Lexmark’s Acquisition of Kofax Expected to
Close in the Second Calendar Quarter of 2015
Kofax® Limited (NASDAQ: KFX), a leading provider of software to
simplify and transform the First Mile™ of customer engagement,
today reported unaudited financial results for its third quarter
and nine months of its fiscal year 2015 ended March 31, 2015.
Non-GAAP Financial Highlights:
- Software license revenue increased 4.8%
to $30.9 million (PY: $29.5 million), and for the nine months
increased 2.9% to $90.8 million (PY: $88.2 million)
- Total revenues increased 4.2% to $75.3
million (PY: $72.2 million), and for the nine months increased 3.9%
to $225.6 million (PY: $217.1 million)
- Adjusted earnings before interest,
taxes, depreciation and amortization (EBITDA) increased 14.0% to
$8.6 million (PY: $7.5 million) or a 11.4% margin (PY: 10.4%), and
for the nine months decreased 5.6% to $27.2 million (PY: $28.9
million) or a 12.1% margin (PY: 13.3%)
- Adjusted diluted earnings per share
(EPS) was $0.07 (PY: $0.05), and for the nine months was $0.18 (PY:
$0.17)
- Adjusted cash generated by operations
was $12.1 million (PY: $19.7 million), and for the nine months was
$19.6 million (PY: $42.8 million)
GAAP Financial Highlights:
- Software license revenue increased 7.5%
to $30.2 million (PY: $28.1 million), and for the nine months
increased 7.4% to $89.2 million (PY: $83.1 million)
- Total revenues increased 4.6% to $74.0
million (PY: $70.8 million), and for the nine months increased 5.6%
to $222.3 million (PY: $210.5 million)
- Income from operations1
decreased to a loss of $1.7 million (PY: $0.2 million) or a -2.3%
margin (PY: 0.3%), and for the nine months decreased 33.4% to $2.8
million (PY: $4.2 million) or a 1.3% margin (PY: 2.0%)
- Diluted EPS was $0.02 (PY: $0.01), and
for the nine months was $0.04 (PY: $0.05)
- Cash generated by operations was $10.4
million (PY: 16.1 million), and for the nine months was $15.8
million (PY: $33.7 million)
Quarter end cash was $55.6 million (PY: $93.1 million).
A summary of Kofax’s unaudited revenues and adjusted EBITDA for
its third quarter and nine months compared to the prior year on
both a GAAP and non-GAAP basis is as follows:
Non-GAAP Quarter Nine
Months Y/Y
% Y/Y
% $M
Change Total
$M Change
Total Software Licenses 30.9 4.8 % 41.1 %
90.8 2.9 % 40.2 % Maintenance Services 34.5 5.2 % 45.8 %
106.2 7.2 % 47.1 % Professional Services 9.9
-0.6 % 13.1 %
28.6 -3.9 %
12.7 %
Total Revenues 75.3 4.2 %
100.0 % 225.6 3.9 % 100.0
%
Adjusted EBITDA
8.6 14.0 % 27.2 -5.6 %
Margin
11.4 %
12.1 %
GAAP Quarter
Nine Months Y/Y
%
Y/Y % $M
Change Total
$M Change
Total Software Licenses 30.2 7.5 % 40.8
% 89.2 7.4 % 40.1 % Maintenance Services 34.0 4.2 % 45.9 %
104.5 6.3 % 47.0 % Professional Services 9.8
-2.3 % 13.3 %
28.6 -1.8 %
12.9 %
Total Revenues 74.0 4.6 %
100.0 % 222.3 5.6 % 100.0
%
Income from Operations1
-1.7 -826.7 % 2.8 -33.4 %
Margin
-2.3 %
1.3 %
1 Includes $2.3 million of legal and other expenses related to
the Company’s acquisition by Lexmark.
Commenting on the Non-GAAP financial results for the quarter,
Reynolds C. Bish, Chief Executive Officer, said: “We had a solid
quarter with strong growth in new and acquired software products
and a continuing year over year increase in the number of six and
seven figure software license transactions. Despite this, the
strengthening of the U.S. dollar since we last provided guidance on
January 29 again negatively impacted our revenues. On a constant
currency basis, using exchange rate levels in the prior year
period, software license revenue would have been approximately $1.8
million and total revenues $5.0 million higher. The effect on
Adjusted EBITDA was less pronounced as a result of the global
nature and distribution of our employees and expenses. We expect
Lexmark’s acquisition of Kofax to close in the second calendar
quarter of 2015, and look forward to working with its management to
combine the two businesses.”
Operating Highlights:
- Announced a definitive agreement for
Lexmark to acquire all of Kofax’s outstanding shares for $11.00 per
share in cash at a total value of more than $1 billion. The
acquisition is contingent on Kofax shareholder approval at a
special general meeting of Kofax shareholders scheduled for May 18,
2015, applicable regulatory clearances and other customary closing
conditions.
- Acquired Aia Holding BV, a provider of
customer communications management (CCM) software for $19.5
million. Aia’s CCM software helps organizations manage interactive
and ad hoc customer correspondence both electronically and on
paper, and will be fully integrated within Kofax
TotalAgility®.
- Launched Kofax Mobile ID™, a mobile
capture framework that powers the capture and submittal of proof of
identity documents, including U.S. and most international driver
licenses, passports and national identity cards, and their content.
This capability is an essential part of an account opening or other
process initiated by taking a picture of such documents using a
smartphone or other mobile device.
- Delisted Kofax’s shares from the London
Stock Exchange effective March 31, 2015.
- Gartner’s reports on its Magic
Quadrants for Intelligent Business Process Management Suites and
BPM-Platform-Based Case Management Frameworks were issued and
recognized Kofax for its TotalAgility Platform.
About Kofax
Kofax is a leading provider of software to simplify and
transform the First Mile™ of customer engagement. Success in the
First Mile can dramatically improve the customer experience,
greatly reduce operating costs and increase competitiveness, growth
and profitability. Kofax software and solutions provide a rapid
return on investment to more than 20,000 customers in financial
services, insurance, government, healthcare, supply chain, business
process outsourcing and other markets. Kofax delivers these through
its direct sales and service organization, and a global network of
more than 800 authorized partners in more than 75 countries
throughout the Americas, EMEA and Asia Pacific. For more
information, visit kofax.com.
Safe Harbor Statement
This document contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements are subject to risks and uncertainties that could
cause actual results to vary materially from those projected in the
forward-looking statements. The Company has attempted to identify
forward-looking statements by terminology including “anticipates,”
“believes,” “can,” “continue,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “should” or
“will” or the negative of these terms or other comparable
terminology. The Company may experience significant fluctuations in
future operating results due to a number of economic, competitive
and other factors, including, among other things, our reliance on
third-party manufacturers and suppliers, government agency
budgetary and political constraints, new or increased competition,
changes in market demand, our ability to consummate and the timing
of the consummation of software revenue transactions and the
performance or reliability of our products and the ability of the
Company and Lexmark to complete the transactions contemplated by
the merger agreement, including the parties’ ability to satisfy the
conditions to the transaction set forth in the merger agreement
(including obtaining necessary Company shareholder and regulatory
approvals) and the absence of facts, circumstances, changes or
events resulting in a material adverse effect on the Company. These
factors and others could cause operating results to vary
significantly from those in prior periods, and those projected in
forward-looking statements. Additional information with respect to
these and other factors, which could materially affect the Company
and its operations, are included in certain forms the Company has
filed with the Securities and Exchange Commission. Although the
Company believes that the expectations reflected in any
forward-looking statements are reasonable based on its current
knowledge of the business and operations, it cannot guarantee
future results, levels of activity, performance or achievements.
The Company assumes no obligation to provide revisions to any
forward-looking statements should circumstances change.
Non-GAAP Financial Measures
Management uses financial measures, both GAAP and Non-GAAP, in
analyzing and assessing the overall performance of the business and
making operational decisions. The Company has provided and believes
that the Non-GAAP financial measures and supplemental
reconciliations to GAAP financial measures are useful to investors
and other users of its financial statements because the Non-GAAP
financial measures may be used as additional tools to compare our
performance across peer companies, periods and financial markets.
Please refer to the forms the Company has filed with the Securities
and Exchange Commission for a discussion of the Non-GAAP financial
measures and supplemental reconciliations to GAAP financial
measures for more information regarding the Non-GAAP measures.
© 2015 Kofax Limited. Kofax, and TotalAgility are registered
trademarks and Kofax Mobile ID and First Mile are trademarks of
Kofax Limited.
Source: Kofax
KOFAX LIMITED UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS (in thousands)
March 31, 2015 June 30,
2014 Assets Current assets: Cash and cash equivalents $
55,567 $ 89,631 Accounts receivable, net of allowances of $971 and
$881, respectively 59,431 58,392 Other current assets 9,622 9,690
Income tax receivable 7,126 7,209 Deferred tax assets 5,579
3,502 Total current assets 137,325 168,424
Property and equipment, net 6,403 6,753 Goodwill 201,925
186,103 Acquired intangible assets, net 49,883 36,085 Deferred tax
assets, net of current portion 3,897 1,877 Other non-current assets
4,638 4,105 Total assets $
404,071 $ 403,347
Liabilities and
shareholders’ equity Current liabilities: Accounts payable and
accrued expenses $ 41,572 $ 37,445 Deferred revenue 79,746 78,497
Income taxes payable 2,699 1,101 Deferred tax liabilities 1,301 217
Contingent acquisition payables 6,086 4,775
Total current liabilities 131,404 122,035 Minimum
pension liability 5,121 4,078 Deferred revenue, net of current
portion 8,143 8,079 Deferred tax liabilities, net of current
portion 10,729 3,243 Contingent acquisition payables, net of
current portion 2,456 3,927 Other non-current liabilities
7,148 7,519 Total liabilities 165,001
148,881
Commitments and contingencies
Shareholders‘ equity: Common stock 98 97 Additional paid in
capital 65,969 60,695 Employee benefit shares (17,685 ) (18,207 )
Treasury shares (15,980 ) (15,980 ) Retained earnings 210,778
207,141 Accumulated other comprehensive income (loss) (4,110
) 20,720 Total shareholders’ equity 239,070
254,466 Total liabilities and
shareholders’ equity $ 404,071 $ 403,347
KOFAX LIMITED UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (in thousands, except per share
amounts) Three Months Ended
Nine Months Ended March 31,
March 31, 2015 2014
2015 2014 Revenue:
Software licenses $ 30,243 $ 28,137 $ 89,215 $ 83,082 Maintenance
services 33,951 32,584 104,494 98,290 Professional services
9,818 10,052 28,585
29,096 Total revenues 74,012 70,773 222,294 210,468
Cost of revenue: Cost of software licenses 2,347 1,955 6,579 7,640
Cost of maintenance services 5,497 5,218 15,894 15,104 Cost of
professional services 8,518 8,129 24,323 23,976 Amortization of
intangible assets 1,532 1,275
4,761 4,186 Total cost of revenues 17,894
16,577 51,557 50,906 Gross profit 56,118 54,196 170,737
159,562 Operating expenses: Research and development 10,383
10,318 30,258 29,346 Sales and marketing 32,670 31,418 96,857
89,853 General and administrative 10,417 10,428 32,010 29,562
Amortization of intangible assets 1,253 889 3,272 2,542
Acquisition-related costs 711 504 2,960 400 Other operating
expenses 2,392 404 2,567
3,638 Total operating expenses 57,826
53,961 167,924 155,341
Income from operations (1,708 ) 235 2,813 4,221
Interest (expense), net (96 ) (153 ) (367 ) (507 ) Other income,
net 2,931 1,495 2,990
5,445 Income from operations, before tax 1,127
1,577 5,436 9,159 Income tax expense (credit) (451 ) 951
1,799 4,336 Net income $ 1,578 $
626 $ 3,637 $ 4,823 Net income per
share: Basic $ 0.02 $ 0.01 $ 0.04 $ 0.05
Diluted $ 0.02 $ 0.01 $ 0.04 $ 0.05
Weighted average shares outstanding: Basic
88,997 88,948 88,888
88,729 Diluted 92,694 92,944
92,449 92,087
KOFAX
LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOW (in thousands) Nine Months
Ended March 31, 2015 2014
Cash flows from operating activities: Net income $ 3,637 $ 4,823
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 10,807 10,817 Share-based
compensation expense 4,809 3,253 Other income (2,990 ) (5,445 )
Restructuring payments − (588 ) Changes in operating assets and
liabilities: Accounts receivable, net (4,887 ) 13,185 Other assets
(584 ) 1,935 Accounts and other payables 6,189 (5,346 ) Deferred
revenue 4,384 14,448 Other liabilities (1,126 ) (1,724 ) Deferred
income taxes (4,857 ) (729 ) Income taxes payable 414
(913 ) Net cash inflow from operating activities
15,796 33,716 Cash flows from investing
activities: Purchase of property and equipment (1,979 ) (2,776 )
Acquisitions of subsidiaries, net of cash acquired (48,450 )
(45,387 ) Interest received 105 77 Net
cash used in investing activities (50,324 ) (48,086 )
Cash flows from financing activities: Issue of common stock
212 521 Excess tax benefits on share-based compensation 536 208
Proceeds from initial public offering in the United States − 12,366
Proceeds from EBT shares, net 523 (135 ) Net
cash inflow from financing activities 1,271
12,960 Effect of exchange rate changes on cash and
cash equivalents (807 ) 1,048 Net decrease in
cash and cash equivalents (34,064 ) (362 ) Cash and cash
equivalents at the beginning of the year 89,631
93,413 Cash and cash equivalents at the end of the
year $ 55,567 $ 93,051 Supplemental cash flow
disclosure: Cash paid for income taxes, net $ 3,809 $ 8,447
Cash paid for interest $ 98 $ 437
KOFAX LIMITED UNAUDITED RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES (in thousands,
except per share amounts) Acquisition Fair Value
Adjustment to Revenue Three
Months Ended Nine Months Ended
March 31, March 31, 2015
2014 2015 2014
Non-GAAP Software License Software License $ 30,243 $ 28,137
$ 89,215 $ 83,082 Acquisition Fair Value Adjustment 698
1,400 1,544 5,102
Total Non-GAAP Software License $ 30,941 $ 29,537 $
90,759 $ 88,184
Non-GAAP Maintenance
Services Maintenance Services $ 33,951 $ 32,584 $ 104,494 $
98,290 Acquisition Fair Value Adjustment 524
197 1,694 801 Total Non-GAAP
Maintenance Services $ 34,475 $ 32,781 $ 106,188
$ 99,091
Non-GAAP Professional
Services Professional Services $ 9,818 $ 10,052 $ 28,585 $
29,096 Acquisition Fair Value Adjustment 39
(136 ) 55 694 Total Non-GAAP
Professional Services $ 9,857 $ 9,916 $ 28,640
$ 29,790
Non-GAAP Total Revenue Total
Revenue $ 74,012 $ 70,773 $ 222,294 $ 210,468 Acquisition Fair
Value Adjustment 1,261 1,461
3,293 6,597 Total Non-GAAP Revenue $ 75,273
$ 72,234 $ 225,587 $ 217,065
Three Months Ended Nine Months Ended
Non-GAAP Income from Operations March 31, March
31, 2015 2014 2015 2014 Income
(loss) from operations $ (1,708 ) $ 235 $ 2,813 $ 4,221 Acquisition
fair value adjustment to revenue 1,261 1,461 3,293 6,597
Share-based compensation expense 2,205 1,387 4,809 3,253
Depreciation and amortization expense 907 1,349 2,774 4,020
Amortization of acquired intangible assets 2,785 2,164 8,033 6,728
Acquisition-related costs 711 504 2,960 400 Other operating
expenses 2,392 404 2,567
3,638 Non-GAAP income from operations $ 8,553
$ 7,504 $ 27,249 $ 28,857
Three Months Ended Nine Months Ended Adjusted
Diluted Earnings Per Share March 31, March 31,
2015 2014 2015 2014 Net income $ 1,578
$ 626 $ 3,637 $ 4,823 Acquisition fair value adjustment to revenue
1,261 1,461 3,293 6,597 Share-based compensation expense 2,205
1,387 4,809 3,253 Amortization of acquired intangible assets 2,785
2,164 8,033 6,728 Acquisition-related costs 711 504 2,960 400 Net
finance, other income and expense, net (443 ) (938 ) (56 ) (1,300 )
Tax effect of above adjustments (2,054 ) (391 )
(6,263 ) (4,228 ) Adjusted net income $ 6,043
$ 4,813 $ 16,413 $ 16,273 Adjusted
diluted earnings per share $ 0.07 $ 0.05 $ 0.18
$ 0.17 Diluted shares outstanding
92,694 92,944 92,449
92,087
Reconciliation of Adjusted Cash Flow
from Operations Three Months Ended Nine Months
Ended March 31, March 31, 2015 2014
2015 2014 Cash inflows from operations $ 10,380 $
16,098 $ 15,796 $ 33,716 Cash paid for income taxes, net 1,675
3,577 3,809 8,477 Payments under restructuring −
− − 588 Adjusted cash
inflows from
operations
$ 12,055 $ 19,675 $ 19,605 $ 42,751
Income Statements - Non-GAAP Three Months
Ended Nine Months Ended March 31, March
31, 2015 2014 2015 2014 Non-GAAP
Software licenses $ 30,941 $ 29,537 $ 90,759 $ 88,184 Non-GAAP
Maintenance services 34,475 32,781 106,188 99,091 Non-GAAP
Professional services 9,857 9,916
28,640 29,790 Non-GAAP Total revenue
75,273 72,234 225,587 217,065 Cost of software licenses (1)
2,344 1,950 6,570 7,613 Cost of maintenance services (1) 5,381
5,080 15,564 14,688 Cost of professional services (1) 8,388 7,920
23,952 23,313 Research and development (1) 9,779 9,617 28,664
27,486 Sales and marketing (1) 31,329 30,282 93,850 86,978 General
and administrative (1) 9,499 9,881
29,738 28,130 Non-GAAP operating costs
and expenses 66,720 64,730 198,338 188,208
Non-GAAP income from operations $ 8,553 $ 7,504
$ 27,249 $ 28,857
(1) Excludes depreciation, amortization and share-based
compensation expenses
Definition of Non-GAAP Measures
Non-GAAP Revenue – We defined Non-GAAP revenue as
revenue, as reported under GAAP, increased to include revenue that
is associated with our historic acquisitions that has been excluded
from reported results for a limited period due to the effects of
purchase accounting. In accordance with GAAP purchase accounting,
an acquired company’s deferred revenue at the date of acquisition
is subject to a fair value adjustment which generally reduces the
deferred amount and revenues recognized subsequent to an
acquisition. We include non-GAAP revenue to allow for more complete
comparisons to the financial results of our historical operations,
forward looking guidance and the financial results of peer
companies. We believe these adjustments are useful to management
and investors as a measure of the ongoing performance of the
business. Additionally, although acquisition-related revenue
adjustments are nonrecurring, we may incur similar adjustments in
connection with future acquisitions. At times when we are
communicating with our shareholders, analysts and other parties we
refer to Non-GAAP Revenue as Adjusted Revenue.
Non-GAAP Income from Operations – We define non-GAAP
income from operations as income/(loss) from operations, as
reported under GAAP, excluding the effect of Acquisition fair value
adjustment to revenue, Share-based compensation expense,
Depreciation expense, Amortization of acquired intangible assets,
Acquisition-related costs, and Other operating expense, net.
Share-based compensation expense, Depreciation expense and
Amortization of acquired intangible assets in our non-GAAP income
from operations reconciliation represent non-cash charges which are
not considered by management in evaluating our operating
performance. Acquisition-related costs consist of: (i) costs
directly attributable to our acquisition strategy and the
evaluation, consummation and integration of our acquisitions
(composed substantially of professional services fees including
legal, accounting and other consultants and to a lesser degree to
our personnel whose responsibilities are devoted to acquisition
activities), and (ii) transition compensation costs (composed
substantially of contingent payments for shares that are treated as
compensation expense and retention payments that are anticipated to
become payable to employees, as well as severance payments to
employees whose positions were made redundant). These
acquisition-related costs are not considered to be related to the
continuing operations of the acquired businesses and are generally
not relevant to assessing or estimating the long-term performance
of the acquired assets. Other operating expense, net represents
items that are not necessarily related to our recurring operations
and which therefore are not, under GAAP, included in other expense
lines. Accordingly, we exclude those amounts when assessing
non-GAAP income from operations. At times when we are
communicating with our shareholders, financial analysts and other
parties we refer to non-GAAP income from operations as adjusted
EBITDA.
We assess non-GAAP income from operations as a percentage of
total non-GAAP revenue and by doing so we are able to evaluate the
relative performance of our revenue growth compared to the expense
growth for those items included in non-GAAP income from operations.
This measure allows management and our Board of Directors to
compare our performance against that of other companies in our
industry that may be of different sizes.
At times when we are communicating with our shareholders,
financial analysts and other parties, we refer to adjusted income
from operations as a percentage of revenues as EBITDA
margin.
Non-GAAP diluted earnings per share – Non-GAAP diluted
earnings per share is calculated using GAAP net income/(loss)
excluding the effect of Acquisition fair value adjustment to
revenue, Share-based compensation expense, Amortization of
intangible assets, Acquisition-related costs, Net Interest-Other
Income and Expense, and the related tax effect, divided by weighted
average fully diluted shares outstanding. Therefore, we include
this non-GAAP measure in order to provide a more complete
comparison of our earnings per share from one period to another.
At times when we are communicating with our shareholders,
financial analysts and other parties we refer to Non-GAAP diluted
earnings per share as Adjusted EPS.
Non-GAAP Cash Flows from Operations - We define Non-GAAP
cash flows from operations as cash flows from operations as
reported under GAAP, adjusted for income taxes paid or received and
payments under restructurings. Income tax payments are included in
this reconciliation as the timing of cash payments and receipts can
vary significantly from year-to-year based on a number of factors,
including the influence of acquisitions on our consolidated tax
attributes. Payments for restructurings relate to a specific
activity that is not part of ongoing operations. At times when
we are communicating with our shareholders, financial analysts and
other parties we refer to Non-GAAP cash flows from operations as
Adjusted cash flows from operations.
Kofax® LimitedMedia Contact:Colleen Edwards, +1 (949)
783-1582Vice President, Corporate
Communicationscolleen.edwards@kofax.comorInvestor
Contact:MKR Group Inc.Todd Kehrli, +1 (323)
468-2300kfx@mkr-group.com
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