Viisage Technology is a company both James Bond and Donald Trump could love: Its systems help government agencies and casinos finger a wide assortment of scoundrels—everyone from card cheats to suspected terrorists.
Customers using Viisages facial-recognition software, which can compare a photo against a database of millions and find the most likely matches in just a few seconds, include the U.S. Department of Defense, Berlins airports and more than 100 casinos, such as the MGM Mirage, Trump Hotels & Casino Resorts and the Stratosphere Casino Hotel & Tower.
But while facial recognition brings Viisage some sizzle, the real steaks on its plate are digital systems for producing and verifying identification documents, including drivers licenses for 16 U.S. states. Last year, 82% of the companys $37.4 million in sales were from digital ID systems, and Viisage estimates its customers have generated 135 million documents to date.
In a few cases, though, the companys ID and facial-recognition offerings work hand-in-glove. The Oklahoma Department of Public Safety, for example, is using Viisages facial-recognition tools to ferret out drivers-license fraud. The state, which signed a six-year, $12 million contract with Viisage, scans its photo database nightly to catch IDs that may have been issued to the same individual under an alias.
After initiating the project in September 2003, Oklahoma has produced about 220,000 drivers licenses with the new system. Of those, the Viisage system has flagged 50 that are being investigated for fraud, says David Beatty, the manager in charge of the drivers-license project. "These are cases we simply wouldnt have known about before," he says.
Beatty says Viisages willingness to accommodate special requests to customize its software and its leadership in facial-recognition technology were the major reasons the state picked the company over Digimarc, whose systems produce digital drivers licenses for 32 states. Viisage "has been very flexible," he says. "The other companys attitude was, Heres our product."
The Pinellas County Sheriffs Office in Clearwater, Fla., meanwhile, is using facial-recognition technology to identify repeat offenders. The system compares the mug shot of a fresh detainee against the departments database of 500,000 images—everyone whos been arrested in the county over the last 10 years—and it pulls up the most likely matches in three seconds. "Its reduced the number of people trying to use aliases as they come in the front door," says Lt. Jim Main, who oversaw the project for the sheriffs office. "We can also ID someone whos uncooperative, or too drunk or too high to tell us their name."
Viisages strategy is to stay focused on its core ID market, while pushing facial-recognition software as part of the overall equation. In February, it bought Trans Digital Technologies (TDT), which supplies the digital printing system for U.S. passports, for $50 million in cash and stock. Last year, the Arlington, Va.-based TDT landed a five-year, $65 million contract extension with the U.S. State Department for the passport system.
Bernard Bailey, president and chief executive officer of Viisage, calls the acquisition of TDT "the single most important transformational event in Viisages history," and he views it as a foot in the door to sell more facial-recognition technology to the federal government. He joined Viisage in August 2002 after a stint as chief operating officer of Art Technology Group, a customer-relationship-management software vendor, and 17 years at IBM.
So far, Bailey hasnt been able to lift the company out of the red. Viisages already disappointing results for 2003, a pro-forma net loss of $5.5 million, were exacerbated by a $12.1 million charge related to a change in how it accounts for revenues from long-term contracts. Viisage says it started 2004 with an order backlog of about $190 million, factoring in anticipated business from TDT and another company it recently acquired, German facial-recognition firm ZN Vision Technologies. Nevertheless, the company is forecasting a net loss, of "not more than $3.0 million," for this year.
At some point, Viisage expects an about-face in its misfortunes—especially if the facial-recognition market takes off. Research firm Frost & Sullivan estimates it will be a $792 million market by 2009, up from $21.5 million in 2002. But even customers recognize the technology is still in its infancy. "With a fingerprint, we get confirmation of someones identity that is 100% accurate a great deal of the time," says Capt. Alecia Edgington of the Kentucky State Police. "With facial recognition, that threshold has not been reached yet."
Headquarters: 30 Porter Road, Littleton, MA 01460
Phone: (978) 952-2200
Ticker: VISG (NASDAQ)
Business: Sells systems and services for producing identification documents and analyzing facial images to verify identity. About 90% of revenue comes from contracts with government and law-enforcement agencies.
Executives: Bernard Bailey, president and CEO; Iftikhar Ahmad, senior vice president of identification services; Mohamed Lazzouni, chief technology officer and vice president of engineering.
Products: Identification systems designed for digital drivers licenses, visas and passports; facial-recognition applications include FaceExplorer, which compares an image against a database to find the closest matches.
Market Share: 30% of the $21.5 million facial- recognition market worldwide in 2002 (Frost & Sullivan).
Competitors: Cognitec Systems; Digimarc; Identix