(Source: Business Wire)
Corel Corporation (NASDAQ:CREL) (TSX:CRE) today reported financial results for its second quarter ended May 31, 2009. Revenues in the second quarter of fiscal 2009 were $50.4 million, compared to $67.0 million in the second quarter of fiscal 2008. GAAP net loss in the second quarter of fiscal 2009 was $4.1 million or $0.16 per basic and diluted share, compared to GAAP net income of $930,000, or $0.04 per basic and diluted share, in the second quarter of fiscal 2008.
Non-GAAP adjusted net income for the second quarter of fiscal 2009 was $5.6 million, or $0.22 per diluted share, compared to non-GAAP adjusted net income for the second quarter of fiscal 2008 of $9.5 million, or $0.36 per diluted share. Non-GAAP adjusted EBITDA in the second quarter of 2009 was $10.1 million, compared to $14.9 million in the second quarter of 2008.
A reconciliation of GAAP net income to non-GAAP adjusted net income and non-GAAP adjusted EBITDA is provided in the notes to the financial information included in this press release.
"While Corel continued to feel the effects of the economic climate, we took proactive steps to reduce expenses and were pleased by the industry recognition we received for our innovative efforts to improve user experience," said Kris Hagerman, Interim CEO, Corel. "We continue to invest in the product strategies, distribution channels and regions that will further strengthen our competitive position and support our long term growth as the economy improves."
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) 795-3613 or (719) 325-4799 approximately 5 minutes prior to the 8:00 AM 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 beginning at 11:00 AM ET on July 10, 2009 from Corel's Investor Relations website or by calling (888) 203-1112 or (719) 457-0820, Passcode: 4081313.
Financial Statements Governance Practice:
The Audit Committee of Corel's Board of Directors reviewed the earnings portion of this press release as well as the related financial statements and MD&A, and recommended they be approved by the Board of Directors. Following review by the full Board, the financial statements, MD&A and the earnings portion of this press release were approved.
Forward Looking Statements:
This news release includes forward-looking statements which are based on estimates and assumptions made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances including but not limited to general economic conditions, product pricing levels and competitive intensity, and new product introductions.
Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause 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 recent disruption in the overall economy and financial and credit markets, which may adversely impact our operations and financial results as well as our ability to obtain financing required to grow our business and make acquisitions. We may experience fluctuations in our operating results depending on the timing and success of product releases. 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, establish relationships with new original equipment manufacturer customers, or increase penetration of our installed base to achieve revenue growth. The long-term trend in our business reflects growth in revenues from acquisitions, which give rise to their own risks and challenges, rather than from our existing products, and that recent growth may not be representative of future growth. We face 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, 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. Any resulting litigation costs, settlement costs or royalty requirements could affect our profitability.
These and other risks, uncertainties and other important factors are described in Corel's Annual Report dated February 9, 2009, 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 such other filings 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. These factors should be considered carefully, and readers should not place undue reliance on our forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any intention 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, except as required by law.
Financial Presentation and Use of Non-GAAP Measures:
Our financial statements are 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, to assist in evaluation of our ongoing operations and liquidity and to determine appropriate levels of indebtedness. We believe each of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. 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. These non-GAAP financial measures should not be considered in isolation, and should not be viewed as alternatives to measures of financial performance or changes in cash flows calculated in accordance with GAAP. We believe it is useful for ourselves and investors to review, as applicable, both GAAP information, which includes interest, income taxes, depreciation, amortization, provision for bad debts, effects of disposal or fixed assets and investments, restructuring, integration and reorganization costs, and certain other gains, losses and expenses, and the non-GAAP measures, which exclude certain of these amounts, in order to assess the performance of our continuing operations and for planning and forecasting in future periods. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to the closest GAAP measures as 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® Graphics Suite, Corel® Painter, Corel DESIGNER® Technical Suite, Corel® Paint Shop Pro® Photo, VideoStudio®, WinDVD®, Corel® WordPerfect® Office and WinZip®. Our global headquarters are in Ottawa, Canada, with major offices in the United States, United Kingdom, Germany, China, Taiwan and Japan.
© 2009 Corel Corporation. All rights reserved. Corel, CorelDRAW, Corel DESIGNER, Painter, Paint Shop Pro, VideoStudio, WinDVD, WinZip, WordPerfect, and the Corel logo are trademarks or registered trademarks of Corel Corporation and/or its subsidiaries. All other product names and any registered and unregistered trademarks mentioned are used for identification purposes only and remain the exclusive property of their respective owners.
CRELF
Corel Corporation Quarterly Financial results For the quarter ended May 31, 2009 (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 2009 2008 2009 2008 Revenues - Product $ 44,280 $ 60,249 $ 94,355 $ 119,611 Revenues - Maintenance and services 6,088 6,795 12,227 12,977 Total revenues 50,368 67,044 106,582 132,588 Cost of revenues - Product 14,366 14,008 29,897 29,235 Cost of revenues - Maintenance and services 110 132 210 299 Amortization of intangible assets 6,154 6,418 12,319 12,832 Total cost of revenues 20,630 20,558 42,426 42,366 Gross margin 29,738 46,486 64,156 90,222 Operating expenses Sales and marketing 14,820 20,748 30,042 40,432 Research and development 9,180 11,716 18,396 23,807 General and administration 5,945 8,640 12,424 17,451 Restructuring 1,404 447 1,613 625 Total operating expenses 31,349 41,551 62,475 82,315 Income (loss) from operations (1,611 ) 4,935 1,681 7,907 Other expenses (income) Interest expense - net 2,969 2,933 6,023 7,221 Amortization of deferred financing fees 271 270 542 540 Expenses associated with evaluation of strategic alternatives - 705 - 705 Other non-operating (income) expense (1,774 ) 102 (898 ) (1,362 ) Income (loss) before income taxes (3,077 ) 925 (3,986 ) 803 Income tax provision (recovery) 1,048 (5 ) 1,675 (97 ) Net income (loss) $ (4,125 ) $ 930 $ (5,661 ) $ 900 Net loss per share: Basic $ (0.16 ) $ 0.04 $ (0.22 ) $ 0.04 Fully diluted $ (0.16 ) $ 0.04 $ (0.22 ) $ 0.03 Weighted average number of shares: Basic 25,878 25,543 25,860 25,503 Fully diluted 25,878 26,238 25,860 26,165 -------------------------------------------------------------------------------
Consolidated Condensed Balance Sheet May 31, November 30, 2009 2008 Assets Current assets: Cash and cash equivalents $ 32,127 $ 50,260 Restricted cash 159 159 Accounts receivable Trade, net of allowance for doubtful accounts 29,033 33,241 Other 1,889 2,932 Inventory 1,138 1,562 Income taxes recoverable 719 785 Deferred tax assets - 3,138 Prepaids and other current assets 3,530 2,456 Total current assets 68,595 94,533 Capital assets 9,475 10,549 Intangible assets 54,520 67,029 Goodwill 80,993 82,343 Deferred financing and other long-term assets 4,407 4,942 Total assets $ 217,990 $ 259,396 Liabilities and shareholders' deficit Current liabilities: Accounts payable and accrued liabilities $ 53,470 $ 64,376 Due to related parties 334 341 Income taxes payable 1,404 1,226 Deferred revenue 11,461 15,190 Current portion of long-term debt 14,385 19,095 Current portion of obligations under capital leases 732 621 Total current liabilities 81,786 100,849 Deferred revenue 1,987 2,404 Income taxes payable 13,232 12,960 Deferred income taxes 8,431 13,059 Long-term debt 123,729 137,264 Accrued pension benefit obligation 243 261 Obligations under capital leases 701 962 Total liabilities 230,109 267,759 Shareholders' deficit Share capital 44,718 43,992 Additional paid-in capital 10,867 9,198 Accumulated other comprehensive loss (4,641 ) (4,151 ) Deficit (63,063 ) (57,402 ) Total shareholders' deficit (12,119 ) (8,363 ) Total liabilities and shareholders' deficit $ 217,990 $ 259,396 -------------------------------------------------------------------------------
Consolidated Condensed Statement of Cash Flows Three Months ended Six Months ended May 31, May 31, May 31, May 31, 2009 2008 2009 2008 Cash flow from operating activities Net income (loss) $ (4,125 ) $ 930 $ (5,661 ) $ 900 Depreciation and amortization 1,119 1,233 2,299 2,395 Amortization of deferred financing fees 271 270 542 540 Amortization of intangible assets 6,154 6,418 12,319 12,832 Stock-based compensation 1,307 1,977 2,360 3,115 Provision for (recovery of) bad debts 80 129 (29 ) 233 Deferred income taxes 605 (1,233 ) (140 ) (2,467 ) Loss on disposal of fixed assets 17 6 18 48 Loss (gain) on interest rate swap recorded at fair value (122 ) (512 ) (219 ) 243 Unrealized gain on forward foreign exchange contracts (45 ) - (45 ) - Gain on sale of investment - - - (822 ) Defined benefit pension plan costs 15 - 22 - Change in operating assets and liabilities (4,496 ) (2,308 ) (10,715 ) (3,700 ) Cash flow provided by (used in) operating activities 780 6,910 751 13,317 Cash flow from financing activities Restricted cash - - - 56 Repayments of long-term debt (17,846 ) (404 ) (18,245 ) (1,095 ) Repayments of capital lease obligations (190 ) (205 ) (366 ) (339 ) Proceeds from exercise of stock options 1 203 35 254 Other financing activities (21 ) - (50 ) - Cash flow provided by (used in) financing activities (18,056 ) (406 ) (18,626 ) (1,124 ) Cash flow from investing activities Purchase of long-lived assets (269 ) (1,865 ) (1,053 ) (3,299 ) Cash flow used in investing activities (269 ) (1,865 ) (1,053 ) (3,299 ) Effect of exchange rate changes on cash and cash equivalents 999 (59 ) 795 (94 ) Increase (decrease) in cash and cash equivalents (16,546 ) 4,580 (18,133 ) 8,800 Cash and cash equivalents, beginning of period 48,673 28,835 50,260 24,615 Cash and cash equivalents, end of period $ 32,127 $ 33,415 $ 32,127 $ 33,415 -------------------------------------------------------------------------------
Non-GAAP Results (In thousands, except per share data) Three Months ended Six Months ended May 31, May 31, May 31, May 31, 2009 2008 2009 2008 Non-GAAP Adjusted Net Income Calculation: Net income (loss) $ (4,125 ) $ 930 $ (5,661 ) $ 900 Amortization of intangible assets 6,154 6,418 12,319 12,832 Tax benefit on amortization of intangible assets 605 (1,233 ) (140 ) (2,467 ) Stock-based compensation 1,307 1,977 2,360 3,115 Restructuring 1,404 447 1,613 625 Expenses associated with evaluation of strategic alternatives - 705 - 705 Amortization of deferred financing fees 271 270 542 540 Non-GAAP Adjusted Net Income $ 5,616 $ 9,514 $ 11,033 $ 16,250 Percentage of revenue 11.1 % 14.2 % 10.4 % 12.3 % Diluted non-GAAP adjusted net income per share $ 0.22 $ 0.36 $ 0.42 $ 0.62 Shares used in computing diluted non-GAAP adjusted net income per share 26,063 26,238 26,120 26,165 Non-GAAP Adjusted EBITDA Calculation: Cash flow provided by (used in) operating activities $ 780 $ 6,910 $ 751 $ 13,317 Change in operating assets and liabilities 4,496 2,308 10,715 3,700 Interest expense, net 2,969 2,933 6,023 7,221 Income tax expense (recovery) 1,048 (5 ) 1,675 (97 ) Deferred income taxes (605 ) 1,233 140 2,467 Recovery (provision) for bad debts (80 ) (129 ) 29 (233 ) Defined benefit pension plan costs (15 ) - (22 ) - Unrealized gain on forward foreign exchange contracts 45 - 45 - Gain on sale of investment - - - 822 Gain (loss) on interest rate swap recorded at fair value 122 512 219 (243 ) Loss on disposal of fixed assets (17 ) (6 ) (18 ) (48 ) Expenses associated with evaluation of strategic alternatives - 705 - 705 Restructuring 1,404 447 1,613 625 Non-GAAP Adjusted EBITDA $ 10,147 $ 14,908 $ 21,170 $ 28,236 Percentage of revenue 20.1 % 22.2 % 19.9 % 21.3 % -------------------------------------------------------------------------------
Other Supplemental Information (In thousands) Three Months ended Six Months ended May 31, May 31, May 31, May 31, 2009 2008 2009 2008 Revenue by Product Segment Graphics and Productivity $ 27,582 $ 38,497 $ 57,236 $ 75,444 Digital Media 22,786 28,547 49,346 $ 57,144 Total $ 50,368 $ 67,044 $ 106,582 $ 132,588 As percentage of revenues Graphics and Productivity 54.8 % 57.4 % 53.7 % 56.9 % Digital Media 45.2 % 42.6 % 46.3 % 43.1 % Total 100.0 % 100.0 % 100.0 % 100.0 % Revenue by Geography Americas $ 24,997 $ 32,793 $ 51,166 $ 63,690 EMEA 11,249 19,564 26,369 40,577 APAC 14,122 14,687 29,047 28,321 Total $ 50,368 $ 67,044 $ 106,582 $ 132,588 As percentage of revenues Americas 49.6 % 48.9 % 48.0 % 48.0 % EMEA 22.3 % 29.2 % 24.7 % 30.6 % APAC 28.0 % 21.9 % 27.3 % 21.4 % Total 100.0 % 100.0 % 100.0 % 100.0 % Allocation of Stock-Based Compensation Expense Cost of revenues - Product $ 3 $ 5 $ 7 $ 15 Cost of revenues - Maintenance and services 2 2 4 4 Sales and marketing 631 504 947 899 Research and development 176 329 343 536 General and administration 495 1,137 1,059 1,661 Total $ 1,307 $ 1,977 $ 2,360 $ 3,115 -------------------------------------------------------------------------------
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