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/