Image Sensing Systems, Inc. (NASDAQ:ISNS) today announced results
for its fourth quarter and fiscal year ended December 31, 2016.
Fourth-Quarter Results:Image Sensing Systems’
(ISS) 2016 fourth quarter revenue from continuing operations was
$2.8 million, compared to revenue from continuing operations of
$3.5 million in the fourth quarter of 2015. Gross margin from
continuing operations for the fourth quarter of 2016 was 51
percent, a 18 percentage point decrease from a gross margin of 69
percent for the same period in 2015. The decrease in gross margin
is driven by a $473,000 warranty charge in the fourth quarter
related to a legacy product that is no longer sold. We have
completed a detailed analysis of the warranty matter and have begun
remediation of the issue. Revenue from royalties was $1.6
million in the fourth quarter of 2016, consistent with prior year
period.
Product sales from continuing operations
decreased to $1.2 million in the fourth quarter of 2016, a 36
percent decrease from $1.9 million in the fourth quarter of 2015.
The decrease in product sales resulted from purchase timing in
Europe and the Middle East and Africa (EMEA) region and an
unanticipated supply chain disruption for our Autoscope video
product sold into the EMEA region. Autoscope video product
sales and royalties were $145,000 and $1.6 million, respectively,
and RTMS radar product sales were $1.1 million in the fourth
quarter of 2016. Product sales gross margin for the fourth
quarter of 2016 was negative eight percent, a 50-percentage point
decrease from the prior year period. The decrease in gross
margin is due to the previously discussed individually significant
warranty charge related to a legacy product that is no longer
sold. Furthermore, our lower product sales volume magnified
this impact during the quarter.
“Shipment of Autoscope Vision, our new
intersection product, began in the fourth quarter and the market
has responded enthusiastically,” said Chad Stelzig, President and
CEO for ISS. “The rapid acceptance of the Vision product is a
testament to the level of detection performance, product quality,
and user experience achieved by our talented engineering staff.
Early feedback from the market and preliminary bookings from our
partner Econolite, give us optimism that our royalty revenue will
continue on this improved trajectory in the quarters to
come.”
“We are also happy to report that royalty
revenue stabilized for the first time in nine quarters,” continued
Stelzig. “The combination of new intellectual property,
stabilization of royalty revenue, and controlled operational costs
will allow us to make key strategic investments in development to
accelerate our growth and increase our product offering
diversification over the upcoming year,” concluded Stelzig.
On a non-GAAP basis, excluding the individually
significant warranty charge related to legacy product that is no
longer sold, fourth quarter 2016 non-GAAP gross margins and product
gross margins would have been 67 percent and 31 percent,
respectively.
The Company’s net loss from continuing
operations in the fourth quarter of 2016 was $683,000 or $0.14 per
basic share, compared to a net loss from the continuing operations
of $403,000, or $0.08 per basic share, in the prior year period.
The fourth quarter 2016 net income from continuing operations
includes operating expenses of $2.2 million, a $668,000 or 24
percent improvement from the fourth quarter of 2015. The
reduction of operating expense is the result of cost saving measure
implemented during the year, partially offset by higher R&D
expense due to capitalized software in the comparable prior year
period.
On a non-GAAP basis, excluding intangible asset
amortization, depreciation, and restructuring charges for the
applicable periods, operating loss from continuing operations for
the fourth quarter of 2016 was $546,000 compared to an operating
loss from continuing operations of $231,000 in the fourth quarter
of 2015.
Full-Year Results:ISS’s revenue for 2016 was
$14.1 million, a seven percent decrease from revenue of $15.2
million in 2015. Revenue from royalties was $7.7 million in 2016,
compared to $8.5 million in 2015, a nine percent decline. Product
sales decreased to $6.4 million in 2016, a five percent decline
from $6.7 million in 2015.
In 2016 revenue included Autoscope Video product
sales and royalties of $1.1 million and $7.7 million, respectively,
and RTMS Radar product sales of $5.3 million. Product sales gross
margin for 2016 was 37 percent, a decrease of 11 percentage points
from prior year period. This decline is due to the previously
discussed warranty charge taken in the fourth quarter of 2016.
On a non-GAAP basis, excluding the individually
significant warranty charge related to legacy product that is no
longer sold, full year 2016 non-GAAP gross margins and product
gross margins would have been 74 percent and 45 percent,
respectively.
The Company’s net income from continuing
operations for 2016 was $687,000, or $0.14 per basic share,
compared to a net income of $383,000, or $0.08 per basic share, in
2015. In 2016 net income includes operating expenses of $9.4
million, which is a $2 million decrease from 2015. During
2016, we capitalized $1.7 million of software development costs for
the development of our next generation video detection product, the
Autoscope Vision, which was available for sale starting in the
fourth quarter of 2016. In comparison, we capitalized $1.2
million of software development cost in 2015. Our cash
balance at December 31, 2016 was $1.5 million, a decrease of
$130,000 from the $1.7 million cash balance at the end of the third
quarter of 2016. The decrease in cash is the result of
collection timing compared to the prior quarter.
On a non-GAAP basis, excluding intangible asset
amortization, depreciation, and restructuring charges for the
applicable periods, income from continuing operations for 2016 was
$1.2 million compared to a net operating income of $1.3 million in
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
2015, the Company incurred a net loss of $3.5 million from
discontinued operations, including a loss on disposal of $1.1
million, 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 SystemsImage 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-Months Ended December 31, |
|
Years Ended December 31, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Revenue |
|
|
|
|
|
|
|
|
Product
Sales |
|
$ |
1,214 |
|
|
$ |
1,885 |
|
|
$ |
6,398 |
|
|
$ |
6,729 |
|
Royalties |
|
|
1,631 |
|
|
|
1,634 |
|
|
|
7,744 |
|
|
|
8,486 |
|
|
|
|
2,845 |
|
|
|
3,519 |
|
|
|
14,142 |
|
|
|
15,215 |
|
Cost of
revenue |
|
|
1,402 |
|
|
|
1,093 |
|
|
|
4,098 |
|
|
|
3,477 |
|
Gross
profit |
|
|
1,443 |
|
|
|
2,426 |
|
|
|
10,044 |
|
|
|
11,738 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
1,244 |
|
|
|
2,110 |
|
|
|
6,285 |
|
|
|
7,264 |
|
Research
and development |
|
|
913 |
|
|
|
627 |
|
|
|
2,946 |
|
|
|
3,520 |
|
Amortization of intangible assets |
|
|
-- |
|
|
|
88 |
|
|
|
-- |
|
|
|
455 |
|
Restructuring charges |
|
|
-- |
|
|
|
-- |
|
|
|
126 |
|
|
|
119 |
|
|
|
|
2,157 |
|
|
|
2,825 |
|
|
|
9,357 |
|
|
|
11,358 |
|
Income
(loss) from continuing operations |
|
|
(714 |
) |
|
|
(399 |
) |
|
|
687 |
|
|
|
380 |
|
Other
Income (loss) |
|
|
2 |
|
|
|
1 |
|
|
|
(25 |
) |
|
|
21 |
|
Income (loss)
before income taxes |
|
|
(712 |
) |
|
|
(398 |
) |
|
|
662 |
|
|
|
401 |
|
Income tax
expense (benefit) |
|
|
(29 |
) |
|
|
5 |
|
|
|
(25 |
) |
|
|
18 |
|
Net income
(loss) from continuing operations |
|
|
(683 |
) |
|
|
(403 |
) |
|
|
687 |
|
|
|
383 |
|
Net income
(loss) from discontinued operations, net of tax |
|
|
-- |
|
|
|
134 |
|
|
|
-- |
|
|
|
(3,485 |
) |
Net Income
(loss) |
|
$ |
(683 |
) |
|
$ |
(269 |
) |
|
$ |
687 |
|
|
$ |
(3,102 |
) |
|
|
|
|
|
|
|
|
|
Net income
(loss) Per Share |
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.14 |
) |
|
$ |
(0.08 |
) |
|
$ |
0.14 |
|
|
$ |
0.08 |
|
Discontinued operations |
|
$ |
-- |
|
|
$ |
0.03 |
|
|
$ |
-- |
|
|
$ |
(0.70 |
) |
Net basic
income (loss) per share |
|
$ |
(0.14 |
) |
|
$ |
(0.05 |
) |
|
$ |
0.14 |
|
|
$ |
(0.62 |
) |
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.14 |
) |
|
$ |
(0.08 |
) |
|
$ |
0.14 |
|
|
$ |
0.08 |
|
Discontinued operations |
|
$ |
-- |
|
|
$ |
0.03 |
|
|
$ |
-- |
|
|
$ |
(0.69 |
) |
Net
diluted income (loss) per share |
|
$ |
(0.14 |
) |
|
$ |
(0.05 |
) |
|
$ |
0.14 |
|
|
$ |
(0.61 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
5,050 |
|
|
|
5,021 |
|
|
|
5,050 |
|
|
|
5,011 |
|
Diluted |
|
|
5,050 |
|
|
|
5,021 |
|
|
|
5,055 |
|
|
|
5,019 |
|
Image Sensing Systems, Inc.Condensed Consolidated
Balance Sheets(in thousands)(unaudited) |
|
|
December 31,2016 |
|
December 31,2015 |
Assets |
|
|
|
Current
assets |
|
|
|
Cash and
cash equivalents |
$ |
1,547 |
|
$ |
2,648 |
Receivables, net |
|
3,011 |
|
|
3,063 |
Inventories |
|
141 |
|
|
648 |
Other
current assets |
|
281 |
|
|
445 |
|
|
4,980 |
|
|
6,804 |
Property
and equipment, net |
|
371 |
|
|
518 |
Intangible assets, net |
|
2,795 |
|
|
1,210 |
Deferred
taxes |
|
58 |
|
|
19 |
Discontinued operations assets |
|
-- |
|
|
420 |
|
$ |
8,204 |
|
$ |
8,971 |
Liabilities and
Shareholders’ Equity |
|
|
|
Current
liabilities |
|
|
|
Accounts
payable |
$ |
256 |
|
$ |
1,519 |
Warranty
and other current liabilities |
|
1,739 |
|
|
2,055 |
|
|
1,995 |
|
|
3,574 |
|
|
|
|
Shareholders’
equity |
|
6,209 |
|
|
5,397 |
|
$ |
8,204 |
|
$ |
8,971 |
Image Sensing Systems, Inc.Condensed Consolidated
Statements of Cash Flows(in thousands)(unaudited) |
|
|
Years Ended December 31, |
|
|
2016 |
|
|
|
2015 |
|
Operating
Activities |
|
|
|
Net income from
continued operations |
$ |
687 |
|
|
$ |
383 |
|
Net loss from
discontinued operations, net of tax |
|
-- |
|
|
|
(3,485 |
) |
Net income (loss) |
|
687 |
|
|
|
(3,102 |
) |
|
|
|
|
Adjustments
to reconcile net income (loss) to net cash provided by (used for)
operation activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
390 |
|
|
|
753 |
|
Stock-based compensation |
|
247 |
|
|
|
279 |
|
Loss on
disposal of assets |
|
17 |
|
|
|
(157 |
) |
Deferred
income tax expense (benefit) |
|
(39 |
) |
|
|
4 |
|
Changes
in operating assets and liabilities |
|
(855 |
) |
|
|
(1,118 |
) |
Net cash provided by
(used for) continuing operating activities |
|
447 |
|
|
|
(3,341 |
) |
Net cash provided by
discontinuing operating activities |
|
-- |
|
|
|
1,557 |
|
Net cash provided by
(used in) operating activities |
|
447 |
|
|
|
(1,784 |
) |
|
|
|
|
Investing
activities |
|
|
|
Capitalized software development costs |
|
(1,675 |
) |
|
|
(1,210 |
) |
Purchases
of property and equipment |
|
(163 |
) |
|
|
(150 |
) |
Net cash used for
continuing investing activities |
|
(1,838 |
) |
|
|
(1,360 |
) |
Net cash provided by
discontinued investing activities |
|
420 |
|
|
|
3,253 |
|
Net cash provided by
(used for) investing activities |
|
(1,418 |
) |
|
|
1,893 |
|
|
|
|
|
Financing
activities |
|
|
|
Stock for tax
withholding |
|
(17 |
) |
|
|
-- |
|
Net cash used for
continuing financing activities |
|
(17 |
) |
|
|
-- |
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
(113 |
) |
|
|
(117 |
) |
Decrease in cash and
cash equivalents |
|
(1,101 |
) |
|
|
(8 |
) |
|
|
|
|
Cash and cash
equivalents at beginning of period |
|
2,648 |
|
|
|
2,656 |
|
Cash and cash
equivalents at end of period |
$ |
1,547 |
|
|
$ |
2,648 |
|
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 on-GAAP Income
from Continuing Operations, which is a non-GAAP financial measure,
to comparable GAAP financial measures:
|
|
Three-Months Ended December 31, |
|
Years Ended December 31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
Income from continuing operations |
|
$ |
(714 |
) |
|
$ |
(399 |
) |
|
$ |
687 |
|
$ |
380 |
|
Depreciation |
|
|
78 |
|
|
|
80 |
|
|
|
300 |
|
|
298 |
|
Amortization of
intangible assets |
|
|
90 |
|
|
|
88 |
|
|
|
90 |
|
|
455 |
|
Restructuring
charges |
|
|
-- |
|
|
|
-- |
|
|
|
126 |
|
|
119 |
|
Non-GAAP income from
continuing operations |
|
$ |
(546 |
) |
|
$ |
(231 |
) |
|
$ |
1,203 |
|
$ |
1,252 |
|
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.
Richard Ehrich, Chief Financial Officer
Image Sensing Systems, Inc. Phone: 651.603.7706
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