Image Sensing Systems announced results for its second quarter and first half ended June 30, 2018.
Image Sensing Systems announced results for its second quarter and first half ended June 30, 2018.
Second quarter 2018 financial highlights
- Second quarter royalties were $2.5 million, an increase of 36 percent from the same period in the prior year.
- Second quarter product sales were $1.4 million, a decrease of 16 percent from the same period in the prior year.
- Operating expenses totaled $2.7 million in the second quarter of 2018, an increase of 12 percent from the prior year period. Capitalized software costs in the second quarter were $36,000 compared to $392,000 in the prior year period.
- Net income for the second quarter of 2018 totaled $511,000, compared to net income of $323,000 for the same period in the prior year.
- Cash balance increased to $3.7 million, up from $3.3 million at the end of the first quarter of 2018.
Second-quarter results:
The 2018 second quarter revenue for Image Sensing Systems, Inc. ("ISS" or the "Company") was $3.9 million, compared to $3.5 million in the second quarter of 2017. Gross margin from the second quarter of 2018 was 82 percent, a 5 percent increase from a gross margin of 77 percent for the same period in 2017. The increase in the gross margin percent was primarily the result of a larger portion of revenue from royalties during the quarter. Revenue from royalties was $2.5 million in the second quarter of 2018 compared to $1.8 million in the second quarter of 2017, a 36 percent increase.
Product sales decreased to $1.4 million in the 2018 second quarter, a 16 percent decrease from $1.6 million in the second quarter of 2017. The decrease in product sales resulted from lower volumes of sales in all jurisdictions. Autoscope video product sales and royalties were $325,000 and $2.5 million, respectively, and RTMS radar product sales were $1.1 million in the second quarter of 2018. Product sales gross margin for the second quarter of 2018 was 56 percent compared to 57 percent in the prior year period.
ISS’s net income in the second quarter was $511,000, or $0.10 per basic share, compared to net income of $323,000, or $0.06 per basic share, in the prior year period. The 2018 second quarter net income includes operating expenses of $2.7 million, a 12 percent increase from the second quarter of 2017. The increase is primarily due to additional R&D expense as less R&D costs could be capitalized during the current quarter. During the second quarter of 2018, ISS capitalized $36,000 of internal software development costs compared to $392,000 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 2018 was $694,000 compared to operating income of $445,000 in the prior year period.
"Royalties from North American Autoscope sales have exceeded our expectations over the most recent quarter," said Chad Stelzig, CEO for ISS. "This is a testament to the Autoscope Vision receiving broad market adoption and successful sales execution by our partner Econolite."
"We have taken action to correct the underperforming RTMS and international Autoscope businesses with the previously announced addition of Andrew Markese as Vice President of Global Sales and Marketing. Mr. Markese is a key component to revitalizing our sales organization and channel partners by taking an active role in improving processes and strategies. Our highest priority is enabling his success," stated Mr. Stelzig.
Year-to-date results:
ISS’s revenue for the first half of 2018 was $6.9 million, a 5 percent increase from revenue of $6.6 million in the first half of 2017. Sales gross margin for the first six months of 2018 was 83 percent, a 5 percent increase from the prior year period. The increase in gross margin was the result of a higher percentage of revenue from royalties and a decrease in the warranty reserve recorded in the first six months of 2018. Revenue from royalties was $4.7 million in the first six months of 2018 compared to $3.5 million in the same period in 2017, a 34 percent increase. Product sales were $2.2 million in the first half of 2018, a 28 percent decrease from $3.1 million in the first half of 2017.
The first six months of revenue for 2018 included Autoscope video product sales and royalties of $576,000 and $4.7 million, respectively, and RTMS radar product sales of $1.6 million. Product sales gross margin for the first six months of 2018 was 57 percent, a 2 percent decrease from the same period in the prior year.
The Company’s net income for the first six months of 2018 was $494,000, or $0.10 per basic share, compared to a net income of $520,000, or $0.10 per basic share, in the first six months of 2017. The first six months of 2018 net income includes operating expenses of $5.3 million, a 13 percent increase from the same period in 2017. During the first half of 2018, we capitalized $102,000 of software development costs, compared to $566,000 in the first half of 2017. Cash flow in the first half of 2018 decreased to $500,000, compared to a cash flow of $1.1 million in the first half of 2017.
On a non-GAAP basis, excluding intangible asset amortization and depreciation for the applicable periods, operating income for the first half of 2018 was $851,000 compared to an operating income of $798,000 in the first half of 2017.
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.