OPNET Reports Results for Fiscal Q3 2005; Revenue of $16.1 Million and

OPNET Reports Results for Fiscal Q3 2005; Revenue of $16.1 Million and EPS of $0.01

    Business Editors/Software Writers

    BETHESDA, Md.--(BUSINESS WIRE)--Jan. 31, 2005--OPNET Technologies, Inc. (NASDAQ:OPNT), a leading provider of management software for networks and applications, today announced financial results for its third fiscal quarter ended December 31, 2004. Revenue for the quarter ended December 31, 2004 was $16.1 million compared to $14.4 million for the same quarter in the prior year. Earnings per share for the third quarter of fiscal 2005 was $0.01 on a diluted basis, compared to $0.08 in the same quarter of the prior year.
    For the nine months ended December 31, 2004, revenues were $47.1 million compared to $40.1 million for the same period in the prior fiscal year. Earnings per share for the nine months ended December 31, 2004 was $0.13 on a diluted basis, compared to $0.18 for the same period in the prior fiscal year.
    OPNET Chairman & CEO, Marc A. Cohen, stated, "We are very pleased to report strong results for fiscal Q3 of 2005. We exceeded our revenue guidance, and generated a record increase in deferred revenue. Our performance was not driven by any single deal, but rather results from consistent execution across the sales organization. Our EPS, although within guidance, was negatively impacted by a reserve for an IRS examination of our R&D tax credit for fiscal years 2002 and 2003, and also by increased consulting costs associated with our Sarbanes-Oxley implementation efforts. The degree to which Sarbanes-Oxley implementation costs will negatively impact EPS will significantly decrease following Q4 of 2005. Overall, we are very encouraged by our revenue visibility."

    Third Quarter Fiscal Year 2005 Financial Outlook

    OPNET expects fiscal fourth quarter revenue to be between $16.2 and $17.0 million, and diluted earnings to be between breakeven and 3 cents per share. These amounts represent management's current expectations about the Company's future financial performance, based on information available at this time.

    Financial Highlights for the Third Quarter of Fiscal 2005

--	Grew revenue 11.3% year over year to $16.1 million from $14.4 million from the third quarter of fiscal 2004. Revenue for the quarter grew sequentially 13.0% from $14.2 million from the second quarter of fiscal 2005.
--	Grew license revenue sequentially 35.8% to $7.8 million, from $5.7 million from the second quarter of fiscal 2005.
--	Increased deferred revenue to a record $16.8 million as of December 31, 2004. Deferred revenue for the quarter experienced a record sequential quarter Dollar increase of $2.7 million from the second quarter of fiscal 2005.
--	Maintained profitability despite significant increases in consulting costs associated with Sarbanes-Oxley implementation efforts, and the inclusion of a full quarter of operating expenses associated with the operations of Altaworks Corporation (which was acquired on October 6, 2004).
--	Maintained a strong balance sheet with $80.6 million in cash and marketable securities at December 31, 2004.

    The Company will hold an investor conference call on Monday, January 31, 2005 at 5:00 pm Eastern Time to review financial results for the third quarter of fiscal 2005. Investors will be able to listen to the call by dialing 877-407-9205 in the U.S. or 201-689-8054 for international callers, and entering password OPT Q305, or use the webcast at www.opnet.com, or at www.vcall.com (click on OPNT under "Today's VCalls"). Investors are advised to go to the web site at least 15 minutes early to register, download, and install any necessary audio software. Investors can listed to the archived call by calling the replay phone number at 877-660-6853 or 201-612-7415 for international callers. For replay, enter account # 1628, conference ID # 133881. The replay will be available from 7:00 pm Eastern Time January 31st through 11:59 pm Eastern Time February 4th. The webcast will be available at www.opnet.com or www.vcall.com, archived for seven days.

    About OPNET Technologies, Inc.

    Founded in 1986, OPNET Technologies, Inc. is a leading provider of management software for networks and applications. For more information about OPNET and its products, visit www.opnet.com.

    OPNET and OPNET Technologies, Inc. are trademarks of OPNET Technologies, Inc. All other trademarks are the property of their respective owners.

    Statements in this press release that are not purely historical facts, including statements about expected financial performance in future periods, constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. OPNET Technologies, Inc. ("OPNET") assumes no obligation to update these statements. Forward-looking statements are based upon information available to OPNET as of the date of this press release and involve risks and uncertainties; therefore, actual events or results may differ materially. For a discussion of risk factors that could affect OPNET's future performance, see OPNET's most recent 10-Q, filed with the Securities & Exchange Commission. These risks include, among others, the evolving nature of our market, fluctuations in customer demand, the length and variability of our sales cycle, and risks regarding our ability to successfully expand our sales force.

    Note to editors: The word OPNET is spelled with all upper-case letters.

OPNET Technologies, Inc. Condensed Consolidated Statements of Operations (unaudited)

Three Months Ended Nine Months Ended December 31, December 31, ------------------ ----------------- 2004 2003 2004 2003 --------- -------- -------- -------- (in thousands, except per share data) Revenues: New software licenses $ 7,793 $ 7,113 $21,578 $19,987 Software license updates and technical support 4,998 3,940 14,617 10,907 Professional services 3,272 3,379 10,869 9,244 --------- -------- -------- -------- Total revenues 16,063 14,432 47,064 40,138 --------- -------- -------- --------

Cost of revenues: New software licenses 202 126 578 614 Software license updates and technical support 597 445 1,734 1,188 Professional services 2,367 2,048 7,128 5,302 Amortization of acquired technology 192 125 460 375 --------- -------- -------- -------- Total cost of revenues 3,358 2,744 9,900 7,479 --------- -------- -------- --------

Gross profit 12,705 11,688 37,164 32,659 --------- -------- -------- -------- Operating expenses: Research and development 3,780 3,144 10,836 9,450 Sales and marketing 5,867 4,964 16,568 14,044 General and administrative 2,475 1,438 5,865 4,208 --------- -------- -------- -------- Total operating expenses 12,122 9,546 33,269 27,702 --------- -------- -------- --------

Income from operations 583 2,142 3,895 4,957 Interest and other income, net 326 135 787 436 --------- -------- -------- -------- Income before provision for income taxes 909 2,277 4,682 5,393 Provision for income taxes 740 658 1,979 1,666 --------- -------- -------- -------- Net income $ 169 $ 1,619 $ 2,703 $ 3,727 ========= ======== ======== ======== Basic net income per common share $ 0.01 $ 0.08 $ 0.13 $ 0.19 ========= ======== ======== ======== Diluted net income per common share $ 0.01 $ 0.08 $ 0.13 $ 0.18 ========= ======== ======== ======== Basic weighted average common shares outstanding 20,168 19,759 20,129 19,605 ========= ======== ======== ======== Diluted weighted average common shares outstanding 20,758 20,906 20,626 20,489 ========= ======== ======== ========

OPNET Technologies, Inc. Condensed Consolidated Balance Sheets (unaudited)

December 31, March 31, 2004 2004 ------------ --------- ASSETS (in thousands) Current assets: Cash and cash equivalents $ 43,029 $ 41,492 Marketable securities 37,640 40,001 ------------ --------- Total cash and marketable securities 80,669 81,493

Accounts receivable, net 13,900 10,044 Unbilled accounts receivable 2,189 2,559 Deferred income taxes, prepaid expenses and other current assets 2,503 1,772 ------------ --------- Total current assets 99,261 95,868

Property and equipment, net 6,051 6,410 Intangible assets, net 1,470 1,240 Goodwill 15,818 12,212 Deferred income taxes and other assets 620 952 ------------ --------- Total assets $ 123,220 $116,682 ============ =========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 564 $ 934 Accrued liabilities 4,378 4,218 Deferred and accrued income taxes 99 173 Deferred revenue 15,775 12,918 ------------ --------- Total current liabilities 20,816 18,243

Note payable 300 300 Deferred rent 1,101 994 Deferred revenue 982 774 ------------ --------- Total liabilities 23,199 20,311 ------------ ---------

Commitments and contingencies

Stockholders' equity: Preferred stock - - Common stock 26 26 Additional paid-in capital 78,640 77,808 Deferred compensation - (21) Retained earnings 25,365 22,661 Accumulated other comprehensive loss 90 (3) Treasury stock (4,100) (4,100) ------------ --------- Total stockholders' equity 100,021 96,371 ------------ --------- Total liabilities and stockholders' equity $ 123,220 $116,682 ============ =========

--30--JM/ph*

CONTACT: OPNET Technologies, Inc. Media Contact: Margarita Castillo, 240-497-3000 Media@opnet.com or Investor Relations: Mel Wesley, 240-497-3000 ir@opnet.com

KEYWORD: MARYLAND INDUSTRY KEYWORD: BANKING SOFTWARE NETWORKING EARNINGS CONFERENCE CALLS SOURCE: OPNET Technologies, Inc.

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