Revenue Increases 15% Sequentially BELLEVUE, Wash., Aug. 8
/PRNewswire-FirstCall/ -- 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. Conference Call
The Company will discuss its 2008 second quarter financial results
and business outlook on its regularly scheduled conference call
today, August 8th, at 7:30 a.m. PT (10:30 a.m. ET). A live webcast
of the conference call can be accessed from the Captaris Web site
at http://www.captaris.com/ under About Us -- Investor Relations.
The live call may also be accessed by dialing into the call at
1-800-218-0713 and providing the Company name "Captaris." An audio
replay of the conference call can be accessed at 1-800-405-2236.
The replay will be available starting two hours after the call and
remain in effect until Friday, August 15th at 11:59 PT. The
required pass code is 11117557#. About Captaris, Inc. Captaris,
Inc. is a leading provider of software products that automate
document-centric business processes. Captaris specializes in
document capture, recognition, routing, workflow and delivery.
Captaris integrated solutions provide interoperability with leading
line of business applications and technology platforms. Captaris
products include RightFax, Captaris Workflow, Alchemy, FaxPress,
DOKuStar, RecoStar, and Single Click Entry which are distributed
through a global network of leading technology partners. Captaris
customers include the entire Fortune 100 and the majority of 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. http://www.captaris.com/. (C)2008 All rights
reserved. No part of this publication may be reproduced,
transmitted, transcribed, stored in a retrieval system, or
translated into any language in any form by any means without the
written permission of Captaris. The following are registered
trademarks and trademarks of Captaris Inc. and its subsidiaries:
Captaris, the Captaris logo, Alchemy(R), Captaris Workflow(TM),
RightDocs(TM), RightFax(R), RightFlow(TM) and RightStar(TM) in the
US and/or other jurisdictions. FaxPress(TM) is a registered
trademark of Castelle. RecoStar, DOKuStar, DOKuStar Capture Suite,
Single Click Entry, and Invoice CENTER are registered trademarks
and trademarks of Captaris Document Technologies GmbH. 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 the expected impact of cost
synergies, improvements to our overall business model and
acceptance of new and existing products. 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, including the recent
acquisition of Captaris Document Technologies GmbH, 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 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. Consolidated Balance Sheets (in
thousands) June 30, December 31, 2008 2007 Assets (unaudited)
(audited) Current assets: Cash and cash equivalents $29,667 $46,182
Restricted cash - 1,000 Accounts receivable, net 22,089 19,348
Inventories 2,647 1,681 Prepaid expenses and other current assets
2,981 4,564 Income tax receivable and current deferred tax assets,
net 3,612 3,527 Total current assets 60,996 76,302 Other long-term
assets 1,151 847 Equipment and leasehold improvements, net 10,508
7,735 Intangible assets, net 30,339 11,748 Goodwill 56,767 37,522
Long-term deferred tax assets, net 4,130 5,344 Total assets
$163,891 $139,498 Liabilities and Shareholders' Equity Current
liabilities: Accounts payable $8,669 $8,621 Accrued compensation
and benefits 6,733 5,528 Other accrued liabilities 2,985 1,706
Income taxes payable 74 327 Deferred revenue 25,821 22,747 Total
current liabilities 44,282 38,929 Other long-term accrued
liabilities 1,044 696 Long-term deferred revenue 5,321 5,962
Pension and other long-term employee benefit obligations 19,913 -
Bank loan 8,072 - Total liabilities 78,632 45,587 Shareholders'
equity: Common stock 265 264 Additional paid-in capital 42,118
40,971 Retained earnings 40,599 49,961 Accumulated other
comprehensive income 2,277 2,715 Total shareholders' equity 85,259
93,911 Total liabilities and shareholders' equity $163,891 $139,498
Captaris, Inc. Consolidated Statements of Operations (in thousands,
except per share amounts) (Unaudited) Quarter Ended Six Months
Ended June 30, June 30, 2008 2007 2008 2007 Net revenue: Software
revenue $11,274 $8,363 $20,129 $15,456 Maintenance, support and
services revenue 14,927 9,838 29,312 19,217 Hardware revenue 3,799
4,765 7,461 8,806 Appliance revenue 2,098 - 3,115 - Net revenue
32,098 22,966 60,017 43,479 Cost of revenue 10,307 6,893 20,060
13,151 Gross profit 21,791 16,073 39,957 30,328 Operating expenses:
Research and development 6,193 3,633 12,544 6,819 Selling and
marketing 12,392 8,900 24,614 17,178 General and administrative
6,265 4,102 12,726 8,818 Amortization of intangible assets 694 142
1,358 283 In-process research and development 54 - 1,278 - Gain on
sale of discontinued product line CallXpress - - - (1,000) Total
operating expenses 25,598 16,777 52,520 32,098 Operating loss
(3,807) (704) (12,563) (1,770) Other income (expense): Interest
income 197 548 468 1,123 Interest expense (736) - (1,176) - Other
income (expense), net (544) 82 (70) 226 Other income (expense)
(1,083) 630 (778) 1,349 Loss from continuing operations before
income tax (benefit) expense (4,890) (74) (13,341) (421) Income tax
(benefit) expense (2,175) 90 (3,980) 6 Loss from continuing
operations (2,715) (164) (9,361) (427) Discontinued operations:
Loss on sale of MediaTel assets, net of income tax benefit - (1)
(1) (3) Loss from discontinued operations - (1) (1) (3) Net loss
$(2,715) $(165) $(9,362) $(430) Basic and diluted net loss per
common share: Loss from continuing operations $(0.10) $(0.01)
$(0.35) $(0.02) Loss from discontinued operations - (0.00) (0.00)
(0.00) Net loss $(0.10) $(0.01) $(0.35) $(0.02) Weighted average
shares used in computation of: Basic net loss per share 26,532
27,223 26,469 27,368 Diluted net loss per share 26,532 27,223
26,469 27,368 Captaris, Inc. Consolidated Statements of Cash Flows
(in thousands) (Unaudited) Six Months Ended June 30, 2008 2007 Cash
flows from operating activities: Net loss $(9,362) $(430)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: Depreciation 1,766 1,317 Amortization 3,547
1,244 Stock-based compensation expense 752 532 Gain on foreign
currency revaluation (3,765) - Loss on derivative instrument 991 -
Pension and long-term employee benefit expense 1,029 - Provision
for doubtful accounts 169 15 In-process research and development
1,278 - Loss on disposition of assets 115 58 Deferred income tax
benefit (3,980) (605) Changes in assets and liabilities (net of
acquired assets and liabilities): Accounts receivable 2,695 5,995
Inventories (387) 347 Prepaid expenses and other assets 1,362
(1,038) Income tax receivable - (100) Accounts payable (1,676)
(909) Accrued compensation and benefits (981) (937) Other accrued
liabilities (450) (57) Income taxes payable (8) 103 Pension
liability (145) - Deferred revenue 412 1,290 Net cash flow (used
in) provided by operating activities (6,638) 6,825 Cash flows from
investing activities: Purchase of equipment and leasehold
improvements (3,793) (2,433) Purchase of investments - (16,569)
Purchase of Captaris Document Technologies GmbH (17,926) - Proceeds
from disposals of assets 35 55 Proceeds from sales and maturities
of investments 4 21,683 Net cash (used in) provided by investing
activities (21,680) 2,736 Cash flows from financing activities:
Proceeds from bank loan 13,073 - Repayments on bank loan (5,000) -
Proceeds from release of restricted cash 1,000 - Proceeds from
exercise of common stock options 520 2,037 Repurchase of common
stock (138) (4,895) Excess tax benefits from stock-based
compensation 14 294 Net cash provided by (used in) financing
activities 9,469 (2,564) Net (decrease) increase in cash (18,849)
6,997 Effect of exchange rate changes on cash 2,334 (33) Cash and
cash equivalents at beginning of period 46,182 10,695 Cash and cash
equivalents at end of period $29,667 $17,659 DATASOURCE: Captaris,
Inc. CONTACT: Investor Relations, Erika Simms, Treasury Analyst of
Captaris, Inc., +1-425-638-4048, Web site: http://www.captaris.com/
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