BALTIMORE—(BUSINESS WIRE)—May 4, 2006— SafeNet (NASDAQ: SFNT), setting the standard for information security, today announced results for the first quarter ended March 31, 2006. The Company also announced that its Board of Directors has authorized the use of $50 million for stock repurchases.
Revenues for the three-month period ended March 31, 2006,
increased 6% to $63.5 million, compared to $59.8 million for the same
period in 2005.
Non-GAAP net income for the quarter ended March 31, 2006 was $3.9
million, or $0.16 per diluted share, compared to $8.1 million, or
$0.32 per diluted share, for the same period of 2005. Non-GAAP net
income excludes acquisition related charges, integration costs, and
the expensing of stock options in accordance with FAS 123R. The
assumed effective income tax rate is 35%. Reconciliations of Non-GAAP
to GAAP financial measures used in this press release are contained in
the Consolidated Statements of Operations, Non-GAAP table.
Net loss under generally accepted accounting principles (GAAP) for
the quarter ended March 31, 2006 was $2.4 million or $0.10 per share,
which compares to a GAAP net income of $1.2 million, or $0.05 per
diluted share, for the same period of 2005. For the first time,
financial results for 2006 include stock-based compensation expenses
as required by FAS 123R. For the quarter ended March 31, 2006 this
expense was $2 million.
Share Repurchase Program - The Company's Board of Directors has
approved a share repurchase program that authorizes the repurchase of
up to $50 million of the Company's common stock. The program will be
implemented using cash on hand through purchases made from time to
time in either the open market or privately negotiated transactions at
the Company's discretion, subject to market conditions and compliance
with the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder.
First Quarter 2006 Financial Highlights
-- Cash, cash equivalents, and short term investments were $354
million as of March 31, 2006, an increase of $11.5 million
from December 31, 2005.
-- In the first quarter of 2006, operating cash flow was $12.3
million as compared to $7.1 million in the same quarter of
-- As of March 31, 2006, advance payments and deferred revenue
was $14.1 million, an increase of $3.1 million sequentially.
-- As of March 31, 2006, DSOs were 79 days as compared to 74 days
for the same quarter of 2005.
Anthony Caputo, Chairman and CEO of SafeNet, stated, "We are
taking steps to increase shareholder value, starting with the $50
million stock repurchase program that has now been approved by
SafeNet's Board of Directors. This program will be funded through our
existing cash balance, which we expect to be augmented through strong
quarterly cash flow as it was this quarter when we generated $12
million in cash."
Mr. Caputo continued, "Three of our business areas, Classified
Government, Digital Rights Management and OEM, are performing well.
Together they represent approximately 75% of our revenue, have good
growth, and very strong profitability. We are pleased that our backlog
is building, led by our subsidiary Mykotronx Inc.'s KIV-7M link
encryptor, which Mykotronx began shipping late last year. Our
consistent performance in Rights Management is demonstrating the
appeal of SafeNet's comprehensive approach to this market while our
strength in OEM continues to validate our leading technology that not
only powers our solutions but also many other vendors who seek to
incorporate among the industry's strongest encryption. We continue to
expect strong performance from these businesses as we work diligently
to improve the results from our High Speed Encryption and Borderless
Security business units. In addition to the organizational changes
being made, we believe the recent launch of our new high speed
Ethernet encryptors, the complementary Data at Rest product suite, and
the macro trends around our upcoming next generation authentication
tokens and upgraded Hardware Security Modules, bode well for momentum
as we move through 2006."
First Quarter 2006 Business Highlights
Product Developments and Customer Wins
-- Mykotronx's KIV-7M encryptor was certified by the U.S.
Government. The KIV-7M is the first encryption product that
was certified and fully compliant with the U.S. Government's
Cryptographic Modernization Initiative administered by the
National Security Agency (NSA).
-- British Telecom licensed SafeNet's Digital Rights Management
software for the UK's first ever wholesale mobile broadcast
entertainment back-end infrastructure. SafeNet will provide
the technology to encrypt radio and television channels over
Digital Audio Broadcasting (DAB) and manage the access and
usage of the content.
-- Hewlett Packard selected SafeNet's QuickSec VPN security
software and SafeXcel-1141 security co-processor to provide
networking security functionality for the Gigabit-class HP
Jetdirect 635n internal print server. The HP Jetdirect 635n is
designed to enable IT organizations to securely share
supported peripherals on a Gigabit or Fast Ethernet network,
with data transmission at Gigabit speeds.
-- SafeNet's OMA DRM Server Toolkit is being incorporated into
Motricity's Fuel offering, the industry's leading mobile
content delivery platform. SafeNet's technology will enable
Motricity to rights-protect the more than 600,000 titles
contained in its digital catalog and safely distribute that
content to over 120 million mobile subscribers worldwide.
Motricity partners with companies such as Cingular Wireless,
Verizon Wireless, China Unicom, O2, Amazon.com, Palm, BET and
a network of consumer Web sites, including eReader.com and
Awards and Recognitions
-- SafeNet attained Gold Certified Partner status in the
Microsoft Partner Program, recognizing SafeNet's expertise and
total impact in the security technology marketplace.
-- SafeNet's Sentinel RMS and Sentinel Hardware Keys were named
by the Software & Information Industry Association (SIIA) as
finalists in the 2006 CODiE Awards for Best DRM Software
-- SafeNet launched its Security Partner Alliance program, an
award-winning Channel Partners Program in the Asia Pacific
Current Business Outlook for Second Quarter and Full Year 2006
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.
During the quarter, SafeNet's corporate representatives may
reiterate the company's published Business Outlook during private
meetings with investors, investment analysts, the media and others.
Prior to the start of SafeNet's quiet period for the second quarter of
2006, the public can continue to rely on the Business Outlook set
forth in this press release as being SafeNet's current expectations
unless SafeNet publishes a notice stating otherwise. During the quiet
period, SafeNet and its corporate representatives will not comment
concerning the previously published Business Outlook and previously
published guidance should no longer be considered the Company's then
current Outlook. During the quiet period, the Company's press releases
and filings with the SEC on Forms 10-K and 10-Q should be considered
historical, speaking as of prior to the quiet period only and not
subject to update by the Company. SafeNet's quiet period at the end of
the second quarter is expected to run from June 19, 2006 until
financial results are released in July 2006.