EL SEGUNDO, CA--(Marketwire - August 30, 2007) -
Selected Highlights:
-- Q2 net income reported at $1.2 million, or $0.07 per share
-- Konica Minolta signs $3.2 million perpetual license
-- Kyocera Mita signs new software licensing agreement
-- Agreement with Adobe extended through June 30, 2008
-- Company reaffirms full-year revenue and profit forecast
-- Board expands to six members
Peerless Systems Corporation (
NASDAQ:
PRLS), a provider of advanced imaging
and networking technologies and components to the digital document market,
today reported financial results for its 2008 second fiscal quarter ended
July 31, 2007.
Second Quarter Results
Second quarter revenues were $6.9 million versus $7.9 million in the second
quarter a year ago, and $4.7 million in the first quarter of fiscal 2008.
Product licensing revenue was $4.4 million compared with $5.2 million in
last year's second quarter and $2.1 million in the first quarter of fiscal
2008. Engineering services and maintenance revenue was $2.5 million versus
$2.7 million in the second quarter a year ago and $2.7 million in the first
fiscal quarter of 2008. The company earned $0.24 million in performance
incentives associated with its engineering services agreement with
Kyocera-Mita Corporation.
Peerless signed one block license agreement valued at $0.4 million in the
second quarter, all of which was recognized as revenue during the quarter.
In addition, the company signed a one-time, non-exclusive,
non-transferable, perpetual license with Konica Minolta Business
Technologies, Inc. (KMBT) valued at $3.2 million, all of which was
recognized as revenue during the quarter. The current portion of the
company's contract backlog for engineering services is $2.4 million, which
management believes will be recognized during the third quarter of fiscal
2008, and includes revenue expected under the Kyocera Mita agreement.
Contract backlog does not include up to $0.25 million in potential
incentive fees associated with this agreement. In addition, the Company has
a contract backlog for licensing revenues of $5.0 million arising from the
signing of a software licensing agreement with Kyocera Mita. None of the
licensing backlog is expected to be recognized as revenue during the third
quarter.
Second quarter gross margin was 69% compared with 54.2% in the second
quarter last year and 46.4% in this year's first fiscal quarter. The
increase is primarily attributable to the signing of the perpetual license
with KMBT for certain Peerless technologies, which resulted in a
significant decrease in the ratio of third-party technology sales to
Peerless technology sales and a 58.1% decrease in product licensing expense
from this year's first quarter.
Research and development expenses were $1.2 million, or 17.6% of revenue, a
reduction of approximately $0.9 million compared with last year's second
quarter R&D expenses of $2.1 million, or 26.8% of revenue. The
year-over-year decline in R&D expenses resulted from the completion of work
on various software development products and a reduction earlier this year
in the workforce. R&D expenses in this year's first quarter were $1.1
million, or 24.2% of revenue. Sales and marketing expenses were $0.7
million, or 9.8% of revenue, versus $0.8 million, or 9.6% of revenue, in
last year's second quarter, and $0.6 million, or 12.8% of revenue, in the
first quarter of fiscal 2008.
General and administrative expenses were $1.8 million, or 26.4% of revenue,
compared with $1.8 million, or 23.3% of revenue in the second quarter last
year and $1.5 million, or 31.6% of revenue, in the 2008 first fiscal
quarter. G&A expenses in this year's second quarter included one-time
charges totaling $0.5 million, or 7.2% of revenue, related to the recent
proxy contest.
Peerless reported second quarter net income of $1.2 million, or $0.07 per
basic share, versus a net loss of $0.3 million, or $0.02 per basic share,
in last year's second quarter. The company reported a net loss of $0.8
million, or $0.05 per basic share, in this year's first quarter.
Peerless ended the second quarter with cash and cash equivalents of $15.8
million compared with $17.2 million at the end of the previous quarter and
$16.4 million at the end of fiscal 2007. The decline was primarily due to
the timing of payments on contracts.
Management Commentary
"We achieved several important operational milestones during the second
quarter, including the signing of a key license agreement with Konica
Minolta," said Rick Roll, president and CEO. "Our promising second quarter
performance better positions us to achieve our previously stated full-year
revenue and earnings forecasts.
"Konica Minolta has been a longtime strategic partner of Peerless, and the
perpetual license it has signed was for select legacy networking
technology," Roll added. "We had previously mentioned that our agreement
with Adobe would terminate, if not extended or renewed, prior to the end of
our fiscal year. Subsequent to the end of the second quarter we entered
into an agreement that extends our Adobe PostScript Software Development
and Sublicense Agreement through June 30, 2008. Adobe has been an important
long-term Peerless partner, and this extension gives us more time to
negotiate a multi-year agreement. As always, there can be no assurance
that these efforts will be successful.
"We are maintaining our aggressive pursuit of diversification opportunities
to help fuel growth and enhance profitability," Roll said. "During the
second quarter, we visited a number of potential business partners,
including select companies in Taiwan, China and Japan, to discuss our
vision for a solution-software application as well as opportunities in the
all-in-one device market. In addition, we recently engaged a consultant to
assist us in the development of a strategic initiative focused on
all-in-one devices. We intend to pursue these opportunities in disciplined
fashion."
Roll added, "I have focused much of my effort during the last few months on
assembling an expanded board of directors that is deep in operational,
managerial and technology-related expertise. I am confident our current
team of directors, which includes five members that have joined the board
during the past six months, will play a significant role, along with
management, in charting our future direction. I look forward to providing
our shareholders with more insight into the prospects we are exploring in
the near term."
Guidance
Management reiterated its prior forecast of profitable results during the
second half of fiscal 2008. Expectations for fiscal 2008 net income
continue to be in a range of between $3.8 million and $4.5 million.
Full-year revenue is expected to range from $29.0 million to $31.0 million.
As previously stated, this forecast is contingent upon the closing of a
significant amount of block license revenue.
Management and the board of directors will continue to consider all
opportunities to enhance the value of the company, including aggressive
marketing of new technologies, development of new market opportunities,
raising additional capital, mergers and/or acquisitions.
Peerless Systems Conference Call
Management will hold a conference call to discuss fiscal second quarter
results today at 5:00 p.m. Eastern (2:00 p.m. Pacific). Investors are
invited to listen to the call live via the Internet at
www.peerless.com, or
by dialing into the teleconference at 888-680-0894 (617-213-4860 for
international callers) and entering the passcode 55143905. Participants
should access the website at least 15 minutes early to register and
download any necessary audio software. A replay of the webcast will be
available for 30 days and an audio replay will be available through
September 9, 2007, by calling 888-286-8010 (617-801-6888 for international
callers) and entering the passcode 79791042.
About Peerless Systems Corporation
Founded in 1982, Peerless Systems Corporation is a provider of imaging and
networking technologies and components to the digital document markets,
which include manufacturers of color, monochrome and multifunction office
products and digital appliances. In order to process digital text and
graphics, digital document products rely on a core set of imaging software
and supporting electronics, collectively known as an imaging controller.
Peerless' broad line of scalable software and silicon offerings enables its
customers to shorten their time-to-market and reduce costs by offering
unique solutions for multiple products. Peerless' customer base includes
companies such as Canon, IBM, Konica Minolta, Kyocera Mita, Lenovo,
OkiData, Ricoh, RISO, Seiko Epson and Xerox. Peerless also maintains
strategic partnerships with Adobe and Novell. For more information, visit
Peerless' web site at
www.peerless.com.
Safe Harbor Statement Under The U.S. Private Securities Litigation Reform
Act Of 1995
Statements made by us in this press release that are not historical facts
constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. These forward-looking statements are necessarily estimates
reflecting the best judgment of our senior management based on our current
estimates, expectations, forecasts and projections and include comments
that express our current opinions about trends and factors that may impact
future operating results. Statements that use words such as we "believe,"
"anticipate," "estimate," "intend," "could," "plan," "expect," "project,"
"predict," "forecast," "outlook," "potential," "continue," "may," "future,"
"can," "enhance," and "should," or the negative of these, as well as
similar expressions, can be used to identify forward-looking statements.
These statements are not guarantees of future performance, rely on a number
of assumptions concerning future events, many of which are outside of our
control, and involve known and unknown risks and uncertainties that could
cause our actual results, performance or achievements, or industry results,
to differ materially from any future results, performance or achievements,
expressed or implied by such forward-looking statements. Such risks and
uncertainties include, among other things, changing competitive and market
conditions, our reliance on certain OEM customers for significant portions
of our revenues, the sufficiency of our capital resources, any adverse
change in our relationship with Adobe Systems Incorporated and/or Novell,
Inc, increased competition both from in-house OEM products and low cost
offshore competitors, the impact of Microsoft's Vista™ operating system,
reduced demand for our existing monochrome technologies or other products,
the rapid changes taking place in the emerging color print devices markets,
our ability to realize contract backlog, our ability to identify new
customers or place our technology in a broader base of products, our
ability to leverage core competencies and find product segments that blend
well with our core business, our ability to successfully enter new software
application sectors, our ability to maintain our profit objectives and
create compelling margins, the tenure of the competitive advantage of our
old and new technologies, our reliance on block licensing, our ability to
develop and market our advanced devices and software, the validity and
protection of our intellectual property rights, risks associated with
international business activities, our reliance on key personnel and our
board of directors and our ability to execute our business plan and
strategic partnering transactions.
The above risks, and others, are described in further detail in our reports
filed with the Securities and Exchange Commission, including, but not
limited to, those described under "Item 1A. Risk Factors" in our most
recent Annual Report on Form 10-K for the fiscal year ended January 31,
2007, filed on April 13, 2007, and those described under "Item 1A. Risk
Factors" in the most recent Quarterly Report on Form 10-Q for the quarter
ended April 30, 2007, filed June 11, 2007.
Current and prospective stockholders are urged not to place undue reliance
on forward-looking statements, which speak only as of the date hereof. We
are under no obligation, and expressly disclaim any obligation, to update
or alter any forward-looking statements, whether as a result of new
information, future events or otherwise. All forward-looking statements
contained herein are qualified in their entirety by the foregoing
cautionary statements.
PEERLESS SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
-----------------------------------
Three Months Ended
July 31,
-----------------------------------
2007 2006
----------------- -----------------
Revenues:
Product licensing $ 4,415 63.6% $ 5,156 65.3%
Engineering services and maintenance 2,526 36.4% 2,725 34.5%
Hardware sales 1 0.0% 15 2%
-------- -------
Total revenues 6,942 100.0% 7,896 100%
-------- -------
Cost of revenues:
Product licensing 319 4.6% 1,352 17.1%
Engineering services and maintenance 1,838 26.4% 2,245 28.4%
Hardware sales - 0.0% 23 .3%
-------- -------
Total cost of revenues 2,157 31.0% 3,620 45.8%
-------- -------
Gross margin 4,785 69.0% 4,276 54.2%
-------- -------
Operating expenses:
Research and development 1,219 17.6% 2,116 26.8%
Sales and marketing 679 9.8% 756 9.6%
General and administrative 1,838 26.4% 1,842 23.3%
-------- -------
Total operating expenses 3,736 53.8% 4,714 59.7%
-------- -------
Income (loss) from operations 1,049 15.1% (438) -5.5%
Other income, net 169 2.4% 108 1.4%
-------- -------
Income (loss) before income taxes 1,218 17.5% (330) -4.2%
Provision for income taxes (benefit) 5 0.0% (3) .1%
-------- -------
Net income (loss) $ 1,213 17.5% (327) -4.1%
======== =======
Basic earnings (loss) per share $ 0.07 $ (0.02)
======== =======
Diluted earnings (loss) per share $ 0.07 $ (0.02)
======== =======
Weighted average common shares
outstanding - basic 17,260 17,142
======== =======
Weighted average common shares
outstanding - diluted 18,259 17,142
======== =======
PEERLESS SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
-----------------------------------
Six Months Ended
July 31,
-----------------------------------
2007 2006
----------------- -----------------
Revenues:
Product licensing $ 6,508 55.7% $ 10,670 63.9%
Engineering services and maintenance 5,179 44.3% 5,675 34.0%
Hardware sales 2 0.0% 355 2.1%
-------- --------
Total revenues 11,689 100.0% 16,700 100.0%
-------- --------
Cost of revenues:
Product licensing 1,081 9.2% 1,852 11.1%
Engineering services and maintenance 3,618 31.0% 4,203 25.1%
Hardware sales 0 0.0% 181 1.1%
-------- --------
Total cost of revenues 4,699 40.2% 6,236 37.3%
-------- --------
Gross margin 6,990 59.8% 10,464 62.7%
-------- --------
Operating expenses:
Research and development 2,368 20.3% 4,172 24.9%
Sales and marketing 1,286 11.0% 1,550 9.2%
General and administrative 3,336 28.5% 3,233 19.3%
-------- --------
Total operating expenses 6,990 59.8% 8,955 53.4%
-------- --------
Income from operations - 0.0% 1,508 9.3%
Other income, net 392 3.4% 219 1.3%
-------- --------
Income before income taxes 392 3.4% 1,728 10.6%
Provision for income taxes 8 0.1% 12 0.0%
-------- --------
Net income $ 384 3.3% $ 1,716 10.6%
======== ========
Basic earnings per share $ 0.02 $ 0.10
======== ========
Diluted earnings per share $ 0.02 $ 0.09
======== ========
Weighted average common shares
outstanding - basic 17,225 17,057
======== ========
Weighted average common shares
outstanding - diluted 18,198 19,329
======== ========
Contact Information: Contacts:
Peerless Systems Corporation:
John Rigali
Chief Financial Officer
(310) 297-3146
Investor Contact:
Geoff High
Pfeiffer High Investor Relations, Inc.
(303) 393-7044