Gemalto posts full year results

Source: Gemalto

Gemalto (Euronext NL0000400653 - GTO), the world leader in digital security today announced its revenue for the full year and fourth quarter of 2008.

Fourth quarter and full year 2008 revenue and year-on-year revenue variation at constant exchange rates, by segment:

   

Mobile
Communication

 

Secure
Transactions

  Security  

Total
three main
segments

 

Others2

 

Total
Gemalto
2008

 

Total
Gemalto
2007

Fourth quarter   270 M€   115 M€   61 M€   446M€   25 M€   471 M€   471 M€
Variation   (5%)   + 5%   (4%)   (2%)   (2%)   (2%)    
Full year 948 M€ 443 M€ 216 M€ 1 607 M€ 73 M€ 1 680 M€ 1 631 M€
Variation   + 6%   + 11%   + 14%   +8%   (23%)   + 6%    

Olivier Piou, Chief Executive Officer, commented: "Gemalto matches its best quarterly revenue ever, at € 471 million in Q4. The three main segments together are up more than 8% for the full year. Software and services continue to expand rapidly, reaching nearly 10% of the Company annual turnover. We have experienced only a relatively small impact from the current global economic environment, and see limited changes in overall market demand. We confirm our 2008 profit outlook, which we had upgraded in August to around € 160 million in adjusted operating income. Today, Gemalto clearly benefits from its balanced portfolio, its industry leadership worldwide, and its consistent ability to generate strong cash flows."

Fourth quarter and full year 2008 revenue

Total revenue for the fourth quarter 2008 was € 471 million, matching the strongest quarter the company has ever reported. The previous quarterly revenue record for Gemalto was also € 471 million, in Q4'07. Growth continued across segments and geographies, offsetting shortfalls in specific accounts related to customers' cash and inventory optimization efforts. Quarterly revenue was also similar to that in the prior year at constant exchange rates, posting only a slight decrease of 2%.

For the full year, revenue was up 6% year-on-year at € 1 680 million. Excluding Public Telephony and POS, the three main business segments combined grew by 8.1% for the full year. Total revenue from software and services grew by 44% from last year, and now accounts for close to 10% of the company's total turnover. For the full year the company saw revenue growth in all regions. Product mix continued to improve across all segments.

Segment information 3

Mobile Communication

€ in millions   Q4 2007   Q4 2008   FY 2007   FY 2008
Mobile Communication   274   270   925   948

Year-on-year variation at
constant exchange rates

      (5%)       + 6%

Mobile Communication revenue was essentially flat in the fourth quarter of 2008 at historical exchange rates and decreased by 5% at constant rates, because of shortfalls in specific accounts in the Americas and Asia.

Software and services revenues increased by 41% year-on-year in the fourth quarter and by 65% for the full year to reach annual revenues of € 65 million. As mobile communications become the point of entry to a new digital lifestyle for a growing segment of the population, Gemalto continues to innovate and generate new opportunities for mobile operators. Our Allynis offer links mobile network operators closer to their end-user subscribers. Applications such as SIM portal, mobile banking, roaming and personal data management all create new revenue opportunities for our customers, strengthening Gemalto's unique positioning and elevating the level of our customers' satisfaction.

Over the quarter the average SIM card selling price was down by 8% compared with the previous quarter, and 15% year-on-year, reflecting a higher proportion of shipments to entry range accounts. For the full year the average SIM card selling price decrease was contained to 8%.

In the last quarter, Gemalto commercially launched with Oi, the first quadri-play operator in Brazil, and in partnership with Microsoft, a new SIM card that gives access to Windows Live Messenger services from any mobile phone. This service provides to existing users continuous access to the service, and opens up instant messaging services to the vast majority of mobile subscribers worldwide, who have no access to a PC-connected Internet.

Secure Transactions

€ in millions   Q4 2007   Q4 2008   FY 2007   FY 2008
Secure Transactions   109   115   413   443

Year-on-year variation at
constant exchange rates

      + 5%       + 11%

Secure Transactions growth was driven in the fourth quarter by contactless EMV rollouts in Europe and a 23% improvement in personalization services revenue. Our production levels were lowered to accommodate customers' efforts to optimize cash and inventory. PayTV shipments were low this quarter, partially offset by stronger activity in Transport. Overall fourth quarter revenue increased by 5% on the previous year.

For the full year the segment revenue is up by 11%, with personalization services growing by 30%. Contactless technology is an increasingly attractive opportunity for our customers and Gemalto grew revenue by 50% with those new products as compared to last year.

Additionally, market dynamics are further strengthened by the recent decision of Visa and MasterCard to require all EMV payment cards in Europe to be upgraded with the latest DDA (Dynamic Data Authentication) security technology by 2011.

Security

€ in millions   Q4 2007   Q4 2008   FY 2007   FY 2008
Security   62   61   193   216

Year-on-year variation at
constant exchange rates

      (4%)       + 14%

Security revenue contracted by 4% in the fourth quarter on the back of the anticipated reduction of patent licensing revenue, down by 8M€ on the comparable quarter last year. Excluding patent revenues, Government Programs and IAM together grew by 9% over the very strong fourth quarter of 2007.

Government Programs revenue expanded by 16% with strong deliveries in the Americas. Identity and Access Management (IAM) revenue was down 5%, reflecting the current year efforts of indirect distribution channels to limit deliveries at the end of the year to minimize their inventories and a very strong quarter in the prior year. Revenues were stable compared with the preceding quarter. In this project-based activity, e-banking solutions continue to gain ground, as well as enterprise solutions in the Americas.

During the last quarter Gemalto has further increased its lead in the number of contracts for electronic government documents, and the backlog continues to increase. The recent extension of the Bahrain electronic identity program illustrates the emerging trend of incorporating additional features in citizens' secure electronic documents, such as multi-application capabilities for online authentication to e-government and e-commerce services.

Public Telephony

€ in millions   Q4 2007   Q4 2008   FY 2007   FY 2008
Public Telephony   11   10   44   35

Year-on-year variation at
constant exchange rates

      (10%)       (17%)

The memory card market for Public Telephony continues to decline as mobile telephony expands worldwide.

Point-of-Sale Terminals

€ in millions   Q4 2007   Q4 2008   FY 2007   FY 2008
Point-of-Sale Terminals   15   15   56   38

Year-on-year variation at
constant exchange rates

      + 4%       (28%)

Revenue shortfalls were recorded in the first part of 2008 due to an issue related to a faulty component detected in Gemalto's contract-manufacturer's supply chain. The issue was solved in Q3, and this segment is progressively returning to a normal level of activity, with year-on-year revenue up 4% in the fourth quarter.

Net cash position

Gemalto's net cash position4 was € 344 million at the end of 2008 vs. € 314 million at the end of 2007, after spending € 65 million on the share repurchase programs during the year.

Outlook

Our business has strong fundamentals and prospects, at the same time short-term visibility is limited by the current global environment. We confirm our 2008 profit outlook of around € 160 million in adjusted operating income. Our 2009 objective of above 10% adjusted operating margin remains unchanged.

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