Company Generates Revenue of $76.5 Million and Earnings Per Share of $0.12;
Increases Stock Repurchase Program;
Financial Results for the Second Quarter and Guidance for the Third and Fourth
Quarters to be Discussed on Conference Call Today at 4:30 p.m. E.D.T.
BEDFORD, Mass., July 21 /PRNewswire-FirstCall/ -- RSA Security Inc.
(Nasdaq: RSAS) today reported financial results for the second quarter ended
June 30, 2005.
Revenue for the second quarter of 2005 increased to $76.5 million from
$75.6 million for the second quarter of 2004. Net income for the second
quarter of 2005 increased 6% to $8.5 million, or $0.12 per diluted share, from
$8.0 million, or $0.12 per diluted share, for the comparable period a year
ago.
"While we improved our performance this quarter in several key areas, we
fully expect to capture greater earnings and growth momentum in the second
half of the year," said Art Coviello, president and chief executive officer of
RSA Security. "We expect the rollout of our new RSA SecurWorld(TM) partner
program and the sales momentum of several new authentication products will
position us to drive these improvements."
The Company also announced that its board of directors has authorized the
repurchase of an additional 2.0 million shares of the Company's common stock
under its share repurchase program originally announced in September 2004.
The board of directors also extended the share repurchase program until June
30, 2006. The original plan authorized the repurchase of up to 6.7 million
shares of the Company's common stock during 2004 and 2005. As of June 30,
2005, under the original plan, there were 5.1 million shares available for
repurchase.
Second-Quarter Financial Highlights
* Revenue: Revenue for the second quarter of 2005 increased to $76.5
million from $75.6 million for the second quarter of 2004. RSA
Security's book-to-bill ratio for the quarter was approximately 1.0 to
1, and the Company closed the quarter with $62.0 million in combined
backlog and deferred revenue. This represents a 13% increase from RSA
Security's $55.1 million in backlog and deferred revenue at June 30,
2004.
* Net Income: Net income for the second quarter of 2005 increased 6% to
$8.5 million, or $0.12 per diluted share, from $8.0 million, or $0.12
per diluted share, from the second quarter of 2004.
* Cash Position: Cash, cash equivalents, and marketable securities
decreased to $284.2 million at June 30, 2005 from $289.7 million at
December 31, 2004. During the quarter, in accordance with the Company's
approved share repurchase program, RSA Security repurchased 777,600
shares of its common stock for $8.6 million.
Operational Highlights
* Customers: RSA Security shipped product to approximately 5,400
customers in the second quarter, including 683 new customers. With
these new customers, RSA Security's overall customer base now stands at
more than 18,000 worldwide.
* RSA SecurWorld(TM) Partner Program: RSA Security launched its new RSA
SecurWorld(TM) partner program in the second quarter. This program was
created in conjunction with RSA Security's existing partners and is
focused on driving greater volume through the channel, increasing new
customer acquisition rates and driving greater revenue and profitability
from new products. This new program includes incentives for partners
that drive new business and sell new products, as well as for partners
who receive sales and technical certification.
* Products: RSA Security shipped an increased number of SD 700s, one of
the newest releases in its family of authentication credentials.
Additionally, in the second quarter, RSA Security began shipping its SD
800 USB-enabled tokens, as well as the RSA SecurID(R) Appliance. The
USB-enabled combo token device enables customers to manage a broad range
of credentials, including one-time-passwords, digital certificates and
static passwords in a convenient easy-to-carry device. The RSA
SecurID(R) Appliance has an intuitive user interface and is designed to
be easy to deploy, providing small-to-medium sized businesses
significantly higher levels of security.
RSA Security also announced its new RSA BSAFE(R) Data Security Manager
software, which is scheduled to be released in the third quarter. This
product allows enterprises to secure their digital assets. RSA BSAFE
Data Security Manager enables companies to more easily enforce security
policies, provides audit and usage logs in order to meet regulatory
requirements and enables strong data security to be incorporated into
applications and databases.
Business Outlook
While the third quarter is typically a seasonally slower quarter, the
Company expects increased levels of business activity from new products in the
second half of this year. Therefore, the Company is providing financial
guidance for both the third and fourth quarters of 2005.
RSA Security's financial guidance for the third and fourth quarters of
2005 is only current as of today, Thursday, July 21st, 2005, and the Company
undertakes no obligation to update its estimates:
Third Quarter Guidance:
* Total quarterly revenue in the range of $74 million to $78
million.
* Diluted earnings per share in the range of $0.11 to $0.14.
Fourth Quarter Guidance:
* Total quarterly revenue in the range of $81 million to $85
million.
* Diluted earnings per share in the range of $0.15 to $0.19.
Conference Call Details
In conjunction with this announcement, RSA Security will host a conference
call today at 4:30 p.m. (ET) to discuss the Company's financial results,
highlights of the quarter and business strategy. A live webcast of this
conference call will be available on the "Investor" page of the Company's
website, and a webcast archive will be available for approximately three
months. To access this call by telephone, dial (877) 502-9276 or (913) 981-
5591. A replay will be available through midnight on Wednesday, July 27, 2005
at (719) 457-0820 or (888) 203-1112. Both live and replay numbers have a pass
code of 5132942.
About RSA Security Inc.
RSA Security Inc. helps organizations and individuals confidently protect
identities and information access. The company secures more than 15 million
user identities, safeguards trillions of business transactions annually, and
manages the confidentiality of data in tens of thousands of applications
worldwide. RSA Security's portfolio of award-winning solutions -- including
identity & access management, secure mobile & remote access, secure enterprise
access, secure transactions and consumer identity protection -- sets the
standard in the industry. Our strong reputation is built on a 20-year history
of ingenuity, leadership and proven technologies, and our more than 18,000
customers around the globe. Together with more than 1,000 technology and
integration partners, RSA Security inspires confidence in everyone to
experience the power and promise of the Internet. For more information, please
visit http://www.rsasecurity.com.
RSA, BSAFE, SecurWorld and SecurID are either registered trademarks or
trademarks of RSA Security Inc. in the United States and/or other countries.
All other products and services mentioned are trademarks of their respective
companies.
This press release contains forward-looking statements regarding RSA
Security's financial guidance for both the third and fourth quarters of 2005.
These statements involve a number of risks and uncertainties. Some of the
important factors that could cause actual results to differ materially from
those indicated by the forward-looking statements are general economic
conditions, including the global economy, changes in our operating expenses,
the long and unpredictable nature of the sales cycle for some of our products,
the timing of the introduction or enhancement of our products and our
competitors' and strategic partners' products, changes in product pricing,
including changes in competitors' pricing policies, development and
performance of our 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 14, 2005.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenue
Products $54,767 $56,455 $109,401 $111,654
Maintenance and
professional services 21,761 19,122 42,745 35,891
Total revenue 76,528 75,577 152,146 147,545
Cost of revenue
Products 9,864 7,844 18,579 16,065
Maintenance and
professional services 6,391 5,619 12,483 11,224
Total cost of revenue 16,255 13,463 31,062 27,289
Gross profit 60,273 62,114 121,084 120,256
Costs and expenses
Research and
development 15,516 15,477 31,470 30,186
Marketing and selling 28,302 26,895 57,444 53,222
General and
administrative 7,999 6,596 16,346 14,169
Restructurings -- 1,601 -- 1,601
Total 51,817 50,569 105,260 99,178
Income from operations 8,456 11,545 15,824 21,078
Interest expense
and other 2,400 (1,623) 4,291 (2,968)
Income (loss) from
investing activities -- 49 -- (70)
Income before provision
for income taxes 10,856 9,971 20,115 18,040
Provision for
income taxes 2,388 1,995 4,425 3,609
Net income $8,468 $7,976 $15,690 $14,431
Basic earnings per share
Per share amount $0.12 $0.13 $0.22 $0.23
Weighted average
shares 70,923 62,344 71,187 61,761
Diluted earnings
per share
Per share amount $0.12 $0.12 $0.21 $0.22
Weighted average
shares 70,923 62,344 71,187 61,761
Effect of dilutive
equity instruments 1,817 4,496 2,356 4,420
Adjusted weighted
average shares 72,740 66,840 73,543 66,181
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
June 30, December 31,
2005 2004
ASSETS
Current assets
Cash and cash equivalents $61,942 $68,210
Marketable securities 222,264 221,509
Accounts receivable (less allowance
for doubtful accounts
of $1,521 in 2005 and $1,672 in 2004) 48,836 53,494
Inventory 4,501 3,465
Prepaid expenses and other assets 9,817 8,702
Refundable income taxes 3,146 3,146
Deferred taxes 2,520 2,459
Total current assets 353,026 360,985
Property and equipment, net 67,323 70,700
Other assets
Goodwill, net 172,736 172,736
Deferred taxes 8,222 8,222
Other 14,184 12,184
Total other assets 195,142 193,142
Total assets $615,491 $624,827
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $11,036 $10,995
Accrued payroll and related benefits 12,539 18,964
Accrued expenses and other liabilities 19,114 18,952
Current portion of accrued restructurings 5,080 6,031
Income taxes accrued and payable 22,994 22,479
Deferred revenue 44,317 45,010
Total current liabilities 115,080 122,431
Accrued restructurings, long-term 12,222 13,682
Deferred revenue, long-term 7,582 6,125
Other 6,604 6,057
Total liabilities 141,488 148,295
Stockholders' equity 474,003 476,532
Total liabilities and shareholders' equity $615,491 $624,827
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Cash flows from
operating activities
Net income $8,468 $7,976 $15,690 $14,431
Adjustments to reconcile
net income to net cash provided
by operating activities:
Depreciation 3,109 2,780 6,004 5,744
Tax benefit from
exercise of
stock options 395 2,708 1,214 4,743
Amortization of convertible
debentures deferred
financing costs -- 460 -- 861
Non cash warrant
accretion -- 356 -- 710
(Increase) decrease in
Crosby Finance,
LLC fair value -- (49) -- 70
Increase (decrease) in
cash from changes in:
Accounts receivable (3,022) 3,589 4,311 (811)
Inventory (938) (318) (1,036) 224
Prepaid expenses and
other assets (2,045) (1,099) (1,318) 1,389
Accounts payable 1,600 144 160 873
Accrued payroll and
related benefits 2,352 3,310 (6,032) (2,543)
Accrued expenses and
other liabilities (1,649) 738 (1,396) (630)
Accrued
restructurings (1,105) (705) (2,410) (3,288)
Refundable income taxes
and income taxes
accrued and payable 1,334 (1,501) 553 (402)
Deferred revenue 3,251 1,465 854 5,430
Net cash provided by
operating
activities 11,750 19,854 16,594 26,801
Cash flows from investing
activities
Purchase of marketable
securities (31,852) (106,991) (96,177) (171,311)
Sales/maturities of
marketable
securities 38,013 62,850 95,247 94,300
Purchases of property
and equipment (1,993) (1,856) (4,202) (3,307)
Other (601) 450 (1,237) 52
Net cash provided by
(used for) investing
activities 3,567 (45,547) (6,369) (80,266)
Cash flows from financing
activities
Proceeds from exercise
of stock options and
purchase plans 1,052 8,062 4,672 15,266
Share repurchase (8,647) -- (21,088) --
Net cash (used for)
provided by financing
activities (7,595) 8,062 (16,416) 15,266
Effect of exchange rate
changes on cash
and cash equivalents 57 (420) (77) (1,060)
Net increase (decrease) in
cash and cash
equivalents 7,779 (18,051) (6,268) (39,259)
Cash and cash equivalents,
beginning of period 54,163 186,115 68,210 207,323
Cash and cash equivalents,
end of period $61,942 $168,064 $61,942 $168,064
Supplemental Financial Data
(Unaudited)
(In thousands, except per share data)
Three Months Ended
June 30, Sept 30, Dec 31, March 31, June 30,
2004 2004 2004 2005 2005
Revenue
Enterprise
solutions $68,742 $70,542 $73,340 $70,185 $68,700
Developer
solutions 6,835 6,189 9,891 5,433 7,828
Total $75,577 $76,731 $83,231 $75,618 $76,528
Enterprise
solutions 91% 92% 88% 93% 90%
Developer
solutions 9% 8% 12% 7% 10%
Total 100% 100% 100% 100% 100%
Products $56,455 $57,776 $63,068 $54,634 $54,767
Maintenance
and professional
services 19,122 18,955 20,163 20,984 21,761
Total $75,577 $76,731 $83,231 $75,618 $76,528
Products 75% 75% 76% 72% 72%
Maintenance and
professional
services 25% 25% 24% 28% 28%
Total 100% 100% 100% 100% 100%
Domestic $42,559 $42,942 $46,731 $41,117 $42,823
International 33,018 33,789 36,500 34,501 33,705
Total $75,577 $76,731 $83,231 $75,618 $76,528
Domestic 56% 56% 56% 54% 56%
International 44% 44% 44% 46% 44%
Total 100% 100% 100% 100% 100%
Statements of
Operations Data
Gross profit $62,114 $62,905 $69,113 $60,811 $60,273
Gross margin 82.2% 82.0% 83.0% 80.4% 78.8%
Total operating
expenses $50,569 $51,268 $55,109 $53,443 $51,817
Income from
operations $11,545 $11,637 $14,004 $7,368 $8,456
Operating
margin (1) 15.3% 15.2% 16.8% 9.7% 11.0%
Interest expense
and other $(1,623) $(935) $625 $1,891 $2,400
Income (loss) from
investing
activities $49 $354 $(74) -- --
Provision for
income taxes $1,995 $2,315 $2,745 $2,037 $2,388
Net income $7,976 $8,741 $11,810 $7,222 $8,468
Diluted earnings
per share $0.12 $0.13 $0.16 $0.10 $0.12
Other Financial Data
Gross margin -
products 86.1% 86.2% 87.5% 84.0% 82.0%
Gross margin -
maintenance and
professional
services 70.6% 69.2% 69.1% 71.0% 70.6%
Authentication
credentials
(4) 905,000 1,033,000 1,021,000 1,039,000 1,031,000
Cash and cash
equivalents
and marketable
securities $244,631 $255,996 $289,719 $282,289 $284,206
Deferred revenue
balance $40,056 $42,526 $51,135 $48,784 $51,899
Book to bill
ratio (2) 1.1 1.0 1.1 1.0 1.0
Day sales
outstanding (DSO) 42 50 59 55 58
Debt to equity
ratio 0.2 0.2 NA NA NA
Cash flow from
operations $19,854 $11,872 $15,640 $4,844 $11,750
Cash flow from
operations per
diluted
share (3) $0.30 $0.19 $0.21 $0.06 $0.16
(1) Operating margin is equal to total income from operations as a
percentage of total revenue for the period presented.
(2) The book to bill ratio is equal to the ratio of total orders booked
for the period as compared to total revenue for the period.
(3) Cash flow from operations per diluted share is calculated as cash flow
from operations divided by dilutive weighted average shares
outstanding during the period.
(4) Includes RSA SecurID tokens (both enterprise and consumer) as well as
software tokens, smart cards and USB.
Condensed Consolidated Statements of Operations
(Unaudited)
The following table sets forth certain consolidated financial data as a
percentage of our total revenue:
Percentage
Increase
Three Months Ended June 30, (Decrease)
2005 2004 in Dollars
Revenue
Products 71.6% 74.7% (3.0)%
Maintenance and professional
services 28.4 25.3 13.8
Total revenue 100.0 100.0 1.3
Cost of revenue
Products 12.8 10.4 25.8
Maintenance and professional
services 8.4 7.4 13.7
Total cost of revenue 21.2 17.8 20.7
Gross margin 78.8 82.2 (3.0)
Costs and expenses
Research and development 20.3 20.5 0.3
Marketing and selling 37.0 35.6 5.2
General and administrative 10.5 8.7 21.3
Restructurings -- 2.1 (100.0)
Total 67.8 66.9 2.5
Income from operations 11.0 15.3 (26.8)
Interest expense and other 3.2 (2.1) (247.9)
Income before provision
for income taxes 14.2 13.2 8.9
Provision for income taxes 3.1 2.6 19.7
Net income 11.1% 10.6% 6.2%
Press contact: Financial contact:
Matt Buckley Jeremiah Sisitsky
RSA Security Inc. RSA Security Inc.
(781) 515-6212 (781) 515-6065
mbuckley@rsasecurity.com jsisitsky@rsasecurity.com
SOURCE RSA Security Inc.
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Related links:
http://www.rsasecurity.com
CONTACT:
Press contact: Matt Buckley, +1-781-515-6212,
mbuckley@rsasecurity.com, or Financial contact: Jeremiah
Sisitsky, +1-781-515-6065, jsisitsky@rsasecurity.com both of RSA
Security Inc.
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