Business News
Captaris Reports Q2, 2008 Financial Results
Friday 08. August 2008 - Revenue Increases 15% Sequentially
Captaris, Inc. (NASDAQ:CAPA), a leading provider of software products that automate document-centric processes, today reported financial results for its second quarter ended June 30, 2008.
Total revenue for the quarter was $32.1 million, a 40% increase over the prior year’s second quarter and 15% higher than the first quarter of 2008. The increase from the prior year’s second quarter was primarily attributable to the acquisitions of Castelle and CDT. Revenue by category compared to the second quarter of 2007 was as follows:
— Software revenue was $11.3 million, an increase of $2.9 million, or
35%
— Maintenance, support and services revenue was $14.9 million, an
increase of $5.1 million or 52%
— Hardware revenue was $3.8 million, a decrease of $1.0 million or 20%
— Appliance revenue, the FaxPress product line of hardware and embedded
software, was $2.1 million
“We have made a significant improvement in our financial results from the first quarter by focusing on growing revenues and controlling costs and we will continue to work on identifying cost synergies and driving improvements in our overall business model,” said David P. Anastasi, President and CEO of Captaris. “We have previewed and launched new products created by bringing together our existing offerings with technology acquired from our CDT and Castelle acquisitions. Initial results are encouraging and we have received positive feedback from both our customers and partners.”
Gross profit was $21.8 million, an increase of $5.7 million from the second quarter of 2007. Gross margin was 67.9%, compared to 70.0% in the same quarter last year. The decline in the gross margin was due to including the operating results of CDT and Castelle, which have lower gross margins than the Company’s legacy business, and the increased amortization expense from those acquisitions of $665,000.
Total operating expenses for the quarter were $25.6 million, compared to $16.8 million in the second quarter of 2007. R&D expenses increased $2.6 million, including $2.1 million due to acquisitions and $519,000 for the consolidation and outsourcing of the Company’s software development activities. Sales and marketing expenses increased $3.5 million, including $2.9 million from the acquisitions and $1.4 million for additional sales resources, offset by a reduction of $778,000 in marketing. G&A expenses increased $2.2 million, including $1.3 million for the acquisitions, $440,000 associated with the evaluation of strategic alternatives and related shareholder matters and a decrease in capitalized labor costs of $452,000. Operating results also include a $54,000 charge for acquired in-process development expense associated with the acquisition of CDT.
Amortization of intangible assets for the quarter was $1.8 million, including $1.1 million in cost of revenue and $694,000 in operating expenses, compared to $623,000 for the same quarter last year, including $481,000 in cost of revenue and $142,000 in operating expenses. Depreciation expense was $829,000 in the second quarter of 2008 compared to $590,000 in the second quarter of 2007. Stock based compensation expense was $356,000 in the second quarter of 2008 compared to $339,000 in the second quarter of 2007.
The decrease in other income for the quarter ended June 30, 2008 compared to the same quarter last year was primarily due to less net interest income earned as a result of cash used for the acquisition of CDT combined with the net cost of the Company’s foreign currency hedging activities.
The Company reported a net loss for the second quarter of 2008 of $2.7 million, or $0.10 per basic and diluted share, compared to a net loss of $165,000, or $0.01 per basic and diluted share for the second quarter of 2007.
On a year-to-date basis, total revenue of $60.0 million was an increase of $16.5 million or 38% from the same period last year. Net loss for the first six months of 2008 was $9.4 million, or a loss of $0.35 per basic and diluted share, compared to a net loss of $430,000, or a loss of $0.02 per basic and diluted share, for the same period in 2007.
Consolidated cash, cash equivalents and investment balances as of June 30, 2008 totaled $29.7 million, compared to $46.2 million as of December 31, 2007. On January 4, 2008, the Company purchased Captaris Document Technologies GmbH (“CDT”) (formerly Oce Document Technologies GmbH) for a net cash payment of $17.9 million. Cash used in operations for the six months ended June 30, 2008 was $6.6 million including a $3.1 million loss on a foreign exchange contract settled in April 2008. In early January 2008, the Company established a credit facility and during the six months ended June 30, 2008 obtained cash advances, net of repayments, totaling $8.1 million.
Deferred revenue at June 30, 2008 was $31.1 million compared to $28.7 million at December 31, 2007.
Stock Repurchase
During the quarter ended June 30, 2008, the Company did not repurchase any shares of its outstanding common stock. On June 30, 2008, approximately 26.5 million shares of common stock were outstanding and $9.5 million was available for share repurchase under the Company’s stock repurchase program. Captaris may repurchase shares under its stock repurchase program subject to overall market conditions, stock prices and its cash position and requirements.
Evaluation of Strategic Alternatives
In March 2008, the Company announced that the Board of Directors decided to evaluate strategic alternatives to further enhance shareholder value. The cost of this evaluation was $440,000 in the second quarter of 2008 and $1.1 million for the first half of 2008. This evaluation is ongoing and developments will be disclosed as the Board deems appropriate.