Cogent Systems Announces Second Quarter Results; Board of Directors Authorizes Stock Repurchase Plan.SOUTH PASADENA South Pasadena (păs'ədē`nə), city (1990 pop. 23,936), Los Angeles co., S Calif., a residential suburb of Los Angeles; inc. 1888. Medical supplies, clothing, and transportation and electronic equipment are manufactured. , Calif. -- Cogent COGENT - COmpiler and GENeralized Translator Systems (Nasdaq:COGT) today announced financial results for the second quarter ended June 30, 2006. Second quarter 2006 revenues were $13.2 million, which compares to $39.4 million in the same period last year. Net income on a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis for the second quarter of 2006 was $3.6 million, or $0.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, which compares to GAAP net income of $14.4 million, or $0.16 per diluted share in the same year ago period. Cogent's second quarter of 2006 GAAP results included $1.2 million of non-cash share based compensation charges related to the adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R. Excluding the effects of share-based compensation and the net tax effect, non-GAAP net income for the second quarter of 2006 was $4.4 million, or $0.05 per diluted share. This compares to $15.7 million or $0.17 per diluted share in the same period last year, excluding the effects of similar items. "Our lower second quarter revenues reflect lumpiness in our business, the timing of revenue recognition of contracts and the delay of projects from key existing customers," commented Ming Hsieh Ming Hsieh (simplified Chinese: 谢明; traditional Chinese: 謝明; b. 1955) is a billionaire Chinese American entrepreneur and philanthropist and the founder of AMAZ technology in 1987 and Cogent Systems in 1990. , President and Chief Executive Officer of Cogent. "Last year, our two largest customers -- the Department of Homeland Security Noun 1. Department of Homeland Security - the federal department that administers all matters relating to homeland security Homeland Security executive department - a federal department in the executive branch of the government of the United States (DHS DHS Department of Homeland Security (USA) DHS Department of Human Services DHS Department of Health Services DHS Demographic and Health Surveys DHS Dirhams (Morocco national currency) ) and National Electoral Council of Venezuela (CNE (Certified NetWare Engineer) See Novell certification. ) -- accounted for approximately $59 million in revenue during the first half of the year. In the same period this year, these two customers have accounted for approximately $14 million in revenue. Despite this drop, we believe our position with these two customers is very strong and are encouraged by the prospects for future growth in the coming years. Over the next eleven months, we will be recognizing $26 million in revenues from the CNE and have an additional revenue opportunity tied to national elections in the fourth quarter. Even more importantly, we expect the DHS to ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale in the second half of 2006 and into 2007 based on existing orders and key projects coming on line." "We are working hard to grow our business and diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. our revenue stream to provide more consistent results," added Mr. Hsieh. "We continue to win new contracts and expect greater contributions from important existing customers, like Morocco Morocco, country, Africa Morocco (mərŏk`ō), officially Kingdom of Morocco, kingdom (2005 est. pop. 32,726,000), 171,834 sq mi (445,050 sq km), NW Africa. and the Royal Canadian Mounted Police Royal Canadian Mounted Police, constabulary organized (1873) as the Northwest Mounted Police to bring law and order to the Canadian west. In 1920 the name was changed to the present title. . Recently, we won five new contract awards in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , including serving 105 police departments in Oakland County, Michigan Oakland County is a county in the U.S. state of Michigan. As of 2005, the population was estimated at 1,214,361.[2] The county seat is Pontiac6. Oakland County is part of the Detroit metropolitan area, though the actual city of Detroit is located in and providing a state-wide system for background checking and application processing in Tennessee. Looking ahead, we are aggressively targeting multiple large scale deployments for Automated Fingerprint Identification Systems Automated Fingerprint Identification System (or AFIS) is a system to automatically match one or many unknown fingerprints against a database of known prints. This is done for various reasons, not the least of which is because the person has committed a crime. (AFIS AFIS Automated Fingerprint Identification System AFIS Aerodrome Flight Information Service AFIS Armed Forces Radio and Television Service AFIS Airborne Flight Information System AFIS Automated Fingerprinting Identification System (Pakistan) ) that are expected to be awarded over the next 12 months. Our competitive positioning remains very strong, based on both our technological performance and our track record with our customers." "During the quarter, we remained solidly profitable despite the decline in revenues, recording gross margins of 57.7%," commented Paul Kim, Chief Financial Officer of Cogent. "Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. decreased in actual dollars from the immediately preceding quarter, even with a notable increase in outside legal expenses. During the second quarter, cash and investments increased by $14 million, bringing our cash and investments position to approximately $399 million or $4.15 per share." The Company also announced today that its Board of Directors has approved a share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program. Pursuant to this program, beginning on August 4, 2006 Cogent may repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. up to $30.0 million of its common stock. Depending on market conditions, shares may be repurchased from time to time at prevailing market prices through open market or negotiated transactions. The program will terminate following a period of six months. "The decision to repurchase shares emphasizes our focus on stockholder value and our confidence in Cogent's future prospects. Given our financial strength and our ability to generate cash, we remain well positioned to invest in our future," concluded Mr. Hsieh. The Company is not obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to purchase any shares. Subject to applicable corporate securities laws, repurchases may be made at such times and in such amounts as the Company's management deems appropriate. Purchases under the program can be discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: at any time management feels additional purchases are not warranted. The repurchases will be made using the Company's cash resources. The Company will host a conference call and live webcast at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) today to discuss these results. Cogent will offer a live webcast of the conference call, accessible from the "Investor Relations Investor relations The process by which the corporation communicates with its investors. " 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 2 hours after the call and will run for 2 days. To hear the replay, parties in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada should call 800-405-2236 and enter pass code 11064989. International parties should call 303-590-3000 and enter pass code 11064989. 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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . 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 fingerprint, an impression of the underside of the end of a finger or thumb, used for identification because the arrangement of ridges in any fingerprint is thought to be unique and permanent with each person (no two persons having the same prints have ever been biometric bi·o·met·rics n. (used with a sing. verb) The statistical study of biological phenomena. bi solutions to governments, law enforcement agencies A law enforcement agency (LEA) is a term used to describe any agency which enforces the law. This may be a local or state police, federal agencies such as the Federal Bureau of Investigation (FBI) or the Drug Enforcement Administration (DEA). and other organizations worldwide. Cogent's AFIS solutions enable customers to capture fingerprint images electronically, encode (1) To assign a code to represent data, such as a parts code. Contrast with decode. (2) To convert from one format or signal to another. See codec and D/A converter. (3) The term is sometimes erroneously used for "encrypt. fingerprints Impressions or reproductions of the distinctive pattern of lines and grooves on the skin of human fingertips. Fingerprints are reproduced by pressing a person's fingertips into ink and then onto a piece of paper. into searchable files and accurately compare a set of fingerprints to a database containing potentially millions of fingerprints in seconds. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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, as swell as Cogent's anticipated share repurchases. 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-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 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 The biological identification of a person. Examples are face, iris and retinal patterns, hand geometry and voice. Increasingly built into laptop computers, fingerprint readers have become popular as a secure method for identification. 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 Noun 1. confidential information - an indication of potential opportunity; "he got a tip on the stock market"; "a good lead for a job" steer, tip, wind, hint, lead ; 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 here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" 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
June 30, 2006 and December 31, 2005
(in thousands)
Balance at Balance at
ASSETS: 6/30/2006 12/31/2005
----------- ------------
Cash and investments $ 398,796 $ 351,087
Accounts receivable, net 7,323 42,804
Unbilled accounts receivable 2,090 3,257
Inventories 20,731 20,222
Property and equipment, net 32,822 33,136
Deferred income taxes 49,583 55,246
Other assets 9,043 7,513
----------- ------------
Total assets $ 520,388 $ 513,265
=========== ============
LIABILITIES & EQUITY:
Accounts payable and accrued liabilities $ 5,845 $ 9,495
Deferred revenue 42,114 45,158
Total stockholders' equity 472,429 458,612
----------- ------------
Total liabilities & equity $ 520,388 $ 513,265
=========== ============
COGENT, INC.
CONDENSED STATEMENT OF OPERATIONS
Three Months and Six Months Ended June 30, 2006 and 2005
(in thousands, except per share data)
Three months Six months
ended June 30, ended June 30,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenues:
Product revenues $ 7,319 $35,557 $24,187 $67,337
Maintenance and services
revenues 5,898 3,797 11,761 7,858
-------- -------- -------- --------
Total revenues 13,217 39,354 35,948 75,195
-------- -------- -------- --------
Cost of revenues:
Cost of product revenues (1) 4,303 14,663 11,385 28,568
Cost of maintenance and services
revenues (1) 1,491 1,375 3,140 2,592
-------- -------- -------- --------
Total cost of revenues 5,794 16,038 14,525 31,160
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit 7,423 23,316 21,423 44,035
-------- -------- -------- --------
Operating expenses:
Research and development (1) 1,950 2,268 4,217 4,709
Selling and marketing (1) 1,906 1,977 3,745 3,933
General and administrative (1) 2,669 2,317 5,362 4,709
-------- -------- -------- --------
Total operating expenses 6,525 6,562 13,324 13,351
-------- -------- -------- --------
Operating income 898 16,754 8,099 30,684
Interest income 4,182 1,570 7,671 2,958
Other, net 453 112 457 396
-------- -------- -------- --------
Income before income taxes 5,533 18,436 16,227 34,038
Income tax provision 1,963 3,988 5,910 9,525
-------- -------- -------- --------
Net income $ 3,570 $14,448 $10,317 $24,513
======== ======== ======== ========
Net income per share:
Basic $ 0.04 $ 0.17 $ 0.11 $ 0.29
Diluted $ 0.04 $ 0.16 $ 0.11 $ 0.27
Number of shares used in per share
computations:
Basic 94,203 86,129 93,945 84,057
Diluted 96,063 92,279 96,063 92,069
(1) Stock compensation expense was
allocated as follows:
Cost of product revenues $ 73 $ 70 $ 159 $ 137
Cost of maintenance and
services revenues 132 122 303 250
Research and development 180 485 411 1,013
Selling and marketing 369 393 772 823
General and administrative 434 577 928 1,242
-------- -------- -------- --------
Total stock compensation expense $ 1,188 $ 1,647 $ 2,573 $ 3,465
======== ======== ======== ========
COGENT, INC.
Non-GAAP Earnings per Share Reconciliation
Three Months Ended June 30, 2006 and 2005
(in thousands, except per share data)
Three Three
months months
ended ended
June 30, June 30,
2006 2005
-------- --------
Earnings for per share calculations
GAAP Net Income $ 3,570 $14,448
GAAP Income tax provision 1,963 3,988
Stock-based compensation expense 1,188 1,647
Tax effect (1) (2,352) (4,418)
-------- --------
Non-GAAP Net income $ 4,369 $15,665
======== ========
Earnings per share
GAAP Diluted EPS $ 0.04 $ 0.16
GAAP Income tax provision 0.02 0.04
Stock-based compensation expense 0.01 0.02
Tax effect (1) (0.02) (0.05)
-------- --------
Non-GAAP Diluted EPS $ 0.05 $ 0.17
======== ========
(1) Tax rates as follows:
-- 35% for three months ended June 30, 2006
-- 22% for three months ended June 30, 2005
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