OTTAWA -- Corel Corporation (NASDAQ:CREL)(TSX:CRE) today reported results for its first quarter ended February 28, 2006, consistent with the preliminary results reported in the Company's Final Prospectus from its Initial Public Offering dated April 25, 2006. Results from WinZip's operations are included from January 18, 2005 under the rules of SFAS 141. E[acute accent]Total revenues in the first quarter of fiscal 2006 were $44.3 million, an increase of 11% over total revenues of $40.0 million in the first quarter of fiscal 2005. Income from operations for the 2006 first quarter was $5.7 million, compared to $4.0 million in the first quarter of 2005, an increase of 41%. The Company recorded income tax expense of $3.2 million in the quarter, including $2.4 million related to WinZip, and interest expense of $3.9 million, resulting in a net loss of $1.6 million, or $(0.08) per pro forma diluted share. In the first quarter of fiscal 2005, the Company recorded a tax expense of $180,000 and interest expense of $2.0 million, resulting in a net loss of $2.5 million, or $(0.16) per share. E[acute accent]Adjusted EBITDA in the first quarter of fiscal 2006 was $14.4 million, a 19% increase compared to $12.1 million in the first quarter of fiscal 2005. A reconciliation of Cash Flow from Operations, which was $5.9 million and $9.0 million in the first quarters of fiscal years 2006 and 2005, respectively, to Adjusted EBITDA can be found in the tables accompanying this press release. E[acute accent]David Dobson, CEO of Corel Corporation, said, "We are pleased with our first quarter results that reflect the fundamental strengths of the Corel business model. The acquisition of WinZip delivered positive results in the quarter, contributing to the increase in revenue and operating income. During the quarter we also signed a new OEM agreement with Lenovo, the third largest PC manufacturer in the world. This agreement supports our goal of extending Corel's reach into both mature and emerging markets by offering value-conscious consumers full-featured, easy-to-use products that are highly compatible with industry standards." E[acute accent]On May 2, 2006, Corel completed its initial public offering of 6,500,000 common shares at US $16.00 (CDN $18.11) per share. As part of the offering, Corel sold 5,000,000 common shares and certain selling shareholders sold 1,500,000 common shares.
E[acute accent]Forward-Looking Statements:
E[acute accent]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 of results 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 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. These risks, uncertainties and other important factors are described in our Prospectus dated April 25, 2006, filed with the Securities and Exchange Commission pursuant to Rule 462(b) of the rules and regulations under the Securities Act of 1933. A copy of the Prospectus can be obtained on our website, or at www.sec.gov. Such risks are also included in our Canadian supplemented PREP prospectus dated April 26, 2006, available for free 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.
E[acute accent]Use of Non-GAAP Measures:
E[acute accent]This news release includes certain non-GAAP financial measures, such as Adjusted EBITDA. We use these non-GAAP financial measures 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 unlikely to be 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 are set out in the tables attached to this news release. E[acute accent]Corel has filed a Prospectus with the SEC for the offering to which this communication relates. Before you invest, you should read the Prospectus and other documents Corel has filed with the SEC for more complete information about Corel and this offering. You may get these documents for free by visiting EDGAR on the SEC website at http://www.sec.gov. In addition, the Prospectus relating to this offering is available on Corel's website at http://investor.corel.com/SEC.cfm.
E[acute accent]About Corel Corporation
E[acute accent]Corel is a leading global packaged software company with an estimated installed base of over 40 million users. The Company provides high quality, affordable and easy-to-use productivity, graphics and digital imaging software and enjoys a favorable market position among value-conscious consumers and small businesses. Its products are sold in over 75 countries through a scalable distribution platform comprised of original equipment manufacturers (OEMs), Corel's domestic and international websites, and a global network of resellers and retailers. The Company's product portfolio features well-established, globally recognized brands including CorelDRAW(R) Graphics Suite, Corel(R) WordPerfect(R) Office, WinZip(R), Corel(R) Paint Shop(R) Pro, and Corel Painter(TM).
E[acute accent](C) 2006 Corel Corporation. All rights reserved. Corel, CorelDRAW, WordPerfect, WinZip, Paint Shop, Painter, 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.
E[acute accent]CRELF
Corel Corporation Combined Consolidated Balance Sheets (In thousands of U.S. dollars or shares) (Unaudited) As of As of February 28, November 30, 2006 2005 Assets Current assets: Cash and cash equivalents $ 15,198 $ 20,746 Restricted cash 716 966 Accounts receivable Trade, net 16,420 19,342 Other 482 978 Inventory 850 726 Deferred tax assets 421 592 Prepaid and other current assets 2,285 2,343 ------------ ------------ Total current assets 36,372 45,693 Investments 287 334 Capital assets 3,450 3,532 Intangible assets 45,501 52,397 Goodwill 9,850 9,850 Deferred tax assets 20 284 Deferred financing and other long-term assets 10,065 8,746 ------------ ------------ Total assets $ 105,545 $ 120,836 ============ ============ Liabilities and shareholders' deficit Current liabilities: Accounts payable and accrued liabilities $ 24,585 $ 30,486 Current portion of promissory note 771 1,170 Income taxes payable 12,663 10,773 Deferred revenue 10,586 11,755 Current portion of term loans payable 9,500 15,764 ------------ ------------ Total current liabilities 58,105 69,948 Promissory note 815 1,072 Deferred revenue 2,050 2,085 Term loans payable 130,591 132,965 ------------ ------------ Total liabilities 191,561 206,070 ------------ ------------ Commitments and contingencies Shareholders' deficit Share capital: Class A Common Shares (par value: none; authorized: unlimited; issued and outstanding: nil, and 3,740 shares, respectively; convertible to Class B Common Shares) - (42,229) Class B Common Shares (par value: none; authorized: unlimited; issued and outstanding: nil, and 8,321 shares, respectively) - (34,184) Preferred Shares (par value: none; authorized: unlimited; issued and outstanding: nil, and 3,105 shares, respectively) - 2,600 WinZip Common Shares (par value: $1; authorized: 50; issued and outstanding: 20 and 20 shares, respectively) 20 20 Corel common shares (par value: none; authorized: unlimited; issued and outstanding: 15,170 and nil shares, respectively) (73,761) - Additional paid-in capital 8,279 7,427 Accumulated other comprehensive income 37 85 Deficit (20,591) (18,953) ------------ ------------ Total shareholders' deficit (86,016) (85,234) ------------ ------------ Total liabilities and shareholders' deficit $ 105,545 $ 120,836 ============ ============ Corel Corporation Combined Consolidated Statements of Operations (In thousands of U.S. dollars or shares, except per share data) (Unaudited) Three months ended February 28, 2006 2005 ------------ ------------ Revenues Product $ 39,498 $ 36,082 Maintenance and services 4,789 3,906 ------------ ------------ Total revenues 44,287 39,988 ------------ ------------ Cost of revenues Cost of products 5,005 4,708 Cost of maintenance and services 314 348 Amortization of intangible assets 6,627 6,199 ------------ ------------ Total cost of revenues 11,946 11,255 ------------ ------------ Gross margin 32,341 28,733 ------------ ------------ Operating expenses Sales and marketing 14,504 12,824 Research and development 6,181 5,671 General and administration 5,395 5,659 Restructuring 560 540 ------------ ------------ Total operating expenses 26,640 24,694 ------------ ------------ Income from operations 5,701 4,039 ------------ ------------ Other expenses (income) Loss on debt retirement - 3,931 Interest expense, net 3,863 1,970 Amortization of deferred financing fees 444 300 Other non-operating (income) expense (120) 178 ------------ ------------ Income (loss) before taxes 1,514 (2,340) Income tax expense 3,152 180 ------------ ------------ Net loss $ (1,638) $ (2,520) ============ ============ Other comprehensive income (loss) Unrealized (loss) gain on securities (48) 214 ------------ ------------ Other comprehensive income (loss) (48) 214 ------------ ------------ Total comprehensive loss $ (1,686) $ (2,306) ============ ============ Net income (loss) per share: Basic Class A $ N/A $ (1.64) Class B $ N/A $ (1.64) WinZip common $ 105.85 $ (9.75) Corel common $ (0.25) $ N/A Fully diluted Class A $ N/A $ (1.64) Class B $ N/A $ (1.64) WinZip common $ 92.04 $ (9.75) Corel common $ (0.25) $ N/A Pro-forma Basic $ (0.08) $ (0.16) Diluted $ (0.08) $ (0.16) Corel Corporation Combined Consolidated Statements of Operations (In thousands of U.S. dollars or shares, except per share data) (Unaudited) Three months ended February 28, 2006 2005 ---------- ---------- Income (loss) applicable to shareholders: Class A Distributed earnings to class $ N/A $ 21,006 Loss allocable to class $ N/A $ (27,136) Class B Distributed earnings to class $ N/A $ 46,785 Loss allocable to class $ N/A $ (60,438) WinZip Common Distributed earnings to class $ - $ - (Loss) income allocable to class $ 2,117 $ (195) Corel Common Distributed earnings to class $ - $ N/A Loss allocable to class $ (3,755) $ N/A Weighted average number of shares: Shares used in basic per share amounts Class A N/A 3,736 Class B N/A 8,321 WinZip common 20 20 Corel common 15,167 N/A Shares used in fully diluted per share amounts Class A N/A 3,736 Class B N/A 8,321 WinZip common 23 20 Corel common 15,167 N/A Shares used in pro-forma per share amounts Basic 19,490 19,485 Diluted 19,490 19,485 Corel Corporation Combined Consolidated Statements of Cash Flows (In thousands of U.S. dollars) (Unaudited) Three months ended February 28, 2006 2005 ----------- ----------- Cash flows from operating activities Net loss $ (1,638) $ (2,520) Depreciation 399 462 Amortization of deferred financing fees 444 300 Amortization of intangible assets 6,627 6,199 Stock-based compensation 852 116 Accrued interest (613) 367 Provision for bad debts 122 166 Deferred income taxes 435 295 Unrealized foreign exchange loss on forward exchange contracts 28 206 Loss on disposal of fixed assets - 13 Loss on early retirement of debt - 3,931 Change in operating assets and liabilities Accounts receivable 3,295 4,477 Inventory (124) 693 Prepaids and other current assets 67 (74) Accounts payable and accrued liabilities (5,036) (4,525) Taxes payable 2,272 (125) Deferred revenue (1,204) (1,024) ----------- ----------- Cash flows provided by operating activities 5,926 8,957 ----------- ----------- Cash flows from financing activities Proceeds from term loan - 130,000 Repayments of term loan (8,638) (64,305) Financing fees incurred (1,763) (7,000) Paid up capital distribution - (83,113) Dividends - (2,135) Other financing activities (606) 1,870 ----------- ----------- Cash flows used in financing activities (11,007) (24,683) ----------- ----------- Cash flows from investing activities Redemption of short-term investments - 9,987 Acquisition of Jasc - 185 Purchase of long lived assets, net of proceeds (430) (299) ----------- ----------- Cash flows (used in) provided by investing activities (430) 9,873 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents (37) (9) Decrease in cash and cash equivalents (5,548) (5,862) Cash and cash equivalents, beginning of period 20,746 11,557 ----------- ----------- Cash and cash equivalents, end of period $ 15,198 $ 5,695 =========== =========== Corel Corporation Reconciliation of Cash Flow from Operations to Adjusted EBITDA (In thousands of U.S. dollars) (Unaudited) Three months ended February 28, 2006 2005 ----------- ----------- Cash flow provided by operations $ 5,926 $ 8,957 Change in operating assets and liabilities 730 578 Interest expenses 3,940 2,045 Interest income (77) (75) Income tax expense 3,152 180 Accrued interest 613 (367) Provision for bad debts (122) (166) Unrealized foreign exchange losses on forward contracts (28) (206) Deferred income taxes (435) (295) Loss on disposal of fixed assets - (13) Restructuring 560 540 Reorganization costs 117 883 ----------- ----------- Adjusted EBITDA $ 14,376 $ 12,061 =========== ===========
