Highlights of the fiscal 2007 first quarter include:

• Year over year revenue growth of 56% in SCM's PC Security business, based on strong sales of smart card readers for HSPD-12 and contactless applications;
• Gross margin above 40% for the second quarter in a row; and
• Income from continuing operations of $134,000.

First Quarter Results

Revenues from continuing operations in the first quarter of 2007 were $8.5 million, up 14% from revenues of $7.4 million in the first quarter of 2006. By product segment, first quarter 2007 revenues included $7.1 million from sales of smart card readers and other products for secure network and physical access, compared with sales of $4.6 million in the first quarter of 2006; and $1.4 million from sales of OEM digital media reader technology, compared with sales of $2.9 million in the year ago quarter.

Gross margin in the first quarter of 2007 was 44%, compared with gross margin of 36% in the first quarter of 2006. The increase in gross margin reflects improvements in inventory and cost management implemented over the last few months, which have stabilized gross margin levels at or around 40% per quarter.

Operating expenses in the first quarter of 2007, as reported in accordance with GAAP, were $3.9 million, including amortization of intangibles of $0.2 million. This represents a decrease of 30% from operating expenses of $5.5 million in the first quarter of 2006, which included amortization of intangibles of $0.2 million and restructuring and other charges of $0.4 million. Operating loss for the first quarter of 2007, as reported in accordance with GAAP, was $(114,000), compared with operating loss of $(2.8) million in the year ago quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter of 2007 was $40,000, compared with EBITDA of $(2.7) million in the first quarter of 2006. (See reconciliation of EBITDA to GAAP accounting on page 5 of this release.)

As reported in accordance with GAAP, income from continuing operations in the first quarter of 2007 was $134,000, or $0.01 per share, compared with loss from continuing operations of $(2.7) million, or $(0.17) per share, in the first quarter of 2006.

Cash and cash equivalents at March 31, 2007 were $34.4 million, compared with $34.9 million at December 31, 2006.

Robert Schneider, chief executive officer of SCM Microsystems, commented, "Our position as a trusted provider for U.S. government security projects yielded additional orders for smart card readers in the first quarter as various federal agencies begin to implement Homeland Security Presidential Directive-12 (HSPD-12). We also supplied an existing customer in Asia with significant volumes of contactless readers for their internal employee authentication program as well as their customers' needs. While we believe the more substantial ramp in demand for smart card readers will not take place until the second half of this year, we are very pleased with the strength we saw in reader sales in the first quarter."

"We are also pleased with the significant reductions we made to cost and expense levels in fiscal 2006, which continue to benefit us in 2007," continued Schneider. "Our restructuring and consolidation actions in 2006 resulted in a 30% decrease in operating expenses year-over-year, which we expect to be able to maintain based on our current model of operations. These lower cost and expense levels and better inventory management, in turn, helped us to achieve both year-over-year and sequential improvements to gross margin across our product portfolio. We believe we are now very competitively positioned to capitalize on the tremendous opportunities for smart card readers in the government, financial and enterprise sectors, both today and in the future."Download the document now 7.8 kb (PDF File)