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Embarcadero Technologies Announces Record Total Revenue for the Fourth Quarter 2005; Company Drives Higher Growth with License Revenue Increasing 9% Sequentially.

SAN FRANCISCO -- Embarcadero Technologies, Inc. (Nasdaq:EMBT), a leading provider of strategic data management solutions, today announced results for its fourth quarter and year ended December 31, 2005.

Total revenues for the fourth quarter of 2005 were $15.6 million, a 7.5% increase as compared to the prior year's fourth quarter results of $14.5 million. License revenue increased approximately 9% to $7.8 million in the fourth quarter 2005 compared to $7.1 million in the third quarter 2005. Net income and diluted net income per share under Generally Accepted Accounting Principles (GAAP) were $1.2 million and $0.04, respectively, for the fourth quarter of 2005, as compared to GAAP net income and diluted net income per share of $0.3 million and $0.01, respectively, for the fourth quarter ended December 31, 2004.

For the 2005 fiscal year, revenues were $57.6 million as compared to $56.3 million for 2004. GAAP net income and diluted earnings per share for the year were $4.3 million and $0.16, respectively. This compares to GAAP net income and diluted earnings per share of $2.0 million and $0.07, respectively, for the year ended December 31, 2004.

"We're pleased with the progress and financial results achieved by the company during the fourth quarter as we delivered higher revenue growth while sustaining strong profitability and operating cash flow," said Stephen Wong, chairman and chief executive officer of Embarcadero Technologies. "As we enter 2006, the company is focused on driving higher license revenue growth and further strengthening its position as the leading provider of strategic data management solutions. Furthermore, the acquisition of Ambeo accelerates our plans to become the leader in data security, which is an essential component of strategic data management."

Non-GAAP net income and diluted net income per share were $2.2 million and $0.08, respectively, for the fourth quarter of 2005, as compared to non-GAAP net income and diluted net income per share of $0.8 million and $0.03, respectively, for the fourth quarter of 2004. Non-GAAP measurements are tax adjusted and exclude amortization of non-cash stock-based compensation, amortization of acquired technology and in-house developed technologies (for the comparable period in 2004). For the year ended December 31, 2005 and 2004, non-GAAP net income was $6.8 million, or $0.25 per diluted share, and $6.6 million, or $0.23 per diluted share, respectively. A detailed reconciliation of GAAP to non-GAAP net income is provided in the attached financial statements.

Cash flows from operations were $1.5 million for the three months ended December 31, 2005. Cash, cash equivalents, and short-term investments were $60.0 million at December 31, 2005. Total deferred revenues were $16.0 million at December 31, 2005, as compared to $14.7 million at December 31, 2004.

Non-GAAP Financial Measurements

The non-GAAP measurements of operating and net income and net income per share exclude $390,000 of amortization of non-cash stock-based compensation, $132,000 of amortization of acquired technology of which $122,000 is related to Ambeo's core technology, $88,000 amortization of intangible assets acquired from Ambeo, $473,000 write down of internally developed software as a result of discontinued product, and $440,000 of charges related to write down of intangibles acquired from Ambeo in the fourth quarter of 2005. In the fourth quarter 2004, non-GAAP net income excluded $438,000 in amortization of acquired technology, $882,000 of amortization of non-cash stock-based compensation, and $36,000 related to restructuring charge reversal. The non-GAAP results in the fourth quarter 2005 assume approximately a 27% tax provision rate. Embarcadero has previously provided these non-GAAP measurements in press releases reporting operating and net income and earnings per share because we believe these measurements provide a consistent basis for the comparison of data between quarters and are not influenced by changes in certain non-cash or non-recurring charges and are therefore useful to investors. The non-GAAP measurements should not be considered as an alternative to GAAP, and as such, they may not be comparable to information provided by other companies.

Conference Call Information

Embarcadero will discuss its fourth quarter 2005 results, as well as provide business outlook for the first quarter of 2006, on a conference call and simultaneous Web-cast to be held today, February 7, 2006, at 2:00 PM Pacific Time. Those interested in participating may call (913) 981-5559. The Web-cast of this conference call, which will be available live as well as archived, can be accessed by all interested parties at the Embarcadero Technologies Web site, www.embarcadero.com, in the events calendar under "Investor Relations."

About Embarcadero Technologies

Embarcadero Technologies, Inc. (Nasdaq:EMBT) is a leading provider of strategic data management solutions that help companies to improve the availability, integrity, accessibility, and security of corporate data. Nearly 12,000 customers, including 97 of the Fortune 100, rely on Embarcadero Technologies solutions to maximize their return on corporate data assets and to meet the challenges of explosive data growth, escalating data security requirements, and complex, multi-platform data environments. Embarcadero Technologies is headquartered in San Francisco, CA. For more information, call 415/834-3131 or visit www.embarcadero.com.

Forward-Looking Statements

The statements in this press release that are not historical facts are forward-looking statements that involve risks and uncertainties, including risks associated with fluctuations in quarterly results and other risks identified in the Company's periodic filings with the Securities and Exchange Commission including, but not limited to, those appearing under the caption "Risk Factors" in the Company's most recent Quarterly Reports on Form 10-Q and Annual Report on Form 10-K/A. Actual results, events, and performance may differ materially. Readers are cautioned not to place undue relevance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated events.

Embarcadero, the Embarcadero Technologies logos and all other Embarcadero Technologies product or service names are trademarks of Embarcadero Technologies, Inc. All other trademarks are property of their respective owners.
Embarcadero Technologies, Inc.
 GAAP Consolidated Statements of Operations
 (in thousands, except per share data)
 (unaudited)




 Three months ended Twelve months ended
 December 31 December 31
 ------------------- -------------------
 2005 2004 2005 2004
 -------- --------- --------- --------

Revenues:
 License $7,776 $7,644 $27,513 $28,208
 Maintenance 7,846 6,894 30,039 28,086
 -------- --------- --------- --------
 Total revenues 15,622 14,538 57,552 56,294
 -------- --------- --------- --------

Cost of revenues:
 License 692 294 1,388 999
 Amortization of acquired
 technology 132 438 841 2,105
 Maintenance 585 548 2,173 2,362
 -------- --------- --------- --------
 Total cost of revenues 1,409 1,280 4,402 5,466

 -------- --------- --------- --------
Gross profit 14,213 13,258 53,150 50,828
 -------- --------- --------- --------

Operating expenses:
 Research and development 4,528 4,042 16,178 15,637
 Sales and marketing 6,471 5,666 22,950 21,077
 General and administrative 2,046 3,761 8,596 8,777
 Restructuring and impairment
 charges -- (36) -- 4,032
 Litigation settlement
 charge, net -- -- 573 --
 -------- --------- --------- --------
 Total operating expenses 13,045 13,433 48,297 49,523
 -------- --------- --------- --------

Income (loss) from operations 1,168 (175) 4,853 1,305
Other income, net 316 233 1,239 791
 -------- --------- --------- --------
Income before provision for
 income taxes 1,484 58 6,092 2,096
Benefit from (provision for)
 income taxes (264) 243 (1,755) (108)
 -------- --------- --------- --------
Net income $1,220 $ 301 $ 4,337 $ 1,988
 -------- --------- --------- --------

Net income per share:
 Basic $ 0.05 $ 0.01 $ 0.17 $ 0.07
 -------- --------- --------- --------
 Diluted $ 0.04 $ 0.01 $ 0.16 $ 0.07
 -------- --------- --------- --------

Shares used in per share
 calculation:
 Basic 25,768 25,955 25,866 26,788
 -------- --------- --------- --------
 Diluted 27,307 27,610 27,294 28,502
 -------- --------- --------- --------




The following table summarizes the non-GAAP measures discussed in this
press release and provides a reconciliation between GAAP and non-GAAP
measures:



 Embarcadero Technologies,Inc.
 Non-GAAP Consolidated Statements of Operations
 (in thousands, except per share data)
 (unaudited)


The following table reconciles non-GAAP net income to GAAP net income:



 Three months ended Twelve months ended
 December 31 December 31
 ------------------- -------------------
 2005 2004 2005 2004
 --------- --------- -------- ---------


GAAP net income and diluted
 earnings per share $1,220 $ 301 $4,337 $1,988
 Amortization of acquired
 technology 132 438 706 2,105
 Amortization of acquired
 intangibles 88 -- 88 --
 Non-cash stock-based
 compensation 390 882 1,614 2,318
 Write-down of acquired
 intangible and internally
 developed software 913 -- 913 --
 Restructuring and
 impairment charges -- (36) -- 4,032
 Litigation settlement
 charge, net -- -- 573 --
 Non-GAAP tax adjustments (559) (738) (1,388) (3,795)
 --------- --------- -------- ---------
Non-GAAP net income $2,184 $ 847 $6,843 $6,648
 ========= ========= ======== =========

Net income per share:
 Basic $ 0.08 $0.03 $ 0.26 $ 0.25
 --------- --------- -------- ---------
 Diluted $ 0.08 $0.03 $ 0.25 $ 0.23
 --------- --------- -------- ---------

Shares used in per share
 calculation:
 Basic 25,768 25,955 25,866 26,788
 --------- --------- -------- ---------
 Diluted 27,307 27,610 27,294 28,502
 --------- --------- -------- ---------







 Embarcadero Technologies, Inc.
 Condensed Consolidated Balance Sheet
 (in thousands)
 (unaudited)



 December 31, December 31,
 2005 2004
 (unaudited) (1)
 ------------ ------------
 ASSETS

Current Assets:
 Cash, cash equivalents and short-term
 investments $59,969 $59,907
 Trade accounts receivable, net 9,407 8,339
 Prepaid expenses and other current
 assets 1,863 1,634
 Deferred income taxes 377 732
 ------------ ------------
 Total current assets 71,616 70,612

Property and equipment, net 2,059 2,922
Goodwill 13,920 10,950
Deferred income taxes 2,500 3,967
Other assets, net 3,061 1,672
 ------------ ------------

 Total assets $93,156 $90,123
 ------------ ------------

 LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
 Accounts payable $ 817 $ 1,004
 Accrued liabilities 5,291 5,167
 Capital lease obligation 161 171
 Deferred revenue 15,802 14,503
 ------------ ------------
 Total current liabilities 22,071 20,845
Long-term deferred revenue 180 199
Long-term capital lease obligation 87 238
Long-term restructuring and impairment
 accrual 1,061 1,747
 ------------ ------------
 Total liabilities 23,399 23,029

Stockholders' Equity 69,757 67,094
 ------------ ------------

 Total liabilities and
 stockholders' equity $93,156 $90,123
 ------------ ------------


(1) The balance sheet as of December 31, 2004 has been derived from
 the audited consolidated financial statements at that date.

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Date:Feb 7, 2006
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