VUANCE Ltd. Announces Record Second Quarter 2008 Operating Results
Tuesday August 5, 8:00 am ET
Revenues Increase 80% to Record $5.3 Million, up 29% Sequentially vs. Q1
Gross Profits Up 73.9% Compared to Prior-Year Period
Reduces Non-GAAP Operating Loss to Under $1 Million vs. $1.6 Million in Q1
ROCKVILLE, Md.--(BUSINESS WIRE)--VUANCE Ltd. (NASDAQ: VUNC - News), a leading provider of innovative Radio Frequency Verification Solutions, including active RFID, electronic access control, credentialing, accountability and critical situation management, today announced its operating results for the second quarter and six month periods ending June 30, 2008.
Operating Highlights
* VUANCE was awarded a $1.4 million contract from the Racine (Wisc.) Unified School District to install its MASC (Managed Automated Security Controls) security solution into 31 school buildings, and two administrative buildings, in the district. The school district is contemplating additional buildings with the potential to expand this initial project.
* The French Art Network, a leading New Orleans Art Dealer with multiple locations throughout the country, selected VUANCE’s Active RFID product line, AAID’s Long Range Asset Tags and Passive Readers to monitor and secure the presence of valuable artwork in and between its galleries. A comprehensive asset management solution was developed by Florida-based Silent Partner Technologies, an AAID/VUANCE business partner and systems integrator.
* The Company made continued progress in its goal to achieve more revenue diversity, expanding the sales within the United States as a percent of revenue.
Second Quarter 2008 Results
Revenues for the quarter ended June 30, 2008 increased 80% to a record $5.3 million compared with revenues of $2.9 million in the second quarter of 2007. This was also a 29% sequential improvement compared to the first quarter revenue of $4.1 million. The increase was largely driven by growth in the Passive RFID business, specifically related to Electronic access control and international projects implementation.
Eyal Tuchman, Chief Executive Officer of VUANCE Ltd., commented, “Demand for our solutions continues to grow across all our market verticals and we have reported record revenue despite the economic pressures impacting other industries. We are experiencing particular strength in the transportation and educational verticals, and our strategic shift to an indirect sales model continues to gain traction as we are seeing progress with our distribution partners around the world. The increased focus on security, whether it is protecting assets, preventing terrorism or supporting first responders in crisis situations, remains a driver for our business. It is becoming increasingly clear that security, such as preventing the theft or loss of valuable assets as well as protecting the public and improving the safety of first responders, is a necessity, not a discretionary purchase. VUANCE is uniquely positioned to provide fully integrated solutions in these areas, utilizing both passive and active RFID technologies.”
Gross profit increased 72.8% to $3.2 million in the most recent quarter, versus $1.8 million in the second quarter of 2007. Gross profit margin for the second quarter of 2008 was 60.1% compared to gross profit margin of 62.6% for the second quarter last year. The lower gross margin is the result of a change in product mix, and the impact of sales made through distribution partners, which carry a lower gross profit margin, but over time will result in a reduced sales and marketing expense. The Company expects to experience an increased operating margin which will more than offset the reduced gross profit margin as this strategic shift to a more indirect sales model comes to fruition.
Total operating expenses for the quarter were $4.5 million, reflecting the contribution of SHC, which was acquired in August of 2007, compared to total operating expenses of $2.9 million for the prior-year second quarter and $4.5 million for the previous quarter. The total operating expenses were unchanged compared to the $4.5 million reported for the first quarter of the year. The Company reported a loss from operations of $1.3 million compared to a loss from operations of $1.1 million in the prior-year second quarter and compared sequentially to the $1.9 million loss in the first quarter.
The Company reported a net loss of $1.6 million, or $0.30 per share, in the three months ended June 30, 2008, compared with a net loss of $1.3 million, or $0.33 per share, in the second quarter of 2007 based on 5.2 million and 4.0 million weighted average shares outstanding, respectively. For further comparison, the Company reported a net loss of $4.0 million, or $0.77 per share, in the three months ended March 31, 2008.
On a non-GAAP basis (see reconciliation between GAAP and non-GAAP results at the end of this press release), excluding non-cash stock-based compensation and amortization of intangibles assets related to SHC acquisition of $314,000 during the second quarter of 2008, the Company reported a non-GAAP operating loss of $984,000 in the second quarter of 2008 compared to the non-GAAP operating loss of $757,000 in the second quarter of 2007 and compared sequentially to a non-GAAP operating loss of $1.6 million in the first quarter of 2008. In the second quarter of 2008, the Company’s non-GAAP net loss totaled $1.2 million, or $0.24 per share, versus a non-GAAP net loss of $976,000, or $0.24 per share, in the second quarter of 2007 based on 5.2 million and 4.0 million weighted average shares outstanding, respectively. Non-cash stock-based compensation of $201,000 was recorded in the second quarter of 2008.
Mr. Tuchman continued, “As per our operating plan, we continue to narrow our losses and are making steady progress toward operational break-even by the end of this year. As projected in the first quarter, we have stabilized our total operating expenses and were able to leverage our fixed costs to report record revenue with flat operating expenses on a sequential basis. As a result, our non-GAAP operating loss decreased to $984,000 from $1.6 million in the first quarter of this year. We anticipate continuing this trend through the second half of the year, and reiterate our expectations of reaching operational break-even for the fourth quarter of this year, and we are confident we will experience profitability throughout 2009. Our year-over-year comparisons reflect the contribution of the SHC acquisition, which added to our fixed costs and also resulted in integration expenses, but we are proving our ability to leverage these new assets to drive top-line growth while reducing our expenses. At the same time, the price decrease of OTI shares and the recognition of onetime deferred expenses related to our convertible bond agreements continue to impact our GAAP financial results, albeit on a non-operating basis.”
Revenues for the six months ended June 30, 2008 increased 65.2% to $9.4 million compared with revenues of $5.7 million in the prior year period. Gross profit increased 73.9% to $5.8 million in the most recent six months, versus $3.3 million for the six months ended June 30, 2007. Gross profit margin for the first six months of 2008 was 61.2% compared to gross profit margin of 58.1% for the year-ago period. Total operating expenses for the six months ended June 30, 2008 were $8.9 million, reflecting the contribution of SHC, which was acquired in August of 2007, compared to total operating expenses of $5.2 million for the prior-year six month period. The Company reported a loss from operations of $3.2 million compared to a loss from operations of $1.9 million in the year-ago period. The Company reported a net loss of $5.5 million, or $1.07 per share, for the six months ended June 30, 2008, compared with a net loss of $2.4 million, or $0.60 per share, in the year-ago period based on 5.1 million and 4.0 million weighted average shares outstanding, respectively.
“Through two quarters, we are well on our way to achieving our guidance of at least $20 million in revenue for 2008,” added Mr. Tuchman. “We have about $9 million of this revenue goal already included in our backlog of booked orders to be implemented before the end of the year, as well as ongoing service and maintenance agreements. With $9.4 million booked through the first six months of the year, and nearly $9 million in the backlog, we can achieve this $20 million target with only a few additional sales closing from our robust and growing sales pipeline. Simultaneously, we remain focused on sequential reductions in our operating expenses, allowing us to expand make steady progress toward the goal of break even EBITDA in our fourth quarter.”
On a non-GAAP basis (see reconciliation between GAAP and non-GAAP results at the end of this press release), excluding non-cash stock-based compensation and amortization of intangibles assets related to SHC acquisition $636,000 during the first six months of 2008, the Company reported a non-GAAP operating loss of $2.5 million compared with a non-GAAP operating loss of $1.3 in the year-ago period. In the six months ended June 30, 2008 excluding also Beneficial Conversion Feature of convertible bonds of $715,000, the Company’s non-GAAP net loss totaled $4.2 million, or $0.81 per share, versus a non-GAAP net loss of $1.8 million, or $0.46 per share, in the prior-year period based on 5.1 million and 4.0 million weighted average shares outstanding, respectively. Non-cash stock-based compensation of $412,000 was recorded in the first six months of 2008.
AI
Market Data 
Markets 
