SOURCE: ActivIdentity

August 06, 2009 16:05 ET

ActivIdentity Reports Third Quarter Fiscal 2009 Financial Results

Revenue Increased by 7% to $15.4 Million Over Prior-Year Quarter. Net Income Was $2.1 Million

FREMONT, CA--(Marketwire - August 6, 2009) - ActivIdentity Corporation (NASDAQ: ACTI), a global leader in credential management and strong authentication, reported revenue for the quarter ended June 30, 2009 of $15.4 million, compared to $14.3 million for the quarter ended June 30, 2008 and $16.1 million for the quarter ended March 31, 2009.

ActivIdentity's net income for the quarter ended June 30, 2009, was $2.1 million or $0.05 per basic and diluted share, compared to a net loss of ($7.0) million, or ($0.15) per basic and diluted share for the three months ended June 30, 2008. Net income for the quarter ended June 30, 2009 included realized and unrealized gains on foreign exchange totaling $2.1 million, primarily due to the weakening of the U.S. dollar.

ActivIdentity's operating loss was ($1.1) million for the quarter ended June 30, 2009 compared to an operating loss of ($4.7) million for the quarter ended June 30, 2008 and ($1.7) million for the quarter ended March 31, 2009. Adjusted EBITDA was $0.9 million for the quarter ended June 30, 2009, representing an improvement of $3.6 million compared to the prior-year quarter, and an increase of $0.2 million sequentially. Adjusted EBITDA is a Non-GAAP measure and is defined as Operating Income adjusted for non-recurring and non-cash items such as stock-based compensation expense, depreciation, amortization of intangibles, severance and asset impairments.

"Despite little improvement in the tough economic climate, ActivIdentity still posted solid operational and financial performance results during the fiscal third quarter," said Grant Evans, chief executive officer and chairman of ActivIdentity. "Throughout this challenging time our credential management and strong authentication solutions continue to exemplify the resiliency and stability of our renewed market focus and management team. As we look forward to the remainder of our fiscal year ending September 30, 2009 and beyond, we remain focused on streamlining our operations and continue to manage our expenses in order to be positioned for future growth."

Financial Highlights

GAAP RESULTS                                    Three Months Ended
                                        -----------------------------------
(In Millions except Per Share Data)       Jun. 30     Mar. 31    June. 30
                                           2009        2009        2008
                                        ----------- ----------  ----------
Revenue                                 $      15.4 $     16.1  $     14.3
Net Income (Loss)                       $       2.1 ($     2.8) ($     7.0)
(Loss) Earnings Per Share - Basic       $      0.05 ($    0.06) ($    0.15)
(Loss) Earnings Per Share - Diluted     $      0.05 ($    0.06) ($    0.15)

NON-GAAP RESULTS

Adjusted EBITDA                         $       0.9 $      0.7  ($     2.7)

ActivIdentity is presenting non-GAAP numbers in this press release as it believes the one time charges for nonrecurring items and the non-cash charges distort the period to period results and that investors will benefit from the comparison of information from period to period without these items. 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.

Conference Call Details

ActivIdentity will host its Fiscal Third Quarter conference call on Thursday, Aug 6, at 5:00 PM Eastern Daylight Savings Time / 2:00 PM Pacific Daylight Savings Time.

To access the conference call within the U.S. or Canada, please dial (866) 393-1796 and enter conference ID 2295985. To access the conference call outside the U.S. or Canada please dial (706) 679-9681 and enter conference ID 2295985.

A replay of the conference call will be available approximately two hours after the conclusion of the call at www.actividentity.com.

About ActivIdentity

ActivIdentity Corporation is a global leader in credential management and strong authentication, providing solutions to confidently establish a person's identity when interacting digitally. For more than two decades the company's experience has been leveraged by security-minded organizations in large-scale deployments such as the U.S. Department of Defense, Nissan, and Saudi Aramco. The company's customers have issued more than 100 million credentials, securing the holder's digital identity. ActivIdentity is headquartered in Silicon Valley, California. For more information, visit www.actividentity.com.

ActivIdentity is a registered trademark 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 including, but not limited to, statements regarding ActivIdentity's ability to achieve its fiscal year guidance and continued customer acceptance of its products. These risks and uncertainties include risks relating to uncertainty in the economy and its impact on customer deployments of our products, customer adoption of ActivIdentity's new products, continued expense reductions from ActivIdentity's various restructuring and cost control measures, 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 as may be amended 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 us and on the SEC 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. ActivIdentity 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)



                          June 30,                 September 30,
                            2009                       2008
                      -----------------          -----------------
                        (Unaudited)                     (1)
ASSETS
Current assets:
  Cash and cash
   equivalents        $          75,392          $          70,173
  Short-term
   investments                    3,454                      9,656
  Accounts
   receivable, net of
   allowance for
   doubtful accounts
   of $288 and $317              10,092                     11,792
  Inventories, net                  990                      1,760
  Prepaid and other
   current assets                 2,517                      1,696
                      -----------------          -----------------
    Total current
     assets                      92,445                     95,077
Restricted cash                   1,610                         --
Investments                      11,752                     11,752
Property and
 equipment, net                   1,953                      2,877
Other intangible
 assets, net                      2,248                      4,150
Other long-term
 assets                             848                      3,745
                      -----------------          -----------------
    Total assets      $         110,856          $         117,601
                      =================          =================
LIABILITIES AND
 STOCKHOLDERS’ EQUITY
Current liabilities:
  Accounts payable    $             812          $           1,652
  Accrued
   compensation and
   related benefits               5,095                      5,935
  Current portion of
   accrued
   restructuring
   liability                        634                        616
  Accrued and other
   current
   liabilities                    3,869                      3,682
  Current portion of
   deferred revenue              10,637                     11,024
                      -----------------          -----------------
    Total current
     liabilities                 21,047                     22,909
Deferred revenue, net
 of current portion                 826                      1,125
Accrued restructuring
 liability, net of
 current portion                    490                        962
Long-term deferred
 rent                               208                        430
Other long-term
 liabilities                        571                      2,517
                      -----------------          -----------------
    Total liabilities            23,142                     27,943
                      -----------------          -----------------
Minority interest                   312                        304
Commitments and
 contingencies                       --                         --
Stockholders’ equity:
  Preferred stock,
   $0.001 par value:
   10,000,000 shares
   authorized, none
   issued and
   outstanding                       --                         --
  Common stock,
   $0.001 par value:
   75,000,000 shares
   authorized,
   45,839,860 and
   45,786,184 issued
   and outstanding                   46                         46
  Additional paid-in
   capital                      428,183                    426,141
  Accumulated deficit          (328,285)                  (323,053)
  Accumulated other
   comprehensive loss           (12,542)                   (13,780)
                      -----------------          -----------------
   Total
    stockholders’
    equity                       87,402                     89,354
                      -----------------          -----------------
   Total liabilities
    and stockholders’
    equity            $         110,856          $         117,601
                      =================          =================


(1)  Derived from Audited Consolidated Financial Statements



                        ACTIVIDENTITY CORPORATION
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
                                   LOSS
                  (In thousands, except per share data)



                                  Three Months Ended    Nine Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Revenue:
  Software                      $   6,888  $   5,024  $  18,405  $  13,961
  Hardware                          3,245      3,175     12,196     11,090
  Service                           5,236      6,099     17,199     18,311
                                ---------  ---------  ---------  ---------
    Total revenue                  15,369     14,298     47,800     43,362
                                ---------  ---------  ---------  ---------

Cost of revenue:
  Software                          1,046        530      3,227        829
  Hardware                          1,675      2,071      6,234      6,819
  Service                           1,716      2,596      5,699      8,034
  Amortization of acquired
   developed technology and
   patents                            593        592      1,779      1,788
                                ---------  ---------  ---------  ---------
    Total cost of revenue           5,030      5,789     16,939     17,470
                                ---------  ---------  ---------  ---------
Gross profit                       10,339      8,509     30,861     25,892
                                ---------  ---------  ---------  ---------

Operating expenses:
  Sales and marketing               4,868      5,827     15,172     19,548
  Research and development          3,398      4,676     11,690     14,092
  General and administration        3,101      2,626      9,732      8,267
  Restructuring expense (net of
   adjustments)                        --          3         --        (70)
  Amortization of acquired
   intangible assets                   41         42        123        124
  Impairment of goodwill               --         --         --     35,874
                                ---------  ---------  ---------  ---------
    Total operating expenses       11,408     13,174     36,717     77,835
                                ---------  ---------  ---------  ---------
Income (Loss) from operations      (1,069)    (4,665)    (5,856)   (51,943)
                                ---------  ---------  ---------  ---------

Other income (expense):
  Interest income, net                285        845      1,465      3,772
  Other income (expense), net       2,108     (2,927)    (1,053)    (4,977)
                                ---------  ---------  ---------  ---------
    Total other income
     (expense), net                 2,393     (2,082)       412     (1,205)
                                ---------  ---------  ---------  ---------
Income (loss) before income tax
 and minority interest              1,324     (6,747)    (5,444)   (53,148)
Income tax benefit (provision)        766       (250)       113       (280)
Minority interest                      (5)        14         99         32
                                ---------  ---------  ---------  ---------
Net Income (loss)               $   2,085  $  (6,983) $  (5,232) $ (53,396)
                                =========  =========  =========  =========
Net income (loss) per share:
 Basic                               0.05      (0.15) $   (0.11)     (1.17)
                                =========  =========  =========  =========
  Diluted                            0.05      (0.15)     (0.11)     (1.17)
                                =========  =========  =========  =========
Shares used to compute net
 income (loss) per share: Basic    45,817     45,778     45,800     45,764
  Diluted                          46,309     45,778     45,800     45,764
Other comprehensive income
 (loss):
  Net income (loss)             $   2,085  $  (6,983) $  (5,232) $ (53,396)
  Unrealized (loss) gain on
   short-term investment, net          --        (78)       152       (911)
  Reclassification of
   unrealized income (loss) on
   short-term investments              --         --         --        945
  Foreign currency translation
   gain (loss)                     (1,678)      (372)     1,086     (1,213)
                                ---------  ---------  ---------  ---------
Reclassification of currency
 translation loss on
 liquidation of investment in
 foreign entity                        --      1,946         --      1,946
                                ---------  ---------  ---------  ---------
Comprehensive income (loss)     $     407  $  (5,487) $  (3,994) $ (52,629)
                                ---------  ---------  ---------  ---------



                        ACTIVIDENTITY CORPORATION
        CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
                              (In thousands)




                                                    Nine Months Ended
                                                         June 30,
                                                ---------------------------
                                                    2009          2008
                                                ------------- -------------

Cash flows from operating activities:
  Net loss                                      $      (5,232)$    (53,396)
  Adjustments to reconcile net loss to net cash
   provided by operating activities:
    Depreciation of property, plant, and
     equipment                                            973        1,225
    Amortization of acquired developed
     technology and patents                             1,779        1,787
    Unrealized foreign exchange (gain) loss               717       (1,470)
    Amortization of acquired intangible assets            123          124
    Stock-based compensation expense                    2,152        2,127
    Loss on disposal of property and equipment             43           20
    Currency translation loss on liquidation of
     investment in foreign entity                          --        1,946
    Goodwill impairment charge                             --       35,874
    Investment impairment charge                           --        3,812
    Minority interest in ActivIdentity Europe
     S.A.                                                 (99)         (32)
    Changes in:
      Accounts receivable                               1,872        6,339
      Inventories                                         731           22
      Prepaid and other current assets                   (505)         593
      Long-term income taxes receivable                 2,719           --
      Accounts payable                                   (809)        (192)
      Accrued compensation and related benefits          (761)        (714)
      Accrued restructuring liability                    (454)        (581)
      Accrued and other liabilities                    (2,029)         666
      Deferred revenue                                   (759)      (1,396)
                                                ------------- -------------
    Net cash provided by (used in) operating
     activities                                           461       (3,246)
                                                ------------- -------------

Cash flows from investing activities:
  Purchases of property and equipment, net               (135)        (264)
  Purchases of short-term investments                      --      (37,245)
  Proceeds from sales and maturities of
   short-term investments                               6,184        78,215
  Restricted cash                                      (1,396)           --
  Other long-term assets                                    7            63
                                                ------------- -------------
    Net cash provided by investing activities           4,660        40,643
                                                ------------- -------------

Cash flows from financing activities:
  Proceeds from exercise of options, rights and
   warrants                                                --            25
                                                ------------- -------------
    Net cash provided by financing activities              --            25
                                                ------------- -------------

                                                ------------- -------------
Effect of exchange rate changes on cash and
 cash equivalents                                          98           257
                                                ------------- -------------
Net increase in cash and cash equivalents               5,219        37,679
Cash and cash equivalents, beginning of period  $      70,173 $      30,639
                                                ------------- -------------
Cash and cash equivalents, end of period        $      75,392 $      68,318
                                                ============= =============

Supplemental disclosures:
   Cash paid (refund received) for income taxes $          35 $        (11)

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 (defined as Operating Income adjusted for non-recurring and non-cash items such as stock-based compensation expenses, depreciation, amortization of intangibles, severance and asset impairments). We believe Adjusted EBITDA is a useful supplemental financial measure for investors because it facilitates investors' ability to evaluate the operational strength of the company's business. Adjusted 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 Adjusted EBITDA to operating income from continuing operations is presented below.


                        ActivIdentity Corporation
  Unaudited Reconciliation from GAAP Operating Income (Loss) to Adjusted
                                  EBITDA
                              (In thousands)

                           Three Months Ended           Nine Months Ended
                     -------------------------------  --------------------
                      June 30    Mar. 31    June 30    June 30    June 30
                       2009       2009       2008       2009       2008
                     ---------  ---------  ---------  ---------  ---------
Operating Income
 (Loss)              ($  1,069) ($  1,678) ($  4,665) ($  5,856) ($ 51,943)

Add back
 depreciation
 expense                   282        316        334        973      1,225

Add back
 amortization
 expense                   634        634        634      1,902      1,911
Add back stock based
 compensation
 expense                   521        740        760      2,152      2,127

Add back severance
 expense                   502        639        257      2,642      1,898

Add back impairment
 related expense             0          0          0          0     35,874
                     ---------  ---------  ---------  ---------  ---------

Adjusted EBITDA      $     870  $     651  ($  2,680) $   1,813  ($  8,908)
                     =========  =========  =========  =========  =========


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 to Non-GAAP Expenses
                              (In thousands)

                               Three Months Ended       Nine Months Ended
                          ----------------------------  ------------------
                          June 30   Mar. 31   June 30   June 30   June 30
                            2009      2009      2008      2009      2008
                          --------  --------  --------  --------  --------
COST OF REVENUE (GAAP)    $  5,030  $  5,764  $  5,789  $ 16,939  $ 17,470
  Subtract depreciation
   expense                     (17)      (19)      (29)      (58)      (85)
  Subtract amortization
   expense                    (593)     (593)     (592)   (1,779)   (1,787)
  Subtract stock
   compensation expense        (15)      (38)      (62)     (109)     (195)
  Subtract severance
   expense                     (20)      (11)        0       (37)        0
                          --------  --------  --------  --------  --------
COST OF REVENUE
 (NON-GAAP)                  4,385     5,103     5,106    14,956    15,403


OPERATING EXPENSES
Sales & Marketing (GAAP)     4,868     5,294     5,827    15,172    19,548
  Subtract depreciation
   expense                     (30)      (32)      (50)     (100)     (145)
  Subtract stock based
   compensation expense       (148)     (164)     (155)     (465)     (486)
  Subtract severance
   expense                    (459)     (515)      201    (1,612)     (432)
                          --------  --------  --------  --------  --------
Sales & Marketing
 (Non-GAAP)                  4,231     4,583     5,823    12,995    18,485

Research & Development
 (GAAP)                      3,398     3,505     4,676    11,690    14,092
  Subtract depreciation
   expense                     (41)      (45)      (58)     (140)     (177)
  Subtract stock based
   compensation expense        (34)     (176)     (219)     (490)     (628)
  Subtract severance
   expense                      (5)        0       (26)     (784)     (566)
                          --------  --------  --------  --------  --------
Research & Development
 (Non-GAAP)                  3,318     3,284     4,373    10,276    12,721

General & Administration
 (GAAP)                      3,101     3,204     2,626     9,732     8,267
  Subtract depreciation
   expense                    (193)     (220)     (197)     (675)     (818)
  Subtract stock
   compensation expense       (324)     (362)     (324)   (1,088)     (818)
  Subtract severance
   expense                     (18)     (113)     (432)     (209)     (900)
                          --------  --------  --------  --------  --------
General & Administration
 (Non-GAAP)                  2,566     2,509     1,673     7,760     5,731

Amortization of
 intangibles expense            41        41        42       123       124
Subtract amortization
 expense                       (41)      (41)      (42)     (123)     (124)

Restructuring related
 expenses                        0         0         3         0       (70)

Impairment related
 expense                         0         0         0         0    35,874
Subtract impairment
 related expense                 0         0         0         0   (35,874)

OPERATING EXPENSES (GAAP) $ 11,408  $ 12,044  $ 13,174  $ 36,717  $ 77,835
OPERATING EXPENSES
 (Non-GAAP)               $ 10,115  $ 10,375  $ 11,872  $ 31,031  $ 36,867
                          ========  ========  ========  ========  ========

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. Stock based compensation - We exclude stock based compensation expense associated with stock options and restricted stock units 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 expenses in comparing our financial performance with that of other companies.

3. 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 help 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.

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