Image Sensing Systems, (ISS or the company) acquired all of the stock of CitySync Limited, a UK-based, privately-held developer and marketer of automatic license plate recognition (ALPR) technology, for initial consideration of US$7.9 million in cash and 57,000 restricted shares of ISS common stock (valued at $727,000 as of the previous day's closing price). In addition, the sellers have an 18-month earn-out agreement under which they could receive an additional $2 million or more based on revenue and gross margin achievement from CitySync products. Also, ISS will repay $437,000 in borrowings to CitySync from certain sellers in June.
ALPR applications include police, security, intelligent transportation systems (ITS) (such as journey time measurement and congestion charging), tolling and parking. In its most recent fiscal year, CitySync had revenue of $7.4 million.
Ken Aubrey, CEO of ISS, said, "We're again pleased to add a well-respected detection technology to our product portfolio. CitySync ALPR products are highly rated by users in Europe and North America. CitySync's technology is a great fit for ISS as it is founded on software-based machine vision and we also value CitySync's employee base which will give us important critical mass in the EMEA marketplace.”
"As part of our study of the combination, we believe we have identified a number of key synergies, both technological and financial," Aubrey said. "Financially, we believe the acquisition will be accretive to earnings in 2011 (at minimum on a non-GAAP basis where acquisition related intangibles amortization is removed from operating expenses) as we anticipate benefiting from ISS' worldwide sales footprint and realizing operational efficiencies. Technically, we see numerous opportunities for improving our current product set and developing new features."
Frank Thomson, CEO of CitySync said, "We are excited to join forces with ISS. CitySync has had a track record of strong year-on-year revenue growth and we can now enhance our opportunities by taking advantage of ISS sales reach and financial strength."
Aubrey said, "Our core competency is computer-enabled detection (CED) which we define as a group of technologies in which software, rather than humans, examines the outputs of complex sensors through the use of software-based algorithms to determine what's happening in the field of view in real-time."
"Along with the video and radar technologies we possess, the addition of ALPR, with its core object tracking and classification capabilities, expands our opportunities to develop ever more sophisticated hybrid products as well as make enhancements to our existing Autoscope video products," he said. "These new products will combine the best features of each of the parent technologies, using data fusion to overcome their individual shortfalls. This will produce a new breed of detectors that can achieve levels of accuracy that we believe are simply not available in the market today."
"We will continue to leverage our strength in ITS to capture additional market share in this attractive world-wide market," Aubrey said. "Ultimately, we see a convergence of ITS, security and environmental markets and we aim to be well positioned to be a leading provider of CED components to management systems providers. We anticipate following our same path of combining continued internal development and selected product and channel acquisition strategies to best position the company."