Business News
Convera(R) Reports Results for the Third Quarter Ended October 31, 2008
Friday 12. December 2008 - Convera Corporation (NASDAQ:CNVR) - www.convera.com - a leading provider of vertical search services for publishers, today announced financial results for the three-month period ended October 31, 2008.
Revenue from continuing operations for the third quarter of fiscal 2009 decreased to $239,000 or 8% from $259,000 in revenue recorded in the third quarter of last year and decreased $230,000 or 49% from $469,000 of revenue recognized in second quarter ended July 31, 2008.
The decline in revenue is due to a contractual dispute with a significant customer. Revenues from providing services to this significant customer for the three months ended October 31, 2007 included $234,000 of minimum revenues and $270,000 of minimum revenues for the three months ended July 31, 2008. As a consequence of this dispute, we recorded no revenue from the customer during the three months ended October 31, 2008. We will not recognize any additional revenue with this customer until the dispute is resolved. We continue to provide them service and both parties are working to resolve the dispute as soon as possible.
Search traffic activity from the Excalibur supported vertical sites continued to grow due to our audience development efforts, increasing 17% from 30.8 million searches in the second quarter to over 36 million searches in the third quarter ended October 31, 2008.
As of today, a total of 82 Excalibur supported vertical search sites are under contract with customers, 47 of these sites have been commercially launched and 35 sites are in development. These contracted sites represent publications in over 24 major vertical industries.
On December 9, 2008 we launched the beta version Converanet (www.converanet.com), an online search directory portal that contains all the search engines we have developed for our customers in a single website. Converanet is designed to help drive traffic and advertising revenue for our customers. In addition, Converanet is generating Ad revenue through the Microsoft Ad Center contract that we signed in September 2008. Under this contract, Convera directly earns revenue from Microsoft provided paid search ads to Converanet and other Convera owned sites.
We continue to make progress in building search traffic and page views for our customers. President and CEO of Convera, Pat Condo, stated, ” Now, with the launch of Converanet, and having the Microsoft ad network partnership, we offer the B2B community two new programs to increase traffic and advertising revenue while offering Convera the additional opportunity to earn advertising sales, including direct sales when ads are sold on Converanet.”
The loss from continuing operations for the three-month period ended October 31, 2008, was $6.0 million, or $0.11 per share, (which includes $ 2.0 million in depreciation and stock compensation expenses which are non cash expenses) compared to a loss of $5.9 million, or $0.11 per share, (which includes $1.3 million in depreciation and stock compensation which are non cash expenses) for the comparable year-ago period and a loss of $3.6 million (which includes $1.1 million in depreciation and stock compensation which are non cash expenses, offset by $0.7 million in other income from the recognition of previously deferred revenue that was collected in a prior period) for the three months ended July 31, 2008.
The loss from continuing operations for the three months ended October 31, 2008 reflects lower revenue growth as discussed above and reduced expense levels when compared to the prior year. The reduced expense levels result from the reduction in staffing levels and Convera’s continuing efforts to discontinue non-strategic activities.
With the launch of Converanet and our self service operation, we reduced the cost structure of our sales, marketing and customer service groups in November 2008. The Company will record a severance charge for the nine people terminated in this action of approximately $400,000 during the fourth quarter ended January 31, 2009. We expect this move to reduce our annual expense base by $2.5 million while having no significant impact on our ability to serve our customers effectively.
The results for the three months and nine months ended October 31, 2007 include the $17.5 million net gain from the sale of the RetrievalWare enterprise search business which was completed in August 2007. The net gain from the sale of the RetrievalWare business was reported as a component of discontinued operations.
Net loss for the three months ended October 31, 2008 was $6.0 million or $0.11 per share, which compares to a net income of $11.7 million or $0.22 per share, for the comparable period of the prior year.
Cash and investments as of October 31, 2008, totaled $26.8 million.
The attached financial information compares the results of operations for the three months and nine months ended October 31, 2008, to the same period in 2007, and the balance sheets as of October 31, 2008 and January 31, 2008.
The condensed, consolidated statements of operations for the Company for the three months ended October 31, 2008 and 2007 appear below and are presented in accordance with accounting principles generally accepted in the United States. All amounts, except per share amounts, are expressed in thousands of U.S. dollars.
Three Months Ended
October 31,
2008 2007
Continuing Operations: (unaudited) (unaudited)
Revenues:
Hosted services $239 $259
Operating Expenses:
Cost of revenue – hosted services 1,892 2,457
Sales and marketing 911 772
Research and product development 1,216 1,140
General and administrative 2,288 2,239
Total Expense 6,307 6,608
Operating loss (6,068) (6,349)
Other income , net 98 482
Net (loss) from continuing
operations $(5,970) $(5,867)
Discontinued Operations:
Loss from discontinued operations – (240)
Gain from sale of discontinued
RetrievalWare operations – 17,759
Income from discontinued operations – 17,519
Net income (loss) $(5,970) $11,652
Earnings(loss) per share – basic &
diluted
Continuing operations $(0.11) $(0.11)
Discontinued operations – 0.33
$(0.11) $0.22
Weighted average number of common
shares outstanding – basic and
diluted 53,327 53,218
The condensed, consolidated statements of operations for the Company for the nine months ended October 31, 2008 and 2007 appear below and are presented in accordance with accounting principles generally accepted in the United States. All amounts, except per share amounts, are expressed in thousands of U.S. dollars.
Nine Months Ended
October 31,
2008 2007
(unaudited) (unaudited)
Continuing Operations:
Revenues:
Hosted services $1,110 $838
Operating Expenses:
Cost of revenue – hosted services 5,573 6,461
Sales and marketing 2,560 2,984
Research and product development 3,509 3,335
General and administrative 5,712 9,153
Total Expense 17,354 21,933
Operating loss (16,244) (21,095)
Other income , net 1,222 1,451
Net (loss) from continuing
operations $(15,022) $(19,644)
Discontinued Operations:
Loss from discontinued operations – (221)
Gain from sale of discontinued
RetrievalWare operations – 17,759
Income from discontinued
operations – 17,538
Net Loss $(15,022) $(2,106)
Earnings(loss) per share – basic
& diluted
Continuing operations $(0.28) $(0.37)
Discontinued operations – 0.33
$(0.28) $(0.04)
Weighted average number of common
shares outstanding – basic and
diluted 53,320 53,101
The condensed, consolidated Balance Sheets for the Company as of October 31, 2008, and January 31, 2008, appear below and are presented in accordance with accounting principles generally accepted in the United States. All amounts are expressed in thousands of U.S. dollars
October 31, 2008 January 31, 2008
Assets (Unaudited)
Current Assets:
Cash and cash equivalents $26,817 $36,641
Accounts receivable, net 484 182
Escrow, Prepaid expenses and other 857 4,002
Total current assets 28,158 40,825
Equipment and leasehold improvements, net 3,767 4,913
Other assets 598 629
Total assets $32,523 $46,367
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable $604 $699
Accrued expenses 1,793 2,282
Deferred revenues 61 651
Total Liabilities 2,458 3,632
Shareholders’ Equity 30,065 42,735
Total liabilities and
shareholders’ equity $32,523 $46,367