Rally Announces First Quarter Fiscal Year 2016 Financial Results

Rally Software Development Corp. 

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

April 30,

January 31,

2015

2015

ASSETS

Current assets:

Cash and cash equivalents

$   14,564

$      15,175

Short-term investments

53,152

51,410

Restricted cash

-

15

Accounts receivable, net

19,014

25,986

Other receivables

384

117

Prepaid expenses and other current assets

3,393

Total current assets

90,913

96,096

Property and equipment, net

5,444

5,419

Goodwill

2,049

2,104

Intangible assets, net

1,250

1,382

Restricted cash

4,200

4,200

Other assets

503

671

Total assets

$ 104,359

$    109,872

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$     3,467

$        3,230

Accrued liabilities

4,353

5,511

Deferred revenue

43,733

43,978

Other current liabilities

2,657

1,909

Total current liabilities

54,210

54,628

Deferred revenue, net of current portion

458

697

Other long-term liabilities

1,105

876

Total liabilities

55,773

56,201

Stockholders' equity:

Common stock

3

3

Additional paid-in capital

185,374

183,532

Accumulated deficit

(136,350)

(129,424)

Accumulated other comprehensive income (loss)

(441)

(440)

Total stockholders' equity 

48,586

53,671

Total liabilities and stockholders' equity 

$ 104,359

$    109,872

Rally Software Development Corp. 

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)

Three Months Ended

April 30,

2015

2014

Revenue:

Subscription and support

$ 19,203

$ 16,105

Perpetual license

267

639

   Total product revenue

19,470

16,744

Professional services

4,981

2,687

      Total revenue

24,451

19,431

Cost of revenue (1) (2):

Product 

2,977

2,396

Professional services

4,033

2,771

   Total cost of revenue

7,010

5,167

   Gross profit

17,441

14,264

Operating expenses (1):

Sales and marketing

12,992

11,410

Research and development

6,314

5,986

General and administrative

5,164

5,188

   Total operating expenses

24,470

22,584

   Loss from operations

(7,029)

(8,320)

Other income (expense):

Interest and other income

52

39

Loss on foreign currency transactions and other gain (loss)

(84)

(82)

Loss before provision for income taxes

(7,061)

(8,363)

Provision (credit) for income taxes

(135)

118

Net loss 

$ (6,926)

$ (8,481)

Net loss per share attributable to common stockholders, basic and diluted

$   (0.27)

$   (0.34)

Weighted average common shares outstanding, basic and diluted

25,538

24,816

(1) Includes stock-based compensation expense as follows:

Three Months Ended

April 30,

2015

2014

Cost of product revenue

$        94

$        95

Cost of professional services revenue

73

89

Sales and marketing

435

438

Research and development

305

412

General and administrative

656

522

$   1,563

$   1,556

(2) Includes amortization expense of acquired intangible assets as follows:

Cost of product revenue

$      132

$      132

Rally Software Development Corp. 

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

Three Months Ended

April 30, 

2015

2014

Cash flow from operating activities:

Net loss

$ (6,926)

$ (8,481)

Adjustments to reconcile net loss to net cash provided by (used) in operating activities:

Depreciation and amortization

762

724

Noncash stock-based compensation expense

1,563

1,556

Other

5

19

Changes in operating assets and liabilities: 

Accounts receivable

6,972

5,742

Other receivables

(268)

(30)

Prepaid and other current assets

(405)

(867)

Restricted cash

15

-

Other assets

155

36

Accounts payable and accrued expenses

(1,159)

(1,183)

Deferred revenue

(484)

(1,075)

Other current liabilities

748

815

Other long-term liabilities

228

(15)

Net cash provided by (used) in operating activities

1,206

Cash flow from investing activities:

Purchase of property and equipment

(365)

(648)

Purchase of investments

(27,958)

-

Proceeds from maturities of investments

26,225

-

Proceeds from sale of property and equipment

1

1

Net cash (used) in investing activities

(2,097)

(647)

Cash flow from financing activities:

Proceeds from exercise of common stock options

470

246

Proceeds from issuance of common stock warrants

20

-

Payment of payroll taxes related to net settled restricted stock units

(210)

-

Net cash provided by financing activities

280

246

Net (decrease) in cash and cash equivalents during period

(611)

(3,160)

Cash and cash equivalents at beginning of period

15,175

88,891

Cash and cash equivalents at end of period

$ 14,564

$ 85,731

Rally Software Development Corp. 

Reconciliation of GAAP to Non-GAAP Financial Measures

(unaudited, in thousands, except per share amounts)

Three Months Ended

April 30, 

2015

2014

GAAP product cost of revenue

$   2,977

$   2,396

Amortization expense of acquired intangible assets

(132)

(132)

Stock-based compensation expense

(94)

(95)

Non-GAAP product cost of revenue

$   2,751

$   2,169

GAAP professional services cost of revenue

$   4,033

$   2,771

Stock-based compensation expense

(73)

(89)

Non-GAAP professional services cost of revenue

$   3,960

$   2,682

GAAP gross profit 

$ 17,441

$ 14,264

Amortization expense of acquired intangible assets

132

132

Stock-based compensation expense

167

184

Non-GAAP gross profit

$ 17,740

$ 14,580

Gross margin: 

 GAAP

71%

73%

 Non-GAAP

73%

75%

Product gross margin: 

 GAAP

85%

86%

 Non-GAAP

86%

87%

Professional services gross margin: 

 GAAP

19%

 Non-GAAP

20%

0%

GAAP sales and marketing expense

$ 12,992

$ 11,410

Stock-based compensation expense

(435)

(438)

Non-GAAP sales and marketing expense

$ 12,557

$ 10,972

GAAP research and development expense

$   6,314

$   5,986

Stock-based compensation expense

(305)

(412)

Non-GAAP research and development expense

$   6,009

$   5,574

GAAP general and administrative expense

$   5,164

$   5,188

Stock-based compensation expense

(656)

(522)

Non-GAAP general and administrative expense

$   4,508

$   4,666

GAAP net loss 

$ (6,926)

$ (8,481)

Amortization expense of acquired intangible assets

132

132

Stock-based compensation expense

1,563

1,556

Non-GAAP net loss

$ (5,231)

$ (6,793)

Basic and diluted net loss per share: 

 GAAP basic and diluted net loss per share

$   (0.27)

$   (0.34)

Amortization expense of acquired intangible assets

0.01

0.01

Stock-based compensation expense

0.06

0.06

 Non-GAAP basic and diluted net loss per share

$   (0.20)

$   (0.27)

Shares used to calculate basic and diluted net loss per share

25,538

24,816