Also Provides Updated Guidance
ATLANTA, Ga. — July 16, 2003 — Internet Security Systems, Inc. (ISS) (Nasdaq: ISSX), a leading global provider of enterprise security solutions, today announced financial results for the second quarter ended June 30, 2003. Additionally, the Company is providing its business outlook for the third quarter ending September 30, 2003 and updating its outlook for the full year.
Second Quarter and Year-to-Date 2003 Revenues
Revenues were $59,125,000 for the second quarter of 2003, a two percent decrease compared with second quarter 2002 revenues of $60,031,000. Revenues for the six months ended June 30, 2003 were $118,578,000 compared with $118,408,000 for the comparable period of 2002.
Pro Forma Earnings
Pro forma net income for the second quarter of 2003 was $5,878,000, or $0.12 per diluted share, compared to $5,342,000, or $0.11 per diluted share, in the second quarter of 2002. Pro forma net income for the six months ended June 30, 2003 was $12,342,000, or $0.25 per diluted share, compared to $10,065,000, or $0.21 per diluted share, in the comparable period of 2002.
Pro forma net income excludes the after-tax impact of non-cash acquisition expense for amortization of intangibles and compensation charges for unvested stock options, as stated and reconciled on the accompanying Consolidated Statements of Operations.
Reported net income under generally accepted accounting principles (GAAP) for the second quarter of 2003 was $4,891,000, or $0.10 per diluted share, compared to net income of $4,125,000 or $0.08 per diluted share, in the second quarter of 2002. Reported net income for the six months ended June 30, 2003 was $10,253,000, or $0.21 per diluted share, compared to $7,494,000, or $0.15 per diluted share, in the comparable period of 2002.
“We are proud of our team's performance and market leadership,” said Tom Noonan, chairman, president and chief executive officer of Internet Security Systems. “We made excellent progress on our key growth strategies, including the introduction of our first Proventia™ protection appliances, which performed well ahead of our expectations. This new, end-to-end family of protection products is built as a platform to go beyond today's stand-alone security products. No longer must the industry endure the complexity, cost and lost productivity of managing a disparate collection of firewalls, anti-virus, web filtering, anti-spam, and intrusion protection systems. Operated through a single management system, the Proventia family puts you in control of your security to flexibly protect the network from today's ever changing threats.”
Business Highlights to Date
During the quarter, Internet Security Systems announced the company’s entry into the security appliance market with the introduction of its Proventia family of network protection appliances, including the A201, A604, A1204 and A1204F. The Proventia appliances are an integral component of ISS’ Dynamic Threat Protection™ enterprise security platform, combining the industry’s best-in-class protection technology with world-renowned security intelligence to provide customers with maximum protection for the best value. Proventia appliances feature unified, multi-function protection capabilities designed to identify and prevent many forms of attack with minimal user intervention. They are optimized for the most demanding network environments yet easy to deploy, easy to use and centrally managed, making them extremely cost-effective.
ISS also announced another significant advancement to its Dynamic Threat Protection platform that enables fast, accurate defense for networks, servers and desktops against known and unknown threats. The advancement includes improved vulnerability detection for the network with Internet Scanner® 7.0 and enhanced host protection with RealSecure® Server 7.0 and RealSecure Desktop 7.0.
ISS introduced the X-Force™ Catastrophic Risk Index (CRI), a list of the most serious, high-risk vulnerabilities and attacks currently affecting computer networks. Developed by the X-Force and publicly available on the ISS Web site, the X-Force CRI acts as a best practices guide for companies looking to prioritize protection around threats and vulnerabilities posing the greatest risk to confidentiality, integrity and availability of essential business systems.
Also during the quarter, Infonetics Research issued its “Intrusion Detection and Prevention Products, Quarterly Worldwide Market Share and Forecasts for 1Q03, May 2003, “ which reported that Internet Security Systems earned 47 percent of the worldwide network-based Intrusion Detection and Prevention software market, based on revenue, in the first quarter of 2003--nearly six times that of its nearest competitor. The report showed that ISS also led the overall worldwide Intrusion Detection and Prevention market, which includes both software and hardware, in first quarter 2003 with 20 percent market share, based on revenue.
Updated Business Outlook for 2003
The following statements are based on current expectations for the third quarter and fiscal year 2003 regarding ISS’ revenues and earnings per share. These statements are forward-looking, and actual results may differ materially. These statements do not reflect the potential impact of any mergers, acquisitions or other business combinations that may be completed after the date of this release. ISS will keep its earnings release and published expectations publicly available on its Web site (www.iss.net). Prior to the start of ISS’ quiet period, the public can continue to rely on the expectations published in this earnings release and Web site as being its current expectations on matters covered, unless ISS publishes a notice stating otherwise. Towards the end of each fiscal quarter, ISS will have a “quiet period” when ISS and its representatives will not comment concerning previously published financial expectations, and we disclaim any obligation to update during the quiet period. The public should not rely on previously published expectations during the quiet period. ISS’ quiet period at the end of the third quarter is expected to run from September 15, 2003 until the earnings are released in October 2003.
ISS continues to expect that the enterprise spending environment will remain difficult for the balance of 2003. Accordingly, ISS intends to continue its focus on business efficiencies until such time as there are indications that spending intentions are strengthening.
For the year ending December 31, 2003, ISS is updating its guidance to revenues in the range of $238,000,000 to $248,000,000 and pro forma net income of $0.50 to $0.57 per diluted share. For the quarter ending September 30, 2003, ISS currently expects to achieve revenues in the range of $58,000,000 to $62,000,000 and pro forma net income in the range of $0.11 to $0.14 per diluted share. Pro forma net income excludes the after-tax impact of non-cash acquisition related expenses, as stated and reconciled in the accompanying Business Outlook Reconciliation table.
Earnings Conference Call
The Company’s conference call regarding this press release is being held July 16, 2003, at 4:30 p.m. Eastern Daylight Time and can be accessed as follows:
DATE/TIME: Wednesday, July 16, 2003 at 4:30 p.m. Eastern
Passcode ISSX (or 4779)
A live Webcast of this conference call will be available at www.iss.net (click on About ISS, then Investor Relations, then Conference Calls) and will remain accessible until August 31, 2003. A rebroadcast of the teleconference will be available from 5:00 p.m., July 16 until 5:00 p.m., July 23, 2003.
REBROADCAST DIAL IN:
Passcode ISSX (or 4779)
Additional investor information can be accessed on the Internet Security Systems Web site or by contacting the Investor Relations department at 888- 901-7477.
About Internet Security Systems, Inc.
Internet Security Systems, Inc. (ISS) (Nasdaq: ISSX) is the world leader in Dynamic Threat Protection™ products and services that protect critical information assets from an ever-changing spectrum of threats and misuse. Products from Internet Security Systems dynamically detect, prevent and respond to sophisticated threats to networks, servers and desktops. Services include 24/7 system monitoring, emergency response and access to the X-Force, Internet Security Systems’ renowned research and development team. Internet Security Systems is the trusted security provider for more than 11,000 corporate customers, including all of the Fortune 50, the top 10 largest U.S. securities firms, 10 of the world’s largest telecommunications companies and major agencies and departments within U.S. local, state and federal governments. Headquartered in Atlanta, Ga., Internet Security Systems has additional operations throughout the Americas, Asia, Australia, Europe and the Middle East. For more information, visit www.iss.net or call 0800 085 2976.
For more information on Internet Security Systems, please contact:
UK: Richard Millar, UK/Ireland Sales and Marketing Director
Tel: +44 (0)20 7653 9191, firstname.lastname@example.org
EMEA: Andrea Andernach, EMEA PR & Events Co-ordinator
Tel: +32 (0)2 479 67 97, email@example.com
UK/Ireland press contacts for Internet Security Systems are:
Technology: Jane Lee, Dexterity
Tel: +44 (0)1273 470199, firstname.lastname@example.org
Business: Andrew Smith, Object Marketing Ltd.
Tel: +44 (0)20 8762 9292, email@example.com
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Forward-Looking Statements and Pro Forma Results
This release, other than historical information, includes forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Some of these forward-looking statements include our Business Outlook and statements regarding new products, products under development and related plans. 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 ISS’ products; customer budgets; the volume and timing of orders; product and price competition; ISS’ ability to develop new and enhanced products; acceptance of new and enhanced products by customers; ISS’ ability to assimilate acquisitions or investments; ISS’ ability to attract and retain key personnel; reliance on distribution channels through which ISS’ products are sold; the growth in the acceptance and use of the Internet and of private Internet-based networks or "intranets"; the extent to which unauthorized access to and use of online information is perceived as a threat to network security; the assertion of infringement claims with respect to ISS’ intellectual property; foreign currency exchange rates; risks concerning the rapid change of technology; and general economic factors. These risks and others are discussed in ISS’ periodic filings with the Securities and Exchange Commission, including ISS’ 2002 Annual Report on Form 10-K and March 31, 2003 Quarterly Report on Form 10-Q. These filings can be obtained either by contacting ISS Investor Relations or through ISS’ Web site at www.iss.net or the Securities and Exchange Commission's Web site at "http://www.sec.gov".
ISS believes that Pro Forma Earnings, which exclude the after-tax effect of non-cash acquisition related expenses, is an additional meaningful measure of operating performance. However, this pro forma information will necessarily be different from comparable information provided by other companies and should not be used as an alternative to ISS operating and other financial information as determined under accounting principles generally accepted in the United States of America. ISS believes that its presentation of pro forma earnings and pro forma operating margin provides useful information to investors as a measure of operating performance basic to the its ongoing operations, which is more comparable from period to period without the charges related to occasional acquisition activity. ISS uses the pro forma earnings measure to provide its forward-looking guidance and compare with financial analysts estimates, and uses pro forma earnings and operating margin measures to eval
uate its internal performance, including as a basis for calculating incentive compensation.
Internet Security Systems, Proventia, Dynamic Threat Protection, and X-Force are trademarks, and RealSecure and Internet Scanner are registered trademarks of Internet Security Systems, Inc. All other companies and products mentioned are trademarks and property of their respective owners.
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