Insignia Systems, Inc.
Q2 2015 Earnings Call Transcript

Published: 29 Jul 2015

[Operator:]

Greetings, and welcome to the Insignia Systems' Second 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 those 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. John Gonsior, President and Chief Financial Officer. Please go ahead, Mr. Gonsior.

[John Gonsior:]

Thank you. Good afternoon everybody and thank you for participating in today's call to discuss our second quarter. With me is Tim Halfmann, our Chief Sales & Marketing Officer. I will start the call off by discussing some financial highlights and then provide commentary on our business as well as other recent corporate events. But first, let's review the financials. As we stated in our release from earlier today, we saw nice increases in our core business year-over-year. As a look at it on a year-to-date perspective, revenue is up about 4% overall with increases in both service revenues and legacy product revenues. Gross margin dollars have increased on similar gross margin percentages to last year, operating expenses are down, operating income is nearly doubled and EPS is $0.03 a share versus a $0.01 a share last year. Next, I wanted to touch on a couple of other forward-looking figures that we provide in our release. The first one is our current POPS booking number for the third quarter. That number sits at $6.1 million, which is down compared to the 2014 quarter, but keep in mind that in Q3 of 2014, we have one of the largest quarters that we have had in recent history. Secondly, we discussed total backlog. And again, total backlog represents all orders that we received that means POPS, legacy products as well as Like Machine programs that are contracted to run in the next 12 months from today forward. Total backlog as of today sits at $11.6 million, which is slightly ahead of last year's number. To all of that said, I believe this was a good second quarter, but certainly wouldn't categorize it as an exciting quarter. And one thing that I'm 100% committed to is making our company, our culture and our products exciting. As I think about here, some of you guys I have spoken to you on the phone, some I met in person, but several of the people on the call don't me and there is obviously a transition in my role here in the past few weeks. So I just wanted to talk to you guys a bit and I guess a little off the script here, but a bit about who I am and where I have had success in the future, and how I see things for our company. You know where I have had success in the future is typically where there is a plan that you can put in place and then execute against that. I think that's crucial. I'm someone that definitely likes to get things done, check boxes things like that. And make sure that we are progressing forward. I think that I tried to lead by example, I love creating a good culture and I think that I'm committed to creating a culture as a company of innovation, collaboration, agency whatever other words you want to use, but that sense I think is crucial. And I'm also committed to building on the opportunity I think is in front of us with new products and things like that, but Tim is going to touch on a little bit later. So just wanted to give you guys a bit of a sense there and then I will get back to the script here. But so to that end, I just wanted to have that are, I believe we got a talented team in place at the company, which if we can bring focus on the execution against those goals, I think we have got a great opportunity in front of us with more direct focus on some key areas. I believe we can try and interpret the exciting story for our company and our investors. With that, I'm going to ask Tim to give an update on our sales and marketing strategies.

[Tim Halfmann:]

Thanks, John, and thank you, everyone, for the time and for the interest in our chat this afternoon. I would like to build for a minute on John's commitment to execution, I would like to talk about core business a little bit and I would certainly like to fill you on our progress with the Like Machine today and any questions we have afterward and wrap up, I'm happy to [entertain too] [ph] as well. As a starting point, we think the great execution is built on a platform of simplicity and focus. We believe that's where we will win and we believe that it helps us deliver the results that we expect. So for our core business, the execution that helps the tactics that we have in place because they are simple and they are working and really three things of note that I wanted to hit on today. The first one is, the team is creating, building and closing an impressive pipeline of opportunity in spite of really significant and competitive pressures. They have done that all year. Results are as expected and predicted. Our second tactic is that we have been very effective and balanced in our promotion tactics this year. I have got a great example to explain. Our first POPS day is this Thursday, some of you may have heard of that. It's going to be very similar to what Amazon did with Black Friday in July. It's a way for us to build on our back half momentum; it's a way for us to build on our operating leverage and to drive incremental revenue and contribution to our bottom line. It gives a great way that we can reward our current customers, we can incent new customers as well and we are optimistic about what it can do for us in the next two quarters. What we are getting is great feedback from our customers so far. There is a lot of anticipation out there for the day and we should have some good things to report. As part of this, we have been also really active in our use of social and targeted media to reach the customers with messaging that is meaningful and that is customized to the right message to the right person, so we think that's working for us. Just a third tactic, I wanted to hit a little bit is, are focused on our largest and most important priority customer base has been unwavering. Our list of relationships is large, it's impressive, they look to us for industry insights and they ask us how they can do more with us. It is a core and key asset to our company. Which brings us a little bit more to the strategic side of the conversation today. Of the simple growth strategy for Insignia is to add more selling opportunity. And that opportunity is defined by our network and the number of products that we offer; seem simple, our network and the number of products. Some of our competitors have significantly larger networks and more products. They can dwarf us in those opportunities. Did six products in 50,000 stores that's 300,000 opportunities. We are far from there today, but we see tremendous headroom and opportunity for unique ownership inside this space. So our goal continues to be more retail partners, hence that larger network and audience and more products for our team to sell. The two things go hand in hand. It's not surprising. We were finding that with more products, we have more interest from retailers. And with more stores, we have greater interest from our partners and customers and the ability to launch new products, which all kind of leads us back to the Like Machine. We are making tremendous strides in this initiative. Shopper engagement has been off the chart. We are in just over 100 stores right now in our launch and we have well over a million likes to-date from shoppers and store. We are highly encouraged by the results of the direct shopper feedback in interaction we had with them and the purchase lift that we are seeing at shelf. We placed over a 100 campaigns for national and private label brands, many of them have been repeat customers. And we are adding key retail banners, we are now at six. The six represents something over $28 billion in retail sales. Further, all this dialogue with priority retail partners, it's exciting and it's encouraging and we think taking us to dialogue we have not had in the past with partners that we have not had on our list before. So clearly the simplicity of the concept is resonating. So with the Like Machine bottom line, we will continue our roll out plans, expand or really adapt to retailer base and bring growing revenue to the business. John?

[John Gonsior:]

Thanks Tim. So what is all that mean? In my mind, I boil it down to three main areas, one, retailers; two, core product innovation; and thirdly, expanded product offerings. So on a retail front, Insignia is now having very meaningful conversations with the largest and most respected retailers in the country. They are interested in our products, our team and our go-forward plan. That will lead to a larger network offering to our customers. Second, our core product innovation efforts are now [front and center] [ph]. We intend to solve the needs of shoppers, retails and CPG marketers and the POPS program can always improve and evolve and we intend to make that happen. And thirdly, the team is committed to expanding the number of products we offer and is in exploration mode right now for new opportunities in mobile, digital, social and yet even traditional program. So with that, I would like to open it up to questions.

[John Gonsior:]

At this time, I just wanted to thank everyone for their participation again in today's call. And as I said in the press release, we are excited about the opportunities in front of us and hope to have great news to report when we are back together in a few months. Take care.

[Operator:]

Thank you. That does conclude today's teleconference. You may disconnect your lines. And have a wonderful day. We thank you for your participation today.