Exhibit 99.1
For Immediate Release
Corel Corporation Reports Third Quarter 2008 Financial Results
Revenue Up 10% Year over Year
OTTAWA, October 3, 2008 — Corel Corporation (NASDAQ:CREL) (TSX:CRE) today reported financial results for its third quarter ended August 31, 2008. Revenues in the third quarter of fiscal 2008 were $66.2 million, compared to $60.4 million in the third quarter fiscal 2007. GAAP net income in the third quarter of fiscal 2008 was $1.6 million, or $0.06 per basic and diluted share, compared to a GAAP net loss of $6.8 million, or $(0.27) per basic and diluted share, in the third quarter of fiscal 2007.
Non-GAAP adjusted net income for the third quarter fiscal 2008 was $10.2 million, or $0.39 per diluted share, compared to non-GAAP adjusted net income for the third quarter of fiscal 2007 of $8.1 million, or $0.31 per diluted share. Non-GAAP adjusted EBITDA in the third quarter of 2008 was $15.8 million, compared to $13.5 million in the third quarter of 2007.
“Corel delivered a strong third quarter, posting revenue growth across all our key business units and geographies,” said Kris Hagerman, Interim Chief Executive Officer, Corel Corporation. “Corel’s solid performance in a challenging economic environment is a testament to the commitment of our global team and to the quality and value our products deliver to millions of customers worldwide.”
Revenues for the nine months ended August 31, 2008 were $198.8 million, compared to revenues of $178.0 million for the nine months ended August 31, 2007. GAAP net income for the nine months ended August 31, 2008 was $2.5 million, or $0.10 per basic and diluted share, compared to a GAAP net loss of $16.3 million, or $(0.66) per basic and diluted share, for the nine months ended August 31, 2007.
Non-GAAP adjusted net income for the nine months ended August 31, 2008 was $26.4 million, or $1.01 per diluted share, compared to non-GAAP adjusted net income for the nine months ended August 31, 2007 of $20.7 million, or $0.80 per diluted share. Non-GAAP adjusted EBITDA for the nine months ended August 31, 2008 was $44.0 million, compared to $37.4 million for the nine months ended August 31, 2007.
Fourth Quarter Fiscal 2008 Guidance
Corel provided guidance for the fourth quarter ending November 30, 2008. The Company currently expects:
— Revenue in the range of $71 million to $75 million.
— GAAP net income in the range of $4.0 million to $6.0 million and non-GAAP adjusted net income in the range of $14.0 million to $16.0 million.
— GAAP earnings per share in the range of $0.15 to $0.22 and non-GAAP earnings per share in the range of $0.52 to $0.60.
Fiscal 2008 Guidance
Resulting guidance for the year ending November 30, 2008 is as follows:
— Revenue in the range of $270 million to $274 million.
— GAAP net income of $6.5 million to $8.5 million and non-GAAP adjusted net income of $40.5 million to $42.5 million.
— GAAP earnings per share of $0.25 to $0.32 and non-GAAP earnings per share of $1.54 to $1.62.
Corel will host a conference call to discuss its financial results at 8:00 a.m. Eastern Time today. To access the conference call, please dial (877) 857-6173 or (719) 325-4751 approximately 5 minutes prior to the 8:00 AM 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 between 11:00 AM ET October 3, 2008 and 12:00 AM ET October 17, 2008 from Corel’s Investor Relations website or by calling (888) 203-1112 or (719) 457-0820, Passcode: 7387664.
Following the call, an audio replay will be available between 11:00 AM ET October 3, 2008 and 12:00 AM ET October 17, 2008 from Corel’s Investor Relations website or by calling (888) 203-1112 or (719) 457-0820, Passcode: 7387664.
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 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 8, 2008, 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. 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 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 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 closest GAAP measures are 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, VideoStudio®, WinDVD®,
Corel® WordPerfect® Office and WinZip®. Our global headquarters are in Ottawa, Canada, with major offices in the United States, United Kingdom, Germany, China, Taiwan and Japan.
© Corel Corporation. All rights reserved. Corel, CorelDRAW, Paint Shop Pro, Painter, Corel DESIGNER, VideoStudio, WordPerfect, WinDVD, WinZip, 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
Catherine Hughes, 613-728-0826 x1659 (Press)
catherine.hughes@corel.com
or
The Blueshirt Group
Todd Friedman, 415-217-7722 (Investor Relations)
todd@blueshirtgroup.com
Stacie Bosinoff, 415-217-7722 (Investor Relations)
stacie@blueshirtgroup.com
Catherine Hughes, 613-728-0826 x1659 (Press)
catherine.hughes@corel.com
or
The Blueshirt Group
Todd Friedman, 415-217-7722 (Investor Relations)
todd@blueshirtgroup.com
Stacie Bosinoff, 415-217-7722 (Investor Relations)
stacie@blueshirtgroup.com
Corel Corporation
Quarterly Financial results
For the quarter ended August 31, 2008
(in thousands, except per share data; unaudited)
Quarterly Financial results
For the quarter ended August 31, 2008
(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 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Revenues — Product | $ | 59,725 | $ | 55,018 | $ | 179,336 | $ | 161,875 | ||||||||
Revenues — Maintenance and services | 6,503 | 5,352 | 19,480 | 16,161 | ||||||||||||
Total revenues | 66,228 | 60,370 | 198,816 | 178,036 | ||||||||||||
Cost of revenues — Product | 15,218 | 12,167 | 44,453 | 34,690 | ||||||||||||
Cost of revenues — Maintenance and services | 113 | 244 | 412 | 663 | ||||||||||||
Amortization of intangible assets | 6,418 | 6,925 | 19,250 | 19,055 | ||||||||||||
Total cost of revenues | 21,749 | 19,336 | 64,115 | 54,408 | ||||||||||||
Gross margin | 44,479 | 41,034 | 134,701 | 123,628 | ||||||||||||
Operating expenses | ||||||||||||||||
Sales and marketing | 17,941 | 17,590 | 58,373 | 52,580 | ||||||||||||
Research and development | 10,610 | 11,939 | 34,417 | 34,605 | ||||||||||||
General and administration | 8,378 | 7,763 | 25,829 | 25,000 | ||||||||||||
Acquired in-process research and development | — | — | — | 7,831 | ||||||||||||
InterVideo integration expense | — | 2,220 | — | 3,865 | ||||||||||||
Restructuring | 293 | — | 918 | — | ||||||||||||
Total operating expenses | 37,222 | 39,512 | 119,537 | 123,881 | ||||||||||||
Income (loss) from operations | 7,257 | 1,522 | 15,164 | (253 | ) | |||||||||||
Other expenses (income) | ||||||||||||||||
Interest Income | (123 | ) | (112 | ) | (342 | ) | (934 | ) | ||||||||
Interest expense | 3,663 | 4,307 | 11,103 | 12,768 | ||||||||||||
Amortization of deferred financing fees | 270 | 270 | 810 | 804 | ||||||||||||
Expenses associated with Special Committee review | 992 | — | 1,697 | — | ||||||||||||
Other non-operating expense (income) | 1,034 | (497 | ) | (328 | ) | (650 | ) | |||||||||
Income (loss) before income taxes | 1,421 | (2,446 | ) | 2,224 | (12,241 | ) | ||||||||||
Income tax (recovery) provision | (177 | ) | 4,314 | (274 | ) | 4,082 | ||||||||||
Net income (loss) | $ | 1,598 | $ | (6,760 | ) | $ | 2,498 | $ | (16,323 | ) | ||||||
Net loss per share: | ||||||||||||||||
Basic | $ | 0.06 | $ | (0.27 | ) | $ | 0.10 | $ | (0.66 | ) | ||||||
Fully diluted | $ | 0.06 | $ | (0.27 | ) | $ | 0.10 | $ | (0.66 | ) | ||||||
Weighted average number of shares: | ||||||||||||||||
Basic | 25,704 | 25,041 | 25,570 | 24,828 | ||||||||||||
Fully diluted | 26,248 | 25,041 | 26,192 | 24,828 |
Consolidated Condensed Balance Sheet
August 31, | November 30, | |||||||
2008 | 2007 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 37,137 | $ | 24,615 | ||||
Restricted cash | 159 | 217 | ||||||
Accounts receivable | ||||||||
Trade, net | 28,485 | 41,092 | ||||||
Other | 3,236 | 118 | ||||||
Inventory | 1,260 | 729 | ||||||
Income taxes recoverable | 1,760 | 1,470 | ||||||
Prepaids and other current assets | 3,279 | 3,276 | ||||||
Total current assets | 75,316 | 71,517 | ||||||
Capital assets | 9,920 | 8,971 | ||||||
Intangible assets | 72,925 | 92,010 | ||||||
Goodwill | 88,643 | 88,643 | ||||||
Deferred financing and other long-term assets | 5,419 | 5,696 | ||||||
Total assets | $ | 252,223 | $ | 266,837 | ||||
Liabilities and shareholders’ deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 54,569 | $ | 67,290 | ||||
Income taxes payable | 1,464 | 723 | ||||||
Deferred revenue | 12,588 | 15,707 | ||||||
Current portion of long-term debt | 16,595 | 2,249 | ||||||
Current portion of obligations under capital leases | 708 | 767 | ||||||
Total current liabilities | 85,924 | 86,736 | ||||||
Deferred revenue | 2,236 | 2,365 | ||||||
Deferred income tax liability | 17,054 | 20,754 | ||||||
Obligations under capital leases | 1,302 | 2,114 | ||||||
Income taxes payable | 13,139 | 11,693 | ||||||
Accrued pension benefit obligation | 1,075 | 1,116 | ||||||
Long-term debt | 140,163 | 156,359 | ||||||
Total liabilities | 260,893 | 281,137 | ||||||
Shareholders’ deficit | ||||||||
Share capital | 44,042 | 40,652 | ||||||
Additional paid-in capital | 7,970 | 5,926 | ||||||
Accumulated other comprehensive loss | (2,071 | ) | (721 | ) | ||||
Deficit | (58,611 | ) | (60,157 | ) | ||||
Total shareholders’ deficit | (8,670 | ) | (14,300 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 252,223 | $ | 266,837 | ||||
Consolidated Condensed Statement of Cash Flows
Three Months ended | Nine Months ended | |||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income (loss) | $ | 1,598 | $ | (6,760 | ) | $ | 2,498 | $ | (16,323 | ) | ||||||
Depreciation and amortization | 1,022 | 544 | 3,417 | 2,215 | ||||||||||||
Amortization of deferred financing fees | 270 | 270 | 810 | 804 | ||||||||||||
Amortization of intangible assets | 6,418 | 6,925 | 19,250 | 19,055 | ||||||||||||
Stock-based compensation | 1,839 | 1,770 | 4,954 | 4,068 | ||||||||||||
Provision for bad debts | 146 | 115 | 379 | 180 | ||||||||||||
Deferred income taxes | (1,233 | ) | 3,667 | (3,700 | ) | 1,352 | ||||||||||
Acquired in-process research and development | — | — | — | 7,831 | ||||||||||||
Unrealized (gain) loss on forward exchange contracts | — | (26 | ) | — | 9 | |||||||||||
Loss on disposal of fixed assets | 19 | 48 | 67 | 102 | ||||||||||||
Gain on sale of investment | — | — | (822 | ) | — | |||||||||||
Loss (gain) on interest rate swap recorded at fair value | (193 | ) | 337 | 50 | (245 | ) | ||||||||||
Change in operating assets and liabilities | (3,667 | ) | (6,387 | ) | (7,367 | ) | (3,321 | ) | ||||||||
Cash flows provided by operating activities | 6,219 | 503 | 19,536 | 15,727 | ||||||||||||
Cash flows from financing activities | ||||||||||||||||
Restricted cash | 2 | 500 | 58 | 500 | ||||||||||||
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 | ||||||||||||
Repayments of long-term debt | (755 | ) | (399 | ) | (1,850 | ) | (1,479 | ) | ||||||||
Repayments of capital lease obligations | (318 | ) | (128 | ) | (657 | ) | (128 | ) | ||||||||
Financing fees incurred | — | (4 | ) | — | (1,681 | ) | ||||||||||
Proceeds from exercise of stock options | 231 | 1,298 | 485 | 3,987 | ||||||||||||
Other financing activities | — | (272 | ) | — | (221 | ) | ||||||||||
Cash flows provided by (used in) financing activities | (840 | ) | (5,005 | ) | (1,964 | ) | 77,978 | |||||||||
Cash flows from investing activities | ||||||||||||||||
Purchase of InterVideo Inc, net of cash acquired | — | (203 | ) | — | (121,357 | ) | ||||||||||
Purchase of long lived assets | (1,657 | ) | (1,441 | ) | (4,956 | ) | (2,159 | ) | ||||||||
Cash flows used in investing activities | (1,657 | ) | (1,644 | ) | (4,956 | ) | (123,516 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | — | (7 | ) | (94 | ) | 38 | ||||||||||
Increase (decrease) in cash and cash equivalents | 3,722 | (6,153 | ) | 12,522 | (29,773 | ) | ||||||||||
Cash and cash equivalents, beginning of period | 33,415 | 27,410 | 24,615 | 51,030 | ||||||||||||
Cash and cash equivalents, end of period | $ | 37,137 | $ | 21,257 | $ | 37,137 | $ | 21,257 | ||||||||
Non-GAAP Results
(In thousands, except per share data)
Three Months ended | Nine Months ended | |||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Non-GAAP Adjusted Net Income Calculation: | ||||||||||||||||
Net income (loss) | $ | 1,598 | $ | (6,760 | ) | $ | 2,498 | $ | (16,323 | ) | ||||||
Amortization of intangible assets | 6,418 | 6,925 | 19,250 | 19,055 | ||||||||||||
Tax benefit on amortization of intangible assets | (1,233 | ) | (1,340 | ) | (3,700 | ) | (3,655 | ) | ||||||||
Tax expense on write-off of deferred tax asset | — | 5,007 | — | 5,007 | ||||||||||||
Stock-based compensation | 1,839 | 1,770 | 4,954 | 4,068 | ||||||||||||
Restructuring | 293 | — | 918 | — | ||||||||||||
InterVideo integration expense | — | 2,220 | — | 3,865 | ||||||||||||
Expenses associated with Special Committee review | 992 | — | 1,697 | — | ||||||||||||
Acquired in-process research and development | — | — | — | 7,831 | ||||||||||||
Amortization of deferred financing fees | 270 | 270 | 810 | 804 | ||||||||||||
Non-GAAP Adjusted Net Income | $ | 10,177 | $ | 8,092 | $ | 26,427 | $ | 20,652 | ||||||||
Percentage of revenue | 15.4 | % | 13.4 | % | 13.3 | % | 11.6 | % | ||||||||
Pro-forma diluted non-GAAP adjusted net income per share | $ | 0.39 | $ | 0.31 | $ | 1.01 | $ | 0.80 | ||||||||
Shares used in computing proforma diluted non-GAAP adjusted net income per share | 26,248 | 25,888 | 26,192 | 25,716 | ||||||||||||
Non-GAAP Adjusted EBITDA Calculation: | ||||||||||||||||
Cash flows provided by operating activities | $ | 6,219 | $ | 503 | $ | 19,536 | $ | 15,727 | ||||||||
Change in operating assets and liabilities | 3,667 | 6,387 | 7,367 | 3,321 | ||||||||||||
Interest expense, net | 3,540 | 4,195 | 10,761 | 11,834 | ||||||||||||
Income tax (recovery) | (177 | ) | 4,314 | (274 | ) | 4,082 | ||||||||||
Deferred income taxes | 1,233 | (3,667 | ) | 3,700 | (1,352 | ) | ||||||||||
Provision for bad debts | (146 | ) | (115 | ) | (379 | ) | (180 | ) | ||||||||
Unrealized loss on forward exchange contracts | — | 26 | — | (9 | ) | |||||||||||
Gain on sale of investment | — | — | 822 | — | ||||||||||||
Gain (loss) on interest rate swap | 193 | (337 | ) | (50 | ) | 245 | ||||||||||
Loss on disposal of fixed assets | (19 | ) | (48 | ) | (67 | ) | (102 | ) | ||||||||
Expenses associated with Special Committee review | 992 | — | 1,697 | — | ||||||||||||
InterVideo integration expense | — | 2,220 | — | 3,865 | ||||||||||||
Restructuring | 293 | — | 918 | — | ||||||||||||
Non-GAAP Adjusted EBITDA | $ | 15,795 | $ | 13,478 | $ | 44,031 | $ | 37,431 | ||||||||
Percentage of revenue | 23.8 | % | 22.3 | % | 22.1 | % | 21.0 | % |
Other Supplemental Information
(In thousands)
(In thousands)
Three Months ended | Nine Months ended | |||||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||
Revenue by Product Segment | ||||||||||||||||||
Graphics and Productivity | $ | 37,913 | $ | 33,683 | $ | 113,357 | $ | 102,264 | ||||||||||
Digital Media | 28,315 | 26,687 | 85,459 | 75,772 | ||||||||||||||
Total | $ | 66,228 | $ | 60,370 | $ | 198,816 | $ | 178,036 | ||||||||||
As percentage of revenues | ||||||||||||||||||
Graphics and Productivity | 57.2 | % | 55.8 | % | 57.0 | % | 57.4 | % | ||||||||||
Digital Media | 42.8 | % | 44.2 | % | 43.0 | % | 42.6 | % | ||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Revenue by Geography | ||||||||||||||||||
Americas | $ | 33,000 | $ | 31,426 | $ | 96,690 | $ | 91,634 | ||||||||||
EMEA | 18,151 | 14,566 | 58,728 | 49,332 | ||||||||||||||
APAC | 15,077 | 14,378 | 43,398 | 37,070 | ||||||||||||||
Total | $ | 66,228 | $ | 60,370 | $ | 198,816 | $ | 178,036 | ||||||||||
As percentage of revenues | ||||||||||||||||||
Americas | 49.8 | % | 52.1 | % | 48.6 | % | 51.5 | % | ||||||||||
EMEA | 27.4 | % | 24.1 | % | 29.5 | % | 27.7 | % | ||||||||||
APAC | 22.8 | % | 23.8 | % | 21.8 | % | 20.8 | % | ||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Allocation of Stock-Based Compensation Expense | ||||||||||||||||||
Cost of revenues — Product | $ | 4 | $ | 15 | $ | 19 | $ | 33 | ||||||||||
Cost of revenues — Maintenance and service | 2 | 3 | 6 | 7 | ||||||||||||||
Sales and marketing | 459 | 468 | 1,358 | 1,049 | ||||||||||||||
Research and development | 232 | 369 | 767 | 857 | ||||||||||||||
General and administration | 1,142 | 915 | 2,804 | 2,122 | ||||||||||||||
Total | $ | 1,839 | $ | 1,770 | $ | 4,954 | $ | 4,068 | ||||||||||