EL SEGUNDO, CA--(Marketwire - April 10, 2008) - Peerless Systems (
NASDAQ:
PRLS)
Selected Highlights:
-- Full-year income before tax benefit increases to $5.2 million
-- Company books $5.0 million tax benefit and realizes full-year net
income of $10.1 million, or $0.56 per diluted share
-- Year-over-year cost of goods sold and operating expenses cut by
combined $6.4 million
-- Year-end cash balance reaches $23.1 million, up 41% from the end of
fiscal 2007
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 fourth fiscal quarter and full
fiscal year ended January 31, 2008.
Fourth Quarter Results
Fourth quarter revenues were $9.3 million versus $8.7 million in the fourth
quarter a year ago and $7.4 million in the third quarter of fiscal 2008.
Product licensing revenue was $6.4 million compared with $6.1 million in
last year's fourth quarter and $4.9 million in the third quarter of fiscal
2008. Engineering services and maintenance revenue was $2.9 million versus
$2.6 million in the fourth quarter a year ago and $2.5 million in the third
fiscal quarter of 2008. During the fourth quarter, Kyocera Mita Corporation
(KMC) awarded Peerless $0.25 million in performance incentives associated
with its engineering services agreement.
During the fourth quarter, Peerless recorded two block license agreements
collectively valued at $5.6 million, all of which were recognized as
revenue during the period. Five million dollars in fourth quarter license
revenue was related to the KMC block license signed in the second quarter
of fiscal year 2008. The current portion of the company's contract backlog
for engineering services, including KMC, is $2.8 million, of which
management believes most will be recognized during the first quarter of
fiscal 2009. KMC and Peerless have extended the engineering services
portion of their master development agreement for the period just prior to
the special shareholder vote on the proposed KMC Asset Purchase Agreement.
The extension calls for a monthly payment of $625,000 with no bonus
incentive until the outcome of the April 28, 2008, stockholder meeting is
known.
Fourth quarter gross margin was 76.1% compared with 63.1% in the fourth
quarter last year and 60.1% in the prior quarter. The increase was
attributable to a greater percentage of Peerless technology versus
third-party technology within the company's sales mix. In addition, the
company recorded a one-time reduction of $0.3 million in product licensing
expense during the quarter, which arose from one of Peerless' vendor's
review of several years of royalty transactions.
Research and development expenses were $0.7 million, or 8% of revenue, a
reduction of approximately $0.5 million compared with last year's fourth
quarter R&D expenses, which were $1.2 million, or 14.2% of revenue. R&D
expenses in the 2008 third quarter were $1.3 million, or 17.3% of revenue.
Sales and marketing expenses were $0.6 million, or 6.7% of revenue, versus
$0.7 million, or 8.2% of revenue, in last year's fourth quarter, and $0.6
million, or 8.4% of revenue, in the 2008 third quarter.
General and administrative expenses were $2.5 million, or 26.3% of revenue,
compared with $2.1 million, or 24.0% of revenue, in the fourth quarter last
year and $1.5 million, or 19.7% of revenue, in the third fiscal quarter.
This year's fourth quarter G&A expense was impacted by approximately $1.1
million of combined costs, which included expenses associated with the KMC
Asset Purchase Agreement, professional service fees associated with a R&D
tax credit engagement, and other expenses.
Income before taxes in the fourth quarter was $3.5 million. The company
recorded a fourth quarter income tax benefit in the amount of $5 million
associated with the expected realization of certain deferred tax assets
that were previously fully reserved. The expected realization of the
deferred tax assets was primarily a result of the signing of the KMC Asset
Purchase Agreement in the fourth quarter. Peerless reported income before
taxes of $1.6 million in last year's fourth quarter and $1.3 million in
this fiscal year's third quarter. Fourth quarter net income was $8.5
million or $0.47 per diluted share, which includes the $5 million income
tax benefit.
Peerless ended the fiscal year with cash and cash equivalents of $23.1
million, an increase of 41% versus the $16.4 million reported at the end of
fiscal 2007, and an increase of 6% when compared with the $21.7 million
recorded at the end of the 2008 third quarter.
Fiscal 2008 full-year results
For the full fiscal year, Peerless reported income before taxes of $5.2
million on total revenue of $28.4 million. In fiscal 2007, income before
taxes was $3.3 million on revenue of $33.4 million. Fiscal 2008 net income
was $10.1 million, or $0.56 per diluted share, which includes the $5
million income tax benefit.
Gross margin increased from 57.9% in fiscal 2007 to 65.2% in fiscal 2008.
The primary reason for the increase was the more favorable mix of Peerless
technology to third-party technology in the company's sales mix, as well as
the benefit of a product licensing adjustment arising from one of Peerless'
vendor's review of several years of royalty transactions. Operating
expenses declined 14%, or $2.3 million year over year. This reduction was
achieved despite $1.4 million in expenses associated with the signing of
the KMC Asset Purchase Agreement, the decision to enter the rapidly growing
digital content management market, a proxy contest earlier in the year and
an outside study commissioned on the company's R&D tax credit position.
Management Commentary
Rick Roll, president and CEO, said, "We established aggressive profit
objectives for fiscal 2008, and despite the dramatic changes taking place
in our traditional end markets, we achieved our bottom-line performance
goals. We also made significant progress in advancing the strategic
initiatives we rolled out in March of last year. Key strategic milestones
during fiscal 2008 included a $6.4 million, year-over-year reduction in our
combined cost of goods sold and operating expenses, our signing of a
definitive agreement with Kyocera Mita Corporation calling for the sale and
perpetual licensing back of our intellectual property, and our decision to
enter the rapidly growing digital content management sector. Subsequent to
the end of our fiscal year, we took an important step toward this latter
objective when we announced our plans to purchase substantially all of the
assets of Prism Software. We believe this acquisition will serve as a
springboard toward our broader strategy of addressing the market for
solution-software and digital content management applications."
Roll said that Peerless recently retained the services of Roth Capital
Partners, a leading regional investment bank, which has been selected to
assist the company in identifying and evaluating additional acquisition
candidates in the digital content management sector.
"While growth in our traditional digital imaging markets has slowed
considerably in recent years, several related industry segments are
expanding rapidly," Roll said. "We have spent much of the past year
analyzing these segments and have formulated a strategy designed to
redirect Peerless' core competencies and position the company as a strong
participant within these high-growth markets."
The company's initial efforts have been focused on document solutions
applications and all-in-one (AIO) imaging devices -- both of which exist
within the broader $8 billion digital content management industry. A
leading independent research firm estimates that document solutions -- the
segment in which Prism competes -- is growing domestically at a compound
annul rate of 27%. The AIO sector is estimated to be growing globally at a
compound annual rate of 26%, and Peerless' new wholly owned subsidiary, Cue
Imaging Corporation, is pursuing opportunities in that space.
"We believe these and other initiatives we are pursuing will provide
Peerless with new opportunities for sustained, long-term growth and
enhanced shareholder value," Roll said. "We are encouraged by the broad
base of additional prospects that exist within the digital content
management sector, and will be working closely with our investment bankers
to identify other compelling acquisition candidates. We are confident that
the strategy we are pursuing is the best course for addressing our
overarching objective of building value for Peerless shareholders."
To help facilitate its growth strategy, the company also recently named
Andrew Lombard as vice president of corporate development. "Andy joins
Peerless with extensive experience as a senior executive with both private
and public companies," Roll said. "His management background and
entrepreneurial drive will be extremely valuable as we expand our presence
in the digital content management arena. Andy also serves as president of
Cue Imaging Corporation, which will be advancing our AIO imaging device
program." Lombard, 44, was previously chairman and CEO of Protégé Sports, a
digital media and sports Internet company he co-founded in 2005. He also
was founder, chairman and CEO of airBand Communications, a wireless
communications service provider; and served in executive management
positions with Adaptive Broadband Corporation (NASDAQ: ADAP), a wireless
broadband equipment company. Lombard also held several positions with
Motorola, including director of strategy and new business at Motorola
Network Ventures.
Peerless stockholders are scheduled to vote on the Kyocera Mita asset sale
on April 28, 2008, and the acquisition of substantially all of the assets
of Prism Software is expected to close within the next 60 days. Roll said
that until these two transactions are finalized, it will be difficult for
management to provide guidance on Peerless' anticipated financial
performance for fiscal 2009. "Once we have closed these two transactions we
intend to complete our revenue and earnings forecasts and will share our
expectations with stockholders during a future earnings presentation," Roll
said. "As we have previously stated, the Kyocera Mita asset sale is a key
component of our overall strategy for enhancing shareholder value. We
strongly encourage our stockholders to vote their shares as soon as
possible in favor of the transaction. We are very encouraged by our recent
accomplishments and look forward to reporting on our ongoing progress
throughout the coming fiscal year."
Peerless Systems Conference Call
Management will hold a conference call to discuss fiscal fourth 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 888-713-4199 (617-213-4861 for
international callers) and entering the passcode 79712991. 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
April 12, 2008, by calling 888-286-8010 (617-801-6888 for international
callers) and entering the passcode 33887334.
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, stockholder approval of the sale
of substantially all of our intellectual property to Kyocera Mita
Corporation, 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 October 31, 2007, filed December 12, 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
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
-----------------------------------
Three Months Ended
January 31,
-----------------------------------
2008 2007
---------------- -----------------
Revenues:
Product licensing $ 6,387 68.5% $ 6,134 70.5%
Engineering services and
maintenance 2,939 31.5% 2,569 29.5%
Hardware and other sales - 0.0% 1 0.0%
------- --------
Total revenues 9,326 100.0% 8,704 100.0%
------- --------
Cost of revenues:
Product licensing 575 6.2% 756 8.7%
Engineering services and
maintenance 1,658 17.8% 2,210 25.4%
Hardware and other sales - 0.0% 243 2.8%
------- --------
Total cost of revenues 2,233 23.9% 3,209 36.9%
------- --------
Gross margin 7,093 76.1% 5,495 63.1%
------- --------
Operating expenses:
Research and development 746 8.0% 1,233 14.2%
Sales and marketing 629 6.7% 712 8.2%
General and administrative 2,454 26.3% 2,090 24.0%
------- --------
Total operating expenses 3,829 41.1% 4,035 46.4%
------- --------
Income from operations 3,264 35.0% 1,460 16.8%
Other income 238 2.6% 143 1.6%
------- --------
Income before income taxes 3,502 37.6% 1,603 18.4%
Provision (benefit) for income taxes (4,982) (53.4)% 15 1.0%
------- --------
Net income $ 8,484 91.0% $ 1,588 18.2%
======= ========
Basic earnings per share $ 0.49 $ 0.09
======= ========
Diluted earnings per share $ 0.47 $ 0.09
======= ========
Weighted average common shares
outstanding - basic 17,458 17,152
======= ========
Weighted average common shares
outstanding - diluted 18,181 18,464
======= ========
PEERLESS SYSTEMS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
---------------------------------------
Twelve Months Ended
January 31,
---------------------------------------
2008 2007
------------------ -------------------
Revenues:
Product licensing $ 17,809 62.6% $ 21,758 65.2%
Engineering services and
maintenance 10,632 37.4% 11,232 33.6%
Hardware and other sales 2 0.0% 393 1.2%
-------- ---------
Total revenues 28,443 100.0% 33,383 100.0%
-------- ---------
Cost of revenues:
Product licensing 3,339 11.7% 4,612 13.8%
Engineering services and
maintenance 6,554 23.0% 8,768 26.3%
Hardware and other sales - 0.0% 670 2.0%
-------- ---------
Total cost of revenues 9,893 34.8% 14,050 42.1%
-------- ---------
Gross margin 18,550 65.2% 19,333 57.9%
-------- ---------
Operating expenses:
Research and development 4,394 15.5% 6,706 20.1%
Sales and marketing 2,539 8.9% 3,040 9.1%
General and administrative 7,272 25.6% 6,746 20.2%
-------- ---------
Total operating expenses 14,205 49.9% 16,492 49.4%
-------- ---------
Income from operations 4,345 15.3% 2,841 8.5%
Other income 833 2.9% 468 1.4%
-------- ---------
Income before income taxes 5,178 18.2% 3,309 9.9%
Provision (benefit) for income
taxes (4,969) (17.5)% 23 0.1%
-------- ---------
Net income $ 10,147 35.7% $ 3,286 9.8%
======== =========
Basic earnings per share $ 0.59 $ 0.19
======== =========
Diluted earnings per share $ 0.56 $ 0.17
======== =========
Weighted average common shares
outstanding - basic 17,321 17,100
======== =========
Weighted average common shares
outstanding - diluted 18,154 18,912
======== =========
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