L-1 Identity Solutions Reports Second Quarter

L-1 Identity Solutions, a supplier of identity solutions and services, announced financial results for the second quarter and six months ended June 30, 2009.

Revenue increased to $168.1 million in Q2 2009, compared to $145.0 million in the second quarter of 2008, an increase of $23.1 million or 16 percent. The improvement reflects the acquisition of Digimarc and increased enrollment services revenue. Organic revenue growth was flat in Q2 2009 compared to Q2 2008 due to approximately $16 million in U.S. Passport and Passport Card consumables and printer orders placed in 2008 in anticipation of future requirements, along with significant license revenues in the prior year's quarter. The Company expects robust organic growth in the second half of the year that will result in 13-15 percent organic growth for all of 2009.

Gross margin in the second quarter of 2009 decreased to 29 percent compared to 33 percent for the second quarter of 2008. The decrease was attributed to the effect of licensing revenue from the biometrics business and the U.S. Passport and Passport Card consumables and printer orders in 2008 as noted above. Margins are expected to increase in the second half of 2009, resulting in a gross margin of approximately 31 percent for all of 2009 vs. 30 percent for 2008.

Adjusted EBITDA for Q2 2009 increased to $24.2 million, excluding a $1.3 million charge associated with Registered Traveler (RT) and acquisition-related expenses. Including these items, Adjusted EBITDA was $22.9 million compared to $22.5 million for the same period in the prior year. The increase was driven by government consulting and enrollment services, along with the Digimarc acquisition, partially offset by lower licensing and secure credentialing revenues. Second quarter 2009 operating expenses as a percentage of revenue decreased to 24 percent compared to 27 percent in the comparable period of 2008. Improvements in operating expenses came primarily from better operating leverage and a reduction in expenses. Unlevered free cash flow for the quarter was strong at $16.6 million.

L-1 reported a Q2 2009 net loss of $1.2 million, or ($0.01) per diluted share compared to net income of $2.5 million, or $0.03 per diluted share in the second quarter of 2008, including stock based compensation and the effect of adopting new accounting standards in both periods. This is based on weighted average diluted shares outstanding of 85.5 million in the second quarter of 2009 compared to 74.8 million in the prior year period. Excluding stock based compensation, earnings per diluted share were $0.05 for the second quarter of 2009.
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