TIDMKFX
Kofax® Limited (NASDAQ and LSE: KFX), a leading provider of
smart process applications for the business critical First MileT of
customer interactions, today reported unaudited financial results
for the first quarter of its fiscal year 2015, which ended
September 30, 2014.
Non-GAAP Financial Highlights:
-- Software license revenue decreased 3.5% to $25.2 million (PY: $26.1
million)
-- Total revenues increased 2.3% to $69.3 million (PY: $67.7 million)
-- Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) decreased 47.8% to $4.3 million (PY:
$8.3
million) or a 6.3% margin (PY: 12.3%)
-- Adjusted diluted earnings per share (EPS) was $0.02 (PY: $0.04)
-- Adjusted cash generated by operations was $6.1 million (PY: $19.6
million)
GAAP Financial Highlights:
-- Software license revenue increased 0.6% to $24.7 million (PY: $24.6
million)
-- Total revenues increased 4.4% to $68.5 million (PY: $65.6 million)
-- Loss from operations increased 446.2% to -$3.3 million (PY: -$0.6
million) or a -4.8% margin (PY: -0.9%)
-- Diluted EPS was $-0.03 (PY: $0.03)
-- Cash generated by operations was $4.8 million (PY: $18.2 million)
Quarter end cash was $60.3 million (PY: $72.0 million).
A summary of Kofax's condensed consolidated income statements
for the first quarter compared to the prior year are as
follows:
Unaudited Non-GAAP GAAP
Y/Y % Y/Y %
$M Change Total $M Change Total
Software Licenses 25.2 -3.5% 36.4% 24.7 0.6% 36.1%
Maintenance Services 35.5 9.5% 51.3% 35.2 9.5% 51.4%
Professional Services 8.6 -6.9% 12.3% 8.5 -3.7% 12.5%
Total Revenues 69.3 2.3% 100.0% 68.5 4.4% 100.0%
Adjusted EBITDA 4.3 -47.8% -3.3 -446.3%
Margin 6.3% -49.0% -4.8% -423.2%
Operating Highlights:
-- Launched Kofax Mortgage AgilityT, a solution designed to radically
transform and simplify the mortgage application process
-- Acquired Softpro GmbH, a leading provider of signature verification,
fraud prevention and electronic signature software and
services
-- Announced that Kofax received five new patents for document imaging,
classification and process automation
-- KMWorld Magazine recognized Kapow Enterprise as a "Trend Setting
Product of 2014"
-- Voluntarily changed the basis of preparation of its financial
statements from IFRS to GAAP effective as of July 1, 2014,
and
published audited GAAP financial statements for Kofax's fiscal
years
ended June 30, 2013 and 2014
-- Announced the Board of Directors' intention to seek shareholder
approval to delist from the London Stock Exchange on or before
March
31, 2015
Commenting on the Non-GAAP financial results for the quarter and
forward looking guidance, Reynolds C. Bish, Chief Executive
Officer, said: "These results are above the mid-point of the ranges
provided when we announced our preliminary results earlier this
month. As previously discussed, mobile and new or acquired products
software license revenue grew by more than 80% year-over-year and
accounted for approximately 35% of total software license revenue
during the quarter. However, as also previously disclosed, our
overall results were lower than our expectations for the quarter
due to six and seven figure core capture software license revenue
transactions primarily in the "enterprise" or more direct segment
of that market slipping into future quarters. These opportunities
were not lost to competitors nor have the related projects been
cancelled. In fact, since pre announcing these results we've now
closed one of the two seven figure transactions that slipped at the
end of September for approximately $2.0 million dollars of software
license revenue as well as some of the six figure
transactions."
Bish continued: "Our guidance for fiscal year 2015 remains as
outlined below:"
Millions GAAP Non-GAAP Non-GAAPGrowth
or Percentages Rate orEBITDA
Margin(using
mid point)
Software License $132.0 to $143.0 $133.0 to $144.0 11.7%
Revenue
Total Revenues $314.0 to $328.0 $317.0 to $331.0 8.8%
Adjusted EBITDA $38.0 to $45.0 $41.0 to $51.0 14.2%
Effective Tax Rate 41.0% to 43.0% 33.0% to 35.0%
Bish concluded: "We believe growth in the faster growing areas
of our business - mobile and new or acquired products - will pull
through core capture revenue and allow us to return to single digit
growth in this part of our business. This allows us to continue
targeting the long-term financial model we've previously provided,
which is based on software license revenue growth in the mid teens,
total revenue growth of 10% to 12% and an adjusted EBITDA margin of
20% or greater in fiscal year 2017."
Conference Call Info
Management will host a conference call and audio only webcast to
discuss these selected unaudited financial results at 2:00 pm U.S.
Pacific time / 9:00 pm U.K. time today. To participate in the call,
investors can use the dial in information below, or access the call
via the investor relations section of the Company's website at:
http://investor.kofax.com/events.cfm. A replay via telephone and
webcast will be available for 30 days.
Live Replay Access Code
U.S. +1 (888) 437-9445 +1 (888) 203-1112 3312860
U.K. + 44 (0) 800 404 7655 +44 (0) 808 101 1153 3312860
About Kofax
Kofax is a leading provider of smart process applications for
the business critical First Mile of customer interactions. These
begin with an organization's systems of engagement, which generate
real time, information intensive communications from customers, and
provide an essential connection to their systems of record, which
are typically large scale, rigid enterprise applications and
repositories not easily adapted to more contemporary technology.
Success in the First Mile can dramatically improve an
organization's customer experience and greatly reduce operating
costs, thus driving increased competitiveness, growth and
profitability. Kofax software and solutions provide a rapid return
on investment to more than 20,000 customers in financial services,
insurance, government, healthcare, business process outsourcing and
other markets. Kofax delivers these through its own sales and
service organization, and a global network of more than 800
authorized partners in more than 75 countries throughout the
Americas, EMEA and Asia Pacific. For more information, visit
kofax.com.
Safe Harbor Statement
This document contains forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements are subject to risks and uncertainties that could
cause actual results to vary materially from those projected in the
forward looking statements. The Company has attempted to identify
forward-looking statements by terminology including "anticipates,"
"believes," "can," "continue," "could," "estimates," "expects,"
"intends," "may," "plans," "potential," "predicts," "should" or
"will" or the negative of these terms or other comparable
terminology. The Company may experience significant fluctuations in
future operating results due to a number of economic, competitive,
and other factors, including, among other things, our reliance on
third-party manufacturers and suppliers, government agency
budgetary and political constraints, new or increased competition,
changes in market demand, our ability to consummate and the timing
of the consummation of software revenue transactions and the
performance or reliability of our products. These factors and
others could cause operating results to vary significantly from
those in prior periods, and those projected in forward looking
statements. Additional information with respect to these and other
factors, which could materially affect the Company and its
operations, are included in certain forms the Company has filed
with the Securities and Exchange Commission. Although the Company
believes that the expectations reflected in any forward looking
statements are reasonable based on its current knowledge of the
business and operations, it cannot guarantee future results, levels
of activity, performance or achievements. The Company assumes no
obligation to provide revisions to any forward looking statements
should circumstances change.
Non-GAAP Financial Measures
Management uses financial measures, both GAAP and Non-GAAP, in
analyzing and assessing the overall performance of the business and
making operational decisions. The Company has provided and believes
that the Non-GAAP financial measures and supplemental
reconciliations to GAAP financial measures are useful to investors
and other users of its financial statements because the Non-GAAP
financial measures may be used as additional tools to compare our
performance across peer companies, periods and financial markets.
Please refer to the forms the Company has furnished with the
Securities and Exchange Commission for a discussion of the Non-GAAP
financial measures and supplemental reconciliations to GAAP
financial measures for more information regarding the Non-GAAP
measures.
© 2014 Kofax Limited. Kofax is a registered trademark and First
Mile is a trademark of Kofax Limited.
Source: Kofax
Chief Financial Officer's Review
With the exception of the section titled "Reconciliation of
Non-GAAP Measures", the Chief Financial Officer's Review refers to
our GAAP financial statements and measures for the three months
ended September 30, 2014 and 2013.
Revenue
Total revenues increased $2.9 million, or 4.4% in the quarter
ended September 30, 2014 compared to the quarter ended September
30, 2013 reflecting growth across all geographies.
The following tables present revenue by financial statement
line, as well as in total for each of our geographic regions:
Three Months EndedSeptember 30, % ofTotal Revenue
2014 2013 % Change 2014 2013
($ in thousands, except percentages)
Software license $ 24,704 $ 24,560 0.6% 36.1% 37.4%
Maintenance services 35,220 32,150 9.5% 51.4% 49.1%
Professional services 8,544 8,871 (3.7)% 12.5% 13.5%
Total revenues $ 68,468 $ 65,581 4.4% 100.0% 100.0%
Americas $ 38,924 $ 37,451 3.9% 56.8% 57.1%
EMEA 24,614 23,787 3.5% 36.0% 36.3%
Asia Pacific 4,930 4,343 13.5% 7.2% 6.6%
Total revenues $ 68,468 $ 65,581 4.4% 100.0% 100.0%
Software license revenue was flat in the three months ended
September 30, 2014, due to a 158.9% increase in our mobile and new
or acquired products software license revenue, which was assisted
by revenues from our acquisitions of Kapow and Softpro, offset by a
23.2% decline in core capture revenues. The decline in core capture
was due to six and seven figure core capture software license
revenue transactions primarily in the "enterprise" or more direct
segment of that market. Software license revenue increased $0.1
million in Asia Pacific and was flat in the Americas and EMEA.
Maintenance services revenue increased $3.1 million, or 9.5%, in
the three months ended September 30, 2014 due to an increase of
$1.8 million in the Americas, $1.2 million in EMEA, and $0.1
million in Asia Pacific. Our maintenance services revenue increased
due primarily to continued high maintenance contract renewal rates
and maintenance on new license transactions over the last year.
Included in the increase in maintenance revenue is $0.3 million
from our Softpro acquisition.
Professional services revenue decreased $0.3 million, or 3.7%,
in the three months ended September 30, 2014 due to a decrease of
$0.3 million in the Americas and $0.3 million in EMEA offset by a
$0.3 million increase in Asia Pacific. The decrease in professional
services revenue is primarily due to lower license revenues in the
prior quarter.
Costs and Expenses
Cost of Software Licenses
Cost of software licenses primarily consists of royalties to
third-party software developers from whom we OEM their products as
well as personnel costs related to the distribution of our software
licenses and associated costs such as facilities and overhead
charges. The following table reflects cost of software license
revenue, in dollars and as a percentage of software license
revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Cost of software $ 1,957 $ 2,656 $ (699) (26.3)%
licenses
% of software license 7.9% 10.8%
revenue
Cost of software licenses decreased by $0.7 million, or 26.3%,
in the three months ended September 30, 2014, which is primarily
related to a change in product mix resulting in lower royalty
expense. Royalty costs vary by product and accordingly, the cost of
software licenses as a percentage of the software license revenue
can fluctuate based on the mix of software licenses sold.
Cost of Maintenance Services
Cost of maintenance services primarily consists of personnel
costs for our staff who respond to customer inquiries as well as
associated costs such as facilities and related overhead
charges.
The following table shows cost of maintenance services, in
dollars and as a percentage of maintenance services revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Cost of maintenance $ 5,017 $ 4,807 $ 210 4.4%
services
% of maintenance 14.2% 15.0%
services revenue
Cost of maintenance services increased $0.2 million, or 4.4%, in
the three months ended September 30, 2014, primarily as a result of
our acquisitions of Kapow and Softpro.
Cost of Professional Services
Cost of professional services primarily consists of personnel
costs for our staff of consultants and trainers, other associated
costs such as facilities and related overhead charges, travel
related expenses and the cost of contractors, whom we engage from
time to time to assist us in delivering professional services. The
following table shows cost of professional services, in dollars and
as a percentage of professional services revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Cost of professional $ 7,998 $ 7,629 $ 369 4.8%
services
% of professional 93.6% 86.0%
service revenue
Cost of professional services increased $0.4 million, or 4.8%,
in the three months ended September 30, 2014 due to increase in
compensation costs largely associated with our acquisitions of
Softpro and Kapow. Our gross margin on professional services
decreased from 14.0% in the three months ended September 30, 2013
to 6.4% in the three months ended September 30, 2014 as we
experienced lower utilization rates during this period.
Research and Development
Research and development expenses consist primarily of personnel
costs incurred in connection with the design, development, testing
and documentation of our software products as well as associated
costs such as facilities and related overhead charges. Research and
development expenses are expensed as incurred.
The following table shows research and development expense, in
dollars and as a percentage of total revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Research and $ 10,027 $ 9,077 $ 950 10.5%
development
% of total revenue 14.6% 13.8%
Research and development expenses increased $1.0 million, or
10.5%, in the three months ended September 30, 2014 due to an
increase in compensation costs largely associated with our
acquisitions of Softpro and Kapow and associated with incremental
personnel to develop solutions based on Kofax Total Agility.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel
costs related to our sales and marketing staff, travel costs, costs
for trade shows, advertising and other lead generating activities,
as well as associated costs such as facilities and overhead
charges.
The following table shows sales and marketing expense, in
dollars and as a percentage of total revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Sales and marketing $ 32,080 $ 27,933 $ 4,147 14.8%
expense
% of total revenue 46.9% 42.6%
Sales and marketing expenses increased $4.1 million, or 14.8%,
in the three months ended September 30, 2014 due to an increase in
compensation costs, including share-based payment expenses, largely
associated with our acquisitions of Kapow and Softpro and our
increased investment in growing the sales organization.
General and Administrative
General and administrative expenses consist primarily of
personnel costs for our executive, finance, human resource and
legal functions, as well as associated costs such as facilities and
overhead charges. Also included in general and administrative
expenses are costs associated with legal, accounting, tax and
advisory fees.
The following table shows general and administrative expense, in
dollars and as a percentage of total revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
General $ 10,499 $ 9,439 $ 1,060 11.2%
and administrative
expense
% of total revenue 15.3% 14.4%
General and administrative expenses increased $1.1 million, or
11.2%, in the three months ended September 30, 2014 due to
increased legal, accounting, and tax fees, related to the changes
in the Company's regulatory and reporting requirements and
increased share-based payment expense, primarily driven by the
increase in value of awards resulting from recent increases in our
share price.
Amortization of Acquired Intangible Assets
We amortize acquired intangible assets using the straight-line
method over the estimated useful life of the respective asset. Our
intangible assets include acquired contractual and customer
relationships, technology and trade names, each based on their fair
values ascribed in accounting for the initial business acquisition.
The following table shows expense related to the amortization of
acquired intangible assets, in dollars and as a percentage of total
revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Amortization $ 2,429 $ 2,224 $ 205 9.2%
of acquired
intangible assets
% of total revenue 3.5% 3.4%
Amortization of acquired intangible assets increased $0.2
million, or 9.2%, in the three months ended September 30, 2014 due
to the acquisition of Softpro on September 1, 2014. For the three
months ended September 30, 2014, amortization of technology related
assets of $1.7 million was included in cost of revenue with the
remaining other intangible asset amortization of $0.7 million
included in operating expenses.
Acquisition-related Costs
Acquisition-related costs include those costs related to
business and other acquisitions and consist of (i) costs directly
attributable to our acquisition strategy, including the evaluation,
consummation and integration of our acquisitions and (ii)
transition compensation costs. The following table shows
acquisition-related costs, in dollars and as a percentage of total
revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Acquisition related $ 1,718 $ 2,104 $ (386) (18.3)%
costs
% of total revenue 2.5% 3.2%
Acquisition-related costs decreased $0.4 million, or 18.3%, to
$1.7 million in the three months ended September 30, 2014 due to
incurring $1.8 million less of the fair value of contingent
consideration and retention related to our acquisition of Altosoft
and Singularity, offset by $1.5 million increase in direct
acquisition costs associated with the acquisition of Softpro.
Other Operating Expenses, net
Other operating expenses, net consists of all income or expense
that is not directly attributable to one of our other operating
revenue or expense lines. The following table shows other operating
expenses, net in dollars and as a percentage of total revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Other operating $ 16 $ 311 $ (295) (94.8)%
expenses, net
% of total revenue 0.0% 0.5%
Other operating expenses, net decreased $0.3 million, or 94.8%
to $0.0 million in the three months ended September 30, 2014
primarily due to a decrease in professional fees incurred for
attorneys, accountants and other advisors who worked with us to
complete a NASDAQ listing of our common shares in the second
quarter of fiscal year 2014.
Interest (Expense) Income, net
Interest (expense) income, net consists of interest associated
with our banking arrangements as well as interest accretion for
deferred acquisition payments. The following table shows interest
(expense) income, net in dollars and as a percentage of total
revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Interest (expense) $ (126) $ (110) $ (16) (14.5)%
income, net
% of total revenue (0.2)% (0.2)%
Interest (expense) income, net was flat in the three months
ended September 30, 2014.
Other (Expense) Income, net
Other (expense) income, net consists primarily of foreign
exchange gains or losses related to our intercompany receivables
and payables, to fair value adjustments relating to forward
contracts or other financial instruments.
The following table shows other (expense) income, net, in
dollars and as a percentage of total revenue:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Other (expense) $ 522 $ 4,161 $ (3,639) (87.5)%
income, net
% of total revenue (0.8)% 6.3%
Other (expense) income, net fluctuated in the three months ended
September 30, 2014 due to management's efforts to reduce foreign
exchange exposure on intercompany balances and gains on forward
contracts.
Income tax expense
The following table shows income tax expense, in dollars and as
a percentage of income before tax:
Three Months EndedSeptember 30, Change
2014 2013 $ %
($ in thousands, except percentages)
Income tax expense $ (524) 730 $ (1,254) (171.8)%
(benefit)
Income (loss) $ (2,877) $ 3,452
before tax
Effective tax (18.2)% 21.1%
(benefit)
rate
Income tax expense decreased by $1.3 million, or 171.8%, to a
tax benefit of $0.5 million during the three months ended September
30, 2014. The decrease in income tax expense and effective tax rate
was primarily due to certain jurisdictional profits being offset by
previously unrecognized losses.
Liquidity and Capital Resources
Historically, we have financed our business primarily through
our cash on hand as well as cash flows from operations. We had
$60.3 million of cash and cash equivalents at September 30, 2014,
compared to $89.6 million at June 30, 2014. The majority of our
cash is held in U.S. dollars, Euros and to a lesser extent, British
Pounds. We have no outstanding debt as of September 30, 2014.
The following table sets forth the summary of our cash
flows:
Three Months EndedSeptember 30,
2014 2013 Change
($ in thousands)
Cash generated
from (used in)
Operating activities $ 4,769 $ 18,182 $ (13,413)
Investing activities (33,740) (41,182) 7,442
Financing activities 595 412 183
Effect of exchange (980) 1,174 (2,154)
rate fluctuations
Net (decrease) $ (29,356) $ (21,414) $ (7,942)
Operating Activities
Net cash generated from operating activities was $4.8 million in
the three months ended September 30, 2014, compared to $18.2
million in the three months ended September 30, 2013, a decrease of
$13.4 million. This decrease was attributable primarily to
decreased cash inflows from account receivables and deferred
revenue balances as compared to the prior year.
Investing Activities
Net cash used in investing activities was $33.7 million in the
three months ended September 30, 2014, compared to $41.2 million in
the three months ended September 30, 2013, representing a decreased
outflow of $7.4 million. The primary use of cash in both years was
associated with our acquisitions. We paid $30.7 million associated
with the acquisition of Softpro in fiscal 2015 and $39.2 million in
fiscal 2014 associated with the acquisition of Kapow, representing
an incremental decrease related to acquisitions of $8.5 million.
Additionally, during fiscal 2015 we paid $2.3 million of deferred
consideration and, during fiscal 2014 we paid $0.7 million in
deferred consideration related to our acquisition of Altosoft and
contingent consideration payment for the Atalasoft acquisition of
$0.4 million. We also purchased $0.2 million less property and
equipment as compared to the prior year.
Financing Activities
Net cash generated from financing activities was $0.6 million in
the three months ended September 30, 2014, compared to $0.4 million
in the three months ended September 30, 2013. The increase was
primarily the result of increased excess tax benefits on share
based compensation during the three months ended September 30,
2014.
Exchange Rate Effects
We operate in many countries around the world, and maintain cash
balances in locations outside of the United States, in currencies
other than the U.S. dollar. In the three months ended September 30,
2014 changes in foreign exchange rates resulted in a decrease of
$1.0 million in cash and cash equivalents, while during the three
months ended September 30, 2013 changes in foreign exchange rates
resulted in an increase of $1.2 million. Our cash and cash
equivalents will continue to fluctuate in the future, as foreign
currency exchange rates vary.
Treasury Management
On October 14, 2013, the Company extended the term of its $40.0
million revolving line of credit with Bank of America Merrill Lynch
to June 30, 2016. Subject to certain conditions, borrowings under
the credit facility can be denominated in U.S. dollars, Euros and
certain other currencies and can be made in the United States and
certain other countries. The credit facility is available for
general corporate purposes, including acquisitions, is secured by
certain assets of the Company and can be increased by an additional
$10.0 million. As of September 30, 2014 $39.5 million was
available, as $0.5 million has been used to guarantee letters of
credit in certain operating facilities and payroll services.
The Company has significant overseas subsidiaries, which operate
principally in their local currencies. Where appropriate,
intra-company borrowings are arranged in the functional currencies
of the borrower to centralize the foreign exchange impact and
provide a natural hedge against exchange rate movement risks.
The Company hedges certain foreign currency cash and cash flows
relating to transactions in accordance with policies set by the
Board of Directors. Assessment of the credit risk profile of the
Company's key customers and resellers is centralized for increased
focus.
Reconciliation of Non-GAAP Measures
Non-GAAP Revenue - We defined Non-GAAP revenue as revenue, as
reported under GAAP, increased to include revenue that is
associated with our historic acquisitions that has been excluded
from reported results for a limited period due to the effects of
purchase accounting. In accordance with GAAP purchase accounting,
an acquired company's deferred revenue at the date of acquisition
is subject to a fair value adjustment which generally reduces the
deferred amount and revenues recognized subsequent to an
acquisition. We include non-GAAP revenue to allow for more complete
comparisons to the financial results of our historical operations,
forward looking guidance and the financial results of peer
companies. We believe these adjustments are useful to management
and investors as a measure of the ongoing performance of the
business. Additionally, although acquisition-related revenue
adjustments are nonrecurring, we may incur similar adjustments in
connection with future acquisitions. At times when we are
communicating with our shareholders, analysts and other parties we
refer to Non-GAAP Revenue as Adjusted Revenue.
The tables below provide a reconciliation of GAAP revenues to
Non-GAAP revenues related to all of our historic acquisitions:
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
GAAPRevenues AcquisitionFair ValueAdjustment Non-GAAPRevenues GAAPRevenues AcquisitionFair ValueAdjustment Non-GAAPRevenues
($ in thousands)
Software licenses $ 24,704 $ 470 $ 25,174 $ 24,560 $ 1,515 $ 26,075
Maintenance services 35,220 305 35,525 32,150 307 32,457
Professional services 8,544 9 8,553 8,871 314 9,185
Total revenues $ 68,468 $ 784 $ 69,252 $ 65,581 $ 2,136 $ 67,717
Non-GAAP software license revenue decreased $0.9 million, or
3.5% in the three months ended September 30, 2014 as a result of a
decrease in core capture revenues. Acquisition fair value
adjustments decreased $1.4 million as the result of pre-acquisition
deferred revenue balance from the acquisition of Kapow being
amortized and reduced over time.
Non-GAAP Income from Operations - We define non-GAAP income from
operations as income/(loss) from operations, as reported under
GAAP, excluding the effect of Acquisition fair value adjustment to
revenue, Share-based compensation expense, Depreciation expense,
Amortization of acquired intangible assets, Acquisition-related
costs, and Other operating expense, net. Share-based compensation
expense, Depreciation expense and Amortization of acquired
intangible assets in our non-GAAP income from operations
reconciliation represent non-cash charges which are not considered
by management in evaluating our operating performance.
Acquisition-related costs consist of: (i) costs directly
attributable to our acquisition strategy and the evaluation,
consummation and integration of our acquisitions (composed
substantially of professional services fees including legal,
accounting and other consultants and to a lesser degree to our
personnel whose responsibilities are devoted to acquisition
activities), and (ii) transition compensation costs (composed
substantially of contingent payments for shares that are treated as
compensation expense and retention payments that are anticipated to
become payable to employees, as well as severance payments to
employees whose positions were made redundant). These
acquisition-related costs are not considered to be related to the
continuing operations of the acquired businesses and are generally
not relevant to assessing or estimating the long-term performance
of the acquired assets. Other operating expense, net represents
items that are not necessarily related to our recurring operations
and which therefore are not, under GAAP, included in other expense
lines. Accordingly, we exclude those amounts when assessing
non-GAAP income from operations. At times when we are communicating
with our shareholders, analysts and other parties we refer to
non-GAAP income from operations as adjusted EBITDA.
We assess non-GAAP income from operations as a percentage of
total non-GAAP revenue and by doing so we are able to evaluate the
relative performance of our revenue growth compared to the expense
growth for those items included in non-GAAP income from operations.
This measure allows management and our Board of Directors to
compare our performance against that of other companies in our
industry that may be of different sizes.
The following table provides a reconciliation of GAAP income
from operations to Non-GAAP income from operations and presents
Non-GAAP income from operations as a percentage of total
revenues.
Three Months Ended September 30,
2014 2013
($ in thousands)
Loss from operations $ (3,273) $ (599)
Acquisition fair value 784 2,136
adjustment to revenue
Share-based payment expense 1,690 749
Depreciation and amortization 971 1,383
expense
Amortization of acquired 2,429 2,224
intangible assets
Acquisition-related costs 1,718 2,104
Other operating expenses, net 16 311
Non-GAAP income from operations $ 4,335 $ 8,308
Non-GAAP income from operations 6.3% 12.3%
as a percentage of revenue
At times when we are communicating with our shareholders,
analysts and other parties, we refer to adjusted income from
operations as a percentage of revenues as EBITDA margin.
Non-GAAP Cash Flows from Operations - We define Non-GAAP cash
flows from operations as cash flows from operations as reported
under GAAP, adjusted for income taxes paid or received and payments
under restructurings. Income tax payments are included in this
reconciliation as the timing of cash payments and receipts can vary
significantly from year-to-year based on a number of factors,
including the influence of acquisitions on our consolidated tax
attributes. Payments for restructurings relate to a specific
activity that is not part of ongoing operations. At times when we
are communicating with our shareholders, analysts and other parties
we refer to Non-GAAP cash flows from operations per share as
Adjusted cash flows from operations.
The table below provides a reconciliation of GAAP cash flows
from operations to Non-GAAP cash flows from operations:
Three Months Ended September 30,
2014 2013
($ in thousands)
Cash flows from operations $ 4,769 $ 18,182
Income tax paid 1,323 1,302
Payments under restructuring - 100
Non-GAAP cash flows $ 6,092 $ 19,584
from operations
Non-GAAP cash flow from operations decreased $13.5 million to
$6.1 million in the three months ended September 30, 2014,
attributable primarily to decreased cash inflows from collection of
accounts receivable and deferred revenue balances as compared to
the prior year.
Non-GAAP diluted earnings per share - Non-GAAP diluted earnings
per share is calculated using GAAP net income/(loss) excluding the
effect of Acquisition fair value adjustment to revenue, Share-based
compensation expense, Amortization of intangible assets,
Acquisition-related costs, Net Interest-Other Income and Expense,
and the related tax effect, divided by fully diluted shares
outstanding. Therefore, we include this non-GAAP measure in order
to provide a more complete comparison of our earnings per share
from one period to another. At times when we are communicating with
our shareholders, analysts and other parties we refer to Non-GAAP
diluted earnings per share as Adjusted EPS.
Reconciliation of Non-GAAP Diluted Earnings Per Share
The tables below provide a reconciliation of our Non-GAAP
diluted earnings per share, and our associated Non-GAAP income
(loss), after tax:
Three Months Ended September 30,
2014 2013
($ in thousands, except per share amounts)
Net (loss) income $ (2,353) $ 2,722
Acquisition fair value 784 2,136
adjustment to revenue
Share-based payment expense 1,690 749
Amortization of intangible 2,429 2,224
assets
Acquisition-related costs 1,718 2,104
Net finance and other (380) (3,740)
expense (income)
Tax effect of above (2,066) (2,116)
Adjusted net income $ 1,822 $ 4,079
Non-GAAP diluted earnings $ 0.02 $ 0.04
per share
Supplemental Information
Share based payment expense recognized by functional line in the
Consolidated Income Statements is as follows:
Three Months Ended September 30,
2014 2013
($ in thousands)
Cost of maintenance services $ 33 $ 14
Cost of professional services 25 25
Research and development 285 140
Sales and marketing 895 370
General and administrative 452 200
Total share-based payment expense $ 1,690 $ 749
Depreciation and amortization expense recognized by functional
line in the Consolidated Income Statements is as follows:
Three Months Ended September 30,
2014 2013
($ in thousands)
Cost of software licenses $ 3 $ 14
Cost of maintenance services 90 130
Cost of professional services 131 220
Research and development 298 410
Sales and marketing 316 410
General and administrative 133 199
Total depreciation and $ 971 $ 1,383
amortization expense
Business Risks and Uncertainties
For the three months ended September 30, 2014, there have been
no material changes to the risk factors as presented in our Form
20-F filed on September 2, 2014 with the U.S. Securities and
Exchange Commission.
James Arnold, Jr.Chief Financial OfficerOctober 30, 2014
KOFAX LIMITEDUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share amounts)
Three Months Ended September 30,
2014 2013
Revenue:
Software licenses $ 24,704 $ 24,560
Maintenance services 35,220 32,150
Professional services 8,544 8,871
Total revenue 68,468 65,581
Cost of revenue:
Cost of software licenses 1,957 2,656
Cost of maintenance services 5,017 4,807
Cost of professional services 7,998 7,629
Amortization of intangible assets 1,698 1,464
Total cost of revenue 16,670 16,556
Gross profit 51,798 49,025
Operating expenses:
Research and development 10,027 9,077
Sales and marketing 32,080 27,933
General and administrative 10,499 9,439
Amortization of intangible assets 731 760
Acquisition-related costs 1,718 2,104
Other operating expenses, net 16 311
Total operating expenses 55,071 49,624
Loss from operations (3,273) (599)
Interest expense, net (126) (110)
Other (expense) income, net 522 4,161
(Loss) income from operations, before tax (2,877) 3,452
Income tax (benefits) expense (524) 730
Net (loss) income $ (2,353) $ 2,722
Net (loss) income per share:
Basic $ (0.03) $ 0.03
Diluted $ (0.03) $ 0.03
Weighted average shares outstanding:
Basic 87,564 87,300
Diluted 99,480 94,371
KOFAX LIMITEDUNAUDITED CONDENSED
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME(in
thousands)
Three Months EndedSeptember 30,
2014 2013
Net (loss) income $ (2,353) $ 2,722
Other comprehensive
(loss) income:
Foreign currency translation (5,068) 1,089
adjustments, net of tax
Foreign currency transaction (1,295) (170)
gains
(losses) related to intercompany
transactions of a long-term
investment
nature, net of tax
Pension adjustments, net of tax (45) (59)
Total other comprehensive (loss) (6,408) 860
income, net of tax
Comprehensive (loss) income $ (8,761) $ 3,582
KOFAX LIMITEDUNAUDITED
CONDENSED CONSOLIDATED
BALANCE SHEETS(in thousands,
except number of shares, which
are reflected in thousands)
September 30,2014 June 30,2014
Assets
Current assets:
Cash and cash equivalents $ 60,275 $ 89,631
Accounts receivable, 46,209 58,392
net of allowances
of $1,076 and $881,
respectively
Other current assets 10,251 9,690
Income tax receivable 7,282 7,209
Deferred tax assets 4,522 3,502
Total current assets 128,539 168,424
Property and equipment, net 6,629 6,753
Goodwill 203,540 186,103
Acquired intangible assets, net 50,592 36,085
Deferred tax assets, net 3,330 1,877
of current portion
Other non-current assets 3,650 4,105
Total assets $ 396,280 $ 403,347
Liabilities and shareholders'
equity
Current liabilities:
Accounts payable and $ 36,759 $ 37,445
accrued expenses
Deferred revenue 71,912 78,497
Income taxes payable 373 1,101
Deferred tax liabilities 868 217
Contingent acquisition payments 6,625 4,775
Total current liabilities 116,537 122,035
Minimum pension liability 3,832 4,078
Deferred revenue, net 7,777 8,079
of current portion
Deferred tax liabilities, 9,823 3,243
net of current portion
Contingent acquisition payments, 2,769 3,927
net of current portion
Other non-current liabilities 7,748 7,519
Total liabilities 148,486 148,881
Commitments and contingencies
(Note 10)
Shareholders' equity:
Common stock 98 97
Additional paid in capital 62,581 60,695
Employee benefit shares (18,005) (18,207)
Treasury shares (15,980) (15,980)
Retained earnings 204,788 207,141
Accumulated other comprehensive 14,312 20,720
income
Total shareholders' equity 247,794 254,466
Total liabilities and $ 396,280 $ 403,347
shareholders' equity
KOFAX LIMITEDUNAUDITED
CONDENSED CONSOLIDATED
STATEMENTS OF CASH
FLOW(in thousands)
Three Months EndedSeptember 30,
2014 2013
Cash flows from operating
activities:
Net (loss) income $ (2,353) $ 2,722
Adjustments to reconcile
net (loss) income to
net cash flows from operating
activities:
Depreciation and amortization 3,399 3,635
Share-based compensation expense 1,690 749
Other (expense) income (522) (4,161)
Restructuring payments - (100)
Changes in operating assets
and liabilities:
Accounts receivable, net 12,481 20,173
Other assets 1,720 (1,184)
Accounts and other payables (1,309) (8,101)
Deferred revenue (6,943) 1,345
Other liabilities (276) 1,263
Deferred income taxes (1,643) 326
Income taxes payable (1,475) 1,515
Net cash inflow from 4,769 18,182
operating activities
Cash flows from investing
activities
Purchase of property (848) (1,070)
and equipment
Acquisitions of subsidiaries, (32,944) (40,141)
net of cash acquired
Interest received 52 29
Net cash used in investing (33,740) (41,182)
activities
Cash flows from financing
activities
Issue of common stock 78 94
Excess tax benefits 315 88
on share-based
compensation
Proceeds from EBT shares, net 202 230
Net cash inflow from 595 412
financing activities
Effect of exchange rate changes (980) 1,174
on cash and cash equivalents
Net increase (decrease) in (29,356) (21,414)
cash and cash equivalents
Cash and cash equivalents at 89,631 93,413
the beginning of the year.
Cash and cash equivalents $ 60,275 $ 71,999
at the end of the year.
Supplemental cash
flow disclosure:
Cash paid for income taxes, net $ 1,323 $ 1,302
Cash paid for interest $ 28 $ 137
Note 1: Basis of presentation
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
necessary (consisting only of normal recurring accruals) to present
fairly the financial information contained therein. These
statements do not include all disclosures required by accounting
principles generally accepted in the United States (GAAP) for
annual periods and should be read in conjunction with the Company's
audited consolidated financial statements and related notes for the
year ended June 30, 2014. The Company prepared the unaudited
condensed consolidated financial statements following the
requirements of the U.S. Securities and Exchange Commission for
interim reporting. As permitted under those rules, certain
footnotes or other financial information that are normally required
by GAAP can be condensed or omitted. The results of operations for
the three month period ended September 30, 2014 is not necessarily
indicative of the results to be expected for the year ending June
30, 2015 or any other period.
New Accounting Standards Not Yet Adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts
with Customers, issued as a new topic, ASC 606. The new revenue
recognition standard provides a five-step analysis of transactions
to determine when and how revenue is recognized. The core principle
of the guidance is that a Company should recognize revenue to
depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The
new standard will also result in enhanced disclosures about
revenue, providing guidance for transactions that were not
previously addressed comprehensively, and improve guidance for
multiple-element arrangements. This ASU is effective for us
beginning in fiscal 2018 and can be adopted by the Company either
retrospectively or as a cumulative-effect adjustment as of the date
of adoption. We are currently evaluating the effect that adopting
this new accounting guidance will have on our consolidated
financial statements.
Note 2: Acquisitions
Acquisition of Softpro GmbH
On September 1, 2014, Kofax acquired 100% of the shares of
Softpro GmbH (Softpro), a company incorporated in Germany,
specializing in e-signature and signature verification solutions.
The Company believes Softpro's software will accelerate Kofax's
ability to improve customer interactions by enabling organizations
to offer a streamlined, fully digital and secure experience to
their constituents and transform customer workflow to an
all-electronic process, dramatically accelerating closure in any
type of transaction that requires a contract. Additionally, Softpro
provides a full suite of banking solutions including signature
verification, authentication and fraud detection. These
capabilities, offered both on premise and in the cloud, further
differentiate Kofax's smart process application (SPA) offering from
competitors who do not offer these capabilities. The acquisition
will be accounted for using the acquisition method.
The condensed consolidated financial statements include the
results of Softpro during the one month period from the acquisition
date. The preliminary fair value of the identifiable assets and
liabilities of Softpro, at the acquisition date, are as
follows:
($ in thousands)
Net liabilities, acquired (6,307)
Intangible assets 18,100
Goodwill 22,828
Total consideration 34,621
Analysis of cash flows on acquisition:
($ in thousands)
Cash outflow at time of closing 31,200
Deferred consideration 3,421
Total consideration 34,621
The preliminary goodwill of $22.8 million includes the value of
acquired technologies, and expected synergies arising from the
acquisition and workforce, which is not separately recognizable.
None of the goodwill is expected to be deductible for tax
purposes.
Note 3:Contingent acquisition payments
For the three month period ended September 30, 2014, contingent
consideration of $3.4 million was recorded from the acquisition of
Softpro in September 2014, with $1.1 million to be paid in December
2014, $1.2 million to be paid in September 2015 and $1.2 million to
be paid in September 2016, with said amounts being subject to
certain indemnification terms and conditions.
Cash payments related to contingent consideration of $2.7
million were made during the three months ended September 30, 2014,
primarily due to a $2.2 million payment for the second installment
of deferred consideration from the acquisition of Kapow.
Please refer to Note 8 for the rollforward of our contingent
consideration balance as of September 30, 2014.
Note 4: Operating Segments
The Company operates one reportable business segment, the
software business. All products and services are considered one
solution to customers and are operated and analyzed under one
income statement provided to and evaluated by the chief operating
decision maker (CODM). The CODM manages the business based on the
key measures for resource allocation, based on a single set of
financial data that encompasses the Company's entire operations for
purposes of making operating decisions and assessing financial
performance. The Company's CODM is the Chief Executive Officer.
Geographic Information
The following revenue information is based on the location of
the customer:
Three Months Ended September 30,
2014 2013
($ in thousands)
Americas $ 38,924 $ 37,451
United Kingdom 7,195 6,848
Rest of EMEA 17,419 16,939
Asia Pacific 4,930 4,343
$ 68,468 $ 65,581
The following table presents non-current assets by subsidiary
location:
September 30, 2014 June 30, 2014
($ in thousands)
Americas $ 5,816 $ 6,234
EMEA 3,615 3,770
Asia Pacific 848 854
$ 10,279 $ 10,858
Non-current assets for this purpose consist of property and
equipment, and other non-current assets- excluding intangible
assets, including goodwill and deferred tax assets.
Note 5: Intangibles and Goodwill
Intangibles
Intangible assets consist of the following as of September 30,
2014 and June 30, 2014, respectively:
September 30, 2014
GrossCarryingAmount AccumulatedAmortization NetCarryingAmount WeightedAverage Life(Years)
($ in thousands)
Customer relationships 29,209 (16,559) 12,650 5.1
Technology and patents 66,898 (31,887) 35,011 7.5
Trade names, trademarks 1,489 (952) 537 3.8
and other
Backlog 300 (300) - 3.0
Non-competition agreements 1,647 (274) 1,373 2.8
In process research 1,085 (64) 1,021 8.2
and development
Total 100,628 (50,036) 50,592 6.7
June 30, 2014
GrossCarryingAmount AccumulatedAmortization NetCarryingAmount WeightedAverage Life(Years)
(in thousands)
Customer relationships 23,272 (16,055) 7,217 5.1
Technology and patents 58,230 (30,568) 27,662 7.0
Trade names, trademarks 1,334 (881) 453 3.6
and other
Backlog 300 (300) - 3.0
Non-competition agreements 300 (200) 100 2.0
In process research 700 (47) 653 10.0
and development
Total 84,136 (48,051) 36,085 6.5
Intangible assets, such as contractual relationships and
technology, are amortized over their expected useful lives on a
straight-line basis. Amortization of these intangibles is included
in either cost of revenue or operating expenses based on the
function of the intangible asset. Amortization expense for
intangible assets was $11.2 million and $7.0 million for the three
months ended September 30, 2014 and 2013, respectively.
Goodwill
The changes in the carrying amount of goodwill for our
reportable segment as of September 30, 2014 were as follows:
September 30, 2014
($ in thousands)
Goodwill as of June 30, 2014 186,103
Acquisitions 22,828
Foreign exchange translation effects (5,391)
Goodwill as of September 30, 2014 203,540
Note 6: Income Taxes
During the quarter ended September 30, 2014, the effective tax
rate of 18.24% was below the United Kingdom (U.K.) statutory rate
of 20.75% primarily due to certain jurisdictional profits being
offset by previously unrecognized losses. These profits are
disproportionate to the quarterly operating profit thus reducing
the rate. If the effect of these unrecognized losses were ignored
the effective tax rate would be significantly above the U.K.
headline rate of 20.75% due to significant acquisition expenses
which attract no tax deduction, unrecognized losses and U.S.
profits (which is the group's primary operating jurisdiction) being
tax effected at the higher U.S. tax rate.
The timing and outcome of our tax audit settlements is
uncertain, however it is reasonably possible that a reduction of
uncertain tax benefits may occur due to audit settlements and/or
expiration of statutes of limitations. The settlement of these
unrecognized tax benefits could result in a reduction in the tax
charge of between zero and $1.1 million within the next twelve
months.
Note 7: Earnings per share
The following table presents a reconciliation of basic and
diluted shares for the three months ended September 30, 2014 and
2013:
September 30,
2014 2013
(shares in thousands)
Basic weighted-average number 87,564 87,300
of common shares outstanding
Dilutive effect of potential common shares 11,916 7,071
Diluted weighted-average common 99,480 94,371
and potential common
shares outstanding
Note 8: Fair Value Measures
The Company measures fair value based on the prices that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. Fair value measurements are based on a three-tier hierarchy
that prioritizes the inputs used to measure fair value. These tiers
include: Level 1, defined as observable inputs such as quoted
prices in active markets; Level 2, defined as inputs other than
quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs
for which little or no market data exists, therefore requiring an
entity to develop its own assumptions. The fair value of foreign
currency forward contracts is established based on market value
advice received by management from the issuing bank.
September 30, 2014
Total Level 1 Level 2 Level 3
($in thousands)
Assets measured at fair value
Cash and cash equivalents 60,275 60,275 - -
Foreign exchange 40 - 40 -
derivative asset
Total assets measured 60,315 60,275 40 -
at fair value
Liabilities measured
at fair value
Contingent and deferred 9,394 - - 9,394
consideration
Total liabilities measured 9,394 - - 9,394
at fair value
June 30, 2014
Total Level 1 Level 2 Level 3
($ in thousands)
Assets measured at fair value
Cash and cash equivalents 89,631 89,631 - -
Foreign exchange derivative asset 58 - 58 -
Total assets measured at fair value 89,689 89,631 58 -
Liabilities measured at fair value
Contingent and deferred 8,702 - - 8,702
consideration
Total liabilities measured 8,702 - - 8,702
at fair value
Foreign currency derivative instruments are valued using quoted
forward foreign exchange prices and option volatility at the
reporting date. The Company believes the fair values assigned to
its derivative instruments as of September 30, 2014 are based upon
reasonable estimates and assumptions. Contingent consideration
liabilities represent future amounts the Company may be required to
pay in conjunction with various business combinations. The ultimate
amount of future payments is based on specified future criteria,
such as sales performance and the achievement of certain future
development, regulatory and sales milestones and other contractual
performance conditions. The Company evaluates its estimates of the
fair value of contingent consideration liabilities on a periodic
basis. Any changes in the fair value of contingent consideration
liabilities are recorded as acquisition related costs in the
Consolidated Income Statements.
During the reporting period ended September 30, 2014, there were
no transfers between Level 1 and Level 2 fair value measurements. A
reconciliation of fair value measurements of level 3 financial
instruments is disclosed below:
September 30, 2014
($ in thousands)
As of June 30, 2014 8,702
Contingent consideration payments (2,695)
Fair value of contingent consideration 3,421
from acquisition
Change in fair value of contingent consideration 1
Foreign exchange translation effects (35)
As of September 30, 2014 9,394
Note 9: Share-Based Compensation
We recognize share-based compensation expense over the requisite
service period. Our share-based awards are accounted for as equity
instruments. Share-based compensation included in the condensed
consolidated income statements are as follows:
Three Months Ended September 30,
2014 2013
($ in thousands)
Cost of maintenance services $ 33 $ 14
Cost of professional services 25 25
Research and development 285 140
Sales and marketing 895 370
General and administrative 452 200
Total share-based payment expense $ 1,690 $ 749
Stock options
The Company has an incentive award plan that provides for the
granting of non-qualified stock options and incentive stock options
to officers, key employees and non-employee directors.
Stock option grants to officers and key employees under the
incentive award plan are generally granted at an exercise price
equal to the fair market value at the date of grant, generally
expire ten years after their original date of grant and generally
become vested and exercisable after four years at a rate of 25% per
year beginning twelve months after the date of grant and 6.25%
vesting each three months thereafter.
The fair value of share options granted is estimated at the date
of the grant using the Black-Scholes pricing model, taking into
account the terms and conditions upon which the share options were
granted.
The table below summarizes activity relating to stock options
for the three months ended September 30, 2014:
Number of shares
(in thousands)
Options outstanding at July 1, 2014 4,946
Granted 88
Exercised (37)
Forfeited/expired -
Options outstanding at September 30, 2014 4,997
Options exercisable at September 30, 2014 4,102
Long Term Incentive Plan (LTIP)
The table below summarizes activity relating to LTIP awards for
the three months ended September 30, 2014:
Number of underlying LTIPshares
- Contingent awards
(shares in thousands)
LTIP's outstanding at July 1, 2014 4,207
Granted 938
Earned/released (127)
Forfeited/cancelled (193)
LTIP's outstanding at September 30, 2014 4,825
Note 10: Contingencies
Litigation and other claims
The Company is subject to legal proceedings, lawsuits and other
claims relating to labor, service and other matters arising in the
ordinary course of business. Management judgment is required in
deciding the amount and timing of the accrual of certain
contingencies. Depending on the timing of when conditions or
situations arise, the timing of a contingency becoming probable and
estimable is not necessarily determinable. The amount of the
contingency may change in the future as incremental knowledge,
factors or other matters change or become known. There are no
material pending or threatened lawsuits against the Company.
Guarantees and other
The Company includes indemnification provisions in the contracts
it enters into with customers and business partners. Generally,
these provisions require us to defend claims arising out of the
Company's products' infringement of third-party intellectual
property rights, breach of contractual obligations and/or unlawful
or otherwise culpable conduct. The indemnity obligations generally
cover damages, costs and attorneys' fees arising out of such
claims. In most, but not all cases, the Company's total liability
under such provisions is limited to either the value of the
contract or a specified, agreed upon amount. In some cases our
total liability under such provisions is unlimited. In many, but
not all, cases, the term of the indemnity provision is perpetual.
While the maximum potential amount of future payments we could be
required to make under all the indemnification provisions is
unlimited, we believe the estimated fair value of these provisions
is de-minimis due to the low frequency with which these provisions
have been triggered.
The Company indemnifies its directors and officers to the
fullest extent permitted by law. These agreements, among other
things, indemnify directors and officers for expenses, judgments,
fines, penalties and settlement amounts incurred by such persons in
their capacity as a director or officer of the Company, regardless
of whether the individual is serving in any such capacity at the
time the liability or expense is incurred. Additionally, in
connection with certain acquisitions we have agreed to indemnify
the former officers and members of the boards of directors of those
companies, on similar terms as described above, for a period of six
years from the acquisition date. In certain cases we purchase
director and officer insurance policies related to these
obligations, which fully cover the six year periods. To the extent
that we do not purchase a director and officer insurance policy for
the full period of any contractual indemnification, we would be
required to pay for costs incurred, if any, as described above.
Media:KofaxColleen Edwards, +1 949-783-1582Vice President,
Corporate Communicationscolleen.edwards@kofax.comorInvestors:MKR
Group Inc.Todd Kehrli, +1 323-468-2300kfx@mkr-group.comorFTI
ConsultingChris Lane, +44 (0) 20 3727
1000kofax@fticonsulting.com
This information is provided by Business Wire
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