Viisage (NASDAQ:VISG)
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Viisage (Nasdaq: VISG), a leading provider of advanced
technology identity solutions, today reported results for the quarter
ended June 30, 2006. Revenue for the second quarter of 2006 was $24.9
million compared to $20.1 million in the second quarter of 2005.
Revenue from Integrated Biometrics Technology (IBT) and SecuriMetrics,
acquired December 16, 2005 and February 17, 2006, respectively, was
$6.9 million and is included in the results for the full second
quarter of 2006. Prior year revenue for the quarter ended June 30,
2005 included $4 million of one time and accelerated orders from ABN
AMRO, the Department of Defense (DOD) and the U.S. Department of State
(DOS). The Company reported a second quarter net loss of $1.6 million,
or $0.06 per diluted share, compared to a net loss of $0.5 million, or
$0.03 per diluted share in the second quarter of 2005. The results of
the second quarter of 2006 include a non-cash charge of $0.8 million
for stock-based compensation in connection with the adoption of FAS
123(R) on January 1, 2006.
Gross margin in the second quarter of 2006 was 29 percent,
compared to 31 percent in the second quarter of 2005, reflecting the
impact of IBT and an unusually large sale of products in the second
quarter of 2005. Gross margin, excluding the impact of the
acquisitions of IBT and SecuriMetrics was 32 percent. Earnings before
interest, taxes, depreciation and amortization and non-cash stock
compensation expense, or Adjusted EBITDA, was $3.8 million in the
second quarter, compared to $3.0 million in the same period in the
prior year.
Year to Date Results
Revenue for the first half of 2006 was $48.3 million compared to
$37.0 million for the same period in the prior year. Revenue from IBT
and SecuriMetrics of $13.3 million has been included in the six month
results since their respective dates of acquisition. Prior year
revenue for the same period included $4.5 million of one time and
accelerated revenues from ABN AMRO, the DOS and the DOD. The Company
reported a net loss of $3.8 million, or $0.13 per diluted share
compared to a net loss of $2.1 million, or $0.11 per diluted share for
the corresponding period in the prior year. The 2006 results include a
non-cash charge for stock-based compensation of $1.4 million as a
result of adopting FAS 123(R) on January 1, 2006.
Gross margin for the first half of 2006 was 28 percent compared to
32 percent for the same period in the prior year and reflects the
impact of the acquisitions of IBT and SecuriMetrics. Gross margin for
the first half of the year excluding the impact of the acquisitions
was 32 percent. Adjusted EBITDA was $6.3 million compared to $4.6
million for the same period in the prior year.
"We are pleased with our second quarter results especially with
respect to our bookings, which totaled $50 million during the quarter.
Our healthy bookings rate reflects robust growth in our sole source US
passport program and increases in our drivers' license business," said
Robert V. LaPenta, Chairman of the Board of Viisage. "Furthermore, we
continue to see a number of identity and credentialing programs, such
as the Western Hemisphere Travel Initiative and the Real ID Act
favorably impacting our current business and future prospects. We also
are gaining traction with a significant number of opportunities
worldwide for our facial recognition and document authentication
equipment as countries strive to meet critical deadlines and comply
with a myriad of legislative requirements including the US Visit and
e-Passport initiatives."
Mr. LaPenta also noted, "Our backlog is in excess of $210 million
at June 30, 2006, compared to approximately $180 million at June 30,
2005. Our broad product and program base and significant backlog
provides us with a unique position in the industry and confidence in
our ability to achieve increased quarterly revenue performance."
Second Quarter Highlights
-- Viisage continued to help state motor vehicle departments
address security requirements of the REAL ID Act, with four
deals announced in the quarter that collectively represented
$48 million in contract revenue. These deals were with the
Pennsylvania Department of Transportation, the Wisconsin
Department of Transportation, the Arkansas Department of
Finance and Administration, and the Maryland Department of
Motor Vehicles.
-- Viisage saw added momentum in the automation of driver
knowledge testing by state Department of Motor Vehicle (DMV)
agencies as they seek to improve the accuracy and security of
identity proofing, ID issuance and customer service. Six DMV
agencies awarded Viisage contracts with a total value of $2.3
million in this area including Alabama, Mississippi, Nebraska,
Kentucky, Colorado and Arkansas.
-- Internationally, the Australian Department of Immigration and
Multicultural Affairs selected Viisage's iA-thenticate(R)
Smart Chip/RFID Electronic Document Reader for the
authentication of passports, as well as e-passports at 26
embassies worldwide. This marks the second consecutive
contract win for the Company from an Australian agency.
-- Organic growth continued, with follow-on orders in the quarter
from ABN AMRO Bank, Kuwait Immigration Services, and the
Province of Alberta, Canada.
LaPenta concluded, "We are nearing the completion of our merger
with Identix with a strong bench of technological and industry
expertise in hand that will be a major differentiator for the company
and offer competitive advantage for our customers. We recently
welcomed former Deputy Secretary of the U.S. Department of Homeland
Security James Loy and former Director of the U.S. Federal Bureau of
Investigation (FBI) Louis Freeh to the Viisage Board of Directors.
Their insight into the issues and concerns at local, state and federal
agencies as they relate to protecting and securing personal identities
will be invaluable. We also announced plans to acquire Iridian
Technologies, which will further enhance our multi-modal biometric
product portfolio and open up a new era for the market in the
development of applications based on iris recognition technologies."
Guidance
The Company expects to complete the merger with Identix on or
about August 29, 2006. Assuming the transaction is concluded, the
combined entity expects pro forma revenue for the second half of the
year in the range of $120 to $125 million with pro forma Adjusted
EBITDA of between $25 and $27 million. The Company expects gross
margin to be approximately 40 percent for the second half of 2006.
(See Adjusted EBITDA discussion below.)
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. EDT
today. The dial-in number for the call is 800-299-0148, participant
passcode 21054761. Internationally, please dial 617-801-9711, 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, amortization, and
stock-based compensation expense. Adjusted EBITDA is provided to
investors to supplement the results of operations reported in
accordance with GAAP. Management believes Adjusted EBITDA is useful to
help investors analyze the operating trends of the business before and
after the adoption of FAS 123(R) and to assess the relative underlying
performance of businesses with different capital and tax structures.
Management 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. Management also uses Adjusted EBITDA to evaluate potential
acquisitions, establish internal budgets and goals, and evaluate
performance.
Viisage considers Adjusted EBITDA to be an important indicator of
the Company's operational strength and performance of its business and
a useful measure of the Company's historical operating trend. However,
there are significant limitations to the use of Adjusted EBITDA since
it excludes interest income and expense and income taxes, all of which
impact the Company's profitability, as well as depreciation and
amortization related to the use of long term assets which benefit
multiple periods. Viisage believes that these limitations are
compensated by providing Adjusted EBITDA only with GAAP net income
(loss) and clearly identifying the difference between the two
measures. Consequently, Adjusted EBITDA should not be considered in
isolation or as a substitute for net income (loss) presented in
accordance with GAAP. Adjusted EBITDA as defined by the Company may
not be comparable with similarly named measures provided by other
entities.
We have not provided a reconciliation of expected pro forma net
income (loss) to expected pro forma Adjusted EBITDA for the second
half of 2006 because such data is based on the assumed merger with
Identix as of July 1, 2006. Because the actual timing of the merger
and related actions to improve profitability are not known, related
costs could not be quantified, accordingly, a reliable projection of
net income for the second half of the year is not available without
unreasonable efforts. A reconciliation of GAAP Net Income (Loss) to
Adjusted EBITDA for the historical periods follows:
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(in millions)
For the Quarter Ended For the Six Months Ended
June 30, July 3, June 30, July 3,
2006 2005 2006 2005
---------------------- ------------------------
Net Loss $( 1.6 ) $( 0.5 ) $( 3.8 ) $( 2.1 )
Add/Deduct:
Depreciation and
Amortization $ 4.4 $ 3.2 $ 8.5 $ 6.1
Interest (Income)
/Expense, Net $ (0.5 ) $ --- $( 1.1 ) $ ---
Provision for
Income Taxes $ 0.7 $ 0.3 $ 1.3 $ 0.6
Stock Based
Compensation $ 0.8 $ --- $ 1.4 $ ---
-------- -------- --------- --------
Adjusted EBITDA $ 3.8 $ 3.0 $ 6.3 $ 4.6
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About Viisage Technology, Inc.
Viisage 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
be granted other privileges. With more than 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(TM)
SDK, Viisage PROOF(TM), FaceEXPLORER(R), iA-thenticate(R),
ID-GUARD(R), BorderGuard(R), PIER(TM), HIIDE(TM), AutoTest(TM),
FacePASS(TM) and FaceFINDER(R).
Forward Looking Statements
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, 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 requisite Iridian shareholder approval will not be
obtained, or that the pending Iridian acquisition will not close or
otherwise be delayed, 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 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," and Identix' Annual Report on Form 10-K for the year
ended June 30, 2005 and its Quarterly Reports on Form 10-Q for the
quarters ended September 30, 2005, December 31, 2005 and 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
proposed business combination transaction between the two companies
because it contains important information. Viisage and Identix have
mailed a joint proxy statement/prospectus about the transaction to
their respective stockholders. This joint proxy statement/prospectus
has been 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 Identix or Viisage 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 joint proxy statement/prospectus dated July 27, 2006, for
Viisage's special meeting of shareholders to be held on August 29,
2006 as filed with the SEC as part of the registration statement on
Form S-4. Information concerning Identix' participants is set forth in
the joint proxy statement/prospectus dated July 27, 2006, for Identix'
special meeting of shareholders as filed with the SEC on Schedule 14A.
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VIISAGE TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, July 3, June 30, July 3,
2006 2005 2006 2005
-------- -------- -------- --------
Revenue $24.9 $20.1 $48.3 $37.0
-------- -------- -------- --------
Cost of Revenues:
Cost of Revenue (1) 15.7 12.7 30.8 22.9
Amortization of
Purchased Intangible
Assets 2.0 1.2 3.9 2.4
-------- -------- -------- --------
Total Cost of Revenue 17.7 13.9 34.7 25.3
-------- -------- -------- --------
Gross Profit 7.2 6.2 13.6 11.7
-------- -------- -------- --------
Operating Expenses:
Sales and Marketing (2) 2.9 2.0 5.3 4.2
Research and
Development (3) 1.9 1.2 3.5 2.5
General and
Administrative (4) 3.6 3.1 8.1 6.4
Amortization of Purchase
Intangible Assets 0.1 0.1 0.2 0.2
-------- -------- -------- --------
Total Operating Expenses 8.5 6.4 17.2 13.3
-------- -------- -------- --------
Loss from Operations: (1.3) (0.2) (3.6) (1.6)
Interest Income, net 0.4 --- 1.1 ---
Other Expense, net --- --- --- 0.1
-------- -------- -------- --------
Loss Before Income Taxes (0.9) (0.2) (2.5) (1.5)
Provision for Income Taxes 0.7 0.3 1.3 0.6
-------- -------- -------- --------
Net Loss $ (1.6) $ (0.5) $ (3.8) $ (2.1)
======== ======== ======== ========
Net loss per Basic and
Diluted Share $ (0.06) $ (0.03) $ (0.13) $ (0.11)
======== ======== ======== ========
Weighted Average Basic and
Diluted Shares 29.1 19.2 29.0 19.2
======== ======== ======== ========
(1) Includes $0.1 and $0.2 and stock-based compensation in three and
six months ended June 30, 2006, respectively
(2) Includes $0.2 and $0.4 and stock-based compensation in three and
six months ended June 30, 2006, respectively
(3) Includes $0.1 and $0.2 and stock-based compensation in three and
six months ended June 30, 2006, respectively
(4) Includes $0.4 and $0.7 and stock-based compensation in three and
six months ended June 30, 2006, respectively
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VIISAGE TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets (in millions)
(unaudited)
June 30, December 31,
Assets 2006 2005
--------- ------------
Current Assets:
Cash $ 43.6 $ 72.4
Other Current Assets 23.9 20.5
--------- ------------
Total Current Assets 67.5 92.9
Property and Equipment, net 19.4 19.5
Goodwill and Net Intangible Assets 206.5 179.4
Other Assets 5.0 2.3
--------- ------------
Total Assets $ 298.4 $ 294.1
========= ============
Liabilities & Shareholders Equity
Current Liabilities:
Accounts Payable, Accrued
Expenses and Other Current
Liabilities 14.7 12.8
Current Deferred Revenue 3.3 2.6
--------- ------------
Total Current Liabilities 18.0 15.4
Deferred Tax Liability 3.0 2.0
Deferred Revenue 2.0 1.7
Other Liabilities 0.2 0.3
--------- ------------
Total Liabilities 23.2 19.4
Shareholders' Equity 275.2 274.7
--------- ------------
Total Liabilities and
Shareholders' Equity $ 298.4 $ 294.1
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