TEL AVIV, ISRAEL , an information security leader specializing
in authentication, software DRM and content security, today
announced financial results for the second quarter of fiscal year
2008, ended June 30, 2008.
Total revenues for the second quarter 2008 were $26.4 million,
an increase of four percent from $25.5 million for the same period
in 2007. Software DRM revenues for the second quarter of 2008 were
$16.4 million, in-line with the same period in 2007. Enterprise
Security revenues for the second quarter were $10.0 million, an 11
percent increase from $9.0 million recorded in the same period in
2007.
Net income in accordance with U.S. Generally Accepted Accounting
Principles (GAAP) for the second quarter of 2008 was $0.1 million,
or $0.01 per basic and diluted share, compared to second quarter of
2007 GAAP net income of $3.9 million or $0.27 per basic share and
$0.26 per diluted share. GAAP net income for the second quarter of
2008 included $0.4 million for stock-based compensation expenses,
compared to $0.2 million reported in the second quarter of
2007.
Excluding stock-based compensation expenses, the Company
reported non-GAAP net income for the second quarter of 2008 of $0.5
million, or $0.04 per basic share and diluted share, compared to
second quarter of 2007 non-GAAP net income of $4.6 million or $0.32
per basic share and $0.31 per diluted share. Refer to the "Use of
Non-GAAP Measures" section and accompanying financial table for a
reconciliation of GAAP financial information to non-GAAP.
Cash, cash equivalents and marketable securities totaled $94.5
million at June 30, 2008. The Company generated cash flow from
operations of $0.6 million during the second quarter of 2008.
Yanki Margalit, Chairman and CEO of Aladdin Knowledge Systems,
said, "Our second quarter 2008 revenue and earnings per share
results were in line with our preliminary results announced on July
2, 2008. With a goal of improving long-term performance, we are
increasing our investment in customer focused research and
development as well as marketing resources in order to drive
organic growth while also seeking additional complementary
acquisition opportunities. I believe these investments in our core
business will strengthen our portfolio of IT security offerings and
increase our global brand recognition."
Financial and Operating Highlights
-- Quarterly revenues of $26.4 million, an increase of four percent year-
over-year.
-- Announced a definitive agreement to acquire Italian-based Eutronsec,
S.p.A. for approximately EUR 10.0 million in cash, including acquisition-
related expenses. The closing of the transaction is subject to customary
closing conditions and is expected to be consummated by September 2008.
-- Established a new office in Portugal as part of Aladdin Europe.
Located near Lisbon, the Portuguese office, Aladdin Europe, Lda., is set to
strengthen its HASP software DRM business in Portugal through the
acquisition of long-time partner and distributor, Futurm�tica.
Quarterly Product Highlights
-- Released Aladdin eToken NG-FLASH 72K, which combines the features of a
USB encrypted flash drive and an open Java Card technology with an advanced
smartcard.
-- Aladdin HASP SRM won "Most Innovative Software for the Software
Industry" at the Computer Technology Industry Association (CompTIA) 2008
SoftwareCEO Software Innovation Awards.
-- Aladdin HASP SRM won a 2008 Codie Award in the "Best Digital Rights
Management Solution" category from the Software and Information Industry
Association (SIIA).
-- Released Aladdin eSafe v6.2 Proxy, offering organizations more options
in control and flexibility for secure Web gateway deployment.
-- Announced Linux support for Aladdin HASP SRM, the first fully-
integrated software- and hardware-based copy protection and licensing
solution.
For further information on product highlights, refer to the
press room on the Company's Web site at
http://www.aladdin.com/about/press/corporate.aspx.
Future Business Outlook
Based on current business conditions and expectations, Aladdin
management is reiterating the recently updated 2008 top line
revenue target range issued on July 2, 2008 of between $112.0
million and $120.0 million for fiscal year 2008 as compared to the
$105.9 million in revenues reported for fiscal year 2007.
The Company is also reiterating its recently updated fiscal year
2008 GAAP diluted earnings per share guidance range of between
$0.36 to $0.44. These figures do not include amortization and
reorganization charges related to the acquisition of Eutronsec, as
they are not yet determinable. The Company reported GAAP diluted
earnings per share of $1.02 for fiscal year 2007.
Fiscal year 2008 non-GAAP diluted earnings per share are
expected to be in the range of $0.48 to $0.56. Non-GAAP earnings
per share guidance excludes the projected impact of stock-based
compensation expenses and anticipated one-time expenses related to
the Company's recent and announced acquisitions. The Company
reported non-GAAP earnings per diluted share of $1.20 for fiscal
year 2007, which excluded stock-based compensation expense and the
impact of the $2.0 million non-recurring up-front cost associated
with production of video-based training.
The Company undertakes no obligation to update its
estimates.
Use of Non-GAAP Measures
This press release provides financial measures for net income,
basic and diluted earnings per share that exclude stock-based
compensation expense and anticipated one-time mergers and
acquisition related expenses which are not calculated in accordance
with U.S. Generally Accepted Accounting Principles (GAAP).
Management believes that these non-GAAP financial measures provide
meaningful supplemental information regarding the Company's
performance that enhances management's and investors' ability to
evaluate the Company's net income and earnings per share as well as
to compare it with historical net income and earnings per
share.
Earnings Teleconference & Web Cast
The Company will hold a teleconference today, July 21st, at 9
a.m. EDT to discuss the quarterly results. To participate in the
call, dial +1 (800) 994-4498 in North America, or +972 (3) 918-0610
internationally, approximately five minutes prior to the scheduled
call start time. The call is being simultaneously Web cast and can
be accessed on the Aladdin Web site at www.Aladdin.com/investor.
Please visit the Web site at least 15 minutes prior to the
scheduled call time to register for the Web cast and download any
necessary audio software.
A replay of the call can also be accessed via telephone from
12:00 p.m. EDT on July 21st through 11:59 p.m. EDT on August 21st
by calling +1 (877) 456-0009 in North America, or +972 (3) 925-5953
internationally. A Web cast replay of the call will also be made
and can be accessed on the Aladdin Web site at
www.Aladdin.com/investor.
Analyst Day
Aladdin will host an analyst day on Friday, August 1st from
10:00 a.m. to 12:30 p.m. EDT in New York, at the NASDAQ Market
Site, 43rd and Broadway. Speakers at the breakfast event will
include Chairman and CEO Yanki Margalit, CFO Aviram Shemer, and the
vice presidents of the Aladdin HASP, eSafe and eToken Business
Units. Aladdin management will provide an update on Aladdin's
vision for growth and expansion into new global markets and
technologies, as well as operational and financial highlights.
Following the breakfast, Mr. Margalit will host a question and
answer session.
A live Web cast of the presentations will be available on the
Aladdin Web site at www.Aladdin.com. Please visit the Web site at
least 15 minutes early to register for the Web cast and download
any necessary audio software.
For more details and to register, email investor@aladdin.com or
call +1 (646) 468-0481.
About Aladdin Knowledge Systems
Aladdin Knowledge Systems' Software Rights Management products
are the #1 choice of software developers and publishers to protect
intellectual property, increase revenues, and reduce losses from
software piracy. Aladdin eToken is the world's #1 USB-based
authentication solution. The Aladdin eSafe secure Web gateway
provides the most advanced protection against the latest Web-based
threats and attacks. Aladdin has offices in 12 countries, a
worldwide network of channel partners, and has won numerous awards
for innovation. For more information, visit the Aladdin Web site at
www.Aladdin.com.
�2008 Aladdin Knowledge Systems, Ltd. All rights reserved. HASP,
eToken, eSafe, Aladdin Knowledge Systems and the Aladdin logo are
trademarks or registered trademarks of Aladdin Knowledge Systems,
Ltd. All other product and brand names mentioned in this document
are trademarks or registered trademarks of their respective
owners.
Safe Harbor Statement
Certain information presented herein constitutes forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the
company to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. Such factors include general economic
and business conditions, risks relating to our recent acquisition
of Athena Smartcards and the proposed acquisition of Eutronsec,
including the failure to realize expected synergies, failure to
effectively integrate these businesses into our business and
increasing unexpected liabilities, the loss of market share,
changes in the level of business or anticipated business from a
large customer or customers, failure to achieve anticipated
customer orders, changes in the competitive landscape and other
factors over which the company has little or no control. For more
information, please refer to the Company's filings with the
Securities and Exchange Commission, which are available on the
Commission's website at www.sec.gov.
(Tables Follow)
Aladdin Knowledge Systems Ltd.
Condensed Consolidated Statements of Operations
(U.S. dollars, in thousands - except for per-share amount)
(Unaudited)
Three month period Six month period
ended ended
June 30, June 30,
------------------- ------------------
2008 2007 2008 2007
-------- --------- -------- ---------
Revenues:
Software Security (DRM) 16,420 16,466 35,407 33,488
Enterprise Security 9,960 9,000 20,996 17,156
-------- --------- -------- ---------
Total revenues 26,380 25,466 56,403 50,644
-------- --------- -------- ---------
Cost of revenues 6,256 5,843 13,982 11,252
-------- --------- -------- ---------
Gross profit 20,124 19,623 42,421 39,392
-------- --------- -------- ---------
Research & development 6,679 4,585 12,944 9,174
Selling & marketing 9,751 7,917 19,248 15,994
General & administrative 4,211 3,370 8,205 6,765
-------- --------- -------- ---------
Total operating expenses 20,641 15,872 40,397 31,933
-------- --------- -------- ---------
Operating income (loss) (517) 3,751 2,024 7,459
Financial income, net 284 1,042 997 2,047
Other income - 5 613 14
-------- --------- -------- ---------
Income (loss) before taxes (233) 4,798 3,634 9,520
Taxes on income (50) 770 450 1,512
-------- --------- -------- ---------
Income (loss) before equity in loss
of an affiliate and
non-controlling interest (183) 4,028 3,184 8,008
Equity in loss of an affiliate - 149 (68) 261
-------- --------- -------- ---------
Income (loss) before
non-controlling interest (183) 3,879 3,116 7,747
Non-controlling interest 327 - 693 -
-------- --------- -------- ---------
Net income 144 3,879 3,809 7,747
======== ========= ======== =========
Basic earnings per share 0.01 0.27 0.27 0.53
Diluted earnings per share 0.01 0.26 0.27 0.52
Weighted average number of shares
outstanding for Basic EPS 13,882 14,493 13,874 14,590
Weighted average number of shares
outstanding for Diluted EPS 14,196 14,914 14,212 14,962
Aladdin Knowledge Systems Ltd.
Condensed Consolidated Balance Sheets
(U.S. dollars, in thousands)
(Unaudited)
June 30, December 31,
2008 2007
------------ ------------
Assets
Current assets:
Cash & cash equivalents 90,934 77,209
Marketable securities 3,577 13,127
Investment in other companies 2,336 4,423
Trade receivables, net of allowance for
doubtful accounts 16,947 16,918
Other accounts receivable 6,634 7,061
Inventories 12,311 8,763
------------ ------------
Total current assets 132,739 127,501
------------ ------------
Severance pay fund 4,903 3,853
Fixed assets, net 7,276 6,501
Other long-term assets, net 20,528 12,195
------------ ------------
Total Assets 165,446 150,050
============ ============
Liabilities and Shareholders? Equity
Current liabilities:
Trade payables 8,414 8,236
Deferred revenues 6,681 6,635
Other current liabilities 10,606 8,583
------------ ------------
Total current liabilities 25,701 23,454
------------ ------------
Accrued severance pay 6,370 4,802
Other long-term liabilities 3,354 2,564
Non-controlling interest 5,712 -
Shareholders? Equity 124,309 119,230
------------ ------------
Total Liabilities and Shareholders? Equity 165,446 150,050
============ ============
Aladdin Knowledge Systems Ltd.
Condensed Consolidated Statement of Cash Flows
(U.S. dollars, in thousands)
(Unaudited)
Three month period Six month period
ended ended
June 30, June 30,
---------------- ----------------
2008 2007 2008 2007
------- ------- ------- -------
Cash flow from operating activities:
Net income 144 3,879 3,809 7,747
Adjustment to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 769 990 1,265 1,649
Increase (decrease) in trade and other
receivables, net 2,007 (720) 1,185 (1,752)
Increase in inventory (1,013) (190) (2,284) (383)
Increase (decrease) in trade payables
and accrued liabilities (567) 578 (201) 188
Other adjustments (774) 44 (1,014) 1,062
Net cash provided by operating
activities 566 4,581 2,760 8,511
Cash flow from investing activities:
Purchase of property and equipment, net (667) (1,161) (1,142) (1,798)
Proceeds from sale of property and
equipment - 16 - 29
Investment in available-for-sale
marketable securities - (13,728) - (34,356)
Proceeds from sale of
available-for-sale marketable
securities 5,357 14,210 9,561 35,210
Investment in other companies - (245) (203) (495)
Investment in other assets (236) - (236) -
Proceeds from return on investment in
other companies - - 2,904 -
Net cash provided by (used in)
investing activities 4,454 (908) 10,884 (1,410)
Cash flow from financing activities:
Proceeds from exercise of options 36 312 185 398
Loan Payments - - (250) -
Purchase of treasury shares - (9,983) - (9,983)
Net cash provided by (used in)
financing activities 36 (9,671) (65) -
Effect of exchange rate on cash and
cash equivalents (166) 18 146 9
Increase (decrease) in cash and cash
equivalents 4,890 (5,980) 13,725 (2,476)
Cash and cash equivalents at the
beginning of the period 86,044 43,239 77,209 39,734
Cash and cash equivalents at the end of
the period 90,934 37,259 90,934 37,259
Aladdin Knowledge Systems Ltd.
Supplementary Financial Information
Reconciliation of GAAP Financial Information to Non-GAAP
(U.S. dollars, in thousands - except for per-share amount)
(Unaudited)
Quarter ended June 30
------------------------------------------
SFAS 123R Non-GAAP Non-GAAP
GAAP 2008 adjustments 2008 2007
--------- --------- --------- ----------
(Unaudited)
--------- --------- --------- ----------
Revenues:
Software Security (DRM) 16,420 16,420 16,466
Enterprise Security 9,960 9,960 9,000
--------- --------- --------- ----------
Total Revenues 26,380 26,380 25,466
--------- --------- --------- ----------
Cost of revenues 6,256 18 6,238 5,833
--------- --------- --------- ----------
Gross profit 20,124 (18) 20,142 19,633
--------- --------- --------- ----------
Research & development 6,679 149 6,530 4,431
Selling & marketing 9,751 145 9,606 7,818
General & administrative 4,211 91 4,120 3,213
--------- --------- --------- ----------
Total operating expenses 20,641 385 20,256 15,462
--------- --------- --------- ----------
Operating income (loss) (517) (403) (114) 4,171
Financial income, net 284 284 1,042
Other income - 5
--------- --------- --------- ----------
Income (loss) before taxes (233) (403) 170 5,218
--------- --------- --------- ----------
Taxes on income (50) (50) 770
--------- --------- --------- ----------
Income (loss) before equity in
loss of an affiliate (183) (403) 220 4,448
Equity in loss of an affiliate - - 149
Income (loss) before
non-controlling interest (183) 220 -
Non-controlling interest 327 327 -
--------- --------- --------- ----------
Net income 144 (403) 547 4,597
--------- --------- --------- ----------
Basic earnings per share 0.01 0.04 0.32
--------- --------- --------- ----------
Diluted earnings per share 0.01 0.04 0.31
--------- --------- --------- ----------
Weighted average number of
shares outstanding for Basic
EPS 13,882 13,882 14,493
--------- --------- --------- ----------
Weighted average number of
shares outstanding for Diluted
EPS 14,196 14,196 14,914
--------- --------- --------- ----------
Six month period ended June 30
--------------------------------------
GAAP SFAS 123R Non- Non-GAAP
2008 adjustments GAAP 2007
2008
--------- ----- --------- --------
Revenues:
Software Security (DRM) 35,407 35,407 33,488
Enterprise Security 20,966 20,966 17,156
--------- ----- --------- ---------
Total Revenues 56,403 56,403 50,644
--------- ----- --------- ---------
Cost of revenues 13,982 38 13,944 11,252
--------- ----- --------- ---------
Gross profit 42,421 (38) 42,459 39,392
--------- ----- --------- ---------
Research & development 12,941 276 12,668 8,939
Selling & marketing 19,248 297 18,951 15,787
General & administrative 8,205 174 8,031 6,642
--------- ----- --------- ---------
Total operating expenses 40,397 747 39,650 31,368
--------- ----- --------- ---------
Operating income (loss) 2,024 (785) 2,809 8,024
Financial income, net 997 997 2,048
Other income 613 613 14
--------- ----- --------- ---------
Income (loss) before taxes 3,634 (785) 4,419 10,086
--------- ----- --------- ---------
Taxes on income 450 450 1,512
--------- ----- --------- ---------
Income (loss) before equity in
loss of an affiliate 3,184 (785) 3,969 8,574
Equity in loss of an affiliate (68) (68) (261)
Income (loss) before
non-controlling interest 3,116 3,901 8,313
Non-controlling interest 693 693 -
--------- ----- --------- ---------
Net income 3,809 (785) 4,594 8,313
--------- ----- --------- ---------
Basic earnings per share 0.27 0.33 0.57
--------- ----- --------- ---------
Diluted earnings per share 0.27 0.32 0.56
--------- ----- --------- ---------
Weighted average number of
shares outstanding for Basic
EPS 13,874 13,874 14,590
--------- ----- --------- ---------
Weighted average number of
shares outstanding for
Diluted EPS 14,212 14,212 14,962
--------- ----- --------- ---------
Press Contact: Matthew Zintel Zintel Public Relations
matthew.zintel@zintelpr.com 310.574.8888 Investor Relations
Contact: Debbie Kaye Aladdin Investor Relations
investor@aladdin.com 646.468.0481
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