We use cookies and similar web technologies to recognize your repeat websites visits and preferences and to analyze traffic. To learn more about cookies, including steps for disabling, view our Cookie Policy. By clicking “I Accept” on this banner you consent to the use of cookies unless you disable them.

Skip to Main Content
Back to News
November 3, 2011

Image Sensing Systems Announces Third Quarter Financial Results

Contacts: Greg Smith, Chief Financial Officer
Image Sensing Systems, Inc., Phone: 651.603.7700

Saint Paul, Minn., November 3, 2011 - Image Sensing Systems, Inc. (NASDAQ: ISNS), announced today the results for its first nine months of its fiscal year and third quarter ended September 30, 2011. The results include a non-cash goodwill impairment charge of $11.7 million (pre-tax) triggered by the decline in our market capitalization.

Revenue for the nine months ended September 30, 2011 was $21.7 million compared to $21.1 million for the same period of 2010, while revenue for the third quarter of 2011 was $7.4 million compared to $9.1 million for the same period a year ago. Revenue from royalties was $9.1 million in the first nine months of 2011 compared to $9.2 million in 2010 and $3.3 million in the third quarter of 2011 compared to $3.4 million in the same period of 2010. Product sales were $12.6 million for the first nine months of 2011 compared to $11.9 million in 2010 and were $4.1 million in the third quarter of 2011 compared to $5.7 million in the same period in 2010. World-wide, RTMS and CitySync product sales in the first nine months of 2011 were $5.8 million and $4.7 million, respectively and for the third quarter of 2011 were $1.7 million and $1.3 million, respectively.

Net loss for the first nine months of 2011 was $(9.3) million or $(1.93) per share compared to net income of $1.9 million or $0.41 per diluted share for the same period in 2010. Net loss for our 2011 third quarter was $(8.7) million or $(1.81) per diluted share compared to net income of $1.1 million or $0.23 per diluted share for the same period in 2010. On a non-GAAP basis, excluding the goodwill impairment charge and intangible asset amortization, both net of tax, net income for the first nine months of 2011 was $530,000 or $0.11 per share and net income for the third quarter was $582,000 or $0.12 per diluted share.

The impairment charge consisted of write-downs to goodwill recorded for our Flow Traffic, RTMS and CitySync acquisitions after which the remaining total goodwill is $3.1 million. There was no impact to our intangible asset balances. The charge is non-cash and does not affect our working capital position.

Ken Aubrey, CEO, said, Our results reflect an uncertain economic environment in the United States and in portions of Europe, especially in the United Kingdom and southern Europe where governments are facing austerity measures. Revenue fell short of expectations in all our lines of business with the largest shortfalls experienced in our CitySync product line and in our Asian region. We had believed the general economic trend to be improving over the summer but it quickly softened. Additionally, our transition to new management leadership in Asia was slower than planned. Our overall product gross margins remain depressed due mostly to lower than anticipated volume and an unfavorable product mix in the quarter and to a lesser extent due to sporadic increased price competition.

Although our near term outlook is unpredictable, we remain confident in the long range prospects for our portfolio of detection products and the growing demand for intelligent traffic systems, security, tolling and parking applications. One example of our optimism is our Hybrid product which is expected to launch in Q1 2012. The hardware is in final certification testing and were adding a second beta site. This combined video and radar product gives us the opportunity to significantly expand our market by accelerating the conversion from legacy loop detection to above ground detection. We estimate the annual loop market in North America to be at least double that of above ground detection, so even in a shrinking tax base environment we have an opportunity to tap a large market.

In light of the current circumstances, we expect to execute on plans to reduce operating expenses to align them with an uncertain revenue outlook. We believe we are well capitalized and liquid with cash and investments of $7 million and net current assets of $22 million but it is managements intent to return to improved profit levels urgently, continued Mr. Aubrey.

Non-GAAP Information

We provide certain non-GAAP financial information as supplemental information to GAAP amounts. This non-GAAP information excludes the impact, net of tax, of amortizing the intangible assets from the 2007 EIS asset acquisition and the 2010 CitySync acquisition and may exclude other non-recurring items. Management believes that this presentation facilitates the comparison of our current operating results to historical operating results. Management uses this non-GAAP information to evaluate short-term and long-term operating trends in our core operations. Non-GAAP information is not prepared in accordance with GAAP and should not be considered a substitute for or an alternative to GAAP financial measures and may not be computed the same as similarly titled measures used by other companies.

About ISS

Image Sensing Systems, Inc. is a provider of software-based detection solutions for the Intelligent Transportation Systems (ITS) sector and adjacent markets including security, police and parking. We have sold more than 120,000 units of our industry leading Autoscope machine-vision, RTMS radar and CitySync automatic number plate recognition (ANPR) products in over 60 countries worldwide. The depth of our experience coupled with the breadth of our product portfolio uniquely positions us to provide powerful hybrid technology solutions and to exploit the convergence of the traffic, security and environmental management markets. We are headquartered in St. Paul, Minnesota. Visit us on the web at imagesensing.com.

Download Release As PDF

Image Sensing Systems, Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share information)

Three-Month Periods
Ended September 30
Nine-Month Periods Ended September 30
2011
2010
2011
2010
Revenue
Royalties
$3,337
$3,444
$9,052
$9,222
Product sales
4,085
5,677
12,617
11,886
7,422
9,121
21,669
21,108
.
Cost of revenue (exclusive of amortization below)
1,775
2,155
5,598
4,597
Gross Profit
5,647
6,966
16,071
16,511
Operating expenses
Selling, marketing and product support
2,616
2,586
7,874
6,588
General and administrative
1,743
1,307
4,749
3,283
Research and development
1,091
989
3,119
2,600
Acquisition related expenses
-
-
-
527
Goodwill impairment
11,685
-
11,685
-
Amortization of intangible assets
417
411
1,243
819
17,552
5,293
28,670
13,817
Income (loss) from operations
(11,905)
1,673
(12,599)
2,694
Other income (expense), net
1
(74)
7
(146)
Income (loss) before income taxes
(11,904)
1,599
(12,592)
2,548
Income tax expense (benefit)
(3,174)
472
(3,264)
652
Net income (loss)
$(8,730)
$1,127
$(9,328)
$1,896

Net income per common share
Basic (loss)
$(1.81)
$0.23
$(1.93)
$0.42
Diluted (loss)
$(1.81)
$0.23
$(1.93)
$0.41
Weighted average shares outstanding
Basic
4,836
4,805
4,826
4,471
Diluted
4,836
4,911
4,826
4,584


Reconciliation of GAAP to non-GAAP basis
Non-GAAP operating expenses (1)
$5,450
$4,882
$15,742
$12,471
Non-GAAP income from operations
197
2,084
329
4,040
Other income (expense), net
1
(74)
7
(146)
Non-GAAP income before income taxes
198
2,010
336
3,894
Non-GAAP income tax expense (benefit) (2)
(384)
612
(194)
930
Non-GAAP net income
$582
$1,398
$530
$2,964

Non-GAAP basic net income per share
$0.12
$0.29
$0.11
$0.66
Non-GAAP diluted net income per share
$0.12
$0.28
$0.11
$0.65
Notes to Non-GAAP adjustments
(1) Amortization of intangible assets, goodwill impairment and acquisition released expenses for the applicable period as shown above are removed
(2) Income tax expense (benefit) is increased (reduced) by impact of (1) at ISS' marginal tax rate of 34% for 2010 and using the effective rate for 2011 after adjusting for amortization of intangible assets and goodwill impairment



Image Sensing Systems, Inc.
Unadudited Condensed Consolidated Balance Sheet
(in thousands)
September 30,
2011
December 31,
2010
Assets
Current assets
Cash and cash equivalents
$4,142
$8,021
Investments
2,680
3,954
Receivables, net
10,235
10,137
Inventories
6,406
4,649
Prepaid expenses and deferred taxes
2,376
2,247
25,839
29,008
Property and equipment, net
1,340
1,122
Deferred taxes
2,712
-
Goodwill and intangible assets, net
11,498
24,226
$41,389
$54,356
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued expenses
$3,714
$4,925
Earnout payable
603
2,928
Income taxes payable
-
17
4,317
7,870
Income taxes payable and deferred taxes
36
465
Shareholders' equity
37,036
46,021
$41,389
$54,356



Image Sensing Systems, Inc.
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands)
Nine-Month Period
Ended September 30
2011
2010
Operating activities
Net income (loss)
$(9,328)
$1,896
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations
Goodwill impairment
11,685
-
Depreciation and amortization
1,620
1,157
Stock option expense
308
251
Changes in operating assets and liabilities
(6,546)
(2,566)
Net cash provided by (used in) operating activities
(2,261)
738
Ivesting activities
Purchase of CitySync
-
(7,871)
Purchase of property and equipment, net of disposals
(566)
(224)
Repayment of CitySync seller loans
-
(445)
Payment of earnouts
(2,361)
(1,541)
Sales of investments
1,274
345
Net cash used in investing activities
(1,653)
(9,736)
Financing activities
Repayment of bank debt
-
(4,556)
Net proceeds from common stock offering
-
8,818
Proceeds from exercise of stock options
70
87
Net cash provided by financing activities
70
4,349
Effect of exchange rate changes on cash
(35)
(74)
Decrease in cash and cash equivalents
(3,879)
(4,723)
Cash and cash equivalents, beginning of period
8,021
14,084
Cash and cash equivalents, end of period
$4,142
$9,361