(Source: PRNewswire)
FREMONT, Calif. and ISMANING, Germany, May 15 /PRNewswire- FirstCall/ -- SCM Microsystems, Inc. (Nasdaq: SCMM, Prime Standard: 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.
