The Company Returns to Profitability for the Quarter
PLAINVIEW, NY / ACCESSWIRE / November 14, 2019 / Vaso Corporation ("Vaso") (VASO) today reported its operating results for the three months ended September 30, 2019.
"The Company recorded an operating profit of $0.8 million for the third quarter of 2019 on revenue of $18.7 million, which remained virtually flat year-over-year. This operating result represented an improvement of over $1.0 million when compared to the operating loss of $0.2 million in the same quarter last year, and was the result of a higher gross profit margin as well as a significant reduction in selling, general and administrative ("SG&A") costs. Year to date, we have reduced SG&A expenses by $2.6 million or 8% year-over-year as a direct effect of the cost cutting measures we implemented in the last several quarters. We anticipate continued improvement in the operating results for the reminder of the year and in the coming quarters," stated Dr. Jun Ma, President and CEO of the Company.
"Our IT segment continues to be a main contributor of the Company's revenue, growing to $11.5 million during the quarter ended September 30, 2019, or 4% over the same quarter in the prior year. We look forward to continued growth in this segment, especially in the healthcare IT business where our expertise in managed network services combined with comprehensive healthcare IT solutions present unique value proposition to a broad base of healthcare provision clients to address their needs for bandwidth, applications, cloud storage and security," Dr. Ma commented.
Financial Results for Three Months Ended September 30, 2019
For the three months ended September 30, 2019, revenue decreased $61 thousand, or 0.3%, to $18.7 million from $18.8 million for the same period of 2018. Quarterly revenue in our IT segment increased $483 thousand or 4% year-over-year. Revenue in the professional sales service segment decreased $518 thousand, mainly due to lower equipment deliveries by our partner. We expect that deliveries of equipment will improve over the remainder of 2019. Revenue in the equipment segment decreased $26 thousand, or 3%, to $906 thousand year-over-year, due to lower sales of EECP® equipment.
Gross profit for the third quarter of 2019 increased 4% to $10.8 million, compared with a gross profit of $10.5 million for the third quarter of 2018. This increase is primarily the result of an increase in revenue in the IT segment where gross profit increased $632 thousand or 14% year-over-year. The IT segment had increased sales and higher gross margins in the network services as well as the healthcare IT VAR business. As the healthcare ITVAR business continues to improve, we anticipate further growth in this segment. Gross profit decreased in the professional sales service and equipment segments in the third quarter 2019 compared to the same period in 2018, by $193 thousand and $49 thousand, respectively, due to lower sales.
SG&A expenses for the third quarter of 2019 decreased 6% to $9.8 million compared to $10.5 million for the same quarter of 2018. The decrease is primarily attributable to decreases in personnel and other costs in the professional sales service and IT segments, resulting from the cost reduction program the Company initiated in the fourth quarter 2018. We anticipate these costs reduction initiatives will result in significant cost savings for the full year 2019.
Research and development costs decreased 15% to $196 thousand in the third quarter of 2019 compared to the same period in 2018, due to lower software development costs in the equipment segment.
Net income for the three months ended September 30, 2019 was $562 thousand, compared to a net loss of $377 thousand for the third quarter of 2018. The improvement of $939 thousand is primarily the result of the increase in revenue and gross profit in the IT segment and the decrease in SG&A costs for the quarter. We expect continued improvement in performance for the remainder of 2019, as we anticipate an increase in equipment deliveries in the professional sales service segment, continued growth in the IT segment, and improved operating results as an effect of our cost reduction initiatives.
Net cash used in operating activities was $2.1 million in the nine months ended September 30, 2019, compared to net cash used in operating activities of $1.5 million for the same period in 2018. Cash and cash equivalents at September 30, 2019 was $1.3 million, compared to $2.7 million at December 31, 2018.
Total deferred revenue remains substantial, at approximately $17.9 million as of September 30, 2019, which will be recognized in the future when the underlying equipment or services are delivered and accepted at the customer site. Our shareholders' equity decreased to $2.6 million as of September 30, 2019 from $5.6 million as of December 31, 2018. Shareholders' equity at September 30, 2019 increased as compared to shareholders' equity at June 30, 2019, as a result of the positive net income in the third quarter.
We have incurred net losses from operations for the years ended December 31, 2018 and 2017 and for the nine months ended September 30, 2019. We maintain lines of credit from a lending institution which will require further extensions after their current December 18, 2019 maturity date, as well as other notes payable that mature within twelve months from September 30, 2019. Our ability to continue operating as a going concern is dependent upon achieving profitability, extending the maturity date of our existing lines of credit and notes payable, or through additional debt or equity
