Published on November 10, 2008
|
Contacts:
|
|
|
Stephan
Rohaly
|
Darby
Dye
|
|
Chief
Financial Officer
|
Investor
Relations-US
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+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
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SCM
MICROSYSTEMS REPORTS THIRD QUARTER 2008 RESULTS
Ismaning,
Germany - November 10, 2008
- SCM
Microsystems, Inc. (Nasdaq: SCMM, Prime Standard: SMY), a leading provider
of
solutions that open the Digital World, today announced
results for the third quarter ended September 30, 2008.
Revenues
from continuing operations in the third quarter of 2008 were $6.4 million,
down
16% from revenues of $7.6 million in the third quarter of 2007. Revenues for
the
first nine months of 2008 were $19.4 million, down 6% from revenues of $20.7
million for the first nine months of 2007. By product segment, third quarter
2008 revenues included $5.9 million from sales of smart card readers and other
products for secure network and physical access, compared with sales of $6.1
million in the third quarter of 2007; and $0.5 million from sales of original
equipment manufacturer (OEM) digital media reader technology, compared with
sales of $1.5 million in the third quarter of 2007.
U.S.
sales in the third quarter of 2008 were positively affected by stronger demand
for smart card readers for U.S. government programs, which had been very weak
in
the first two quarters of 2008 primarily due to budget and project delays.
Asian
sales of smart card interface chips also remained strong. However, European
sales were lower than expected due to variability in the timing of orders for
regional programs requiring smart card readers. In addition, sales of digital
media readers historically have been concentrated among a small number of major
customers, and demand from these customers was unexpectedly light in the third
quarter of 2008.
“The
product investments we have been making for the last several quarters have
resulted in innovative new devices for emerging security applications around
the
world,” said Felix Marx, chief executive officer of SCM Microsystems. “Within
the last several weeks we have introduced @MAXX™ prime, enabling secure
mobile authentication for financial and enterprise applications, and certified
terminals for the electronic health card program in Germany. Additional product
introductions will soon follow. These new products are important tools in our
strategy to expand and diversify our customer base and to bring the strength
of
our technology, reputation and relationships to emerging markets.”
Gross
profit margin in the third quarter of 2008 was 46%, compared with 45% in the
second quarter of 2007. Gross profit margin improved to 43% of revenue in the
first nine months of 2008, compared with 41% in the first nine months of 2007.
These improvements are primarily due to a more favorable mix of products sold
in
the 2008 periods and ongoing product cost reductions that have continued to
strengthen PC Security product margins for the past several
quarters.
-More-
Page
2 of 7
Operating
expenses in the third quarter of 2008, as reported in accordance with GAAP,
were
$5.0 million, compared with $3.8 million in the third quarter of 2007. Higher
operating expenses in the third quarter of 2008 primarily reflect investments
the Company has made to diversify and expand its sales base and to develop
new
products and business opportunities in the contactless market, which started
in
the beginning of 2008.
Operating
loss for the third quarter of 2008, as reported in accordance with GAAP, was
$(2.0) million, compared with operating loss of $(0.4) million in the year
ago
quarter.
Earnings
before interest, taxes, depreciation and amortization (EBITDA) in the third
quarter of 2008 was $(3.3) million, compared with EBITDA of $(0.4) million
in
the third 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 third
quarter of 2008 was $(3.3) million, or $(0.21) per share, compared with loss
from continuing operations of $(0.1) million, or $(0.01) per share, in the
third
quarter of 2007. The loss in the third quarter of 2008 includes other
expenses,
net of $(1.1) million that are primarily related to a non-cash loss on foreign
currency exchange. Third quarter 2007 results included other income, net of
$0.3
million.
Cash,
cash equivalents and short-term investments at September 30, 2008 were $25.0
million, compared with $28.0 million at June 30, 2008.
“We
continue to invest in business development activities to expand sales of our
traditional products into new geographies, strengthen our expertise in
contactless technology and build partnerships in key markets and regions,” said
Marx. “Our equity investment in TranZfinity strengthens our ability to deliver
innovative services to the contactless applications market. Our partnership
with
XIRING should enable us to rapidly deliver a new mobile terminal for the German
eHealth market. We have a unique opportunity to become a key supplier of
infrastructure technology for emerging contactless applications in banking,
commerce, transportation and personal authentication, and we are focused on
continuing to invest in the activities that can help us realize this
opportunity.”
Guidance
for 2008
For
the
full year 2008, the Company expects to achieve revenue of $27 million to $30
million, which represents flat to 10% lower revenues than those recorded for
the
full year 2007. The upper end of this forecast is subject to the German
government beginning to implement its national electronic health card program
before the end of the year and sufficient quantities of the Company’s eHealth
terminals being purchased for the program during the fourth quarter.
Page 3
of 7
In
August
2008, the Company previously announced expected revenue growth of 5% to 15%
for
the year as a whole, or revenues of approximately $32 million to $35 million.
The decrease in expected revenue compared with the guidance given in June is
primarily due to lower than expected sales in the third quarter of 2008 as
a
result of variability in the timing of orders for smart card readers in Europe
and unexpectedly light demand for digital media readers in the U.S.
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.
Additional
Information
SCM
does
not plan to hold a conference call or webcast to discuss the results of its
2008
third 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 September 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 http://www.scmmicro.com
Page 4
of 7
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 the near-term introduction of additional new products and our
expectations for the
Company’s
fourth
quarter and full fiscal year 2008,
including specifically
our statements regarding our expectations that we expect revenue to decrease
0%
to 10% in the full year 2008 compared to prior year levels; 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 the German government for
its
national electronic health card program may not occur or may decline;
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; the current economic conditions could
negatively impact our ability to access capital, could increase the cost of
capital, could negatively impact customer demand, or could negatively impact
the
ability of our suppliers to produce and sell to us key components for our
products; 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:
@MAXX is a trademark of SCM Microsystems, Inc. All trade names are trademarks
or
registered trademarks of their respective holders.
-
FINANCIALS FOLLOW -
Page 5
of 7
SCM
MICROSYSTEMS, INC.
Condensed
Consolidated Statements of Operations
(in
thousands, except per share data)
(unaudited)
|
|
|
Three
months
ended
|
|
Nine
months
ended
|
|||||||||
|
September
30,
|
September
30,
|
||||||||||||
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|||||||
|
Net
revenues
|
$
|
6,393
|
$
|
7,617
|
$
|
19,377
|
$
|
20,721
|
|||||
|
Cost
of revenues
|
3,483
|
4,170
|
10,961
|
12,201
|
|||||||||
|
Gross
profit
|
2,910
|
3,447
|
8,416
|
8,520
|
|||||||||
|
Operating
expenses:
|
|||||||||||||
|
Research
and development
|
980
|
815
|
3,058
|
2,327
|
|||||||||
|
Sales
and marketing
|
2,280
|
1,625
|
7,010
|
4,802
|
|||||||||
|
General
and administrative
|
1,697
|
1,374
|
4,718
|
5,653
|
|||||||||
|
Amortization
of intangible assets
|
--
|
--
|
--
|
272
|
|||||||||
|
Restructuring
and other charges (credits)
|
--
|
(4
|
)
|
--
|
(4
|
)
|
|||||||
|
Total
operating expenses
|
4,957
|
3,810
|
14,786
|
13,050
|
|||||||||
|
Loss
from operations
|
(2,047
|
)
|
(363
|
)
|
(6,370
|
)
|
(4,530
|
)
|
|||||
|
Interest
and other, net
|
(1,117
|
)
|
279
|
(293
|
)
|
999
|
|||||||
|
Loss
from continuing operations before income
taxes
|
(3,164
|
)
|
(84
|
)
|
(6,663
|
)
|
(3,531
|
)
|
|||||
|
Benefit
(provision) for income taxes
|
(103
|
)
|
(32
|
)
|
(151
|
)
|
(124
|
)
|
|||||
|
Loss
from continuing operations
|
(3,267
|
)
|
(116
|
)
|
(6,814
|
)
|
(3,655
|
)
|
|||||
|
Income
(loss) from discontinued operations, net of income taxes
|
424
|
(83
|
)
|
273
|
(202
|
)
|
|||||||
|
Gain
(loss) on sale of discontinued operations, net of income
taxes
|
44
|
16
|
553
|
1,569
|
|||||||||
|
Net
income (loss)
|
$
|
(2,799
|
)
|
$
|
(183
|
)
|
$
|
(5,988
|
)
|
$
|
(2,288
|
)
|
|
|
Loss
per share from continuing operations:
|
|||||||||||||
|
Basic
and diluted
|
$
|
(0.21
|
)
|
$
|
(0.01
|
)
|
$
|
(0.43
|
)
|
$
|
(0.23
|
)
|
|
| Gain (loss) per share from discontinued operations: | |||||||||||||
|
Basic
and diluted
|
$
|
0.03
|
$
|
(0.00
|
)
|
$
|
0.05
|
$
|
0.08
|
||||
|
Net
income (loss) per share:
|
|||||||||||||
|
Basic
and diluted
|
$
|
(0.18
|
)
|
$
|
(0.01
|
)
|
$
|
(0.38
|
)
|
$
|
(0.15
|
)
|
|
|
Shares
used in computing loss per share:
|
|||||||||||||
|
Basic
and diluted
|
15,744
|
15,736
|
15,743
|
15,722
|
|||||||||
Page 6
of 7
SCM
MICROSYSTEMS, INC.
Reconciliation
of EBITDA Calculation to GAAP Accounting
(in
thousands)
(unaudited)
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|||||||
|
EBITDA
|
$
|
(3,273
|
)
|
$
|
(424
|
)
|
$
|
(7,089
|
)
|
$
|
(4,265
|
)
|
|
|
Interest
income
|
173
|
423
|
642
|
1,234
|
|||||||||
|
Provision
for income taxes
|
(103
|
)
|
(32
|
)
|
(151
|
)
|
(124
|
)
|
|||||
|
Depreciation
and amortization
|
(64
|
)
|
(83
|
)
|
(216
|
)
|
(500
|
)
|
|||||
|
Net
loss from continuing operations
|
$
|
(3,267
|
)
|
$
|
(116
|
)
|
$
|
(6,814
|
)
|
$
|
(3,655
|
)
|
|
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 7
of 7
SCM
MICROSYSTEMS, INC.
Condensed
Consolidated Balance Sheets
(in
thousands)
(unaudited)
|
September
30,
|
|
December
31,
|
|||||
|
ASSETS
|
2008
|
2007
|
|||||
|
Current
assets:
|
|||||||
|
Cash,
cash equivalents and short-term investments
|
$
|
25,020
|
$
|
32,444
|
|||
|
Accounts
receivable, net
|
6,368
|
8,638
|
|||||
|
Inventories
|
4,321
|
2,738
|
|||||
|
Other
current assets
|
1,310
|
1,455
|
|||||
|
Total
current assets
|
37,019
|
45,275
|
|||||
|
Property,
equipment, intangibles and other assets, net
|
3,581
|
3,289
|
|||||
|
Total
assets
|
$
|
40,600
|
$
|
48,564
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
2,484
|
$
|
3,063
|
|||
|
Accrued
expenses and other current liabilities
|
6,763
|
8,185
|
|||||
|
Total
current liabilities
|
9,247
|
11,248
|
|||||
|
Long-term
income taxes payable
|
142
|
200
|
|||||
|
Deferred
tax liability
|
74
|
77
|
|||||
|
Stockholders’
equity
|
31,137
|
37,039
|
|||||
|
Total
liabilities and stockholders’ equity
|
$
|
40,600
|
$
|
48,564
|
|||