Autoscope Technologies Corporation
Q1 2015 Earnings Call Transcript

Published: 14 May 2015

[Operator:]

Good day, and welcome to the Image Sensing Systems’ First Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I’d like to turn today’s conference to Al Galgano, Investor Relations for Image Sensing Systems. Please go ahead, sir.

[Al Galgano:]

Thank you, John. Joining me on today's call is Dale Parker, Image Sensing Systems’ Interim CEO and CFO; Rich Ehrich, Corporate Controller. Dale and Rich will discuss Image Sensing Systems' performance for the quarter as well as provide a product and operational update. We will then open up the call for your questions. Before I turn the call over to Dale, I'd like to preface all remarks with customary Safe Harbor statement. Today's conference call contains certain forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties. Actual results may differ materially depending on a variety of factors. Additional information with respect to the risks and uncertainties faced by Image Sensing Systems may be found in the Company's Security and Exchange Commission reports, including the latest Annual Report on Form 10-K filed in March of 2015. So with that, I'd like to turn the call over to Dale. Dale?

[Dale Parker:]

Thanks Al and thank you everyone for joining us this afternoon. On today’s call, I will summarize our first quarter 2015 operational performance. Before turning the call over to Rich to provide more detail regarding our financial performance. After Rich discusses the financial results, I'll return to recap our ongoing initiatives for future growth and then we'll open it up to your questions. For those of you who are new to following our company, let me briefly summarize how we view the marketplace, so you’ll have some context for my comments. We separate our business into three segments

[Richard Ehrich:]

Thank you, Dale. Good afternoon everyone. For the first quarter ended March 31, 2015, Image Sensing Systems revenue totaled $4.3 million and is consistent with the same period in the prior year. Revenue from royalties was $2 million in the first quarter, compared to $2.4 million in the first quarter of 2014. The difference is due to the timing of order fulfillment an individually significant orders in the first quarter. Product sales were $2.3 million, compared to $1.9 million in the same period in the prior year, an increase of $430,000 or 23%. Autoscope Radar product sales were 1.1 million in the first quarter, up approximately 53% from 2014. As previously disclosed, we completed the transfer of domestic marketing and manufacturing of the Autoscope Radar product line from Econolite during the third quarter of 2014. Autoscope Video product sales and royalties were $150,000 and $2 million, respectively in the period. Worldwide sales of Autoscope License Plate Recognition or LPR products were 1.1 million, approximately the same as in the prior period year. As Dale outlined, we saw product gross margins of approximately 56% in the first quarter of 2015, an increase of approximately 20 percentage points from the 37% margin experienced in the same period in the prior year. This increase was primarily due to the combination of a greater percentage of higher margin software sales and the continued improvement in our warranty claim rates. With significant product quality issue behind us, we expect the gross margin percent to stabilize in the near-term and continue to improve. As previously disclosed in the fourth quarter of 2014, we made the decision to close our offices in Asia in order to further reduce our expense base. As a result, we incurred a $119,000 of restructuring charges in the first quarter of 2015. For the quarter, Image Sensing recorded a net loss of $1.2 million, compared to a net loss of $3.8 million in the same period in the prior year. The first quarter of 2015 net loss included operating expenses of approximately $4.5 million, down 35% from $6.9 million in the first quarter of 2014. We are pleased with the net operating loss improvement we saw during the quarter. However, we are not satisfied with the continued operating losses and continue to work rigorously to return the company to historical profitability levels. On a non-GAAP basis, excluding intangible asset amortization, depreciation, investigation and restructuring expenses. The net operating loss for the first quarter was $563,000, compared to a net operating loss of 2.6 million in the same period in the prior year. On the balance sheet, cash and investments at March 31st totaled approximately $884,000, down from 2.7 million at the fourth quarter of 2014. The decrease in cash is primarily attributable to the timing of our sales and collections during the quarter. We believe that going forward, we have sufficient capital to support our operations. Our strong balance sheet which contains no debt allows flexibility at circumstances dictate. With that, I’d like to turn the call back over to Dale for some final thoughts. Dale?

[Dale Parker:]

Thanks Rich. Before we open up the call to your questions, let me reiterate how encouraged we are with the progress made in the first quarter and the growth opportunities we see before us. From a products and solution portfolio perspective, we're focused on user and customer needs and believe that our offering is a strategic value add to our customers operation in the traffic and safety management markets. We see significant growth opportunities in both our domestic and international markets and believe that we are well positioned for the future. With the leading product and service offering in the industry, our renewed focus on execution and the company now operationally and financially positioned for long-term profitable growth, we believe we can take advantage of the market opportunities that will return to the company to historical profitable levels and grow shareholder value. Again, thank you for joining us today. I look forward to updating you on our next call. And at this time, I’d like to open up the call for any questions that you may have. Thank you.

[Operator:]

Thank you. [Operator Instructions] We’ll take our first question from Ben Fishman, a private investor.

[Ben Fishman:]

What are you forecasting for the next quarter?

[Al Galgano:]

We don’t give guidance.

[Ben Fishman:]

Part B to the question, are you doing any – can you breakdown your businesses you’re doing with the law enforcement?

[Al Galgano:]

I’m sorry, the question. Are you asking me do we break it down?

[Ben Fishman:]

What percentage of the license scanning business goes towards the law enforcement?

[Al Galgano:]

I don’t have that percentage on top of my head. It is not a large percentage of the total business. We do a lot of license plate reading in the UK specifically around airports, parking garages, things of that nature, but we don’t do a lot of business with our police department. We’re still working on that, that’s one of the markets that we’ve been working on for about 18 months here in the U.S.

[Ben Fishman:]

That’s the point that I wanted to get to because that seems to be what the world is talking about now and what you’re doing seems to be critical to use law enforcement.

[Operator:]

[Operator Instructions] It appears there are no further questions at this time. I’ll turn the conference back to Mr. Galgano for any closing remarks.

[Al Galgano:]

Well, thank you everyone for joining us for today’s call. We look forward to updating you on our second quarter earnings call. Thank you again and we’re signing off. Thanks.

[Operator:]

This concludes today’s conference. Thank you for your participation.