Business News

VUANCE Ltd. Announces Record 2008 Revenues

Tuesday 31. March 2009 - Full-Year Revenues Increase 55% to Record $20.7 Million; Q4 Revenues up 32% Year-Over-Year to $5.5 Million

VUANCE Ltd. (NASDAQ: VUNC), a leading provider of innovative Radio Frequency Verification Solutions, including active RFID, electronic access control, credentialing, accountability and critical situation management, today announced selected preliminary operating results for the fourth quarter and full-year periods ending December 31, 2008.

Operational Highlights
— VUANCE was selected to monitor and control all activity in the Decker
Lake Youth Complex, a correctional facility designed for housing youth
in a Medium/High security setting, in West Valley City, Utah.
— The Company expanded its RAPTOR solution with two existing customers
in the North Eastern United States. VUANCE’s RAPTOR system is a smart
card-based system and the industry’s only solution that manages the
skills, certifications and licenses (attributes) of the responders to
emergencies and incidents without forcing states, counties and
municipalities to adopt a single definition of what qualifications a
specific type of responder must have. The Massachusetts Homeland
Security Region V and Chester County, PA., both expanded their use of
the RAPTOR system, and the Chester County agreement also provides
opportunities for business in nearby Bucks and Montgomery counties.
— VUANCE was awarded a stake in a $900,000 government-funded project to
develop a crime scene security and evidentiary tracking system. The
project, which is the result of a grant sponsored by Vice President
Joseph Biden, was awarded to Delaware State University, the Delaware
State Police and the Delaware Department of Safety and Homeland
Security. VUANCE’s portion of the project is nearly $700,000 for the
first year.
— Due in large part to increased spending by the U.S. Federal
Government, and the particular emphasis on spending for schools and
public safety projects, VUANCE’s pipeline of potential business has
substantially expanded compared to the same period in the prior year.

— Non-GAAP operational losses narrowed substantially. On a non-GAAP
basis (see reconciliation between GAAP and non-GAAP results at the end
of this press release) the Company reported a non-GAAP operating loss
of $663,000 in the fourth quarter of 2008 compared to the non-GAAP
operating loss of $2.0 million in the fourth quarter of 2007 and
compared to the non-GAAP operating loss of $1.1 million in the third
quarter of 2008.




The Company’s financial statements for the quarter and the year ended December 31, 2008 have not been finalized and are subject to the completion of its year-end closing procedures. Therefore, the preliminary selected unaudited financial data set forth below is likely to change. As a consequence, actual results could differ materially from the results below. In addition, once the financial statements have been finalized and the audit is complete, the Company may be required to record a non-cash charge for the impairment of Goodwill of approximately $3 million during the fourth quarter and the full year 2008.

Preliminary Fourth Quarter 2008 Selected Unaudited Financial Results

Revenues for the quarter ended December 31, 2008 increased 31.8% to $5.5 million from $4.1 million in the year-ago fourth quarter. The increase was largely driven by growth in the implementation of international projects including progress in the previously announced $13.8 million project at a European International Airport and the Passive RFID business, specifically related to Electronic access control.

Gross profit increased 43.2% to $3.2 million for the fourth quarter compared to $2.2 million for the prior-year fourth quarter and essentially flat compared on a sequential basis to the $3.3 million for the third quarter, despite a small sequential drop in revenue. Gross profit margin for the fourth quarter was 57.9%, up compared to the 53.3% for the fourth quarter of 2007 and also up compared to the 56.6% in the third quarter of 2008.

Total operating expenses from continued operations for the quarter, excluding any impact of goodwill impairment charge, were $4.3 million, down 8.3% compared to $4.7 million in the year-ago fourth quarter and also down sequentially compared to $4.7 million for the third quarter of 2008. The Company is expecting a loss from operations of $1.1 million compared to an operating loss of $2.5 million in the fourth quarter last year and compared sequentially to a $1.4 million operating loss for the third quarter of 2008, excluding any impact of goodwill impairment charges.

Eyal Tuchman, Chief Executive Officer of VUANCE Ltd., commented, “VUANCE finished the year on a strong note, exceeding our stated goal of $20 million in revenue. During the quarter we expanded our gross profit margin despite a slight sequential decline in revenue, demonstrating the leverage in our business model. As part of our goal to reaching cash flow neutral status on a non-GAAP basis, we decided to discontinue our locks initiative, a complementary business we began in the third quarter. As of Dec 31, 2008 we had approximately $260,000 in inventory for this initiative, during the first quarter of 2009, we have liquidated this entire inventory. Our core business, meanwhile, is still strong. We have seen a significant growth of our pipeline for potential business with contracts leveraging funding from the increase in spending by the U.S. government. The renewed focus on security and public safety, especially for schools and colleges across the country, is benefiting VUANCE and resulting in increase in activity.”

The Company is expecting a net loss from continuing operations of $1.3 million, or $(0.24) per diluted share, for the three months ended December 31, 2008, compared with a net loss from continuing operations of $6.1 million, or $(1.19) per diluted share, in the fourth quarter of 2007 based on 5.2 million and 5.1 million weighted average shares outstanding, respectively, subject to any further impact on goodwill impairment charges. The Company is expecting a net loss of $1.4 million, or $(0.27) per diluted share, for the three months ended December 31, 2008, compared with a net loss of $6.1 million, or $(1.19) per diluted share, in the fourth quarter of 2007 based on 5.2 million and 5.1 million weighted average shares outstanding, respectively, subject to any further impact on goodwill impairment charges.

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 intangible assets related to the SHC acquisition of $484,000 during the fourth quarter of 2008, the Company reported a non-GAAP operating loss of $663,000 in the fourth quarter of 2008 compared to the non-GAAP operating loss of $2.0 million in the fourth quarter of 2007, excluding litigation expenses. In the fourth quarter of 2008, the Company’s non-GAAP net loss from continuing operations totaled $787,000 or $(0.15) per diluted share, compared to a non-GAAP net loss from continuing operations of $5.6 million, or $(1.10) per diluted share in the fourth quarter last year. The Company’s non-GAAP net loss totaled $926,000 or $(0.18) per diluted share for the fourth quarter of 2008, compared to non-GAAP net loss of $5.6 million, or $(1.10) per diluted share in the fourth quarter last year. In 2008 all data is subject to any further impact on goodwill impairment charges.

Preliminary Year Ended 2008 Selected Unaudited Financial Results

Revenues for the year ended December 31, 2008 increased 55.1% to a record $20.7 million compared with revenues of $13.3 million during 2007. Gross profit increased 58.2% to $12.2 million for the year versus $7.7 million for 2007. Gross profit margin for the year was 59.1% compared to gross profit margin of 57.9% for the year-ago period. Total operating expenses for the year were $17.8 million, reflecting the contribution of SHC, which was acquired at the end of August 2007, compared to total operating expenses of $14.0 million for the prior-year, which included only four months of SHC, excluding any further impact of goodwill impairment charges. The Company is expecting a loss from operations of $5.6 million compared to a loss from operations of $6.3 million for 2007, excluding any further impact of goodwill impairment charges. The Company is expecting a net loss from continuing operations, excluding any further impact of goodwill impairment charges, of $8.9 million, or $(1.71) per share, for the year, compared with a net loss from continuing operations of $11.3 million, or $(2.57) per share, in the year-ago period based on 5.2 million and 4.4 million weighted average shares outstanding, respectively. The Company is expecting a net loss, excluding any further impact of goodwill impairment charges, of $9.1 million, or $(1.76) per share, for the year, compared with a net loss of $11.3 million, or $(2.57) per share, in the year-ago period based on 5.2 million and 4.4 million weighted average shares outstanding, respectively.

“We entered 2009 with a backlog of $10.6 million for the next 12 months and a total backlog of $51 million, setting the stage for another record year in 2009,” added Mr. Tuchman. “Our investment in sales and marketing has enabled us to expand our market share and establish VUANCE as a recognized leader in technologies to control access to secure areas and track sensitive inventory. While we are not providing specific guidance for 2009 due to the uncertainty in the global economy, we are confident, based on our existing backlog, our improving recurring revenue and our rapidly growing pipeline of business, that we can build on our record 2008 and improve both our top and bottom line results during 2009 as compared to 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 the SHC acquisition of $1.5 million during fiscal 2008, the Company reported a non-GAAP operating loss of $4.1 million compared with a non-GAAP operating loss of $5.0 million last year, excluding litigation expenses. For the year ended December 31, 2008, excluding also the Beneficial Conversion Feature of convertible bonds of $0.8, the Company’s non-GAAP net loss from continuing operations totaled $6.6 million, or $(1.27) per share, versus a non-GAAP net loss from continuing operations of $9.7 million, or $(2.21) per share, last year, based on 5.2 million and 4.4 million weighted average shares outstanding, respectively. For the year ended December 31, 2008, excluding also the Beneficial Conversion Feature of convertible bonds of $0.8, the Company’s non-GAAP net loss totaled $6.8 million, or $(1.32) per share, versus a non-GAAP net loss of $9.7 million, or $(2.21) per share, last year. In 2008 all data is subject to any further impact on goodwill impairment charges.

VUANCE completed the year with cash and cash equivalent totaling $812,000.

The Company’s selected preliminary financial results have been prepared on a going concern basis, which presumes the realization of assets and the settlement of liabilities in the normal course of operations. The application of the going concern basis is dependent upon the Company having sufficient available cash resources and achieving profitable operations to generate sufficient cash flows to fund continued operations. Should the Company fail to generate sufficient cash flows from operations, it will require additional financing to remain a going concern.