Image Sensing Systems, Inc., (NASDAQ:ISNS) today announced results
for its third quarter and nine months ended September 30, 2017.
Third-Quarter Results:Image Sensing Systems'
(ISS) 2017 third quarter revenue was $3.6 million,
compared to $3.4 million in the third quarter of 2016.
Gross margin from the third quarter
of 2017 was 83 percent, a 7 percent
increase from a gross margin of 76 percent for the same
period in 2016. The increase in the gross margin percent
was primarily the result of a larger portion of sales being
attributed to royalties. Revenue from royalties was
$2.5 million in the third quarter of 2017 compared
to $2.1 million in the third quarter of 2016, a
17 percent increase. Included in the third quarter were
royalties related to the previously announced Miami-Dade County
sale through Econolite.
Product sales decreased to $1.1 million in
the quarter, a 10 percent decrease from $1.2 million in
the third quarter of 2016. The decrease in product sales
resulted from lower volume in North America. Autoscope
video product sales and royalties were $348,000 and
$2.5 million, respectively, and RTMS radar product sales were
$772,000 in the third quarter of 2017. Product
sales gross margin for the third quarter of 2017 was
54 percent, a 19 percent increase from the same
period in 2016. The increase in product gross
margin is due to individually significant warranty charges in the
prior year period related to legacy products that are no longer
sold.
The Company’s net income in the third quarter
was $870,000, or $0.17 per basic share, compared to net income
of $469,000, or $0.09 per basic share, in the prior year
period. The third quarter 2017 net income includes
operating expenses of $2.2 million, a 4 percent increase
from the third quarter of 2016. During the third quarter
of 2017, ISS capitalized $305,000 of internal software
development costs compared to $507,000 in the prior year
period.
On a non-GAAP basis, excluding intangible asset
amortization and depreciation for the applicable periods, operating
income for the third quarter of 2017 was
$1.0 million compared to $570,000 in the prior year
period.
"We were pleased to see Autoscope royalties
improve in the third quarter, due in part to the delivery of
product in support of the Miami-Dade adaptive corridor
project. The weather-related events in the Southern United
States impacted our North American RTMS product sales and resulted
in a product revenue shortfall. Considering these challenges,
we were pleased to realize the increase in net income and cash
flow, which is a direct reflection of our commitment to disciplined
investment," said Chad Stelzig, CEO for ISS.
Year-to-Date Results:ISS’s revenue for the first
nine months of 2017 was $10.2 million, a
10 percent decrease from revenue of $11.3 million in
the first nine months of 2016. Sales gross margin for the
first nine-months of 2017 was 80 percent, a 4 percent
increase from the prior year period. The increase in the gross
margin percent was primarily the result of a larger portion
of sales attributable to royalties. Revenue from
royalties was $6.0 million in the first nine-months
of 2017, compared to $6.1 million in the same period
in 2016, a 2 percent decline. Product sales were
$4.2 million in the first nine months of 2017, a
19 percent decrease from $5.2 million in the first nine
months of 2016. The previously announced Miami-Dade County
Sale through Econolite is included in year-to-date royalties.
The first nine-months of revenue
for 2017 included Autoscope Video product sales and
royalties of $976,000 and $6.0 million, respectively, and
RTMS Radar product sales of $3.2 million. Product sales gross
margin for the first nine-months of 2017 was
58 percent, a 10 percent increase from the same
period in the prior year.
The Company’s net income for the
first nine months of 2017 and 2016 was
$1.4 million, or $0.27 per basic share. The net
income for the first nine months of 2017 includes
operating expenses of $6.8 million, a 6 percent decrease
from the same period in 2016. During the first nine
months of 2017, we capitalized $871,000 of software
development costs, compared to $1.6 million in the same period
in the prior year. Cash flow in the first nine months
of 2017 improved to a positive $1.2 million,
compared to a negative cash flow of $1.0 million in the first
nine months of 2016.
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 2017 was $1.8 million, which is unchanged
compared to the same period in the prior year.
"We are excited about the recent launch of RTMS
Wrong Way Alerting Solution and IntellitraffiQ® central management
software offerings. RTMS Wrong Way Alerting Solution enables
real-time detection and notification of vehicles traveling the
wrong way on highway ramps. The ability to quickly and
accurately detect a vehicle and alert the driver and traffic
management officials makes it an invaluable safety solution for
traffic engineers. IntellitraffiQ provides end users with
unparalleled access to their infrastructure and also provides
customizable asset mapping, reporting, and data mining. With
the addition of these new solutions to our product portfolio, we
believe our solutions uniquely enable end-users to more effectively
manage their infrastructure," 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; 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, 2016 filed on March 24, 2017.
|
Image Sensing Systems, Inc.Condensed Consolidated
Statements of Operations(in thousands, except per share
information)(unaudited) |
|
|
|
Three-Month PeriodsEnded September 30, |
|
Nine-Month PeriodsEnded September 30, |
|
|
2017 |
|
2016 |
|
|
2017 |
|
2016 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales |
|
$ |
1,120 |
|
$ |
1,249 |
|
|
$ |
4,189 |
|
$ |
5,184 |
|
Royalties |
|
|
2,504 |
|
|
2,133 |
|
|
|
5,994 |
|
|
6,113 |
|
|
|
|
3,624 |
|
|
3,382 |
|
|
|
10,183 |
|
|
11,297 |
|
Cost of
revenue |
|
|
602 |
|
|
814 |
|
|
|
2,034 |
|
|
2,696 |
|
Gross profit |
|
|
3,022 |
|
|
2,568 |
|
|
|
8,149 |
|
|
8,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
1,430 |
|
|
1,436 |
|
|
|
4,522 |
|
|
5,041 |
|
Research
and development |
|
|
722 |
|
|
636 |
|
|
|
2,266 |
|
|
2,033 |
|
Restructuring charges |
|
|
— |
|
|
— |
|
|
|
— |
|
|
126 |
|
|
|
|
2,152 |
|
|
2,072 |
|
|
|
6,788 |
|
|
7,200 |
|
Income
from operations |
|
|
870 |
|
|
496 |
|
|
|
1,361 |
|
|
1,401 |
|
Other
income |
|
|
— |
|
|
(27 |
) |
|
|
33 |
|
|
(27 |
) |
Income before income
taxes |
|
|
870 |
|
|
469 |
|
|
|
1,394 |
|
|
1,374 |
|
Income tax
expense
|
|
|
— |
|
|
— |
|
|
|
4 |
|
|
4 |
|
Net income |
|
$ |
870 |
|
$ |
469 |
|
|
$ |
1,390 |
|
$ |
1,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net
income per share |
|
$ |
0.17 |
|
$ |
0.09 |
|
|
$ |
0.27 |
|
$ |
0.27 |
|
Diluted
net income per share |
|
$ |
0.17 |
|
$ |
0.09 |
|
|
$ |
0.27 |
|
$ |
0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares -
basic |
|
|
5,138 |
|
|
5,059 |
|
|
|
5,117 |
|
|
5,043 |
|
Weighted shares -
diluted |
|
|
5,151 |
|
|
5,068 |
|
|
|
5,121 |
|
|
5,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed Consolidated
Balance Sheets(in thousands)(unaudited) |
|
|
September 30,2017 |
|
December 31,2016 |
Assets |
|
|
|
Current
assets |
|
|
|
Cash and
cash equivalents |
$2,756 |
|
$1,547 |
Receivables, net |
|
3,091 |
|
|
3,011 |
Inventories |
|
426 |
|
|
141 |
Prepaid
expenses and other current assets |
|
396 |
|
|
281 |
|
|
6,669 |
|
|
4,980 |
Property
and equipment, net |
|
423 |
|
|
371 |
Intangible assets, net |
|
3,396 |
|
|
2,795 |
Deferred
taxes |
|
63 |
|
|
58 |
|
$10,551 |
|
$8,204 |
Liabilities and
Shareholders’ Equity |
|
|
|
Current
liabilities |
|
|
|
Accounts
payable |
$827 |
|
$256 |
Warranty
and other current liabilities |
|
1,849 |
|
|
1,739 |
|
|
2,676 |
|
|
1,995 |
|
|
|
|
Shareholders’ equity |
|
7,875 |
|
|
6,209 |
|
$10,551 |
|
$8,204 |
|
Image Sensing Systems, Inc.Condensed Consolidated
Statements of Cash Flows(in thousands)(unaudited) |
|
|
Nine-Month PeriodsEnded September 30, |
|
2017 |
|
|
2016 |
|
Operating
Activities |
|
|
|
|
|
Net
income |
$ |
1,390 |
|
|
$ |
1,370 |
|
|
|
|
|
|
|
Adjustments to
reconcile net income to net cash provided by (used in) operating
activities: |
|
|
|
|
|
Depreciation and amortization |
|
461 |
|
|
|
223 |
|
Stock
option expense |
|
229 |
|
|
|
160 |
|
Loss on
disposal of assets |
|
2 |
|
|
|
13 |
|
Changes
in operating assets and liabilities |
|
73 |
|
|
|
(1,339 |
) |
Net cash provided by
operating activities |
|
2,155 |
|
|
|
427 |
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
Capitalized software development costs |
|
(833 |
) |
|
|
(1,632 |
) |
Purchases
of property and equipment |
|
(148 |
) |
|
|
(113 |
) |
Net cash used for
continuing investing activities |
|
(981 |
) |
|
|
(1,745 |
) |
Net cash provided by
discontinued investing activities |
|
— |
|
|
|
420 |
|
Net cash used for
investing activities |
|
(981 |
) |
|
|
(1,325 |
) |
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
35 |
|
|
|
(73 |
) |
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents |
|
1,209 |
|
|
|
(971 |
) |
Cash and cash
equivalents at beginning of period |
|
1,547 |
|
|
|
2,648 |
|
Cash and cash
equivalents at end of period |
$ |
2,756 |
|
|
$ |
1,677 |
|
|
|
|
|
|
|
Non-Cash
investing and financing activities: |
|
|
|
|
|
Purchase of property
and equipment in accounts payable |
$ |
85 |
|
|
$ |
— |
|
Capitalization of
software development cost 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,
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, |
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
Income from
operations |
|
$ |
870 |
|
$ |
496 |
|
$ |
1,361 |
|
$ |
1,401 |
|
Amortization of
intangible assets |
|
|
90 |
|
|
— |
|
|
270 |
|
|
— |
|
Depreciation |
|
|
64 |
|
|
74 |
|
|
191 |
|
|
223 |
|
Restructuring
charges
|
|
|
— |
|
|
— |
|
|
— |
|
|
126 |
|
Non-GAAP income from
operations |
|
$ |
1,024 |
|
$ |
570 |
|
$ |
1,822 |
|
$ |
1,750 |
|
|
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: |
Richard Ehrich,
Chief Financial Officer |
|
Image Sensing
Systems, Inc. Phone: 651.603.7700 |
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