Deltek Reports Q2 License Revenue of $15.8 Million, Total

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Deltek Reports Q2 License Revenue of $15.8 Million, Total Revenue of $69.4 Million

HERNDON, Va. — (BUSINESS WIRE) — July 30, 2009 — Deltek, Inc. (Nasdaq: PROJ), the leading provider of enterprise applications software for project-focused businesses, today announced financial results for its second quarter ended June 30, 2009.

Total revenue for Q2 was $69.4 million, an increase of 12% from Q1. Q2 license revenue increased 40% from Q1 to $15.8 million. Maintenance and support revenue in Q2 was $31.0 million, an increase of 1% from Q1. Consulting services revenue decreased 4% from Q1 to $19.2 million. Other revenues in Q2 increased to $3.4 million from $0.1 million in Q1.

Q2 GAAP net income increased 85% to $4.9 million, or $0.09 per diluted share, from $2.7 million, or $0.06 per diluted share, in Q1. Q2 non-GAAP net income increased 35% to $7.6 million, or $0.14 per diluted share, from $5.6 million, or $0.13 per diluted share, in Q1.

Excluding the additional shares issued in conjunction with the Company’s common stock rights offering, Deltek’s Q2 2009 non-GAAP and GAAP EPS would have been $0.17 and $0.11, respectively.

“We had a strong quarter and delivered financial results that significantly exceeded expectations,” said Kevin Parker, president and CEO of Deltek. “Our revenue and profitability were driven by improved execution across multiple facets of our business, a continuing focus on operational efficiency and cost reductions, and our customers’ increasing confidence in their future business prospects.”

“We remain focused on executing effectively and committed to delivering a strong bottom line and healthy cash flows. Looking forward, our sales pipeline continues to be strong and the numerous new products we’ve launched this year are being well received by our customers. Our strong competitive position provides a solid foundation for growth when the economy eventually recovers.”

When compared to prior year results, total revenue in Q2 was $69.4 million, compared to $77.4 million last year. License revenue for Q2 was $15.8 million, compared to $22.1 million in Q2 2008. Maintenance and support revenue in the second quarter was $31.0 million, an increase from $28.3 million in Q2 2008. Consulting services revenue for Q2 was $19.2 million, compared to $22.3 million in the prior year. Other revenues in Q2 were $3.4 million, compared to $4.6 million in the prior year.

GAAP net income for the second quarter was $4.9 million, or $0.09 per diluted share, compared to $5.4 million, or $0.11 per diluted share, last year. Non-GAAP net income for the second quarter of 2009 was $7.6 million, or $0.14 per diluted share, compared to $7.5 million, or $0.16 per diluted share, in Q2 2008.

Non-GAAP net income excludes the net-of-tax impact of stock-based compensation, expenses associated with the Company’s 2005 recapitalization, amortization of acquired intangible assets and restructuring charges.

Q2 Highlights

Deltek announced that its common stock rights offering was fully subscribed by its stockholders, including its largest stockholders, affiliates of New Mountain Capital. Upon completion of the rights offering, the Company issued 20,000,000 new shares of common stock at a price of $3.00 per share. Deltek used $3.1 million of the $58.2 million in net proceeds from the rights offering to repay indebtedness. Deltek ended Q2 with a cash balance of $113.5 million, compared to $43.0 million in Q1 2009. The $70.5 million increase in cash was driven by proceeds received from the Company’s common stock rights offering and cash flow generated from operations.
Deltek announced the release of Premier Analytics, a new business intelligence solution for GCS Premier customers. Premier Analytics delivers executive dashboards that empower executives to monitor, measure, and manage their businesses using real-time data from GCS Premier, Deltek’s powerful project accounting solution for small-to-mid-size government contractors. Deltek also announced the release of GovWin 6.0, the newest version of its industry-leading business development and capture solution for firms who want to do more business with the Federal Government. GovWin 6.0 contains numerous usability enhancements that improve collaboration and communication throughout the business development process. The new release also offers unique Contract Data Management capabilities that enable companies to manage opportunities throughout the entire contract management lifecycle.
Deltek announced the release of Cobra 5.0, the leading enterprise cost and earned value management (EVM) solution for government contractors and other project-based businesses. As the industry’s first EVM solution built on Microsoft’s .NET framework and Smart Client architecture, Cobra 5.0 eases the burden on IT resources with one-click deployment, and it eliminates the need for Citrix resulting in lower TCO. By delivering tight control over project costs, insight into mission-critical project data and the ability to easily calculate and report on earned value, Cobra 5.0 helps organizations better manage project and program performance.
Deltek announced the release of Vision 6.0, the newest version of its industry-leading solution for professional services firms of all sizes. Vision 6.0 enables customers to fully unlock, analyze, and act on the essential data elements within Vision through role-based dashboards and SQL reporting services. In addition, Vision 6.0 offers capabilities to manage the global enterprise, including enhancements that simplify international accounting and tax transactions and foreign language support. In conjunction with Vision 6.0, Deltek also announced the release of Deltek Project Connect and Vision Performance Management. Project Connect facilitates bi-directional integration between Vision Resource Planning and Microsoft Project to keep resources and schedules in synch. Vision Performance Management dashboards empower organizations to proactively manage performance and mitigate risk.
Deltek held its annual Insight customer conference in Orlando, Florida. Insight 2009 featured approximately 3,000 business leaders and partner attendees representing thousands of unique organizations. The conference showcased major product announcements across all of Deltek’s product lines, multiple channel and technology partners, and the winners of the Second Annual Deltek Project Excellence Awards, which recognize customers that achieve superior business performance through their use of Deltek products.

Impact of Common Stock Rights Offering on Historical Shares Outstanding

In accordance with SFAS 128-Earnings Per Share, for purposes of computing the basic and diluted weighted average shares, results for both 2009 and 2008 have been adjusted prior to June 1, 2009 to reflect the bonus element associated with the Company’s recently completed common stock rights offering. A summary of these retroactive changes is available on the Investor Relations section of Deltek’s website.

Conference Call Information

Deltek will host a conference call at 5:00 p.m. Eastern Time today to discuss the Company’s second quarter results. To access this call, dial 1-877-381-6419 in North America and 1-706-643-9496 outside North America. No password is required to join the call. The conference call also can be accessed through the Investor Relations section of Deltek’s website ( http://investor.deltek.com). Those unable to participate in the live call may hear a replay through August 5, 2009 by dialing 1-800-642-1687 in North America and 1-706-645-9291 outside North America (pass code: 19459768). The replay also will be available through August 5, 2009 on Deltek’s website.

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 margin and adjusted EBITDA.

The Company defines non-GAAP net income as GAAP net income before the net-of-tax impact of stock-based compensation, expenses associated with the Company’s 2005 recapitalization, amortization of acquired intangible assets and restructuring charges. Non-GAAP operating income and margin is defined as GAAP operating income before the pre-tax impact of stock-based compensation, expenses associated with the Company’s 2005 recapitalization, amortization of acquired intangible assets and restructuring charges. Adjusted EBITDA is defined as GAAP net income before interest expenses (net of interest income), provision for income taxes, depreciation, amortization, stock-based compensation, expenses associated with the Company’s 2005 recapitalization and restructuring charges.

The Company believes that the presentation of these non-GAAP financial measures provides useful information to its investors and lenders because these measures allow for more accurate comparisons of operating results from period-to-period, enhance the overall understanding of the Company’s financial performance and provide greater insight into the prospects for the Company’s ongoing business operations. Moreover, the Company also believes it is appropriate to exclude costs associated with restructuring charges because these charges are excluded from management’s assessment of the Company’s operating performance and are not related to the Company’s ongoing business operations. In addition, the Company excludes the items from EBITDA described above in its calculations to determine compliance with its debt covenants and to assess its ability to borrow additional funds to finance or expand its 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 management to plan and forecast its business.

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 may 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 Company's 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
REVENUES:
Software license fees	$	15,758		$	22,132		$	26,984		$	39,139
Consulting services		19,216			22,324			39,282			46,590
Maintenance and support services		30,987			28,286			61,584			56,351
Other revenues		3,408			4,623			3,512			4,639
Total revenues		69,369			77,365			131,362			146,719

COST OF REVENUES:
Cost of software license fees		1,835			1,687			3,223			3,267
Cost of consulting services		16,140			19,192			33,457			39,355
Cost of maintenance and support services		5,529			4,799			11,269			10,426
Cost of other revenues		4,605			4,875			4,648			5,107
Total cost of revenues		28,109			30,553			52,597			58,155
GROSS PROFIT		41,260			46,812			78,765			88,564

Research and development		10,773			11,558			21,644			22,949
Sales and marketing		10,653			13,413			22,172			25,716
General and administrative		9,412			8,379			17,317			15,940
Restructuring charge		1,135			1,052			2,548			1,052
Total operating expenses		31,973			34,402			63,681			65,657

INCOME FROM OPERATIONS		9,287			12,410			15,084			22,907

Interest income		11			193			22			450
Interest expense		(1,473	)		(2,480	)		(2,982	)		(5,954	)
Other income (expense), net		24			(164	)		21			(201	)
INCOME BEFORE INCOME TAXES		7,849			9,959			12,145			17,202
Income tax expense		2,948			4,536			4,590			7,758

NET INCOME	$	4,901		$	5,423		$	7,555		$	9,444


EARNINGS PER SHARE
Basic	$	0.09		$	0.12		$	0.15		$	0.20

Diluted	$	0.09		$	0.11		$	0.15		$	0.20

COMMON SHARES AND EQUIVALENTS OUTSTANDING
Basic weighted average shares		52,394			46,552			49,560			46,527

Diluted weighted average shares		52,914			47,692			49,940			47,812


DELTEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	June 30,			December 31,
	2009			2008
	(unaudited)			(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	113,457		$	35,788
Accounts receivable, net of allowance of $3,632 and $2,195 at June 30, 2009 and December 31, 2008, respectively		47,196			47,747
Deferred income taxes		4,640			4,635
Prepaid expenses and other current assets		6,466			6,874
Income taxes receivable		857			846
TOTAL CURRENT ASSETS		172,616			95,890

PROPERTY AND EQUIPMENT, NET		12,861			14,639
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET		1,034			1,438
LONG-TERM DEFERRED INCOME TAXES		5,820			4,125
INTANGIBLE ASSETS, NET		14,982			17,396
GOODWILL		57,763			57,654
OTHER ASSETS		1,593			2,130
TOTAL ASSETS	$	266,669		$	193,272

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt	$	-		$	10,154
Accounts payable and accrued expenses		28,122			28,734
Accrued liability for redemption of stock in recapitalization		317			317
Deferred revenues		37,032			21,296
TOTAL CURRENT LIABILITIES		65,471			60,501

LONG-TERM DEBT		179,604			182,661
OTHER TAX LIABILITIES		1,130			1,003
OTHER LONG-TERM LIABILITIES		3,024			2,917
TOTAL LIABILITIES		249,229			247,082

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock, $0.001 par value—authorized, 5,000,000 shares; none issued or outstanding at June 30, 2009 or December 31, 2008		–			–
Common stock, $0.001 par value—authorized, 200,000,000 shares; issued and outstanding, 64,268,327 and 43,474,220 shares at June 30, 2009 and December 31, 2008, respectively		64			43
Class A common stock, $0.001 par value—authorized, 100 shares; issued and outstanding, 100 shares at June 30, 2009 and December 31, 2008		–			–
Additional paid-in capital		240,450			177,249
Accumulated deficit		(222,350	)		(229,905	)
Accumulated other comprehensive deficit		(724	)		(1,197	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		17,440			(53,810	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	266,669		$	193,272


DELTEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Six Months Ended June 30,
	2009			2008
	(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,555		$	9,444
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		2,472			489
Depreciation and amortization		5,529			4,597
Amortization of debt issuance costs		481			396
Stock-based compensation expense		4,179			3,693
Employee stock purchase plan expense		162			130
Restructuring charge, net		918			495
Loss on disposal of fixed assets		23			321
Deferred income taxes		(1,909	)		(1,564	)

Change in assets and liabilities:
Accounts receivable, net		(1,675	)		4,888
Prepaid expenses and other assets		501			1,509
Accounts payable and accrued expenses		(1,480	)		(1,379	)
Income taxes receivable		(120	)		(3,768	)
Excess tax benefit (deficiency) benefit from exercise of stock options		108			(59	)
Other tax liabilities		127			202
Other long-term liabilities		(289	)		(303	)
Deferred revenues		16,065			804
Net Cash Provided by Operating Activities		32,647			19,895

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(931	)		(4,295	)
Capitalized software development costs		(150	)		(261	)
Net Cash Used in Investing Activities		(1,081	)		(4,556	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock in connection with rights offering, net of issuance costs		58,228			–
Proceeds from exercise of stock options		677			192
Excess tax (deficiency) benefit from exercise of stock options		(108	)		59
Proceeds from issuance of stock under employee stock purchase plan		310			305
Offering costs paid for 2007 sale of common stock in initial public offering		–			(275	)
Repayment of debt		(13,211	)		–
Net Cash Provided by Financing Activities		45,896			281

IMPACT OF FOREIGN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		207			148

NET INCREASE IN CASH AND CASH EQUIVALENTS		77,669			15,768

CASH AND CASH EQUIVALENTS––Beginning of period		35,788			17,091

CASH AND CASH EQUIVALENTS––End of period	$	113,457		$	32,859


DELTEK, INC.
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(in thousands, except per share data)
(unaudited)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2009				2008					2009				2008

Net Income (GAAP Basis)	$	4,901			$	5,423				$	7,555			$	9,444
Income Tax Expense		2,948				4,536					4,590				7,758
Pre-Tax Income (GAAP Basis)	$	7,849			$	9,959				$	12,145			$	17,202
Adjustments:
Stock-based Compensation		2,221				1,459					4,341				3,823
Recapitalization Retention Expense		7				125					152				294
Amortization of Acquired Intangibles		1,173				831					2,437				1,835
Restructuring Charge		1,135				1,052					2,548				1,052

Adjusted Pre-Tax Income		12,385				13,426					21,623				24,206

Less: Adjusted Income Tax Expense		4,735				5,902					8,324				10,518

Non-GAAP Net Income	$	7,650			$	7,524				$	13,299			$	13,688

Non-GAAP Earnings Per Share (diluted)	$	0.14			$	0.16				$	0.27			$	0.29
Weighted Average Shares		52,914				47,692					49,940				47,812




RECONCILIATION OF GAAP OPERATING INCOME AND OPERATING MARGIN TO NON-GAAP OPERATING INCOME AND OPERATING MARGIN
(in thousands)
(unaudited)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2009				2008					2009				2008

Operating Income and Margin - GAAP	$	9,287	13	%	$	12,410		16	%	$	15,084	11	%	$	22,907		16	%
Plus: Stock-based Compensation and Recapitalization Retention Expense		2,228				1,584					4,493				4,117
Plus: Amortization of Acquired Intangibles		1,173				831					2,437				1,835
Plus: Restructuring Charge		1,135				1,052					2,548				1,052

Operating Income and Margin - Non-GAAP	$	13,823	20	%	$	15,877		21	%	$	24,562	19	%	$	29,911		20	%

Total Revenues	$	69,369			$	77,365				$	131,362			$	146,719




RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
(in thousands)
(unaudited)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2009				2008					2009				2008

Net Income (GAAP Basis)	$	4,901			$	5,423				$	7,555			$	9,444
Stock-based Compensation		2,221				1,459					4,341				3,823
Recapitalization Retention Expense		7				125					152				294
Depreciation		1,294				1,104					2,541				2,124
Amortization		1,381				1,150					2,992				2,473
Interest Expense, net		1,462				2,287					2,960				5,504
Income Tax Provision		2,948				4,536					4,590				7,758
Restructuring Charge		1,135				1,052					2,548				1,052

Adjusted EBITDA	$	15,349			$	17,136				$	27,679			$	32,472




STOCK-BASED COMPENSATION AND RECAPITALIZATION RETENTION EXPENSES
(in thousands)
(unaudited)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2009				2008					2009				2008

Cost of Software License Fees	$	-			$	1				$	-			$	2
Cost of Consulting Services		401				363					846				789
Cost of Maintenance and Support Services		102				(360	)				205				(91	)
Research and Development		421				401					996				951
Sales and Marketing		416				415					801				892
General and Administrative		888				764					1,645				1,574
Total	$	2,228			$	1,584				$	4,493			$	4,117




AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
(in thousands)
(unaudited)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2009				2008					2009				2008

Cost of Software License Fees	$	263			$	255				$	618			$	685
Cost of Consulting Services		19				20					39				39
Sales and Marketing		872				537					1,743				1,074
General and Administrative		19				19					37				37
Total	$	1,173			$	831				$	2,437			$	1,835




AMORTIZATION AND DEPRECIATION EXPENSES
(in thousands)
(unaudited)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2009				2008					2009				2008

Cost of Software License Fees	$	475			$	576				$	1,181			$	1,327
Cost of Consulting Services		433				395					851				753
Cost of Maintenance and Support Services		213				125					425				254
Research and Development		292				264					575				520
Sales and Marketing		1,093				763					2,188				1,494
General and Administrative		169				131					313				249
Total	$	2,675			$	2,254				$	5,533			$	4,597




RECONCILIATION OF GAAP EPS TO EPS EXCLUDING THE RIGHTS OFFERING
(in thousands, except per share data)
(unaudited)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2009				2008					2009				2008

Net Income (GAAP Basis)	$	4,901			$	5,423				$	7,555			$	9,444

GAAP Earnings Per Share (diluted)	$	0.09			$	0.11				$	0.15			$	0.20
Rights Offering	$	0.02			$	0.01				$	0.02			$	0.01
Earnings Per Share Excluding the Rights Offering (diluted)	$	0.11			$	0.12				$	0.17			$	0.21

Weighted Average Shares		52,914				47,692					49,940				47,812
Rights Offering		8,926				3,448					6,217				3,446
Weighted Average Shares (Excluding the Rights Offering)		43,988				44,244					43,723				44,366




RECONCILIATION OF NON-GAAP EPS TO NON-GAAP EPS EXCLUDING THE RIGHTS OFFERING
(in thousands, except per share data)
(unaudited)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2009				2008					2009				2008

Net Income (Non-GAAP Basis)	$	7,650			$	7,524				$	13,299			$	13,688

Non-GAAP Earnings Per Share (diluted)	$	0.14			$	0.16				$	0.27			$	0.29
Rights Offering	$	0.03			$	0.01				$	0.03			$	0.02
Non-GAAP Earnings Per Share Excluding the Rights Offering (diluted)	$	0.17			$	0.17				$	0.30			$	0.31

Weighted Average Shares		52,914				47,692					49,940				47,812
Rights Offering		8,926				3,448					6,217				3,446
Weighted Average Shares (Excluding the Rights Offering)		43,988				44,244					43,723				44,366

Contact:

Deltek, Inc.
Investor Relations:
Dave Spille, 703-885-9423
Email Contact
or
Media Relations:
Patrick Smith, 703-885-9062
Email Contact