Saflink Corporation Reports Third Quarter 2005 Financial Results
BELLEVUE, Wash.--(BUSINESS WIRE)--Nov. 14, 2005--Saflink(R) Corporation (NASDAQ:SFLK), a leading provider of biometric and smart card security solutions, today reported its financial results for its third quarter ended September 30, 2005.
Revenue for the third quarter of 2005 was $2.4 million, compared to $1.8 million for the second quarter of 2005 and $2.4 million for the third quarter of 2004. Saflink reported a net loss attributable to common stockholders of $26.1 million, or $0.30 per share, in the third quarter of 2005, which included non-cash impairment charges to goodwill of $19.3 million and intangible assets of $600,000. This is compared to a net loss attributable to common stockholders of $6.6 million, or $0.08 per share, in the second quarter of 2005, and a net loss attributable to common stockholders of $7.2 million, or $0.12 per share, in the third quarter of 2004.
Non-GAAP operating loss for the third quarter of 2005 was $5.5 million, which excludes certain non-cash charges such as amortization of intangible assets, impairments of goodwill and intangible assets and stock-based compensation expense. This is compared to a non-GAAP operating loss of $4.1 million for the third quarter of 2004. Saflink believes that supplementary non-GAAP measures for operating results enhance an investor's overall understanding of the financial performance of Saflink by reconciling more closely the actual cash expenses of Saflink in its operations, as well as excluding expenses that, in management's view, are unrelated to the core operations of Saflink. A reconciliation of non-GAAP operating loss and non-GAAP net loss to reported GAAP operating loss and net loss is provided below.
Glenn Argenbright, President and CEO of Saflink commented, "The third quarter was marked by our delivery on two large projects - the eastern state penitentiary system and Florida seaport initiatives, as well as the launch of our new product EntryPoint(TM). The product was well-received in the marketplace and we look forward to rolling out additional solutions in connection with EntryPoint and other developed technology in the next three to six months."
Argenbright continued, "We were also gratified to see further movement on some of the major Federal initiatives we've been pursuing, especially the Registered Traveler program, for which the roll-out timetable was clarified in recent weeks by the Transportation Security Administration."
Saflink will hold a conference call to discuss financial results today at 5:00 PM EST. Saflink may provide forward-looking information on this call. To listen to the conference, please call 1-800-938-0653, domestically, or 973-935-2408, internationally. A recording of the call will be available on the Investors page of the Saflink web site for thirty days after the call.
About Saflink
Saflink Corporation offers biometric security and smart card solutions that protect intellectual property, secure information assets and eliminate passwords. Saflink Identity Assurance Management(TM) solutions allow administrators to verify identity and control access to computer networks, physical facilities and applications. Saflink also offers protection and privacy for email, web applications and electronic documents. For more information, please visit http://www.saflink.com or call 800-762-9595.
NOTE: "Saflink" is a registered trademark and "EntryPoint" and "Identity Assurance Management" are trademarks of Saflink Corporation.
This release contains information about management's view of our future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with our financial condition, our ability to sell our products, our ability to compete with competitors and the growth of the security market. In addition, our success will depend in part on our ability to keep pace with a changing marketplace, integrate new technology into our core software and hardware and introduce new products and product enhancements that build off of our existing technologies to address the changing needs of the marketplace. Various technical problems and resource constraints may impede the development, production, distribution and marketing of our products and services. Also, laws, rules, regulations or industry standards may be adopted in response to these technological changes, which in turn, could materially and adversely affect how we will do business. We encourage you to review other factors that may affect our future results in our Annual Report on Form 10-K, as well as other documents we file periodically with the Securities and Exchange Commission.
Saflink CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three months ended Nine months ended September 30, September 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Revenue: Product $2,032 $1,924 $4,309 $2,872 Service 326 487 2,039 1,259 --------- --------- --------- --------- Total revenue 2,358 2,411 6,348 4,131 Cost of revenue: Product 966 851 1,842 1,453 Service 221 311 1,242 764 Amortization of intangibles 670 463 2,012 557 --------- --------- --------- --------- Total cost of revenue 1,857 1,625 5,096 2,774 --------- --------- --------- --------- Gross profit 501 786 1,252 1,357 Operating expenses: Product development 2,313 1,658 6,925 3,380 Sales and marketing 2,378 2,193 7,060 5,164 General and administrative 1,965 1,541 5,499 3,590 Amortization of intangibles 38 31 116 58 Impairment loss on intangible assets 600 -- 1,500 -- Impairment loss on goodwill 19,300 -- 19,300 -- Stock-based compensation 295 380 1,162 399 --------- --------- --------- --------- Total operating expenses 26,889 5,803 41,562 12,591 --------- --------- --------- --------- Operating loss (26,388) (5,017) (40,310) (11,234) Interest expense (37) (21) (103) (22) Other income, net 135 73 296 107 Change in fair value of outstanding warrants -- (29) 172 1,808 --------- --------- --------- --------- Loss before income taxes (26,290) (4,994) (39,945) (9,341) Income tax provision (203) 13 (501) 39 --------- --------- --------- --------- Net loss (26,087) (5,007) (39,444) (9,380) Modification of outstanding warrants -- (2,167) (59) (2,167) --------- --------- --------- --------- Net loss attributable to common stockholders $(26,087) $(7,174) $(39,503) $(11,547) ========= ========= ========= ========= Basic and diluted loss per common share $(0.30) $(0.12) $(0.48) $(0.28) Weighted average number of common shares outstanding 88,057 60,202 82,792 40,574 Saflink CORPORATION Supplemental Non-GAAP Information (Unaudited) (In thousands, except per share data) Three months ended Nine months ended September 30, September 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Operating loss $(26,388) $(5,017) $(40,310) $(11,234) Adjustments to reconcile operating loss in the financial statements to non- GAAP operating loss: Amortization of intangibles - cost of sales 670 463 2,012 557 Amortization of intangibles - general and administrative 38 31 116 58 Impairment loss on intangible assets 600 -- 1,500 -- Impairment loss on goodwill 19,300 -- 19,300 -- Stock-based compensation 295 380 1,162 399 --------- --------- --------- --------- Non-GAAP operating loss $(5,485) $(4,143) $(16,220) $(10,220) ========= ========= ========= ========= Net loss attributable to common shareholders $(26,087) $(7,174) $(39,503) $(11,547) Adjustments to reconcile net loss attributable to common shareholders in the financial statements to non-GAAP net loss attributable to common stockholders: Amortization of intangibles - cost of sales 670 463 2,012 557 Amortization of intangibles - general and administrative 38 31 116 58 Impairment loss on intangible assets 600 -- 1,500 -- Impairment loss on goodwill 19,300 -- 19,300 -- Stock-based compensation 295 380 1,162 399 Change in warrant valuation -- 29 (172) (1,808) Modification of outstanding warrants -- 2,167 59 2,167 Tax benefit related to impairment loss on intangible assets (216) -- (540) -- Deferred income tax associated with acquisition 13 13 39 39 --------- --------- --------- --------- Non-GAAP net income attributable to common shareholders $(5,387) $(4,091) $(16,027) $(10,135) ========= ========= ========= ========= Non-GAAP basic and diluted net loss per share $(0.06) $(0.07) $(0.19) $(0.25) Weighted average number of common shares outstanding 88,057 60,202 82,792 40,574
Statement Regarding Non-GAAP Disclosures:
To supplement the financial information that is presented in accordance U.S. generally accepted accounting principles (GAAP), we present certain financial measures that exclude certain non-cash charges, including charges related to acquisitions such as amortization of intangible assets, impairments of goodwill and intangible assets and stock-based compensation expense which would otherwise be required by GAAP. We believe that these non-GAAP measures facilitate evaluation by management and investors of our ongoing operating business and enhance overall understanding of our financial performance by reconciling more closely our actual cash expenses in operations as well as excluding expenses that in management's view are unrelated to our core operations, the inclusion of which may make it more difficult for investors to compare our results from period to period.
Non-GAAP financial measures should not be considered in isolation from, as a substitute for, or superior to, financial information presented in compliance with GAAP, and non-GAAP financial measures we report may not be comparable to similarly titled items reported by other companies.
Saflink CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenue:
Product $2,032 $1,924 $4,309 $2,872
Service 326 487 2,039 1,259
--------- --------- --------- ---------
Total revenue 2,358 2,411 6,348 4,131
Cost of revenue:
Product 966 851 1,842 1,453
Service 221 311 1,242 764
Amortization of intangibles 670 463 2,012 557
--------- --------- --------- ---------
Total cost of revenue 1,857 1,625 5,096 2,774
--------- --------- --------- ---------
Gross profit 501 786 1,252 1,357
Operating expenses:
Product development 2,313 1,658 6,925 3,380
Sales and marketing 2,378 2,193 7,060 5,164
General and administrative 1,965 1,541 5,499 3,590
Amortization of intangibles 38 31 116 58
Impairment loss on
intangible assets 600 -- 1,500 --
Impairment loss on goodwill 19,300 -- 19,300 --
Stock-based compensation 295 380 1,162 399
--------- --------- --------- ---------
Total operating expenses 26,889 5,803 41,562 12,591
--------- --------- --------- ---------
Operating loss (26,388) (5,017) (40,310) (11,234)
Interest expense (37) (21) (103) (22)
Other income, net 135 73 296 107
Change in fair value of
outstanding warrants -- (29) 172 1,808
--------- --------- --------- ---------
Loss before income taxes (26,290) (4,994) (39,945) (9,341)
Income tax provision (203) 13 (501) 39
--------- --------- --------- ---------
Net loss (26,087) (5,007) (39,444) (9,380)
Modification of outstanding
warrants -- (2,167) (59) (2,167)
--------- --------- --------- ---------
Net loss attributable to common
stockholders $(26,087) $(7,174) $(39,503) $(11,547)
========= ========= ========= =========
Basic and diluted loss per
common share $(0.30) $(0.12) $(0.48) $(0.28)
Weighted average number of
common shares outstanding 88,057 60,202 82,792 40,574
Saflink CORPORATION
Supplemental Non-GAAP Information
(Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Operating loss $(26,388) $(5,017) $(40,310) $(11,234)
Adjustments to reconcile
operating loss in the
financial statements to non-
GAAP operating loss:
Amortization of intangibles
- cost of sales 670 463 2,012 557
Amortization of intangibles
- general and
administrative 38 31 116 58
Impairment loss on
intangible assets 600 -- 1,500 --
Impairment loss on goodwill 19,300 -- 19,300 --
Stock-based compensation 295 380 1,162 399
--------- --------- --------- ---------
Non-GAAP operating loss $(5,485) $(4,143) $(16,220) $(10,220)
========= ========= ========= =========
Net loss attributable to common
shareholders $(26,087) $(7,174) $(39,503) $(11,547)
Adjustments to reconcile net
loss attributable to
common shareholders in the
financial statements
to non-GAAP net loss
attributable to common
stockholders:
Amortization of intangibles
- cost of sales 670 463 2,012 557
Amortization of intangibles
- general and
administrative 38 31 116 58
Impairment loss on
intangible assets 600 -- 1,500 --
Impairment loss on goodwill 19,300 -- 19,300 --
Stock-based compensation 295 380 1,162 399
Change in warrant valuation -- 29 (172) (1,808)
Modification of outstanding
warrants -- 2,167 59 2,167
Tax benefit related to
impairment loss on
intangible assets (216) -- (540) --
Deferred income tax
associated with acquisition 13 13 39 39
--------- --------- --------- ---------
Non-GAAP net income
attributable to common
shareholders $(5,387) $(4,091) $(16,027) $(10,135)
========= ========= ========= =========
Non-GAAP basic and diluted net
loss per share $(0.06) $(0.07) $(0.19) $(0.25)
Weighted average number of
common shares outstanding 88,057 60,202 82,792 40,574
Statement Regarding Non-GAAP Disclosures:
To supplement the financial information that is presented in accordance U.S. generally accepted accounting principles (GAAP), we present certain financial measures that exclude certain non-cash charges, including charges related to acquisitions such as amortization of intangible assets, impairments of goodwill and intangible assets and stock-based compensation expense which would otherwise be required by GAAP. We believe that these non-GAAP measures facilitate evaluation by management and investors of our ongoing operating business and enhance overall understanding of our financial performance by reconciling more closely our actual cash expenses in operations as well as excluding expenses that in management's view are unrelated to our core operations, the inclusion of which may make it more difficult for investors to compare our results from period to period.
Non-GAAP financial measures should not be considered in isolation from, as a substitute for, or superior to, financial information presented in compliance with GAAP, and non-GAAP financial measures we report may not be comparable to similarly titled items reported by other companies.
Saflink CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30, December 31,
ASSETS 2005 2004
Current assets:
Cash and cash equivalents $21,201 $22,217
Accounts receivable, net 1,818 1,737
Inventory 497 672
Prepaid expenses 484 756
Other current assets 234 278
------------- -------------
Total current assets 24,234 25,660
Furniture and equipment, net 1,026 1,153
Intangible assets, net 20,557 24,186
Goodwill 75,923 95,223
------------- -------------
Total assets $121,740 $146,222
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,603 $1,665
Accrued expenses 2,487 2,207
Notes payable to related party 1,250 1,250
Other current obligation 765 937
Deferred revenue 213 340
------------- -------------
Total current liabilities 6,318 6,399
Deferred tax liability 127 628
------------- -------------
Total liabilities 6,445 7,027
Stockholders' equity:
Common stock 889 797
Additional paid-in capital 268,762 254,328
Deferred stock-based compensation (764) (1,841)
Accumulated deficit (153,592) (114,089)
------------- -------------
Total stockholders' equity 115,295 139,195
------------- -------------
Total liabilities and stockholders'
equity $121,740 $146,222
============= =============
INVESTOR RELATIONS CONTACT:
Tony Schor, Lindsay Kenoe
(847) 945-2222
www.investorawareness.com
Saflink PRESS CONTACT:
Sterling Communications
Rachel Berry
(253) 853-5030
rberry@sterlingpr.com