GlobeNewswire Inc | May 3, 2021 04:10PM EDT

May 03, 2021

SAINT PAUL, Minn., May 03, 2021 (GLOBE NEWSWIRE) -- Image Sensing Systems, Inc. (Nasdaq: ISNS) today announced results for itsquarter endedMarch 31, 2021.

First Quarter 2021Financial Summary

-- Firstquarter royalties were $1.8 million, a decrease of 14 percent from the same period in the prior year. -- First quarter product sales were $1.2 million, anincrease of 11percent from the same period in the prior year. -- Operating expenses totaled $1.9 million in thefirst quarter of 2021, adecrease of 34 percent from the prior year period. -- Capitalized software costs in thefirstquarter of 2021were $123,000 compared to $22,000 in the prior year period. -- The Company recognized other income of $931,000 for the forgiveness of the Paycheck Protection Program loan and accrued interest during the first quarter. -- Net income for thefirst quarter of 2021 totaled $1.1million compared to a net loss of $111,000 for the same period in the prior year. -- Cash balance decreased to $8.2 million at March 31, 2021, down from $8.6million at the end of the fourth quarter of 2020.

First-Quarter Results:

First quarter revenue for Image Sensing Systems, Inc. ("ISS," the "Company," "us," "we," or "our") in 2021 was $3.0million compared to $3.2million in the first quarter of 2020.Revenue from royalties was $1.8million in thefirstquarter of2021compared to $2.1million thefirstquarter of2020.Product sales increased to $1.2million in thefirstquarter of2021, an11percentincreasefrom $1.1million in thefirstquarter of2020.Autoscopevideo product sales and royalties were $76,000and $1.8million, respectively, and RTMS radar product sales were $1.1million in thefirstquarter of2021.

Gross margin for thefirst quarter of 2021was 76percent, a 4percentage point or 5 percentdecreasefrom a gross margin of 80percent for the same period in 2020. Gross margin from royalties decreased to95percent in the first quarter of 2021 compared to 96 percent in the first quarter of 2020.Product sales gross margin for thefirstquarter of2021was47percent compared to49percent in the prior year period.The decrease in the gross margin percent was primarily the result of a reduction in warranty reserve in the firstquarter of 2020.

The2021firstquarter net income includes operating expenses of $1.9million, a34percentdecreasefrom thefirstquarter of2020. The decrease is driven by first quarter 2020expenses of $294,000 for legal and outside consulting costs related to the efforts around exploring strategic alternatives to maximize shareholder value which ended in 2020. The decrease in operating expenses is alsodue to the increase in capitalized software development costs and decreased headcount in the firstquarter of 2021 compared to the firstquarter of 2020.During thefirstquarter of2021, the Companycapitalized $123,000 of internal software development costs compared to $22,000in the prior year period. Other income of $931,000 was recorded during the first quarter of 2021 when the Company received forgiveness of the Paycheck Protection Program loan and accrued interest.The Company'snet income for thefirst quarter was $1.1million, or $0.21 per diluted share, compared to a net loss of $(111,000) or $(0.02) per diluted share, in the prior year period.

On a non-GAAP basis, excluding the amortization of intangible assets and depreciation for the applicable periods, operating income for thefirst quarter of 2021was $638,000compared to an operating loss of $(51,000) in the prior year period.

We took measured actions in late 2020 that drove additional efficiencies into the organization to address COVID-19 induced market dynamics and seasonal revenue fluctuations. As reflected in our first quarter results, these actions drove profits allowing us to continue investing in new products and services. I am pleased to report that our product sales came in on target with 11 percent year-over-year growth, a direct result of our teams ability to support, promote, and sell in a challenging virtual environment. We are seeing rapid adoption of our RTMS Echo radar platform and expect this to continue as we add additional features in the coming months. While royalty revenues declined over last year, we believe this to be a transient event and expect Autoscope sales to rebound in the near term, said Chad Stelzig, CEO for ISS.

The first quarter of 2021 also marks the beginning of several important product development initiatives to address vulnerable road users, deploy artificial intelligence, and improve the accessibility of data from our platforms. These initiatives will drive new business opportunities requiring actionable data and unique insights.

Based upon the Companys financial strength and earnings, we believe that the recently declared dividend will be supported by operating cash flow of the Company while still allowing for growth and the exploration of acquisition opportunities.

We are excited about the next chapter of the Company, which we feel will help to build our existing business relationships and distribution agreements that we currently have, while also helping to foster future growth opportunities, concluded Mr. Stelzig.

Non-GAAP Financial Measures:

We provide certain non-GAAP financial information as supplemental information to financial measures calculated and presented in accordance with GAAP (Generally Accepted Accounting Principles in the United States). This non-GAAP information excludes the impact of amortizing intangible assets and depreciation 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 maynot be computed the same as similarly titled measures used by other companies.

About Image Sensing Systems

Image Sensing Systems, Inc. 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 St. Paul, Minnesota. Visit us on the web at imagesensing.com.

Safe Harbor Statement:Statements made in this release concerning the Companys or managements intentions, expectations, or predictions about future results or events are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect managements current expectations or beliefs, and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, which variations could be material and adverse. Factors that could produce such a variation include, but are not limited to, the following: the inherent unreliability of earnings, revenue and cash flow predictions due to numerous factors, many of which are beyond the Companys control; developments in the demand for the Companys products and services; relationships with the Companys major customers and suppliers; the mix of and margins on the products we sell; unanticipated delays, costs and expenses inherent in the development and marketing of new products and services; adverse weather conditions in our markets; the impact of governmental laws, regulations, and orders, including as a result of the COVID-19 pandemic causedby the coronavirus; international presence; tariffsand other trade barriers; our success in integrating any acquisitions; potential disruptions to our supply chains (including disruptions caused by geopolitical events, military actions, work stoppages, nature disasters, or international health emergencies, such as the COVID-19 pandemic) and competitive factors. Our forward-looking statements speak only as of the time made, and we assume no obligation to publicly update any such statements. Additional information concerning these and other factors that could cause actual results and events to differ materially from the Companys current expectations are contained in the Companys reports and other documents filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 11, 2021.

Image Sensing Systems, Inc.Condensed Consolidated Statements of Operations(in thousands, except per share information)(unaudited) Three-Month Periods Ended March 31, 2021 2020Revenue Product sales $ 1,163 $ 1,050 Royalties 1,816 2,109 2,979 3,159 Cost of revenue 706 623 Gross profit 2,273 2,536 Operating expenses Selling, general and administrative 1,366 1,909 Research and development 496 902 1,862 2,811 Income (loss) from operations 411 (275 )Other income, net 925 - Income (loss) from operations before income 1,336 (275 )taxesIncome tax expense (benefit) 205 (164 )Net income (loss) $ 1,131 $ (111 ) Basic net income (loss) per share $ 0.21 $ (0.02 )Diluted net income (loss) per share $ 0.21 $ (0.02 ) Weighted shares - basic 5,322 5,267 Weighted shares - diluted 5,342 5,267

Image Sensing Systems, Inc.Condensed Consolidated Balance Sheets(in thousands)(unaudited) March 31, December 31, 2021 2020Assets Current assets Cash and cash equivalents $ 8,212 $ 8,605 Receivables, net 2,850 2,261 Inventories 829 770 Prepaid expenses and other current assets 434 480 12,325 12,116 Property and equipment, net 268 303 Operating lease asset, net 82 136 Intangible assets, net 3,097 3,161 Deferredincome taxes 5,507 5,708 $ 21,279 $ 21,424 Liabilities and Shareholders? Equity Current liabilities Accounts payable $ 301 $ 547 Short-term debt - 349 Warranty and other current liabilities 495 576 796 1,472 Non-current liabilities Operating lease obligation 6 8 Long-term debt - 574 6 582 Shareholders? equity 20,477 19,370 $ 21,279 $ 21,424

Image Sensing Systems, Inc.Condensed Consolidated Statements of Cash Flows(in thousands)(unaudited) Three-Month Periods Ended March 31, 2021 2020Operating activities Net income (loss) $ 1,131 $ (111 ) Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 227 224 Stock option expense 53 59 Deferred income tax expense 201 - Forgiveness income from PPP Loan (931 ) - Changes in operating assets and liabilities (867 ) 322 Net cash provided by (used for) operating activities (186 ) 494 Investing activities Capitalized software development costs (123 ) (22 )Purchases of property and equipment (10 ) (75 )Net cash used for investing activities (133 ) (97 ) Financing activities Stock for tax withholding (24 ) - Net cash used for financing activities (24 ) - Effect of exchange rate changes on cash (50 ) (90 )Increase (decrease) in cash and cash equivalents (393 ) 307 Cash and cash equivalents at beginning of period 8,605 5,118 Cash and cash equivalents at end of period $ 8,212 $ 5,425 Non-Cash investing and financing activities: Purchase of property and equipment in accounts $ 3 $ 25 payable

Image Sensing Systems, Inc.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 and depreciation 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 Periods Ended March 31, 2021 2020 Income (loss) from operations $ 411 $ (275 )Amortization of intangible assets 187 174 Depreciation 40 50 Non-GAAP income (loss) from operations $ 638 $ (51 )

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 Companys financial performance by investors and financial analysts.

Contact: Frank Hallowell, Chief Financial Officer Image Sensing Systems, Inc. Phone: 651.603.7744