Autoscope Technologies Corporation Announces Financial Results and Dividend Declaration
Minneapolis, Minn., November 9, 2023--Autoscope Technologies Corporation (OTCQX: AATC) today announced results for its quarter and nine months ended September 30, 2023. The Board of Directors has authorized and declared a quarterly cash dividend of $0.13 per share of its common stock. The dividend is payable on November 30, 2023 to the shareholders of record at the close of business on November 20, 2023.
Sale of RTMS Radar Detection Product Line
On August 31, 2023, Image Sensing Systems, Inc. a wholly owned subsidiary of the Company completed the sale of all the assets related to its RTMS radar detection product line to Sensys Networks, Inc. As a result, the activities of the RTMS radar detection product line are reported as discontinued operations. Therefore, for all periods presented in this release, all figures incorporate these changes and reflect continuing operations only, unless otherwise noted.
Third Quarter 2023 Financial Summary
- Increasing demand for Autoscope Vision drove higher royalty revenue during the quarter. Third quarter royalties increased to $3.8 million compared to $2.6 million in the same period in the prior year.
- There were no 2023 third quarter product sales compared to $64,000 of product sales in the same period in the prior year.
- Operating expenses totaled $1.8 million in the third quarter of 2023, an increase of 6.1 percent from the prior year period, primarily due to the hiring of engineers to further research and development efforts, planned building maintenance and repairs, and consulting fees resulting from employee turnover.
- Net income for the third quarter of 2023 totaled $1.5 million, an increase of $0.9 million compared to net income of $0.6 million for the same period in the prior year.
Year-to-date 2023 Financial Summary
- Royalties for the first nine months of 2023 increased to $10.5 million compared to $5.8 million for the same period in the prior year.
- Product sales for the first nine months of 2023 were $71,000 compared to $334,000 for the same period in the prior year.
- Operating expenses totaled $5.8 million in the first nine months of 2023, an increase of 6.4 percent from the prior year period, primarily due to the hiring of engineers to further research and development efforts, planned building maintenance and repairs, and consulting fees resulting from employee turnover partially offset by lower capitalized software development costs. There were no capitalized software development costs during the first nine months of 2023 compared to $0.5 million of capitalized software development costs in the prior year period.
- There were no capitalized software costs in the first nine months of 2023 compared to $534,000 in the prior year period.
- Net income for the first nine months of 2023 totaled $3.4 million compared to net income of $46,000 for the same period in the prior year.
- Cash and cash equivalents increased to $3.3 million, an increase of 176 percent from $1.2 million at December 31, 2022.
Third-Quarter Results
Third quarter 2023 revenue for Autoscope Technologies Corporation ("AATC," the "Company," "us," "we," or "our"), which includes the results of Image Sensing Systems, Inc., a wholly-owned subsidiary of AATC ("ISNS"), was $3.8 million compared to $2.7 million in the third quarter of 2023. Revenue from royalties increased to $3.8 million in the third quarter of 2023 compared to $2.6 million during the third quarter of 2022. There were no product sales in the third quarter of 2023, a 100 percent decrease from $64,000 of product sales in the third quarter of 2022.
Gross margin for the third quarter of 2023 was 97 percent, a 4 percentage point increase from a gross margin of 93 percent for the same period in 2022. Gross margin from royalties increased to 97 percent in the third quarter of 2023 compared to 96 percent in the third quarter of 2022. The increase in the royalty gross margin percent for the third quarter of 2023 resulted primarily from higher sales of video detection products yielding higher royalty revenues. Product sales gross margins were undefined for the third quarter of 2023 given there were no product sales during the quarter, compared to product sales gross margins of (47) percent in the prior year period. The decrease in the product sales gross margin percent was the result of no product sales in the third quarter of 2023 because of the discontinued video detection product sold in the EMEA markets and the fixed costs associated with capitalized software development cost amortization.
The Company’s net income for the third quarter 2023 was $1.5 million, or $0.27 per diluted share, compared to a net income of $0.6 million, or $0.11 per diluted share, in the third quarter of 2022. The third quarter 2023 net income includes operating expenses of $1.8 million, a 6 percent increase from the same period in 2022. There were no capitalized software costs in the third quarter 2023 or the third quarter 2022.
On a non-GAAP basis, excluding the amortization of intangible assets and depreciation for the applicable periods, operating income for the third quarter of 2023 was $2.0 million compared to operating income of $0.9 million in the prior year period.
Year-to-Date Results:
AATC’s revenue for the first nine months of 2023 was $10.5 million, a 72 percent increase from revenue of $6.1 million in the first nine months of 2022. Revenue from royalties increased to $10.5 million in the first nine months of 2023 compared to $5.8 million in the same period in 2022. Product sales were $71,000 in the first nine months of 2023, a 79 percent decrease from $334,000 of product sales in the first nine months of 2022.
Gross margin for the first nine months of 2023 was 95 percent, a 4 percentage point increase from a gross margin of 91 percent for the same period in 2022. Gross margin from royalties increased to 97 percent in the first nine months of 2023 compared to 95 percent in the first nine months of 2022. The increase in the royalty gross margin percent for the first nine months of 2023 resulted primarily from higher sales of video detection products yielding higher royalty revenues. Product sales gross margin for the first nine months of 2023 was (203) percent compared to 23 percent in the prior year period. The decrease in the product sales gross margin percent was the result of lower margin sales on planned discontinued video detection products, as well as inventory obsolescence recognized for these discontinued products.
The Company’s net income for the first nine months of 2023 was $3.4 million, or $0.63 per diluted share, compared to a net income of $46,000, or $0.01 per diluted share, in the first nine months of 2022. The first nine months of 2023 net income includes operating expenses of $5.8 million, a 6 percent increase from the same period in 2022. During the first nine months of 2023, there were no capitalized software costs compared to $534,000 of capitalized software costs in the first nine months of 2022.
On a non-GAAP basis, excluding the amortization of intangible assets and depreciation for the applicable periods, operating income for the first nine months of 2023 was $4.6 million compared to operating income of $0.5 million in the prior year period.
Liquidity and Capital Resources
We believe that cash and cash equivalents on hand of $3.3 million, coupled with $9.2 million of readily available investments in debt and equity securities on September 30, 2023, along with the cash provided by operating activities, will satisfy our projected working capital needs, investing activities, and other cash requirements for the foreseeable future.
As of September 30, 2023, we had $3.3 million in cash and cash equivalents compared to $1.2 million on December 31, 2022.
Net cash provided by operating activities increased to $2.9 million in the first nine months of 2023 compared to net cash used by operating activities of $0.7 million in the same period in 2022. Net cash provided by operating activities increased in the first nine months of 2023 compared to the same period in 2022 primarily due to higher net income and lower deferred taxes in 2023 compared to 2022.
Net cash used by investing activities of continuing operations was $5.1 million in the first nine months of 2023 compared to net cash used by investing activities of continuing operations of $2.9 million in the same period in 2022. The increase in net cash used by investing activities in the first nine months of 2023 compared to the same period in the prior year is primarily the result of higher purchases of debt and equity securities and lower capitalization of software costs in the first nine months of 2023. To generate a greater return on our cash position, the Company purchased various debt and equity securities of $4.3 million during the first nine months of 2022. The Company purchased $10.0 million of debt and equity securities in the first nine months of 2023. There were no capitalized software costs in the first nine months of 2023 compared to $534,000 of capitalized software costs in the same period of 2022.
Net cash used by financing activities was $1.5 million in the first nine months of 2023 compared to net cash used of $2.0 million in the first nine months of 2022. The decrease in net cash used for financing activities in 2023 is primarily due to timing of the 2023 third quarter dividends cash payment, partially offset by additional dividends per share paid. The third quarter 2023 cash dividend payment was not paid prior to the end of the third quarter and was paid on October 9, 2023 compared to the third quarter 2022, during which the cash dividend was paid prior to the end of the third quarter of 2022. The Company paid cash dividends of $0.26 per share in the first nine months of 2023 compared to total dividends of $0.36 per share paid in the first nine months of 2022.
“We are pleased with our efforts to increase royalties on the Autoscope Vision product line. Our work to stabilize the supply chain and investment in critical components in 2022 have yielded higher Vision sales and royalty margins in 2023. The successful sale of the RTMS business to Sensys Networks will allow us to expand our investment in video-based detection capabilities,” said Frank Hallowell, Interim CEO of Autoscope Technologies Corporation. “We are now focused on helping customers improve safety and efficiency by leveraging our video-based sensing technologies and driving growth and diversification,” concluded Mr. Hallowell.
About Autoscope Technologies Corporation
Autoscope Technologies Corporation is a global company dedicated to helping improve safety and efficiency for cities and highways by developing and delivering above-ground detection technology, applications and solutions. We give Intelligent Transportation Systems (ITS) professionals more precise and accurate information – including real-time reaction capabilities and in-depth analytics – to make more confident and proactive decisions. We are headquartered in Minneapolis, Minnesota. Visit us on the web at www.autoscope.com.
Forward-Looking Statements
Certain statements and information included in this release constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange of 1934, as amended. Forward looking statements represent our expectations or beliefs concerning future events and can be identified by the use of forward-looking words such as “believes,” “may,” “will,” “should,” “intends,” “plans,” “estimates,” “expects,” “anticipates” or other comparable terminology. Forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from the results discussed in the forward-looking statements. Some factors that might cause these differences include the factors listed below. Although we have attempted to list these factors comprehensively, we wish to caution investors that other factors may prove to be important in the future and may affect our operating results. New factors may emerge from time to time, and it is not possible to predict all of these factors, nor can we assess the effect each factor or combination of factors may have on our business.
Those risks and uncertainties may include, but are not limited to, our historical dependence on a single product for most of our revenue; competition; potential changes in government spending on transportation technology; acceptance of our product offerings and designs; budget constraints by governmental entities that purchase our products, including constraints caused by declining tax revenue; the continuing ability of Econolite Control Products, Inc. to sell our products and pay royalties owed to us; the mix of and margins on the products we sell; our dependence on third parties for manufacturing and marketing our products; our dependence on single-source suppliers to meet manufacturing needs; our failure to secure adequate protection for our intellectual property rights; our inability to develop new applications and product enhancements; the potential disruptive effect on the markets we serve of new and emerging technologies and applications, including vehicle-to-vehicle communications and autonomous vehicles; unanticipated delays, costs and expenses inherent in the development and marketing of new products; our inability to respond to low-cost local competitors; our inability to properly manage any growth in revenue and/or production requirements; the influence over our voting stock by affiliates; our inability to hire and retain key scientific and technical personnel; the effects of legal matters in which we may become involved; our inability to achieve and maintain effective internal controls; our inability to successfully integrate any acquisitions; tariffs and other trade barriers; our operating costs tend to be fixed, while our revenue tends to be seasonal, thereby resulting in operating results that fluctuate from quarter to quarter; any significant variations between actual amounts and the amounts estimated for those matters identified as our critical accounting estimates and other significant accounting estimates made in the preparation of our financial statements; political and economic instability, including continuing volatility in the economic and political environment of the European Union, the war in Ukraine, and the conflict between Israel and Hamas; our inability to comply with international regulatory restrictions over hazardous substances and electronic waste; the impact of international supply chain disruptions and delays; the impact of changes in U.S. federal and state income tax regulations; the impact of inflation and our ability to pass on rising prices to its customers; and conditions beyond our control such as war, terrorist attacks, health epidemics (including the COVID-19 pandemic caused by the coronavirus) and economic recession.
We further caution you not to unduly rely on any forward-looking statements because they reflect our views only as of the date the statements were made. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Autoscope Technologies Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share information)
(unaudited)
|
Three-Month Period Ended September 30, |
Nine-Month Period Ended September 30, |
||||||
|
2023 |
2022 |
2023 |
2022 |
||||
|
Revenue |
|||||||
|
Royalties |
$ 3,792 |
$ 2,607 |
$ 10,459 |
$ 5,812 |
|||
|
Product sales |
- |
|
64 |
71 |
|
334 |
|
|
3,792 |
|
2,671 |
10,530 |
|
6,146 |
||
|
Cost of revenue |
133 |
|
199 |
542 |
|
573 |
|
|
Gross profit |
3,659 |
|
2,472 |
9,988 |
|
5,573 |
|
|
96% |
|
93% |
95% |
|
91% |
||
|
Operating expenses |
|
|
|
|
|
|
|
|
Selling, general and administrative |
1,154 |
1,133 |
3,859 |
3,950 |
|||
|
Research and development |
664 |
581 |
1,979 |
1,535 |
|||
|
1,818 |
1,714 |
5,838 |
5,485 |
||||
|
Income from operations |
1,841 |
758 |
4,150 |
88 |
|||
|
Other income |
9 |
10 |
26 |
29 |
|||
|
Investment income (loss) |
72 |
8 |
199 |
(17) |
|||
|
Interest expense, net |
(17) |
(18) |
(52) |
(53) |
|||
|
Income before income taxes |
1,905 |
758 |
4,323 |
47 |
|||
|
Income tax expense |
437 |
144 |
936 |
1 |
|||
|
Net income from continuing operations |
1,468 |
614 |
3,387 |
46 |
|||
|
Discontinued operations |
|||||||
|
Net income from discontinued operations, net of tax |
48 |
30 |
98 |
690 |
|||
|
Gain on disposal of discontinued operations, net of tax |
2,031 |
- |
2,031 |
- |
|||
|
Earnings from discontinued operations |
2,079 |
30 |
2,129 |
690 |
|||
|
Consolidated net income |
$ 3,547 |
$ 644 |
$ 5,516 |
$ 736 |
|||
|
Net income per share from continuing operations, basic and diluted |
$ 0.27 |
$ 0.11 |
$ 0.63 |
$ 0.01 |
|||
|
Net income per share from discontinued operations, basic and diluted |
$ 0.38 |
$ 0.01 |
$ 0.39 |
$ 0.13 |
|||
|
Net income per share from operations, basic and diluted |
$ 0.65 |
$ 0.12 |
$ 1.02 |
$ 0.14 |
|||
|
Weighted shares - basic |
5,431 |
5,391 |
5,418 |
5,378 |
|||
|
Weighted shares - diluted |
5,432 |
5,395 |
5,419 |
5,387 |
|||
Autoscope Technologies Corporation
Condensed Consolidated Balance Sheets
(in thousands)
|
September 30, 2023 (unaudited) |
December 31, 2022 |
||
|
Assets |
|||
|
Current assets |
|||
|
Cash and cash equivalents |
$ 3,254 |
$ 1,177 |
|
|
Receivables, net |
4,279 |
3,688 |
|
|
Inventories |
1,728 |
976 |
|
|
Investment in debt and equity securities |
9,216 |
3,138 |
|
|
Prepaid expenses and other current assets |
430 |
545 |
|
|
Current assets held for sale |
- |
1,311 |
|
|
18,907 |
10,835 |
||
|
Property and equipment, net |
1,994 |
2,069 |
|
|
Intangible assets, net |
1,127 |
1,521 |
|
|
Deferred taxes |
2,949 |
4,475 |
|
|
Long term investment securities |
96 |
1,054 |
|
|
Operating lease asset, net |
22 |
3 |
|
|
Long term assets held for sale |
- |
1,143 |
|
|
$ 25,095 |
$ 21,100 |
||
|
Liabilities and Shareholders’ Equity |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
$ 218 |
$ 423 |
|
|
Current maturities on long-term debt |
60 |
58 |
|
|
Warranty and other current liabilities |
419 |
273 |
|
|
Dividends payable |
707 |
- |
|
|
Current liabilities held for sale |
- |
113 |
|
|
1,404 |
867 |
||
|
Non-Current liabilities |
|||
|
Long-term debt |
1,571 |
1,616 |
|
|
Shareholders’ equity |
22,120 |
18,617 |
|
|
$ 25,095 |
$ 21,100 |
||
Autoscope Technologies Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
Nine-Month Period Ended September 30, |
|||
|
2023 |
2022 |
||
|
Operating activities |
|||
|
Net income |
$ 5,516 |
$ 736 |
|
|
Less: Net income from discontinued operations, net of tax |
2,129 |
690 |
|
|
Net income from continuing operations |
3,387 |
46 |
|
|
Adjustments to reconcile net income to net cash |
|||
|
provided by operating activities |
|||
|
Depreciation and amortization |
473 |
421 |
|
|
Stock-based compensation |
153 |
329 |
|
|
Loss on disposal of assets |
- |
5 |
|
|
Investment amortization |
(17) |
||
|
Realized loss on available for sale investments |
- |
20 |
|
|
Realized (gain) loss on equity investments |
- |
53 |
|
|
Unrealized (gain) loss on available for sale investments |
(4) |
- |
|
|
Unrealized (gain) loss on equity investments |
(2) |
5 |
|
|
Noncash investment income |
- |
(5) |
|
|
Amortization of debt issuance costs |
2 |
2 |
|
|
Deferred income tax expense (benefit) |
920 |
(39) |
|
|
Changes in operating assets and liabilities |
(1,982) |
(1,542) |
|
|
Net cash provided (used) by continuing operating activities |
2,930 |
(705) |
|
|
Net cash provided by discontinued operating activities |
4,787 |
994 |
|
|
Net cash provided by operating activities |
7,717 |
289 |
|
|
|
|||
|
Investing activities |
|
|
|
|
Capitalized software development costs |
- |
(534) |
|
|
Purchases of property and equipment |
(6) |
(42) |
|
|
Sale of securities |
4,907 |
1,948 |
|
|
Purchase of securities |
(9,969) |
(4,316) |
|
|
Net cash used by investing activities of continuing operations |
(5,068) |
(2,944) |
|
|
Net cash provided (used) by investing activities of discontinued operations |
946 |
(19) |
|
|
Net cash used by for investing activities |
(4,122) |
(2,963) |
|
|
|
|||
|
Financing activities |
|
||
|
Stock for tax withholding |
- |
(15) |
|
|
Dividends paid |
(1,408) |
(1,941) |
|
|
Proceeds from exercise of stock options |
- |
32 |
|
|
Principal payments on long-term debt |
(45) |
(43) |
|
|
Net cash used by financing activities of continuing operations |
(1,453) |
(1,967) |
|
|
Net cash used by financing activities of discontinued operations |
- |
- |
|
|
Net cash used by financing activities |
(1,453) |
(1,967) |
|
|
|
|
||
|
Effect of exchange rate changes on cash |
(65) |
(177) |
|
|
Increase (decrease) in cash and cash equivalents |
2,077 |
(4,818) |
|
|
Cash and cash equivalents at beginning of period |
1,177 |
8,229 |
|
|
Cash and cash equivalents at end of period |
$ 3,254 |
$ 3,411 |
|
|
Non-Cash investing activities: |
|||
|
Cash paid for interest |
$ 52 |
$ 53 |
|
Autoscope Technologies Corporation
Non-GAAP Income from Continuing Operations
(in thousands)
(unaudited)
We define non-GAAP income from operations as income from operations before amortization of intangible assets, depreciation, and restructuring charges for the applicable periods. Management believes non-GAAP income from operations is a useful indicator of our financial performance and our ability to generate cash flows from operations. Our definition of non-GAAP income from operations may not be comparable to similarly titled definitions used by other companies. The table below reconciles non-GAAP income from operations, which is a non-GAAP financial measure, to comparable GAAP financial measures:
|
Three-Month Period Ended September 30, |
Nine-Month Period Ended September 30, |
||||||
|
2023 |
2022 |
2023 |
2022 |
||||
|
Income from continuing operations |
$ 1,841 |
$ 758 |
$ 4,150 |
$ 88 |
|||
|
Amortization of intangible assets |
131 |
131 |
394 |
344 |
|||
|
Depreciation |
24 |
|
30 |
79 |
|
77 |
|
|
Non-GAAP income from continuing operations |
$ 1,996 |
|
$ 919 |
$ 4,623 |
|
$ 509 |
|
Note – Our calculation of non-GAAP income from operations is considered a non-GAAP financial measure and is not in accordance with, or preferable to, “as reported”, or GAAP financial data. However, we are providing this information, as we believe it facilitates analysis of the Company’s financial performance by investors and financial analysts.