Cyberguard (NASDAQ:CGFW)
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CyberGuard Reports Third Quarter Financial Results
Revenue and Non-GAAP EPS within Guidance; 11th Quarter of Sequential Revenue
Growth; Company Provides Guidance for Fourth Quarter
BOCA RATON, Fla., April 28 /PRNewswire-FirstCall/ -- CyberGuard Corporation
(NASDAQ:CGFW), a global provider of security solutions that protect the
critical components of the largest and most complex information networks for
Global 2000 enterprises and government organizations, today reported revenues
of $16.7 million for the quarter ended March 31, 2005, an increase of $3.7
million, or 28%, over revenues of $13.0 million for the quarter ended March 31,
2004. This is the eleventh consecutive quarter of sequential revenue growth
for the Company. For the first nine months of fiscal 2005, revenues were $48.9
million, up $15.6 million, or 47%, compared to revenues of $33.3 million for
the first nine months of last year.
On a GAAP basis, inclusive of acquisition-related costs, the Company reported a
net income of $473,000, or $0.01 per diluted share, for the third quarter of
fiscal 2005, compared to a net loss of $2.1 million, or $0.09 per diluted
share, for the same quarter of the prior year. For the first nine months of
fiscal 2005, GAAP net income totaled $1.2 million versus GAAP net income of
$1.4 million for the same period of fiscal 2004. GAAP earnings per diluted
share for the first nine months of fiscal 2005 were $0.04 compared to $0.05 for
the first nine months of last year.
On a non-GAAP basis, exclusive of acquisition-related costs, net income for the
third quarter of fiscal year 2005 was $1.6 million, or $0.05 per diluted share,
compared to $1.9 million, or $0.07 per diluted share, for the third quarter of
fiscal year 2004. For the first nine months of fiscal year 2005, non-GAAP net
income totaled $4.4 million, or $0.14 per diluted share, versus $5.3 million,
or $0.19 per diluted share, for the same period a year ago. The attached table
presents a reconciliation of GAAP to non-GAAP income for the third quarter and
first nine months of fiscal 2005 and 2004.
The Company also reported that it had just identified a cost of $209,000 that
needed to be reclassified into the 2005 second quarter, due to an error in the
automatic posting of cost of goods sold. The impact reduced net income for the
quarter and six months ended December 31, 2004, by $209,000, but had no impact
on quarterly diluted earnings per share. For the six months ended December 31,
2004, diluted earnings per share were reduced by $0.01.
According to Pat Clawson, chairman and chief executive officer, "Although we
met our guidance for the quarter, we experienced a setback when two key OEM
customers collapsed, which cost us about $500,000 in third quarter revenues.
Going forward, we expect to build back the OEM business by the end of the
calendar year and in the meantime, growth from our other areas should more than
offset the slowdown in OEM revenues."
Clawson continued, "Our core business remains strong, and we continue to see
evidence that our key initiatives are gaining traction. For example, one of
our objectives was to increase our share of content security business, and the
acquisition of Zix Corporation's 1,600 enterprise customers has substantially
expanded our base in the North American market. This acquisition is also
providing us with excellent cross-selling opportunities, as a large number of
former Zix enterprise customers will benefit from our world-class Webwasher(R)
content security product suite, as well as our leading firewall solutions. And
we continue to look at additional acquisitions targets that would fill out our
integrated product offering with anti-virus, scan and block, and vulnerability
remediation capabilities.
"Another goal has been to expand our channel partner relationships,
particularly in North America, and in the third quarter we added Forsythe
Solutions Group as a value-added reseller. Forsythe, ranked 86 on the VAR 500
list, will initially start with the Webwasher(R) product line, but with the
goal of expanding to other product categories over time. We also signed deals
with seven new international partners and expanded relationships with three
other existing partners.
"Our solid channel relationships and cross-selling success are translating into
a growing list of customer wins, primarily in Japan, Europe and North America.
Our integrated product suite and new product innovations are really beginning
to set us apart from the competition. Webwasher 1000 product sales and Global
Command Center licenses were well ahead of our goal for the quarter."
Clawson concluded, "Another priority has been our marketing and global branding
effort, and the addition of John Doyle as vice president of marketing will
accelerate our efforts."
Company Highlights
* Acquired Zix Corporation's anti-spam, anti-virus and URL filtering
assets for $2.1 million in cash and signed a promissory note for an
additional $1.5 million. The transaction significantly expands the
Company's base of content security customers in the U.S. and Canada and
is expected to be immediately accretive to earnings.
* Signed significant international deals with Cegetel, the second largest
ISP in France, which will resell CyberGuard's Webwasher Suite on a
managed service basis, and with Stadtwerke Munchen (Munich City
Utilities), where our Webwasher suite displaced two competitors. Also
in Germany, RBA, the service center for district banks, adopted
Webwasher for its modular solution.
* Upgraded several large long-term customers, including OTTO Gmbh, an
international trade and services group, which uses the Company's
products for 4,800 users, and Stadtwerke Bielefeld (Bielefeld City
Utilities), which uses Webwasher AntiVirus for 5,000 users.
* Displaced competitors' products in the United Kingdom Government
National Health Service Authority and with a major government department
in the Netherlands.
* Signed deals in Australia, including Powercor, the electricity
distributor for the state of Victoria, and Unitab, a government
organization that manages all on- and off-course betting and gambling in
Queensland. Both deals were won in highly competitive situations.
* Signed major contracts in Japan, including customers within the defense,
banking and power industries.
* Signed major U.S. customers, including deals with Aladdin's Casino and
with First NLC, a mortgage company with 80 remote offices, which
selected CyberGuard's full product suite.
* Added a new North American Distributor, Interwork Technologies, as well
as Forsythe Solutions Group. Interwork is a value-added specialty
distributor of security products which will carry the entire product
line.
* Signed new international partnerships with Netmarks, Inc. in Japan,
Alstor in Poland, MD5 S.A. in Greece, GNT in Latvia, Estonia and
Lithuania, Sinfonika in Croatia, Bosnia and Serbia, Biodata IT in South
Africa, and Instada Nordic in Scandinavia.
* Expanded distribution of the company's product line with existing
partners, including EXER and ITWAY, which both added CyberGuard's
products to their Webwasher offering, and SINTEL, which expanded
Webwasher to its firewall offering.
* Hired John Doyle as vice president of marketing, who will lead
CyberGuard's strategic product and global marketing, including building
out the channel partner program, as well as managing product management,
communications, and market development. Doyle was formerly the director
of product marketing for Nortel Networks.
Financial Highlights
* Results were within guidance both for quarterly revenues and pro-forma
earnings per diluted share.
* Non-GAAP gross profit for the quarter increased to $11.9 million, or 71%
of fiscal third quarter 2005 revenues, versus $8.7 million, or 66% of
third quarter fiscal 2004 revenues.
* The Company paid $2.1 million in cash and signed a promissory note for
an additional $1.5 million in the acquisition of certain assets of Zix
Corporation. As part of the transaction, the Company acquired $3.6
million in Zix assets.
* Cash related balances were $12.9 million and total current assets were
$34.2 million at the end of March 31, 2005.
* Current and long-term liabilities were $36.6 million at the end of
March 31, 2005.
Financial Outlook
The following statements are based on current expectations. These statements
are forward-looking, and actual results may differ materially.
The Company estimates that its revenues for the quarter ending June 30, 2005,
will be in the range of $16.7 million to $17.2 million and anticipates that its
pro forma earnings per diluted share, excluding acquisition related charges,
will be between $0.03 and $0.05.
The investor conference call will take place today at 10.00 a.m. Eastern
Daylight Time via live web cast on CyberGuard's web site at
http://www.cyberguard.com/. To participate by telephone, the dial-in number is
877-560-3200 and the conference ID number is 5492542; the international dial-
in is 706-645-9750 and the conference ID number is 5492542. Investors are
advised to dial-in at least five minutes prior to the call to register. The
web cast will be archived for seven days: from 12:00 p.m. Thursday, April 28,
until 12.00 p.m. Thursday, May 5, 2005. The archived recording may also be
accessed by dialing 800-642-1687 or 706-645-9291 (international) and requesting
conference ID number 5492542. Additional financial information can be found at
http://www.cyberguard.com/investors/reports.cfm.
About CyberGuard Corporation
CyberGuard Corporation (NASDAQ:CGFW) delivers a suite of integrated information
security solutions to provide Global 2000 enterprises and government
organizations with the confidence that their critical information assets are
protected. Based on the company's Total Stream Protection framework and
managed via its Global Command Center, CyberGuard's products go beyond
network-level security to provide protection against the most dangerous
application-layer vulnerabilities and avoid potential damage, securing the
entire data stream. With a growing and satisfied number of brand-name
customers, CyberGuard has deployed more than 250,000 products across the globe.
Headquartered near Boca Raton, Fl., the company has offices and training
centers around the world. For more information visit
http://www.cyberguard.com/.
Forward-Looking Statement
Statements regarding estimates, expectations and future prospects contained in
this press release are forward-looking statements. These statements are based
upon assumptions and analyses made by the Company in light of current
conditions, future developments, and other factors the Company believes are
appropriate in the circumstances, or information obtained from third parties,
and are subject to a number of assumptions, risks and uncertainties. Readers
are cautioned that forward-looking statements are not guarantees and that
actual results might differ materially from those suggested in the
forward-looking statements. Some of the factors that might cause future actual
events to differ from those predicted or assumed include: future advances in
technologies and computer security; the Company's history of losses; the
Company's ability to execute on its business plans and to integrate recent
acquisitions; the Company's dependence on outside parties such as its key
customers and alliance partners; competition from major computer hardware,
software, and networking companies; uncertainties in availability of expansion
capital in the future and other risks associated with capital markets; overall
network security spending; global economic conditions; and litigation against
the Company. For a more complete discussion regarding forward-looking
statements, the reader is referred to the Company's periodic reports filed with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, including the Form 10-K for the fiscal year ended June 30, 2004, and
other information filed with the Commission.
CyberGuard(R) and Webwasher(R) are registered trademarks and Total Stream
Protection(TM) and Global Command Center(TM) are trademarks of CyberGuard
Corporation. All other trademarks are property of their respective owners.
CYBERGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31, 2005
GAAP Proforma Proforma
Presentation Adjustments Presentation
Revenues:
Products $12,645 $- $12,645
Services 4,059 - 4,059
Total revenues 16,704 - 16,704
Cost of revenues:
Products 4,321 (508)(1) 3,813
Services 1,029 - 1,029
Total cost of revenues 5,350 (508) 4,842
Gross profit 11,354 508 11,862
Operating expenses:
Research and development 2,406 - 2,406
Selling, general and administrative 8,190 (572)1 7,618
Compensation expense related to
unearned restricted stock in the
SnapGear acquisition - - -
Total operating expenses 10,596 (572) 10,024
Operating income / (loss) 758 1,080 1,838
Other income
Interest income, net 84 - 84
Other (expense) / income (285) - (285)
Total other (expense) / income (201) - (201)
Income / (loss) before income taxes 557 1,080 1,637
Income tax (expense) / benefit (84) - (84)
Net income / (loss) $473 $1,080 $1,721
Basic earnings per common share $0.02 $0.05
Basic weighted average number of
common shares outstanding 30,666 30,666
Diluted earnings per common share $0.01 $0.05
Diluted weighted average number of
common shares outstanding 32,511 32,511
Note 1 -- The proforma adjustment relates to amortization of acquisition
related intangible assets.
Three Months Ended
March 31, 2004
GAAP Proforma Proforma
Presentation Adjustments Presentation
Revenues:
Products $10,113 $- $10,113
Services 2,923 - 2,923
Total revenues 13,036 - 13,036
Cost of revenues:
Products 3,671 (241)(1) 3,430
Services 947 - 947
Total cost of revenues 4,618 (241) 4,377
Gross profit 8,418 241 8,659
Operating expenses:
Research and development 1,714 - 1,714
Selling, general and administrative 5,432 (177)(1) 5,255
Compensation expense related to
unearned restricted stock in the
SnapGear acquisition 4,113 (4,113) -
Total operating expenses 11,259 (4,290) 6,969
Operating income / (loss) (2,841) 4,531 1,690
Other income
Interest income, net 45 - 45
Other (expense) / income 206 - 206
Total other (expense) / income 251 - 251
Income / (loss) before income taxes (2,590) 4,531 1,941
Income tax (expense) / benefit 481 (481) -
Net income / (loss) $(2,109) $4,050 $1,941
Basic earnings per common share $(0.09) $0.08
Basic weighted average number of
common shares outstanding 23,757 23,757
Diluted earnings per common share $(0.09) $0.07
Diluted weighted average number of
common shares outstanding 23,757 28,878
Note 1 -- The proforma adjustment relates to amortization of acquisition
related intangible assets.
CYBERGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Nine Months Ended
March 31, 2005
GAAP Proforma Proforma
Presentation Adjustments Presentation
Revenues:
Products $38,307 $- $38,307
Services 10,581 - 10,581
Total revenues 48,888 - 48,888
Cost of revenues:
Products 12,730 (1,572)(1) 11,158
Services 2,992 - 2,992
Total cost of revenues 15,722 (1,572) 14,150
Gross profit 33,166 1,572 34,738
Operating expenses:
Research and development 7,510 - 7,510
Selling, general and administrative 24,442 (1,606)(1) 22,836
Compensation expense related to
unearned restricted stock in the
SnapGear acquisition - - -
Total operating expenses 31,952 (1,606) 30,346
Operating income / (loss) 1,214 3,178 4,392
Other income
Interest income, net 151 - 151
Other (expense) / income (17) - (17)
Total other income 134 - 134
Income before income taxes 1,348 3,178 4,526
Income tax (expense) / benefit (123) - (123)
Net income $1,225 $3,178 $4,403
Basic earnings per common share $0.04 $0.15
Basic weighted average number of
common shares outstanding 30,056 30,056
Diluted earnings per common share $0.04 $0.14
Diluted weighted average number of
common shares outstanding 31,871 31,871
Note 1 -- The proforma adjustment relates to amortization of acquisition
related intangible assets.
Nine Months Ended
March 31, 2004
GAAP Proforma Proforma
Presentation Adjustments Presentation
Revenues:
Products $24,497 $- $24,497
Services 8,795 - 8,795
Total revenues 33,292 - 33,292
Cost of revenues:
Products 7,651 (557)(1) 7,094
Services 2,716 - 2,716
Total cost of revenues 10,367 (557) 9,810
Gross profit 22,925 557 23,482
Operating expenses:
Research and development 5,109 - 5,109
Selling, general and administrative 13,853 (264)(1) 13,589
Compensation expense related to
unearned restricted stock in the
SnapGear acquisition 4,387 (4,387) -
Total operating expenses 23,349 (4,651) 18,698
Operating income / (loss) (424) 5,208 4,784
Other income
Interest income, net 113 - 113
Other (expense) / income 358 - 358
Total other income 471 - 471
Income before income taxes 47 5,208 5,255
Income tax (expense) / benefit 1,348 (1,348) -
Net income $1,395 $3,860 $5,255
Basic earnings per common share $0.06 $0.23
Basic weighted average number of
common shares outstanding 22,431 22,431
Diluted earnings per common share $0.05 $0.19
Diluted weighted average number of
common shares outstanding 28,110 28,110
Note 1 -- The proforma adjustment relates to amortization of acquisition
related intangible assets.
CYBERGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
March 31, June 30,
2005 2004
ASSETS
Cash and cash equivalents $12,882 $12,447
Restricted cash 208 197
Accounts receivable, less allowance
for uncollectible accounts
of $1,068 at Mar 31, 2005 and
$365 at June 30, 2004 16,258 9,461
Inventories 1,947 2,063
Other current assets 2,941 2,790
Total current assets 34,236 26,958
Property and equipment at cost,
less accumulated depreciation
of $5,455 at Mar 31,2005 and
$4,619 at June 30, 2004 2,651 1,673
Capitalized software, less
accumulated amortization
of $2,417 at Mar 31, 2005 and
$2,166 at June 30, 2004 2,139 1,530
Intangible assets, less accumulated
amortization of $5,245 at
Mar 31, 2005 and $2,055
at June 30, 2004 20,772 20,262
Other assets 958 104
Goodwill 43,274 40,625
Deferred tax asset, net 5,575 5,575
Total assets $109,605 $96,727
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $2,800 $2,951
Deferred revenue, current portion 15,012 10,760
Note payable 1,500 -
Accrued expenses and other liabilities 5,636 5,750
Total current liabilities 24,948 19,461
Deferred tax liability 7,466 7,466
Deferred revenue, less current portion 4,221 3,758
Total long-term liabilities 11,687 11,224
Total liabilities 36,635 30,685
Commitments and Contingencies - -
Shareholders' equity
Preferred stock par value $0.01;
authorized 5,000 shares; none
issued - -
Common stock par value $0.01;
authorized 50,000 shares;
issued and outstanding 30,712 at
Mar 31, 2005and 28,528 at June 30, 2004 307 285
Additional paid-in capital 150,810 144,569
Accumulated deficit (77,547) (78,772)
Accumulated other comprehensive income (600) (40)
Total shareholders' equity 72,970 66,042
Total liabilities and
shareholders' equity $109,605 $96,727
CYBERGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Nine Months Ended
March 31, March 31,
2005 2004
Cash flows from operating activities:
Net income $1,225 $1,395
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 836 1,113
Amortization 3,441 959
Compensation expense related to
unearned restricted stock in the
SnapGear acquisition - 4,387
Provision for inventory 127 -
Deferred tax benefit - (1,348)
Provision for uncollectible accounts
receivable 703 269
Stock based compensation expense 573 494
Changes in assets and liabilities
(excluding the effect of
acquisitions)
Increase in accounts receivable (7,500) (1,860)
Increase in other current assets (62) (268)
(Increase) / decrease in inventories (11) 804
Increase in other, net (854) (16)
Decrease in accounts payable (149) (657)
Increase in accrued expenses and
other liabilities 687 1,015
Increase in deferred revenue 3,208 1,713
Decrease in litigation receivable - 6,500
Decrease in litigation payable - (10,400)
Net cash provided by operating
activities 2,224 4,100
Cash flows used in investing activities
Increase in restricted cash (11) (21)
Acquisition of SnapGear, net of cash
acquired - 91
Acquisition of certain assets of Zix
Corporation (2,126) -
Capitalized software costs (860) (1,139)
Purchase of property & equipment (1,782) (522)
Net cash used in investing
activities (4,779) (1,591)
Cash flows provided by financing
activities:
Proceeds from stock options exercised 381 4,599
Proceeds from warrants exercised 3,169 145
Net cash provided by financing
activities 3,550 4,744
Effect of exchange rate changes on cash (560) 12
Net increase in cash 435 7,265
Cash and cash equivalents at
beginning of period 12,447 12,095
Cash and cash equivalents at end of
period $12,882 $19,360
Supplemental disclosure of cash flow
information
Cash paid for interest $- $-
Cash paid for income taxes $- $28
Supplemental disclosure of non-cash information
In connection with the acquisition of certain assets from Zix Corporation, the
Company paid Zix $2,126 in cash and signed a promissory note for $1,500. The
following assets and liabilities were acquired:
Current assets
Other current assets $142
Total current assets 142
Non-current assets
Property and equipment 32
Customer base 3,700
Goodwill 1,259
Total non-current assets 4,991
Current liabilites
Deferred revenue 1,317
Total current liabilities 1,317
Deferred revenue, less current
portion 190
Total assets acquired $3,626
In connection with the acquisition of SnapGear, 1,651 shares valued at $14,414
were issued and a contingent purchase consideration of $800 was accrued for
during the quarter ended December 31, 2003.
During the quarter ended December 31, 2004, 342 shares valued at $2,137 (which
includes the $800 of contingent consideration previously recorded), were issued
based on the attainment of revenues during the 12 months following the
acquisition.
Website: http://www.cyberguard.com
DATASOURCE: CyberGuard Corporation
CONTACT: Sally L. Beerbower of Qorvis Communications, +1-703-744-7803,
or , for CyberGuard Corporation