SCM Microsystems Reports First Quarter Results FREMONT, Calif., May
6 /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 first quarter ended
March 31, 2004. SCM's reported financial performance for the 2004
first quarter reflects continuing operations for the Company's
Security business only, as SCM sold its retail Dazzle-branded
digital media and video business in July of 2003. SCM's continuing
Security business is focused on enabling secure access to digital
content and services through the digital television and PC
platforms. Financial results for the retail digital media and video
business are being treated as discontinued operations. First
Quarter Results Revenues from continuing operations in the first
quarter of 2004 were $13.2 million, within the range of management
guidance of $12 million to $15 million. This represents a decrease
of 29% compared with revenues of $18.7 million in the first quarter
of 2003, and a sequential increase of 5% from revenues of $12.6 in
the fourth quarter of 2003. By product segment, first quarter 2004
revenues included $5.9 million from sales of Digital TV security
modules, $4.3 million from sales of smart card readers and other
products for PC and network security, and $3.0 million from sales
of OEM flash media reader technology. Gross margin from continuing
operations in the first quarter of 2004 was 41%, within the range
of management guidance of 40% to 42%. Operating expenses for
continuing operations in the first quarter of 2004, as reported in
accordance with GAAP, were $9.3 million. This figure includes
amortization of intangibles of $0.3 million and $0.1 million in
other charges for legal settlement and costs related to the
Company's Security business. Operating loss for the quarter was
$(3.9) million. This compares with operating loss of $(0.5) million
in the year ago quarter, which included amortization of intangibles
of $0.3 million and restructuring and other charges of $0.3
million. Net loss from continuing operations for SCM's Security
business for the first quarter of 2004, as reported in accordance
with GAAP, was $(3.6) million, or $(0.23) per share, compared with
net income of $0.1 million, or $0.01 per share, in the first
quarter of 2003. Balance Sheet Cash, cash equivalents and
short-term investments at the end of the first quarter of 2004 grew
to $56.2 million, compared with $55.0 million at December 31, 2003.
Steady Execution to Plan Robert Schneider, chief executive officer
of SCM Microsystems commented, "As we had anticipated, sales of our
Digital TV and PC Security products remained soft during the first
three months of 2004, reflecting market pressures that we have been
positioning ourselves to address for several months now. Our
performance in the first quarter demonstrates steady execution to
our plan and careful management of our cash. Significantly, we
signed our first digital television operator customer in Korea, and
achieved certification of our security products with two different
partners for this important market. We also introduced several new
products to address emerging market opportunities in areas such as
mobile security, secure networking for small businesses and
physical access control. In the second quarter we intend to remain
focused on expanding these successes to pave the way for a return
to growth in the second half of 2004." Guidance For the second
quarter of 2004, management estimates that revenues from its
Security business will be in the range of $13 million to $15
million, reflecting continued pressure on sales of Digital TV
products in Europe and a lack of visibility into the timing of
anticipated digital security projects in the U.S. and Europe. Gross
margin is expected to be between 40% and 42%. Within this range of
revenue and gross margin, SCM expects to record an operating loss
for its Security business in the second quarter of 2004. Conference
Call SCM will hold a conference call and webcast on May 6, 2004 at
8:30 a.m. Eastern Time to discuss the results of its 2004 first
quarter. The webcast can be accessed through the Company's investor
relations site at http://www.scmmicro.com/ir_en/index.html . 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
markets and sells its smart card reader technology for network and
physical access and conditional access modules for secure digital
TV decryption to OEM customers in the government, financial,
enterprise and broadcasting markets worldwide. Global headquarters
are in Fremont, California, with European headquarters 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. These statements are subject to
risks and uncertainties which may cause actual results to differ
materially from those contemplated herein. These include, without
limitation, our statements regarding (i) our expectations for
revenue, gross margin and operating loss for the second quarter;
(ii) our expectations that will be able to expand on our initial
successes in the Korean digital TV market and with recently
introduced products in the mobile security, secure networking for
small businesses and physical access control market sectors; and
(iii) our ability to return to growth in the second half of 2004.
Actual results could differ materially. Our financial results may
not meet expectations. Our customers may not go forward with
planned projects that we believe would create demand for our
products, and these projects, even if carried out, may not create
demand for our products or result in the realization of any benefit
to us. We may not successfully execute against our market
opportunities or the identified markets and market opportunities
may grow or develop differently than anticipated or not at all.
Other risks and uncertainties that could cause our actual business
and operating results to differ include, but are not limited to our
ability to manage our business given the greater volatility in
sales and net margins we experience as an OEM Security company; our
ability to grow based on a strategy of participating in multiple
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; we may not successfully compete in the
markets in which we participate or target; and competitors could
take market share or create pricing pressure. For a discussion of
further risks and uncertainties related to our business, please
refer to our public company reports, including the Report on Form
10-K for the year ended December 31, 2003, filed with the U.S.
Securities and Exchange Commission. All trade names are trademarks
or registered trademarks of their respective holders. NOTE: The
Condensed Consolidated Statements of Operations in this press
release include pro forma operating results that are not in
accordance with GAAP. A reconciliation of the presentation of pro
forma results to GAAP is also provided in this release. As
described in the tables, pro forma net earnings exclude charges
related to the amortization of intangible assets and restructuring
and infrequent charges. We believe pro forma results enable our
management and our investors to better evaluate comparable
operating results. Further, our pro forma results are a primary
indicator our management uses to plan and forecast for future
periods. These pro forma results are not intended as a substitute
for information presented in accordance with GAAP. Furthermore, our
pro forma information may not be comparable to pro forma
information that other companies provide. SCM MICROSYSTEMS, INC.
Condensed Consolidated Statements of Operations (in thousands,
except per share data) (unaudited) Three months ended March 31,
2004 2003 Revenues $13,230 $18,722 Cost of revenues 7,825 10,566
Gross margin 5,405 8,156 Operating expenses: Research and
development 2,757 2,438 Sales and marketing 3,317 2,907 General and
administrative 2,825 2,721 Amortization of intangible assets 303
273 Restructuring and other charges 91 329 Total operating expenses
9,293 8,668 Loss from operations (3,888) (512) Interest and other,
net 399 723 Income (loss) from continuing operations before income
taxes (3,489) 211 Provision for income taxes (116) (106) Income
(loss) from continuing operations (3,605) 105 Loss from
discontinued operations (29) (3,829) Gain on sale of discontinued
operations 97 -- Net loss $(3,537) $(3,724) Income (loss) per share
from continuing operations: Basic $(0.23) $0.01 Diluted $(0.23)
$0.01 Income (loss) per share from discontinued operations: Basic
$0.00 $(0.25) Diluted $0.00 $(0.25) Net loss per share: Basic and
diluted $(0.23) $(0.24) Shares used in computing loss per share:
Basic 15,326 15,551 Diluted 15,632 15,552 Pro forma results: Pro
forma operating income (loss) $(3,494) $90 Pro forma income (loss)
from continuing operations $(3,211) $707 Diluted shares used in pro
forma income (loss) per share 15,326 15,552 Pro forma income (loss)
per share $(0.21) $0.05 SCM MICROSYSTEMS, INC. Reconciliation of
Pro Forma Results For Continuing Security Operations (in thousands,
except per share data) Three months ended March 31, 2004 2003
Reconciliation of pro forma income (loss) from operations Loss from
operations $(3,888) $(512) Add back: Amortization of intangibles
303 273 Restructuring and other charges 91 329 Pro forma income
(loss) from operations $(3,494) $90 Reconciliation of pro forma
income (loss) from continuing operations Income (loss) from
continuing operations $(3,605) $105 Add back: Amortization of
intangibles 303 273 Restructuring and other charges 91 329 Pro
forma income (loss) from continuing operations $(3,211) $707
Diluted shares used in pro forma income (loss) per share 15,326
15,552 Pro forma income (loss) per share from continuing operations
$(0.21) $0.05 SCM MICROSYSTEMS, INC. Condensed Consolidated Balance
Sheets (in thousands) (unaudited) March 31, December 31, ASSETS
2004 2003 Current assets: Cash, cash equivalents and short-term
investments $56,234 $55,038 Accounts receivable, net 8,410 10,378
Inventories 12,366 9,108 Other current assets 2,803 8,909 Total
current assets 79,813 83,433 Property, equipment and other assets,
net 9,287 9,933 Intangibles, net 2,718 3,076 Total assets $91,818
$96,442 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $8,231 $7,571 Accrued expenses and other current
liabilities 23,550 25,447 Total current liabilities 31,781 33,018
Stockholders' equity 60,037 63,424 Total liabilities and
stockholders' equity $91,818 $96,442 DATASOURCE: SCM Microsystems,
Inc. CONTACT: Manfred Mueller, Investor Relations-Europe, +49 89
9595 5140, or , or Darby Dye, Investor Relations-US,
+1-510-360-2302, or , or Steve Moore, Chief Financial Officer,
+1-510-360-2300, or , all of SCM Microsystems, Inc. Web site:
http://www.scmmicro.com/
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