eSoft Reports First Quarter Sequential Revenue Growth of 12% and EBITDA Improvement of 18%

InstaGate EX2 Revenue Grows 56%



Apr 24, 2001, 01:00 ET from eSoft Inc.

    BROOMFIELD, Colo., April 24 /PRNewswire Interactive News Release/ --
 eSoft Inc. (Nasdaq: ESFT), a leading provider of Internet security appliances
 that include firewall and VPN for small and medium enterprises (SMEs), today
 reported financial results for the quarter ended March 31, 2001.
     The Company reported a 12% increase in revenue to $2.0 million and an
 18% decrease in its EBITDA loss as compared with the fourth quarter of 2000.
 
     First Quarter and Recent Highlights:
     -- Internet security appliance (ISA) revenue increased 56% from the prior
        quarter
     -- SoftPak revenue, which is predominantly subscription-based and
        recurring, increased 46% from the prior quarter
     -- Launched two new SoftPaks (SpamFilter and Webmail), bringing the  total
        offered to 9
     -- Increased ISP distribution channels with the addition of  7 new ISPs
        during the quarter
     -- Fully Funded business plan with cash on hand of $18.0 million
     -- Improved EBITDA by $0.5 million, or 18%, from the prior quarter, with
        EBITDA profitability targeted in the fourth quarter
 
     "In addition to achieving our revenue, EBITDA and earnings objectives for
 the quarter, we made significant progress on the many goals we outlined last
 quarter and we continue to make progress towards reaching fourth quarter
 EBITDA profitability," said Jeff Finn, president and CEO of eSoft.  "We
 launched our InstaGate EX2 Internet Security Appliance in January to very
 favorable reviews and market acceptance.  We continued to expand our SoftPak
 line and have seen strong adoption of these offerings.  We shipped 1,900 units
 in the quarter, including a 100% increase in InstaGate products from the prior
 quarter.  We think of the InstaGate hardware units as the razor in our
 business model, while the SoftPaks, our subscription based software
 applications, are the razor blades and a key differentiator for eSoft.  Over
 50% of our InstaGate customers purchased SoftPaks during the first quarter."
     The net loss for the quarter was $2.6 million, excluding an unrealized
 loss of $1.275 million for the permanent impairment of equity securities, an
 improvement of 16% from the fourth quarter 2000 net loss of $3.1 million
 excluding the cumulative effect for the change in accounting principle.  Loss
 per share in the first quarter of 2000, excluding the unrealized loss, was
 $0.17, an improvement of 15% from the fourth quarter loss per share of
 $0.20 excluding the cumulative effect for the change in accounting principle.
 EBITDA for the quarter was a loss of $2.3 million, an improvement of $500,000,
 or 18%, from the prior quarter.  The reported net loss for the quarter
 including the unrealized loss was $3.9 million, or $0.25 per share compared to
 a reported net loss of $5.5 million, or $.35 per share, in the fourth quarter
 of 2000.
     "During the quarter, we also expanded our distribution network to include
 a number of new VARs, distributors and seven ISPs, including two international
 service providers.  This channel is ideal for reaching our target market of
 small to medium enterprises, as ISP's are positioned to bundle our products
 with their broadband offerings.  In addition, we continue to experience
 successful adoption by resellers who are attracted by the recurring revenue
 element of our business model and the ability to provide software upgrades and
 new applications downloads, while virtually eliminating truck rolls.  OEMs
 continue to be a part of our distribution strategy as well through our
 redphish program," said Finn.
 
     Outlook
     "We continue to target EBITDA profitability in the fourth quarter of 2001,
 as we increase revenue and improve gross margins.  We will continue to grow
 our higher margin SoftPak sales and manage production costs through increased
 volumes of ISA sales.  We have a business plan that we are successfully
 executing on and have $18 million of cash on hand, which is enough to fund
 operations and our growth plans until we reach profitability," said Finn.
     The Company anticipates revenue for the quarter ending June 30, 2001 will
 be between $2.4 million and $2.7 million.  Of this total, approximately
 $1.8 to $2.0 million is expected to be from ISA and SoftPak revenues, while
 OEM revenues are projected to be between $600,000 to $700,000.  The Company is
 projecting an EBITDA loss in the range of $2.0 million to $2.3 million, and a
 loss per share between $0.14 and $0.17.
 
     Conference Call
     eSoft's First Quarter 2001 conference call will be accessible today via
 live audio webcast at 4:30 PM ET.  The call will be led by eSoft President and
 CEO, Jeff Finn and Vice President of Finance, AmyBeth Hansman.  Please visit
 www.esoft.com for additional information.
     Please note that these projections are based on the current business
 assumptions of eSoft management, in particular assumptions have been made
 related to the acceptance and orders for InstaGate EX and InstaGate EX2, and
 the gross margins that will be recognized for these products.  In addition,
 our projections rely on the forecasts provided by our OEM partners, which may
 change at any time and have a material impact on our revenues and earnings.
 The Company is also subject to general market and economic conditions.
 
     About eSoft Inc.
     eSoft Inc. was founded in 1984 with headquarters in Broomfield, Colo.
 eSoft provides a flexible, customizable and expandable product suite, enabling
 rapid delivery of Internet security appliances for small to medium
 enterprises.  eSoft's family of products provides businesses with firewall
 protection, VPN and other security software and services.  Contact eSoft at
 295 Interlocken Blvd., #500, Broomfield, Colo., 80021, USA; 303-444-1600
 phone; 303-444-1640 fax; www.esoft.com.
 
     InstaGte EX, InstaGate EX2, redphish, SoftPaks, and SoftPak Director are
 trademarks of eSoft, Inc.  Patent pending for SoftPak Director.  All other
 trademarks or registered trademarks are the property of their respective
 owners.
 
     This press release contains "forward-looking statements" within the
 meaning of the Private Securities Litigation Reform Act of 1995.  These
 statements often can be identified by the use of terms such as "may," "will,"
 "expect," "believe," "project," "estimate" or words of similar meaning.
 Readers should not place undue reliance on these forward-looking statements,
 and eSoft will not necessarily update these statements to reflect subsequent
 developments.  In addition, these forward-looking statements are subject to
 risks, uncertainties and important factors that may cause actual results to
 differ materially from those anticipated.  These factors include adverse
 economic conditions, entry of new and stronger competitors, inadequate
 capital, unexpected costs, failure to gain product approval in foreign
 countries, failure to capitalize upon access to new markets, the possibility
 that a competitor will develop a more comprehensive or less expensive Internet
 security appliance solution and delays in the market awareness of eSoft and
 its products.  Readers should review these factors and others, which are
 discussed in reports that eSoft files with the Securities and Exchange
 Commission.
 
 
                                  eSoft, Inc.
           Preliminary Condensed Consolidated Statement of Operations
 
                                                         Quarter Ended
                                                    March 31,       Dec 31,
                                                      2001           2000
 
     REVENUE                                       $2,013,258     $1,805,164
 
     COST OF REVENUE                                1,347,060      1,267,357
 
     GROSS PROFIT                                     666,198        537,807
 
     OPERATING EXPENSES:
       Sales and marketing                          1,216,691      1,605,093
       General and administrative                   1,117,084        968,518
       Engineering                                    603,897        704,308
       Research and development                       227,941        275,156
         Total operating expenses                   3,165,613      3,553,075
 
     LOSS FROM OPERATIONS                          (2,499,415)    (3,015,268)
 
     OTHER INCOME/(EXPENSE):
       Interest income (expense), net                (145,550)      (101,891)
       Unrealized loss on available-for-sale
       securities                                  (1,275,920)             0
         Total other income (expense), net         (1,421,470)      (101,891)
 
     NET LOSS BEFORE CUMULATIVE EFFECT OF
      CHANGE IN ACCOUNTING PRINCIPLE               (3,920,885)    (3,117,159)
 
     NET LOSS                                      (3,920,885)    (5,487,071)
     BASIC AND DILUTED LOSS
      PER COMMON SHARE                                ($0.25)        ($0.35)
     PRO FORMA BASIC AND DILUTED
      PER COMMON SHARE*                               ($0.17)        ($0.20)
     BASIC AND DILUTED WEIGHTED
      AVERAGE SHARES OUTSTANDING                   15,566,227     15,507,908
 
     * December 31, 2000: Pro forma loss per share excludes the effect of a
       one-time charge for the change in accounting principle of $2,369,912.
 
     * March 31, 2001: Pro forma loss per share excludes the effect of the
       unrealized loss on available-for-sale securities of $1,275,920.
 
 
                                   eSoft Inc.
                Preliminary Condensed Consolidated Balance Sheet
 
                                                    March 31,
                                                      2001
     CURRENT ASSETS:
       Cash and cash equivalents                  $17,669,635
       Available for sale securities                  504,243
       Accounts receivable, net of allowance        1,504,941
       Inventories, net                               637,273
       Prepaid expenses and other                     333,358
         Total current assets                      20,649,450
     PROPERTY AND EQUIPMENT, NET                    1,275,964
     OTHER ASSETS                                     374,299
     TOTAL ASSETS                                 $22,299,713
 
     LIABILITIES AND STOCKHOLDERS' EQUITY:
     CURRENT LIABILITIES:
       Accounts payable                              $852,537
       Accrued expenses                             1,446,774
       Deferred revenue                               795,878
         Total current liabilities                  3,095,189
     LONG TERM LIABILITIES                         13,051,678
     TOTAL LIABILITIES                             16,146,867
     STOCKHOLDERS' EQUITY:
       Common stock                                   155,699
       Additional paid-in capital                  40,866,213
       Notes receivable                              (234,060)
       Accumulated deficit                        (34,635,006)
       Total stockholders' equity                   6,152,846
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $22,299,713
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X45582147
 
 

SOURCE eSoft Inc.
    BROOMFIELD, Colo., April 24 /PRNewswire Interactive News Release/ --
 eSoft Inc. (Nasdaq: ESFT), a leading provider of Internet security appliances
 that include firewall and VPN for small and medium enterprises (SMEs), today
 reported financial results for the quarter ended March 31, 2001.
     The Company reported a 12% increase in revenue to $2.0 million and an
 18% decrease in its EBITDA loss as compared with the fourth quarter of 2000.
 
     First Quarter and Recent Highlights:
     -- Internet security appliance (ISA) revenue increased 56% from the prior
        quarter
     -- SoftPak revenue, which is predominantly subscription-based and
        recurring, increased 46% from the prior quarter
     -- Launched two new SoftPaks (SpamFilter and Webmail), bringing the  total
        offered to 9
     -- Increased ISP distribution channels with the addition of  7 new ISPs
        during the quarter
     -- Fully Funded business plan with cash on hand of $18.0 million
     -- Improved EBITDA by $0.5 million, or 18%, from the prior quarter, with
        EBITDA profitability targeted in the fourth quarter
 
     "In addition to achieving our revenue, EBITDA and earnings objectives for
 the quarter, we made significant progress on the many goals we outlined last
 quarter and we continue to make progress towards reaching fourth quarter
 EBITDA profitability," said Jeff Finn, president and CEO of eSoft.  "We
 launched our InstaGate EX2 Internet Security Appliance in January to very
 favorable reviews and market acceptance.  We continued to expand our SoftPak
 line and have seen strong adoption of these offerings.  We shipped 1,900 units
 in the quarter, including a 100% increase in InstaGate products from the prior
 quarter.  We think of the InstaGate hardware units as the razor in our
 business model, while the SoftPaks, our subscription based software
 applications, are the razor blades and a key differentiator for eSoft.  Over
 50% of our InstaGate customers purchased SoftPaks during the first quarter."
     The net loss for the quarter was $2.6 million, excluding an unrealized
 loss of $1.275 million for the permanent impairment of equity securities, an
 improvement of 16% from the fourth quarter 2000 net loss of $3.1 million
 excluding the cumulative effect for the change in accounting principle.  Loss
 per share in the first quarter of 2000, excluding the unrealized loss, was
 $0.17, an improvement of 15% from the fourth quarter loss per share of
 $0.20 excluding the cumulative effect for the change in accounting principle.
 EBITDA for the quarter was a loss of $2.3 million, an improvement of $500,000,
 or 18%, from the prior quarter.  The reported net loss for the quarter
 including the unrealized loss was $3.9 million, or $0.25 per share compared to
 a reported net loss of $5.5 million, or $.35 per share, in the fourth quarter
 of 2000.
     "During the quarter, we also expanded our distribution network to include
 a number of new VARs, distributors and seven ISPs, including two international
 service providers.  This channel is ideal for reaching our target market of
 small to medium enterprises, as ISP's are positioned to bundle our products
 with their broadband offerings.  In addition, we continue to experience
 successful adoption by resellers who are attracted by the recurring revenue
 element of our business model and the ability to provide software upgrades and
 new applications downloads, while virtually eliminating truck rolls.  OEMs
 continue to be a part of our distribution strategy as well through our
 redphish program," said Finn.
 
     Outlook
     "We continue to target EBITDA profitability in the fourth quarter of 2001,
 as we increase revenue and improve gross margins.  We will continue to grow
 our higher margin SoftPak sales and manage production costs through increased
 volumes of ISA sales.  We have a business plan that we are successfully
 executing on and have $18 million of cash on hand, which is enough to fund
 operations and our growth plans until we reach profitability," said Finn.
     The Company anticipates revenue for the quarter ending June 30, 2001 will
 be between $2.4 million and $2.7 million.  Of this total, approximately
 $1.8 to $2.0 million is expected to be from ISA and SoftPak revenues, while
 OEM revenues are projected to be between $600,000 to $700,000.  The Company is
 projecting an EBITDA loss in the range of $2.0 million to $2.3 million, and a
 loss per share between $0.14 and $0.17.
 
     Conference Call
     eSoft's First Quarter 2001 conference call will be accessible today via
 live audio webcast at 4:30 PM ET.  The call will be led by eSoft President and
 CEO, Jeff Finn and Vice President of Finance, AmyBeth Hansman.  Please visit
 www.esoft.com for additional information.
     Please note that these projections are based on the current business
 assumptions of eSoft management, in particular assumptions have been made
 related to the acceptance and orders for InstaGate EX and InstaGate EX2, and
 the gross margins that will be recognized for these products.  In addition,
 our projections rely on the forecasts provided by our OEM partners, which may
 change at any time and have a material impact on our revenues and earnings.
 The Company is also subject to general market and economic conditions.
 
     About eSoft Inc.
     eSoft Inc. was founded in 1984 with headquarters in Broomfield, Colo.
 eSoft provides a flexible, customizable and expandable product suite, enabling
 rapid delivery of Internet security appliances for small to medium
 enterprises.  eSoft's family of products provides businesses with firewall
 protection, VPN and other security software and services.  Contact eSoft at
 295 Interlocken Blvd., #500, Broomfield, Colo., 80021, USA; 303-444-1600
 phone; 303-444-1640 fax; www.esoft.com.
 
     InstaGte EX, InstaGate EX2, redphish, SoftPaks, and SoftPak Director are
 trademarks of eSoft, Inc.  Patent pending for SoftPak Director.  All other
 trademarks or registered trademarks are the property of their respective
 owners.
 
     This press release contains "forward-looking statements" within the
 meaning of the Private Securities Litigation Reform Act of 1995.  These
 statements often can be identified by the use of terms such as "may," "will,"
 "expect," "believe," "project," "estimate" or words of similar meaning.
 Readers should not place undue reliance on these forward-looking statements,
 and eSoft will not necessarily update these statements to reflect subsequent
 developments.  In addition, these forward-looking statements are subject to
 risks, uncertainties and important factors that may cause actual results to
 differ materially from those anticipated.  These factors include adverse
 economic conditions, entry of new and stronger competitors, inadequate
 capital, unexpected costs, failure to gain product approval in foreign
 countries, failure to capitalize upon access to new markets, the possibility
 that a competitor will develop a more comprehensive or less expensive Internet
 security appliance solution and delays in the market awareness of eSoft and
 its products.  Readers should review these factors and others, which are
 discussed in reports that eSoft files with the Securities and Exchange
 Commission.
 
 
                                  eSoft, Inc.
           Preliminary Condensed Consolidated Statement of Operations
 
                                                         Quarter Ended
                                                    March 31,       Dec 31,
                                                      2001           2000
 
     REVENUE                                       $2,013,258     $1,805,164
 
     COST OF REVENUE                                1,347,060      1,267,357
 
     GROSS PROFIT                                     666,198        537,807
 
     OPERATING EXPENSES:
       Sales and marketing                          1,216,691      1,605,093
       General and administrative                   1,117,084        968,518
       Engineering                                    603,897        704,308
       Research and development                       227,941        275,156
         Total operating expenses                   3,165,613      3,553,075
 
     LOSS FROM OPERATIONS                          (2,499,415)    (3,015,268)
 
     OTHER INCOME/(EXPENSE):
       Interest income (expense), net                (145,550)      (101,891)
       Unrealized loss on available-for-sale
       securities                                  (1,275,920)             0
         Total other income (expense), net         (1,421,470)      (101,891)
 
     NET LOSS BEFORE CUMULATIVE EFFECT OF
      CHANGE IN ACCOUNTING PRINCIPLE               (3,920,885)    (3,117,159)
 
     NET LOSS                                      (3,920,885)    (5,487,071)
     BASIC AND DILUTED LOSS
      PER COMMON SHARE                                ($0.25)        ($0.35)
     PRO FORMA BASIC AND DILUTED
      PER COMMON SHARE*                               ($0.17)        ($0.20)
     BASIC AND DILUTED WEIGHTED
      AVERAGE SHARES OUTSTANDING                   15,566,227     15,507,908
 
     * December 31, 2000: Pro forma loss per share excludes the effect of a
       one-time charge for the change in accounting principle of $2,369,912.
 
     * March 31, 2001: Pro forma loss per share excludes the effect of the
       unrealized loss on available-for-sale securities of $1,275,920.
 
 
                                   eSoft Inc.
                Preliminary Condensed Consolidated Balance Sheet
 
                                                    March 31,
                                                      2001
     CURRENT ASSETS:
       Cash and cash equivalents                  $17,669,635
       Available for sale securities                  504,243
       Accounts receivable, net of allowance        1,504,941
       Inventories, net                               637,273
       Prepaid expenses and other                     333,358
         Total current assets                      20,649,450
     PROPERTY AND EQUIPMENT, NET                    1,275,964
     OTHER ASSETS                                     374,299
     TOTAL ASSETS                                 $22,299,713
 
     LIABILITIES AND STOCKHOLDERS' EQUITY:
     CURRENT LIABILITIES:
       Accounts payable                              $852,537
       Accrued expenses                             1,446,774
       Deferred revenue                               795,878
         Total current liabilities                  3,095,189
     LONG TERM LIABILITIES                         13,051,678
     TOTAL LIABILITIES                             16,146,867
     STOCKHOLDERS' EQUITY:
       Common stock                                   155,699
       Additional paid-in capital                  40,866,213
       Notes receivable                              (234,060)
       Accumulated deficit                        (34,635,006)
       Total stockholders' equity                   6,152,846
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $22,299,713
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X45582147
 
 SOURCE  eSoft Inc.