Image Sensing Systems’ (ISS) 2016 third quarter revenue from continuing operations was $3.4 million, compared to revenue from continuing operations of $4.1 million in the third quarter of 2015.
Image Sensing Systems’ (ISS) 2016 third quarter revenue from continuing operations was $3.4 million, compared to revenue from continuing operations of $4.1 million in the third quarter of 2015. Gross margin from continuing operations for the third quarter of 2016 was 76 percent, a 1 percent decrease from a gross margin of 77 percent for the same period in 2015. Revenue from royalties was $2.1 million in the third quarter of 2016 compared to $2.2 million in the third quarter of 2015, a 4 percent decline.
Product sales from continuing operations decreased to $1.2 million in the third quarter of 2016, a 32 percent decrease from $1.8 million in the third quarter of 2015. The decrease in product sales resulted from purchase timing and reduced sales in Europe and the Middle East and Africa (EMEA) region compared to the prior year period. Autoscope video product sales and royalties were $319,000 and $2.1 million, respectively, and RTMS radar product sales were $930,000 in the third quarter of 2016. Product sales gross margin for the third quarter of 2016 was 35 percent, a 14-percentage point decrease from the prior year period. The decrease in gross margin is due to individually significant warranty charges related to legacy products that are no longer sold. Furthermore, our lower product sales volume magnified this impact during the quarter.
The company’s net income from continuing operations in the third quarter of 2016 was $469,000, or $0.09 per basic share, compared to a net income from the continuing operations of $290,000, or $0.06 per basic share, in the prior year period. The third quarter 2016 net income from continuing operations includes operating expenses of $2.1 million, a $760,000 or 27 percent improvement from the third quarter of 2015. During the third quarter of 2016, we capitalized $507,000 of internal software development costs related to the development of our next generation video detection product. Development of this product was completed during the third quarter. While we expect to continue further development and sustaining engineering, we do not expect additional capitalized costs. Additionally, to streamline our operating and cost structure, we have initiated the closure of five of our wholly-owned subsidiaries located in Europe and Asia. We have incurred $35,000 of closure costs during the quarter and expect to incur an additional $169,000 in future periods.
On a non-GAAP basis, excluding intangible asset amortization, depreciation, and restructuring charges for the applicable periods, operating income from continuing operations for the third quarter of 2016 was $570,000 compared to an operating income of $483,000 in the third quarter of 2015.
“In spite of the decreased third quarter revenue results, we remain optimistic that our recent product development investments and operational changes will result in improved financial performance,” said Chad Stelzig, Interim CEO for ISS. “While we will continue to experience quarter over quarter revenue variability, we believe that our strategic investments, product offering diversification and improved business processes are moving the company in the right direction. These initiatives will create more stability and profitability over the longer term.
“We are especially excited for the release of Autoscope Vision, which is expected to begin shipping in this fourth quarter,” continued Stelzig. “A nationwide roadshow was conducted to launch the product and provide hands-on demonstration and training to distributors and end customers. The positive feedback and shipment anticipation has validated our belief that this product will be a game changer.”