St. Bernard Software, Inc. (BULLETIN BOARD: SBSW) , a global provider of security solutions for small- and medium-sized enterprises (SMEs), today reported financial results for the nine-month and three month periods ending September 30, 2006, the company's fiscal 2006 third quarter.

The company reported third quarter revenues of $5.7 million, compared to $6.7 million in the same period last year; a net loss of $0.9 million, compared to a net profit of $0.6 million in the third quarter of 2005; net basic loss per share for the third quarter was $0.08, down from the $0.06 gain reported in the same period last year. The non-GAAP net loss was $2.0 million compared to a net profit of $0.6 million in the third quarter of 2005. Non-GAAP basic loss per share for the third quarter was $0.17 down from the basic earnings per share of $0.06 in the third quarter of 2005.

The company reported revenues of $16.5 million for the first nine months of 2006 compared to $18.1 million in the same period last year; a net loss for the first nine months of 2006 of $3.3 million, compared to a net loss of $1.7 million in the first nine months of 2005; net basic loss per share for the first nine months of 2006 was $0.31, compared to $0.18 reported in the same period last year. The non-GAAP net loss for the nine months ended September 30, 2006 was $4.4 million compared to a net loss of $1.7 million for the nine months ended September 30, 2005. Non-GAAP basic loss per share for the nine months ended September 30, 2006 was $0.41 compared to a basic loss per share for the nine months ended September 30, 2005 of $0.18. Non-GAAP numbers have been adjusted to exclude certain items, and a reconciliation of the specific adjustments to GAAP results is included in the schedule titled "Reconciliation of GAAP Unaudited Consolidated Net Income to Non-GAAP Unaudited Consolidated Net Income".

The company closed the quarter with $13 million in cash and cash equivalents. The net loss and the net loss per share amounts in 2006 include the effect of the adoption of Statement of Financial Accounting Standards ("SFAS") 123 (revised 2004), Share-Based Payment ("SFAS 123R") related to stock-based compensation. During the three and nine months ended September 30, 2006, the company recorded stock-based compensation expense of $0.5 million and $0.5 million, respectively. The company became public in the third quarter of 2006.

Commenting on the results, Vince Rossi, St. Bernard's President and CEO stated, "There were several factors that contributed to our financial results in the third quarter 2006. First, revenue in the third quarter of 2006 decreased, as compared to the prior year, reflecting a non-recurring source code license of $1.2 million recognized by the company in the third quarter of 2005. Second, we saw a decrease in sales of our legacy products, UpdateExpert and Open File Manager, primarily attributable to restructuring of our EMEA operations and the industry's continued adoption of Microsoft's back-up and patch update products."

Mr. Rossi continued, "This year has been a year of tremendous change for the company as we have invested substantial time and resources in focusing on our strategic direction and making the changes necessary to position us for future growth. In the third quarter we completed the merger with Sand Hill IT Security and became a publicly traded company. This additional funding has given us the opportunity to begin executing on our growth strategy by focusing on security solutions to the SME market."

Use of Non-GAAP Financial Information

To assist in making comparisons of current and prior period results, both non-GAAP and GAAP consolidated statements of operations are presented below. To supplement the company's results of operations presented on a GAAP basis, the company uses additional non-GAAP measures of gross profit, income from operations, net income and earnings per share adjusted to exclude certain expenses.

The company's management uses these non-GAAP measures to monitor the performance of its ongoing operations as compared to prior periods, and management believes that providing these non-GAAP measures to investors will enhance investors' understanding of the company operations, allow for potentially more meaningful comparisons of the company's operating results with prior periods, and help investors identify trends in the company's results of operations. The adjustments exclude certain non-recurring charges that do not relate to the company's operations such as a charge related to fully reserving the tax asset and gains and losses related to a warrant liability. The adjustments exclude option compensation expense related to adoption of Statement of Financial Accountings Standard ("SFAS") No. 123R.

These non-GAAP results are a primary indicator that management uses as a basis for planning and forecasting future periods. Each of these adjustments to the company's GAAP results are made with the intent of providing management and investors a more complete understanding of the company's core operations and the company's marketplace performance and result in excluding GAAP charges that management believes do not measure the performance of the company's current operations. By excluding these charges, management believes that it and its investors can more meaningfully compare performance of the company's current operations with historical operating results.

To the extent that the adjustments exclude recurring items, the non-GAAP results may not fully account for the cost of purchased businesses over time. However, information with regard to such recurring items are provided in the GAAP results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for gross profit, income from operations, net income or earnings per share prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies.

Non-GAAP Results

The non-GAAP consolidated results of operations for the quarter and nine months ended September 30, 2006 exclude option compensation expense related to adoption of Statement of Financial Accountings Standard ("SFAS") No. 123R. The non-GAAP results for the quarter and nine months ended September 30, 2006, exclude the warrant liability gain or loss. The non-GAAP results for the quarter ended and nine months ended September 30, 2006 exclude the charge to fully reserve the deferred tax asset. A reconciliation of specific adjustments to GAAP results is included in the schedule titled "Reconciliation of GAAP Unaudited Consolidated Net Income to Non-GAAP Unaudited Consolidated Net Income."

Non-GAAP Revenues for the third quarter were $5.7 million compared to revenues of $6.7 million for the third quarter of 2005. Revenues for the nine months ended September 30, 2006 were $16.5 million, compared to revenues of $18.1 million for the same period last year.

Non-GAAP operating loss for the third quarter was $1.9 million, compared to an operating profit of $0.7 million for the third quarter of 2005. Non-GAAP operating loss for the nine months ended September 30, 2006 was $4.2 million, compared to an operating loss of 1.4 million for the same period last year.

GAAP Results

The operating loss for the third quarter of 2006 was $2.4 million, compared to an operating profit of $0.7 million for the same period last year. The operating loss for the nine months ended September 30, 2006 was $4.7 million, compared to an operating loss of $1.4 million for the same period last year.

Cash and cash equivalents totaled $13.0 million at September 30, 2006, compared to less than $0.1 million of cash and cash equivalents at December 31, 2005.

Guidance

Mr. Rossi concluded, "For the fourth quarter of 2006, we currently anticipate revenues to be in the range of $5.5 - $6.0 million.

Conference Call Information

Conference Call: Today, Wednesday, November 8th at 2:00 p.m. PT

(5:00 p.m. ET)

Dial In Numbers: 866-250-3615 (US and Canada)

303-262-2193 (International)

Company name, "St. Bernard."

Webcast: www.stbernard.com [1] (under the Investor Relations

section.)

Replay Information: 800-405-2236 (US and Canada)

303-590-3000 (International)

passcode: 11071629#

Available starting two hours after call until

Tuesday November 14, 2006 at 11:59pm

About St. Bernard Software

St. Bernard Software (BULLETIN BOARD: SBSW) is a global provider of security solutions, including Internet and email filtering appliances, patch management and data backup solutions. St. Bernard Software also provides the SME market with a complete line of hosted security solutions, including email, I'm and URL filtering services.

Deployed across millions of computers worldwide, the company's award- winning products deliver innovative security solutions that offer the best combination of ease-of-use, performance and value. Established in 1995 with headquarters in San Diego, CA and an international office in the United Kingdom, St. Bernard Software sells and supports its products directly and through solution partners worldwide. For more information, please visit www.stbernard.com [2].