Strong revenue growth in PC Security business, record gross margin
and continued low operating expenses highlight quarter ISMANING,
Germany, Nov. 13 /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 third quarter ended September 30, 2007. Financial highlights of
the 2007 third quarter include: -- Improved PC Security revenues,
following project delays in the previous quarter; -- Gross margin
of 45%, the highest level in two years; -- Operating expenses under
$4 million; and -- Loss from continuing operations approaching
break even for the quarter. Revenues from continuing operations in
the third quarter of 2007 were $7.6 million, up 3% from revenues of
$7.4 million in the third quarter of 2006. Revenues for the first
nine months of 2007 were $20.7 million, down 14% from revenues of
$24.2 million for the first nine months of 2006. By product
segment, third quarter 2007 PC Security revenues, reflecting sales
of smart card readers and other products for secure network and
physical access, were $6.1 million, up 20% from sales of $5.1
million in the third quarter of 2006. Flash Media Reader revenues,
reflecting sales of OEM digital media reader technology, were $1.5
million, down 36% compared with sales of $2.3 million in the year
ago quarter. "Smart card reader sales improved significantly from
the previous quarter, as budget freezes in the U.S. government
sector appeared to relax, demand increased for the Company's
CHIPDRIVE line of smart card-based small office solutions, and
order patterns in Asia, which are variable, were once again
favorable," said Stephan Rohaly, chief financial officer of SCM
Microsystems. "Sales of the Company's digital media readers also
improved from the second quarter, as demand increased from one of
two major customers, although prior year sales levels were not
reached." "Stronger demand from customers in the third quarter
reflected both the recovery of some of our markets and increasing
traction in others," said Felix Marx, chief executive officer of
SCM Microsystems. "To comply with federal mandates, the U.S.
government is expected to implement smart card based security
systems on an ongoing basis across a number of agencies, and SCM
continues to be very active in serving this market. In Europe, we
continue to work closely with various government groups to prepare
for large scale smart card programs including e-passports and
ehealth cards. We have also begun selling our CHIPDRIVE small
office solutions across Europe and are seeing increasing demand for
these products. Additionally, in the last three months we have
added sales resources in each region, underlining our commitment to
leverage expanding market opportunities to deliver revenue growth."
Gross margin in the third quarter of 2007 was 45%, the highest
level in two years, compared with gross margin of 29% in the third
quarter of 2006. The increase in gross margin compared with the
prior year, and with the Company's guidance of 40% for the third
quarter, primarily reflects a more favorable mix of higher margin
products, better inventory management and product cost reductions
in the Company's PC Security business. Operating expenses in the
third quarter of 2007, as reported in accordance with GAAP, were
$3.8 million, below previous guidance of $4.0 million to $4.5
million per quarter. This compares with GAAP operating expenses of
$6.2 million in the third quarter of 2006, which included
amortization of intangibles of $0.2 million and restructuring and
other charges of $0.4 million. Lower base operating expenses in the
third quarter of 2007 compared with the prior year resulted
primarily from restructuring actions completed by the Company in
late 2006. Operating loss for the third quarter of 2007, as
reported in accordance with GAAP, was $(0.4) million, compared with
operating loss of $(4.0) million in the year ago quarter. Earnings
before interest, taxes, depreciation and amortization (EBITDA) in
the third quarter of 2007 was $(0.4) million, compared with EBITDA
of $(3.8) million in the third 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 third quarter of 2007 was $(0.1) million, or
$(0.01) per share, compared with loss from continuing operations of
$(3.7) million, or $(0.24) per share, in the third quarter of 2006.
Cash and cash equivalents at September 30, 2007 were $33.1 million,
compared with cash and cash equivalents of $34.5 million at June
30, 2007. Guidance For the fourth quarter of 2007, the Company
expects revenue between $7.5 million and $9.0 million and gross
margin of approximately 40%. Additionally, the Company expects base
operating expenses in the fourth quarter to be between $4.0 million
and $4.5 million. Consistent with its previous guidance, the
Company expects that full year 2007 revenues will be down 10% to
15% from the previous year's levels and expects to realize a small
operating loss for the second half of 2007. Additional Information
SCM does not plan to hold a conference call or webcast to discuss
the results of its 2007 third quarter. For more information on
SCM's third quarter results, please see the Company's Quarterly
Report on Form 10-Q for the quarter ended September 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 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, our statements regarding our
expectations for revenues of $7.5 million and $9.0 million, gross
margin of approximately 40% and operating expenses of $4.0 million
to $4.5 million in the fourth quarter of 2007; that revenues will
decrease 10% to 15% in the full year 2007 compared to prior year
levels; that we will record a small operating loss for the second
half of 2007; and that demand will continue to increase for our
CHIPDRIVE products. 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 Nine months ended
September 30, September 30, 2007 2006 2007 2006 Revenues $7,617
$7,396 $20,721 $24,185 Cost of revenues 4,170 5,271 12,201 16,251
Gross profit 3,447 2,125 8,520 7,934 Operating expenses: Research
and development 815 1,085 2,327 3,115 Sales and marketing 1,625
2,292 4,802 6,053 General and administrative 1,374 2,208 5,653
6,340 Amortization of intangible assets -- 170 272 495
Restructuring and other charges (credits) (4) 400 (4) 1,066 Total
operating expenses 3,810 6,155 13,050 17,069 Loss from operations
(363) (4,030) (4,530) (9,135) Interest and other, net 279 367 999
809 Loss from continuing operations before income taxes (84)
(3,663) (3,531) (8,326) Benefit (provision) for income taxes (32)
(17) (124) (46) Loss from continuing operations (116) (3,680)
(3,655) (8,372) Income (loss) from discontinued operations (83)
(213) (202) 2,793 Gain (loss) on sale of discontinued operations 16
24 1,569 5,287 Net income (loss) $(183) $(3,869) $(2,288) $(292)
Loss per share from continuing operations: Basic and diluted
$(0.01) $(0.24) $(0.23) $(0.54) Gain (loss) per share from
discontinued operations: Basic and diluted $(0.00) $(0.01) $0.08
$0.52 Net income (loss) per share: Basic and diluted $(0.01)
$(0.25) $(0.15) $(0.02) Shares used in computing loss per share:
Basic and diluted 15,736 15,648 15,722 15,623 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 Nine Months Ended September 30, September 30, 2007
2006 2007 2006 EBITDA $(424) $(3,772) $(4,265) $(8,455) Interest
income 423 368 1,234 943 Provision for income taxes (32) (17) (124)
(46) Depreciation and amortization (83) (259) (500) (814) Net loss
from continuing operations $(116) $(3,680) $(3,655) $(8,372) 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 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) September 30, December 31, ASSETS 2007 2006
Current assets: Cash, cash equivalents and short-term investments
$33,091 $36,902 Accounts receivable, net 6,156 6,583 Inventories
2,870 1,927 Other current assets 1,049 2,489 Total current assets
43,166 47,901 Property, equipment and other assets, net 3,454 3,182
Intangibles, net -- 272 Total assets $46,620 $51,355 LIABILITIES
AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable
$1,995 $4,572 Accrued expenses and other current liabilities 8,014
11,362 Total current liabilities 10,009 15,934 Long-term income
taxes payable 195 -- Deferred tax liability 101 103 Stockholders'
equity 36,315 35,318 Total liabilities and stockholders' equity
$46,620 $51,355 DATASOURCE: SCM Microsystems, Inc. CONTACT: Stephan
Rohaly, Chief Financial Officer, +49 89 95 95 5101, , or Darby Dye,
Investor Relations-US, +1-510-249-4883, , both of SCM Microsystems,
Inc. Web site: http://www.scmmicro.com/
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