Safenet (NASDAQ:SFNT)
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SafeNet (NASDAQ: SFNT), setting the standard for information security,
is reiterating its fourth quarter 2006 guidance, setting revenue
guidance for the first quarter and full year 2007 and is establishing
its approach with respect to non-GAAP measurements. Earnings per share
(EPS) guidance will be provided as soon as is practical after the filing
of the restatements. The Company also announced today that it filed a
Form 8-K disclosing certain revenue recognition restatements for the
periods of 2004, 2005 and the first quarter of 2006, the total impact of
which is approximately $14 million. Management believes a majority of
this revenue will shift to other periods including future periods.
While the Company is in the process of completing its work with regard
to closing the fourth quarter and year end 2006, management remains
comfortable with the revenue range of $78 to $82 million provided
earlier, before the impact of the aforementioned revenue recognition
restatements.
SafeNet also announced today that it will be requesting a listing
extension from NASDAQ beyond the January 31, 2007 previously disclosed
in order to ensure there is sufficient time to properly complete the
restatement process. The current status of the process is as follows:
-- The Company has largely completed the stock option accounting
review and will be pursuing the process of attaining pre-filing
clearance of our accounting conclusions from the U.S. Securities
and Exchange Commission (SEC) for these documents.
-- Management believes more time may be needed for all parties to
respond to any possible SEC communications.
-- The Company continues to focus a significant amount of
resources to the restatement effort to enable the timeliest
possible filing of the documents.
The Company intends to release its fourth quarter and year end 2006
financial results and hold its accompanying conference call as soon as
is practical in February. However, the Company’s
primary focus in its finance department is on advancing and filing the
restatements. Consequently, a precise date cannot be determined at this
time. Management is working to set that date as soon as possible.
Current Business Outlook for Fourth Quarter 2006 and Fiscal Year 2007
The following statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially. These statements do not reflect the potential impact of any
restatements, mergers, acquisitions or other business combinations that
may be completed after the date of this release.
During the quarter, SafeNet’s corporate
representatives may reiterate the Company’s
published Business Outlook during private meetings with investors,
investment analysts, the media and others. SafeNet is in its quiet
period, which is expected to run until financial results are released in
February 2007. This period may be affected by any delay in the filing of
the Company’s financial statements. During the
quiet period, SafeNet and its corporate representatives will not comment
concerning the previously published Business Outlook and previously
published guidance should no longer be considered the Company’s
then current Outlook. During the quiet period, the Company’s
press releases and filings with the SEC on Forms 10-K and 10-Q should be
considered historical, speaking as of prior to the quiet period only and
not subject to update by the Company. Please refer to our Form 8-K dated
January 9, 2007 pertaining to non-reliance on previously issued
financial statements.
For the quarter ending March 31, 2007, SafeNet is establishing a revenue
range consisting of $67 to $70 million, before the impact of the
aforementioned revenue recognition restatements. This range reflects the
normal seasonality experienced between SafeNet’s
fourth and first quarters, whereby the first quarter revenue results are
smaller than the fourth quarter.
For the year ending December 31, 2007, SafeNet is establishing a revenue
range consisting of $318 to $326 million, before the impact of the
aforementioned revenue recognition restatements. Management expects
SafeNet’s organic revenue growth in 2007 to
slightly exceed industry growth expectations, which the Company’s
research indicates is an average of approximately 10 percent. This
growth rate excludes the possible impact of the revenue restatements
discussed above.
For all periods, gross margins are expected to be consistent with the
most recently reported results. In addition, management believes there
will be opportunity for operating leverage as expense growth is
generally expected to be slower than revenue growth during 2007. Further
details on these and other metrics will be provided as soon as is
practical.
Discussion of Non-GAAP Philosophy
Management intends to provide non-GAAP EPS financial guidance as soon as
is practical after the Company files its restatements. Non-GAAP net
income is expected to exclude amortization of acquired intangibles,
compensation expense associated with the expensing of stock options in
accordance with FAS 123R, and legal and professional fees associated
with the stock option granting efforts. The Company does not currently
expect to exclude integration charges. SafeNet management has
traditionally used non-GAAP measurements to evaluate the Company's
operating performance and believes that excluding these items enhances
management's and its investors' ability to evaluate SafeNet's comparable
historical operating results. The new management team has solicited a
number of members of the investment community to gain a current
understanding of how a preponderance of investors are evaluating the
operating performance of the business. Management believes that a
significant number of investors are excluding the legal and professional
fees associated with the stock option granting issues when they focus on
SafeNet’s operating performance. Management’s
decision on how non-GAAP measurements will be reported reflects this
belief.
Management Presentation to be Webcast Today
Management is scheduled to present at the Needham Growth Conference
today from 4:30 pm to 5:00 pm ET during which time they intend to speak
to much of the information in this press release. Interested parties can
listen to the webcast at www.safenetinvestor.com.
About SafeNet, Inc.
SafeNet is a global leader in information security. Founded more than 20
years ago, the Company provides complete security utilizing its
encryption technologies to protect communications, intellectual property
and digital identities, and offers a full spectrum of products including
hardware, software, and chips. ARM, Bank of America, Cisco Systems, the
Departments of Defense and Homeland Security, Adobe, Samsung, Texas
Instruments, the U.S. Internal Revenue Service and scores of other
customers entrust their security needs to SafeNet. For more information,
visit www.safenet-inc.com.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
Statements contained in this document that are not historical facts,
including, without limitation, statements relating to the estimated
impact of expensing stock options under FAS 123R, could
be deemed to be forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements are based on management’s
current expectations and beliefs, are not guarantees of future
performance and are subject to a number of risks, uncertainties and
assumptions that could cause actual results to differ materially from
those described in the forward-looking statements, such as, among
others, economic, business, competitive, and/or regulatory factors
affecting SafeNet’s business generally,
including those set forth in SafeNet’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2005 and its
other filings with the Securities and Exchange Commission, including its
Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. If
any of these risks or uncertainties materializes or any of these
assumptions proves incorrect, SafeNet’s
results could differ materially from the expectations in these
statements. SafeNet assumes no obligation and does not intend to update
or alter these forward-looking statements, whether as a result of new
information, future events, or otherwise.