CyberGuard Reports Second Quarter Financial Results

This is the tenth consecutive quarter of sequential revenue growth for the
Company. For the first six months of fiscal year 2005, revenues were $32.2
million, an increase of $11.9 million, or 59%, over revenues of $20.3 million
for the first six months of last year.
On a GAAP basis, inclusive of acquisition-related costs, the company
reported a net income of $1.0 million, or $0.03 per diluted share, for the
second quarter of fiscal 2005, which compares to a net income of $2.3 million,
or $0.08 earnings per diluted share, for the same quarter of the prior year.
For the first six months of fiscal 2005, GAAP net income totaled $1.0 million
compared to GAAP net income of $3.5 million for the first six months of fiscal
2004. GAAP earnings per diluted share for the first six months of fiscal 2005
were $0.03, as compared to earnings per diluted share of $0.12 for the first
six months of fiscal 2004.
On a non-GAAP or pro forma basis (net of acquisition charges as outlined
in the attached financial statement that reconciles GAAP and pro forma
numbers), net income for the second quarter of fiscal year 2005 was $2.0
million, or $0.06 per diluted share, as compared to $2.6 million, or $0.09 per
diluted share, for the second quarter of fiscal year 2004. For the first six
months of fiscal year 2005, pro forma net income totaled $3.1 million, or
$0.09 per diluted share, compared to pro forma net income of $3.9 million, or
$0.14 per diluted share, for the first six months of fiscal year 2004.
According to Pat Clawson, chairman and chief executive officer,
"Investments in our products, sales channels, global infrastructure and
strategic acquisitions are starting to gain real traction, and the impact is
evident in our results for the second quarter. With the Webwasher acquisition
we are successfully cross-selling products throughout the world, most notably
in Germany, where our Webwasher channels have allowed us to significantly
increase firewall sales year-to-date."
Clawson added, "As CyberGuard continues to establish our enterprise
security leadership position, we'll be focused on accelerating our firewall
and Webwasher cross-selling efforts, not only in Europe but throughout the
world, adding strong channel partners, and increasing sales of our new TSP
firewall product line. The combination of the TSP firewall appliances with
our new Global Command Center gave us the edge over two key competitors in a
major win during the quarter.
"We'll be introducing a new firewall appliance in the third quarter, a
further enhancement to our TSP product line that will offer application layer
security at breakthrough speeds," he added. "This will specifically address a
major challenge for IT security professionals: the slowdown that networks
experience when more robust security is added. You'll also see us
aggressively moving to offer security to the VoIP market, which we consider to
be a major opportunity. We'll continue to improve our Asia / Pacific (APAC)
management, replicating the success we've had in the Middle East and Europe.
Concluded Clawson, "Our total stream protection framework and core-to-edge
product strategy are clear differentiators as we expand more aggressively as a
comprehensive, enterprise security solutions player. Our core-to-edge
strategy heightens the value of our product suite and will continue to set
ourselves apart from the commodity players and position the Company in the
highest realm of value-added security."

Company Highlights

* Closed significant enterprise deals with Saudi Telecom and the Saudi
Ministry of Interior in the Middle East and a number of cross-selling
deals in Europe, including Russia, the United Kingdom, Italy, France,
and most particularly in Germany.

* Signed major domestic customer wins, including deals with the Hospital
Corporation of America (HCA), the Principal Financial Group, IKON
Office Products, Sprint and Sanmina.

* Signed 92 Global Command Center licenses in the first half of the year,
50% ahead of goal for the entire year.

* Added six new security VARs and one distributor in North America.

* Continued to build out CyberGuard's APAC management and infrastructure
particularly in Japan.

* Recruited Mark Reese, former executive vice president at GSI Commerce,
as chief operating officer.

* Appointed Dr. Horst Joepen, former chief executive officer of
CyberGuard's Webwasher subsidiary, to senior vice president, strategic
alliances.

* Named Michael J. Jacobs, currently director of cyber and national
security at SRA International and formerly director of information
assurance at the National Security Agency, to the Company's board of
directors.

Financial Highlights

* Results exceeded guidance for both quarterly revenues and GAAP and pro
forma earnings per diluted share.

* On a sequential basis, pro forma gross profit for the quarter increased
to $12.0 million, or 73% of fiscal second quarter 2005 revenues, versus
$11.1 million, or 71% of first quarter fiscal 2005 revenues.

* Net cash from operations increased to $942,000 for the first six months
of 2005 compared to net cash from operations of $728,000 for the first
half of fiscal year 2004.

* Cash related balances were $13.9 million and total current assets were
$35.6 million at the end of December 31, 2004.

* Current and long-term liabilities were $34.5 million at the end of
December 31, 2004.

Financial Outlook
The following statements are based on current expectations. These
statements are forward-looking, and actual results may differ materially.
The Company estimates that its revenues for the quarter ending March 31,
2005, will be in the range of $16.7 million to $17.5 million and anticipates
that its pro forma earnings per diluted share, excluding acquisition related
charges, will be between $0.04 to $0.07.
The investor conference call will take place today at 10.00 a.m. Eastern
Standard Time via live web cast on CyberGuard's web site at
http://www.cyberguard.com. To participate by telephone, the dial-in number is
877-560-3200 and the conference ID number is 3387872; the international dial-
in is 706-645-9750 and the conference ID number is 3387872. Investors are
advised to dial-in at least five minutes prior to the call to register. The
web cast will be archived for seven days: from 12:00 p.m. Tuesday, January 25,
until 12.00 p.m. Tuesday, February 1, 2005. The archived recording may also
be accessed by dialing 706-645-9291 (North America and international) and
requesting conference ID number 3387872.

About CyberGuard Corporation
CyberGuard Corporation (Nasdaq: CGFW) is a global provider of security
solutions that protect the business-critical information assets of Global
2,000 enterprises and government organizations. The company's firewall/VPN,
Total Stream Protection(TM), Global Command Center(TM) and Webwasher(R)
product suites comprise a comprehensive, integrated security system which
offers highly adaptive, scalable solutions that guard against network
intrusion and content-based vulnerabilities, detecting and eliminating
security threats in real-time for performance optimization. CyberGuard has
deployed more than 250,000 products in organizations around the world to
maintain the health and integrity of their enterprises. Headquartered near
Boca Raton, Florida, the company has branch offices and training centers
around the globe.

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