RSA Security releases preliminary Q4 results

Based on preliminary financial data, the Company anticipates that revenue for the fourth quarter will be in the range of $81 million to $82 million and GAAP earnings per diluted share will be in the range of $0.15 to $0.19. GAAP earnings per diluted share for the fourth quarter of 2005 includes the previously announced restructuring activities, expected to be in the range of $(0.02) to $(0.03) per share and a net beneficial adjustment made to the Company's tax rate for the fourth quarter, which is expected to be in the range of $0.01 to $0.05 per share.

The Company also announced that it anticipates its book-to-bill ratio for the fourth quarter of 2005 to be approximately 1.3 to 1 and that it closed the quarter with a total of approximately $32 million in backlog and $54 million in deferred revenue, across all of its product lines. This compares to a book-to-bill ratio for the third quarter of 2005 of approximately 1.0 to 1, backlog of $12.7 million and deferred revenue of $48.8 million at the close of the third quarter of 2005.

RSA Security also announced that during the fourth quarter it received a $10 million RSA SecurID order from a new customer. Due to the subscription nature of this transaction, revenue will be recognized over the course of five years. This financial institution will deploy RSA SecurID authentication credentials to all of its online consumers over the course of the next 12 months. RSA Security has not shipped any credentials related to this transaction and the Company intends to begin shipping a significant number of these authentication credentials to the financial institution in the first quarter of 2006.

Additionally, the Company disclosed that it shipped approximately 1.5 million authentication credentials during the fourth quarter, up 45% from the third quarter of 2005. Of the 1.5 million authentication credentials shipped during the quarter, approximately 500,000 credentials were consumer related.

"We had a record quarter for bookings, we shipped a record number of authentication credentials, and during the fourth quarter we closed the single largest transaction in the history of the company," said Art Coviello, president and CEO of RSA Security. "I am extremely pleased with our results this quarter, and with the successful closing of the Cyota acquisition and our recent wins in the financial sector, we believe we are poised to garner a significant share of the consumer market in 2006."

Prior Financial Guidance

The Company's anticipated results for the fourth quarter of 2005 are consistent with the Company's guidance previously provided in its press release and related conference call on December 5, 2005. At that time, the Company indicated that it anticipated fourth quarter revenue in the range of $78 million to $82 million, GAAP earnings per diluted share in the range of $0.09 to $0.16, and non-GAAP earnings per diluted share in the range of $0.15 to $0.19. At the time the Company provided non-GAAP earnings per diluted share guidance it defined non-GAAP earnings per diluted share as GAAP earnings per diluted share, less a restructuring charge that was anticipated to be in the range of $3 million to $6 million for the fourth quarter. It was anticipated at that time that this restructuring charge would have reduced the Company's GAAP earnings per diluted share in the range of $0.03 to $0.06. Additionally the Company provided guidance at that time that it anticipated at least a 20 percent sequential increase in authenticator shipments (primarily driven by consumer sales) in addition to a book to bill ratio significantly greater than 1.0 to 1.

The Company's financial results for the fourth quarter of 2005 do not reflect the acquisition of Cyota, Inc., the privately held online security and anti-fraud solutions company that RSA Security recently acquired. This acquisition closed on December 30, 2005. Beginning in the first quarter of 2006, RSA Security will report full financial results reflecting the combined operations of the two companies.

First Quarter 2006 Financial Update

A significant portion of the authentication credentials shipped during the fourth quarter of 2005 and those scheduled to be shipped over the coming quarters are consumer authentication credentials. The current guidance reflects the fact that most of these consumer authentication credentials are sold on a subscription basis, with much of the revenue associated with these units being recognized over longer term subscription contracts. Additionally, guidance for the first quarter of 2006 is only current as of today, Monday January 9, 2006; the Company undertakes no obligation to update its estimates.

• The Company currently expects first quarter 2006 revenue to be in the range of $81 million to $84 million, excluding any revenue associated with the operations of Cyota.
• The Company is also reaffirming its previously issued guidance with regard to the operations of Cyota, stating that it anticipates revenue from Cyota to contribute in the range of $22 million to $25 million for the full year 2006.
• Additionally, the Company indicated that it anticipates Cyota's revenue contribution for the first quarter of 2006 to be in the range of $3 million to $4 million.
• The Company anticipates revenue for the first quarter of 2006 to be in the range of $84 million to $88 million on a combined basis.