TIDMKFX
Kofax® Limited (NASDAQ and LSE: KFX), a leading provider of
smart process applications for the business critical First Miletm
of customer interactions, today reported its unaudited financial
results for the second quarter and six months ended December 31,
2013.
IFRS Financial Highlights:
-- Software license revenue increased 21.4% to $30.4 million (Prior Year
or PY: $25.0 million), and for the six months increased 16.3% to
$54.8
million (PY: $47.1 million)
-- Total revenues increased 16.2% to $74.0 million (PY: $63.7 million),
and for the six months increased 12.6% to $139.5 million (PY:
$123.8
million)
-- Income from operations increased 18.7% to $4.5 million (PY: $3.8
million) or a 6.1% margin (PY: 6.0%), and for the six months
increased
1.2% to $3.9 million (PY: $3.9 million) or a 2.8% margin (PY:
3.1%)
-- Diluted earnings per share (EPS) was $0.03 (PY: $0.01), and for the
six months was $0.05 (PY: $0.00)
-- Cash generated (used) by operations was ($0.2) million (PY: $0.6
million), and for the six months was $18.2 million (PY: $9.2
million)
-- Quarter end cash was $81.2 million (PY: $87.0 million)
Non-IFRS Financial Highlights:
-- Software license revenue increased 30.0% to $32.6 million (PY: $25.1
million), and for the six months increased 23.9% to $58.5
million (PY:
$47.2 million)
-- Total revenues increased 20.7% to $77.0 million (PY: $63.9 million),
and for the six months increased 16.6% to $144.6 million (PY:
$124.0
million)
-- Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) increased 29.1% to $13.0 million (PY:
$10.1
million) or a 16.8% margin (PY: 15.7%), and for the six
months
increased 30.3% to $21.3 million (PY: $16.3 million) or a 14.7%
margin
(Prior Year: 13.2%)
-- Adjusted diluted EPS was $0.08 (PY: $0.07), and for the six months was
$0.13 (PY: $0.10)
-- Adjusted cash generated (used) by operations was $3.9 million (PY:
$3.6 million), and for the six months was $23.7 million (PY:
$14.9
million)
A summary of Kofax's unaudited revenues and adjusted EBITDA for
the second quarter and six months compared to the prior year on
both an IFRS and non-IFRS basis is as follows:
IFRS
Quarter Six Months
Unaudited Y/Y % Y/Y %
$M Change Total $M Change Total
Software Licenses 30.4 21.4% 41.0% 54.8 16.3% 39.3%
Maintenance Services 33.5 8.7% 45.3% 65.6 8.1% 47.0%
Professional Services 10.1 29.1% 13.7% 19.1 18.9% 13.7%
Total Revenues 74.0 16.2% 100.0% 139.5 12.6% 100.0%
Income from Operations 4.5 18.7% 3.9 1.2%
Margin 6.1% 2.2% 2.8% -10.1%
Non-IFRS
Quarter Six Months
Unaudited Y/Y % Y/Y %
$M Change Total $M Change Total
Software Licenses 32.6 30.0% 42.3% 58.5 23.9% 40.5%
Maintenance Services 33.8 9.3% 43.9% 66.2 8.9% 45.8%
Professional Services 10.6 35.6% 13.8% 19.9 24.1% 13.7%
Total Revenues 77.0 20.7% 100.0% 144.6 16.6% 100.0%
Adjusted EBITDA 13.0 29.1% 21.3 30.3%
Margin 16.8% 7.0% 14.7% 11.8%
Operating Highlights:
-- Closed an increasing number of mid-sized software license transactions:
50 greater than $100,000 (PY: 32) and 2 greater than $1
million
(PY: 2), and for the six months 85 greater than $100,000 (PY:
70)
and 4 greater than $1 million (PY: 3)
These periods again included two of the largest sales in the
history of the Company at $7.6 million to a U.S. government
agency
during the first quarter and $3.7 million to a major global
insurance company based in the U.S. during the second
quarter
"Legacy capture" software license revenue increased 17.7%
and
"mobile and new or acquired products" increased 107.4%, and
for
the six months 13.0% and 100.8%, respectively, on a Non IFRS
basis
-- Launched numerous new software products and releases, including:
Kofax TotalAgilitytm 7.0, which the Company believes is the
first
unified platform for the development and deployment of smart
process applications and has been well received to date
Kofax AP Automation, which can be used with any accounting or
ERP
system and offers "out-of-the-box" integration with
Microsoft
Dynamics AX, Kofax Mailroom Automation and Kofax Customer
Onboarding solutions, all built on the Kofax TotalAgility
7.0
platform
An update to Kofax Medical Claims Add-on Pack to support
Centers
for Medicare and Medicaid (CMS) regulations related to the
Affordable Care Act taking effect in January 2014
Kapow Enterprise 9.3, which features a redesigned interface
to
simplify the user experience and encompass the entire
information
supply chain from data acquisition to enrichment,
persistence,
exploration and distribution
-- Continued receiving recognition for Kofax's software products and
solutions from independent sources, including:
DM Magazine recognized Kofax TotalAgility as a Product of the
Year
in its 2013 Document Manager Awards
Mortgage banking executives selected Kofax Mobile Capturetm
for
Mortgage Banking Magazine's 2013 "Harnessing Mobile Award"
Attendees at FinovateAsia 2013 in Singapore voted Kofax
Mobile
Capture Best of Show
Database Trends and Applications Magazine named Kapow
Enterprise
9.3 as a Trendsetting Product of 2014
The Analyst One web site included Kapow's platform on its list
of
24 breakthrough technologies every analyst should be aware
of
-- Received an extension to patent number 8,345,981 from the United
States Patent and Trademark Office covering reverse matching
technology to determine the validity of data extracted from
documents
captured using a mobile device and correcting erroneous or
suspicious
data, thus ensuring its accuracy
-- Welcomed Grant Johnson as the Company's new Chief Marketing Officer
-- Extended the term of the Company's existing, undrawn $40.0 million
revolving line of credit facility with Bank of America Merrill
Lynch
to June 30, 2016
-- Implemented corporate structure changes to create a new parent
corporation for Kofax, which maintains a premium listing on the
London
Stock Exchange and listed on NASDAQ effective as of December 5,
2013
-- Two full service securities brokerage firms based in the U.S.
initiated financial analyst coverage on Kofax
Commenting on these results, Reynolds C. Bish, Chief Executive
Officer, said: "We're pleased with our performance during the
second quarter and first half of this fiscal year, which was in
line with our expectations for those periods as well as our
previous revenue growth guidance for fiscal year 2014. We continue
to invest in strengthening and growing our sales organization and
expanding our research and development efforts in order to drive
faster software license revenue growth in the future. We continue
to realize improved sales execution across all geographies and
product lines, including our legacy capture as well as mobile and
new or acquired product offerings in the faster growing segments of
our target markets, and the introduction of additional new product
and solution offerings. We're therefore sufficiently confident in
our outlook to reaffirm our previous revenue growth guidance and
now provide adjusted EBITDA margin guidance for fiscal year 2014 on
a constant currency basis as follows:
IFRS Non-IFRS
Software License Low Double Digits Mid to High Teens
Revenue Growth
Total Revenues Growth Mid to High Single Digits Low Double Digits
Adjusted EBITDA Margin 12.5 - 13.5% 14.5 - 15.5%
Webcast
Chief Executive Officer Reynolds C. Bish and Chief Financial
Officer Jamie Arnold will present these results and conduct a
question and answer session in the London offices of FTI Consulting
today at 1:00 p.m. U.K. time / 8:00 a.m. U.S. Eastern Standard
time.
A live webcast and accompanying presentation can be listened to
and viewed, and questions can be asked via the webcast console
instant messaging facility, through the investor relations section
of the Company's website at:
http://investor.kofax.com/events.cfm.
The audio only portion of the webcast can be listened to and
questions can be verbally asked as follows:
Live Replay Access Code
U.K. +44 (0) 1452 555566 +44 (0)1452 550000 31147206
U.S. +1 (866) 966 9439 +1 (866) 247 4222 31147206
A replay of the webcast and a transcript of the presentation
will be posted on the Company's investor relations site by 5:00
p.m. U.K. time / 12:00 p.m. U.S. Eastern Standard Time on February
5.
About Kofax
Kofax Limited is a leading provider of innovative smart capture
and process automation software and solutions for the business
critical First Mile of customer interactions. These begin with an
organization's systems of engagement, which generate real time,
information intensive communications from customers, and provide an
essential connection to their systems of record, which are
typically large scale, rigid enterprise applications and
repositories not easily adapted to more contemporary technology.
Success in the First Mile can dramatically improve an
organization's customer experience and greatly reduce operating
costs, thus driving increased 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, business process outsourcing and
other markets. Kofax delivers these through its own 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 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, and the
performance or reliability of our products. 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.
Non-IFRS Financial Measures
Management uses financial measures, both IFRS and non-IFRS, in
analyzing and assessing the overall performance of the business and
making operational decisions. We have provided and believe that the
non-IFRS financial measures and supplemental reconciliation to IFRS
financial measures are useful to investors and other users of our
financial statements because the non-IFRS financial measures may be
used as additional tools to compare our performance across peer
companies, periods and financial markets. Please refer to the Chief
Financial Officer's Review for a discussion of the non-IFRS
financial measures and supplemental reconciliation to IFRS
financial measures for more information regarding the non-IFRS
measures.
Company Names
Except as otherwise required by the context, references to
"Kofax," "the Company," "we," "us" and "our" are to (1) Kofax plc,
a company organized under the laws of the U.K. and listed on the
London Stock Exchange, or Kofax U.K., for all periods prior to
December 5, 2013, and (2) Kofax Limited, a company organized under
the laws of Bermuda and listed on the London Stock Exchange and
NASDAQ, or Kofax Bermuda, for all periods thereafter.
© 2014 Kofax Limited "Kofax" is a registered trademark and
"First Mile", "TotalAgility" and "Kofax Mobile Capture" are
trademarks of Kofax Limited. All other trademarks are the property
of their respective owners.
Chief Executive Officer's Review
Financial Performance
During the second quarter and six months ended December 31,
2013, we continued to progressively realize the benefits expected
to result from the October 2012 reorganization of our sales force
to better focus its resources, improve its execution and
productivity, increase the number of mid-sized software license
transactions and reduce our reliance on large, seven figure
sales.
Non-IFRS software license revenues increased 30.0% to $32.6
million, and for the six months increased 23.9% to $58.5 million,
and non-IFRS total revenues increased 20.7% to $77.0 million, and
for the six months increased 16.6% to $144.5 million.
During these periods we closed an increasing number of mid-sized
software license transactions, as outlined below:
Quarter Six Months
FY13 FY14 FY13 FY14
Sales > $100,000 32 50 70 85
Sales > $1 million 2 2 3 4
The second quarter and six months ended December 31, 2013 once
again included two of the largest sales in the history of the
Company. One was for $7.6 million to a U.S. government agency
during the first quarter, and another for $3.7 million to a major
global insurance company based in the U.S. during the second
quarter.
We were very pleased with the "legacy capture" software license
revenue growth rate, and we continued to realize significantly
faster growth in the "mobile and new or acquired products" portion
of our business. Legacy capture software license revenue increased
17.7%, and mobile and new or acquired products increased 107.4%,
and for the six months 13.0% and 100.8%, respectively, on a
non-IFRS basis. Part of the mobile and new or acquired products
software license revenue growth was attributable to the
contributions of the Altosoft and Kapow acquisitions during
calendar year 2013, but it was nonetheless impressive without that
effect, and bookings in this part of our business were even
stronger.
During the second quarter we closed a $1.25 million smart
process application software license sale to a major global
financial services company based in Western Europe that we believe
will be delivered and recognized as revenue during the current
quarter ending March 31, 2014. This solution is being built on
Kofax Total Agility 7.0, so this sale is an early and very positive
indicator of this exciting new product's market potential.
In addition, during January 2014 we closed a $950K mobile
software license sale to one of the five largest U.S. based banks,
which included the recently announced Kofax Mobile Capture
Platform, and frameworks for Mobile Bill Pay and Mobile Check
Deposit apps.
While the increased number of mid-sized software license
transactions and both "legacy capture" and "mobile and new or
acquired products" software license revenue growth rates are
encouraging, we cannot guarantee that these metrics will
continually improve on a sequential quarter over quarter basis. We
therefore caution readers to consider and evaluate these metrics on
the basis of longer term trends rather than variations arising from
a single quarter's results.
As a result of this revenue growth and prudently managing our
operating expenses, non- IFRS adjusted EBITDA increased 29.1% to
$13.0 million or a 16.8% margin, and for the six months increased
30.3% to $21.3 million or a 14.7% margin.
We ended the second quarter with cash of $81.2 million and
reported adjusted cash generated from operations of $3.9 million
for the quarter and $23.7 million for the six months. In addition,
our existing, undrawn $40.0 million revolving line of credit
facility with Bank of America Merrill Lynch remains available and
has been extended to June 30, 2016.
During the second quarter we also implemented the corporate
structure changes to create a new parent corporation for Kofax,
which continues to maintain a premium listing on the London Stock
Exchange, and we listed on NASDAQ effective as of December 5, 2013
through the offering of 2.3 million new common shares. All Kofax
common shares now trade on and between both exchanges, and this has
to date resulted in a higher share price and increased trading
volumes and liquidity in our common shares. Following the NASDAQ
listing, we were pleased to see two full service securities
brokerage firms based in the U.S. initiate financial analyst
coverage on the Company. We expect additional U.S. firms to
initiate coverage during fiscal year 2014.
As a result of the foregoing, our balance sheet remains strong,
we have the resources needed to fund organic revenue growth while
executing our acquisition strategy and we have access to the
world's leading financial markets for technology companies.
Changes in currency exchange rates did not have a material
effect on our financial performance during the second quarter and
six months ended December 31, 2013.
All of the foregoing was in line with our expectations for the
second quarter and six months ended December 31, 2013. In light of
these results and financial position, we remain confident in our
business and optimistic about our future.
Operating Highlights
Our investments in research and development allowed us to
successfully launch a number of new software products and solutions
during the second quarter, including:
-- Kofax TotalAgilitytm 7.0, which the Company believes is the first
unified platform for the development and deployment of smart
process
applications and has been well received to date
-- Kofax AP Automation, which can be used with any accounting or ERP
system and offers "out-of-the-box" integration with Microsoft
Dynamics
AX, Kofax Mailroom Automation and Kofax Customer Onboarding
solutions,
all built on the Kofax TotalAgility 7.0 platform
-- An update to Kofax Medical Claims Add-on Pack to support Centers for
Medicare and Medicaid (CMS) regulations related to the
Affordable Care
Act taking effect in January 2014
-- Kapow Enterprise 9.3, which features a redesigned interface to
simplify the user experience and encompass the entire
information
supply chain from data acquisition to enrichment,
persistence,
exploration and distribution
These investments also resulted in the issuance of an extension
to Kofax's patent number 8,345,981 from the United States Patent
and Trademark Office. This covers reverse matching technology to
determine the validity of data extracted from documents captured
using a mobile device and correcting erroneous or suspicious data,
thus ensuring its accuracy.
During the second quarter we were also pleased to continue
receiving widespread recognition for our software products and
solutions, including:
-- DM Magazine recognized Kofax TotalAgility as a Product of the Year in
its 2013 Document Manager Awards
-- Mortgage banking executives selected Kofax Mobile Capturetm for
Mortgage Banking Magazine's 2013 "Harnessing Mobile Award"
-- Attendees at FinovateAsia 2013 in Singapore voted Kofax Mobile Capture
Best of Show
-- Database Trends and Applications Magazine named Kapow Enterprise 9.3
as a Trendsetting Product of 2014
-- The Analyst One web site included Kapow's platform on its list of 24
breakthrough technologies every analyst should be aware of
Finally, we welcomed Grant Johnson as our new Chief Marketing
Officer, who brings extensive and very relevant global senior
management and enterprise software marketing experience to
Kofax.
Guidance
We're pleased with our performance during the second quarter and
first half of this fiscal year, which was in line with our
expectations for those periods as well as our previous revenue
growth guidance for fiscal year 2014. We continue to invest in
strengthening and growing our sales organization and expanding our
research and development efforts in order to drive faster software
license revenue growth in the future. We also continue to realize
improved sales execution across all geographies and product lines,
including our legacy capture as well as mobile and new or acquired
product offerings in the faster growing segments of our target
markets, and the introduction of additional new product and
solution offerings. We're therefore sufficiently confident in our
outlook to reaffirm our previous revenue growth guidance and now
provide adjusted EBITDA margin guidance for fiscal year 2014 on a
constant currency basis as follows:
IFRS Non-IFRS
Software License Low Double Digits Mid to High Teens
Revenue Growth
Total Revenues Growth Mid to High Single Digits Low Double Digits
Adjusted EBITDA Margin 12.5 - 13.5% 14.5 - 15.5%
Non-IFRS guidance does not reflect the write off of
substantially all of the deferred revenues of acquired companies as
of their acquisition dates as a result of IFRS purchase accounting
guidelines.
Thank You
Our performance is the direct result of the dedication and hard
work of our valued employees, indirect channel partners and
suppliers, and the continued support of our customers and
shareholders. I would like to once again use this opportunity to
sincerely thank all of these stakeholders for their on-going
contributions to our success.
Reynolds C. BishChief Executive OfficerFebruary 4, 2014
Chief Financial Officer's Review
The first half of fiscal year 2014 continued the trends which
began to emerge in the second half of the fiscal year 2013. For
both the three months and six months ended December 31, 2013, we
generated growth in every revenue line item and every geography. We
expanded our sales organization, particularly the number of quota
carrying sales reps, as well as invested in our product development
organization both, of which position us for continued growth. We
significantly enhanced our product set with the acquisition of
Kapow in July and the introduction of Kofax Total AgilityTM 7.0 in
October. Finally, we strengthened our balance sheet with the
extension of our $40.0 million revolving line of credit, and
increased the liquidity in our shares and enhanced shareholder
value when we completed our NASDAQ listing on December 5, 2013. On
December 5, 2013, Kofax (U.K.) became a wholly-owned subsidiary of
Kofax (Bermuda). Kofax (Bermuda) was incorporated solely for this
purpose. The scheme of arrangement will have no effect on the
manner in which our business is conducted and the results continue
to present the results of the Group applying the appropriate
accounting principles.
There are a couple of items I want to note before continuing
with my review. First, we are and in the future will be providing
three month and year-to-date financial information and statements.
Second, with the exception of the section titled "Discussion of
Non-IFRS Measures", the Chief Financial Officer's refers to IFRS
financial measures.
Revenues
The following tables present revenues by financial statement
line, as well as in total for each of our geographic regions:
Three Months EndedDecember 31, % of Total Revenues
2013 2012 % Change 2013 2012
($ in thousands, except percentages)
Software license $ 30,385 $ 25,017 21.4 % 41.0 % 39.3 %
Maintenance 33,491 30,804 8.7 % 45.3 % 48.3 %
services
Professional 10,173 7,883 29.1 % 13.7 % 12.4 %
services
Total revenues $ 74,049 $ 63,704 16.2 % 100.0 % 100.0 %
Three Months EndedDecember 31, % of Total Revenues
2013 2012 % Change 2013 2012
($ in thousands, except percentages)
Americas $ 41,354 $ 34,520 19.8 % 55.8 % 54.2 %
EMEA 27,756 24,839 11.7 % 37.5 % 39.0 %
Asia Pacific 4,939 4,345 13.7 % 6.7 % 6.8 %
Total revenues $ 74,049 $ 63,704 16.2 % 100.0 % 100.0 %
Six Months EndedDecember 31, % of Total Revenues
2013 2012 % Change 2013 2012
($ in thousands, except percentages)
Software license $ 54,829 $ 47,149 16.3 % 39.3 % 38.1 %
Maintenance 65,588 60,680 8.1 % 47.0 % 49.0 %
services
Professional 19,043 16,010 18.9 % 13.7 % 12.9 %
services
Total revenues $ 139,460 $ 123,839 12.6 % 100.0 % 100.0 %
Americas $ 78,850 $ 67,109 17.5 % 56.6 % 54.2 %
EMEA 51,498 47,683 8.0 % 36.9 % 38.5 %
Asia Pacific 9,112 9,047 0.7 % 6.5 % 7.3 %
Total revenues $ 139,460 $ 123,839 12.6 % 100.0 % 100.0 %
Software license revenues increased $5.4 million, or 21.4%, in
the three months ended December 31, 2013, due to a $3.8 million
increase in our legacy capture products and a $1.6 million increase
in mobile and new or acquired products. Software license revenues
increased $3.1 million in Americas, $1.4 million in EMEA, and $0.9
million in Asia Pacific.
Software license revenues increased $7.7 million, or 16.3%, in
the six months ended December 31, 2013, due to a $5.5 million
increase in our legacy capture products and a $2.4 million increase
in our mobile and new or acquired products. Software license
revenues increased $4.9 million in Americas, $2.1 million in EMEA,
and $0.7 million in Asia Pacific.
Maintenance services revenue increased $2.7 million, or 8.7%, in
the three months ended December 31, 2013 due to an increase of $1.3
million or 8.4% in the Americas and $1.5 million or 11.6% in EMEA
offset by a decrease of $0.1 million or 6.7% in Asia Pacific. In
the six months ended December 31, 2013, maintenance services
revenue increased $4.9 million, or 8.1%, due to an increase of a
$2.5 million or 8.2% in the America and $2.8 million or 10.8% in
EMEA offset by a decrease of $0.4 million or 9.3% in Asia Pacific.
The increase in maintenance services revenue is primarily due to
continued high maintenance contract renewal rates and the expansion
of our installed base from prior quarter software license sales and
to a lesser extent, maintenance revenues from our acquisition of
Kapow and Altosoft.
Professional services revenue increased $2.3 million, or 29.1%,
in the three months ended December 31, 2013 due to an increase of
$2.4 million or 64.8% in the Americas offset by a decrease of $0.1
million in EMEA and Asia Pacific or a 1.1% and 11.5% decrease,
respectively. In the six months ended December 31, 2013,
professional services revenue increased $3.0 million, or 18.9%, due
to an increase of $4.4 million or 60.5% in the Americas offset by a
decrease of $1.1 million or 15.0% in EMEA and $0.3 million or 14.5%
in Asia Pacific. The increase in professional services revenue is
primarily due to incremental professional services arrangements
from our acquisition of Kapow as well as several large capture
projects in the Americas.
Costs and Expenses
Cost of Software Licenses
Cost of software licenses primarily consists of royalties to
third-party software developers as well as personnel costs related
to the distribution of our software licenses and associated costs
such as facilities and related overhead charges.
The following table reflects cost of software license revenues,
in dollars and as a percentage of software license revenues:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Cost of software $ 3,029 $ 2,295 $ 734 32.0% $ 5,685 $ 4,726 $ 959 20.3%
license
% of software 10.0% 9.2% 10.4% 10.0%
license
revenues
Cost of software licenses increased by $0.7 million, or 32.0%,
in the three months ended December 31, 2013 and $1.0 million, or
20.3%, in the six months ended December 31, 2013 which is generally
the result of increases in software license revenues as well as a
shift to more royalty bearing products. Royalty costs vary by
product, as applicable, and accordingly, the cost of software
licenses as a percentage of the software license revenues can
fluctuate based on the mix of software licenses sold.
Cost of Maintenance Services
Cost of maintenance services primarily consists of personnel
costs for our staff who respond to customer inquiries as well as
associated costs such as facilities and related overhead charges.
The following table shows cost of maintenance services, in dollars
and as a percentage of maintenance services revenue:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Cost of maintenance $ 5,079 $ 4,537 $ 542 11.9% $ 9,886 $ 8,763 $ 1,123 12.8%
services
% of maintenance 15.2% 14.7% 15.1% 14.4%
services revenue
Cost of maintenance services increased $0.5 million, or 11.9%,
in the three months ended December 31, 2013 as we increased our
technical support organization to support a larger installed base
as well as to support Altosoft and Kapow customers. Cost of
maintenance services increased $1.1 million, or 12.8%, in the six
months ended December 31, 2013 as we increased our technical
support organization to support a larger installed base as well as
to support Altosoft and Kapow customers.
Cost of Professional Services
Cost of professional services primarily consists of personnel
costs for our staff of consultants and trainers, other associated
costs such as facilities and related overhead charges, travel
related expenses and the cost of contractors, whom we engage from
time to time to assist us in delivering professional services.
The following table shows cost of professional services, in
dollars and as a percentage of professional services revenue:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Cost of professional $ 8,218 $ 7,205 $ 1,013 14.1% $ 15,847 $ 14,130 $ 1,717 12.2%
services
% of professional 80.8% 91.4% 83.2% 88.3%
services revenue
Cost of professional services increased $1.0 million, or 14.1%,
in the three months ended December 31, 2013 primarily due to a $0.4
million increase in compensation costs largely associated with our
acquisitions of Altosoft and Kapow. Cost of professional services
increased $1.7 million, or 12.2%, in the six months ended December
31, 2013 due to a $0.5 million increase in compensation costs
largely for that same reason. Our gross margin on professional
services increased 10.6% and 5.1% in the three months and six
months ended December 31, 2013, respectively as we were able to
better utilize our professional services staff.
Research and Development
Research and development expenses consist primarily of personnel
costs incurred in connection with the design, development, testing
and documentation of our software products and technology as well
as associated costs such as facilities and related overhead
charges. All research and development expenses are expensed as
incurred. The following table shows research and development
expense, in dollars and as a percentage of total revenues:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Research and $ 9,951 $ 8,433 $ 1,518 18.0% $ 19,028 $ 16,904 $ 2,124 12.6%
development
% of total revenues 13.4% 13.2% 13.6% 13.6%
Research and development expenses increased $1.5 million, or
18.0%, in the three months ended December 31, 2013 due to a $1.3
million increase in compensation costs largely associated with our
acquisitions of Altosoft and Kapow as well as increased headcount
to support or mobile and new or acquired products. Research and
development expenses increased $2.1 million, or 12.6%, in the six
months ended December 31, 2013 due to a $1.9 million increase in
compensation costs largely for those same reasons
Sales and Marketing
Sales and marketing expenses consist primarily of personnel
costs related to our sales and marketing staff, costs for trade
shows, advertising and other lead generating activities, as well as
associated costs such as facilities and related overhead
charges.
The following table shows sales and marketing expense, in
dollars and as a percentage of total revenues:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Sales and marketing $ 30,502 $ 23,720 $ 6,782 28.6% $ 58,541 $ 48,205 $ 10,336 21.4%
expense
% of total revenues 41.2% 37.2% 42.0% 38.9%
Sales and marketing expenses increased $6.8 million, or 28.6%,
in the three months ended December 31, 2013 due to a $4.4 million
increase in compensation costs largely associated with our
acquisitions of Altosoft and Kapow and consistent with our plan to
increase investment in the sales organization. Sales and marketing
expenses increased $10.3 million, or 21.4%, in the six months ended
December 31, 2013 due to a $6.1 million increase in compensation
costs largely for those same reasons.
General and Administrative
General and administrative expenses consist primarily of
personnel costs for our executive, finance, human resource and
legal functions, as well as associated costs such as facilities and
related overhead charges. Also included in general and
administrative expenses are costs associated with legal,
accounting, tax and advisory fees.
The following table shows general and administrative expense, in
dollars and as a percentage of total revenues:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
General $ 9,695 $ 9,907 $ (212) (2.1)% $ 18,886 $ 19,235 $ (349) (1.8)%
and administrative
expense
% of total revenues 13.1% 15.5% 13.5% 15.5%
General and administrative expenses decreased $0.2 million, or
2.1%, in the three months ended December 31, 2013 primarily due to
a decrease in depreciation and amortization expense as well as
reduced share-based payment expense. General and administrative
expenses decreased $0.4 million, or 1.8%, in the six months ended
December 31, 2013 primarily due to those same reasons.
Amortization of Acquired Intangible Assets - We record
amortization expense relating to our acquired intangible assets
using the straight-line method over the estimated useful life of
the respective asset. Our intangible assets include acquired
contractual and customer relationships, technology and trade names,
each based on their fair values ascribed in accounting for the
initial business acquisition. The following table shows expense
related to the amortization of acquired intangible assets, in
dollars and as a percentage of total revenues:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Amortization $ 2,340 $ 1,619 $ 721 44.5% $ 4,564 $ 3,226 $ 1,338 41.5%
of acquired
intangible assets
% of total revenues 3.2% 2.5% 3.3% 2.6%
Amortization of acquired intangible assets increased $0.7
million, or 44.5%, to $2.3 million in the three months ended
December 31, 2013, due to additional amortization of acquired
intangible assets arising from our acquisitions of Altosoft and
Kapow. Amortization of acquired intangible assets increased $1.3
million, or 41.5%, to $4.6 million in the six months ended December
31, 2013, due to that same reason.
Acquisition-related Costs - Acquisition-related costs include
those costs related to acquisitions and consist of (i) costs
directly attributable to our acquisition strategy and the
evaluation, consummation and integration of our acquisitions and
(ii) transition compensation costs.
The following table shows Acquisition-related costs, in dollars
and as a percentage of total revenues:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Acquisition-related $ (2,208) $ 1,505 $ (3,713) (246.7) % $ (105) $ 2,943 $ (3,048) (103.6)%
costs
% of total revenues (3.0)% 2.4% (0.1)% 2.4%
Acquisition-related costs decreased $3.7 million, or 246.7%, to
a $2.2 million credit in the three months ended December 31, 2013
due to a decrease in the fair value of contingent consideration
related to the Singularity and Altosoft acquisitions as well as
other acquisition costs of $0.4 million related to the acquisition
of Kapow.
Acquisition-related costs decreased $3.0 million, or 103.6%, to
a $0.1 million credit in the six months ended December 31, 2013 due
to a $2.5 million decrease in the fair value of contingent
consideration related to the Singularity and Altosoft acquisitions
as well as direct acquisition costs of $0.7 million related to the
acquisition of Kapow.
Other Operating Expense, net - Other operating expenses, net
consists of all income or expense that is not directly attributable
to one of our other operating revenue or expense lines. The
following table shows other operating expenses, net, in dollars and
as a percentage of total revenues:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Other operating $ 2,923 $ 678 $ 2,245 331.6% $ 3,231 $ 1,857 $ 1,374 74.0%
expenses, net
% of total revenues 3.9% 1.1% 2.3% 1.5%
Other operating expenses increased $2.2 million, or 331.6% to
$2.9 million in the three months ended December 31, 2013 and
increased $1.4 million, or 74.0% to $3.2 million in the six months
ended December 31, 2013 as a result of the costs associated with
the NASDAQ listing.
Finance Income (Expense), net - Finance income (expense), net
consists primarily of foreign exchange gains or losses related to
our intercompany receivables and payables, to fair value
adjustments relating to forward contracts or other financial
instruments and to a lesser extent to interest income (expense).
The following table shows finance income (expense), net, in dollars
and as a percentage of total revenues:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Finance income $ 465 $ (1,657) $ 2,122 (128.0)% $ 4,153 $ (1,779) $ 5,932 (333.6)%
(expense), net
% of total revenues 0.6% (2.6)% 3.0% (1.4)%
Finance income (expense) net, fluctuated $2.1 million in the
three months ended December 31, 2013 and $5.9 million in the six
months ended December 31, 2013 representing a swing from loss to
income primarily due to unrealized foreign exchange gains related
to revaluing non-functional currency denominated intercompany
positions.
Income tax expense - The following table shows income tax
expense, in dollars and as a percentage of profit from continuing
operations:
Three Months EndedDecember 31, Change Six Months EndedDecember 31, Change
2013 2012 $ % 2013 2012 $ %
(in thousands, except percentages)
Income tax expense $ 2,648 $ 1,651 $ 997 60.3% $ 3,258 $ 2,440 $ 818 33.5%
Income from continuing $ 4,985 $ 2,148 $ 8,050 $ 2,071
operations
Effective tax rate 53.1% 76.9% 40.5% 117.8%
Income tax expense increased by $1.0 million, or 60.3%, to $2.7
million during the three months ended December 31, 2013 and
increased by $0.8 million, or 33.5%, to $3.3 million during the six
months ended December 31, 2013. Increased income tax expense was
the result of greater income from continuing operations for the
three and six months ended December 31, 2013 as compared to the
three and six months ended December 31, 2012. Effective tax rates
decreased, due to the relatively disproportionate effect of
significant expenses during the three and six months ended December
31, 2012 that are not deductible for tax purposes.
Liquidity and Capital Resources
Historically, we have financed our business primarily through
our cash on hand as well as cash flows from operations. We had
$81.2 million of cash and cash equivalents at December 31, 2013,
compared to $93.4 million at June 30, 2013. The majority of our
cash is held in U.S. dollars, Euros and to a lesser extent, British
Pounds. We had no outstanding debt as of June 30, 2013. On October
14, 2013, the Company extended its $40.0 million revolving line of
credit to June 30, 2016. Subject to certain conditions, borrowings
under the credit facility can be denominated in U.S. dollars, Euros
and certain other currencies, can be made in the US and certain
other countries and can be increased by an additional $10.0
million. The credit facility is available for general corporate
purposes, including acquisitions. As of December 31, 2013, we had
$39.5 million available under this revolving credit facility, as
$0.5 million is used to guarantee letters of credit in certain
operating facilities and payroll services.
The following tables set forth the summary of our cash
flows:
Three Months EndedDecember 31,
2013 2012 Change
($ in thousands)
Cash generated
from (used in)
Operating activities $ (186 ) $ 597 $ (783 )
Investing activities (2,011 ) (3,081 ) 1,070
Financing activities 11,627 (896 ) 12,523
Exchange rate effects (196 ) 132 (328 )
Net increase (decrease) $ 9,234 $ (3,248 ) $ 12,482
Six Months EndedDecember 31,
2013 2012 Change
($ in thousands)
Cash generated
from (used in)
Operating activities $ 18,220 $ 9,205 $ 9,015
Investing activities (43,193 ) (5,025 ) (38,168 )
Financing activities 11,814 566 11,248
Exchange rate effects 979 1,163 (184 )
Net increase (decrease) $ (12,180 ) $ 5,909 $ (18,089 )
Operating Activities
Net cash used in operating activities was $0.2 million in the
three months ended December 31, 2013, compared to cash generated
from operating activities of $0.6 million in the three months ended
December 31, 2012, a net decrease of $0.8 million. That decrease
was primarily attributable to a $0.7 million increase in cash paid
for taxes in the quarter.
Net cash generated from operating activities was $18.2 million
in the six months ended December 31, 2013, compared to $9.2 million
in the six months ended December 31, 2012, an increase of $9.0
million. That increase was primarily attributable to a $12.5
million increase in deferred revenue offset by a $3.7 million
decrease in provisions and other assets.
Investing Activities
Net cash used in investing activities was $2.0 million in the
three months ended December 31, 2013, compared to $3.1 million in
the three months ended December 31, 2012, a decreased use of cash
of $1.0 million. The primary use of cash in the current period was
a $0.8 million in payment associated with our acquisition of
Atalasoft and $0.5 million in purchases of fixed assets.
Net cash used in investing activities was $43.2 million in the
six months ended December 31, 2013, compared to $5.0 million in the
six months ended December 31, 2012, an increased use of $38.2
million. The primary use of cash in the current period was a $40.3
million payment associated with our acquisition of Kapow, $0.7
million deferred consideration payment for the Altosoft
acquisition, and $1.1 million earnout payment for the Atalasoft
acquisition. Additionally, we purchased $2.0 million of fixed
assets.
Financing Activities
Net cash generated from financing activities was $11.6 million
in the three months ended December 31, 2013, compared to net cash
used of $0.9 million in the three months ended December 31, 2012 an
increase of $12.5 million due primarily to $12.4 in net proceeds
from our NASDAQ listing.
Net cash generated from financing activities was $11.8 million
in the six months ended December 31, 2013, compared to $0.6 million
in the six months ended December 31, 2012 an increase of $11.2
million due primarily to $12.4 million in net proceeds from NASDAQ
listing offset by decreases of $0.6 million from net purchases of
employee benefit shares and proceeds from option exercises,
issuance of share capital and interest paid.
Exchange Rate Effects
We operate in many countries around the world, and maintain cash
balances in locations in currencies other than the U.S. dollar. In
the three months ended December 31, 2013 cash and cash equivalents
decreased by $0.2 million due to changes in foreign exchange rate,
while during the three months ended December 31, 2012 our cash and
cash equivalents increased by $0.1 million. During the six months
ended December 31, 2013 cash and cash equivalents increased by $1.0
million due to changes in foreign exchange rates, while during the
six months ended December 31, 2012 our cash and cash equivalents
increased by $1.2 million due to changes in foreign exchange rates,
as we maintained more cash on hand in U.S. dollars this period. Our
cash and cash equivalents will continue to fluctuate in the future,
as foreign currency exchange rates vary over time.
Treasury Management
On October 14, 2013, the Company extended the term of its $40.0
million revolving line of credit with Bank of America Merrill Lynch
to June 30, 2016. Subject to certain conditions, borrowings under
the credit facility can be denominated in U.S. dollars, euros and
certain other currencies and can be made in the U.S. and certain
other countries. The credit facility is available for general
corporate purposes, including acquisitions, is secured by certain
assets of the Company and can be increased by an additional $10.0
million. As of December 31, 2013 $39.5 million was available as
$0.5 million has been used to guarantee letters of credit in
certain operating facilities and payroll services.
The Company has significant overseas subsidiaries, which operate
principally in their local currencies. Where appropriate, intra
group borrowings are arranged in functional currencies of the
borrower to centralize the foreign exchange impact and provide a
natural hedge against exchange rate movement risks.
The Company hedges certain foreign currency cash and cash flows
relating to transactions in accordance with policies set by the
Board of Directors. Assessment of the credit risk profile of the
Company's key customers and resellers is centralized for increased
focus.
Reconciliation of Non-IFRS Measures
Management uses financial measures, both IFRS and non-IFRS, in
analyzing and assessing the overall performance of the business and
for making operational decisions. We have provided and believe that
the non-IFRS financial measures and supplemental reconciliation to
IFRS financial measures are useful to investors and other users of
our financial statements because the non-IFRS financial measures
may be used as additional tools to compare business performance
across peer companies, periods and financial markets.
While we use non-IFRS measures as a tool to enhance our
understanding of certain aspects of our financial performance, we
do not believe that these non-IFRS measures are a substitute for,
or are superior to, the information provided by IFRS results. As
such, the presentation of non-IFRS measures is not intended to be
considered in isolation or as a substitute for any measure prepared
in accordance with IFRS. The primary limitations associated with
the use of non-IFRS measures as compared to IFRS results are that
non-IFRS measures may not be comparable to similarly titled
measures used by other companies in our industry and that non-IFRS
measures may exclude financial information that some investors may
consider important in evaluating our performance. We compensate for
these limitations by providing disclosure of the differences
between non-IFRS measures and IFRS results, including providing a
reconciliation of each non-IFRS measure to IFRS results, in order
to enable investors to perform their own analysis of our operating
results.
Non-IFRS Revenues - We define Non-IFRS revenue as revenue, as
reported under IFRS, increased to include revenue that is
associated with our historic acquisitions that has been excluded
from reported results for a given period due to the effects of
purchase accounting. In accordance with IFRS purchase accounting,
an acquired company's deferred revenue at the date of acquisition
is subject to a fair value adjustment which reduces the deferred
amount and revenues recognized subsequent to an acquisition. We
include Non-IFRS 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 non-recurring
we may incur similar adjustments in connection with any future
acquisitions. The tables below provide a reconciliation of IFRS
revenues to Non-IFRS revenues related to all of our historic
acquisitions:
Three Months Ended December 31, 2013 Three Months Ended December 31, 2012
Revenues (asreportedunder IFRS) AcquisitionFair ValueAdjustment Non-IFRSRevenues Revenues (asreportedunder IFRS) AcquisitionFair ValueAdjustment Non-IFRSRevenues
($ in thousands) ($ in thousands)
Software licenses $ 30,385 $ 2,187 $ 32,572 $ 25,017 $ 42 $ 25,059
Maintenance services 33,491 297 33,788 30,804 112 30,916
Professional services 10,173 516 10,689 7,883 - 7,883
Total revenues $ 74,049 $ 3,000 $ 77,049 $ 63,704 $ 154 $ 63,858
Six Months Ended December 31, 2013 Six Months Ended December 31, 2012
Revenues (asreportedunder IFRS) AcquisitionFair ValueAdjustment Non-IFRSRevenues Revenues (asreportedunder IFRS) AcquisitionFair ValueAdjustment Non-IFRSRevenues
($ in thousands) ($ in thousands)
Software licenses $ 54,829 $ 3,702 $ 58,531 $ 47,149 $ 85 $ 47,234
Maintenance services 65,588 603 66,191 60,680 112 60,792
Professional services 19,043 830 19,873 16,010 - 16,010
Total revenues $ 139,460 $ 5,135 $ 144,595 $ 123,839 $ 197 $ 124,036
Non-IFRS Income from Operations - We define Non-IFRS income from
operations as income from operations, as reported under IFRS,
excluding the effect of acquisition fair value adjustment to
revenue, share-based payment expense, depreciation expense,
amortization of acquired intangible assets, acquisition-related
costs, restructuring costs and other operating expense, net.
Share-based payment expense, depreciation expense and amortization
of acquired intangible assets in our Non-IFRS 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
organic continuing operations of the acquired businesses and are
generally not relevant to assessing or estimating the long-term
performance of the acquired assets. Restructuring costs are not
considered in assessing our performance as we have not generally
incurred such costs for our continuing operations. Other operating
expense, net represents items that are not necessarily related to
our recurring operations and which therefore are not, under IFRS,
included in other expense lines. Accordingly, we exclude those
amounts when assessing Non-IFRS income from operations. At times
when we are communicating with our shareholders, analysts and other
parties we refer to Non-IFRS income from operations as adjusted
EBITDA.
We assess Non-IFRS income from operations as a percentage of
total Non-IFRS revenues and by doing so; we are able to evaluate
our relative performance of our revenue growth compared to the
expense growth for those items included in Non-IFRS 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.
The following table provides a reconciliation of IFRS income
from operations to Non-IFRS income from operations and presents
Non-IFRS income from operations as a percentage of total
revenues.
Three Months EndedDecember 31, Six Months EndedDecember 31,
2013 2012 2013 2012
($ in thousands)
Income from $ 4,520 $ 3,805 $ 3,897 $ 3,850
operations
Acquisition 3,000 154 5,135 197
fair value
adjustment to
revenues
Share-based 1,117 829 1,866 1,191
payment
expense
Depreciation 1,288 1,465 2,670 3,048
and
amortization
expense
Amortization 2,340 1,619 4,564 3,226
of acquired
intangible
assets
Acquisition-related (2,208 ) 1,505 (105 ) 2,943
costs
Other 2,922 678 3,231 1,857
operating
expenses, net
Non-IFRS $ 12,979 $ 10,055 $ 21,258 $ 16,312
income
from
operations
Non-IFRS 16.8 % 15.7 % 14.7 % 13.2 %
income
from
operations
as a
percentage of
adjusted
revenues
Adjusted Cash Flows from Operations - We define Adjusted cash
flows from operations as net cash inflows from operating
activities, as reported under IFRS, adjusted for income taxes paid
or refunded and payments under restructurings. Income taxes paid is
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. The
table below provides a reconciliation of IFRS cash flows from
operations to Adjusted cash flows from operations:
Three Months EndedDecember 31, Six Months EndedDecember 31,
2013 2012 2013 2012
($ in thousands)
Cash flows from $ (186 ) $ 597 $ 18,220 $ 9,205
operations
Income taxes paid 3,568 2,927 4,870 4,778
Payments under 488 27 588 867
restructuring
Adjusted cash flows $ 3,870 $ 3,551 $ 23,678 $ 14,850
from operations
Adjusted cash flow from operations increased $0.3 million to
$3.9 million for the three months ended December 31, 2013 as a
result of increased tax and restructuring payments combined with
decreases in cash flow from operations.
Adjusted cash flow from operations increased $8.8 million to
$23.7 million for the six months ended December 31, 2013 as a
result of increased cash flows from operations and tax payments
combined with a decrease in payments under restructuring.
Adjusted diluted earnings per share - We define Adjusted diluted
earnings per share as diluted earnings per share, as reported under
IFRS, adjusted by certain items that are also excluded from our
Non-IFRS income from operations and which are discussed above. The
most comparable IFRS metrics, 'income (loss) from continuing
operations, after tax' and 'earnings per share - diluted', also
include the reconciling items finance income (expense), net, and
the impacts of income taxes on each of the other reconciling items.
Therefore, we include this non-IFRS measure in order to provide a
more complete comparison of our earnings per share from one period
to another.
The tables below provide a reconciliation of our Adjusted
diluted earnings per share, and our associated Non-IFRS income
(loss) from continuing operations, after tax:
Reconciliation of Adjusted Diluted Earnings Per Share
For the Three Months Ended December 31,
2013 2012
Per DilutedShare Per DilutedShare
($ in thousands, except per share data)
Income from $ 0.03 $ 2,337 $ 0.01 $ 497
continuing
operations,
after tax
Acquisition 0.03 3,000 0.00 154
fair value
adjustment to
revenues
Share-based 0.01 1,117 0.01 829
payment
expense
Amortization 0.03 2,340 0.02 1,619
of
intangible
assets
Acquisition-related (0.03 ) (2,208 ) 0.01 1,505
costs
Net finance 0.03 2,457 0.03 2,335
and other
income and
expense
Tax effect (0.02 ) (1,671 ) (0.01 ) (1,126 )
of above
Adjusted $ 0.08 $ 0.07
diluted
earnings
per share
For the Six Months Ended December 31,
2013 2012
Per DilutedShare Per DilutedShare
($ in thousands, except per share data)
Income/(loss) $ 0.05 $ 4,792 $ (0.00 ) $ (369 )
from
continuing
operations,
after tax
Acquisition 0.06 5,135 0.00 197
fair value
adjustment to
revenues
Share-based 0.02 1,866 0.01 1,191
payment
expense
Amortization 0.05 4,564 0.04 3,226
of
intangible
assets
Acquisition-related (0.00 ) (105 ) 0.03 2,943
costs
Net finance (0.01 ) (922 ) 0.04 3,636
and other
income and
expense
Tax effect (0.04 ) (3,761 ) (0.02 ) (1,879 )
of above
Adjusted $ 0.13 $ 0.10
diluted
earnings
per share
Supplemental Information
The following supplemental information is used to reconcile IFRS
Income from operations to Non-IFRS Income from operations:
Share based payment expense recognized by functional line in the
Condensed Consolidated Income Statements is as follows:
For the Three Months EndedDecember 31,
2013 2012
($ in thousands)
Cost of maintenance services $ 17 $ -
Cost of professional 16 -
services
Research and development 210 129
Selling and marketing 567 323
General and administrative 307 377
Total share-based $ 1,117 $ 829
payment expense
For the Six Months EndedDecember 31,
2013 2012
($ in thousands)
Cost of maintenance services $ 31 $ -
Cost of professional 41 1
services
Research and development 350 204
Selling and marketing 936 411
General and administrative 508 575
Total share-based $ 1,866 $ 1,191
payment expense
Depreciation and amortization expense recognized by functional
line in the Condensed Consolidated Income Statements is as
follows:
For the Three Months EndedDecember 31,
2013 2012
($ in thousands)
Cost of software licenses $ 8 $ 16
Cost of maintenance services 117 140
Cost of professional services 193 260
Research and development 399 402
Selling and marketing 392 423
General and administrative 179 224
Total depreciation and $ 1,288 $ 1,465
amortization expense
For the Six Months EndedDecember 31,
2013 2012
($ in thousands)
Cost of software licenses $ 22 $ 33
Cost of maintenance services 247 294
Cost of professional services 413 553
Research and development 802 821
Selling and marketing 809 885
General and administrative 377 462
Total depreciation and $ 2,670 $ 3,048
amortization expense
Going Concern
Our financial statements have been prepared on the basis that
the Company is a going concern. In connection with this
presentation, the Board has reviewed the Company's forecasts and
budgets, borrowing facilities, plans and various other analyses to
determine the level of uncertainties in the business. The use of
the going concern basis of accounting is appropriate because there
are no material uncertainties relating to events or conditions that
may cast significant doubt about the ability of the Company to
continue as a going concern.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Company were
disclosed on pages 12 and 13 of Kofax plc's 2013 Annual Report,
which presents the results of the Company prior to the structural
change, in which Kofax plc. became a wholly-owned subsidiary of
Kofax Limited. Kofax Limited was incorporated solely for this
purpose. This change will not have any effect on the manner in
which our business is conducted.
James Arnold, Jr.Chief Financial OfficerFebruary 3, 2014
Kofax Limited
Unaudited
Condensed
Consolidated
Income
Statements
($
in thousands,
except
per share
amounts)
For the Three Months Ended For the Six Months Ended
December 31,2013 December 31,2012 December 31,2013 December 31,2012
Software 30,385 25,017 54,829 47,149
licenses
Maintenance 33,491 30,804 65,588 60,680
services
Professional 10,173 7,883 19,043 16,010
services
Total revenues 74,049 63,704 139,460 123,839
Cost 3,029 2,295 5,685 4,726
of software
licenses
Cost 5,079 4,537 9,886 8,763
of maintenance
services
Cost 8,218 7,205 15,847 14,130
of
professional
services
Research and 9,951 8,433 19,028 16,904
development
Sales 30,502 23,720 58,541 48,205
and marketing
General 9,695 9,907 18,886 19,235
and
administrative
Amortization 2,340 1,619 4,564 3,226
of acquired
intangible
assets
Acquisition-related (2,208) 1,505 (105) 2,943
costs
Other 2,923 678 3,231 1,857
operating
expenses, net
Operating 69,529 59,899 135,563 119,989
costs
and expenses
Income from 4,520 3,805 3,897 3,850
operations
Finance income 754 65 4,599 116
Finance (289) (1,722) (446) (1,895)
expense
Income from 4,985 2,148 8,050 2,071
continuing
operations,
before tax
Income tax 2,648 1,651 3,258 2,440
expense
Income/(loss) 2,337 497 4,792 (369)
attributable
to
equity holders
of the Parent
Earnings/(loss)
per share
> Basic 0.03 0.01 0.06 (0.00)
> Diluted 0.03 0.01 0.05 (0.00)
Kofax
Limited
Unaudited
Condensed
Consolidated
Statements
of
Comprehensive
Income
($
in
thousands)
For the Three Months Ended For the Six Months Ended
December 31,2013 December 31,2012 December 31,2013 December 31,2012
Income/(loss) 2,337 497 4,792 (369)
attributable
to
equity
holders
of the
Parent
Other
comprehensive
income/(loss)
Items
that
may be
subsequently
reclassified
to
profit or
loss
Exchange (1,830) 1,928 (1,110) 4,106
gains/(losses)
arising
on
translation
of
foreign
operations
Income (2) (43) (12) 22
tax
relating
to items
that
may
be
reclassified
(1,832) 1,885 (1,122) 4,128
Items
that
will not
be
reclassified
to profit
or loss
Actuarial 398 127 339 252
(losses)/gains
on
defined
benefit
pension
plans
Income (59) (21) (59) (40)
tax
relating
to items
that
will
not
be
reclassified
339 106 280 212
Other
comprehensive
income/(loss)
for
the
period,
net of
tax
Total (1,493) 1,991 (842) 4,340
comprehensive
income
for
the
period,
net
of tax,
attributable
to equity
holders
of
the
Parent
Income/(loss) 844 2,488 3,950 3,971
attributable
to
equity
holders
of the
Parent
Kofax Limited
Unaudited Condensed Consolidated
Statements of Financial Position
($ in thousands)
December 31, 2013 June 30, 2013
Current assets:
Cash and cash equivalents 81,233 93,413
Trade receivables, net 60,486 60,929
Inventories 1,528 1,800
Deferred tax assets 609 2,024
Other current assets 9,234 8,657
Total current assets 153,090 166,823
Other non-current assets 3,468 3,671
Property and equipment 4,599 4,510
Deferred tax assets 26,126 14,350
Intangible assets 232,732 189,789
Total assets 420,015 379,143
Current liabilities
Trade and other payables 36,969 35,504
Deferred income - current 72,610 62,955
Current tax liabilities 10,578 10,106
Provisions - current 7,899 8,397
Total current liabilities 128,056 116,962
Employee benefits 3,210 3,018
Deferred income - non-current 7,657 5,095
Deferred tax liabilities 18,098 14,607
Provisions - non-current 5,873 2,334
Shareholders' equity
Share capital 97 95
Share premium account 31,634 18,957
Employee benefit shares (15,712) (15,294)
Treasury shares (15,980) (15,980)
Merger reserve 2,835 2,835
Retained earnings 236,052 227,197
Currency translation adjustment 18,195 19,317
Total Shareholders' equity 257,121 237,127
Total liabilities and 420,015 379,143
Shareholders' equity
Kofax Limited
Unaudited Condensed
Consolidated
Statements of Changes
in Equity
($ in thousands)
ShareCapital Share PremiumAccount EmployeeBenefitShares TreasuryShares MergerReserve RetainedEarnings CurrencyTranslationAdjustment TotalEquity
As of June 30, 2012 94 17,091 (17,386) (15,980) 2,835 216,585 14,701 217,940
Loss for the period - - - - - (369) - (369)
Other comprehensive - - - - - 212 4,128 4,340
income, net of tax
Total comprehensive income - - - - - (157) 4,128 3,971
for the period
Tax on equity awards - - - - - 1,173 - 1,173
Share-based payment expense - - - - - 1,503 - 1,503
Changes in employee - - (953) - - - - (953)
benefit shares
New share capital issued 1 1,783 - - - - - 1,784
As of December 31, 2012 95 18,874 (18,339) (15,980) 2,835 219,104 18,829 225,418
Profit for the period - - - - - 10,370 - 10,370
Other comprehensive - - - - - (891) 488 (403)
income, net of tax
Total comprehensive income - - - - - 9,479 488 9,967
for the period
Tax on equity awards - - - - - 1,012 - 1,012
Share-based payment expense - - - - - (110) - (110)
Changes in employee - - 3,045 - - (2,288) - 757
benefit shares
New share capital issued - 83 - - - - - 83
As of June 30, 2013 95 18,957 (15,294) (15,980) 2,835 227,197 19,317 237,127
Profit for the period - - - - - 4,792 - 4,792
Other comprehensive - - - - - 280 (1,122) (842)
income, net of tax
Total comprehensive income - - - - - 5,072 (1,122) 3,950
for the period
Tax on equity awards - - - - - 2,088 - 2,088
Share-based payment expense - - - - - 1,866 - 1,866
Changes in employee - - (418) - - (171) - (589)
benefit shares
New share capital issued 2 12,677 - - - - - 12,679
As of December 31, 2013 97 31,634 (15,712) (15,980) 2,835 236,052 18,195 257,121
Kofax Limited
Unaudited Condensed Consolidated
Statements of Cash Flows
($ in thousands)
For the Six Months Ended
December 31,2013 December 31,2012
Cash flows from operating activities
Income from continuing 8,050 2,071
operations before tax
Adjustments to reconcile profit
before tax to net cash flows:
Finance income (4,599) (116)
Finance expense 446 1,895
Depreciation and amortization 7,287 6,274
Share-based payment expense 1,866 1,191
Changes in operating assets
and liabilities:
Trade receivables, net 3,508 11,550
Other assets 618 (1,591)
Trade and other payables (47) (5,893)
Deferred income 9,562 (2,878)
Provisions (3,013) 2,347
Payments under restructuring (588) (867)
- personnel
Income taxes paid (4,870) (4,778)
Net cash inflow from 18,220 9,205
operating activities
Cash flows from investing activities
Purchase of property and equipment, (2,177) (1,233)
licenses and similar rights
Acquisition of subsidiaries, (41,085) (4,499)
net of cash acquired*
Proceeds from sale of discontinued - 600
operations
Interest received 69 107
Net cash outflow from (43,193) (5,025)
investing activities
Cash flows from financing activities
Issue of share capital 313 1,746
Proceeds from initial public offering 12,366 -
Purchases of and proceeds from (589) (959)
employee benefit shares
Interest paid (276) (221)
Net cash inflow from 11,814 566
financing activities
Net increase/(decrease) in (13,159) 4,746
cash and cash equivalents
Cash and cash equivalents 93,413 81,122
at start of the period
Exchange rate effects 979 1,163
Cash and cash equivalents 81,233 87,031
at the end of the period
* The Group cash outflow from acquisitions is net of $1.3
million cash acquired from the Kapow acquisition and also includes
payments of contingent consideration related to the Atalasoft
acquisition of $1.2 million and deferred consideration related to
the Altosoft acquisition of $0.7 million.
NOTE 1ACCOUNTING POLICIES
1.1 Basis of presentation
The unaudited Condensed Consolidated Interim Financial
Statements for the six months ended December 31, 2013 have been
prepared in accordance with IAS 34, "Interim Financial Reporting"
and the Disclosure and Transparency Rules of the Financial Services
Authority.
On December 5, 2013, the Group effected an initial public
offering of 2,300,000 shares of common stock at a price to the
public of $5.85 per share. The shares began trading on the NASDAQ
Global Select Market on that exchange under the ticker symbol
"KFX." All of the shares of common stock being offered were by
Kofax; there were no selling Kofax shareholders. Additionally, the
Group established Kofax Limited as the parent company through a
scheme of arrangement under Part 26 of the U.K. Companies Act of
2006. As part of the scheme, the Group established a new par value
of $0.001 per share replacing the 2.5 pence per under Kofax plc.
The reorganization of the Group has been accounted for in
accordance with the principles of merger accounting as applicable
to group reorganizations. The consolidated financial statements are
therefore presented as if Kofax Limited had been the parent company
of the Group throughout the periods presented. Share capital and
share premium mounts in the comparative periods have been
retroactively adjusted to reflect such establishment.
The Condensed Consolidated Interim Financial Statements do not
include all information and disclosures as required in the
Consolidated Annual Financial Statements, and should be read in
conjunction with the Group's Consolidated Annual Financial
Statements of Kofax plc for the year ended June 30, 2013 and
prospectus dated November 28, 2013.
The Condensed Consolidated Interim Financial Statements were
approved by the Board of Directors on February 3, 2014.
1.2 Summary of significant accounting policies
The accounting policies adopted in preparation of the Condensed
Consolidated Interim Financial Statements are consistent with those
followed in preparation of the Consolidated Annual Financial
Statements for the year ended June 30, 2013.
The adoption of the standards/ interpretations that have become
effective for the current fiscal year have already been outlined in
detail in the Consolidated Annual Financial Statements for the year
ended June 30, 2013 and were not considered to have a significant
impact on these Condensed Consolidated Interim Financial
Statements.
1.3 Seasonality of operations
Many contracts, particularly those sold through the direct sales
force, are finalized in the latter portions of any given quarter.
Additionally, Group revenue may vary from quarter to quarter,
depending on the timing and size of license revenue, which may
contain individually large contracts in any given period. The first
and third fiscal quarters have historically been seasonally weaker
than the second and fourth quarters. This information is provided
to allow for a proper appreciation of the results, however
management have concluded that this does not constitute "highly
seasonal" as considered by IAS 34 Interim Financial Reporting.
NOTE 2BUSINESS COMBINATIONS
Acquisition of Kapow
On July 31, 2013, Kofax acquired 100% of the shares of Kapow
Technologies Holdings, Inc. (Kapow), a company incorporated in the
United States, specializing in data integration software. Kapow's
software will assist in Kofax's ability to integrate smart process
applications with third party software for content import and
export purposes as well as data validation during a business
process. In addition, it will assist in penetrating the emerging
electronic content transformation segment of the multichannel
capture market, and is highly complementary to the recent
acquisition of Altosoft's business intelligence and analytics
products. The acquisition will be accounted for using the
acquisition method.
The consolidated financial statements include the results of
Kapow during the five month period from the acquisition date. The
provisional fair value of the identifiable assets and liabilities
of Kapow, at the acquisition date, are as follows:
July 31, 2013
($ in thousands)
Current assets:
Cash and cash equivalents 1,276
Trade receivables, net 3,048
Other current assets 461
Total current assets 4,785
Other non-current assets 87
Property and equipment 99
Deferred tax assets 8,703
Technology-intangible 10,700
Customer relationships-intangible 5,400
In-process R&D-intangible 700
Trade names-intangibles 200
Total assets 30,674
Current liabilities
Trade and other payables 536
Other current liabilities 961
Deferred income - current 1,076
Total current liabilities 2,573
Other liabilities 25
Deferred tax liabilities 6,384
Total liabilities 8,982
Net assets acquired 21,692
Consideration paid in cash at time of closing 40,524
Deferred consideration 6,624
Total consideration 47,148
Goodwill arising from acquisition 25,456
Analysis of cash flows on acquisition:
($ in thousands)
Cash outflow at time of closing 40,524
Less: cash acquired 1,276
Total cash consideration 39,248
The provisional goodwill of $25.5 million includes the value of
acquired technologies, and expected synergies arising from the
acquisition and the workforce, which is not separately
recognizable. None of the goodwill is expected to be deductible for
tax purposes.
From the date of acquisition, Kapow has contributed $2.5 million
of revenues and $4.0 million of net loss to the Group. If the
combination had taken place at the beginning of the fiscal year,
revenues from Kapow's operations would have been approximately $3.5
million higher and the net income would have decreased by
approximately $5.0 million and would have made the Group's total
revenues $140.4 million and net income $3.8 million.
NOTE 3OPERATING SEGMENTS
The Group operates one business segment, the software business.
All products and services are considered one solution to customers
and are operated and analyzed under one income statement provided
to and evaluated by the chief operating decision maker (CODM). The
CODM manages the business based on the key measures for resource
allocation, based on a single set of financial data that
encompasses the Group's entire operations for purposes of making
operating decisions and assessing financial performance. The
Group's CODM is the Chief Executive Officer.
There are no reportable assets that meet the criteria under IFRS
8 to be reported under the single operating segment.
Entity-wide Disclosures
The following revenue information is based on the location of
the customer:
Americas UK Germany Rest ofEMEA Asia-Pacific Total
External ($ in thousands)
Revenues
forthe
Three
Months
Ended
December 41,354 7,256 5,201 15,299 4,939 74,049
31,
2013
December 34,520 6,555 4,330 13,954 4,345 63,704
31,
2012
Americas UK Germany Rest ofEMEA Asia-Pacific Total
External ($ in thousands)
Revenues
forthe
Six
Months
Ended
December 78,850 14,060 9,423 28,015 9,112 139,460
31,
2013
December 67,109 14,620 8,504 24,559 9,047 123,839
31,
2012
The following table presents non-current assets by subsidiary
location:
America UK Germany Rest ofEMEA Asia-Pacific Total
Non-current ($ in thousands)
assets
As 154,584 35,502 6,536 35,577 6,985 239,184
of December
31, 2013
As of June 116,054 34,806 6,078 33,734 6,407 197,079
30, 2013
Non-current assets for this purpose consist of property and
equipment, intangible assets, and other non-current assets-
excluding security deposits and deferred tax assets.
NOTE 4OPERATING COSTS AND EXPENSES
Operating costs and expenses include the following key
elements:
For the Three For the Six Months Ended
Months Ended
December December 31,2012 December 31,2013 December 31,2012
31,2013
($
in thousands)
Staff costs 44,331 36,435 83,973 72,724
excluding
share-based
payment
expense
Share-based 1,117 829 1,866 1,191
payment
expense
Depreciation 576 729 1,249 1,468
of property
and equipment
Amortization 2,340 1,619 4,564 3,226
of acquired
intangible
assets -
technology
and
contractual
relationships
Amortization 712 736 1,421 1,580
of
intangible
assets
- licenses
and
similar
rights
Total 709 1,078 1,145 1,946
remuneration
for
principal
auditors
Operating 2,030 2,075 4,008 4,047
lease
expense -
minimum lease
payments
Acquisition (2,208) 1,505 (105) 2,943
related
costs
Third party 4,080 2,969 7,899 5,821
royalties
and
commissions
Travel 3,317 2,719 6,421 5,458
and
entertainment
Consultants, 3,443 2,525 6,728 5,495
contractors
and advisors
Direct 2,499 2,306 5,589 5,451
marketing
costs
Utilities, 1,613 1,529 3,278 2,987
maintenance
and repair
Other 4,970 2,845 7,527 5,652
administrative
costs
Total 69,529 59,899 135,563 119,989
operating
costs
and expenses
Amortization of acquired intangibles is a component of both cost
of sales and general and administrative expenses. Amortization of
acquired technology intangible assets of $2.9 million (December 31,
2012: $2.3 million) relates to cost of sales, and amortization of
other intangible assets of $1.7 million (December 31, 2012: $0.9
million) relates to general and administrative expenses.
For the Three For the Six Months Ended
Months Ended
December December 31,2012 December 31,2013 December 31,2012
31,2013
($
in thousands)
Total cost
of sales
comprises:
Cost 3,029 2,295 5,685 4,726
of software
licenses
Cost 5,079 4,537 9,886 8,763
of maintenance
services
Cost 8,218 7,205 15,847 14,130
of professional
services
Amortization 1,630 1,159 2,910 2,310
of acquired
technology
intangible
assets
Total cost 17,956 15,196 34,328 29,929
of sales
Total general
and
administrative
comprises:
General 9,695 9,907 18,886 19,235
and
administrative
Amortization of 710 460 1,654 916
other acquired
intangibles
assets
Total general 10,405 10,367 20,540 20,151
and
administrative
expenses
NOTE 5INCOME TAX EXPENSE
The components of income tax expense related to current income
tax expense and deferred income tax expense were as follows:
Three Months EndedDecember 31, Six Months EndedDecember 31,
2013 2012 2013 2012
(in thousands)
Current income
tax expense
Income tax on profits 4,608 2,056 7,625 4,027
for the period
Adjustment for 131 (89) (322) (170)
provision
in prior periods
Total current income 4,739 1,967 7,303 3,857
tax expense
Deferred income
tax expense
Reversal of temporary (2,091) (188) (4,307) (1,289)
differences
Adjustment for - (128) 262 (128)
provision
in prior periods
Total deferred income (2,091) (316) (4,045) (1,417)
tax expense
Total income 2,648 1,651 3,258 2,440
tax expense
The effective tax rate (income tax expense as a percentage of
income from continuing operations) can be influenced by the
disproportionate effect of significant expenses that are not
deductible for tax purposes, together with non-recognition of
certain tax losses, and certain income items that do not attract a
tax charge.
NOTE 6EARNINGS PER SHARE
The table below presents the computation of basic and diluted
earnings per share:
For the Three For the Six Months Ended
Months Ended
December December 31,2012 December 31,2013 December 31,2012
31,2013
($ in thousands, except
per share data)
Income/(loss) 2,337 497 4,792 (369)
from
continuing
operations,
after tax
Earnings/(loss)
per share
> Basic 0.03 0.01 0.06 (0.00)
> Diluted 0.03 0.01 0.05 (0.00)
The difference between the diluted and basic calculation is due
to the additional shares that would be issued on the conversion of
all the dilutive ordinary shares. The table below presents the
computation of basic and diluted shares:
For the Three For the Six Months Ended
Months Ended
December December 31,2012 December 31,2013 December 31,2012
31,2013
($
in thousands)
Weighted 85.9 84.4 85.5 84.1
average
number
of
shares
outstanding*
Dilutive impact 2.3 1.6 2.1 1.6
of
share options
Dilutive 3.5 3.2 3.5 3.2
impact
of Long Term
Incentive Plan
(LTIPs)
Diluted shares 91.7 89.2 91.1 88.9
*excluding employee benefit shares and Treasury shares
NOTE 7PROVISIONS
PersonnelRestructuring OnerousLease ContingentConsideration Others Total
($ in thousands)
As of June 30, 2013 586 644 8,090 1,411 10,731
Arising during - - 9,596 99 9,695
the period
Reversed against - - (3,458) (92) (3,550)
income statement
Utilized during (602) (278) (2,072) (972) (3,924)
the period
Exchange differences 16 26 749 29 820
As of December - 392 12,905 475 13,772
31, 2013
Current - 330 7,554 15 7,899
Non-current - 62 5,351 460 5,873
As of December - 392 12,905 475 13,772
31, 2013
Contingent consideration relates to deferred consideration,
contingent consideration, and employee retention payments
associated with acquisitions in prior periods and in the six months
ended December 31, 2013. On July 25, 2013, the Altosoft share
purchase agreement was amended to allow for achievement of earnings
targets based on cumulative results in the first two years of the
assessment. Management assessed a number of scenarios and based on
those scenarios, estimated for financial accounting purposes, that
$3.7 million of the contingent consideration will be paid to former
shareholders.
In relation to the acquisition of Kapow, an additional $6.6
million of deferred consideration is included in provisions, of
which $1.9 million is expected to be paid during the third quarter
of 2013, with an additional $2.2 million to be paid one year from
closing and $2.5 million to be paid two years from closing, with
said amounts being subject to certain indemnification terms and
conditions.
Additionally, the threshold for the contingent consideration and
related retention bonuses related to the acquisition of Singularity
was not achieved in the second measurement period. Accordingly
provisions totaling $3.6 million have been reversed against the
income statement.
NOTE 9RELATED PARTY TRANSACTIONS
Directors' interests in share options and LTIPs
Directors who are also executive officers of the Group held
1,199,800 LTIP shares as of December 31, 2013, of which 300,000
were granted during the six month period ended December 31, 2013
and no LTIPs were vested during the six months ended December 31,
2013. For the remaining LTIPs, based upon performance criteria and
other factors, shares become subject to release three years after
their issuance. Market prices of the shares were between 146.0
pence and 361.5 pence at the grant dates.
Directors who are also executive officers of the Group held
1,950,000 share options as of December 31, 2013, and no options
were granted during six month period ended December 31, 2013, nor
did any share options lapse during the period. The exercise periods
are between calendar years 2012 and 2020 with exercise prices of
the shares between 146 pence and 240 pence.
NOTE 10CONTINGENT LIABILITIES
There are no material pending or threatened lawsuits against the
Group except for one filed November 29, 2012 in which the Group was
named as a defendant in a lawsuit filed by Scan EMEA Holding GmbH
in Zurich, Switzerland, alleging that the Group breached its
contract with Scan EMEA Holding GmbH in connection with the January
2011 agreement to sell the Group's hardware business. As of
December 31, 2013, the Group assessed the merits of the lawsuit,
believe it would not have a material adverse effect on its
business, results of operations or financial condition and has
vigorously litigated this matter and taken other actions available
to it to mitigate any potential loss. Concurrent with filing the
lawsuit Scan EMEA withheld EUR1.5 million of the final EUR2.0
million payment associated with their purchase of the Group's
hardware business.
In January 2014, Scan EMEA Holding GmbH was acquired by Spigraph
International SA a pan-European value-added reseller of scanners
and capture and image processing software. In conjunction with that
transaction, the Group entered into a settlement agreement that
resulted in Scan EMEA Holding GmbH waiving the claim.
NOTE 11SUBSEQUENT EVENTS
No subsequent events other than described in Note 10 have been
identified requiring disclosure.
RESPONSIBILITY STATEMENT OF THE EXECUTIVE DIRECTORS IN RESPECT
OF THE INTERIM FINANCIAL STATEMENTS
We confirm that to the best of our knowledge:
The condensed consolidated set of financial statements has been
prepared in accordance with IAS 34, "Interim Financial Reporting"
as adopted by the EU;
The interim management report includes a fair review of the
information required by:
a) DTR 4.2.7 R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8 R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period and any changes in the related party transactions
described in the last annual report that could do so.
Reynolds C. BishChief Executive OfficerFebruary 3, 2014
James Arnold, Jr.Chief Financial OfficerFebruary 3, 2014
Media Contact:Kofax LimitedColleen Edwards, +1-949-783-1582Vice
President, Corporate
Communicationscolleen.edwards@kofax.comorInvestor Contacts:MKR
Group Inc.Todd Kehrli, +1-323-468-2300kfx@mkr-group.comorFTI
ConsultingSophie McMillan, +44 (0) 20 7831
3113kofax@fticonsulting.com
Source: KofaxRNS
This information is provided by Business Wire
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