Lyris, Inc., Reports Fourth Quarter Fiscal 2011 Results

Company Names Wolfgang Maasberg Interim Chief Financial Officer

(EMERYVILLE, CA), September 21, 2011—Lyris, Inc., (OTCBB: LYRI.OB), the global digital marketing expert, today reported results for the fourth quarter and all of fiscal 2011.

For the quarter ended June 30, 2011, Lyris reported revenues of $9.6 million, compared to revenues of $11.2 million in the fourth quarter a year ago, and $10.1 million in the prior quarter.

On a GAAP basis, the company reported a net loss of $2.8 million, or $0.02 per share, in the fourth quarter of 2011, compared with a net loss of $927,000, or $0.01 per share, in the fourth quarter of 2010. Included in the results for the fourth quarter of fiscal 2011 was a charge of $408,000 related to impairment of capitalized software.

On a non-GAAP basis, Lyris reported a net loss of $1.5 million, or $0.01 per share, in the fourth quarter of 2011. This compares with a non-GAAP net loss of $79,000, or $0.00 per share, in the fourth quarter of 2010. The material components excluded from the non-GAAP net loss in the fourth quarter of 2011 were amortization of intangibles of $817,000, stock-based compensation expense of $208,000, other income of $183,000, and $440,000 due to a change in an accounting estimate related to the depreciation of information technology equipment. In the prior year, exclusions from non-GAAP net loss were amortization of intangibles of $940,000, and other losses of $6,000. Stock-based compensation in the fourth quarter of 2010 was income of $98,000 due to a year-end true up of prior quarters.

The company said that adjusted EBITDA in the fourth quarter of fiscal 2011 was a negative $1.2 million, compared with positive $338,000 in the same period a year ago. Adjusted EBITDA is earnings before net interest expense, taxes, depreciation and amortization expense, non-cash stock-based compensation expense and other income or losses.

A reconciliation between GAAP and non-GAAP net income and between GAAP net income and adjusted EBITDA can be found in this news release and at www.lyris.com.

Lyris also announced that Wolfgang Maasberg, the company's chief executive officer, will serve as interim chief financial officer due to the death of Keith Taylor, Lyris' chief financial officer, in a traffic accident on Monday, September 19.

"Keith was a tremendous asset to our company and we mourn his loss. Our thoughts and prayers are with Keith's family and friends during this difficult time," Maasberg stated.

As announced yesterday, (Tuesday, September 20), the company has cancelled its fourth quarter earnings conference call in light of Mr. Taylor's death.

For all of fiscal 2011, Lyris reported revenues of $40.1 million compared to revenues of $44.2 million a year ago. On a GAAP basis, the company reported a net loss of $7.0 million, or $0.06 per share, in fiscal 2011, versus a net loss of $2.7 million, or $0.03 per share, in fiscal 2010. On a non-GAAP basis, the company reported a net loss of $3.6 million, or $0.03 per share, in fiscal 2011, compared with non-GAAP net income of $1.5 million, or $0.01 per diluted share, in fiscal 2010. Non-GAAP results in fiscal 2011 exclude amortization and impairment of intangibles of $2.7 million, stock-based compensation expense of $853,000, other income of $228,000, a $325,000 reversal of a balance sheet reserve and the $440,000 change in accounting estimate. In fiscal 2010, non-GAAP net income included amortization and impairment of intangibles of $3.8 million, stock-based compensation expense of $445,000 and other income of $36,000. Adjusted EBITDA for fiscal 2011 was a negative $1.9 million, versus a positive $3.2 million in fiscal 2010.

"Our financial performance for the year reflects the continued decline in legacy subscription revenues, offset in part by growth in Lyris HQ revenues, which grew seven percent year-over-year. We have also continued to manage operating expenses and recently implemented a reduction in headcount to align our staffing needs with current revenues," Maasberg said.

"At the same time, we realized a number of important accomplishments in critical areas of the company, including product enhancement, market development and international expansion. Our Lyris HQ platform now includes mobility applications and a new user interface that enables our customers to realize increased productivity and workflow. In addition, the company has increased its presence in the sector through new sales, marketing and customer service initiatives," he added.

During the quarter, Lyris acquired a majority stake in Cogent Online PTY Ltd., its marketing partner in Australia. "With this transaction, we have increased our footprint in Asia Pacific and we believe it will enable us to accelerate our growth in the region, where we already have a significant presence. In addition, we have completed our first year in Latin America with a strong and growing client base. We also enhanced our presence in Europe with the launch of our French language version of Lyris HQ," Maasberg said.

"In fiscal 2012, we will continue to drive on these key initiatives, while also improving the operating efficiency of the company to position Lyris for an improved financial performance in the future," he added.

Non-GAAP Financial Measures

In this release we use certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting principles ("GAAP"). A reconciliation between non-GAAP and GAAP measures can be found in the accompanying tables. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies.

We believe the calculation of non-GAAP net income (loss) calculated without acquisition-related amortization charges, a non-cash stock-based compensation expense and certain other measure provides a meaningful comparison to our net income (loss) figures. Management does not consider these measures that are excluded to be related to the company's ongoing core operating performance and therefore non-GAAP net income provides a basis for comparison of the company's operating results across other periods and against other companies in our industry. We also believe that adjusted EBITDA, which we calculate as net income (loss) on a GAAP basis, less interest, taxes, depreciation, amortization, non-cash stock compensation expense and certain other financial measures, is an indicator of the company's cash flows. This measure is commonly used by our lenders to assess our leverage capacity, debt service ability and liquidity. These non-GAAP measures have been reconciled to the nearest GAAP measure as required under the rules and regulations promulgated by the U.S. Securities and Exchange Commission.

About Lyris

Lyris, Inc., is the global digital marketing expert, delivering the perfect blend of technology and industry knowledge to help businesses achieve value with their email marketing campaigns. Lyris' high performance, secure and flexible email marketing platforms, Lyris HQ and Lyris ListManager (Lyris LM), optimize email efficiency by providing automated email delivery, robust segmentation and integrated social, mobile, search and analytics. The Lyris solutions portfolio is comprised of both in-the-cloud and on-premises email marketing solutions—Lyris HQ, Lyris LM—combined with customer-focused services and support. We understand the unique needs of companies and build solutions for marketers that deliver quantifiable ROI and true business value.

Contacts:
Richard McDonald
Director, Investor Relations
Lyris, Inc.
(610) 688-3305
rmcdonald@lyris.com

or

Neal B. Rosen
Ruder-Finn
(415) 692-3058
rosenn@ruderfinn.com