Published on August 12, 2008
|
Contacts:
|
|
|
Stephan
Rohaly
|
Darby
Dye
|
|
Chief
Financial Officer
|
Investor
Relations-US
|
|
+49
89 95 95 5101
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510
249 4883
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|
srohaly@scmmicro.de
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ddye@scmmicro.com
|
SCM
MICROSYSTEMS REPORTS SECOND QUARTER 2008 RESULTS
Ismaning,
Germany – August 12, 2008 –
SCM Microsystems, Inc. (Nasdaq: SCMM, Prime Standard: SMY), a leading provider
of solutions that open the Digital World, today announced results for the second
quarter ended June 30, 2008.
Revenues
from continuing operations in the second quarter of 2008 were $6.5 million,
up
40% from revenues of $4.6 million in the second quarter of 2007. Revenues for
the first six months of 2008 were $13.0 million, down slightly from revenues
of
$13.1 million for the first six months of 2007. By product segment, second
quarter 2008 revenues included $4.9 million from sales of smart card readers
and
other products for secure network and physical access, compared with sales
of
$3.9 million in the second quarter of 2007; and $1.6 million from sales of
original equipment manufacturer (OEM) digital media reader technology, compared
with sales of $0.8 million in the second quarter of 2007.
In
the
second quarter of 2008, sales of the Company’s smart card reader products
continued to be impacted by weak demand from U.S. government-based smart card
authentication programs. Additionally, demand continued to shift away from
external reader devices towards readers embedded within laptops and keyboards.
Lower U.S. sales of SCM’s smart card readers were offset by higher sales in Asia
of interface chips for embedded readers, as well as strong sales in Europe
of
smart card readers, which were balanced across the enterprise, government and
small business markets and distributed among several countries. Sales of
CHIPDRIVE® business productivity solutions were once again strong in the
quarter, and SCM’s new contactless readers comprised a significant proportion of
smart card reader sales.
“There
were many signs in the second quarter that our strategy to diversify and expand
our customer base is beginning to yield good results,” said Felix Marx, chief
executive officer of SCM Microsystems. “Increases in both sales levels and the
number of customers in Europe indicate the success of our efforts to expand
sales of our CHIPDRIVE productivity solutions into new geographic markets,
and
the effectiveness of market development activities in the enterprise and
e-government sectors.”
Gross
margin in the second quarter of 2008 was 43%, compared with gross margin of
29%
in the second quarter of 2007. The increase in gross margin compared
with the prior year primarily reflects
higher revenue levels in the 2008 period, a more favorable mix of higher margin
products, including CHIPDRIVE solutions, and product cost reductions.
-
More -
Operating
expenses in the second quarter of 2008, as reported in accordance with GAAP,
were $5.1 million, including $0.2 million in severance costs, compared with
$5.4
million in the second quarter of 2007, which included amortization of
intangibles of $0.1 million and severance and other costs of $1.4 million
related to the resignation of the Company’s former CEO in June 2007. Higher base
operating expenses in the second quarter of 2008 primarily reflect the recent
investment in new sales resources in Latin America, Asia, Europe and the U.S.
to
support the Company’s strategy to diversify and expand its sales base, as well
as increased spending on new product development.
Operating
loss for the second quarter of 2008, as reported in accordance with GAAP, was
$(2.3) million, compared with operating loss of $(4.1) million in the year
ago
quarter.
Earnings
before interest, taxes, depreciation and amortization (EBITDA) in the second
quarter of 2008 was $(2.1) million, compared with EBITDA of $(3.9) million
in
the second quarter of 2007. (See reconciliation of EBITDA to GAAP accounting
contained within this press release.)
As
reported in accordance with GAAP, loss from continuing operations in the second
quarter of 2008 was $(2.0) million, or $(0.13) per share, compared with loss
from continuing operations of $(3.7) million, or $(0.23) per share, in the
second quarter of 2007.
Cash,
cash equivalents and short-term investments at June 30, 2008 were $28.0 million,
compared with $28.7 million at March 31, 2008.
Strategic
Update
“In
May,
we announced our strategy to target the worldwide financial services and
enterprise markets with new contactless reader products,” said Marx.
“Contactless technology is changing the way people travel, work, and perform
everyday transactions such as purchasing goods and services. SCM has a unique
opportunity to establish itself as a significant provider of contactless devices
for emerging applications, with our strong background in security, a talented
and experienced team and an innovative vision. We have already delivered our
first contactless reader, which in only one quarter has begun to generate
significant sales. We are encouraged by our progress and remain focused on
developing additional contactless solutions and building the sales and marketing
capabilities to generate high margin, sustainable growth.”
Guidance
for 2008
For
the
second half of 2008, the Company expects to achieve revenue growth between
10%
and 27% compared to the second half of 2007. Taken together with sales for
the
first half of 2008, the Company therefore expects to achieve revenue growth
of
5% to 15% for the year as a whole, which would result in total revenues of
$32
million to $35 million for the full year. In May 2008, the Company previously
announced expected revenue growth of 25-35% and revenue of $38 million to $40
million for the year as a whole. The decrease in expected revenue compared
with
the guidance given in May is primarily due to weaker demand and the faster
than
expected shift to embedded smart card readers in the U.S. government market.
The
Company’s projections of revenue growth are based on the release of new products
currently being prepared for release, under development or recently released,
which are forecast to begin generating increased sales in the second half of
2008. The Company further expects base operating expenses of approximately
$20
million to $21 million in 2008, including anticipated further investments in
sales and marketing resources and in new product development to address growth
initiatives. Within these ranges, the Company currently expects to record
operating and net loss from continuing operations for the full year, rather
than
the announced expectation in May 2008 to record operating and net profit for
the
full year.
Page
2 of
6
Additional
Information
SCM
does
not plan to hold a conference call or webcast to discuss the results of its
2008
second quarter. For more information on SCM’s second quarter results, please see
the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008,
filed with the U.S. Securities and Exchange Commission.
About
SCM Microsystems
SCM
Microsystems is a leading provider 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 contained above
regarding our expectations for the
Company’s
second
half and full fiscal year 2008,
including specifically
our statements regarding our expectations that we will achieve revenue growth
of
10% to 27% in the second half of 2008 and revenue growth of 5% to 15% in the
full year 2008 compared to prior year levels, based on sales of new contactless
smart card reader products in the second half of 2008; that base operating
expenses will be between $20 million and $21 million in 2008; and that we will
record operating and net loss for the full year 2008. 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 revenues based on a strategy of expanding our sales into new
geographic markets and on diversifying and growing our customer base; our
ability to successfully develop and introduce new products, particularly
contactless reader products, that satisfy the evolving and increasingly complex
requirements of customers; sales of smart card readers to the U.S. government
market may decline faster than currently expected; sales
to
a relatively small number of customers historically have accounted for a
significant percentage of our revenues; the
markets in which we participate or target may not grow, converge or standardize
at anticipated rates or at all, including the government, financial and
enterprise security markets that 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 our operating expenses may not
be
at levels that support profitability. 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 for the year ended December
31, 2007 and subsequent reports, filed with the U.S. Securities and Exchange
Commission
###
Note:
CHIPDRIVE is a registered trademark of SCM Microsystems, Inc. All trade names
are trademarks or registered trademarks of their respective
holders.
– FINANCIALS
FOLLOW –
Page
3 of
6
SCM
MICROSYSTEMS, INC.
Condensed
Consolidated Statements of Operations
(in
thousands, except per share data)
(unaudited)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||
|
Revenues
|
$
|
6,520
|
$
|
4,647
|
$
|
12,984
|
$
|
13,104
|
|||||
|
Cost
of revenues
|
3,697
|
3,314
|
7,478
|
8,031
|
|||||||||
|
Gross
profit
|
2,823
|
1,333
|
5,506
|
5,073
|
|||||||||
|
Operating
expenses:
|
|||||||||||||
|
Research
and development
|
1,043
|
792
|
2,078
|
1,512
|
|||||||||
|
Sales
and marketing
|
2,569
|
1,618
|
4,730
|
3,177
|
|||||||||
|
General
and administrative
|
1,518
|
2,879
|
3,021
|
4,279
|
|||||||||
|
Amortization
of intangible assets
|
0
|
97
|
0
|
272
|
|||||||||
|
Total
operating expenses
|
5,130
|
5,386
|
9,829
|
9,240
|
|||||||||
|
Loss
from operations
|
(2,307
|
)
|
(4,053
|
)
|
(4,323
|
)
|
(4,167
|
)
|
|||||
|
Interest
and other income, net
|
330
|
412
|
824
|
720
|
|||||||||
|
Loss
from continuing operations before income taxes
|
(1,977
|
)
|
(3,641
|
)
|
(3,499
|
)
|
(3,447
|
)
|
|||||
|
Provision
for income taxes
|
(1
|
)
|
(32
|
)
|
(48
|
)
|
(92
|
)
|
|||||
|
Loss
from continuing operations
|
(1,978
|
)
|
(3,673
|
)
|
(3,547
|
)
|
(3,539
|
)
|
|||||
|
Income
(loss) from discontinued operations
|
(26
|
)
|
(102
|
)
|
(151
|
)
|
(119
|
)
|
|||||
|
Gain
on sale of discontinued operations
|
496
|
1,530
|
509
|
1,553
|
|||||||||
|
Net
income (loss)
|
$
|
(1,508
|
)
|
$
|
(2,245
|
)
|
$
|
(3,189
|
)
|
$
|
(2,105
|
)
|
|
|
Loss
per share from continuing operations:
|
|||||||||||||
|
Basic
and diluted
|
$
|
(0.13
|
)
|
$
|
(0.23
|
)
|
$
|
(0.22
|
)
|
$
|
(0.23
|
)
|
|
| Gain (loss) per share from discontinued operations: | |||||||||||||
|
Basic
and Diluted
|
$
|
0.03
|
$
|
0.09
|
$
|
0.02
|
$
|
0.09
|
|||||
|
Net
income (loss) per share:
|
|||||||||||||
|
Basic
and Diluted
|
$
|
(0.10
|
)
|
$
|
(0.14
|
)
|
$
|
(0.20
|
)
|
$
|
(0.14
|
)
|
|
|
Shares
used in computing loss per share:
|
|||||||||||||
|
Basic
and Diluted
|
15,744
|
15,730
|
15,742
|
15,715
|
|||||||||
Page
4 of
6
SCM
MICROSYSTEMS, INC.
Reconciliation
of EBITDA Calculation to GAAP Accounting
(in
thousands)
(unaudited)
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||
|
EBITDA
|
$
|
(2,080
|
)
|
$
|
(3,882
|
)
|
$
|
(3,816
|
)
|
$
|
(3,842
|
)
|
|
|
Interest
income
|
174
|
413
|
469
|
811
|
|||||||||
|
Provision
for income taxes
|
(1
|
)
|
(32
|
)
|
(48
|
)
|
(92
|
)
|
|||||
|
Depreciation
and amortization
|
(71
|
)
|
(172
|
)
|
(152
|
)
|
(416
|
)
|
|||||
|
Net
loss from continuing operations
|
$
|
(1,978
|
)
|
$
|
(3,673
|
)
|
$
|
(3,547
|
)
|
$
|
(3,539
|
)
|
|
We
conduct a significant amount of our business in Europe, we are dually traded
on
the U.S. Nasdaq Global Market and the Prime Standard of the Frankfurt exchange
and the majority of our investors are German-based. In addition, our corporate
headquarters are in Germany. Based on these factors, we have determined that
EBITDA, as defined above, is a relevant measure of performance for the 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 (“GAAP”). While we believe that EBITDA
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 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.
Page
5 of
6
SCM
MICROSYSTEMS, INC.
Condensed
Consolidated Balance Sheets
(in
thousands)
(unaudited)
|
June
30,
|
December
31,
|
||||||
|
|
2008
|
2007
|
|||||
|
ASSETS
|
|||||||
|
Current
assets:
|
|||||||
|
Cash,
cash equivalents and short-term investments
|
$
|
27,991
|
$
|
32,444
|
|||
|
Accounts
receivable, net
|
7,228
|
8,638
|
|||||
|
Inventories
|
4,108
|
2,738
|
|||||
|
Other
current assets
|
1,483
|
1,455
|
|||||
|
Total
current assets
|
40,810
|
45,275
|
|||||
|
Property,
equipment and other assets, net
|
3,315
|
3,289
|
|||||
|
Total
assets
|
$
|
44,125
|
$
|
48,564
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
2,733
|
$
|
3,063
|
|||
|
Accrued
expenses and other current liabilities
|
7,336
|
8,185
|
|||||
|
Total
current liabilities
|
10,069
|
11,248
|
|||||
|
Long-term
income taxes payable
|
133
|
200
|
|||||
|
Deferred
tax liability
|
81
|
77
|
|||||
|
Stockholders’
equity
|
33,842
|
37,039
|
|||||
|
Total
liabilities and stockholders’ equity
|
$
|
44,125
|
$
|
48,564
|
|||
Page
6 of
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