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Rally Software predicting more revenue gains for Q2

BOULDER – Following strong gains reported in its first quarter, Rally Software is now predicting its second quarter expectations will also be higher than originally projected.

In its first year since going public, the Boulder-based company reported a 24 percent year-over-year increase in revenue for the first quarter of its 2014 fiscal year, which ended April 30. The company, which offers cloud-based solutions for managing Agile software development, reported total revenues of $16 million for that period.

For the second quarter, which ends July 31, Rally is projecting total revenue in the range of $18.6 million to $19.1 million, representing growth of 36 percent to 40 percent over the same quarter of fiscal 2013. The company had earlier predicted total revenue in the range of $17.25 to $17.75 million.

In other estimates for Q2, the company expects:

  • Subscription and support revenue in the range of $14.0 million to $14.2 million, representing 34 percent to 36 percent growth over the second quarter of fiscal 2013
  • Perpetual license revenue in the range of $2.1 million to $2.3 million, representing 49 percent to 63 percent growth
  • Professional services revenue in the range of $2.5 million to $2.6 million, representing 42 percent to 47 percent growth
  • Net loss per basic and diluted share is expected to be approximately $0.19 to $0.17, based on 24.0 million weighted average shares of common stock outstanding
  • Cash flow from operating activities to be negative, reflecting continued investment in Rally's business.

For the full fiscal year 2014, management expects total revenue to be in the range of $72.0 to $74.0 million, representing 27 percent to 30 percent growth over fiscal year 2013; subscription and support revenue to be in the range of $58.0 to $58.8 million, representing 32 percent to 34 percent growth over fiscal year 2013; and a net loss per basic and diluted share of approximately $1.19 to $1.16, based on 19.8 million weighted average shares of common stock outstanding.

Other first quarter results showed subscription and support revenue increased 40 percent over the same period a year ago to $13.4 million. Gross margin for the quarter was 78 percent as compared to 79 percent from the same period a year ago. The company sold more than 15,000 seats in the quarter, bringing total paid seat count to more than 184,000. The first quarter results were reported June 6.

“We are delighted to report record results for our first quarter as a public company,” said Tim Miller, Chairman and CEO of Rally. “As our financials demonstrate, we experienced good momentum across the business and had notable new customer wins in many key industries and geographies.”

Along with the first quarter numbers, the company also announced new customers, including a major healthcare provider in the U.S., banks in North America and Europe, and a large retailer in the UK and Europe. Miller also said the company expanded engagements with existing customers, including a major Internet search provider that increased its seat count by 200 percent in the first quarter.

“The number of new companies developing their businesses based on Agile and Rally from inception is not only driving our revenue in the near term, but makes us highly optimistic about our continued success well into the future,” Miller said.

Despite the revenue gains, the company experienced a net loss of $5.8 million for the first quarter, or $0.98 per basic and diluted share, based on 5.9 million weighted average shares of common stock outstanding. The company said the net loss was primarily related to the company’s continued investment for future growth of the business. For the same period last year, Rally reported a net loss of $1.7 million, or $0.86 per basic and diluted share, based on 2.0 million weighted average shares of common stock outstanding.

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