Image Sensing Systems, Inc. (NASDAQ: ISNS) today announced results
for its second quarter and first half ended June 30, 2019.
Second Quarter 2019 Financial Summary
- Second quarter royalties were
$2.2 million, a decrease of 12 percent from the same period in the
prior year.
- Second quarter product sales were
$2.0 million, an increase of 47 percent from the same period in the
prior year.
- Operating expenses totaled $2.4
million in the second quarter of 2019, a decrease of 11
percent from the prior year period.
- Capitalized software costs in
the second quarter were $343,000 compared to
$36,000 in the prior year period.
- Net income for the second
quarter of 2019 totaled $647,000 compared to net income of
$511,000 for the same period in the prior year.
- Cash balance increased to $4.2
million, up from $3.9 million at the end of the first quarter of
2019.
First Half 2019 Financial Summary
- Royalties for the first half of
2019 were $4.0 million,
a decrease of 16 percent from the same period
in the prior year.
- Product sales for the first half of
2019 were $3.6 million, an increase of
64 percent from the same period in the prior year.
- Operating expenses totaled
$4.7 million in the first half of 2019,
a decrease of 11 percent from the prior year
period.
- Capitalized software costs in the
first half of 2019 were $762,000 compared to
$102,000 in the prior year period.
- Net income for the first half
of 2019 totaled $955,000 compared to net income of
$494,000 for the same period in the prior year.
- Cash balance remained consistent at
$4.2 million when compared to the cash balance at the end of
2018.
Second-Quarter Results:The 2019 second
quarter revenue for Image Sensing Systems, Inc. ("ISS" or the
"Company") was $4.2 million compared to $3.9 million in
the second quarter of 2018. Gross margin for the second
quarter of 2019 was 72 percent, a 10 percent
decrease from a gross margin of 82 percent for the same period
in 2018. The decrease in the gross margin percent was primarily the
result of an individually significant, low margin sale into the
Middle East region in the second quarter of 2019. Revenue from
royalties was $2.2 million in the second quarter of
2019 compared to $2.5 million in the second quarter
of 2018, a 12 percent decrease.
Product sales increased to $2.0 million in
the second quarter of 2019, a 47 percent increase from
$1.4 million in the second quarter of 2018. The increase
in product sales resulted from the individually significant sale
into the Middle East region in the second quarter of 2019 and no
comparable sale in the same period in 2018. Autoscope video
product sales and royalties were $307,000 and $2.2 million,
respectively, and RTMS radar product sales were $1.7 million in
the second quarter of 2019. Product sales gross margin for
the second quarter of 2019 was 45 percent compared to
56 percent in the prior year period. The decrease in
sales gross margin is primarily the result of the aforementioned
significant sale into the Middle East.
ISS’ net income in the second quarter was
$647,000, or $0.12 per diluted share, compared to
net income of $511,000, or $0.10 per diluted share, in
the prior year period. The 2019 second quarter net income includes
operating expenses of $2.4 million, an 11 percent
decrease from the second quarter of 2018. The decrease is
primarily due to the increase in capitalized costs in the second
quarter of 2019 compared to the prior year period. During
the second quarter of 2019, ISS capitalized $343,000 of
internal software development costs compared to $36,000 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 second quarter of 2019 was
$844,000 compared to an operating income of $694,000 in
the second quarter of 2018.
Year-to-Date Results:ISS’ revenue for the first
six-months of 2019 was $7.6 million, a 10 percent increase
from revenue of $6.9 million in the first six-months of 2018.
Sales gross margin for the first six-months of 2019 was 74
percent, a 9 percent decrease from the prior year period. The
decrease in gross margin was the result of a combination of a lower
percentage of revenue from royalties and the aforementioned
significant sale in the Middle East. Revenue from royalties was
$4.0 million in the first six-months of 2019 compared to $4.7
million in the same period in 2018, a 16 percent decrease. Product
sales were $3.6 million in the first six-months of 2019, a 64
percent increase from $2.2 million in the first six-months of
2018.
The first six-months of revenue for 2019
included Autoscope video product sales and royalties of
$628,000 and $4.0 million, respectively, and RTMS radar product
sales of $3.0 million. Product sales gross margin for the first
six-months of 2019 was 51 percent, a 6 percent decrease
compared to the same period in the prior year.
The Company’s net income for the first
six-months of 2019 was $955,000, or $0.18 per diluted share,
compared to a net income of $494,000, or $0.10 per diluted share,
in the first six-months of 2018. The first six-months of
2019 net income includes operating expenses of $4.7 million,
an 11 percent decrease from the same period in 2018. During
the first six-months of 2019, we capitalized $762,000 of
software development costs compared to $102,000 in the first
six-months of 2018.
On a non-GAAP basis, excluding intangible asset
amortization, depreciation and restructuring charges for the
applicable periods, operating income for the first six-months of
2019 was $1.4 million compared to an operating income of $851,000
in the first six-months of 2018.
“The decline in Autoscope royalty revenue was
influenced by delayed adoption of Vision in certain
territories. That said, we are encouraged by the year over
year Vision growth and anticipate this trend continuing through the
second half of 2019,” said Chad Stelzig, CEO for ISS.
“We have continued to experience double digit
product sales growth, driven by our RTMS radar product line,
consistent sales processes, and overall execution,” concluded
Mr. Stelzig.
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;
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, 2018 filed on March 14, 2019.
Image Sensing Systems, Inc.Condensed Consolidated
Statements of Operations(in thousands, except per share
information)(unaudited)
|
|
Three-Month Periods Ended June 30, |
|
Six-Month Periods Ended June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
2,020 |
|
$ |
1,376 |
|
$ |
3,641 |
|
$ |
2,220 |
Royalties |
|
|
2,205 |
|
|
2,517 |
|
|
3,956 |
|
|
4,683 |
|
|
|
4,225 |
|
|
3,893 |
|
|
7,597 |
|
|
6,903 |
Cost of revenue |
|
|
1,199 |
|
|
701 |
|
|
1,976 |
|
|
1,148 |
Gross profit |
|
|
3,026 |
|
|
3,192 |
|
|
5,621 |
|
|
5,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,682 |
|
|
1,765 |
|
|
3,349 |
|
|
3,526 |
Research and development |
|
|
697 |
|
|
916 |
|
|
1,317 |
|
|
1,735 |
|
|
|
2,379 |
|
|
2,681 |
|
|
4,666 |
|
|
5,261 |
Income from operations |
|
|
647 |
|
|
511 |
|
|
955 |
|
|
494 |
Other income |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Income before income taxes |
|
|
647 |
|
|
511 |
|
|
955 |
|
|
494 |
Income tax expense |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Net income |
|
$ |
647 |
|
$ |
511 |
|
$ |
955 |
|
$ |
494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.12 |
|
$ |
0.10 |
|
$ |
0.18 |
|
$ |
0.10 |
Diluted net income per share |
|
$ |
0.12 |
|
$ |
0.10 |
|
$ |
0.18 |
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares - basic |
|
|
5,244 |
|
|
5,206 |
|
|
5,234 |
|
|
5,194 |
Weighted shares - diluted |
|
|
5,259 |
|
|
5,219 |
|
|
5,248 |
|
|
5,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed Consolidated
Balance Sheets(in thousands)(unaudited)
|
June 30, 2019 |
|
December 31,2018 |
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
$ |
4,229 |
|
$ |
4,236 |
Receivables, net |
|
3,548 |
|
|
3,830 |
Inventories |
|
681 |
|
|
1,289 |
Prepaid expenses and other current assets |
|
463 |
|
|
410 |
|
|
8,921 |
|
|
9,765 |
Property and equipment, net |
|
407 |
|
|
346 |
Intangible assets, net |
|
3,780 |
|
|
3,317 |
Deferred taxes |
|
58 |
|
|
56 |
Operating lease asset, net |
|
309 |
|
|
- |
|
$ |
13,475 |
|
$ |
13,484 |
Liabilities and Shareholders’
Equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
$ |
426 |
|
$ |
878 |
Warranty and other current liabilities |
|
1,296 |
|
|
1,969 |
|
|
1,722 |
|
|
2,847 |
|
|
|
|
|
|
Non-Current liabilities |
|
|
|
|
|
Operating lease obligation |
|
51 |
|
|
- |
|
|
|
|
|
|
Shareholders’ equity |
|
11,702 |
|
|
10,637 |
|
$ |
13,475 |
|
$ |
13,484 |
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed Consolidated
Statements of Cash Flows(in thousands)(unaudited)
|
Six-Month Periods Ended June 30, |
|
2019 |
|
2018 |
Operating activities |
|
|
|
|
|
Net income |
$ |
955 |
|
|
$ |
494 |
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
398 |
|
|
|
357 |
|
Stock option expense |
|
104 |
|
|
|
123 |
|
Loss on disposal of assets |
|
- |
|
|
|
1 |
|
Changes in operating assets and liabilities |
|
(513 |
) |
|
|
(274 |
) |
Net cash provided by operating
activities |
|
944 |
|
|
|
701 |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Capitalized software development costs |
|
(762 |
) |
|
|
(102 |
) |
Purchases of property and equipment |
|
(160 |
) |
|
|
(79 |
) |
Net cash used for investing
activities |
|
(922 |
) |
|
|
(181 |
) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Stock for tax withholding and options exercised |
|
(17 |
) |
|
|
(10 |
) |
Net cash used for financing
activities |
|
(17 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
Effect of exchange rate changes
on cash |
|
(12 |
) |
|
|
(10 |
) |
Increase in cash and cash
equivalents |
|
(7 |
) |
|
|
500 |
|
|
|
|
|
|
|
Cash and cash equivalents at
beginning of period |
|
4,236 |
|
|
|
3,190 |
|
Cash and cash equivalents at end
of period |
$ |
4,229 |
|
|
$ |
3,690 |
|
|
|
|
|
|
|
Non-Cash investing and
financing activities: |
|
|
|
|
|
Purchase of property and
equipment in accounts payable |
$ |
5 |
|
|
$ |
2 |
|
Capitalization of software
development costs in accounts payable |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
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,
depreciation, and restructuring charges 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 Periods Ended June 30, |
|
Six-Month Periods Ended June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Income from
operations |
|
$ |
647 |
|
$ |
511 |
|
$ |
955 |
|
$ |
494 |
Amortization of intangible assets |
|
|
149 |
|
|
120 |
|
|
299 |
|
|
231 |
Depreciation |
|
|
48 |
|
|
63 |
|
|
99 |
|
|
126 |
Restructuring charges |
|
|
- |
|
|
- |
|
|
2 |
|
|
- |
Non-GAAP income from operations |
|
$ |
844 |
|
$ |
694 |
|
$ |
1,355 |
|
$ |
851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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: |
Frank
Hallowell, Chief Financial Officer |
|
Image Sensing Systems, Inc.
Phone: 651.603.7700 |
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