Shares of Vaso Corporation (VASO Quick QuoteVASO - Free Report) have gained 0.3% since the company reported its earnings for the quarter ended Sept. 30, 2024. This compares with the S&P 500 index’s -2% change over the same time frame. Over the past month, the stock moved -13.6% versus the S&P 500’s 0.6% change.

For the third quarter of 2024, Vaso reported a 6.8% increase in revenue to $20.8 million compared with $19.4 million in the prior-year quarter. The increase is primarily driven by the IT segment, which saw a 12.3% revenue increase to reach $11.1 million, and a 3.1% rise in the professional sales services segment to reach $9.1 million. 

In contrast, the equipment segment reported revenues of $0.6 million, a decline of 23.1% from the year-ago period. Despite the revenue growth, gross profit declined 2.4% to $11.8 million due to lower margins in the IT and equipment segments. Gross profit margins for the three months ended Sept. 30, 2024, and 2023 were 57% and 62%, respectively. Vaso reported an operating loss of $1.4 million for the quarter against the $0.9 million operating income recorded in the same quarter of 2023.

The company posted a net loss of $1.2 million against a net income of $1.2 million in the prior-year quarter. This loss was attributed to an increase in business combination transaction costs, a decrease in gross profit and a 4.8% year-over-year increase in selling, general, and administrative (SG&A) expenses to $11.4 million. The loss per share for the third quarter of 2024 was $0.01 against earnings per share of $0.01 in the year-ago period.

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Other Key Business Metrics

Vaso reported net cash provided by operating activities of $3.6 million for the first nine months of 2024, down from $6.9 million in the same period of 2023. As of Sept. 30, 2024, cash, cash equivalents, and short-term investments totaled $26.8 million compared with $25.3 million as of Dec. 31, 2023. Deferred revenues increased 2.9% during the quarter to $33.1 million from $32.2 million in the prior-year quarter, expected to be recognized as revenue in future periods.

Adjusted EBITDA turned negative at $1.2 million for the quarter against $1.2 million in the prior-year period. This decline was primarily attributable to the decrease in net income and increase in interest income.

Management Commentary

CEO Dr. Jun Ma emphasized the company’s strong cash position and reiterated a commitment to growth through organic means and partnerships across its segments. Management highlighted optimism for the traditionally strong fourth quarter due to the cyclical nature of the business. Dr. Ma also emphasized on ongoing efforts to optimize operations and capture new growth opportunities heading into 2025.

Factors Influencing Results

The revenue growth in the IT segment was primarily driven by higher network services, which accounted for the majority of the segment’s recurring revenues. The professional sales services segment benefited from higher commission rates and equipment volumes delivered by GE Healthcare. However, the decline in the equipment segment was due to lower ARCS subscription revenues in the U.S. operations and weaker equipment deliveries in China.

Operating expenses, including costs related to the terminated business combination, significantly impacted profitability. Additionally, higher personnel costs in the IT and professional sales segments contributed to increased SG&A expenses.

Other Developments

The company terminated its proposed business combination agreement with Achari Ventures Holdings Corp. I in September 2024. Related costs of $1.5 million were incurred during the quarter. Despite this, Vaso aims to explore growth opportunities through internal and external strategies.