SOURCE: ActivIdentity

November 20, 2008 16:05 ET

ActivIdentity Reports Fourth Quarter and Fiscal 2008 Financial Results

Fiscal Fourth Quarter Revenue Increases 14% to $15.6 Million Over Prior-Year Quarter

FREMONT, CA--(Marketwire - November 20, 2008) - 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.

Contact Information


  • Contact:
    Investor Relations:
    Jacques Kerrest
    CFO
    ActivIdentity Corporation
    510-574-1792