On July 10, Corel Corp. (CREL) announced results for the second quarter ended May 31, 2009. Revenue for the quarter was $50.4 million, down 24.7% from the $67.0 million reported in the year-ago period and below our estimate of $56.9 million.
Quarterly revenue declined $16.6 million as a result of weakness in the global economy which particularly affected the company’s operations in Europe and North America. Of the total drop quarterly revenue, $10.9 million is attributable to the Graphics and Productivity group and $5.8 million is attributable to the Digital Media group.
GAAP net loss for the quarter was $4.1 million, or $0.16 per share, versus a net income of $0.93 million, or $0.04 per share, in the year-ago quarter. Excluding amortization of intangibles, tax benefit on amortization charges, restructuring, amortization of deferred financing fees and stock-based compensation, non-GAAP adjusted net income for the second quarter was $5.6 million, or $0.22 per share, versus non-GAAP adjusted net income of $9.5 million, or $0.36 per share, in the year-ago period. Non-GAAP adjusted EPS for the quarter was well above our estimate of $0.17 per diluted share.
GAAP gross margin for the quarter was 59.0% versus 69.3% in the year-ago quarter. GAAP operating margin was -3.2% versus 7.4% in the year-ago quarter. Excluding amortization of intangible assets and restructuring expenses, operating margin for the quarter was 11.1% versus 14.2% in the year-ago quarter. This was due to weak sales rather than a significant decline in operating expense.
Given the global economic uncertainty, Corel did not provided guidance for the third quarter or full-year 2009. The company will continue to invest in the product strategies, distribution channels and regions that will further strengthen its competitive position and support long-term growth as the economy improves.
We have slightly reduced our estimates for the third quarter and FY2009. We expect $0.17 in pro forma EPS on $55.6 million in revenues for the third quarter of 2009. For 2009, we expect $0.83 in pro forma EPS on $221.1 million in revenues. We believe that with the increased pace of new product launches and various restructuring efforts in line, the company will be able to meet our expectation. We reiterate our Hold rating on the stock.
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