Accelrys Announces First Quarter Results

  Accelrys Announces First Quarter Results

Business Wire

SAN DIEGO -- April 30, 2013

Accelrys, Inc. (NASDAQ: ACCL) today reported financial results for the fiscal
quarter ended March31, 2013. Non-GAAP revenue for the quarter ended March31,
2013 increased $2.1 million to $43.9 million from $41.8 million for the same
quarter of the previous year, or an increase of 5%. Non-GAAP net income was
$3.6 million, or $0.06 per diluted share, for the quarter ended March31, 2013
compared to non-GAAP net income of $4.6 million, or $0.08 per diluted share,
for the same quarter of the previous year.

GAAP revenue for the quarter ended March31, 2013 increased $2.7 million to
$42.1 million from $39.4 million for the same quarter of the previous year, or
an increase of 7%. GAAP net loss was $(5.7) million, or $(0.10) per diluted
share, for the quarter ended March31, 2013 compared to GAAP net loss of
$(2.3) million, or $(0.04) per diluted share, for the same quarter of the
previous year.

“The first quarter results were reasonably in line with our internal targets
for revenue and earnings, with the exception of the FX headwind we experienced
in Japan. However, the first quarter was challenging from an orders
perspective causing us to make downward revisions to our calendar 2013
outlook. We remain confident in our strategy and the associated growth
opportunity it creates for our business and shareholders. We are convinced we
have taken the necessary steps to overcome our execution issues in the first
quarter. The fundamentals of our business remain sound and we are firmly
committed to delivering on the opportunity in front of us,” said Max
Carnecchia, President and CEO.

Recent Business Highlights:

  *Expanded the Accelrys Process Management and Compliance Suite (PMC) with
    the new Accelrys Laboratory Information Management System (LIMS),
    transforming the traditional LIMS market with a unified, process-centric
    architecture that improves overall product quality, increases operational
    effectiveness and accelerates innovation.
  *Announced a strategic partnership with U.S. Data Management (USDM), a
    global regulatory compliance and risk management consulting firm,
    enhancingthe Accelrys PMC by helping life sciences organizations achieve
    operational excellence with best practice regulatory compliance and risk
    management solutions.
  *Recognized in Gartner report on enterprise Electronic Laboratory Notebooks
    (ELNs) as the only vendor with the breadth of ELN offerings achieving
    ratings of "very high" or "high" in each scientific and functional
    categories.
  *Announced new integration between the Accelrys ELN and the trusted
    chemistry workflow solution Reaxys from Elsevier, accelerating
    cost-effective research and improving outcomes in upstream R&D and
    downstream process development.

Non-GAAP results for the quarter ended March31, 2013 exclude the impact of
integration activities and fair value accounting associated with the
acquisitions of Vialis AG (“Vialis”) on January 11, 2013, Aegis Analytical
Corporation (“Aegis”) on October 23, 2012, Contur Industry Holding AB and
Contur Software AB (collectively, “Contur”) and VelQuest Corporation
(“VelQuest”), both in 2011, and the merger with Symyx Technologies, Inc.
(“Symyx”) in 2010, and other nonrecurring items, as described below.

Non-GAAP revenue, non-GAAP operating income, and non-GAAP net income for the
quarter ended March31, 2013 include fair value adjustments to deferred
revenue ($1.8 million). Non-GAAP operating income and non-GAAP net income for
the quarter ended March31, 2013 also exclude stock-based compensation expense
($2.4 million), business consolidation, transaction and headquarter-relocation
costs ($2.2 million) and purchased intangible asset amortization ($4.6
million), offset by an adjustment to include acquisition-related cost of
revenue related to VelQuest non-GAAP revenue recognized during the quarter
ended March31, 2013 ($0.1 million). Non-GAAP net income for the quarter ended
March31, 2013 also excludes additional purchased intangible asset
amortization ($0.4 million) offset by removing the impact of the amortization
of note receivable discount related to our promissory note receivable from
Intermolecular, Inc. (“Intermolecular”) ($0.2 million) and other non-operating
income related items ($0.2 million). Finally, our non-GAAP net income reflects
an effective pro-forma tax rate of 40%.

Calendar Year 2013 Outlook

For the year ending December 31, 2013, the Company expects non-GAAP revenue to
be between $176 and $181 million, and non-GAAP diluted earnings per share to
be between $0.32 and $0.34 per diluted share on fully diluted weighted average
shares outstanding of 57.0 million and using an effective tax rate of 40%.

Non-GAAP Financial Measures:

This press release describes financial measures for revenue, operating income,
net income, net income per diluted share and free cash flow that exclude
deferred revenue fair value adjustments, acquisition-related cost of revenue,
business consolidation, transaction and headquarter-relocation costs,
stock-based compensation expense, purchased intangible asset amortization,
royalty income fair value adjustments, amortization of note receivable
discount, other non-operating income and income tax adjustments. These
financial measures are not calculated in accordance with generally accepted
accounting principles (GAAP) and are not based on any comprehensive set of
accounting rules or principles.

Management believes these non-GAAP financial measures provide a useful measure
of the Company's operating results, a meaningful comparison with historical
results and with the results of other companies, and insight into the
Company's ongoing operating performance. Further, management and the Board of
Directors utilize these measures, in addition to GAAP measures, when
evaluating and comparing the Company's operating performance against internal
financial forecasts and budgets. These non-GAAP financial measures should not
be considered as a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. In addition, these non-GAAP
financial measures may be different from non-GAAP financial measures used by
other companies.

For additional information on the items excluded by the Company from its
non-GAAP financial measures please refer to the Form8-K regarding this
release that was furnished today to the Securities and Exchange Commission.

The following table contains a reconciliation of the non-GAAP financial
measures to the most directly comparable GAAP financial measures (unaudited,
amounts in thousands, except per share amounts, including footnotes):

                                                   Three Months Ended
                                                     March 31,
                                                     2013         2012
GAAP revenue                                         $ 42,138       $ 39,439
Deferred revenue fair value adjustment^1             1,768         2,357    
Non-GAAP revenue                                     $ 43,906      $ 41,796 
                                                                    
GAAP operating loss                                  (6,462   )     (3,188   )
Deferred revenue fair value adjustment^1             1,768          2,357
Acquisition-related cost of revenue^2                (124     )     (223     )
Business consolidation, transaction and              2,154          639
headquarter-relocation costs^3
Stock-based compensation expense^4                   2,420          1,791
Purchased intangible asset amortization^5            4,649         4,176    
Non-GAAP operating income                            $ 4,405        $ 5,552
Depreciation expense                                 876            804
Cash received for interest and royalty income        2,528          3,290
Cash (paid) for income taxes, net of refunds         (1,114   )     (1,164   )
received
Capital expenditures                                 (2,253   )     (771     )
Non-GAAP free cash flow                              4,442         7,711    
                                                                    
GAAP net loss                                        $ (5,726 )     $ (2,254 )
Deferred revenue fair value adjustment^1             1,768          2,357
Acquisition-related cost of revenue^2                (124     )     (223     )
Business consolidation, transaction and              2,154          639
headquarter-relocation costs^3
Stock-based compensation expense^4                   2,420          1,791
Purchased intangible asset amortization^5            5,054          4,599
Royalty income fair value adjustment^6               —              200
Amortization of note receivable discount^7           (204     )     (120     )
Other non-operating income^8                         (155     )     —
Income tax^9                                         (1,633   )     (2,377   )
Non-GAAP net income                                  $ 3,554       $ 4,612  
                                                                    
GAAP diluted net loss per share                      $ (0.10  )     $ (0.04  )
Deferred revenue fair value adjustment^1             0.03           0.04
Acquisition-related cost of revenue^2                —              —
Business consolidation, transaction and              0.04           0.01
headquarter-relocation costs^3
Stock-based compensation expense^4                   0.04           0.03
Purchased intangible asset amortization^5            0.09           0.08
Royalty income fair value adjustment^6               —              —
Amortization of note receivable discount^7           —              —
Other non-operating income^8                         —              —
Income tax^9                                         (0.03    )     (0.04    )
Non-GAAP diluted net income per share^10             $ 0.06        $ 0.08   
                                                                    
Basic                                                55,681         55,783
Diluted                                              57,055         56,512
                                                                             

^1Deferred revenue fair value adjustment relates to our acquisitions of
Vialis, Aegis, VelQuest and Contur and our merger with Symyx, and adds back
the impact of writing down the acquired historical deferred revenue to fair
value as required by purchase accounting guidance.
^2Acquisition-related cost of revenue relates to our acquisition of VelQuest,
and adds back the impact of writing down the acquired deferred cost of revenue
as required by purchase accounting guidance.
^3Business consolidation, transaction and headquarter-relocation costs are
included in the business consolidation, transaction and headquarter-relocation
costs line in our consolidated statements of operations and consist of
professional services, legal, litigation, employee-related and other costs
incurred in connection with our acquisition and related integration
activities, as well as lease obligation exit costs, severance and other
related costs incurred in connection with the various restructuring activities
commenced by the Company. Also included are contingent compensation costs
relating to the Vialis and the Contur acquisitions as well as costs associated
with our headquarter relocation expected in July 2013, including professional
services and additional rent expense during the transition to the new
facility.

^4Stock-based compensation expense is included in our consolidated statements
of operations as follows:


                                                     Three Months Ended
                                                       March 31,
                                                       2013        2012
Cost of revenue                                        $ 235         $ 142
Product development                                    456           382
Sales and marketing                                    855           589
General and administrative                             869           687
Business consolidation, transaction and                5            (9      )
headquarter-relocation costs
Total stock-based compensation expense                 $ 2,420      $ 1,791 
                                                                             

^5Purchased intangible asset amortization is included in our consolidated
statements of operations as follows:


                                                  Three Months Ended
                                                    March 31,
                                                    2013        2012
Amortization of completed technology                $ 2,216       $ 2,081
Purchased intangible asset amortization             2,433         2,095
Royalty and other income, net                       405          423
Total purchased intangible amortization expense     $ 5,054      $ 4,599
                                                                    

^6Royalty income fair value adjustment relates to our merger with Symyx, and
adds back the impact of writing down deferred royalty income to fair value as
required by purchase accounting guidance.
^7Amortization of note receivable discount adjusts the amortization of the
discount on our promissory note receivable from Intermolecular in connection
with the sale of intellectual property in November 2011.
^8Other non-operating income relates to gain on sale of intellectual property
to Intermolecular and gain on bargain purchase resulting from our Vialis
acquisition in January 2013.
^9Income tax adjustments relate to adjusting our non-GAAP operating results to
reflect an effective tax rate of 40% that would be applied if the Company was
in a taxable income position and was not able to utilize its net operating
loss carryforwards. The income tax adjustment also excludes any impact of a
release of our valuation allowance against deferred tax assets.
^10Earnings per share amounts for the three months ended March 31, 2013 do not
add due to rounding.


Conference Call Details:

At 5:00 p.m. ET, April 30, 2013, Accelrys will conduct a conference call to
discuss its financial results. To participate, please dial (866) 309-0459 (+
(937) 999-3232 outside the United States) and enter the access code, 35341784,
approximately 15 minutes before the scheduled start of the call. The
conference call will also be accessible live on the Investor Relations section
of the Accelrys website at www.accelrys.com.

A replay of the conference call will be available online at www.accelrys.com
and via telephone by dialing (855) 859-2056 (+1 (404) 537-3406 outside the
United States) and entering access code, 35341784, beginning 8:00 p.m. ET on
April 30, 2013 through 11:59 p.m. ET on June 30, 2013.

About Accelrys:

Accelrys (NASDAQ: ACCL), a leading provider of scientific innovation lifecycle
management software, supports industries and organizations that rely on
scientific innovation to differentiate themselves. The industry-leading
Accelrys Enterprise Platform provides a broad, flexible scientific solution
optimized to integrate the diversity of science, experimental processes and
information requirements across the research, development, process scale-up
and early manufacturing phases of product development. By incorporating
capabilities in applications for modeling and simulation, enterprise lab
management, workflow and automation, and data management and informatics,
Accelrys enables scientific innovators to access, organize, analyze and share
data in unprecedented ways, ultimately enhancing innovation, improving
productivity and compliance, reducing costs and speeding time from lab to
market.

Accelrys solutions are used by more than 1,300 customers in the
pharmaceutical, biotechnology, energy, chemicals, aerospace, consumer packaged
goods and industrial products industries. Headquartered in San Diego, Calif.,
Accelrys employs more than 200 full-time PhD scientists. For more information
about Accelrys, visit http://www.accelrys.com.

Forward-Looking Statements:

Statements contained in this press release relating to the Company's or
management's intentions, hopes, beliefs, expectations or predictions of the
future, including, but not limited to, statements relating to the Company's
expected non-GAAP revenue and diluted earnings per share for the year ending
December 31, 2013 and statements relating to the Company's long-term prospects
and execution of its strategic growth and acquisition-related initiatives, are
forward-looking statements. Such forward-looking statements are subject to a
number of risks and uncertainties, including, but not limited to, risks that
the Company will not achieve its expected non-GAAP revenue or diluted earnings
per share for the year ending December 31, 2013 and/or that the Company will
not successfully execute its strategic growth and acquisition-related
initiatives, in each case due to, among other possibilities, an inability to
withstand negative conditions in the global economy or a lack of demand for or
market acceptance of the Company's products. Additional risks and
uncertainties faced by the Company are contained from time to time in the
Company's filings with the U.S. Securities and Exchange Commission, including,
but not limited to, the Company's Annual Report on Form 10-K for the year
ended December 31, 2012, quarterly reports on Form 10-Q and current reports on
Form 8-K. Collectively, these risks and uncertainties could cause the
Company's actual results to differ materially from those projected in its
forward-looking statements, and the Company disclaims any intention or
obligation to revise any forward-looking statements whether as a result of new
information, future events or otherwise.

ACCELRYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)
                                                  
                                                     Three Months Ended
                                                     March 31,
                                                     2013         2012
Revenue:
License and subscription revenue                     22,275         $ 21,697
Maintenance on perpetual licenses                    10,064         9,491
Content                                              2,568          3,543
Professional services and other                      7,231         4,708    
Total revenue                                        42,138        39,439   
Cost of revenue:
Cost of revenue                                      11,907         9,878
Amortization of completed technology                 2,216         2,081    
Total cost of revenue                                14,123        11,959   
Gross profit                                         28,015         27,480
Operating expenses:
Product development                                  10,368         9,552
Sales and marketing                                  15,133         13,865
General and administrative                           4,384          4,526
Business consolidation, transaction and              2,159          630
headquarter-relocation costs
Purchased intangible asset amortization              2,433         2,095    
Total operating expenses                             34,477        30,668   
Operating loss                                       (6,462   )     (3,188   )
Royalty and other income, net                        1,473         1,631    
Loss before taxes                                    (4,989   )     (1,557   )
Income tax expense                                   737           697      
Net loss                                             $ (5,726 )     $ (2,254 )
                                                                    
Basic and diluted net loss per share                 $ (0.10  )     $ (0.04  )
Weighted average shares used to compute net loss     55,681         55,783
per share
                                                                             

ACCELRYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
                                                             
                                                  March 31,       December 31,
                                                  2013            2012
                                                  (unaudited)     (audited)
Assets
Cash, cash equivalents, and marketable            $ 130,296       $   115,646
securities^1
Trade receivables, net                            28,380          47,196
Notes receivable                                  34,761          34,796
Other assets, net^2                               204,475        208,204
Total assets                                      $ 397,912      $   405,842
Liabilities and stockholders’ equity
Current liabilities, excluding deferred           29,009          37,877
revenue
Deferred revenue, including current portion^3     93,572          89,151
Deferred gain on sale of intellectual             25,821          25,895
property
Non-current liabilities, excluding deferred       11,631          10,098
revenue^4
Total stockholders’ equity                        237,879        242,821
Total liabilities and stockholders’ equity        $ 397,912      $   405,842
                                                                      

^1Cash, cash equivalents, and marketable securities consist of the following
line items in our consolidated balance sheet: Cash and cash equivalents;
Restricted cash; Marketable securities; Marketable securities, net of current
portion; and Restricted cash, net of current portion.
^2Other assets, net, consists of the following line items in our consolidated
balance sheet: Prepaid expenses, deferred tax assets and other current assets;
Property and equipment, net; Goodwill; Purchased intangible assets, net; and
Other assets.
^3Total deferred revenue consists of the following line items in our
consolidated balance sheet: Current portion of deferred revenue; and Deferred
revenue, net of current portion.
^4Noncurrent liabilities, excluding deferred revenue consists of the following
line items in our consolidated balance sheet: Accrued income tax; Accrued
restructuring charges, net of current portion and Lease-related liabilities,
net of current portion.

Contact:

Accelrys, Inc.
Michael A. Piraino
Executive Vice President & Chief Financial Officer
858-799-5200
or
Investor Relations
MKR Group
Todd Kehrli
323-468-2300
accl@mkr-group.com