St. Bernard Software Announces Its Financial Results for the Third Quarter Ended September 30, 2010
Nov. 16, 2010 (Marketwire) --
SAN DIEGO, CA -- (Marketwire) -- 11/16/10 -- St. Bernard Software, Inc. (OTCBB: SBSW), a leader in Secure Content Management (SCM) solutions, today announced unaudited financial results for its third quarter ended September 30, 2010.
Third Quarter 2010 Financial and Operational Highlights
-- Company gained approximately 2,000 customers as a result of the recent
purchase of substantially all of the assets of Red Condor, Inc., an
award-winning provider of email security.
-- Net billings* for the 2010 third quarter totaled $5.6 million, an
increase of approximately 29% compared to the same period in 2009.
-- Net billings* for the nine months ended September 30, 2010 were $15.4
million, an increase of approximately 16% over the same period last
year.
-- Cash and cash equivalents increased to $2.8 million as of September 30,
2010 from $2.5 million as of December 31, 2009 and $1.4 million as of
September 30, 2009.
-- Generated positive cash flow of $335,000 for YTD 2010 compared to
$630,000 negative cash flow for the same period in 2009, an increase
of 153%. Cash flow for the period includes $3.2 million of convertible
notes issued by the company in connection with a Security Purchase
Agreement. The notes can be converted into shares of Company stock at
$1.10 per share.
-- Q3 operating expenses increased approximately 36 % from $3.3 million in
2009 to $4.4 million in 2010 as a result of additional operating
expenses and transaction costs associated with the Red Condor
Transaction.
-- Year to date net loss increased to $1.9 million through September 30,
2010 from $600,000 for the same period of 2009 mainly a result of
additional operating expenses and transaction costs associated with the
Red Condor Transaction.
-- In August 2010, the company entered into a lease agreement for new
corporate offices effective January 1, 2011. The Company's lease
payment is expected to decrease approximately $1 million per year
starting in 2011.
"Our third quarter met operational expectations and we are optimistic about the substantial growth in billings that we saw compared to 2009," said Lou Ryan, CEO of St. Bernard Software. "Additionally, we were fully prepared for the integration of Red Condor Inc. and are pleased with the results. Our expense line continues to be within expectations."
Third Quarter and Year-to-Date 2010 Net Billings*
Net billings* increased for the quarter ended September 30, 2010 by approximately 29% from $4.4 million in 2009 to $5.6 million in 2010. Year to date, for the nine months ending September 30, 2010, net billings totaled $15.4 million, a 16% increase compared to $13.3 million for the same period ending September 30, 2009.
* Net billings represent the amount of subscription contracts billed to customers net of discounts and are not numerical measurements that can be calculated in accordance with GAAP. The Company provides this measurement in its financial performance because this measurement provides a consistent basis for understanding the company's sales activities for the current period. The Company believes the billing measurement is useful to investors because the GAAP measurements of revenue and deferred revenue in the current period include subscription contracts commenced in the prior periods. The rollforward of deferred revenue (which includes net billings and revenue) for the third quarter of 2010 is set forth at the end of this press release.
Asset Purchase Agreement
On July 28, 2010, the Company entered into an Asset Purchase Agreement ("APA") with Red Condor, Inc., an award-winning provider of fully managed email security solutions, pursuant to which St. Bernard purchased substantially all of the assets and assumed certain liabilities of Red Condor in return for restricted shares of Common Stock of St. Bernard. The acquisition builds upon the success of St. Bernard's existing hybrid platform as Red Condor's managed security solutions is a natural extension of St. Bernard's product portfolio and business strategy. As a result of the acquisition, the Company gained approximately 2,000 new customers, a highly scalable on-demand platform, a sophisticated Threat Analysis Center, and a world class provisioning engine.
During the third quarter, we focused on and completed a significant portion of the transition of the Red Condor product on to our current hybrid platform. We have integrated Red Condor's 24x7x365 messaging Threat Analysis Center into our Unified Threat Intelligence Center.
Financing/Credit Facilities
On August 2, 2010, the Company issued convertible notes (the "Notes") in the amount of $3.2 million pursuant to a Securities Purchase Agreement ("SPA") with certain Noteholders (the "Investors"). Pursuant to the terms of the SPA, St. Bernard issued to the Investors Notes and Warrants ("Warrants") to purchase up to 210,111 shares of Common Stock in the aggregate. Under the terms of the Notes, the Notes mature on August 2, 2014. Interest on the outstanding principal balance accrues at a rate of three percent (3.0%) per annum and accrued interest is added to the balance of the Notes. All unpaid principal and interest on the Notes is due and payable at maturity. The Investors may convert the Notes at any time into shares of Common Stock of St. Bernard at a fixed conversion price of $1.10. At any time after the issuance date of the Notes and prior to the Maturity Date, following the occurrence of any period of 60 consecutive trading days where the average closing price of the Common Stock of St. Bernard for such period is equal to or greater than $1.25 per share, the entire unpaid principal amount of the Notes together with any unpaid interest shall be converted into Common Stock of St. Bernard at a conversion price of $1.10. The Warrants have an exercise price equal to $1.10 per share, are immediately exercisable and expire on August 2, 2014. The Company expects to use the additional funding to improve the Company's market leadership position through accelerated hybrid platform development and the delivery of new and innovative offerings to its global customers.
The Company has an existing credit facility with Silicon Valley Bank under which there was a borrowing availability of $1.9 million with no balance outstanding as of September 30, 2010.
Corporate Facilities Lease Agreement
On August 2, 2010, the Company entered into a lease agreement (the "New Lease") for approximately 28,633 square feet. The premises will serve as the Company's new headquarters when its current lease expires on December 31, 2010. The New Lease has a term of sixty-five (65) months. Beginning January 1, 2011, the Company will only be required to pay a monthly Base Rent in the amount of $46,000. The Company currently leases approximately 56,000 square feet for its corporate office space. The current facility lease calls for monthly rent of approximately $142,000 per month.
Business Outlook
Mr. Ryan added, "In addition to strong current quarterly billings and operational execution, we anticipate significant expense savings as we move to our new Company Headquarters in Q1 2011. The move enables us to significantly improve our space creating long term operational benefits while reducing annual cost by approximately $1 million. We expect that this savings will be reinvested in our overall growth strategy.
"We are also excited about this quarter's new product offering; iPrism RF. iPrism RF, our Remote Filtering Client, has been well received and sales are meeting expectations. We have an ambitious new product schedule and that we will continue to invest in our engineering and product development efforts to differentiate our offerings.
"Year to date we have executed well against our growth plan. We began this year with an aggressive strategy which outlined new products, new experienced executives and the acquisition of additional working capital. We have met all of our goals to and are poised to exit 2010 from a position of strength."
About St. Bernard
St. Bernard Software develops and markets on demand, on-premises, and hybrid Secure Content Management (SCM) solutions to the mid-enterprise and small to medium business (SMB) markets. The company recently expanded its product portfolio with the acquisition of substantially all of the assets of Red Condor, a leading provider of messaging security solutions. With an extensive ISP and MSP partner network and millions of end users worldwide in more than 8,000 enterprises, educational institutions, SMB, and government agencies, St. Bernard strives to deliver simple, high performance solutions that offer excellent value to our customers.
Based in San Diego, California, St. Bernard (OTCBB: SBSW) markets its solutions through a network of value added resellers, distributors, system integrators, OEM partners and directly to end users. For more information about St. Bernard Software, visit www.stbernard.com.
Forward Looking Statement
This press release may contain forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, among other things, any projections of billings or net billings, savings and our ability to reinvest any savings towards our growth strategy; any statements of the plans, strategies, and objectives of management (including statements about product schedules, investment in engineering and product development efforts to differentiate St. Bernard's offerings, and statements about our ability to exit 2010 from a position of strength); any statements concerning proposed new products, services, or developments; statements of belief and any statement of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include, among other things, performance of contracts by customers and partners; the ability to retain the customers obtained through the recent Red Condor transaction; employee management issues; the timely development, production and acceptance of products and services and their feature sets; the challenge of managing asset levels, including inventory; the flow of products into third-party distribution channels; our ability to integrate our acquisitions in accordance to plan; and the difficulty of keeping expense growth at modest levels while increasing revenues. These and other risks and factors that could cause events or our results to differ from those expressed or implied by such forward-looking statements are described in our most recent annual report on Form 10-K, as well as other subsequent filings with the Securities and Exchange Commission. We assume no obligation and do not intend to update these forward-looking statements.
©2010 St. Bernard Software Inc. All rights reserved. The St. Bernard Software logo, iPrism, iGuard, the Red Condor logo, and Vx Technology are trademarks of St. Bernard Software Inc. All other trademarks and registered trademarks are hereby acknowledged.
St. Bernard Software, Inc.
Condensed Consolidated Balance Sheets
September 30, December 31,
2010 2009
------------- -------------
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 2,789,000 $ 2,454,000
Accounts receivable - net of allowance for
doubtful accounts of $30,000 and $13,000
at September 30, 2010 and December 31,
2009, respectively 4,446,000 2,534,000
Inventories - net 447,000 242,000
Prepaid expenses and other current assets 409,000 335,000
------------- -------------
Total current assets 8,091,000 5,565,000
Fixed Assets - Net 588,000 564,000
Goodwill 8,280,000 7,568,000
Intangible Assets - Net 619,000 -
Other Assets 737,000 148,000
------------- -------------
Total Assets $ 18,315,000 $ 13,845,000
============= =============
Liabilities and Stockholders' Deficit
Current Liabilities
Short-term borrowings $ 483,000 $ 2,250,000
Accounts payable 981,000 817,000
Accrued compensation 1,349,000 834,000
Accrued expenses and other current
liabilities 819,000 597,000
Warranty liability 190,000 192,000
Capitalized lease obligations - 22,000
Deferred revenue 10,942,000 10,209,000
------------- -------------
Total current liabilities 14,764,000 14,921,000
Convertible Note Payable 3,175,000 -
Deferred Revenue 10,054,000 7,708,000
------------- -------------
Total liabilities 27,993,000 22,629,000
------------- -------------
Stockholders' Deficit
Preferred stock, $0.01 par value; 5,000,000
shares authorized; no shares issued and
outstanding - -
Common stock, $0.01 par value; 50,000,000
shares authorized; 15,922,696 and
13,319,991 shares issued and outstanding at
September 30, 2010 and December 31, 2009,
respectively 157,000 132,000
Additional paid-in capital 41,742,000 40,774,000
Accumulated deficit (51,577,000) (49,690,000)
------------- -------------
Total stockholders' deficit (9,678,000) (8,784,000)
------------- -------------
Total Liabilities and Stockholders' Deficit $ 18,315,000 $ 13,845,000
============= =============
St. Bernard Software, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
2010 2009 2010 2009
------------ ------------- ------------ ------------
Revenues
Subscription $ 3,623,000 $ 3,615,000 $ 10,534,000 $ 10,996,000
Appliance 961,000 875,000 2,727,000 2,691,000
License 3,000 3,000 56,000 9,000
------------ ------------- ------------ ------------
Total Revenues 4,587,000 4,493,000 13,317,000 13,696,000
------------ ------------- ------------ ------------
Cost of Revenues
Subscription 678,000 416,000 1,488,000 1,316,000
Appliance 651,000 594,000 1,884,000 1,826,000
License 1,000 9,000 13,000 11,000
------------ ------------- ------------ ------------
Total Cost of
Revenues 1,330,000 1,019,000 3,385,000 3,153,000
------------ ------------- ------------ ------------
Gross Profit 3,257,000 3,474,000 9,932,000 10,543,000
Operating Expenses
Sales and
marketing 1,868,000 1,474,000 5,288,000 4,715,000
Research and
development 1,249,000 860,000 2,964,000 2,988,000
General and
administrative 1,330,000 462,000 3,335,000 2,709,000
Impairment
expense - 473,000 - 473,000
------------ ------------- ------------ ------------
Total Operating
Expenses 4,447,000 3,269,000 11,587,000 10,885,000
------------ ------------- ------------ ------------
(Loss) Income from
Operations (1,190,000) 205,000 (1,655,000) (342,000)
Other Expense
(Income)
Interest expense
- net 37,000 79,000 133,000 250,000
Other expense
(income) 79,000 9,000 99,000 (29,000)
Total Other Expense 116,000 88,000 232,000 221,000
------------ ------------- ------------ ------------
Loss (Income)
Before Income
Taxes (1,306,000) 117,000 (1,887,000) (563,000)
Income tax expense - - - (5,000)
------------ ------------- ------------ ------------
Net (Loss) Income $ (1,306,000) $ 117,000 $ (1,887,000) $ (568,000)
============ ============= ============ ============
(Loss) Income Per
Common Share -
Basic $ (0.09) $ 0.01 $ (0.14) $ (0.04)
------------ ------------- ------------ ------------
(Loss) Income Per
Common Share -
Diluted $ (0.09) $ 0.01 $ (0.14) $ (0.04)
------------ ------------- ------------ ------------
------------ ------------- ------------ ------------
Weighted Average
Shares
Outstanding -
Basic 15,069,595 13,720,371 13,956,331 14,467,141
============ ============= ============ ============
Weighted Average
Shares
Outstanding -
Diluted 15,069,595 13,873,815 13,956,331 14,467,141
============ ============= ============ ============
St. Bernard Software, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended
September 30,
--------------------------
2010 2009
------------ ------------
Cash Flows From Operating Activities
Net loss $ (1,887,000) $ (568,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 314,000 281,000
Allowance for doubtful accounts (9,000) (32,000)
Loss on change in fair value of warrant
derivative liability 102,000 8,000
Write-off of capitalized software - 473,000
Stock-based compensation expense 135,000 486,000
Noncash interest expense 48,000 116,000
Change in operating assets and liablilities,
net of effect of acquisition:
Accounts receivable (1,265,000) 495,000
Inventories (156,000) (10,000)
Prepaid expenses and other assets (650,000) (418,000)
Accounts payable (256,000) (376,000)
Accrued expenses and other current
liabilities 47,000 (1,165,000)
Accrued compensation 515,000 543,000
Warranty liability (2,000) -
Deferred revenue 2,102,000 67,000
------------ ------------
Net cash used by operating activities (962,000) (100,000)
------------ ------------
Cash Flows From Investing Activities
Acquisition, net of cash acquired (66,000) -
Purchases of fixed assets (59,000) (75,000)
------------ ------------
Net cash used by investing activities (125,000) (75,000)
------------ ------------
Cash Flows From Financing Activities
Proceeds from convertible note payable 3,175,000 -
Proceeds from stock option exercises 12,000 -
Proceeds from the sales of stock under the
employee stock purchase plan 24,000 24,000
Principal payments on capitalized lease
obligations (22,000) (117,000)
Net decrease in short-term borrowings (1,767,000) (362,000)
------------ ------------
Net cash provided (used) by financing
activities 1,422,000 (455,000)
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents 335,000 (630,000)
Cash and Cash Equivalents at Beginning of
Period 2,454,000 2,051,000
------------ ------------
Cash and Cash Equivalents at End of Period $ 2,789,000 $ 1,421,000
============ ============
St. Bernard Software, Inc.
Rollforward of GAAP Deferred Revenue (Unaudited)
Three Months Ended September 30, 2010
GAAP deferred revenue balance at June 30, 2010 $ 19,000
Assumed deferred revenue of Red Condor, Inc 977
Net billings during third quarter 2010 5,606
Less GAAP revenue recognized during third quarter 2010 (4,587)
-----------
GAAP deferred revenue balance at September 30, 2010 $ 20,996
===========
Rollforward of GAAP Deferred Revenue (Unaudited)
Nine Months Ended September 30, 2010
GAAP deferred revenue balance at January 1, 2010 $ 17,917
Assumed deferred revenue of Red Condor, Inc 977
Net billings year to date 2010 15,419
Less GAAP revenue recognized year to date 2010 (13,317)
-----------
GAAP deferred revenue balance at September 30, 2010 $ 20,996
===========
Contact:
Lorrie Hunsaker
St. Bernard Software
Investor and Public Relations Manager
(858) 524-2002
Email Contact
Source: Marketwire (November 16, 2010 - 8:00 AM EST)
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