Q2 Revenue of $22.6 Million up 6.7% Year-Over-Year BELLEVUE, Wash.,
Aug. 3 /PRNewswire-FirstCall/ -- Captaris, Inc. (NASDAQ:CAPA), a
leading provider of software products that automate
document-centric business processes, today reported financial
results for its second quarter ended June 30, 2006. Total revenue
for the second quarter was $22.6 million, a 6.7% increase over the
second quarter of 2005 and a 15.6% increase over the preceding
quarter. Revenue by category compared to the second quarter of 2005
is as follows: * Software revenue was $8.2 million, an increase of
$130,000 * Hardware revenue was $5.4 million, an increase of
$100,000 * Maintenance, support and service revenue was $9.0
million, an increase of $1.2 million Gross profit was $15.9
million, up $1.4 million or 9.5%, compared to the same quarter last
year, and gross margin was 70.1%, compared to 68.3% in the same
quarter last year. Total operating expenses were $16.1 million for
the second quarter of 2006, a decrease of approximately $800,000,
or 4.7%, compared to total operating expenses of $16.9 million for
the second quarter of 2005. The decline in operating expenses was a
result of effective cost control in the quarter and actions the
Company took in the fourth quarter of 2005 to reduce its operating
cost structure. "Our solid second quarter results reflect a
significant increase in the number of larger billing transactions
including notable enterprise deals," said David P. Anastasi,
President and CEO of Captaris, Inc. "Our continued product
development efforts and channel enhancements are driving increased
multiple product sales and enterprise-wide deployments, as well as
growth in deferred revenue through larger maintenance and support
contracts. We also continue to make substantial progress in
streamlining our business and improving operating leverage,
enabling us to execute our planned further reduction of $2.0
million annually in cash spending. Looking ahead, we believe our
ongoing initiatives to build a more stable and predictable business
will enable greater opportunity for top line growth and increasing
profitability." The Company recognized stock based compensation
expense of $151,000 in the second quarter of 2006, compared to
$15,000 in the second quarter of 2005. Amortization of intangible
assets for the second quarter of 2006 was $835,000, including
$481,000 in cost of revenue and $354,000 in operating expenses,
compared to $935,000 in the second quarter of 2005, including
$481,000 in cost of revenue and $454,000 in operating expenses.
Operating loss in the second quarter of 2006 was $252,000, an
improvement of $2.2 million compared to a loss of $2.4 million in
the second quarter of 2005. The Company reported net income for the
second quarter of 2006 of $28,000, or breakeven per diluted share,
compared to a net loss of $1.4 million, or $0.05 per diluted share
in the same quarter last year and compared to net income of
$81,000, or break even per diluted share in the first quarter of
2006. On a year-to-date basis, revenue of $42.2 million was up $2.2
million or 5.6%, operating expenses of $30.2 million were down $2.3
million or 6.9% and net income of $109,000 was up $3.4 million or
103%, all compared to the same period in 2005. Cash flow from
operations was $1.9 million in the second quarter of 2006, an
increase of $1.5 million from the second quarter in 2005. On a
year-to-date basis, cash flow from operations was $6.4 million, up
$7.1 million compared to cash used of $700,000 in 2005.
Consolidated cash, cash equivalents and investment balances as of
June 30, 2006 totaled $56.4 million, an increase of $700,000 from
March 31, 2006. Deferred revenue at June 30, 2006 was $23.4
million, an increase of $760,000 or 3.4% over the preceding
quarter. Spending Reductions The Company commenced actions in July
2006 intended to reduce annual spending by $2.0 million. The
Company expects to realize benefits from these actions beginning in
the fourth quarter of 2006 and carrying into 2007. Mr. Anastasi
stated, "We are on track to meet the $5.0 million annual reduction
in spending we announced on our third quarter 2005 earnings
conference call. We believe the continuing refinement of our
business model allows us to execute further reductions while
driving attractive revenue growth." Stock Repurchase During the
quarter, the Company repurchased approximately 337,000 shares of
its outstanding common stock at a cost of approximately $1.5
million with an average purchase price of $4.45 per share. As of
June 30, 2006, approximately $13.5 million is available under its
repurchase program. Captaris may repurchase shares under its stock
repurchase program subject to overall market conditions, stock
prices and its cash position and requirements. As of June 30, 2006,
the total number of outstanding common shares was 28.1 million. As
previously announced on June 8, 2006, the Board of Directors
authorized the Company to enter into a Rule 10b5-1 plan to
facilitate its stock buyback activity. A Rule 10b5-1 repurchase
plan will allow the Company to purchase its shares at times when it
ordinarily would not be in the market because of self- imposed
trading blackout periods. Captaris anticipates that transactions
under the Rule 10b5-1 repurchase plan would begin, subject to the
parameters of the plan, on September 18, 2006, the first trading
day after the open trading window closes in the third quarter. Web
Cast Information The Company will discuss its second quarter
results and business outlook for 2006 on its regularly scheduled
conference call today at 1:45 pm PT/4:45 p.m. ET. The live web cast
of the conference call can be accessed from the Investor Relations
section of the Captaris Web site at http://www.captaris.com/ or at
http://www.mkr-group.com/ (under featured events). To access the
live conference call, dial 800-240-2134 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 Thursday, August 10th at
11:59 PT. The required pass code is 11065266#. About Captaris, Inc.
Captaris, Inc. is a leading provider of software products that
automate business processes, manage documents electronically and
provide efficient information delivery. Our product suite of
Captaris RightFax, Captaris Workflow and Captaris Alchemy Document
Management is 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 National
Market under the symbol CAPA. For more information please visit
http://www.captaris.com/. 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 belief that our ongoing
initiatives to build a more stable and predictable business will
enable greater opportunity for top line growth and increasing
profitability and that our business model allows us to execute
further cost reductions while driving attractive revenue growth and
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' most recent quarterly report on Form 10-Q and
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. The following are registered trademarks and
trademarks of Captaris: Captaris, Alchemy, RightFax, Captaris
Document Management, Captaris Interchange and Captaris Workflow.
All other brand names and trademarks are the property of their
respective owners. Captaris, Inc. Condensed Consolidated Balance
Sheets (in thousands) (Unaudited) June 30, December 31, 2006 2005
Assets Current assets: Cash and cash equivalents $7,012 $6,420
Short-term investments, available-for-sale 20,615 17,506 Accounts
receivable, net 15,178 18,776 Inventories 830 534 Prepaid expenses
and other 2,788 1,759 Deferred tax assets and income tax receivable
3,270 4,141 Total current assets 49,693 49,136 Long-term
investments, available-for-sale 28,762 27,601 Restricted cash 1,000
1,000 Long-term assets 304 337 Equipment and leasehold
improvements, net 4,956 6,200 Intangible assets, net 8,097 9,767
Goodwill 32,746 32,313 Deferred tax assets, net 5,640 4,849 Total
assets $131,198 $131,203 Liabilities and Shareholders' Equity
Current liabilities: Accounts payable $4,527 $4,665 Accrued
compensation and benefits 3,391 3,764 Other accrued liabilities
1,923 2,390 Income taxes payable 71 80 Deferred revenue 19,005
18,104 Total current liabilities 28,917 29,003 Accrued liabilities
- noncurrent 277 317 Deferred revenue - noncurrent 4,415 4,104
Total Liabilities 33,609 33,424 Shareholders' equity: Common stock
281 284 Additional paid-in capital 49,935 50,835 Retained earnings
45,918 45,809 Accumulated other comprehensive income 1,455 851
Total shareholders' equity 97,589 97,779 Total liabilities and
shareholders' equity $131,198 $131,203 Captaris, Inc. Condensed
Consolidated Statements of Operations (in thousands, except per
share data) (Unaudited) Quarter Ended Six Months Ended June 30,
June 30, 2006 2005 2006 2005 Net revenue: Software revenue $8,230
$8,102 $15,517 $14,839 Maintenance, support and services revenue
9,000 7,812 17,308 15,216 Hardware revenue 5,400 5,301 9,378 9,907
Net revenue 22,630 21,215 42,203 39,962 Cost of revenue 6,761 6,721
12,414 13,042 Gross profit 15,869 14,494 29,789 26,920 Operating
expenses: Research and development 3,189 3,408 6,358 6,752 Selling
and marketing 8,676 8,562 15,973 16,376 General and administrative
3,902 4,496 8,210 9,468 Amortization of intangible assets 354 454
708 908 Gain on sale of discontinued product line CallXpress -- --
(1,000) (1,000) Total operating expenses 16,121 16,920 30,249
32,504 Operating loss (252) (2,426) (460) (5,584) Other income
(expense): Interest 441 299 913 554 Other, net (69) (40) (91) (128)
Other income, net 372 259 822 426 Income (loss) from continuing
operations before income tax expense (benefit) 120 (2,167) 362
(5,158) Income tax expense (benefit) 87 (754) 296 (1,794) Income
(loss) from continuing operations 33 (1,413) 66 (3,364)
Discontinued operations: Gain(loss) from sale of MediaTel assets,
net of income tax (benefit) expense of ($3), $16, $28, $20,
respectively (5) 24 43 30 Income (loss) from discontinued
operations (5) 24 43 30 Net income (loss) $28 $(1,389) $109
$(3,334) Basic net income (loss) per common share: Income (loss)
from continuing operations $0.00 $(0.05) $0.00 $(0.11) Income
(loss) from discontinued operations (0.00) 0.00 0.00 0.00 Net
income (loss) $0.00 $(0.05) $0.00 $(0.11) Diluted net income (loss)
per common share: Income (loss) from continuing operations $0.00
$(0.05) $0.00 $(0.11) Income (loss) from discontinued operations
(0.00) 0.00 0.00 0.00 Net income (loss) $0.00 $(0.05) $0.00 $(0.11)
Weighted average basic common shares 28,191 29,184 28,269 29,331
Weighted average diluted common shares 28,525 29,184 28,545 29,331
Captaris, Inc. Condensed Consolidated Statements of Cash Flows (in
thousands) (Unaudited) Six Months Ended June 30, 2006 2005 Cash
flows from operating activities: Net income (loss) $109 $(3,334)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation 1,658 1,718 Amortization 1,670
1,871 Stock-based compensation expense (benefit) 241 (180)
Provision for doubtful accounts 39 216 Loss (gain) on disposition
of equipment 54 (20) Changes in assets and liabilities: Accounts
receivables, net 3,727 2,689 Inventories (207) 112 Prepaid expenses
and other assets (1,001) (408) Deferred income tax assets, net 544
(1,894) Accounts payable (178) (2,779) Accrued compensation and
benefits (414) (872) Other accrued liabilities (545) 466 Income
taxes payable and deferred tax liabilities (525) 713 Deferred
revenue 1,262 1,025 Net cash flow provided by (used in) operating
activities 6,434 (677) Cash flows from investing activities:
Purchase of equipment and leasehold improvements (426) (1,592)
Purchase of investments (34,240) (42,002) Purchase of businesses,
net of cash acquired -- 2 Proceeds from sale of equipment 7 25
Proceeds from sales and maturities of investments 30,005 42,699 Net
cash used in investing activities (4,654) (868) Cash from financing
activities: Proceeds from exercises of stock options 1,007 89
Repurchase of common stock (2,384) (2,994) Excess tax benefits from
stock-based compensation 234 -- Net cash used in financing
activities (1,143) (2,905) Net increase (decrease) in cash 637
(4,450) Effect of exchange rate changes on cash (45) 63 Cash and
cash equivalents at beginning of period 6,420 7,563 Cash and cash
equivalents at end of period $7,012 $3,176 Cash paid during the
period for income taxes $86 $83 Captaris, Inc. Additional
Information (in thousands) (Unaudited) Quarter Ended Six Months
Ended June 30, June 30, Amortization Amortization 2006 Cost of
revenue $481 $962 Operating expenses: Research and development $--
$-- Selling, general and administrative -- -- Amortization of
intangible assets 354 708 Total operating expenses $354 $708 2005
Cost of revenue $482 $963 Operating expenses: Research and
development $-- $-- Selling, general and administrative -- --
Amortization of intangible assets 454 908 Total operating expenses
$454 $908 DATASOURCE: Captaris, Inc. CONTACT: Melanie Canto,
Director, Treasury and Investor Relations of Captaris, Inc.,
+1-425-638-4048, or ; or investors, Todd Kehrli or Jim Byers, both
of MKR Group, LLC, +1-818-556-3700, or , for Captaris, Inc. Web
site: http://www.captaris.com/
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