Ubizen Reports Second Quarter Results

Ubizen (Nasdaq Europe: UBIZ – Euronext: UBI), the principal provider of managed security solutions (MSS) for global businesses, has announced Q2 results for the quarter ended March 31st 2003.

Ubizen recorded revenues of Euro 13.383 mio, compared to pro forma revenues of Euro 12.605 mio in Q1. EBITDA amounted to Euro 0.099 mio versus 0.487 mio in the previous quarter. Gross profit amounted to Euro 6.634 mio, representing a gross profit margin of 49.6%.

In Q3 (ending June 30th 2003), a similar performance as in Q2 can be expected. Ubizen will focus on improving the profitability of its leading Managed Security Services with full year revenues totaling Euro 28 mio. In the coming quarters, Ubizen will sustain EBITDA profitability but is cautious in confirming former guidance of achieving positive EBITA over the full year.

I.Revenue and Gross Profit:
In Q2 (ended March 31st 2003) Ubizen recorded consolidated revenues of Euro 13.383 mio. Gross profit amounted to Euro 6.634, compared to Euro 6.662 mio in the previous quarter. Q2 revenue and margin breakdown as follows:

Contribution Contribution GPM
(in ‘000 Euro) %
Managed Security Services 6,491 48.5 55.9%
Services 4,216 31.5 52.4%
Software 335 2.5 98.5%
Third-party Products 2,342 17.5 20.2%
13,383 100% 49.6%

Ubizen’s core Managed Security Services business totaled Euro 6.491 mio, representing a revenue contribution of 48.5%. Professional Services contributed with 31.5% with revenues totalling Euro 4.216 mio. Ubizen’s overall gross profit margin, 49.6% compared to 52.9% in the previous quarter, came under some pressure because of an exceptional decrease in contribution of software sales and an expansion of seat capacity in the MSS operations. This increase of capacity will however lead to a gradual improvement of Managed Security Services gross profit margin over the coming quarters.

11. Operating Expenses:

(in ‘000 Euro) Q2-03 Q1-03
General and administrative (2,278) (2,254)
Research and development net (2,428) (2,256)
Sales and marketing (2,533) (2,411)
Compensation Expense (204) (204)
Total Operating expenses (7,443) (7,125)

Total operating expenses amounted to Euro 7.443 mio compared to Euro 7.125 mio in the previous quarter. Research and development showed a slight increase from Euro 2.256 mio to Euro 2.428 mio. This increase is mainly attributable to an increasing interest in Ubizen’s application security software and the fact that some investments have been made to speed up the development process of new releases scheduled for Q3. These new releases are compatible with Ubizen OnlineGuardian Certificate Management.

III. Liquidity and capital resources
During Q2, Ubizen further reduced its stake in RISC Technology. After the sale of 1.333.333 shares in December, an additional 1.910.000 were sold. As a result, Ubizen holds 1.179.272 shares or 11.57% and no longer consolidated RISC Technology according to the equity method. The sale of RISC shares has significantly affected net income since it resulted in a non-cash loss amounting to Euro 4.841 mio. Furthermore, a valuation allowance was recorded on the remaining shares to reflect the current market price of Euro 2.8 per share. The total cost related to the disposal of RISC shares amounts to Euro 5.847 mio.

The proceeds from the sale amounted to Euro 4.634 mio and were used for reimbursing a short-term bank loan amounting to Euro 5 mio. A significant improvement of accounts receivable collection complemented the proceeds from the disposal of the RISC shares. The net cash position increased from Euro 1.188 mio at the end of the previous quarter to Euro 2.963, with no significant short-term financial commitments.

IV. Global Headcount at March 31st 2003

Technology / R&D 109
Services 115
Sales & Marketing 72
General & Administrative 59

V. Quarter Highlights

Gartner, Inc. released its North American MSSP Magic Quadrant 2H02 that reflected Ubizen’s position in the Visionary Quadrant for managed security service providers. Again, Ubizen was the only European MSSP included in the Quadrant. Ubizen gained market momentum in the Magic Quadrant and climbed higher on the quadrant’s axis that measures ability to execute.

Ubizen no longer considers its participation in RISC Technology (listed on the Nouveau Marché in Paris) as being strategic and decided to further reduce its stake to a minority interest. Consequently, Ubizen now holds 11.57%.

Five new customers selected Ubizen OnlineGuardian and 5 existing customers extended their contract. One of the new Ubizen OnlineGuardian in the US is Steelcase Inc. (NYSE:SCS), a Fortune 500 company that helps organizations work more effectively by enabling customers to create work environments that integrate architecture, furniture and technology. Stijn Bijnens, Chief Executive Officer of Ubizen comments; “Despite ongoing challenging market conditions, we continued to execute and sign up new MSS customers ahead of our competitors. We were happy to see sustained strong interest in our leading Managed Security Services and our Professional Services unit also performed well and was able to deliver a slight Q-o-Q growth in terms of revenues.”

Business Outlook
In the third quarter (ending June 30th, 2003), Ubizen expects a similar performance as in the second quarter. A solid backlog for Ubizen’s MSS business guarantees continued growth and increased scalability. Ubizen full year guidance of MSS revenues is Euro 28 mio, representing a revenue growth of 33%. Regarding guidance for the third and fourth quarter, Ubizen’s Chief Executive Officer, Stijn Bijnens, commented: “Although we see continued momentum for the Ubizen MSS offering, it remains difficult to provide guidance for the second half of fiscal 2003. We will sustain our focus on improving the profitability of our solutions and will concentrate on increasing EBITDA profitability. Due to the continued challenging market conditions, we are however cautious in confirming former guidance of achieving positive EBITA over the full year.”

Note from the auditor:
The statutory auditor has not reviewed the accounting information taken up in this press release.

This press release may include forward-looking statements that involve risk and uncertainty. Although the company believes its expectations reflected in such forward-looking statements are based on reasonable assumptions, no assurance can be given that such projections will be fulfilled. Any such forward-looking statement must be considered along with knowledge that actual events or results may vary materially from such predictions due to, among other things, political, economic or legal changes in the markets in which Ubizen does business, competitive developments or risks inherent in the company’s business plan.

About Ubizen
Ubizen is the principal provider of Managed Security Solutions for global businesses. Companies rely on Ubizen OnlineGuardian(r) for outsourced management, monitoring and support of enterprise security devices 24x7x365. A Professional Services team complements Ubizen OnlineGuardian, by helping enterprises plan and implement vulnerability assessments, security policies and security infrastructures. Ubizen also protects Web servers against application-level attacks, such as Nimda and Code Red, with Ubizen DMZ/Shield(tm) Enterprise. Ubizen (http://www.ubizen.com) is a public company with dual listings

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