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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