EXHIBIT 99.1
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FOR IMMEDIATE RELEASE
CONTACT:
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Doni Fordyce
L-1 Identity Solutions
203-504-1109
dfordyce@L1ID.com
L-1 IDENTITY SOLUTIONS REPORTS FOURTH QUARTER AND
FULL YEAR 2007 FINANCIAL RESULTS
Fourth Quarter and Full Year Revenues Increased by 49 Percent
and 137 Percent, Respectively and Adjusted EBITDA Increased 41
Percent and 195 Percent, Respectively
STAMFORD, CT. -- FEBRUARY 13, 2008 -- L-1 Identity Solutions, Inc., (NYSE:ID), a
leading supplier of identity solutions and services, today announced financial
results for the Company's fourth quarter and full year ended December 31, 2007.
Revenue for the fourth quarter of 2007 was $113.9 million compared to $76.3
million in the fourth quarter of 2006, an increase of $37.6 million or 49
percent of which $26.3 million is the result of acquisitions consummated in
2007. The pro forma organic growth in revenues in the quarter, excluding
acquisitions consummated in 2007, represents an increase of 11 percent compared
to the fourth quarter of 2006. The slightly lower than previously projected
revenue is due to delays in international customer orders, some of which have
already been recognized in Q1 2008 while others are expected to be recorded in
the first half of 2008.
Gross margin in the fourth quarter of 2007 was approximately 33 percent compared
to approximately 36 percent for the fourth quarter of 2006. Gross margins
declined slightly due to a change in the mix of business and the impact of
acquisitions.
Adjusted EBITDA for the fourth quarter of 2007 grew to $21.2 million from $15.0
million for the same period in the prior year, an increase of $6.2 million, or
41 percent, reflecting the impact of acquisitions, sales growth and operating
leverage. Fourth quarter of 2007 operating expenses as a percentage of revenue
declined to 27 percent compared to 31 percent in the fourth quarter of 2006
after excluding the impact of $5.0 million of asset impairments recorded in
2007. Unlevered free cash flow for the fourth quarter of 2007 was $23.2 million
as compared to $4.8 million in the fourth quarter of 2006.
The Company's net income in the fourth quarter of 2007 amounted to $26.2
million, or $0.35 per diluted share compared to $2.0 million or $0.03 per
diluted share in the fourth quarter of 2006. The fourth quarter results of
operations included asset impairments of $5.0 million, or $0.04 per diluted
share and an income tax benefit of $27.8 million, or $0.36 per diluted share,
reflecting the reduction of the deferred tax asset valuation allowance of $24.5
million and the reversal of the provision for income taxes of $3.3 million
recorded in the first three quarters of 2007. (See Exhibit III, Condensed
Consolidated Statements of Operations).
Weighted average diluted shares outstanding in the fourth quarter of 2007 were
77.7 million compared to 72.8 million in the prior year. The fourth quarter
weighted average outstanding shares of 77.7 million includes 5.5 million diluted
shares related to the use of the if-converted method to calculate diluted shares
outstanding as a result of the issuance of the convertible notes in May 2007.
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"In our first full year as L-1 Identity Solutions, our business has recognized
important synergies and achieved significant milestones in our mission to
protect and secure personal identities; I am proud of these accomplishments and
the progress we have made in revenue and earnings growth," said Robert V.
LaPenta, Chairman, President and CEO of L-1 Identity Solutions. "Our divisions
are working well together and as a result we are achieving a diversified revenue
stream and an expanded base of multi-modal business opportunities, such as the
Department of Defense ABIS contract which includes finger, face, palm and iris
records. To support our growth, L-1 has made strategic investments in our
marketing efforts to position us for important State, Federal and international
opportunities. The combination of L-1's bottom line double digit earnings
growth, solid backlog and deal flow, coupled with our ability to capitalize on
synergies within the business and take full advantage of our diversified global
footprint, will be an important foundation upon which to take the business
forward."
FULL YEAR RESULTS
Revenue for the twelve months ended December 31, 2007 was $389.5 million
compared with $164.4 million for the twelve months ended December 31, 2006,
representing an increase of $225.1 million, or 137 percent, of which $189.3
million is the result of acquisitions. The Company's pro forma organic growth in
revenues, excluding acquisitions consummated in 2007, represents an increase of
26 percent from 2006 revenues, driven mostly by the demand for multi-modal
biometric solutions and strength in the intelligence consulting businesses.
Gross margin for 2007 was 31 percent, similar to the 31 percent in 2006. On a
pro forma basis, excluding the impact of acquisitions consummated in 2007, gross
margins improved to 31 percent compared to 26 percent in 2006.
Adjusted EBITDA for 2007 was $60.1 million compared to $20.4 million for all of
2006, representing a 195 percent increase. Operating expenses as a percentage of
revenues decreased to 28 percent for the twelve months ended December 31, 2007
from 34 percent for the twelve months ended December 31, 2006, after excluding
the impact of asset impairments and merger-related charges of $5.0 million in
2007 and $22.8 million in 2006.
For the full year ended December 31, 2007, the Company reported net income of
$17.7 million, or $0.24 per diluted share compared to a net loss of $31.0
million, or ($0.71) per diluted share for the full year ended December 31, 2006,
which includes asset impairments and merger related charges of $5.0 million in
2007 and $22.8 million in 2006. The 2007 full year results reflect an income tax
benefit of $24.0 million, reflecting the previously described reduction of the
tax valuation allowance of approximately $21.2 million. Without giving effect to
the reduction of tax valuation allowance of $21.2 million described above, net
loss per diluted share would be ($0.05) for the full year ended December 31,
2007.
Basic and diluted weighted average shares outstanding increased to 72.4 million
from 43.8 million in the prior year primarily as a result of the issuance of
shares in connection with the acquisitions of Identix Incorporated and McClendon
LLC offset by the impact of repurchase share obligation in connection with the
Company's convertible debt offering in the second quarter of 2007. The 72.4
million excludes the effect of the conversion of the convertible notes since the
impact would have been anti-dilutive.
Backlog at December 31, 2007 increased to approximately $715 million from $650
million as of September 30, 2007 and $500 million as of December 31, 2006.
Approximately 75 percent of revenue for 2008 is expected to come from backlog.
Unlevered free cash flow for 2007 was $39.7 million as compared to $5.8 million
in 2006 due to strong growth, cost synergies and operating leverage.
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FOURTH QUARTER AND FULL YEAR 2007 HIGHLIGHTS
o FORWARD ADVANCES IN, AND INDUSTRY RECOGNITION OF, THE UNDERLYING
TECHNOLOGY BEHIND L-1'S MULTI-MODAL SOLUTIONS.(1) In National Institute of
Standards and Technology (NIST) testing, L-1's iris technology exceeded
all competitive solutions by 50 to 1 in speed of the algorithm*. L-1 and
Ultra-Scan also teamed together to develop a potentially revolutionary
live scan device using fingerprint recognition technologies.
o INDUSTRY ADOPTION OF MULTI-MODAL BIOMETRIC SOFTWARE, INCLUDING IRIS. L-1
was selected for the U.S. Department of Defense (DoD) ABIS (Automated
Biometric Identification System) program as part of the Northrop Grumman
team to provide finger, face, palm and iris recognition; L-1 also secured
a contract with the Department of Defense Military Enrollment Process
Command (MEPCOM) for finger and face recognition software. L-1 supplied
the DoD with its multi-biometric enrollment solutions (fingerprint, face,
iris) to accredit foreign nationals working in U.S. military facilities in
Iraq as part of the Biometric Identification System for Access (BISA)
initiative. Use of iris recognition also expanded with a Middle Eastern
country selecting L-1 technology for an iris matching program.
o MOMENTUM FOR L-1 LIVE SCAN HARDWARE AND SOFTWARE DEVICES. The L-1 TP4100
Live Scan device was "ruggedized" and launched with over 5,000 deployments
in 2007 across the Department of State and other international agencies.
Additionally, The Department of Homeland Security continued to rely upon
L-1 TP-3000 live scan systems at border sites, with $2.5 million in
contract revenue secured in 2007 and $12.0 million received since the
inception of the program.
o COMMITMENT TO DEVELOPING CUSTOMIZED APPLICATIONS FOR DMV, LAW ENFORCEMENT
AND BORDER MANAGEMENT MARKETS. The ID SUITE of hardware, software and
services was introduced to meet the unique identity management needs of
these groups. Driver's license contract awards exceeded $30.0 million from
Montana, Illinois and North Carolina and L-1 deployed $6.0 million in
hardware and software document authentication products. The AutoTest
business unit secured contract awards of $2.4 million across six states
and a Canadian province. Finally, the Texas Department of Public Safety
purchased criminal booking systems in excess of $2.5 million to
incorporate finger biometrics and video mug shot capabilities.
o RECOGNITION OF OVER $40.0 MILLION IN REVENUE FOR PORTABLE MULTI-MODAL
DEVICES FROM THE U.S. MILITARY, INCLUDING PIER AND HIIDE. In 2007 more
than 7,000 units were deployed, as a result there are more than 10,000
units in the field today.
o SUPPORT FOR THE REGISTERED TRAVELER PROGRAM to support Clear(R), a
Registered Traveler program operating at U.S. airports, via an agreement
with Verified Identity Pass, Inc. (VIP).
o GROWTH THROUGH ACQUISITION WITH A FOCUS ON ADDING NEW SERVICES AND ACCESS
CONTROL CAPABILITIES. The Comnetix acquisition bolstered L-1's presence in
the Canadian market. The McClendon and ACI acquisitions added engineering
/ analytical and information technology solutions and services,
respectively, as well as raised the number of individuals within L-1 who
have high-level government security clearance to approximately 900. In
early 2008, L-1 also announced the acquisition of Bioscrypt which will add
enterprise logical and physical access control.
o PROLIFERATION OF FINGERPRINTING AND ENROLLMENT PROGRAMS GENERATING MORE
THAN $50 MILLION IN CUSTOMER AWARDS. L-1 secured contracts with Texas,
Maryland, California, New York, South Carolina and others, as well as
deployed its enrollment network in Canada. L-1 also received potentially
significant subcontract roles for the Transportation Worker Identification
Credential (TWIC) and Homeland Security Presidential Directive 12
(HSPD-12) programs.
o INVESTMENT IN THE INTERNATIONAL MARKETPLACE with $28 million in revenue in
key markets up 87 percent from the prior year. This included Latin
America, Europe, and the Middle East. To support this demand, L-1 also
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(1) This section has been revised. References to facial recognition technology
in the February 13, 2008 press release have been deleted.
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made an investment in key international hires in Australia, Latin America
and Europe.
o OVER $60 MILLION IN RECENT AWARDS including the following:
- $6.3 million in purchase orders from the Department of State for
U.S. Passport Printers
- A new state-wide contract with the Minnesota Bureau of Criminal
Apprehension to upgrade its live scan network used for criminal
booking valued in excess of $2 million
- $3.7 million to modernize Panama's National and Voter Registration
ID System
- A five year, $50 million Blanket Purchase Agreement (BPA) supporting
the Project Management Office Defense Travel System (PMO-DTS) within
the Department of Defense's (DOD) Business Transformation Agency
(BTA)
FORWARD LOOKING FINANCIAL EXPECTATIONS
The Company expects revenue for the first quarter ending March 31, 2008 of
between $110.0 million and $115.0 million, Adjusted EBITDA of $10.0 million to
$12.0 million and EPS in the range of a loss of ($0.06) to ($0.03).
The Company continues to expect revenue for the full year ending December 31,
2008 of between $540.0 million and $560.0 million, representing organic growth
of over 20 percent with Adjusted EBITDA of $80.0 to $85.0 million. Unlevered
free cash flow for the year ending December 31, 2008 is estimated to be in the
range of $60.0 to $65.0 million. The expectations for 2008 do not include
Bioscrypt which is expected to close by the end of the first quarter of 2008.
CONFERENCE CALL INFORMATION
The Company will host a conference call with the investment community to discuss
its operating results and outlook beginning at 11:00 a.m. (ET) today. The
conference call will be available live over the Internet at the investor
relations section of the L-1 website at www.L1ID.com. To listen to the
conference call, please dial 888-694-4641 using the passcode 29998536. For
callers outside the U.S., please dial 973-582-2734 with the passcode 29998536. A
recording of the conference call will be available starting one hour after the
completion of the call. 800-642-1687 and use passcode 29998536. To access the
replay from outside the U.S., dial 706-645-9291 and use passcode 29998536.
PRO FORMA ORGANIC GROWTH INFORMATION
Pro forma organic growth information presented in this press release reflects
pro forma results that include only those businesses which are included in our
results for the full year 2007. Therefore we are excluding acquisitions
consummated after January 1, 2007.
ADJUSTED EBITDA
L-1 Identity Solutions uses Adjusted EBITDA as a non-GAAP financial performance
measurement. Adjusted EBITDA is calculated by adding back to net income (loss)
interest, income taxes, depreciation, amortization, and stock-based compensation
expense. Adjusted EBITDA is provided to investors to supplement the results of
operations reported in accordance with GAAP. Management believes Adjusted EBITDA
is useful to help investors analyze the operating trends of the business before
and after the adoption of SFAS 123(R) and to assess the relative underlying
performance of businesses with different capital and tax structures. Management
believes that Adjusted EBITDA provides an additional tool for investors to use
in comparing L-1 Identity Solutions financial results with other companies in
the industry, many of which also use Adjusted EBITDA in their communications to
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investors. By excluding non-cash charges such as amortization, depreciation and
stock-based compensation, impairments of intangible assets as well as
non-operating charges for interest and income taxes, investors can evaluate the
Company's operations and can compare its results on a more consistent basis to
the results of other companies in the industry. Management also uses Adjusted
EBITDA to evaluate potential acquisitions, establish internal budgets and goals,
and evaluate performance of its business units and management.
L-1 Identity Solutions considers Adjusted EBITDA to be an important indicator of
the Company's operational strength and performance of its business and a useful
measure of the Company's historical and prospective operating trends. However,
there are significant limitations to the use of Adjusted EBITDA since it
excludes interest income and expense and income taxes, all of which impact the
Company's profitability, as well as depreciation and amortization related to the
use of long term assets which benefit multiple periods. L-1 Identity Solutions
believes that these limitations are compensated by providing Adjusted EBITDA
only with GAAP net income (loss) and clearly identifying the difference between
the two measures. Consequently, Adjusted EBITDA should not be considered in
isolation or as a substitute for net income (loss) presented in accordance with
GAAP. Adjusted EBITDA as defined by the Company may not be comparable with
similarly named measures provided by other entities. A reconciliation of GAAP
net income (loss) to Adjusted EBITDA is included in the enclosed schedule.
UNLEVERED FREE CASH FLOW
Unlevered Free Cash Flow represents cash flow from operating activities, plus
cash interest expense and cash income taxes, less interest income, and capital
expenditures. L-1 believes unlevered free cash flow is a useful measure for
assessing the company's liquidity, meeting its debt service requirements and
making acquisitions. Unlevered free cash flow is not necessarily comparable to
similar measures used by other entities and is not a substitute for GAAP
measures of liquidity such as cash flows from operating activities. A
reconciliation of cash flow from operating activities to unlevered free cash
flow is shown on Exhibit II.
ABOUT L-1 IDENTITY SOLUTIONS
L-1 Identity Solutions, Inc. (NYSE: ID), together with its portfolio of
companies, offers a comprehensive set of products and solutions for protecting
and securing personal identities and assets. Leveraging the industry's most
advanced multi-modal biometric platform for finger, face and iris recognition,
our solutions provide a circle of trust around all aspects of an identity and
the credentials assigned to it -- including proofing, enrollment, issuance and
usage. With the trust and confidence in individual identities provided by L-1
Identity Solutions, government entities, law enforcement and border management
agencies, and commercial enterprises can better guard the public against global
terrorism, crime and identity theft fostered by fraudulent identity. L-1
Identity Solutions is headquartered in Stamford, CT. For more information, visit
www.L1ID.com.
####
ID-L
FORWARD LOOKING STATEMENTS
This news release contains forward-looking statements that involve risks and
uncertainties. Forward-looking statements in this press release and those made
from time to time by L-1 Identity Solutions through its senior management are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect the Company's
current views based on management's beliefs and assumptions and information
currently available. Forward-looking statements concerning future plans or
results are necessarily only estimates, and actual results could differ
materially from expectations. Certain factors that could cause or contribute to
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such differences include, among other things, the availability of government
funding for the Company's products and solutions, the size and timing of federal
contract awards, performance on existing and future contracts, general economic
and political conditions and other factors affecting spending by customers, and
the unpredictable nature of working with government agencies. Additional risks
and uncertainties are described in the Securities and Exchange Commission
filings of the L-1 Identity Solutions, including the Company's Form10-K for the
year ended December 31, 2006 and form 10-Q for the quarter ended September 30,
2007. L-1 Identity Solutions expressly disclaims any intention or obligation to
update any forward-looking statements.
*See NIST iris recognition report at http://iris.nist.gov/ice/index.html.
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EXHIBIT I
L-1 IDENTITY SOLUTIONS, INC.
RECONCILIATION OF ADJUSTED EDITDA TO NET INCOME (LOSS) IN THOUSANDS
(UNAUDITED)
QUARTER ENDED YEAR ENDED
-------------------- --------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2007 2006 2007 2006
-------- -------- -------- --------
Net Income (Loss) $ 26,223 $ 2,008 $ 17,666 $(31,037)
Interest Income (99) (228) (407) (1,770)
Interest Expense 3,617 1,493 11,311 1,598
Depreciation 2,687 1,857 9,622 8,472
Amortization 8,164 7,101 29,614 14,887
Impairments and Merger
Related Expenses 5,000 -- 5,000 20,566
Stock Based Compensation 3,361 1,991 11,291 4,843
Income Tax Provision
(Benefit) (27,783) 791 (24,001) 2,804
ADJUSTED EBITDA $ 21,170 15,013 $ 60,096 $ 20,363
-------- -------- -------- --------
PROSPECTIVE PERIODS QUARTER ENDING YEAR ENDING
MARCH 30 2008 DEC 31, 2008
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Net Income (Loss) ($4,000) - ($2,000) $7,000 - $12,000
Reconciling Items:
Provision for Income Taxes ($2,000) $6,000
Interest, net $3,000 $12,000
Stock-Based Compensation $3,000 $15,000
Depreciation and Amortization $10,000 $40,000
Adjusted EBITDA $10,000 - $12,000 $80,000 - $85,000
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EXHIBIT II
L-1 IDENTITY SOLUTIONS, INC.
UNLEVERED FREE CASH FLOW
YEAR ENDED QUARTER ENDED
DECEMBER 31 DECEMBER 31 YEAR
-------------------- -------------------- -----------------
2007 2006 2007 2006 2008
-------- -------- -------- -------- -----------------
Cash Flow from Operating Activities $ 40,958 $ 12,561 $ 19,419 $ 5,268 $61,000 - $66,000
Interest Paid 9,009 1,294 4,963 397 12,000
Tax Effect of Stock Options Exercised 2,676 -- 2,676 -- 1,000
Taxes Paid 465 507 221 1,188 1,000
Interest Income (407) (1,770) (99) (227) --
Capital Expenditures (12,995) (6,823) (3,982) (1,850) (15,000)
-------- -------- -------- -------- -----------------
UNLEVERED CASH FLOW $ 39,706 $ 5,769 $23, 198 $ 4,776 $60,000 - $65,000
======== ======== ======== ======== =================
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EXHIBIT III
L-1 IDENTITY SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
QUARTER ENDED YEAR ENDED
DEC 31, DEC 31, DEC 31, DEC 31,
2007 2006 2007 2006
--------- --------- --------- ---------
Revenue $ 113,862 $ 76,315 $ 389,508 $ 164,386
--------- --------- --------- ---------
Cost of Revenues:
Cost of Revenues 69,066 42,216 241,337 99,668
Amortization of Purchased 7,256 6,568 27,095 13,861
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Intangibles
Total Cost of Revenues 76,322 48,784 268,432 113,529
--------- --------- --------- ---------
Gross Profit 37,540 27,531 121,076 50,857
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Operating Expenses:
Sales and Marketing 7,322 5,831 27,719 14,430
Research and Development 4,015 4,721 18,482 11,589
General and Administrative 17,970 12,725 62,279 29,953
Impairments and Merger Related
Expenses 5,000 -- 5,000 22,767
Amortization of Purchased
Intangibles 908 41 2,519 401
--------- --------- --------- ---------
Total Operating Expenses 35,215 23,318 115,999 79,140
--------- --------- --------- ---------
Operating income (loss): 2,325 4,213 5,077 (28,283)
Interest income 99 227 407 1,770
Interest expense (3.617) (1,493) (11,311) (1,598)
Other Income (expense) (367) (148) (508) (122)
--------- --------- --------- ---------
Earnings Before Taxes (1,560) 2,799 (6,335) (28,233)
Income Tax (Benefit) Provision (27,783) 791 (24,001) 2,804
--------- --------- --------- ---------
Net Income (Loss) $ 26,223 $ 2,008 $ 17,666 $ (31,037)
========= ========= ========= =========
Net Income (Loss) Per Share
Basic $ 0.37 $ 0.03 $ 0.25 ($ 0.71)
========= ========= ========= =========
Diluted $ 0.35 $ 0.03 $ 0.24 ($ 0.71)
========= ========= ========= =========
Weighted Average
Basic 71,615 72,279 71,663 43,823
========= ========= ========= =========
Diluted 77,666 72,843 72,385 43,823
========= ========= ========= =========
During the fourth quarter of 2007, management of the Company determined
that based on the cumulative results of operations for the three years
ended December 31, 2007, after considering the effect of recorded items
that do not enter in the determination of taxable income and the expected
future operating results, it is more likely than not that the Company will
realize a substantial portion of the tax benefits of its net operating
loss carry forwards. As a result, the Company reduced its previously
recorded deferred tax asset valuation allowance to reflect the estimated
benefits it expects to realize. The reduction of the deferred tax asset
valuation allowance also resulted in the recognition of a benefit of $27.8
million recorded as a reduction of goodwill.
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EXHIBIT IV
L-1 IDENTITY SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS(2))
(UNAUDITED)
December 31, 2007 December 31, 2006
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ASSETS
Current Assets:
Cash and cash equivalents $ 8,203 $ 4,993
Accounts receivable, net 90,210 61,513
Inventory 21,534(3) 10,967
Other current assets 3,890 4,529
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Total Current Assets 123,837 82,002
Net Property, Plant and Equipment 23,451 19,928
Goodwill 1,054,270 951,443
Intangible Net 184,237 170,098
Deferred Tax Asset 50,546 --
Other Assets 9,304 3,754
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Total Assets $ 1,445,645 $ 1,227,225
=========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $ 81,550 $ 54,807
Current Deferred revenue 12,279 10,331
Other Current Liabilities 2,392 5,206
----------- -----------
Total Current Liabilities 96,221 70,344
Deferred Tax Liability -- 4,394
Deferred Revenue 4,671 3,734
Long-term debt 259,000 80,000
Other Non-Current Liabilities 1,036 1,668
----------- -----------
Total liabilities 360,928 160,140
Shareholders' Equity:
Common Stock 6 73
Total Accumulated Paid in Capital 1,217,839 1,153,791
Accumulated Deficit (69,797) (87,464)
Accumulated Other Comprehensive Income 6,407 685
Prepaid Forward (69,808)
----------- -----------
Total Equity 1,084,717 $ 1,067,085
=========== ===========
Total Liabilities and Shareholders' Equity $ 1,445,645 $ 1,227,225
=========== ===========
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(2) The February 13, 2008 press release reported the condensed consolidated
balance sheets as being "in millions." This was a typographical error.
(3) The February 13, 2008 press release reported 22,534 for Inventory. This was
a typographical error.
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