Revenue for the second quarter of 2006 increased 23% to $94.4 million from $76.5 million for the second quarter of 2005. Net income in accordance with Generally Accepted Accounting Principles (GAAP) for the second quarter of 2006 was $2.8 million, or $0.04 per diluted share. Net income for the second quarter of 2006, adjusted to exclude stock-based compensation charges, restructuring charges related to the Company's restructuring of its engineering resources, transaction fees associated with EMC's proposed acquisition of RSA Security and amortization of intangible assets associated with RSA Security's acquisition of Cyota and PassMark Security (Adjusted Net Income), was $10.6 million, or $0.14 per diluted share (refer to the "Use of Non-GAAP Financial Measures" section and accompanying financial tables for reconciliations of GAAP to non-GAAP financial information). GAAP net income for the second quarter of 2005 was $8.5 million, or $0.12 per diluted share. The Company did not report non-GAAP net income for the second quarter of 2005.

"RSA Security had another outstanding quarter with both record revenue and orders, a clear indication that spending on key identity-centric security initiatives and encryption continues to be a top priority," said Art Coviello, RSA Security president and chief executive officer. "We continue to be successful at growing all areas of our business, and we are excited about the market potential of all of our solutions.

"Further, we are extremely excited about the definitive agreement to be acquired by EMC that we announced on June 29. Together RSA Security and EMC can accelerate the much needed integration of critical security measures into the information infrastructure."

Second-Quarter 2006 Financial Highlights

Revenue and Bookings: RSA Security generated $94.4 million in revenue for the second quarter of 2006, compared to $76.5 million in revenue for the second quarter of 2005. Bookings for the second quarter of 2006 were $108.7 million, up 38% from bookings during the second quarter of 2005 and up 14% from first quarter 2006 bookings of $95.6 million.

Net Income: For the second quarter of 2006, the Company generated GAAP net income of $2.8 million, or $0.04 per diluted share, and Adjusted Net Income of $10.6 million, or $0.14 per diluted share.

Backlog, Deferred Revenue and Estimated Unrecognized Revenue from Managed Service Contracts: The Company closed the quarter with $134.9 million in combined deferred revenue, backlog and estimated unrecognized revenue from managed service contracts, a 13% increase from the $119.1 million balance at March 31, 2006. This increase was driven in part by the best ever quarter of consumer bookings, with the total estimated unrecognized revenue from managed service contracts increasing 37% during the second quarter, to $41.4 million as of June 30, 2006.

Cash Position and Share Repurchase: Cash, cash equivalents, and marketable securities increased to $218.1 million at June 30, 2006 from $208.2 million at March 31, 2006. During the quarter, in accordance with the Company's approved share repurchase program, RSA Security repurchased 450,000 shares of its common stock for $8.5 million. The board of directors of RSA Security approved an amendment to the share repurchase program extending it for an additional two years, until June 30, 2008. As of June 30, 2006, there were approximately 6.0 million shares eligible for repurchase under the plan.

Second-Quarter 2006 Operational Highlights

Acquisition: RSA Security announced on June 29, 2006 that it had entered into a definitive agreement to be acquired by EMC. Under the terms of the agreement, EMC will pay $28.00 per share in cash in exchange for the each share of RSA Security and the assumption of outstanding options, for an aggregate purchase price of slightly less than $2.1 billion, net of RSA Security's existing cash balance. The acquisition is currently expected to close late in the third quarter or early in the fourth quarter of 2006 and is subject to customary closing conditions and regulatory approvals.

Customers: RSA Security closed business with more than 6,600 customers in the second quarter, including approximately 900 new customers. The Company shipped approximately 2.5 million authentication credentials during the second quarter, a 44% increase from the first quarter of 2006. Approximately 1.3 million of those credentials were consumer related, a 116% increase from the consumer credentials shipped during the first quarter of 2006.

Products and Solutions: During the second quarter, RSA Security announced an initiative to provide companies with a more comprehensive approach to enterprise data protection (EDP). RSA Security's EDP approach is designed to provide a robust framework for protecting an organization's sensitive data in any place where data reside: at the application-level; within databases; in files and operating systems; on laptops and mobile devices, and in storage. In addition, this EDP framework addresses the management of associated encryption keys, access control and authentication - helping organizations mitigate risk and reduce costs, while protecting consumer, employee and partner information.

Additionally, the Company announced RSA Access Manager 6.0 software (formerly RSA ClearTrust software) to help protect Web-based resources and enforce centralized user access policies as companies grapple with compliance requirements (e.g., Health Insurance Portability and Accountability Act and European Data Protection Directive) and strive to improve their overall security posture. RSA Access Manager is engineered to provide robust auditing and access control capabilities, while delivering Web single sign-on (SSO) for a superior end-user experience. New features in RSA Access Manager 6.0 software include delegated administration, operational instrumentation and health monitoring, SmartRules extended results, extended interoperability with Microsoft technology, expanded logging, 64-bit computing support and an enhanced graphical user interface (GUI).

The Company also announced that Broadcom Corporation, a global leader in semiconductors for wired and wireless communications, is joining the RSA SecurID Ready for Authenticators program - an extension of the trusted RSA Secured Partner Program. As part of this, Broadcom plans to license RSA SecurID technology for integration within the new Broadcom BCM5890 secure processor. Launched during the second quarter, Broadcom's BCM5890 is a secure silicon processor with integrated radio frequency identification (RFID) technology. By embedding RSA SecurID technology within the BCM5890 secure processor, Broadcom will enable its customers to leverage native support for one-time passcodes (OTPs).

Business Outlook

The Company continues to see strong demand for its products and services across all areas of its business, including all geographic areas. In light of the definitive agreement to be acquired by EMC announced on June 29, 2006, the Company is not providing financial guidance for its operations for the third quarter of 2006.Download the document now 47 kb (Adobe Acrobat Document)