(Source: Business Wire)
Corel Corporation (NASDAQ:CREL) (TSX:CRE) today reported financial
results for its third quarter ended August 31, 2009. Revenues in the
third quarter of fiscal 2009 were $47.4 million, compared to $66.2
million in the third quarter of fiscal 2008. GAAP net income in the
third quarter of fiscal 2009 was $0.5 million or $0.02 per basic and
diluted share, compared to GAAP net income of $1.6 million or $0.06 per
basic and diluted share, in the third quarter of fiscal 2008.
Non-GAAP adjusted net income for the third quarter of fiscal 2009 was
$7.2 million, or $0.27 per diluted share, compared to non-GAAP adjusted
net income for the third quarter of fiscal 2008 of $10.2 million, or
$0.39 per diluted share. Non-GAAP adjusted EBITDA in the third quarter
of fiscal 2009 was $9.6 million, compared to $15.8 million in the third
quarter of fiscal 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.
"In the third quarter, Corel demonstrated not only strong financial
management through a difficult period, but also our commitment to
innovation," said Kris Hagerman, Corel CEO. "Our release of Corel
Digital Studio taps into the dramatic growth of digital photo capture
and video creation, and makes it much easier for consumers to make the
most of their digital memories. By delivering a better user experience
and superior value, we believe we will be well positioned as the economy
improves and consumer confidence returns."
Corel will host a conference call to discuss its financial results at
4:30 PM Eastern Time today. To access the conference call, please dial
(877) 627-6580 or (719) 325-4900 approximately 5 minutes prior to the
4:30 PM 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 7:30
PM ET on October 1, 2009 from Corel's Investor Relations website or by
calling (888) 203-1112 or (719) 457-0820, Passcode: 6894738.
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, Corel® VideoStudio®, Corel® WinDVD®, Corel®
WordPerfect® Office, WinZip®, and the recently released Corel® Digital
Studio 2010. 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, Paint
Shop Pro, Painter, Corel DESIGNER, VideoStudio, WordPerfect, WinDVD,
WinZip, Digital Studio, 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 August 31, 2009
(in thousands, except per share data; unaudited)
Three Months ended Nine Months ended
August 31, August 31 August 31, August 31
Consolidated Condensed Statement of Operations 2009 2008 2009 2008
Revenues - Product $ 41,712 $ 59,725 $ 136,067 $ 179,336
Revenues - Maintenance and services 5,669 6,503 17,896 19,480
Total revenues 47,381 66,228 153,963 198,816
Cost of revenues - Product 12,688 15,218 42,585 44,453
Cost of revenues - Maintenance and services 164 113 374 412
Amortization of intangible assets 6,152 6,418 18,471 19,250
Total cost of revenues 19,004 21,749 61,430 64,115
Gross margin 28,377 44,479 92,533 134,701
Operating expenses
Sales and marketing 13,738 17,941 43,780 58,373
Research and development 7,940 10,610 26,336 34,417
General and administration 5,120 8,378 17,544 25,829
Restructuring (28 ) 293 1,585 918
Total operating expenses 26,770 37,222 89,245 119,537
Income from operations 1,607 7,257 3,288 15,164
Other expenses (income)
Interest expense - net 2,761 3,540 8,784 10,761
Amortization of deferred financing fees 271 270 813 810
Expenses associated with evaluation of strategic alternatives - 992 - 1,697
Other non-operating (income) expense 165 1,034 (733 ) (328 )
Income (loss) before income taxes (1,590 ) 1,421 (5,576 ) 2,224
Income tax provision (recovery) (2,119 ) (177 ) (444 ) (274 )
Net income (loss) $ 529 $ 1,598 $ (5,132 ) $ 2,498
Net loss per share:
Basic $ 0.02 $ 0.06 $ (0.20 ) $ 0.10
Fully diluted $ 0.02 $ 0.06 $ (0.20 ) $ 0.10
Weighted average number of shares:
Basic 25,899 25,704 25,873 25,570
Fully diluted 26,138 26,248 25,873 26,192
Consolidated Condensed Balance Sheet
August 31, November 30,
2009 2008
Assets
Current assets:
Cash and cash equivalents $ 18,902 $ 50,260
Restricted cash 9 159
Accounts receivable
Trade, net of allowance for doubtful accounts 22,587 33,241
Other 1,950 2,932
Inventory 1,149 1,562
Income taxes recoverable 155 785
Deferred tax assets - 3,138
Prepaids and other current assets 3,054 2,456
Total current assets 47,806 94,533
Capital assets 8,545 10,549
Intangible assets 48,237 67,029
Goodwill 80,993 82,343
Deferred financing and other long-term assets 4,136 4,942
Total assets $ 189,717 $ 259,396
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable and accrued liabilities $ 40,774 $ 57,746
Due to related parties 335 341
Income taxes payable 1,568 1,226
Deferred revenue 11,137 15,190
Current portion of long-term debt - 19,095
Current portion of interest rate swaps 3,778 3,096
Current portion of obligations under capital leases 739 621
Total current liabilities 58,331 97,315
Deferred revenue 1,841 2,404
Income taxes payable 10,987 12,960
Deferred income taxes 7,687 13,059
Long-term debt 117,768 137,264
Accrued pension benefit obligation 220 261
Interest rate swaps 2,410 3,534
Obligations under capital leases 517 962
Total liabilities 199,761 267,759
Shareholders' deficit
Share capital 44,800 43,992
Additional paid-in capital 11,800 9,198
Accumulated other comprehensive loss (4,110 ) (4,151 )
Deficit (62,534 ) (57,402 )
Total shareholders' deficit (10,044 ) (8,363 )
Total liabilities and shareholders' deficit $ 189,717 $ 259,396
Consolidated Condensed Statement of Cash Flows
Three Months ended Nine Months ended
August 31, August 31 August 31, August 31
2009 2008 2009 2008
Cash flows from operating activities
Net income (loss) $ 529 $ 1,598 $ (5,132 ) $ 2,498
Depreciation and amortization 1,075 1,022 3,374 3,417
Amortization of deferred financing fees 271 270 813 810
Amortization of intangible assets 6,152 6,418 18,471 19,250
Stock-based compensation 1,001 1,839 3,361 4,954
Provision for (recovery of) bad debts (28 ) 146 (57 ) 379
Change in tax uncertainties (2,245 ) (62 ) (1,973 ) 494
Deferred income taxes (744 ) (1,233 ) (884 ) (3,700 )
Loss on disposal of fixed assets - 19 18 67
Loss (gain) on interest rate swap recorded at fair value (200 ) (193 ) (419 ) 50
Unrealized gain on forward foreign exchange contracts - - (45 ) -
Gain on sale of investment - - - (822 )
Defined benefit pension plan costs (2 ) - 20 -
Change in operating assets and liabilities 1,496 (3,605 ) (9,491 ) (7,861 )
Cash flows provided by (used in) operating activities 7,305 6,219 8,056 19,536
Cash flows from financing activities
Reduction in restricted cash 150 2 150 58
Repayments of long-term debt (20,346 ) (755 ) (38,591 ) (1,850 )
Repayments of capital lease obligations (177 ) (318 ) (543 ) (657 )
Proceeds from exercise of stock options 14 231 49 485
Other financing activities (27 ) - (77 ) -
Cash flows provided by (used in) financing activities (20,386 ) (840 ) (39,012 ) (1,964 )
Cash flows from investing activities
Purchase of long-lived assets (14 ) (1,657 ) (1,067 ) (4,956 )
Cash flows used in investing activities (14 ) (1,657 ) (1,067 ) (4,956 )
Effect of exchange rate changes on cash and cash equivalents (130 ) - 665 (94 )
Increase (decrease) in cash and cash equivalents (13,225 ) 3,722 (31,358 ) 12,522
Cash and cash equivalents, beginning of period 32,127 33,415 50,260 24,615
Cash and cash equivalents, end of period $ 18,902 $ 37,137 $ 18,902 $ 37,137
Non-GAAP Results
(In thousands, except per share data)
Three Months ended Nine Months ended
August 31, August 31 August 31, August 31
2009 2008 2009 2008
Non-GAAP Adjusted Net Income Calculation:
Net income (loss) $ 529 $ 1,598 $ (5,132 ) $ 2,498
Amortization of intangible assets 6,152 6,418 18,471 19,250
Tax benefit on amortization of intangible assets (744 ) (1,233 ) (884 ) (3,700 )
Stock-based compensation 1,001 1,839 3,361 4,954
Restructuring (28 ) 293 1,585 918
Expenses associated with evaluation of strategic alternatives - 992 - 1,697
Amortization of deferred financing fees 271 270 813 810
Non-GAAP Adjusted Net Income $ 7,181 $ 10,177 $ 18,214 $ 26,427
Percentage of revenue 15.2 % 15.4 % 11.8 % 13.3 %
Diluted non-GAAP adjusted net income per share $ 0.27 $ 0.39 $ 0.70 $ 1.01
Shares used in computing diluted non-GAAP
adjusted net income per share 26,138 26,248 26,123 26,192
Non-GAAP Adjusted EBITDA Calculation:
Cash flows provided by (used in) operating activities $ 7,305 $ 6,219 $ 8,056 $ 19,536
Change in operating assets and liabilities (1,496 ) 3,605 9,491 7,861
Interest expense, net 2,761 3,540 8,784 10,761
Income tax expense (recovery) (2,119 ) (177 ) (444 ) (274 )
Change in tax uncertainties 2,245 62 1,973 (494 )
Deferred income taxes 744 1,233 884 3,700
Recovery (provision) for bad debts 28 (146 ) 57 (379 )
Defined benefit pension plan costs 2 - (20 ) -
Unrealized gain on forward foreign exchange contracts - - 45 -
Gain on sale of investment - - - 822
Gain (loss) on interest rate swap recorded at fair value 200 193 419 (50 )
Loss on disposal of fixed assets - (19 ) (18 ) (67 )
Expenses associated with evaluation of strategic alternatives - 992 - 1,697
Restructuring (28 ) 293 1,585 918
Non-GAAP Adjusted EBITDA $ 9,642 $ 15,795 $ 30,812 $ 44,031
Percentage of revenue 20.3 % 23.8 % 20.0 % 22.1 %
Other Supplemental Information
(In thousands)
Three Months ended Nine Months ended
August 31, August 31 August 31, August 31
2009 2008 2009 2008
Revenue by Product Segment
Graphics and Productivity $ 26,998 $ 37,913 $ 84,233 $ 113,357
Digital Media 20,383 28,315 69,730 85,459
Total $ 47,381 $ 66,228 $ 153,963 $ 198,816
As percentage of revenues
Graphics and Productivity 57.0 % 57.2 % 54.7 % 57.0 %
Digital Media 43.0 % 42.8 % 45.3 % 43.0 %
Total 100.0 % 100.0 % 100.0 % 100.0 %
Revenue by Geography
Americas $ 24,915 $ 33,000 $ 76,081 $ 96,690
EMEA 11,314 18,151 37,683 58,728
APAC 11,152 15,077 40,199 43,398
Total $ 47,381 $ 66,228 $ 153,963 $ 198,816
As percentage of revenues
Americas 52.6 % 49.8 % 49.4 % 48.6 %
EMEA 23.9 % 27.4 % 24.5 % 29.5 %
APAC 23.5 % 22.8 % 26.1 % 21.8 %
Total 100.0 % 100.0 % 100.0 % 100.0 %
Allocation of Stock-Based Compensation Expense
Cost of revenues - Product $ 3 $ 4 $ 10 $ 19
Cost of revenues - Maintenance and services 2 2 6 6
Sales and marketing 302 459 1,249 1,358
Research and development 160 232 503 767
General and administration 534 1,142 1,593 2,804
Total $ 1,001 $ 1,839 $ 3,361 $ 4,954
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