ISMANING, Germany, Nov. 10 /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, 2008. Revenues
from continuing operations in the third quarter of 2008 were $6.4
million, down 16% from revenues of $7.6 million in the third
quarter of 2007. Revenues for the first nine months of 2008 were
$19.4 million, down 6% from revenues of $20.7 million for the first
nine months of 2007. By product segment, third quarter 2008
revenues included $5.9 million from sales of smart card readers and
other products for secure network and physical access, compared
with sales of $6.1 million in the third quarter of 2007; and $0.5
million from sales of original equipment manufacturer (OEM) digital
media reader technology, compared with sales of $1.5 million in the
third quarter of 2007. U.S. sales in the third quarter of 2008 were
positively affected by stronger demand for smart card readers for
U.S. government programs, which had been very weak in the first two
quarters of 2008 primarily due to budget and project delays. Asian
sales of smart card interface chips also remained strong. However,
European sales were lower than expected due to variability in the
timing of orders for regional programs requiring smart card
readers. In addition, sales of digital media readers historically
have been concentrated among a small number of major customers, and
demand from these customers was unexpectedly light in the third
quarter of 2008. "The product investments we have been making for
the last several quarters have resulted in innovative new devices
for emerging security applications around the world," said Felix
Marx, chief executive officer of SCM Microsystems. "Within the last
several weeks we have introduced @MAXX(TM) prime, enabling secure
mobile authentication for financial and enterprise applications,
and certified terminals for the electronic health card program in
Germany. Additional product introductions will soon follow. These
new products are important tools in our strategy to expand and
diversify our customer base and to bring the strength of our
technology, reputation and relationships to emerging markets."
Gross profit margin in the third quarter of 2008 was 46%, compared
with 45% in the second quarter of 2007. Gross profit margin
improved to 43% of revenue in the first nine months of 2008,
compared with 41% in the first nine months of 2007. These
improvements are primarily due to a more favorable mix of products
sold in the 2008 periods and ongoing product cost reductions that
have continued to strengthen PC Security product margins for the
past several quarters. Operating expenses in the third quarter of
2008, as reported in accordance with GAAP, were $5.0 million,
compared with $3.8 million in the third quarter of 2007. Higher
operating expenses in the third quarter of 2008 primarily reflect
investments the Company has made to diversify and expand its sales
base and to develop new products and business opportunities in the
contactless market, which started in the beginning of 2008.
Operating loss for the third quarter of 2008, as reported in
accordance with GAAP, was $(2.0) million, compared with operating
loss of $(0.4) million in the year ago quarter. Earnings before
interest, taxes, depreciation and amortization (EBITDA) in the
third quarter of 2008 was $(3.3) million, compared with EBITDA of
$(0.4) million in the third quarter of 2007. (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 2008 was $(3.3) million, or $(0.21) per
share, compared with loss from continuing operations of $(0.1)
million, or $(0.01) per share, in the third quarter of 2007. The
loss in the third quarter of 2008 includes other expenses, net of
$(1.1) million that are primarily related to a non-cash loss on
foreign currency exchange. Third quarter 2007 results included
other income, net of $0.3 million. Cash, cash equivalents and
short-term investments at September 30, 2008 were $25.0 million,
compared with $28.0 million at June 30, 2008. "We continue to
invest in business development activities to expand sales of our
traditional products into new geographies, strengthen our expertise
in contactless technology and build partnerships in key markets and
regions," said Marx. "Our equity investment in TranZfinity
strengthens our ability to deliver innovative services to the
contactless applications market. Our partnership with XIRING should
enable us to rapidly deliver a new mobile terminal for the German
eHealth market. We have a unique opportunity to become a key
supplier of infrastructure technology for emerging contactless
applications in banking, commerce, transportation and personal
authentication, and we are focused on continuing to invest in the
activities that can help us realize this opportunity." Guidance for
2008 For the full year 2008, the Company expects to achieve revenue
of $27 million to $30 million, which represents flat to 10% lower
revenues than those recorded for the full year 2007. The upper end
of this forecast is subject to the German government beginning to
implement its national electronic health card program before the
end of the year and sufficient quantities of the Company's eHealth
terminals being purchased for the program during the fourth
quarter. In August 2008, the Company previously announced expected
revenue growth of 5% to 15% for the year as a whole, or revenues of
approximately $32 million to $35 million. The decrease in expected
revenue compared with the guidance given in June is primarily due
to lower than expected sales in the third quarter of 2008 as a
result of variability in the timing of orders for smart card
readers in Europe and unexpectedly light demand for digital media
readers in the U.S. The Company further expects base operating
expenses of approximately $20 million to $21 million in 2008,
including anticipated further investments in sales and marketing
resources and in new product development to address growth
initiatives. Within these ranges, the Company currently expects to
record operating and net loss from continuing operations for the
full year. Additional Information SCM does not plan to hold a
conference call or webcast to discuss the results of its 2008 third
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 September 30, 2008, filed with the U.S. Securities
and Exchange Commission. About SCM Microsystems SCM Microsystems is
a leading provider 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 contained above regarding the near-term
introduction of additional new products and our expectations for
the Company's fourth quarter and full fiscal year 2008, including
specifically our statements regarding our expectations that we
expect revenue to decrease 0% to 10% in the full year 2008 compared
to prior year levels; that base operating expenses will be between
$20 million and $21 million in 2008; and that we will record
operating and net loss for the full year 2008. 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 revenues based on a strategy of expanding our sales into new
geographic markets and on diversifying and growing our customer
base; our ability to successfully develop and introduce new
products, particularly contactless reader products, that satisfy
the evolving and increasingly complex requirements of customers;
sales of smart card readers to the U.S. government market may
decline faster than currently expected; sales to the German
government for its national electronic health card program may not
occur or may decline; sales to a relatively small number of
customers historically have accounted for a significant percentage
of our revenues; the markets in which we participate or target may
not grow, converge or standardize at anticipated rates or at all,
including the government, financial and enterprise security markets
that 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; the current economic
conditions could negatively impact our ability to access capital,
could increase the cost of capital, could negatively impact
customer demand, or could negatively impact the ability of our
suppliers to produce and sell to us key components for our
products; and our operating expenses may not be at levels that
support profitability. 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, 2007 and subsequent reports, filed with the
U.S. Securities and Exchange Commission. Note: @MAXX is a trademark
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 Nine months ended September 30, September 30,
2008 2007 2008 2007 Net revenues $6,393 $7,617 $19,377 $20,721 Cost
of revenues 3,483 4,170 10,961 12,201 Gross profit 2,910 3,447
8,416 8,520 Operating expenses: Research and development 980 815
3,058 2,327 Sales and marketing 2,280 1,625 7,010 4,802 General and
administrative 1,697 1,374 4,718 5,653 Amortization of intangible
assets -- -- -- 272 Restructuring and other charges (credits) --
(4) -- (4) Total operating expenses 4,957 3,810 14,786 13,050 Loss
from operations (2,047) (363) (6,370) (4,530) Interest and other,
net (1,117) 279 (293) 999 Loss from continuing operations before
income taxes (3,164) (84) (6,663) (3,531) Benefit (provision) for
income taxes (103) (32) (151) (124) Loss from continuing operations
(3,267) (116) (6,814) (3,655) Income (loss) from discontinued
operations, net of income taxes 424 (83) 273 (202) Gain (loss) on
sale of discontinued operations, net of income taxes 44 16 553
1,569 Net income (loss) $ (2,799) $ (183) $(5,988) $(2,288) Loss
per share from continuing operations: Basic and diluted $(0.21)
$(0.01) $(0.43) $(0.23) Gain (loss) per share from discontinued
operations: Basic and diluted $0.03 $(0.00) $ 0.05 $ 0.08 Net
income (loss) per share: Basic and diluted $(0.18) $ (0.01) $
(0.38) $ (0.15) Shares used in computing loss per share: Basic and
diluted 15,744 15,736 15,743 15,722 SCM MICROSYSTEMS, INC.
Reconciliation of EBITDA Calculation to GAAP Accounting (in
thousands) (unaudited) Three Months Ended Nine Months Ended
September 30, September 30, 2008 2007 2008 2007 EBITDA $(3,273)
$(424) $(7,089) $(4,265) Interest income 173 423 642 1,234
Provision for income taxes (103) (32) (151) (124) Depreciation and
amortization (64) (83) (216) (500) Net loss from continuing
operations $(3,267) $(116) $(6,814) $(3,655) We conduct a
significant amount of our business in Europe, we are dually traded
on the U.S. Nasdaq Global Market and the Prime Standard of the
Frankfurt exchange and the majority of our investors are
German-based. In addition, our corporate headquarters are in
Germany. Based on these factors, we have determined that EBITDA, as
defined above, is a relevant measure of performance for the
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
(GAAP). 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 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 2008 2007
Current assets: Cash, cash equivalents and short-term investments $
25,020 $ 32,444 Accounts receivable, net 6,368 8,638 Inventories
4,321 2,738 Other current assets 1,310 1,455 Total current assets
37,019 45,275 Property, equipment, intangibles and other assets,
net 3,581 3,289 Total assets $ 40,600 $ 48,564 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $2,484
$3,063 Accrued expenses and other current liabilities 6,763 8,185
Total current liabilities 9,247 11,248 Long-term income taxes
payable 142 200 Deferred tax liability 74 77 Stockholders' equity
31,137 37,039 Total liabilities and stockholders' equity $ 40,600 $
48,564 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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