ATG Reports First Quarter 2007 Results

Business Wire,  April 24, 2007  

Tags: ATG

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-Cash Flow from Operations Increased 191% Year-Over-Year

-Revenue Increased 22% Year-Over-Year

-Company Announces a Stock Repurchase Program

CAMBRIDGE, Mass. -- Art Technology Group, Inc. (NASDAQ: ARTG), the leading eCommerce platform provider, today reported financial results for the first quarter ended March 31, 2007.

Revenue for the first quarter of 2007 grew 22% to $29.2 million, compared with first quarter 2006 revenue of $24.0 million.

Services revenue for the first quarter of 2007 grew 43% to $22.6 million, compared with first quarter 2006 services revenue of $15.9 million. eStara revenue for the first quarter of 2007 grew to $5.2 million.

Given the evolution of its business model, ATG considers product license bookings, which it defines as product license revenue recognized plus net change in deferred license revenue during the period, to be an important indicator of growth in its software license business. Product license bookings grew 10% year-over-year to $8.9 million for the quarter.

As previously communicated, the business model of ATG is evolving from primarily product license focused to recurring revenue. ATG customers are leveraging more ATG solutions, specifically On Demand and eStara services. This trend increases recurring revenue streams and the portion of license transactions that are recognized on a ratable basis. In the first quarter of 2007, $2.3 million or approximately 25% of license transactions booked will be recognized ratably. The change in the timing of recognition of revenue associated with these transactions affected ATG's short-term revenue and profitability.

Net loss in accordance with United States Generally Accepted Accounting Principles (GAAP), for the first quarter of 2007 was $1.5 million, or $(0.01) per share. This compares with net income of $2.6 million, or $0.02 per diluted share, in the first quarter of 2006.

Non-GAAP net income1 was $781,000 for the first quarter of 2007, or $0.01 per diluted share, compared with non-GAAP net income of $3.7 million, or $0.03 per diluted share for the first quarter of 2006.

Cash, cash equivalents, and marketable securities as of March 31, 2007 increased $6.3 million to $37.5 million from $31.2 million as of December 31, 2006. Cash flow from operations for the first quarter of 2007 increased 191% year-over-year to $8.1 million. Total deferred revenue increased $6.2 million to $30.4 million compared with deferred revenue of $24.2 million on December 31, 2006.

ATG generated business from new and repeat customers during the first quarter including Chico's, Diane von Furstenburg, J. Crew, Liverpool, Natural Wellness, Newell Rubbermaid, Nutrisystem, Personal Shopper, Premier Farnell, and Progress Software. In addition, eStara signed on several new customers including CitySearch, La Poste, Ritz Carlton, Singapore Yellow Pages and Unreal Marketing.

"ATG had a great first quarter marked by strong revenue growth and cash flow from operations," said Bob Burke, ATG's president and CEO. "As evidenced by the quality of new customers we signed during the quarter, the market continues to demand highly scalable e-commerce solutions in order to achieve long-term online revenue goals. We are very pleased with our fast start to 2007 and expect to carry this momentum into the second quarter and remainder of the year."

ATG also announced that the company's Board of Directors has authorized a stock repurchase program. The stock repurchase program authorizes the company to repurchase shares of its common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by the company depending upon prevailing market conditions and other corporate considerations. The program limits the company to an aggregate purchase of $20 million. As of April 19, 2007, ATG had approximately 127.7 million shares outstanding.

"The stock repurchase program is a reflection of the company's strong cash flow and ongoing commitment to increasing shareholder value," said Julie Bradley, ATG's senior vice president and CFO. "The program also demonstrates the confidence we have in our current operational strengths and prospects for the future."

Financial Guidance and Business Outlook

"We are very pleased by eStara's strong performance this past quarter. We believe eStara is on target to achieve the earn-out threshold of $25 million in revenue for 2007," said Bradley. "As the business model evolves towards an increasing amount of license revenue being recognized on a ratable basis, we remain confident that revenue recognized plus net change in license deferred revenue will grow at least 25% in 2007. Since the number of product license transactions that will be deferred may vary, we are reaffirming our original revenue guidance including the eStara earn-out achievement."

Assuming eStara achieves the earn-out threshold of $25 million, $1.4 million of the $2 million earn-out will be recognized as acquisition-related compensation expense and reduce GAAP net income. GAAP net income guidance has been adjusted to reflect this additional expense attributable to eStara's employee shareholders. Non-GAAP net income guidance remains unchanged, as the earn-out is an acquisition-related expense.