Identity protection solutions provider L-1 Identity Solutions, Inc. (ID), reported Wednesday a swing to loss in the second quarter, despite increase in revenues, reflecting lower gross margins. The company also provided its outlook for the third quarter and full year, however, cut its revenue forecast for the full year.
For the second quarter, L-1 Identity reported a net loss of $1.25 million or $0.01 per share, compared to net income of $2.46 million or $0.03 per share in the previous year.
L-1 Identity adopted new accounting standards, effective January 1, 2009, which required provisions to be applied retroactively to all prior periods, by which the previously reported net income for the quarter ended June 30, 2008 decreased to $2.5 million or $0.03 per share from $3.2 million or $0.04 per share previously.
Stock-based compensation for the latest quarter was $5.60 million, compared to $3.50 million last year. Excluding the compensation, earnings were $0.05 a share for the second quarter of 2009.
On average, seven analysts polled by Thomson Reuters expected the company to report loss of $0.01 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues for the period increased 16% to $168.05 million from $144.95 million, reflecting the acquisition of Digimarc and higher enrollment services revenue. Organic revenue growth was flat with the prior-year quarter. The Street expected revenues of $168.96 million in the second quarter.
Gross margin in the second quarter declined to 29% from 33% in the second quarter of 2008. The decrease was linked to the effect of licensing revenue from the biometrics business and the U.S. Passport and Passport Card consumables and printer orders in 2008.
L-1 Identity expects margins to increase in the second half of 2009, resulting in a gross margin of about 31% for all of 2009, compared to 30% for 2008.
Contractual interest increased year-over-year to $6.83 million from $2.81 million in the year-ago quarter.
For the first six months of 2009, net loss widened to $5.03 million or $0.06 per share from $120 thousand or breakeven per share last year. After application of the new accounting standards the previously reported net loss for the six months ended June 30, 2008 was $0.1 million or breakeven per share, instead of a profit of $1.3 million or $0.02 per share.
Revenues for the six-month period surged to $318.24 million from $260.95 million in the same period last year.
Looking ahead, L-1 expects third quarter earnings, excluding stock based compensation, in the range of $0.04 - $0.06 per share. The Street currently expects the company to report earnings of $0.05 per share for the quarter.
Revenue for the third quarter are projected in the range of $175.0 million - $180.0 million, while analysts currently anticipate revenues of $195.21 million.
For the full year, L-1 expects earnings exclusive of certain items to be $0.06 - $0.12 per share. Earnings excluding stock based compensation are projected in the range of $0.17 - $0.24 per share.
Analysts currently expect the company to report earnings of $0.09 per share for the year.
The company now expects full year revenues of $700.0 - $725.0 million, compared to previous estimates of $725.0 - $750.0 million. The reduction is mainly attributed to delays in bookings on certain international orders, elimination of RT revenues, and a reduction in demand for U.S. Passports. Analysts currently estimate revenues of $732.24 million for the year.
L-1 Identity also said it expects robust organic growth in the second half of the year that will result in 13% -15% organic growth for all of 2009.
ID is currently trading at $7.84, down $0.62 or 7.33%, on the NYSE.
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