Translate
OTTAWA, October 10 /CNW/ - Corel Corporation (NASDAQ:CREL) (TSX:CRE) today reported financial results for its third quarter ended August 31, 2007. Revenues in the third quarter of fiscal 2007 were $60.4 million, an increase of 46 percent over revenues of $41.3 million in the third quarter fiscal 2006. GAAP net loss in the third quarter of fiscal 2007 was $6.8 million, or $(0.27) per share, compared to GAAP net income of $5.5 million, or $0.22 per share, in the third quarter of fiscal 2006. GAAP net loss for the third quarter of 2007 includes a non-cash, one-time $5.0 million tax expense relating to the establishment of a valuation allowance against deferred tax assets acquired through the acquisition of InterVideo Inc.
Non-GAAP adjusted net income for the third quarter fiscal 2007 was $8.1 million, or $0.31 per diluted share, compared to non-GAAP adjusted net income for the third quarter of fiscal 2006 of $9.2 million, or $0.36 per diluted share. Non-GAAP adjusted EBITDA in the third quarter of 2007 was $13.5 million, compared to $12.4 million in the third quarter of fiscal 2006.
"Corel delivered another solid financial quarter, driven by our ability to successfully identify, acquire and integrate complementary companies and products," said David Dobson, CEO of Corel Corporation. "We were especially pleased with the performance of our Graphics and Productivity products where we experienced double digit year over year growth for CorelDraw Graphics Suite, WinZip, Painter, Designer and iGrafx. These results demonstrate the strong foundation that we derive from our diverse revenue mix across product categories, distribution channels and geographies."
Revenues for the nine months ended August 31, 2007 were $178.0 million, an increase of 37 percent over revenues of $129.8 million for the nine months ended August 31, 2006. GAAP net loss for the nine months ended August 31, 2007 was $16.3 million, or $(0.66) per share, compared to a GAAP net loss of $115,000, or $(0.01) per share, for the nine months ended August 31, 2006.
Non-GAAP adjusted net income for the nine months ended August 31, 2007 was $20.7 million, or $0.80 per diluted share, compared to non-GAAP adjusted net income for the nine months ended August 31, 2006 of $24.5 million, or $1.09 per diluted share. Non-GAAP adjusted EBITDA for the nine months ended August 31, 2007 was $37.4 million, compared to $40.5 million for the nine months ended August 31, 2006.
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.
Financial Guidance
Fourth Quarter Fiscal 2007 Guidance
Corel provided guidance for the fourth quarter ending November 30, 2007. The Company currently expects:
-- Revenue in the range of $66 million to $70 million.
-- GAAP net income in the range of $3.0 million to $5.0 million and non-GAAP adjusted net income in the range of $11.5 million to $13.5 million.
-- GAAP earnings per share in the range of $0.12 to $0.19 and non-GAAP earnings per share in the range of $0.43 to $0.52.
Fiscal 2007 Guidance
Resulting guidance for the year ending November 30, 2007 is as follows:
-- Revenue in the range of $244 million to $248 million.
-- GAAP net loss of $(13.3) million to $(11.3) million and non-GAAP adjusted net income of $32 million to $34 million.
-- GAAP loss per share of $(0.51) to $(0.44) and non-GAAP earnings per share of $1.24 to $1.33.
Corel will host a conference call to discuss its financial results at 4:30 p.m. Eastern Time today. To access the conference call, please dial (888) 211-7311 or (913) 312-0946. A live webcast and replay of the call will also be available through Corel's Investor Relations website at http://investor.corel.com/events.cfm. An audio replay of the call will be available between 7:30 p.m. (ET) October 10, 2007 and midnight (ET) October 24, 2007 by calling (888) 203-1112 or (719) 457-0820, Passcode: 8465039. The replay will also be available on our Investor Relations website. http://investor.corel.com/events.cfm
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 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 risks related to the acquisition of InterVideo, Inc., including the risk that disruption from the transaction may make it more difficult to maintain relationships with customers, employees, or suppliers. 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 23, 2007, filed with the Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA) and Corel's other filings including Corel's form 10-Q for the quarter ended May 31, 2007 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. In addition, these and other risks can be found in InterVideo's previous reports filed with the SEC under the caption "Risk Factors" and elsewhere, including InterVideo's 10-Q for the quarter ended September 30, 2006, which can be found on InterVideo's website or on the SEC's website at http://www.sec.gov. 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 closes GAAP measures are set out in the notes to the financial statements attached to this news release.
About Corel
Corel is a leading developer of graphics, productivity and digital media software with more than 100 million users worldwide. The Company's product portfolio includes some of the world's most popular and widely recognized software brands including CorelDRAW(R) Graphics Suite, Corel(R) Paint Shop Pro(R), Corel(R) Painter(TM), Corel DESIGNER(R), Corel(R) WordPerfect(R) Office, WinZip(R) and iGrafx(R). In 2006, Corel acquired InterVideo, makers of WinDVD(R), and Ulead, a leading developer of video, imaging and DVD authoring software. Designed to help people become more productive and express their creative potential, Corel's software strives to set a higher standard for value with full-featured products that are easier to learn and use. The industry has responded with hundreds of awards recognizing Corel's leadership in software innovation, design and value.
Corel's products are sold in more than 75 countries through a well-established network of international resellers, retailers, original equipment manufacturers, online providers and Corel's global websites. The Company's headquarters are located in Ottawa, Canada with major offices in the United States, United Kingdom, Germany, China, Taiwan and Japan. Corel's stock is traded on the NASDAQ under the symbol CREL and on the TSX under the symbol CRE.
(C) 2007 Corel Corporation. All rights reserved. Corel, CorelDRAW, Paint Shop Pro, Painter, Corel DESIGNER, WordPerfect, WinZip, iGrafx, WinDVD, InterVideo, Ulead 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 mentioned are used for identification purposes only and remain the exclusive property of their respective owners.
Corel Corporation
Quarterly Financial results
For the quarter ended Aug 31, 2007
(in thousands, except per share data; unaudited)
Consolidated Condensed Statement of Operations
------------------- -------------------
Three Months Nine Months
ended August 31, ended August 31,
2007 2006 2007 2006
------------------- -------------------
Revenues - Product $ 55,018 $ 36,362 $ 161,875 $ 115,011
Revenues - Maintenance and
services 5,352 4,892 16,161 14,740
----------------------------------------------------------------------
Total revenues 60,370 41,254 178,036 129,751
----------------------------------------------------------------------
Cost of revenues - Product 12,143 5,338 34,640 15,392
Cost of revenues - Maintenance
and services 244 287 663 877
Amortization of intangible
assets 6,925 2,712 19,055 11,987
----------------------------------------------------------------------
Total cost of revenues 19,312 8,337 54,358 28,256
----------------------------------------------------------------------
Gross margin 41,058 32,917 123,678 101,495
----------------------------------------------------------------------
Operating expenses
Sales and marketing 17,231 11,810 51,827 40,337
Research and development 11,282 6,379 33,323 19,200
General and administration 8,803 5,833 27,085 17,421
Acquired in-process research
and development - - 7,831 -
InterVideo integration
expense 2,220 - 3,865 -
Restructuring - - - 811
----------------------------------------------------------------------
Total operating expenses 39,536 24,022 123,931 77,769
----------------------------------------------------------------------
Income (loss) from operations 1,522 8,895 (253) 23,726
Other expenses (income)
Loss on debt retirement - 17 - 8,292
Interest expense, net 4,195 2,334 11,834 9,404
Amortization of deferred
financing fees 270 188 804 989
Other non-operating (income)
expense (497) 377 (650) (271)
----------------------------------------------------------------------
Income (loss) before income
taxes (2,446) 5,979 (12,241) 5,312
Income tax recovery
(provision) (4,314) (485) (4,082) (5,427)
----------------------------------------------------------------------
Net income (loss) $ (6,760) $ 5,494 $(16,323) $ (115)
----------------------------------------------------------------------
Net income (loss) per share:
Basic $ (0.27) $ 0.22 $ (0.66) $ (0.01)
Fully diluted $ (0.27) $ 0.22 $ (0.66) $ (0.01)
Weighted average number of
shares:
Basic 25,041 24,494 24,828 21,708
Fully diluted 25,041 25,348 24,828 21,708
Consolidated Condensed Balance Sheet
---------------- ----------------
As of August 31, November 30,
2007 2006
---------------- ----------------
Assets
Current assets:
Cash and cash equivalents $ 21,257 $ 51,030
Restricted cash 217 717
Accounts receivable
Trade, net 24,309 18,150
Other 1,431 808
Inventory 856 914
Income taxes recoverable 1,024 -
Prepaids and other current assets 4,419 2,300
----------------------------------------------------------------------
Total current assets 53,513 73,919
Investments 218 203
Capital assets 9,156 3,651
Intangible assets 98,041 37,831
Goodwill 83,419 9,850
Deferred financing charges and
other long-term assets 4,852 5,232
----------------------------------------------------------------------
Total assets $ 249,199 $ 130,686
----------------------------------------------------------------------
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable and accrued
liabilities $ 49,699 $ 28,220
Due to related parties - 167
Operating line of credit 7,000 -
Income taxes payable - 235
Deferred revenue 13,333 12,719
Current portion of long-term debt 2,164 1,426
Current portion of obligation
under capital leases 655 -
----------------------------------------------------------------------
Total current liabilities 72,851 42,767
Deferred revenue 2,285 2,015
Deferred income tax liability 22,189 -
Obligation under capital leases 2,209 -
Income taxes payable 12,528 8,488
Long-term debt 156,808 89,223
----------------------------------------------------------------------
Total liabilities 268,870 142,493
----------------------------------------------------------------------
Shareholders' deficit
Share capital 37,526 30,722
Additional paid-in capital 6,211 4,612
Accumulated other comprehensive
loss 10 (46)
Deficit (63,418) (47,095)
----------------------------------------------------------------------
Total shareholders' deficit (19,671) (11,807)
----------------------------------------------------------------------
----------------------------------------------------------------------
Total liabilities and shareholders'
deficit $ 249,199 $ 130,686
----------------------------------------------------------------------
Consolidated Condensed Statement of Cash Flows
--------------------- ---------------------
Three Months Nine Months
ended August 31, ended August 31,
2007 2006 2007 2006
--------------------- ---------------------
Cash flow from operating
activities
Net income (loss) $ (6,760) $ 5,494 $ (16,323) $ (115)
Depreciation and
amortization 544 336 2,215 1,112
Amortization of deferred
financing fees 270 188 804 989
Amortization of
intangible assets 6,925 2,712 19,055 11,987
Stock-based compensation 1,770 805 4,068 2,451
Provision for bad debts 115 (24) 180 150
Deferred income taxes 3,667 - 1,352 636
Acquired in-process
research and
development - - 7,831 -
Unrealized loss on
forward exchange
contracts (26) (43) 9 178
Loss on early retirement
of debt - 17 - 8,292
Loss on disposal of
fixed assets 48 - 102 -
(Gain)/loss on interest
rate swap recorded at
fair value 337 - (245) -
Change in operating
assets and liabilities (6,387) (3,453) (3,321) (3,981)
----------------------------------------------------------------------
Cash flow provided by
(used in) operating
activities 503 6,032 15,727 21,699
----------------------------------------------------------------------
Cash flow from financing
activities
Restricted cash 500 (1) 500 (1)
Proceeds from operating
line of credit - - 48,000 -
Repayments on operating
line of credit (6,000) - (41,000) -
Proceeds from long-term
debt - - 70,000 90,000
Repayments of long-term
debt (399) (225) (1,479) (148,954)
Repayments of capital
lease obligations (128) - (128) -
Financing fees incurred (4) (70) (1,681) (7,708)
Net proceeds from public
offering - (3,221) - 69,317
Proceeds from exercise
of stock options 1,298 3 3,987 4
Dividends paid - - - (7,500)
Other financing
activities (272) (340) (221) (1,438)
----------------------------------------------------------------------
Cash flow provided by
(used in) financing
activities (5,005) (3,854) 77,978 (6,280)
----------------------------------------------------------------------
Cash flow from investing
activities
Purchase of InterVideo
Inc, net of cash
acquired (203) - (121,357) -
Purchase of long lived
assets, net of proceeds (1,441) (616) (2,159) (1,471)
----------------------------------------------------------------------
Cash flow used in
investing activities (1,644) (616) (123,516) (1,471)
----------------------------------------------------------------------
Effect of exchange rate
changes on cash and cash
equivalents (7) (29) 38 (140)
Increase (decrease) in
cash and cash equivalents (6,153) 1,533 (29,773) 13,808
Cash and cash equivalents,
beginning of period 27,410 33,021 51,030 20,746
----------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 21,257 $ 34,554 $ 21,257 $ 34,554
----------------------------------------------------------------------
Non-GAAP Results
(In thousands, except per share data)
------------------- -------------------
Three Months Nine Months
ended August 31, ended August 31,
2007 2006 2007 2006
------------------- -------------------
Non-GAAP Adjusted Net Income
Calculation:
Net income (loss) $ (6,760) $ 5,494 $(16,323) $ (115)
Amortization of intangible
assets 6,925 2,712 19,055 11,987
Tax benefit on amortization
of intangible assets (1,340) (3,655)
Tax expense on write-off of
deferred tax asset 5,007 5,007
Stock-based compensation 1,770 805 4,068 2,451
Restructuring - - - 928
InterVideo integration
expense 2,220 - 3,865 -
Acquired in-process research
and development - - 7,831 -
Loss on debt retirement - 17 - 8,292
Amortization of deferred
financing fees 270 188 804 989
--------------------------------------------------------------------
Non-GAAP Adjusted Net Income $ 8,092 $ 9,216 $ 20,652 $ 24,532
--------------------------------------------------------------------
Percentage of revenue 13.4% 22.3% 11.6% 18.9%
Pro-forma diluted non-GAAP
adjusted net income per
share $ 0.31 $ 0.36 $ 0.80 $ 1.09
Shares used in computing
proforma diluted non-GAAP
adjusted net income per
share 25,888 25,348 25,716 22,492
Non-GAAP Adjusted EBITDA
Calculation:
Cash flow provided by (used
in) operating activities $ 503 $ 6,032 $ 15,727 $ 21,699
Change in operating assets
and liabilities 6,387 3,453 3,321 3,981
Interest expense, net 4,195 2,334 11,834 9,404
Income tax provision 4,314 485 4,082 5,427
Deferred income taxes (3,667) - (1,352) (636)
Provision for bad debts (115) 24 (180) (150)
Unrealized losses on forward
exchange contracts 26 43 (9) (178)
(Gain)/loss on interest rate
swap recorded at fair value (337) - 245 -
Loss on disposal of fixed
assets (48) - (102) -
InterVideo integration
expense 2,220 - 3,865 -
Restructuring - - - 928
--------------------------------------------------------------------
Non-GAAP Adjusted EBITDA $ 13,478 $ 12,371 $ 37,431 $ 40,475
--------------------------------------------------------------------
Percentage of revenue 22.3% 30.0% 21.0% 31.2%
Other Supplemental Information
----------------- -----------------
Three Months Nine Months
ended August 31, ended August 31,
2007 2006 2007 2006
----------------- -----------------
Revenue by Product Segment
Graphics and Productivity $ 33,683 $ 32,619 $102,265 $103,330
Digital Media 26,687 8,635 75,771 26,421
----------------------------------------------------------------------
Total $ 60,370 $ 41,254 $178,036 $129,751
----------------------------------------------------------------------
As percentage of revenues
Graphics and Productivity 55.8% 79.1% 57.4% 79.6%
Digital Media 44.2% 20.9% 42.6% 20.4%
----------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0%
----------------------------------------------------------------------
Revenue by Geography
Americas $ 31,426 $ 26,559 $ 91,634 $ 79,141
Europe, Middle East, Africa 14,566 10,887 49,332 40,336
Asia-Pacific 14,378 3,808 37,070 10,274
----------------------------------------------------------------------
Total $ 60,370 $ 41,254 $178,036 $129,751
----------------------------------------------------------------------
As percentage of revenues
Americas 52.1% 64.4% 51.5% 61.0%
Europe, Middle East, Africa 24.1% 26.4% 27.7% 31.1%
Asia-Pacific 23.8% 9.2% 20.8% 7.9%
----------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0%
----------------------------------------------------------------------
Allocation of Stock-Based
Compensation Expense
Cost of revenues - Product $ 15 $ 4 $ 33 $ 19
Cost of revenues - Maintenance
and service 3 2 7 6
Sales and marketing 468 231 1,049 543
Research and development 369 101 857 217
General and administration 915 467 2,122 1,666
----------------------------------------------------------------------
Total $ 1,770 $ 805 $ 4,068 $ 2,451
----------------------------------------------------------------------
CRELF