On Wednesday, Nov. 29, automation software maven Opsware (NASDAQ:OPSW) released Q3 2006 earnings for the period ended Oct. 31.

  • Excluding $4.24 million in stock-based compensation and a couple of smaller charges, Opsware made a pro forma profit of $544,000, or $0.01 per share.

  • While we're looking at nonstandard metrics anyway, let's give a nod to management's preferred growth measurement. Opsware likes to talk about non-EDS revenues, particularly when discussing growth rates, because there is a very predictable revenue stream of $4.8 million per quarter coming from a long-term contract with Electronic Data Systems (NYSE:EDS). On that basis, non-EDS sales grew by 97%.

  • Margins slipped a bit across the board, as the company builds out its sales and research departments. It looks like Opsware wants to be ready to meet increased demand for its products as the server virtualization boom gains traction, making software management automation more desirable.

(Figures in thousands, except per-share data)

Income Statement Highlights

Q3 2007

Q3 2006

Change

Sales

$25,041

$15,747

59%

Net Profit

($4,725)

($2,380)

(98.5%)

EPS

($0.05)

($0.02)

(150%)

Diluted Shares

103,326

98,292

5.1%



Get back to basics with a look at the income statement.

Margin Checkup

Q3 2007

Q3 2006

Change*

Gross Margin

73.39%

74.94%

(1.55)

Operating Margin

(23.45%)

(20.48%)

(2.97)

Net Margin

(18.87%)

(15.11%)

(3.76)

*Expressed in percentage points.

Margin History*

7/05

10/05

1/06

4/06

7/06

10/06

Gross

68.4

76.7

76.7

76.8

77.9

76.6

Operating

(35.8)

(25.5)

(24.9)

(19.7)

(13.4)

(27.6)

Net

(36.1)

(25.1)

(24.2)

(21.9)

(18.7)

(19.5)
*Data reflects trailing-12-month performance for the quarters ended in the named months, measured in percent.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q3 2007

Q3 2006

Change

Cash + ST Invest.

$91,206

$101,225

(9.9%)

Accounts Rec.

$20,237

$12,077

67.6%



Liabilities

Q3 2007

Q3 2006

Change

Accounts Payable

$1,254

$795

57.7%

Long-Term Debt

$0

$0

N/A

Deferred Revenue

$28,358

$25,512

11.2%



Learn the ways of the balance sheet.

Cash Flow Highlights

The company did not supply a cash flow statement at this time. Natch!

Find out why Fools always follow the money.

Cash Management Checkup

Q3 2007

Q3 2006

Change

Days in Receivables

74.2

52.1

22.1

Days Payables Outstanding

24.5

19.1

5.4



Read up on cash conversion metrics.

Major Customers:

  • EDS
  • UBS (NYSE:UBS)

Partners:

  • EMC (NYSE:EMC)
  • Cisco Systems (NASDAQ:CSCO)

Competitors:

  • Hewlett-Packard (NYSE:HPQ)
  • BMC Software (NYSE:BMC)

Related Foolishness:

Forty-five Motley Fool CAPS players pick Opsware to outperform the market. Five say it will underperform. Where do you stand? Join more than 14,000 fellow investors in the Fool's new stock-rating service and let your voice be heard .

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Fool contributor Anders Bylund had no position in any company mentioned. Fool rules are here .