Acquisition Enhances RSA Security's Portfolio of Adaptive Authentication
Solutions and Expands Reach in the Financial Services Industry
Company Also Updates Financial Guidance; Bill Harris Joins Board of
Directors
Company to Hold Conference Call at 9:00 a.m. ET
BEDFORD, Mass., April 24 /PRNewswire-FirstCall/ -- RSA Security Inc.
(Nasdaq: RSAS) today announced that it has acquired PassMark Security, Inc.
A privately held company based in Menlo Park, PassMark delivers robust
software- based authentication to millions of users worldwide, through some
of the largest consumer-facing financial institutions.
RSA Security purchased PassMark for total consideration of $44.7
million, which consisted of $9.0 million in cash and the issuance of
approximately 2.0 million shares of RSA Security common stock (based on the
average of the prior 30 days' closing stock price as quoted by The NASDAQ
Stock Market). For purposes of generally accepted accounting principles
(GAAP), this transaction will be accounted for as a purchase, and the
securities issued will be valued based on the average of the closing stock
price on or around the closing date; as a result, for GAAP purposes, the
merger consideration is currently estimated to be approximately $48.2
million.
In addition, RSA Security is setting aside $2.7 million to fund
employee retention plans and termination costs. The Company will also
reserve approximately 80,000 shares of its common stock related to the
assumption of PassMark's stock option plan.
RSA Security expects this transaction to add in the range of $4 million
to $5 million in revenue over the remainder of 2006 and in the range of $10
million to $15 million in revenue in 2007. Additionally, the Company
anticipates that the acquisition will be mildly dilutive in the second and
third quarters of 2006 and accretive beginning in the fourth quarter of
2006.
"As financial institutions of all sizes race to address the regulatory
community's guidance on stronger authentication, this acquisition -- with
its ability to expand the RSA eFraudNetwork(SM), broaden our distribution
network, and add deep domain expertise in consumer authentication --
significantly strengthens our position in the market," said Art Coviello,
president and CEO of RSA Security. "Since our successful acquisition of
Cyota and the great traction we are gaining in the marketplace, we have
become even more bullish about our opportunity."
The acquisition of PassMark will extend and broaden RSA Security's
channels-to-market in the financial sector by adding further depth to a
growing distribution network, and customers and prospects of both
organizations are set to gain from an expansion of RSA Security's sales,
implementation and support teams. RSA Security believes that the
acquisition will strengthen its move to establish itself as a strategic hub
for the financial marketplace, providing the ability to authenticate and
protect all aspects of online banking and e-commerce: end-users, merchants
and transactions.
Mr. Coviello continued: "RSA Security has clearly differentiated itself
in the authentication market with a broad-based, adaptive approach. Now we
are gaining from the addition of more than 20 leading financial
institutions to our consumer online banking portfolio -- and the deep
market knowledge and experience of this group."
The deal further enhances RSA Security's broad consumer identity
protection portfolio that features a comprehensive range of authentication
options and anti-fraud capabilities. It also gives more than 20 leading
financial institutions the ability to contribute information to the RSA
eFraudNetwork, the world's largest cross-bank collaborative anti-fraud
community, which in turn can benefit their tens of millions of online
banking customers by protecting them from online fraud. The Network tracks
online criminal behavior across banking institutions, around the globe,
enabling the Company to protect all the businesses on the Network from
fraud attempts in real-time. All expansion to the Network helps to make its
anti-fraud capabilities and reach more effective and more pervasive -- to
the benefit of every member.
RSA Security is also acquiring PassMark's proven solutions that are
currently protecting millions of online users worldwide every day. These
include: a two-factor authentication solution that authenticates each user
to a Web site based on a password and specific positive device forensics --
and, at the same time, authenticates the site to the user with visual
images, offering both parties assurances that they are taking part in a
legitimate transaction; and a voice-based biometric authentication system
-- that identifies wired and wireless phones in combination with biometric
voiceprints -- to instantly authenticate remote users over the phone. RSA
Security will continue to develop and support these products to meet the
needs of customers. In addition, the Company will leverage these
technologies to further enhance its RSA(R) Adaptive Authentication
offering, which allows the dynamic tailoring of authentication
methodologies according to specific user preferences and scenarios.
Bill Harris, chairman of PassMark, added, "Joining forces with RSA
Security is the right move at the right time: as the industry moves to
facilitate the mass-adoption of identity protection solutions, success will
depend on the availability of a full suite of authentication offerings --
and genuine flexibility and choice for enterprises and their customers. I
am delighted that PassMark's technology will form part of a robust and
complete solution from RSA Security, with its strong history of technical
excellence, customer service and support."
Board of Directors
RSA also announced the appointment of Bill Harris to RSA Security's
board of directors, effective immediately following the closing of the
transaction.
Mr. Harris co-founded PassMark and served as the chairman of its board
of directors. In an extraordinary career marked by innovation and
entrepreneurial achievement, Mr. Harris has co-founded a number of
companies and overseen significant growth, expansion and increased
profitability during his tenure on the boards of directors of organizations
including EarthLink, Macromedia and LowerMyBills.com. Mr. Harris has also
served as the chief executive officer of Intuit and PayPal.
"We are delighted to welcome Mr. Harris to our board of directors,"
said James K. Sims, chairman of RSA Security's board of directors. "His
deep knowledge of the financial services industry and consumer market,
combined with his great experience as an entrepreneur, will make him a
valuable advisor to our Company. Mr. Harris is a man of vision and has an
established reputation as one of the leaders of our industry; we are
excited about working alongside him as we extend our leadership in the
protection of identities and assets online."
Financial Update
Guidance for the second quarter of 2006 and beyond is only current as
of today, Monday April 24, 2006; the Company undertakes no obligation to
update its estimates.
* The Company currently anticipates revenue for the second quarter of
2006 to be in the range of $89 million to $94 million, as compared to
the Company's previous guidance on April 17, 2006 of revenue in the
range of $88 million to $92 million.
* The Company currently anticipates GAAP earnings per diluted share for
the second quarter of 2006 to be in the range of $0.05 to $0.09, as
compared to the Company's previous guidance on April 17, 2006 of GAAP
earnings per diluted share in the range of $0.06 to $0.10.
* The Company currently anticipates non-GAAP earnings per diluted share
for the second quarter of 2006 to be in the range of $0.13 to $0.15, as
compared to the Company's previous guidance on April 17, 2006 of non-
GAAP earnings per diluted share in the range of $0.14 to $0.16.
* GAAP earnings per diluted share, less the following anticipated charges
for the second quarter of 2006, equals non-GAAP earnings per diluted
share:
-- A stock-based compensation charge in accordance with SFAS 123R in
the range of $4 million to $5 million, or $(0.04) to $(0.05) per
diluted share.
-- Restructuring charges in the range of $500,000 to $1 million, or
$(0.00) to $(0.01) per diluted share, related to the Company's
restructuring of its engineering resources.
-- Amortization charges of intangible assets primarily associated with
the acquisition of Cyota in the range of $1.3 million to $1.5
million, or $(0.01) per diluted share, compared to the Company's
previous guidance on April 17, 2006 of approximately $1.3 million in
charges.
Use of Non-GAAP Financial Measures
The Company is providing non-GAAP financial measures as the Company
believes that these figures are helpful in allowing investors to more
accurately assess the ongoing nature of RSA Security's core operations.
Further, management from time to time provides guidance with regard to
future expectations of the business; both these GAAP and non-GAAP measures
will assist investors in reconciling this forward-looking guidance to
actual results. Additionally, the Company is providing GAAP and non-GAAP
measures in order to illustrate the impact of recent changes in accounting
regulations, and to assist investors with the comparison of current and
prior period results.
The presentation of this non-GAAP financial information is not intended
to be considered in isolation or as a substitute for the financial
information prepared and presented in accordance with GAAP. Management uses
both GAAP and non-GAAP measures when evaluating the business internally and
therefore felt it important to make these same metrics available to
investors.
Conference Call and Web Cast Information
RSA Security will host a conference call today at 9:00 a.m. ET. A live
Web cast of this conference call will be available on the "Investor" page
of the Company's website: http://www.rsasecurity.com. To access this call by
telephone, dial (866) 592-8995 or (706) 634-1223. A replay will be
available through midnight (ET) on Friday, April 28, 2006 at (800) 642-1687
or (706) 645-9291. Both live and replay numbers have a pass code of
8311984.
About RSA Security Inc.
RSA Security Inc. is the expert in protecting online identities and
digital assets. The inventor of core security technologies for the
Internet, the company leads the way in strong authentication and
encryption, bringing trust to millions of user identities and the
transactions that they perform. RSA Security's portfolio of award-winning
identity and access management solutions helps businesses to establish
who's who online -- and what they can do.
With a strong reputation built on a 20-year history of ingenuity,
leadership and proven technologies, we serve more than 20,000 customers
around the globe and interoperate with over 1,000 technology and
integration partners. For more information, please visit
http://www.rsasecurity.com.
This press release contains forward-looking statements regarding the
benefits and synergies of RSA Security's acquisition of PassMark Security,
Inc., the expected future business and financial performance of the
combined company following the transaction and RSA Security's anticipated
financial performance for the second quarter of 2006. Some of the important
factors that could cause actual results to differ materially from those
indicated by the forward-looking statements are RSA Security's ability to
successfully integrate PassMark's employees and operations, the ability to
realize anticipated synergies and cost savings as a result of the
transaction, general economic conditions, changes in RSA Security's
operating expenses, the long and unpredictable nature of the sales cycle
for some of RSA Security's products, the timing of the introduction or
enhancement of RSA Security's products and its competitors' and strategic
partners' products, changes in product pricing, including changes in
competitors' pricing policies, development and performance of RSA
Security's direct and indirect distribution channels, delays in product
development, competitive pressures, changes in customer and market
requirements and standards, market acceptance of new products and
technologies, technological changes in the computer industry, and the risk
factors detailed from time to time in RSA Security's periodic reports and
registration statements filed with the Securities and Exchange Commission,
including, without limitation, RSA Security's Annual Report on Form 10-K
filed on March 16, 2006.
Public Relations: Public Relations: Investor Relations:
Matt Buckley Julie Kehoe Jerry Sisitsky
RSA Security Inc. OutCast Communications RSA Security Inc.
(781) 515-6212 (646) 442-3370 (781) 515-6065
mbuckley@rsasecurity.com RSA@outcastpr.com jsisitsky@rsasecurity.com
SOURCE RSA Security Inc.
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Related links:
http://www.rsasecurity.com
CONTACT:
Public Relations: Matt Buckley, RSA Security
Inc., +1-781-515-6212, mbuckley@rsasecurity.com, Public
Relations: Julie Kehoe, OutCast Communications, +1-646-442-3370,
RSA@outcastpr.com, Investor Relations: Jerry Sisitsky, RSA
Security Inc., +1-781-515-6065 jsisitsky@rsasecurity.com
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