Lipman Electronic Engineering Ltd (LPMA) (LPMA)

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Lipman Electronic Engineering Ltd. Reports Second Quarter 2005 Results
Tuesday July 26, 4:10 pm ET
Revenues of $58.3 Million
Net Income of $7.4 Million, or $0.27 Per Diluted Share
Excluding Stock-Based Compensation, Non-GAAP Net Income of $8.7 Million, or $0.31 Per Diluted Share


ROSH HAAYIN, Israel--(BUSINESS WIRE)--July 26, 2005-- Lipman Electronic Engineering Ltd. (Nasdaq, TASE: LPMA), a leading provider of electronic payment systems, today announced financial results for the second quarter ended June 30, 2005.


For the second quarter of 2005, revenues were $58.3 million, an increase of 52.2% over revenues of $38.3 million for the second quarter of 2004. Revenues increased due to the consolidation of Dione's results of operations, as well as increased sales in the United States and Latin America. Net income for the quarter was $7.4 million, or $0.27 per diluted share, compared to $6.6 million, or $0.25 per diluted share, for the comparable period in 2004. There were 27,536,901 diluted shares outstanding in the second quarter of 2005 compared to 26,991,269 diluted shares outstanding in the second quarter of 2004. All share and per share data have been adjusted to reflect a two-for-one stock split effected on June 22, 2004.

Gross profit for the quarter was $25.2 million, or 43.3% of revenues, compared to $18.0 million, or 47.1% of revenues, for the second quarter of 2004. The lower gross margin is due mainly to the consolidation of Dione's results as the gross margin on products sold by Dione is lower than the Company's gross margin prior to Dione's acquisition.

During the second quarter of 2005, the Company had amortization of intangible assets expenses of $746,000, compared to $52,000 of such expenses in the second quarter of 2004. In addition, operating expenses for the second quarter of 2005 included $478,000 (equal to approximately $.02 per share) in special legal expenses in connection with patent infringement claims brought against the company, and most of the other major POS terminal vendors serving the US market, by Verve, LLC and filed with the US International Trade Commission. In February 2005, Verve filed a motion to withdraw the complaint and terminate the ITC action without prejudice. The ITC Administrative Law Judge has terminated the ITC investigation ending the case against the Company.

Financial income for the second quarter of 2005 was $787,000, compared to $415,000 for the second quarter of 2004. Financial income in the second quarter of 2005 included $522,000, or approximately $0.02 per share related to a one-time gain from the sale of the Company's shares in Wizcom Technologies Ltd.

Operating expenses for the three months ended June 30, 2005 also included $1.3 million of non-cash stock-based compensation expenses compared to $1.2 million of similar expenses in the comparable period in 2004. Excluding the effect of stock-based compensation, non-GAAP net income for the quarter was $8.7 million, or $0.31 per diluted share, compared to non-GAAP net income of $7.8 million, or $0.29 per diluted share, for the same period last year.

As of June 30, 2005, the Company had cash and cash equivalents of $121.5 million compared to $117.4 million as of December 31, 2004.

For the six months ended June 30, 2005, revenues increased 59.8% to $112.5 million, from $70.4 million in the same period last year. Revenues increased due to the consolidation of Dione's results of operations, as well as increased sales in the United States, Latin America and Turkey. Net income for the six months was $12.6 million, or $0.46 per diluted share, compared to $11.5 million, or $0.44 per diluted share, in the same period in 2004. There were 27,498,156 diluted shares outstanding in the six months ended June 30, 2005 compared to 26,148,486 diluted shares outstanding in the first six months of 2004.

For the six months ended June 30, 2005, gross profit was $48.1 million, or 42.8% of revenues, compared to $33.8 million, or 48.0% of revenues, for the same period in 2004. The lower gross margin is due mainly to the consolidation of Dione's results as the gross margin on products sold by Dione is lower then the Company's gross margin prior to Dione's acquisition.

During the first half of 2005, the Company had amortization of intangible assets expenses of $1.6 million, compared to $103,000 of such expenses in the comparable period in 2004 and incurred $899,000 in special legal expenses related to the patent infringement claims by Verve. Operating expenses for the six months ended June 30, 2005 included $2.6 million of non-cash stock-based compensation expenses, compared to $3.0 million of non-cash stock-based compensation expenses in the six-month period in 2004. Excluding the effect of stock-based compensation, non-GAAP net income for the period was $15.3 million, or $0.55 per diluted share, compared to non-GAAP net income of $14.5 million, or $0.56 per diluted share, for the six months ended June 30, 2004.

Cash flow from operating activities for the six months ended June 30, 2005 was $5.2 million.

In May, 2005, a public offering of 2,269,000 Lipman ordinary shares was completed by certain shareholders. Proceeds from the offering went to the selling shareholders. Lipman did receive approximately $1.2 million upon the exercise of options for shares sold in the offering by two of the selling shareholders.

Commenting on the results, Isaac Angel, President and CEO of Lipman said, "Our revenues for the second quarter were driven in part by strength in our international markets, notably Turkey, Spain and Latin America where our performance remained strong as we received major orders from a number of key customers. We believe our success in these markets is indicative of the strong relationships that we have been able to develop, and of the appreciation institutions have for the technological benefits of our solutions. We are also encouraged by the momentum and solid performance Lipman achieved in the United States, which we attribute to the success of our new U.S. management team and the receipt of key certifications in 2004."

"During the quarter, we achieved Sistema 4B certification in Spain. This certification positions Lipman to take better advantage of this market as it allows us to begin selling our NURIT 8010 wireless terminals to all banks that process payment transactions through Sistema 4B, one of the leading network authorization centers for electronic payments in Spain. This certification should help Lipman to effectively implement its growth strategy just as the Company has done in other regions around the world."

Mr. Angel concluded, "We will continue to build on Lipman's strong performance, and we remain focused on driving growth through innovation and the successful execution of our long-term business strategy. We remain positive about the trends in our business, and we believe the combination of our solid financial position, strong customer relationships, and our commitment to leadership and quality, will enable us to continue expanding our business in the point of sale market for the rest of the year and beyond."

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