Double-Take: Fiscal 4Q09 Financial Results

Double-Take Software, Inc. announced its financial results for the fourth quarter and year ended December 31, 2009.

“We were pleased with both our earnings and cash flow for the quarter and the year. Despite the market pressure on our license sales, particularly in the SMB and financial markets, our operating margins were robust. In several areas, we saw growth including the Federal sector, the Asia Pacific region, and our Double-Take Back-Up product line. Additionally, we introduced Double-Take Move, which won the Best of Tech Ed Award at Microsoft’s Tech Ed conference and a new Double-Take Back-Up has been nominated for product of the year award by SearchStorage,” said Dean Goodermote, Chairman and CEO of Double-Take Software, Inc.

Total revenue for the fourth quarter of 2009 decreased 8.7% to $22.8 million from $25.0 million in the fourth quarter of 2008. Software revenue decreased 16.6% to $11.7 million in the fourth quarter of 2009 from $14.1 million in the fourth quarter of 2008. Maintenance and professional services revenue increased 1.5% to $11.0 million in the fourth quarter of 2009 from $10.9 million in the fourth quarter of 2008. On a constant currency basis, total revenue in the fourth quarter of 2009 declined by 10.6%, software revenue declined by 18.2% and maintenance and professional services revenue decreased by 0.8% compared to the fourth quarter of 2008.

Income from operations was $4.0 million in the fourth quarter of 2009 compared to $5.3 million in the fourth quarter of 2008.

The Company recorded a net income tax benefit of $6.5 million in the fourth quarter of 2009 compared to a benefit of $5.1 million in the fourth quarter of 2008. In the fourth quarter of 2009, the Company completed its ongoing analysis of its tax obligations and the utilization of its net operating loss carryforwards. As a result of this analysis, the Company recorded a net tax benefit of approximately $8.7 million which increased diluted EPS by $0.37 per share. The net tax benefit was primarily related to reversals of valuation allowances on deferred tax assets. The combination of income taxes on income for the fourth quarter of 2009 of $2.2 million and the net tax benefits of $8.7 million recorded in the quarter resulted in the net income tax benefit of $6.5 million. In the fourth quarter of 2008, the Company reversed the valuation allowance on approximately $7.4 million of deferred tax assets which increased diluted EPS by $0.31 per share. Taxes on income generated in the fourth quarter of 2008 were approximately $2.3 million which resulted in a net income tax benefit in the quarter of $5.1 million.

Net income, including the benefit from the income tax items described above, totaled $10.6 million, or $0.45 per diluted share in the fourth quarter of 2009 compared with $10.2 million, or $0.44 per diluted share, in the fourth quarter of 2008.

Income from operations on an adjusted, non-GAAP basis in the fourth quarter of 2009 was $5.1 million compared with $6.3 million in the fourth quarter of 2008. Adjusted, non-GAAP net income in the fourth quarter of 2009 was $11.7 million, or $0.50 per diluted share, including the $0.37 per share fourth quarter benefit related to income taxes. This compares with $11.2 million, or $0.48 per diluted share, including $0.31 per share from tax related items, in the fourth quarter of 2008.

The Company calculates these adjusted non-GAAP income measures stated above and for the full year as stated below by excluding the effects in the respective periods of the non-cash stock based compensation. An explanation of these adjusted, non-GAAP financial measures and a reconciliation of these measures to GAAP results are provided in the tables included in this press release, and these measures should only be viewed together with the reconciliation and the further explanation given under “Non-GAAP Financial Measures” below.

Cash generated from operations was $7.3 million in the fourth quarter of 2009. Cash and short term investments at December 31, 2009 totaled $96.2 million, an increase of approximately $6.8 million from September 30, 2009.

For the full year, total revenue decreased 13.6% to $83.2 million for the year ended December 31, 2009, from $96.3 million for the year ended December 31, 2008. Software revenue for the full year decreased 24.2% to $40.1 million for the year ended December 31, 2009, from $52.9 million for the year ended December 31, 2008. Maintenance and professional services revenue decreased 0.6% to $43.1 million for the year ended December 31, 2009, from $43.4 million for the year ended December 31, 2008.

Income from operations was $10.2 million for the year ended December 31, 2009 compared to $17.6 million for the year ended December 31, 2008.

The Company recorded an income tax benefit of $3.1 million for the year ended December 31, 2009 compared to an income tax expense of $0.7 million for the year ended December 31, 2008. Tax expense for each year has been reduced due to the reversal of the valuation allowance on certain deferred tax assets and other year end tax items which impacted income tax expense. The net benefit of these items was approximately $8.7 million or $0.37 per diluted share for the year ended December 31, 2009 and approximately $7.4 million or $0.32 per share for the year ended December 31, 2008.

Net income, which includes the effect of the income tax items discussed above, totaled $13.5 million, or $0.58 per diluted share for the year ended December 31, 2009 compared with $17.6 million, or $0.76 per diluted share, in the same period in 2008.

Income from operations on an adjusted, non-GAAP basis for the year ended December 31, 2009 was $14.6 million compared with $21.5 million for the year ended December 31, 2008. Adjusted, non-GAAP net income, including the effect of the income tax items of $0.37 per share for 2009 and $0.32 per share for 2008 was $17.9 million or $0.77 per diluted share for the year ended December 31, 2009, compared with $21.6 million, or $0.93 per diluted share, for the year ended December 31, 2008. As noted above in each case these non-GAAP financial measures exclude the effects in the respective periods of the non-cash stock based compensation.

Stock Repurchase Program
Double-Take Software, Inc. also announced that the Company’s Board of Directors has approved the repurchase of up to an aggregate of $15 million of the Company’s common stock. The Company may repurchase Double-Take Software, Inc. common stock in the open market at prevailing market prices or in privately negotiated transactions from time to time based upon market and business conditions. Repurchases may also be made through a trading plan under SEC Rule 10b5-1. The stock repurchase program may be suspended or discontinued at any time, and will be funded using the Company’s available cash.

2010 Financial Guidance
The Company is providing guidance for the first quarter and full year 2010 as follows: Revenue for the first quarter of 2010 is expected to be in the range of $20.0 to $21.2 million and $90.0 to $95.0 million for the full year.

Guidance for adjusted non-GAAP operating income for the first quarter is $0.6 to $1.5 million and $11.0 to $14.7 million for the full year 2010. Non-GAAP net income per share for the first quarter is expected to be in the range of $0.02 to $0.04 and $0.29 to $0.39 for full year excluding the impact of stock-based compensation charges, and assuming a 38% effective income tax rate. Weighted average diluted shares using the treasury method are expected to be approximately 23.6 million for the first quarter and 23.8 million for the full year 2010, excluding the effect of any shares that may be repurchased under the share repurchase plan which can’t be estimated.

“We are enthusiastic about the potential to expand into additional markets in 2010 and 2011. We believe that our target markets have stabilized, and that now is the right time to invest more heavily in some of our new products, such as our Cloud Computing initiatives, and geographically in Asia and Latin America,” stated Goodermote.