Viisage (NASDAQ:VISG)
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Viisage (Nasdaq: VISG), a leading provider of advanced
technology identity solutions, today reported results for the first
quarter ended March 31, 2006. The quarterly results are being reviewed
by the Company's new independent registered public accounting firm,
Deloitte & Touche, LLP. The Company anticipates filing its Form 10-Q
with the Securities and Exchange Commission later this week.
Revenue for first quarter of 2006 was $23.4 million compared to
$16.8 million in the first quarter of 2005, and was above the high-end
of the Company's previously provided guidance of $20.0 million to
$22.0 million. Revenue from Integrated Biometrics Technology (IBT) and
SecuriMetrics that were acquired December 16, 2005 and February 17,
2006, respectively, are reflected from their dates of acquisition. The
Company reported a first quarter net loss of $2.2 million, or $0.07
per diluted share, compared to a net loss of $1.6 million, or $0.09
per diluted share in the first quarter of 2005. The Company had
previously guided to a loss between $0.10 and $0.14 per diluted share.
The Company is reporting a non-cash charge of $626,000 for stock-based
compensation in connection with the adoption of FAS 123(R) in the 2006
first quarter.
Gross margin in the first quarter was 27 percent, compared to 32
percent in the first quarter of 2005, reflecting the IBT and
SecuriMetrics acquisitions. The Company expects gross margin to
improve to a target in excess of 35 percent for the second half of
2006. Earnings before interest, taxes, depreciation and amortization
and non-cash stock compensation expense, or Adjusted EBITDA, was $2.5
million in the first quarter, up from $1.6 million in the prior year
period. Total cash at March 31, 2006 was $46.4 million, including $3.7
million generated from operations during the quarter.
Bernard Bailey, president and CEO of Viisage, commented, "With
first quarter revenue above the top-end of our prior guidance, we are
demonstrating a commitment to the growth of the business. Furthermore,
our determination to manage our costs allowed us to report a
better-than-expected bottom line, further strengthening the business
ahead of the closing of the merger with Identix."
Earlier in the quarter, Viisage also completed its acquisition of
privately held SecuriMetrics, Inc. The strategic acquisition enhanced
Viisage's product line, adding iris recognition, another critical
modality to the Company's biometric capabilities.
Commenting on the pending merger and acquisition activity, Robert
V. LaPenta, chairman of the board of Viisage, said, "Our planned
merger with Identix is moving forward and we are eagerly anticipating
the close to occur in late June or early in the third quarter. I am
encouraged by our integration efforts thus far and applaud both the
Viisage and Identix management teams for their accomplishments to date
in this important effort."
First Quarter Highlights
Momentum within federal and international government markets and
customers continued to fuel the business in the first quarter for
Viisage. In the area of e-passports, the Ministry of Justice and
Ecclesiastical Affairs of Iceland selected Viisage identity solutions
to gather the multi-biometric data required to issue new electronic
passports for its citizens at all civil registration offices
throughout the country. The Brazilian SERPRO (Servico Federal de
Processamento de Dados) also selected Viisage solutions to ensure the
authenticity and accuracy of information stored in e-Passports,
e-Visas, driver's licenses and ID cards at all airports, seaports and
land crossing borders throughout the country. The SERPRO contract
marked the first industry deployment of a smart chip reader and
includes a provision to add an additional 25 percent to the original
contract value through the exercise of add-on technologies. Finally,
the Australia Department of Immigration and Multicultural Affairs
(DIMA) selected the Viisage iA-thenticate(R) Smart Chip/RFID
Electronic Document Reader to improve security in more than 25
Australian overseas locations worldwide. Australia has been a leader
in implementing the Viisage document authentication technologies and
products, which include the world's largest document database.
Domestically, Viisage received a $56 million contract extension
from the US Department of State (DoS), bringing the total potential
contract value to $121 million. The DoS expects demand for US
passports to increase by approximately 20 percent per year and
estimates that the US will produce 17 million passports annually by
2009.
The company also made traction in the commercial market,
announcing that one of the world's largest banks, ABN AMRO, was
implementing Viisage identity solutions to ensure regulatory
compliance with pending identity assurance regulations and plans on
expanding the capability company-wide. The solution represents the
largest commercial deployment of this technology and provides a
showcase for other commercial enterprises worldwide on the effective
use of identity solutions.
Guidance
As noted above, the Company is expecting to complete the merger
with Identix late in the second quarter or early in the third quarter.
As a result, the Company expects to reflect any adjustments resulting
from the integration during the quarter when the transaction closes.
Assuming the transaction is concluded during the second quarter, the
combined entity expects revenue for the second half of the year in the
range of $120 to $125 million with adjusted EBITDA of between $23 and
$27 million.
Conference Call Information
The Company will host a conference call with the investment
community to discuss its operating results beginning at 5:00 p.m. EST
today. The dial-in number for the call is 800-510-9661, confirmation
code 58604124. Internationally, please dial 617-614-3452, using the
same confirmation code. The call also will be available via live audio
webcast, found under the Conference Calls page of the Investors
section of the company's Web site www.viisage.com. To access the
webcast, please go to the company's Web site at least 10 minutes prior
to the start of the call and follow the directions. A replay of the
webcast will be available at Viisage's Web site beginning an hour
after completion of the call.
Adjusted EBITDA
Viisage uses Adjusted EBITDA as a non-GAAP financial performance
measurement. Adjusted EBITDA is calculated by adding back to net
income (loss) interest, taxes, depreciation and amortization, and
stock-based compensation expense. Adjusted EBITDA is provided to
investors to complement results provided in accordance with GAAP, as
management believes the measure helps illustrate underlying operating
trends in the Company's business and uses the measure to establish
internal budgets and goals, manage the business, and evaluate
performance. Management also believes that Adjusted EBITDA provides an
additional tool for investors to use in comparing Viisage's financial
results with other companies in the industry, many of which also use
Adjusted EBITDA in their communications to investors. By excluding
non-cash charges such as amortization, depreciation and stock-based
compensation, as well as non-operating charges for interest and income
taxes, Viisage can evaluate its operations and can compare its results
on a more consistent basis to the results of other companies in the
industry and to its operations in prior quarters. As noted above,
Adjusted EBITDA excludes the effect of interest, taxes, depreciation
and amortization, and stock-based compensation expense. Because
Adjusted EBITDA eliminates these items, Viisage considers this
financial measure to be an important indicator of the Company's
operational strength and performance of its business and a good
measure of the Company's historical operating trend. Adjusted EBITDA
should not be considered in isolation or as a substitute for
comparable measures calculated and presented in accordance with GAAP.
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A reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA follows:
For the Quarter Ended
-------------------------------------
March 31, April 3,
2006 2005
------------------ ------------------
Net Loss $(2,158) $(1,642)
Add:
Depreciation and Amortization 4,094 2,861
Interest (Income)/expense, net (665) 16
Provision for income taxes 565 358
Stock based compensation 659 --
------------------ ------------------
Adjusted EBITDA $2,495 $1,593
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About Viisage
Viisage (NASDAQ: VISG) delivers advanced technology identity
solutions for governments, law enforcement agencies and businesses
concerned with enhancing security, reducing identity theft, and
protecting personal privacy. Viisage solutions include secure
credentials such as passports and drivers' licenses, biometric
technologies for uniquely linking individuals to those credentials,
and credential authentication technologies to ensure the documents are
valid before individuals are allowed to cross borders, gain access to
finances, or granted other privileges. With over 3,000 installations
worldwide, Viisage's identity solutions stand out as a result of the
Company's industry-leading technology and unique understanding of
customer needs. Viisage's product suite includes IdentityTOOLS(R) SDK,
Viisage PROOF(TM), FaceEXPLORER(R), Viisage iA-thenticate(R),
BorderGuard(R), PIER(TM), HIIDE(TM), AutoTest(TM), FacePASS(TM) and
FaceFINDER(R).
This news release contains forward-looking statements that involve
risks and uncertainties. Forward-looking statements in this document
and those made from time to time by Viisage through its senior
management are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements reflect the Company's current views with
respect to the future events or financial performance discussed in
this release, based on management's beliefs and assumptions and
information currently available. When used, the words "believe",
"anticipate", "estimate", "project", "should", "expect", "plan",
"assume" and similar expressions that do not relate solely to
historical matters identify forward-looking statements.
Forward-looking statements concerning future plans or results are
necessarily only estimates and actual results could differ materially
from expectations. Certain factors that could cause or contribute to
such differences include, among other things, in particular, the size
and timing of contract awards, performance on contracts, performance
of acquired companies, availability and cost of key components,
unanticipated results from audits of the financial results of the
Company and acquired companies, changing interpretations of generally
accepted accounting principles, outcomes of government reviews,
developments with respect to litigation to which we are a party,
potential fluctuations in quarterly results, dependence on large
contracts and a limited number of customers, lengthy sales and
implementation cycles, market acceptance of new or enhanced products
and services, proprietary technology and changing competitive
conditions, system performance, management of growth, dependence on
key personnel, ability to obtain project financing, general economic
and political conditions and other factors affecting spending by
customers, and the unpredictable nature of working with government
agencies. In addition, such risks and uncertainties include, among
others, the following risks: that the merger with Identix will not
close, that the regulatory or shareholder approval will not be
obtained, that the closing will be delayed, that customers and
partners will not react favorably to the merger, integration risks,
the risk that the combined companies may be unable to achieve
cost-cutting synergies, and other risks described in Viisage's and
Identix' Securities and Exchange Commission filings, including the
Registration Statement on Form S-4 filed (on April 4, 2006) with the
SEC in connection with the transaction, Viisage's Annual Report on
Form 10-K for the year ended December 31, 2005 and its Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006 under the
captions "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Viisage expressly
disclaims any obligation to update any forward-looking statements.
Additional Information and Where to Find It
Investors and security holders of both Viisage and Identix are
advised to read the joint proxy statement/prospectus regarding the
business combination transaction referred to in the material below
because it contains important information. Viisage and Identix expect
to mail a joint proxy statement/prospectus about the transaction to
their respective stockholders. This joint proxy statement/prospectus
will be filed with the Securities and Exchange Commission by both
companies. Investors and security holders may obtain a free copy of
the joint proxy statement/prospectus and other documents filed by the
companies at the Securities and Exchange Commission's web site at
http://www.sec.gov. The joint proxy statement/prospectus and such
other documents may also be obtained from Viisage or Identix by
directing such requests to the companies.
Participants In Solicitation
Viisage, Identix and their respective directors and executive
officers and other members of management and employees may be deemed
to be participants in the solicitation of proxies in respect of the
merger. Information concerning Viisage's participants is set forth in
the proxy statement dated, November 21, 2005, for Viisage's special
meeting of shareholders held on December 16, 2005 as filed with the
SEC on Schedule 14A. Information concerning Identix' participants is
set forth in the proxy statement, dated October 6, 2005, for Identix'
2005 annual meeting of shareholders as filed with the SEC on Schedule
14A. Additional information regarding the interests of participants of
Viisage and Identix in the solicitation of proxies in respect of the
merger will be included in the registration statement and joint proxy
statement/prospectus filed with the SEC.
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VIISAGE TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
Three Months Three Months
Ended Ended
March 31, April 3,
2006 2005
------------- -------------
Revenues:
Services revenue $ 15.2 $ 10.1
Product revenue 8.2 6.7
-------------- -------------
Total revenue 23.4 16.8
-------------- -------------
Cost of revenues:
Services cost of revenue 11.4 (a) 7.1
Product cost of revenue 3.8 3.1
Amortization of purchased intangible
assets 1.8 1.2
-------------- -------------
Total cost of revenue 17.0 11.4
-------------- -------------
Gross Profit: 6.4 5.4
-------------- -------------
Operating expenses:
Sales and marketing 2.4 (b) 2.1
Research and development 1.6 (c) 1.2
General and administrative 4.6 (d) 3.4
Amortization of purchased intangible
assets 0.1 0.1
-------------- -------------
Total operating expenses 8.7 6.8
-------------- -------------
Loss from operations (2.3) (1.4)
Interest income (expense), net 0.7 -
Other income (expense) - 0.1
--------------- -------------
Income (loss) before income taxes (1.6) (1.3)
Provision for income taxes (0.6) (0.3)
-------------- -------------
Net loss $ (2.2) $ (1.6)
============== =============
Net loss per share:
Net income (loss) per basic
and Diluted share $ (0.07) $ (0.09)
============== =============
Weighted average basic and diluted
shares 29.0 19.2
============== =============
(a) Includes $85,000 stock-based compensation in 2006
(b) Includes $171,000 stock-based compensation in 2006
(c) Includes $97,000 stock-based compensation in 2006
(d) Includes $306,000 stock-based compensation in 2006
VIISAGE TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets (in millions)
(unaudited)
March 31, December 31,
2006 2005
------------- ------------
Current assets:
Cash $ 46.4 $ 72.4
Other current assets 24.3 20.5
------------- ------------
Total current assets 70.7 92.9
Property and equipment, net 19.5 19.5
Goodwill and net intangible assets 207.1 179.4
Other assets 4.4 2.3
------------- ------------
Total assets $ 301.7 $ 294.1
============= ============
Liabilities & Shareholders Equity
Current liabilities:
Accounts payable, accrued expenses
and other current liabilities 18.7 12.8
Current deferred revenue 3.4 2.6
------------- ------------
Total current liabilities 22.1 15.4
Deferred tax liability 2.5 2.0
Deferred revenue 1.8 1.7
Other liabilities 0.3 0.3
------------- ------------
Total Liabilities 26.7 19.4
Shareholders' equity 275.0 274.7
------------- ------------
$ 301.7 $ 294.1
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