Legato Announces Record Third Quarter 1998 Results; Revenues Grow 71%, Net Income Grows 86%, and Earnings Per
Share Increases 82% -- Excluding One-time Charges
Business Wire - October 14, 1998 16:15
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PALO ALTO, Calif.--(BUSINESS WIRE)--Oct. 14, 1998--Legato Systems, Inc. (Nasdaq:LGTO), a leader in the enterprise storage management software market, today announced revenue of $37.5
million for the third quarter ended September 30, 1998, representing growth of 71% over third quarter 1997 revenues. Excluding $0.6 million of non-recurring charges associated with the Software Moguls
acquisition announced on July 30, 1998, net income grew 86% to $7.9 million, compared with $4.3 million in the third quarter of last year. On the same basis, diluted earnings per share increased 82% to
$0.20, up from $0.11 in the year-earlier quarter. Including non-recurring charges from the merger, net income grew 76% to $7.5 million with diluted earnings per share of $0.19 growing 73% over the same
quarter of last year.
"Our third quarter results were very strong, reflecting continued success in the enterprise storage management software market," commented Louis C. Cole, President and Chief Executive Officer. "We're very
pleased with our increasing market momentum and continued customer demand for Legato's storage management solutions," said Mr. Cole. Also during the quarter the company successfully completed the
merger and integration of Software Moguls, Inc., a Minnesota-based developer and supplier of storage management software.
For the first nine months of fiscal 1998, the company reported revenues of $98.6 million, an increase of 71% over the $57.8 million reported in the same period of last year. Net income, excluding
non-recurring expenses, grew 82% to $18.5 million, compared with $10.2 million in the corresponding period of last year. Comparable diluted earnings per share for the first nine months increased 74% to
$0.47, versus the year-earlier period. Including non-recurring charges, net income for the first nine months was $18.1 million and fully diluted earnings were $0.46 per share.
"We are pleased with our third quarter financial performance in all respects," observed Stephen C. Wise, Chief Financial Officer. "Product revenues grew $11.4 million over last year's third quarter to $28.8
million, achieving record levels both domestically and internationally. Our efforts to expand our consulting services and support offerings are driving higher growth in service revenues, which grew 90.7% to
$8.7 million in the current quarter. Excluding non-recurring charges, operating income expanded to 30.6% of revenue helping to fuel year-over-year earnings per share growth of 82%," Wise concluded.
This announcement may contain forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results described in such statements. Factors that
might cause such a difference include, but are not limited to, those discussed in the "Risk Factors" section of the Company's Report on Form 10-K filed with the Securities and Exchange Commission in March,
1998, and in the "Risk Factors" section of the Company's Report on Form 10-Q filed with the Securities and Exchange Commission in August, 1998, copies of which are available on request from the
Company.
About Legato Systems
Legato Systems, Inc. develops, markets and supports an integrated set of enterprise storage management software products for heterogeneous, client/server computing environments. The company's solutions
are selected by large customers around the world because of their reliability, platform-independence and ability to seamlessly integrate with existing computing environments. The company's storage
management software has become the recognized de-facto standard with the largest installed base representing over 37,000 customers, protecting more than 4,000,000 systems. Twenty-four of the world's
largest system and applications vendors have chosen Legato's software as their preferred storage management solution for their customers, including Banyan, BMC Software, Compaq/Digital,
Compaq/Tandem, Data General, Fujitsu/Amdahl, Fujitsu/ICL, Groupe Bull, Hewlett-Packard, Hitachi, Informix, NEC, Netscape, Network Appliance, Nihon-Unisys, Oracle, Siemens Nixdorf, Silicon
Graphics, Sony and Sun Microsystems. The company's NetWorker, BusinesSuite, SmartMedia, and GEMS products are also licensed, resold, or endorsed by other major vendors, including Computer
Associates, IBM/Tivoli, Microsoft Corporation, MTI, Novell, and SAP.
Note to Editors: Legato NetWorker is a registered trademark, and NetWorker Archive, NetWorker HSM, ClientPak, SmartClient, SmartMedia, StorSuite, BusinesSuite, Power Edition, Legato GEMS, and
OpenTape are trademarks of Legato Systems, Inc. in the U.S. and/or other countries. All other product, trademark, company, or service names mentioned herein are the property of their respective owners.
The following condensed consolidated financial statements have been restated to reflect the Company's acquisition of Software Moguls, Inc., announced on July 30, 1998, and accounted for as a
pooling-of-interests.
LEGATO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
REVENUES:
Product $28,770 $17,415 $76,874 $45,573
Service & support 8,722 4,573 21,764 12,228
------- ------- ------- -------
Total Revenues 37,492 21,988 98,638 57,801
COST OF REVENUES:
Product 1,155 773 2,917 1,938
Service & support 3,481 1,830 9,169 4,682
------- ------- ------- -------
Total cost of revenues 4,636 2,603 12,086 6,620
------- ------- ------- -------
GROSS PROFIT 32,856 19,385 86,552 51,181
OPERATING EXPENSES:
Research and development 6,018 3,719 15,567 10,482
Sales and marketing 12,614 7,438 36,052 20,116
General and administrative 2,483 1,824 7,434 4,785
Amortization of intangibles 279 279 838 838
Merger related expenses 645 0 645 0
------- ------- ------- -------
Total operating expenses 22,039 13,260 60,536 36,221
------- ------- ------- -------
INCOME FROM OPERATIONS 10,817 6,125 26,016 14,960
Interest income, net 1,130 543 2,994 1,492
------- ------- ------- -------
INCOME BEFORE PROVISION FOR
INCOME TAXES 11,947 6,668 29,010 16,452
Provision for income taxes 4,420 2,395 10,883 6,254
------- ------- ------- -------
NET INCOME $ 7,527 $ 4,273 $18,127 $10,198
======= ======= ======= =======
Basic earnings per share $ 0.20 $ 0.12 $ 0.49 $ 0.29
======= ======= ======= =======
Diluted earnings per share (1) $ 0.19 $ 0.11 $ 0.46 $ 0.27
======= ======= ======= =======
Shares used in the calculation
of basic earnings per share 37,143 35,247 36,693 34,873
======= ======= ======= =======
Shares used in the calculation
of diluted earnings per share 40,348 37,961 39,813 37,710
======= ======= ======= =======
(1) Excluding non-recurring charges from the Software Moguls, Inc.
merger, diluted earnings per share was $0.20 and $0.47 for the
three-months and nine-months ended September 30, 1998,
respectively
LEGATO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, Dec. 31,
1998 1997
--------- --------
(unaudited)
ASSETS
Current assets:
Cash, cash equivalents and investments $103,331 $ 71,991
Accounts receivables, net 30,597 21,426
Other current assets 4,571 4,365
Deferred tax asset 4,099 2,702
-------- --------
Total current assets 142,598 100,484
Property and equipment, net 15,164 10,515
Deposits and other assets 515 362
Intangible assets, net 2,540 3,431
-------- --------
Total assets $160,817 $114,792
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 16,373 $ 8,224
Deferred revenues 16,885 12,491
-------- --------
Total current liabilities 33,258 20,715
Deferred tax liability 531 768
Stockholders' equity:
Common stock 81,919 66,326
Retained earnings 45,109 26,983
-------- --------
Total stockholders' equity 127,028 93,309
-------- --------
Total liabilities and
stockholders' equity $160,817 $114,792
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