Revenue for the twelve months ended December 31, 2008 was $562.9 million compared with $389.5 million for the twelve months ended December 31, 2007, representing an increase of $173.4 million, or 45 percent, of which $60.4 million is the result of acquisitions. The Company's full-year organic revenue growth of 13 percent excludes acquisitions made in 2008 and includes acquisitions closed in 2007 for the full year of 2007 and 2008. Organic growth in the Secure Credentialing division and in the enrollment and government consulting services businesses was 25 percent for the year, offset by lower organic growth in the Biometrics division primarily due to unusually large shipments of HIIDE and LiveScan devices in Q4 2007 that created incomparable year-over-year results.
Gross margin for 2008 was 30 percent, compared to 31 percent in 2007. The decrease was due to changes in the revenue mix as previously described.
Adjusted EBITDA for 2008 was $83.5 million (excluding the impact of one-time charges related to the Digimarc acquisition), compared to $60.1 million for 2007, representing a 39 percent increase. Operating expenses as a percentage of revenue decreased to 27 percent for the twelve months ended December 31, 2008 from 28 percent for the twelve months ended December 31, 2007, due to improved operating leverage.
For the full year, the Company recorded a non-cash charge of $528.6 million as a result of its annual impairment review in accordance with the Statement of Financial Accounting Standard (SFAS) No. 142 â€œGoodwill and Other Intangiblesâ€ and SFAS No. 144 â€œAccounting for the Impairment or Disposal of Long-lived Assetsâ€. The impairment charge is primarily driven by a difficult economic environment and a decrease in the market price of the Companyâ€™s stock in the last quarter of 2008. The charge is attributable to impairment of goodwill, intangibles and other long-lived assets recorded in connection with an acquisition in the Biometrics division. The non-cash impairment charge does not impact the Companyâ€™s ongoing business operations and will not have any impact on its compliance with debt covenants, cash flow or liquidity.
After giving effect to the $528.6 million non-cash non-recurring impairment charge, the Companyâ€™s loss for the year was $548.7 million, or ($7.08) per diluted share based on weighted average shares outstanding of 77.5 million compared to net income of $17.7 million, or $0.24 per diluted share for the full year ended December 31, 2007. Excluding non-cash non-recurring items in Q4 of 2007 and 2008 resulting from impairment charges and non-recurring tax charges and credits, the net loss would have been $0.12 per diluted share in 2008 and the net income would have been $0.01 per diluted share in 2007.
Unlevered free cash flow for 2008 was $47.5 million as compared to $39.7 million in 2007. Cash flow was driven by organic growth, acquisitions, operating leverage, and the reduction of days-sales-outstanding from 73 to 65 days, offset by shipments made at the end of Q4 2008 that were collected in Q1 2009.
â€œThe significant non-cash impairment charges in 2008 will not impact Company operations and are not reflective of the many positive accomplishments that we achieved this year,â€ said Robert V. LaPenta, Chairman, President and CEO of L-1 Identity Solutions. â€œWe continue to take important steps in reducing costs, strengthening the Companyâ€™s financial position, and building on our leadership in key areas including multi-modal biometric devices and software, as well as credentialing solutions.â€
Fourth Quarter and Full Year 2008 Highlights
Backlog at December 31, 2008 increased to approximately $1.1 billion from $715.0 million as of December 31, 2007 and $523.0 million as of December 31, 2006. Backlog includes funded backlog and firm customer orders for which funding are not contractually obligated. Approximately 84 percent of revenue for 2009 is expected to come from backlog. Additional highlights include:
Secure Credentialing Division
* The acquisition of the ID Systems business from Digimarc was completed in 2008. Integration of the business into the Secure Credentialing division is on schedule, with synergies targeted at $15.0 million.