SCM Microsystems Reports Second Quarter 2007 Results
ISMANING, Germany, Aug. 14 /PRNewswire-FirstCall/ -- 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, 2007.
Revenues from continuing operations in the second quarter of 2007 were
$4.6 million, down 50% from revenues of $9.4 million in the second quarter of
2006. Revenues for the first six months of 2007 were $13.1 million, down 22%
from revenues of $16.8 million for the first six months of 2006. By product
segment, second quarter 2007 revenues included $3.9 million from sales of smart
card readers and other products for secure network and physical access, compared
with sales of $6.8 million in the second quarter of 2006; and $0.8 million from
sales of OEM digital media reader technology, compared with sales of $2.6
million in the year ago quarter. The Company attributed lower sales of its smart
card reader products to a combination of factors, including recent budget
freezes at U.S. government agencies, demand fluctuations with a major customer
in Asia and project delays in Europe. The Company attributed lower sales of its
OEM digital media reader technology primarily to reduced orders from one of two
major customers in this business segment.
"Information we have received from our smart card reader customers
continues to suggest that what we believe are temporary market factors are
responsible for the decreased level of orders we have seen in recent weeks,"
said Stephan Rohaly, Chief Financial Officer and interim Chief Executive Officer
of SCM Microsystems. "We believe that these market issues will limit, but not
prevent, growth in our smart card reader business in the second half of the
year, as various government and enterprise security projects move forward. We
also believe that revenue from our digital media reader products will increase
from current levels in the second half of the year, as we have recently been
building backlog with a major customer that previously had reduced order levels
for our products due to decreased demand in their end markets."
Gross margin in the second quarter of 2007 was 29%, compared with gross
margin of 34% in the second quarter of 2006. The decrease in gross margin
compared with the prior year, and with the Company's previous guidance of 40%
per quarter, primarily reflects lower sales levels in the 2007 second quarter.
Operating expenses in the second quarter of 2007, as reported in
accordance with GAAP, were $5.4 million, including amortization of intangibles
of $0.1 million and severance and other costs of $1.4 million related to the
resignation of the Company's CEO and founder in June 2007. This compares with
GAAP operating expenses of $5.4 million in the second quarter of 2006, which
included amortization of intangibles of $0.2 million and restructuring and other
charges of $0.2 million. Lower base operating expenses in the second quarter of
2007, which exclude the severance and other costs relating to the resignation of
the Company's CEO and founder, compared with the prior year resulted primarily
from restructuring actions completed by the Company in late 2006.
Operating loss for the second quarter of 2007, as reported in accordance
with GAAP, was $(4.1) million, compared with operating loss of $(2.3) million in
the year ago quarter.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in
the second quarter of 2007 was $(3.9) million, compared with EBITDA of $(2.0)
million in the second quarter of 2006. (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 2007 was $(3.7) million, or $(0.23) per share, compared
with loss from continuing operations of $(2.0) million, or $(0.13) per share, in
the second quarter of 2006.
Cash and cash equivalents at June 30, 2007 were $34.5 million and included
$1.6 million received from Kudleski S.A. during the second quarter as final
payment for Kudelski's purchase of SCM's DTV solutions business, compared with
cash and cash equivalents of $34.4 million at March 31, 2007.
On August 1, 2007, the Company announced that it will appoint a new Chief
Executive Officer on November 1, 2007. "We are very pleased that Felix Marx has
agreed to become SCM's new CEO," continued Rohaly. "He is an experienced sales
leader and general manager and is recognized as an innovative executive in the
smart card industry. His focus will be to leverage SCM's strong reputation in
the security space and our operational model to drive new business opportunities
for SCM in 2008 and beyond."
Guidance
The Company currently expects that revenues for the second half of fiscal
2007 will be flat to approximately 10% lower than revenues for the second half
of fiscal 2006. Based on these expected results and the Company's 2007 first
half revenues, which were approximately 20% below levels for the first half of
2006, the Company now expects that full year 2007 revenues will be down 10% to
15% from the previous year's levels, rather than grow 15% to 20%, as previously
reported. The Company continues to expect gross margins in the second half of
2007 to be approximately 40% per quarter. Additionally, the Company expects base
operating expenses to be between $4 million and $4.5 million per quarter for the
second half of 2007. As a result, the Company does not expect to realize an
operating profit for 2007 as a whole.
Additional Information
SCM does not plan to hold a conference call or webcast to discuss the
results of its 2007 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, 2007, filed with the U.S. Securities and Exchange Commission.
About SCM Microsystems
SCM Microsystems is a leading supplier 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 regarding our expectations that revenues will
decrease 0% to 10% in the second half of 2007 and decrease 10%-15% in the full
year 2007 compared to prior year levels; that we will achieve gross margin of
approximately 40% per quarter in the second half of 2007; that we will not
record an operating profit for the full year 2007; that our smart card reader
business will grow in the second half of 2007, based on government and
enterprise projects moving forward; and that our digital media reader business
will grow from second quarter levels in the second half of 2007, based on
current order backlog. 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 market share and
revenues based on a strategy of participating in specific early stage markets;
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 and enterprise security
markets which 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 we may not be successful in maintaining operating expenses
at current or lower 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 and our amended Annual Report on Form 10-K/A for
the year ended December 31, 2006, filed with the U.S. Securities and Exchange
Commission.
All trade names are trademarks or registered trademarks of their
respective holders.
- FINANCIALS FOLLOW -
SCM MICROSYSTEMS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
2007 2006 2007 2006
Revenues $ 4,647 $ 9,362 $ 13,104 $ 16,789
Cost of revenues 3,314 6,203 8,031 10,980
Gross profit 1,333 3,159 5,073 5,809
Operating expenses:
Research and development 792 1,061 1,512 2,030
Sales and marketing 1,618 1,922 3,177 3,761
General and administrative 2,879 2,048 4,279 4,132
Amortization of intangible
assets 97 165 272 325
Restructuring and other
charges (credits) 0 244 0 666
Total operating expenses 5,386 5,440 9,240 10,914
Loss from operations (4,053) (2,281) (4,167) (5,105)
Interest and other income, net 412 308 720 442
Loss from continuing operations
before income taxes (3,641) (1,973) (3,447) (4,663)
Provision for income taxes (32) (18) (92) (29)
Loss from continuing
operations (3,673) (1,991) (3,539) (4,692)
Income (loss) from
discontinued operations (102) 3,948 (119) 3,006
Gain on sale of discontinued
operations 1,530 5,242 1,553 5,263
Net income (loss) $ (2,245) $ 7,199 $ (2,105) $ 3,577
Loss per share from continuing
operations:
Basic and diluted $ (0.23) $ (0.13) $ (0.23) $ (0.30)
Gain (loss) per share from
discontinued operations:
Basic and Diluted $ 0.09 $ 0.59 $ 0.09 $ 0.53
Net income (loss) per share:
Basic and Diluted $ (0.14) $ 0.46 $ (0.14) $ 0.23
Shares used in computing
loss per share:
Basic and Diluted 15,730 15,627 15,715 15,610
Note: Financial results contained in this release reflect continuing
operations of the Company's PC Security and Flash Media Reader businesses
only. The Company completed the sale of its Digital TV solutions business
in May 2006; therefore, financial results for the Digital TV solutions
business are being accounted for as discontinued operations.
SCM MICROSYSTEMS, INC.
Reconciliation of EBITDA Calculation to GAAP Accounting
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
EBITDA $ (3,882) $ (2,022) $ (3,842) $ (4,682)
Interest income 413 311 811 576
Provision for income taxes (32) (18) (92) (29)
Depreciation and
amortization (172) (262) (416) (557)
Net loss from
continuing operations $ (3,673) $ (1,991) $ (3,539) $ (4,692)
We conduct a significant amount of our business in Europe, we are dually
traded on the U.S. Nasdaq and German Prime Standard stock exchanges and the
majority of our investors are German-based. In addition, we have recently moved
our corporate headquarters from the U.S. to Germany. 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 reported in accordance with accounting
principles generally accepted in the United States. While we believe that
EBITDA, as defined above, 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.
SCM MICROSYSTEMS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, December 31,
ASSETS 2007 2006
Current assets:
Cash, cash equivalents and short-term
investments $ 34,488 $ 36,902
Accounts receivable, net 4,398 6,583
Inventories 3,864 1,927
Other current assets 1,335 2,489
Total current assets 44,085 47,901
Property, equipment and other assets, net 3,395 3,182
Intangibles, net -- 272
Total assets $ 47,480 $ 51,355
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,689 $ 4,572
Accrued expenses and other current
liabilities 8,695 11,362
Total current liabilities 11,384 15,934
Long-term income taxes payable 170 --
Deferred tax liability 112 103
Stockholders' equity 35,814 35,318
Total liabilities and stockholders'
equity $ 47,480 $ 51,355
SOURCE SCM Microsystems, Inc.