Cogent Systems Announces Fourth Quarter and Full Year 2008 Financial Results

Wed Feb 25, 2009 4:15pm EST

* Reuters is not responsible for the content in this press release.

Recent Wins Include BOSS-U and U.K. Post Office Limited
PASADENA, Calif.--(Business Wire)--
Cogent Systems (Nasdaq:COGT) today announced financial results for the fourth
quarter and full fiscal year ended December 31, 2008. 

Fourth quarter 2008 revenues were $40.0 million, compared to revenue of $21.9
million in the same year ago period. Net income on a GAAP basis for the fourth
quarter of 2008 was $11.5 million, or $0.13 per diluted share. This compares to
GAAP net income of $7.7 million, or $0.08 per diluted share in the same year ago
period. 

Cogent's fourth quarter of 2008 GAAP results included $1.0 million of non-cash
share based compensation charges. Excluding the effects of share-based
compensation and the net tax effect, non-GAAP net income for the fourth quarter
of 2008 was $12.2 million, or $0.14 per diluted share. This compares to non-GAAP
net income of $8.0 million, or $0.08 per diluted share, in the same year ago
period, excluding the effects of similar items in both periods. 

For the full-year ended December 31, 2008, revenues increased to $125.7 million
from $105.8 million in 2007. Net income in 2008 on a GAAP basis was $45.2
million, or $0.50 per diluted share, which compares to GAAP net income of $28.6
million, or $0.30 per diluted share, for the year ended December 31, 2007.
Excluding the effects of share-based compensation and related tax effects,
non-GAAP net income in 2008 was $47.2 million, or $0.52 per diluted share,
compared to non-GAAP net income of $30.4 million, or $0.32 per diluted share in
2007. 

"Fourth quarter revenue increased 83% year-over-year, and we entered 2009 with a
solid backlog of orders, including deferred revenues of almost $75 million,"
commented Ming Hsieh, Chief Executive Officer of Cogent. "During the year, we
saw increased demand from a number of core customers, while also expanding our
customer base with key wins at the U.S. Census Bureau and the Department of
Defense. At the end of 2008, Cogent was one of 12 companies selected for the
Biometrics Operations and Support Services Unrestricted (BOSS-U) contract by the
U.S. Army. We believe that the Department of Defense will be a leading driver of
biometrics in the years to come and expect BOSS-U to be an important purchasing
vehicle for future orders. Last week and following the completion of tenders
evaluation, the UK Post Office, Post Office Limited, notified Cogent Systems of
its decision to appoint Cogent as its preferred bidder for the contract to
provide integrated biometric data collection services to Post Office Limited.
This is one of the final main steps leading to the award and signing of the
contract marking the completion of Post Office Limited's competitive tendering
process. Post Office Limited provides a variety of products and services through
12,500 branches in the UK. The size of the initial award is potentially larger
than any other single international win in the Company`s history. We believe
these recent wins will help us continue to grow and diversify our business, and
we also expect several significant contracts to be awarded over the next several
months by large government agencies both domestically and internationally.
Dependent on timing and revenue recognition, the award of these contracts to
Cogent may have an incrementally positive impact on our outlook for 2009." 

"While gross margins were impacted by product mix, we expect them to improve in
the first quarter," commented Paul Kim, Chief Financial Officer of Cogent. "We
also generated $24 million in cash this quarter, ending the quarter with our
cash and investments position at approximately $480 million, or $5.32 per
share." 

The Company will host a conference call at 4:30 p.m. Eastern Time (1:30 p.m.
Pacific Time) on Wednesday, February 25 to discuss these results. For parties in
the United States and Canada, call 800-240-6709 to access the conference call.
International parties can access the call at 303-262-2191. 

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 2 hours after the call and will run for 2
days. To hear the replay, parties in the United States and Canada should call
800-405-2236 and enter pass code 11124769. International parties should call
303-590-3000 and enter pass code 11124769. 

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 share-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 global biometric identification solutions provider to governments,
law enforcement agencies, and commercial enterprises. Cogent provides the
highest quality identification systems, products and services with leading
technology, accuracy and speed. Cogent`s Automated Fingerprint/Palmprint
Identification Systems, or AFIS, enable customers to capture fingerprint and
palm print images electronically, encode prints into searchable files, and
accurately compare a set of fingerprints/palm prints to a database containing
potentially millions of prints in seconds. For more information, please visit
www.cogentsystems.com

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 anticipated contract awards and market
developments. 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 for the year
ended December 31, 2007 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; exposure to intellectual property and product
liability claims; difficulty in integrating acquisitions; and failure to achieve
the expected benefits of acquisitions. 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, 2008 and December 31, 2007                                                           
 (in thousands)                                                                                    
                                                                                               
                                                                   Balance at     Balance at   
 ASSETS:                                                           12/31/2008     12/31/2007   
                                                                                               
 Cash and investments                                              $  479,896    $  444,307  
 Accounts receivable, net                                             30,767        31,845   
 Unbilled accounts receivable                                         1,110         1,201    
 Inventories                                                          18,528        11,359   
 Property and equipment, net                                          37,192        33,644   
 Deferred income taxes                                                41,068        26,143   
 Other assets                                                         11,570        2,689    
                                                                                               
 Total assets                                                      $  620,131    $  551,188  
                                                                                               
 LIABILITIES & EQUITY:                                                                         
                                                                                               
 Accounts payable, accrued liabilities and income taxes payable    $  25,681     $  13,324   
 Deferred revenue                                                     74,978        27,648   
 Total stockholders' equity                                           519,472       510,216  
                                                                                               
 Total liabilities & equity                                        $  620,131    $  551,188  
                                                                                             


 COGENT, INC.                                                                                                                                  
 CONDENSED STATEMENT OF INCOME                                                                                                                 
 Three Months and Year Ended December 31, 2008 and 2007                                                                                        
 (in thousands, except per share data)                                                                                                         
                                                                                                                                       
                                                                                                                                       
                                                                   Three months ended                Twelve months ended                   
                                                                   December 31,                      December 31,                          
                                                                                                                                       
                                                                   2008          2007              2008               2007             
                                                                                                                                       
 Revenues:                                                                                                                             
 Product revenues                                                  $  31,307    $  14,858       $  90,761        $  80,572      
 Maintenance and services revenues                                    8,670        7,017           34,920           25,222      
 Total revenues                                                       39,977       21,875          125,681          105,794     
                                                                                                                                       
 Cost of revenues:                                                                                                                     
 Cost of product revenues (1)                                         12,730       4,175           29,335           33,081      
 Cost of maintenance and services revenues (1)                        4,362        2,169           15,146           7,615       
 Total cost of revenues                                               17,092       6,344           44,481           40,696      
                                                                                                                                       
 Gross profit                                                         22,885       15,531          81,200           65,098      
                                                                                                                                       
 Operating expenses:                                                                                                                   
 Research and development (1)                                         4,203        2,850           14,788           10,625      
 Selling and marketing (1)                                            3,879        2,960           13,187           9,382       
 General and administrative (1)                                       2,400        2,381           10,157           19,927      
 Income from settlement of lawsuit                                    -            -               (10,000  )       -           
 Total operating expenses                                             10,482       8,191           28,132           39,934      
                                                                                                                                       
 Operating income                                                     12,403       7,340           53,068           25,164      
                                                                                                                                       
 Interest income                                                      3,799        5,602           16,862           22,132      
 Other, net                                                           15           (302    )       189              (117     )  
                                                                                                                                       
 Income before income taxes                                           16,217       12,640          70,119           47,179      
                                                                                                                                       
 Income tax provision                                                 4,709        4,930           24,939           18,537      
                                                                                                                                       
 Net income                                                        $  11,508    $  7,710        $  45,180        $  28,642      
                                                                                                                                       
 Net income per share:                                                                                                                 
 Basic                                                             $  0.13      $  0.08         $  0.50          $  0.30        
 Diluted                                                           $  0.13      $  0.08         $  0.50          $  0.30        
                                                                                                                                       
 Number of shares used in per share computations:                                                                                      
 Basic                                                                89,424       93,903          89,947           94,223      
 Diluted                                                              90,290       95,455          90,938           95,837      
                                                                                                                                       
                                                                                                                                       
 (1) Share-based compensation expense was allocated as follows:                                                                        
 Cost of product revenues                                          $  139       $  47           $  470           $  332         
 Cost of maintenance and services revenues                            172          58              576              320         
 Research and development                                             267          76              937              350         
 Selling and marketing                                                223          193             912              919         
 General and administrative                                           202          158             801              804         
                                                                                                                                       
 Total share-based compensation expense                            $  1,003     $  532          $  3,696         $  2,725       
                                                                                                                                


 COGENT, INC.                                                                                                                      
 Non-GAAP Earnings per Share Reconciliation                                                                                        
 Three Months and Year Ended December 31, 2008 and 2007                                                                            
 (in thousands, except per share data)                                                                                             
                                                                                                                           
                                                   Three months      Three months      Year ended         Year ended       
                                                   ended             ended             
December 31,      
December 31,    
                                                   December 31,      December 31,      
2008              
2007            
                                                   
2008             
2007                                                 
                                                                                                                           
 Earnings for per share calculations                                                                                       
                                                                                                                           
 GAAP Net Income                                   $  11,508       $  7,710        $  45,180        $  28,642      
                                                                                                                           
 GAAP Income tax provision                            4,709           4,930           24,939           18,537      
 Share-based compensation expense                     1,003           532             3,696            2,725       
 Tax effect (1)                                       (4,993  )       (5,137  )       (26,574  )       (19,463  )  
                                                                                                                           
 Non-GAAP Net income                               $  12,227       $  8,035        $  47,241        $  30,441      
                                                                                                                           
 Earnings per share                                                                                                        
                                                                                                                           
 GAAP Diluted EPS                                  $  0.13         $  0.08         $  0.50          $  0.30        
                                                                                                                           
 GAAP Income tax provision                            0.05            0.05            0.27             0.19        
 Share-based compensation expense                     0.01            0.01            0.04             0.03        
 Tax effect (1)                                       (0.05   )       (0.06   )       (0.29    )       (0.20    )  
                                                                                                                           
 Non-GAAP Diluted EPS                              $  0.14         $  0.08         $  0.52          $  0.32        
                                                                                                                           
 (1) Tax rates as follows:                                                                                                 
 - 29% for three months ended December 31, 2008                                                                            
 - 39% for three months ended December 31, 2007                                                                            
 - 36% for Year ended December 31, 2008                                                                                    
 - 39% for Year ended December 31, 2007                                                                                    


Cogent Systems, Inc.
Paul Kim, 626-325-9600
Chief Financial Officer
www.cogentsystems.com
or
The Blueshirt Group, Investor Relations
Chris Danne, 415-217-7722
chris@blueshirtgroup.com
Jill Isenstadt, 415-217-7722
jill@blueshirtgroup.com



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