L-1 Identity Solutions Inc. (ID)

Q2 2010 Earnings Call

July 28, 2010 11:00 am ET

Executives

Bob LaPenta - Chairman, President and CEO

Jim DePalma - EVP, CFO and Treasurer

Lisa Cradit

Analysts

Paul Coster - JPMorgan

Brian Rutternbur - Morgan Keegan

Michael Kim - Imperial Capital

Steve Velgot - Susquehana

Michael French - Morgan Joseph

Presentation

Operator

Welcome to L-1 Identity Solutions Conference Call regarding the companies second quarter and first half 2010, financial results.

At this time all participants have been placed in a listen only more and the floor will be open for your questions following the presentation. (Operator Instructions). Thank you.

I will now turn the floor over to Lisa Cradit.

Lisa Cradit

Thank you for joining us for the second quarter and first half 2010 financial results conference call. Statements that representatives of L-1 Identity Solutions make during this call that are not historical facts are forward-looking statements made under the safe harbor provision of Private Securities Litigation Reform Act of 1995.

Forward-looking statements are based on management's current beliefs and assumptions that involve inherent risks and uncertainties. Any statements made today of our future expectations or results are necessarily only estimates.

Actual results could differ materially from any forward-looking expectations. Factors that may cause differences between forward-looking expectations and future actual results are fully described in the companies SEC filings.

The company expressly disclaims any obligations to revise or update any forward-looking statements. Representatives of L-1 plan to use the number of defined financial terms during today's call, including certain non-GAAP financial terms.

Please refer to the companies press release issued this morning which appeared on our website at www.l1id.com for further definition of and contacts for the use of these terms including a reconciliation of the non-GAAP financial terms to the most closely relevant GAAP financial term.

With that, I would like to turn the call over to Mr. Bob LaPenta, Bob?

Bob LaPenta

Thank you Lisa, good morning everyone thanks for participating in our second quarter and six months earnings conference call. First let me open up by saying that I like most of you are disappointed in the sales we had in the second quarter.

Most of it was due to the delay in PASScard sales, all of which will be shipped in the second half of the year as we indicated in our press release most of that is already in backlog and has been booked,

We also had a delay in a number of domestic and international licensing and national ID programs. We are encouraged however by the increase in pipeline of our new business opportunities across all of our divisions.

We have outstanding today over $1.2 billion of these business opportunities and we believe we are well positioned on a good number of them. I am also pleased that despite the lower sales we have been able to maintain our original EBITDA guidance as a result of our focus on expenses additional synergies we continue to realize in integrating the business and the favorable product mix including more IP and software related sales.

Now before I take you through some of the highlights and give color to some of the divisions and the sales forecast for the second half of the year. I’d like to update you on the status of our strategic alternative process. As you know we announced early in the year that we were going to evaluate our strategic alternatives.

We disclosed that we had hired Stone Key partners and Goldman Sachs on March 1, and we are following a well run and organized process. Thus far we have received initial indications and been through some multiple parties both domestic and foreign and the process is ongoing.

Over the past two months several companies have conducted a detailed due diligence process. We expect to continue discussions with a number of interested parties over the next few weeks and I'm hopeful to be able to advice you with the result shortly there after.

We are committed to enhancing shareholder value and are mindful of our customers and important relationships we have established with them. Our legal counsel advised me I cant say really too much more than that but I’m sure you may a question during the Q&A period.

Moving onto the divisions, taking a quicker look at some of the performance of our companies in the first half and what we hope and are confident that we will be able to achieve in the second half.

Biometrics is doing very, very well probably in the best condition they have been in since we acquired the company. Their new order pipeline doubled to over $350 million and as you read yesterday we were successful in becoming one of the providers for the for the de-dupe pattern on the deep UID program.

Now that’s a very controversial program. I know there’s a lot of rumors circulating on what that all means but this is a very, very key program and I think strategically it positions us really at the top tier of all of the biometric providers.

Our multi model ABIS technology has proven superior and we’re going to be involved in a process of de-duping and enrolling over 200 million people over the next two to three years.

So this is an indication as well not only in India, where ultimately after the two year period, there will be a competition for over a billion records for enrollment in de-duping but it also positions us well to sales of our mobilized product where we currently are one of two certified providers and in that program over the next two to three years, there’s a requirement for over 300,000 devices and being one of two approved sources, I think its going to improve exceedingly beneficial to L-1.

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