Corel Corporation Reports Second Quarter 2007 Financial Results

Corel Corporation (NASDAQ:CREL; TSX:CRE) today reported financial results for its second quarter ended May 31, 2007. Revenues in the second quarter of fiscal 2007 were $65.0 million, an increase of 47% over revenues of $44.2 million in the second quarter fiscal 2006. GAAP net income in the second quarter of fiscal 2007 was $2.3 million, or $0.09 per share, compared to a GAAP net loss of $4.0 million, or $(0.19) per share, in the second quarter of fiscal 2006.

Non-GAAP adjusted net income for the second quarter fiscal 2007 was $9.8 million, or $0.39 per diluted share, compared to non-GAAP adjusted net income for the second quarter of fiscal 2006 of $8.4 million, or $0.38 per diluted share. Non-GAAP adjusted EBITDA in the second quarter of 2007 was $15.2 million, compared to $13.7 million in the second quarter of fiscal 2006.

“We are pleased with our performance in the second quarter, as we continue to execute our key strategies and demonstrate our ability to generate attractive financial returns for our shareholders,” said David Dobson, CEO of Corel Corporation. “We are realizing many of the anticipated benefits from the acquisition of InterVideo and Ulead, including increased revenue contribution from a broader mix of OEM partners as well as a more diverse mix of revenue by geography. I am pleased with the progress we have made so far as we continue to execute on our core strategic initiatives and expand into the digital media market.”

Revenues for the six months ended May 31, 2007 were $117.7 million, an increase of 33% over revenues of $88.5 million for the six months ended May 31, 2006. GAAP net loss for six months ended May 31, 2007 was $9.6 million, or $(0.39) per share, compared to a GAAP net loss of $5.6 million, or $(0.28) per share, for the six months ended May 31, 2006.

Non-GAAP adjusted net income for the six months ended May 31, 2007 was $12.6 million, or $0.50 per diluted share, compared to non-GAAP adjusted net income for the six months ended May 31, 2006 of $15.3 million, or $0.72 per diluted share. Non-GAAP adjusted EBITDA for the six months ended May 31, 2007 was $24.0 million, compared to $28.1 million for the six months ended May 31, 2006. A reconciliation of GAAP net income to non- GAAP adjusted net income and non-GAAP adjusted EBITDA is provided in the notes to the financial statements included in this press release.

Financial Guidance

Third Quarter Fiscal 2007 Guidance
Corel provided guidance for the third quarter ending August 31, 2007. The Company currently expects:

Revenue in the range of $60 million to $62 million.
GAAP net loss of $(0.5) million to GAAP net income of $1 million and non-GAAP adjusted net income in the range of $7.0 million to $8.5 million.
GAAP earnings per share in the range of $(0.02) to $0.04 and non-GAAP earnings per share in the range of $0.27 to $0.33.
Fiscal 2007 Guidance Corel provided guidance for the year ending November 30, 2007. The Company currently expects:

Revenue in the range of $247 million to $253 million
GAAP net loss of $4.0 million to $2.0 million and non-GAAP adjusted net income of $34 million to $36 million.
GAAP loss per share of $(0.15) to $(0.08) and non-GAAP earnings per share of $1.30 to $1.40.
Corel will host a conference call to discuss its financial results at 4:30 p.m. Eastern Time today. To access the conference call, please dial (800) 817-4887 or (913) 981-4913. A live webcast and replay of the call will also be available through Corel’s Investor Relations website at http://investor.corel.com/events.cfm. An audio replay of the call will be available between 7:30 p.m. (EDT) July 12, 2007 and midnight (EDT) July 26, 2007 by calling (888) 203-1112 or (719) 457-0820, Passcode: 1434033. The replay will also be available on our Investor Relations website.

Forward-Looking Statements:
This news release includes forward-looking statements that are based on certain assumptions and reflect our current expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance, or achievements discussed or implied by such forward-looking statements. Such risks include competitive threats from well-established software companies that have significantly greater market share and resources than us and from online services companies that are increasingly seeking to provide software products at little or no incremental cost to their customers to expand their Internet presence and build consumer loyalty. We rely on a small number of key strategic relationships for a significant percentage of our revenue and these relationships can be modified or terminated at any time. In addition, our core products have been marketed for many years and the packaged software market in North America and Europe is relatively mature and characterized by modest growth. Accordingly, we must successfully complete acquisitions, penetrate new markets or increase penetration of our installed base to achieve revenue growth. In addition, we face risks related to the acquisition of InterVideo, Inc., including the risk that disruption from the transaction may make it more difficult to maintain relationships with customers, employees, or suppliers. We face potential claims from third parties who may hold patent and other intellectual property rights which purport to cover various aspects of our products and from certain of our customers who may be entitled to indemnification from us in respect of potential claims they may receive from third parties related to their use or distribution of our products.

These and other risks, uncertainties and other important factors are described in Corel’s Annual Report dated February 23, 2007, filed with the Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA) and Corel’s other filings including Corel’s form 10-Q for the quarter ended February 28, 2007 under the caption “Risk Factors” and elsewhere. A copy of the Corel Annual Report and such other filings can be obtained on Corel’s website, on the SEC’s website at http://www.sec.gov/ or on the CSA’s website at http://www.sedar.com. In addition, these and other risks can be found in InterVideo’s previous reports filed with the SEC under the caption “Risk Factors” and elsewhere, including InterVideo’s 10-Q for the quarter ended September 30, 2006, which can be found on InterVideo’s website or on the SEC’s website at http://www.sec.gov. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based.

Financial Presentation and Use of Non-GAAP Measures:
Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, which differ in certain material respects from Canadian generally accepted accounting principles. In addition, our financial statements and information in this release are presented in U.S. Dollars, unless otherwise indicated. This news release includes certain non-GAAP financial measures, such as adjusted net income and adjusted EBITDA. We use these non-GAAP financial measures to confirm our compliance with covenants contained in our debt facilities, as supplemental indicators of our operating performance and to assist in evaluation of our liquidity. These measures do not have any standardized meanings prescribed by GAAP and therefore are not comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance or changes in cash flows calculated in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the closes GAAP measures are set out in the notes to the financial statements attached to this news release.