LOS ANGELES, Aug. 2, 2011 (GLOBE NEWSWIRE) -- CyberDefender Corporation (Nasdaq:CYDE), a leading provider of direct to consumer remote technical support services, Internet security software and utilities, today announced financial results for the second quarter ended June 30, 2011.
Second Quarter 2011 Highlights
- GAAP revenue up 31% year-over-year
- Gross sales (a non-GAAP measure) up 25% year-over-year
- Gross sales of new LiveTech subscriptions increased 39% year-over-year
- Deferred revenue increased 55% year-over-year to $18.7 million
First Six Months 2011 Highlights
- GAAP revenue up 46% over the same period of 2010
- Gross sales (a non-GAAP measure) up 53% over the same period of 2010
- Gross sales of new LiveTech subscriptions increased 85% over the same period of 2010
Management Change
On July 29, 2011, the Board of Directors of the company accepted the resignation of the Chairman and CEO, Gary Guseinov, effective August 1, 2011. The Board elected current independent board member, Howard Bain, as Chairman. The Board is actively negotiating with an Interim CEO candidate, Greg Thomas.
Mr. Thomas has been an independent advisor to the Board and Company since late May 2011, and has had direct oversight and management responsibility for all aspects of the Company's operations relating to call center operations, product development, marketing, renewals, technology and business development during this time.
"Over the course of the past two years, our business has evolved and the opportunity before us today is very different from where we started; during the second quarter, the company determined that it was the opportune time to formalize a plan which would enable us to best capitalize on our strength with direct to consumer marketing and leverage our position as a leading provider of remote technical support services," said CyberDefender CFO Kevin Harris.
Strategic Repositioning
Major elements of the new strategic direction include:
- Focus strategic efforts on high-growth LiveTech service offering
- Discontinue development of proprietary software intended for sale to consumers
- Improve software product offerings via third party licensing arrangements
- Increase focus on optimizing operations to accelerate profitability
- Reduce overhead and call center operational costs while improving overall customer experience
- CyberDefender's management team is expected to be augmented with additional expertise from direct response industry veterans who are charged with a clear focus on results, accountability and profit performance
- The company expects to continue to operate its own in-house technical support call center for CyberDefender's LiveTech remote computer repair service
During the second quarter, the company eliminated substantial headcount across the entire organization focusing specifically on software development. Having already identified a number of robust software product suites that are available to be licensed, management is underway in negotiations with a highly reputable prospective security software vendor and targets finalization of the contract in the coming months.
The company plans to continue to execute on the strategic plan throughout the third and fourth quarters of 2011, to further streamline operations.
"While growth for the quarter was weaker than expected, principally due to challenges impacting the call center operations and the seasonality associated with direct to consumer marketing, we believe the company is in a stronger position to more expediently meet our financial goals, improve our product offerings and enhance customer satisfaction and retention, all of which ultimately, enhance stockholder value," concluded Harris.
Results for the Quarter Ended June 30, 2011
GAAP revenue for the second quarter of 2011 grew 31% to $12.7 million, compared to $9.7 million reported in the same quarter of 2010. Gross Sales for the second quarter of 2011 grew 25% to $15.5 million, compared to $12.4 million reported in the same quarter of 2010. The Company defines gross sales (a non-GAAP measure) as GAAP revenues before returns and before deferring revenue for GAAP purposes (the Company's use of non-GAAP measures and reconciliation to GAAP is explained below). The increase in revenue was primarily attributable to continued momentum in the LiveTech offering.
Cost of revenue was $6.1 million for the second quarter of 2011 compared to $4.0 million for the second quarter of 2010. The increase from prior year was primarily attributable to expenses associated with CyberDefender managed call centers required to support the LiveTech service.
Gross profit for the second quarter of 2011 increased 16% to $6.6 million compared to $5.7 million in the same quarter of 2010. Due to a greater mix of LiveTech Services relative to software sales, gross margins in the second quarter of 2011 were 52% of net revenue compared to 59% in the same quarter of 2010.
Operating loss decreased to $5.7 million in the second quarter of 2011 compared with an operating loss of $11.0 million for the same quarter of 2010.
Net loss for the second quarter of 2011 improved to $6.6 million, or $0.23 per share, compared with a net loss of $12.0 million, or $0.45 per share, in the same quarter of 2010.
CyberDefender exited the quarter with record deferred revenue of $18.7 million and unrestricted cash of $1.8 million.
Results for the Six Months Ended June 30, 2011
GAAP revenue for the six months ended June 30, 2011 grew 46% to 28.1 million, compared to $19.2 million reported during the same period of 2010. Gross sales (a non-GAAP measure) for the six months ended June 30, 2011 grew 53% to $37.1 million, compared to $24.2 million reported during the same period of 2010.
Gross profit in the first six months of 2011 grew 24% to $14.9 million, compared to $12.0 million in the same period of 2010.
The company reported an operating loss of $10.7 million in the first six months of 2011, compared with an operating loss of $19.1 million in the same quarter of 2010.
Net loss for the first six months of 2011 was $12.6 million or $0.45 per share, compared with a net loss of $20.3 million, or $0.78 per share in the same period of 2010.
Financing
The Company believes that its repositioning strategy will allow the Company to rely on its strong direct to consumer marketing expertise to strengthen its position as a leading provider of remote technical support services. However, the implementation of the new strategy will depend upon the Company's ability to secure additional financing.
Subsequent to the close of the second quarter, the company closed a $1.5 million private offering of subordinated convertible promissory notes to accredited investors. The convertible notes and related agreements are described in and included as exhibits to a Form 8-K filed with the Securities and Exchange Commission ("SEC") on July 29, 2011 (the "Form 8-K").
The Company believes, but cannot ensure, that the $1.5 million will be sufficient to permit the Company to continue to operate until it can secure the additional financing during the next 60 days that it requires to continue to operate as a going concern. Although the Company is exploring a number of sources for the additional financing, the Company cannot ensure that it will be able to secure the necessary financing.
Thus far, the Company's unsecured creditors have not asserted claims against the Company for amounts the Company owes, but it is not certain that they will continue to do so.
In addition, the Company is in default of certain provisions of its loan agreements with its senior lender and the Company and the senior secured lender have entered into a Waiver and Forbearance Agreement (the "Agreement") which was described in and filed as an exhibit to the Form 8-K. Pursuant to the Agreement, the senior secured lender agreed to waive, for a period of 60 days, its rights and remedies against the Company as a result of the defaults. If the waiver period is not extended, the senior lender will be able to pursue all of its rights and remedies against the Company resulting from the defaults.
The Company is pursuing all strategic and financing opportunities in order to seek to properly capitalize its operations and execute its strategic plan.
2011 Guidance
For the full year 2011, CyberDefender expects gross sales to exceed $70 million and the company anticipates generating positive cash flow from operations by the end of 2011.
Non-GAAP Financial Measures
Gross sales are a non-GAAP measure that CyberDefender uses in assessing its operating performance. We define gross sales as total sales before refunds and uncollectible receivables/cancels and before deferring revenue for GAAP purposes. We use this non-GAAP financial measure frequently because we believe it gives a better indication of our operating performance and the profitability of our marketing initiatives. We include this non-GAAP financial measure in our earnings announcements in order to provide transparency to our investors and enable investors to better understand our operating performance. However, gross sales alone should not be used to assess our financial performance or to formulate investment decisions.
The following is a reconciliation of gross sales to net GAAP revenue for the three and six months ended June 30, 2011 and June 30, 2010:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||
| 2011 | 2010 | 2011 | 2010 | ||||
| Gross Sales | $ 15,499,723 | $ 12,428,803 | $37,097,607 | $24,242,211 | |||
| Less: Refunds | (1,718,817) | (1,562,587) | (4,170,560) | (2,955,645) | |||
| Less: Uncollected EZ pay | (701,396) | (691,956) | (1,910,185) | (794,362) | |||
| Less: Change in deferred revenue | (358,913) | (461,674) | (2,920,372) | (1,302,288) | |||
| Net revenue | $12,720,597 | $ 9,712,586 | $28,096,490 | $19,189,916 | |||
Conference Call Information
The Company will host a conference call to discuss first quarter 2011 results today, Tuesday, August 2, 2011 at 1:30 pm PT/4:30 pm ET.
To access the live conference call, dial (877) 407-9210 (toll free) and give the company name, "CyberDefender." Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. For those unable to participate in the live conference call, a replay of the conference call will be available (starting two hours after the call) by dialing (877) 660-6853 and entering the following account #: 286 and conference ID #: 376207. International callers may access the replay by calling (201) 612-7415 and entering the above pass code.
To listen to the live webcast, logon using the link provided in the events section of the Company's website: www.cyberdefendercorp.com. An instant replay of the conference call will be available over the Internet at the same web address.
About CyberDefender
CyberDefender is a leading provider of remote technical support services, Internet security software and utilities directly to the consumer market. CyberDefender's team of highly trained technicians and sales agents provide customers with efficient, round the clock remote PC repair services. The company markets antispyware/antivirus software, PC optimization software and online backup services. By combining remote live technical support and the aforementioned software products, CyberDefender offers a complete Internet security solution to consumers.
CyberDefender directly markets its products and services to consumers through television and radio via its MyCleanPC®, MaxMySpeed® and DoubleMySpeed® brands. CyberDefender products are fully compatible with Microsoft Windows® XP, Vista®, and 7 Operating systems. All products are available at www.cyberdefender.com. Investor relations information is available at www.cyberdefendercorp.com.
The CyberDefender Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7874
Forward Looking Statements
Statements in this public announcement that are not statements of historical or current fact, including any statement regarding future growth and profitability, and future revenue targets, constitute "forward-looking statements" under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward looking statements include statements concerning the Company's future business and financial prospects including, but not limited to, the following: the Company's expectation that it will finalize an agreement with a security software vendor in the coming months; the Company's plans to continue to execute on the strategic plan throughout the third and fourth quarters of 2011; the Company's ability to meet its financial goals, improve its product offerings and customer satisfaction and retention; the Company's belief that the $1.5 million in financing will be sufficient to permit the Company to continue to operate until it can secure the additional financing during the next 60 days that it needs to continue to operate as a going concern; the Company's ability to secure the additional required financing; and the Company's expectation that it will generate positive cash flow from operations by the end of 2011. The forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause CyberDefender's actual results to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Factors that could cause CyberDefender's results to be materially different from the forward-looking statements include whether CyberDefender will be able to find financing as required and whether CyberDefender's revenues eventually will exceed its expenses. The forward-looking statements also are subject generally to other risks and uncertainties that are described from time to time in CyberDefender's reports and registration statements filed with the Securities and Exchange Commission, which are available for review at www.sec.gov.
| CYBERDEFENDER CORPORATION | ||
| CONDENSED BALANCE SHEETS | ||
| (UNAUDITED) | ||
|
June 30, 2011 |
December 31, 2010 |
|
| ASSETS | ||
| Current assets | ||
| Cash | $ 1,780,231 | $ 2,649,061 |
| Restricted cash | 2,250,000 | 3,079,394 |
| Accounts receivable | 1,046,354 | 2,385,920 |
| Deferred financing costs, current | 147,376 | 103,484 |
| Prepaid expenses | 252,966 | 195,258 |
| Deferred charges, current | 470,652 | 1,147,764 |
| Total current assets | 5,947,579 | 9,560,881 |
| Property and equipment, net | 1,620,952 | 1,742,675 |
| Deferred financing costs, net of current portion | -- | 6,377 |
| Deferred charges, net of current portion | 72,976 | 402,772 |
| Other assets | 252,196 | 269,314 |
| Total assets | $ 7,893,703 | $ 11,982,019 |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||
| Current liabilities: | ||
| Accounts payable | $ 5,964,537 | $ 6,275,896 |
| Accounts payable and accrued expenses – related party | 3,434,645 | 1,447,257 |
| Accrued expenses | 1,922,522 | 1,788,435 |
| Deferred revenue, current | 13,932,184 | 11,342,211 |
| Convertible notes payable – related party, net of discount | 9,595,581 | -- |
| Capital lease obligations, current | 131,722 | 137,435 |
| Total current liabilities | 34,981,191 | 20,991,234 |
| Deferred rent | 798,388 | 466,920 |
| Deferred revenue, less current portion | 4,746,841 | 4,116,442 |
| Convertible notes payable – related party, net of discount | -- | 9,825,056 |
| Capital lease obligations, less current portion | 111,224 | 168,572 |
| Total liabilities | 40,637,644 | 35,568,224 |
| Commitments and contingencies | ||
| Stockholders' deficit: | ||
| Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively | -- | -- |
| Common stock, no par value; 100,000,000 shares authorized 28,170,370 and 27,327,702 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively | 28,170 | 27,328 |
| Additional paid-in capital | 64,317,804 | 60,926,037 |
| Accumulated deficit | (97,089,915) | (84,539,570) |
| Total stockholders' deficit | (32,743,941) | (23,586,205) |
| Total liabilities and stockholders' deficit | $ 7,893,703 | $ 11,982,019 |
| CYBERDEFENDER CORPORATION | ||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||
| (UNAUDITED) | ||||
| For the Three Months Ended | For the Six Months Ended | |||
|
June 30, 2011 |
June 30, 2010 |
June 30, 2011 |
June 30, 2010 |
|
| Net revenue: | ||||
| Services | $ 8,526,646 | $ 5,184,857 | $ 18,537,424 | $ 9,664,261 |
| Software and other | 4,193,951 | 4,527,729 | 9,559,066 | 9,525,655 |
| Total net revenue | 12,720,597 | 9,712,586 | 28,096,490 | 19,189,916 |
| Cost of revenue: | ||||
| Services | 5,826,779 | 3,800,144 | 12,653,239 | 6,731,983 |
| Software and other | 272,080 | 213,657 | 575,139 | 436,868 |
| Total cost of revenue | 6,098,859 | 4,013,801 | 13,228,378 | 7,168,851 |
| Gross profit | 6,621,738 | 5,698,785 | 14,868,112 | 12,021,065 |
| Operating expenses: | ||||
| Media and marketing services | 5,639,908 | 5,421,145 | 11,929,673 | 10,083,979 |
| Media and marketing services – related party | 330,900 | 6,555,963 | 686,232 | 12,123,060 |
| Product development | 828,492 | 963,392 | 1,762,762 | 1,715,519 |
| Selling, general and administrative | 5,428,207 | 3,722,577 | 10,964,283 | 7,149,533 |
| Depreciation and amortization | 113,503 | 54,903 | 205,356 | 75,145 |
| Total operating expenses | 12,341,010 | 16,717,980 | 25,548,306 | 31,147,236 |
| Loss from operations | (5,719,272) | (11,019,195) | (10,680,194) | (19,126,171) |
| Interest expense – related party | (886,478) | (276,898) | (1,754,101) | (276,698) |
| Interest expense, net | (8,316) | (713,850) | (13,333) | (933,219) |
| Loss on securities modifications | -- | -- | (102,717) | -- |
| Net loss | $ (6,614,066) | $ (12,009,943) | $ (12,550,345) | $ (20,336,088) |
| Basic and fully diluted net loss per share | $ (0.23) | $ (0.45) | $ (0.45) | $ (0.78) |
| Weighted average shares outstanding: | ||||
| Basic and fully diluted | 28,149,446 | 26,427,048 | 27,876,411 | 26,094,502 |