( BW)(COREL)(CREL)(CRE.TO) Corel Corporation Reports First Quarter
2007 Financial Results
Business Editors
OTTAWA--(BUSINESS WIRE)--April 19, 2007--Corel Corporation
(NASDAQ:CREL) (TSX:CRE) today reported financial results for its first
quarter ended February 28, 2007. Revenues in the first quarter of
fiscal 2007 were $52.6 million, an increase of 19% over revenues of
$44.3 million in the first quarter fiscal 2006. GAAP net loss in the
first quarter of fiscal 2007 was $11.9 million, or ($0.48) per share,
compared to a GAAP net loss of $1.6 million, or $(0.08) per share in
the first quarter of fiscal 2006.
Non-GAAP adjusted net income for the first quarter fiscal 2007 was
$2.7 million, or $0.11 per diluted share, compared to non-GAAP
adjusted net income for the first quarter of fiscal 2006 of $6.8
million, or $0.33 per diluted share. Non-GAAP adjusted EBITDA in the
first quarter of 2007 was $8.7 million, compared to $14.4 million in
the first quarter of fiscal 2006.
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.
"With revenue at the high end of our guidance and earnings above
guidance, Q1 was another solid quarter for Corel as we reported our
first combined results for Corel and InterVideo," said David Dobson,
CEO of Corel Corporation. "The strength of our existing portfolio was
demonstrated through the performance of WinZip, iGrafx, CorelDRAW
Graphics Suite and Paint Shop Pro. We achieved these results while
completing the acquisition of InterVideo and establishing a new
Digital Media business to pursue the significant market opportunities
we see ahead."
Added Mr. Dobson: "I am pleased with the progress we have made in
advancing the integration and creating a global team that is well
positioned in the rapidly growing digital media market. With a proven
product portfolio, expanded distribution capabilities, and growing
traction in developing and emerging markets, Corel is poised to
capitalize on the growing market demand for compelling digital content
that is easy to create and share."
Financial Guidance
Second Quarter Fiscal 2007 Guidance
Corel provided guidance for the second quarter ending May 31,
2007. The Company currently expects:
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-- Revenue in the range of $62 million to $64 million.
-- GAAP net loss of $1.5 million to net income of $0.5 million
and non-GAAP adjusted net income in the range of $7.5 million
to $9.5 million.
-- GAAP EPS of $(0.06) to $0.02 per share and non-GAAP EPS of
$0.28 to $0.35 per share.
Fiscal 2007 Guidance
Corel provided guidance for the year ending November 30, 2007.
The Company currently expects:
-- Revenue in the range of $245 million to $255 million.
-- GAAP net loss of $9 million to $6 million and non-GAAP
adjusted net income of $33 million to $36 million.
-- GAAP EPS of $(0.35) to $(0.20) per share and non-GAAP EPS of
$1.25 to $1.40 per diluted share.
Corel will host a conference call to discuss its financial results
at 4:30 p.m. Eastern Time today. To access the conference call, please
dial (800) 289-0494 or (913) 981-5520. 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 the acquisition of InterVideo,
Inc., including the risk that disruption from the transaction may make
it more difficult to maintain relationships with customers, employees,
or suppliers. 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 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 Corel's other filings with the SEC including Corel's form 10-Q for
the quarter ended August 31, 2006 under the caption "Risk Factors" and
elsewhere. A copy of the Corel Prospectus and such other filings can
be obtained on Corel's website or on the SEC's website a
http://www.sec.gov. http://www.sec.gov./ Certain of such risks are
also included in Corel's Canadian supplemented PREP prospectus dated
April 25, 2006 available at http://www.sedar.com. In addition, these
and other risks can be found in InterVideo's previous reports filed
with the SEC under the caption "Risk Factors" and elsewhere, including
InterVideo's 10-Q for the quarter ended September 30, 2006, which can
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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 developer of graphics, productivity and digital
media software with more than 100 million users worldwide. The
Company's product portfolio includes some of the world's most popular
and widely recognized software brands including CorelDRAW(R) Graphics
Suite, Corel(R) Paint Shop Pro(R), Corel(R) Painter(TM), Corel
DESIGNER(R), Corel(R) WordPerfect(R) Office, WinZip(R) and iGrafx(R).
In 2006, Corel acquired InterVideo, makers of WinDVD(R), and Ulead, a
leading developer of video, imaging and DVD authoring software.
Designed to help people become more productive and express their
creative potential, Corel's software strives to set a higher standard
for value with full-featured products that are easier to learn and
use. The industry has responded with hundreds of awards recognizing
Corel's leadership in software innovation, design and value.
Corel's products are sold in more than 75 countries through a
well-established network of international resellers, retailers,
original equipment manufacturers, online providers and Corel's global
websites. The Company's headquarters are located in Ottawa, Canada
with major offices in the United States, United Kingdom, Germany,
China and Japan. Corel's stock is traded on the NASDAQ under the
symbol CREL and on the TSX under the symbol CRE.
(C) 2007 Corel Corporation. All rights reserved. Corel, CorelDRAW,
Paint Shop Pro, Snapfire, Painter, Corel DESIGNER, WordPerfect,
WinZip, iGrafx, the Corel logo, InterVideo, Ulead, WinDVD and WinDVD
Creator are trademarks or registered trademarks of Corel Corporation
and/or its subsidiaries. All other trademarks are the property of
their respective holders.
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CRELF
Corel Corporation
Quarterly Financial results
For the quarter ended February 28, 2007
(in thousands, except per share data; unaudited)
Consolidated Condensed Statement of Operations
--------------------------
Three Months ended Feb 28,
2007 2006
--------------------------
Revenues - Product $ 47,304 $ 39,498
Revenues - Maintenance and services 5,330 4,789
- ----------------------------------------------------------------------
Total revenues 52,634 44,287
- ----------------------------------------------------------------------
Cost of revenues - Product 8,487 5,005
Cost of revenues - Maintenance and services 198 314
Amortization of intangible assets 5,757 6,627
- ----------------------------------------------------------------------
Total cost of revenues 14,442 11,946
- ----------------------------------------------------------------------
Gross margin 38,192 32,341
- ----------------------------------------------------------------------
Operating expenses
Sales and marketing 17,104 14,504
Research and development 11,344 6,181
General and administration 9,095 5,395
Acquired in-process research and
development 7,831 -
InterVideo integration expense 785 -
Restructuring - 560
- ----------------------------------------------------------------------
Total operating expenses 46,159 26,640
- ----------------------------------------------------------------------
Income (loss) from operations (7,967) 5,701
Other expenses (income)
Interest expense, net 3,921 3,863
Amortization of deferred financing fees 265 444
Other non-operating income (632) (120)
- ----------------------------------------------------------------------
Income (loss) before income taxes (11,521) 1,514
Income tax provision 355 3,152
- ----------------------------------------------------------------------
Net loss $ (11,876) $ (1,638)
- ----------------------------------------------------------------------
Net loss per share:
Basic $ (0.48) $ (0.08)
Fully diluted $ (0.48) $ (0.08)
Weighted average number of shares:
Basic 24,627 19,490
Fully diluted 24,627 19,490
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Consolidated Condensed Balance Sheet
--------------------------
As of Feb 28, November 30,
2007 2006
--------------------------
Assets
Current assets:
Cash and cash equivalents $ 40,906 $ 51,030
Restricted cash 717 717
Accounts receivable
Trade, net 15,650 18,150
Other 1,233 808
Inventory 1,893 914
Prepaids and other current assets 4,975 2,300
--------------------------------------------------------------------
Total current assets 65,374 73,919
Investments 203 203
Capital assets 6,145 3,651
Intangible assets 110,666 37,831
Goodwill 82,488 9,850
Deferred financing charges and other
long-term assets 5,938 5,232
- ----------------------------------------------------------------------
Total assets $ 270,814 $ 130,686
- ----------------------------------------------------------------------
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable and accrued
liabilities $ 62,858 $ 28,220
Due to related parties - 167
Operating line of credit 23,000 -
Income taxes payable 2,411 235
Deferred revenue 11,806 12,719
Current portion of long term debt 2,637 1,426
Deferred income tax liability 4,972 -
- ----------------------------------------------------------------------
Total current liabilities 107,684 42,767
Deferred revenue 1,748 2,015
Deferred income tax liability 14,830 -
Income taxes payable 9,875 8,488
Long term debt 157,331 89,223
- ----------------------------------------------------------------------
Total liabilities 291,468 142,493
- ----------------------------------------------------------------------
Shareholders' deficit
Share capital 32,828 30,722
Additional paid-in capital 5,535 4,612
Accumulated other comprehensive loss (46) (46)
Deficit (58,971) (47,095)
- ----------------------------------------------------------------------
Total shareholders' deficit (20,654) (11,807)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Total liabilities and shareholders' deficit $ 270,814 $ 130,686
- ----------------------------------------------------------------------
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Consolidated Condensed Statement of Cash Flows
--------------------------
Three Months ended Feb 28,
2007 2006
--------------------------
Cash flow from operating activities
Net loss $ (11,876) $ (1,638)
Depreciation and amortization 702 399
Amortization of deferred financing fees 265 444
Amortization of intangible assets 5,757 6,627
Stock-based compensation 1,008 852
Provision for bad debts 16 122
Deferred income taxes (1,035) 435
Acquired in-process research and
development 7,831 -
Unrealized loss on foreign exchange
contracts 35 28
Gain on interest rate swap recorded at
fair value (191) -
Change in operating assets and
liabilities 15,928 (1,343)
- ----------------------------------------------------------------------
Cash flow provided by operating activities 18,440 5,926
- ----------------------------------------------------------------------
Cash flow from financing activities
Proceeds from operating line of credit 23,000 -
Proceeds from long term debt 70,000 -
Repayments of long term debt (681) (9,294)
Proceeds from exercise of stock options 1,302 -
Financing fees incurred (1,672) (1,763)
Other financing activities - 50
- ----------------------------------------------------------------------
Cash flow provided by (used in) financing
activities 91,949 (11,007)
- ----------------------------------------------------------------------
Cash flow from investing activities
Purchase of InterVideo Inc, net of cash
acquired (120,368) -
Purchase of long lived assets (110) (430)
- ----------------------------------------------------------------------
Cash flow used in investing activities (120,478) (430)
- ----------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents (35) (37)
Decrease in cash and cash equivalents (10,124) (5,548)
Cash and cash equivalents, beginning of
period 51,030 20,746
- ----------------------------------------------------------------------
Cash and cash equivalents, end of period $ 40,906 $ 15,198
- ----------------------------------------------------------------------
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Non-GAAP Results
(In thousands, except per share data)
--------------------------
Three Months ended Feb 28,
2007 2006
--------------------------
Non-GAAP Adjusted Net Income Calculation:
Net loss $ (11,876) $ (1,638)
Amortization of intangible assets 5,757 6,627
Tax benefit on amortization of
intangible assets (1,035) -
Stock-based compensation 1,008 852
Restructuring - 560
InterVideo integration expense 785 -
Acquired in-process research and
development 7,831 -
Amortization of deferred financing fees 265 444
------------------------------------------------------------------
Non-GAAP Adjusted Net Income $ 2,735 $ 6,845
------------------------------------------------------------------
Percentage of revenue 5.2% 15.5%
Pro-forma diluted non-GAAP adjusted net
income per share $ 0.11 $ 0.33
Shares used in computing proforma
diluted non-GAAP adjusted net income
per share 25,402 20,558
Non-GAAP Adjusted EBITDA Calculation:
Cash flow provided by operating
activities $ 18,440 $ 5,926
Change in operating assets and
liabilities (15,928) 1,343
Interest expense, net 3,921 3,863
Income tax expense 355 3,152
Deferred income taxes 1,035 (435)
Provision for bad debts (16) (122)
Unrealized losses on foreign exchange
contracts (35) (28)
Gain on interest rate swap recorded at
fair value 191 -
InterVideo integration expense 785 -
Restructuring - 560
Reorganizational costs - 117
------------------------------------------------------------------
Non-GAAP Adjusted EBITDA $ 8,748 $ 14,376
------------------------------------------------------------------
Percentage of revenue 16.6% 32.5%
Other Supplemental Information
Revenue by Product Segment
Graphics and Productivity $ 34,064 $ 36,637
Digital Media 18,570 7,650
------------------------------------------------------------------
Total $ 52,634 $ 44,287
------------------------------------------------------------------
As percentage of revenues
Graphics and Productivity 64.7% 82.7%
Digital Media 35.3% 17.3%
------------------------------------------------------------------
Total 100.0% 100.0%
------------------------------------------------------------------
Revenue by Geography
Americas $ 27,193 $ 25,652
Europe, Middle East, Africa 17,658 15,784
Asia-Pacific 7,783 2,851
------------------------------------------------------------------
Total $ 52,634 $ 44,287
------------------------------------------------------------------
As percentage of revenues
Americas 51.7% 57.9%
Europe, Middle East, Africa 33.5% 35.6%
Asia-Pacific 14.8% 6.4%
------------------------------------------------------------------
Total 100.0% 100.0%
------------------------------------------------------------------
Allocation of Stock-Based Compensation
Expense
Cost of revenues - Product $ 9 $ 8
Cost of revenues - Maintenance and
service 2 2
Sales and marketing 270 191
Research and development 195 63
General and administration 532 588
------------------------------------------------------------------
Total $ 1,008 $ 852
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CONTACT: 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
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