Aladdin Knowledge Systems Ltd. (ALDN)

[midastouch017]

Aladdin Knowledge Systems Reports First Quarter 2006 Financial Results

Monday April 24, 7:00 am ET

Record Revenues of $22.9 Million

GAAP Net Income of $3.8 Million or $0.25 Per Diluted Share
Non-GAAP Net Income of $4.3 Million or $0.28 Per Diluted Share


CHICAGO and TEL AVIV, Israel, April 24 /PRNewswire-FirstCall/ -- Aladdin Knowledge Systems (Nasdaq: ALDN - News), the leader in Software DRM, identity management and content security solutions, today announced financial results for the first quarter of fiscal year 2006 ended March 31, 2006.

(Logo: http://www.newscom.com/cgi-bin/prnh/20040416/CGALADDINLOGO )

Revenues for the first quarter of 2006 were a record $22.9 million, an increase of 12 percent from $20.3 million for the same period in 2005. Aladdin again recorded double digit year-over-year growth rates in both of the Company's operating segments, Software DRM and Enterprise Security. Software DRM revenues for the first quarter were $16.1 million, an increase of 12 percent from $14.4 million in the same period in 2005. Enterprise Security revenues for the first quarter of 2006 were $6.8 million, a 14 percent increase from $5.9 million recorded in the same period in 2005.

Net income in accordance with Generally Accepted Accounting Principles (GAAP) for the first quarter of 2006 was $3.8 million or $0.26 per basic share and $0.25 per diluted share and compared to first quarter of 2005 GAAP net income of $1.2 million or $0.10 per basic share and $0.09 per diluted share. GAAP net income for the first quarter of 2005 was impacted by a $2 million one-time charge to settle a patent lawsuit. The one-time charge reduced net income per basic and diluted share by $0.15 and $0.14, respectively.

Non-GAAP net income for the first quarter of 2006, excluding stock-based compensation expense related to the Company's adoption of Financial Accounting Standards (FAS) No. 123R of approximately $0.5 million was $4.3 million, or $0.30 per basic share and $0.28 per diluted share. (Refer to the "Use of Non-GAAP Measures" section and accompanying financial table for reconciliation of GAAP financial information to Non-GAAP).

Cash, cash equivalents and marketable securities totaled $80.6 million at March 31, 2006, up $3.4 million from $77.2 million reported at the end of 2005. The increase was mainly attributable to positive cash flow from operations during the first fiscal quarter 2006 of $3.6 million.

Yanki Margalit, Chairman and CEO of Aladdin Knowledge Systems said, "Aladdin recorded an excellent start to 2006, with balanced year-over-year growth across our core Software DRM and Enterprise Security business segments. Strong demand for all of our advanced security solutions has allowed Aladdin to deliver record revenues, operating income and first quarter net income. The primary driver behind our top and bottom line financial performance is our ongoing ability to deliver innovative products and security solutions which meet the evolving needs of our global customer base."


Financial and Operating Highlights
- Record quarterly revenues of $22.9 million.
- Non-GAAP net income of $4.3 million, excluding stock-based
compensation expense of $0.5 million.
- Cash flow from operating activities totaled $3.6 million.
- Cash, cash equivalents and marketable securities increased by $3.4
million to $80.6 million.

Product Highlights
- Software Security (DRM)
* Launched the latest version of HASP HL, Aladdin's Software DRM
solution. Advanced features include stronger software anti-piracy
measures, new developer tools, and broader support for operating
systems.
- eSafe® Integrated Proactive Content Security Solution
* Aladdin eSafe named "Best Anti-Trojan" solution at the 2006 SC
Magazine Awards.
* Aladdin gained strong traction with its ISP/Mobile initiative,
signing contracts with two ISPs and two cellular phone operators
from Europe, the Middle East and Asia who are deploying the new
eSafe Mobile Content Security Gateway (MCSG) solution.
- eToken(TM) User Authentication Solution
* Aladdin signed an OEM agreement, expanding its partnership with RSA
Security. Under the agreement, RSA Security will release a new RSA
SecurID® authenticator that incorporates the Aladdin eToken USB
technology.
* Aladdin announced two new patent licensing and OEM agreements for
its eToken technology.
* Presented eToken NG-FLASH, a device that combines the powerful
capabilities of strong authentication with the convenience of a
mass storage device, and demonstrated a new biometric
authentication technology based on cardiac patterns. The new
cardio-based biometric technology provides authentication using a
person's natural BioDynamic Signature (BDSTM).

For further information on product highlights, please refer to the press room on the Company's Web site which can be found at http://www.Aladdin.com/about/pressroom.asp .

Future Business Outlook

Aladdin continues to provide a business outlook on a quarterly basis. The Company undertakes no obligation to update its estimates. Based on current business activities and general economic conditions, Aladdin's management believes revenues for the second quarter of fiscal 2006 will be in the range of $21.7 million to $23.7 million. Non-GAAP diluted earnings per share for the second quarter of 2006 are expected to be in the range of $0.26 to $0.29, excluding the impact of stock-based compensation expense which is anticipated to be between $0.03 to $0.04 per diluted share. GAAP diluted earnings per share for the second quarter of 2006 are expected to be in the range of $0.22 to $0.26.

Use of Non-GAAP Measures

This press release provides financial measures for net income and basic and diluted earnings per share that exclude stock-based compensation expense and are therefore not calculated in accordance with generally accepted accounting principals (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance that enhances management's and investors' ability to evaluate the Company's net income and earnings per share and to compare it with historical net income and earnings per share prior to the adoption of FAS 123R.

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management uses both GAAP and non-GAAP measures when evaluating the business internally and therefore felt it important to make these non-GAAP adjustments available to investors.

Earnings Teleconference

The Company will hold a teleconference today, April 24th, at 9:00 a.m. EDT to discuss the quarterly results. To participate in the call, please dial [phone] in North America, or [phone] internationally, approximately five minutes prior to the scheduled call start time. The call is being simultaneously Web cast and can be accessed on the Aladdin Web site at http://www.Aladdin.com/investor. Please visit the Web site at least 15 minutes prior to the scheduled call time to register for the Web cast and download any necessary audio software.

A replay of the call can also be accessed via telephone from 12:00 p.m. EDT on April 24th through 11:59 p.m. on May 1st by calling [phone] in North America, or [phone] internationally, and entering the following access code: 7600190. A Web cast replay of the call will also be made and can be accessed on the Aladdin Web site at http://www.Aladdin.com/investor.

http://biz.yahoo.com/prnews/060424/nym161a.html?.v=1

Dubi