CyberDefender CEO Discusses Q3 2010 Results - Earnings Call Transcript
CyberDefender Corporation (
)
Q3 2010 Earnings Call Transcript
November 8, 2010 4:30 pm ET
Executives
Kevin Harris – CFO
Gary Guseinov – Co-Founder, Chairman and CEO
Analysts
Jim Ragan – Crowell, Weedon & Co.
Nathan Schneiderman – Roth Capital Partners
Jonathan Ruykhaver – Morgan Keegan
Alan Weinfeld [ph] – Grantchester Securities [ph]
Presentation
Operator
Compare to:
Previous Statements by CYDE.OB
»
CyberDefender Corporation Q2 2010 Earnings Call Transcript
»
CyberDefender Corporation Q1 2010 Earnings Call Transcript
»
CyberDefender Corporation Q4 2009 Earnings Call Transcript
Greetings and welcome to the CyberDefender Corporation third quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Kevin Harris, the Chief Financial Officer for CyberDefender Corporation. Thank you, Mr. Harris, you may now begin.
Kevin Harris
Good afternoon and welcome to the CyberDefender’s third quarter 2010 financial results conference call. Today, we will be discussing the quarter ended September 30, 2010. With me on the call today is Gary Guseinov, Co-Founder, Chairman, and CEO of the company.
Before we get started, I’d like to read our Safe Harbor statement. During the course of this conference call, the company will make forward-looking statements. We caution that any statement that is not a statement of historical fact is a forward-looking statement. This includes any projections of earnings or revenues, sales, cash or other financial statements; any statement about plans, strategies or objectives of management for future operations; any statements regarding expectations for the success of our business; any statement concerning proposed new products; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumption underlying any of the foregoing. These statements are all based on expectations and assumptions as of the date of this conference call and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
These risks are described in the Risk Factors section of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010. Investor or potential investors should read these risks. We assume no obligation to update these forward-looking statements to reflect future events or actual outcomes and we do not intend to do so.
In addition, from time to time on this call we refer to the term gross sales. Gross sales are a non-GAAP financial measure that we use in assessing our operating performance. We define gross sales as total sales before refunds and before deferring revenue for GAAP purposes.
We reference this non-GAAP financial measure frequently as 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.
With that, I will first review the results for the quarter and then turn it over to Gary for his comments.
GAAP revenues for the third quarter of 2010 were 12.7 million, representing a 188% growth over the 4.4 million in the same quarter of 2009. This solid year-over-year growth was driven by several factors; we continue to see increasing demand for our software products and LiveTech services and increase in renewal revenues and continued improvements related to infrastructure optimization. Based on the volumes we achieved during October and trends into November, we believe our fourth quarter will reflect continued top line growth. We will provide further details on our outlook for Q4 later in the call.
Gross sales, a non-GAAP measure, grew to a record 18.6 million for the third quarter, representing a 175% growth over the 6.7 million in the same quarter of 2009 and a 50% growth over the 12.4 million in the second quarter of 2010. Gross sales, is defined as total sales before refunds and before deferring revenue for GAAP purposes.
Our mix of gross sales for the quarter was 34% software and renewals, 63% services, and 3% ancillary. We expect to see services, as a percentage of overall business continues to increase over the next few quarters as we ramp our domestic call center operations and begin to directly market our LiveTech service offerings.
We are nearing completion of the implementation of our new infrastructure enhancements to support high volume operations, which include new best-in-class SaaS based CRM, IVR and e-commerce platforms from RightNow Technologies, Interactive Intelligence and MarketLive.
Gross sales calculations were derived as follows. For Q3 2010, reported net GAAP revenue equaled 12.7 million; adding back refunds of 3.7 million and the change in deferred revenue of 2.1 million, we reconciled to our reported gross sales of $18.6 million. This compares to Q3 2009 net GAAP revenue of 4.4 million; adding back refunds of 800,000 and the change in deferred revenue of 1.5 million, we reconciled to our reported gross sales of 6.7 million for Q3 2009.
Cost of sales in the third quarter of 2010 was 5.8 million compared with 4.4 million in the third quarter of 2009. The increase was primarily related to our expansion of internal and external call center operations which support increased sales of CyberDefender’s remote tech support services.
Gross profit in the third quarter of 2010 increased 103% to 6.9 million compared to 3.4 million in the third quarter of 2009. As a percentage of net sales, gross profit in the third quarter of 2010 was 54% compared to 77% in the third quarter of 2009. The decline in gross margin percentage was primarily related to our transition from a third-party revenue share call center facility to a CyberDefender controlled call center operation.
Read the rest of this transcript for free on seekingalpha.com
