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 third quarter ended September 30, 2011.
Third Quarter 2011 Highlights
- Cost of revenue declined 30% year-over-year, 33%
sequentially
- Gross profit increased 11% year-over-year, 16%
sequentially
- Gross sales renewals increased 11% year-over-year
- Company secured $5.2 million in financing
Management Change
The Board of Directors reached an agreement in principle to
appoint Greg Thomas as its chief executive officer and is engaged
with Mr. Thomas to execute a formal employment agreement by
November 15, 2011. Gary Guseinov, the Company's former chairman and
chief executive officer, resigned effective August 1, 2011. Kevin
Harris, the Company's chief financial officer, has been appointed
interim chief executive officer.
Mr. Thomas has served as an independent advisor to the Board of
Directors and the Company since May 2011. He brings to
CyberDefender more than 20 years of industry expertise in growing
and managing highly successful direct-to-consumer marketing
companies.
"Our third quarter was dedicated to the
implementation of our strategic plan, and I am excited to report
our efforts yielded meaningful improvements to a number of key
metrics," said Mr. Thomas. "Our company plan for
stability, growth and profitability includes comprehensive efforts
across front-end customer acquisition, product portfolio, call
center efficiency, collections, and our eCommerce platform. We
are committed to providing best-of-breed products and services to
our customers while achieving sustainable profitability and
building a solid foundation so that we may capitalize on the
opportunity ahead of us."
"Meeting our goals for profitability will require perseverance,
determination and commitment and this will not be accomplished
overnight. I am, however, confident we have the right plan and
the right team in place," concluded Mr. Thomas.
Results for the Quarter Ended September 30,
2011
GAAP revenue for the third quarter of 2011 was $11.8 million,
compared to $12.7 million reported in the same quarter of 2010.
Gross sales for the third quarter of 2011 were $13.8 million
compared to $18.6 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).
Cost of revenue for the third quarter of 2011 was $4.1 million
compared to $5.8 million for the third quarter of 2010.
Gross profit for the third quarter of 2011 was $7.7 million
compared to $6.9 million in the third quarter of 2010.
Gross margins in the third quarter of 2011 increased to 65% of
net revenue compared to 54% in the same quarter of 2010.
During the third quarter, the Company raised an aggregate of
$5.2 million in financing. The company closed $3.2 million of
the aggregate during the third quarter, and will recognize the
remaining $2 million during the fourth quarter. The financing is
described in a Form 8-K filed with the Securities and Exchange
Commission on October 4, 2011.
"As we continue to explore opportunities to improve the
capitalization of the company, we believe that the additional
financing raised during the third quarter will permit the Company
to continue to execute on its strategic repositioning plan," said
Interim Chief Executive Officer and Chief Financial Officer Kevin
Harris.
The Company ended the quarter with deferred revenue of $18.5
million and unrestricted cash of $1.5 million.
Results for the Nine Months Ended September 30,
2011
GAAP revenue for the nine months ended September 30, 2011 was
$39.9 million, compared to $32.0 million reported during the same
period of 2010. Gross sales (a non-GAAP measure) for the nine
months ended September 30, 2011 was $50.9 million, compared to
$42.8 million reported during the same period of 2010.
Cost of revenue for the first nine months of 2011 was $17.3
million, compared to $13.0 million reported during the same period
of 2010.
Gross profit for the first nine months of 2011 was $22.6
million, compared to $18.9 million reported during the same period
of 2010.
2011 Guidance
For the full year 2011, the Company expects gross sales in the
range of $63 to $65 million.
Non-GAAP Financial Measures
Gross sales are a non-GAAP measure that the Company 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 nine months ended September 30, 2011 and
September 30, 2010.
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
Gross Sales |
$ 13,820,120 |
|
$ 18,559,760 |
|
$ 50,917,727 |
|
$ 42,801,971 |
Less: Refunds |
(1,433,312) |
|
(2,455,713) |
|
(5,603,873) |
|
(5,411,358) |
Less: Uncollected EZ pay |
(729,714) |
|
(1,276,108) |
|
(2,639,899) |
|
(2,070,470) |
Less: Change in deferred revenue |
129,455 |
|
(2,081,836) |
|
(2,790,917) |
|
(3,384,124) |
Net revenue |
$ 11,786,549 |
|
$ 12,746,103 |
|
$ 39,883,038 |
|
$ 31,936,019 |
Conference Call Information
The Company will host a conference call to discuss third quarter
2011 results today, Thursday, November 10, 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 #: 382231. 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 Company's ability to execute on its strategic repositioning
plan and its ability to achieve profitability. . 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) |
|
|
|
|
|
|
September 30, 2011 |
December 31, 2010 |
ASSETS |
|
|
Current assets |
|
|
Cash |
$ 1,546,221 |
$ 2,649,061 |
Restricted cash |
2,255,074 |
3,079,394 |
Accounts receivable |
1,688,276 |
2,385,920 |
Deferred financing costs, current |
124,241 |
103,484 |
Prepaid expenses |
174,225 |
195,258 |
Deferred charges, current |
335,174 |
1,147,764 |
|
|
|
Total current assets |
6,123,211 |
9,560,881 |
|
|
|
Property and equipment, net |
1,508,744 |
1,742,675 |
Deferred financing costs, net of current
portion |
-- |
6,377 |
Deferred charges, net of current portion |
41,467 |
402,772 |
Other assets |
288,225 |
269,314 |
|
|
|
Total assets |
$ 7,961,647 |
$ 11,982,019 |
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 5,794,669 |
$ 6,275,896 |
Accounts payable and accrued
expenses – related party |
3,140,890 |
1,447,257 |
Accrued expenses |
1,887,959 |
1,788,435 |
Deferred revenue, current |
13,707,888 |
11,342,211 |
Convertible notes payable –
related party, net of discount |
10,458,924 |
-- |
Capital lease obligations,
current |
129,552 |
137,435 |
|
|
|
Total current liabilities |
35,119,882 |
20,991,234 |
|
|
|
Deferred rent |
804,777 |
466,920 |
Deferred revenue, less current portion |
4,841,681 |
4,116,442 |
Convertible notes payable – related
party |
150,000 |
9,825,056 |
Convertible notes payable, net of
discount |
1,554,059 |
-- |
Capital lease obligations, less current
portion |
78,856 |
168,572 |
|
|
|
Total liabilities |
42,549,255 |
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 September
30, 2011 and December 31, 2010, respectively |
-- |
-- |
Common stock, par value $0.001; 100,000,000
shares authorized; 27,916,440 and 27,327,702 shares issued and
outstanding at September 30, 2011 and December 31, 2010,
respectively |
28,115 |
27,328 |
Treasury stock at par value, 199,287
shares |
(199) |
-- |
Additional paid-in capital |
67,511,341 |
60,926,037 |
Accumulated deficit |
(102,126,865) |
(84,539,570) |
|
|
|
Total stockholders' deficit |
(34,587,608) |
(23,586,205) |
|
|
|
Total liabilities and stockholders'
deficit |
$ 7,961,647 |
$ 11,982,019 |
|
CYBERDEFENDER
CORPORATION CONDENSED STATEMENTS OF OPERATIONS |
(UNAUDITED) |
|
|
|
|
|
|
For the Three
Months Ended |
For the Nine
Months Ended |
|
September 30,
2011 |
September 30,
2010 |
September 30,
2011 |
September 30,
2010 |
Net revenue: |
|
|
|
|
Services |
$ 7,345,340 |
$ 7,928,021 |
$ 25,882,764 |
$ 17,592,282 |
Software and other |
4,441,209 |
4,818,082 |
14,000,275 |
14,343,737 |
Total net revenue |
11,786,549 |
12,746,103 |
39,883,039 |
31,936,019 |
Cost of revenue: |
|
|
|
|
Services |
3,935,382 |
5,616,316 |
16,588,621 |
12,348,299 |
Software and other |
152,132 |
217,581 |
727,271 |
654,449 |
Total cost of revenue |
4,087,514 |
5,833,897 |
17,315,892 |
13,002,748 |
|
|
|
|
|
Gross profit |
7,699,035 |
6,912,206 |
22,567,147 |
18,933,271 |
|
|
|
|
|
Operating expenses: |
|
|
|
|
Media and marketing
services |
5,145,098 |
5,954,673 |
17,074,771 |
16,038,652 |
Media and marketing services –
related party |
175,534 |
6,500,634 |
861,766 |
18,623,694 |
Product development |
571,289 |
742,207 |
2,334,051 |
2,457,726 |
Selling, general and
administrative |
4,610,523 |
4,252,866 |
15,574,806 |
11,402,399 |
Depreciation and
amortization |
111,353 |
51,867 |
316,709 |
127,012 |
Total operating expenses |
10,613,797 |
17,502,247 |
36,162,103 |
48,649,483 |
|
|
|
|
|
Loss from operations |
(2,914,762) |
(10,590,041) |
(13,594,956) |
(29,716,212) |
|
|
|
|
|
Interest expense – related party |
(1,866,870) |
(279,382) |
(3,620,971) |
(556,080) |
Interest expense, net |
(255,318) |
(11,897) |
(268,651) |
(945,116) |
Loss on securities modifications |
-- |
-- |
(102,717) |
-- |
|
|
|
|
|
Net loss |
$ (5,036,950) |
$ (10,881,320) |
$ (17,587,295) |
$ (31,217,408) |
|
|
|
|
|
Basic and fully diluted net
loss per share |
$ (0.18) |
$ (0.40) |
$ (0.63) |
$ (1.18) |
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
Basic and fully diluted |
27,745,673 |
27,027,189 |
27,832,353 |
26,408,814 |
CONTACT: Investor Relations:
(213) 689-8631 x 401
IR@CyberDefender.com
IR Site: www.CyberDefenderCorp.com
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