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Gemplus Reports Third Quarter 2001 Results
Revenue down 10% compared to Q2 2001: early indications of stabilizing GSM SIM card business, continued progress of Financial Services, strong performance of the Americas region. Substantial improvements in operating expenses, accounts receivable DSO and inventory levels. Encouraging mid-to-long term prospects strengthened by recent developments in both Telecommunications and Financial Services.
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LUXEMBOURG, (November 6, 2001) -- Gemplus International S.A. (Euronext: Sicovam 5768 and NASDAQ:GEMP) today reported results for the third quarter ended September 30, 2001.
Revenue for the third quarter was 226 million Euros, which is down 27% from the same quarter a year ago, and down 10% compared to the second quarter 2001. Telecommunications declined 37% from year ago levels and accounted for 64% of group revenues. Network Systems grew 22% and accounted for 24% of group revenues. Excluding the SkiData business, which was divested during the quarter, Network Systems grew 44% over the third quarter of last year. Other revenue, which consists of Plastic Magnetic Striped Cards, Contactless Cards and TAG declined.
Operating loss was 55.3 million Euros, compared with an operating profit of 32 million Euros for the same quarter a year ago. Excluding the 18.1 million Euro charge for the Humetrix lawsuit, the operating loss was 37.2 million Euros.
Net income for the third quarter was 6.6 million Euros, or 0.01 Euro per fully diluted share. Net income includes a combined after tax capital gain of 58.4 million Euros from the divestitures of SkiData and the TAGs business as well as an 18.1 million Euro charge for the Humetrix lawsuit. Net loss for the quarter, excluding these exceptional items, was 29.7 million Euros, or a 0.05 Euro loss per diluted share.
According to the company, the third quarter results reflect three key themes: the unfavorable impact of the continuing weak SIM market, a substantial reduction in the level of operating expenses, and encouraging mid-to-long term prospects strengthened by recent developments in both its Telecommunications and Financial Services businesses.
"Early signs that the SIM card market may be stabilizing encourage us," said Antonio Perez, President and CEO. "This is an extremely important segment for Gemplus. We are also pleased with the continued progress of our Financial Services business, although we are watching the US economy very closely. Furthermore, the recent heightened interest in Security and National ID cards could be a major growth engine for us over the intermediate and longer term." He noted, however, "Business conditions in our specific markets and the added uncertainty in the world economic environment make it too difficult to provide meaningful guidance for the fourth quarter or for 2002."
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Stabilizing GSM SIM card business, continued progress of Financial Services, strong performance of the Americas.
The company noted that it is seeing early indications of stabilization in the GSM SIM market. The company also expects operator inventory levels to be in balance with end user demand at the end of the year. While this is unlikely to cause a dramatic increase in GSM SIM card orders this fourth quarter, this can be viewed as a positive development for 2002.
Regional growth rates were down across all geographies with the exception of the Americas region, where the 32% increase in revenue was fueled by progress in the Financial Services multi-application (MAP) card business.
Despite the delay of some shipments into the fourth quarter, as we anticipated in our September 27 announcement, the Financial Services multi-application card (MAP) business still grew 44%. Although the weakening US economy could further impact growth rates, Gemplus continues to believe that it is gaining market share in the very important U.S. market.
Substantial improvement in operating expenses and asset performance.
The actions taken this year to improve financial competitiveness and enhance strategic corporate focus enabled the company to reduce operating expenses by 15% from the second quarter. This is the lowest level of expenses since Q3 of last year. Perez stressed, "In addition to the divestiture of the SkiData and TAG businesses, earlier this year, the continuing implementation of the restructuring program is well on its way to achieving our 40 million Euros in annual cost savings objective."
Furthermore, inventory levels declined 21% during the quarter, as shipments exceeded receipt of material and as a result of the SkiData divestiture. Accounts Receivable Days Sales Outstanding (DSO) also declined. The company finished the third quarter with a 503 million Euro cash balance. Perez noted, "A full-fledged competitive advantage in itself, our strong cash position provides enormous flexibility during challenging market environments such as these."
Encouraging mid-to-long term prospects strengthened by recent developments in both the Telecommunications and Financial Services.
Perez cited plans by two major US mobile operators to offer GSM and GPRS service in the U.S. "These developments combined with recent indications that GPRS service will be available in several regions of the world by mid-2002 signal a potential return to much healthier SIM card sales growth rates next year. Furthermore, our MAP business continues to grow, particularly in the US." In closing, Perez stated, "With this as a backdrop, we have been able to reduce our level of operating expenses, improve our asset performance and enhance our strategic focus. These combined actions should help us speed our return to profitability as the market improves."
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Conference Call
Conference Call Presentation (362k)
The company has scheduled a conference call for Tuesday, November 6, 2001 starting at:
8:00 am New York time
2 pm Paris time
1 pm London time.
Callers may participate in the live conference call by dialing:
Europe: 44 (0) 208 781 0563
North America: 1 (800) 966 6338
The live conference call will also be available on the Internet at www.companyboardroom.com
Replays of the conference call will be available approximately 2 hours after the conclusion of the live conference call for 2 weeks at: 44 (0) 208 288 4459 (Access Code: 699212).
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Contacts
Press
Gemplus
Séverine Percetti
Tel 33 4 42 36 67 67
severine.percetti@gemplus.com
Edelman PR Worldwide
Stephen Benzikie
Tel 44 20 7344 1325
stephen.benzikie@edelman.com
Investor Relations
Gemplus
Michael Look
Tel : 00 1 650 654 2940
michael.look@gemplus.com
Fineo
Anne Guimard
Tel : 00 33 1 45 72 20 96
guimard@fineo.com
Some of the statements contained in this release or our conference call of November 6, 2001 constitute forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. The statements relate to the future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activities, performance, or achievements expressed or implied by such forward-looking statements. Actual events or results may differ materially. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this release or our conference call include, but are not limited to: trends in wireless communication and financial services markets and trends in the growth of mobile commerce, mobile banking and internet business; our ability to develop and market new chip card technologies to meet market demands and the effects of the adoption of competing technologies in our target markets, particularly in the telecommunications industry and expected intense competition generally in our main markets; profitability of our market expansion strategy; challenges to or loss of our intellectual property rights regarding chip card technologies; our ability to establish and maintain strategic relationships in our major businesses (i.e. with wireless network operators, financial service providers, internet business infrastructure providers and security technology developers); our ability to develop and take advantage of new software and services; the effect of future acquisitions and investments on our share price; the effect of industry wide chip shortages; defects in our products or errors in our services and our ability to attract and maintain qualified executives and personnel, particularly in our research and development division. You are cautioned not to place undue reliance on the forward-looking statements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. The forward-looking statements contained in this release speak only as of this release. We are under no duty to update any of the forward-looking statements after this date to conform such statements to actual results or to reflect the occurrence of anticipated results.
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About Gemplus
GEMPLUS: the world's number one provider of solutions empowered by Smart Cards (Gartner Dataquest 2001).
Gemplus helps its clients offer an exceptional range of portable, personalized solutions that bring security and convenience to people's lives. These include mobile Internet access, inter-operable banking facilities, e-commerce and a wealth of other applications.
Gemplus is the only completely dedicated, truly global player in the Smart Card industry, with the largest R&D team, unrivalled experience, and an outstanding track record of technological innovation.
Gemplus trades its shares on Euronext Paris S.A. First Market and on the Nasdaq Stock Market(R) as GEMP in the form of ADSs. Its revenue in 2000 was 1.205 billion Euros. It employs 7800 people in 37 countries throughout the world.
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