Marlborough Software Development Holdings Inc. (“MSDH” or the
“Company”) (OTC: MBGH) today reported revenue of $2,335,000 for the
three months ended December 31, 2012, an increase of $700,000 or
43% as compared to the three months ended September 30, 2012 and an
increase of $150,000 or 7% as compared to revenue of $2,185,000 for
the three months ended December 31, 2011. The increase in revenue
for the fourth quarter combined with savings from the expense
reductions we announced in August, 2012 resulted in an operating
loss of $700,000 for the quarter ended December 31, 2012, an
improvement of $1,796,000 and $1,519,000, respectively, as compared
to the losses reported for the quarters ended December 31, 2011 and
September 30, 2012.
The Company’s cash balance at December 31, 2012 totaled
$2,018,000, an increase of $1,467,000 from a balance of $551,000 at
December 31, 2011 and an increase of $1,397,000 from a balance of
$621,000 at September 30, 2012. The increase in our cash balance
during the fourth quarter reflects the receipt of an equity
investment from two investors totaling $2,000,000.
“We are very pleased with the progress we have made in the
fourth quarter. The Pageflex business which was previously operated
by Bitstream Inc., our former parent company, prior to the spin-out
of MSDH and the Pageflex business, recorded its highest quarterly
revenue and smallest operating loss since the second quarter of
2008,” said Pinhas Romik, President and CEO of MSDH. “The
investments and commitments that we received during the fourth
quarter and cost savings which we continue to achieve have made us
a stronger company and better positioned us to move the Company
forward as we explore long term growth initiatives and the
attainment of profitability. We remain committed to the development
of the Pageflex brand of products while we also continue to work
with Corporate Partners LLC, who are advising us on strategic
alternatives.”
GAAP Loss
Our loss from operations decreased $1,796,000 to $700,000 for
the three months ended December 31, 2012, as compared to $2,496,000
for the three months ended December 31, 2011. Our net loss
allocable to common stockholders decreased $1,565,000 to $958,000
or $0.09 per share for the three months ended December 31, 2012, as
compared to $2,523,000 or $0.23 per share for the three months
ended December 31, 2011.
Our loss from operations decreased $1,519,000 to $700,000 for
the three months ended December 31, 2012, as compared to $2,219,000
for the three months ended September 30, 2012. Our net loss
allocable to common stockholders decreased $1,279,000 to $958,000
or $0.09 per share for the three months ended December 31, 2012 as
compared to $2,237,000 or $0.21 per share for the three months
ended September 30, 2012.
Non-GAAP Loss
Our non-GAAP results exclude stock-based compensation expense,
allocated costs associated with the resignation in May 2011 of the
CEO of our former parent, Bitstream Inc., the amortization of
capitalized software and intangible assets primarily acquired from
Press-Sense Ltd., as well as expenses related to the preferred
stock issued in October 2012, and include MSDH expenses charged to
Bitstream Inc. via our management fee agreement or allocated to
Bitstream Inc. via our allocation methodology. Our non-GAAP loss
from operations decreased $4,084,000 to $457,000 for the three
months ended December 31, 2012, as compared to $4,541,000 for the
three months ended December 31, 2011. Our non-GAAP net loss
allocable to common stockholders decreased $4,056,000 to $512,000
or $0.05 per share for the three months ended December 31, 2012, as
compared to $4,568,000 or $0.42 per share for the three months
ended December 31, 2011. A reconciliation between GAAP and non-GAAP
results is provided at the end of this press release.
Forward-Looking Statements Disclosure
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are based on management’s current
expectations. Forward-looking statements can be identified by the
use of the words "may," "will," "should," "could," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts,"
"intends," "potential," "proposed," or "continue" or the negative
of those terms. Actual performance and results of operations may
differ materially from those projected or suggested in the
forward-looking statements due to certain risks and uncertainties,
including, without limitation, market acceptance of the Company’s
products, competition and the timely introduction of new products.
Additional information concerning certain risks and uncertainties
that would cause actual results to differ materially from those
projected or suggested in the forward-looking statements is
contained in the Company’s filings with the Securities and Exchange
Commission (“SEC”), including MSDH’s Annual Report on Form 10-K for
the year ended December 31, 2012, as may be supplemented from time
to time by MSDH’s subsequent reports filed with the SEC. We
undertake no obligation to update or supplement forward-looking
statements that become untrue because of subsequent events, new
information or otherwise after the date of this document.
Use of Non-GAAP Financial Information
To supplement the financial measures presented in the Company's
press release in accordance with accounting principles generally
accepted in the United States ("GAAP"), the Company also presents
non-GAAP measures relating to income or loss from operations, net
income or loss, and net income or loss per diluted share which were
adjusted from amounts determined based on GAAP to exclude
share-based compensation expenses, allocated resignation costs of
the CEO of our former parent, as well as expenses from the
amortization of capitalized software and intangible assets
primarily acquired from Press-sense Ltd., and include
non-transaction related MSDH expenses charged to Bitstream Inc. via
our management fee agreement or allocated to Bitstream Inc. via our
allocation methodology as discussed further in our 2011 Annual
Report on Form 10-K filed March 30, 2012.
The Company believes these non-GAAP financial measures will
enhance the reader’s overall understanding of MSDH’s current
financial performance and the Company's prospects for the future by
providing a higher degree of transparency for certain financial
measures and providing a level of disclosure that helps investors
understand how the Company plans and measures its own business.
These financial measures are not in accordance with GAAP, should
not be considered an alternative for measures prepared in
accordance with GAAP, and may have limitations in that they do not
reflect all of MSDH’s results of operations as determined in
accordance with GAAP.
These non-GAAP measures should only be used to evaluate MSDH’s
results of operations in conjunction with the corresponding GAAP
measures. The presentation of non-GAAP information is not meant to
be considered superior to, in isolation from, or as a substitute
for results prepared in accordance with GAAP.
About Marlborough Software Development Holdings Inc.
(“MSDH”)
MSDH’s Pageflex brand enables companies across the globe to
communicate their marketing messages more easily and effectively.
The award-winning Pageflex product line sets a standard for
excellence and innovation in targeted marketing and brand
management. Pageflex offers the ability to personalize any form of
communication in print, e-mail, or on the Web. Pageflex has been a
pioneer in the development of variable data and web-to-print
storefronts, and has expanded to offer software for multi-channel
campaign management, dynamic publishing, and back-end production
automation. Pageflex solutions use the patented Pageflex variable
publishing engine and Adobe® InDesign®. For more information, visit
www.pageflex.com.
Marlborough Software Development Holdings Inc. and
Subsidiaries Condensed Consolidated Statements of
Operations (In Thousands, Except Per Share Data)
Three Months Ended December 31,
Year Ended December 31,
2012
2011
2012
2011
Revenue: Software licenses $ 889 $ 715 $ 2,280 $ 2,793 Services
1,446 1,470 5,423 5,849 Total revenue
2,335 2,185 7,703 8,642 Cost of revenue: Software licenses
352 244 1,052 1,103 Services 439 506 2,280
2,025 Total cost of revenue 791 750 3,332 3,128
Gross profit 1,544 1,435 4,371
5,514 Operating expenses: Marketing and
selling 840 1,211 3,948 3,863 Research and development 931 1,965
5,645 7,119 General and administrative 473 755 3,263
3,208 Total operating expenses 2,244
3,931 12,856 14,190 Operating loss (700
) (2,496 ) (8,485 ) (8,676 ) Interest and other (expense)
income, net
(1 ) 3 (27 ) 10 Loss before provision for
income taxes (701 ) (2,493 ) (8,512 ) (8,666 ) Provision for income
taxes 54 30 200 162 Net loss
(755 ) (2,523 ) (8,712 ) (8,828 )
Amortization of financing costs
onredeemable preferred stock
7 --- 7 ---
Accretion of discount on
redeemablepreferred stock
167 --- 167 ---
Dividends on redeemable preferredstock
29 --- 29 ---
Net loss allocable to
commonstockholders
$ (958 ) $ (2,523 ) $ (8,915 ) $ (8,828 )
Net loss per share allocable to
commonstockholders, basic and diluted
$ (0.09 ) $ (0.23 ) $ (0.83 ) $ (0.82 )
Shares used in calculating net loss
pershare allocable to commonstockholders, basic and diluted
10,802
10,752 10,767 10,752
Marlborough Software Development Holdings Inc. and
Subsidiaries Condensed Consolidated Balance Sheets
(In Thousands)
December 31,2012
December 31,2011
ASSETS Current assets: Cash $ 2,018 $ 551 Accounts
receivable, net 540 628 Prepaid expenses and other current assets
420 394 Total current assets 2,978 1,573 Property and
equipment, net 1,722 1,355 Other 413 238 Goodwill 3,297 3,297
Intangible assets, net 2,669 3,070 Total assets $ 11,079 $
9,533
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 385 $ 169 Accrued payroll and other
compensation 491 775 Other accrued expenses 723 388 Short-term
deferred revenue 2,229 2,200 Total current liabilities 3,828 3,532
Long-term deferred revenue 555 526 Long-term deferred rent
469 506 Total liabilities 4,852 4,564 Series A redeemable
preferred stock 1,888 --- Total stockholders’ equity 4,339
4,969 Total liabilities and stockholders’ equity $ 11,079 $
9,533
Marlborough
Software Development Holdings Inc. and Subsidiaries Non-GAAP
Results (In Thousands, Except Per Share Data)
The following table shows MSDH’s non-GAAP
results reconciled to GAAP results included in this release.
Three Months Ended
December
31,
Year Ended
December
31,
2012
2011
2012
2011
Operating loss: GAAP operating loss $ (700 ) $ (2,496 ) $
(8,485 ) $ (8,676 ) Stock-based compensation 9 81 1,451 384
Amortization of intangible assets and
capitalized software
234
102
580
408
Allocation to former parent --- (2,228 ) (818 ) (4,883 )
Resignation costs, former CEO --- --- --- 347
Non-GAAP operating loss $ (457 ) $ (4,541 ) $ (7,272 ) $
(12,420 )
Net loss allocable to common
stockholders:
GAAP net loss allocable to common
stockholders
$ (958 ) $ (2,523 ) $ (8,915 ) $ (8,828 ) Stock-based compensation
9 81 1,451 384
Amortization of intangible assets and
capitalized software
234
102
580
408
Allocation to former parent --- (2,228 ) (818 ) (4,883 )
Resignation costs, former CEO --- --- --- 347
Expenses related to redeemable
preferred
stock- including
accretion of discount,
amortization of
financing costs, and
dividends
203 --- 203 ---
Non-GAAP net loss allocable to common
stockholders
$ (512 ) $ (4,568 ) $ (7,499 ) $ (12,572 )
Net loss per
share allocable to common
stockholders:
GAAP net loss per share allocable to
common stockholders
$ (0.09 ) $ (0.23 ) $ (0.83 ) $ (0.82 ) Stock-based compensation
per share --- --- 0.13 0.04
Amortization of intangible assets and
capitalized software per
share
0.02
0.01
0.05
0.04
Allocation to former parent per share --- (0.20 ) (0.07 ) (0.46 )
Resignation costs, former CEO per share --- --- --- 0.03
Expenses per share related to
redeemable
preferred stock-
including accretion of
discount, amortization
of financing costs,
and dividends
0.02 --- 0.02 ---
Non-GAAP net loss per share allocable
to
common stockholders
$ (0.05 ) $ (0.42 ) $ (0.70 ) $ (1.17 )
For the three and twelve month periods ended December 31, 2012,
net loss per share is based on 10,802,000 and 10,767,000 weighted
average shares outstanding, respectively. For the three and twelve
months ended December 31, 2011, net loss per share is based on
10,752,000 weighted average shares outstanding. GAAP and Non-GAAP
amounts exclude $0 and $2,254,000 for the three and twelve months
ended December 31, 2012, respectively, for Separation,
Distribution, and Merger costs which were incurred by MSDH and
subsequently charged to Bitstream Inc. via a management fee
agreement.
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