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Deltek reports 1st quarter earnings

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%

HERNDON, Va.--(BUSINESS WIRE)--Deltek, Inc. (Nasdaq: PROJ), the leading provider of enterprise applications software and solutions for project-focused businesses, today announced financial results for its first quarter ended March 31, 2010.

Q1 license revenue was $14.0 million, an increase of 24.7% compared to the first quarter of 2009. Maintenance and support revenue in the first quarter was $32.6 million, up 6.5% from the prior year. Consulting services revenue for Q1 was $17.2 million, compared to $20.1 million in Q1 2009, a decline of 14%. Total revenue for the first quarter of 2010 was $63.8 million, up 2.9% from last year's first quarter.

Q1 GAAP operating income increased 59% to $9.2 million from $5.8 million in the first quarter of 2009. Q1 GAAP operating income margin was 14.4%, up from 9.4% for Q1 of the prior year. Non-GAAP operating income for the first quarter of 2010 increased 28.2% to $13.8 million, from $10.7 million in 2009. Non-GAAP operating income margin was 21.6% for Q1 2010 and up from 17.3 % in the prior year.

Q1 GAAP net income was $4.2 million, or $0.06 per diluted share, compared to $2.7 million, or $0.06 per diluted share, in the first quarter of 2009. Non-GAAP net income for the first quarter of 2010 was $6.9 million, or $0.11 per diluted share, compared to $5.6 million, or $0.12 per diluted share, in Q1 2009.

Non-GAAP operating income and margin exclude the pre-tax impact of stock-based compensation, expenses associated with the Company's 2005 recapitalization, amortization of acquired intangible assets, and restructuring charges. Non-GAAP net income excludes the same items on a net-of-tax basis.

A reconciliation of GAAP to non-GAAP financial measures is provided in the tables at the end of this press release.

"The significant increase in our Q1 license revenue and operating margins was driven by growth in both our Architecture & Engineering and international markets, the improving level of confidence among our customers, and our continuing focus on our profitability," said Kevin Parker, Deltek's president and CEO. "We also saw a significant increase in sales to our existing customers as they expanded their use of Deltek solutions across their organizations, an important indication of customer growth and improving business confidence."

Sequential Results (Q1 2010 vs. Q4 2009)

Total revenue for the first quarter of 2010 was $63.8 million compared to $70.3 million in Q4 2009. License revenue for Q1 2010 was $14.0 million compared to $19.2 million in the fourth quarter of 2009. Maintenance and support revenue in the first quarter of 2010 was $32.6 million, up from $32.3 million in Q4 2009. Consulting services revenue for Q1 2010 was $17.2 million compared to $18.8 million in Q4 2009.

Q1 GAAP operating income was $9.2 million compared to $14.1 million in the fourth quarter of 2009. GAAP operating income margin was 14.4% for Q1 2010 and 20% for Q4 of 2009. Non-GAAP operating income for the first quarter of 2010 was $13.8 million compared to $18.2 million in the fourth quarter of 2009. Non-GAAP operating income margin was 21.6% for Q1 2010 compared to 25.9% for Q4 2009.

Q1 GAAP net income was $4.2 million, or $0.06 per diluted share, compared to $7.2 million, or $0.11 per diluted share, in the fourth quarter of 2009. Non-GAAP net income for the first quarter of 2010 was $6.9 million, or $0.11 per diluted share, compared to $9.8 million, or $0.15 per diluted share, in Q4 2009.

Non-GAAP operating income and margin exclude the pre-tax impact of stock-based compensation, expenses associated with the Company's 2005 recapitalization, amortization of acquired intangible assets, and restructuring charges. Non-GAAP net income excludes the same items on a net-of-tax basis.

The sequential variances primarily reflect the historic pattern of seasonal fluctuations in the company's business.

A reconciliation of GAAP to non-GAAP financial measures is provided in the tables at the end of this press release.

Recent Highlights

  • Deltek and FedSources entered into a partnership to offer the industry's first opportunity-based teaming centers through Deltek's breakthrough govWin network. These unique teaming centers provide one central location to review the latest content on individual government program opportunities, discover teaming partners, and form the optimal team to win business from government programs. With this partnership, the govWin network now includes a pre-built teaming center specifically targeted to winning business within the massive Eagle II program.
  • VSE Corporation, one of the fastest-growing government contractors in the nation, is standardizing on Deltek's government contracting solutions to power its continued growth. A longtime Costpoint user, VSE has entered into a multi-year agreement to use Deltek software to further enhance business performance and increase customer service. VSE recently deployed Deltek Performance Management (DPM) to offer dashboards for executive and business managers, implemented Deltek Cobra to assist with the execution of a major government contract, and became an enterprise customer of Deltek's govWin network to find teaming partners and win new business.
  • Deltek's govWin network was successfully launched in January, and by the end of the quarter had achieved a number of important milestones, with more than 10,000 registered users across the entire government contracting market. During the quarter, a number of Deltek Costpoint customers have subscribed to govWin's Supplier Management Solution to enable them to better manage their supplier networks, and Deltek added its first govWin CRM customers, who will be utilizing Deltek's SaaS solution to power their business development initiatives.
  • The Tatitlek Corporation, an Alaska Native Corporation headquartered in Anchorage, Alaska, selected Deltek's Costpoint to streamline its processes and power its rapid growth strategy. Tatitlek will utilize Deltek's market-leading government contracting solutions to automate important functions such as time collection, payroll, and fixed-asset tracking. The company will also leverage Costpoint CRM to improve the efficiency and effectiveness of its business development processes, and Deltek Performance Management to drive business intelligence across the organization. Tatitlek is an important addition to Deltek's strong customer base of Alaska Native Corporations.
  • Altus Group, a leading Canada-based global provider of real estate consulting services, selected Deltek Vision to streamline its entire back and front offices to increase organizational efficiency. Altus Group also purchased Vision Performance Management and will leverage the role-based dashboards in the solution to make important business decisions based on real-time metrics. The deal with Altus Group represents another major win in Canada, further demonstrating Deltek's continuing momentum in this region.
  • After a successful multi-year implementation process, SAIC has completed its company-wide roll-out of Deltek Costpoint across their rapidly growing government contracting business. By replacing their legacy systems with Costpoint, SAIC has standardized on a single scalable platform and delivered significant improvements to their core operational and financial capabilities. Powered by the industry leading functionality and capabilities of Costpoint, SAIC has over 35,000 employees delivering overĀ 40,000 projects around the world.
Conference Call Information

Deltek will host a conference call at 5:00 p.m. Eastern Time today to discuss the Company's first quarter results. To access this call, dial 1-877-381-6419 in North America and 1-706-643-9496 outside North America. No password is required to join the call. The conference call also can be accessed through the Investor Relations section of Deltek's website (http://investor.deltek.com). Those unable to participate in the live call may hear a replay through May 6, 2010 by dialing 1-800-642-1687 in North America and 1-706-645-9291 outside North America (pass code: 68715452). The replay also will be available through May 6, 2010 on Deltek's website.

About Deltek

Deltek (Nasdaq: PROJ) is the leading provider of enterprise applications software and solutions designed specifically for project-focused businesses. For more than two decades, our software applications have enabled organizations to automate mission-critical business processes around the engagement, execution and delivery of projects. More than 12,000 customers worldwide rely on Deltek to measure business results, optimize performance, streamline operations and win new business. For more information, visit www.deltek.com.

Deltek also offers govWin, the industry's only online community dedicated to solving common business problems for government contractors. The govWin network delivers unique and specialized content, offers innovative matching capabilities to establish and manage teaming opportunities, and provides applications to identify, pursue, and win government contracts. Over 10,000 registered members, prime contractors, and small businesses are part of the govWin community. For more information, visit www.govwin.com.

Use of Non-GAAP Financial Measures

This press release and the related conference call described above contain certain non-GAAP financial measures, including non-GAAP net income, non-GAAP operating income and margin and adjusted EBITDA. The Company defines non-GAAP net income as GAAP net income before the net-of-tax impact of stock-based compensation, expenses associated with the Company's 2005 recapitalization, amortization of acquired intangible assets and restructuring charges. Non-GAAP operating income and margin are defined as GAAP operating income before the pre-tax impact of stock-based compensation, expenses associated with the Company's 2005 recapitalization, amortization of acquired intangible assets and restructuring charges. Adjusted EBITDA is defined as GAAP net income before interest expenses (net of interest income), provision for income taxes, depreciation, amortization, stock-based compensation, expenses associated with the Company's 2005 recapitalization and restructuring charges.

The Company believes that the presentation of these non-GAAP financial measures provides useful information to its investors and lenders because these measures allow for more accurate comparisons of operating results from period-to-period, enhance the overall understanding of the Company's financial performance and provide greater insight into the prospects for the Company's ongoing business operations. Moreover, the Company also believes it is appropriate to exclude costs associated with restructuring charges because these charges are excluded from management's assessment of the Company's operating performance and are not related to the Company's ongoing business operations. In addition, the Company excludes the items from EBITDA described above in its calculations to determine compliance with its debt covenants and to assess its ability to borrow additional funds to finance or expand its operations.

The Company believes that by reporting these measures, it provides insight and consistency in its financial reporting and presents a basis for comparison of its business operations between current, past and future periods. In addition, the measures provide a basis for the Company to compare its financial results to those of other comparable publicly traded companies and are used by its management team to plan and forecast its business.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance which are prepared in accordance with U.S. GAAP and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review the reconciliations of our GAAP to non-GAAP net income and adjusted EBITDA, which are set forth below.

Forward-Looking Statements

This press release and related conference call contain forward-looking statements that involve substantial risks and uncertainties. You can identify forward-looking statements by words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "should," "would" or similar words. You should consider these statements carefully because they discuss our plans, targets, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. There will be events in the future, however, that we are not able to predict accurately or control. Our actual results may differ materially from the expectations we describe in our forward-looking statements. Factors or events that could cause our actual results to materially differ may emerge from time to time, and it is not possible for us to accurately predict all of them. Before you invest in our common stock, you should be aware that the occurrence of any such event or of any of the additional events described as risk factors in the Company's filings with the Securities and Exchange Commission could have a material adverse effect on our business, results of operation and financial position. Any forward-looking statement made by us in this press release or related conference call speaks only as of the date on which we make it. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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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