Secure Computing Reports Q1 2008 Results

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Secure Computing Corporation (Nasdaq: SCUR), a leading enterprise gateway security company, has recently announced first quarter GAAP revenue of $60.7 million. This represents a 13 per cent increase in revenue compared to USD 53.8 million in the same quarter last year. First quarter non-GAAP revenue was USD 65.7 million; representing an 8% increase compared to the same quarter last year.
 
 First quarter non-GAAP net income was USD 5.0 million or USD 0.07 per fully diluted share. The company also generated USD 13.1 million of cash from operations. Billings for the quarter were USD 69.1 million, a 4 per cent increase compared to the same quarter last year. On a GAAP basis, net loss was USD 18.4 million or USD 0.29 per share; excluding a litigation charge, net loss was USD 9.2 million, or USD 0.15 per share. 
  
“We are clearly disappointed with our first quarter results and are taking the appropriate actions to improve our performance,” said Dan Ryan, interim chief executive officer of Secure Computing. “These actions include reducing the company’s expense plan by approximately 10 percent, while significantly increasing our focus and investments in the email and web gateway areas of our business. Going forward, we believe this plan will allow us to better capitalize on the market opportunities before us, expand our operational leverage, and ultimately provide stronger top and bottom line growth for the company.”
 
Secure Computing has also recently announced the appointment of Steve Kozachok, as Senior Vice President, Secretary and General Counsel, effective May 5, 2008. 
“Steve is a seasoned professional with extensive experience in securities compliance, intellectual property, litigation and corporate governance,” said Ryan. “He will be an excellent addition to our senior management team.”
 
Kozachok was associate general counsel at St. Jude Medical, where he was primarily responsible for business development efforts, including the negotiation of license agreements. Prior to joining St. Jude Medical, Kozachok was a partner with the Minneapolis-based law firm of Dorsey & Whitney, were he was lead outside merger and acquisition counsel to a Fortune 50 company.
 
Kozachok has a J.D. from George Washington University Law School and a B.S. in economics and French from University of Notre Dame.
 
First Quarter Financial Highlights: 
·         GAAP revenue for the first quarter was USD 60.7 million, which is a 13 per cent increase compared to USD 53.8 million in the same quarter last year. Non-GAAP revenue for the quarter was USD 65.7 million and represents an 8 per cent increase compared to the same quarter last year.
·         GAAP gross profit in the first quarter was 71 per cent of revenue or USD 43.2 million. Non-GAAP gross profit in the first quarter was 75 per cent of revenue or USD 49.1 million. These non-GAAP results compare to 75 per cent of non-GAAP revenue, or USD 45.4 million, in the year ago quarter and 73 per cent of non-GAAP revenue, or USD 51.1 million, in the prior quarter. 
·         First quarter GAAP operating expenses were USD 59.7 million, or 98 per cent of revenue; excluding a litigation charge, operating expenses were USD 50.5 million, or 83 per cent of revenue. Non-GAAP operating expenses for the quarter were USD 42.8 million or 65 per cent of non-GAAP revenue. These non-GAAP results compare to 65 per cent of non-GAAP revenue in the year ago quarter and 61 per cent in the prior quarter.     
·         GAAP operating loss for the first quarter was USD 16.5 million; excluding a litigation charge, operating loss was USD 7.3 million. First quarter non-GAAP operating income was USD 6.3 million or 10 per cent of non-GAAP revenue, compared to 10 per cent in the same quarter last year and 12 per cent in the prior quarter. 
·         GAAP net loss for the first quarter was USD 18.4 million or USD 0.29 per share; excluding a litigation charge, net loss was USD 9.2 million, or USD 0.15 per share. First quarter non-GAAP net income was USD 5.0 million or USD 0.07 per fully-diluted share, compared to non-GAAP net income of USD 3.4 million, or USD 0.05 per fully-diluted share in the year ago quarter. 
·         In the first quarter, deferred revenue increased USD 6.2 million, or 4 per cent, bringing the total deferred revenue balance to a record USD 174.4 million at the end of March. 
·         Days sales outstanding (DSOs) were 81 days.  As we have experienced in previous quarters, the change in DSOs from the prior quarter correlates to the change in deferred revenue. Excluding the impact of the increase in deferred revenue, DSOs were 72 days.
·         Total cash and restricted cash was USD 23.7 million at March 31, 2008. Cash generated from operations in the quarter was USD 13.1 million.

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