Globalscape Announces Financial Results for the Third Quarter 2013

Reports Strong Earnings Growth Driven by Increased Revenue Combined with Lower Operating Expenses

Business Wire

SAN ANTONIO--(BUSINESS WIRE)--

GlobalSCAPE, Inc. (NYSE MKT: GSB), a leading developer of secure information exchange solutions, today announced its financial results for the three and nine month periods ended September 30, 2013.

Revenue for the three months ended September 30, 2013, was $6.3 million, a 3% increase over revenue of $6.1 million for the three months ended September 30, 2012. Revenue for the nine months ended September 30, 2013 was $18.1 million, a 5% increase over revenue of $17.2 million for the nine months ended September 30, 2012.

The Company’s deferred revenue, which the Company believes can be an indicator of future revenue trends, grew to $10.7 million at September 30, 2013, compared to $9.8 million at September 30, 2012, a 9.2% increase.

For the three months ended September 30, 2013, the Company had net income of $2.3 million or $0.12 per share, compared to a net loss of $2.7 million, or ($0.15) per share, for the three months ended September 30, 2012. For the nine months ended September 30, 2013, the Company had net income of $3.2 million, or $0.17 per share, compared to a net loss of $3.1 million, or ($0.17) per share for the nine months ended September 30, 2012.

Adjusted EBITDA Excluding Infrequent Items was $1.9 million for the three months ended September 30, 2013, compared to $1.1 million for the three months ended September 30, 2012, and was $4.1 million for the nine months ended September 30, 2013, compared to $1.7 for the nine months ended September 30, 2012. Adjusted EBITDA Excluding Infrequent Items is not a measure of financial performance under GAAP and has limitations as an analytical tools and when assessing the Company’s operating performance. Adjusted EBITDA Excluding Infrequent Items should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with GAAP.

Net cash provided by operating activities was $3.8 million for the nine months ended September 30, 2013. This cash flow performance allowed the Company to end the quarter with over $9.8 million of cash and $3.1 million of long term investments.

“Our third quarter results continue the year-long trend toward greater profitability and position us for further growth,” said James Bindseil, interim president of Globalscape. “Our revenue and deferred revenue continue their consistent pattern of growth between comparable periods, which reflects ongoing customer satisfaction with our solutions. While we intend to remain focused on customer satisfaction, we will also be enhancing our position through marketing growth, competitive displacements, and continued evolution of our products to further enhance our market leadership position.”

Conference Call November 12, 2013 at 4:30 p.m. ET

Globalscape management will hold a conference call Tuesday, November 12, 2013 to discuss financial results for the third quarter of 2013 and other corporate matters at 4:30 p.m. Eastern Time/3:30 p.m. Central Time. Those wanting to join should dial 1-877-941-4775 and use Conference ID # 4647703. A live webcast of the conference call will also be available in the investor relations page of the company's website at www.Globalscape.com. A webcast replay of the conference call will be available on the Company’s website through December 12, 2013.

About Globalscape

San Antonio, Texas-based GlobalSCAPE, Inc. (NYSE MKT: GSB) ensures the reliability of mission-critical operations by securing sensitive data and intellectual property. Globalscape’s suite of solutions features EFT Server, the industry-leading enterprise file transfer solution that delivers military-grade security and a customizable platform for achieving best in class control and visibility of data in motion or at rest, across multiple locations. Founded in 1996, Globalscape is a leading enterprise solution provider of secure information exchange software and services to thousands of customers, including global enterprises, governments and small businesses. For more information, visit Globalscape, or subscribe to our Blog or Twitter updates.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "would," "exceed," "should," "anticipates," "believe," "steady," "dramatic," and variations of such words and similar expressions identify forward-looking statements, but their absence does not mean that a statement is not a forward-looking statement. These forward-looking statements are based upon the Company’s current expectations and are subject to a number of risks, uncertainties and assumptions. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ significantly from those expressed or implied by such forward-looking statements are risks that are detailed in the Company’s Annual Report on Form 10-K for the 2012 calendar year, filed with the Securities and Exchange Commission on March 28, 2013.

 
 
Summary Financial Data
 
GlobalSCAPE, Inc.
Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
           
Three months ended September 30, Nine months ended September 30,
  2013     2012     2013     2012  
 
Operating Revenues:
Software license $ 2,103 $ 2,528 $ 5,966 $ 7,424
Maintenance and support 3,478 3,054 10,128 8,294
Professional services 412 274 1,237 1,013
Others   344     222     811     442  
Total Revenues 6,337 6,078 18,142 17,173
Operating Expenses:
Cost of revenues 250 331 782 962
Selling, general and administrative expenses 3,492 4,136 11,137 12,532
Research and development expenses 923 822 2,653 2,660

TappIn intangible asset impairment and earnout liability elimination

(128 ) - (128 ) -
Affiliated entity asset impairment - 3,264 - 3,264
Depreciation and amortization   265     314     787     951  
Total operating expenses   4,802     8,867     15,231     20,369  
Income (loss) from operations 1,535 (2,789 ) 2,911 (3,196 )
Other income (expense), net   (39 )   (11 )   (130 )   (138 )
Income (loss) before income taxes 1,496 (2,800 ) 2,781 (3,334 )
Provision (benefit) for income taxes   (791 )   (86 )   (404 )   (227 )
Net income (loss) $ 2,287   $ (2,714 ) $ 3,185   $ (3,107 )
Comprehensive income (loss) $ 2,287   $ (2,714 ) $ 3,185   $ (3,107 )
 
Net income (loss) per common share - basic $ 0.12 $ (0.15 ) $ 0.17 $ (0.17 )
Net income (loss) per common share - diluted $ 0.12 $ (0.15 ) $ 0.17 $ (0.17 )
Average shares outstanding:
Basic 18,761 18,398 18,570 18,336
Diluted 19,158 18,398 19,001 18,336
 
 
GlobalSCAPE, Inc.
Balance Sheets
(Unaudited)
In thousands except per share amounts.
       
September 30, December 31,
  2013         2012  
 
Assets
Current assets:
Cash and cash equivalents $ 9,757 $ 8,079
Accounts receivable (net of allowance for doubtful accounts
of $155 and $171 on September 30, 2013 and
December 31, 2012 respectively) 3,572 3,350
Income tax receivable - -
Current deferred tax assets 123 177
Prepaid expenses   418         426  
Total current assets 13,870 12,032
 
Fixed assets, net 739 900
Investment in certificate of deposit 3,107 3,060
Intangible assets, net 867 4,308
Goodwill 12,712 12,712
Deferred tax asset 1,619 535
Other assets   103         41  
Total assets $ 33,017       $ 33,588  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 426 $ 432
Accrued expenses 1,204 1,353
Deferred revenue 9,134 8,293
Income taxes payable 22 46

TappIn earn out, current portion

- 500
Long term debt, current portion   1,381         1,335  
Total current liabilities 12,167 11,959
 
Deferred revenue, non-current portion 1,587 1,480
TappIn earn out, non-current portion - 3,694
Long-term debt. non-current portion 3,344 4,389
Other long term liabilities 60 62
 
Commitments and contingencies - -
 
Stockholders’ equity:
Preferred stock, par value $0.001 per share, 10,000,000
authorized, no shares issued or outstanding - -
Common stock, par value $0.001 per share, 40,000,000
authorized, 19,184,197 and 18,846,547 issued September 30, 2013
and December 31, 2012 19 19
Additional paid-in capital 15,105 14,435
Treasury stock, 403,581 shares, at cost, at September 30, 2013
and December 31, 2012. (1,452 ) (1,452 )
Retained earnings   2,187         (998 )
Total stockholders’ equity   15,859         12,004  
Total liabilities and stockholders’ equity $ 33,017       $ 33,588  
 
 
GlobalSCAPE, Inc.
Statements of Cash Flows
(Unaudited)
(in thousands)
    For the nine months ended September 30,
  2013         2012  
Operating Activities:
Net income (loss) $ 3,185 $ (3,107 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 787 951
Stock-based compensation 522 711
Deferred taxes (1,030 ) (341 )
Bad debt expense (recoveries) 29 (55 )

Net tax effect of stock option and restricted stock activity

83 2

TappIn intangible asset impairment and earnout liability elimination

(128 ) -
Affiliated entity asset impairment - 3,264
Other   -     40  
Subtotal before changes in operating assets and liabilities 3,448 1,465
Changes in operating assets and liabilities:
Accounts receivable (251 ) 314
CoreTrace receivable - (150 )
Prepaid expenses 8 (65 )
Income tax receivable and payable (107 ) (178 )
Other assets (62 ) (11 )
Accounts payable (6 ) (239 )
Accrued expenses (149 ) (202 )
Deferred revenues 948 1,926
Other long-term liabilities   (2 )   6  
Net cash provided by (used for) operating activities   3,827     2,866  
Investing Activities:
Purchase of property and equipment (65 ) (210 )
Software development costs (686 ) (313 )
TappIn, Inc, earnout liability paid (500 ) -
Interest reinvested in certificate of deposit   (47 )   (45 )
Net cash provided by (used for) investing activities (1,298 ) (568 )
Financing Activities:
Proceeds from exercise of stock options 231 48
Net tax effect of stock option and restricted stock activity (83 ) (2 )
Notes payable principle payments   (999 )   (952 )
Net cash provided by (used for) financing activities (851 ) (906 )
Net increase (decrease) in cash 1,678 1,392
Cash at beginning of period   8,079     8,861  
Cash at end of period $ 9,757   $ 10,253  
 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on notes payable $ 182   $ 248  
Income taxes $ 731   $ 271  
 
 
GlobalSCAPE, Inc.
Adjusted EBITDA Excluding Infrequent Items
(Unaudited)
(In thousands)
 
    Three Months Ended     Nine Months Ended
September 30, September 30,
  2013       2012     2013       2012  
Net income (loss) 2,287 (2,714 ) 3,185 (3,107 )
Add (subtract) items to determine adjusted EBITDA excluding infrequent items:
Income tax expense (791 ) (86 ) (404 ) (227 )
Other expense 39 11 130 138
Depreciation and amortization 265 314 787 951
Stock-based compensation expense 225 283 522 711
Infrequent item:

TappIn intangible asset impairment and earnout liability elimination

(128 ) - (128 ) -
Affiliated entity asset impairment - 3,264 - 3,264
       
Adjusted EBITDA excluding infrequent items $ 1,897   $ 1,072   $ 4,092   $ 1,730  

Adjusted EBITDA [Earnings before Interest, Taxes, Total Other Income (Expense), Depreciation, and Amortization (including amortized stock-based compensation expense)] Excluding Infrequent Items is not a measure of financial performance under generally accepted accounting principles and should not be considered a substitute for net income. Adjusted EBITDA Excluding Infrequent Items has limitations as an analytical tool and when assessing our operating performance. Adjusted EBITDA Excluding Infrequent Items should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with generally accepted accounting principles.

Contact:
GlobalSCAPE, Inc.
Jim Albrecht
Chief Financial Officer
ir@Globalscape.com
or
Darrow Associates, Inc.
Jim Fanucchi, 408-404-5400
ir@Globalscape.com

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