AuthenTec Reports Second Quarter 2010 Financial Results

Forward Looking Statements:

This press release contains statements that may relate to expected future results and business trends that are based upon AuthenTec’s current estimate, expectations, and projections about the industry, and upon management’s beliefs, and certain assumptions it has made that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including, without limitation, statements relating to our expectations that the Company will be able to capitalize on synergistic opportunities between our ESS and Smart Sensor businesses, design wins resulting in new product shipments and the timing and volume of such shipments and revenue, receiving TruePrint sensor revenue from 9 of the top 10 PC OEMs next year as well as several wireless manufacturers, generating our first TrueSuite software revenues based on the seven PC OEMs we now count as future customers, revenue, operating expenses and net loss for the third quarter, growth in Smart Sensor revenue in the fourth quarter and growth in 2011. Words such as “anticipates,” “guidance,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “prospects,” “outlook,” “forecast,” and variations of these words or similar expressions are intended to identify “forward-looking statements.” In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances, including any underlying assumptions, are “forward-looking statements.” Such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Therefore, the Company’s actual results may differ materially and adversely from those expressed in any “forward-looking statement” as a result of various factors. These factors include, but are not limited to: the Company’s ability to integrate the SafeNet embedded business, the Company’s ability to operate the acquired business profitably, demand for, and market acceptance of, new and existing fingerprint sensors, identity management software and embedded security products, the Company’s ability to secure design wins for enterprise and consumer laptops and wireless devices, customer design wins materializing into production programs, the timely introduction of new products, the rate at which the Company increases its activity and opportunities in the wireless market, and additional opportunities in various markets for applications that might use AuthenTec’s products, and changes in product mix, as well as other risks detailed from time to time in its SEC filings, including those described in AuthenTec’s annual report on Form 10-K filed with the SEC on March 17, 2010. These “forward-looking statements” are made only as of the date hereof, and the Company undertakes no obligation to update or revise the “forward-looking statements,” whether as a result of new information, future events or otherwise.

About AuthenTec

AuthenTec provides security, identity management and touch control solutions for enterprise and consumer applications. The Company's smart sensor products and security solutions are used in virtually every aspect of life, from the PC on your desk to the mobile device in your hand to the server in the cloud. AuthenTec's newest generation of TruePrint® smart sensors, TrueSuite® identity management software and TrueProtect™ embedded security products (formerly SafeNet Embedded Security Solutions) provide developers and users secure and convenient ways to manage today's rapidly evolving digital identities and security needs. For more information, visit  www.authentec.com or follow us at twitter.com/authentecnews.

AuthenTec, Inc.

Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Table 1          
Three months ended Six months ended
July 2, April 2, July 3, July 2, July 3,
2010 2010 2009 2010 2009
 
Revenue $   10,721 $   9,176 $   8,446 $   19,897 $   15,484
 
Cost of revenue 5,210 4,726 4,557 9,936 8,220
 
Gross profit 5,511 4,450 3,889 9,961 7,264
51.4 % 48.5 % 46.0 % 50.1 % 46.9 %
Operating expenses:
Research and development 4,742 3,986 3,642 8,728 7,447
Selling and marketing 3,306 2,266 1,786 5,572 3,806
General and administrative     2,073       2,953       4,303       5,026       6,523  
Total operating expenses 10,121 9,205 9,731 19,326 17,776
         
Operating loss (4,610 ) (4,755 ) (5,842 ) (9,365 ) (10,512 )
 
Other income (expense):
Impairment on investments - - - - (28 )
Earnout adjustment 729 - - 729 -
Interest income     44       40       89       84       265  
Total other income (expense), net 773 40 89 813 237
 
Provision for income taxes 63 - - 63 -
         
Net Loss $   (3,900 ) $   (4,715 ) $   (5,753 ) $   (8,615 ) $   (10,275 )
 
Net loss per share:
Basic $   (0.13 ) $   (0.16 ) $   (0.20 ) $   (0.29 ) $   (0.36 )
Diluted $   (0.13 ) $   (0.16 ) $   (0.20 ) $   (0.29 ) $   (0.36 )
 
Shares used in computing net loss per common share:
Basic     29,912       29,196       28,658       29,532       28,652  
Diluted     29,912       29,196       28,658       29,532       28,652  
 
Three months ended Six months ended
July 2, April 2, July 3, July 2, July 3,
2010 2010 2009 2010 2009
Other Financial Metrics:
Stock-based compensation expense:
Cost of revenue 50 64 74 114 132
Research and development 173 229 267 402 468
Selling and marketing 200 248 283 448 486
General and administrative 202 245 324 447 563
Costs related to reduction in workforce
Research and development - - 22 - 141
Selling and marketing 415 - - 415 91
General and administrative - - - - 3
Legal and acquisition related costs
General and administrative 601 1,336 2,601 1,937 2,601

Amortization of purchased tangible and intangible assets

Cost of revenue

291

89

-

380

-

Research and development

65

31

-

96

-

Selling and marketing

130

25

-

155

-

Impairment on investments - - - - 28
Earnout adjustment (729 ) - - (729 ) -
AuthenTec, Inc.
Non-GAAP Financial Information - Consolidated
(In thousands, except per share amounts)
(Unaudited)
Table 2          
Three months ended Six months ended
July 2, April 2, July 3, July 2, July 3,
2010   2010   2009   2010   2009  
 
Net loss on GAAP basis: $ (3,900 ) $ (4,715 ) $ (5,753 ) $ (8,615 ) $ (10,275 )
Stock-based compensation expense 625 786 948 1,411 1,649
Costs related to reduction in workforce 415 - 22 415 235
Legal and acquisition related costs 601 1,336 2,601 1,937 2,601
Amortization of purchased tangible and intangible assets 486 145 - 631 -
Earnout adjustment (729 ) - - (729 ) -
Impairment on investments   -     -     -     -     28  
Net loss on non-GAAP basis: $ (2,502 ) $ (2,448 ) $ (2,182 ) $ (4,950 ) $ (5,762 )
 
Non-GAAP basic earnings per share $ (0.08 ) $ (0.08 ) $ (0.08 ) $ (0.17 ) $ (0.20 )
Non-GAAP diluted earnings per share $ (0.08 ) $ (0.08 ) $ (0.08 ) $ (0.17 ) $ (0.20 )
AuthenTec, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
Table 3    
  July 2, January 2,
2010 2009
ASSETS
Current assets
Cash and cash equivalents $ 14,994 $ 27,482
Short-term investments 24,931 24,893
Accounts receivable, net 5,613 3,208
Inventory 1,729 2,245
Other current assets   1,246     1,123  
Total current assets 48,513 58,951
Long-term investments 3,244 3,173
Purchased intangible assets 8,327 998
Goodwill 2,497
Other long-term assets 10 9
Property and equipment, net   3,601     3,048  
Total assets $ 66,192   $ 66,179  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,133 $ 2,458
Other accrued liabilities   6,973     3,380  
Total current liabilities 11,106 5,838
Deferred rent   529     514  
Total liabilities   11,635     6,352  
 
Stockholders' equity
Common stock and additional paid in capital 156,649 153,350
Other comprehensive income (loss) (149 ) (195 )
Accumulated deficit   (101,943 )   (93,328 )
 
Total stockholders' equity   54,557     59,827  
Total liabilities and stockholders' equity $ 66,192   $ 66,179  

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