OTTAWA, June 28 /CNW/ - Corel Corporation (NASDAQ:CREL)(TSX:CRE) today
reported financial results for its second quarter ended May 31, 2006.
Revenues in the second quarter of fiscal 2006 were $44.2 million, an
increase of 11% over revenues of $40.0 million in the second quarter of fiscal
2005. GAAP net loss in the second quarter of fiscal 2006, which includes a one
time charge of $8.3 million related to the early retirement of debt, was
$(4.0) million, or $(0.19) per share. This compares to net income of $158,000,
or $0.01 per share in the second quarter of fiscal 2005.
Non-GAAP adjusted net income for the second quarter of fiscal 2006 was
$8.4 million, an increase of 11% compared to non-GAAP adjusted net income for
the second quarter of fiscal 2005 of $7.5 million, remaining constant at $0.38
per diluted share. Non-GAAP adjusted EBITDA in the second quarter of fiscal
2006 was $13.7 million, a 6% increase compared to $13.0 million in the second
quarter of fiscal 2005. 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 statements included in this press release.
During the quarter, Corel completed its initial public offering and
refinanced its credit facilities. Net proceeds to Corel from the offering were
$72.5 million. As a result of the offering and related transactions, Corel
reduced its outstanding debt at the end of the quarter from $140.0 million to
$90.0 million and ended the quarter with $33.0 million in cash and cash
equivalents.
"Corel's second quarter performance demonstrates the continued strength
of our business model and the results we are able to achieve by remaining
focused on the needs of our customers and partners," said David Dobson, CEO of
Corel Corporation. "With strong revenue performance, new global partnerships,
and increasing traction in developing and emerging markets, Corel is
successfully executing its strategy to deliver long-term, shareholder value.
WinZip's contribution further illustrates the benefits of the Corel
acquisition model as we leverage operating efficiencies to drive incremental
earnings."
Dobson continued, "Corel has proven itself to be a leader in delivering
high-value, affordable software that is easy to learn and use. We remain
committed to that vision and to delivering a unique customer experience that
differentiates Corel in the marketplace. Our new digital imaging platform,
code named "Alta," is an example of the innovations we are developing to
provide customers and partners with more flexibility, convenience, and control
in creating their own digital imaging environment. Corel's employees will
continue to work closely with our customers and partners to deliver software
that responds to their evolving needs."
Third Quarter Fiscal 2006 Guidance
Corel provided guidance for the third quarter ending August 31, 2006.
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The Company currently expects:
Revenue in the range of $39 million to $41 million.
GAAP net income of $3.4 million to $4.7 million and non-GAAP
adjusted net income of $7.2 million to $8.5 million.
GAAP EPS of $0.13 to $0.18 per share and non-GAAP EPS of $0.28
to $0.33 per share.
>>
Fiscal 2006 Guidance
Corel provided guidance for the year ending November 30, 2006.
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The Company currently expects:
Revenue in the range of $172 million to $175 million
GAAP net income of $4.7 million to $7.1 million and non-GAAP
adjusted net income of $33.0 million to $35.4 million.
GAAP EPS of $0.20 to $0.30 per share and non-GAAP EPS of $1.40
to $1.50 per share.
>>
Corel will host a conference call to discuss the results at 4:30 p.m.
Eastern Time today. To access the conference call, please dial (800) 810-0924
or (913) 981-4900. 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.
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, new entrants that
benefit from industry trends, such as the increasing importance of Internet
distribution and open source software, 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. These and other risks, uncertainties and other important factors are
described in our Prospectus dated April 25, 2006, filed with the Securities
and Exchange Commission pursuant to Rule 462(b) of the rules and regulations
under the Securities Act of 1933. A copy of the Prospectus can be obtained on
our website, or at www.sec.gov. Such risks are also included in our Canadian
supplemented PREP prospectus dated April 25, 2006, available 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 closes
GAAP measures are set out in the notes to the financial statements attached to
this news release.
About Corel Corporation
Corel is a leading global packaged software company with an estimated
installed base of over 40 million users. The Company provides high quality,
affordable and easy-to-use productivity, graphics and digital imaging software
and enjoys a favorable market position among value-conscious consumers and
small businesses. Its products are sold in over 75 countries through a
scalable distribution platform comprised of original equipment manufacturers
(OEMs), Corel's international websites, and a global network of resellers and
retailers. The Company's product portfolio features well-established, globally
recognized brands including CorelDRAW(R) Graphics Suite, Corel(R)
WordPerfect(R) Office, WinZip(R), Corel(R) Paint Shop(R) Pro, and Corel
Painter(TM). To learn more about Corel, please visit www.corel.com.
(C) 2006 Corel Corporation. All rights reserved. Corel, CorelDRAW,
WordPerfect, WinZip, Paint Shop, Painter, 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
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Corel Corporation
Quarterly Financial Results
For the quarter ended May 31, 2006
(in thousands, except per share data; unaudited)
Consolidated Condensed Statement of Operations
Three Months ended Six Months ended
May 31, May 31,
2006 2005 2006 2005
-------- -------- -------- ---------
Revenues - Product $39,151 $36,428 $78,649 $ 72,510
Revenues - Maintenance and
service 5,059 3,573 9,848 7,479
-------- -------- -------- ---------
Total revenues 44,210 40,001 88,497 79,989
-------- -------- -------- ---------
Cost of revenues - Product 5,049 4,097 10,054 8,805
Cost of revenues - Maintenance
and service 276 293 590 641
Amortization of intangible
assets 2,648 6,636 9,275 12,835
-------- -------- -------- ---------
Total cost of revenues 7,973 11,026 19,919 22,281
-------- -------- -------- ---------
Gross margin 36,237 28,975 68,578 57,708
-------- -------- -------- ---------
Operating expenses
Sales and marketing 14,023 12,164 28,527 24,988
Research and development 6,640 5,982 12,821 11,653
General and administrative 6,193 4,654 11,588 10,313
Restructuring 251 72 811 612
-------- -------- -------- ---------
Total operating expenses 27,107 22,872 53,747 47,566
-------- -------- -------- ---------
Income from operations 9,130 6,103 14,831 10,142
Other expenses (income)
Loss on debt retirement 8,275 6 8,275 3,937
Interest expense, net 3,207 3,407 7,070 5,377
Amortization of deferred
financing fees 357 504 801 804
Other non-operating expense
(income) (528) 193 (648) 371
-------- -------- -------- ---------
Income (loss) before taxes (2,181) 1,993 (667) (347)
Income tax expense 1,791 1,835 4,942 2,015
-------- -------- -------- ---------
Net income (loss) $(3,972) $ 158 $(5,609) $ (2,362)
-------- -------- -------- ---------
Net income (loss) per share
Basic and diluted
Class A $ N/A $ (0.05) N/A $ (1.69)
Class B N/A (0.05) N/A (1.69)
WinZip Common N/A 38.95 N/A 29.20
Corel Common (0.19) N/A (0.28) N/A
Pro-forma basic and diluted (0.19) 0.01 (0.28) (0.16)
Weighted average number of shares:
Shares used in basic and diluted
per share amounts
Class A N/A 3,736 N/A 3,736
Class B N/A 8,321 N/A 8,321
WinZip Common N/A 20 N/A 20
Corel Common 21,086 N/A 20,293 N/A
Shares used in pro-forma per
share amounts
Basic 21,086 19,485 20,293 19,485
Diluted 21,086 19,965 20,293 19,485
Consolidated Condensed Balance Sheet
May 31, November 30,
2006 2005
----------- ------------
Assets
Current assets:
Cash and cash equivalents $ 33,021 $ 20,746
Restricted cash 717 966
Accounts receivable
Trade, net 16,763 19,342
Due from related parties - 667
Other 648 311
Inventory 1,365 726
Deferred tax assets, current portion 240 592
Prepaids and other current assets 2,242 2,343
----------- ------------
Total current assets 54,996 45,693
Investments 262 334
Capital assets 3,536 3,532
Intangible assets 42,813 52,397
Goodwill 9,850 9,850
Deferred Income tax assets - 284
Deferred financing charges and other long-
term assets 4,199 8,746
----------- ------------
Total assets $ 115,656 $ 120,836
----------- ------------
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable & accrued liabilities $ 26,650 $ 30,152
Due to related party - 334
Income taxes payable 13,472 10,773
Deferred revenue 10,107 11,755
Current portion of promissory note 532 1,170
Current portion of term loan payable 900 15,764
----------- ------------
Total current liabilities 51,661 69,948
Deferred revenue 2,159 2,085
Term loan payable 89,100 132,965
Promissory note and other long-term
liabilities 797 1,072
----------- ------------
Total liabilities 143,717 206,070
----------- ------------
Shareholders' deficit
Share capital 30,721 (73,793)
Additional paid-in capital 3,160 7,427
Accumulated other comprehensive income 14 85
Deficit (61,956) (18,953)
----------- ------------
Total shareholders' deficit (28,061) (85,234)
----------- ------------
----------- ------------
Total liabilities and shareholders' deficit $ 115,656 $ 120,836
----------- ------------
Consolidated Condensed Statement of Cash Flows
Three Months ended Six Months ended
May 31, May 31,
2006 2005 2006 2005
--------- -------- --------- --------
Cash flow from operating activities
Net income (loss) $(3,972) $158 $(5,609) $(2,362)
Depreciation 378 307 776 769
Amortization of deferred
financing fees 357 504 801 804
Amortization of intangible
assets 2,648 6,636 9,275 12,835
Stock-based compensation 794 123 1,646 239
Accrued interest 352 166 (261) 533
Provision for bad debts 52 27 174 193
Deferred income taxes 201 19 636 313
Unrealized losses on
foreign exchange contracts 193 87 221 293
Gain on disposal of fixed
assets - (28) - (14)
Loss on early retirement of
debt 8,275 6 8,275 3,937
Gain on disposal of
investments - (71) - (71)
Operating Assets 463 469 (267) (109)
--------- -------- --------- --------
Cash flow provided by operating
activities 9,741 8,403 15,667 17,360
--------- -------- --------- --------
Cash flow from financing activities
Restricted cash - (13) - 1,357
Proceeds from term loan 90,000 - 90,000 130,000
Repayments of term loan (140,091) - (148,729) (64,305)
Financing fees incurred (5,875) (668) (7,638) (7,668)
Proceeds from public offering 72,538 - 72,538 -
Proceeds from issuance of
common shares 1 - 1 -
Paid up capital distribution - - - (83,113)
Dividends (7,500) (4,000) (7,500) (6,135)
Other financing (492) (3,250) (1,098) (2,750)
--------- -------- --------- --------
Cash flow provided by (used in)
financing activities 8,581 (7,931) (2,426) (32,614)
--------- -------- --------- --------
Cash flow from investing activities
Proceeds from redemption of
investments - 71 - 10,058
Acquisition of Jasc - (369) - (184)
Purchase of long lived
assets, net of proceeds (425) (169) (855) (468)
--------- -------- --------- --------
Cash flow provided by (used in)
investing activities (425) (467) (855) 9,406
--------- -------- --------- --------
Effect of exchange rate changes
on cash (74) (10) (111) (19)
Increase (decrease) in cash and
cash equivalents 17,823 (5) 12,275 (5,867)
Opening cash and cash
equivalents 15,198 5,695 20,746 11,557
--------- -------- --------- --------
Closing cash and cash
equivalents $33,021 $5,690 $33,021 $5,690
--------- -------- --------- --------
Non-GAAP Results
(In thousands, except per share data)
Three Months ended Six Months ended
May 31, May 31,
2006 2005 2006 2005
-------- --------- -------- --------
Non-GAAP Adjusted Net Income Calculation:
Net income (loss) $(3,972) $ 158 $(5,609) $(2,362)
Amortization of intangible
assets 2,648 6,636 9,275 12,835
Stock based compensation 794 123 1,646 239
Restructuring 251 72 811 612
Reorganization costs - - 117 883
Amortization of deferred
financing fees 357 504 801 804
Loss on debt retirement 8,275 6 8,275 3,937
-------- --------- -------- --------
Non-GAAP Adjusted Net Income $ 8,353 $ 7,499 $15,316 $16,948
-------- --------- -------- --------
Percentage of revenue 18.9% 18.7% 17.3% 21.2%
Pro-forma diluted non-GAAP
adjusted net income
per share $ 0.38 $ 0.38 $ 0.72 $ 0.85
Shares used in computing
pro-forma diluted non-GAAP
adjusted net income per
share 22,178 19,965 21,386 19,953
Non-GAAP Adjusted EBITDA
Calculation:
Cash flow provided by
operating activities $ 9,741 $ 8,403 $15,667 $17,360
Change in operating assets
and liabilities (463) (469) 267 109
Interest Expense 3,207 3,407 7,070 5,377
Income tax expense 1,791 1,835 4,942 2,015
Accrued interest (352) (166) 261 (533)
Provision for bad debts (52) (27) (174) (193)
Unrealized losses on
foreign exchange contracts (193) (87) (221) (293)
Deferred income taxes (201) (19) (636) (313)
Gain on disposal of
fixed assets - 28 - 14
Restructuring 251 72 811 612
Reorganizational costs - - 117 883
-------- --------- -------- --------
Non-GAAP Adjusted EBITDA $13,729 $ 12,977 $28,102 $25,038
-------- --------- -------- --------
Percentage of revenues 31.1% 32.4% 31.8% 31.3%
Other Supplemental Information
Revenues by Product Segment
Productivity $19,173 $ 16,897 $38,963 $31,900
Graphics and Digital Imaging 25,037 23,104 49,534 48,089
-------- --------- -------- --------
Total $44,210 $ 40,001 $88,497 $79,989
-------- --------- -------- --------
As percentage of revenues
Productivity 43.4% 42.2% 44.0% 39.9%
Graphics and Digital Imaging 56.6% 57.8% 56.0% 60.1%
-------- --------- -------- --------
Total 100.0% 100.0% 100.0% 100.0%
-------- --------- -------- --------
Revenues by Geography
Americas $26,919 $ 23,270 $52,582 $47,821
Europe, Middle East, Africa 13,681 13,671 29,449 27,097
Asia-Pacific 3,610 3,060 6,466 5,071
-------- --------- -------- --------
Total $44,210 $ 40,001 $88,497 $79,989
-------- --------- -------- --------
As percentage of revenues
Americas 60.9% 58.2% 59.4% 59.8%
Europe, Middle East, Africa 30.9% 34.2% 33.3% 33.9%
Asia-Pacific 8.2% 7.6% 7.3% 6.3%
-------- --------- -------- --------
Total 100.0% 100.0% 100.0% 100.0%
-------- --------- -------- --------
Allocation of Stock-Based Compensation Expense
Cost of revenues - Product $ 7 $ 4 $ 15 $ 8
Cost of revenues - Maintenance
and service 2 1 4 2
Sales and marketing 121 53 312 102
Research and development 53 36 116 71
General and administrative 611 29 1,199 56
-------- --------- -------- --------
Total $ 794 $ 123 $ 1,646 $ 239
-------- --------- -------- --------
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