Deltek Reports Q1 License Revenue Up 25% and Non-GAAP Operating

Deltek Reports Q1 License Revenue Up 25% and Non-GAAP Operating Income Up 28% Compared to Q1 2009; Q1 Non-GAAP Operating Income Margin Increases to 21.6%

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DELTEK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

	Three Months Ended March 31,
	2010			2009
REVENUES:
Software license fees	$	14,004		$	11,226
Consulting services		17,218			20,066
Maintenance and support services		32,571			30,597
Other revenues		11			104
Total revenues		63,804			61,993
COST OF REVENUES:
Cost of software license fees		1,020			1,388
Cost of consulting services		14,565			17,317
Cost of maintenance and support services		6,114			5,740
Cost of other revenues		18			43
Total cost of revenues		21,717			24,488
GROSS PROFIT		42,087			37,505
Research and development		11,103			10,871
Sales and marketing		11,041			11,519
General and administrative		9,753			7,905
Restructuring charge		973			1,413
Total operating expenses		32,870			31,708
INCOME FROM OPERATIONS		9,217			5,797
Interest income		12			11
Interest expense		(2,706	)		(1,509	)
Other income (expense), net		49			(3	)
INCOME BEFORE INCOME TAXES		6,572			4,296
Income tax expense		2,406			1,642
NET INCOME	$	4,166		$	2,654

EARNINGS PER SHARE
Basic	$	0.06		$	0.06
Diluted	$	0.06		$	0.06

COMMON SHARES AND EQUIVALENTS OUTSTANDING
Basic weighted average shares		64,440			46,672
Diluted weighted average shares		65,717			47,290


DELTEK, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

	March 31,			December 31,
	2010			2009

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	119,252		$	132,636
Accounts receivable, net of allowance of 2,463 and 2,658 at March 31, 2010 and December 31, 2009, respectively		39,215			42,531
Deferred income taxes		2,790			6,014
Prepaid expenses and other current assets		10,828			11,256
Income taxes receivable		145			-
TOTAL CURRENT ASSETS		172,230			192,437

PROPERTY AND EQUIPMENT, NET		10,630			11,371
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET		507			618
LONG-TERM DEFERRED INCOME TAXES		7,763			6,359
INTANGIBLE ASSETS, NET		15,459			13,748
GOODWILL		70,200			63,910
OTHER ASSETS		3,119			3,165
TOTAL ASSETS	$	279,908		$	291,608

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	30,220		$	44,707
Accounts payable and accrued expenses		26,592			26,740
Accrued liability for redemption of stock in recapitalization		317			317
Deferred revenues		46,579			40,176
Income taxes payable		–			992
TOTAL CURRENT LIABILITIES		103,708			112,932

LONG-TERM DEBT		121,723			134,250
OTHER TAX LIABILITIES		1,898			1,871
OTHER LONG-TERM LIABILITIES		4,623			1,875
TOTAL LIABILITIES		231,952			250,928

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:
Preferred stock, $0.001 par value—authorized, 5,000,000 shares; none issued or outstanding at March 31, 2010 or December 31, 2009		–			–
Common stock, $0.001 par value—authorized, 200,000,000 shares; issued and outstanding, 67,255,414 and 66,292,415 shares at March 31, 2010 and December 31, 2009, respectively		67			66
Class A common stock, $0.001 par value—authorized, 100 shares; issued and outstanding, 100 shares at March 31, 2010 and December 31, 2009		–			–
Additional paid-in capital		252,987			249,798
Accumulated deficit		(204,343	)		(208,509	)
Accumulated other comprehensive deficit		(755	)		(675	)
TOTAL STOCKHOLDERS’ EQUITY		47,956			40,680

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	279,908		$	291,608


DELTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	Three Months Ended March 31,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,166		$	2,654
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		382			1,389
Depreciation and amortization		2,255			2,859
Amortization of debt issuance costs		322			270
Stock-based compensation expense		2,608			2,011
Employee stock purchase plan expense		62			109
Restructuring charge, net		479			529
Loss on disposal of fixed assets		3			6
Deferred income taxes		1,627			(1,188	)

Change in assets and liabilities, net of effects from acquisition:
Accounts receivable, net		2,981			6,662
Prepaid expenses and other assets		442			(995	)
Accounts payable and accrued expenses		(1,263	)		(2,022	)
Income taxes receivable/payable		(687	)		1,474
Excess tax (deficiency) benefit from stock awards		(451	)		46
Other tax liabilities		24			88
Other long-term liabilities		(230	)		(147	)
Deferred revenues		6,949			3,624
Net Cash Provided by Operating Activities		19,669			17,369

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		(6,109	)		-
Purchase of property and equipment		(499	)		(292	)
Capitalized software development costs		-			(150	)
Net Cash Used in Investing Activities		(6,608	)		(442	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		391			90
Excess tax benefit (deficiency) from stock awards		451			(46	)
Proceeds from issuance of stock under employee stock purchase plan		413			310
Shares withheld for minimum tax withholding on vested restricted stock awards		(661	)		–
Repayment of debt		(27,015	)		(10,154	)
Net Cash Used in Financing Activities		(26,421	)		(9,800	)

IMPACT OF FOREIGN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		(24	)		37

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(13,384	)		7,164

CASH AND CASH EQUIVALENTS––Beginning of period		132,636			35,788

CASH AND CASH EQUIVALENTS––End of period	$	119,252		$	42,952


DELTEK, INC.
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(in thousands, except per share data)
(unaudited)

	Three Months Ended				Three Months Ended
	December 31,				March 31,
	2009				2010				2009

Net Income (GAAP Basis)	$	7,234			$	4,166			$	2,654
Income Tax Expense		4,178				2,406				1,642
Pre-Tax Income (GAAP Basis)	$	11,412			$	6,572			$	4,296
Adjustments:
Stock-based Compensation		2,431				2,670				2,120
Recapitalization Retention Expense		-				-				145
Amortization of Acquired Intangibles		989				904				1,264
Restructuring Charge		766				973				1,413

Adjusted Pre-Tax Income		15,598				11,119				9,238

Less: Adjusted Income Tax Expense		5,827				4,198				3,589

Non-GAAP Net Income	$	9,771			$	6,921			$	5,649

Non-GAAP Earnings Per Share (diluted)	$	0.15			$	0.11			$	0.12
Weighted Average Shares		65,411				65,717				47,290



RECONCILIATION OF GAAP OPERATING INCOME AND OPERATING MARGIN TO NON-GAAP OPERATING INCOME AND OPERATING MARGIN
(in thousands)
(unaudited)

	Three Months Ended				Three Months Ended
	December 31,				March 31,
	2009				2010				2009

Operating Income and Margin - GAAP	$	14,054	20	%	$	9,217	14	%	$	5,797	9	%
Stock-based Compensation		2,431				2,670				2,120
Recapitalization Retention Expense		-				-				145
Amortization of Acquired Intangibles		989				904				1,264
Restructuring Charge (Benefit)		766				973				1,413

Operating Income and Margin - Non-GAAP	$	18,240	26	%	$	13,764	22	%	$	10,739	17	%

Total Revenues	$	70,345			$	63,804			$	61,993



RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
(in thousands)
(unaudited)

	Three Months Ended				Three Months Ended
	December 31,				March 31,
	2009				2010				2009

Net Income (GAAP Basis)	$	7,234			$	4,166			$	2,654
Stock-based Compensation		2,431				2,670				2,120
Recapitalization Retention Expense		-				-				145
Depreciation		1,304				1,240				1,247
Amortization		1,197				1,015				1,611
Interest Expense, net		2,693				2,694				1,498
Income Tax Expense		4,178				2,406				1,642
Restructuring Charge		766				973				1,413

Adjusted EBITDA	$	19,803			$	15,164			$	12,330



STOCK-BASED COMPENSATION AND RECAPITALIZATION RETENTION EXPENSES
(in thousands)
(unaudited)

	Three Months Ended				Three Months Ended
	December 31,				March 31,
	2009				2010				2009

Cost of Consulting Services	$	192			$	136			$	445
Cost of Maintenance and Support Services		166				190				103
Research and Development		519				540				575
Sales and Marketing		563				662				385
General and Administrative		991				1,142				757
Total	$	2,431			$	2,670			$	2,265



AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
(in thousands)
(unaudited)

	Three Months Ended				Three Months Ended
	December 31,				March 31,
	2009				2010				2009

Cost of Software License Fees	$	80			$	140			$	355
Cost of Consulting Services		19				20				20
Cost of Other Revenues		10				15				-
Sales and Marketing		880				726				871
General and Administrative		-				3				18
Total	$	989			$	904			$	1,264



AMORTIZATION AND DEPRECIATION EXPENSES
(in thousands)
(unaudited)

	Three Months Ended				Three Months Ended
	December 31,				March 31,
	2009				2010				2009

Cost of Software License Fees	$	290			$	254			$	706
Cost of Consulting Services		374				393				418
Cost of Maintenance and Support Services		213				237				212
Cost of Other Revenues		10				15				-
Research and Development		417				303				283
Sales and Marketing		1,071				866				1,095
General and Administrative		126				187				144
Total	$	2,501			$	2,255			$	2,858

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