Autonomy Corporation plc Announced Results for the Year Ended December 31, 2010
CAMBRIDGE, England February 1, 2011 December 31, 2010
Highlights - Record full year revenues of $870 million, up 18% from 2009 - All 2010 financial metrics in line with analyst consensus estimates (Bloomberg as at 1/11/2011) - Revenues $870 million (consensus $868 million) - PBT(adj.) $379 million (consensus $360 million) - Op margin (adj.) 43% (consensus 41%) - Strong growth in core IDOL business, including IDOL OEM growth of 32% and strong growth in IDOL Cloud revenues (Q4 up 12% year-on-year) with increasing contracts reflected in our "commit" number - Full year organic growth in core business of 17% (2009: 22%) - Rise in deferred revenue from last quarter, up to $178 million (Q3 2010: $168 million) - Operating margins (adj.) in Q4 at 45%; up significantly from 40% in Q3 2010 - Full year diluted EPS (adj. IFRS) at $1.20* up 24% from 2009 (IFRS: $0.89, up 12%) - Cash conversion for 2010 at 87%, up significantly from 80% in 2009 - 94 seven figure deals in 2010, up 42% from last year - Average selling price for 2010 rises to $790,000 - Strong investment in business with R&D up 16% from 2009 - Positive cash flow generated by operations of $363 million (2009: $287 million), up 27% - Gross cash of $1,061 million at year end and no net debt ----- * on the basis that if the share price were to be above GBP20.63 in February 2015 the convert would generate extra shares giving diluted EPS (adj.) at $1.11. See note 6.
Adjusted income statements are included on page 8, which reconcile IFRS to the adjusted measures above.
Chief Executive’s Review
Mike Lynch
"2010 was a year of transition for us. During the year Autonomy’s technology and its ability to extract meaning from human friendly information has spearheaded the Meaning Based Computing movement forward with new applications of the technology and mission critical usages by our customers. Human friendly information and the need to process it has continued to grow rapidly with applications in customer interaction, legal, regulatory and, as a result of new smart phone technology, mobile leading the way.
This year we have seen Autonomy become one of the leading players in cloud computing as our customers, who can choose to take up our core functionality by traditional licence, IDOL OEM or IDOL Cloud offering, have transitioned to the private cloud model faster than expected. This trend can be seen in the unexpected rise in our ‘commit’ metric (contracts entered into by the customer with an expected minimum spend). The IDOL OEM and IDOL Cloud routes are highly attractive to us as they turn one-off sales into multi-year committed annuity streams, and these new fast growing routes have become the dominant usage models for our technology. However there is a short-term effect of depressing growth rates as those one-off sales which were recognised immediately are replaced by longer-term but more valuable annuity streams.
Autonomy continues to be chosen to handle the world’s most complex legal cases and regulatory issues, for both corporates and regulators, including the largest lawsuits in the world such as BP and as reported by industry analysts has continued to gain market share in areas such as legal and archiving. We are particularly pleased to see the very high growth rates in IDOL OEM, which is now seeing IDOL used by most major software companies across almost all sectors of the software industry.
Latin America
Unlike others in the sector, Autonomy’s business thrived during the downturn resulting in Autonomy reporting growth on growth unlike others who are now seeing growth as a return to normal levels. In light of these tougher comparative periods due to our strong growth in 2009, and the transition to longer-term value revenue models, Autonomy continues to perform well.
In 2010 we saw transitions in the business and significant investments for which we expect to reap the rewards in coming years. We also saw in Q3 2010 volatility in customer assessment of the macro environment, which now seems to have reduced.
During the course of 2010 we saw the balance of our business shift towards IDOL Cloud and IDOL OEM being the key drivers of our business. We believe the growth rates seen across our business lines in Q4 2010 projected forward provide a solid baseline on top of which our current record pipeline and "commit" imply that current market expectations are conservative."
Operations Review
Progress Towards Strategic Goals. During 2010 we made significant progress on our strategic goals, including in the following areas:
- New standardisation agreements further cementing IDOL within the enterprise as the core platform for processing unstructured information, including Amgen, Bank of America, BNP Paribas, BP, Cigna, Philip Morris International and Play.com, and continued strong conversion of law firm customers from other suppliers. - 57% of sales during the year were from existing customers extending their investment in IDOL in new business areas. - Many more third party software products are now built on IDOL with 42 new and extended relationships with major software providers including: Nuance, Xerox and Cisco. Growth in this area accelerated to 32% during 2010. - Strong growth in the IDOL Cloud business, Q4 2010 up 12% year-on-year, increasing the level of recurring revenue and securing lifetime customer relationships. - Autonomy's market position remained strong with the Average Selling Price (ASP) for IDOL technology rises to $790,000 during FY 2010 and 94 deals in excess of $1 million signed. - $115 million invested in R&D resulting in a significant new product offering to the Healthcare sector. - Rated number one across multiple industry analyst reports and segments, as discussed below.
Sales and Customers. As expected, the adoption of our technology for "Protect" usages continued strongly throughout the year driven by a whole series of new regulations coming into effect which is driving our business. We are still seeing very large deals in this area and expect this to continue for the foreseeable future across most industry sectors. We have also seen strong take-up of our technology for "Promote" usages, with customers such as Allstate, AT&T, Belgacom, Blackrock, BNP Paribas, Canadian Broadcasting Corporation, Euronews, Health Care Services Corporation, Safeway and Verizon during the year. Our multi-channel offerings including optimisation and real-time analytics have proven extremely attractive, leading to the company’s largest ever deal in this area. At the close of the year, Autonomy was pleased to count virtually the entire Fortune 1000 group of companies as customers.
R&D. We continued to invest heavily in R&D during the year resulting in the launch of a major new initiative targeted at Healthcare during 2010 and another major launch imminent. The net impact of R&D capitalisation on the operating margin was in the order of 2%, the same as in 2009.
Market Position and Penetration. Autonomy’s market leadership position strengthened during 2010. We saw a continuation of the "chaining" effect as customers deploy IDOL across functional areas that have traditionally been isolated and served by different software vendors. Ultimately this leads to a growing number of enterprise-wide standardisation customers. Competition during the year also became slightly more benign with major players pulling out of our market.
Amongst industry analysts we elevated our positions, being rated number one across multiple industry analyst reports and segments, including IDC’s Worldwide Search and Discovery Software 2010-2014 forecast, and the Forrester Wave 2010 for Online Testing. Other accolades included:
- Rated by IDC as fastest-growing archiving software company and the leading provider of search and discovery software - Rated "Strong Positive" in Gartner's 2010 eDiscovery market report - Positioned as leader in Gartner's 2010 Magic Quadrant for Web Content Management - Achieved the highest score in the Forrester Wave 2010 for Online Testing, based on current offering, product strategy, corporate strategy and market presence
Brazil
Jonathan Bloomer Frank Kelly
Financial Review
In 2010 Autonomy commenced providing supplemental metrics as part of its financial results to assist in the understanding and analysis of Autonomy’s business.
Revenue
$870 million $740 million
$1.0 million $592 million $278 million
Autonomy’s strategy to deepen the penetration of IDOL across all areas of the enterprise is proving successful, as the high level of repeat business demonstrates, with 57% of 2010 revenues from existing customers (2009: 48%). As customers return for additional technology, the scale of projects increases, with greater levels of functionality and connectivity.
January 1, 2010
Sales during 2010 and Q4 2010 were as follows, with the trends as discussed above:
$251 million $84 million
$190 million $370 million $347 million $51 million
$132 million $34 million $27 million
$255 million $212 million $66 million $61 million
$10 million to $11 million $9 million to $11 million
Q4 Customers
Australia Canada Italy Kuwait Singapore Slovakia U.S.A.
Organic Growth
In analysing organic growth Autonomy considers organic IDOL growth to be the most meaningful performance metric for understanding the momentum within the business. This excludes the contribution from acquisitions, foreign exchange impact, services revenue (not a goal of the business) and deferred revenue release (primarily maintenance income).
Table 1: Core Business Organic Revenue Growth Calculation(1) Revenue ($ millions) 2010 2009 Q4'10 Q4'09 Core IDOL reported revenues(2) 574 491 169 153 IWOV stub revenues(3) - 4 - - Microlink/CA non-service revenue(4) - - - - FX 4 - 3 - 578 495 172 153 Growth 17% 12% 1 Autonomy's Core Business above excludes services and deferred revenue. 2 Core IDOL is made up of IDOL Product, IDOL Cloud and IDOL OEM categories, discussed above. 3 Interwoven stub revenues are for licence for the period January 1, 2009 through to March 16, 2009. 4 Microlink did not have its own product lines but only services. CA unit original product not sold by Autonomy.
Gross Profits and Gross Margins
$759 million $652 million $702 million $602 million
$211 million $199 million $197 million $185 million
Operating Expenses
Brazil
$385 million $330 million $3.5 million
Profit from Operations and Operating Margins
$377 million $329 million $316 million $272 million
During the year we did significant work on one specific acquisition target and during the fourth quarter we expensed the costs relating to this work. The transaction was delayed due to changes in the targeted asset; this asset has not transacted with any other party.
$109 million $113 million $99 million $97 million
Interest payable
$41.3 million $7.0 million $35.2 million March 2010
Taxation
The effective tax rate for 2010 was as forecast at 23%, down from 28% for 2009. The decrease from 2009 is the result of changes in the profit mix between the UK and overseas, as well as the completion of tax studies resulting in the recognition of additional tax losses. The effective tax rate for 2011 will likely be in the range of 27-29% as the one-off benefit in 2010 in relation to the utilisation of tax losses will not be repeated.
Foreign Exchange Impact on Revenues
$4 million $4 million $874 million $1.55 $1.57
$3 million $1.58 $1.63
Net Profits
$292 million $233 million $88 million $80 million
$217 million $192 million $70 million $69 million
IAS 38 Charges and Capitalization
$115 million $99 million $39 million $25 million $13 million $6 million $17 million $9 million $5 million $3 million
$21 million $16 million
EPS
$1.20 $0.97 $0.36 $0.33 $1.11 $0.97 $0.33 $0.33 $0.89 $0.80 $0.29 $0.29
This result was achieved against the unusually strong performance a year ago, and after the substantial discretionary investment in sales and marketing, research and development and new product launches.
Balance Sheet and Cash Flows
$1.1 billion $145 million $198 million $682 million
Movements. Movements of note in cash flow during 2010 included: - Positive cash flow from operating activities of $302 million, up 21% from $250 million in 2009. - Capital expenditure of $60 million during 2010, up from $34 million in 2009. This represents the continued investment of the company in areas of expected growth for future years. - Expenditure on product development, resulting in a cash outflow of $39 million (2009: $25 million), as discussed above. - Acquisition of Microlink and CA's Information Governance assets for aggregate consideration of approximately $79 million. - Proceeds of approximately $762 million through the issuance of convertible loan notes in March 2010, offset by interest payments of $13 million during 2010 representing the first semi-annual payment of the coupon rate of 3.25%. - Scheduled bank loan repayments of $54 million (2009: $37 million).
Cash Conversion. On a twelve month basis, which accounts for the seasonality of the business, cash conversion improved to 87% (2009: 80%). Given the growth profile of the Company 87% approximates to the theoretical maximum that should be achievable. Cash conversion was 84% in Q4 (Q4 2009: 58%), and within the company’s target range.
Receivables. In Q4 2010 DSOs were 94 days (Q4 2009: 88 days), just above the top end of the company’s target 80-90 day range but in line with normal historic fluctuations The bad debt write off was below 1% of sales and accrued income remained below 5% of revenue.
$178 million $174 million
Five Year Financial Summary Table 2: Five Year Financial Summary ($'000s) 2010 2009 2008 2007 2006 Revenue 870 740 503 343 251 Profit before tax 379 323 209 113 69 (adj.) Net cash generation 363 287 179 83 47 Operating margin 43% 44% 41% 32% 27% (adj.)* Diluted EPS (adj. $1.20 $0.97 $0.68 $0.38 $0.26 IFRS)** * See adjusted measures as calculated on page 8 ** Diluted EPS (adj.) at $1.11, see note 6
Scheduling of Conference Call and Further Information
http://www.autonomy.com February 1, 2011 9:00 a.m. GMT 4:00 a.m. EST 1:00 a.m. PST
http://www.autonomy.com/investors/questions
Financial Calendar
www.autonomy.com/content/Investors/calendar/index.en.html
About Autonomy Corporation plc
Autonomy Corporation plc (LSE: AU. or AU.L), a global leader in infrastructure software for the enterprise, spearheads the Meaning Based Computing movement. IDC recently recognized Autonomy as having the largest market share and fastest growth in the worldwide search and discovery market. Autonomy’s technology allows computers to harness the full richness of human information, forming a conceptual and contextual understanding of any piece of electronic data, including unstructured information, such as text, email, web pages, voice, or video. Autonomy’s software powers the full spectrum of mission-critical enterprise applications including pan-enterprise search, customer interaction solutions, information governance, end-to-end eDiscovery, records management, archiving, business process management, web content management, web optimization, rich media management and video and audio analysis.
Autonomy and the Autonomy logo are registered trademarks or trademarks of Autonomy Corporation plc. All other trademarks are the property of their respective owners. Autonomy Corporation plc Condensed Consolidated Income Statement (in thousands, except per share amounts) Twelve Months Ended Three Months Ended (unaudited) (unaudited) Dec 31, Dec 31, Dec 31, Dec 31, 2010 2009 2010 2009 Continuing operations $'000 $'000 $'000 $'000 Revenues (see note 3) 870,366 739,688 244,505 223,111 Cost of revenues (excl. amortization) (111,513) (87,747) (33,518) (23,686) Amortization of purchased intangibles (57,280) (49,650) (13,793) (14,601) Total cost of revenues (168,793) (137,397) (47,311) (38,287) Gross profit 701,573 602,291 197,194 184,824 Operating expenses: Research and development (114,752) (98,785) (29,776) (26,141) Sales and marketing (204,109) (170,797) (56,828) (45,621) General and administrative (69,405) (60,627) (17,617) (17,046) Other costs Post-acquisition restructuring (3,468) (846) (1,353) - costs Gain on foreign exchange 6,576 942 7,097 852 Total operating expenses (385,158) (330,113) (98,477) (87,956) Profit from operations 316,415 272,178 98,717 96,868 Share of (loss) profit of associate (1,816) (273) (891) 457 Profit on disposal of investment 436 - 436 - Interest receivable 8,458 1,205 2,776 230 Interest payable (41,299) (7,044) (12,683) (1,798) Profit before income taxes 282,194 266,066 88,355 95,757 Income taxes (see note 4) (64,901) (74,515) (17,956) (26,363) Net profit 217,293 191,551 70,399 69,394 Basic earnings per share (see note 6) 0.90 0.81 0.29 0.29 Diluted earnings per share (see note 6) 0.89 0.80 0.29 0.29 Reconciliation of Adjusted Financial Measures Twelve Months Ended Three Months Ended (unaudited) (unaudited) Dec 31, Dec 31, Dec 31, Dec 31, 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Gross profit 701,573 602,291 197,194 184,824 Amortization of purchased intangibles 57,280 49,650 13,793 14,601 Gross profit (adj.) 758,853 651,941 210,987 199,425 Profit before income taxes 282,194 266,066 88,355 95,757 Amortization of purchased intangibles 57,280 49,650 13,793 14,601 Share based compensation (see note 5) 5,979 7,173 2,044 1,994 Post-acquisition restructuring 3,468 846 1,353 - costs Gain on foreign exchange (6,576) (942) (7,097) (852) Profit on disposal of investment (436) - (436) - Interest charge on convertible loan notes 35,196 - 11,038 - Share of loss (profit) of associate 1,816 273 891 (457) Profit before tax (adj.) 378,921 323,066 109,941 111,043 Provision for income taxes (86,705) (90,268) (22,122) (30,571) Net profit (adj.) 292,216 232,798 87,819 80,472 Profit from operations 316,415 272,178 98,717 96,868 Amortization of purchased intangibles 57,280 49,650 13,793 14,601 Share based compensation (see note 5) 5,979 7,173 2,044 1,994 Post-acquisition restructuring costs 3,468 846 1,353 - Gain on foreign exchange (6,576) (942) (7,097) (852) Profit from operations (adj.) 376,566 328,905 108,810 112,611 Autonomy Corporation plc Condensed Consolidated Balance Sheet As at (unaudited) Dec 31, Dec 31, 2010 2009 $'000 $'000 ASSETS Non-current assets: Goodwill 1,361,900 1,287,042 Other intangible assets 400,372 399,277 Property and equipment, net 42,554 33,886 Equity and other investments 68,600 16,608 Deferred tax asset 16,263 24,015 Total non-current assets 1,889,689 1,760,828 Current assets: Trade receivables, net 267,646 230,219 Other receivables 62,471 45,231 Total trade and other receivables 330,117 275,450 Inventory 116 486 Cash and cash equivalents 1,060,600 242,791 Total current assets 1,390,833 518,727 TOTAL ASSETS 3,280,522 2,279,555 CURRENT LIABILITIES Trade payable (23,443) (14,926) Other payables (51,968) (54,517) Total trade and other payables (75,411) (69,443) Bank loan (78,745) (52,375) Tax liabilities (33,210) (43,338) Deferred revenue (170,256) (164,931) Provisions (1,661) (2,731) Total current liabilities (359,283) (332,818) Net current assets 1,031,550 185,909 NON-CURRENT LIABILITIES Bank loan (66,407) (145,152) Convertible loan notes (681,791) - Deferred tax liabilities (91,072) (85,087) Deferred revenue (7,421) (8,576) Other payables (3,702) (1,020) Provisions (3,597) (5,123) Total non-current liabilities (853,990) (244,958) Total liabilities (1,213,273) (577,776) NET ASSETS 2,067,249 1,701,779 Shareholders' equity: Ordinary shares (1) 1,344 1,333 Share premium account 1,247,907 1,130,767 Capital redemption reserve 135 135 Own shares (788) (845) Merger reserve 27,589 27,589 Stock compensation reserve 27,881 21,959 Revaluation reserve 47,415 4,499 Translation reserve (30,161) (12,032) Retained earnings 745,927 528,374 TOTAL EQUITY 2,067,249 1,701,779 ------------ (1) At December 31, 2010, 600,000,000 ordinary shares of nominal value 1/3 pence each authorized, 242,562,584 issued and outstanding; as of December 31, 2009, 600,000,000 ordinary shares of nominal value 1/3 pence each authorized, 240,574,304 issued and outstanding. Autonomy Corporation plc Condensed Consolidated Statements of Cash Flows Twelve Months Ended Three Months Ended (unaudited) (unaudited) Dec 31, Dec 31, Dec 31, Dec 31, 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Cash flows from operating activities: Profit from operations 316,415 272,178 98,717 96,868 Adjustments for: Depreciation and amortization 99,610 81,083 24,757 25,490 Share based compensation 5,979 7,173 2,044 1,994 Foreign currency movements (6,576) (942) (7,097) (852) Post-acquisition restructuring 698 846 costs - 250 Other non-cash items - 128 - 1 Operating cash flows before movements in working cap 416,126 360,466 118,421 123,751 Changes in operating assets and liabilities: Receivables (60,983) (78,396) (54,007) (13,021) Inventories 369 235 89 (33) Payables 7,718 4,267 35,165 (38,503) Cash generated by operations 363,230 286,572 99,668 72,194 Income taxes paid (60,902) (36,551) (11,985) (10,368) Net cash provided by operating 302,328 250,021 87,683 61,826 activities Cash flows from investment activities: Interest received 7,789 1,127 2,776 152 Purchase of fixed assets (59,624) (34,429) (19,261) (11,031) Proceeds on disposal of 467 - 467 - investments Purchase of investments (10,676) (6,449) (8,176) (4,297) Expenditure on product (38,542) (24,722) (12,696) (5,574) development Acquisition of subsidiaries, net (79,460) (630,052) (658) (1,522) of cash acquired Net cash used in investing (180,046) (694,525) (37,548) (22,272) activities Cash flows from financing activities: Proceeds from issuance of shares, 18,735 24,668 2,382 7,472 net of issuance costs Proceeds from share placing, net - 308,512 of issuance costs - - Proceeds from convertible loan notes, net of issuance costs 761,781 - - - Interest on convertible loan (12,527) - - - notes Interest on bank loan (4,501) (5,340) (1,204) (1,380) Repayment of bank loan (53,906) (37,450) - - Drawdown of bank loan - 200,000 - - Payment of arrangement fee - (3,846) - - Net cash provided by financing 709,582 486,544 1,178 6,092 activities Net increase in cash and cash 831,864 42,040 51,313 45,646 equivalents Beginning cash and cash 242,791 199,218 1,027,739 200,732 equivalents Effect of foreign exchange on (14,055) 1,533 (18,452) (3,587) cash and cash equivalents Ending cash and cash equivalents 1,060,600 242,791 1,060,600 242,791 Autonomy Corporation plc Condensed Consolidated Statement of Comprehensive Income Twelve Months Three Months Ended Ended (unaudited) (unaudited) Dec 31, Dec 31, Dec 31, Dec 31, 2010 2009 2010 2009 $'000 $'000 $'000 $'000 Net profit 217,293 191,551 70,399 69,394 Revaluation of equity investment 42,916 1,512 298 (967) Translation of overseas operations (18,129) 6,229 (15,332) (3,995) Other comprehensive income 24,787 7,741 (15,034) (4,962) Total comprehensive income 242,080 199,292 55,365 64,432 Autonomy Corporation plc Condensed Consolidated Statement of Changes in Equity Capital Ordinary Share redemption Own Merger shares premium reserve shares reserve Sub-total $'000 $'000 $'000 $'000 $'000 $'000 At January 1, 2009 1,214 798,279 135 (905) 27,589 826,312 Retained profit - - - - - - Other comprehensive income - - - - - - Stock compensation - - - - - - Share placing 103 308,409 - - - 308,512 Share options exercised 16 24,079 - - - 24,095 EBT options exercised - - - 60 - 60 Deferred tax on stock options..... - - - - - - At Dec 31, 2009 1,333 1,130,767 135 (845) 27,589 1,158,979 Stock Revaluation Sub-total comp'n Translation Retained Forwarded reserve reserve reserve earnings Total $'000 $'000 $'000 $'000 $'000 $'000 At January 1, 826,312 14,846 2,987 (18,261) 294,016 1,119,900 2009 Retained profit - - - - 191,551 191,551 Other comprehensive income - - 1,512 6,229 - 7,741 Stock compensation - 7,173 - - - 7,173 Share placing 308,512 - - - - 308,512 Share options exercised 24,095 - - - - 24,095 EBT options exercised 60 (60) - - - - Deferred tax on stock options - - - - 42,807 42,807 At Dec 31, 2009 1,158,979 21,959 4,499 (12,032) 528,374 1,701,779 Capital Ordinary Share redemption Own Merger shares premium reserve shares reserve Sub-total $'000 $'000 $'000 $'000 $'000 $'000 At January 1, 2010 1,333 1,130,767 135 (845) 27,589 1,158,979 Retained profit - - - - - - Other comprehensive income - - - - - - Stock compensation - - - - - - Share options exercised 11 19,325 - - - 19,336 EBT options exercised - - - 57 - 57 Equity element of convertible loan notes - 97,815 - - - 97,815 Deferred tax on stock options - - - - - - At Dec 31, 2010 1,344 1,247,907 135 (788) 27,589 1,276,187 Sub-total Stock Revaluation comp'n Translation Retained Forwarded reserve reserve reserve earnings Total $'000 $'000 $'000 $'000 $'000 $'000 At January 1, 2010 1,158,979 21,959 4,499 (12,032) 528,374 1,701,779 Retained profit - - - - 217,293 217,293 Other comprehensive income - - 42,916 (18,129) - 24,787 Stock compensation - 5,979 - - - 5,979 Share options exercised 19,336 - - - - 19,336 EBT options exercised 57 (57) - - - - Equity element of convertible loan notes 97,815 - - - - 97,815 Deferred tax on stock options - - - - 260 260 At Dec 31, 2010 1,276,187 27,881 47,415 (30,161) 745,927 2,067,249
AUTONOMY CORPORATION plc
DECEMBER 31, 2010
1. General information
December 31, 2010 December 31, 2009 February 2011
December 31, 2010 December 31, 2010 December 31, 2009 December 31, 2009 December 31, 2010 February 1, 2011
2. Accounting policies
Whilst the financial information included in this quarterly and twelve month announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain all of the disclosures required by IFRSs.
Basis of preparation
The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the group’s 2009 Annual Report, except for as described below.
Adoption of new and current standards
December 31, 2009
Going Concern
December 31, 2010 $1,061 million $827 million
After making enquiries and considering the cash flow forecasts of the group the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the twelve month and quarterly consolidated financial statements.
2. Accounting policies (continued)
Adjusted Results
Although IFRS disclosure provides investors and management with an overall view of the Company’s financial performance, Autonomy believes that it is important for investors to also understand the performance of the Company’s fundamental business without giving effect to certain specific, non-recurring and non-cash charges.
Consequently, the non-IFRS (adj.) results exclude share of profit/loss of associates, profit on disposal of investment, interest on convertible loan notes, post-acquisition restructuring costs and non-cash charges for the amortization of purchased intangibles, share-based compensation, non-cash translational foreign exchange gains and losses and associated tax effects. Management uses the adjusted results to assess the financial performance of the Company’s operational business activities.
See reconciliations on page 8.
3. Segmental information
The Company is organized internally along group function lines with each line reporting to the group’s chief operating decision maker, the Chief Executive Officer. The primary group function lines include: finance; operations, including legal, HR, and operations, marketing, sales and technology. Each of these functions supports the overall business activities, however they do not engage in activities from which they earn revenues or incur expenditure in their operations with each other. No discrete financial information is produced for these function lines. The Company integrates acquired businesses and products into the Autonomy model such that separate financial data on these entities is not maintained post acquisition.
The group has operations in various geographic locations however no discrete financial information is maintained on a regional basis. Decisions around the allocation of resources are not determined on a regional basis and the chief operating decision maker does not assess the group’s performance on a geographic basis.
The group is a software business that utilises its single technology in a set of standard products to address unique business problems associated with unstructured data. The group offers over 500 different functions and connectors to over 400 different data repositories as part of its product suite. Each customer selects from a list of options, but underneath from a single unit of the proprietary core technology platform. As a result, no analysis of revenues by product type can be provided.
Each of the group’s virtual brands is founded on the group’s unique Intelligent Data Operating Layer (IDOL), the group’s core infrastructure for automating the handling of all forms of unstructured information. Separate financial information is not prepared for each virtual brand to assess its performance for the purpose of resource allocation decisions. The pervasive nature of the group’s technology across each brand requires decisions to be taken at the group level and financial information is prepared on that basis.
A significant proportion of the group’s cost base is fixed and represents payroll and property costs which relate to the multiple function lines of the group. As a result the business model drives enhanced performance though growing sales and accordingly group wide revenue generation is the key performance metric that is monitored by the chief operating decision maker. The revenue financial data used to monitor performance is prepared and compiled on a group wide basis. No separate revenue financial analysis is maintained on revenues from any of the virtual brands.
The Company’s chief operating decision maker is the group’s Chief Executive Officer, who evaluates the performance of the Company on a group wide basis and any elements within it on the basis of information from junior executives and group financial information and is ultimately responsible for entity-wide resource allocation decisions.
As a consequence of the above factors the group has one operating segment in accordance with IFRS 8 "Operating Segments". IFRS 8 also requires information on a geographic basis and that information is shown below.
3. Segmental information (continued)
United Kingdom Canada
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