Cogent Systems Announces Fourth Quarter and Year End Results
SOUTH PASADENA, Calif.--Feb. 2, 20068, 2006--Cogent Systems today announced financial results for the fourth quarter and year ended December 31, 2005.Fourth quarter 2005 revenues were $46.2 million, which is a 20% sequential increase over revenues of $38.4 million in the immediately preceding third quarter and a 46% increase over revenue of $31.8 million in the same year ago period. Net income on a GAAP basis for the fourth quarter of 2005 was $20.7 million, or $0.22 per diluted share. This compares to GAAP net income of $20.1 million, or $0.21 per diluted share, in the immediately preceding third quarter and compares to GAAP net income of $9.9 million, or $0.11 per diluted share in the same year ago period.
Cogent's fourth quarter of 2005 GAAP results included $1.3 million of non-cash charges related to the amortization of stock-based compensation. Excluding the effects of stock-based compensation and the net tax effect, non-GAAP net income was $21.8 million, or $0.23 per diluted share. This compares to $21.2 million, or $0.22 per diluted share, in the immediately preceding third quarter and $10.0 million, or $0.11 per diluted share, in the same year ago period, excluding the effects of similar items in both periods.
"We are pleased with our performance in 2005 as we increased revenues by 82% from the prior year and non-GAAP net income by 142%," commented Ming Hsieh, President and Chief Executive Officer of Cogent. "Results in the fourth quarter were bolstered by revenues from our core customers including the DHS, Venezuela, LA County and State of Connecticut. Over the past three years, we have won market share and built an impressive customer list. In the fourth quarter, we won contracts for new AFIS systems abroad and in multiple counties in California and received follow-on orders from customers in North America, Asia and Latin America. We believe that our AFIS solution is the most technologically advanced in the world, with clear advantages in terms of overall performance, scalability, integration and cost of ownership."
For the year ended December 31, 2005, revenues increased 82% to $159.9 million from $87.7 million in 2004. Net income in 2005 on a GAAP basis was $65.3 million, or $0.69 per diluted share, which compares to GAAP net income of $42.6 million, or $0.56 per diluted share, for the year ended December 31, 2004. Excluding the effects of stock-based compensation and related tax effects, non-GAAP net income in 2005 was $69.8 million, or $0.74 per diluted share, compared to non-GAAP net income of $28.9 million, or $0.38 per diluted share in 2004, which excludes the effects of stock-based compensation, related tax effects and a tax benefit of $6.4 million.
"Looking forward, we are seeing major RFPs for large border control programs in Europe and multiple opportunities from the civil and commercial sectors," commented Paul Kim, Chief Financial Officer of Cogent. "At the same time, our visibility has decreased on the timing and potential revenue recognition of some large follow-on orders to existing customers and possible new orders."
The Company will host a conference call and live webcast at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) today to discuss these results and anticipated results for fiscal year 2006. Cogent will offer a live webcast of the conference call, accessible from the "Investor Relations" section of the Company's website (www.cogentsystems.com). The webcast will be archived for a period of 15 days. A telephonic replay of the conference call will also be available two hours after the call and will run for two days. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter pass code 11050805. International parties should call 303-590-3000 and enter pass code 11050805.
Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including non-GAAP net income and earnings per share, may be considered non-GAAP financial measures. Cogent believes this information is useful to investors because it provides a basis for measuring Cogent's available capital resources, the operating performance of Cogent's business and Cogent's cash flow, excluding stock-based compensation that would normally be included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles. Cogent's management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating Cogent's operating performance, capital resources and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-financial measures as reported by Cogent may not be comparable to similarly titled amounts reported by other companies.
About Cogent Systems
Cogent is a leading provider of Automated Fingerprint Identification Systems, or AFIS, and other fingerprint biometric solutions to governments, law enforcement agencies and other organizations worldwide. Cogent's AFIS solutions enable customers to capture fingerprint images electronically, encode fingerprints into searchable files and accurately compare a set of fingerprints to a database containing potentially millions of fingerprints in seconds.
Forward-Looking Statements
This press release contains, in addition to historical information, forward-looking statements. Such statements are based on management's current estimates and expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Cogent is providing this information as of the date of this press release, and expressly disclaims any duty to update information contained in this press release.
Forward-looking statements in this press release include, without limitation, express and implied statements regarding Cogent's anticipated revenue growth and growth in sales opportunities in a variety of markets, including future domestic and international growth. These forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those expressed or implied here. Readers are referred to Cogent's Report on Form 10-Q for the quarter ended September 30, 2005 filed by Cogent with the Securities and Exchange Commission which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including but not limited to: changes in government policies; uncertain political conditions in international markets; deriving a significant portion of revenues from a limited number of customers; deriving a significant portion of revenues from the sale of solutions pursuant to government contracts; failure of the biometrics market to experience significant growth; failure of Cogent's products to achieve broad acceptance; potential fluctuations in quarterly and annual results; changes in Cogent's effective tax rate; failure to successfully compete; failure to comply with government regulations; failure to accurately predict financial results due to long sales cycles; negative publicity and/or loss of clients due to security breaches resulting in the disclosure of confidential information; loss of export licenses or changes in export laws; failure to manage projects; rapid technology change in the biometrics market; loss of a key member of management team; termination of backlog orders; loss of limited source suppliers; negative audits by government agencies; failure to protect intellectual property; and exposure to intellectual property and product liability claims. The information contained in this press release is a statement of Cogent's present intention, belief or expectation and is based upon, among other things, existing industry conditions, market conditions, the economy in general and Cogent's assumptions. Cogent may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in its assumptions or otherwise. Cogent undertakes no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. By including any information in this press release, Cogent does not necessarily acknowledge that disclosure of such information is required by applicable law or that the information is material.
COGENT, INC.
CONDENSED BALANCE SHEET
December 31, 2005 and 2004
(in thousands)
Balance at Balance at
ASSETS: 12/31/2005 12/31/2004
------------ ------------
Cash and investments $351,087 $223,284
Accounts receivable, net 42,804 14,761
Unbilled accounts receivable 3,257 1,308
Inventories 20,222 37,980
Property and equipment, net 33,136 8,478
Deferred income taxes 55,246 14,312
Other assets 7,513 771
----------- -----------
Total assets $513,265 $300,894
=========== ===========
LIABILITIES & EQUITY:
Accounts payable and accrued liabilities $ 9,495 $ 10,401
Deferred revenue 45,158 68,429
Total stockholders' equity 458,612 222,064
----------- -----------
Total liabilities & equity $513,265 $300,894
=========== ===========
COGENT, INC.
CONDENSED STATEMENT OF OPERATIONS
Three Months and Year Ended December 31, 2005 and 2004
(in thousands, except per share data)
Three months ended Year ended
December 31, December 31,
------------------- ------------------
2005 2004 2005 2004
-------- -------- --------- --------
Revenues:
Product revenues $41,346 $28,450 $141,649 $74,698
Maintenance and services
revenues 4,903 3,330 18,240 12,990
-------- -------- --------- --------
Total revenues 46,249 31,780 159,889 87,688
-------- -------- --------- --------
Cost of revenues:
Cost of product revenues 16,604 12,457 53,062 25,551
Cost of maintenance and
services revenues 1,153 1,069 4,553 3,607
Amortization of deferred
stock-based compensation 148 169 690 669
-------- -------- --------- --------
Total cost of revenues 17,905 13,695 58,305 29,827
-------- -------- --------- --------
-------- -------- --------- --------
Gross profit 28,344 18,085 101,584 57,861
-------- -------- --------- --------
Operating expenses:
Research and development 1,767 1,733 7,157 6,890
Selling and marketing 1,535 1,382 6,060 3,826
General and administrative 2,572 1,246 7,998 3,976
Amortization of deferred
stock-based compensation 1,133 1,497 5,388 9,759
-------- -------- --------- --------
Total operating expenses 7,007 5,858 26,603 24,451
-------- -------- --------- --------
Operating income 21,337 12,227 74,981 33,410
Interest income 3,518 948 9,050 1,144
Other, net (219) 1,237 518 1,599
-------- -------- --------- --------
Income before income taxes 24,636 14,412 84,549 36,153
Income tax provision (benefit) 3,967 4,502 19,263 (6,428)
-------- -------- --------- --------
Net income $20,669 $ 9,910 $ 65,286 $42,581
======== ======== ========= ========
Net income per share:
Basic $ 0.22 $ 0.12 $ 0.74 $ 0.65
Diluted $ 0.22 $ 0.11 $ 0.69 $ 0.56
Number of shares used in per
share computations:
Basic 92,957 80,792 88,403 65,617
Diluted 96,093 91,716 94,053 75,817
COGENT, INC.
Non-GAAP Earnings per Share Reconciliation
Three Months Ended December 31, 2005 and 2004
(in thousands, except per share data)
Three Three Year Year Three
months months ended ended months
ended ended December December ended
December December 31, 31, September
31, 31, 2005 2004 30,
2005 2004 2005
-------- -------- --------- --------- --------
Earnings for per share
calculations
GAAP Net Income $20,669 $ 9,910 $ 65,286 $ 42,581 $20,104
GAAP Income tax
provision (benefit) 3,967 4,502 19,263 (6,428) 5,771
Amortization of
deferred stock-based
compensation 1,281 1,666 6,078 10,428 1,332
Tax effect (1) (4,147) (6,110) (20,844) (17,701) (5,986)
-------- -------- --------- --------- --------
Non-GAAP Net income $21,770 $ 9,968 $ 69,783 $ 28,880 $21,221
======== ======== ========= ========= ========
Earnings per share
GAAP Diluted EPS $ 0.22 $ 0.11 $ 0.69 $ 0.56 $ 0.21
GAAP Income tax
provision (benefit) 0.04 0.05 0.21 (0.09) 0.06
Amortization of
deferred stock-based
compensation 0.01 0.02 0.06 0.14 0.01
Tax effect (1) (0.04) (0.07) (0.22) (0.23) (0.06)
-------- -------- --------- --------- --------
Non-GAAP Diluted EPS $ 0.23 $ 0.11 $ 0.74 $ 0.38 $ 0.22
======== ======== ========= ========= ========
(1) Tax rates as follows:
-- 16% for three months ended December 31, 2005
-- 38% for three months ended December 31, 2004
-- 23% for year ended December 31, 2005
-- 38% for year ended December 31, 2004
-- 22% for three months ended September 30, 2005