Published on May 15, 2007
SCM
Microsystems Reports First Quarter 2007 Results
FREMONT,
Calif., May 15 /PRNewswire-FirstCall/ -- SCM Microsystems, Inc. (Nasdaq:
SCMM,
Prime Standard: SMY), a leading provider of solutions that open the Digital
World, today announced results for the first quarter ended March 31,
2007.
Highlights
of the fiscal 2007 first quarter include:
--
Year
over year revenue growth of 56% in SCM's PC Security business, based
on
strong sales of smart card readers for HSPD-12 and contactless applications;
--
Gross
margin above 40% for the second quarter in a row; and
--
Income
from continuing operations of $134,000.
First
Quarter Results
Revenues
from continuing operations in the first quarter of 2007 were $8.5 million,
up
14% from revenues of $7.4 million in the first quarter of 2006. By product
segment, first quarter 2007 revenues included $7.1 million from sales of
smart
card readers and other products for secure network and physical access, compared
with sales of $4.6 million in the first quarter of 2006; and $1.4 million
from
sales of OEM digital media reader technology, compared with sales of $2.9
million in the year ago quarter.
Gross
margin in the first quarter of 2007 was 44%, compared with gross margin of
36%
in the first quarter of 2006. The increase in gross margin reflects improvements
in inventory and cost management implemented over the last few months, which
have stabilized gross margin levels at or around 40% per quarter.
Operating
expenses in the first quarter of 2007, as reported in accordance with GAAP,
were
$3.9 million, including amortization of intangibles of $0.2 million. This
represents a decrease of 30% from operating expenses of $5.5 million in the
first quarter of 2006, which included amortization of intangibles of $0.2
million and restructuring and other charges of $0.4 million. Operating loss
for
the first quarter of 2007, as reported in accordance with GAAP, was $(114,000),
compared with operating loss of $(2.8) million in the year ago
quarter.
Earnings
before interest, taxes, depreciation and amortization (EBITDA) in the first
quarter of 2007 was $40,000, compared with EBITDA of $(2.7) million in the
first
quarter of 2006. (See reconciliation of EBITDA to GAAP accounting on page
5 of
this release.)
As
reported in accordance with GAAP, income from continuing operations in the
first
quarter of 2007 was $134,000, or $0.01 per share, compared with loss from
continuing operations of $(2.7) million, or $(0.17) per share, in the first
quarter of 2006.
Cash
and
cash equivalents at March 31, 2007 were $34.4 million, compared with $34.9
million at December 31, 2006.
Robert
Schneider, chief executive officer of SCM Microsystems, commented, "Our position
as a trusted provider for U.S. government security projects yielded additional
orders for smart card readers in the first quarter as various federal agencies
begin to implement Homeland Security Presidential Directive-12 (HSPD-12).
We
also supplied an existing customer in Asia with significant volumes of
contactless readers for their internal employee authentication program as
well
as their customers' needs. While we believe the more substantial ramp in
demand
for smart card readers will not take place until the second half of this
year,
we are very pleased with the strength we saw in reader sales in the first
quarter."
"We
are
also pleased with the significant reductions we made to cost and expense
levels
in fiscal 2006, which continue to benefit us in 2007," continued Schneider.
"Our
restructuring and consolidation actions in 2006 resulted in a 30% decrease
in
operating expenses year-over-year, which we expect to be able to maintain
based
on our current model of operations. These lower cost and expense levels and
better inventory management, in turn, helped us to achieve both year-over-year
and sequential improvements to gross margin across our product portfolio.
We
believe we are now very competitively positioned to capitalize on the tremendous
opportunities for smart card readers in the government, financial and enterprise
sectors, both today and in the future."
Guidance
The
Company continues to expect to achieve annual revenue growth of 15% to 20%
in
2007, which would result in revenues between $38.6 million and $40.3 million
for
the year ended December 31, 2007. This revenue growth estimate is based on
the
Company's current expectations for flat to slightly lower sales of smart
card
readers in the first half of the 2007 fiscal year compared to the prior year
period and anticipated increases in sales of the Company's smart card readers
in
the second half of the year from the projected expansion of various government
and enterprise security programs using smart cards, such as e-passport, e-health
and secure access for employees. The Company further expects quarterly gross
margin of approximately 40% and base operating expenses to be under $4 million
per quarter for the remainder of 2007, which are expected to result in the
realization of an operating profit for 2007 as a whole.
Additional
Information
SCM
does
not plan to hold a conference call or webcast to discuss the results of its
2007
first quarter. For more information on SCM's first quarter results, please
see
the Company's Quarterly Report on Form 10-Q for quarter ended March 31, 2007,
filed with the U.S. Securities and Exchange Commission.
About
SCM
Microsystems
SCM
Microsystems is a leading supplier of solutions that open the Digital World
by
enabling people to conveniently access digital content and services. The
company
develops, markets and sells the industry's broadest range of smart card reader
technology for secure PC, network and physical access and digital media readers
for transfer of digital content to OEM customers in the government, financial,
enterprise, consumer electronics and photographic equipment markets worldwide.
Global headquarters are in Ismaning, Germany. For additional information,
visit
the SCM Microsystems web site at www.scmmicro.com.
NOTE:
This press release contains forward-looking statements within the meaning
of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the
Securities Exchange Act of 1934, as amended. These include, without limitation,
our statements regarding our expectations that we will achieve annual revenue
growth of 15%-20% in fiscal 2007, that we will achieve quarterly gross margin
of
approximately 40% and will maintain base expense levels under $4 million
per
quarter for the remainder of 2007, and that we will record operating profit
for
the full year 2007; and our expectation for increased revenues from sales
of our
smart card readers for financial, government and enterprise security programs
in
the second half of 2007. These statements are subject to risks and uncertainties
which may cause actual results to differ materially from those contemplated
herein. Our financial results may not meet expectations. Some of the risks
and
uncertainties that could cause our actual business and operating results
to
differ include, but are not limited to, our ability to grow market share
and
revenues based on a strategy of participating in specific early stage markets;
our ability to successfully develop and introduce new products that satisfy
the
evolving and increasingly complex requirements of customers; the markets
in
which we participate or target may not grow, converge or standardize at
anticipated rates or at all, including the government and enterprise security
markets which we are targeting; we may not successfully compete in the markets
in which we participate or target; competitors could take market share or
create
pricing pressure; and we may not be successful in maintaining operating expenses
at current or lower levels. For a discussion of further risks and uncertainties
related to our business, please refer to our public company reports, including
our Annual Report on Form 10-K and our amended Annual Report on Form 10-K/A
for
the year ended December 31, 2006, filed with the U.S. Securities and Exchange
Commission.
All
trade
names are trademarks or registered trademarks of theirrespective
holders.
SCM
MICROSYSTEMS, INC.
Condensed
Consolidated Statements of Operations
(in
thousands, except per share data)
(unaudited)
|
Three
months ended
|
|||||||
|
March
31,
|
|||||||
|
2007
|
|
2006
|
|||||
|
Net
revenue
|
$
|
8,457
|
$
|
7,427
|
|||
|
Cost
of revenue
|
4,717
|
4,777
|
|||||
|
Gross
margin
|
3,740
|
2,650
|
|||||
|
Operating
expenses:
|
|||||||
|
Research
and development
|
720
|
969
|
|||||
|
Sales
and marketing
|
1,559
|
1,839
|
|||||
|
General
and administrative
|
1,400
|
2,084
|
|||||
|
Amortization
of intangible assets
|
175
|
160
|
|||||
|
Restructuring
and other charges
|
--
|
422
|
|||||
|
Total
operating expenses
|
3,854
|
5,474
|
|||||
|
Loss
from operations
|
(114
|
)
|
(2,824
|
)
|
|||
|
Interest
and other income, net
|
308
|
134
|
|||||
|
Income
(loss) from continuing operations
|
|||||||
|
before
income taxes
|
194
|
(2,690
|
)
|
||||
|
Provision
for income taxes
|
(60
|
)
|
(11
|
)
|
|||
|
Income
(loss) from continuing operations
|
134
|
(2,701
|
)
|
||||
|
Loss
from discontinued operations,
|
|||||||
|
net
of income taxes
|
(17
|
)
|
(942
|
)
|
|||
|
Gain
on sale of discontinued operations,
|
|||||||
|
net
of income taxes
|
23
|
21
|
|||||
|
Net
income (loss)
|
$
|
140
|
$
|
(3,622
|
)
|
||
|
Income
(loss) per share from continuing
|
|||||||
|
operations:
|
|||||||
|
Basis
and diluted
|
$
|
0.01
|
$
|
(0.17
|
)
|
||
|
Loss
per share from discontinued operations:
|
|||||||
|
Basic
and diluted
|
--
|
$
|
(0.06
|
)
|
|||
|
Net
income (loss) per share:
|
|||||||
|
Basic
and diluted
|
$
|
0.01
|
$
|
(0.23
|
)
|
||
|
Shares
used in computing income (loss) per share:
|
|||||||
|
Basic
|
15,700
|
15,593
|
|||||
|
Diluted
|
15,742
|
15,593
|
|||||
Note:
Financial results contained in this release reflect continuing operations
of the Company's PC Security and Flash Media Reader businesses only.
The
Company completed the sale of its Digital TV solutions business in May
2006;
therefore, financial results for the Digital TV solutions business are
being
accounted for as discontinued operations.
SCM
MICROSYSTEMS, INC.
Reconciliation
of EBITDA Calculation to GAAP Accounting
(in
thousands)
(unaudited)
|
Three
Months Ended
|
|
||||||
|
|
|
March
31,
|
|
||||
|
|
|
2007
|
|
2006
|
|||
|
EBITDA
|
$
|
40
|
$
|
(2,660
|
)
|
||
|
Interest
income
|
398
|
265
|
|||||
|
(Provision)
benefit for income taxes
|
(60
|
)
|
(11
|
)
|
|||
|
Depreciation
and amortization
|
(244
|
)
|
(295
|
)
|
|||
|
Net
income (loss) from continuing operations
|
$
|
134
|
$
|
(2,701
|
)
|
||
We
conduct a significant amount of our business in Europe, we are dually traded
on
the U.S. Nasdaq and German Prime Standard stock exchanges and the majority
of
our investors are German-based. In addition, we have recently moved our
corporate headquarters from the U.S. to Germany. Based on these factors,
we have
determined that EBITDA is a relevant measure of performance for our company,
as
it is a metric commonly used among companies doing business in Europe and
is
therefore a helpful tool for communicating our performance to our investors
and
analysts and for comparisons to other companies in Europe and within our
industry.
EBITDA
should be considered in addition to, but not as a substitute for, other measures
of financial performance reported in accordance with accounting principles
generally accepted in the United States. While we believe that EBITDA, as
defined above, is useful within the context described above, it is in fact
incomplete and not a measure that should be used to evaluate the full
performance of the Company or its prospects. Such evaluation needs to consider
all of the complexities associated with our business including, but not limited
to, how past actions are affecting current results and how they may affect
future results, how we have chosen to finance the business and how regulations
and the other aforementioned items affect the final amounts that are or will
be
available to shareholders as a return on their investment. Net income determined
in accordance with U.S. GAAP is the most complete measure available today
to
evaluate all elements of our performance. Similarly, our Consolidated Statement
of Cash Flows, as presented in our most recent filings with the Securities
and
Exchange Commission, provide the full accounting for how we have decided
to use
resources provided to us from our customers, lenders and
shareholders.
SCM
MICROSYSTEMS, INC.
Condensed
Consolidated Balance Sheets
(in
thousands)
(unaudited)
|
March
31,
|
December
31,
|
||||||
|
ASSETS
|
2007
|
2006
|
|||||
|
Current
assets:
|
|
|
|||||
|
Cash,
cash equivalents and short-term
|
|||||||
|
investments
|
$
|
36,440
|
$
|
36,902
|
|||
|
Accounts
receivable, net
|
6,089
|
6,583
|
|||||
|
Inventories
|
2,821
|
1,927
|
|||||
|
Other
current assets
|
1,780
|
2,489
|
|||||
|
Total
current assets
|
47,130
|
47,901
|
|||||
|
Property,
equipment and other assets, net
|
3,291
|
3,182
|
|||||
|
Intangibles,
net
|
97
|
272
|
|||||
|
Total
assets
|
$
|
50,518
|
$
|
51,355
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
4,270
|
$
|
4,572
|
|||
|
Accrued
expenses and other current
|
|||||||
|
liabilities
|
8,530
|
11,362
|
|||||
|
Total
current liabilities
|
12,800
|
15,934
|
|||||
|
Long-term
income taxes payable
|
168
|
--
|
|||||
|
Deferred
tax liability
|
105
|
103
|
|||||
|
Stockholders'
equity
|
37,445
|
35,318
|
|||||
|
Total
liabilities and stockholders'
|
|||||||
|
equity
|
$
|
50,518
|
$
|
51,355
|
|||
| SOURCE |
SCM
Microsystems, Inc.
|
-0- 05/15/2007
/CONTACT:
Stephan Rohaly, Chief Financial Officer, +49 89 95 95 5101, srohaly@scmmicro.de,
or Darby Dye, Investor Relations-US, +1
510
249 4883, ddye@scmmicro.com,
both of SCM Microsystems, Inc./
/Web
site: http://www.scmmicro.com/