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| 8-K - ID SYSTEMS INC | form8-k.htm |
I.D. Systems Reports Third Quarter and Nine Month 2018 Results
Revenue Up 21% for the Quarter and Year-to-Date Revenues Surpass Total Revenue for 2017
Woodcliff Lake, NJ — November 8, 2018 — I.D. Systems, Inc. (NASDAQ: IDSY), a leading provider of enterprise asset management technology, reported results for the third quarter ended September 30, 2018.
Management Commentary
“The third quarter and first nine months of 2018 marked another period of top-line growth, solid gross margins and cash generation for our company,” said I.D. Systems CEO, Chris Wolfe. “In addition to the 21% year-over-year growth for the quarter, our topline for the first nine months exceeded the total revenue we reported in 2017, putting us on track to realize meaningful double-digit growth in 2018. We also shipped the remaining Avis units from our first order while beginning development efforts on several critical programs that will be covered under our next statement of work with Avis.
“Our improving financial performance is due, in part, to our improving product quality and new product innovation as well as our successful integration of the Keytroller acquisition. We also started field trials of our new Logistics Visibility telemetry platforms, a new sensor family as well as FreightCAM for cargo visibility and our voice-integrated deep learning platform Lucy. These platforms were announced at the American Trucking Association in October and exceeded our expectations in generating prospect and customer excitement.”
Third Quarter 2018 Financial Results
Revenue increased 21% to $13.4 million from $11.1 million in same year-ago period. The increase was primarily due to higher Connected Vehicle Solutions and Industrial Truck Management revenue.
Recurring revenue increased 5% to $5.0 million from $4.7 million in the same period a year ago.
Gross profit increased 21% to $6.8 million (50.8% of total revenue) from $5.6 million (50.8% of total revenue) in the same year-ago period.
Selling, general and administrative expenses were $5.9 million, compared to $5.1 million in the same year-ago period. The increase was primarily due to higher sales and marketing expenses related to the company’s introduction of new Logistics Visibility Solutions products.
Research and development expenses were $1.7 million, compared to $1.1 million in the same year-ago quarter. The increase in research and development expenses was primarily due to reallocation of internal product development resources to cost of services in 2017 for the development program for Avis Budget Group.
Excluding stock-based compensation, depreciation and amortization, foreign currency translation losses, and acquisition-related expenses, non-GAAP net income totaled $165,000 or $0.01 per basic and diluted share (based on 17.3 million weighted average shares outstanding), compared to non-GAAP net income of $287,000 or $0.02 per basic and diluted share (based on 16.2 million weighted average shares outstanding) in the same year-ago quarter.
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Net loss totaled $897,000 or $(0.05) per basic and diluted share (based on 17.3 million weighted average shares outstanding), compared to net loss of $586,000 or $(0.04) per basic and diluted share in the same year-ago quarter (based on 16.2 million weighted average shares outstanding).
At quarter-end, the company had $16.3 million in cash, cash equivalents and marketable securities, an improvement from $13.1 million at the end of the prior quarter.
Nine Month 2018 Financial Results
Revenue increased 40% to a record $41.6 million from $29.8 million in same year-ago period. The increase was primarily due to higher Connected Vehicle Solutions and Industrial Truck Management revenue.
Recurring revenue increased 2% to $14.5 million from $14.3 million in the same period a year ago.
Gross profit increased 28% to $19.7 million (47.3% of total revenue) from $15.3 million (51.4% of total revenue) in the same year-ago period. The increase in gross profit was due to higher total revenue in the 2018 period. The decrease in gross margin was primarily due to deliveries of Connected Vehicle Solutions hardware, which have lower upfront margins, but grow over time making for high lifecycle profitability over the contract term.
Selling, general and administrative expenses were $17.6 million, compared to $14.8 million in the same year-ago period. The increase was primarily due to the inclusion of expenses from Keytroller, which were absent in the first half of 2017 and higher sales and marketing expenses related to the company’s introduction of new Logistics Visibility Solutions products.
Research and development expenses were $5.0 million, compared to $3.5 million in the same year-ago period. The increase in research and development expenses was primarily due to reallocation of internal product development resources to cost of services in 2017 for the development program for Avis Budget Group.
Excluding stock-based compensation, depreciation and amortization, foreign currency translation losses, and acquisition-related expenses, non-GAAP net income totaled $354,000 or $0.02 per basic and diluted share (based on 17.1 million weighted average shares outstanding), compared to non-GAAP net loss of $556,000 or $(0.04) per basic and diluted share (based on 14.3 million weighted average shares outstanding) in the same year-ago period.
Net loss totaled $3.0 million or $(0.18) per basic and diluted share (based on 17.1 million weighted average shares outstanding), compared to net loss of $3.0 million or $(0.21) per basic and diluted share in the same year-ago period (based on 14.3 million weighted average shares outstanding).
Investor Conference Call
I.D. Systems management will discuss the results of the company’s operations and business outlook on a conference call today (Thursday, November 8, 2018) at 4:45 p.m. Eastern time (1:45 p.m. Pacific time).
CEO Chris Wolfe and CFO Ned Mavrommatis will host the call, followed by a question and answer session where sell-side analysts and major institutional shareholders can ask questions.
U.S. dial-in: (877) 307-1379
International dial-in: (443) 877-4066
Conference ID: 8284779
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The conference call will be broadcast simultaneously and available for replay in the investor section of the company’s website at www.id-systems.com.
If you have any difficulty connecting with the conference call, please contact I.D. Systems’ investor relations team at (949) 574-3860.
Non-GAAP Measures
To supplement its financial statements presented in accordance with Generally Accepted Accounting Principles (GAAP), I.D. Systems provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP net income/loss and non-GAAP net income/loss per basic and diluted share. Reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, or superior to, GAAP results. These non-GAAP measures are provided to enhance investors’ overall understanding of I.D. Systems’ current financial performance. Specifically, I.D. Systems believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results and business outlook. Because I.D. Systems’ method for calculating the non-GAAP measures may differ from other companies’ methods, the non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliation of all non-GAAP measures included in this press release to the nearest GAAP measures can be found in the financial tables included in this press release.
About I.D. Systems
Headquartered in Woodcliff Lake, New Jersey, with subsidiaries in Texas, Florida, Germany, and the United Kingdom, I.D. Systems is a leading global provider of wireless M2M solutions for securing, controlling, tracking, and managing high-value enterprise assets such as industrial vehicles, rental cars, trailers, containers, and cargo. The Company’s patented technologies address the needs of organizations to monitor and analyze their assets to increase efficiency and productivity, reduce costs, and improve profitability. For more information, please visit www.id-systems.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward looking statements within the meaning of federal securities laws. Forward-looking statements include statements with respect to I.D. Systems’ beliefs, plans, goals, objectives, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond I.D. Systems’ control, and which may cause its actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. For example, forward-looking statements include statements regarding: prospects for additional customers; potential contract values; market forecasts; projections of earnings, revenues, synergies, accretion or other financial information; emerging new products; and plans, strategies and objectives of management for future operations, including growing revenue, controlling operating costs, increasing production volumes, and expanding business with core customers. The risks and uncertainties referred to above include, but are not limited to, future economic and business conditions, the loss of key customers or reduction in the purchase of products by any such customers, the failure of the market for I.D. Systems’ products to continue to develop, the possibility that I.D. Systems may not be able to integrate successfully the business, operations and employees of acquired businesses, the inability to protect I.D. Systems’ intellectual property, the inability to manage growth, the effects of competition from a variety of local, regional, national and other providers of wireless solutions, and other risks detailed from time to time in I.D. Systems’ filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2017. These risks could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, I.D. Systems. Unless otherwise required by applicable law, I.D. Systems assumes no obligation to update the information contained in this press release, and expressly disclaims any obligation to do so, whether as a result of new information, future events or otherwise.
I.D. Systems Contact
Ned Mavrommatis, CFO
ned@id-systems.com
(201) 996-9000
Investor Contact
Matt Glover
Liolios
IDSY@liolios.com
(949) 574-3860
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I.D. Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Data
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2018 | 2017 | 2018 | |||||||||||||
| Revenue: | ||||||||||||||||
| Products | $ | 6,490,000 | $ | 9,044,000 | $ | 17,199,000 | $ | 29,726,000 | ||||||||
| Services | 4,596,000 | 4,341,000 | 12,592,000 | 11,847,000 | ||||||||||||
| 11,086,000 | 13,385,000 | 29,791,000 | 41,573,000 | |||||||||||||
| Cost of revenue: | ||||||||||||||||
| Cost of products | 3,475,000 | 5,287,000 | 9,717,000 | 18,537,000 | ||||||||||||
| Cost of services | 1,984,000 | 1,301,000 | 4,756,000 | 3,362,000 | ||||||||||||
| 5,459,000 | 6,588,000 | 14,473,000 | 21,899,000 | |||||||||||||
| Gross profit | 5,627,000 | 6,797,000 | 15,318,000 | 19,674,000 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 5,063,000 | 5,921,000 | 14,762,000 | 17,610,000 | ||||||||||||
| Research and development expenses | 1,108,000 | 1,696,000 | 3,472,000 | 4,981,000 | ||||||||||||
| 6,171,000 | 7,617,000 | 18,234,000 | 22,591,000 | |||||||||||||
| Loss from operations | (544,000 | ) | (820,000 | ) | (2,916,000 | ) | (2,917,000 | ) | ||||||||
| Interest income | 59,000 | 66,000 | 169,000 | 217,000 | ||||||||||||
| Interest expense | (100,000 | ) | (34,000 | ) | (248,000 | ) | (150,000 | ) | ||||||||
| Other income, net | (1,000 | ) | (109,000 | ) | (1,000 | ) | (153,000 | ) | ||||||||
| Net loss | $ | (586,000 | ) | $ | (897,000 | ) | $ | (2,996,000 | ) | $ | (3,003,000 | ) | ||||
| Net loss per share - basic and diluted | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.21 | ) | $ | (0.18 | ) | ||||
| Weighted average common shares outstanding -basic and diluted | 16,190,000 | 17,312,000 | 14,311,000 | 17,121,000 | ||||||||||||
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I.D. Systems, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2018 | 2017 | 2018 | |||||||||||||
| Net loss attributable to common stockholders | $ | (586,000 | ) | $ | (897,000 | ) | $ | (2,996,000 | ) | $ | (3,003,000 | ) | ||||
| Depreciation and amortization | 349,000 | 392,000 | 742,000 | 1,174,000 | ||||||||||||
| Stock-based compensation | 556,000 | 569,000 | 1,853,000 | 1,658,000 | ||||||||||||
| Foreign currency translation | (133,000 | ) | 50,000 | (406,000 | ) | 146,000 | ||||||||||
| Acquisition related fees | 101,000 | 51,000 | 251,000 | 379,000 | ||||||||||||
| Non-GAAP (loss) income | $ | 287,000 | $ | 165,000 | $ | (556,000 | ) | $ | 354,000 | |||||||
| Non-GAAP net (loss) income per share - basic and diluted | $ | 0.02 | $ | 0.01 | $ | (0.04 | ) | $ | 0.02 | |||||||
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I.D. Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Data
December 31, 2017* | September 30, 2018 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,097,000 | $ | 11,528,000 | ||||
| Restricted cash | 306,000 | 306,000 | ||||||
| Investments - short term | 1,201,000 | 197,000 | ||||||
| Accounts receivable, net | 8,746,000 | 9,544,000 | ||||||
| Financing receivables - current, net | 1,295,000 | 1,048,000 | ||||||
| Inventory, net | 4,586,000 | 3,954,000 | ||||||
| Deferred costs - current | 4,296,000 | 3,976,000 | ||||||
| Prepaid expenses and other current assets | 3,627,000 | 4,781,000 | ||||||
| Total current assets | 29,154,000 | 35,334,000 | ||||||
| Investments - long term | 10,278,000 | 4,246,000 | ||||||
| Financing receivables - less current portion | 1,557,000 | 1,293,000 | ||||||
| Deferred costs - less current portion | 4,302,000 | 4,639,000 | ||||||
| Fixed assets, net | 2,747,000 | 2,262,000 | ||||||
| Goodwill | 7,318,000 | 7,318,000 | ||||||
| Intangible assets, net | 5,417,000 | 4,883,000 | ||||||
| Other assets | 159,000 | 157,000 | ||||||
| $ | 60,932,000 | $ | 60,132,000 | |||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 7,440,000 | $ | 8,608,000 | ||||
| Deferred revenue - current | 9,711,000 | 8,319,000 | ||||||
| Acquisition related contingent consideration - current | 1,923,000 | 923,000 | ||||||
| Total current liabilities | 19,074,000 | 17,850,000 | ||||||
| Deferred revenue - less current portion | 7,738,000 | 8,563,000 | ||||||
| Acquisition related contingent consideration - less current portion | 854,000 | - | ||||||
| Deferred rent | 295,000 | 230,000 | ||||||
| 27,961,000 | 26,643,000 | |||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock | - | - | ||||||
| Common stock | 183,000 | 191,000 | ||||||
| Additional paid-in capital | 133,569,000 | 137,829,000 | ||||||
| Accumulated deficit | (95,368,000 | ) | (98,371,000 | ) | ||||
| Accumulated other comprehensive loss | (578,000 | ) | (455,000 | ) | ||||
| Treasury stock | (4,835,000 | ) | (5,705,000 | ) | ||||
| Total stockholders’ equity | 32,971,000 | 33,489,000 | ||||||
| Total liabilities and stockholders’ equity | $ | 60,932,000 | $ | 60,132,000 | ||||
* Derived from audited balance sheet as of December 31, 2017.
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I.D. Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow Data
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2017 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (2,996,000 | ) | $ | (3,003,000 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Bad debt expense | 141,000 | 15,000 | ||||||
| Stock-based compensation expense | 1,853,000 | 1,658,000 | ||||||
| Depreciation and amortization | 742,000 | 1,174,000 | ||||||
| Inventory reserve | 256,000 | 260,000 | ||||||
| Change in contingent consideration | - | 146,000 | ||||||
| Other non-cash items | (49,000 | ) | 93,000 | |||||
| Changes in: | ||||||||
| Accounts receivable | 967,000 | (835,000 | ) | |||||
| Financing receivables | 1,050,000 | 511,000 | ||||||
| Inventory | 7,000 | 372,000 | ||||||
| Prepaid expenses and other assets | (306,000 | ) | (1,152,000 | ) | ||||
| Deferred costs | 1,153,000 | (17,000 | ) | |||||
| Deferred revenue | 939,000 | (567,000 | ) | |||||
| Accounts payable and accrued expenses | 134,000 | 1,168,000 | ||||||
| Net cash provided by (used in) operating activities | 3,891,000 | (177,000 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Acquisition | (7,098,000 | ) | - | |||||
| Capital expenditures | (197,000 | ) | (155,000 | ) | ||||
| Purchase of investments | (10,618,000 | ) | (2,415,000 | ) | ||||
| Proceeds from the sale and maturities of investments | 678,000 | 9,308,000 | ||||||
| Net cash (used in) provided by investing activities | (17,235,000 | ) | 6,738,000 | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from underwritten public offering | 16,065,000 | - | ||||||
| Borrowings under revolving credit facility | 11,655,000 | - | ||||||
| Repayments under revolving credit facility | (14,648,000 | ) | - | |||||
| Proceeds from exercise of stock options | 1,254,000 | 361,000 | ||||||
| Common stock repurchased | - | (621,000 | ) | |||||
| Net cash provided by used in financing activities | 14,326,000 | (260,000 | ) | |||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (408,000 | ) | 130,000 | |||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 574,000 | 6,431,000 | ) | |||||
| Cash, cash equivalents and restricted cash - beginning of period | 5,277,000 | 5,403,000 | ||||||
| Cash, cash equivalents and restricted cash - end of period | $ | 5,851,000 | $ | 11,834,000 | ||||