Revenue Increases 7%; GAAP Net Income of $0.22 Per Diluted Share;
Non-GAAP Adjusted Net Income of $0.36 Per Diluted Share
OTTAWA, September 28 /CNW/ - Corel Corporation (NASDAQ:CREL) (TSX:CRE)
today reported financial results for its third quarter ended August 31, 2006.
Revenues in the third quarter of fiscal 2006 were $41.3 million, an increase
of 7% over revenues of $38.5 million in the third quarter of fiscal 2005. GAAP
net income in the third quarter of fiscal 2006 was $5.5 million, or $0.22 per
diluted share. This compares to a GAAP net loss of $(3.0) million, or $(0.15)
per share in the third quarter of fiscal 2005.
Non-GAAP adjusted net income for the third quarter of fiscal 2006 was
$9.2 million, or $0.36 per diluted share, an increase of 88% compared to
non-GAAP adjusted net income for the third quarter of fiscal 2005 of $4.9
million, or $0.24 per diluted share. Non-GAAP adjusted EBITDA in the third
quarter of fiscal 2006 was $12.4 million, a 16% increase compared to $10.7
million in the third 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.
"Corel continued to execute against all aspects of our strategy in the
third quarter," said David Dobson, CEO of Corel Corporation. "Our announced
acquisition of InterVideo and recent launches of Snapfire and Paint Shop Pro
Photo XI show that we are focused on delivering the products and value that
customers and partners demand. We also showed our discipline around driving
profits as earnings growth outpaced revenue growth. 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."
Fourth Quarter Fiscal 2006 Guidance
Corel provided guidance for the fourth quarter ending November 30, 2006.
The Company currently expects:
-- Revenue in the range of $46 million to $48 million.
-- GAAP net income of $6.7 million to $7.8 million and non-GAAP adjusted
net income of $10.4 million to $11.5 million.
-- GAAP EPS of $0.26 to $0.30 per share and non-GAAP EPS of $0.40 to
$0.45 per share.
Fiscal 2006 Guidance
Corel provided guidance for the year ending November 30, 2006.
The Company currently expects:
-- Revenue in the range of $175.8 million to $177.8 million
-- GAAP net income of $6.6 million to $7.7 million and non-GAAP adjusted
net income of $ 34.8 million to $ 35.9 million.
-- GAAP EPS of $0.28 to $0.33 per share and non-GAAP EPS of $1.48 to
$1.52 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) 289-0572
or (913) 981-5543. 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. In addition, we face risks related to our proposed acquisition of
InterVideo, Inc., including the risk that the proposed acquisition may not be
completed in a timely manner, if at all, and disruption from the transaction
making it more difficult to maintain relationships with customers, employees,
or suppliers. These and other risks, uncertainties andother important factors
are described in our Prospectus dated April 25, 2006, filed with the
Securities and Exchange Commission (The SEC) pursuant to Rule 462(b) of the
rules and regulations under the Securities Act of 1933 and our other filings
with the SEC under the caption "Risk Factors" and elsewhere. A copy of the
Prospectus and such other filings can be obtained on our website or on the
SEC's website at http://www.sec.gov. Certain of such risks are also included
in our Canadian supplemented PREP prospectus dated April 25, 2006, available
at http://www.sedar.com. Risks related to InterVideo's business can be found
in InterVideo's reports filed with the SEC under the caption "Risk Factors"
and elsewhere, including InterVideo's 10-Q for the quarter ended June 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 Corporation
Corel is a leading global packaged software company with over 40 million
users. The Company provides full-featured, easy-to-use productivity, graphics
and digital imaging software and enjoys a favorable market position among
consumers and small businesses. The Company's award-winning product portfolio
features popular, globally recognized brands, including CorelDRAW(R) Graphics
Suite, Corel(R) Paint Shop(R) Pro, Corel Painter(TM), Corel DESIGNER(R),
Corel(R) WordPerfect(R) Office, WinZip(R), and iGrafx(R). With hundreds of
industry awards for leadership in software innovation, design and value,
Corel's products have built a loyal following of customers and partners around
the globe. Corel's products are sold in over 75 countries through an
international network of resellers and retailers, original equipment
manufacturers (OEMs), and Corel's global websites.
(C)2006 Corel Corporation. All rights reserved. Corel, CorelDRAW, Paint
Shop, Painter, Designer, WordPerfect, WinZip, iGrafx and the Corel logo are
trademarks or registered trademarks of Corel Corporation and/or its
subsidiaries.
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Corel Corporation
Quarterly Financial results
For the quarter ended August 31, 2006
(in thousands, except per share data; unaudited)
Consolidated Condensed Statement of Operations
----------------------- -------------------------
Three Months ended Nine Months ended
August 31, August 31,
2006 2005 2006 2005
----------------------- -------------------------
Revenues - Product $36,362 $34,360 $115,011 $106,870
Revenues -
Maintenance and
service 4,892 4,129 14,740 11,608
----------------------------------------------------------------------
Total revenues 41,254 38,489 129,751 118,478
----------------------------------------------------------------------
Cost of revenues -
Product 5,338 4,263 15,392 13,068
Cost of revenues -
Maintenance and
service 287 257 877 898
Amortization of
intangible assets 2,712 6,654 11,987 19,489
----------------------------------------------------------------------
Total cost of
revenues 8,337 11,174 28,256 33,455
----------------------------------------------------------------------
Gross margin 32,917 27,315 101,495 85,023
----------------------------------------------------------------------
Operating expenses
Sales and marketing 11,810 12,938 40,337 37,926
Research and
development 6,379 6,016 19,200 17,669
General and
administrative 5,833 5,088 17,421 15,401
Restructuring - 68 811 680
----------------------------------------------------------------------
Total operating
expenses 24,022 24,110 77,769 71,676
----------------------------------------------------------------------
Income from
operations 8,895 3,205 23,726 13,347
Other expenses
(income)
Loss on debt
retirement 17 - 8,292 3,937
Interest expense,
net 2,334 3,549 9,404 8,926
Impairment (gain on
disposal) of
equity investment - (60) (60)
Amortization of
deferred financing
fees 188 455 989 1,259
Other non-operating
expense (income) 377 282 (271) 653
----------------------------------------------------------------------
Income (loss) before
taxes 5,979 (1,021) 5,312 (1,368)
Income tax expense 485 1,969 5,427 3,984
----------------------------------------------------------------------
Net income (loss) $ 5,494 $(2,990) $ (115) $ (5,352)
----------------------------------------------------------------------
Net income (loss)
per share
Basic and diluted
Class A $ N/A $ N/A $ N/A $ N/A
Class B N/A N/A N/A N/A
WinZip Common N/A N/A N/A N/A
Corel Common 0.22 (0.15) (0.01) (0.27)
Pro-forma basic 0.22 (0.15) (0.01) (0.27)
Pro-forma diluted 0.22 (0.15) (0.01) (0.27)
Shares used in
basic and diluted
per share amounts
Class A N/A N/A N/A N/A
Class B N/A N/A N/A N/A
WinZip Common N/A N/A N/A N/A
Corel Common 25,348 19,485 21,708 19,485
Shares used in pro-
forma per share
amounts
Basic 24,494 19,485 21,708 19,485
Diluted 25,348 19,485 21,708 19,485
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Consolidated Condensed Balance Sheet
--------------------------------
August 31, November 30,
2006 2005
--------------------------------
Assets
Current assets:
Cash and cash equivalents $ 34,554 $ 20,746
Restricted cash 718 966
Accounts receivable
Trade, net 15,531 19,342
Due from related parties - 667
Other 251 311
Inventory 1,005 726
Defered tax assets, current portion 240 592
Prepaids and other current assets 2,367 2,343
---------------------------------------------------------------------
Total current assets 54,666 45,693
Investments 226 334
Capital assets 3,564 3,532
Intangible assets 40,353 52,397
Goodwill 9,850 9,850
Deferred Income tax assets - 284
Deferred financing charges and other
long-term assets 4,080 8,746
----------------------------------------------------------------------
Total assets $ 112,739 $ 120,836
----------------------------------------------------------------------
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable & accrued
liabilities $ 21,796 $ 30,152
Due to related party - 334
Income taxes payable 9,814 10,773
Deferred revenue 10,319 11,755
Current portion of promissory note 542 1,170
Current portion of term loan
payable 900 15,764
----------------------------------------------------------------------
Total current liabilities 43,371 69,948
Deferred revenue 1,842 2,085
Term loan payable 88,875 132,965
Promissory note and other long-term
liabilities 591 1,072
----------------------------------------------------------------------
Total liabilities 134,679 206,070
----------------------------------------------------------------------
Shareholders' deficit
Share capital 30,584 (73,793)
Additional paid-in capital 3,960 7,427
Accumulated other comprehensive
income (22) 85
Deficit (56,462) (18,953)
----------------------------------------------------------------------
Total shareholders' deficit (21,940) (85,234)
----------------------------------------------------------------------
----------------------------------------------------------------------
Total liabilities and shareholders'
deficit $ 112,739 $ 120,836
----------------------------------------------------------------------
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Consolidated Condensed Statement of Cash Flows
------------------- --------------------
Three Months ended Nine Months ended
August 31, August 31,
2006 2005 2006 2005
------------------- --------------------
Cash flow from operating
activities
Net income (loss) $ 5,494 $ (2,990) $ (115) $ (5,352)
Depreciation 336 327 1,112 1,096
Amortization of deferred
financing fees 188 455 989 1,259
Amortization of intangible
assets 2,712 6,654 11,987 19,489
Stock-based compensation 805 755 2,451 994
Accrued interest 161 (180) (100) 353
Provision for bad debts (24) 216 150 409
Deferred income taxes - 426 636 739
Unrealized losses on foreign
exchange contracts (43) (31) 178 262
Gain on disposal of fixed
assets - (2) - (16)
Loss on early retirement of
debt 17 - 8,292 3,937
Gain on disposal of
investments - (54) - (125)
Operating Assets (3,614) (341) (3,881) (450)
----------------------------- ----------------------------------------
Cash flow provided by
operating activities 6,032 5,235 21,699 22,595
----------------------------- ----------------------------------------
Cash flow from financing
activities
Restricted cash (1) (500) (1) 857
Proceeds from term loan - 23,000 90,000 153,000
Repayments of term loan (225) (16,895) (148,954) (81,200)
Financing fees incurred (70) (956) (7,708) (8,624)
Proceeds from public
offering (3,221) - 69,317 -
Proceeds from issuance of
common shares 3 - 4 -
Paid up capital distribution - - - (83,113)
Dividends - (8,000) (7,500) (14,135)
Other financing (340) (250) (1,438) (3,000)
----------------------------- ----------------------------------------
Cash flow provided by (used
in) financing activities (3,854) (3,601) (6,280) (36,215)
----------------------------- ----------------------------------------
Cash flow from investing
activities
Proceeds from redemption of
investments - 54 - 10,112
Acquisition of Jasc - (170) - (354)
Purchase of long lived
assets, net of proceeds (616) (538) (1,471) (1,006)
----------------------------- ----------------------------------------
Cash flow provided by (used
in) investing activities (616) (654) (1,471) 8,752
----------------------------- ----------------------------------------
Effect of exchange rate
changes on cash (29) (10) (140) (29)
Increase (decrease) in cash
and cash equivalents 1,533 970 13,808 (4,897)
Opening cash and cash
equivalents 33,021 5,690 20,746 11,557
----------------------------- ----------------------------------------
Closing cash and cash
equivalents $ 34,554 $ 6,660 $ 34,554 $ 6,660
----------------------------- ----------------------------------------
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Non-GAAP Results
(In thousands, except per share data)
------------------ -------------------
Three Months ended Nine Months ended
August 31, August 31,
2006 2005 2006 2005
------------------ -------------------
Non-GAAP Adjusted Net Income
Calculation:
Net income (loss) $ 5,494 $(2,990) $ (115) $ (5,352)
Amortization of intangible
assets 2,712 6,654 11,987 19,489
Stock based compensation 805 755 2,451 994
Restructuring - 68 811 680
Impairment gain on disposal
of investments - (54) - (125)
Reorganization costs - - 117 883
Amortization of deferred
financing fees 188 455 989 1,259
Loss on debt retirement 17 - 8,292 3,937
----------------------------------------------- -------------------
Non-GAAP Adjusted Net Income $ 9,216 $ 4,888 $ 24,532 $ 21,765
----------------------------------------------- -------------------
Percentage of revenue 22.3% 12.7% 18.9% 18.4%
Pro-forma diluted non-GAAP
adjusted net income per
share $ 0.36 $ 0.24 $ 1.09 $ 1.09
Shares used in computing
proforma diluted non-GAAP
adjusted net income per
share 25,348 20,253 22,492 19,959
Non-GAAP Adjusted EBITDA
Calculation:
Cash flow provided by
operating activities $ 6,032 $ 5,235 $ 21,699 $ 22,595
Change in operating assets
and liabilities 3,614 341 3,881 450
Interest Expense 2,334 3,549 9,404 8,926
Income tax expense, net 485 1,969 5,427 3,984
Accrued interest (161) 180 100 (353)
Provision for bad debts 24 (216) (150) (409)
Unrealized losses on foreign
exchange contracts 43 31 (178) (262)
Deferred income taxes (426) (636) (739)
Gain on disposal of fixed
assets 2 16
Restructuring - 68 811 680
Reorganizational costs 117 883
----------------------------------------------- -------------------
Non-GAAP Adjusted EBITDA $ 12,371 $10,733 $ 40,475 $ 35,771
----------------------------------------------- -------------------
Percentage of revenue 30.0% 27.9% 31.2% 30.2%
Other Supplemental Information
Revenue by Product Segment
Productivity $ 20,265 $17,756 $ 59,228 $ 49,656
Graphics and Digital Imaging 20,989 20,733 70,523 68,822
---------------------------- ------------------ -------------------
Total $ 41,254 $38,489 $129,751 $118,478
---------------------------- ------------------ -------------------
As percentage of revenues
Productivity 49.1% 46.1% 45.6% 41.9%
Graphics and Digital Imaging 50.9% 53.9% 54.4% 58.1%
---------------------------- ------------------ -------------------
Total 100.0% 100.0% 100.0% 100.0%
---------------------------- ------------------ -------------------
Revenue by Geography
Americas $ 26,559 $25,583 $ 79,141 $ 73,404
Europe, Middle East, Africa 10,887 9,703 40,336 36,800
Asia-Pacific 3,808 3,203 10,274 8,274
---------------------------- ------------------ -------------------
Total $ 41,254 $38,489 $129,751 $118,478
---------------------------- ------------------ -------------------
As percentage of revenues
Americas 64.4% 66.5% 61.0% 62.0%
Europe, Middle East, Africa 26.4% 25.2% 31.1% 31.0%
Asia-Pacific 9.2% 8.3% 7.9% 7.0%
---------------------------- ------------------ -------------------
Total 100.0% 100.0% 100.0% 100.0%
---------------------------- ------------------ -------------------
Allocation of Stock-Based
Compensation Expense
Cost of revenues - Product $ 4 $ 4 $ 19 $ 12
Cost of revenues -
Maintenance and service 2 1 6 3
Sales and marketing 231 290 543 392
Research and development 101 74 217 145
General and administrative 467 386 1,666 442
---------------------------- ------------------ -------------------
Total $ 805 $ 755 $ 2,451 $ 994
---------------------------- ------------------ -------------------
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CRELF
