Corel Corporation Reports First Quarter 2007 Financial Results



    OTTAWA, April 19 /CNW/ - 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:

    --  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 at 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 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.

    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



    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
    ----------------------------------------------------------------------



    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
    ----------------------------------------------------------------------



    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
        ------------------------------------------------------------------
    




For further information:

For further information: 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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