EXHIBIT 99.1
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 |
For Immediate Release
RSA Security Announces First Quarter Results
Company To Host Conference Call This Afternoon at 4:30 p.m. ET
BEDFORD, Mass., April 27, 2005– RSA Security Inc. (NASDAQ: RSAS) today reported financial results for the first quarter ended March 31, 2005.
Revenue for the first quarter of 2005 increased 5% to $75.6 million from $72.0 million for the first quarter of 2004. Net income for the first quarter of 2005 increased 12% to $7.2 million, or $0.10 per diluted share, from $6.5 million, or $0.10 per diluted share, for the comparable period a year ago.
“While we experienced slower than anticipated uptake rates during the first quarter, we remain confident in our ability to build upon our leadership position in identity management,” said Art Coviello, president and chief executive officer of RSA Security.
First-Quarter Financial Overview
| • | Revenue:Revenue for the first quarter of 2005 increased 5% to $75.6 million from $72.0 million for the first quarter of 2004. The Company experienced a slower than expected growth rate in software sales in both Europe and the Americas. RSA Security’s book-to-bill ratio for the quarter was approximately 1.0 to 1, and the Company closed the quarter with $59.2 million in combined backlog and deferred revenue. This represents a 19% increase from RSA Security’s $49.9 million in backlog and deferred revenue at March 31, 2004. | |||
| • | Net Income:Net income for the first quarter of 2005 increased 12% to $7.2 million, or $0.10 per diluted share, from $6.5 million, or $0.10 per diluted share, from the first quarter of 2004. | |||
| • | Cash Position:Cash, cash equivalents, and marketable securities decreased to $282.3 million at March 31, 2005 from $289.7 million at December 31, 2004. During the quarter, in accordance with the Company’s approved stock buyback plan, RSA Security repurchased 750,000 shares of its common stock for $12.4 million. | |||
Operational Overview
| • | Customers and Partners:RSA Security shipped product to more than 5,400 customers in the first quarter, including 622 new customers. While the technology, financial services, professional services and manufacturing sectors generated the most revenue for the Company, revenue from the technology vertical market was lower than anticipated. RSA Security sold approximately 77% of its RSA SecurID® products through its indirect channel during the first quarter of 2005, consistent with the first quarter of 2004 . |
Business Outlook
RSA Security’s financial guidance for the second quarter of 2005 is only current as of today, Wednesday, April 27th, 2005, and the Company undertakes no obligation to update its estimates:
| • | Total quarterly revenue in the range of $76 million to $80 million. |
| • | Diluted earnings per share in the range of $0.10 to $0.13. |
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 (800) 811-0667 or (913) 981-4901. A replay will be available through midnight on Tuesday, May 3, 2005 at 888-203-1112 or 719-457-0820. Both live and replay numbers have a pass code of 2614831.
About RSA Security Inc.
RSA Security Inc. helps organizations 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 17,000 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 www.rsasecurity.com.
# # #
RSA 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 the second quarter 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 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 | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
| Revenue | ||||||||
| Products | $ | 54,634 | $ | 55,198 | ||||
| Maintenance and professional services | 20,984 | 16,770 | ||||||
| Total revenue | 75,618 | 71,968 | ||||||
| Cost of revenue | ||||||||
| Products | 8,715 | 8,221 | ||||||
| Maintenance and professional services | 6,092 | 5,605 | ||||||
| Total cost of revenue | 14,807 | 13,826 | ||||||
| Gross profit | 60,811 | 58,142 | ||||||
| Costs and expenses | ||||||||
| Research and development | 15,954 | 14,709 | ||||||
| Marketing and selling | 29,142 | 26,327 | ||||||
| General and administrative | 8,347 | 7,573 | ||||||
| Total | 53,443 | 48,609 | ||||||
| Income from operations | 7,368 | 9,533 | ||||||
| Interest expense and other | 1,891 | (1,345 | ) | |||||
| Income (loss) from investing activities | — | (119 | ) | |||||
| Income before provision for income taxes | 9,259 | 8,069 | ||||||
| Provision for income taxes | 2,037 | 1,614 | ||||||
| Net income | $ | 7,222 | $ | 6,455 | ||||
| Basic earnings per share | ||||||||
| Per share amount | $ | 0.10 | $ | 0.11 | ||||
| Weighted average shares | 71,462 | 61,177 | ||||||
| Diluted earnings per share | ||||||||
| Per share amount | $ | 0.10 | $ | 0.10 | ||||
| Weighted average shares | 71,462 | 61,177 | ||||||
| Effect of dilutive equity instruments | 3,678 | 4,369 | ||||||
| Adjusted weighted average shares | 75,140 | 65,546 | ||||||
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 54,163 | $ | 68,210 | ||||
| Marketable securities | 228,126 | 221,509 | ||||||
| Accounts receivable (less allowance for doubtful accounts of $1,729 in 2005 and $1,672 in 2004) | 45,992 | 53,494 | ||||||
| Inventory | 3,563 | 3,465 | ||||||
| Prepaid expenses and other assets | 7,886 | 8,702 | ||||||
| Refundable income taxes | 3,146 | 3,146 | ||||||
| Deferred taxes | 2,623 | 2,459 | ||||||
| Total current assets | 345,499 | 360,985 | ||||||
| Property and equipment, net | 69,690 | 70,700 | ||||||
| Other assets | ||||||||
| Goodwill, net | 172,736 | 172,736 | ||||||
| Deferred taxes | 8,222 | 8,222 | ||||||
| Other | 14,371 | 12,184 | ||||||
| Total other assets | 195,329 | 193,142 | ||||||
| Total assets | $ | 610,518 | $ | 624,827 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Convertible debentures | — | — | ||||||
| Accounts payable | $ | 9,518 | $ | 10,995 | ||||
| Accrued payroll and related benefits | 10,423 | 18,964 | ||||||
| Accrued expenses and other liabilities | 20,968 | 18,952 | ||||||
| Current portion of accrued restructurings | 5,674 | 6,031 | ||||||
| Income taxes accrued and payable | 21,684 | 22,479 | ||||||
| Deferred revenue | 48,784 | 51,135 | ||||||
| Total current liabilities | 117,051 | 128,556 | ||||||
| Deferred taxes, long-term | — | — | ||||||
| Deferred compensation liability | 6,360 | 6,057 | ||||||
| Accrued restructurings, long-term | 12,734 | 13,682 | ||||||
| Total liabilities | 136,145 | 148,295 | ||||||
| Stockholders’ equity | 474,373 | 476,532 | ||||||
| Total liabilities and shareholders’ equity | $ | 610,518 | $ | 624,827 | ||||
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 7,222 | $ | 6,455 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 2,895 | 2,964 | ||||||
| Tax benefit from exercise of stock options | 819 | 2,035 | ||||||
| Amortization of convertible debentures deferred financing costs | — | 401 | ||||||
| Non cash warrant accretion | — | 354 | ||||||
| Decrease in Crosby Finance, LLC fair value | — | 119 | ||||||
| Increase (decrease) in cash from changes in: | ||||||||
| Accounts receivable | 7,333 | (4,400 | ) | |||||
| Inventory | (98 | ) | 542 | |||||
| Prepaid expenses and other assets | 727 | 2,488 | ||||||
| Accounts payable | (1,440 | ) | 729 | |||||
| Accrued payroll and related benefits | (8,384 | ) | (5,853 | ) | ||||
| Accrued expenses and other liabilities | 253 | (1,368 | ) | |||||
| Accrued restructurings | (1,305 | ) | (2,583 | ) | ||||
| Refundable income taxes and income taxes accrued and payable | (781 | ) | 1,099 | |||||
| Deferred revenue | (2,397 | ) | 3,965 | |||||
| Net cash provided by operating activities | 4,844 | 6,947 | ||||||
| Cash flows from investing activities | ||||||||
| Purchase of marketable securities | (64,325 | ) | (32,870 | ) | ||||
| Sale/maturities of marketable securities | 57,234 | — | ||||||
| Purchases of property and equipment | (2,209 | ) | (1,451 | ) | ||||
| Other | (636 | ) | (398 | ) | ||||
| Net cash used for investing activities | (9,936 | ) | (34,719 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from exercise of stock options and purchase plans | 3,620 | 7,204 | ||||||
| Share repurchase | (12,441 | ) | — | |||||
| Net cash (used for) provided by financing activities | (8,821 | ) | 7,204 | |||||
| Effect of exchange rate changes on cash and cash equivalents | (134 | ) | (640 | ) | ||||
| Net decrease in cash and cash equivalents | (14,047 | ) | (21,208 | ) | ||||
| Cash and cash equivalents, beginning of period | 68,210 | 207,323 | ||||||
| Cash and cash equivalents, end of period | $ | 54,163 | $ | 186,115 | ||||
Supplemental Financial Data
(Unaudited)
(In thousands, except per share data)
| Three Months Ended | ||||||||||||||||||||
| March 31, | June 30, | Sept 30, | Dec 31, | March 31, | ||||||||||||||||
| 2004 | 2004 | 2004 | 2004 | 2005 | ||||||||||||||||
Revenue | ||||||||||||||||||||
| Enterprise solutions | $ | 66,601 | $ | 68,742 | $ | 70,542 | $ | 73,340 | $ | 70,185 | ||||||||||
| Developer solutions | 5,367 | 6,835 | 6,189 | 9,891 | 5,433 | |||||||||||||||
| Total | $ | 71,968 | $ | 75,577 | $ | 76,731 | $ | 83,231 | $ | 75,618 | ||||||||||
| Enterprise solutions | 93 | % | 91 | % | 92 | % | 88 | % | 93 | % | ||||||||||
| Developer solutions | 7 | % | 9 | % | 8 | % | 12 | % | 7 | % | ||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
| Products | $ | 55,198 | $ | 56,455 | $ | 57,776 | $ | 63,068 | $ | 54,634 | ||||||||||
| Maintenance and professional services | 16,770 | 19,122 | 18,955 | 20,163 | 20,984 | |||||||||||||||
| Total | $ | 71,968 | $ | 75,577 | $ | 76,731 | $ | 83,231 | $ | 75,618 | ||||||||||
| Products | 77 | % | 75 | % | 75 | % | 76 | % | 72 | % | ||||||||||
| Maintenance and professional services | 23 | % | 25 | % | 25 | % | 24 | % | 28 | % | ||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
| Domestic | $ | 40,467 | $ | 42,559 | $ | 42,942 | $ | 46,731 | $ | 41,117 | ||||||||||
| International | 31,501 | 33,018 | 33,789 | 36,500 | 34,501 | |||||||||||||||
| Total | $ | 71,968 | $ | 75,577 | $ | 76,731 | $ | 83,231 | $ | 75,618 | ||||||||||
| Domestic | 56 | % | 56 | % | 56 | % | 56 | % | 54 | % | ||||||||||
| International | 44 | % | 44 | % | 44 | % | 44 | % | 46 | % | ||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
Statements of Operations Data | ||||||||||||||||||||
| Gross profit | $ | 58,142 | $ | 62,114 | $ | 62,905 | $ | 69,113 | $ | 60,811 | ||||||||||
| Gross margin | 80.8 | % | 82.2 | % | 82.0 | % | 83.0 | % | 80.4 | % | ||||||||||
| Total operating expenses | $ | 48,609 | $ | 50,569 | $ | 51,268 | $ | 55,109 | $ | 53,443 | ||||||||||
| Income from operations | $ | 9,533 | $ | 11,545 | $ | 11,637 | $ | 14,004 | $ | 7,368 | ||||||||||
| Operating margin (1) | 13.2 | % | 15.3 | % | 15.2 | % | 16.8 | % | 9.7 | % | ||||||||||
| Interest expense and other | $ | (1,345 | ) | $ | (1,623 | ) | $ | (935 | ) | $ | 625 | $ | 1,891 | |||||||
| Income (loss) from investing activities | $ | (119 | ) | $ | 49 | $ | 354 | $ | (74 | ) | — | |||||||||
| Provision for income taxes | $ | 1,614 | $ | 1,995 | $ | 2,315 | $ | 2,745 | $ | 2,037 | ||||||||||
| Net income | $ | 6,455 | $ | 7,976 | $ | 8,741 | $ | 11,810 | $ | 7,222 | ||||||||||
| Diluted earnings per share | $ | 0.10 | $ | 0.12 | $ | 0.13 | $ | 0.16 | $ | 0.10 | ||||||||||
Other Financial Data | ||||||||||||||||||||
| Gross margin – products | 85.2 | % | 86.1 | % | 86.2 | % | 87.5 | % | 84.0 | % | ||||||||||
| Gross margin – maintenance and professional services | 66.6 | % | 70.6 | % | 69.2 | % | 69.1 | % | 71.0 | % | ||||||||||
| Authentication credentials (4) | 927,000 | 905,000 | 1,033,000 | 1,021,000 | 1,039,000 | |||||||||||||||
| Cash and cash equivalents and marketable securities | $ | 219,009 | $ | 244,631 | $ | 255,996 | $ | 289,719 | $ | 282,289 | ||||||||||
| Deferred revenue balance | $ | 38,590 | $ | 40,056 | $ | 42,526 | $ | 51,135 | $ | 48,784 | ||||||||||
| Book to bill ratio (2) | 1.0 | 1.1 | 1.0 | 1.1 | 1.0 | |||||||||||||||
| Day sales outstanding (DSO) | 49 | 42 | 50 | 59 | 55 | |||||||||||||||
| Current ratio | 1.4 | 1.6 | 1.7 | 2.8 | 3.0 | |||||||||||||||
| Debt to equity ratio | 0.3 | 0.2 | 0.2 | NA | NA | |||||||||||||||
| Cash flow from operations | $ | 6,947 | $ | 19,854 | $ | 11,872 | $ | 15,640 | $ | 4,844 | ||||||||||
| Cash flow from operations per diluted share (3) | $ | 0.11 | $ | 0.30 | $ | 0.19 | $ | 0.21 | $ | 0.06 | ||||||||||
| (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 | ||||||||||||
| Three Months Ended | Increase | |||||||||||
| March 31, | (Decrease) | |||||||||||
| 2005 | 2004 | in Dollars | ||||||||||
| Revenue | ||||||||||||
| Products | 72.2 | % | 76.7 | % | (1.0 | )% | ||||||
| Maintenance and professional services | 27.8 | 23.3 | 25.1 | |||||||||
| Total revenue | 100.0 | 100.0 | 5.1 | |||||||||
| Cost of revenue | ||||||||||||
| Products | 11.5 | 11.4 | 6.0 | |||||||||
| Maintenance and professional services | 8.1 | 7.8 | 8.7 | |||||||||
| Total cost of revenue | 19.6 | 19.2 | 7.1 | |||||||||
| Gross margin | 80.4 | 80.8 | 4.6 | |||||||||
| Costs and expenses | ||||||||||||
| Research and development | 21.1 | 20.4 | 8.5 | |||||||||
| Marketing and selling | 38.5 | 36.6 | 10.7 | |||||||||
| General and administrative | 11.1 | 10.5 | 10.2 | |||||||||
| Total | 70.7 | 67.5 | 9.9 | |||||||||
| Income from operations | 9.7 | 13.3 | (22.7 | ) | ||||||||
| Interest expense and other | 2.5 | (1.9 | ) | (240.6 | ) | |||||||
| Income from investing activities | 0.0 | (0.2 | ) | (100.0 | ) | |||||||
| Income before provision for income taxes | 12.2 | 11.2 | 14.7 | |||||||||
| Provision for income taxes | 2.6 | 2.2 | 26.2 | |||||||||
| Net income | 9.6 | % | 9.0 | % | 11.9 | % | ||||||