Published:
ActivIdentity Reports Fourth Quarter and Fiscal 2008 Financial Results
Fiscal Fourth Quarter Revenue Increases 14% to $15.6 Million Over Prior-Year Quarter
ActivIdentity Corporation (NASDAQ: ACTI), a
global leader in digital identity assurance, today announced preliminary
and unaudited financial results for the fourth quarter and fiscal year
ended September 30, 2008.
Revenue for the quarter ended September 30, 2008 was $15.6 million,
compared to $13.8 million for the quarter ended September 30, 2007.
Revenue for the year ended September 30, 2008 was $59.0 million, compared
to $59.6 million for the prior year.
Net loss for the quarter ended September 30, 2008 was $23.9 million or
$(0.52) per basic and diluted share, compared to a net loss of $1.7
million, or $(0.04) per basic and diluted share for the three months ended
September 30, 2007. Net loss for the year ended September 30, 2008 was
$77.3 million or $(1.69) per basic and diluted share, compared to a net
loss of $9.3 million or $(0.20) per share for the prior year.
Non-GAAP net loss for the quarter ended September 30, 2008 was $4.4 million
or $(0.10) per basic and diluted share compared to a loss of $0.4 million
or $(0.01) for the fourth quarter of fiscal 2007. Non-GAAP net loss for
the full year ended September 30, 2008 was $10.3 million or $(0.23) per
basic and diluted share compared to a loss of $3.7 million or $(0.08) per
basic and diluted share in the year-ago period. Quarterly non-GAAP net
loss excluded $0.7 million of stock-based compensation expense, $0.6
million of amortization expense, $0.8 million of severance expenses related
to our global cost reduction program and an estimated impairment charge of
$17.4 million for auction rate securities. Please refer to the GAAP to
non-GAAP reconciliation table for further detail. Certain financial
results are subject to the application of accounting estimates, especially
with regards to fair value accounting. Management has used what it
believes to be appropriate valuation techniques to assess the fair value of
impaired investments and the fair value of undelivered elements in
multi-element software arrangements.
Fiscal Fourth Quarter and Fiscal Year Financial Highlights
-- Fourth quarter revenues were higher on both a sequential and year-over-
year basis due to new large customers in banking both in Europe and North
America and large enterprise deals, which drove both software and hardware
revenue streams.
-- Although 2008 revenues were flat compared with 2007, the Company
finished the 2008 fiscal year with momentum, reflecting the new "ID360"
business strategy which will focus on targeting 3 key markets: Employer-to-
Employee, Business-to-Customer, and Government-to-Citizen.
-- EBITDA, adjusted for non-recurring and non-cash items such as stock-
based compensation expense, depreciation, severance, amortization of
intangibles and asset impairments, was a loss of $2.0 million, representing
an improvement over losses in the previous two quarters of $3.9 million and
$2.7 million, respectively.
-- In the fiscal fourth quarter, ActivIdentity continued to rationalize
its business model by aligning expenses with revenues, and reduced total
headcount to 260 people, down from 283 at the end of the third quarter.
-- As of September 30, 2008, cash and short-term investments were $79.8
million.
"Revenue growth in the fiscal fourth quarter reflects our new go-to-market
strategy aimed at focusing our sales efforts on the Employer-to-Employee,
Business-to-Customer, and Government-to-Citizen space, which we believe
collectively represents a multi-billion dollar market," said Grant Evans,
Chairman and Chief Executive Officer of ActivIdentity. "We have already
shown significant progress executing on this strategy with the signing of a
major contract with the State of Queensland in Australia for the issuance
of smartcard driver's licenses to millions of Queensland citizens. This
contract proves the viability of our new strategy, the worldwide acceptance
of identity assurance solutions and, specifically, the significant market
opportunity in the government space."
Conference Call Details
ActivIdentity will host its Fourth Quarter and Fiscal Year 2008 conference
call on Thursday, November 20, 2008 at 4:30 PM Eastern Standard Time / 1:30
PM Pacific Standard Time.
To access the conference call within the U.S. or Canada, please dial (877)
292-2820 and enter conference ID 72348549. To access the conference call
outside the U.S. or Canada please dial (706) 679-4390 and enter conference
ID 72348549.
The conference call web cast will be available on the investor relations
section of the Company's website at www.actividentity.com. A replay of the
web cast will be available approximately two hours after the conclusion of
the call at www.actividentity.com through December 4, 2008.
About ActivIdentity
ActivIdentity Corporation has provided identity assurance and credential
management solutions to enterprise, government, and financial services
organizations worldwide for more than a decade. Trusted identity is the
core of the ActivIdentity platform, enabling secure credential management.
ActivIdentity customers experience multiple benefits including increased
digital and physical security, protection against on-line fraud, enhanced
business process efficiencies, secure access to digital assets, and a
pathway to regulatory compliance.
Headquartered in Fremont, CA (USA), ActivIdentity develops products in the
United States, Australia, and France, and has sales and technical service
centers in more than ten countries. Millions of users worldwide rely on
ActivIdentity identity assurance and credential management system to
address growing internal and external identity risks. For more information,
visit www.actividentity.com.
ActivIdentity and ActivCard are registered trademarks in the United States
and/or other countries. All other trademarks are the property of their
respective owners in the United States and/or other countries.
Safe Harbor Statement
The statements in this press release that are not historical facts are
forward-looking statements that involve risks and uncertainties. These
risks and uncertainties include risks relating to changes to our management
team, the use of estimates and assumptions in our financial reporting, and
other risks identified under the caption "Risk Factors" in our most recent
Annual Report on Form 10-K, and in subsequent Quarterly Reports on Form
10-Q, which are filed with the United States Securities and Exchange
Commission (SEC). Copies of these filings are available from the Company
and on the SEC's website at www.sec.gov. Actual results, events and
performance may differ materially from our forward-looking statements and
final results may vary from our preliminary reports. Readers are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company disclaims any intention to
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
ActivIdentity Corporation
Condensed Consolidated Unaudited Balance Sheets
(in thousands)
September September
30, 30,
2008 2007 (1)
========= =========
ASSETS
Current assets:
Cash and cash equivalents $ 70,173 $ 30,639
Short-term investments 9,656 91,084
Accounts receivable, net of allowance for
doubtful accounts 11,792 14,566
Inventories, net 1,760 2,146
Prepaid and other current assets 1,696 2,077
--------- ---------
Total current assets 95,077 140,512
--------- ---------
Long-term investments 11,752 -
Property and equipment, net 2,877 4,267
Other intangible assets, net 4,150 6,695
Other long-term assets 863 1,104
Goodwill - 35,874
--------- ---------
Total assets $ 114,719 $ 188,452
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,652 $ 2,116
Accrued compensation and related benefits 5,935 6,942
Current portion of accrual for restructuring
liability 616 733
Accrued and other current liabilities 3,702 3,484
Current portion of deferred revenue 11,024 11,710
--------- ---------
Total current liabilities 22,929 24,985
Deferred revenue, net of current portion 1,125 1,391
Accrual for restructuring liability, net of current
portion 962 1,574
Long-term deferred rent 430 705
Other long-term liabilities 479 -
--------- ---------
Total liabilities 25,925 28,655
--------- ---------
Minority interest 304 354
Stockholders' equity:
Common stock 46 46
Additional paid-in capital 426,141 423,242
Accumulated deficit (323,934) (246,501)
Accumulated other comprehensive loss (13,763) (17,344)
--------- ---------
Total stockholders' equity 88,490 159,443
--------- ---------
Total liabilities and stockholders' equity $ 114,719 $ 188,452
========= =========
(1) Derived from audited consolidated financial statements.
ActivIdentity Corporation
Condensed Consolidated Unaudited Statement of Operations
(In thousands, except per share amounts)
Three Months Twelve Months
Ended September 30, Ended September 30,
==================== ====================
2008 2007 2008 2007
========= ========= ========= =========
Revenue:
Software $ 5,628 $ 4,422 $ 19,589 $ 19,363
Hardware 3,989 3,116 15,078 16,894
Service 6,031 6,232 24,342 23,296
--------- --------- --------- ---------
Total revenue 15,648 13,770 59,009 59,553
--------- --------- --------- ---------
Cost of revenue:
Software 133 258 963 1,303
Hardware 2,732 1,500 9,551 9,036
Service 2,746 1,976 10,779 7,267
Amortization of acquired
developed technology and
patents 593 618 2,380 2,949
--------- --------- --------- ---------
Total cost of revenue 6,204 4,352 23,673 20,555
--------- --------- --------- ---------
Gross profit 9,444 9,418 35,336 38,998
Operating expenses:
Sales and marketing 6,054 6,229 25,602 25,282
Research and development 4,775 5,022 18,867 19,935
General and administration 3,113 2,340 11,380 12,124
Restructuring expense
(recovery) - - (70) -
Amortization of acquired
intangible assets 41 42 165 186
Impairment of goodwill - - 35,874 -
--------- --------- --------- ---------
Total operating expenses 13,983 13,633 91,818 57,527
--------- --------- --------- ---------
Operating income (loss) (4,539) (4,215) (56,482) (18,529)
Other income (expense):
Interest income, net 886 1,714 4,659 6,208
Other income (expense), net (20,213) 1,009 (25,190) 3,440
--------- --------- --------- ---------
Total other income
(expense), net (19,327) 2,723 (20,531) 9,648
--------- --------- --------- ---------
Loss before income tax and
minority interest (23,866) (1,492) (77,013) (8,881)
Income tax benefit (provision) (96) (274) (375) (429)
Minority interest 19 20 50 12
--------- --------- --------- ---------
Net loss $ (23,943) $ (1,746) $ (77,338) $ (9,298)
========= ========= ========= =========
Basic and diluted net loss per
share $ (0.52) $ (0.04) $ (1.69) $ (0.20)
========= ========= ========= =========
Shares used to compute basic
and diluted net loss per
share 45,786 45,728 45,770 45,694
ActivIdentity Corporation
Condensed Consolidated Unaudited Statement of Cash Flows
(In thousands)
Twelve Months Ended
September 30,
--------------------
2008 2007
--------- ---------
Cash flows from operating activities:
Net loss $ (77,338) $ (9,298)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization of fixed assets 1,566 1,576
Amortization of acquired developed technology and
patents 2,380 2,949
Non-realized foreign exchange loss (gain) 1,741 (3,610)
Amortization of acquired intangible assets 165 186
Stock-based compensation expense 2,874 2,518
Loss on disposal of property and equipment 24 25
Currency translation loss on liquidation of
investment in foreign entity 1,946 -
Goodwill impairment charge 35,874 -
Investment impairment charge 21,209 -
Minority interest in ActivIdentity Europe S.A (50) (12)
Changes in:
Accounts receivable 2,643 4,254
Inventories 402 (313)
Prepaid and other assets 872 924
Accounts payable (444) (135)
Accrued compensation and related benefits (838) 4
Accrual for restructuring liability (729) (710)
Accrued and other liabilities 446 (1,896)
Deferred revenue (872) (2,065)
--------- ---------
Net cash provided by (used in) operating
activities (8,129) (5,603)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (307) (2,099)
Purchases of short-term investments (37,245) (156,721)
Proceeds from sales and maturities of short-term
investments 85,165 182,795
Other long-term assets 136 (83)
--------- ---------
Net cash provided by investing activities 47,749 23,892
--------- ---------
Cash flows from financing activities:
Proceeds from exercise of options, rights and
warrants 25 191
--------- ---------
Net cash provided by financing activities 25 191
--------- ---------
Effect of exchange rate changes (111) 682
--------- ---------
Net increase in cash and cash equivalents 39,534 19,162
Cash and cash equivalents, beginning of period 30,639 11,477
--------- ---------
Cash and cash equivalents, end of period $ 70,173 $ 30,639
========= =========
Supplemental Financial Measures -- Adjusted EBITDA
In this press release and our related earnings conference call, we intend
to provide investors with a better understanding of operating results and
underlying trends to assess our performance and liquidity. We evaluate our
operating performance based on several measures, including the non-GAAP
financial measure of adjusted EBITDA (earnings before interest, taxes,
depreciation, amortization, and other income / expense). We believe EBITDA
is a useful supplemental financial measure for investors because it
facilitates investors' ability to evaluate the operational strength of the
company's business. EBITDA, however, is not calculated in accordance with
GAAP and should not be considered a substitute for net income as an
indicator of operating performance. A reconciliation of EBITDA to operating
income from continuing operations is presented below.
ActivIdentity Corporation
Unaudited Reconciliation from GAAP Results to Adjusted EBITDA
(In thousands)
Three Months Twelve Months
Ended September 30, Ended September 30,
==================== ====================
2008 2007 2008 2007
========= ========= ========= =========
Operating income (loss) (4,539) (4,215) (56,482) (18,529)
Add back depreciation expense 341 376 1,566 1,533
Add back amortization expense 634 660 2,545 3,135
Add back impairment of goodwill - - 35,874 -
Add back stock compensation
expense 746 719 2,874 2,518
Add back restructuring expense
(recovery) - - (70) -
Add back severance expense 818 211 2,825 297
--------- --------- --------- ---------
Adjusted EBITDA (2,000) (2,249) (10,868) (11,046)
========= ========= ========= =========
Supplemental Financial Measures -- Non-GAAP Results
This press release contains non-GAAP financial measures. The following
table reconciles the non-GAAP financial measures in the press release to
the most directly comparable financial measures prepared in accordance with
Generally Accepted Accounting Principles (GAAP). These non-GAAP measures
include non-GAAP costs of revenue, operating expenses, other expenses, net
loss and net loss per share amounts.
Non-GAAP financial measures should not be considered as a substitute for,
or superior to, GAAP financial measures, which should be considered as the
primary financial metrics for evaluating our financial performance.
Significantly, non-GAAP financial measures are not based on a comprehensive
set of accounting rules or principles. Instead, they are based on
subjective determinations by management designed to supplement our GAAP
financial measures. They are subject to a number of important limitations
and should be considered only in conjunction with our consolidated
financial statements prepared in accordance with GAAP. Our non-GAAP
financial measures differ from GAAP measures with the same names, may vary
over time, and may differ from non-GAAP financial measures with the same or
similar names used by other companies. Accordingly, investors should
exercise caution when evaluating our non-GAAP financial measures.
Despite these limitations, we believe our non-GAAP financial measures
provide meaningful supplemental information about our operating results,
primarily because they exclude goodwill and investment impairments as well
as costs and expenses that we do not believe are indicative of the ongoing
operating performance of our business and our senior management. Although
these items should properly be considered in our GAAP financial measures,
we believe they should be excluded when evaluating our current operating
performance. The non-GAAP financial measures disclosed in the accompanying
press release are used by our Board of Directors and senior management to
evaluate our current operating performance, are used in evaluating the
performance of our senior management, and are used in our budget and
planning processes. We believe that our non-GAAP financial measures are
helpful to investors by facilitating comparisons of our current and prior
operating results and by facilitating comparisons of our operating results
with those of other software companies.
ActivIdentity Corporation
Unaudited Reconciliation from GAAP Results to Non-GAAP
(In thousands)
Three Months Twelve Months
Ended September Ended September
30, 30,
================ ================
2008 2007 2008 2007
======= ======= ======= =======
Reported net income (loss) (GAAP basis) (23,943) (1,746) (77,338) (9,298)
Add back amortization expense 634 660 2,545 3,135
Add back impairment of goodwill - - 35,874 -
Add back stock compensation expense 746 719 2,874 2,518
Add back restructuring expense
(recovery) - - (70) -
Add back severance expense 818 211 2,825 297
Add back investment impairment charge 17,396 - 21,209 -
Add back loss on liquidation of
investment in a foreign entity - - 1,946 -
Tax effect of non-GAAP adjustments (79) (291) (183) (369)
------- ------- ------- -------
Non-GAAP net income (loss) (4,428) (447) (10,318) (3,717)
======= ======= ======= =======
Net income (loss) per share
reconciliation (0.52) (0.04) (1.69) (0.20)
Add back amortization expense 0.01 0.01 0.06 0.07
Add back impairment of goodwill - - 0.78 -
Add back stock compensation expense 0.02 0.02 0.06 0.06
Add back restructuring expense
(recovery) - - (0.00) -
Add back severance expense 0.02 0.00 0.06 0.01
Add back investment impairment charge 0.38 - 0.46 -
Add back loss on liquidation of
investment in a foreign entity - - 0.04 -
Tax effect of non-GAAP adjustments (0.00) (0.01) (0.00) (0.01)
------- ------- ------- -------
Non-GAAP net income (loss) per share -
basic and diluted (0.10) (0.01) (0.23) (0.08)
======= ======= ======= =======
Weighted average shares - basic 45,786 45,728 45,770 45,694
Discussion of Specific Items Excluded from Non-GAAP Financial Measures
We exclude the below items in our non-GAAP financial measures because we
believe they are not closely related to the ongoing operating performance
of our business and management and are generally excluded from our budget
and planning process. In addition, we believe our non-GAAP financial
measures are helpful to investors by facilitating comparisons of our
operating results over different time periods and by facilitating
comparisons of our financial performance with that of other companies.
Except for costs and expenses related to restructuring and severance, these
items are non-cash and do not affect cash flows.
1) Amortization of acquired intangible assets -- In accordance with
GAAP, we amortize intangible assets acquired in connection with
acquisitions over the estimated useful lives of the assets. We exclude
these amortization costs in our non-GAAP financial measures because they
(i) result from prior acquisitions, rather than the ongoing operating
performance of our business, and (ii) absent additional acquisitions, are
expected to decline over time as the remaining carrying amounts of these
assets are amortized. We believe excluding these costs helps investors
compare our financial performance with that of other companies with
different acquisition histories. However, as with impairment charges, we
recognize that amortization costs provide a helpful measure of the
financial impact and performance of prior acquisitions and investors should
consider our non-GAAP financial measures in conjunction with our GAAP
financial results that include amortization costs.
2) Impairment of goodwill -- During fiscal 2008, upon completion of an
evaluation analysis, we wrote-off the remaining balance of Goodwill.
Because the goodwill impairment resulted from a decline in the market value
of our stock price rather than as a result of any current period
operational activity, we include this non-GAAP financial adjustment to
provide investors a more comparative report of financial performance for
the period. However, as with amortization of intangible charges, we
recognize that impairment costs provide a helpful measure of the financial
impact and performance of prior acquisitions and investors should consider
our non-GAAP financial measures in conjunction with our GAAP financial
results that include impairment costs.
3) Stock based compensation -- We exclude stock based compensation
expense associated with stock options and stock granted to employees and
non-executive directors in our non-GAAP financial measures. While stock
based compensation is a significant component of our expenses, we believe
that investors wish to be able to exclude the effects of stock based
compensation expense in comparing our financial performance with that of
other companies.
4) Restructuring and severance -- We exclude restructuring and
severance in our non-GAAP financial measures because these costs are
unrelated to our ongoing operations. We believe excluding restructuring and
severance expenses helps investors compare our operating performance with
that of other companies. We recognize, however, that restructuring and
severance will impact cash flows and that we and investors should carefully
consider the impact of these costs on future cash flows.
5) Impairment of investments -- During fiscal 2008, due to conditions
existing in the financial markets, we recorded other-than-temporary
impairments of Auction Rate Securities holding. In order to provide
investors with financial information that facilitates comparison of both
historical and future results, we have provided non-GAAP financial measures
which exclude the impact of the impairment of ARS investments. We believe
that this non-GAAP financial adjustment is useful to investors because it
allows investors to (i) evaluate the effectiveness of the methodology and
information used by management in its financial and operational
decision-making and (ii) compare past and future reports of financial
results of the Company excluding the impact of uncertainty in the credit
markets.
6) Loss on liquidation of investment in foreign entity -- During
fiscal 2008, in accordance with GAAP, we reclassified the cumulative
translation adjustment attributable to our liquidated Australian entity
from Other Comprehensive Income (Loss) to other expense on our income
statement. The accumulated loss related to the historic translation of the
foreign entity's Australian dollar local books in our consolidation
process. We exclude this loss on liquidation from our non-GAAP financial
measures as the liquidation was (i) a non-recurring transaction with no
operational impact on current period earnings, and (ii) the accumulated
loss related to the fluctuation of foreign exchange rates over the past
several years.
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