Commtouch Reports Fourth Quarter and Full Year 2012 Results
MCLEAN, Virginia, February 20, 2013 /PRNewswire/ --
Fourth Quarter 2012 Revenues of $6.8 Million, Up 22% Sequentially, Up 14% Versus a Year Ago
Full Year 2012 Revenues of $23.9 Million, Up 4% Year-over-Year
Formal Launch of New Cloud-Based Email Security-as-a-Service Offering in Early 2013 Highlights Execution on Strategic Roadmap and Foundation for Future Growth
2013 Full Year GAAP Revenue Growth Forecasted to be 42% to 46% Above 2012 Level
Commtouch® (NASDAQ: CTCH), a leading provider of Internet security technology and cloud-based services, today announced its fourth quarter and full year 2012 financial results for the period ending December 31, 2012.
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Fourth Quarter & Full Year 2012 Financial Highlights:
- Revenues in accordance with US Generally Accepted Accounting Principles (US GAAP) totaled $6.8 million for the fourth quarter compared to $5.6 million for the sequential third quarter of 2012 and $6.0 million in the fourth quarter of 2011. Full year 2012 revenues totaled $23.9 million, an increase of 4.0% as compared to $23.0 million in 2011.
- Non-GAAP revenues totaled $7.0 million for the fourth quarter compared to $5.6 million for the sequential third quarter of 2012 and $6.0 million in the fourth quarter of 2011. Full year 2012 non-GAAP revenues totaled $24.1 million, an increase of 5.0% as compared to $23.0 million in 2011. The difference between non-GAAP and GAAP revenue is derived from the fact that deferred revenues consolidated from acquired companies are recorded based on fair value rather than book value for GAAP purposes.
- In the fourth quarter of 2012, Commtouch closed the previously announced acquisitions of FRISK Software International's antivirus business as of October 1, 2012 and eleven GmbH as of November 16, 2012. During the fourth quarter and full year, the company recognized expenses totaling approximately $0.4 million and $0.8 million in the respective periods related to acquisition related costs. Fourth quarter and full year 2012 GAAP net income (loss) and earnings per diluted share data include the impact of the aforementioned acquisition and related costs.
- GAAP net income (loss) for the fourth quarter was ($0.5 million) compared to net income of $19,000 for the sequential third quarter of 2012 and $1.3 million in the fourth quarter of 2011. Full year 2012 GAAP net income totaled $1.5 million compared to $4.6 million in 2011. Fourth quarter and full year 2012 data includes the aforementioned acquisition related expenses.
- GAAP earnings per diluted share for the fourth quarter were ($0.02), compared to $0.00 for the sequential third quarter of 2012 and $0.05 in the fourth quarter of 2011. Full year 2012 GAAP earnings per diluted share were $0.06 compared to $0.19 in 2011. Fourth quarter and full year 2012 data includes the aforementioned acquisition related expenses.
- Non-GAAP net income for the fourth quarter was $0.3 million compared to $0.7 million for the sequential third quarter of 2012 and $1.7 million in the fourth quarter of 2011. Full year 2012 non-GAAP net income totaled $3.9 million compared to $6.4 million in 2011 and was marginally lower than anticipated primarily due to an increased strategic investment in the company's global sales and marketing function to leverage Commtouch's expanded portfolio of IT security solutions.
- Non-GAAP earnings per diluted share for the fourth quarter were $0.01, compared to $0.03 for the sequential third quarter of 2012 and $0.07 in the fourth quarter of 2011. Full year 2012 non-GAAP earnings per diluted share were $0.16 compared to $0.26 in 2011.
- Cash used for operating cash activities during the quarter was $1.6 million, which included payments for professional service fees and other acquisition related costs associated with the two acquisitions that closed during the quarter.
- Cash as of December 31, 2012 was $5.1 million, compared to $17.3 million as of September 30, 2012. Cash usage during the quarter included the net purchase price payments of $10.2 million, as well as payments for transaction and integration costs associated with the two acquisitions completed during the quarter.
- Brian Briggs was appointed as Commtouch Chief Financial Officer. Briggs brings more than 22 years of finance and operations experience, offering extensive expertise in profitability building in public companies.
Shlomi Yanai, Commtouch's chief executive officer stated, "The fourth quarter culminated 2012 with renewed revenue growth and tremendous progress on our transformation into a provider of comprehensive SecaaS offerings, which was accelerated by our strategic acquisitions. Commtouch's new Email Security-as-a-Service solution marks a major launch of the Company's latest cloud-based offerings and is complemented by new solutions focused on Email Security On-Premise for Service Providers and Mobile Security Services for Android. All three solutions were recently launched into the market and have generated great initial customer interest. Our material progress on executing this strategy and deploying our new offerings has successfully set the stage for double-digit revenue growth in 2013.
"On the financial front, fourth quarter and full year sales marked Commtouch's return to top-line growth, while acquisition related transaction and integration expenses, combined with an increased investments in global sales and marketing infrastructure, contributed to lower bottom-line profitability. New bookings growth remained strong in the fourth quarter and full year, doubling new bookings compared to the levels seen in the year ago period. Organic new bookings growth, combined with the synergies of our late 2012 strategic acquisitions, put Commtouch on track to realize full year 2013 revenue growth in the range of 42% to 46% over 2012. We remain committed to investing in our enhanced sales and marketing platform to fully leverage the value of our innovative new SecaaS offerings among customers and partners worldwide, all while continuing to fund our growth through internal cash flow generation and with a focused commitment to improving bottom line profitability.
"Building on Commtouch's progress in 2012, we are focused on increasing our market share in the fast growing markets for cloud-based email, Web and antivirus solutions, including the launch of our new cloud-based web security solution which is currently on track for release in third quarter of 2013. Our solutions are aimed at helping our customers quickly and easily add cloud-based offerings under their own private label brand, allowing them to maximize performance, generate new revenue streams, reduce product launch times and greatly lower their costs. Based on the strength of our expanded portfolio of cloud-based IT security solutions as well as the integration and streamlining of our recent acquisitions, we are setting a solid foundation for growth in 2013 and beyond," concluded Mr. Yanai.
Announced in May of 2012, Commtouch's Board of Directors authorized the initiation of a stock repurchase program of the company's ordinary shares in the open market, in an amount in cash of up to $2.5 million. During the fourth quarter Commtouch repurchased 105,000 shares at an aggregate cost of approximately $0.3 million. As of December 31, 2012, approximately 767,000 shares have been repurchased through the program at an aggregate cost of approximately $1.7 million.
For information regarding the non-GAAP financial measures discussed in this release, please see "Use of Non-GAAP Financial Information" and "Reconciliation of Non-GAAP to GAAP Financial Information."
Business Highlights:
- Commtouch closed the previously announced acquisition of FRISK Software International's antivirus business, accelerating the deployment of an expanded range of OEM and service provider antivirus solutions, including private label solutions.
- Commtouch announced and closed the acquisition of eleven GmbH, which has captured more than 36 percent of the Germany's market for managed email security. eleven GmbH is currently Germany's leading provider of email based Security-as-a-Service (SecaaS) providing advanced email solutions and services to some of the largest organizations in Germany, such as BMW, SAP, Siemens and Deutsche Telekom / T-Online. The acquisition of eleven has enabled Commtouch to accelerate to early 2013 the launch of private label cloud-based security solutions designed for OEM and service provider markets, as well as extend Commtouch's global sales and marketing reach across Europe and beyond.
- Significant investment in expanding the Company's global sales and marketing capabilities delivered sharply higher new booking activity during the fourth quarter. As a result, overall new booking activity for the full fiscal 2012 year was approximately double the level in 2011 setting a solid foundation for future growth. In line with Commtouch's long-term agreement model, the majority of contracts signed average approximately three years in length. Revenue recognition for these new multi-year contracts is expected to begin ramping up and positively impacting Commtouch's top-line in the coming quarters.
- Key new client wins during the quarter reflected our enhanced international sales and marketing penetration, including:
- Openwave Messaging Inc., the leading global provider of innovative messaging software solutions, selected Commtouch as its preferred messaging security partner for integrating Commtouch's anti-spam and virus outbreak detection into its messaging platform for carriers and service providers.
- i7 Networks integrated Commtouch's GlobalView™ URL categorization technology into its i7 solutions. India based i7 offers its corporate clients a suite of products that help manage Web content classification and bandwidth monitoring, including URL filtering based on the best of breed URL content categorization databases.
- NSFOCUS Information Technology Co., Ltd, a China based global leader in providing enterprise-level network security solutions and services, selected Commtouch's antivirus and URL filtering solutions.
Business Outlook
Based on the current expectations, the company is announcing its financial outlook for the full year 2013. The company anticipates full year 2013 revenue will be between $34.0 million and $35.0 million, an increase of approximately 42% to 46% compared with full year 2012. GAAP and non-GAAP net income guidance includes a higher level of sales and marketing expense versus 2012 to support a strengthened global sales platform. Full year 2013 GAAP net income is expected to be greater than $2.0 million and non-GAAP net income is expected to be greater than $3.5 million.
During the first half of 2013, the company also expects to recognize extraordinary expenses related to its previously announced acquisitions, as well as related integration and streamlining expenses, totaling approximately $0.8 million, the majority of which will be recognized in the first quarter of 2013. The impact of these charges is reflected in the aforementioned full year 2013 GAAP net income guidance. The company expects the impact of integration and streamlining activities to positively impact the financial performance of the business during the second half of 2013.
The company plans to continue to strategically invest in the build-out of its global sales and marketing efforts. The impact of these investments is reflected in the full year 2013 GAAP net income guidance.
The above outlook is as of the date of this release, and the company undertakes no obligation to update its estimates in the future.
Use of Non-GAAP Measures
Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: share based compensation expenses, amortization and impairment of acquired intangible assets, deferred taxes, acquisition related costs and adjustments to earnout obligations. The purpose of such adjustments is to give an indication of the company's performance exclusive of non-cash charges and other items that are considered by management to be outside of the company's core operating results. The company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. Company management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions.
These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. The company believes this adjustment is useful to investors as a measure of the ongoing performance of our business. The company believes these non-GAAP financial measures provide consistent and comparable measures to help investors understand the company's current and future operating cash flow performance. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table immediately following the Consolidated Statements of Income. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management uses both GAAP and non-GAAP measures when evaluating the business internally and therefore felt it important to make these non-GAAP adjustments available to investors.
Financial Results Conference Call
The company has scheduled a conference call later today, February 20, 2013 at 10:00 a.m. ET to review the fourth quarter and full year 2012 highlights, as well as walk through a strategic overview of the evolution of the company's growth strategy.
To participate, please call one of the following teleconferencing numbers by dialing in at least ten minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1-877-407-9210
Israel Dial-in Number: 00-800-4626-6666
International Dial-in Number: 1-201-689-8049
at:
10:00 a.m. Eastern Time, 7:00 a.m. Pacific Time, 3:00 p.m. UK Time, 5:00 p.m. Israel Time
The call will be simultaneously webcast live from a link on Commtouch's website at http://www.commtouch.com.
For those unable to listen to the live call, a webcast replay of the call will be available from the day after the call in the investor relations section of Commtouch's corporate Web site.
About Commtouch
Commtouch® (NASDAQ: CTCH) is a leading provider of Internet security technology and cloud-based services for vendors and service providers, increasing the value and profitability of customers' solutions by protecting billions of Internet transactions on a daily basis. With six global data centers and renowned technology, Commtouch's email, Web, and antivirus capabilities easily integrate into customers' products and solutions, keeping more than 350 million end users safe. To learn more, visit http://www.commtouch.com.
• Blog: http://blog.commtouch.com/cafe
• Facebook: http://www.facebook.com/commtouch
• LinkedIn: http://www.linkedin.com/company/commtouch
• Twitter: @Commtouch
Recurrent Pattern Detection, RPD, Zero-Hour and GlobalView are trademarks, and Commtouch is a registered trademark of Commtouch. U.S. Patent No. 6,330,590 is owned by Commtouch. All other trademarks are the property of their respective owners.
This press release contains forward-looking statements, including projections about our business, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements in the future tense, and statements including words such as "expect," "plan," "estimate," "anticipate," or "believe" are forward-looking statements. These statements are based on information available to us at the time of the release; we assume no obligation to update any of them. The statements in this release, including the company's expectations that i) it will meet its 2013 revenue and profit forecasts, ii) its new service offerings will impact those forecasts in the positive manner indicated, and iii) the result of integration and efficiency activities will be to positively impact the financial performance of the business during the second half of 2013, are not guarantees of future performance and actual results could differ materially from our current expectations as a result of numerous factors, including business conditions and growth or deterioration in the Internet market, commerce and the general economy, both domestic as well as international; fewer than expected new-partner relationships; competitive factors, including pricing pressures; technological developments, and products offered by competitors; the ability of our OEM partners to successfully penetrate markets with products integrated with Commtouch technology; a slower than expected acceptance rate for our newer product offerings; availability of qualified staff; and technological difficulties and resource constraints encountered in developing new products, as well as those risks described in the text of this press release and the company's Annual Reports on Form 20-F and reports on Form 6-K, which are available through http://www.sec.gov.
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In US$ thousands, except per share amounts)
Three months ended Twelve months ended
December 31 December 31
--------------------- ----------------------
2012 2011 2012 2011
------ ------ ------ ------
Unaudited Unaudited Unaudited Unaudited
Revenues $6,785 $5,950 $23,910 $23,016
Cost of
revenues 1,367 1,124 4,350 4,091
------- ------- ------- -------
Gross profit 5,418 4,826 19,560 18,925
------- ------- ------- -------
Operating
expenses:
Research and
development 2,185 1,444 6,281 5,410
Sales and
marketing 1,866 1,639 5,860 5,486
General and
administrative 2,374 1,615 6,639 4,721
------- ------- ------- -------
Total operating
expenses 6,425 4,698 18,780 15,617
------- ------- ------- -------
Operating
profit (loss) (1,007) 128 780 3,308
Financial
income
(expenses), net (70) (23) 80 (27)
------- ------- ------- -------
Income (loss)
before taxes (1,077) 105 860 3,281
Tax Benefit,
net 530 1,170 625 1,317
------- ------- ------- -------
Net income
(loss)
attributable to
ordinary
shareholders ($547) $1,275 $1,485 $4,598
======= ======= ======= =======
Basic earnings
per share ($0.02) $0.05 $0.06 $0.19
======= ======= ======= =======
Diluted
earnings per
share ($0.02) $0.05 $0.06 $0.19
======= ======= ======= =======
Weighted
average number
of shares
outstanding:
Basic 25,357 23,854 24,610 23,620
======= ======= ======= =======
Diluted 25,598 24,828 25,140 24,654
======= ======= ======= =======
COMMTOUCH SOFTWARE LTD.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON GAAP MEASURES
(In US$ thousands, except per share amounts)
Three months ended Twelve months ended
December 31 December 31
-------------------- ---------------------
2012 2011 2012 2011
------ ------ ------ ------
Unaudited Unaudited Unaudited Unaudited
GAAP operating
profit (loss) ($1,007) $128 $780 $3,308
Stock-based
compensation(1) 191 365 1,289 1,230
Other
acquisition
related costs(2) 400 - 777 53
Amortization of
intangible
assets (3) 286 628 589 1,003
Executive
terminations(4) 115 343 115 343
Adjustment to
deferred
revenues (5) 227 - 227 -
Adjustment to
earnout
obligation (6) (19) 200 (19) 396
------- ------- ------- -------
Non-GAAP
operating
profit $193 $1,664 $3,758 $6,333
======= ======= ======= =======
GAAP net income ($547) $1,275 $1,485 $4,598
Stock-based
compensation
(1) 191 365 1,289 1,230
Other
acquisition
related costs
(2) 400 - 777 53
Amortization of
intangible
assets (3) 286 628 589 1,003
Executive
terminations
(4) 115 343 115 343
Adjustment to
deferred
revenues (5) 227 - 227 -
Adjustment to
earnout
obligation (6) 204 240 232 541
Income taxes
(7) (607) (1,198) (806) (1,385)
------- ------- ------- -------
Non-GAAP net
income $269 $1,653 $3,908 $6,383
======= ======= ======= =======
GAAP earnings
per share ($0.02) $0.05 $0.06 $0.19
Stock-based
compensation(1) 0.01 0.01 0.05 0.05
Other
acquisition
related costs(2) 0.016 - 0.031 0.002
Amortization of
intangible
assets (3) 0.011 0.025 0.023 0.041
Executive
terminations(4) 0.004 0.014 0.005 0.014
Adjustment to
earnout
obligation (5) 0.008 0.010 0.009 0.022
Income taxes(6) (0.024) (0.048) (0.032) (0.056)
------- ------- ------- -------
Non-GAAP
earnings per
share $0.01 $0.07 $0.16 $0.26
======= ======= ======= =======
Numbers of
shares used in
computing
Non-GAAP
earnings per
share (diluted) 25,598 24,828 25,140 24,654
======= ======= ======= =======
(1) Stock-based
compensation
------------
Cost of
revenues $26 $7 $53 $24
Research and
development 9 76 231 294
Sales and
marketing (69) 83 200 355
General and
administrative 225 199 805 557
------- ------- ------- -------
$191 $365 $1,289 $1,230
======= ======= ======= =======
(2) Other
acquisition
related costs
-------------
General and
administrative 400 - 777 53
------- ------- ------- -------
$400 - $777 $53
======= ======= ======= =======
(3)Amortization of
intangible
assets
-------------
Cost of
revenues $128 $48 $272 $195
Sales and
marketing 158 580 317 808
------- ------- ------- -------
$286 $628 $589 $1,003
======= ======= ======= =======
(4) Executive
terminations
-------------
Research and
development - $82 - $82
General and
administrative 115 261 115 261
------- ------- ------- -------
$115 $343 $115 $343
======= ======= ======= =======
(5) Adjustment
to deferred
revenues
-------------
Revenues 227 - 227 -
------- ------- ------- -------
$227 - $227 -
======= ======= ======= =======
(6) Adjustment
to earnout
obligation
-------------
General and
administrative ($19) $200 (19) $396
Financial
expenses
(income), net 223 40 251 145
------- ------- ------- -------
$204 $240 $232 $541
======= ======= ======= =======
(7) Income
taxes
------------
Deferred tax
asset - tax
benefit (607) (1,198) (806) (1,385)
------- ------- ------- -------
($607) ($1,198) ($806) ($1,385)
======= ======= ======= =======
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31 December 31
----------- -----------
2012 2011
------ ------
Unaudited Audited
In US$ thousands
Assets:
Current Assets:
Cash and cash equivalents $5,137 $20,868
Trade receivables, net 5,996 2,838
Deferred income taxes 2,239 1,996
Prepaid expenses and other
accounts receivable 1,503 463
------- -------
Total current assets 14,875 26,165
------- -------
Long-term lease deposits 57 40
Severance pay fund 756 1,031
Property and equipment, net 1,608 885
Deferred income taxes 3,348 2,889
Intangible assets, net 37,479 7,297
Investment in affiliate 1,403 1,227
------- -------
Total assets 59,526 39,534
======= =======
Liabilities and
Shareholders' Equity
Current Liabilities:
Accounts payable 958 551
Employees and payroll
accruals 2,280 1,215
Accrued expenses and other
liabilities 1,388 628
Deferred revenues 4,535 3,058
Other short-term liabilities 4,247 3,372
------- -------
Total current liabilities 13,408 8,824
------- -------
Long-term deferred revenues 492 694
Long-term deferred tax 3,330 -
Other Long term liabilities 6,659 -
Accrued severance pay 915 1,192
------- -------
Total liabilities 11,396 1,886
------- -------
Shareholders' equity 34,722 28,824
------- -------
Total liabilities and
shareholders' equity $59,526 $39,534
======= =======
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED CASH FLOW DATA
(In US$ thousands)
Three months ended Twelve months ended
December 31 December 31
-------------------- ---------------------
2012 2011 2012 2011
------ ------ ------ ------
Unaudited Unaudited Unaudited Unaudited
Cash flow from
operating
activities
Net income
(loss) ($547) $1,275 $1,485 $4,598
Adjustments:
------------
Depreciation 129 131 561 545
Compensation
related to
options issued
to employees
and consultants 191 365 1,289 1,213
Amortization of
intangible
assets 284 629 588 1,005
Changes in
assets and
liabilities:
------------
Decrease
(Increase) in
trade
receivables (704) 598 (2,194) 130
Decrease in
deferred taxes (608) (1,198) (807) (1,385)
Decrease
(Increase) in
prepaid
expenses and
other
receivables 143 55 (541) (79)
Increase in
accounts
payable 259 194 297 17
Increase
(decrease) in
employees and
payroll
accruals,
accrued
expenses and
other
liabilities (1,022) 419 (860) 981
Increase
(decrease) in
deferred
revenues 299 (301) (163) (390)
Increase
(decrease) in
accrued
severance pay,
net 21 59 (2) 66
------- ------- ------- -------
Net cash (used
in) provided by
operating
activities (1,555) 2,226 (347) 6,701
Cash from
investing
activities
Payments for
business
acquisitions,
net of cash
acquired (10,243) - (10,243) -
Change in
long-term lease
deposits (12) 3 (17) 1
Investment in
an affiliate
company (176) - (3,576) -
Purchase of
property and
equipment (176) (104) (805) (526)
------- ------- ------- -------
Net cash used
in investing
activities (10,607) (101) (14,641) (525)
Cash flows from
financing
activities
Buyback of
shares (279) - (1,720) -
Proceeds from
options and
warrants
exercised 157 1,097 890 1,260
------- ------- ------- -------
Net cash (used
in) provided by
financing
activities (122) 1,097 (830) 1,260
Effect of
exchange rate
changes on cash 87 - 87 -
Increase
(decrease) in
cash and cash
equivalents (12,284) 3,222 (15,818) 7,436
Cash and cash
equivalents at
the beginning
of the period 17,334 17,646 20,868 13,432
------- ------- ------- -------
Cash and cash
equivalents at
the end of the
period $5,137 $20,868 $5,137 $20,868
======= ======= ======= =======
Company Contact:
Brian Briggs, Chief Financial Officer
Commtouch
+1-703-760-3444
[email protected]
Israel Investor Relations Contact:
Iris Lubitch
EffectiveIR
+972-54-252-8007
[email protected]
U.S. Investor Contact:
Christopher Chu
Grayling
+1-646-284-9400
[email protected]
Commtouch Media Contact:
Matthew Zintel
Zintel Public Relations
+1-281-444-1590
[email protected]
SOURCE Commtouch
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