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SurfControl Reports First Quarter of Net Profitability, Growth in Revenue and Enhanced Reseller and OEM Relationships in First Quarter Ending September 30, 2002

Revenue Growth Beats Target, Increasing 41 percent over First Quarter of Last Year and Helping Company Record Most Successful Quarter in its History

Congleton. (November 5, 2002) - SurfControl (London:SRF, Nasdaq Europe:SRFC), the world's number one Web and e-mail filtering company, today reported its first quarter of net profitability, a milestone for the Company. For the quarter ending September 30, 2002, SurfControl reported revenues of $15.7 million compared to revenues of $11.1 million in the same period last year, an increase of 41 percent.

EBITDA for the quarter showed a profit of $1.8 million against a loss in the first quarter of last year of $1.6 million. SurfControl's first quarter of net profitability showed a before-tax profit of $900,000, against a loss of $21.9 million in the same period last year. Basic earnings per share were 1.44 cents, compared to a loss of 72.60 cents in Q1 last year.

"I am pleased to report our first quarter of net profit, the achievement of another long-term goal," said Steve Purdham, SurfControl's Chief Executive Officer. "The combination of net profitability, increased sales, increased deferred revenue, and a growing cash balance demonstrate the strength of our
business. "It is particularly positive given the challenging market environment and from a Summer quarter that typically sees reduced activity. Our results give clear evidence of effective cost management, the leveraging of existing resources, and the continued growth and effectiveness of our reseller network. We remain on target to achieve market expectations for the year."

Total deferred revenues increased by 41 percent to $34.5 million over the prior year Q1, and 2 percent over the prior quarter. Invoicing in the first quarter grew 25 percent over the same period last year. E-mail sales and bundled filtering sales each represented 11 percent, while Web sales represented 78 percent. Sales to new customers represented 47 percent of invoicing. License revenue represented 27 percent of total revenue in the quarter.

SurfControl continued to generate significant cash from operations during the quarter with an overall increase in cash of $4 million, resulting in a balance of $39.9 million at the end of the quarter. Debt collection remained comfortably within the target range of 45-50 days.

Indirect channel sales continued to grow, delivering 46 percent of invoicing compared to 31 percent for the same period last year. These improved results reflected the Company's focus on recruiting and supporting quality resellers and offering programs to help them achieve success, such as the "SurfControl Worldwide Channel Program" launched in Q1.

The Company increased its OEM relationships, signing two more contracts and renewing several others. The Company's order book of OEM contractual commitments increased to $3.3 million, compared to $2.8 million in the previous quarter. OEM revenue in the quarter was $700,000.

The United States represented 73 percent of overall revenues, broadly consistent with recent prior quarters and last year. Reflecting an increase in enterprises bundling Web and e-mail filtering, the average U.S. corporate invoice increased in value to $5,900, compared to $5,100 in the same quarter
of last year. The average U.S. education invoice increased in value to $3,300 from $2,200 in the first quarter of last year, reflecting increased value pricing to schools. The company ended the quarter with 403 full-time equivalent employees, up from 397 at the end of the last fiscal year.

First Quarter Highlights

Continued mrket and industry leadership All Internet content that is read, sent, or received carries a risk.SurfControl's products manage that risk. SurfControl's industry leading product set and global sales and marketing model ensures it remains recognised as the world leader in Internet filtering. According to the respected industry analyst firm IDC, SurfControl led the content security
market in 2001 with more than $46 million in revenue. IDC anticipates the content security market to more than triple between 2001 and 2006 to $1.4 billion and says SurfControl is well positioned to take advantage of this growing market.

During the quarter, SurfControl continued to achieve robust sales growth, with 1,365 new customers. Of particular note in the quarter, was the addition of new customers in the manufacturing sector including Contract Manufacturing, Crystal Windows, Durr Production Systems Inc., Embee Incorporated, Lyf-Tym Building Products, ROI Systems Inc., and Univar USA Inc. SurfControl also announced seven new customers in the financial sector: American First Federal Credit Union, Atlanta Postal Credit Union,
Citizens Trust Bank, Educational Community Credit Union, MetLife Investors, The Palmetto Bank, and Superior Home Services.

SurfControl expects the market to continue to grow as organizations focus on maximizing existing resources. Filtering solutions have a rapid ROI for companies of any size because they enhance productivity, preserve network resources and protect organizations from virus attacks and legal liability.

Channel success

Development of our reseller network was a particular focus during Q1 and included the launch of our global three-tier reseller program. Significant investment was made in the launch of the "SurfControl Worldwide Channel Program," including a global Webcast that attracted more than 600 registered
participants. SurfControl also is conducting training seminars in cities around the world as part of the "Partners in Security Tour," which is co-sponsored by Check Point and Radware. Other initiatives of the program include the online STAR reseller sales certification program. New resellers
in the quarter included Zones, Softek, Compuquip and Fortune 500 company Northrop-Grumman, plus the Company's first resellers in the Latin American market, OpenSouth and Estrategia.

Continued technology leadership and investment SurfControl's technology leadership is demonstrated in the continuing confidence placed in the Company's technology by the world's largest OEMs,
as well as the Company's continuing investment in developing pioneering technology. The Company extended its OEM relationships by announcing an agreement with Microsoft to provide Web Filter technology for the advanced parental controls in MSN 8. Other new OEM relationships in the quarter
included BT Payphones and Fujitsu Panasonic. SurfControl now has 56 OEM relationships contributing to revenue.

Enhanced product range with a focus on the core demands of Filtering SurfControl's continues to invest in delivering technology that understands content so that relevant policies can be applied to manage Internet and e-mail usage. The combination of the largest URL database in the world,
artificial intelligence in the form of Adaptive Reasoning Technology products and state of the art Web and e-mail filtering technology gives SurfControl a significant competitive advantage in delivering a Total
Solution for filtering the most critical of today's business communications tools. New products delivered in the quarter included updates to SurfControl Web and E-mail Filters, an E-mail API hat lets ISPs offer spam filtering services to their subscribers and CyberPatrol 6.0, an updated version of the world's leading consumer filter.

For further information, contact:

James Russell


0118 989 5600

About SurfControl

SurfControl plc, the world's Number One Web and e-mail filtering company, is the only company in the security market offering a total content security solution that combines Web and e-mail filtering technology with the industry's largest, most accurate and relevant content database and adaptive
reasoning tools to automate content recognition. Analysts estimate double-digit growth in the security market with forecasts predicting it will reach $14.6 billion by 2006.

SurfControl's Internet monitoring and policy management solutions are flexible, scaleable and interoperable to meet the diverse needs of all its markets -- corporate, education, home and OEM. SurfControl offers a choice of platform independent or integrated solutions, and the software can be
installed in any network environment. With world-class partners such as AT&T, Cisco and IBM, as well as a customer base that includes many of the world's largest corporations, SurfControl offers the most sophisticated yet easy to use technology, the best understanding of market needs and a global
reach unmatched in the industry. For further information and news on SurfControl, please visit <> .

Summary statistics/Q1-FY 2003/ Q1-FY 2002/% increase



Gross margin/99%/98%


Profit before tax/0.94/(21.93)

Basic EPS (per share in US cents)/1.44/ (72.60)

S&M spend as % of overall revenue/56%/69%

Indirect Channel invoicing/46%/31%

Non U.S, revenue/27%/26%

Deferred revenue balance/34.46/24.47/41%

Cash balances/39.91/22.96

Total cash movement/ 4.45/0.21

James Russell

Account Director

éclat Marketing

Tel: 0118 989 5605

Mob: 07879 842077

Fax: 0118 989 5656

Web: <>

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