EL SEGUNDO, CA--(Marketwire - November 29, 2007) -
Selected Highlights:
-- Q3 net income reported at $1.3 million, or $0.07 per share, versus net
loss in year-ago period
-- Cash balance increases to $21.7 million from $15.8 million in second
fiscal quarter
-- Company increases full-year net income forecast to new range of $5.0
million to $5.5 million
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 third fiscal quarter ended
October 31, 2007.
Third Quarter Results
Third quarter revenues were $7.4 million versus $8.0 million in the third
quarter a year ago, and $6.9 million in the second quarter of fiscal 2008.
Product licensing revenue was $4.9 million compared with $5.0 million in
last year's third quarter and $4.4 million in the second quarter of fiscal
2008. Engineering services and maintenance revenue was $2.5 million versus
$3.0 million in the third quarter a year ago and $2.5 million in the second
fiscal quarter of 2008. The company earned $0.23 million in performance
incentives associated with its engineering services agreement with
Kyocera-Mita Corporation.
Peerless signed four block license agreements valued at $4.0 million in the
third quarter, of which $3.8 million were recognized as revenue during the
period. The current portion of the company's contract backlog for
engineering services is $2.5 million, which management believes will be
recognized during the fourth 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 during this year's second fiscal
quarter. None of the licensing backlog was recognized as revenue during the
third quarter; however, $1.5 million in payments related to this agreement
already have been received and were recorded as deferred licensing revenue
in the third quarter.
Third quarter gross margin was 60.1% compared with 42.3% in the third
quarter last year and 69.0% in this year's second fiscal quarter. The
quarter-over-quarter increase resulted from efficiencies realized in our
engineering department and improved licensing margins.
Research and development expenses were $1.3 million, or 17.3% of revenue, a
reduction of approximately $0.19 million compared with last year's third
quarter R&D expenses, which were 16.3% of revenue. R&D expenses in the
second quarter were $1.2 million, or 17.6% of revenue. Sales and marketing
expenses were $0.6 million, or 8.4% of revenue, versus $0.8 million, or
9.8% of revenue, in last year's third quarter, and $0.7 million, or 9.8% of
revenue, in the second quarter.
General and administrative expenses were $1.5 million, or 19.7% of revenue,
compared with $1.4 million, or 17.8% of revenue in the third quarter last
year and $1.8 million, or 26.5% of revenue, in the second fiscal quarter.
Net income in the third quarter was $1.3 million, or $0.07 per diluted
share, versus a net loss of $0.02 million, or $0.00 per share, in last
year's third quarter. The company reported net income of $1.2 million, or
$0.07 per diluted share, in this year's second quarter.
Peerless ended the third quarter with cash and cash equivalents of $21.7
million, an increase of 37% when compared with the $15.8 million recorded
at the end of the previous quarter, and an increase of 32% versus the $16.4
million at the end of fiscal 2007. The increases were primarily due to
strong gross margins and shorter payment terms on contracts.
Management Commentary
Rick Roll, president and CEO, said, "Our achievements during the third
quarter have helped propel us well ahead of our year-to-date net income
forecasts. We therefore have increased the high end of our guidance range
for full-year net income by more than $1 million."
"Our Q3 earnings performance reflects the successful efforts we have made
to maximize revenue opportunities from existing customer relationships, and
effectively manage our cost structure," Roll added. "As anticipated, our
revenue is being negatively impacted by a number of changes taking place in
the highly competitive digital imaging industry. We have been anticipating
these changes for some time, and are continuing the pursuit of a strategic
program designed to diversify our business into ancillary, high-growth
segments of the imaging sector. As we have stated previously, we are
focusing on specific opportunities related to solution-software
applications for the multifunction printer market, as well as prospects in
the all-in-one imaging-device market. In the meantime we continue to
strengthen our balance sheet and accumulate cash to pursue our future
endeavors."
Guidance
Management increased its prior guidance for full-year net income to range
of $5.0 million to $5.5 million from a prior range of $3.8 million to $4.5
million. Full-year revenue is now expected to range from $28.5 million to
$30.0 million, versus a prior revenue forecast of $29.0 million to $31.0
million. As previously stated, these forecasts are 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, but not
limited to, 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 third 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 888-713-4217 (617-213-4869 for
international callers) and entering the passcode 43662341. 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 a telephonic replay will be available through
December 6, 2007, by calling 888-286-8010 (617-801-6888 for international
callers) and entering the passcode 57181076.
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 July 31, 2007, filed September 10, 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
October 31,
-----------------------------------
2007 2006
----------------- ----------------
Revenues:
Product licensing $ 4,914 66.2% $ 4,954 62.1%
Engineering services and maintenance 2,515 33.8% 2,989 37.5%
Hardware sales 0.0% 37 .5%
-------- -------
Total revenues 7,429 100.0% 7,980 100%
-------- -------
Cost of revenues:
Product licensing 1,683 22.7% 2,005 25.1%
Engineering services and maintenance 1,278 17.2% 2,355 29.5%
Hardware sales - 0.0% 246 3.1%
-------- -------
Total cost of revenues 2,961 39.9% 4,606 57.7%
-------- -------
Gross margin 4,468 60.1% 3,374 42.3%
-------- -------
Operating expenses:
Research and development 1,281 17.3% 1,300 16.3%
Sales and marketing 623 8.4% 779 9.8%
General and administrative 1,483 19.7% 1,423 17.8%
-------- -------
Total operating expenses 3,387 45.4% 3,502 43.9%
-------- -------
Income (loss) from operations 1,081 14.7% (128) -1.6%
Other income, net 203 2.7% 106 1.3%
-------- -------
Income (loss) before income taxes 1,284 17.5% (22) -.28%
Provision for income taxes (benefit) 5 0.1% (4) .05%
-------- -------
Net income (loss) $ 1,279 17.4% (18) -.23%
======== =======
Basic earnings (loss) per share $ 0.07 $ (0.00)
======== =======
Diluted earnings (loss) per share $ 0.07 $ (0.00)
======== =======
Weighted average common shares
outstanding - basic 17,371 17,147
======== =======
Weighted average common shares
outstanding - diluted 18,134 17,147
======== =======
PEERLESS SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
----------------------------------
Nine Months Ended
October 31,
-----------------------------------
2007 2006
----------------- -----------------
Revenues:
Product licensing $ 11,422 59.7% $ 15,624 63.3%
Engineering services and
maintenance 7,694 40.2% 8,664 35.1%
Hardware sales 2 0.1% 392 1.6%
-------- --------
Total revenues 19,118 100.0% 24,680 100.0%
-------- --------
Cost of revenues:
Product licensing 2,764 14.5% 3,856 15.6%
Engineering services and
maintenance 4,896 25.6% 6,558 26.6%
Hardware sales 0.0% 428 1.7%
-------- --------
Total cost of revenues 7,660 40.1% 10,842 43.9%
-------- --------
Gross margin 11,458 59.9% 13,838 56.07%
-------- --------
Operating expenses:
Research and development 3,649 19.1% 5,473 22.2%
Sales and marketing 1,910 9.9% 2,328 9.4%
General and administrative 4,818 25.2% 4,656 18.9%
-------- --------
Total operating expenses 10,377 54.2% 12,457 50.5%
-------- --------
Income from operations 1,081 5.7% 1,381 5.6%
Other income, net 595 3.1% 325 1.3%
-------- --------
Income before income taxes 1,676 8.8% 1,706 6.9%
Provision for income taxes 13 0.1% 8 0.0%
-------- --------
Net income $ 1,663 8.7% $ 1,698 6.9%
======== ========
Basic earnings per share $ 0.10 $ 0.10
======== ========
Diluted earnings per share $ 0.09 $ 0.09
======== ========
Weighted average common shares
outstanding - basic 17,274 17,082
======== ========
Weighted average common shares
outstanding - diluted 18,150 19,101
======== ========
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