November 10, 2011 at 16:01 PM EST
CyberDefender Corporation Announces Third Quarter 2011 Financial Results

LOS ANGELES, Nov. 10, 2011 (GLOBE NEWSWIRE) -- 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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