Captaris Reports Third Quarter 2007 Financial Results
EPS of $0.02
Bellevue, Wash. — November 5, 2007 — Captaris, Inc. (NASDAQ: CAPA), a leading provider of software products that automate document-centric processes, today reported financial results for its
third quarter ended September 30, 2007. The results for the quarter included the operations of Castelle from the date of acquisition,
July 10, 2007.
Total revenue for the third quarter was $23.3 million, compared to $24.6 million in the prior year’s third quarter and consistent
with the $23 million estimate stated in our press release on October 11. Third quarter revenue by category compared to the
third quarter of 2006 was as follows:
- Software revenue was $7.7 million, a decrease of $2.0 million
- Maintenance, support and service revenue was $10.0 million, an increase of $628,000, including $483,000 of Castelle revenue.
- Hardware revenue was $3.9 million, a decrease of $1.6 million
- Appliance revenue, the Castelle product line of hardware and embedded software, was $1.6 million
Gross profit was $16.3 million, compared to $17.1 million in the prior year’s third quarter, and gross margin was 70.1%, compared
to 69.7% in the same quarter last year.
Total operating expenses for the third quarter were $17.9 million, compared to $15.1 million in the prior year’s third quarter.
The increase in operating expenses reflects $1.8 million for Castelle, including an in-process research and development charge
of $219,000.
David P. Anastasi, President and CEO of Captaris, stated, “While we are disappointed in our overall third quarter revenue
result, from a slow start in July and August, we are encouraged by a rebound beginning in September that has carried over
through October. Our overall pipeline is solid and we remain optimistic that we are experiencing a positive recovery.
We continue to progress with initiatives designed to strengthen our distribution capabilities, accelerate product development,
and better position ourselves in key targeted markets. Our product development is focused on new enhancements to our core
platforms that we believe will provide new revenue streams and expand the demand for our product offerings. At the same time,
we continue ongoing efforts to realize improved operating efficiencies.”
The Company recognized stock-based compensation expense of $439,000 in the third quarter of 2007, compared to $235,000 in
the third quarter of 2006. Amortization of intangible assets for the third quarter of 2007 was $890,000, including $508,000
in cost of revenue and $382,000 in operating expenses, compared to $835,000 in the third quarter of 2006, including $481,000
in cost of revenue and $354,000 in operating expenses. Depreciation was $644,000 in the third quarter of 2007, compared to
$749,000 in the third quarter of 2006.
The Company reported net income for the third quarter of 2007 of $486,000, or $0.02 per basic and diluted share, compared
to net income of $1.6 million, or $0.06 per basic and diluted share, for the same period in 2006. Results in 2007 included
a $1.6 million tax benefit due to R&D tax credits and a change in our estimated effective rate for the year.
For the nine months ended September 30, 2007, net revenue was $66.7 million, consistent with total revenue for the same period
in 2006. Operating expenses for the nine month period ended September 30, 2007 were $50.0 million, compared to $45.4 million
in the same period in 2006. Net income for the first nine months of 2007 was $56,000, or breakeven per basic and diluted share,
compared to net income of $1.7 million, or $0.06 per basic and diluted share, for the same period in 2006.
Cash flow from operations was $2.0 million in the third quarter of 2007, compared to $5.6 million in the prior year’s third
quarter. Cash flow from operations for the first nine months of 2007 was $8.9 million, compared to $12.0 million for the same
period in 2006.
Consolidated cash, cash equivalents and investment balances as of September 30, 2007 totaled $46.5 million, compared to $61.2
million as of June 30, 2007 and $56.9 as of September 30, 2006. The decrease is primarily due to cash paid to acquire of Castelle
of $12.0 million, net of acquired cash. Deferred revenue at September 30, 2007 was $27.7 million compared to $23.8 million
at September 30, 2006.
Stock Repurchase
During the quarter, the Company repurchased about 600,000 shares of its outstanding common stock at a cost of $3.1 million,
at an average purchase price of $5.23 per share. In the last four quarters, the Company has repurchased 1.9 million shares
at a cost of $11.6 million.
Captaris may repurchase shares under its stock repurchase program subject to overall market conditions, stock prices and its
cash position and requirements. On September 30, 2007, the total number of outstanding common shares was approximately 26.7
million. As of September 30, 2007, $11.0 million was available for repurchase under the Company's stock repurchase program.
Conference Call
The Company will discuss its 2007 third quarter results and business outlook for the fourth quarter of 2007 on its regularly
scheduled conference call today, November 5th, at 7:30 a.m. PT (10:30 a.m. ET). The live web cast of the conference call can
be accessed from the Investor Relations section of the Captaris Web site at www.captaris.com or at www.mkr-group.com (under
“featured events”). To access the live conference call, dial (800) 218-0713 and give the Company name “Captaris.” An audio
replay of the conference call can be accessed at (800) 405-2236. The replay will be available starting two hours after the
call and remain in effect until Monday, November 12th at 11:59 PT. The required pass code is 11098215#.
About Captaris, Inc.
Captaris, Inc. is a leading provider of software products that automate business processes, manage documents electronically
and provide efficient information delivery. The products of Captaris and its subsidiary Castelle, including Captaris RightFax,
Captaris Workflow, Captaris Alchemy and the Castelle FaxPress line of products, are distributed through a global network of
leading technology partners. We have customers in financial services, healthcare, government and many other industries, and
our products are installed in all of the Fortune 100 and many Global 2000 companies. Headquartered in Bellevue, Washington,
Captaris was founded in 1982 and is publicly traded on the NASDAQ Global Market under the symbol CAPA. For more information
please visit www.captaris.com.
The following are registered trademarks and trademarks of Captaris: Captaris, Alchemy, RightFax and Captaris Workflow. FaxPress
is a trademark of Castelle. All other brand names and trademarks are the property of their respective owners.
Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, including, without limitation, statements regarding our plan to repurchase shares under our stock repurchase
plan. Forward-looking statements include all passages containing verbs such as "aims," "anticipates," "estimates," "expects,"
"intends," "plans," "predicts," "projects" or "targets" or nouns corresponding to such verbs. Forward-looking statements also
include any other passages that are primarily relevant to expected future events or that can only be evaluated by events that
will occur in the future. Forward-looking statements are based on the opinions and estimates of the management at the time
the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially
from those anticipated in the forward-looking statements. Factors that could affect Captaris’ actual results include, among
others, the impact, if any, of stock-based compensation charges, the potential failure to maintain and expand Captaris’ network
of dealers and resellers or to establish and maintain strategic relationships, inability to integrate recent and future acquisitions,
inability to develop new products or product enhancements on a timely basis, inability to protect our proprietary rights or
to operate without infringing the patents and proprietary rights of others, and quarterly and seasonal fluctuations in operating
results. More information about factors that potentially could affect Captaris’ financial results is included in Captaris’
quarterly reports on Form 10-Q filed in 2007, and most recent annual report on Form 10-K filed with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance upon these forward-looking statements that speak only as to
the date of this release. Except as required by law, Captaris undertakes no obligation to update any forward-looking or other
statements in this press release, whether as a result of new information, future events or otherwise.
| Captaris, Inc. |
|
|
|
|
| Condensed Consolidated Balance Sheets |
|
|
|
|
| (in thousands) |
|
|
|
|
| (Unaudited) |
|
|
|
|
| |
|
|
September 30, |
|
December 31, |
| |
|
|
2007 |
|
2006 |
| Assets |
|
|
|
|
| Current assets: |
|
|
|
|
| Cash and cash equivalents |
|
$ 11,230 |
|
$ 10,695 |
| Short-term investments, available-for-sale |
|
2,819 |
|
7,084 |
| Accounts receivable, net |
|
16,206 |
|
21,347 |
| Inventories, net |
|
1,837 |
|
961 |
| Prepaid expenses and other current assets |
|
3,683 |
|
2,971 |
| Income tax receivable and current deferred tax assets, net |
2,880 |
|
3,052 |
| |
Total current assets |
|
38,655 |
|
46,110 |
| |
|
|
|
|
|
| Long-term investments, available-for-sale |
|
32,474 |
|
41,584 |
| Restricted cash |
|
1,000 |
|
1,000 |
| Other long-term assets |
|
498 |
|
303 |
| Equipment and leasehold improvements, net |
|
7,376 |
|
4,340 |
| Intangible assets, net |
|
12,596 |
|
6,570 |
| Goodwill |
|
|
37,521 |
|
32,199 |
| Long-term deferred tax assets, net |
|
6,021 |
|
3,842 |
| |
Total assets |
|
$ 136,141 |
|
$ 135,948 |
| |
|
|
|
|
|
| |
|
|
|
|
|
| Liabilities and Shareholders' Equity |
|
|
|
|
| Current liabilities: |
|
|
|
|
| Accounts payable |
|
$ 6,087 |
|
$ 5,308 |
| Accrued compensation and benefits |
|
4,310 |
|
4,522 |
| Other accrued liabilities |
|
2,172 |
|
1,920 |
| Income taxes payable |
|
571 |
|
192 |
| Deferred revenue |
|
21,898 |
|
20,328 |
| |
Total current liabilities |
|
35,038 |
|
32,270 |
| |
|
|
|
|
|
| |
|
|
|
|
|
| Other long-term accrued liabilities |
|
702 |
|
307 |
| Long-term deferred revenue |
|
5,805 |
|
5,544 |
| |
Total liabilities |
|
41,545 |
|
38,121 |
| |
|
|
|
|
|
| Shareholders' equity: |
|
|
|
|
| Common stock |
|
267 |
|
275 |
| Additional paid-in capital |
|
42,023 |
|
46,614 |
| Retained earnings |
|
49,794 |
|
49,790 |
| Accumulated other comprehensive income |
|
2,512 |
|
1,148 |
| |
Total shareholders' equity |
|
94,596 |
|
97,827 |
| |
|
|
|
|
|
| |
Total liabilities and shareholders' equity |
|
$ 136,141 |
|
$ 135,948 |
| Captaris, Inc. |
|
|
|
|
|
|
|
| Condensed Consolidated Statements of Operations |
|
|
|
|
|
|
|
| (in thousands, except per share data) |
|
|
|
|
|
|
|
| (Unaudited) |
|
|
|
|
|
|
|
| |
Quarter Ended |
|
Nine Months Ended |
| |
September 30, |
|
September 30, |
| |
2007 |
|
2006 |
|
2007 |
|
2006 |
| |
|
|
|
|
|
|
|
| Net revenue: |
|
|
|
|
|
|
|
| Software revenue |
$ 7,691 |
|
$ 9,647 |
|
$ 23,147 |
|
$ 25,164 |
| Maintenance, support and services revenue |
10,013 |
|
9,385 |
|
29,230 |
|
26,693 |
| Hardware revenue |
3,914 |
|
5,528 |
|
12,720 |
|
14,906 |
| Appliance revenue |
1,647 |
|
- |
|
1,647 |
|
- |
| Net revenue |
23,265 |
|
24,560 |
|
66,744 |
|
66,763 |
| |
|
|
|
|
|
|
|
| Cost of revenue |
6,947 |
|
7,441 |
|
20,098 |
|
19,855 |
| |
|
|
|
|
|
|
|
| Gross profit |
16,318 |
|
17,119 |
|
46,646 |
|
46,908 |
| |
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
| Research and development |
4,453 |
|
3,029 |
|
11,272 |
|
9,387 |
| Selling and marketing |
8,452 |
|
7,806 |
|
25,630 |
|
23,779 |
| General and administrative |
4,352 |
|
3,929 |
|
13,170 |
|
12,139 |
| Amortization of intangible assets |
382 |
|
354 |
|
665 |
|
1,062 |
| In progress research and development |
219 |
|
- |
|
219 |
|
- |
| Gain on sale of discontinued product line CallXpress |
- |
|
- |
|
(1,000) |
|
(1,000) |
| |
|
|
|
|
|
|
|
| Total operating expenses |
17,858 |
|
15,118 |
|
49,956 |
|
45,367 |
| |
|
|
|
|
|
|
|
| Operating loss |
(1,540) |
|
2,001 |
|
(3,310) |
|
1,541 |
| |
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
| Interest income |
467 |
|
481 |
|
1,590 |
|
1,394 |
| Other income (expense), net |
(47) |
|
(146) |
|
179 |
|
(237) |
| Other income |
420 |
|
335 |
|
1,769 |
|
1,157 |
| |
|
|
|
|
|
|
|
Income (loss) from continuing operations before income tax
expense
|
(1,120) |
|
2,336 |
|
(1,541) |
|
2,698 |
| Income tax expense (benefit) |
(1,606) |
|
693 |
|
(1,600) |
|
989 |
| |
|
|
|
|
|
|
|
| Income from continuing operations |
486 |
|
1,643 |
|
59 |
|
1,709 |
| |
|
|
|
|
|
|
|
| Discontinued operations: |
|
|
|
|
|
|
|
Gain (loss) from sale of MediaTel assets, net of income tax
expense (benefit)
|
- |
|
(16) |
|
(3) |
|
27 |
| Income (loss) from discontinued operations |
- |
|
(16) |
|
(3) |
|
27 |
| |
|
|
|
|
|
|
|
| Net income |
$ 486 |
|
$ 1,627 |
|
$ 56 |
|
$ 1,736 |
| |
|
|
|
|
|
|
|
| Basic net income per common share: |
|
|
|
|
|
|
|
| Income from continuing operations |
$ 0.02 |
|
$ 0.06 |
|
$ 0.00 |
|
$ 0.06 |
| Income (loss) from discontinued operations |
- |
|
(0.00) |
|
(0.00) |
|
0.00 |
| Net income |
$ 0.02 |
|
$ 0.06 |
|
$ 0.00 |
|
$ 0.06 |
| |
|
|
|
|
|
|
|
| Diluted net income per common share: |
|
|
|
|
|
|
|
| Income from continuing operations |
$ 0.02 |
|
$ 0.06 |
|
$ 0.00 |
|
$ 0.06 |
| Income (loss) from discontinued operations |
- |
|
(0.00) |
|
(0.00) |
|
0.00 |
| Net income |
$ 0.02 |
|
$ 0.06 |
|
$ 0.00 |
|
$ 0.06 |
| |
|
|
|
|
|
|
|
| Weighted average basic common shares |
26,968 |
|
27,859 |
|
27,212 |
|
28,131 |
| Weighted average diluted common shares |
27,504 |
|
28,472 |
|
27,965 |
|
28,617 |
| Captaris, Inc. |
|
|
|
| Condensed Consolidated Statements of Cash Flows |
|
|
|
| (in thousands) |
|
|
|
| (Unaudited) |
|
|
|
| |
Nine Months Ended |
| |
September 30, |
| |
2007 |
|
2006 |
| |
|
|
|
| Cash flows from operating activities: |
|
|
|
| Net income |
$ 56 |
|
$ 1,736 |
| Adjustments to reconcile net income to net cash provided |
|
|
|
| by operating activities: |
|
|
|
| Depreciation |
1,961 |
|
2,407 |
| Amortization |
2,134 |
|
2,505 |
| Stock-based compensation expense |
971 |
|
476 |
| In process research and development |
219 |
|
- |
| (Gain) loss on disposition of assets |
(7) |
|
55 |
| Provision for doubtful accounts |
39 |
|
113 |
| Changes in assets and liabilities: |
|
|
|
| Accounts receivables |
5,937 |
|
3,046 |
| Inventories, net |
(138) |
|
(187) |
| Prepaid expenses and other assets |
(678) |
|
(916) |
| Income tax receivable and deferred income taxes, net |
(2,005) |
|
3,070 |
| Accounts payable |
222 |
` |
(802) |
| Accrued compensation and benefits |
(806) |
|
70 |
| Other accrued liabilities |
(71) |
|
(466) |
| Income taxes payable |
114 |
|
(647) |
| Deferred revenue |
908 |
|
1,586 |
| Net cash flow provided by operating activities |
8,856 |
|
12,046 |
| |
|
|
|
| Cash flows from investing activities: |
|
|
|
| Purchase of equipment and leasehold improvements |
(4,156) |
|
(530) |
| Purchase of investments |
(19,528) |
|
(51,965) |
| Purchase of Castelle, net of cash acquired |
(11,974) |
|
- |
| Proceeds from disposals of assets |
55 |
|
7 |
| Proceeds from sales and maturities of investments |
32,903 |
|
48,878 |
| Net cash used in investing activities |
(2,700) |
|
(3,610) |
| |
|
|
|
| Cash from financing activities: |
|
|
|
| Proceeds from exercise of common stock options |
2,160 |
|
1,250 |
| Repurchase of common stock |
(8,039) |
|
(7,754) |
| Excess tax benefits from stock-based compensation |
308 |
|
271 |
| Net cash used in financing activities |
(5,571) |
|
(6,233) |
| |
|
|
|
| Net increase in cash |
585 |
|
2,203 |
| |
|
|
|
| Effect of exchange rate changes on cash |
(50) |
|
(45) |
| |
|
|
|
| Cash and cash equivalents at beginning of period |
10,695 |
|
6,420 |
| |
|
|
|
| Cash and cash equivalents at end of period |
$ 11,230 |
|
$ 8,578 |
|
