Phoenix Technologies Ltd. Reports Fiscal Second Quarter Financial Resu

    Business Editors/High-Tech Editors

    MILPITAS, Calif.--(BUSINESS WIRE)--April 27, 2005--Phoenix Technologies Ltd. (Nasdaq:PTEC) today reported its fiscal second quarter 2005 financial results.
    For the fiscal quarter ended March 31, 2005, the Company announced revenue of $27.0 million, operating income of $4.7 million, and net income of $3.0 million, or $0.12 per diluted share. These figures compare to revenue of $26.2 million, operating income of $4.2 million, and net income of $2.2 million, or $0.09 per diluted share, in the quarter ended December 31, 2004. The comparable results in the year-earlier period ended March 31, 2004 were revenue of $20.7 million, operating income of $0.6 million, and a net loss of $0.6 million, or $0.02 per share. Revenue from new businesses, including PC applications and non-PC devices, accounted for 31% of total revenue, compared to 28% in the previous quarter and 40% in the year-earlier quarter.
    "We are pleased to deliver another solid quarter, with sequential revenue growth, improved operational efficiency and continued financial discipline all contributing significantly to Phoenix Technologies' further improvement in net income," said Albert E. Sisto, Chairman, CEO and President. "Revenue from our new business areas continued to grow and we are especially encouraged by the acceptance of our applications products by our worldwide channel partners. The scope of the devices that we touch continues to expand in every region laying the foundation for additional top line growth. Our new innovative tool, Phoenix CoreArchitect, for both our PC and non-PC customers, is helping to bring new, differentiated designs to market faster, demonstrating our commitment to deliver leading 'state of the art' solutions that are highly valued by our customers."
    The Company's cash and short-term investments as of March 31, 2005, were $58.9 million, compared to $62.6 million at December 31, 2004. Operating expenses were $18.0 million, compared to $17.7 million in the quarter ended December 31, 2004 and $16.0 million for the quarter ended March 31, 2004.
    The Company will conduct its regularly scheduled financial announcement conference call on Wednesday, April 27, 2005, at 1:30 p.m. PT. Investors are invited to listen to a live audio web cast of Phoenix's quarterly conference call on the investor relations section of the Company's website at www.phoenix.com. A replay of the web cast will be available approximately 30 minutes after the conclusion of the call. An audio replay of the conference call will also be available approximately two hours after the conclusion of the call. The audio replay will be available until Monday, May 2, 2005 at 9:00 p.m. PT and can be accessed by dialing 800-642-1687 or 706-645-9291 and entering conference number 5171293.

    About Phoenix

    Phoenix Technologies develops a complete product suite of Core System Software, tools and applications to deliver trusted, seamless computing to digital devices for an Internet-connected world. Phoenix Technologies helped launch the PC industry over 25 years ago. Today we are extending our leadership and knowledge at the core of machines, beyond the PC to a wide range of platforms and devices.
    Phoenix Core System Software has set the standard for the world's leading branded PC OEMs and their global network of supply chain and software partners. Today, Phoenix solutions enable, secure, connect, and recover the world's best-known systems. These solutions are built into the device core, where they are protected from viruses, user errors, hackers, and corruption. Phoenix is headquartered in Milpitas, Calif. (Silicon Valley), with offices in global business and technology centers. For more information, visit www.phoenix.com.

    Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

    With the exception of historical information, the statements set forth above include forward-looking statements that involve risk and uncertainties. All forward-looking statements included in this document are based upon information available to the Company as of the date hereof, and the Company assumes no obligation to update any such forward looking statement. Factors that could cause actual results to differ materially from those in the forward looking statements are discussed in the Company's filings with the Securities and Exchange Commission, including its recent filings on Form 10-K, filed December 27, 2004.

    Phoenix and Phoenix Technologies are registered trademarks of Phoenix Technologies Ltd.

PHOENIX TECHNOLOGIES LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)

March 31, September 30, 2005 2004 ------------- -------------- Assets Current assets: Cash and short-term investments $ 58,920 $ 59,823 Accounts receivable, net 35,776 23,871 Other current assets 3,797 6,268 ------------ ------------- Total current assets 98,493 89,962

Property and equipment, net 4,287 4,519 Computer software costs, net 6,245 7,922 Goodwill, net 13,933 13,433 Intangible assets, net 403 437 Other assets 3,242 4,612 ------------ ------------- Total assets $ 126,603 $ 120,885 ============ =============

Liabilities and stockholders' equity

Current liabilities: Accounts payable $ 1,168 $ 2,188 Accrued compensation and related liabilities 6,810 5,535 Deferred revenue 6,040 9,642 Income taxes payable 3,032 3,136 Other accrued liabilities 4,571 3,765 ------------ ------------- Total current liabilities 21,621 24,266

Long-term obligations 3,475 3,590 ------------ ------------- Total liabilities 25,096 27,856

Stockholders' equity: Preferred stock - - Common stock 32 32 Additional paid-in capital 182,584 180,525 Retained earnings 10,025 4,793 Accumulated other comprehensive loss (691) (1,878) Less: Cost of treasury stock (90,443) (90,443) ------------ ------------- Total stockholders' equity 101,507 93,029

------------ ------------- Total liabilities and stockholders' equity $ 126,603 $ 120,885 ============ =============

PHOENIX TECHNOLOGIES, LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)

Three Months Ended Six Months Ended March 31, March 31, ------------------- ------------------ 2005 2004 2005 2004 ---------- -------- --------- --------

Revenues $27,044 $20,672 $53,220 $39,172 Cost of revenues 4,328 4,042 8,564 7,656 ---------- -------- --------- -------- Gross Margin 22,716 16,630 44,656 31,516

Operating expenses: Research and development 5,215 5,469 9,945 11,008 Sales and marketing 8,689 7,404 17,999 15,748 General and administrative 4,052 3,143 7,630 6,226 Amortization of acquired intangible assets 17 17 34 34 Stock-based compensation 60 53 132 105 Restructuring and related charges 0 (60) 0 (60) ---------- -------- --------- -------- Total operating expenses 18,033 16,026 35,740 33,061 ---------- -------- --------- --------

Income (loss) from operations 4,683 604 8,916 (1,545)

Interest and other income (expense), net (44) (528) (741) (367) ---------- -------- --------- -------- Income (loss) before income taxes 4,639 76 8,175 (1,912)

Income tax expense 1,649 683 2,943 1,133 ---------- -------- --------- -------- Net income (loss) $ 2,990 $ (607) $ 5,232 $(3,045) ========== ======== ========= ========

Income (loss) per share: Basic $0.12 $(0.02) $0.21 $(0.12) Diluted $0.12 $(0.02) $0.20 $(0.12) Shares used in income (loss) per share calculation: Basic 24,786 24,435 24,692 24,384 Diluted 25,873 24,435 25,546 24,384

PHOENIX TECHNOLOGIES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)

Six Months Ended March 31, ----------------------- 2005 2004 ----------- ---------- Cash flows from operating activities: Net income (loss) $ 5,232 $ (3,045) Reconciliation to net cash provided by operating activities: Depreciation and amortization 3,337 3,882 Stock-based compensation 133 105 Loss from disposal of fixed assets - 268 Deferred income tax 370 (9)

Change in operating assets and liabilities: Accounts receivable (11,905) (4,750) Prepaid royalties and maintenance 1,149 1,361 Other assets 2,321 123 Accounts payable (1,021) (663) Accrued compensation and related liabilities 1,275 (2,052) Deferred revenue (3,602) 15,483 Income taxes (104) (1,033) Accrued restructuring charges (434) (613) Other accrued liabilities 1,126 (690) ----------- ---------- Net cash (used in) provided by operating activities (2,123) 8,367 ----------- ----------

Cash flows from investing activities: Proceeds from sale of investments 85,737 86,939 Purchases of investments (78,310) (83,945) Proceeds from the sale of fixed assets - 38 Acquisition of Businesses, Net of Cash and Cash Equivalents (500) - Purchases of property and equipment (1,394) (593) ----------- ---------- Net cash provided by investing activities 5,533 2,439 ----------- ----------

Cash flows from financing activities: Proceeds from stock purchases under stock option and stock purchase plans 1,927 641 ----------- ---------- Net cash provided by financing activities 1,927 641 ----------- ----------

Effect of exchange rate changes on cash and cash equivalents 1,187 144 ----------- ---------- Net increase in cash and cash equivalents 6,524 11,591 Cash and cash equivalents at beginning of period 38,898 26,601 ----------- ---------- Cash and cash equivalents at end of period $ 45,422 $ 38,192 =========== ==========

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CONTACT: Phoenix Technologies Ltd. Randall Bolten, 408-570-1000 Investor_Relations@phoenix.com or Sapphire Investor Relations, LLC Maria Riley, 408-570-1319 Investor_Relations@phoenix.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE SOFTWARE NETWORKING INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Phoenix Technologies Ltd.

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