ISS Reports 18th Consecutive Quarter of Growth and Record Fiscal Year.Business Editors/Technology Writers ATLANTA--(BUSINESS WIRE)--Jan. 27, 2000 Continues to Extend Leadership into Managed Security Services Market ISS ISS See Institutional Shareholder Services (ISS). Group, Inc., parent company 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. Systems, Inc. (ISS) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ISSX ISSX Internet Security Systems Inc. (stock abbreviation, AMEX) ), a leading provider of security management solutions for e-business (Electronic-BUSINESS) Doing business online. The term is often used synonymously with e-commerce, but e-business is more of an umbrella term for having a presence on the Web. , today announced record financial results for the fourth quarter and fiscal year ended December 31, 1999. For the fourth quarter, revenues were $36,232,000, a 73% increase over $20,975,000 for the corresponding period in 1998 and a 21% sequential growth over the third quarter of 1999. The fourth quarter results continued the significant growth trends in products and service offerings established in the first three quarters, producing 1999 annual revenues of $116,487,000, a 104% increase over $57,088,000 for the 1998 fiscal year. The Company continued to display leverage in the business as net income for the Company for the fourth quarter was $3,494,000 or $.08 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share while net income for the fiscal year was $7,490,000 or $.17 per fully diluted share. This compared to losses recorded in comparable 1998 periods. The Company's income is not fully-taxed due to the existence of net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. . However, it's the Company's understanding that estimates of the Company's performance by many market analysts who follow the Company are based on fully-taxed earnings. These estimates for the full year also do not reflect the direct costs of the Netrex business combination expensed in the third quarter. For comparisons to such published estimates, the Company's earnings per share, assuming a tax rate of 35% and excluding such merger costs, would have been $.10 per share in the fourth quarter and $.16 per share for the year. &uot;Our record 1999 financial performance demonstrates ISS' strong business growth and continued market leadership,&uot; said Tom Noonan, president and chief executive officer of ISS. &uot;Our entry into one of the fastest growing segments of the Internet security industry -- Managed Security Services Security services are state institutions for the provision of intelligence, primarily of a strategic nature, but also including protective security intelligence. Examples include the Security Service (MI5) and the Secret Intelligence Service (MI6) in the United Kingdom, and the (MSS MSS - maximum segment size ) - has dramatically increased ISS' market potential and expanded our solutions to include both security management software and remote monitoring (protocol) remote monitoring - (RMON) A network management protocol that allows network information to be gathered at a single computer. Whereas SNMP gathers network data from a single type of Management Information Base (MIB), RMON 1 defines nine additional MIBs that provide a services critical to serving a broad customer base. As we look to 2000, the rapid growth in the business-to-business and business-to-consumer markets will continue to drive our leadership and momentum in providing the security management solutions essential to ensuring safe and uninterrupted e-business.&uot; Highlights for 1999 include: Acquisition of Netrex and Expansion into Managed Security Services Market In August 1999, ISS dramatically expanded its customer reach and propelled its vision into a new market with the acquisition of privately-held Netrex, Inc., a leading Managed Security Service (MSS) provider. With the addition of Netrex's ePatrol(TM) MSS offerings, ISS expanded its solutions set to provide both industry-leading security management software and a complete set of remote 24x7 security management services. With the acquisition, ISS is providing a wider range of customers with the technology and outsource security solutions they need to manage their security. ISS' ePatrol provides the remote management of best-of-breed security technologies from Check Point, Trend Micro, RSA (1) (Rural Service Area) See MSA. (2) (Rivest-Shamir-Adleman) A highly secure cryptography method by RSA Security, Inc., Bedford, MA (www.rsa.com), a division of EMC Corporation since 2006. It uses a two-part key. and WatchGuard including firewalls, VPNs, anti-virus, 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. and web site blocking software See Web filtering and parental control software. , as well as ISS security assessment and intrusion detection systems This article is about the computing term. For other uses, see Burglar alarm. An intrusion detection system (IDS) generally detects unwanted manipulations of computer systems, mainly through the Internet. . In October 1999, ISS announced the expansion of ePatrol with a new service for remote security assessments that builds on an underlying technology foundation gained through the ISS acquisition of privately-held NJH NJH National Jewish Hospital Security Consulting, an Atlanta consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee consulting company business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a focused on providing information security services. Validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. of MSS Strategy with Global Strategic Partnerships In addition to offering services directly, ISS has continued to leverage existing relationships with leading telecommunications companies See telecom company. and world-class security service providers to offer MSS on a wholesale basis. On January 25, 2000, ISS and BellSouth announced a strategic alliance to co-develop and deliver Managed Security Services to meet the needs of BellSouth customers. BellSouth, which relies on ISS for internal network security, named ISS its &uot;preferred&uot; managed security provider with new services becoming immediately available to both domestic and international markets. In November, ISS announced key alliances with Embratel, telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. leader in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. and subsidiary of MCI (1) (Media Control Interface) A high-level programming interface from Microsoft and IBM for controlling multimedia devices. It provides commands and functions to open, play and close the device. (2) (Microwave Communications Inc. Worldcom The former name of MCI. Based in Jackson, MS, WorldCom, Inc. was a major, international telecommunications carrier. It was founded in 1983 by Bernard Ebbers as Long Distance Discount Service (LDDS), a reseller of AT&T WATS lines to small businesses. , to launch the first Managed Security Service in Latin America, and SECOM SECOM Secure Communications SECOM Software Engineering Cost Model SECOM Smart Enterprise Common Object Model , the largest managed security services provider in Japan, to deliver Japan's first remote intrusion detection See IDS and IPS. service. Expansion into Ebusiness Market ISS' MSS strategy is enabling the company to serve a broader market, providing outsource 24x7 remote security monitoring and management services to all companies engaging in e-business. On January 13, 2000, ISS announced a partnership with iXL, a leading e-business provider, to deliver services and software solutions to iXL customers. ISS relationships with key e-business companies, such as iXL, demonstrates that security becoming a key driver in e-business solutions and reinforces that security management is critical to ensuring system uptime and information protection. Industry Leadership Recognition In a July1999 study, International Data Corporation (IDC) named ISS the market leader in the network intrusion detection and security assessment (IDnA) market with a combined 49% worldwide market share. ISS was also named a Top 50 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 Company by InternetWorld magazine, and included as a Top 50 E-business company in the USA Today USA Today National U.S. daily general-interest newspaper, the first of its kind. Launched in 1982 by Allen Neuharth, head of the Gannett newspaper chain, it reached a circulation of one million within a year and surpassed two million in the 1990s. Internet 100, ad well as a &uot;Cream of the Crop&uot; stock pick for 2000 in Business Week's Top 50 E-business Stock Index demonstrating further recognition of ISS as a critical, high-growth e-business security provider. New Strategic Consulting Services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" In November, ISS launched a series of Knowledge Services offerings designed to help customers better leverage the wealth of security knowledge within ISS. As an expansion of ISS' Consulting and Education Group, Knowledge Services provide organizations with the ability to outsource security policy research and documentation, security threat impact analysis and secure e-business implementation assessment. A core offering is the SAVANT sa·vant n. 1. A learned person; a scholar. 2. An idiot savant. [French, learned, savant, from Old French, present participle of savoir, to know Windows NT-based security advisory service, providing customers with detailed, continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. updated information on how to effectively manage the security of their Windows NT-based enterprises. Continued Enhancement of ISS SAFEsuite(R) Security Management Software Solutions ISS continued to add significant functionality to its award-winning SAFEsuite family of security management software, providing customers with more powerful and easier-to-use solutions for security management across the enterprise. Throughout 1999, ISS announced and shipped enhanced versions of all of its SAFEsuite products including SAFEsuite security assessment solutions, Internet Scanner (1) See also antivirus program. (2) An optical device that reads a printed page or transparency and converts it into a graphics image for the computer. The scanner does not recognize or differentiate in any manner the content of the material it is scanning. (TM), Database Scanner(TM) and System Scanner(TM), and SAFEsuite intrusion detection solutions, RealSecure(TM) network and host-based threat management systems. In addition, ISS delivered an enhanced version of its first security management application, SAFEsuite Decisions(R), including support for Oracle and faster, more efficient identification of severe security hot spots hot spots acute moist dermatitis. . Continued Security Research Leadership: ISS X-Force In December, ISS' leading research team, the X-Force, led the industry in researching and informing customers and the security community about newly developed and potentially dangerous &uot;Denial of Service&uot; attacks. ISS formed the Y2K See Y2K problem and Y2K compliant. Y2K - Year 2000 SecurityWatch to monitor, research and report hacker A person who writes programs in assembly language or in system-level languages, such as C. The term often refers to any programmer, but its true meaning is someone with a strong technical background who is "hacking away" at the bits and bytes. activity throughout the Y2K rollover A graphic element in an application or on a Web page that changes its color or shape when the pointer is moved (rolled) over it. See JavaScript rollover. See also n-key rollover. . ISS also supported the Cyber-Assurance Cell of the US Government's National Y2K Information Coordination Center (ICC ICC See: International Chamber of Commerce ) in Washington D.C. by communicating security risks and events to the ICC as they occurred. Throughout 1999, the ISS X-Force released over 25 Security Advisories and Alerts to inform customers and the security community of new security vulnerabilities and threats. ISS' intense focus on security research also resulted in the documentation and addition of over 2247 entries in 1999 to the ISS X-Force Database, the world's largest online repository (1) A database of information about applications software that includes author, data elements, inputs, processes, outputs and interrelationships. A repository is used in a CASE or application development system in order to identify objects and business rules for reuse. of security risk information. About ISS ISS is a leading global provider of security management solutions for e-business. By offering best-of-breed SAFEsuite security software, industry-leading ePatrol managed security services, and strategic consulting and education services, ISS is a trusted security provider to its customers, protecting digital assets and ensuring the availability, confidentiality and integrity of computer systems and information critical to e-business success. ISS' lifecycle e-business security management solutions protect more than 5,000 customers including 21 of the 25 largest U.S. commercial banks, 9 of the 10 largest telecommunications companies and over 35 government agencies. Founded in 1994, ISS is headquartered in Atlanta, GA, with additional offices throughout North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. in Asia, Australia, Europe and Latin America. For more information, visit the ISS Web site at www.iss.net or call 800-776-2362. NOTE TO EDITORS: This release, other than historical information, includes 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. made pursuant to the &uot;safe harbor&uot; provisions 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. The risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following: the level of demand for the Company's products; the volume and timing of orders; product and price competition; the Company's ability to expand its domestic and international sales and marketing organizations; the Company's ability to develop new and enhanced products; the Company's ability to assimilate as·sim·i·late v. 1. To consume and incorporate nutrients into the body after digestion. 2. To transform food into living tissue by the process of anabolism. recent and potential future acquisitions or investments ; the Company's ability to attract and retain key personnel; reliance on distribution channels through which the Company's products are sold; the growth in the acceptance and use of the Internet and of private Internet-based networks or &uot;intranets&uot;; the extent to which unauthorized access to and use of online information is perceived as a threat to network security; customer budgets; the assertion of infringement The encroachment, breach, or violation of a right, law, regulation, or contract. The term is most frequently used in reference to the invasion of rights secured by Copyright, patent, or trademark. claims with respect to the Company's intellectual property; foreign currency exchange rates; and risks concerning the rapid change of technology; and general economic factors. These risks and others are discussed in the Company's periodic filings with the Securities and Exchange Commission. These filings can be obtained either by contacting ISS Investor Relations Investor relations The process by which the corporation communicates with its investors. or through the Securities and Exchange Commission's Web site at &uot;http://www.sec.gov&uot;. Internet Security Systems, SAFEsuite, ePatrol, Internet Scanner, System Scanner, Database Scanner and RealSecure are trademarks of Internet Security Systems, Inc. and ISS Group, Inc. All other companies and products mentioned are trademarks and property of their respective owners.
ISS GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(amounts in thousands, except per share amounts)
(unaudited)
Three Months Ended
-------------------------------------------
December 31, September 30, December 31,
1999 1999 1998
---------- ---------- ----------
Revenues:
Product licenses and sales $22,784 $19,200 $13,762
Subscriptions 7,563 6,202 3,965
Professional services 5,885 4,599 3,248
---------- ---------- ----------
36,232 30,001 20,975
Costs and expenses:
Cost of revenues:
Product 6,312 5,055 3,891
Subscription and service 5,809 4,801 3,721
---------- ---------- ----------
Total cost of revenues 12,121 9,856 7,612
Research and development 6,250 5,315 3,407
Charges for in-process
research and development - - 802
Sales and marketing 12,531 10,991 7,959
General and administrative 2,675 2,105 2,063
Amortization 248 247 230
Merger costs - 2,329 -
---------- ---------- ----------
33,825 30,843 22,073
Operating income (loss) 2,407 (842) (1,098)
Interest income, net 1,888 1,640 653
Exchange gain (loss) (136) - -
---------- ---------- ----------
Income (loss) before
income taxes 4,159 798 (445)
Provision for income taxes (665) (105) (62)
---------- ---------- ----------
Net income (loss) $3,494 $693 ($507)
Basic net income (loss)
per share of Common Stock $0.09 $0.02 ($0.01)
========== ========== ==========
Diluted net income (loss)
per share of Common Stock $0.08 $0.02 ($0.01)
========== ========== ==========
Weighted average number of shares:
Basic 40,816 40,582 36,675
========== ========== ==========
Diluted 44,360 43,946 36,675
========== ========== ==========
Supplementary Data
(excluding merger costs and assuming a 35% tax rate)
Operating Income $2,407 $1,487
========== ==========
Net Income $2,703 $2,033
========== ==========
Fully diluted earnings
per share $0.06 $0.05
========== ==========
ISS GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(amounts in thousands, except per share amounts)
(unaudited)
TWELVE MONTHS ENDED
-----------------------------------
December 31, December 31,
1999 1998
------------ ------------
Revenues:
Product licenses and sales $74,050 $36,908
Subscriptions 24,141 12,037
Professional services 18,296 8,143
-----------------------------------
116,487 57,088
Costs and expenses:
Cost of revenues:
Product 18,842 8,875
Subscription and service 18,858 11,076
-----------------------------------
Total cost of revenues 37,700 19,951
Research and development 20,304 9,655
Charges for in-process
research and development - 802
Sales and marketing 43,232 25,998
General and administrative 9,230 6,557
Amortization 992 230
Merger costs 2,329 -
-----------------------------------
113,787 63,193
Operating income (loss) 2,700 (6,105)
Interest income, net 5,902 2,274
Exchange gain (loss) (136) -
-----------------------------------
Income (loss) before income taxes 8,466 (3,831)
Provision for income taxes (976) (62)
Net income (loss) $7,490 ($3,893)
===================================
Basic net income (loss)
per share of Common Stock $0.19 ($0.12)
===================================
Diluted net income (loss)
per share of Common Stock $0.17 ($0.12)
===================================
Weighted average number of shares:
Basic 39,996 32,351
===================================
Diluted 43,691 32,351
===================================
Unaudited pro forma net income (loss) per share of
Common Stock ($0.11)
========
Unaudited weighted average number of shares used in
Calculating unaudited pro forma net loss per share of
Common Stock 34,963
Supplementary Data
(excluding merger costs and assuming a 35% tax rate)
Operating Income $5,029
========
Net Income $7,017
========
Fully diluted earnings per share $ 0.16
========
ISS GROUP INC.
SELECTED CONSOLIDATED BALANCE SHEET DATA
(amounts in thousands, except per share amounts)
(unaudited)
December 31, 1999 December 31, 1998
------------------ -----------------
Cash, including Cash
Equivalents and
Restricted Cash $139,283 $52,921
Accounts Receivable 26,934 16,590
Total Assets 184,845 84,724
Deferred Revenue 17,155 8,333
Stockholders' Equity
Common Stock and Additional
Paid-In Capital 157,508 76,189
Deferred Compensation (288) (662)
Cumulative Adjustment for
Currency Revaluation 100 142
Retained Earnings (deficit) (2,167) (9,164)
Total Stockholders Equity $155,153 $66,505
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