MELBOURNE, Fla. — (BUSINESS WIRE) — August 8, 2012 — AuthenTec (NASDAQ: AUTH), a leading provider of mobile and network security, today reported financial results for the second quarter ended June 29, 2012.

Second Quarter Highlights:

• Posted revenue of $20.5 million
• Achieved fourth consecutive quarter of non-GAAP profitability
• AuthenTec Added to the Russell 3000 and Global Indexes

AuthenTec achieved revenue of $20.5 million for the second quarter of 2012, which was comprised of approximately $12.7 million from Smart Sensor Solutions and $7.9 million from Embedded Security Solutions.

GAAP Results:

Under Generally Accepted Accounting Principles in the United States of America (GAAP), consolidated net loss for the second quarter of 2012 was $1.2 million, or $0.03 per diluted share. This compares to GAAP net loss of $1.5 million, or $0.03 per diluted share, in the first quarter of 2012 and a GAAP net loss of $4.8 million, or $0.11 per diluted share, in the second quarter of 2011.

GAAP gross margin in the second quarter was 57.4 percent, compared to 57.5 percent reported in the first quarter of 2012 and 47.8 percent in the second quarter of 2011. Total operating expenses on a GAAP basis in the second quarter were $12.8 million, compared to $11.4 million in the first quarter of 2012, and $12.3 million in the second quarter of 2011. The $1.4 million sequential increase in operating expenses was due to fees incurred to support M&A activities as well as increased R&D investments in our Embedded Security business.

Non-GAAP Results:

On a non-GAAP basis, consolidated net income for the second quarter of 2012 was $1.3 million, or $0.03 per diluted share. Non-GAAP results exclude certain legal and other costs, stock-based compensation, as well as the amortization of acquired intangible assets. The second quarter net income compares to non-GAAP net income of $0.3 million, or $0.01 per diluted share, in the first quarter of 2012 and a non-GAAP net loss of $1.9 million, or $0.04 per diluted share, in the second quarter of 2011.

Non-GAAP gross margin in the second quarter was 58.4 percent, compared to 58.7 percent in the first quarter of 2012 and 53.7 percent in the second quarter of 2011.

Total operating expenses on a non-GAAP basis were $10.6 million, an increase from the $9.8 million reported in the first quarter of 2012 and the $10.4 million in the second quarter of 2011. A reconciliation of second quarter GAAP to non-GAAP results is provided in Table 2 following the text of this press release.

As of June 29, 2012, AuthenTec had approximately $25.3 million in cash and investments, up from the $22.8 million cash and investments at the end of the first quarter of 2012, and had no debt.

Recent Business Highlights:

• Posted sequential and year-over-year growth in both business segments. Smart Sensor revenue of $12.7 million was driven by growth of sensors for wireless to support new smartphone programs and was partially offset by a decrease in government programs. Embedded Security revenue of $7.9 million was driven by increased license revenue from new contracts.
• Began production of smart fingerprint sensors during the quarter to support new Android smartphones from Fujitsu.
• Announced that Samsung has chosen AuthenTec’s QuickSec™ VPN security for use in new Android smartphone and tablet models, giving device users built-in security that enables easier, more secure connections to enterprise networks.
• Supported the launch of multiple new mobile content delivery programs that utilize the Company’s DRM content protection.

Pending Merger Transaction:

On July 27, AuthenTec filed a Form 8-K with the U.S. Securities and Exchange Commission disclosing that it had entered into an agreement and plan of merger with Apple Inc. pursuant to which Apple will acquire all of the outstanding shares of common stock of AuthenTec for $8.00 per share in cash. The transaction is subject to customary closing conditions, including regulatory approval and AuthenTec stockholder approval. Additional details will be provided in the proxy statement AuthenTec will file with the U.S. Securities and Exchange Commission.

Use of GAAP and Non-GAAP Financial Metrics:

To supplement AuthenTec’s consolidated financial statements presented in accordance with GAAP, the Company uses non-GAAP financial measures that exclude from the statement of operations the effects of stock-based compensation, certain acquisition-related charges, amortization of certain intangible assets, impairments on investments, and costs related to a reduction in workforce. AuthenTec uses the above non-GAAP financial measures internally to understand, manage and evaluate the business. Management believes it is useful for itself and investors to review, as applicable, both GAAP information and the non-GAAP measures in order to assess the performance of continuing operations and for planning and forecasting in future periods. The presentation of these non-GAAP measures is intended to provide investors with an understanding of AuthenTec’s operational results and trends that enables them to analyze the base financial and operating performance and facilitate period-to-period comparisons and analysis of operational trends. AuthenTec believes the presentation of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered substitutes for or superior to GAAP results. In addition, our non-GAAP financial measures may not be comparable to similarly titled measures utilized by other companies since such other companies may not calculate such measures in the same manner as we do.