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Document Security Systems, Inc. Announces 2013 Second Quarter Financial Results
Aug 13, 2013 (12:08 PM EDT)
ROCHESTER, N.Y., Aug. 13, 2013 /PRNewswire/ -- Document Security Systems, Inc. (NYSE MKT: DSS), which merged with Lexington Technology Group, Inc. ("LTG") on July 1, 2013 and is a leading developer of anti-counterfeiting, anti-fraud and authentication technologies for governments, corporations and financial institutions, today announced its 2013 second quarter financial results.
Highlights for 2Q13:
Revenues for the second quarter of 2013 were $4.3 million, a 17% increase over the second quarter of 2012. During the quarter, the Company experienced strong revenue growth for its packaging and plastics products, which were partially offset by a decline in the Company's printing revenues.
Gross profit for the second quarter of 2013 was $1.6 million, a 22% increase over the second quarter of 2012. The growth was driven by gross profits for packaging and printing with improvements in sales mix and reductions in production costs as the driving factors for both divisions.
Total operating expenses increased 53% in the second quarter of 2013 to $3.5 million compared to the second quarter of 2012, primarily due to a 222% increase in professional fees, including legal, accounting and filing fees, and $723,000 of stock based compensation costs associated with the Company's merger with LTG which closed on July 1, 2013. Absent merger related costs, operating expenses would have remained relatively flat compared to the second quarter of 2012.
Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock based compensation and other non-recurring items, including professional fees and stock based compensation incurred for the Company's merger with LTG) for the second quarter of 2013 was a loss of $171,000, a 65% improvement over the adjusted EBITDA loss of $493,000 for the second quarter of 2012.
The Company recorded a net loss for the second quarter of 2013 of $1,925,000, or a net loss of $0.09 per share compared to a net loss of $995,000 or $0.05 per share in the second quarter of 2012. Absent merger related costs, net loss would have been approximately $723,000, a 27% improvement over the net loss in the second quarter of 2012.
Revenues for the first half of 2013 were $8.1 million, a 7% increase over the first half of 2012, primarily driven by sales increases in the Company's plastics group and technology. Gross profit for the first half of 2013 reached $3.1 million, a 19% increase over the first half of 2012.
Total operating expenses increased 40% in the first half of 2013 to $6.0 million compared to the first half of 2012 primarily due to a 171% increase in professional fees, including legal, accounting and filing fees, and $723,000 of stock based compensation costs associated with the Company's merger with LTG. Absent merger related costs, operating expenses would have reflected a 9% increase during the first half of 2013 compared to the total operating expenses for the first half of 2012.
Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock based compensation and other non-recurring items, including professional fees and stock based compensation incurred for the Company's merger with LTG) for the first half of 2013 was a loss of $570,000, a 41% improvement over the adjusted EBITDA loss of $973,000 for the first half of 2013.
The Company recorded a net loss for the first half of 2013 of $3.1 million, or a net loss of $0.14 per share compared to a loss of $2.1 million or $0.10 per share in the first half of 2012. Absent merger related costs, net loss for the first half of 2013 would have been approximately $1.7 million, a 16% improvement over the net loss in the first half of 2012.
The Company's balance sheet as of June 30, 2013 does not reflect the cash balance in excess of the $6.25 million held by LTG on the merger date of July 1, 2013. The Company expects to report post-merger pro-forma financial statements on Form 8-K for the combined Company as of and for the six months ended June 30, 2013 no later than September 13, 2013.
"I am very pleased with the progress of the legacy DSS operating groups during the second quarter. Despite the decline in printing revenue, our efforts to reduce costs resulted in a 22% year-over-year increase in gross profit for the printing group," said Robert Bzdick, President of Document Security Systems. "The strong performance of the packaging, plastics, and licensing and digital groups helped drive business-wide improvements in revenue and gross profit. As I transition to the role of President of DSS, I am confident that we will be able to maintain these positive trends."
"With the closing of the merger on July 1, we are excited to have begun a new era at DSS," said Jeff Ronaldi, CEO of Document Security Systems. "In the newly created DSS Technology Management group, we have several exciting IP milestones, including the tentatively scheduled Virtual Agility Markman hearing in April 2014, and investment opportunities on the horizon. Combined with the positive operational trends that Bob and our DSS management team have underway, I believe that the overall future looks very bright."
CONFERENCE CALL AND WEBCAST DETAILS:
Time: 4:30 p.m. ET
A replay of the teleconference will be available until August 28, 2013 which can be accessed by dialing (877) 660-6853 if calling within the U.S. or (201) 612-7415 if calling internationally. Please enter conference ID # 418897 to access the replay.
About DSS (Document Security Systems, Inc.)
Document Security Systems, Inc.'s (NYSE MKT: DSS) products and solutions are used by governments, corporations and financial institutions to defeat fraud and to protect brands and digital information from the expanding world-wide counterfeiting problem.
DSS continually invests in technology to meet the ever-changing security needs of its clients and implements these patented solutions through the Company's operating groups: DSS Plastics Group, DSS Secure Printing Group, DSS Packaging Group and DSS Digital Group.
DSS Technology Management, which includes all of the assets and operations of Lexington Technology Group, is the licensing and intellectual property management unit of DSS. Effective July 1, 2013, Lexington Technology Group, Inc. ("LTG") became a wholly-owned subsidiary of Document Security Systems, Inc. ("DSS" or "Company"). Effective on August 2, 2013, LTG changed its name to DSS Technology Management, Inc. DSS Technology Management provides strategy for DSS's IP portfolio, as well as legal expertise and investment capital for pioneering inventions.
Through these divisions, DSS provides counterfeit deterrence and authentication technology coupled with licensing and IP monetization solutions. When implemented, DSS technologies help ensure the authenticity of both digital and physical financial instruments, identification documents, sensitive publications and brand packaging.
For more information:
Forward Looking Statements
Forward-looking statements that may be contained in this press release, including, without limitation, statements related to the Company's plans, strategies, objectives, expectations, potential value, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act and contain words such as "believes", "anticipates", "expects", "plans", "intends" and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those disclosed in the "Risk Factors" section of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed with the Securities and Exchange Commission on August 13, 2013. Forward-looking statements that may be contained in this press release are being made as of the date of its release, and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements.
FINANCIAL TABLES FOLLOW
Adjusted EBITDA: Non-GAAP Financial Performance Measure
The Company uses Adjusted EBITDA as a non-GAAP financial performance measurement. Adjusted EBITDA is calculated by the Company by adding back to net loss interest, income taxes, depreciation and amortization expense as further adjusted to add back stock-based compensation expense and non-recurring items, such as gain on the change in fair value of derivative liability and costs related to the Company's merger with Lexington Technology Group. Adjusted EBITDA is provided to investors to supplement the results of operations reported in accordance with GAAP. Management believes that Adjusted EBITDA provides an additional tool for investors to use in comparing its financial results with other companies in the industry, many of which also use Adjusted EBITDA in their communications to investors. By excluding non-cash charges such as amortization, depreciation and stock-based compensation, as well as non-operating charges for interest and income taxes, investors can evaluate the Company's operations and its ability to generate cash flows from operations and can compare its results on a more consistent basis to the results of other companies in the industry. Management also uses Adjusted EBITDA to evaluate potential acquisitions, establish internal budgets and goals, and evaluate performance of its business units and management. The Company considers Adjusted EBITDA to be an important indicator of the Company's operational strength and performance of its business and a useful measure of the Company's historical and prospective operating trends. However, there are significant limitations to the use of Adjusted EBITDA since it excludes interest income and expense and income taxes, all of which impact the Company's profitability and operating cash flows, as well as depreciation, amortization and stock-based compensation. The Company believes that these limitations are compensated by clearly identifying the difference between the two measures. Consequently, Adjusted EBITDA should not be considered in isolation or as a substitute for net loss presented in accordance with GAAP. Adjusted EBITDA as defined by the Company may not be comparable with similarly named measures provided by other entities. The following is a reconciliation of Net Loss to Adjusted EBITDA loss:
SOURCE Document Security Systems, Inc.