Veritas Vrooms

Reports record Q2 revenues and better than expected earnings. But can it keep up the pace?

July 24, 2003

3 Min Read
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Posting better-than-expected profits and revenues today, Veritas Software Corp. (Nasdaq: VRTS) claimed that its second quarter was the best quarter in its history, with revenues of $413 million and profits of $48.7 million, or 11 cents per share (see Veritas Reports Record Revenue).

We are clearly encouraged with our Q2 results,” Gary Bloom, Veritas’s chairman, president, and CEO, said on a conference call this evening.

The company's earnings of $48.7 million were almost double its year-ago profits of $26 million, or 6 cents per diluted share. Excluding charges, the Mountain View, Calif., company’s earnings were 19 cents a share, compared with 14 cents a share for the same quarter last year (see Veritas Posts Q2 Profit).

The company’s results far exceed both its own forecasts and analysts' expectations. Veritas had been anticipating earnings of between 13 and 14 cents before charges, while analysts polled by Thomson First Call had expected the company to post pro forma earnings of 15 cents a share (see Veritas Sees Profits Slip).

Veritas also beat its revenue forecast of between $370 million and $380 million for the quarter. For the same quarter last year, the company reported revenues of $365 million. Gross margins were flat for the quarter at 85 percent.“The revenue number was fantastic,” says Punk Ziegel & Co. analyst Steve Berg.

The services side of Veritas’s business did particularly well during the quarter, at $152 million, a 24 percent increase over the year ago quarter, and representing 37 percent of total revenue. About 80 percent of the company’s services revenues was related to high renewal rates, Veritas CFO Edwin Gillis said on the conference call.

Veritas also beat its own estimates on how much cash it would generate over the quarter. While the company’s cash reserve remained the same as last quarter at $2.4 billion, it managed to generate about $122 million during its second quarter, outshining the $70 million to $90 million it expected to bring in.

For the current quarter, which ends on September 30, Veritas says it expects earnings of between 13 cents and 15 cents a share on a GAAP basis, including acquisition-related charges of 2 cents a share. The company also expects its revenues for the quarter to range from $420 million to $430 million. That number includes revenues attributable to Precise Software, which it acquired at the end of June (see Veritas Picks Up Precise).

Factored into the guidance is also anticipated seasonal weakness in the European economy, Bloom said. “Clearly, whenever you get into the summer months in Europe, you get concerned about that seasonal weakness that goes on,” he said. “The softness is a little softer than I’d like to see it... We remain concerned.”The company also said today that its board has authorized it to use up to $300 million for a stock repurchase program, which is meant to help reduce the dilution in connection with Veritas’s recent acquisition of Precise, as well as its employee stock option program. The stock repurchase program is effective immediately, the company says.

Before the company’s second-quarter numbers were released this afternoon, Veritas was trading up just over 1 percent, at $27.91 a share, slightly higher than the overall Byte and Switch Index.

— Eugénie Larson, Senior Editor, Byte and Switch

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