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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 27, 2000
ISS Group, Inc.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 0-23655 58-2362189
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification Number)
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6600 PEACHTREE-DUNWOODY ROAD
EMBASSY ROW, BLDG. 300, STE. 500
ATLANTA, GEORGIA 30339
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (678) 443-6000
(Former Name or Former Address, if Changed Since Last Report)
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Item 7. Exhibits.
Exhibit No.
99.1 Press release dated January 27, 2000
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: January 31, 2000
ISS Group, Inc
By: /s/ Richard Macchia
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Richard Macchia
Vice President and Chief Financial Officer
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EXHIBIT INDEX
99.1 Press release dated January 27, 2000
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EXHIBIT 99.1
CONTACTS: Michele Norwood Trade Press: Holly Haggerman
Internet Security Systems Connect Public Relations
678-443-6142 801-373-7888
[email protected] [email protected]
Business Press: Kristin Nofi
Brodeur Worldwide
617-587-2884
[email protected]
FOR IMMEDIATE RELEASE
ISS REPORTS 18TH CONSECUTIVE QUARTER OF GROWTH AND RECORD FISCAL YEAR
~ CONTINUES TO EXTEND LEADERSHIP INTO MANAGED SECURITY SERVICES MARKET ~
ATLANTA, GA. -- JANUARY 27, 2000 -- ISS Group, Inc., parent company of
Internet Security Systems, Inc. (ISS) (NASDAQ: ISSX), a leading provider of
security management solutions for e-business, today announced record financial
results for the fourth quarter and fiscal year ended December 31, 1999. For the
fourth quarter, revenues were $36,232,000, a 73% increase over $20,975,000 for
the corresponding period in 1998 and a 21% sequential growth over the third
quarter of 1999. The fourth quarter results continued the significant growth
trends in products and service offerings established in the first three
quarters, producing 1999 annual revenues of $116,487,000, a 104% increase over
$57,088,000 for the 1998 fiscal year.
The Company continued to display leverage in the business as net
income for the Company for the fourth quarter was $3,494,000 or $.08 per fully
diluted share while net income for the fiscal year was $7,490,000 or $.17 per
fully diluted share. This compared to losses recorded in comparable 1998
periods.
The Company's income is not fully-taxed due to the existence of net
operating loss carryforwards. However, it's the Company's understanding that
estimates of the Company's performance by many market analysts who follow the
Company are based on fully-taxed earnings. These estimates for the full year
also do not reflect the direct costs of the Netrex business combination expensed
in the third quarter. For comparisons to such published estimates, the Company's
earnings per share, assuming a tax rate of 35% and excluding such merger costs,
would have been $.10 per share in the fourth quarter and $.16 per share for the
year.
-- more --
"Our record 1999 financial performance demonstrates ISS' strong
business growth and continued market leadership," said Tom Noonan, president and
chief executive officer of ISS.
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"Our entry into one of the fastest growing segments of the Internet security
industry -- Managed Security Services (MSS) - has dramatically increased ISS'
market potential and has expanded our solutions to include both the security
management software and remote monitoring services critical to serving a broad
customer base. As we look to 2000 and beyond, we are extremely excited to be a
critical player in meeting the significant demand for best-of-breed security
management solutions that ensure safe and productive e-business."
HIGHLIGHTS FOR 1999 INCLUDE:
ACQUISITION OF NETREX AND EXPANSION INTO MANAGED SECURITY SERVICES MARKET
In August 1999, ISS dramatically expanded its customer reach and
propelled its vision into a new market with the acquisition of privately-held
Netrex, Inc., a leading Managed Security Service (MSS) provider. With the
addition of Netrex's ePatrol(TM) MSS offerings, ISS expanded its solutions set
to provide both industry-leading security management software and a complete set
of remote 24x7 security management services. With the acquisition, ISS is
providing a wider range of customers with the technology and outsource security
solutions they need to manage their security. ISS' ePatrol provides the remote
management of best-of-breed security technologies from Check Point, Trend Micro,
RSA and WatchGuard including firewalls, VPNs, anti-virus, authentication and web
site blocking software, as well as ISS security assessment and intrusion
detection systems.
In October 1999, ISS announced the expansion of ePatrol with a new
service for remote security assessments that builds on an underlying technology
foundation gained through the ISS acquisition of privately-held NJH Security
Consulting, an Atlanta consulting firm focused on providing information security
services.
VALIDATION OF MSS STRATEGY WITH GLOBAL STRATEGIC PARTNERSHIPS
In addition to offering services directly, ISS has continued to
leverage existing relationships with leading telecommunications companies and
world-class security service providers to offer MSS on a wholesale basis. On
January 25, 2000, ISS and BellSouth announced a strategic alliance to co-develop
and deliver Managed Security Services to meet the needs of BellSouth customers.
BellSouth, which relies on ISS for internal network security, named ISS its
-- more --
"preferred" managed security provider with new services becoming immediately
available to both domestic and international markets.
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In November, ISS announced key alliances with Embratel,
telecommunications leader in Latin America and subsidiary of MCI Worldcom, to
launch the first Managed Security Service in Latin America, and SECOM, the
largest managed security services provider in Japan, to deliver Japan's first
remote intrusion detection service.
EXPANSION INTO EBUSINESS MARKET
ISS' MSS strategy is enabling the company to serve a broader market,
providing outsource 24x7 remote security monitoring and management services to
all companies engaging in e-business. On January 13, 2000, ISS announced a
partnership with iXL, a leading e-business provider, to deliver services and
software solutions to iXL customers. ISS relationships with key e-business
companies, such as iXL, demonstrates that security becoming a key driver in
e-business solutions and reinforces that security management is critical to
ensuring system uptime and information protection.
INDUSTRY LEADERSHIP RECOGNITION
In a July 1999 study, International Data Corporation (IDC) named ISS
the market leader in the network intrusion detection and security assessment
(IDnA) market with a combined 49% worldwide market share.
ISS was also named a Top 50 Internet Company by InternetWorld magazine,
and included in USA Today's Top 50 E-business Stock Index and Business Week's
"Cream of the Crop" stock picks for 2000, demonstrating further recognition of
ISS as a critical, high-growth e-business security provider.
NEW STRATEGIC CONSULTING SERVICES
In November, ISS launched a series of Knowledge Services offerings
designed to help customers better leverage the wealth of security knowledge
within ISS. As an expansion of ISS' Consulting and Education Group, Knowledge
Services provide organizations with the ability to outsource security policy
research and documentation, security threat impact analysis and secure
e-business implementation assessment. A core offering is the SAVANT Windows
NT-based security advisory service, providing customers with detailed,
continually updated information on how to effectively manage the security of
their Windows NT-based enterprises.
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CONTINUED ENHANCEMENT OF ISS SAFESUITE(R) SECURITY MANAGEMENT SOFTWARE SOLUTIONS
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ISS continued to add significant functionality to its award-winning
SAFEsuite family of security management software, providing customers with more
powerful and easier-to-use solutions for security management across the
enterprise. Throughout 1999, ISS announced and shipped enhanced versions of all
of its SAFEsuite products including SAFEsuite security assessment solutions,
Internet Scanner(TM), Database Scanner(TM) and System Scanner(TM), and SAFEsuite
intrusion detection solutions, RealSecure(TM) network and host-based threat
management systems. In addition, ISS delivered an enhanced version of its first
security management application, SAFEsuite Decisions(R), including support for
Oracle and faster, more efficient identification of severe security hot spots.
CONTINUED SECURITY RESEARCH LEADERSHIP: ISS X-FORCE
In December, ISS' leading research team, the X-Force, led the industry
in researching and informing customers and the security community about newly
developed and potentially dangerous "Denial of Service" attacks. ISS formed the
Y2K SecurityWatch to monitor, research and report hacker activity throughout the
Y2K rollover. ISS also supported the Cyber-Assurance Cell of the US Government's
National Y2K Information Coordination Center (ICC) in Washington D.C. by
communicating security risks and events to the ICC as they occurred. Throughout
1999, the ISS X-Force released over 25 Security Advisories and Alerts to inform
customers and the security community of new security vulnerabilities and
threats. ISS' intense focus on security research also resulted in the
documentation and addition of over 2247 entries in 1999 to the ISS X-Force
Database, the world's largest online repository of security risk information.
ABOUT ISS
ISS is a leading global provider of security management solutions for
e-business. By offering best-of-breed SAFEsuite security software,
industry-leading ePatrol managed security services, and strategic consulting and
education services, ISS is a trusted security provider to its customers,
protecting digital assets and ensuring the availability, confidentiality and
integrity of computer systems and information critical to e-business success.
ISS' lifecycle e-business security management solutions protect more than 5,000
customers including 21 of the 25 largest U.S. commercial banks, 9 of the 10
largest telecommunications companies and over 35 government agencies. Founded in
1994, ISS is headquartered in Atlanta, GA, with additional offices throughout
North America and international operations in Asia, Australia, Europe and Latin
America. For more information, visit the ISS Web site at www.iss.net or call
800-776-2362.
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This release, other than historical information, includes forward-looking
statements made pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. The risks and uncertainties which
could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, the following: the
level of demand for the Company's products; the volume and timing of orders;
product and price competition; the Company's ability to expand its domestic and
international sales and marketing organizations; the Company's ability to
develop new and enhanced products; the Company's ability to assimilate recent
and potential future acquisitions or investments ; the Company's ability to
attract and retain key personnel; reliance on distribution channels through
which the Company's products are sold; the growth in the acceptance and use of
the Internet and of private Internet-based networks or "intranets"; the extent
to which unauthorized access to and use of online information is perceived as a
threat to network security; customer budgets; the assertion of infringement
claims with respect to the Company's intellectual property; foreign currency
exchange rates; and risks concerning the rapid change of technology; and general
economic factors. These risks and others are discussed in the Company's periodic
filings with the Securities and Exchange Commission. These filings can be
obtained either by contacting ISS Investor Relations or through the Securities
and Exchange Commission's Web site at "http://www.sec.gov".
Internet Security Systems, SAFEsuite, ePatrol, Internet Scanner, System Scanner,
Database Scanner and RealSecure are trademarks of Internet Security Systems,
Inc. and ISS Group, Inc. All other companies and products mentioned are
trademarks and property of their respective owners.
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ISS GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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THREE MONTHS ENDED
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DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1999 1999 1998
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Revenues:
Product licenses and sales $ 22,784 $ 19,200 $ 13,762
Subscriptions 7,563 6,202 3,965
Professional services 5,885 4,599 3,248
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36,232 30,001 20,975
Costs and expenses:
Cost of revenues:
Product 6,312 5,055 3,891
Subscription and service 5,809 4,801 3,721
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Total cost of revenues 12,121 9,856 7,612
Research and development 6,250 5,315 3,407
Charges for in-process research and development -- -- 802
Sales and marketing 12,531 10,991 7,959
General and administrative 2,675 2,105 2,063
Amortization 248 247 230
Merger costs -- 2,329 --
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33,825 30,843 22,073
Operating income (loss) 2,407 (842) (1,098)
Interest income, net 1,888 1,640 653
Exchange gain (loss) (136) -- --
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Income (loss) before income taxes 4,159 798 (445)
Provision for income taxes (665) (105) (62)
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Net income (loss) $ 3,494 $ 693 $ (507)
Basic net income (loss) per share of Common Stock $ 0.09 $ 0.02 $ (0.01)
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Diluted net income (loss) per share of Common Stock $ 0.08 $ 0.02 $ (0.01)
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Weighted average number of shares:
Basic 40,816 40,582 36,675
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Diluted 44,360 43,946 36,675
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Supplementary Data
(excluding merger costs and assuming a 35% tax rate)
Operating Income $ 2,407 $ 1,487
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Net Income $ 2,703 $ 2,033
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Fully diluted earnings per share $ 0.06 $ 0.05
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ISS GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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TWELVE MONTHS ENDED
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DECEMBER 31, DECEMBER 31,
1999 1998
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Revenues:
Product licenses and sales $ 74,050 $ 36,908
Subscriptions 24,141 12,037
Professional services 18,296 8,143
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116,487 57,088
Costs and expenses:
Cost of revenues:
Product 18,842 8,875
Subscription and service 18,858 11,076
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Total cost of revenues 37,700 19,951
Research and development 20,304 9,655
Charges for in-process research and development -- 802
Sales and marketing 43,232 25,998
General and administrative 9,230 6,557
Amortization 992 230
Merger costs 2,329 --
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113,787 63,193
Operating income (loss) 2,700 (6,105)
Interest income, net 5,902 2,274
Exchange gain (loss) (136) --
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Income (loss) before income taxes 8,466 (3,831)
Provision for income taxes (976) (62)
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Net income (loss) $ 7,490 $ (3,893)
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Basic net income (loss) per share of Common Stock $ 0.19 $ (0.12)
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Diluted net income (loss) per share of Common Stock $ 0.17 $ (0.12)
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Weighted average number of shares:
Basic
39,996 32,351
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Diluted 43,691 32,351
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Unaudited pro forma net income (loss) per share of
Common Stock $ (0.11)
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Unaudited weighted average number of shares used in
Calculating unaudited pro forma net loss per share of Common Stock 34,963
Supplementary Data
(excluding merger costs and assuming a 35% tax rate)
Operating Income $ 5,029
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Net Income $ 7,017
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Fully diluted earnings per share $ 0.16
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ISS GROUP, INC.
SELECTED CONSOLIDATED BALANCE SHEET DATA
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
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DECEMBER 31, 1999 DECEMBER 31, 1998
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Cash, including Cash Equivalents and Restricted Cash $ 139,283 $ 52,921
Accounts Receivable
26,934 16,590
Total Assets
184,845 84,724
Deferred Revenue
17,155 8,333
Stockholders' Equity
Common Stock and Additional Paid-In Capital 157,508 76,189
Deferred Compensation (288) (662)
Cumulative Adjustment for Currency Revaluation 100 142
Retained Earnings (deficit) (2,167) (9,164)
Total Stockholders' Equity $ 155,153 $ 66,505
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