Financial Data
PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, September 30,
2008 2007
Assets
Current assets:
Cash and cash equivalents $37,721 $62,705
Accounts receivable, net of allowances 6,246 6,383
Other assets - current 8,190 3,496
Total current assets 52,157 72,584
Property and equipment, net 4,125 2,791
Purchased technology and intangible
assets, net 22,323 3,571
Goodwill 54,943 14,497
Other assets - noncurrent 2,994 1,037
Total assets $136,542 $94,480
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $2,855 $1,186
Accrued compensation and related liabilities 6,050 3,922
Deferred revenue 15,010 11,805
Income taxes payable - current 4,099 11,733
Accrued restructuring charges - current 658 1,905
Other liabilities - current 10,318 1,744
Total current liabilities 38,990 32,295
Accrued restructuring charges - noncurrent 8 358
Income taxes payable - noncurrent 13,629 -
Other liabilities - noncurrent 2,508 2,055
Total liabilities 55,135 34,708
Stockholders' equity:
Preferred stock - -
Common stock 29 28
Additional paid-in capital 235,562 206,800
Accumulated deficit (61,786) (55,311)
Accumulated other comprehensive loss (466) (67)
Less: Cost of treasury stock (91,932) (91,678)
Total stockholders' equity 81,407 59,772
Total liabilities and
stockholders' equity $136,542 $94,480
See notes to unaudited condensed consolidated financial statements
PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three months ended Twelve months ended
September 30, September 30,
2008 2007 2008 2007
Revenues:
License fees $17,249 $13,578 $64,359 $39,655
Subscription fees 112 - 132 -
Service fees 2,641 2,087 9,211 7,362
Total revenues 20,002 15,665 73,702 47,017
Cost of revenues:
License fees 98 234 519 927
Subscription fees 144 - 164 -
Service fees 2,186 1,609 7,864 7,377
Amortization of purchased
intangible assets 828 471 1,272 1,387
Total cost of revenues 3,256 2,314 9,819 9,691
Gross margin 16,746 13,351 63,883 37,326
Operating expenses:
Research and development 9,591 5,137 29,660 19,193
Sales and marketing 4,384 2,593 13,269 11,992
General and administrative 6,291 4,357 22,512 16,611
Restructuring 57 1,036 237 4,118
Total operating expenses 20,323 13,123 65,678 51,914
Income (loss) from operations (3,577) 228 (1,795) (14,588)
Interest and other income, net 1,000 470 1,602 1,984
Income (loss) before income taxes (2,577) 698 (193) (12,604)
Income tax expense 1,993 1,366 6,030 3,805
Net loss $(4,570) $(668) $(6,223) $(16,409)
Loss per share:
Basic and diluted $(0.16) $(0.02) $(0.23) $(0.63)
Shares used in loss per share
calculation:
Basic and diluted 27,936 26,736 27,523 25,976
See notes to unaudited condensed consolidated financial statements
PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
September June September Twelve months ended
30, 30, 30, September 30,
2008 2008 2007 2008 2007
Cash flows from operating
activities:
Net loss $(4,570) $(2,780) $(668) $(6,223) $(16,409)
Reconciliation to net
cash provided by
(used in) operating
activities:
Depreciation and
amortization 1,305 868 944 3,224 3,588
Stock-based compensation 4,010 3,605 2,311 12,302 6,235
Other non cash charges 79 - - 79 -
Loss from disposal of
fixed assets (7) (17) 4 9 55
Change in operating
assets and liabilities:
Accounts receivable (1,245) 524 (1,165) 1,540 2,067
Prepaid royalties and
maintenance (15) 6 (13) 23 73
Other assets 327 663 (235) 440 1,600
Accounts payable 681 652 305 1,330 (1,872)
Accrued compensation
and related
liabilities 1,094 322 644 1,128 (230)
Deferred revenue 444 (387) 109 2,521 4,257
Income taxes 1,306 1,104 1,435 5,617 2,715
Accrued restructuring
charges (28) (132) 1,015 (1,636) (2,171)
Other accrued
liabilities 126 (888) (730) 116 (2,347)
Net cash provided by
(used in) operating
activities 3,507 3,540 3,956 20,470 (2,439)
Cash flows from investing
activities:
Proceeds from sales of
marketable securities - - - - 105,214
Proceeds from maturities
of marketable securities - - - - 9,500
Purchases of marketable
securities - - - - (89,125)
Purchases of property and
equipment (1,137) (1,027) (427) (3,095) (800)
Purchases of technology - - (3,500) - (3,500)
Funds held in escrow - (18,706) - - -
Acquisition of businesses,
net of cash acquired (11,200) (17,715) - (47,621) -
Net cash provided by
(used in) investing
activities (12,337) (37,448) (3,927) (50,716) 21,289
Cash flows from financing
activities:
Proceeds from stock
purchases under stock
option and stock purchase
plans 803 1,173 3,839 5,526 8,993
Repurchase of common stock (254) - - (254) -
Net cash provided by
financing activities 549 1,173 3,839 5,272 8,993
Effect of changes in
exchange rates (99) (149) 83 (10) 119
Net increase (decrease) in
cash and cash equivalents (8,380) (32,884) 3,951 (24,984) 27,962
Cash and cash equivalents
at beginning of period 46,101 78,985 58,754 62,705 34,743
Cash and cash equivalents
at end of period $37,721 $46,101 $62,705 $37,721 $62,705
Supplemental disclosure of
cash flow information:
Non-cash financing
activity:
Fair value of stock
issued in connection
with acquisition 7,930 2,985 - 10,915 -
See notes to unaudited condensed consolidated financial statements
PHOENIX TECHNOLOGIES LTD.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) AND
NET EARNINGS (LOSS) PER SHARE
(in thousands, except per share data)
(unaudited)
Three months ended Twelve months ended
September 30, June 30, September 30, September 30,
2008 2008 2007 2008 2007
GAAP net loss $(4,570) $(2,780) $(668) $(6,223) $(16,409)
Equity-based
compensation
expense under
SFAS No. 123(R)(1) 4,010 3,605 2,311 12,302 6,183
Restructuring(2) 57 67 1,036 237 4,118
Amortization of
purchased intangible
assets (3) 828 373 471 1,272 1,387
Non-GAAP net income
(loss) $325 $1,265 $3,150 $7,588 $(4,721)
Non-GAAP earnings
(loss) per share:
Basic $0.01 $0.05 $0.12 $0.28 $(0.18)
Diluted $0.01 $0.04 $0.12 $0.26 $(0.18)
Shares used in
earnings (loss)
per share
calculation:
Basic 27,936 27,574 26,736 27,523 25,976
Diluted 29,460 29,253 27,681 29,219 25,976
These adjustments reconcile the Company's GAAP net loss to the
reported non-GAAP net income (loss). The Company believes that
presentation of net income and net income per share excluding
equity-based compensation, restructuring costs, and amortization of
purchased intangible assets provides meaningful supplemental
information to investors, as well as management, that is indicative of
the Company's core operating results and facilitates comparison of
operating results across reporting periods as well as comparison with
other companies. The Company uses these non-GAAP measures when
evaluating its financial results as well as for internal planning and
budgeting purposes. Equity-based compensation is excluded from
non-GAAP results because management believes it is useful to investors
to understand how the expenses associated with the adoption of SFAS
No. 123(R) are reflected in net income (loss). Restructuring costs
are excluded from non-GAAP financial results since they may not be
considered directly related to our ongoing business operations.
Amortization of purchased intangible assets, principally purchased
technology, is excluded from non-GAAP financial results since it
generally cannot be changed by management after an acquisition has
occurred. These non-GAAP measures should not be viewed as a
substitute for the Company's GAAP results, and may be different than
non-GAAP measures used by other companies.
(1) This represents equity-based compensation expense related to the
Company's adoption of SFAS No. 123(R) beginning October 1, 2005. For
the three months ended September 30, 2008, equity-based compensation
was $4.0 million, allocated as follows: $0.2 million to cost of goods
sold, $1.1 million to research and development, $0.5 million to sales
and marketing and $2.2 million to general and administrative. For the
three months ended June 30, 2008, equity-based compensation was $3.6
million, allocated as follows: $0.2 million to cost of goods sold,
$1.0 million to research and development, $0.4 million to sales and
marketing and $2.0 million to general and administrative. For the
three months ended September 30, 2007, non-cash equity-based
compensation was $2.3 million, allocated as follows: $0.5 million to
research and development, $0.3 million to sales and marketing and $1.5
million to general and administrative. For the twelve months ended
September 30, 2008, equity-based compensation was $12.3 million,
allocated as follows: $0.5 million to cost of goods sold, $3.3 million
to research and development, $1.5 million to sales and marketing and
$7.0 million to general and administrative. For the twelve months
ended September 30, 2007, non-cash equity-based compensation was $6.2
million, allocated as follows: $0.2 million to cost of goods sold,
$1.4 million to research and development, $1.0 million to sales and
marketing and $3.6 million to general and administrative. Management
believes that it is useful to investors to understand how the expenses
associated with the adoption of SFAS No. 123(R) are reflected in net
income.
The quarter ended March 31, 2008 is the first quarter during in which
the Company reported equity-based compensation expense under SFAS No.
123(R) in respect of stock options granted to the Company's four most
senior executives as approved by the Company's stockholders on January
2, 2008 (the "Performance Options"). Of the $4.0 million of
equity-based compensation for the three months ended September 30,
2008, $2.0 million was due to equity-based compensation expense which
resulted from the grant of the Performance Options. Of the $3.6
million of equity-based compensation for the three moths ended June
30, 2008, $1.9 million was due to equity-based compensation expense
which resulted from the grant of the Performance Options. Of the
$12.3 million of equity-based compensation for the twelve months ended
September 30, 2008, $5.9 million was due to equity-based compensation
expense which resulted from the grant of the Performance Options.
(2) The Company has incurred restructuring expenses, included in its GAAP
presentation of operating expenses, primarily due to workforce related
charges such as payments for severance and benefits and estimated
costs of exiting and terminating facility lease commitments related to
formal restructuring plans approved by the Board of Directors in June
2006, September 2006, November 2006 and September 2007. For the three
months ended September 30, 2008, costs related to exiting and
terminating facilities leases totaled approximately $0.1 million due
mainly to an increase in the fiscal year 2003 restructuring reserve
for the Irvine facility by $0.1 million due to projected increased
operating expenses over the remaining term of the lease. For the
three months ended June 30, 2008, cost related to exiting and
terminating 2 facility leases totaled approximately $0.1 million due
to a change in estimate of sublease income. For the three months
ended September 30, 2007, severance and benefits totaled $0.4 million
and cost related to exiting and terminating 2 facility lease totaled
$0.5 million. In addition, for the three months ended September 30,
2007, the Company increased the fiscal year 2003 restructuring reserve
for the Irvine facility by $0.1 million due to projected increased
operating expenses over the remaining term of the lease. For the
twelve months ended September 30, 2008, restructuring costs were $0.2
million which were composed mainly of terminating facilities lease
costs. For the twelve months ended September 30, 2007, restructuring
costs were $4.1 million. The severance and benefits costs totaled
$2.2 million. Costs related to terminating facility leases totaled
$1.9 million. The Company believes that these items do not reflect
expected future operating expenses nor does the Company believe that
they provide a meaningful evaluation of current versus past
operational performance.
(3) This represents amortization of purchased intangible assets,
principally purchased technology, in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS No. 144") and SFAS No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed" ("SFAS
No. 86"). For the three months ended September 30, 2008, amortization
of purchased intangible assets was $0.8 million allocated to cost of
goods sold, which includes the amortization of the new acquired assets
from recent acquisitions. For the three months ended June 30, 2008,
amortization of purchased intangible assets was $0.4 million allocated
to cost of goods sold. For the three months ended September 30, 2007,
amortization of purchased intangible assets was $0.5 million allocated
to cost of goods sold. For the twelve months ended September 30,
2008, amortization of purchased intangible assets was $1.3 million
allocated to cost of goods sold. For the twelve months ended September
30, 2007, amortization of purchased intangible assets was $1.4 million
allocated to cost of goods sold. Future acquisitions may cause
amortization expenses to be higher than these amounts.
