Business News

Aladdin Knowledge Systems Reports Record Annual Revenues, Net Income and Cash Flow

Thursday 24. January 2008 - Record Full Year Revenues of $105.9 Million, Up 19% Year-Over-Year Record Full Year GAAP Net Income of $14.9 Million, or $1.02 Per Diluted Share, Up 6% Year-Over-Year, Including a Non-Recurring Cost of $2.0 Million Record Full Year Cash Flow from Operations of $22.1 Million, Up 17% Year-Over- Year

Aladdin Knowledge Systems Ltd. (NASDAQ:ALDN), an information security leader specializing in authentication, software DRM and content security, today announced financial results for the fourth quarter and full fiscal year 2007, ended December 31, 2007. All results are prepared in accordance with generally accepted accounting principles in the United States, except where noted.

Revenues for the fourth quarter of 2007 were a record $29.1 million, an increase of 20 percent from the $24.3 million reported for the same period in 2006. Software DRM revenues for the fourth quarter of 2007 were a record $17.1 million, an increase of 8 percent from the $15.9 million reported in the same period in 2006. Enterprise Security revenues for the fourth quarter were a record $12.0 million, a 43 percent increase from the $8.4 million recorded in the same period in 2006. Revenues for the full year 2007 were a record $105.9 million, an increase of 19 percent from the $89.0 million recorded in the full year 2006 period.

Net income in accordance with generally accepted accounting principles (GAAP) for the fourth quarter of 2007 was $2.8 million or $0.20 per basic and diluted share compared to GAAP net income for the fourth quarter 2006 of $3.6 million or $0.25 per basic share and $0.24 per diluted share, including stock based compensation expense and the impact of a $2.0 million non-recurring up- front cost associated with production of Video Based Training required for the CIITE project. For the full year 2007, GAAP net income was a record $14.9 million, or $1.04 per basic share and $1.02 per diluted share, compared with GAAP net income of $14.0 million or $0.96 per basic share and $0.93 per diluted share for the full year 2006 period.

Excluding stock based compensation expense and the impact of the $2.0 million non- recurring up-front cost associated with production of Video Based Training required for the CIITE project, the Company reported non-GAAP net income for the fourth quarter of 2007 of $4.8 million, or $0.35 per basic share and $0.34 per diluted share, and full year 2007 non-GAAP net income of $17.6 million, or $1.23 per basic share and $1.20 per diluted share. Refer to the “Use of Non-GAAP Measures” section and accompanying financial table for a reconciliation of GAAP financial information to non-GAAP.

Yanki Margalit, Chairman and CEO of Aladdin Knowledge Systems, stated, “2007 was an exceptional year for Aladdin as we crossed the $100 million mark in annual revenues while driving record levels of operating cash flow and bottom line profitability. Our software security business grew 9 percent year- over-year supported by the launch of HASP SRM, the industry’s first software protection and licensing system that offers customers both hardware- and software-based security in a unified solution, while our eToken and eSafe businesses combined to drive enterprise security revenues up a truly impressive 40 percent year-over-year. Overall, Aladdin delivered full year results at the high end of our stated 2007 revenue and net income guidance, excluding the impact of the non-recurring cost recognized in the fourth quarter of 2007.

“From an operational perspective Aladdin made excellent strides in 2007 in terms of leveraging its global presence and driving new customer growth across geographies as well as key business verticals. Overall, demand for content, Internet and enterprise security solutions remains robust, driven by the rising range of IT security threats in mature as well as emerging markets. Based on the combined strength of our portfolio of software and enterprise security solutions, Aladdin has never been better positioned to capitalize on these industry growth trends, building upon our significant financial and operational achievements in 2007,” concluded Margalit.

Cash, cash equivalents and marketable securities totaled $90.3 million at December 31, 2007, as compared with $83.4 million as of September 30, 2007 and $90.9 million as of year end 2006. The Company generated record cash flow from operations of $7.2 million during the fourth quarter of 2007 and a record $22.1 million for the full year 2007. Aladdin used approximately $20 million in cash to purchase shares through the Company’s share repurchase program during 2007.

Quarterly Financial and Operating Highlights
— Record full year and quarterly revenues of $105.9 million and $29.1
million, respectively.
— Record full year GAAP net income of $14.9 million.
— Record full year and quarterly non-GAAP net income of $17.6 million and
$4.8 million respectively, excluding stock based compensation expenses
and a non-recurring cost of $2.0 million.
— Software DRM revenues set a new full year record of $66.1 million, up 9
percent.
— Enterprise Security revenues set a new full year record of $39.8
million, up 40 percent.
— Cash flow from operating activities set a new full year and quarterly
record of $22.1 million and $7.2 million respectively.
— The Board of Directors approved the Company’s third share buy back
authorization of 2007, raising the total combined total repurchase
authorization for the year to $30 million. To date, a total of 928,697
shares have been repurchased.


Quarterly Product Highlights
— Aladdin announced an initial deployment of 14,000 Aladdin eToken strong
authentication devices throughout Thailand’s numerous government
departments. The Aladdin eToken solution is set to secure each
department’s access to Thailand’s Web-based Government Fiscal
Management Information System (GFMIS), allowing employees to access the
application securely.
— South Korea’s largest online banking community began offering secured
banking transactions with Aladdin eToken. The National Agricultural
Cooperative Federation (NACF), known locally as NongHyup / NH Bank,
will provide more than 10,000 of its customers with the USB-based
Aladdin eToken strong authentication device to secure online banking
transactions. With more than 5,000 branches and cooperatives throughout
the country, the NACF features the largest number of online banking
customers in South Korea.
— Aladdin eToken was implemented to assist in securing Continental
Airlines network. More than 1,000 Aladdin eToken devices have been
distributed worldwide to Continental Airlines employees and business
partners.
— The Eugene Water & Electric Board (EWEB), Oregon’s largest public
utility, selected the Aladdin eToken smart card solution to provide
strong authentication for employees who access the organization’s data
network. Aladdin eToken is set to play an important role in ensuring
compliance with security standards mandated by the North American
Electric Reliability Corporation (NERC).
— Aladdin signed a partnership with Blue Ridge Networks combining
networking services and eToken strong authentication to provide an
unparalleled level of security for identity and access management to
government and commercial entities. The partnership includes joint
collaboration on marketing and field sales activity, as well as new
joint solutions development, which combine Aladdin eSafe and BRN’s
EdgeGuard to address customers’ growing need to deploy scalable and
unified gateway and endpoint content security solutions.
— COMPUTERLINKS signed on as the latest nationwide distributor for the
Aladdin’s award-winning eSafe content security solution. The agreement
greatly expands the channel presence for Aladdin eSafe and opens
significant opportunities among COMPUTERLINKS’ North America network of
partners.
— Aladdin launched HASP HL for Mac software anti-piracy and licensing USB
key solution to support Mac OS(R) X Leopard, Apple’s latest operating
system.
— Aladdin eToken strong authentication device was announced as the first
hardware product to be certified under the recently established
SAFE(TM) Product Certification Program (SPCP). The program is
administered by SAFE-BioPharma Association, a fast-growing industry
group that developed and manages the SAFE(TM) digital identity standard
for the pharmaceutical and healthcare industries.
— Aladdin eToken two-factor authentication solution received Federal
Information Processing Standards (FIPS) 140-2 Level 2 and 3 validation
certificates — a government standard managed by the National Institute
of Standards and Technology (NIST). This represents a significant mark
for Aladdin eToken, as it sets the Company apart from its competition
by meeting the highest possible requirements for its cryptographic
module, as well as strict hardware requirements not met by all
authentication token vendors. Aladdin eToken underwent a thorough
testing process by the accredited cryptographic module testing lab at
Electronic Warfare Associates – Canada.