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Accelrys Reports Drop in Q1 Revenues, Says Integration with Symyx on Track to Wrap up by Year-End

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By Uduak Grace Thomas

In spite of a 2 percent revenue dip and a $1.6 million net loss, Accelrys CEO Max Carnecchia this week called the company's first fiscal quarter a “milestone quarter” because of the company's merger with Symyx Technologies, which was completed on July 1.

During a conference call to discuss the company's financial results, Carnecchia said that the “newly combined company has greater scale and scope through our combined resources, capabilities, and financial strength.”

He said that the “go-forward management team is in place” and plans to complete all integration activities by the end of December.

To accomplish these objectives, Carnecchia said that the company is in the process of developing an "integrated product roadmap," which will be completed in September, after which Accelrys will “kick off” a customer roadshow.

Through the merger, Accelrys has expanded its product portfolio to include Symyx's electronic laboratory notebook, decision-support software, and chemical informatics databases. Going forward, all products and services for the combined firm will be "unified" under the Accelrys brand, the company said.

CFO Michael Piraino said during the call that the company had “a solid quarterly performance” in Q1. “Orders for the first quarter were above Q1 fiscal 2010 levels, [and the] subscription renewal rate averaged 83 percent across all product categories for the quarter,” he said.

Total revenue for the three months ended June 30 fell 2 percent to $19.8 million from $20.1 million for the same quarter last year.

Even though there were no orders in excess of $1 million during the quarter, which Piraino said is consistent with the prior year, the company’s Pipeline Pilot software grew at double digit rates and is expected to continue double-digit order growth through the remainder of the year.

Revenue breakout for the quarter by geography was 48 percent for North America, 29 percent for Europe, Middle East, and Africa, and 23 percent for Asia-Pacific.

The company is changing its fiscal year-end from March 31 to Dec. 31, effective for the period ending Dec 31, 2010.

Piraino said that the reason for the change was to make it easier for stakeholders to track the company’s financial results in a “timeframe that is consistent with our peers.”

He also said that the change “synchronizes” the reporting period with the company’s commitment to complete its merger integration plan and “extract cost synergies” by the end of the calendar year.

Deferred revenue, which the company uses as an indicator of its overall order intake, increased 5 percent to $53 million from about $50 million in the year-ago period.

Net loss was $1.6 million for the current quarter compared to net income of $700,000 for the same quarter of the previous year. The net loss for the current quarter includes business consolidation costs of $1.7 million. The company did not provide additional comments about these costs during the call.

Free cash flow for the quarter ended June 30, 2010, was $1.4 million, compared to $2.6 million for the same period of last year.

Prior to the merger, Accelrys had 358 employees compared to 360 employees a year ago.

Following the merger, the combined firm has 641 employees, but plans to reduce the combined workforce by approximately 80 employees by the end of the year (BI 7/2/2010).

The company expects non-GAAP revenues for the combined firm through Dec. 31 — adjusted for the expected write-down of deferred revenue — to be in the range of $80 million to $82 million

As of June 30, Accelrys had a total of $93 million in cash, cash equivalents, marketable securities, and restricted cash.

Carnecchia said that the company plans to use its net cash to “aggressively" identify targets "that will help us accelerate our product and services roadmaps into white space where we determine it's more prudent to acquire capabilities, customers, [and] domain expertise as opposed to trying to develop it organically.”

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