BALTIMORE, Maryland—April 28, 2005—
SafeNet (NASDAQ: SFNT), setting the standard for information security, today announced results for the first quarter ended March 31, 2005.
Revenues for the three-month period ended March 31, 2005 increased 149% to $59.8 million, compared to $24.0 million for the same period in 2004.
Adjusted net income for the 2005 first quarter was $8.1 million, or $0.32 per diluted share, compared to $2.7 million, or $0.17 per diluted share, for the quarter ended March 31, 2004. The quarterly adjusted net income and per share information excludes acquisition-related expenses and assumes a 35% effective income tax rate.
The net income calculated on a GAAP (Generally Accepted Accounting Principles) basis for the quarter ended March 31, 2005, was approximately $1.2 million or $0.05 per diluted share, which compares to a GAAP net loss of $456,000, or $(0.03) per diluted share, for the same period of 2004. The GAAP results for the three months ended March 31, 2005 include expenses related to acquisitions, including amortization of intangibles of $5.8 million, amortization of unearned compensation of $1.5 million, integration costs of $3.3 million, and their tax effects, resulting in an increase to adjusted net income of $6.9 million, or $0.27 per diluted share. This compares to an adjusted net income increase of $3.1 million, or $0.20 per diluted share, for the quarter ended March 31, 2004.
Anthony Caputo, Chairman and CEO of SafeNet, stated, "This first quarter of 2005 completes the first full year of our acquisition with Rainbow. We are pleased that this is working very well for us—our revenue is up 149% from the first quarter last year, adjusted net income is up by 200%, and adjusted EPS up by 88% from the first quarter last year."
Caputo continued, "Our management and staff delivered a strong quarter highlighted by positive cash generation and GAAP income as well as declining receivables and days sales outstanding. Another indication of the strong execution by our team is the fact that our outside auditors have completed the audit of management's assessment pursuant to Section 404 of the Sarbanes-Oxley Act that the company maintained effective internal control over financial reporting and issued an unqualified opinion."
In conclusion, "This week, SafeNet was named as the fastest growing networking company in America by Network World—this is especially significant since our growth topped other fast growing companies such as Research in Motion and Juniper Networks. Last year we were named as the third fastest growing company in the same issue, and our goal is to continue growing over the next five years. We feel this recognition as well as our strong financial results demonstrate that focused execution of our business plan continues to fuel our growth and ranking in the security space."Business Updates
Since the beginning of the first quarter of 2005, SafeNet has announced:Customer Wins and Partnerships
- The Department of Defense, as part of the government's Cryptographic Modernization (CM) program, awarded SafeNet a contract to develop the Enhanced Crypto Card (ECC). The ECC is the next-generation version of SafeNet's successful FORTEZZA Plus Crypto Card. The value of the contract is $7.7 million. SafeNet has booked nearly $35 million from the CM program to date, and expects acceleration from this program to begin later this year.
- Royal Philips Electronics selected SafeZone Software to provide the security foundation for Philips Trust v2 DRM Solution. SafeNet and Philips will jointly deliver an integrated solution to the OEM marketplace.
- Tally Solutions Pvt. Ltd., India's biggest and most successful business accounting software, selected SafeNet for its software security solution. SafeNet will help define software security mechanisms for Tally's products.
- Digital River, Inc., a global leader in e-commerce outsourcing, plans to expand its licensing and platform support for SoftwarePassport™, its digital revenue management solution, by integrating with SafeNet's Sentinel LM, a software-based license management technology.
- QuickSec Security Toolkits, SafeXcel IP products for Semiconductor OEMs, and all Luna hardware security appliances and PCI cards include SHA-256 hashing algorithms. This algorithm is the next generation answer beyond SHA-1 for data protection.
- The availability of an expanded line of QuickSec products, including QuickSec IKEv2 and QuickSec for Telecom. The QuickSec products are a key component of SafeNet's fully integrated security systems for VPN, Firewall, and Intrusion Prevention solutions. QuickSec for Telecom is the market's first IPSec network security toolkit to secure third generation (3G) Wireless Networks. QuickSec IKEv2 Toolkit provides OEM developers with a fast, reliable, and secure IPSec authentication solution at a fraction of the cost and time needed for in-house designs.
- Borderless Security Platform, a new approach to Information Security that combines authentication, authorization, and confidentiality wrapped in a robust management system was announced at the RSA Conference. The SafeNet Borderless Security Platform enables granular authentication and authorization to applications, files, and networks, and provides enforcement of role and risk-based authorization policies.
- SafeNet's entire line of SafeXcel™ security processors received Federal Information Processing Standards (FIPS) Cryptographic Module Validation from the U.S. Government's National Institute of Standards and Technology (NIST). All U.S. Government Agencies are required to use security solutions that are FIPS validated, and we believe SafeNet holds the most NIST certifications in the industry.
- SafeNet's subsidiary, SafeNet Mykotronx, was assessed under the Software Engineering Institute's (SEI) Capability Maturity Model® (CMM) and rated at level 3. A CMM Level 3 rating is the Software Engineering Institute's standard for benchmarking the commercial and defense industry's best practices for systems engineering. The Department of Defense views CMM as a necessity and now requires all their software developments to be performed by contractors that are rated CMM Level 3.
Current Outlook for Second Quarter and Full Year 2005
- The completion of the acquisition of DMDsecure B.V. in April 2005, a global leader in digital rights management (DRM) software. The acquisition will expand SafeNet's Digital Rights Management Business growth into the electronic content protection market.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not reflect the potential impact of any mergers, acquisitions or other business combinations that may be completed after the date of this release.
For the year ended December 31, 2005, the Company reiterates its prior guidance to achieve revenues in the range of $255 to $275 million. Adjusted net income guidance for 2005 is expected to be between $1.55 and $1.65 per diluted share. Adjusted guidance excludes estimated integration costs of $4.0 million, amortization of acquired intangibles of $22.5 million, and amortization of unearned compensation of $5.1 million. These adjustments net of a 35% effective tax rate are expected to increase net income by approximately $22.0 to $26.0 million, or approximately $0.88 to $0.98 per diluted share. The GAAP income per share guidance for 2005 is between $0.64 and $0.74 per diluted share.
For the quarter ending June 30, 2005, SafeNet currently expects to achieve revenues in the range of $60.0 to $64.0 million. The adjusted net income is expected to be in the range of $0.32 to $0.36 per diluted share. Adjusted guidance excludes integration costs of approximately $0.7 million, amortization of acquired intangible assets of $5.6 million, and amortization of unearned compensation of $1.2 million. These adjustments net of a 35% effective tax rate are expected to increase net income by approximately $5.2 million, or $0.20 per diluted share. The GAAP net income is expected to be in the range of $0.12 to $0.16 per diluted share.Conference Call
As previously announced, SafeNet is hosting a conference call today at 5:00 pm EDT. To join SafeNet in the conference call, dial 1-888-396-2384 and use passcode 86669843 within the United States. If you are calling from outside the U.S., please dial 1-617-847-8711 and use passcode 86669843. The conference call will also be available via live webcast on SafeNet's Investor Relations web site at www.safenetinvestor.com
. A replay of the conference call will be immediately available via webcast on SafeNet's Investor Relations site. SafeNet Analyst Briefing
SafeNet will be holding an Analyst Briefing on May 6, 2005 at the NASDAQ MarketSite in New York City. The event will be available through a live webcast on SafeNet's Investor Relations web site at www.safenetinvestor.com
beginning at 12:30 p.m. Eastern.Financial tablesCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF OPERATIONS, AS ADJUSTEDCONSOLIDATED BALANCE SHEETSAbout SafeNet, Inc.
SafeNet is a global leader in information security. Founded more than 20 years ago, the company provides complete security utilizing its encryption technologies to protect communications, intellectual property and digital identities, and offers a full spectrum of products including hardware, software, and chips. ARM, Bank of America, Cisco Systems, the Departments of Defense and Homeland Security, Adobe, Samsung, Texas Instruments, the U.S. Internal Revenue Service and scores of other customers entrust their security needs to SafeNet. For more information, visit www.safenet-inc.com
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
Statements contained in this document that are not historical facts could be deemed to be 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. These statements are based on management’s current expectations and beliefs, are not guarantees of future performance and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements, such as, among others, economic, business, competitive, and/or regulatory factors affecting SafeNet's business generally, including those set forth in SafeNet’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and its other filings with the Securities and Exchange Commission, including its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, SafeNet’s results could differ materially from the expectations in these statements. SafeNet assumes no obligation and does not intend to update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise.
Editor’s Note: SafeNet is a registered trademark and SafeXcel is a trademark of SafeNet. All other trademarks are the property of their respective owners.