CGFW Cyberguard Corp (MM)

Company Reports Revenue Growth of 19%; Revenues and EPS Within Guidance BOCA RATON, Fla., Aug. 18 /PRNewswire-FirstCall/ -- CyberGuard Corporation (NASDAQ:CGFW), a global provider of security solutions that protect the critical components of the largest and most complex information networks for Global 2000 enterprises and government organizations, today reported revenues of $17.2 million for the quarter ended June 30, 2005, an increase of $2.7 million, or 19%, over revenues of $14.5 million for the quarter ended June 30, 2004. This is the twelfth consecutive quarter of sequential revenue growth. Revenues for the fiscal year ended June 30, 2005, were $66.1 million, up $18.3 million, or 38%, compared to revenues of $47.8 million for the fiscal year ended June 30, 2004. On a GAAP basis, inclusive of acquisition related costs, the Company reported a net loss of $464,000, or $0.02 per diluted share, for the fourth quarter of fiscal 2005, compared to a net income of $375,000, or $0.01 per diluted share, for the same quarter of the prior year. Net income for the quarter ended June 30, 2004, included a $352,000 income tax benefit. For fiscal 2005, GAAP net income totaled $761,000 versus GAAP net income of $1.8 million for the same period of fiscal 2004. GAAP earnings per diluted share for fiscal 2005 were $0.02 compared to $0.06 for fiscal 2004. On a non-GAAP basis, exclusive of acquisition-related costs, net income for the fourth quarter of fiscal year 2005 was $887,000, or $0.03 per diluted share, compared to $1.3 million, or $0.04 per diluted share, for the fourth quarter of fiscal year 2004. For the fiscal year ended June 30, 2005, non- GAAP net income totaled $5.3 million, or $0.16 per diluted share, versus $7.9 million, or $0.28 per diluted share, for the same period a year ago. The attached table presents a reconciliation of GAAP to non-GAAP income for the fourth quarter of both years and for fiscal 2005 and 2004. According to Pat Clawson, chairman and chief executive officer, "In the fourth quarter, we continued to add new and prestigious customers around the world and across both our firewall and content security product lines. We achieved an exceptional level of Webwasher(R) bookings in the fourth quarter, resulting in higher-than-anticipated sales commissions. The result was generating revenues at the top of our guidance range this quarter, but coming in at the lower end of our guidance for earnings. We expect to continue to generate exceptional Webwasher sales growth, with a new sales commission structure in place that will more appropriately balance revenues with commissions. "It is important to highlight the acceleration we are seeing in Webwasher sales and the success of that product line. Our products are resonating with enterprise security managers who require easier-to-use, easier-to-manage solutions which can be centrally managed to address more complex security issues. We took a major step forward in meeting our customers' requirements when we achieved Common Criteria EAL 4+ Certification from the National Information Assurance Partnership for our TSP network security appliances. EAL4+ is the highest mutually recognized certification level and it assures our customers that CyberGuard's products have gone through a long and rigorous testing process." Clawson concluded, "Looking back on the year, I would characterize it as one of strategic investment with a focus on enhancing and releasing new products, strengthening our management team, signing new Global 2000 enterprise customers, adding strong channel partners and increasing cross- selling of our product suites. We have delivered on all of our key priorities, and the excellent Webwasher results in the fourth quarter give me even greater confidence in our future growth opportunities." New Business Highlights * Announced that Deutsche Telekom, one of the world's largest telecommunications firms, expanded its managed security services offering based on CyberGuard's Total Stream Protection(TM) framework. * Signed a significant deal with UBS, a global banking leader, to secure its worldwide operations. UBS is standardizing its global content security operations on CyberGuard's Webwasher Content Security Management suite. * Finalized Webwasher agreements in France with SCNF, the French Rail Company, and Groupama Insurance, a major insurance company, where CyberGuard's solution replaced a multi-vendor solution that had been in place for three years. * Signed additional deals in Europe, including a contract with the Delta Bank in Serbia, along with Webwasher deals with ERGO, a large Norwegian managed service provider, and Fiducia, a German-based top ten IT full service provider. * Added several major U.S. customers including Caterpillar, Inc. and the Pepsi Bottling Group, both of which standardized on the Webwasher Content Security Management suite. In addition, the U.S. Marine Corps continued to migrate from the Classic Family of firewalls to the new TSP line. * Added several government agencies in Japan as customers, including the National Printing Bureau and the National Tax Agency. * Signed contracts with various Sub-Saharan African companies and government agencies, including deals with the Intercontinental Bank in Nigeria and the European Aeronautic Defence & Space Company (EADS) in South Africa. Other Highlights * Released Webwasher Content Security Management Suite 5.2, which delivers a unique 'One-Click Lockdown' feature enabling organizations to weather heavy attacks by triggering a lockdown of vulnerable areas of the network while allowing necessary applications to run uninterrupted. * Partnered with Blue Coat(R) Systems, a leading provider of proxy appliances, to deliver CyberGuard's Webwasher URL Filter on the high- performance Blue Coat ProxySG(TM) appliances. * Released CyberGuard SG565, a new all-in-one wireless workgroup security and data access appliance, designed to secure the wireless and wired local area networks of small and medium-sized enterprises. * Announced that Trusonic's newest MBOX Media Player is powered by CyberGuard's technology. Trusonic provides custom business music and messaging services and maintains licensing relationships with major record labels and over 200,000 Independent Artists representing over 1.5 million songs. Financial Highlights * Revenues grew 19% over the same three month period of the previous year, and both revenue and EPS results were within guidance. * Non-GAAP gross profit for the quarter increased to $12.5 million, or 73% of fiscal fourth quarter 2005 revenues, versus $9.7 million, or 67% of revenues for the same quarter a year ago. On a sequential basis, non- GAAP gross profit increased 2% from 71% of revenues. * Non-GAAP gross profit for the 2005 fiscal year increased to $47.2 million, or 71% of revenues, versus $33.1 million, or 69% of revenues for the year ended June 30, 2004. * Cash related balances were $15.0 million, and total current assets were $39.8 million as of June 30, 2005. * Current and long-term liabilities were $43.9 million as of June 30, 2005. The investor conference call will take place today at 10.00 a.m. Eastern Daylight Time via live web cast on CyberGuard's web site at http://www.cyberguard.com/. To participate by telephone, the dial-in number is 877-560-3200 and the conference ID number is 7895959; the international dial- in is 706-645-9750 and the conference ID number is 7895959. Investors are advised to dial-in at least five minutes prior to the call to register. The web cast will be archived for seven days: from 12:00 p.m. Thursday, August 18, until 12.00 p.m. Thursday, August 25, 2005. The archived recording may also be accessed by dialing 800-642-1687 or 706-645-9291 (international) and requesting conference ID number 7895959. Additional financial information can be found at http://www.cyberguard.com/investors/reports.cfm. About CyberGuard Corporation CyberGuard Corporation (NASDAQ:CGFW) delivers a suite of integrated information security solutions to provide Global 2000 enterprises and government organizations with the confidence that their critical information assets are protected. Based on the company's Total Stream Protection framework and managed via its Global Command Center, CyberGuard's products go beyond network-level security to provide protection against the most dangerous application-layer vulnerabilities and avoid potential damage, securing the entire data stream. With a growing and satisfied number of brand-name customers, CyberGuard has deployed more than 250,000 products across the globe. Headquartered near Boca Raton, FL., the company has offices and training centers around the world. For more information visit http://www.cyberguard.com/. Forward-Looking Statement Statements regarding estimates, expectations and future prospects contained in this press release are forward-looking statements. These statements are based upon assumptions and analyses made by the Company in light of current conditions, future developments, and other factors the Company believes are appropriate in the circumstances, or information obtained from third parties, and are subject to a number of assumptions, risks and uncertainties. Readers are cautioned that forward-looking statements are not guarantees and that actual results might differ materially from those suggested in the forward-looking statements. Some of the factors that might cause future actual events to differ from those predicted or assumed include: future advances in technologies and computer security; the Company's history of losses; the Company's ability to execute on its business plans and to integrate recent acquisitions; the Company's dependence on outside parties such as its key customers and alliance partners; competition from major computer hardware, software, and networking companies; uncertainties in availability of expansion capital in the future and other risks associated with capital markets; overall network security spending; global economic conditions; and litigation against the Company. For a more complete discussion regarding forward-looking statements, the reader is referred to the Company's periodic reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, including the Form 10-K for the fiscal year ended June 30, 2004, and other information filed with the Commission. CyberGuard(R) and Webwasher(R) are registered trademarks and Total Stream Protection(TM) and Global Command Center(TM) are trademarks of CyberGuard Corporation. All other trademarks are property of their respective owners. CYBERGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (Amounts in thousands, except per share data) Three Months Ended (Unaudited) June 30, June 30, 2005 2004 GAAP Proforma Proforma GAAP Proforma Proforma Presenta- Adjust- Presenta- Presenta- Adjust- Presenta- tion ments tion tion ments tion Revenues: Products $11,829 $- $11,829 $11,299 $- $11,299 Services 5,381 - 5,381 3,221 - 3,221 Total revenues 17,210 - 17,210 14,520 - 14,520 Cost of revenues: Products 3,938 (508)(1) 3,430 4,092 (470)(1) 3,622 Services 1,285 - 1,285 1,203 - 1,203 Total cost of revenues 5,223 (508) 4,715 5,295 (470) 4,825 Gross profit 11,987 508 12,495 9,225 470 9,695 Operating expenses: Research and development 2,281 - 2,281 2,311 - 2,311 Selling, general and administrative 10,199 (843)(1) 9,356 6,944 (460)(1) 6,484 Total operating expenses 12,480 (843) 11,637 9,255 (460) 8,795 Operating income / (loss) (493) 1,351 858 (30) 930 900 Other income Interest income, net 51 - 51 35 - 35 Other (expense) / income (33) - (33) 18 - 18 Total other (expense) / income 18 - 18 53 - 53 Income / (loss) before income taxes (475) 1,351 876 23 930 953 Income tax (expense) / benefit 11 - 11 352 - 352 Net income / (loss) $(464) $1,351 $887 $375 $930 $1,305 Basic earnings per common share $(0.02) $0.03 $0.01 $0.05 Basic weighted average number of common shares outstanding 30,912 30,912 27,656 27,656 Diluted earnings per common share $(0.02) $0.03 $0.01 $0.04 Diluted weighted average number of common shares outstanding 30,912 32,709 31,241 31,241 Note 1 - The proforma adjustment relates to amortization of acquisition related intangible assets and costs. CYBERGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (Amounts in thousands, except per share data) Year Ended (Unaudited) June 30, 2005 GAAP Proforma Proforma Presentation Adjustments Presentation Revenues: Products $49,677 $- $49,677 Services 16,421 - 16,421 Total revenues 66,098 - 66,098 Cost of revenues: Products 16,668 (2,066)(1) 14,602 Services 4,277 - 4,277 Total cost of revenues 20,945 (2,066) 18,879 Gross profit 45,153 2,066 47,219 Operating expenses: Research and development 9,791 - 9,791 Selling, general and administrative 34,641 (2,463)(1) 32,178 Compensation expense related to unearned restricted stock in the SnapGear acquisition - - - Total operating expenses 44,432 (2,463) 41,969 Operating income / (loss) 721 4,529 5,250 Other income Interest income, net 202 - 202 Other (expense) / income (50) - (50) Total other income 152 - 152 Income before income taxes 873 4,529 5,402 Income tax (expense) / benefit (112) - (112) Net income $761 $4,529 $5,290 Basic earnings per common share $0.03 $0.17 Basic weighted average number of common shares outstanding 30,270 30,270 Diluted earnings per common share $0.02 $0.16 Diluted weighted average number of common shares outstanding 32,087 32,087 Note 1 - The proforma adjustment relates to amortization of acquisition related intangible assets and costs. Year Ended June 30, 2004 GAAP Proforma Proforma Presentation Adjustments Presentation Revenues: Products $35,796 $- $35,796 Services 12,016 - 12,016 Total revenues 47,812 - 47,812 Cost of revenues: Products 11,743 (905)(1) 10,838 Services 3,919 - 3,919 Total cost of revenues 15,662 (905) 14,757 Gross profit 32,150 905 33,055 Operating expenses: Research and development 7,420 - 7,420 Selling, general and administrative 20,797 (844)(1) 19,953 Compensation expense related to unearned restricted stock in the SnapGear acquisition 4,387 (4,387) - Total operating expenses 32,604 (5,231) 27,373 Operating income / (loss) (454) 6,136 5,682 Other income Interest income, net 148 - 148 Other (expense) / income 376 - 376 Total other income 524 - 524 Income before income taxes 70 6,136 6,206 Income tax (expense) / benefit 1,700 - 1,700 Net income $1,770 $6,136 $7,906 Basic earnings per common share $0.07 $0.33 Basic weighted average number of common shares outstanding 23,829 23,829 Diluted earnings per common share $0.06 $0.28 Diluted weighted average number of common shares outstanding 28,363 28,363 Note 1 - The proforma adjustment relates to amortization of acquisition related intangible assets and costs. CYBERGUARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) (Unaudited) June 30, June 30, 2005 2004 ASSETS Cash and cash equivalents $15,003 $12,447 Restricted cash 298 197 Accounts receivable, less allowance for uncollectible accounts of $481 at June 30, 2005 and $365 at June 30, 2004 19,456 9,461 Inventories, net 1,753 2,063 Other current assets 3,248 2,790 Total current assets 39,758 26,958 Property and equipment at cost, less accumulated depreciation of $5,562 at June 30, 2005 and $4,619 at June 30, 2004 3,366 1,673 Capitalized software, less accumulated amortization of $2,547 at June 30, 2005 and $2,166 at June 30, 2004 2,521 1,530 Intangible assets, less accumulated amortization of $6,452 at June 30, 2005 and $2,055 at June 30, 2004 20,316 20,262 Other assets 241 104 Goodwill 45,454 40,625 Deferred tax asset, net 5,575 5,575 Total assets $117,231 $96,727 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $3,769 $2,951 Deferred revenue, current portion 16,500 10,760 Note payable 974 - Accrued expenses and other liabilities 8,928 5,750 Total current liabilities 30,171 19,461 Deferred tax liability 7,466 7,466 Deferred revenue, less current portion 6,310 3,758 Total long-term liabilities 13,776 11,224 Total liabilities 43,947 30,685 Commitments and Contingencies - - Shareholders' equity Preferred stock par value $0.01; authorized 5,000 shares; none issued - - Common stock par value $0.01; authorized 50,000 shares; issued and outstanding 31,082 at June 30, 2005 and 28,528 at June 30, 2004 311 285 Additional paid-in capital 150,995 144,569 Accumulated deficit (78,011) (78,772) Accumulated other comprehensive income (11) (40) Total shareholders' equity 73,284 66,042 Total liabilities and shareholders' equity $117,231 $96,727 CYBERGUARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands) Year Ended June 30, June 30, 2005 2004 Cash flows from operating activities: Net income $761 $1,770 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 943 1,245 Amortization 4,778 1,930 Compensation expense related to unearned restricted stock in the SnapGear acquisition - 4,387 Provision for inventory 47 - Deferred tax benefit - (1,700) Provision for uncollectible accounts receivable 116 231 Stock based compensation expense 725 453 Changes in assets and liabilities (excluding the effect of acquisitions) Increase in accounts receivable (10,111) (1,275) Increase in other current assets (536) (710) Decrease in inventories 263 720 Decrease in other, net 83 179 Increase in accounts payable 818 839 Increase / (decrease) in accrued expenses and other liabilities 1,956 (1,339) Increase in deferred revenue 6,714 1,925 Decrease in litigation receivable - 6,500 Decrease in litigation payable - (10,400) Net cash provided by operating activities 6,557 4,755 Cash flows used in investing activities Increase / (decrease) in restricted cash (101) 284 Increase in intangible assets (750) - Acquisition of SnapGear, net of cash acquired - (35) Acquisition of webwasher AG, net of cash acquired - (8,166) Acquisition of certain assets of Zix Corporation (2,310) - Capitalized software costs (1,372) (1,550) Purchase of property & equipment (2,604) (660) Net cash used in investing activities (7,137) (10,127) Cash flows provided by financing activities: Proceeds from stock options exercised 421 4,819 Payment on note (483) - Proceeds from warrants exercised 3,169 857 Proceeds from issuance of common stock in stock purchase plan - 167 Net cash provided by financing activities 3,107 5,843 Effect of exchange rate changes on cash 29 (119) Net increase in cash 2,556 352 Cash and cash equivalents at beginning of period 12,447 12,095 Cash and cash equivalents at end of period $15,003 $12,447 Supplemental disclosure of cash flow information Cash paid for interest $17 $- Cash paid for income taxes $- $28 Supplemental disclosure of non-cash information In connection with the acquisition of certain assets from Zix Corporation, the Company paid Zix $2,126 in cash and signed a promissory note for $1,500. The following assets and liabilities were acquired: Current assets Other current assets $142 Total current assets 142 Non-current assets Property and equipment 32 Customer base 3,700 Goodwill 1,302 Total non-current assets 5,034 Current liabilities Deferred revenue 1,387 Total current liabilities 1,387 Deferred revenue, less current portion 190 Total assets acquired $3,599 In connection with the acquisition of SnapGear, 1,651 shares valued at $14,414 were issued and a contingent purchase consideration of $800 was accrued for during the quarter ended December 31, 2003. During the quarter ended December 31, 2004, 342 shares valued at $2,137 (which includes the $800 of contingent consideration previously recorded), were issued based on the attainment of revenues during the 12 months following the acquisition. In accordance with the price protection clause of the Stock Purchase and Sale agreement related to the acquisition of webwasher AG, 334 shares were issued to the sellers of webwasher AG during the quarter ended June 30, 2005. On June 30, 2005, the issuance of 340 shares valued at $2,022, was accrued based on the attainment of certain revenue criteria by the webwasher subsidiary in accordance with the webwasher AG Stock Purchase and Sale Agreement. As of June 30, 2005 these shares had not been issued. DATASOURCE: CyberGuard Corporation CONTACT: Sally L. Beerbower of Qorvis Communications, +1-703-744-7803, , for CyberGuard Corporation Web site: http://www.cyberguard.com/

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