Exhibit 99.1
ACTIVCARD REPORTS SECOND QUARTER 25 PERCENT YEAR-OVER-YEAR
REVENUE GROWTH
FREMONT, Calif., May 10, 2005 – ActivCard Corp. (Nasdaq: ACTI), a global provider of identity assurance solutions for secure remote access, single sign-on, enterprise access cards and multi-channel identification and verification, today reported financial results for its second quarter of fiscal 2005 ended March 31, 2005.
Revenue for the quarter ended March 31, 2005 was $9.2 million, which is in line with prior guidance, compared to $7.3 million for the quarter ended March 31, 2004 an increase of 25%. However, quarter-over-quarter revenue decreased by 21% compared to $11.6 million for the quarter ended December 31, 2004 due to a historically seasonally slow quarter compounded by a slowdown in the U.S. Federal Government business due to the transition to the new Homeland Security Presidential Directive-12 standards.
Total operating expenses were $27.2 million for the quarter ended March 31, 2005 compared to $13.1 million for the quarter ended March 31, 2004 and $15.9 million for the quarter ended December 31, 2004. Total operating expenses for the quarter ended March 31, 2005 include non-cash charges of $9.4 million related to impairment of goodwill and $2.4 million related to write-down of acquired intangible assets, both related to the Aspace reporting unit. Additionally, a $409,000 restructuring charge was recorded related to the delays in sub lease activity for the Company’s vacant Canadian and Fremont facilities.
In the quarter ended March 31, 2005 the Aspace reporting unit failed to meet one of its earn-out contingencies resulting in the Company revising its near term revenue forecast for the 4TRESS product line. Based on the revised revenue forecast, the Company recorded an impairment of acquired technology of $3.6 million, included in cost of revenue, an impairment of goodwill of $9.4 million, and write-down of acquired intangible assets of $2.4 million, during the quarter ended March 31, 2005.
Net loss was $25.4 million, or $0.58 per basic and diluted share, for the quarter ended March 31, 2005 compared to $9.1 million, or $0.22 per basic and diluted share, for the
quarter ended March 31, 2004, an increase in net loss of 180%. Net loss increased 274% compared to $6.8 million or $0.16 per basic and diluted share for the quarter ended December 31, 2004. The increase in net loss is primarily driven by non-cash charges related to impairment of acquired developed technology and goodwill and write-down of and other intangible assets.
Sales and marketing, research and development, and general and administrative expenses were $14.4 million for the quarter ended March 31, 2005 compared to $11.9 million for the quarter ended March 31, 2004 and $15.3 million in the quarter ended December 31, 2004.
Second Quarter Financial Highlights
| • | 25% year-over-year revenue growth. 21% decline in quarter-over-quarter revenue. |
| • | Sales and marketing, research and development, and general and administrative expenses, in total, decreased by $861,000 from the December 2004 quarter. |
| • | Ended the quarter with $184.2 million in cash and short-term investments. |
“Although the revenue results were in line with previously stated guidance, we are by no means satisfied with our financial performance,” said Ben C. Barnes, Chief Executive Officer of ActivCard. “However, we are encouraged by our accomplishments, including strengthening our reseller agreement with IBM which resulted in the first sale of our 4TRESS product,” continued Mr. Barnes. “Our goal is to remain focused on strengthening our products, developing our distribution channel and improving our sales execution while focusing on reducing our costs.”
Second Quarter Business Highlights
| • | Completed the first sale of the 4TRESS product through reseller relationship with IBM. |
| • | Signed 162 new customers, including: Progressive Insurance, NY Life Insurance, Nissan Europe, and the U.S. Institute of Defense and Analysis. |
| • | Achieved additional revenue from many existing customers including: HP, Visa, British Telecom, Monsanto, Renault, Airbus, and KDDI. |
| • | Added 16 new value-added-resellers, giving 234 resellers worldwide. |
| • | Announced a joint distribution agreement with Lenel Systems International to jointly market a solution for physical access to facilities and logical access to networks. |
| • | Announced planned support of the US Government’s Homeland Security Presidential Directive-12 (HSPD-12) and Federal Information Processing Standards 201 (FIPS 201). |
Management Changes
Frank Bishop, SVP Sales and Marketing, will be leaving the Company. Ben C. Barnes, ActivCard’s Chief Executive Officer, will be acting head of worldwide sales and marketing until a replacement is hired. Additionally, ActivCard has appointed Craig Reichenbach as Vice President of its U.S. Government Division, replacing Greg Dicks. On April 1, 2005 ActivCard announced a reduction in force of approximately 10% of the workforce to improve its cost structure.
Outlook
ActivCard anticipates revenue for its third quarter of fiscal 2005 ending June 30, 2005 to be in the range of $9.0 to $10.0 million.
Conference Call
ActivCard will hold a conference call at 2:00 P.M. Pacific Time today, Tuesday, May 10, 2005 to discuss the results for the quarter ended March 31, 2005. The call may be accessed by dialing 877-292-2820 domestically or 706-679-4390 for international callers. A live web cast of the conference call will also be available on the investor relations section of the Company’s website at www.activcard.com. A replay of the web cast will be available approximately two hours after the conclusion of the call. An audio replay of the conference call will also be made available approximately one hour after the conclusion of the call. The audio replay will remain available until May 17, 2005, 9:00 P.M. Pacific Time and can be accessed by dialing 800-642-1687 or 706-645-9291 and entering pass code 5290867.
About ActivCard
ActivCard is a global provider of identity assurance solutions that, when integrated into an identity management system, allow customers to issue, use and manage trusted
digital identities. ActivCard’s solutions include secure remote access, single sign-on, enterprise access cards, and multi-channel identification and verification. Globally, over seven million users at corporations, government agencies, and financial institutions use ActivCard solutions to safely and efficiently interact electronically. Headquartered in Fremont, Calif., ActivCard has development centers in the US, France, and the United Kingdom and sales and service centers in more than nine countries. For more information, visit www.activcard.com.
The statements in this press release that are not historical facts, including (but not limited to) the statements under the caption “Outlook,” are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include risks relating to future revenues and contract wins, the integration of acquired business and technologies, changes in our management team, operating expenses and other risks identified under the caption “Risk Factors” in our most recent Annual Report on Form 10-K, and in subsequent Quarterly Reports on Form 10-Q, which are filed with the United States Securities and Exchange Commission (SEC). Copies of these filings are available from ActivCard and on the SEC’s website at www.sec.gov. Actual results, events and performance may differ materially from our forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. ActivCard disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
ActivCard is a registered trademark and Return on Identity is a trademark of ActivCard in the United States and/or other countries. All other trademarks are the property of their respective owners in the United States and/or other countries.
IR Contacts
| Ragu Bhargava | Maria Riley | |||
| ActivCard Corp. | Sapphire Investor Relations | |||
| 510-574-0100 | 415-399-9345 | |||
| rbhargava@activcard.com | maria@sapphireinvestorrelations.com |
ACTIVCARD CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands)
| March 31, 2005 | September 30, 2004 | |||||||
| (Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 13,123 | $ | 17,113 | ||||
Short-term investments | 171,086 | 196,950 | ||||||
Accounts receivable, net of allowance for doubtful accounts | 6,392 | 5,325 | ||||||
Inventories | 1,711 | 1,996 | ||||||
Prepaid expenses and other current assets | 3,535 | 2,450 | ||||||
Total current assets | 195,847 | 223,834 | ||||||
Property and equipment, net | 3,487 | 3,989 | ||||||
Restricted investments | — | 715 | ||||||
Other intangible assets, net | 3,018 | 2,286 | ||||||
Other long-term assets | 835 | 800 | ||||||
Goodwill | 15,356 | 19,462 | ||||||
Total assets | $ | 218,543 | $ | 251,086 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,480 | $ | 2,324 | ||||
Short-term borrowings | — | 1,605 | ||||||
Accrued compensation and related benefits | 5,294 | 7,339 | ||||||
Current portion of accrual for restructuring, business realignment, and severance benefits | 927 | 1,262 | ||||||
Accrued and other current liabilities | 2,650 | 3,278 | ||||||
Current portion of deferred revenue | 4,606 | 6,962 | ||||||
Total current liabilities | 15,957 | 22,770 | ||||||
Long-term deferred revenue, net of current portion | 2,858 | 3,677 | ||||||
Long-term portion of accrual for restructuring, business realignment, and severance benefits, net of current portion | 3,438 | 3,605 | ||||||
Long-term deferred rent | 1,130 | 1,109 | ||||||
Total liabilities | 23,383 | 31,161 | ||||||
Minority interest | 1,326 | 1,394 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 409,525 | 400,056 | ||||||
Deferred employee stock-based compensation | (834 | ) | (639 | ) | ||||
Accumulated deficit | (199,000 | ) | (166,805 | ) | ||||
Accumulated other comprehensive loss | (15,857 | ) | (14,081 | ) | ||||
Total stockholders’ equity | 193,834 | 218,531 | ||||||
Total liabilities and stockholders’ equity | $ | 218,543 | $ | 251,086 | ||||
ACTIVCARD CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Revenue: | ||||||||||||||||
Hardware | $ | 2,632 | $ | 3,797 | $ | 6,477 | $ | 7,013 | ||||||||
Software | 4,317 | 1,997 | 9,998 | 4,075 | ||||||||||||
Maintenance and support | 2,207 | 1,509 | 4,236 | 2,938 | ||||||||||||
| 9,156 | 7,303 | 20,711 | 14,026 | |||||||||||||
Cost of revenue: | ||||||||||||||||
Hardware | 1,584 | 1,816 | 3,672 | 3,742 | ||||||||||||
Software | 1,443 | 731 | 2,400 | 1,957 | ||||||||||||
Maintenance and support | 620 | 478 | 1,263 | 940 | ||||||||||||
Amortization and impairment of acquired developed technology | 4,357 | 102 | 4,613 | 204 | ||||||||||||
| 8,004 | 3,127 | 11,948 | 6,843 | |||||||||||||
Gross profit | 1,152 | 4,176 | 8,763 | 7,183 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 7,442 | 5,409 | 15,090 | 10,027 | ||||||||||||
Research and development | 4,254 | 4,934 | 9,004 | 10,263 | ||||||||||||
General and administration | 2,742 | 1,544 | 5,643 | 3,157 | ||||||||||||
Impairment of goodwill | 9,426 | — | 9,426 | — | ||||||||||||
Write-down of acquired intangible assets | 2,352 | — | 2,352 | — | ||||||||||||
Amortization of acquired intangible assets | 611 | 12 | 626 | 34 | ||||||||||||
Restructuring, business realignment, and severance benefits | 409 | 1,187 | 409 | 1,391 | ||||||||||||
In-process research and development | — | — | 537 | — | ||||||||||||
Total operating expenses | 27,236 | 13,086 | 43,087 | 24,872 | ||||||||||||
Loss from operations | (26,084 | ) | (8,910 | ) | (34,324 | ) | (17,689 | ) | ||||||||
Other income (expenses): | ||||||||||||||||
Interest income, net | 1,063 | 1,016 | 2,139 | 2,038 | ||||||||||||
Other income (expense), net | (283 | ) | 410 | 70 | 437 | |||||||||||
Equity in net loss of Aspace Solutions Limited | — | (1,572 | ) | — | (3,111 | ) | ||||||||||
Total other income (expenses), net | 780 | (146 | ) | 2,209 | (636 | ) | ||||||||||
Loss before income taxes and minority interest | (25,304 | ) | (9,056 | ) | (32,115 | ) | (18,325 | ) | ||||||||
Income taxes | (108 | ) | (55 | ) | (110 | ) | (209 | ) | ||||||||
Minority interest | 5 | 35 | 30 | 80 | ||||||||||||
Net loss | $ | (25,407 | ) | $ | (9,076 | ) | $ | (32,195 | ) | $ | (18,454 | ) | ||||
Basic and diluted net loss per common share | $ | (0.58 | ) | $ | (0.22 | ) | $ | (0.75 | ) | $ | (0.44 | ) | ||||
Shares used to compute basic and diluted net loss per share | 43,485 | 42,144 | 43,080 | 42,123 | ||||||||||||
ACTIVCARD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended March 31, | ||||||||
| 2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net loss from operations | $ | (32,195 | ) | $ | (18,454 | ) | ||
Adjustments to reconcile net loss from operations to net cash used in operations: | ||||||||
Depreciation and amortization | 1,019 | 1,219 | ||||||
Amortization and impairment of acquired developed technology | 4,613 | 204 | ||||||
Impairment of goodwill | 9,426 | — | ||||||
Write-down of acquired intangible assets | 2,352 | — | ||||||
Amortization of acquired intangible assets | 626 | 34 | ||||||
In-process research and development | 537 | — | ||||||
Amortization of employee stock-based compensation | 112 | 119 | ||||||
Loss on disposal of property and equipment | 22 | — | ||||||
Minority interest in ActivCard S.A. | (30 | ) | (80 | ) | ||||
Equity in net loss of Aspace Solutions Limited | — | 3,111 | ||||||
Changes in: | ||||||||
Accounts receivable | (927 | ) | 2,684 | |||||
Inventories | 359 | 387 | ||||||
Prepaid expenses and other current assets | (590 | ) | 605 | |||||
Accounts payable | 77 | (152 | ) | |||||
Accrued compensation and related benefits | (2,238 | ) | (818 | ) | ||||
Accrual for restructuring, business realignment, and severance benefits | (537 | ) | 162 | |||||
Accrued and other current liabilities | (78 | ) | (358 | ) | ||||
Deferred revenue | (3,244 | ) | 752 | |||||
Deferred rent | 20 | 146 | ||||||
Cash used in operating activities | (20,676 | ) | (10,439 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (555 | ) | (1,133 | ) | ||||
Purchases of short-term investments | (14,159 | ) | (127,238 | ) | ||||
Proceeds from sale or maturities of short-term investments | 38,375 | 100,854 | ||||||
Cash used in acquisition of Aspace Solutions Limited | (7,162 | ) | — | |||||
Investment in and loans to Aspace Solutions Limited | — | (2,177 | ) | |||||
Acquisition of ActivCard S.A. minority interest | (33 | ) | — | |||||
Other long-term assets | (22 | ) | 184 | |||||
Cash provided by (used in) investing activities | 16,444 | (29,510 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of stock options, rights, and warrants | 2,145 | 806 | ||||||
Repayment of short-term borrowings | (1,670 | ) | — | |||||
Repayment of long-term debt | — | (3 | ) | |||||
Cash provided by financing activities | 475 | 803 | ||||||
Effect of exchange rate changes | (233 | ) | 83 | |||||
Net decrease in cash and cash equivalents | (3,990 | ) | (39,063 | ) | ||||
Cash and cash equivalents, beginning of period | 17,113 | 80,101 | ||||||
Cash and cash equivalents, end of period | $ | 13,123 | $ | 41,038 | ||||