Image Sensing Systems, Inc. (NASDAQ: ISNS) today announced results
for its third quarter and nine months ended September 30,
2018.
Third Quarter 2018 Financial
Highlights
- Third quarter royalties were
$2.3 million, a decrease of 8 percent from the same period in the
prior year.
- Third quarter product sales were
$1.8 million, an increase of 56 percent from the same period in the
prior year.
- Operating expenses totaled $2.5
million in the third quarter of 2018, an increase of 14
percent from the prior year period. Capitalized software
costs in the third quarter were $32,000 compared to
$305,000 in the prior year period.
- Net income for the third
quarter of 2018 totaled $851,000, compared to net income of
$870,000 for the same period in the prior year.
- The cash balance decreased to $3.5
million, down from $3.7 million at the end of the second quarter of
2018.
Third-Quarter Results:
The 2018 third quarter revenue for
Image Sensing Systems, Inc. ("ISS" or the "Company") was
$4.0 million, compared to $3.6 million in the third
quarter of 2017. Gross margin for the third quarter of
2018 was 82 percent, a 1 percent decrease from a
gross margin of 83 percent for the same period in 2017. The
decrease in the gross margin percent was primarily the result of a
larger portion of revenue from product sales during the quarter.
Revenue from royalties was $2.3 million in the third
quarter of 2018 compared to $2.5 million in
the third quarter of 2017, an 8 percent decrease.
The decrease in royalties was due to an individually significant
royalty related to a sale through Econolite, our partner, in
the same period in 2017 and no comparable project in the same
period in 2018.
Product sales increased to $1.8 million in
the 2018 third quarter, a 56 percent increase from
$1.1 million in the third quarter of 2017. The increase
in product sales resulted from higher volumes of RTMS sales in
North America. Autoscope video product sales and
royalties were $300,000 and $2.3 million, respectively, and
RTMS radar product sales were $1.5 million in the third
quarter of 2018. Product sales gross margin for
the third quarter of 2018 was 63 percent compared to
54 percent in the prior year period.
ISS’s net income in the third quarter was
$851,000, or $0.16 per basic share, compared to
net income of $870,000, or $0.17 per basic share, in the
prior year period. The 2018 third quarter net income includes
operating expenses of $2.5 million, a 14 percent increase
from the third quarter of 2017. The increase is primarily due
to additional R&D expense, as less R&D costs could be
capitalized during the current quarter. During the third
quarter of 2018, ISS capitalized $32,000 of internal software
development costs compared to $305,000 in the prior year
period.
On a non-GAAP basis, excluding the amortization
of intangible assets and depreciation for the applicable periods,
operating income for the third quarter of 2018 was $1.1
million compared to an operating income of $1.0 million in
the third quarter of 2017.
"Our third quarter results highlight the
importance of looking beyond any singular quarter when evaluating
our success," said Chad Stelzig, CEO for ISS. "For instance,
while our product sales are up quarter-over-quarter, we cannot
attribute it entirely to business improvements, as we had a backlog
of opportunities that were finally awarded in the third
quarter. Similarly, royalties in the third quarter were down
due to the initial phase of a significantly large opportunity
that shipped in the third quarter of the prior year. We
believe this opportunity will have revenue potential in future
quarters, and we will continue to collaborate with
Econolite to identify and adapt to the needs of the
intersection detection market."
"Furthermore, with the addition of our Vice
President of Global Sales and Marketing, we evaluated our sales
office structure during the quarter. As a result, we made the
decision to eliminate our sales office in Bucharest, Romania and to
direct our resources in regions we believe will produce better
revenue growth. Going forward, our international product
sales will be managed from our office in Barcelona, Spain.
The sales team has responded to the new leadership and I am eager
to see continued improvement in the coming quarters," stated Mr.
Stelzig.
Year-to-Date Results:
ISS’s revenue for the first nine months of 2018
was $11.0 million, an 8 percent increase from revenue of
$10.2 million in the first nine months of 2017. Sales gross
margin for the first nine months of 2018 was 83 percent, a 3
percent increase from the prior year period. The increase in gross
margin was the result of a higher percentage of revenue from
royalties and a decrease in the warranty reserve recorded in the
first nine months of 2018. Revenue from royalties was $7.0
million in the first nine months of 2018 compared to $6.0
million in the same period in 2017, a 16 percent increase. Product
sales were $4.0 million in the first nine months of 2018, a 5
percent decrease from $4.2 million in the first nine months of
2017.
The first nine months of revenue for 2018
included Autoscope video product sales and royalties of
$876,000 and $7.0 million, respectively, and RTMS radar product
sales of $3.1 million. Product sales gross margin for the first
nine months of 2018 was 59 percent, a 1 percent increase
compared to the same period in the prior year.
The Company’s net income for the first nine
months of 2018 was $1.3 million, or $0.26 per basic share,
compared to a net income of $1.4 million, or $0.27 per basic share,
in the first nine months of 2017. The first nine
months of 2018 net income includes operating expenses of $7.7
million, a 14 percent increase from the same period in 2017. During
the first nine months of 2018, we capitalized $134,000 of software
development costs, compared to $871,000 in the first nine months of
2017. Cash flow in the first nine months of 2018 decreased to
$355,000, compared to a cash flow of $1.2 million in the first nine
months of 2017.
On a non-GAAP basis, excluding intangible asset
amortization and depreciation for the applicable periods, operating
income for the first nine months of 2018 was $1.9 million compared
to an operating income of $1.8 million in the first nine months of
2017.
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;
tariffs and other trade barriers; 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, 2017 filed on March 14, 2018.
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, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales |
|
$ |
1,750 |
|
$ |
1,120 |
|
$ |
3,970 |
|
$ |
4,189 |
Royalties |
|
|
2,299 |
|
|
2,504 |
|
|
6,982 |
|
|
5,994 |
|
|
|
4,049 |
|
|
3,624 |
|
|
10,952 |
|
|
10,183 |
Cost of revenue |
|
|
743 |
|
|
602 |
|
|
1,891 |
|
|
2,034 |
Gross profit |
|
|
3,306 |
|
|
3,022 |
|
|
9,061 |
|
|
8,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
1,592 |
|
|
1,430 |
|
|
5,118 |
|
|
4,522 |
Research
and development |
|
|
863 |
|
|
722 |
|
|
2,598 |
|
|
2,266 |
|
|
|
2,455 |
|
|
2,152 |
|
|
7,716 |
|
|
6,788 |
Income
from operations |
|
|
851 |
|
|
870 |
|
|
1,345 |
|
|
1,361 |
Other
income |
|
|
- |
|
|
- |
|
|
- |
|
|
33 |
Income before income
taxes |
|
|
851 |
|
|
870 |
|
|
1,345 |
|
|
1,394 |
Income tax expense |
|
|
- |
|
|
- |
|
|
- |
|
|
4 |
Net income |
|
$ |
851 |
|
$ |
870 |
|
$ |
1,345 |
|
$ |
1,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net
income per share |
|
$ |
0.16 |
|
$ |
0.17 |
|
$ |
0.26 |
|
$ |
0.27 |
Diluted
net income per share |
|
$ |
0.16 |
|
$ |
0.17 |
|
$ |
0.26 |
|
$ |
0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares -
basic |
|
|
5,212 |
|
|
5,138 |
|
|
5,200 |
|
|
5,117 |
Weighted shares -
diluted |
|
|
5,244 |
|
|
5,151 |
|
|
5,206 |
|
|
5,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed Consolidated
Balance Sheets(in thousands)(unaudited)
|
|
|
|
|
September 30, 2018 |
|
December 31,2017 |
Assets |
|
|
|
|
|
Current
assets |
|
|
|
|
|
Cash and
cash equivalents |
$ |
3,545 |
|
$ |
3,190 |
Receivables, net |
|
3,722 |
|
|
3,339 |
Inventories |
|
779 |
|
|
335 |
Prepaid
expenses and other current assets |
|
441 |
|
|
255 |
|
|
8,487 |
|
|
7,119 |
Property
and equipment, net |
|
418 |
|
|
486 |
Intangible assets, net |
|
3,239 |
|
|
3,485 |
Deferred
taxes |
|
37 |
|
|
38 |
|
$ |
12,181 |
|
$ |
11,128 |
Liabilities and
Shareholders’ Equity |
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
Accounts
payable |
$ |
564 |
|
$ |
563 |
Warranty
and other current liabilities |
|
1,494 |
|
|
1,924 |
|
|
2,058 |
|
|
2,487 |
|
|
|
|
|
|
Shareholders’ equity |
|
10,123 |
|
|
8,641 |
|
$ |
12,181 |
|
$ |
11,128 |
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed
Consolidated Statements of Cash Flows(in thousands)(unaudited)
|
|
|
Nine-Month Periods Ended September 30, |
|
2018 |
|
|
2017 |
|
Operating
activities |
|
|
|
|
|
Net
income |
$ |
1,345 |
|
|
$ |
1,390 |
|
|
|
|
|
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
Depreciation and amortization |
|
571 |
|
|
|
461 |
|
Stock
option expense |
|
164 |
|
|
|
229 |
|
Loss on
disposal of assets |
|
5 |
|
|
|
2 |
|
Changes
in operating assets and liabilities |
|
(1,410 |
) |
|
|
73 |
|
Net cash provided by
operating activities |
|
675 |
|
|
|
2,155 |
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
Capitalized software development costs |
|
(134 |
) |
|
|
(833 |
) |
Purchases
of property and equipment |
|
(163 |
) |
|
|
(148 |
) |
Net cash used for
investing activities |
|
(297 |
) |
|
|
(981 |
) |
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
Stock for
tax withholding |
|
(10 |
) |
|
|
- |
|
Net cash used for
financing activities |
|
(10 |
) |
|
|
- |
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
(13 |
) |
|
|
35 |
|
Increase in cash and
cash equivalents |
|
355 |
|
|
|
1,209 |
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period |
|
3,190 |
|
|
|
1,547 |
|
Cash and cash
equivalents at end of period |
$ |
3,545 |
|
|
$ |
2,756 |
|
|
|
|
|
|
|
Non-Cash
investing and financing activities: |
|
|
|
|
|
Purchase of property
and equipment in accounts payable |
$ |
18 |
|
|
$ |
85 |
|
Capitalization of
software development costs in accounts payable |
|
- |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
Image Sensing Systems, Inc.Non-GAAP Income
from Continuing Operations(in thousands)(unaudited)
We define non-GAAP income from operations as
income from operations before amortization of intangible assets and
depreciation for the applicable periods. Management believes
non-GAAP income from 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 operations
may not be comparable to similarly titled definitions used by other
companies. The table below reconciles non-GAAP income from
operations, which is a non-GAAP financial measure, to comparable
GAAP financial measures:
|
|
|
|
|
|
|
Three-Month PeriodsEnded September 30, |
|
Nine-Month Periods Ended September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Income from
operations |
|
$ |
851 |
|
$ |
870 |
|
$ |
1,345 |
|
$ |
1,361 |
Amortization of
intangible assets |
|
|
149 |
|
|
90 |
|
|
380 |
|
|
270 |
Depreciation |
|
|
65 |
|
|
64 |
|
|
191 |
|
|
191 |
Non-GAAP income from
operations |
|
$ |
1,065 |
|
$ |
1,024 |
|
$ |
1,916 |
|
$ |
1,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note – Our calculation of non-GAAP income from
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:
Todd Slawson, Interim Chief Financial
OfficerImage Sensing Systems, Inc. Phone:
651.603.7700
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