Insignia Systems, Inc.
Q1 2015 Earnings Call Transcript

Published: 29 Apr 2015

[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 risks and uncertainties as described in the company’s Form 10-K for the year ended December 31, 2014 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 speaks only as of the date made. At this time, I would like to turn the conference over to Mr. Glen Dall, President and Chief Executive Officer. Please go ahead, Mr. Dall.

[Glen Dall:]

Thank you very much, Kevin. Thank you everyone for participating in this conference call in which we will discuss our first quarter 2015 results, and then some comments and any questions you may have after that. John Gonsior, our CFO; and Tim Halfmann, our Chief Sales and Marketing Officer are with me here today as well. So John will review the numbers, still have some comment, and then I will have some comments and then we will open the call for questions. And with that go ahead John.

[John Gonsior:]

Thanks, good afternoon. As Glen mentioned I'll start the call with a review of our first quarter and then provide other commentary on our business. Net sales in the first quarter were $6.5 million, which produced a pretax income of $171,000. This compares to the first quarter of 2014, where we had net sales of $6.4 million and pretax income of $173,000. As we highlighted in our press release the 2015 quarter included year-over-year growth in both our POPS and legacy products. As it relates to The Like Machine, our beta testing is going well. In the first quarter we recognized revenue and incurred expense related to this test both of which I will classify as being immaterial to the results in total. In the first quarter, we saw an improvement in gross margin to 42.8% as compared to 41.9% in the first quarter last year. As we’ve highlighted in the past our gross margin percentage is highly dependent on sales levels as we have a highly leveraged cost model. That said we did benefit from our program mix year-over-year as well as our continued focus on cost efficiencies in our operations. We produced net income of $96,000 or $0.01 a share compared to net income of $115,000 in 2014 or $0.01 a share as well. As we have done in past releases we highlighted two forward looking figures I wanted to provide some color on. The first figure is our current POPS and bookings for the second quarter. That number is at $6 million which is up slightly as compared to prior year. We highlighted metric as POPS continues to be a significant driver in our overall business. And secondly, we highlighted full backlog number. That number represents all orders that we've received for POPS, legacy products as well as The Light Machine program that are contracted to run in the next 12 months from today forward. Total backlog today sits at approximately $12.2 million which is 4% ahead of last year's backlog at this point. We believe that this gives our investors a sense of what trends we are seeing at this point in time as compared to the prior year. Again, as we want to point out to this backlog amount versus the prior year does tend to fluctuate month to month for the figures not necessarily meant to be a prediction of the future revenue, but should be used more directionally in nature and it can and will fluctuate. And as you can see it only represents a portion of our total revenue for the year. All of that said, this is a good quarter to start the year and for the remainder of 2015, we are focused on four key areas. One, gaining additional retailers to help support and grow our POPS program. Two, fully launching our new product The Like Machine. Three, exploring and potentially introducing other new products to our CPG and retail partners. And four, providing value to our shareholders through both our operational results as well as other capital allocation decision. With that I'll turn it back over to Glen.

[Glen Dall:]

Thanks, John. As you see we had a very solid Q1 and we are pleased with that. Our team did a nice job of maximizing the opportunities we had with our CPG client for POPS programs, but also engaging some really top tier brands that has been participating in our beta test for The Like Machine. Legacy team also continued momentum there. And that's a really good thing to see. The Like Machine. When we talk about our beta test and as we talked about before we see The Like Machine, the very innovative way to take an online behavior and allow shoppers at the shelf to demonstrate the same behavior or liking the brand that they are interested in at the shop. We've added some retailers to that and we are seeing some really great learning from that beta test. Shoppers are engaging at the shelf and they are talking to the brand that they like and the brand they like to purchase. If we see successful results inclusion of the beta test, we are looking for the end of the year or early next year to begin a more national rollout of our products. Talking about this family that I am [indiscernible] John's other comments and really talk a bit about the future vision for Insignia. So we talk before I think when you see in CPG industry they are definitely pressures and their business which put pressure on our business in terms of the discretionary spend, the spending on marketing, business and center stores CPG and grocery is down and there is some fundamental trend and trends of the way shoppers are purchasing and where they’re purchasing, there is also shifting interest, I get a lot of news out there as it relates to digital e-commerce. But we still see that there is an opportunity for us to capitalize on what we do best and that's engaging consumers at the point of decision. We are at the shelf and if you look at the studies depending on which one you read right now between 96% and 98% of all grocery purchases are still bricks and motor in grocery stores. And that's what we continue to see, an option we have to leverage first, the network of resellers that we have about 23,000 stores and also the CPG relationships we have, the trust they have in Insignia and our knowledge of their business. We really feel we can take this, continue to add innovative product and services and doing that in-store can add operating leverage to the network. We are also looking at using and expanding our data capabilities that can enable our CPG to be able to market smart to shoppers, and which could be an additional service to bring the markets for them. Really, the key is going to be innovating outside the current constraints while maximizing our current core products. Having more innovative products, more services, gets us into more conversations, quality conversations with more clients and more retailer partners. And this is exactly what we are seeing with The Like Machine. So overall feel we are off to good start for the year. Excited about what we are seeing with The Like Machine and I feel we continue to be well positioned to continue with innovative offerings that can differentiate us and bring value to our retail partners, CPG customers and shoppers. So with that I'd like it open it up for questions. [Operator Instructions] There are no questions at this time. I'd like to turn the call back over to management for any further closing comments.

[Glen Dall:]

All right. Well, just like to thank those of who you did join the call this afternoon. And thank you for your continued support for Insignia. And have a good day.