three Months Ended                       Year Ended                          
                                                    December 31,                             December 31,                        
                                                    2012                  2011               2012                   2011         
 Amortization of completed technology               $    2,580            $    2,135         $    8,843             $    8,393   
 Purchased intangible asset amortization            2,619                 2,503              8,939                  9,846        
 Royalty and other income, net                      424                   592                1,695                  2,365        
 Total purchased intangible amortization expense    $    5,623            $    5,230         $    19,477            $    20,604  


6Royalty income fair value adjustment relates to our merger with Symyx, and adds
back the impact of writing down deferred royalty income to fair value as
required by purchase accounting guidance. 

7Amortization of note receivable discount adjusts the amortization of the
discount on our promissory note receivable from Intermolecular in connection
with the sale of intellectual property in November 2011. 

8Gain on sale of real estate relates to the sale of real property, comprised of
land and an office building located in Santa Clara, California, which we sold in
June 2012. This property was acquired as a result of our merger with Symyx and
was not utilized in our ongoing operations. 

9Gain on sale of equity investment reflects the gain recognized upon the sale of
our investment in Intermolecular in November 2011. 

10Sale of intangible asset reflects the write off of our cost basis in the
intellectual property sold to Intermolecular in November 2011. 

11Other non-operating expense relates to the write off in June 2012 of certain
assets in connection with exiting the lease of a restructured facility net of
other non-operating income. 

12Income tax adjustments relate to adjusting our non-GAAP operating results to
reflect an effective tax rate of 40% that would be applied if the Company was in
a taxable income position and was not able to utilize its net operating loss
carryforwards. The income tax adjustment also excludes any impact of a release
of our valuation allowance against deferred tax assets. 

13Earnings per share amounts for the three months and year ended December 31,
2012 do not add due to rounding. 

Conference Call Details:

At 5:00 p.m. ET, February 26, 2013, Accelrys will conduct a conference call to
discuss its financial results. To participate, please dial (866) 309-0459 (+
(937) 999-3232 outside the United States) and enter the access code, 88646167,
approximately 15 minutes before the scheduled start of the call. The conference
call will also be accessible live on the Investor Relations section of the
Accelrys website at www.accelrys.com. 

A replay of the conference call will be available online at www.accelrys.com and
via telephone by dialing (855) 859-2056 (+1 (404) 537-3406 outside the United
States) and entering access code, 88646167, beginning 8:00 p.m. ET on February
26, 2013, through 11:59 p.m. ET on April 26, 2013. 

About Accelrys:

Accelrys, Inc. (NASDAQ: ACCL), a leading provider of scientific innovation
lifecycle management software, supports industries and organizations that rely
on scientific innovation to differentiate themselves. The industry-leading
Accelrys Enterprise Platform provides a broad and flexible scientific solution
optimized to integrate the diversity of science, experimental processes and
information requirements across the research, development, process scale-up and
early manufacturing phases of product development. By incorporating capabilities
in applications for modeling and simulation, enterprise lab management, workflow
and automation, and data management and informatics, Accelrys enables scientific
innovators to access, organize, analyze and share data in unprecedented ways,
ultimately enhancing innovation, improving productivity and compliance, reducing
costs and speeding time from lab to market. 

Accelrys solutions are used by more than 1,300 companies in the pharmaceutical,
biotechnology, energy, chemicals, aerospace, consumer packaged goods and
industrial products industries. Headquartered in San Diego, California, USA,
Accelrys employs more than 200 full-time PhD scientists. For more information
about Accelrys, visit www.accelrys.com. 

Forward-Looking Statements:

Statements contained in this press release relating to the Company's or
management's intentions, hopes, beliefs, expectations or predictions of the
future, including, but not limited to, statements relating to the Company's
expected non-GAAP revenue and diluted earnings per share for the year ending
December 31, 2013 and statements relating to the Company's long-term prospects
and execution of its strategic growth and acquisition-related initiatives, are
forward-looking statements. Such forward-looking statements are subject to a
number of risks and uncertainties, including, but not limited to, risks that the
Company will not achieve its expected non-GAAP revenue or diluted earnings per
share for the year ending December 31, 2013 and/or that the Company will not
successfully execute its strategic growth and acquisition-related initiatives,
in each case due to, among other possibilities, an inability to withstand
negative conditions in the global economy or a lack of demand for or market
acceptance of the Company's products. Additional risks and uncertainties faced
by the Company are contained from time to time in the Company's filings with the
U.S. Securities and Exchange Commission, including, but not limited to, the
Company's Annual Report on Form 10-K for the year ended December 31, 2011,
quarterly reports on Form 10-Q and current reports on Form 8-K. Collectively,
these risks and uncertainties could cause the Company's actual results to differ
materially from those projected in its forward-looking statements, and the
Company disclaims any intention or obligation to revise any forward-looking
statements whether as a result of new information, future events or otherwise.

 ACCELRYS, INC.                                                                                                                                                
 
CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                        
 
(In thousands, except per share amounts)                                                                                                                     
 
(unaudited)                                                                                                                                                  
                                                                                                                                                               
                                                                         Three Months Ended                           Year Ended                               
                                                                         December 31,                                 December 31,                             
                                                                         2012                    2011                 2012                   2011              
 Revenue:                                                                                                                                                      
 License and subscription revenue                                        23,149                  $     21,231         $     89,440           $     79,425      
 Maintenance on perpetual licenses                                       10,035                  9,301                38,254                 34,862            
 Content                                                                 2,991                   4,270                12,485                 16,838            
 Professional services and other                                         8,019                   4,960                22,347                 13,214            
 Total revenue                                                           44,194                  39,762               162,526                144,339           
 Cost of revenue:                                                                                                                                              
 Cost of revenue                                                         11,961                  9,501                41,695                 36,065            
 Amortization of completed technology                                    2,580                   2,135                8,843                  8,393             
 Total cost of revenue                                                   14,541                  11,636               50,538                 44,458            
 Gross profit                                                            29,653                  28,126               111,988                99,881            
 Operating expenses:                                                                                                                                           
 Product development                                                     9,892                   8,779                38,849                 33,977            
 Sales and marketing                                                     17,528                  14,173               57,971                 51,517            
 General and administrative                                              4,229                   4,047                17,480                 16,467            
 Business consolidation, transaction and restructuring costs             6,588                   1,550                7,803                  7,775             
 Purchased intangible asset amortization                                 2,619                   2,503                8,939                  9,846             
 Total operating expenses                                                40,856                  31,052               131,042                119,582           
 Operating loss                                                          (11,203       )         (2,926        )      (19,054        )       (19,701       )   
 Net gain on sale of cost method investment                              -                       18,970               -                      18,970            
 Royalty and other income, including gain on sale of real estate, net    1,763                   (3,259        )      8,870                  1,740             
 Income (loss) before income taxes                                       (9,440        )         12,785               (10,184        )       1,009             
 Income tax expense (benefit)                                            (1,211        )         (1,420        )      218                    (756          )   
 Net income (loss)                                                       $     (8,229  )         $     14,205         $     (10,402  )       $     1,765       
                                                                                                                                                               
 Net income (loss) per share amounts:                                                                                                                          
 Basic                                                                   $     (0.15   )         $     0.26           $     (0.19    )       $     0.03        
 Diluted                                                                 $     (0.15   )         $     0.25           $     (0.19    )       $     0.03        
 Weighted average shares used to compute net income (loss) per share:                                                                                          
 Basic                                                                   55,713                  55,587               55,696                 55,489            
 Diluted                                                                 55,713                  55,933               55,696                 56,037            
                                                                                                                                                               


 ACCELRYS, INC.                                                                                                       
 
CONDENSED CONSOLIDATED BALANCE SHEETS                                                                               
 
(In thousands)                                                                                                      
                                                                                                                      
                                                                           December 31,             December 31,      
                                                                            2012                     2011             
                                                                           (unaudited)              (audited)         
 Assets                                                                                                               
 Cash, cash equivalents, and marketable securities1                        $      115,646           $        143,624  
 Trade receivables, net                                                    47,196                   40,706            
 Notes receivable                                                          34,796                   34,720            
 Other assets, net2                                                        208,204                  188,836           
 Total assets                                                              $      405,842           $        407,886  
 Liabilities and stockholders` equity                                                                                 
 Current liabilities, excluding deferred revenue                           37,877                   36,582            
 Deferred revenue, including current portion3                              89,151                   86,012            
 Deferred gain, including current portion4                                 25,895                   25,974            
 Non-current liabilities, excluding deferred revenue and deferred gain5    10,098                   10,634            
 Total stockholders` equity                                                242,821                  248,684           
 Total liabilities and stockholders` equity                                $      405,842           $        407,886  


1Cash, cash equivalents, and marketable securities consist of the following line
items in our consolidated balance sheet: Cash and cash equivalents; Restricted
cash; Marketable securities; Marketable securities, net of current portion; and
Restricted cash, net of current portion. 

2Other assets, net, consists of the following line items in our consolidated
balance sheet: Prepaid expenses, deferred tax assets and other current assets;
Property and equipment, net; Goodwill; Purchased intangible assets, net; and
Other assets. 

3Total deferred revenue consists of the following line items in our consolidated
balance sheet: Current portion of deferred revenue; and Deferred revenue, net of
current portion. 

4Total deferred gain consists of the following line items in our consolidated
balance sheet: Current portion of deferred gain on sale of intellectual
property; and Deferred gain on sale of intellectual property, net of current
portion. 

5Noncurrent liabilities, excluding deferred revenue and deferred gain consists
of the following line items in our consolidated balance sheet: Accrued income
tax; Accrued restructuring charges, net of current portion and Lease-related
liabilities, net of current portion.

Accelrys, Inc.
Michael A. Piraino
Executive Vice President &
Chief Financial Officer
858-799-5200
or
Investor Relations
MKR Group
Charles Messman or Todd Kehrli
323-468-2300
accl@mkr-group.com

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