Image Sensing Systems, Inc. (NASDAQ:ISNS) today announced results
for its third quarter and nine months ended September 30, 2016.
Third-Quarter Results:
Image Sensing Systems’ (ISS) 2016 third quarter
revenue from continuing operations was $3.4 million, compared to
revenue from continuing operations of $4.1 million in the third
quarter of 2015. Gross margin from continuing operations for the
third quarter of 2016 was 76 percent, a 1 percent decrease from a
gross margin of 77 percent for the same period in 2015.
Revenue from royalties was $2.1 million in the third
quarter of 2016 compared to $2.2 million in the third quarter of
2015, a 4 percent decline.
Product sales from continuing operations
decreased to $1.2 million in the third quarter of 2016, a 32
percent decrease from $1.8 million in the third quarter of 2015.
The decrease in product sales resulted from purchase timing and
reduced sales in Europe and the Middle East and Africa (EMEA)
region compared to the prior year period. Autoscope video
product sales and royalties were $319,000 and $2.1 million,
respectively, and RTMS radar product sales were $930,000 in the
third quarter of 2016. Product sales gross margin for the
third quarter of 2016 was 35 percent, a 14-percentage point
decrease from the prior year period. The decrease in gross
margin is due to individually significant warranty charges related
to legacy products that are no longer sold. Furthermore, our
lower product sales volume magnified this impact during the
quarter.
The Company’s net income from continuing
operations in the third quarter of 2016 was $469,000, or $0.09 per
basic share, compared to a net income from the continuing
operations of $290,000, or $0.06 per basic share, in the prior year
period. The third quarter 2016 net income from continuing
operations includes operating expenses of $2.1 million, a $760,000
or 27 percent improvement from the third quarter of 2015.
During the third quarter of 2016, we capitalized $507,000 of
internal software development costs related to the development of
our next generation video detection product. Development of
this product was completed during the third quarter. While we
expect to continue further development and sustaining engineering,
we do not expect additional capitalized costs. Additionally,
to streamline our operating and cost structure, we have initiated
the closure of five of our wholly-owned subsidiaries located in
Europe and Asia. We have incurred $35,000 of closure costs
during the quarter and expect to incur an additional $169,000 in
future periods.
On a non-GAAP basis, excluding intangible asset
amortization, depreciation, and restructuring charges for the
applicable periods, operating income from continuing operations for
the third quarter of 2016 was $570,000 compared to an operating
income of $483,000 in the third quarter of 2015.
“In spite of the decreased third quarter revenue results, we
remain optimistic that our recent product development investments
and operational changes will result in improved financial
performance,” said Chad Stelzig, Interim CEO for ISS. “While
we will continue to experience quarter over quarter revenue
variability, we believe that our strategic investments, product
offering diversification and improved business processes are moving
the company in the right direction. These initiatives will
create more stability and profitability over the longer term.
“We are especially excited for the release of Autoscope Vision,
which is expected to begin shipping in this fourth quarter,”
continued Stelzig. “A nationwide roadshow was conducted to
launch the product and provide hands-on demonstration and training
to distributors and end customers. The positive feedback and
shipment anticipation has validated our belief that this product
will be a game changer.”
Year-to-Date Results:
ISS’s revenue for the first nine months of 2016
was $11.3 million, a 3 percent decrease from revenue of $11.7
million in the first nine months of 2015. Revenue from royalties
was $6.1 million in the first nine months of 2016, compared to $6.9
million in the same period in 2015, an 11 percent decline. Product
sales increased to $5.2 million in the first nine months of 2016, a
7 percent increase from $4.8 million in the nine months of
2015.
The first nine months of revenue for 2016
included Autoscope video product sales and royalties of $940,000
and $6.1 million, respectively, and RTMS radar product sales of
$4.2 million. Product sales gross margin for the first nine months
of 2016 was 48 percent, a decrease of 3 percentage points from
prior year period.
The Company’s net income from continuing
operations for the first nine months of 2016 was $1.4 million, or
$0.27 per basic share, compared to a net income of $785,000, or
$0.16 per basic share, in the first nine months of 2015. The first
nine months of 2016 net income includes operating expenses of $7.2
million, which is a $1.3 million decrease from the same period in
2015. During the first nine months of 2016, we capitalized
$1.6 million of software development costs related to the
development of our next generation video detection product.
Our cash balance at September 30, 2016 was $1.7 million, an
increase of $736,000 from the $964,000 cash balance at the end of
the second quarter of 2016.
On a non-GAAP basis, excluding intangible asset
amortization, depreciation, and restructuring charges for the
applicable periods, net operating income for the first nine months
of 2016 was $1.7 million compared to a net operating income of $1.5
million in the first nine months of 2015.
Discontinued Operations: Sale of License Plate
Recognition (LPR) Business Segment:
On July 9, 2015, ISS sold its license plate
recognition (LPR) business to TagMaster A.B. for the purchase price
of $4.2 million in cash. As a result of this sale, results of
the LPR business segment are classified and reported as
discontinued operations in all periods presented. In third quarter
of 2015, the Company incurred a net loss of $1.2 million from
discontinued operations related to the LPR business
segment.
Non-GAAP Financial Measures:
We provide certain non-GAAP financial
information as supplemental information to financial measures
calculated and presented in accordance with GAAP (Generally
Accepted Accounting Principles in the United States). This non-GAAP
information excludes the impact of amortizing intangible assets and
depreciation and may exclude other non-recurring items.
Management believes that this presentation facilitates the
comparison of our current operating results to historical operating
results. Management uses this non-GAAP information to evaluate
short-term and long-term operating trends in our core operations.
Non-GAAP information is not prepared in accordance with GAAP and
should not be considered a substitute for or an alternative to GAAP
financial measures and may not be computed the same as
similarly titled measures used by other companies.
About Image Sensing Systems
Image Sensing Systems, Inc. is a global company
dedicated to helping improve safety and efficiency for cities and
highways by developing and delivering above-ground detection
technology, applications and solutions. We give Intelligent
Transportation Systems (ITS) professionals more precise and
accurate information – including real-time reaction capabilities
and in-depth analytics – to make more confident and proactive
decisions. We are headquartered in St. Paul, Minnesota. Visit us on
the web at imagesensing.com.
Safe Harbor Statement:
Statements made in this release concerning the Company’s or
management’s intentions, expectations, or predictions about future
results or events are “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such statements reflect management’s current expectations or
beliefs and are subject to risks and uncertainties that could cause
actual results or events to vary from stated expectations, which
variations could be material and adverse. Factors that could
produce such a variation include, but are not limited to, the
following: the inherent unreliability of earnings, revenue and cash
flow predictions due to numerous factors, many of which are beyond
the Company’s control; developments in the demand for the Company’s
products and services; relationships with the Company’s major
customers and suppliers; the mix of and margins on the products we
sell; unanticipated delays, costs and expenses inherent in the
development and marketing of new products and services; adverse
weather conditions in our markets; the impact of governmental laws
and regulations; international presence; our success in integrating
any acquisitions; and competitive factors. Our forward-looking
statements speak only as of the time made, and we assume no
obligation to publicly update any such statements. Additional
information concerning these and other factors that could cause
actual results and events to differ materially from the Company’s
current expectations are contained in the Company’s reports and
other documents filed with the Securities and Exchange Commission,
including its Annual Report on Form 10-K for the year ended
December 31, 2015 filed on March 10, 2016.
Image Sensing Systems,
Inc. |
Condensed Consolidated
Statements of Operations |
(in thousands, except
per share information) |
(unaudited) |
|
|
|
Three-Month Periods
Ended September 30, |
|
Nine-Month Periods
Ended September 30, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenue |
|
|
|
|
|
|
|
|
Product Sales |
|
$ |
1,249 |
|
|
$ |
1,829 |
|
|
$ |
5,184 |
|
|
$ |
4,844 |
|
Royalties |
|
|
2,133 |
|
|
|
2,232 |
|
|
|
6,113 |
|
|
|
6,852 |
|
|
|
|
3,382 |
|
|
|
4,061 |
|
|
|
11,297 |
|
|
|
11,696 |
|
Cost of revenue |
|
|
814 |
|
|
|
941 |
|
|
|
2,696 |
|
|
|
2,384 |
|
Gross profit |
|
|
2,568 |
|
|
|
3,120 |
|
|
|
8,601 |
|
|
|
9,312 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Selling, general and
administrative |
|
|
1,436 |
|
|
|
1,680 |
|
|
|
5,041 |
|
|
|
5,154 |
|
Research and development |
|
|
636 |
|
|
|
1,029 |
|
|
|
2,033 |
|
|
|
2,894 |
|
Amortization of intangible
assets |
|
|
-- |
|
|
|
123 |
|
|
|
-- |
|
|
|
367 |
|
Restructuring charges |
|
|
-- |
|
|
|
-- |
|
|
|
126 |
|
|
|
119 |
|
|
|
|
2,072 |
|
|
|
2,832 |
|
|
|
7,200 |
|
|
|
8,534 |
|
Income from operations |
|
|
496 |
|
|
|
288 |
|
|
|
1,401 |
|
|
|
778 |
|
Other Income (loss) |
|
|
(27 |
) |
|
|
(9 |
) |
|
|
(27 |
) |
|
|
20 |
|
Income before income taxes |
|
|
469 |
|
|
|
279 |
|
|
|
1,374 |
|
|
|
798 |
|
Income tax expense (benefit) |
|
|
-- |
|
|
|
(11 |
) |
|
|
4 |
|
|
|
13 |
|
Net income from continuing operations |
|
|
469 |
|
|
|
290 |
|
|
|
1,370 |
|
|
|
785 |
|
Net loss from discontinued operations, net of
tax |
|
|
-- |
|
|
|
(1,215 |
) |
|
|
-- |
|
|
|
(3,619 |
) |
Net Income (loss) |
|
$ |
469 |
|
|
$ |
(925 |
) |
|
$ |
1,370 |
|
|
$ |
(2,834 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) Per Share |
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.09 |
|
|
$ |
0.06 |
|
|
$ |
0.27 |
|
|
$ |
0.16 |
|
Discontinued operations |
|
$ |
-- |
|
|
$ |
(0.24 |
) |
|
$ |
-- |
|
|
$ |
(0.72 |
) |
Net basic income (loss) per
share |
|
$ |
0.09 |
|
|
$ |
(0.18 |
) |
|
$ |
0.27 |
|
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.09 |
|
|
$ |
0.06 |
|
|
$ |
0.27 |
|
|
$ |
0.16 |
|
Discontinued operations |
|
$ |
-- |
|
|
$ |
(0.24 |
) |
|
$ |
-- |
|
|
$ |
(0.72 |
) |
Net diluted income (loss) per
share |
|
$ |
0.09 |
|
|
$ |
(0.18 |
) |
|
$ |
0.27 |
|
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
5,059 |
|
|
|
5,015 |
|
|
|
5,043 |
|
|
|
5,007 |
|
Diluted |
|
|
5,068 |
|
|
|
5,015 |
|
|
|
5,045 |
|
|
|
5,007 |
|
|
|
|
|
|
|
|
|
|
Image Sensing Systems,
Inc. |
Condensed Consolidated
Balance Sheets |
(in thousands) |
(unaudited) |
|
|
|
September
30,2016 |
|
December
31,2015 |
Assets |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
1,677 |
|
|
$ |
2,648 |
|
Receivables, net |
|
|
3,126 |
|
|
|
3,063 |
|
Inventories |
|
|
161 |
|
|
|
648 |
|
Other current assets |
|
|
416 |
|
|
|
445 |
|
|
|
|
5,380 |
|
|
|
6,804 |
|
Property and equipment, net |
|
|
402 |
|
|
|
518 |
|
Intangible assets, net |
|
|
2,842 |
|
|
|
1,210 |
|
Deferred taxes |
|
|
20 |
|
|
|
19 |
|
Discontinued operations assets |
|
|
-- |
|
|
|
420 |
|
|
|
$ |
8,644 |
|
|
$ |
8,971 |
|
Liabilities and
Shareholders’ Equity |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
385 |
|
|
$ |
1,519 |
|
Warranty and other current
liabilities |
|
|
1,397 |
|
|
|
2,055 |
|
|
|
|
1,782 |
|
|
|
3,574 |
|
|
|
|
|
|
Shareholders’ equity |
|
|
6,862 |
|
|
|
5,397 |
|
|
|
$ |
8,644 |
|
|
$ |
8,971 |
|
|
|
|
|
|
|
|
|
|
Image Sensing Systems,
Inc. |
Condensed Consolidated
Statements of Cash Flows |
(in thousands) |
(unaudited) |
|
|
|
Nine-Month
PeriodsEnded September 30, |
|
|
2016 |
|
2015 |
Operating Activities |
|
|
|
|
Net income from continued
operations |
|
$ |
1,370 |
|
|
$ |
785 |
|
Net (loss) from discontinued
operations, net of tax |
|
|
-- |
|
|
|
(3,619 |
) |
Net income (loss) |
|
|
1,370 |
|
|
|
(2,834 |
) |
|
|
|
|
|
Adjustments to reconcile
net income (loss) to net cash provided by (used for) operation
activities: |
|
|
|
|
Depreciation |
|
|
223 |
|
|
|
218 |
|
Amortization |
|
|
-- |
|
|
|
367 |
|
Stock-based compensation |
|
|
160 |
|
|
|
184 |
|
Loss on disposal of assets |
|
|
13 |
|
|
|
4 |
|
Changes in operating assets and
liabilities: |
|
|
|
|
Accounts receivable, net |
|
|
(63 |
) |
|
|
(847 |
) |
Inventories |
|
|
487 |
|
|
|
265 |
|
Prepaid expenses and other current
assets |
|
|
29 |
|
|
|
228 |
|
Accounts payable |
|
|
(1,134 |
) |
|
|
(943 |
) |
Accrued expenses and other current
liabilities |
|
|
(658 |
) |
|
|
(597 |
) |
Net cash provided by (used
for) continuing operating activities |
|
|
427 |
|
|
|
(3,955 |
) |
Net cash provided by
discontinuing operating activities |
|
|
-- |
|
|
|
1,557 |
|
Net cash provided by (used
in) operating activities |
|
|
427 |
|
|
|
(2,398 |
) |
|
|
|
|
|
Investing activities |
|
|
|
|
Capitalized software development
costs |
|
|
(1,632 |
) |
|
|
(621 |
) |
Purchases of property and
equipment |
|
|
(113 |
) |
|
|
(120 |
) |
Net cash used for
continuing investing activities |
|
|
(1,745 |
) |
|
|
(741 |
) |
Net cash provided by
discontinued investing activities |
|
|
420 |
|
|
|
3,253 |
|
Net cash provided by (used
for) investing activities |
|
|
(1,325 |
) |
|
|
2,512 |
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
|
(73 |
) |
|
|
(90 |
) |
Increase (decrease) in
cash and cash equivalents |
|
|
(971 |
) |
|
|
25 |
|
|
|
|
|
|
Cash and cash equivalents
at beginning of period |
|
|
2,648 |
|
|
|
2,656 |
|
Cash and cash equivalents
at end of period |
|
$ |
1,677 |
|
|
$ |
2,681 |
|
|
|
|
|
|
|
|
|
|
Image Sensing Systems, Inc.Non-GAAP Income
from Continuing Operations(in thousands)(unaudited)
We define Non-GAAP Income from Continuing
Operations as income from continuing operations before amortization
of intangible assets, depreciation and restructuring charges for
the applicable periods. Management believes Non-GAAP Income
from Continuing Operations is a useful indicator of our financial
performance and our ability to generate cash flows from
operations. Our definition of Non-GAAP Income from Continuing
Operations may not be comparable to similarly titled definitions
used by other companies. The table below reconciles Non-GAAP
Income from Continuing Operations, which is a non-GAAP financial
measure, to comparable GAAP financial measures:
|
|
Three-Month Periods
Ended September, 30 |
|
Nine-Month Periods
Ended September 30, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Income from operations |
|
$ |
496 |
|
|
$ |
288 |
|
|
$ |
1,401 |
|
|
$ |
778 |
|
Amortization of intangible assets |
|
|
-- |
|
|
|
123 |
|
|
|
-- |
|
|
|
367 |
|
Depreciation |
|
|
74 |
|
|
|
72 |
|
|
|
223 |
|
|
|
218 |
|
Restructuring charges |
|
|
-- |
|
|
|
-- |
|
|
|
126 |
|
|
|
119 |
|
Non-GAAP income from operations |
|
$ |
570 |
|
|
$ |
483 |
|
|
$ |
1,750 |
|
|
$ |
1,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note – Our calculation of Non-GAAP Income from
Continuing Operations is considered a non-GAAP financial measure
and is not in accordance with, or preferable to, “as reported”, or
GAAP financial data. However, we are providing this
information, as we believe it facilitates analysis of the Company’s
financial performance by investors and financial analysts.
Contact:
Richard Ehrich, Chief Financial Officer
Image Sensing Systems, Inc. Phone: 651.603.7706
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