Lyris Announces Third Quarter Fiscal 2014 Financial Results

Lyris Announces Third Quarter Fiscal 2014 Financial Results

91% of F3Q14 Revenue Was Recurring;
79% of F3Q14 Revenue From Subscriptions

EMERYVILLE, Calif., May 7, 2014 (GLOBE NEWSWIRE) -- Lyris, Inc. (OTCBB:LYRI),
a leading global provider of digital marketing solutions, today announced
financial results for the third quarter of fiscal 2014 ended March 31, 2014.

Highlights

  *Fiscal third quarter revenues were $7.6 million, down 6.8% from $8.1
    million in the prior quarter and down 14.7% from $8.9 million in the same
    period last year.
  *Recurring revenue was 91% of total revenue in the fiscal third quarter
    compared to 90% of total revenues in the same period a year ago and 90% of
    revenues in the prior quarter.
  *Lyris HQ Software-as-a-Service (SaaS) revenues were 62% of total revenues
    in the fiscal third quarter compared to 61% in the same period a year ago
    and 60% of total revenues in the prior quarter.
  *Fiscal third quarter gross margin was 64% compared to 61% for the same
    period last year.
  *Fiscal third quarter loss from operations was $(0.04) million, compared to
    loss from operations of $(0.3) million in the same period last year.
  *Fiscal third quarter net income was $0.02 million, or $0.00 per diluted
    share, compared to net loss of $(0.6) million, or $(0.06) per share, in
    the same period last year.
  *Fiscal third quarter non-GAAP net income was $0.6 million, or $0.05 per
    diluted share, compared to a non-GAAP net income of $0.4 million, or $0.04
    per share, in the same period a year ago.
  *Fiscal third quarter adjusted EBITDA was $0.9 million, compared to
    adjusted EBITDA of $0.9 million in the same period a year ago.
  *At March 31, 2014, the Company had $1.5 million in cash. The Company also
    had $1.5 million available for drawdown on its $5 million loan facility
    with Silicon Valley Bank.

"In the fiscal third quarter, we continued to see the momentum that began with
the start of calendar 2014, and we managed our business responsibly to
maintain our journey to growth and profitability," stated John Philpin,
president and CEO of Lyris. "As we look to the coming months, we are very
excited about the opportunities we see ahead of us as we continue to enhance
and evolve our regional business strategies to better target customers around
the globe. We are adding—and we will continue to add—new sales people,
particularly in the U.S., and we now have the engineering and professional
services infrastructure in place to further innovate on our core service
offerings."

Third Quarter Fiscal 2014 Financial Results

Total revenues of the third quarter of fiscal 2014 were $7.6 million, down
6.8% from $8.1 million in the prior quarter and down 14.7% from $8.9 million
in the same period last year. Total subscription revenues were $6.0 million,
or 79% of total revenues, in the third quarter of fiscal 2014, compared to
$7.0 million, or 79% of total revenues, in the same period in fiscal 2013.
Lyris HQ SaaS revenues were $4.7 million, or 62% of total revenues, in the
third quarter of fiscal 2014, down from $5.4 million, or 61% of total
revenues, in the same period a year ago.

Gross profit was $4.9 million, or 64% as a percentage of total revenues, in
the third quarter of fiscal 2014, compared to $5.5 million, or 61% of total
revenue, in the same period in fiscal 2013.

Loss from operations was $(0.04) million in the third quarter of fiscal 2014,
compared to loss from operations of $(0.3) million in the same period last
year. Net income was $0.02 million, or $0.00 per diluted share, compared to
net loss of $(0.6) million, or $(0.06) per share, in the same period last
year.

Conference Call Information

Lyris will hold a conference call and webcast to discuss its financial results
and operating activities open to all interested parties at 4:30 p.m. Eastern
Time (1:30 p.m. Pacific Time), May 7, 2014.

The teleconference can be accessed by calling 888-438-5448, passcode 5935935.
Please dial in 10-15 minutes prior to the beginning of the call. The webcast
will be available on the Internet at www.lyris.com.

A replay of the call will be available through May 14, 2014, at 877-870-5176,
passcode 5935935, and on the company's website at www.lyris.com.

About Lyris

Lyris is a global provider of digital marketing solutions that help companies
engage with customers in meaningful ways. Lyris products and services empower
marketers to design, automate, and optimize data-driven interactive marketing
campaigns that facilitate superior engagement, increase conversions and
deliver measurable business value. Lyris' high-performance, secure and
flexible digital marketing applications improve marketing efficiency by
providing automated digital message delivery, robust segmentation, and
real-time social, mobile, and interaction analytics. The Lyris solutions
portfolio is uniquely comprised of both in-the-cloud and on-premises solutions
– Lyris HQ and Lyris List Manager – combined with customer-focused services
and support, and delivered on a powerful integration platform that connects
data and marketing workflows across the enterprise. More than 5,000 companies
worldwide partner with Lyris to manage and execute sophisticated digital
marketing campaigns across email, social, Web and mobile channels.

www.lyris.com

Forward Looking Statements

This press release includes forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995 (PSLRA), that reflect our
current views with respect to future events and financial performance, and
that are subject to many risks and uncertainties. These forward-looking
statements include material in quotations from management, including our
estimate of our addressable market. Statements that include words such as
"expects," "intends," "plan," "believe," "project," "estimate," "may,"
"should," "anticipate," "will" and similar statements identify many of our
forward-looking statements.

Many factors could cause actual results to differ materially from those
indicated in our forward-looking statements. For example, market acceptance of
our products, potential delays in product development, product offerings by
our competitors, and our ability to finance anticipated growth could affect
our future results. Other risk factors that could cause actual results to
differ significantly from our expectations are described in our annual and
quarterly reports filed with the Securities and Exchange Commission (available
at www.sec.gov). Unless otherwise required by law, we undertake no obligation
to publicly update or revise any forward-looking statements, whether as a
result of new information, future developments or otherwise.

If one or more of these risks or uncertainties materialize, or if our
underlying assumptions otherwise prove to be incorrect, our actual results may
vary materially from what we project. Any forward-looking statements you read
in this news release reflect our views as of the date of this press release
with respect to future events, and are subject to these and other risks,
uncertainties and assumptions relating to our operations, financial condition,
results of operations, growth strategy and liquidity. All subsequent written
and oral forward-looking statements attributable to us or individuals acting
on our behalf are expressly qualified in their entirety by this paragraph.

Non-GAAP Financial Measures

In this release we present certain non-GAAP financial measures. Generally, a
non-GAAP financial measure is a numerical measure of a company's performance,
financial position or cash flow that either excludes or includes amounts that
are not normally excluded or included in the most directly comparable measure
calculated and presented in accordance with United States generally accepted
accounting principles ("GAAP"). A reconciliation between non-GAAP and GAAP
measures can be found in the accompanying tables. Non-GAAP financial measures
should not be considered a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP. These non-GAAP
financial measures do not reflect a comprehensive system of accounting and may
differ from non-GAAP financial measures with the same or similar captions that
are used by other companies.

We believe the calculation of non-GAAP net income (loss), calculated without
giving effect to acquisition-related amortization charges, stock-based
compensation expense and certain other amounts that we do not consider to be
related to our ongoing core operating performance, provides a basis to compare
our operating results across periods and against other companies in our
industry. We also believe that adjusted EBITDA, which we calculate as GAAP net
income (loss) less interest, taxes, depreciation, amortization, non-cash stock
compensation expense and certain other financial measures, is an indicator of
our cash flows. This measure is commonly used by our lenders to assess our
leverage capacity, debt service ability and liquidity. These non-GAAP measures
have been reconciled to the nearest GAAP measure, as required under SEC rules
and regulations, in tables attached to this release.

Lyris, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except for per share data)
                                                                   
                                                           Three Months Ended
                                                            March 31,
                                                           2014     2013
                                                                   
Revenues:                                                           
Subscription revenue                                        $5,960 $7,031
Support and maintenance revenue                             959      984
Professional services revenue                               510     589
Software revenue                                            160      289
Total revenues                                              7,589   8,893
Cost of revenues:                                                   
Subscription, software and other services                   2,292   2,898
Amortization of developed technology                        427     534
Total cost of revenues                                      2,719   3,432
Gross profit                                                4,870   5,461
Operating expenses:                                                 
Sales & marketing                                          2,453   2,653
General and administrative                                 1,393   2,119
Research & development                                      1,019   911
Amortization of customer relationship and trade names       50      50
Total operating expenses                                    4,915   5,733
Loss from operations                                        (45)    (272)
Interest expense                                            (39)    (32)
Interest income                                             --      --
Other income (expense), net                                 29      (289)
Loss from operations before income taxes                    (55)    (593)
Income tax (provision) benefit                              71      25
Net income (loss)                                          16      (568)
Net income (loss) per share basic and diluted               $0.00  $(0.06)
Weighted average shares outstanding used in calculating net         
income (loss) per share:
Basic                                                       9,568   9,618
Diluted                                                     11,568  9,618


Lyris, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except for per share data)
                                                                   
                                                          Nine Months Ended
                                                           March 31,
                                                          2014      2013
                                                                   
Revenues:                                                           
Subscription revenue                                       $18,572 $21,498
Support and maintenance revenue                            2,987    2,913
Professional services revenue                              1,688    1,845
Software revenue                                           720       1,275
Total revenues                                             23,967   27,531
Cost of revenues:                                                   
Subscription, software and other services                  7,386    9,570
Amortization of developed technology                       1,305    1,207
Total cost of revenues                                     8,691    10,777
Gross profit                                               15,276   16,754
Operating expenses:                                                 
Sales & marketing                                         7,694    7,423
General and administrative                                4,489    6,365
Research & development                                     2,893    2,908
Amortization of customer relationship and trade names      151      151
Total operating expenses                                   15,227   16,847
Income (loss) from operations                              49       (93)
Interest expense                                           (116)    (180)
Interest income                                            --       3
Other income (expense), net                                43       (253)
Loss from operations before income taxes                   (24)     (523)
Income tax (provision) benefit                             25       (99)
Net income (loss)                                          $1      $(622)
Less: income attributable to noncontrolling interest       --      29
Net income (loss) attributable to Lyris, Inc.              $1      $(651)
Net income (loss) per share basic and diluted              $0.00   $(0.07)
Weighted average shares outstanding used in calculating             
net income (loss) per share:
Basic                                                      9,568    9,568
Diluted                                                    11,568   9,568


Lyris, Inc.
Reconciliation of Net Income to Non-GAAP Net Income
(Unaudited)
(in thousands, except for per share data)
                                                          
                                        Three Months Ended
                                         March 31,
                                        2014               2013
Net loss                                 $16              $(568)
Stock-based compensation expense         100               133
Amortization of intangible assets        477               584
Other (income) expense, net              (29)              289
Non-GAAP net income                      $564             $438
Non-GAAP net income per share:                            
Basic                                   $0.06            $0.05
Diluted                                  $0.05            $0.04
Shares used to compute Non-GAAP net                        
income per share:
Basic                                    9,568             9,618
Diluted                                  11,568            11,568
                                                          
Non-GAAP net income excludes stock-based compensation expense, amortization of
intangibles and certain other financial measures. Management believes that
non-GAAP net income provides useful, supplemental information to management
and investors regarding the performance of the company's business operations.
Non-GAAP net income is not a measure determined in accordance with United
States Generally Accepted Accounting Principles ("GAAP") and is thus
susceptible to varying calculations. As presented, this measure may not be
comparable to similarly titled measures that other companies may disclose.
Non-GAAP net income should not be considered in isolation or construed as a
substitute for other measures of profitability prepared in accordance with
GAAP for purposes of analyzing our financial performance or profitability.
Non-GAAP net income should be considered in addition to, and not as a
substitute or as superior measure to, net income, earnings per share or other
measures of financial performance prepared in accordance with GAAP.


Lyris, Inc.
Reconciliation of Net Income to Non-GAAP Net Income
(Unaudited)
(in thousands, except for per share data)
                                                           
                                        Nine Months Ended
                                         March 31,
                                        2014                2013
Net loss                                 $1                $(622)
Stock-based compensation expense         256                675
Amortization of intangible assets        1,456              1,358
Other (income) expense, net              (43)               253
Non-GAAP net income                     $1,670            $1,664
Non-GAAP net income per share                              
Basic                                   $0.17             $0.17
Diluted                                  $0.14             $0.14
Shares used to compute Non-GAAP net                         
income per share
Basic                                    9,568              9,568
Diluted                                  11,568             11,568
                                                           
Non-GAAP net income excludes stock-based compensation expense, amortization of
intangibles and certain other financial measures. Management believes that
non-GAAP net income provides useful, supplemental information to management
and investors regarding the performance of the company's business operations.
Non-GAAP net income is not a measure determined in accordance with United
States Generally Accepted Accounting Principles ("GAAP") and is thus
susceptible to varying calculations. As presented, this measure may not be
comparable to similarly titled measures that other companies may disclose.
Non-GAAP net income should not be considered in isolation or construed as a
substitute for other measures of profitability prepared in accordance with
GAAP for purposes of analyzing our financial performance or profitability.
Non-GAAP net income should be considered in addition to, and not as a
substitute or as superior measure to, net income, earnings per share or other
measures of financial performance prepared in accordance with GAAP.


Lyris, Inc.
Reconciliation of Net Income to Adjusted EBITDA
(Unaudited, in thousands)
                                                         
                                        Three Months Ended
                                         March 31,
                                        2014              2013
Net income                              $16             $(568)
Interest (income) / expense, net         39               32
Income tax (benefit) / provision         (71)             (25)
Depreciation and amortization            827              991
                                                         
Total EBITDA                             811              430
                                                         
Stock-based compensation expense         100              133
Other (income) expense, net              (29)             289
                                                         
Total Adjusted EBITDA                    $882            $852
                                                         
Adjusted EBITDA is calculated as earnings before net interest expense, taxes,
depreciation and amortization expense, stock-based compensation expense and
certain other financial measures. Adjusted EBITDA is commonly used by our
lenders to assess leverage capacity, debt service ability and liquidity, and
the company uses adjusted EBITDA to evaluate financial performance and to
award incentive compensation for certain employees, includingour chief
executive officer. We believe that adjusted EBITDA also provides useful
measurementsof liquidity and financial performance for our investors.


Lyris, Inc.
Reconciliation of Net Income to Adjusted EBITDA
(Unaudited, in thousands)
                                                           
                                        Nine Months Ended
                                         March 31,
                                        2014                2013
Net income (loss)                        $1                $(622)
Interest (income) / expense, net         116                177
Income tax (benefit) / provision         (25)               99
Depreciation and amortization            2,541              2,430
                                                           
Total EBITDA                             2,633              2,084
                                                           
Stock-based compensation expense         256                675
Other (income) expense, net              (43)               253
                                                           
Total Adjusted EBITDA                    $2,846            $3,012
                                                           
Adjusted EBITDA is calculated as earnings before net interest expense, taxes,
depreciation and amortization expense, stock-based compensation expense and
certain other financial measures. Adjusted EBITDA is commonly used by our
lenders to assess leverage capacity, debt service ability and liquidity, and
the company uses adjusted EBITDA to evaluate financial performance and to
award incentive compensation for certain employees, including our chief
executive officer. We believe that adjusted EBITDA also provides useful
measurements of liquidity and financial performance for our investors.


Lyris, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for per share data)
                                                                  
                                                        March 31, June 30,
                                                        2014       2013
ASSETS                                                             
Current assets:                                                    
Cash and cash equivalents                                $1,536   $2,318
Accounts receivable, less allowances of$342 and $510,   3,901     4,103
respectively
Prepaid expenses and other current assets                674       722
Deferred income taxes                                    988       942
Total current assets                                     7,099     8,085
Property and equipment, net                              1,652     2,376
Capitalized software, net                                7,773     6,978
Intangible assets, net                                   4,867     5,014
Goodwill                                                 9,791     9,791
Other long-term assets                                   681       663
TOTAL ASSETS                                             $31,863  $32,907
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY                               
Current liabilities:                                               
Accounts payable and accrued expenses                    $2,730   $3,458
Revolving line of credit                                 2,340     2,260
Capital lease obligations - short-term                   602       827
Income taxes payable                                     149       203
Deferred revenue                                         3,177     3,220
Total current liabilities                                8,998     9,968
Other long-term liabilities                              459       436
Capital lease obligations - long-term                    235       504
TOTAL LIABILITIES                                       9,692     10,908
Commitments and contingencies                                     
Redeemable Series A convertible preferred stock; $0.01
par value per share, 2,000 shares authorized, issued and 5,000     5,000
outstanding, liquidation preference $5,000
Stockholders' equity:                                              
Common stock, $0.15 par value; 40,000 shares authorized; 1,415     1,415
9,579 issued and outstanding
Additional paid-in capital                               268,464   268,209
Accumulated deficit                                      (252,608) (252,608)
Treasury stock, at cost 11 shares held                  (56)      (56)
Accumulated other comprehensive income                   (44)      39
Total stockholders' equity                               17,171    16,999
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED      $31,863  $32,907
STOCK AND STOCKHOLDERS' EQUITY

CONTACT: Lyris, Inc.
        
         Investor Relations Contact:
         Rich McDonald
         Director, Investor Relations
         (610) 688-3305
         rmcdonald@lyris.com
 
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