FREMONT, Calif. and ISMANING, Germany, May 15
/PRNewswire-FirstCall/ -- SCM Microsystems, Inc.
(NASDAQ:SCMMNASDAQ:PrimeNASDAQ:Standard:NASDAQ:SMY), a leading
provider of solutions that open the Digital World, today announced
final results for its first quarter ended March 31, 2009. In a
challenging macroeconomic environment, SCM improved its cost
structure and business mix, maintained its strong liquidity
position, and advanced its growth strategy. All figures are
reported in accordance with U.S. GAAP, except as noted. "As with
many companies across industry, our revenue in the first quarter
was affected by the global economic downturn. Our engagement with
customers remained quite active, however, and we believe that
economic uncertainty was the main reason they slowed purchases of
our solutions," commented Felix Marx, chief executive officer of
SCM Microsystems. "In fact we saw important signs of progress,
particularly with our strategy of expanding and diversifying our
customer base. For example, we continued shipping terminals for
Germany's electronic health card program. Germany began rolling the
cards out to its 82 million citizens in April, so we believe that
most of our revenue from this program is still ahead of us. We also
penetrated new geographic markets with our digital media readers,
including our first photo kiosk customers in Europe." "To keep our
gross margin stable, we cut costs and improved our product mix
among other actions," Marx noted. "To keep our growth strategy on
track, we put an intense effort into closing our merger with Hirsch
Electronics. That paid off, as we succeeded in completing the
transaction in April with overwhelming shareholder approval. We are
now looking forward to taking advantage of our significantly
expanded size, resources, and market presence." SCM's primary
business is Secure Authentication, which provides smart card
readers and other products for secure physical and network access.
First-quarter revenue from the Secure Authentication business was
$3.9 million, down 21% from $5.0 million in the same quarter a year
earlier. Key factors in the decline include customer pullbacks in
U.S. government authentication programs, retail chipdrive(R)
products in Europe and smart card readers in Japan. SCM's Digital
Media and Connectivity business recorded $1.2 million in revenue in
the first quarter, 17% lower than $1.5 million in the prior-year
period due primarily to cutbacks by a major OEM customer. In
aggregate, total revenue from continuing operations was $5.2
million in the first quarter of 2009, down 20% compared with $6.5
million in the same period a year earlier. Despite the decline in
revenue, first-quarter gross profit margin edged down only
slightly, to 41% of revenue compared to 42% in the same period a
year earlier. A more favorable revenue mix helped hold gross margin
relatively stable year-over-year, as did continued implementation
of cost reduction programs already in place. SCM also continued to
improve its expense position, reducing fixed expenses for the third
consecutive quarter. Associated severance payments resulted in $0.1
million in expenses in the first quarter, and the merger with
Hirsch mentioned above generated approximately $1.4 million in
expenses. These non-recurring expenses were only partly offset by a
gain on the sale of assets of $0.2 million and a reduction in
research and development expenses achieved by streamlining the
development organization. As a result, total operating expenses for
the first quarter were $5.3 million, up from $4.7 million in the
prior-year period. Combined with lower revenue, this led to an
operating loss of $(3.1) million in the first quarter of 2009,
compared with an operating loss of $(2.0) million in the same
period a year earlier. Loss from continuing operations was $(3.1)
million, or $(0.20) per share, in the first quarter of 2009. In the
prior year, the first-quarter loss from continuing operations was
$(1.6) million, or $(0.10) per share. Despite the net loss, SCM
conserved cash and maintained its liquidity, recording cash and
cash equivalents at March 31, 2009 of $20.6 million, unchanged from
the previous quarter. Earnings before interest, taxes, depreciation
and amortization (EBITDA) in the first quarter of 2009 was $(3.1)
million, compared with EBITDA of $(1.7) million in the first
quarter of 2008. (See reconciliation of EBITDA to GAAP accounting
contained within this press release.) "Obviously we are not
satisfied with lower revenue and losses," Marx said. "It is
difficult to pursue any growth strategy in a contracting economy,
even when many signs indicate that we are on the right path
forward. So we are working to keep our costs down and to
consolidate our strategic progress in recent quarters, especially
our merger with Hirsch. The greater scale and resources we now have
make it easier to pursue strategic goals such as building on our
strong regional base in Europe, expanding into Latin America and
Asia, and penetrating the global market for contactless solutions
that enable e-commerce, e-government and e-business. Another
benefit of the merger is adding Hirsch president Lawrence Midland
to our executive team and adding both Mr. Midland and Douglas
Morgan, a Hirsch director, to our board. We are a stronger company
now, top to bottom, and committed to forging ahead despite the
economic headwinds." Business Outlook Due to the speed and severity
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 first quarter. For more
information on SCM's first quarter results, please see the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 2009, 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 at work, at home
and in the marketplace. SCM delivers the industry's broadest range
of smart card reader technology for secure authentication of
individuals by computers, networks and facilities. Through its
wholly owned subsidiary, Santa Ana, California-based Hirsch
Electronics, SCM is a leader in IP-based physical access solutions
that integrate databases, devices, alarm systems and surveillance
systems. The company's customers include OEMs, governments and
enterprises worldwide. U.S. headquarters are in Fremont,
California; global headquarters are in Ismaning, Germany. For
additional information, visit the SCM Microsystems web site at
http://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, the statements by Felix Marx; our statements about
advancing our growth strategy in 2009 and our statements about
product demand from the German electronic healthcard 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. 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
our Quarterly Report on Form 10-Q for the period ended March 31,
2009, filed with the U.S. Securities and Exchange Commission. SCM,
the SCM logo and CHIPDRIVE are registered trademarks of SCM
Microsystems, Inc. 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 March 31, 2009 2008 Net revenue $5,155 $6,464 Cost of revenue
3,042 3,781 Gross margin 2,113 2,683 Operating expenses: Research
and development 769 1,035 Sales and marketing 2,244 2,161 General
and administrative 2,487 1,503 Amortization of intangible assets
(249) -- Total operating expenses 5,251 4,699 Loss from operations
(3,138) (2,016) Interest and other income (expense), net (10) 493
Income (loss) from continuing operations before income taxes
(3,148) (1,523) (Provision for) benefit from income taxes 1 (47)
Income (loss) from continuing operations (3,147) (1,570) Gain
(loss) from discontinued operations, net of income taxes 67 (125)
Gain on sale of discontinued operations, net of income taxes 37 13
Net income (loss) $(3,043) $(1,682) Income (loss) per share from
continuing operations: Basis and diluted $(0.20) $(0.10) Loss per
share from discontinued operations: Basic and diluted $0.01 $(0.01)
Net income (loss) per share: Basic and diluted $(0.19) $(0.11)
Shares used in computing income (loss) per share: Basic and diluted
15,744 15,741 SCM MICROSYSTEMS, INC. Reconciliation of EBITDA
Calculation to GAAP Accounting (in thousands) (unaudited) Three
Months Ended March 31, 2009 2008 EBITDA $(3,092) $(1,737) Interest
income 27 295 (Provision) benefit for income taxes 1 (47)
Depreciation and amortization (83) (81) Net income (loss) from
continuing operations $(3,147) $(1,570) 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, our corporate
headquarters 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. SCM
MICROSYSTEMS, INC. Condensed Consolidated Balance Sheets (in
thousands) (unaudited) March 31, December 31, ASSETS 2009 2008
Current assets: Cash and cash equivalents $20,561 $20,550 Accounts
receivable, net 5,147 8,665 Inventories 5,604 5,065 Other current
assets 1,234 1,139 Total current assets 32,546 35,419 Equity
investments 1,955 2,244 Property, equipment and other assets, net
2,259 3,168 Intangibles, net 463 307 Total assets $37,223 $41,138
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $3,991 $3,555 Accrued expenses and other current
liabilities 7,426 7,933 Total current liabilities 11,417 11,488
Long-term income taxes payable 215 184 Deferred tax liability 1,147
1,340 Stockholders' equity 24,444 28,126 Total liabilities and
stockholders' equity $37,223 $41,138 DATASOURCE: SCM Microsystems,
Inc. CONTACT: Stephan Rohaly, Chief Financial Officer, +49 89 95 95
5101, , or Investor Relations-US, Darby Dye, +1-510-249-4883, ,
both of SCM Microsystems, Inc. Web Site: http://www.scmmicro.com/
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