Datakey Inc. Announces 2002 Year-end and Fourth Quarter Results
MINNEAPOLIS, Feb. 27, 2003 – Datakey Inc. (Nasdaq: DKEY), a leading developer of smart card technology for securing e-business, today reported results for the fourth quarter and year ended Dec. 31, 2002. Revenue from continuing operations for the fourth quarter of 2002 was $1,507,000, down 45 percent from $2,749,000 for the same period last year. The fourth quarter loss from continuing operations was $761,000, or $.08 per share, compared to a net profit of $88,000, or $.01 per share, in the year-earlier period.
Annual revenue from continuing operations decreased by seven percent to $7,257,000 from $7,815,000 in 2001. Net loss from continuing operations was $2,668,000, or $.26 per share, compared to $2,006,000, or $.21 per share, in 2001.
“We were disappointed in our fourth quarter results that continue to reflect the slow economy and reduced government spending,” said Carl P. Boecher, President and CEO of Datakey. “Steps were taken in the fourth quarter to reduce expenses. We are taking a conservative outlook regarding 2003 until we see marked improvement in our market sector. Annual revenue was significantly less than we had forecast in 2002, even though there was a substantial increase in new pilot programs and pilots converted to production. The revenue decrease in 2002 is primarily attributable to a material decrease in the dollar value per order of initial production orders, which we believe was primarily the result of the extended time frame that organizations are scheduling to complete their production deployments.”
Highlights for the fourth quarter:
Datakey initiated 23 new pilot programs
Datakey converted 10 pilot programs to production for 2 U.S. banks, a European bank, a European postal authority, 2 European government agencies, 2 U.S. government agencies, a Provincial government agency and a UK corporation.
Datakey received add-on orders from 12 production customers
Datakey extended its product interoperability with two new partners
New Product
From the time Datakey launched its first products that provide smart card based information security, they were designed to capitalize on the expected growth in the Public Key Infrastructure (PKI) marketplace. As a result of the perceived complexity and cost of implementing a PKI and the significant slowdown in the international economy, the technology has not grown as rapidly as many experts anticipated.
Datakey is introducing a new product called Datakey Axis that specifically addresses a large unfulfilled need for medium and large enterprises to access applications securely without requiring an investment in PKI. The product combines Datakey’s smart card and software technology, with existing user ID/password infrastructure, to make access to business applications and securing corporate information easy, cost effective and more secure.
Guidance
Our principal objectives in 2003 will be to increase revenue in 2003 over 2002, manage losses to the extent possible by tightly controlling expenses, and introduce the Datakey Axis product in the second quarter of 2003. First quarter revenues are expected to be down materially from first quarter revenues in 2002 and we expect to incur a loss comparable to the Q4 2002 loss. It is anticipated that revenues will gradually improve over the last three quarters. How fast Datakey recovers will depend on an improved economy and increased U.S. government spending on security projects.
About Datakey Inc.
Datakey Inc. (www.datakey.com) focuses on delivering complete smart card-based solutions that simplify access and identity management throughout the enterprise. Datakey’s comprehensive solution set makes it easier to administer digital identities and to manage user access to a full range of corporate resources. Our solutions reduce administrative costs while at the same time providing stronger security. In turn, Datakey solutions make it much more convenient and secure for users to login to company resources by consolidating all digital credentials – including passwords, digital certificates, VPN/dial-up credentials and biometric data – onto one smart card and automating access through a reduced number of sign-ons.
Forward-Looking Statements
Statements in this press release related to anticipated financial results for the first quarter of 2003 and for the year 2003 are forward-looking statements subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. The statement that losses in the first quarter of 2003 will be comparable to losses in the fourth quarter will be dependent on the Company’s ability to generate the revenue it has projected for the first quarter, which cannot be assured. The Company’s projection that revenues in 2003 will exceed revenues in 2002 is subject to the following risks: (i) the level of conversions of pilot programs to production orders decreases materially from that of 2002; (ii) the dollar value of initial product orders continues to decrease; and (iii) the market deployment of the Datakey Axis product family is either untimely and/or unsuccessful.