i2 Reports First Quarter 2007 Results

Company achieves $0.13 in GAAP diluted earnings per share versus $0.04 in the first quarter of 2006

(PresseBox) ( München, )
i2 Technologies, Inc. (NASDAQ: ITWO) today announced results for the first quarter 2007.
A summary of first quarter results:

- Total revenue was $65.6 million, including contract revenue of $2.5 million
- Total costs and expenses were $60.1 million
- Net income applicable to common stockholders was $3.5 million
- Diluted earnings per share (GAAP) were $0.13
- Non-GAAP diluted earnings per share were $0.16 (excluding stock option expense and contract revenue)
- Cash used in operations was negative $6.6 million
- Total bookings of $61.5 million, including $7.7 million in software solutions bookings

“Our earnings and cash used in operations for the first quarter were generally in line with our internal expectations,” stated i2 Chief Executive Officer Michael McGrath. “While we were disappointed with our software solutions and maintenance revenue as well as our software solutions bookings in the quarter, we were pleased with the strong growth we achieved in our services business this quarter as compared to the first quarter of 2006. This growth highlights our continuing transition to a solutions-oriented provider.

“Interest in our new-generation solutions continues to build and we are looking forward to showcasing customer successes, as well as hosting discussions and demonstrations that display the benefits of our new-generation solutions, at i2 Planet later this week,” concluded McGrath.

First Quarter Results

Revenue Detail

Total revenue for the first quarter was $65.6 million as compared to $64.0 million in the first quarter of 2006. Total revenue included contract revenue of $2.5 million and $33,000 in the first quarters of 2007 and 2006, respectively. Excluding the impact of contract revenue, operating revenue was $63.1 million as compared to $64.0 million in the first quarter of 2006, a decline of one percent period-to-period.

i2 had total first quarter software solutions revenue, which includes core license revenue, recurring license revenue as well as fees received to develop the licensed functionality, of $13.4 million. This compares to $16.9 million of software solutions revenue in the first quarter of 2006, a decline of 21 percent period-to-period.

Services revenue in the first quarter was $28.7 million, an increase of 20 percent from the $23.9 million of services revenue in the first quarter of 2006. Services revenue includes fees received from arrangements to customize or enhance previously purchased licensed software. Services revenue also includes reimbursable expenses.

First quarter maintenance revenue was $21.0 million, a decrease of 9 percent from $23.2 million in the comparable prior year quarter.

Costs and Expenses
Total costs and expenses for the first quarter of 2007 were $60.1 million, a slight decrease compared to $60.4 million in the first quarter of 2006. Total costs and expenses in the first quarter of 2007 included $4.2 million in stock-based compensation expense, which includes $3.2 million in expense related to stock options and $1.0 million in expense related to restricted stock units.

Net Income
The company reported first quarter 2007 net income applicable to common stockholders of $3.5 million or $0.13 per diluted share. This compares to $1.2 million or $0.04 per diluted share in net income applicable to common stockholders in the first quarter of 2006.

Non-GAAP Earnings Per Share

The company provides non-GAAP financial measures to assist stockholders with the analysis of financial and business trends related to the company’s operations. These calculations are not in accordance with, or an alternative for, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies. A full reconciliation of GAAP to non-GAAP financial measures can be found in Schedule A included with this release.

Non-GAAP diluted earnings per share applicable to common stockholders in the first quarter of 2007 were $0.16, compared to $0.21 per diluted share in the comparable period last year on a non-GAAP basis. Non-GAAP diluted earnings per share excludes stock option expense and contract revenue.

Contract revenue is the result of the recognition of certain revenue carried on i2’s balance sheet as a portion of deferred revenue and is a result of the company’s 2003 financial restatement. The company recognized $2.5 million of contract revenue during the first quarter of 2007 and as of March 31, 2007 the deferred contract revenue balance was zero.

Other Financial Information

On March 31, 2007, i2’s total cash (including restricted cash) was $108.5 million. Total debt at the end of the first quarter was $86.3 million, which represents the face value of the company’s 5 percent senior convertible notes.

The company experienced negative cash flow from operations of $6.6 million in the first quarter of 2007. Included in the first quarter operating cash outflows were $12 million for the cash payment of employee bonuses earned in 2006, $5 million in non-operating and other non-recurring legal fees accrued in 2006 and other pre-paid expenses.

CEO Succession Planning

The board of directors also announced that it has initiated a search to replace CEO and President Michael McGrath, who is expected to retire from i2 by the end of 2007 when his contract expires. McGrath was appointed CEO on February 28, 2005 and led i2 through a critical transition by stabilizing the company, improving its management foundation, and igniting growth to set the stage for the future.

“We have accomplished many strategic initiatives since I joined i2 more than two years ago, and as a result we are a much stronger company with exciting growth opportunities for our new-generation solutions,” said McGrath. “I have stayed in the position a little longer than originally planned because I enjoyed working with a terrific group of i2ers and our passionate customers. I remain committed to i2 until the board of directors completes its search and my successor begins.”

Earnings Conference Call and Webcast Information

The i2 management team will host a live conference call with investors today, May 1 at 10 a.m. EDT to discuss the first quarter 2007 financial results. Investors and other interested parties may access the call and accompanying slide presentation via webcast through the company’s Web site at http://www.i2.com/investor.

An audio replay of the conference call will be available for approximately 24 hours following the call. To access the replay, dial (800) 475-6701 (USA) or (320) 365-3844 (International) and enter access code 870713. The webcast will also be archived via the company's Web site at http://www.i2.com/investor.

i2 Planet 2007

In addition, i2 announced that it would host a meeting for investors and analysts later this week at i2 Planet 2007. The meeting is scheduled from 2-4 p.m. EDT on Thursday, May 3 at the JW Marriott Grande Lakes in Orlando, Fla. The meeting will be open to the public via webcast and available on the company’s web site at http://www.i2.com/investor.
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