Deltek Reports First Quarter 2008 Financial Results

Deltek will host a conference call at 5:00 p.m. Eastern Time today to discuss the Companys first quarter results. To access this call, dial 1-877-381-6419 in North America and 1-706-643-9496 outside North America. The conference call also will be available via webcast at http://investor.deltek.com. Those unable to participate in the live call may hear a rebroadcast by dialing 1-800-642-1687 in North America and 1-706-645-9291 outside North America. The confirmation number is 43441906. The rebroadcast and the webcast will be available for replay through May 15, 2008.

About Deltek

Deltek (NASDAQ: PROJ) is the leading provider of enterprise applications software 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.

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 adjusted EBITDA. The Company defines non-GAAP net income as GAAP net income before the net-of-tax impact of stock-based compensation, retention payments associated with the Companys 2005 recapitalization, amortization of acquired intangible assets and New Mountain Capital fees. Non-GAAP operating income is defined as GAAP operating income before the pre-tax impact of stock-based compensation, retention payments associated with the Companys 2005 recapitalization, amortization of acquired intangible assets and New Mountain Capital fees. Adjusted EBITDA is defined as GAAP net income before interest expenses (net of interest income), provision for income taxes, depreciation, amortization, stock-based compensation, retention payments associated with the Companys 2005 recapitalization and New Mountain Capital fees.

The Company believes that the presentation of these non-GAAP financial measures provides useful information to its investors and lenders because these measures enhance their overall understanding of the Companys financial performance and the prospects for the future of the Companys ongoing business 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.

Adjusted EBITDA is also used as the basis for the Companys calculations to determine compliance with its debt covenants and to assess its ability to borrow additional funds to finance or expand its operations.

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, will, 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 Companys 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,
2008 2007
REVENUES:
Software license fees $ 17,007 $ 19,810
Consulting services 24,266 18,489
Maintenance and support services 28,065 23,969
Other revenues   16     197  
Total revenues   69,354     62,465  
 
COST OF REVENUES:
Cost of software license fees 1,580 2,219
Cost of consulting services 20,163 15,498
Cost of maintenance and support services 5,627 3,866
Cost of other revenues   232     178  
Total cost of revenues   27,602     21,761  
GROSS PROFIT   41,752     40,704  
 
Research and development 11,391 10,236
Sales and marketing 12,303 10,528
General and administrative   7,561     7,119  
Operating expenses   31,255     27,883  
 
INCOME FROM OPERATIONS 10,497 12,821
 
Interest income 257 92
Interest expense (3,474 ) (4,598 )
Other (expense) income, net   (37 )   86  
INCOME BEFORE INCOME TAXES 7,243 8,401
Income tax expense   3,222     3,297  
 
NET INCOME $ 4,021   $ 5,104  
 
EARNINGS PER SHARE
Basic $ 0.09   $ 0.13  
 
Diluted $ 0.09   $ 0.12  
 
COMMON SHARES AND EQUIVALENTS OUTSTANDING
Basic weighted average shares   43,058     39,408  
 
Diluted weighted average shares   44,406     40,904  
 
DELTEK, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
   
 
March 31, December 31,
2008 2007
 
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 35,364 $ 17,091

Accounts receivable, net of allowance of $2,421 and $2,866 at March 31, 2008 and December 31, 2007, respectively

47,305 55,663
Deferred income taxes 4,934 5,027
Prepaid expenses and other current assets   6,435     7,104  
TOTAL CURRENT ASSETS 94,038 84,885
 
PROPERTY AND EQUIPMENT, NET 15,149 13,575
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET 2,080 2,399
LONG-TERM DEFERRED INCOME TAXES 1,987 354
INTANGIBLE ASSETS, NET 12,142 13,132
GOODWILL 50,572 50,082
OTHER ASSETS   3,107     3,253  
TOTAL ASSETS $ 179,075   $ 167,680  
 
LIABILITIES AND STOCKHOLDERS DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt $ 996 $ 498
Accounts payable and accrued expenses 31,208 33,310
Accrued liability for redemption of stock in recapitalization 569 569
Deferred revenues 25,865 22,046
Income taxes payable   3,241     729  
TOTAL CURRENT LIABILITIES 61,879 57,152
 
LONG-TERM DEBT 192,317 192,815
OTHER TAX LIABILITIES 744 551
OTHER LONG-TERM LIABILITIES   3,558     3,350  
TOTAL LIABILITIES 258,498 253,868
 
STOCKHOLDERS DEFICIT:

Preferred stock, $0.001 par value authorized, 5,000,000 shares; issued and outstanding, 0 and 100 shares at March 31, 2008 and December 31, 2007, respectively

Common stock, $0.001 par value authorized, 200,000,000 shares; issued and outstanding, 43,079,835 and 43,046,523 shares at March 31, 2008 and December 31, 2007, respectively

43 43

Class A common stock, $0.001 par value authorized, 100 shares; issued and outstanding, 100 and 100 shares at March 31, 2008 and December 31, 2007, respectively

Additional paid-in capital 170,257 167,527
Accumulated deficit (249,403 ) (253,424 )
Accumulated other comprehensive income   (320 )   (334 )
TOTAL STOCKHOLDERS DEFICIT (79,423 ) (86,188 )
       
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT $ 179,075   $ 167,680  
 
DELTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
   
Three Months Ended March 31,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,021 $ 5,104
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts 48 608
Depreciation and amortization 2,343 2,110
Amortization of debt issuance costs 198 220
Stock-based compensation expense 2,297 905
Employee stock purchase plan expense 67
Loss on disposal of fixed assets 64
Deferred income taxes (1,538 ) (593 )
 
Change in assets and liabilities:
Accounts receivable, net 8,338 (28 )
Prepaid expenses and other assets (896 ) (2,288 )
Accounts payable and accrued expenses (1,426 ) (1,690 )
Income taxes payable/receivable 2,522 633
Other tax liabilities 193
Other long-term liabilities (110 ) (34 )
Deferred revenues   4,111     2,440  
Net Cash Provided by Operating Activities   20,232     7,387  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired - (500 )
Purchase of property and equipment (2,066 ) (702 )
Capitalized software development costs   -     (208 )
Net Cash (Used in) Investing Activities   (2,066 )   (1,410 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 37
Proceeds from exercise of stock options 72
Proceeds from issuance of stock under employee stock purchase plan 305
Offering costs paid for 2007 sale of common stock in initial public offering (275 )
Redemption of stock and stockholder payments in recapitalization (4,780 )
Proceeds from the issuance of debt 7,500
Repayment of debt       (8,537 )
Net Cash Provided by (Used in) Financing Activities   102     (5,780 )
 
IMPACT OF FOREIGN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS   5     (8 )
 
NET INCREASE IN CASH AND CASH EQUIVALENTS 18,273 189
 
CASH AND CASH EQUIVALENTS Beginning of period   17,091     6,667  
 
CASH AND CASH EQUIVALENTS End of period $ 35,364   $ 6,856  
 
DELTEK, INC.
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(in thousands, except per share amounts)
(unaudited)
   
Three Months Ended
March 31,
2008 2007
 
Net Income (GAAP Basis) $ 4,021 $ 5,104
Income Tax Expense   3,222   3,297
Pre-Tax Income (GAAP Basis) $ 7,243 $ 8,401
Adjustments:
NMC Advisory and Transaction Fees - 125
Stock-based Compensation 2,297 905
Recapitalization Retention Expense 169 206
Amortization of Acquired Intangibles 1,004 1,018
   
Adjusted Pre-Tax Income 10,713 10,655
 
Less: Adjusted Income Tax Expense 4,589 4,185
   
Non-GAAP Net Income $ 6,124 $ 6,470
 
Non-GAAP Earnings Per Share (diluted) $ 0.14 $ 0.16
Weighted Average Shares   44,406   40,904
 
 
 
 
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
2008 2007
 
Operating Income - GAAP $ 10,497 $ 12,821
Plus: Stock-based Compensation and Recapitalization Retention Expense 2,466 1,111
Plus: Amortization of Acquired Intangibles 1,004 1,018
Plus: NMC Advisory and Transaction Fees   -   125
Operating Income - Non-GAAP $ 13,967 $ 15,075
 
 
 
 
 
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
2008 2007
 
Net Income (GAAP Basis) $ 4,021 $ 5,104
NMC Advisory and Transaction Fees - 125
Stock-based Compensation 2,297 905
Recapitalization Retention Expense 169 206
Depreciation 1,020 701
Amortization 1,323 1,409
Interest Expense, net 3,217 4,506
Income Tax Expense 3,222 3,297
   
Adjusted EBITDA $ 15,269 $ 16,253
 
 
 
 
STOCK-BASED COMPENSATION AND RECAPITALIZATION RETENTION EXPENSES
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
2008 2007
 
Cost of Software License Fees $ 1 $ 1
Cost of Consulting Services 402 198
Cost of Maintenance and Support Services 261 31
Research and Development 534 277
Sales and Marketing 464 204
General and Administrative 804 400
   
Total $ 2,466 $ 1,111
 
 
 
 
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
2008 2007
 
Cost of Software License Fees $ 430 $ 426
Cost of Consulting Services 19 -
Cost of Maintenance and Support Services - -
Research and Development - -
Sales and Marketing 537 574
General and Administrative 18 18
   
Total $ 1,004 $ 1,018
 
 
 
AMORTIZATION AND DEPRECIATION EXPENSES
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
2008 2007
 
Cost of Software License Fees $ 751 $ 819
Cost of Consulting Services 358 226
Cost of Maintenance and Support Services 129 77
Research and Development 256 195
Sales and Marketing 731 702
General and Administrative 118 91
   
Total $ 2,343 $ 2,110
 




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