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TIBCO Software Reports Second Quarter Financial Results

PALO ALTO, Calif., June 28 /PRNewswire-FirstCall/ -- TIBCO Software Inc. (Nasdaq: TIBX) today announced results for its second quarter, which ended on June 3, 2007.

PALO ALTO, Calif., June 28 /PRNewswire-FirstCall/ — TIBCO Software Inc. (Nasdaq: TIBX) today announced results for its second quarter, which ended on June 3, 2007.

Total revenue for the second quarter of fiscal 2007 was $130.5 million and net income was $9.2 million, or $0.04 per diluted share. This compares to total revenue of $121.2 million and net income of $24.5 million, or $0.11 per diluted share, as reported for the second quarter of fiscal 2006. Net income for the second quarter of fiscal 2006 included a benefit of $9.9 million, or $0.05 per diluted share, related to the release of valuation allowance that had previously been recorded against our deferred tax assets.

On a non-GAAP basis, net income for the second quarter of fiscal 2007 was $14.8 million or $0.07 per diluted share, compared with $16.9 million or $0.08 per diluted share for the second quarter of fiscal 2006.

"The company's performance was within our range of expectations and, on an annual basis, we are confident we will achieve our goal of 10-15% revenue growth," said Vivek Ranadive, TIBCO's chairman and chief executive officer. "I'm very positive about our long-term potential, especially with the addition of Spotfire and the strength of our offerings in service-oriented architecture, business process management and business optimization."

Second Quarter Fiscal 2007 Highlights — TIBCO closed 73 deals over $100k including 12 deals over $1 million in Q2; — Average deal size moved up to $680k for deals over $100k; — Deferred revenue was up 21% year over year; and — TIBCO made significant sales to both new and existing customers, including BNP Paribas, Bombardier Transportation, CNET Channel, Deutsche Bank AG, Fujitsu Siemens, GFI Group Inc., Sun International, Societe Generale and Telenor.

Conference Call Details

TIBCO will hold its Q2 fiscal 2007 earnings conference call today at 5:00 pm ET / 2:00 pm PT. The conference call will be hosted by Thomson Financial and may be accessed over the Internet at http://www.tibco.com or via dial-in at (800) 231-9012 or (719) 457-2617. Please join the conference call at least 10 minutes early to register. A replay of the conference call will be available until midnight on July 28, 2007 at http://www.tibco.com or via dial-in at (888) 203-1112 or (719) 457-0820. The pass code for both the call and the replay is 4780988.

About TIBCO

TIBCO Software Inc. provides enterprise software that helps companies achieve service-oriented architecture (SOA) and business process management (BPM) success. With over 3,000 customers, TIBCO has given leading organizations around the world better awareness and agility — what TIBCO calls The Power of Now(R). To learn more, contact TIBCO at +1 650-846-1000 or on the Web at http://www.tibco.com.

TIBCO, The Power of Now and TIBCO Software are trademarks or registered trademarks of TIBCO Software Inc. in the United States and/or other countries. All other product and company names and marks mentioned in this document are the property of their respective owners and are mentioned for identification purposes only.

About Non-GAAP Financial Information

This press release includes non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), please see the section entitled "About Non-GAAP Financial Measures" and the accompanying table entitled "Reconciliation of GAAP to Non-GAAP Measures."

Legal Notice Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the federal securities laws, including, without limitation, TIBCO's ability to achieve 10-15% annual revenue growth and TIBCO's long-term potential. Because these forward-looking statements involve risks and uncertainties, important factors could cause actual results to differ materially from such forward-looking statements. These factors include: TIBCO's ability to compete with other enterprise software providers, TIBCO's successful implementation of its execution strategy and its ability to successfully integrate Spotfire. Additional information regarding potential risks is provided in TIBCO's filings with the SEC, including its most recent Quarterly Report on Form 10-Q for the quarter ended March 4, 2007. TIBCO assumes no obligation to update the forward-looking statements included in this release.

TIBCO Software Inc. Condensed Consolidated Balance Sheets (unaudited) (in thousands) June 3, November 30, 2007 2006 ASSETS Current assets: Cash and cash equivalents $288,529 $138,912 Short-term investments 181,572 400,658 Accounts receivable, net 115,248 149,141 Prepaid expenses and other current assets 36,032 35,699 Total current assets 621,381 724,410 Property and equipment, net 112,231 113,787 Goodwill 275,472 274,442 Acquired intangible assets, net 47,596 55,072 Long-term deferred income tax assets 21,437 21,437 Other assets 38,267 37,211 Total assets $1,116,384 $1,226,359 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $9,672 $12,651 Accrued liabilities 61,468 74,347 Accrued excess facilities costs 5,042 4,251 Deferred revenue 104,708 102,269 Current portion of long-term debt 1,935 1,892 Total current liabilities 182,825 195,410 Accrued excess facilities costs, less current portion 14,584 18,150 Long-term deferred revenue 3,107 4,151 Long-term deferred income tax liabilities 10,254 11,439 Long-term debt, less current portion 45,476 46,453 Other long-term liabilities 5,006 4,749 Total long-term liabilities 78,427 84,942 Total liabilities 261,252 280,352 Minority interest 294 — Total stockholders' equity 854,838 946,007 Total liabilities and stockholders' equity $1,116,384 $1,226,359 TIBCO Software Inc. Condensed Consolidated Statements of Operations (unaudited) (in thousands, except net income per share) Three Months Ended Six Months Ended June 3, June 4, June 3, June 4, 2007 2006 2007 2006 Revenue: License revenue $54,926 $52,513 $107,111 $100,662 Service and maintenance revenue: Service and maintenance 73,686 66,862 145,625 131,492 Reimbursable expenses 1,905 1,872 3,435 3,673 Total service and maintenance revenue 75,591 68,734 149,060 135,165 Total revenue 130,517 121,247 256,171 235,827 Cost of revenue: License 4,730 3,434 8,801 7,343 Service and maintenance 31,756 28,704 62,584 57,470 Total cost of revenue 36,486 32,138 71,385 64,813 Gross Profit 94,031 89,109 184,786 171,014 Operating expenses: Research and development 21,997 21,974 43,012 43,951 Sales and marketing 46,433 39,415 89,382 78,063 General and administrative 12,113 10,363 24,865 20,750 Amortization of acquired intangible assets 2,472 2,364 4,942 4,727 Total operating expenses 83,015 74,116 162,201 147,491 Income from operations 11,016 14,993 22,585 23,523 Interest income 5,716 4,970 12,106 9,356 Interest expense (645) (646) (1,013) (1,300) Other income (expense), net (302) 61 (1,567) 108 Income before provision for income taxes 15,785 19,378 32,111 31,687 Provision for (benefit from) income taxes 6,561 (5,094) 12,484 1,614 Minority interest, net of tax 6 — 18 — Net income $9,218 $24,472 $19,609 $30,073 Net income per share: Basic $0.05 $0.12 $0.09 $0.14 Diluted $0.04 $0.11 $0.09 $0.14 Shares used to compute net income per share: Basic 204,575 209,777 206,487 210,177 Diluted 211,885 219,782 214,097 219,976 TIBCO Software Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands) Six Months Ended June 3, June 4, 2007 2006 Cash flows from operating activities: Net income $19,609 $30,073 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 8,179 7,548 Amortization of acquired intangible assets 7,753 7,388 Stock-based compensation 7,697 8,264 Tax benefits related to employee stock option plans, net (66) — Minority interest, net of tax 18 — Other non-cash adjustments, net 57 (20) Changes in assets and liabilities: Accounts receivable 33,430 1,336 Due from related parties, net — 1,243 Prepaid expenses and other assets (5,496) (1,836) Accounts payable (815) 143 Accrued liabilities and excess facilities costs (18,950) (15,431) Deferred revenue 1,177 7,058 Net cash provided by operating activities 52,593 45,766 Cash flows from investing activities: Purchases of short-term investments (131,265) (290,536) Proceeds from sales and maturities of short-term investments 353,513 153,941 Purchases of private equity investments (31) (51) Proceeds from sales of private equity investments 618 — Purchases of property and equipment (6,586) (5,139) Restricted cash pledged as security (37) (1,331) Net cash provided by (used for) investing activities 216,212 (143,116) Cash flows from financing activities: Proceeds from issuance of common stock 16,513 11,217 Repurchase of common stock (142,777) (33,982) Excess tax benefits from stock-based compensation 6,918 — Principal payments on long term debt (934) (888) Proceeds from minority investors 189 — Net cash used for financing activities (120,091) (23,653) Effect of exchange rate changes on cash 903 1,942 Net change in cash and cash equivalents 149,617 (119,061) Cash and cash equivalents at beginning of period 138,912 208,756 Cash and cash equivalents at end of period $288,529 $89,695

About Non-GAAP Financial Measures

TIBCO provides non-GAAP measures for operating income, net income and net income per share data as supplemental information regarding TIBCO's business performance. TIBCO believes that these non-GAAP financial measures are useful to investors because they exclude non-operating charges. TIBCO's management excludes these non-operating charges when it internally evaluates the performance of TIBCO's business and makes operating decisions, including internal budgeting, performance measurement and the calculation of bonuses and discretionary compensation, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential revenue generation activities of TIBCO. Accordingly, management excludes gains and losses on equity investments, costs related to formal restructuring plans, stock-based compensation related to employee stock options, the amortization of purchased intangible assets and charges for acquired in-process research and development, and the income tax effects of the foregoing, as well as adjustments for the impact of changes in the valuation allowance recorded against TIBCO's deferred tax assets when making operational decisions.

TIBCO believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand TIBCO's financial performance on a trended basis across historical periods. In addition, it allows investors to evaluate TIBCO's performance using the same methodology and information as that used by TIBCO's management.

Non-GAAP measures are subject to material limitations as these measures are not in accordance with, or a substitute for, GAAP and thus TIBCO's definition may be different from similar non-GAAP measures used by other companies and/or analysts. However, TIBCO's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. In addition, some items such as restructuring charges that are excluded from non-GAAP net income and non-GAAP earnings per share can have a material impact on cash flows and stock compensation charges can have a significant impact on earnings. Management compensates for these limitations by evaluating the non-GAAP measure together with the most directly comparable GAAP measure. TIBCO has historically provided non-GAAP measures to the investment community as a supplement to its GAAP results, to enable investors to evaluate TIBCO's business performance in the way that management does.

The non-GAAP adjustments, and the basis for excluding them, are outlined below:

Stock-based Compensation

TIBCO incurs stock-based compensation expense under SFAS 123(R). TIBCO excludes this item for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share because it is a non-cash expense that TIBCO believes is not reflective of its business performance. The nature of the stock-based compensation expense also makes it very difficult to estimate prospectively, since the expense will vary with changes in the stock price and market conditions at the time of new grants, varying valuation methodologies, subjective assumptions and different award types, making the comparison of current results with forward looking guidance potentially difficult for investors to interpret. The tax effects of stock-based compensation expenses may also vary significantly from period to period, without any change in underlying operational performance, thereby obscuring the underlying profitability of operations relative to prior periods (including prior periods following the adoption of SFAS 123(R)). The exclusion of stock-based compensation from the non-GAAP measures also allows a consistent comparison of TIBCO's relative historical financial performance, since the method for accounting for stock-based compensation changed at the beginning of fiscal 2006 when TIBCO adopted SFAS 123(R). Finally, TIBCO believes that non-GAAP measures of profitability that exclude stock-based compensation are widely used by analysts and investors in the software industry.

Amortization of Intangible Assets

TIBCO has incurred amortization of intangible assets, included in its GAAP financial statements, related to various acquisitions TIBCO has made. Management excludes these items, for the purposes of calculating non-GAAP operating income, non-GAAP net income and non-GAAP net income per share. TIBCO believes that eliminating this expense from its non-GAAP measures is useful to investors, because the amortization of intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of TIBCO's acquisition transactions, which also vary substantially in frequency from period to period.

The following table is a reconciliation of GAAP to non-GAAP measures for the second quarter and first half of fiscal 2007 and fiscal 2006, respectively. TIBCO Software Inc. Reconciliation of GAAP to Non-GAAP Measures (unaudited) (in thousands, except net income per share) Three Months Ended June 3, 2007 June 4, 2006 Operating Net Operating Net Income Income Income Income GAAP $11,016 $9,218 $14,993 $24,472 Amortization of intangible assets – cost of revenue 1,409 1,409 1,330 1,330 Amortization of intangible assets – operating expense 2,472 2,472 2,364 2,364 Stock-based compensation – cost of revenue 577 577 531 531 Stock-based compensation – R&D expense 925 925 896 896 Stock-based compensation – S&M expense 1,150 1,150 1,030 1,030 Stock-based compensation – G&A expense 1,109 1,109 1,219 1,219 Income tax adjustment for non-GAAP (1) (2,107) (14,991) Non-GAAP $18,658 $14,753 $22,363 $16,851 Diluted net income per share: GAAP $0.04 $0.11 Non-GAAP $0.07 $0.08 Shares used to compute diluted net income per share 211,885 219,782 Six Months Ended June 3, 2007 June 4, 2006 Operating Net Operating Net Income Income Income Income GAAP $22,585 $19,609 $23,523 $30,073 Amortization of intangible assets – cost of revenue 2,811 2,811 2,661 2,661 Amortization of intangible assets – operating expense 4,942 4,942 4,727 4,727 Stock-based compensation – cost of revenue 1,058 1,058 1,177 1,177 Stock-based compensation – R&D expense 1,793 1,793 2,018 2,018 Stock-based compensation – S&M expense 2,370 2,370 2,371 2,371 Stock-based compensation – G&A expense 2,476 2,476 2,698 2,698 Income tax adjustment for non-GAAP (1) (5,114) (15,901) Non-GAAP $38,035 $29,945 $39,175 $29,824 Diluted net income per share: GAAP $0.09 $0.14 Non-GAAP $0.14 $0.14 Shares used to compute diluted net income per share 214,097 219,976 (1) The estimated non-GAAP effective tax rate was 37% for fiscal 2007 and fiscal 2006, and has been used to adjust the provision for income taxes for non-GAAP purposes.

SOURCE TIBCO Software Inc.

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