Insignia Systems, Inc.
Q1 2016 Earnings Call Transcript

Published: 27 Apr 2016

[Operator:]

Greetings, and welcome to the Insignia Systems First Quarter Results Conference Call. Just a reminder, today’s conference is being recorded. Except for the historical information mentioned, the matters discussed in this conference call are forward-looking statements. The company’s actual results could differ materially from these forward-looking statements as a result of a number of factors, including risk factors and uncertainties as described in the company’s Form 10-K for the year ended December 31, 2015, and other recent filings with the Securities and Exchange Commission. The company wishes to caution listeners not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. At this time, I would like to turn the conference over to Mr. John Gonsior, President and Chief Financial Officer. Please go ahead, Mr. Gonsior.

[John Gonsior:]

Thank you and thanks everyone for joining the call today. On the phone with me today is Tim Halfmann, our Chief Sales and Marketing Officer. And I’ll open it up with some comments on the quarter and then open up for questions after that. So we obviously didn’t have a great quarter and I want to spend time on this call focusing on four main areas. First, the missing revenue; second, several unusual expenses that we had in the quarter; thirdly, some investments we’re making in our core business; and finally, Kristine Glancy joining us as CEO in about 10 days. First on revenue, we were down about 7% year-over-year. As you know our business has tended to be lumpy from quarter-to-quarter. One main item that we saw in 2016 that wasn’t present in the quarter a year ago was a large amount of programs that shifted in the quarter two that were what we call, just in time programs. What this means is that we offer our customers the ability to have their programs lineup with their new product introductions. And to the extent that there is a delay in the introduction of those new products, our revenue will shift in a corresponding fashion. We did see that this quarter and that wasn’t present to the extent that we saw it in this quarter. And of course we do continue to see pricing pressure that we do our best to respond to you. Over the past few years, the front half of our year has been lower than the back half revenue, and sometimes that difference can be significant. Quarter two bookings at this point are low, but we do have more time to book revenue than we did when we released Q1 bookings a couple of months ago. Next, the unplanned expenses; I highlighted several expense items in Q1 that were unusual in nature. First, legal, there’s really two main buckets there. We renegotiated TLM license agreement in the first quarter and also general corporate and other board matters contributing those fees that I called out. Secondarily, we have CEO onboarding cost, and third other move related costs that are related to the physical move, leasehold improvements and other ancillary costs. When you combine these expenses with the margin impact of the declining revenue that we saw, this explains the difference in profit that we see year-over-year. A huge fact that there may be some of these costs continuing in to the next quarter, however many of them should subside as we move forward. Next on the investment in our business; first and foremost under this topic is our IT operational infrastructure. We highlighted this in the fourth quarter release and again put some more color around it in this release. The current system that is running our business is pretty old and at times it is not overly dependable. System issues can cause significant drops in or missed opportunities in revenue and profit, so we are doing this, we’re inflating in these systems from two standpoints. One, we need this to support our current business that we run today. Our current process is far too manual and needs to become more streamline. Second, we needed to support our future business strategy which will involve new product introductions and other complimentary business relationships. The current system would be hard for us to support these items going forward. Other investments that we are making in our core business includes securing additional retailers for both parts and TLM, grow up cost related to The Like Machine product launch and evolving our products in response to market place pressures. Lastly, I would like to formally welcome Kristine Glancy , who will be joining us in a little over a week. Everyone is excited to have her join and lead our company, and I as well as my leadership team have been in regular contact with her about her onboarding and getting her as up to speed as possible before she arrives. Her deep sales and marketing experience in our industry should help immensely and that experience comes from both the CPG standpoint as well as the retailer perspective. I know she has a passion for innovation and growth and that will serve us well. She’s excited to be joining our company at this time and believe we have a significant opportunity in front of us to grow the company. With that I’d like to open it up for questions.

[Operator:]

[Operator Instructions] Our first question today is coming from Mike Allen, a private investor. Please proceed with your question.

[Unidentified Analyst:]

Could you expand a little bit on the legal cost, kind of break that down as to what they were, and also give us a little update on Chairman of the Board, people who have left this company and maybe you can give us some reason for that.

[John Gonsior:]

Yeah, absolutely on the legal side I bucketed in two main buckets, and certainly there is ongoing legal cost that we incur every quarter, every month. The two main items that I mentioned were shouldn’t have been surprising right, we announced the TLM renegotiation in March and also announced the CEO onboarding the same month, and those two factors were significant as that increased our legal cost and then to settle general corporate and Board matters would have been the third bucket. I’m not going to split out each one, but those are three buckets that would have increased that. When you look at the total of the unplanned or unusual items I mentioned that really being the legal cost, recruiting and consulting fees, it’s about 300 to 350 I’d say year-over-year impact of those three items. So it was pretty significant for the quarter. As it relates to the announcements we’ve made regarding Ed and Jacob, I can’t let you in to the reasoning outside of what we’ve put in the release. Jacob has decided not to stand for reelection and he has his reasons for that and he communicated that to the Board, and the same goes for Ed. He communicated that to the Board, we made a filing on it, and so outside of that it couldn’t really go in to my speculation or anything along those lines.

[Operator:]

[Operator Instructions] We’ve reached the end of our question and answer session. I’d like to turn the floor back to the management for any further or closing comments.

[John Gonsior:]

Thank you and again thank you all for participating in today’s call. Look forward to speaking to you in the near future. Take care.

[Operator:]

Thank you. This concludes the teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.