Published on August 14, 2009
Contacts:
|
Stephan
Rohaly
|
Darby
Dye
|
|
|
Chief
Financial Officer
|
Investor
Relations–US
|
|
|
+49
89 95 95 5101
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+1
949-553-4251
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|
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srohaly@scmmicro.de
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ddye@scmmicro.com
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SCM
MICROSYSTEMS REPORTS SECOND QUARTER 2009 RESULTS
Hirsch Merger Drives Nearly 70%
Revenue Increase and Higher Gross Profit Margin;
Record
Quarter in Asia Yields Additional, Organic Growth
SANTA ANA, Calif. and ISMANING,
Germany – August 14, 2009
– SCM Microsystems, Inc. (NASDAQ: SCMM, Prime Standard: SMY), a leading provider
of solutions for secure access, secure identity and secure exchange, today
announced results for its
second quarter ended June 30, 2009. Despite continued sluggishness of
security and identity programs in the U.S., Japan and Europe, revenue grew
nearly 70% year over year as a result of successful strategic initiatives,
including the Company’s merger with Hirsch Electronics Corporation and
investments made in key markets and regions. All figures are reported in accordance
with U.S. GAAP, except as noted.
“Our
merger with Hirsch is proving a strategic success, as it has strengthened our
financial performance across multiple metrics, our ability to capture new and
existing sales opportunities and our overall business profile. With only two
months of operating results from our Hirsch subsidiary included in the second
quarter, sales doubled in our Security and Identity Solutions business, overall
gross profit margin increased by eight percentage points and the Hirsch
subsidiary generated operating profit on a standalone basis,” said Felix Marx,
chief executive officer of SCM Microsystems. “The integration of Hirsch and SCM
is proceeding as planned. Sales and marketing cross training is under way and we
have already secured our first joint sales win. Integrated finance systems,
including reporting processes, are in place or in process, and the move of our
U.S. headquarters to Santa Ana, California is nearly complete.”
“We also
charted significant progress in our strategy to regionally expand and diversify
our customer base in the second quarter. Strategic sales programs and a
systematic focus on the development of new customers and sales channels resulted
in record sales in Asia, other than Japan, primarily to new PC OEM customers,”
continued Marx. “In Europe, we continued to ship desktop eHealth terminals and
recorded our first sales of mobile terminals for the German electronic health
card program, under which deployments began in April. Additionally, we leveraged
the investments made in the technology underlying these terminals to supply
solutions for emerging applications outside the healthcare sector.”
/More...
Page 2 of
7
Second Quarter
Results
On April
30, 2009, SCM completed its merger with Hirsch Electronics Corporation, and
financial results for the 2009 second quarter include two months of operating
results for the Hirsch subsidiary.
SCM’s
primary business segment, which includes operations from the Hirsch subsidiary,
is Security and Identity Solutions, which provides contact, contactless and
mobile smart card reader technology, digital identity and transaction platforms
and access control systems to enable security, identity, contactless payment,
e-health and electronic government services. Second-quarter revenue from the
Security and Identity Solutions business was $10.0 million, up more than 100%
from $4.9 million in the same quarter a year earlier. The primary reason for
this increase was the inclusion of two months of revenue from the Hirsch
subsidiary. On a standalone basis, revenue in the Hirsch subsidiary was up both
sequentially and year over year in the second quarter, led by sales of access
control systems and strong government agency deployments. SCM’s organic smart
card reader revenue increased 12%, driven by record sales in Asia (excluding
Japan), which offset declines in Europe and Japan.
Revenue
from SCM’s Digital Media and Connectivity business decreased 43% to $0.9 million
in the second quarter, compared with $1.6 million in the same quarter of 2008,
primary as a result of variability in the timing of orders from major
customers.
In
aggregate, total revenue in the second quarter of 2009 was $11.0 million, up
nearly 70% from $6.5 million in the second quarter of 2008.
Gross
profit margin in the second quarter was positively impacted by higher-margin
sales made by the Hirsch subsidiary, and increased to 51% of revenue, compared
with 43% in the same quarter a year ago.
As
expected, operating expenses in the second quarter increased year over year as a
result of adding two months of expenses for the Hirsch subsidiary, from $5.1
million in the second quarter of 2008 to $7.4 million in the current-year
period, an increase of 45%. Operating expenses in the second quarter of 2009
included approximately $0.5 million in transaction-related costs. Aside from
Hirsch subsidiary and merger-related expenses, operating expenses decreased both
sequentially and year over year across all major categories..
Operating
loss decreased to $(1.9) million in the second quarter, compared with operating
loss of $(2.3) million in the same quarter of 2008. Additionally, the
Company recorded other expenses and loss on investments of $0.5 million, as well
as tax benefit of $1.7 million in the second quarter related to the accounting
for taxes following the Hirsch transaction.
Loss from
continuing operations in the second quarter of 2009 was $(0.6) million, or
$(0.03) per share, compared with loss from continuing operations of $(2.0)
million, or $(0.13) per share in the prior year period.
Page 3 of
7
SCM used
$14.2 million of cash in the second quarter of 2009 as consideration for the
Hirsch merger and received $3.3 million cash from the transaction, ending the
quarter with cash and cash equivalents of $5.3 million, compared with $20.6
million at the end of the first quarter of 2009.
Earnings
before interest, taxes, depreciation and amortization (EBITDA) in the second
quarter of 2009 was $(2.0) million, compared with EBITDA of $(2.1) million in
the second quarter of 2008. (EBITDA is not reported in accordance with U.S.
GAAP. See reconciliation of EBITDA to GAAP accounting contained within this
press release.)
“While
the global economic situation remains uncertain, we believe our merger with
Hirsch will create a more consistent and stable revenue profile for SCM and
provide significant, complementary new opportunities for incremental revenue
growth,” said Marx. “During the second half of 2009, we expect that normal
seasonality will result in increased activity in the U.S. government sector, and
that the electronic health card program in Germany will continue to ramp,
although the current pace of the program deployments may delay higher volume
demand until 2010. Expense management, as always, will be a key
focus.”
Business
Outlook
Due to the severity and
unpredictability of the global economic downturn and the resulting disruption in
forecasting of future financial results, SCM will not provide financial guidance
until visibility improves regarding the economic environment and its impact on
the Company’s business.
Additional
Information
SCM does
not plan to hold a conference call or webcast to discuss the results of its 2009
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, 2009, filed with the U.S. Securities and Exchange
Commission.
About
SCM Microsystems, Inc.
SCM
Microsystems (NASDAQ:SCMM; Prime Standard: SMY) is a global leader in security
and identity solutions for secure access, secure identity and secure exchange.
Together with its Hirsch Electronics subsidiary, SCM provides complete,
integrated solutions that secure digital assets, electronic transactions and
facilities. The company offers the world's broadest range of contact,
contactless and mobile smart card reader technology; physical and logical access
control systems; digital identity transaction platforms; biometrics; and digital
video. SCM's solutions enable a wide variety of applications including
enterprise security, identity management, contactless payment, e-health and
electronic government services. For additional information, visit
www.scmmicro.com and www.HirschElectronics.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, the statements by Felix Marx; our statements about the expected future benefits of our merger with Hirsch, including stronger financial performance, the ability to better capture new and existing sales opportunities for incremental revenue growth and the creation of a more consistent and stable revenue profile; our expected areas of increased sales activity in 2009; and our statements about product demand from the German electronic health card program. These statements are based on current expectations or beliefs, as well as a number of assumptions about future events that are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated herein. Our financial results may not meet expectations. Readers should not unduly rely on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of risks and uncertainties, many of which are outside our control, that could cause our actual business and operating results to differ, including, but not limited to, our ability to grow market share and revenues based on a strategy of participating in early stage markets for contactless products; our ability to successfully integrate the Hirsch business into ours; 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, payment and enterprise security markets that we are targeting; sales to a relatively small number of customers historically have accounted for a significant percentage of our revenues; 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 customer demand, the ability of our suppliers to produce and sell to us key components of our products, and/or our ability to access capital; and we may not be able to successfully maintain operating expenses at current or reduced 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 for the year ended December 31, 2008 and subsequent reports filed with the U.S. Securities and Exchange Commission.
###
SCM and
the SCM logo are registered trademarks 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
June 30, |
Six
months ended
June 30, |
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Revenues
|
$ | 10,961 | $ | 6,520 | $ | 16,116 | $ | 12,984 | ||||||||
|
Cost
of revenues
|
5,390 | 3,697 | 8,432 | 7,478 | ||||||||||||
|
Gross
profit
|
5,571 | 2,823 | 7,684 | 5,506 | ||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Research
and development
|
1,489 | 1,043 | 2,258 | 2,078 | ||||||||||||
|
Sales
and marketing
|
3,739 | 2,569 | 5,983 | 4,730 | ||||||||||||
|
General
and administrative
|
2,199 | 1,518 | 4,686 | 3,021 | ||||||||||||
|
Gain
on sale of assets
|
-- | -- | (249 | ) | -- | |||||||||||
|
Total
operating expenses
|
7,427 | 5,130 | 12,678 | 9,829 | ||||||||||||
|
Loss
from operations
|
(1,856 | ) | (2,307 | ) | (4,994 | ) | (4,323 | ) | ||||||||
|
Interest
and other income (expense), net
|
(493 | ) | 330 | (503 | ) | 824 | ||||||||||
|
Loss
from continuing operations before income taxes
|
(2,349 | ) | (1,977 | ) | (5,497 | ) | (3,499 | ) | ||||||||
|
Benefit
(provision) for income taxes
|
1,739 | (1 | ) | 1,740 | (48 | ) | ||||||||||
|
Loss
from continuing operations
|
(610 | ) | (1,978 | ) | (3,757 | ) | (3,547 | ) | ||||||||
|
Income
(loss) from discontinued operations
|
84 | (26 | ) | 151 | (151 | ) | ||||||||||
|
Gain
on sale of discontinued operations
|
38 | 496 | 75 | 509 | ||||||||||||
|
Net
loss
|
$ | (488 | ) | $ | (1,508 | ) | $ | (3,531 | ) | $ | (3,189 | ) | ||||
|
Loss
per share from continuing operations:
|
||||||||||||||||
|
Basic
and diluted
|
$ | (0.03 | ) | $ | (0.13 | ) | $ | (0.20 | ) | $ | (0.22 | ) | ||||
| Gain (loss) per share from discontinued operations: | ||||||||||||||||
|
Basic
and Diluted
|
$ | 0.01 | $ | 0.03 | $ | 0.01 | $ | 0.02 | ||||||||
|
Net
loss per share:
|
||||||||||||||||
|
Basic
and Diluted
|
$ | (0.02 | ) | $ | (0.10 | ) | $ | (0.19 | ) | $ | (0.20 | ) | ||||
|
Shares
used in computing loss per share:
|
||||||||||||||||
|
Basic
and Diluted
|
22,039 | 15,744 | 18,891 | 15,742 | ||||||||||||
Page 6 of
7
SCM
MICROSYSTEMS, INC.
Reconciliation
of EBITDA Calculation to GAAP Accounting
(in
thousands)
(unaudited)
|
Three
Months Ended
June 30, |
Six
Months Ended
June
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
EBITDA
|
$ | (1,955 | ) | $ | (2,080 | ) | $ | (5,046 | ) | $ | (3,816 | ) | ||||
|
Interest
income (expense)
|
(126 | ) | 174 | (100 | ) | 469 | ||||||||||
|
Provision
for income taxes
|
1,739 | (1 | ) | 1,740 | (48 | ) | ||||||||||
|
Depreciation
and amortization
|
(268 | ) | (71 | ) | (351 | ) | (152 | ) | ||||||||
|
Net
loss from continuing operations
|
$ | (610 | ) | $ | (1,978 | ) | $ | (3,757 | ) | $ | (3,547 | ) | ||||
We
conduct a significant amount of our business in Europe, we are dually traded on
the U.S. NASDAQ and Frankfurt Prime Standard stock exchanges, the majority of
our executive management are located in Germany and a significant portion of our
investors are German-based. 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 determined in accordance with accounting principles
generally accepted in the United States. 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 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.
Page 7 of
7
SCM MICROSYSTEMS, INC.
Condensed
Consolidated Balance Sheets
(in
thousands)
(unaudited)
|
June
30,
|
December
31,
|
|||||||
|
|
2009
|
2008
|
||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 5,309 | $ | 20,550 | ||||
|
Accounts
receivable, net
|
9,723 | 8,665 | ||||||
|
Inventories
|
7,652 | 5,065 | ||||||
|
Other
current assets
|
2,286 | 1,139 | ||||||
|
Total
current assets
|
24,970 | 35,419 | ||||||
|
Equity
investments
|
1,674 | 2,244 | ||||||
|
Property,
equipment and other assets, net
|
2,657 | 3,168 | ||||||
|
Goodwill
|
21,895 | -- | ||||||
|
Intangibles,
net
|
23,017 | 307 | ||||||
|
Total
assets
|
$ | 74,213 | $ | 41,138 | ||||
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 5,713 | $ | 3,555 | ||||
|
Accrued
expenses and other current liabilities
|
7,797 | 7,933 | ||||||
|
Total
current liabilities
|
13,510 | 11,488 | ||||||
|
Long-term
liability to related parties
|
8,018 | --- | ||||||
|
Long-term
income taxes payable
|
377 | 184 | ||||||
|
Deferred
tax liability
|
4,154 | 1,340 | ||||||
|
Stockholders’
equity
|
48,154 | 28,126 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 74,213 | $ | 41,138 | ||||