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News and Information Article
SANTA CLARA, Calif., Jan. 31 /-FirstCall/ -- WebEx
Communications, Inc. (Nasdaq: WEBX), the leading provider of on-demand
applications for collaborative business on the web, today announced
financial results for the fourth quarter of 2006 and year ended December
31, 2006.
Revenue
For the fourth quarter of 2006, revenue was $101.9 million, an increase
of 22% compared to $83.7 million in the fourth quarter of 2005.
For the year 2006, revenue was $380.0 million, a 23% increase from
$308.4 million in the year 2005.
Non-GAAP Earnings
For the fourth quarter of 2006, net income on a non-GAAP basis was
$21.8 million, a 50% increase over the $14.5 million net income from the
fourth quarter of 2005. Non-GAAP diluted earnings per share were $0.42 in
the fourth quarter of 2006, a 40% increase from $0.30 per share in the
fourth quarter of 2005. Non-GAAP EPS excludes the expense and tax impact of
the new SFAS 123R equity compensation rule, and certain expenses associated
with the acquisition of Intranets.com, such as the non-cash amortization of
intangible assets and certain employee compensation expenses.
For the year 2006, net income on the same non-GAAP basis was $71.7
million, a 32% increase from $54.3 million for the year 2005. Diluted
earnings per share in 2006 were $1.43, a 25% increase from $1.14 per share
in the year 2005.
GAAP Earnings
For the fourth quarter of 2006, net income on a GAAP basis was $16.7
million or $0.33 per share on a fully diluted basis and includes the
expense and tax impact of the new SFAS 123R equity compensation rule, and
the non-cash amortization of intangible assets associated with the
acquisition of Intranets.com. By comparison, WebEx had GAAP net income of
$13.6 million and diluted EPS of $0.28 in the fourth quarter of 2005, which
did not include items related to SFAS 123R, but did include certain
expenses associated with the acquisition of Intranets.com, such as the
non-cash amortization of intangible assets and certain employee
compensation expenses.
For the year 2006, net income on a GAAP basis was $48.6 million and
diluted earnings per share were $0.97, compared to $53.0 million and
diluted earnings per share of $1.11 for the year 2005.
Cash
Cash and short-term investments at the end of the fourth quarter of
2006 were $345 million. Cash flow from operations was $34.0 million,
partially offset by $1.7 million of capital expenditures, yielding free
cash flow of $32.3 million for the quarter ended December 31, 2006.
"I am very pleased with our first ever $100 million quarter. We
finished 2006 with strong performance in our core web collaboration
business highlighted by excellent bookings and record cash flow", said
Subrah Iyar, chairman and chief executive officer of WebEx. "We enter 2007
well-positioned to go deep with our web collaboration suite and wide with
new offerings through our WebEx Connect platform."
Guidance
The following contains forward-looking guidance regarding WebExs
financial outlook. The following statements are based on current
expectations.
For the first quarter of 2007, WebEx anticipates revenues in the range
of $105 to $108 million, GAAP EPS in the range of $0.29 to $0.31 and
Non-GAAP EPS in the range of $0.39 to $0.41. Non-GAAP EPS excludes the
expense and tax impact of the new SFAS 123R equity compensation rule, and
the non-cash amortization of intangible assets associated with the
acquisition of Intranets.com.
On a full year basis for 2007, revenues are anticipated to be in the
range of $450 to $465 million. WebEx anticipates GAAP EPS in the range of
$1.24 to $1.34 and Non-GAAP EPS in the range of $1.60 to $1.70, after
excluding the expense and tax impact of the new SFAS 123R equity
compensation rule and the non-cash amortization of intangible assets
associated with the acquisition of Intranets.com.
Conference Call
Management will host the quarterly WebEx online meeting to discuss the
results today January 31, 2007, beginning at 5:00 p.m. Eastern time. In
conjunction with the audio call, there will be a WebEx meeting for the
visual part of the presentation.
Interested parties may participate in the WebEx online meeting in one
of two ways:
To join the WebEx online meeting and listen to the audio via the
computer (WebEx VoIP), please go to http://www.webex.com/q406_earnings_voip
or
To join the WebEx online meeting and listen to the audio via the
telephone, please go to http://www.webex.com/q406_earnings_tele and call
(617) 614-3454 and enter passcode 88488728.
For those unable to participate in the live WebEx meeting, a replay
will be available beginning one hour after the conclusion of the meeting.
To replay the recorded WebEx online meeting, go to
http://www.webex.com/q406_earnings_replay or to replay the audio only, call
+1-617-801-6888 and enter reservation number 88488728.
Non-GAAP Financial Measures
This press release includes financial measures for earnings per share
and net income for our results for both the fourth quarter of 2006 and the
year ending December 31, 2006, and guidance for both the first quarter of
2007 and the year ending December 31, 2007 that have not been calculated in
accordance with generally accepted accounting principles (GAAP) and may not
necessarily be comparable to similarly-titled measures employed by other
companies. These financial measures differ from GAAP in that they exclude
the expense and tax impact of the new SFAS 123R equity compensation rule,
and certain expenses from the acquisition of Intranets.com, including the
effects of non-cash amortization of intangible assets, an in-process
research and development charge and certain employee retention expenses.
WebEx uses these non-GAAP financial measures to enhance understanding of
its operational financial performance. WebEx believes that providing each
of these non-GAAP financial measurements is useful to management and
investors because they provide a consistent basis for comparison of WebExs
financial condition and results of operations between quarters, which
comparison is not influenced by changes in accounting rules for stock-based
compensation, changes in tax rates resulting solely from changes in
accounting rules, and acquisition-related expenses associated with the
purchase of Intranets.com. The presentation of this additional information
is not meant to be considered in isolation or as a substitute for earnings
per share or net income calculated in accordance with GAAP, and should be
read only in conjunction with our condensed consolidated financial
statements prepared in accordance with GAAP. A reconciliation of these GAAP
and non-GAAP financial measures is included in the attached tables.
Our non-GAAP financial measures reflect adjustments based on the
following items:
-- Stock-based compensation: Our GAAP income statement includes stock
compensation expense and the tax impact related to the adoption of
Statement of Financial Accounting Standard 123R, Share-Based Payment
(SFAS No. 123R), which we have been subject to since the first
quarter of 2006. SFAS No. 123R requires us to recognize a non-cash
expense related to the fair value of all our employee stock-based
compensation awards. In periods prior to the adoption of SFAS No.
123R, when employee stock-based compensation awards had an exercise
price equal to or above the market value of the underlying common
stock on the date of grant, no stock compensation expense was
required to be recognized in our statement of operations. We believe
it is useful to provide financial statements with both the GAAP and
the non-GAAP measures of our compensation expense and the related
tax impact, as this helps to provide a more meaningful comparison of
our current operating results to operating results in prior periods
when SFAS No. 123R was not in effect. Stock-based compensation is a
key incentive offered to our employees, and we believe it
contributed to the revenue earned during the period and will
contribute to our future revenue generation. Stock-based
compensation expenses will recur in future periods.
-- Amortization of intangibles, Intranets.com Acquisition: We continue
to incur charges relating to the amortization of intangible assets
which were purchased in connection with our acquisition of
Intranets.com in September 2005. These charges are included in our
GAAP presentation of earnings from operations, operating margin, net
earnings and net earnings per share. We exclude these charges for
purposes of calculating these non-GAAP measures to facilitate a more
meaningful evaluation of our current operating performance and
comparisons to our past operating performance.
-- Employee Retention-Related Charges, Intranets.com Acquisition:
Through and including the third quarter of 2006 but not thereafter,
we incurred certain employee-retention costs in connection with the
acquisition of Intranets.com that we would not have otherwise
incurred. These GAAP costs were incurred to motivate individuals
employed by Intranets.com prior to the acquisition to remain
employed by us following the acquisition. We believe that
eliminating these acquisition-related expenses for purposes of
calculating the comparable non-GAAP financial measure facilitates a
more meaningful evaluation of our current operating performance and
comparisons to our past operating performance. These charges have
now been completed and will not recur in future quarters.
-- In-process research and development charge, Intranets.com
Acquisition: We incurred, in the third quarter of 2005, a one-time
GAAP accounting charge in connection with the acquisition of
Intranets.com. The GAAP charge related to amounts assigned to
tangible and intangible assets to be used in research and
development projects that had no alternative future use and
therefore were charged to expense at the acquisition date. The
charge for in-process research and development in connection with
the acquisition of Intranets.com is reflected in our GAAP
presentation of earnings from operations, operating margin, net
earnings and net earnings per share solely in the third quarter of
2005. In-process research and development expenses are not
indicative of our ongoing operating costs. Accordingly, we believe
that eliminating this accounting charge for purposes of calculating
these non-GAAP measures contributes to a meaningful evaluation of
our current operating performance and comparisons to past operating
performance.
About WebEx Communications, Inc.
With more than 2.2 million registered users, WebEx is the global leader
in on-demand applications for collaborative business on the web. WebEx
applications combine both synchronous and asynchronous collaboration
capabilities and enhance high-touch business processes, such as sales and
training, with efficient web-touch interactions. As an on-demand provider,
WebEx is able to facilitate both internal and external collaboration. WebEx
delivers its range of applications over the WebEx MediaTone Network, a
global network specifically designed for the secure delivery of on-demand
applications. WebEx is based in Santa Clara, California and has regional
headquarters in Europe, Asia and Australia. Please call toll free
877-509-3239 or visit http://www.webex.com for more information.
This press release contains forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements may be identified by use of the terms
anticipates, believes, continue, could, estimates, expects, intends, may,
plans, potential, predicts, should or will, or the negative of those terms
or similar expressions. These forward-looking statements are subject to
significant risks and uncertainties. Actual results may differ materially
from those described in such statements as a result of these risks and
uncertainties. In particular, these forward looking statements include, but
are not limited to, statements regarding guidance for the first quarter of
2007 and the year ending December 31, 2007 on anticipated revenues and
earnings per share, increasing market penetration with our web
collaboration suite and expanding our offerings through our WebEx Connect
platform, the benefits to management and investors in providing non- GAAP
financial measures, the contribution to revenue of stock-based compensation
and the recurrence of stock-based compensation expenses. Factors which
could contribute to risks and uncertainties include, but are not limited
to, the failure of WebEx to meet financial expectations, decrease in demand
for WebEx collaboration applications and services, the failure of WebEx to
meet projections in domestic and international direct sales activity,
channel sales, customer retention and expense control, failures and
interruptions in the software and systems underlying WebExs services, the
effects of competitive offerings, additional expenses associated with the
further integration of Intranets.com, the commercial success of our core
collaboration business, and our success in making new applications
available through the WebEx Connect platform. A fuller discussion of risks
and uncertainties that could affect WebEx Communications, Inc. is more
fully set forth in WebEx Communications, Inc.s filings with the Securities
and Exchange Commission, including WebExs Form 10-Q filed on November 8,
2006. WebEx Communications, Inc. assumes no obligation to update
forward-looking information contained in this press release.
WebEx Communications, Inc.
Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
Three months ended Twelve months ended
December 31, December 31,
2006 2005(1) 2006 2005(1)
Net revenues $101,925 $83,685 $380,012 $308,422
Cost of revenues(2) 16,924 14,740 67,945 53,893
Gross profit 85,001 68,945 312,067 254,529
Operating expenses:
Sales and marketing(2) 37,349 28,219 141,787 102,707
Research and development(2) 13,761 12,099 53,799 45,713
General and administrative(2) 9,065 8,371 37,753 26,184
Total operating expenses 60,175 48,689 233,339 174,604
Operating income 24,826 20,256 78,728 79,925
Interest and other income, net 2,956 1,726 9,360 6,613
Income before income taxes 27,782 21,982 88,088 86,538
Provision for income taxes 11,085 8,385 39,514 33,536
Net income $16,697 $13,597 $48,574 $53,002
Net income per share:
Basic $0.34 $0.29 $1.01 $1.16
Diluted $0.33 $0.28 $0.97 $1.11
Weighted average shares used to
compute net income per share:
Basic 49,104 46,204 48,009 45,819
Diluted 51,243 47,803 50,055 47,775
(1) Certain reclassifications have
been made to prior year amounts in
order to conform to the current
year presentation.
(2) Cost of revenues and operating
expenses include the following
stock compensation expense:
Cost of revenues $616 $- $2,863 $-
Sales and marketing 2,120 - 9,592 -
Research and development 1,365 - 5,906 -
General and administrative 1,439 3 5,795 13
$5,540 $3 $24,156 $13
An itemized reconciliation between net income on a GAAP basis and non-GAAP
basis is as follows (in thousands, except per share amounts):
Three months Twelve months
ended ended
December 31, December 31,
2006 2005(1) 2006 2005(1)
GAAP net income $16,697 $13,597 $48,574 $53,002
Stock-based compensation 5,540 3 24,156 13
Amortization of acquisition-related
intangibles 723 723 2,892 900
Acquisition-related charges - 680 1,874 846
In-process research and development
charge - - - 307
Provision for income taxes(2) (1,195) (536) (5,842) (793)
Non-GAAP net income $21,765 $14,467 $71,654 $54,275
Non-GAAP net income per share:
Basic $0.44 $0.31 $1.49 $1.18
Diluted $0.42 $0.30 $1.43 $1.14
Weighted average shares used to
compute non-GAAP net income per
share:
Basic 49,104 46,204 48,009 45,819
Diluted 51,243 47,803 50,055 47,775
(1) Certain reclassifications have been made to prior year amounts in
order to conform to the current year presentation.
(2) The estimated non-GAAP effective tax rate was 36% and 39% for the
fourth quarter and twelve months ended 2006, respectively. The estimated
non-GAAP effective tax rate was 38% for both the fourth quarter and twelve
months ended 2005, respectively. These non-GAAP effective tax rates have
been used to adjust the provision for income taxes for non-GAAP purposes.
WebEx Communications, Inc.
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2006 2005(1)
ASSETS
Current assets:
Cash and cash equivalents $54,687 $18,101
Short-term investments 290,465 179,110
Accounts receivable, net 53,838 51,231
Prepaid expenses and other current
assets 10,193 7,231
Deferred tax assets 10,883 6,326
Total current assets 420,066 261,999
Property and equipment, net 48,594 51,592
Goodwill 26,965 28,224
Intangible assets, net 12,971 16,453
Deferred tax assets 5,583 2,930
Other non-current assets 2,078 1,579
Total assets $516,257 $362,777
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable $5,253 $9,011
Accrued liabilities 25,116 19,635
Deferred revenue 16,429 12,652
Income tax payable 3,042 4,348
Total current liabilities 49,840 45,646
Non-current liabilities 6,191 5,102
Stockholders equity:
Common stock 49 46
Additional paid-in capital 355,482 258,002
Accumulated other comprehensive
income 4,162 2,022
Accumulated earnings 100,533 51,959
Total stockholders equity 460,226 312,029
Total liabilities and stockholders
equity $516,257 $362,777
(1) Certain reclassifications have been made to prior year amounts in
order to conform to the current year presentation.
WebEx Communications, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Twelve months ended
December 31,
2006 2005(1)
Cash flows from operating activities:
Net income $48,574 $53,002
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provisions for doubtful
accounts and sales reserve 19,257 14,537
Depreciation and amortization 21,204 15,989
Loss from disposal of assets 273 464
Deferred income taxes (5,603) 583
Tax benefit of stock plans 15,074 10,459
Excess tax benefit from stock-
based compensation (6,929) -
Stock-based compensation 24,156 13
In-process research and
development charge - 307
Changes in operating assets and
liabilities:
Accounts receivable (21,864) (32,159)
Prepaid expenses and other
current assets (2,962) (2,303)
Other non-current assets (367) (36)
Accounts payable (3,758) (884)
Accrued liabilities 6,570 545
Income tax payable (1,306) 5,625
Deferred revenue 3,777 2,152
Other 3,345 298
Net cash provided by
operating activities 99,441 68,592
Cash flows from investing activities:
Purchases of available-for-sale
securities and other
investments (243,395) (182,097)
Maturities and sales of
available-for-sale securities
and other investments 130,703 107,141
Adjustments (payments) made in
connection with business
acquisition, net (348) (40,023)
Purchases of property and
equipment (14,997) (17,691)
Net cash used in investing
activities (128,037) (132,670)
Cash flows from financing activities:
Net proceeds from issuances of
common stock 58,286 35,876
Excess tax benefit from stock-
based compensation 6,929 -
Repurchase of common stock (33) (34,139)
Net cash provided by
financing activities 65,182 1,737
Increase (decrease) in cash and cash
equivalents 36,586 (62,341)
Cash and cash equivalents at beginning
of the period 18,101 80,442
Cash and cash equivalents at end of
the period $54,687 $18,101
(1) Certain reclassifications have been made to prior year amounts in
order to conform to the current year presentation.
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