Exhibit 99.1
ST. BERNARD SOFTWARE ANNOUNCES ITS FINANCIAL RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2010
SAN DIEGO, CA, August 10, 2010 -- St. Bernard Software, Inc. (OTC BB:SBSW.OB - News), a leader in Web security appliances, today announced unaudited financial results for its second quarter ended June 30, 2010.
Second Quarter 2010 Financial Highlights:
| | • | | Cash and cash equivalents increased to $2.6 million as of June 30, 2010 from $2.5 million as of December 31, 2009 and $1.1 million as of June 30, 2009 |
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| | • | | Generated positive cash flow of $167,000 for YTD 2010 compared to $1.0 million negative cash flow for the same period in 2009, an increase of 117% |
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| | • | | Cash flow used by operating activities decreased $533,000 to $82,000, an improvement of 86.7% |
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| | • | | Q2 2010 operating expenses remained relatively unchanged from Q2 2009 |
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| | • | | Net loss of $581,000 for the six months ended June 30, 2010, compared to a net loss of $685,000 for the same period in 2009 |
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“Our second quarter met operational expectations and we are optimistic about the growth in new customer business that we saw compared to 2009”, said Lou Ryan, CEO of St. Bernard Software. “Additionally, we were able to prepare operationally for the integration of Red Condor that we announced last week. The integration along with the additional investment we received will help support our drive for greater growth in our core security markets.”
Financial Results
St. Bernard reported revenues of $4.3 million and $8.7 million for the three and six months ended June 30, 2010, respectively, compared to revenues of $4.8 million and $9.2 million for the same periods in 2009; operating expenses of $3.6 million and $7.1 million for the three and six months ended June 30, 2010, respectively, compared to operating expenses of $3.6 million and $7.6 million for the same periods in 2009; and a net loss for the three and six months ended June 30, 2010 of $432,000 and $581,000, respectively, compared to a net loss of $52,000 and $685,000 for the same periods in 2009.
The Company ended the second quarter of 2010 with cash and cash equivalents of $2.6 million compared to $2.5 million at December 31, 2009 and $1.1 million at June 30, 2009. Cash used by operations decreased $533,000 to $82,000 for the three months ended June 30, 2010 compared to cash used by operations of $615,000 for the same period in 2009.
Sales and marketing expense consists primarily of salaries, related benefits, commissions, consultant fees, advertising, lead generation and other costs associated with our sales and marketing efforts. For the three months ended June 30, 2010 sales and marketing expense increased 6.8%, or approximately $108,000, over the same period in 2009.
Research and development expense consists primarily of salaries, related benefits, third-party consultant fees and other engineering related costs. Research and development expenses were $927,000 in Q2 2010, which is down from $979,000 in Q2 2009 resulting in a 5.3% decrease quarter over prior year quarter. The decrease was primarily the result of a net decrease in consulting costs. During 2009, after making the decision to move research and development in-house, the Company modified its consulting agreement with Softworks Group Pty Ltd. The transition from outside consulting to in-house occurred during the latter half of 2009 and into 2010, resulting in a significant decrease in consulting expenses. Management believes that significant investments in research and development is required to remain competitive, and as such, expects research and development expenses to increase in order to extend the core functionality and features within our products.
General and administrative expenses were $1.0 million and $1.1 million for the three months ended June 30, 2010 and 2009, respectively, a $33,000 or 3.1%, decrease year over prior year. The decrease was primarily a result of the reduction in stock-based compensation expenses, offset by an increase to lease and rents expense. During 2009, we subleased approximately 30,000 square feet of our unused office space to a company. The proceeds from the sublease were used to offset our monthly facilities rent expense. The company’s current corporate facility lease expires at the end of 2010. On August 2, 2010, the Company entered into a lease agreement with Kilroy Realty, L.P. The lease commences January 1, 2011 with a term of sixty-five (65) months from the commencement date.
Liquidity
The Company has existing credit facilities with Silicon Valley Bank and Partners for Growth, LP (“PFG”), under which there was borrowing availability of $440,000 and $750,000, respectively, as of June 30, 2010. On July 20, 2010, the PFG note was paid off, and on August 3, 2010 the Company received proceeds of $3.0 million in connection with the issuance of subordinated convertible notes.
Business Outlook
Mr. Ryan added, “In addition to strong current quarter sales and operational execution, we anticipate significant expense savings as we move into 2011 with our announced move to a new headquarters building in Q4, 2010. The move enables us to significantly improve our space which will create long term operational benefits. Moreover, the move also represents an annual cost savings of about $1 million which we will be able to reinvest in our growth strategy.”
About St. Bernard
St. Bernard Software develops and markets Internet security appliances and services that empower IT professionals to effectively, efficiently and intelligently manage their enterprise's Internet-based resources. Incorporated in 1986, the Company has evolved to become a well recognized leader in the SWG market and now recognized for delivering one of the leading Web filtering and security appliances, iPrism®. With millions of end users worldwide in approximately 6,000 enterprises, educational institutions, small and medium businesses, and government agencies, St. Bernard strives to deliver simple, high performance solutions that offer excellent value to our customers. Based in San Diego, California, St. Bernard (OTCBB: SBSW) markets its solutions through a network of value added resellers, distributors, system integ rators, OEM partners and directly to end users. For more information about St. Bernard Software, visit www.stbernard.com.
©2010 St. Bernard Software, Inc. All rights reserved. The St. Bernard Software logo, LivePrism, iPrism, and iGuard are trademarks of St. Bernard Software, Inc. All other trademarks and registered trademarks are hereby acknowledged.
Forward Looking Statement
This press release may contain forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, among other things, any projections of savings and our ability to reinvest any savings towards our growth strategy; any statements of the plans, strategies, and objectives of management for future operations (including statements about our ability to support our drive for greater growth in our core business); any statements concerning proposed new products, services, or developments; any statements regarding future economic condit ions or performance; statements of belief and any statement of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include, among other things, performance of contracts by customers and partners; employee management issues; the timely development, production and acceptance of products and services and their feature sets; the challenge of managing asset levels, including inventory; the flow of products into third-party distribution channels; our ability to integrate our acquisitions in accordance to plan; and the difficulty of keeping expense growth at modest levels while increasing revenues. These and other risks and factors that could cause events or our results to differ from those expressed or implied by such forward-looking statements are described in our most recent annual report on Form 10-K, as well as other subsequent filings with the Securities and Exchange Commission. We assume no obligation and do not intend to update these forward-loo king statements.
Contact:
St. Bernard Software
Lorrie Hunsaker
St. Bernard Software
Investor and Public Relations Manager
(858) 524-2002
IR@stbernard.com
| St. Bernard Software, Inc. |
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| Condensed Consolidated Balance Sheets |
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| | | June 30, 2010 | | | December 31, 2009 | |
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| Assets | | | | | | |
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| Current Assets | | | | | | |
| Cash and cash equivalents | | $ | 2,621,000 | | | $ | 2,454,000 | |
Accounts receivable - net of allowance for doubtful accounts of $12,000 and $13,000 at June 30, 2010 and December 31, 2009, respectively | | | 3,461,000 | | | | 2,534,000 | |
| Inventories - net | | | 471,000 | | | | 242,000 | |
| Prepaid expenses and other current assets | | | 297,000 | | | | 335,000 | |
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| Total current assets | | | 6,850,000 | | | | 5,565,000 | |
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| Fixed Assets - Net | | | 444,000 | | | | 564,000 | |
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| Other Assets | | | 406,000 | | | | 148,000 | |
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| Goodwill | | | 7,568,000 | | | | 7,568,000 | |
| Total Assets | | $ | 15,268,000 | | | $ | 13,845,000 | |
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| Liabilities and Stockholders’ Deficit | | | | | | | | |
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| Current Liabilities | | | | | | | | |
| Short-term borrowings | | $ | 2,550,000 | | | $ | 2,250,000 | |
| Accounts payable | | | 1,170,000 | | | | 817,000 | |
| Accrued compensation | | | 1,012,000 | | | | 834,000 | |
| Accrued expenses and other current liabilities | | | 604,000 | | | | 597,000 | |
| Warranty liability | | | 191,000 | | | | 192,000 | |
| Capitalized lease obligations | | | - | | | | 22,000 | |
| Deferred revenue | | | 10,111,000 | | | | 10,209,000 | |
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| Total current liabilities | | | 15,638,000 | | | | 14,921,000 | |
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| Deferred Revenue | | | 8,889,000 | | | | 7,708,000 | |
| Total liabilities | | | 24,527,000 | | | | 22,629,000 | |
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| Stockholders’ Deficit | | | | | | | | |
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding | | | - | | | | - | |
Common stock, $0.01 par value; 50,000,000 shares authorized; 13,432,605 and 13,319,991 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively | | | 133,000 | | | | 132,000 | |
| Additional paid-in capital | | | 40,879,000 | | | | 40,774,000 | |
| Accumulated deficit | | | (50,271,000 | ) | | | (49,690,000 | ) |
| Total stockholders’ deficit | | | (9,259,000 | ) | | | (8,784,000 | ) |
| Total Liabilities and Stockholders’ Deficit | | $ | 15,268,000 | | | $ | 13,845,000 | |
| St. Bernard Software, Inc. |
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| | | Condensed Consolidated Statements of Operations (Unaudited) |
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| | | Three months ended June 30, | | | Six months ended June 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
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| Revenues | | | | | | | | | | | | |
| Subscription | | $ | 3,415,000 | | | $ | 3,692,000 | | | $ | 6,911,000 | | | $ | 7,381,000 | |
| Appliance | | | 883,000 | | | | 1,062,000 | | | | 1,766,000 | | | | 1,816,000 | |
| License | | | 44,000 | | | | - | | | | 53,000 | | | | 6,000 | |
| Total Revenues | | | 4,342,000 | | | | 4,754,000 | | | | 8,730,000 | | | | 9,203,000 | |
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| Cost of Revenues | | | | | | | | | | | | | | | | |
| Subscription | | | 417,000 | | | | 439,000 | | | | 810,000 | | | | 901,000 | |
| Appliance | | | 633,000 | | | | 696,000 | | | | 1,233,000 | | | | 1,232,000 | |
| License | | | 10,000 | | | | - | | | | 12,000 | | | | 2,000 | |
| Total Cost of Revenues | | | 1,060,000 | | | | 1,135,000 | | | | 2,055,000 | | | | 2,135,000 | |
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| Gross Profit | | | 3,282,000 | | | | 3,619,000 | | | | 6,675,000 | | | | 7,068,000 | |
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| Operating Expenses | | | | | | | | | | | | | | | | |
| Sales and marketing | | | 1,690,000 | | | | 1,582,000 | | | | 3,420,000 | | | | 3,241,000 | |
| Research and development | | | 927,000 | | | | 979,000 | | | | 1,715,000 | | | | 2,127,000 | |
| General and administrative | | | 1,020,000 | | | | 1,053,000 | | | | 2,005,000 | | | | 2,247,000 | |
| Total Operating Expenses | | | 3,637,000 | | | | 3,614,000 | | | | 7,140,000 | | | | 7,615,000 | |
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| (Loss) Income from Operations | | | (355,000 | ) | | | 5,000 | | | | (465,000 | ) | | | (547,000 | ) |
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| Other Expense (Income) | | | | | | | | | | | | | | | | |
| Interest expense - net | | | 55,000 | | | | 79,000 | | | | 96,000 | | | | 171,000 | |
| Gain on sale of assets | | | - | | | | - | | | | - | | | | - | |
| Other expense (income) | | | 22,000 | | | | (22,000 | ) | | | 20,000 | | | | (38,000 | ) |
| Total Other Expense | | | 77,000 | | | | 57,000 | | | | 116,000 | | | | 133,000 | |
| Loss Before Income Taxes | | | (432,000 | ) | | | (52,000 | ) | | | (581,000 | ) | | | (680,000 | ) |
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| Income tax expense | | | - | | | | - | | | | - | | | | (5,000 | ) |
| Net Loss | | $ | (432,000 | ) | | $ | (52,000 | ) | | $ | (581,000 | ) | | $ | (685,000 | ) |
| Loss Per Common Share - Basic and Diluted | | $ | (0.03 | ) | | $ | (0.00 | ) | | $ | (0.04 | ) | | $ | (0.05 | ) |
| Weighted Average Shares Outstanding - Basic and Diluted | | | 13,404,105 | | | | 14,838,940 | | | | 13,396,623 | | | | 14,838,322 | |
| St. Bernard Software, Inc. | |
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| Condensed Consolidated Statements of Cash Flows (Unaudited) | |
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| | | Six months ended June 30, | |
| | | 2010 | | | 2009 | |
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| Cash Flows From Operating Activities | | | | | | |
| Net loss | | $ | (581,000 | ) | | $ | (685,000 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Depreciation and amortization | | | 171,000 | | | | 196,000 | |
| Allowance for doubtful accounts | | | (1,000 | ) | | | (27,000 | ) |
| Gain on change in fair value of warrant derivative liability | | | 20,000 | | | | (16,000 | ) |
| Stock-based compensation expense | | | 84,000 | | | | 669,000 | |
| Noncash interest expense | | | 30,000 | | | | 77,000 | |
| Increase (decrease) in cash resulting from changes in: | | | | | | | | |
| Accounts receivable | | | (926,000 | ) | | | 491,000 | |
| Inventories | | | (229,000 | ) | | | (66,000 | ) |
| Prepaid expenses and other assets | | | (250,000 | ) | | | (420,000 | ) |
| Accounts payable | | | 353,000 | | | | (69,000 | ) |
| Accrued expenses and other current liabilities | | | (13,000 | ) | | | (1,058,000 | ) |
| Accrued compensation | | | 178,000 | | | | 521,000 | |
| Warranty liability | | | (1,000 | ) | | | (11,000 | ) |
| Deferred revenue | | | 1,083,000 | | | | (217,000 | ) |
| Net cash used by operating activities | | | (82,000 | ) | | | (615,000 | ) |
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| Cash Flows From Investing Activities | | | | | | | | |
| Purchases of fixed assets | | | (51,000 | ) | | | (76,000 | ) |
| Net cash used by investing activities | | | (51,000 | ) | | | (76,000 | ) |
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| Cash Flows From Financing Activities | | | | | | | | |
| Proceeds from stock option exercises | | | 10,000 | | | | - | |
| Proceeds from the sales of stock under the employee stock purchase plan | | | 12,000 | | | | 9,000 | |
| Principal payments on capitalized lease obligations | | | (22,000 | ) | | | (81,000 | ) |
| Net increase (decrease) in short-term borrowings | | | 300,000 | | | | (237,000 | ) |
| Net cash provided (used) by financing activities | | | 300,000 | | | | (309,000 | ) |
| Net Increase (Decrease) in Cash and Cash Equivalents | | | 167,000 | | | | (1,000,000 | ) |
| Cash and Cash Equivalents at Beginning of Period | | | 2,454,000 | | | | 2,051,000 | |
| Cash and Cash Equivalents at End of Period | | $ | 2,621,000 | | | $ | 1,051,000 | |
