Aladdin Announces Record 1999 Fourth Quarter and Year End Results; Fourth Quarter Revenues Up 26%.Business Editors TEL AVIV Tel Aviv (tĕl əvēv`), city (1994 pop. 355,200), W central Israel, on the Mediterranean Sea. Oficially named Tel Aviv–Jaffa, it is Israel's commercial, financial, communications, and cultural center and the core of its largest , Israel--(BUSINESS WIRE)--February 24, 2000 Aladdin Knowledge Systems Aladdin Knowledge Systems NASDAQ: ALDN is a company that provides solutions for software digital rights management and Internet security since 1985. Its corporate headquarters are located in Tel Aviv, Israel. (Nasdaq: ALDN) today reported financial results for the fourth quarter and year ended December December: see month. 31, 1999. Sales for the 1999 fourth quarter hit a record high of $12.4 million, an increase of approximately 26%, compared with $9.8 million in sales reported for the fourth quarter of 1998. Net income for the quarter was $2.7 million, as compared to a loss of $7.0 million for the comparable period of 1998. Basic earnings per share rose to $ 0.24, based on 11,312,000 shares outstanding, compared with a loss of $0.69 per share in the fourth quarter of 1998, based on 10,093,000 million shares outstanding. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of rose to $0.24, based on 11,606,000 shares outstanding, compared with a loss of $0.68, based on 10,182,000 shares outstanding. Fourth quarter 1999 results included a net capital gain of $2.5 million related to Aladdin's investment in WAVE Systems shares. For the year ended December 31, 1999 sales rose 24% to $ 44.7 million, compared with $36.1 million in the previous year. In 1999, net income grew to $8.3 million, compared with net income of $692,000 in 1998. Basic earnings per share for the twelve months increased to $0.73, based on 11,284,000 shares outstanding, compared with $0.07 per share for the comparable 1998 period, based on 10,058,000 shares outstanding. Diluted earnings per share for the twelve months increased to $0.72, based on 11,482,000 shares outstanding, compared with $0.07 per share for the comparable 1998 period, based on 10,307,000 shares outstanding. 1998 results included one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. acquisition related expenses. For the 1999 fourth quarter and full year, R&D expenses were up 60% and 67%, respectively, as compared to 1998. This increased spending represents the Company's deliberate decision to further develop and support the market launches of its eSafe, eToken and Privilege product lines for new Internet See Web 2.0 and Internet2. security applications. To support these launches, the Company is also expanding its engineering, sales and marketing organizations worldwide. Accordingly SG&A was up 76% in the fourth quarter of 1999 and 79% for the full year, as compared to year ago periods. Yanki Margalit, Aladdin Aladdin Hero of a well-known story in The Thousand and One Nights. The son of a poor widow, Aladdin is a lazy, careless boy who meets an African magician claiming to be his uncle. Chairman and Chief Executive Officer, commented, "We believe the significant market opportunities for our portfolio of Internet security ''This article or section is being rewritten at Internet security is the process of protecting data and privacy of devices connected to internet from information robbery, hacking, malware infection and unwanted software. products - eSafe, eToken and Privilege - are worthy of increased investment, and therefore we have made the conscious and deliberate decision to invest the profits from our core business into these new and exciting technologies, forfeiting Forfeiting Method of financing international trade of capital goods. earnings growth for the coming year." Mr. Margalit continued, "Throughout the year we have seen a growing awareness of the increased exposure PC users and networks face while being connected to the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , and the subsequent need for additional security. During the fourth quarter Aladdin introduced new versions of our award winning eSafe Desktop and eSafe Enterprise 2.2, the complete content security solution for corporation and home users. eSafe is the first content security solution to offer protection from vandals Vandals, ancient Germanic tribe. They originated in N Jutland and, along with other Germanic peoples, settled in the valley of the Oder about the 5th cent. B.C. They appeared in Pannonia and Dacia in the 3d cent. A.D., apparently under imperial aegis. , viruses, data exposure and inappropriate content, and was voted PC Magazine's Editors' Choice Award two consecutive years in a row. With eSafe 2.2, we are now taking proactive measures In antiterrorism, measures taken in the preventive stage of antiterrorism designed to harden targets and detect actions before they occur. to protect PC users and networks from malicious Involving malice; characterized by wicked or mischievous motives or intentions. An act done maliciously is one that is wrongful and performed willfully or intentionally, and without legal justification. DESERTION, MALICIOUS. vandals by trapping trapping, most broadly, the use of mechanical or deceptive devices to capture, kill, or injure animals. It may be applied to the practice of using birdlime to capture birds, lobster pots to trap lobsters, and seines to catch fish. them before they can harm digital content and spread throughout a network." "On the international front," Mr. Margalit concluded, "we have expanded our global presence with the acquisition of our affiliate Aladdin France, and the eSafe assets of CTI (Computer Telephone Integration) Combining data with voice systems in order to enhance telephone services. For example, automatic number identification (ANI) allows a caller's records to be retrieved from the database while the call is routed to the appropriate party. , Aladdin's eSafe distributor in France. Our investments in eToken, the further expansion into Europe, and the November launch of Privilege, which provides vendors with the ability to distribute licenses electronically, will all help Aladdin continue to be the leading provider of Internet and content security in the new millennium." About Aladdin Aladdin (Nasdaq: ALDN) is a global leader in securing digital content, from applications software to Internet use and access. Aladdin's products include HASP (Houston Automatic Spooling Program) A mainframe spooling program that provides task, job and data management functions. HASP - Houston Automatic Spooling Program and Hardlock, software security systems that protect the revenues of developers and publishers; Privilege, a software licensing platform for the Internet; the eSafe line of anti-vandal, anti-virus and content filtering See Web filtering and parental control software. software for PCs and networks connected to the Internet; and eToken for Internet security and authentication (1) Verifying the integrity of a transmitted message. See message integrity, e-mail authentication and MAC. (2) Verifying the identity of a user logging into a network. . Aladdin serves its customers through nine offices located in the world's major software markets as well as a network of 50 distributors serving more than 100 countries. For more information, visit the Aladdin web site at www.eAladdin.com Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Except for the statements of historical fact, the information presented herein constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements involve 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, the loss of market share, changes in consumer buying habits and other factors over which Aladdin Knowledge Systems Ltd. has little or no control.
Aladdin Knowledge Systems Ltd.
Summary of unaudited results
(U.S. dollars, in thousands -except for per share amount)
Three month Twelve month
period ended period ended
December 31 December 31
1999 1998 1999 1998
Sales $12,358 $9,811 $44,691 $36,139
Cost of sales 3,037 2,858 10,015 10,025
Gross profit 9,321 6,953 34,676 26,114
Research and 2,132 1,329 7,280 4,364
development
Selling and 5,383 2,862 18,142 9,988
marketing
General and 1,201 1,082 5,268 3,891
administrative
Write off of 554 105 2,232 420
intangible assets
Acquisition &
reorganization
expenses 9,131 - 9,131
9,270 14,509 32,922 27,794
Operating income 51 (7,556) 1,754 (1,680)
Financial income, 445 768 1,438 1,770
net
Other income 4,101 257 10,190 2,337
(expenses)
Income (loss) 4,597 (6,531) 13,382 2,427
before taxes
Taxes on income 1,863 441 4,891 1,735
2,734 (6,972) 8,491 692
Equity in the loss
of affiliate, net 4 - 234 -
of taxes
Net income (loss) $2,730 $(6,972) $8,257 $ 692
Basic earnings per $ 0.24 $ (0.69) $ 0.73 $ 0.07
share
Diluted earnings $ 0.24 $ (0.68) $ 0.72 $ 0.07
per share
Weighted average
number of shares 11,312 10,093 11,284 10,058
outstanding for
Basic EPS
Weighted average
number of shares
outstanding for 11,606 10,182 11,482 10,307
Diluted EPS
Aladdin Knowledge Systems Ltd. Balance Sheets
(U.S. dollars, in thousands)
December 31, December 31,
1999 1998
Assets
Current assets
Cash and cash equivalents $30,349 $17,475
Marketable securities 8,387 1,697
Other accounts 10,029 7,557
receivable
Inventories 5,083 4,794
53,848 31,523
Fixed assets, net 4,990 4,130
Other long term assets 22,879 24,232
net
81,717 $59,885
Liabilities and shareholders' equity
Current liabilities
Other current liabilities $19,034 $ 8,987
Accrued severance pay 1,623 1,223
Shareholders' Equity 61,060 49,675
$81,717 $59,885
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