Aladdin Knowledge Systems Ltd. (NASDAQ: ALDN), an information
security leader specializing in authentication, software DRM and
content security, today announced financial results for the third
quarter of fiscal year 2008, ended September 30, 2008.
Non-GAAP Financial Highlights for the Third Quarter:
-- Record revenues of $31.7 million, up 22 percent year-over-year
-- Net income of $2.9 million, or $0.20 per share
-- Strong demand from organic business
-- Recent acquisitions position Aladdin as the leading software DRM and
strong authentication provider
Yanki Margalit, Chairman and CEO of Aladdin Knowledge Systems,
stated, "Our strong third quarter results demonstrate that the
continued execution of our strategy creates long-term growth for
the company and increased shareholder value. These record results,
combined with the ongoing performance of our core business and our
pipeline, raises our confidence and we have revised our annual
guidance accordingly. During the third quarter we completed two
significant acquisitions, SafeWord and Eutronsec, which had an
immediate positive impact on our non-GAAP earnings, and have
enhanced value for our customers and shareholders. Our Board and
management team are committed to continuing to further strengthen
our IT security offerings, contribute to our market share and sales
and increase our global brand recognition."
Non-GAAP revenues for the third quarter of 2008 were a record
$31.7 million, an increase of 22 percent from the $26.1 million
reported for the same period in 2007. Software DRM revenues for the
third quarter of 2008 were $15.7 million, slightly above the same
period in 2007. Non-GAAP Enterprise Security revenues for the third
quarter were a record $16.0 million, a 51 percent increase from the
$10.6 million recorded in the same period in 2007. For the first
time, revenues in the third quarter included the consolidation of
the SafeWord business line and EutronSec, beginning September 2008.
Total non-GAAP revenues included approximately $0.4 million of
Non-GAAP adjusted revenues, from the Enterprise Security business
unit.
Non-GAAP revenues for the first nine months of 2008 were $88.1
million, an increase of 15 percent from the $76.8 million recorded
in the first nine months of 2007. Software DRM revenues for the
first nine months of 2008 were $51.2 million, an increase of 4
percent from the $49.0 million reported in the same period in 2007.
Non-GAAP Enterprise Security revenues for the first nine months of
2008 were $37.0 million, a 33 percent increase from the $27.8
million recorded in the same period in 2007.
Non-GAAP net income for the third quarter of 2008 was $2.9
million, or $0.21 per basic and $0.20 per diluted share, compared
to third quarter of 2007 non-GAAP net income of $4.5 million, or
$0.32 per basic and $0.31 per diluted share. Non-GAAP earnings per
share excludes the impact of stock-based compensation expenses of
approximately $0.7 million, fair value adjustment to acquired
deferred revenues of approximately $0.4 million, amortization of
intangibles related to the Company's acquisitions of approximately
$0.6 million and approximately $1.9 million of non-recurring legal
and other expenses related to the unsolicited acquisition proposal
and request for a shareholders' meeting received by the Company
during the third quarter.
For the first nine months of 2008, non-GAAP net income was $7.7
million, or $0.56 per basic and $0.54 per diluted share, compared
with non-GAAP net income of $12.9 million, or $0.89 per basic share
and $0.87 per diluted share for the first nine months of 2007.
Non-GAAP net income for the first nine months of 2008 excludes the
impact of stock-based compensation expenses of approximately $1.5
million, fair value adjustment to acquired deferred revenues of
approximately $0.4 million, amortization of intangibles related to
the Company's acquisitions of approximately $0.9 million and
approximately $1.9 million of non-recurring legal and other
expenses related to the unsolicited acquisition proposal and
request for a shareholders' meeting.
Refer to the "Use of Non-GAAP Measures" section and accompanying
financial table for a reconciliation of GAAP financial information
to non-GAAP.
On a GAAP basis, third quarter revenues totaled $31.4 million.
Software DRM revenues for the third quarter of 2008 were $15.7
million. Enterprise Security revenues for the third quarter were a
record $15.6 million. Revenues for the first nine months of 2008
were $87.8 million. Software DRM revenues for the first nine months
of 2008 were $51.2 million. Enterprise Security revenues for the
first nine months of 2008 were $36.6 million.
On a GAAP basis, net loss for the third quarter of 2008 was $0.3
million, or $0.02 per basic and diluted share, compared to third
quarter of 2007 GAAP net income of $4.3 million, or $0.31 per basic
share and $0.30 per diluted share. GAAP net income for the third
quarter of 2008 included $0.7 million for stock-based compensation
expenses, compared to $0.1 million reported in the third quarter of
2007.
For the first nine months of 2008, GAAP net income was $3.5
million, or $0.25 per basic share and $0.24 per diluted share,
compared with GAAP net income of $12.1 million, or $0.84 per basic
and $0.82 per diluted share for the first nine months of 2007. Net
income for the first nine months of 2008 included approximately
$1.5 million for equity-based compensation expenses compared to
$0.7 million in the first nine months of 2007.
Cash, cash equivalents and marketable securities totaled $8.8
million at September 30, 2008.
Quarterly Highlights
-- Completed the acquisition of the Secure SafeWord product line from
Secure Computing Corporation for approximately $65 million in cash,
including acquisition costs.
-- Completed the acquisition of EutronSec, a provider of software
protection and authentication products, for approximately EUR 10.0 million
in cash, including acquisition related expenses.
-- Signed a license agreement with Giesecke & Devrient (G&D), a
technology leader in the field of smart cards and IT-security solutions.
The agreement recognizes Aladdin's USB smartcard patents used in G&D's
authentication products and grants G&D the rights to use the protected
technology for its well-established StarSign e-Identity token solutions.
-- Durham Regional Police (DRP) in Ontario, Canada chose the Aladdin
eToken two-factor authentication device to comply with Canadian Police
Information Centre (CPIC) regulations. DRP's deployment follows numerous
other Canadian police forces that also chose Aladdin eToken.
-- Dingli Communications, Inc., one of China's largest network
engineering service providers, selected Aladdin HASP SRM to protect its
software and increase licensing flexibility and enforcement.
-- China Finance Online Co. Limited, a leading Chinese online financial
information and corporate data provider, will deploy Aladdin eToken PRO USB
smartcard devices, thereby enabling secure customer access to its
"StockStar" investment analysis tools and services.
-- Aladdin's eSafe was positioned in the visionaries' quadrant in
Gartner's Magic Quadrant for Secure Web Gateway by Peter Firstbrook and
Lawrence Orens, published September 11, 2008.
For further information on product highlights, please refer to
the press room on the Company's Web site which can be found at
http://www.aladdin.com/news/2008/index.aspx.
Future Business Outlook
Based on current business conditions and expectations, Aladdin
management is again raising its Fiscal Year 2008 guidance, which
was previously updated on September 4, 2008.
Aladdin now expects its 2008 non-GAAP revenues to be between
$124 million and $134 million, compared to the previously projected
non-GAAP range of $124 million to $132 million and as compared to
the $105.9 million in revenues reported for fiscal year 2007.
Non-GAAP revenues include any deferred revenue valuation
adjustments. Aladdin expects GAAP revenues to be between $122
million and $132 million in fiscal year 2008.
Fiscal year 2008 non-GAAP diluted earnings per share are
expected to increase to between $0.74 and $0.84 from between $0.67
and $0.77, as previously projected. The Company reported non-GAAP
earnings per diluted share of $1.21 for fiscal year 2007, which
excluded stock-based compensation expense, amortization of
intangibles related to and the impact of the $2.0 million
non-recurring up-front cost associated with production of
video-based training.
Fiscal year 2008 GAAP diluted earnings per share is expected to
increase to between $0.04 and $0.10 from a range of $0.00 to $0.05,
as previously projected. The Company reported GAAP diluted earnings
per share of $1.02 for fiscal year 2007.
The Company undertakes no obligation to update its
estimates.
Earnings Teleconference
The Company will hold a teleconference today, October 16, 2008
at 9:00 a.m. Eastern Time / 3:00 p.m. Israel Time to discuss the
quarterly results. To participate in the call, dial +1 (866) 345
5855 in North America, or +972 (3) 918 0609 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.
About Aladdin
Aladdin Knowledge Systems (NASDAQ: ALDN) is an information
security leader with offices in 12 countries, a worldwide network
of channel partners, and numerous awards for innovation. Aladdin
eToken is the world's #1 USB-based authentication solution,
offering identity and access management tools that protect
sensitive data. Aladdin SafeWord two-factor authentication
technology protects companies' important information assets and
applications. Aladdin HASP SRM boosts growth for software
developers and publishers through strong anti-piracy protection, IP
protection, and secure licensing and product activation. Aladdin
eSafe delivers real-time intelligent Web gateway security that
helps protect data and networks, improves productivity, and enables
compliance. Visit www.Aladdin.com.
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, SafeWord and 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, unexpected costs associated with one
time corporate events 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.
�2008 Aladdin Knowledge Systems, Ltd. All rights reserved. HASP,
eToken, eSafe, SafeWord, Eutronsec, Aladdin Knowledge Systems and
the Aladdin logos 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.
Aladdin Knowledge Systems Ltd.
Condensed Consolidated Statements of Operations
(U.S. dollars, in thousands - except for per-share amount)
(Unaudited)
Three month period Nine month period
ended September 30, ended September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Revenues:
Software Security (DRM) 15,743 15,498 51,150 48,986
Enterprise Security 15,616 10,622 36,612 27,778
-------- -------- -------- --------
Total revenues 31,359 26,120 87,762 76,764
-------- -------- -------- --------
Cost of revenues 9,005 5,993 22,987 17,245
-------- -------- -------- --------
Gross profit 22,354 20,127 64,775 59,519
-------- -------- -------- --------
Research & development 6,928 4,866 19,872 14,040
Selling & marketing 10,423 7,958 29,671 23,952
General & administrative 4,280 3,157 12,485 9,922
Non-recurring unsolicited proposal
and EGM 1,872 - 1,872 -
-------- -------- -------- --------
Total operating expenses 23,503 15,981 63,900 47,914
-------- -------- -------- --------
Operating income (loss) (1,149) 4,146 875 11,605
Financial income, net 289 1,114 1,287 3,161
Other income - (9) 613 5
-------- -------- -------- --------
Income (loss) before taxes (860) 5,251 2,775 14,771
Taxes on income 23 876 474 2,388
-------- -------- -------- --------
Income (loss) before equity in loss
of an affiliate and non-controlling
interest (883) 4,375 2,301 12,383
Equity in loss of an affiliate - (42) (68) (303)
-------- -------- -------- --------
Income (loss) before
non-controlling interest (883) 4,333 2,233 12,080
Non-controlling interest 538 - 1,231 -
-------- -------- -------- --------
Net income (loss) (345) 4,333 3,464 12,080
======== ======== ======== ========
Basic earnings per share (0.02) 0.31 0.25 0.84
Diluted earnings per share (0.02) 0.30 0.24 0.82
Weighted average number of shares
outstanding for Basic EPS 13,905 14,022 13,884 14,398
Weighted average number of shares
outstanding for Diluted EPS 14,148 14,442 14,253 14,787
Aladdin Knowledge Systems Ltd.
Condensed Consolidated Balance Sheets
(U.S. dollars, in thousands)
(Unaudited)
September 30, December 31,
2008 2007
------------ ------------
Assets
Current assets:
Cash & cash equivalents 8,804 77,209
Marketable securities - 13,127
Investment in other companies 2,336 4,423
Trade receivables, net of allowance for doubtful
accounts 24,542 16,918
Other accounts receivable 8,135 7,061
Inventories 15,502 8,763
------------ ------------
Total current assets 59,319 127,501
------------ ------------
Severance pay fund 5,154 3,853
Fixed assets, net 8,323 6,501
Other long-term assets, net 109,634 12,195
------------ ------------
Total Assets 182,430 150,050
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Trade payables 10,280 8,236
Deferred revenues 10,963 6,635
Other current liabilities 15,794 8,583
------------ ------------
Total current liabilities 37,037 23,454
------------ ------------
Accrued severance pay 6,887 4,802
Other long-term liabilities 8,908 2,564
Non-controlling interest 5,174 -
Shareholders' Equity 124,424 119,230
------------ ------------
Total Liabilities and Shareholders' Equity 182,430 150,050
============ ============
Aladdin Knowledge Systems Ltd.
Condensed Consolidated Statement of Cash Flows
(U.S. dollars, in thousands)
(Unaudited)
Three month Nine month
period ended period ended
September 30, September 30,
---------------- ----------------
2008 2007 2008 2007
------- ------- ------- -------
Cash flow from operating activities:
Net income (loss) (345) 4,333 3,464 12,080
Adjustment to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,600 887 2,865 2,536
Increase in trade and other
receivables, net (5,280) (920) (4,095) (3,012)
Increase in inventory (519) (394) (2,803) (777)
Increase in trade payables and accrued
liabilities 3,565 2,368 3,364 2,896
Other adjustments 176 164 (838) 1,253
Net cash provided by (used in)
operating activities (803) 6,458 1,957 14,971
Cash flow from investing activities:
Purchase of property and equipment, net (1,229) (862) (2,371) (2,660)
Investment in available-for-sale
marketable securities - (8,909) - (43,265)
Proceeds from sale of
available-for-sale marketable
securities 3,548 36,909 13,109 72,119
Investment in other companies (80,305) - (80,305) (495)
Investment in other assets (30) - (266) -
Proceeds from return on investment in
other companies - - 2,701 -
Net cash provided by (used in)
investing activities (78,016) 27,120 (67,132) 25,710
Cash flow from financing activities:
Proceeds from exercise of options 159 81 344 479
Loan Payments (2,857) - (3,107) -
Purchase of treasury shares - (10,003) - (19,986)
Net cash provided by (used in)
financing activities (2,698) (9,922) (2,763) (19,507)
Effect of exchange rate on cash and
cash equivalents (613) (224) (467) (215)
Increase (decrease) in cash and cash
equivalents (82,130) 23,432 (68,405) 20,959
Cash and cash equivalents at the
beginning of the period 90,934 37,259 77,209 39,734
Cash and cash equivalents at the end of
the period 8,804 60,691 8,804 60,693
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 September 30
----------------------------------------------
SFAS Amorti-
123R zation
GAAP adjust- and Non-GAAP Non-GAAP
2008 ments other 2008 2007
------ -------- -------- --------- --------
(Unaudited)
Revenues:
Software Security (DRM) 15,743 15,743 15,498
Enterprise Security 15,616 (384) 16,000 10,622
------ -------- -------- --------- --------
Total Revenues 31,359 (384) 31,743 26,120
------ -------- -------- --------- --------
Cost of revenues 9,005 31 8,974 5,993
------ -------- -------- --------- --------
Gross profit 22,354 (31) (384) 22,769 20,127
------ -------- -------- --------- --------
Research & development 6,928 288 190 6,450 4,782
Selling & marketing 10,423 254 440 9,729 7,813
General & administrative 4,280 140 4,140 3,231
Non-recurring unsolicited
proposal and EGM 1,872 - 1,872 - -
------ -------- -------- --------- --------
Total operating expenses 23,503 682 2,502 20,319 15,826
------ -------- -------- --------- --------
Operating income (loss) (1,149) (713) (2,886) 2,450 4,301
Financial income, net 289 289 1,114
Other (expense) income - - (9)
------ -------- -------- --------- --------
Income (loss) before taxes (860) (713) (2,886) 2,739 5,406
------ -------- -------- --------- --------
Taxes on income 23 (389) 412 876
------ -------- -------- --------- --------
Income (loss) before equity
in loss of an affiliate (883) (713) (2,497) 2,327 4,530
Equity in loss of an
affiliate - - (42)
------ -------- -------- --------- --------
Income (loss) before
non-controlling interest (883) (713) (2,497) 2,327 4,488
Non-controlling interest 538 538 -
------ -------- -------- --------- --------
Net income (loss) (345) (713) (2,497) 2,865 4,488
------ -------- -------- --------- --------
Basic earnings per share (0.02) 0.21 0.32
------ -------- -------- --------- --------
Diluted earnings per share (0.02) 0.20 0.31
------ -------- -------- --------- --------
Weighted average number of
shares outstanding for
Basic EPS 13,905 13,905 14,022
------ -------- -------- --------- --------
Weighted average number of
shares outstanding for
Diluted EPS 14,148 14,148 14,442
------ -------- -------- --------- --------
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)
Nine month period ended September 30
----------------------------------------------
SFAS Amorti-
123R zation
GAAP adjust- and Non-GAAP Non-GAAP
2008 ments other 2008 2007
------ -------- -------- --------- --------
(Unaudited)
Revenues:
Software Security (DRM) 51,150 51,150 48,986
Enterprise Security 36,612 (384) 36,996 27,778
------ -------- -------- -------- --------
Total Revenues 87,762 (384) 88,146 76,764
------ -------- -------- -------- --------
Cost of revenues 22,987 69 22,918 17,245
------ -------- -------- -------- --------
Gross profit 64,775 (69) (384) 65,228 59,519
------ -------- -------- -------- --------
Research & development 19,872 564 337 18,971 13,721
Selling & marketing 29,671 551 568 28,552 23,518
General & administrative 12,485 314 12,171 9,873
Non-recurring unsolicited
proposal and EGM 1,872 1,872 - -
------ -------- -------- -------- --------
Total operating expenses 63,900 1,429 2,777 59,694 47,112
------ -------- -------- -------- --------
Operating income 875 (1,498) (3,161) 5,534 12,407
Financial income, net 1,287 1,287 3,161
Other income 613 613 5
------ -------- -------- -------- --------
Income before taxes 2,775 (1,498) (3,161) 7,434 15,573
Taxes on income 474 (389) 863 2,388
------ -------- -------- -------- --------
Income before equity in
loss of an affiliate 2,301 (1,498) (2,772) 6,571 13,185
Equity in loss of an
affiliate (68) (68) (303)
------ -------- -------- -------- --------
Income (loss) before
non-controlling interest 2,233 (1,498) (2,772) 6,503 12,882
Non-controlling interest 1,231 1,231 -
------ -------- -------- -------- --------
Net income 3,464 (1,498) (2,772) 7,734 12,882
------ -------- -------- -------- --------
Basic earnings per share 0.25 0.56 0.89
------ -------- -------- -------- --------
Diluted earnings per share 0.24 0.54 0.87
------ -------- -------- -------- --------
Weighted average number of
shares outstanding for
Basic EPS 13,884 13,884 14,398
------ -------- -------- -------- --------
Weighted average number of
shares outstanding for
Diluted EPS 14,253 14,253 14,787
------ -------- -------- -------- --------
Aladdin Knowledge Systems Ltd.
Supplementary Financial Information
Reconciliation of 2007 GAAP Financial Information to Non-GAAP
(U.S. dollars, in thousands - except for per-share amount)
(Unaudited)
Quarter ended September 30
--------------------------------------
SFAS
123R
GAAP adjust- Amorti- Non-GAAP
2007 ments zation 2007
-------- -------- -------- --------
(Unaudited)
Revenues:
Software Security (DRM) 15,498 15,498
Enterprise Security 10,622 10,622
-------- -------- -------- --------
Total Revenues 26,120 26,120
-------- -------- -------- --------
Cost of revenues 5,993 5,993
-------- -------- -------- --------
Gross profit 20,127 20,127
-------- -------- -------- --------
Research & development 4,866 84 4,782
Selling & marketing 7,958 104 41 7,813
General & administrative 3,157 (74) 3,231
-------- -------- -------- --------
Total operating expenses 15,981 114 41 15,826
-------- -------- -------- --------
Operating income 4,416 (114) (41) 4,301
Financial income, net 1,114 1,114
Other income (9) (9)
-------- -------- -------- --------
Income before taxes 5,251 (114) (41) 5,406
-------- -------- -------- --------
Taxes on income 876 876
-------- -------- -------- --------
Income before equity in loss of an
affiliate 4,375 (114) (41) 4,530
Equity in loss of an affiliate - (42)
Income before non-controlling
interest 4,375 (114) (41) 4,488
Non-controlling interest (42) -
-------- -------- -------- --------
Net income 4,333 (114) (41) 4,488
-------- -------- -------- --------
Basic earnings per share 0.31 0.32
-------- -------- -------- --------
Diluted earnings per share 0.30 0.31
-------- -------- -------- --------
Weighted average number of shares
outstanding for Basic EPS 14,022 14,022
-------- -------- -------- --------
Weighted average number of shares
outstanding for Diluted EPS 14,442 14,442
-------- -------- -------- --------
Nine month period ended September 30
--------------------------------------
SFAS
123R
GAAP adjust- Amorti- Non-GAAP
2007 ments zation 2007
-------- -------- -------- --------
Revenues:
Software Security (DRM) 48,986 48,986
Enterprise Security 27,778 27,778
-------- -------- -------- --------
Total Revenues 76,764 76,764
-------- -------- -------- --------
Cost of revenues 17,245 17,245
-------- -------- -------- --------
Gross profit 59,519 59,519
-------- -------- -------- --------
Research & development 14,952 319 13,721
Selling & marketing 23,952 311 123 23,518
General & administrative 9,922 49 9,873
-------- -------- -------- --------
Total operating expenses 47,914 679 123 47,212
-------- -------- -------- --------
Operating income 11,605 (679) (123) 12,407
Financial income, net 3,161 3,161
Other income 5 5
-------- -------- -------- --------
Income before taxes 14,771 (679) (123) 15,373
-------- -------- -------- --------
Taxes on income 2,388 2,388
-------- -------- -------- --------
Income before equity in loss of an
affiliate 12,383 (679) (123) 13,185
Equity in loss of an affiliate (303) (303)
Income before non-controlling
interest 12,080 (679) (123) 12,882
Non-controlling interest - -
-------- -------- -------- --------
Net income 12,080 (679) (123) 12,882
-------- -------- -------- --------
Basic earnings per share 0.84 0.89
-------- -------- -------- --------
Diluted earnings per share 0.82 0.87
-------- -------- -------- --------
Weighted average number of shares
outstanding for Basic EPS 14,398 14,398
-------- -------- -------- --------
Weighted average number of shares
outstanding for Diluted EPS 14,787 14,787
-------- -------- -------- --------
Press Contact: Matthew Zintel Zintel Public Relations
matthew.zintel@zintelpr.com 310.574.8888 Aladdin Company Contact:
Debbie Kaye Corporate Communications Manager
debbie.kaye@aladdin.com 646.468.0481
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