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 $17.4 million
for the quarter ended September 30, 2005. This represents an
increase of $1.8 million, or 11.2 percent, over revenues of $15.6
million for the quarter ended September 30, 2004, and is the
thirteenth consecutive quarter of sequential revenue growth for the
company. On a GAAP basis the Company reported net income of
$341,000 for the first quarter of fiscal year 2006 or $0.01
earnings per diluted share to common stock shareholders. That
compares to net loss of $59,000 for the same quarter a year earlier
or $0.00 earnings per diluted share. On a non-GAAP or pro forma
basis (exclusive of acquisition-related costs and option expense)
net income for the first quarter of fiscal year 2006 was $2.5
million compared to $1.0 million for the first quarter of the
fiscal year ending September 30, 2004. On a pro forma basis, the
net income to common stock shareholders for the first quarter of
fiscal year 2006 was $0.08 per diluted share compared to $0.03 per
diluted share for the quarter ending September 30, 2004. "By any
measure, the first quarter of FY '06 was an outstanding quarter for
CyberGuard," said CyberGuard chairman and CEO, Pat Clawson.
"Revenues were at record levels, and, through a combination of
improved operating efficiencies and our ability to fully leverage
previous acquisitions, we were able to post exceptionally strong
results." "Most importantly, however, is that, despite the
inevitable uncertainty surrounding the pending acquisition by
Secure Computing, buying behavior remained largely unaffected. This
is a strong endorsement of our products and a tribute to the faith
our customers have in our products. We did lose some business this
quarter as a result of the announcement of the acquisition because
some customers decided to postpone their buying decisions. This was
more than offset, however, by strong demand from other customers."
Clawson added that CyberGuard's services revenue doubled from last
year's levels and that the company has also seen a 100 percent
increase in its SG Appliance revenue from Q4 '05 levels. New
Business Highlights: -- CyberGuard was notified by the U.S.
Veteran's Administration that our Webwasher 1000 product has been
selected to provide content security management as part of a major
$10M IT upgrade. This award is expected to be worth approximately
$2.3M to CyberGuard over the life of the contract. -- In Q1
CyberGuard sold to over 140 customers in central Europe with more
than half of these being new customers. Of particular note were
Webwasher wins with Wincor Nixdorf and the German Army, and the
signing of an agreement with PSP in Germany for the distribution of
the SG Appliance family. PSP had been a Sonicwall distributor. --
We continue to gain traction in the Middle East with Saudi Telecom
choosing CyberGuard for a 15 site firewall implementation. -- In
Japan we made major inroads with Webwasher, resulting in major
contracts in the energy sector and government. -- For the fourth
year in a row, we were selected as one of two approved firewall
appliance vendors by the InfoComm Development Authority (IDA) of
Singapore. -- CyberGuard extended its reach to sub-Saharan Africa
with the sale of a Webwasher license to MWEB, the area's largest
digital TV service provider. -- In the UK we sold our firewall
products to a large British service provider, the British
government and a global financial services company based in the UK.
-- In Eastern Europe CyberGuard was awarded a 56 unit SG appliance
contract with the Romanian National Environmental Agency. -- We
have regained momentum with OEM business, having received a major
order in Q1 and completing the initial phase of our VoIP
implementation for an important OEM customer. We also signed a new
OEM Partner. About CyberGuard Corporation CyberGuard Corporation
(NASDAQ:CGFW) is a global provider of security solutions that
protect business-critical information assets at Global 2,000
organizations and government entities. The company's firewall/VPN,
TSP(TM), Global Command Center(TM) and Webwasher(R) product suites
comprise a comprehensive, integrated security system, which offers
highly adaptive, scalable solutions that intelligently guard
against network intrusion and content-based vulnerabilities,
detecting and eliminating security threats in real-time for
performance optimization. CyberGuard has deployed more than 250,000
products in organizations around the world to maintain the health
and integrity of their enterprises. Headquartered near Boca Raton,
Florida, the company has branch offices and training centers around
the globe and can be located on the World Wide Web at
www.CyberGuard.com. Forward-Looking Statements 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, 2005, 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. -0- *T - Tables
Follow - CYBERGUARD CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (Amounts in thousands) (Unaudited)
September 30, June 30, 2005 2005 ------------- ---------- ASSETS
Cash and cash equivalents $ 13,837 $ 15,003 Restricted cash 243 298
Accounts receivable, less allowance for uncollectible accounts of
$1,391 at September 30, 2005 and $480 at June 30, 2005 20,251
19,456 Inventories, net 1,864 1,753 Other current assets 4,035
3,248 ------------------------ Total current assets 40,230 39,758
Property and equipment at cost, less accumulated depreciation of
$5,904 at September 30, 2005 and $5,562 at June 30, 2005 3,225
3,366 Capitalized software, less accumulated amortization of $2,716
at September 30, 2005 and $2,547 at June 30, 2005 3,084 2,521
Intangible assets, less accumulated amortization of $7,696 at
September 30, 2005 and $6,452 at June 30, 2005 19,072 20,316 Other
assets 210 241 Goodwill 45,339 45,339 Deferred tax asset, net 3,864
3,864 ------------------------ Total assets $ 115,024 $115,405
======================== LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 2,449 $ 3,769 Deferred revenue, current portion
16,954 16,500 Note payable 488 974 Accrued expenses and other
liabilities 7,734 8,813 ------------------------ Total current
liabilities 27,625 30,056 Deferred tax liability 5,755 5,755
Deferred revenue, less current portion 6,257 6,310
------------------------ Total long-term liabilities 12,012 12,065
------------------------ Total liabilities 39,637 42,121
------------------------ 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 31,390 at
September 30, 2005 and 31,082 at June 30, 2005 314 311 Additional
paid-in capital 152,683 150,995 Accumulated deficit (77,670)
(78,011) Accumulated other comprehensive income 60 (11)
------------------------ Total shareholders' equity 75,387 73,284
------------------------ Total liabilities and shareholders' equity
$ 115,024 $115,405 ======================== CYBERGUARD CORPORATION
AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (Amounts in
thousands, except per share data) (Unaudited) Three Months Ended
September 30, 2005 ------------------------------------------ GAAP
Proforma Proforma Presentation Adjustments Presentation
------------- ------------ ------------- Revenues: Products $
12,170 $ - $ 12,170 Services 5,266 - 5,266 -------------
------------ ------------- Total revenues 17,436 - 17,436 Cost of
revenues: Products 3,835 (508)(1) 3,327 Services 1,332 - 1,332
------------- ------------ ------------- Total cost of revenues
5,167 (508) 4,659 ------------- ------------ ------------- Gross
profit 12,269 508 12,777 ------------- ------------ -------------
Operating expenses: Research and development 2,146 - 2,146 Selling,
general and administrative 9,639 (1,676)(2) 7,963 -------------
------------ ------------- Total operating expenses 11,785 (1,676)
10,109 ------------- ------------ ------------- Operating income /
(loss) 484 2,184 2,668 ------------- ------------ -------------
Other income Interest income, net 59 - 59 Other (expense) / income
(120) - (120) ------------- ------------ ------------- Total other
(expense) / income (61) - (61) ------------- ------------
------------- Income / (loss) before income taxes 423 2,184 2,607
------------- ------------ ------------- Income tax (expense) /
benefit (82) - (82) ------------- ------------ ------------- Net
income / (loss) $ 341 $ 2,184 $ 2,525 ============= ============
============= Basic earnings per common share $ 0.01 $ 0.08
============= ============ ============= Basic weighted average
number of common shares outstanding 31,568 31,568 =============
============ ============= Diluted earnings per common share $ 0.01
$ 0.08 ============= ============ ============= Diluted weighted
average number of common shares outstanding 33,491 33,491
============= ============ ============= Three Months Ended
September 30, 2004 ------------------------------------------ GAAP
Proforma Proforma Presentation Adjustments Presentation
------------- ------------ ------------- Revenues: Products $
12,475 $ - $ 12,475 Services 3,204 - 3,204 -------------
------------ ------------- Total revenues 15,679 - 15,679 Cost of
revenues: Products 4,155 (541)(1) 3,614 Services 996 - 996
------------ ----------- ------------ Total cost of revenues 5,151
(541) 4,610 ------------- ------------ ------------- Gross profit
10,528 541 11,069 ------------- ------------ -------------
Operating expenses: Research and development 2,589 - 2,589 Selling,
general and administrative 8,064 (538)(1) 7,526 -------------
------------ ------------- Total operating expenses 10,653 (538)
10,115 ------------- ------------ ------------- Operating income /
(loss) (125) 1,079 954 ------------- ------------ -------------
Other income Interest income, net 46 - 46 Other (expense) / income
8 - 8 ------------- ------------ ------------- Total other
(expense) / income 54 - 54 ------------- ------------ -------------
Income / (loss) before income taxes (71) 1,079 1,008 -------------
------------ ------------- Income tax (expense) / benefit 12 - 12
------------- ------------ ------------- Net income / (loss) $ (59)
$ 1,079 $ 1,020 ============= ============ ============= Basic
earnings per common share $ - $ 0.03 ============= ============
============= Basic weighted average number of common shares
outstanding 29,172 29,172 ============= ============ =============
Diluted earnings per common share $ - $ 0.03 =============
============ ============= Diluted weighted average number of
common shares outstanding 29,172 32,028 ============= ============
============= Note 1 - The proforma adjustment relates to
amortization of acquisition related intangible assets and costs.
Note 2 - The proforma adjustment relates to stock compensation
expense in accordance with SFAS 123(R) and amortization of
acquisition related intangible assets and costs. CYBERGUARD
CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) (Amounts in thousands) Three Months Ended
September 30, September 30, 2005 2004 ------------- -------------
Cash flows from operating activities: Net income / (loss) $ 341 $
(59) Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 342 184 Amortization 1,414 1,178
Provision for inventory - 127 Deferred tax benefit - (12) Provision
for uncollectible accounts receivable 808 348 Stock based
compensation expense 964 126 Changes in assets and liabilities
Increase in accounts receivable (1,603) (2,140) (Increase) /
decrease in other current assets (777) 8 Increase in inventories
(111) (507) Decrease / (increase) in other, net 21 (288) Decrease
in accounts payable (1,320) (239) Increase / (decrease) in accrued
expenses and other liabilities (1,080) 1,287 Increase / (decrease)
in deferred revenue 402 (128) --------------------------- Net cash
used in operating activities (599) (115)
--------------------------- Cash flows used in investing activities
Decrease / (increase) in restricted cash 55 (3) Capitalized
software costs (732) - Purchase of property & equipment (201)
(799) --------------------------- Net cash used in investing
activities (878) (802) --------------------------- Cash flows
provided by financing activities: Proceeds from stock options
exercised 529 52 Payment on note (486) - Proceeds from warrants
exercised - 3,169 Proceeds from issuance of common stock in stock
purchase plan 197 - --------------------------- Net cash provided
by financing activities 240 3,221 ---------------------------
Effect of exchange rate changes on cash 71 (130) Net (decrease) /
increase in cash (1,166) 2,174 Cash and cash equivalents at
beginning of period 15,003 12,447 --------------------------- Cash
and cash equivalents at end of period $ 13,837 $ 14,621
=========================== Supplemental disclosure of cash flow
information Cash paid for interest $ 12 $ -
=========================== Cash paid for income taxes $ - $ -
=========================== *T
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