London - October 25, 2002 -- WatchGuard Technologies, Inc. (Nasdaq: WGRD), a leading provider of Internet security solutions, today announced its financial results for the third quarter ended September 30, 2002.WatchGuard reported record net revenue of $20.1 million for the third quarter of 2002, up 12% from $17.8 million in the previous quarter. Product revenue was $14.2 million, up 14% from $12.5 million in the previous quarter. Service revenue was $5.9 million, up 9% from $5.3 million in the previous quarter. WatchGuard also reported strong gross margins of 66% for the third quarter of 2002, up from 64% in the previous quarter. Product gross margins were 63%, up from 61% in the previous quarter. Service gross margins were 74%, up from 71% in the previous quarter.
As anticipated, operating expenses in the third quarter were down 5% sequentially. The decrease is primarily due to the elimination of redundant resources following the acquisition and integration of RapidStream. WatchGuard expects to continue to improve its operating efficiencies as it expands its business.
On a GAAP basis, WatchGuard reported a net loss of $3.6 million, or ($0.11) per share, compared to a net loss of $11.7 million, or ($0.36) per share in the previous quarter. Pro forma net loss for the third quarter, excluding amortisation of acquisition-related costs and acquired in-process technology, non-cash stock-based compensation, and restructuring charges, was $2.1 million, or ($0.06) per share, compared to a pro forma net loss of $4.6 million, or ($0.14) per share in the previous quarter. WatchGuard ended September 30, 2002, with $91.1 million in cash and securities.
Recent Developments
WatchGuard recently announced:
- A report by Infonetics Research that WatchGuard has increased its unit volumes in the key mid-range segment of the SME market ($1,500 to $9,999), gained market share, and moved to the number two position in this segment behind Cisco, based on unit volumes.
- The selection of the Firebox Vclass by a major foreign government for worldwide deployment of over 100 mid-range Firebox Vclass models in distributed locations worldwide to provide managed firewall and VPN functionality.
- The worldwide availability of the Firebox SOHO 6, an easily deployed high-performance firewall, VPN, and broadband sharing appliance for small businesses or remote offices requiring superior network security.
- WatchGuard Central Policy Manager (CPM), a powerful, highly scalable network management platform that simplifies large-scale network security deployments.
- The results of a survey by Market Trends, Inc. indicating that 94% of those surveyed believed that WatchGuard's security solutions met or exceeded their expectations.
"This was another solid quarter for WatchGuard with record quarterly revenues and strong gross margin improvements," said Jim Cady, President and Chief Executive Officer of WatchGuard. "For the third consecutive quarter, we have met or exceeded our expectations in revenues, gross margins, DSOs, LiveSecurity renewals, unit shipments, and operating cash flow."
"We believe our strong performance is a direct result of the actions that we have taken to reshape our business. Our core SME business, which is targeted by our Firebox III and SOHO lines, remains strong. We believe that we have taken share from our competitors and that SME customers are choosing the WatchGuard solution for its superior depth of security, simplicity of installation and management, and value-added proactive LiveSecurity service."
"We are particularly excited about our new high-performance Vclass product line, which has allowed us to gain a foothold in the distributed enterprise segment of the market. We believe our recent transaction with a foreign government to install over 100 of our mid-range Vclass appliances worldwide clearly demonstrates a high level of customer confidence in our solution and validates our new high-performance technology. Although the distributed enterprise market has a longer sales cycle than our traditional SME market, we expect to close other significant Vclass customers in the coming quarters."
Stock Buyback Authorised
WatchGuard also announced today that its Board of Directors has approved the repurchase by the Company of up to $8 million of its common stock. Depending on market conditions and other factors, repurchases may be made from time to time in the open market and in negotiated transactions, including block transactions, and may be discontinued at any time. WatchGuard management believes that acquisition of the Company's stock at this time appears to be advantageous to WatchGuard and its stockholders because management considers the market price of its shares to be currently undervalued in the market.
Over WatchGuard Technologies
WatchGuard is een toonaangevende leverancier van dynamische en uitgebreide oplossingen voor internetbeveiliging. Deze oplossingen zijn speciaal ontworpen voor de bescherming van bedrijven die het internet gebruiken voor e-business en veilige communicatie. WatchGuard heeft baanbrekend werk verricht met de ontwikkeling van de plug-and-play beveiligingstoepassing, Firebox en server beveiligingssoftware. Met haar innovatieve LiveSecurity Service stelt WatchGuard ondernemingen en gebruikers in staat hun beveiligingssystemen continu te actualiseren. Met WatchGuard ServerLock en AppLock/Web software kunnen belangrijke data en diensten worden beschermd tegen ongeautoriseerde of onbedoelde toegang en manipulatie. WatchGuard's RapidStream "Secured by Check Point" productlijn speelt in op de behoefte van grote ondernemingen die de prestaties, schaalbaarheid en flexibiliteit van VPN's binnen bestaande Check Point toepassingen willen verbeteren. Meer informatie over WatchGuard kunt u vinden op: www.watchguard.com.