Image Sensing Systems, Inc. (NASDAQ: ISNS) today announced results
for its third quarter and nine months ended
September 30, 2019.
Third Quarter 2019 Financial Summary
- Third quarter royalties were
$2.4 million, an increase of 4 percent from the same period in
the prior year.
- Third quarter product sales were
$1.3 million, a decrease of 26 percent from the same period in
the prior year.
- Operating expenses totaled $2.3
million in the third quarter of 2019, a decrease of 8
percent from the prior year period.
- Capitalized software costs in
the third quarter were $281,000 compared to
$32,000 in the prior year period.
- Net income for the third
quarter of 2019 totaled $6.1 million compared to net income of
$851,000 for the same period in the prior year.
- A non-recurring, non-cash $5.2
million tax benefit was recorded during the third quarter of
2019.
- Cash balance increased to $4.7
million, up from $4.2 million at the end of the second quarter
of 2019.
2019 Year-to-Date Financial Summary
- Year-to-date 2019 royalties were
$6.3 million, a decrease of 9 percent from the same period in the
prior year.
- Product sales for the first nine
months of 2019 were $4.9 million,
an increase of 24 percent from the same period
in the prior year.
- Operating expenses totaled
$6.9 million in the first nine months of 2019,
a decrease of 10 percent from the prior year
period.
- Capitalized software costs in the
first nine months of 2019 were $1.0 million compared to
$134,000 in the prior year period.
- Net income for the first nine
months of 2019 totaled $7.1 million compared to net
income of $1.3 million for the same period in the prior year.
- A non-recurring, non-cash $5.2
million tax benefit was recorded during the first nine months of
2019.
- Cash balance increased to
$4.7 million, up from $4.2 million at the end of 2018.
Third-Quarter Results:
The 2019 third quarter revenue for
Image Sensing Systems, Inc. ("ISS" or the "Company") was
$3.7 million compared to $4.0 million in the third
quarter of 2018. Gross margin for the third quarter of
2019 was 86 percent, a 4-percentage point or 5
percent increase from a gross margin of 82 percent
for the same period in 2018. The increase in the gross margin
percent was primarily the result of a reduction in the warranty
reserve and revenues related to consulting services. Revenue from
royalties was $2.4 million in the third quarter of
2019 compared to $2.3 million in the third quarter
of 2018, a 4 percent increase.
Product sales decreased to $1.3 million in
the third quarter of 2019, a 26 percent decrease from
$1.8 million in the third quarter of 2018. The decrease
in product sales resulted from lower volumes of RTMS sales in North
America due to construction delays during the third
quarter. Autoscope video product sales and royalties were
$264,000 and $2.4 million, respectively, RTMS radar product sales
were $900,000, and consulting service sales were $135,000 in
the third quarter of 2019. Product sales gross margin for
the third quarter of 2019 was 68 percent compared to
63 percent in the prior year period.
The 2019 third quarter net income
includes operating expenses of $2.3 million,
an 8 percent decrease from
the third quarter of 2018. The decrease is primarily
due to the increase in capitalized costs in the third quarter of
2019 compared to the prior year period. During
the third quarter of 2019, ISS capitalized $281,000
of internal software development costs compared to $32,000 in
the prior year period. ISS’ net income in the third
quarter was $6.1 million, or $1.17 per diluted share, compared
to net income of $851,000, or $0.16 per diluted share, in
the prior year period. The increase in net income included a $5.2
million non-cash income tax benefit due to the release of a
significant portion of the deferred tax asset valuation allowance
of $5.4 million during the third quarter.
On a non-GAAP basis, excluding the amortization
of intangible assets and depreciation for the applicable periods,
operating income for the third quarter of 2019 was $1.1
million, which is consistent with the same period in the prior
year.
Year-to-Date Results:
ISS’ revenue for the first nine months of
2019 was $11.3 million, a 3 percent increase from revenue of
$11.0 million in the first nine months of 2018. Sales gross
margin for the first nine months of 2019 was 78 percent, a
5-percentage point or 6 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 an
individually significant, low margin sale into the Middle East
region in the second quarter of 2019. Revenue from royalties was
$6.3 million in the first nine months of 2019 compared to $7.0
million in the same period in 2018, a 9 percent decrease. Product
sales were $4.9 million in the first nine months of 2019, a 24
percent increase from $4.0 million in the first nine months of
2018.
The first nine months of revenue for 2019
included Autoscope video product sales and royalties of
$892,000 and $6.3 million, respectively, and RTMS radar product
sales of $3.9 million. Product sales gross margin for the first
nine months of 2019 was 55 percent, a 4-percentage point
or 7 percent decrease compared to the same period in the prior
year.
The first nine months of 2019 net
income included operating expenses of $6.9 million,
a 10 percent decrease from the same period
in 2018. During the first nine months of 2019,
we capitalized $1.0 million of software development costs
compared to $134,000 in the first nine
months of 2018. The Company’s net income for the
first nine months of 2019 was $7.1 million, or $1.35 per
diluted share, compared to a net income of $1.3 million, or
$0.26 per diluted share, in the first nine months of 2018. Net
income for the first nine months of 2019 included a $5.2
million non-cash income tax benefit due to the release of a
significant portion of the deferred tax asset valuation allowance
of $5.4 million.
On a non-GAAP basis, excluding intangible asset
amortization, depreciation and restructuring charges for the
applicable periods, operating income for the first nine months of
2019 was $2.5 million compared to an operating income of
$1.9 million in the first nine months of 2018.
“Third quarter Autoscope royalties returned
to anticipated levels led by strong sales results in the Southwest
sunbelt and Maryland. We continue to make measured investments into
the Autoscope product line to unlock additional market
segments and regions,” said Chad Stelzig, CEO for
ISS.
“The decrease in year over year product sales
for the quarter is a direct result of several North
American highway sensor infrastructure projects being
delayed. As construction schedules slip, so does
the delivery of our sensors, which are often the last
component to be installed on an infrastructure project. These
projects are not at risk, and we anticipate the majority of the
delayed revenue to be realized in the fourth quarter. While we
believe the variations in product and royalty revenues are
temporary, we continue to invest appropriately and manage
operating expenses as we drive for a profitable
2019," 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
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, 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 September 30, |
|
Nine-Month Periods Ended September 30, |
|
|
2019 |
|
|
2018 |
|
2019 |
|
|
2018 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
1,299 |
|
|
$ |
1,750 |
|
$ |
4,940 |
|
|
$ |
3,970 |
Royalties |
|
|
2,390 |
|
|
|
2,299 |
|
|
6,346 |
|
|
|
6,982 |
|
|
|
3,689 |
|
|
|
4,049 |
|
|
11,286 |
|
|
|
10,952 |
Cost of revenue |
|
|
513 |
|
|
|
743 |
|
|
2,489 |
|
|
|
1,891 |
Gross profit |
|
|
3,176 |
|
|
|
3,306 |
|
|
8,797 |
|
|
|
9,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,560 |
|
|
|
1,592 |
|
|
4,909 |
|
|
|
5,118 |
Research and development |
|
|
691 |
|
|
|
863 |
|
|
2,008 |
|
|
|
2,598 |
|
|
|
2,251 |
|
|
|
2,455 |
|
|
6,917 |
|
|
|
7,716 |
Income from operations |
|
|
925 |
|
|
|
851 |
|
|
1,880 |
|
|
|
1,345 |
Other income |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
Income before income taxes |
|
|
925 |
|
|
|
851 |
|
|
1,880 |
|
|
|
1,345 |
Income tax benefit |
|
|
(5,205) |
|
|
|
- |
|
|
(5,205) |
|
|
|
- |
Net income |
|
$ |
6,130 |
|
|
$ |
851 |
|
$ |
7,085 |
|
|
$ |
1,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
1.17 |
|
|
$ |
0.16 |
|
$ |
1.35 |
|
|
$ |
0.26 |
Diluted net income per share |
|
$ |
1.16 |
|
|
$ |
0.16 |
|
$ |
1.35 |
|
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares - basic |
|
|
5,252 |
|
|
|
5,212 |
|
|
5,240 |
|
|
|
5,200 |
Weighted shares - diluted |
|
|
5,270 |
|
|
|
5,244 |
|
|
5,259 |
|
|
|
5,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed Consolidated
Balance Sheets(in thousands)(unaudited)
|
September 30, 2019 |
|
December 31,2018 |
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
$ |
4,723 |
|
$ |
4,236 |
Receivables, net |
|
3,376 |
|
|
3,830 |
Inventories |
|
765 |
|
|
1,289 |
Prepaid expenses and other current assets |
|
528 |
|
|
410 |
|
|
9,392 |
|
|
9,765 |
Property and equipment, net |
|
429 |
|
|
346 |
Intangible assets, net |
|
3,911 |
|
|
3,317 |
Deferred taxes |
|
5,257 |
|
|
56 |
Operating lease asset, net |
|
245 |
|
|
- |
|
$ |
19,234 |
|
$ |
13,484 |
Liabilities and Shareholders’
Equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
$ |
395 |
|
$ |
878 |
Warranty and other current liabilities |
|
1,000 |
|
|
1,969 |
|
|
1,395 |
|
|
2,847 |
|
|
|
|
|
|
Non-Current liabilities |
|
|
|
|
|
Operating lease obligation |
|
24 |
|
|
- |
|
|
|
|
|
|
Shareholders’ equity |
|
17,815 |
|
|
10,637 |
|
$ |
19,234 |
|
$ |
13,484 |
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed Consolidated
Statements of Cash Flows(in thousands)(unaudited)
|
Nine-Month Periods Ended September 30, |
|
2019 |
|
|
2018 |
|
Operating activities |
|
|
|
|
|
Net income |
$ |
7,085 |
|
|
$ |
1,345 |
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
597 |
|
|
|
571 |
|
Stock option expense |
|
162 |
|
|
|
164 |
|
Deferred income tax benefit |
|
(5,200) |
|
|
|
- |
|
Loss on disposal of assets |
|
- |
|
|
|
5 |
|
Changes in operating assets and liabilities |
|
(765) |
|
|
|
(1,410) |
|
Net cash provided by operating
activities |
|
1,879 |
|
|
|
675 |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Capitalized software development costs |
|
(1,042) |
|
|
|
(134) |
|
Purchases of property and equipment |
|
(239) |
|
|
|
(163) |
|
Net cash used for investing
activities |
|
(1,281) |
|
|
|
(297) |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Stock for tax withholding |
|
(21) |
|
|
|
(10) |
|
Proceeds from exercise of stock options |
|
4 |
|
|
|
- |
|
Net cash used for financing
activities |
|
(17) |
|
|
|
(10) |
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash |
|
(94) |
|
|
|
(13) |
|
Increase in cash and cash
equivalents |
|
487 |
|
|
|
355 |
|
|
|
|
|
|
|
Cash and cash equivalents at
beginning of period |
|
4,236 |
|
|
|
3,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash investing and
financing activities: |
|
|
|
|
|
Purchase of property and
equipment in accounts payable |
$ |
20 |
|
|
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, |
|
Nine-Month Periods Ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Income from
operations |
|
$ |
925 |
|
$ |
851 |
|
$ |
1,880 |
|
$ |
1,345 |
Amortization of intangible assets |
|
|
149 |
|
|
149 |
|
|
448 |
|
|
380 |
Depreciation |
|
|
50 |
|
|
65 |
|
|
149 |
|
|
191 |
Restructuring charges |
|
|
- |
|
|
- |
|
|
2 |
|
|
- |
Non-GAAP income from operations |
|
$ |
1,124 |
|
$ |
1,065 |
|
$ |
2,479 |
|
$ |
1,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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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