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OTTAWA, Jul 03, 2008 (BUSINESS WIRE) -- Corel Corporation (NASDAQ:CREL) (TSX:CRE) today reported financial results for its second quarter ended May 31, 2008. Revenues in the second quarter of fiscal 2008 were $67.0 million, compared to $65.0 million in the second quarter fiscal 2007. GAAP net income in the second quarter of fiscal 2008 was $930,000, or $0.04 per basic and diluted share, compared to GAAP net income of $2.3 million, or $0.09 per basic and diluted share, in the second quarter of fiscal 2007.
Non-GAAP adjusted net income for the second quarter fiscal 2008 was $9.5 million, or $0.36 per diluted share, compared to non-GAAP adjusted net income for the second quarter of fiscal 2007 of $9.8 million, or $0.39 per diluted share. Non-GAAP adjusted EBITDA in the second quarter of 2008 was $14.9 million, compared to $15.2 million in the second quarter of 2007.
"Corel performed well in the second quarter, reflecting the diversity of the Company's products and distribution channels and the strength of its brand in key geographies," said Kris Hagerman, Interim Chief Executive Officer, Corel Corporation. "We continue to successfully execute our core strategy which is to drive profitable growth by pursuing opportunities in faster growing markets, while delivering consistent growth and profits from our more established product lines and channels. As Corel's results for the second quarter illustrate, we continue to benefit from our highly diversified business model."
Financial Guidance
Third Quarter Fiscal 2008 Guidance
Corel provided guidance for the third quarter ending August 30, 2008. The Company currently expects:
-- Revenue in the range of $63 million to $65 million.
-- GAAP net income in the range of break even to $1.6 million and non-GAAP adjusted net income in the range of $8.0 million to $9.5 million.
-- GAAP earnings per share in the range of $0.00 to $0.06 and non-GAAP earnings per share in the range of $0.30 to $0.36.
Fiscal 2008 Guidance
Resulting guidance for the year ending November 30, 2008 is as follows:
-- Revenue in the range of $263 million to $275 million.
-- GAAP net income of $8.5 million to $13.5 million and non-GAAP adjusted net income of $40.5 million to $46.0 million.
-- GAAP income per share of $0.30 to $0.50 and non-GAAP earnings per share of $1.50 to $1.70.
Corel will host a conference call to discuss its financial results at 8:00 a.m. Eastern Time today. To access the conference call, please dial (877) 419-6600 or (719) 325-4860 approximately 5 minutes prior to the 8:00 a.m. ET start time. A live webcast will also be available through Corel's Investor Relations website at http://investor.corel.com/events.cfm. Following the call, an audio replay will be available between 11:00 a.m. ET July 3, 2008 and midnight ET July 16, 2008 from Corel's Investor Relations website or by calling (888) 203-1112 or (719) 457-0820, Passcode: 8074180.
Forward-Looking Statements:
This news release includes forward-looking statements that are based on certain assumptions and reflect our current expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance, or achievements discussed or implied by such forward-looking statements. Such risks include the pending proposed offer from our majority shareholder Corel Holdings, L.P. (which is controlled by an affiliate of Vector Capital Corporation) ("CHLP") and the ongoing evaluation of the strategic alternatives by the Special Committee, which create additional expense for the company and cause uncertainty which could affect our ability to retain customers and employees. There can be no assurance that any transaction with CHLP or any other party will be consummated. Such risks also include competitive threats from well established software companies that have significantly greater market share and resources than us and from online services companies that are increasingly seeking to provide software products at little or no incremental cost to their customers to expand their Internet presence and build consumer loyalty. We rely on a small number of key strategic relationships for a significant percentage of our revenue and these relationships can be modified or terminated at any time. In addition, our core products have been marketed for many years and the packaged software market in North America and Europe is relatively mature and characterized by modest growth. Accordingly, we must successfully complete acquisitions, penetrate new markets or increase penetration of our installed base to achieve revenue growth. In addition, we face potential claims from third parties who may hold patent and other intellectual property rights which purport to cover various aspects of our products and from certain of our customers who may be entitled to indemnification from us in respect of potential claims they may receive from third parties related to their use or distribution of our products.
These and other risks, uncertainties and other important factors are described in Corel's Annual Report dated February 8, 2008, and in Corel's 10-Q dated April 7, 2008 filed with the Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA) under the caption "Risk Factors" and elsewhere. A copy of the Corel Annual Report and 10-Q can be obtained on Corel's website, on the SEC's website at http://www.sec.gov or on the CSA's website at http://www.sedar.com. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based.
Financial Presentation and Use of Non-GAAP Measures:
Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, which differ in certain material respects from Canadian generally accepted accounting principles. In addition, our financial statements and information in this release are presented in U.S. Dollars, unless otherwise indicated. This news release includes certain non-GAAP financial measures, such as adjusted net income and adjusted EBITDA. We use these non-GAAP financial measures to confirm our compliance with covenants contained in our debt facilities, as supplemental indicators of our operating performance and to assist in evaluation of our liquidity. These measures do not have any standardized meanings prescribed by GAAP and therefore are not comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance or changes in cash flows calculated in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the closest GAAP measures are set out in the notes to the financial statements attached to this news release.
About Corel
Corel is one of the world's top software companies with more than 100 million active users in over 75 countries. We develop software that helps people express their ideas and share their stories in more exciting, creative and persuasive ways. Through the years we've built a reputation for delivering innovative, trusted products that are easy to learn and use, helping people achieve new levels of productivity. The industry has responded with hundreds of awards for software innovation, design and value.
Our award-winning product portfolio includes some of the world's most widely recognized and popular software brands, including CorelDRAW(R) Graphics Suite, Corel(R) Paint Shop Pro(R) Photo, Corel(R) Painter(TM), VideoStudio(R), WinDVD(R), Corel(R) WordPerfect(R) Office and WinZip(R). Our global headquarters are in Ottawa, Canada, with major offices in the United States, United Kingdom, Germany, China, Taiwan and Japan.
(C) 2008 Corel Corporation. All rights reserved. Corel, CorelDRAW, Paint Shop Pro, Painter, Corel DESIGNER, VideoStudio, WordPerfect, WinDVD, WinZip, iGrafx, and the Corel logo are trademarks or registered trademarks of Corel Corporation and/or its subsidiaries. All other product, font and company names and logos are trademarks or registered trademarks of their respective companies.
CRELF
Corel Corporation
Quarterly Financial results
For the quarter ended May 31, 2008
(in thousands, except per share data; unaudited)
------------------ ------------------
Three Months ended Six Months ended
May 31, May 31, May 31, May 31,
Consolidated Condensed Statement
of Operations 2008 2007 2008 2007
------------------ ------------------
Revenues - Product $ 60,249 $ 59,553 $119,611 $106,857
Revenues - Maintenance and
services 6,795 5,479 12,977 10,809
-------------------------------- ------------------ ------------------
Total revenues 67,044 65,032 132,588 117,666
-------------------------------- ------------------ ------------------
Cost of revenues - Product 14,008 14,026 29,235 22,523
Cost of revenues - Maintenance
and services 132 221 299 419
Amortization of intangible
assets 6,418 6,373 12,832 12,130
-------------------------------- ------------------ ------------------
Total cost of revenues 20,558 20,620 42,366 35,072
-------------------------------- ------------------ ------------------
Gross margin 46,486 44,412 90,222 82,594
-------------------------------- ------------------ ------------------
Operating expenses
Sales and marketing 20,748 17,715 40,432 34,990
Research and development 11,716 11,070 23,807 22,666
General and administration 8,640 8,575 17,451 17,237
Acquired in-process research
and development - - - 7,831
InterVideo integration expense - 860 - 1,645
Restructuring 447 - 625 -
-------------------------------- ------------------ ------------------
Total operating expenses 41,551 38,220 82,315 84,369
-------------------------------- ------------------ ------------------
Income (loss) from operations 4,935 6,192 7,907 (1,775)
Other expenses (income)
Interest Income (99) (518) (219) (882)
Interest expense 3,032 4,236 7,440 8,521
Amortization of deferred
financing fees 270 269 540 534
Expenses associated with
Special Committee review 705 - 705 -
Other non-operating expense
(income) 102 479 (1,362) (153)
-------------------------------- ------------------ ------------------
Income (loss) before income
taxes 925 1,726 803 (9,795)
Income tax (recovery) (5) (587) (97) (232)
-------------------------------- ------------------ ------------------
Net income (loss) $ 930 $ 2,313 $ 900 $ (9,563)
-------------------------------- ------------------ ------------------
Net loss per share:
Basic $ 0.04 $ 0.09 $ 0.04 $ (0.39)
Fully diluted $ 0.04 $ 0.09 $ 0.03 $ (0.39)
Weighted average number of
shares:
Basic 25,543 24,817 25,503 24,722
Fully diluted 26,238 25,284 26,165 24,722
Consolidated Condensed Balance Sheet
------------------------
May 31, November 30,
2008 2007
------------------------
Assets
Current assets:
Cash and cash equivalents $ 33,415 $ 24,615
Restricted cash 161 217
Accounts receivable
Trade, net 28,775 41,092
Other 2,958 118
Inventory 932 729
Income taxes recoverable 1,649 1,470
Prepaids and other current assets 3,930 3,276
-------------------------------------------- ------------------------
Total current assets 71,820 71,517
Capital assets 9,176 8,971
Intangible assets 79,471 92,010
Goodwill 88,643 88,643
Deferred financing and other long-term
assets 5,641 5,696
--------------------------------------------- ------------------------
Total assets $ 254,751 $ 266,837
--------------------------------------------- ------------------------
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable and accrued liabilities $ 58,089 $ 67,290
Income taxes payable 944 723
Deferred revenue 12,816 15,707
Current portion of long-term debt 18,952 2,249
Current portion of obligations under
capital leases 728 767
-------------------------------------------- ------------------------
Total current liabilities 91,529 86,736
Deferred revenue 2,179 2,365
Deferred income tax liability 18,287 20,754
Obligations under capital leases 1,600 2,114
Income taxes payable 13,201 11,693
Accrued pension benefit obligation 1,083 1,116
Long-term debt 138,561 156,359
--------------------------------------------- ------------------------
Total liabilities 266,440 281,137
--------------------------------------------- ------------------------
Shareholders' deficit
Share capital 42,182 40,652
Additional paid-in capital 7,763 5,926
Accumulated other comprehensive loss (1,425) (721)
Deficit (60,209) (60,157)
--------------------------------------------- ------------------------
Total shareholders' deficit (11,689) (14,300)
--------------------------------------------- ------------------------
--------------------------------------------- ------------------------
Total liabilities and shareholders' deficit $ 254,751 $ 266,837
--------------------------------------------- ------------------------
Consolidated Condensed Statement of Cash Flows
------------------- ------------------
Three Months ended Six Months ended
May 31, May 31, May 31, May 31,
2008 2007 2008 2007
------------------- ------------------
Cash flows from operating
activities
Net income (loss) $ 930 $ 2,313 $ 900 $ (9,563)
Depreciation and amortization 1,233 969 2,395 1,671
Amortization of deferred
financing fees 270 269 540 534
Amortization of intangible
assets 6,418 6,373 12,832 12,130
Stock-based compensation 1,977 1,290 3,115 2,298
Provision for bad debts 129 49 233 65
Deferred income taxes (1,233) (1,280) (2,467) (2,315)
Acquired in-process research
and development - - - 7,831
Unrealized loss on forward
exchange contracts - - - 35
Loss on disposal of fixed
assets 6 54 48 54
Loss (gain) on interest rate
swap recorded at fair value (512) (391) 243 (582)
Gain on sale of investment - - (822) -
Change in operating assets and
liabilities (2,308) (12,862) (3,700) 3,066
------------------------------- ------------------- ------------------
Cash flows provided by (used
in) operating activities 6,910 (3,216) 13,317 15,224
------------------------------- ------------------- ------------------
Cash flows from financing
activities
Restricted cash - - 56 -
Proceeds from operating line
of credit - 5,000 - 48,000
Repayments on operating line
of credit - (15,000) - (35,000)
Proceeds from long-term debt - - - 70,000
Repayments of long-term debt (404) (399) (1,095) (1,080)
Repayments of capital lease
obligations (205) - (339) -
Financing fees incurred - (5) - (1,677)
Proceeds from exercise of
stock options 203 1,387 254 2,689
Other financing activities - 51 - 51
------------------------------- ------------------- ------------------
Cash flows provided by (used
in) financing activities (406) (8,966) (1,124) 82,983
------------------------------- ------------------- ------------------
Cash flows from investing
activities
Purchase of InterVideo Inc,
net of cash acquired - (786) - (121,154)
Purchase of long lived assets (1,865) (608) (3,299) (718)
------------------------------- ------------------- ------------------
Cash flows used in investing
activities (1,865) (1,394) (3,299) (121,872)
------------------------------- ------------------- ------------------
Effect of exchange rate changes
on cash and cash equivalents (59) 80 (94) 45
Increase (decrease) in cash and
cash equivalents 4,580 (13,496) 8,800 (23,620)
Cash and cash equivalents,
beginning of period 28,835 40,906 24,615 51,030
------------------------------- ------------------- ------------------
Cash and cash equivalents, end
of period $ 33,415 $ 27,410 $33,415 $ 27,410
------------------------------- ------------------- ------------------
Non-GAAP Results
(In thousands, except per share data)
------------------ ------------------
Three Months ended Six Months ended
May 31, May 31, May 31, May 31,
2008 2007 2008 2007
------------------ ------------------
Non-GAAP Adjusted Net Income
Calculation:
Net income (loss) $ 930 $ 2,313 $ 900 $ (9,563)
Amortization of intangible
assets 6,418 6,373 12,832 12,130
Deferred income taxes (1,233) (1,280) (2,467) (2,315)
Stock-based compensation 1,977 1,290 3,115 2,298
Restructuring 447 - 625 -
InterVideo integration expense - 860 - 1,645
Expenses associated with
Special Committee review 705 - 705 -
Acquired in-process research
and development - - - 7,831
Amortization of deferred
financing fees 270 269 540 534
------------------------------ ------------------ ------------------
Non-GAAP Adjusted Net Income $ 9,514 $ 9,825 $ 16,250 $ 12,560
------------------------------ ------------------ ------------------
Percentage of revenue 14.2% 15.1% 12.3% 10.7%
Pro-forma diluted non-GAAP
adjusted net income per share $ 0.36 $ 0.39 $ 0.62 $ 0.50
Shares used in computing
proforma diluted non-GAAP
adjusted net income per
share 26,238 25,284 26,165 25,307
Non-GAAP Adjusted EBITDA
Calculation:
Cash flows provided by
operating activities $ 6,910 $(3,216) $ 13,317 $ 15,224
Change in operating assets and
liabilities 2,308 12,862 3,700 (3,066)
Interest expense, net 2,933 3,718 7,221 7,639
Income tax (recovery) (5) (587) (97) (232)
Deferred income taxes 1,233 1,280 2,467 2,315
Provision for bad debts (129) (49) (233) (65)
Unrealized loss on forward
exchange contracts - - - (35)
Gain (loss) on interest rate
swap 512 391 (243) 582
Loss on disposal of fixed
assets (6) (54) (48) (54)
Gain on sale of investment - - 822 -
Expenses associated with
Special Committee review 705 - 705 -
InterVideo integration expense - 860 - 1,645
Restructuring 447 - 625 -
------------------------------ ------------------ ------------------
Non-GAAP Adjusted EBITDA $ 14,908 $15,205 $ 28,236 $ 23,953
------------------------------ ------------------ ------------------
Percentage of revenue 22.2% 23.4% 21.3% 20.4%
Other Supplemental Information
(In thousands)
------------------ ------------------
Three Months ended Six Months ended
May 31, May 31, May 31, May 31,
2008 2007 2008 2007
------------------ ------------------
Revenue by Product Segment
Graphics and Productivity $ 38,497 $ 34,517 $ 75,444 $ 68,582
Digital Media 28,547 30,515 57,144 49,084
------------------------------ ------------------ ------------------
Total $ 67,044 $ 65,032 $132,588 $117,666
------------------------------ ------------------ ------------------
As percentage of revenues
Graphics and Productivity 57.4% 53.1% 56.9% 58.3%
Digital Media 42.6% 46.9% 43.1% 41.7%
------------------------------ ------------------ ------------------
Total 100.0% 100.0% 100.0% 100.0%
------------------------------ ------------------ ------------------
Revenue by Geography
Americas $ 32,793 $ 33,015 $ 63,690 $ 60,208
EMEA 19,564 17,108 40,577 34,766
APAC 14,687 14,909 28,321 22,692
------------------------------ ------------------ ------------------
Total $ 67,044 $ 65,032 $132,588 $117,666
------------------------------ ------------------ ------------------
As percentage of revenues
Americas 48.9% 50.8% 48.0% 51.2%
EMEA 29.2% 26.3% 30.6% 29.5%
APAC 21.9% 22.9% 21.4% 19.3%
------------------------------ ------------------ ------------------
Total 100.0% 100.0% 100.0% 100.0%
------------------------------ ------------------ ------------------
Allocation of Stock-Based Compensation
Expense
Cost of revenues - Product $ 5 $ 9 $ 15 $ 18
Cost of revenues - Maintenance
and service 2 2 4 4
Sales and marketing 504 311 899 581
Research and development 329 293 536 488
General and administration 1,137 675 1,661 1,207
------------------------------ ------------------ ------------------
Total $ 1,977 $ 1,290 $ 3,115 $ 2,298
------------------------------ ------------------ ------------------
SOURCE: Corel Corporation
Corel Corporation Catherine Hughes, 613-728-0826 ext. 1659 (Press) catherine.hughes@corel.com or The Blueshirt Group Todd Friedman, 415-217-7722 (Investor Relations) todd@blueshirtgroup.com Stacie Bosinoff, 415-217-7722 (Investor Relations) stacie@blueshirtgroup.com
Copyright Business Wire 2008
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