Sybase Q2 '08: EPS Up 33% - Beats By Six Cents - Guides Up

July 24, 2008

Sybase reported financial results for the second quarter ended June 30, 2008.

Total revenue for the second quarter of 2008 increased 15% to $282.7 million from $245.0 million in the second quarter of 2007. License revenue grew 17% to $90.5 million from $77.4 million in the second quarter of 2007. Services revenue increased 8% to $146.6 million from $135.2 million a year ago. Messaging revenue grew 41% to $45.6 million from $32.4 million a year ago.

For the second quarter, operating income calculated in accordance with generally accepted accounting principles (GAAP) increased 44% year over year to $51.1 million, representing an operating margin of 18%. This compares with GAAP operating income of $35.6 million and an operating margin of 15% a year ago.

GAAP net income increased 24% year over year to $32.4 million from $26.0 million a year ago. GAAP earnings per diluted share (EPS) increased 31% to $0.37 for the 2008 second quarter from $0.28 for the second quarter of 2007.

Non-GAAP operating income for the second quarter increased 33% year over year to $63.7 million, representing a 23% operating margin. This compares with non-GAAP operating income of $47.8 million, representing a 20% operating margin, in the 2007 second quarter.

Non-GAAP net income for the 2008 second quarter increased 26% to $43.0 million from $34.3 million for the second quarter of 2007. Non-GAAP EPS for the 2008 second quarter increased 33% to $0.49 from $0.37 for the second quarter of 2007.

Analysts expected a profit, excluding items, of 43 cents per share, and sales of $262.5 million.

“I am extremely pleased with our strong performance in the second quarter of 2008,” stated John Chen, chairman, CEO and president of Sybase. “We have now delivered three consecutive record quarters, four consecutive quarters exceeding Street consensus revenue, and 16 consecutive quarters exceeding consensus earnings.”

Added Mr. Chen, “Our ongoing success is attributable to growing market acceptance of our Unwired Enterprise strategy. We are excited about our prospects for continued growth, driven by our flagship enterprise database, IQ analytics server, mobile middleware, and mobile messaging. Additional growth catalysts expected to enhance our momentum include new offerings such as risk analytics, data clustering, Mobile Office, mobile banking, and next-generation mobile messaging.

“Notwithstanding the macro-economic cross-currents, our business pipeline remains healthy, and we are confident in our team’s ability to execute. As a result, we are again raising our 2008 revenue, earnings, and cash flow targets, which put us on track to deliver yet another record full-year performance,” concluded Mr. Chen.

Balance Sheet and Other Data

At June 30, 2008, Sybase reported $606.4 million in cash and cash investments, including long-term cash investments of $22.7 million and restricted cash of $3.7 million. In the second quarter, the company generated $62.7 million in cash flow from operations.

There remains $82.9 million authorized under the company’s current share repurchase program.

Days sales outstanding (DSO) for the second quarter was 75.

Guidance

For the third quarter ending September 30, 2008, management anticipates total revenue in the range of $270 million to $275 million. Management anticipates non-GAAP fully diluted EPS in the range of $0.48 to $0.50 and GAAP EPS in the range of $0.38 to $0.40.

Analysts are expecting non-GAAP fully diluted profit of 48 cents per share on sales of $269.3 million for the quarter.

Management is raising guidance for full-year 2008 revenue, earnings, and cash flow from operations due to the company’s stronger-than-expected performance in the second quarter of 2008. Management now anticipates total revenue of approximately $1.11 billion. Non-GAAP EPS is now anticipated in the range of $1.98 to $2.00, and GAAP EPS is anticipated in the range of $1.53 to $1.55. Management now anticipates cash flow from operations of approximately $250 million.

Analysts are expecting Non-GAAP EPS of $1.97 per share.