Image Sensing Systems, Inc. (NASDAQ: ISNS) today announced results
for its fourth quarter and year ended December 31, 2019.
Fourth Quarter 2019 Financial
Summary
- Fourth quarter royalties were $2.0 million,
an increase of 2 percent from the same period in the
prior year.
- Fourth quarter product sales were $1.5
million, a decrease of 12 percent from the same
period in the prior year.
- Operating expenses totaled $2.9 million in the fourth quarter
of 2019, an increase of 29 percent from the prior year period.
- Capitalized software costs in the fourth quarter were
$114,000 compared to $228,000 in the prior year period.
- Net loss for the fourth quarter of 2019 totaled
$90,000 compared to net income of $517,000 for the same period
in the prior year.
- Cash balance increased to $5.1 million, up from $4.7 million at
the end of the third quarter of 2019.
2019 Full Year Financial
Summary
- 2019 royalties were
$8.3 million, a decrease of 7 percent from
the prior year.
- 2019 product sales were
$6.4 million, an increase of 14 percent
from the prior year.
- Operating expenses totaled $9.8 million in 2019,
a decrease of 2 percent from the prior year.
- Capitalized software costs in 2019 were $1.2 million compared
to $362,000 in the prior year.
- Net income for 2019 totaled $7.0 million, a
$5.1 million increase from the prior year.
- A non-recurring, non-cash $5.2 million tax benefit was recorded
during 2019.
- Cash balance increased to $5.1 million, up from
$4.2 million at the end of 2018.
Fourth-Quarter Results:
The 2019 fourth quarter revenue for
Image Sensing Systems, Inc. ("ISS" or the "Company) was $3.4
million compared to $3.6 million in the fourth quarter of
2018. Gross margin from the fourth quarter of 2019 was
81 percent, a 6 percentage point or 8
percent increase from a gross margin of 75 percent for the
same period in 2018. The increase in the gross margin percent was
primarily the result of selling less third-party accessories on
product sales in the fourth quarter of 2019. Revenue from
royalties was $2.0 million in the fourth quarter of
2019 compared to $1.9 million in the fourth quarter of 2018, a
2 percent increase.
Product sales were $1.5 million in the 2019
fourth quarter compared to $1.7 million in the fourth quarter of
2018. Autoscope video product sales and royalties were $256,000 and
$2.0 million, respectively, and RTMS radar product sales were $1.2
million in the fourth quarter of 2019. Product sales gross margin
for the fourth quarter of 2019 was 63 percent, an 11 percent
increase from the same period in 2018.
The Company’s net loss in the fourth quarter was
$90,000, or $(0.02) per diluted share, compared to net income
of $517,000, or $0.10 per diluted share, in the prior year period.
The fourth quarter 2019 net loss includes operating expenses of
$2.9 million, a 29 percent increase from the fourth
quarter of 2018. This increase is partially related to $149,000 of
costs incurred as part of the review of strategic alternatives to
maximize shareholder value beginning in the fourth quarter of 2019,
in addition to less capitalized software development costs as the
next generation RTMS product approached completion. During the
fourth quarter of 2019, ISS capitalized $114,000 of internal
software development costs compared to $228,000 in the prior
year period.
On a non-GAAP basis, excluding the amortization
of intangible assets, depreciation, and restructuring charges for
the applicable periods, operating income for the fourth quarter of
2019 was $148,000 compared to $854,000 in the prior year
period.
Full Year Results:
ISS’s 2019 revenue was $14.7 million
compared to $14.6 million in 2018. Gross margin for 2019
was 79 percent, a 2 percentage point or 3
percent decrease from a gross margin of 81 percent
in 2018. The decrease in the gross margin percent was
primarily the result of a smaller portion of sales in 2019 from
royalties compared to the prior year. Revenue from royalties was
$8.3 million in 2019 compared to $8.9 million
in 2018, a 7 percent decrease. The decrease in
royalty revenue was largely driven by lower sales in the first half
of 2019, which performed above previous year levels in the third
and fourth quarter of 2019.
Product sales increased to $6.4 million in
2019, a 14 percent increase from $5.6 million
in 2018. The increase in product sales resulted from higher
volume in Europe and the Middle East, offset in part by lower
volumes in North America. Autoscope video product sales and
royalties were $1.3 million and $8.3 million,
respectively, and RTMS radar product sales were $5.1 million in
2019. Product sales gross margin for 2019 of 57 percent
remained unchanged when compared to the 2018.
The Company’s net income in 2019 was
$7.0 million, or $1.33 per diluted share, compared to
$1.9 million, or $0.36 per diluted share, in the prior year.
The 2019 net income includes operating expenses of
$9.8 million, a 2 percent decrease from 2018.
During 2019, ISS capitalized $1.2 million of internal software
development costs compared to $362,000 in
2018.
On a non-GAAP basis, excluding the amortization
of intangible assets, depreciation, and restructuring charges for
the applicable periods, operating income for 2019 was
$2.6 million compared to $2.8 million in the prior
year.
"Our full year financial results only tell part
of the story when evaluating our accomplishments and progress in
2019. Over the past two years, we committed to improving our sales
organization through new leadership, partners, and initiatives. I
am happy to report that our 2019 product sales growth of 14%
year-over-year ended a five-year stretch of declining sales. Our
team has done a great job arresting the slide and is well
positioned to continue this trend with new technology in our
portfolio," said Chad Stelzig, CEO for ISS.
"Another meaningful 2019 accomplishment was the
completion of RTMS Echo, a radar detection product for the highway
market segment that is central to our growth strategy. Echo
was a multi-year development initiative in which our team created a
proprietary platform that leverages proven radar concepts alongside
modern data and connectivity capabilities to serve current and
future IoT, smart city, and connected infrastructure market needs,"
continued Mr. Stelzig.
"Although royalties were slightly down
year-over-year, we do not anticipate this being a continued trend,
as they were significantly influenced by first quarter market
dynamics that were overcome by the collective Image Sensing Systems
and Econolite teams. Through measured investment in
operational expense, we are able to accommodate these occasional
disruptions without impacting our profitability," 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; potential disruptions to our supply chains (including
disruptions caused by geopolitical events, military actions, work
stoppages, nature disasters, or international health emergencies,
such as coronavirus); 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 PeriodsEnded December 31, |
|
|
Years EndedDecember 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
$ |
1,476 |
|
|
$ |
1,674 |
|
|
$ |
6,416 |
|
|
$ |
5,644 |
|
Royalties |
|
1,970 |
|
|
|
1,935 |
|
|
|
8,316 |
|
|
|
8,917 |
|
|
|
3,446 |
|
|
|
3,609 |
|
|
|
14,732 |
|
|
|
14,561 |
|
Cost of revenue |
|
640 |
|
|
|
895 |
|
|
|
3,129 |
|
|
|
2,786 |
|
Gross profit |
|
2,806 |
|
|
|
2,714 |
|
|
|
11,603 |
|
|
|
11,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
2,028 |
|
|
|
1,377 |
|
|
|
6,935 |
|
|
|
6,495 |
|
Research and development |
|
828 |
|
|
|
686 |
|
|
|
2,836 |
|
|
|
3,284 |
|
Restructuring charges |
|
- |
|
|
|
144 |
|
|
|
2 |
|
|
|
144 |
|
|
|
2,856 |
|
|
|
2,207 |
|
|
|
9,773 |
|
|
|
9,923 |
|
Income (loss) from operations before income taxes |
|
(50 |
) |
|
|
507 |
|
|
|
1,830 |
|
|
|
1,852 |
|
Income tax expense (benefit) |
|
40 |
|
|
|
(10 |
) |
|
|
(5,165 |
) |
|
|
(10 |
) |
Net income (loss) |
$ |
(90 |
) |
|
$ |
517 |
|
|
$ |
6,995 |
|
|
$ |
1,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share |
$ |
(0.02 |
) |
|
$ |
0.10 |
|
|
$ |
1.33 |
|
|
$ |
0.36 |
|
Diluted net income (loss) per share |
$ |
(0.02 |
) |
|
$ |
0.10 |
|
|
$ |
1.33 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares - basic |
|
5,258 |
|
|
|
5,216 |
|
|
|
5,244 |
|
|
|
5,204 |
|
Weighted shares - diluted |
|
5,280 |
|
|
|
5,254 |
|
|
|
5,268 |
|
|
|
5,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed Consolidated
Balance Sheets(in thousands)(unaudited)
|
|
|
|
|
|
|
|
|
|
December 31,2019 |
|
|
December 31,2018 |
Assets |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
5,118 |
|
|
$ |
4,236 |
|
Receivables, net |
|
3,126 |
|
|
|
3,830 |
|
Inventories |
|
781 |
|
|
|
1,289 |
|
Prepaid expenses and other current assets |
|
463 |
|
|
|
410 |
|
|
|
9,488 |
|
|
|
9,765 |
|
Property and equipment, net |
|
419 |
|
|
|
346 |
|
Intangible assets, net |
|
3,875 |
|
|
|
3,317 |
|
Deferred taxes |
|
5,220 |
|
|
|
56 |
|
Operating lease asset, net |
|
181 |
|
|
|
- |
|
|
$ |
19,183 |
|
|
$ |
13,484 |
|
Liabilities and Shareholders’
Equity |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
$ |
373 |
|
|
$ |
878 |
|
Warranty and other current liabilities |
|
858 |
|
|
|
1,969 |
|
|
|
1,231 |
|
|
|
2,847 |
|
|
|
|
|
|
|
|
|
Non-Current liabilities |
|
|
|
|
|
|
|
Operating lease obligation |
|
19 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
17,933 |
|
|
|
10,637 |
|
|
$ |
19,183 |
|
|
$ |
13,484 |
|
|
|
|
|
|
|
|
|
Image Sensing Systems, Inc.Condensed Consolidated
Statements of Cash Flows(in thousands)(unaudited)
|
|
|
|
Years EndedDecember 31, |
|
|
2019 |
|
2018 |
Operating activities |
|
|
|
|
|
|
|
Net income |
$ |
6,995 |
|
|
$ |
1,862 |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
795 |
|
|
|
774 |
|
Stock option expense |
|
219 |
|
|
|
206 |
|
Loss on disposal of assets |
|
- |
|
|
|
36 |
|
Deferred income tax benefit |
|
(5,162 |
) |
|
|
(21 |
) |
Changes in operating assets and liabilities |
|
(597 |
) |
|
|
(1,195 |
) |
Net cash provided by operating
activities |
|
2,250 |
|
|
|
1,662 |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
Capitalized software development costs |
|
(1,156 |
) |
|
|
(362 |
) |
Purchases of property and equipment |
|
(254 |
) |
|
|
(194 |
) |
Net cash used for investing
activities |
|
(1,410 |
) |
|
|
(556 |
) |
|
|
|
|
|
|
|
|
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 |
|
59 |
|
|
|
(50 |
) |
Increase in cash and cash
equivalents |
|
882 |
|
|
|
1,046 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
beginning of period |
|
4,236 |
|
|
|
3,190 |
|
Cash and cash equivalents at end
of period |
$ |
5,118 |
|
|
$ |
4,236 |
|
|
|
|
|
|
|
|
|
Non-Cash investing and
financing activities: |
|
|
|
|
|
|
|
Purchase of property and
equipment in accounts payable |
$ |
14 |
|
|
$ |
5 |
|
|
|
|
|
|
|
|
|
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, restructuring charges and the
arbitration decision 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 December 31, |
|
|
Years Ended December 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Income (loss)
from operations |
$ |
(50 |
) |
|
$ |
507 |
|
|
$ |
1,830 |
|
|
$ |
1,852 |
|
Amortization of intangible assets |
|
150 |
|
|
|
150 |
|
|
|
598 |
|
|
|
530 |
|
Depreciation |
|
48 |
|
|
|
53 |
|
|
|
197 |
|
|
|
244 |
|
Restructuring charges |
|
- |
|
|
|
144 |
|
|
|
2 |
|
|
|
144 |
|
Non-GAAP income from operations |
$ |
148 |
|
|
$ |
854 |
|
|
$ |
2,627 |
|
|
$ |
2,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
OfficerImage Sensing Systems, Inc. Phone:
651.603.7744 |
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