WOODCLIFF LAKE, N.J., Nov. 09, 2016 (GLOBE NEWSWIRE) -- I.D. Systems, Inc. (NASDAQ:IDSY), a leading provider of enterprise asset management technology and solutions for the Industrial Internet of Things, reported results for the third quarter ended September 30, 2016.

Management Commentary

“Our results for the third quarter and first nine months of this year were highlighted by strong gross margins and lower operating expenses, reflecting the continued success of our profitability initiatives,” said company chairman and CEO, Kenneth Ehrman. “In fact, our operating expenses for the first nine months of this year marked the lowest level since 2009, driving a significant improvement in our cash used in operating activities from $7.5 million last year to $1.3 million this year. However, while the improvements in gross margin and operating expenses are encouraging, our topline results have not met expectations. A key reason for this is related to the product issues we experienced in 2015—issues that we have successfully addressed—which caused certain customers to exclude our solutions from their 2016 budgets.

“Nevertheless, our team has worked incredibly hard this year to regain customer confidence and reestablish sales momentum with key enterprise accounts. This is demonstrated by the orders we began rolling out in late Q3 and early Q4 with enterprise customers, including Michael Foods and a Fortune 10 global industrial manufacturer. These types of roll outs are consistent with our strategy of getting major customers to accelerate their quarterly buying activity. Based on orders already secured from new and existing customers, along with additional orders that we expect to receive when customers exhaust their year-end budgets, we believe our revenue in the fourth quarter will be higher on a sequential basis. We continue to believe we have a scalable business model that enables us to achieve accelerating growth and profitability as we penetrate our customer base and pipeline.

“Along that line, our sales team is working closely with major customers to confirm our products are included in their 2017 budgets and to ensure I.D. Systems is selected as their preferred vehicle management solutions provider. Our recent wins confirm our success in this regard, which has led to a renewal of our outlook and confidence for next year. In fact, we have seen leading enterprises such as John Deere, Walmart, Nestle and P&G all name us as their official VMS supplier. We expect to add more marquee names to this list over the course of the next year. Altogether, we believe 2017 will be a pivotal year in our development, highlighted by meaningful growth and profitability. Our recent wins demonstrate that we are leaders in the large industrial Internet of Things sector and we believe we are finally in a position to profitably and meaningfully increase our market share in 2017 and beyond.”

Third Quarter 2016 Highlights

• Appointed former Qualcomm division President Chris Wolfe as new chief product officer
• American Intermodal Management deployed the company’s VeriWise® fleet management solution on its fleet of new chassis
• Secured new order from a global intermodal shipping company for 3,500 VeriWise container tracking systems
• Released next-generation FleetView™ transportation fleet management software interface for fleets of dry van trailers, intermodal containers, chassis, and flatbed trailers
• Selected by Michael Foods, a leading food processor and distributor, to outfit its fleet of 150 industrial trucks with the PowerFleet® Vehicle Management System
• Continued progress on cost reduction and margin improvement initiatives

Third Quarter 2016 Financial Results

Revenue decreased 8% to $8.2 million from $8.9 million in the prior quarter, and decreased 22% from $10.6 million in the same year-ago period. The year-over-year decline was primarily due to a $1.7 million decrease in transportation asset management (TAM) revenue and a $600,000 decrease in vehicle management systems (VMS) revenue. The year-over-year decrease in TAM revenue was primarily due to a large customer placing one-time spare part orders during Q3 2015.

Recurring revenue decreased 2% to $4.5 million (55% of total revenue) from $4.6 million (44% of total revenue) in the same period a year ago. The decrease in recurring revenue dollars was primarily attributable to customer contract renewals at lower prices per unit.

Gross margin improved by 755 basis points to 48.7% from 41.2% in the same period a year ago. The improvement was primarily due to the increased efficiency of the company’s VAC4 installation, analytics software, and online training process implemented in Q4 2015, as well as customers signing long-term, higher-margin service contracts.

Selling, general and administrative expenses decreased 4% to $5.0 million from $5.2 million in the same year-ago period, driven by headcount reductions and other cost-cutting measures implemented in the second half of 2015.

Research and development expenses were $1.1 million compared to $1.1 million in same year-ago quarter.

Excluding stock-based compensation, depreciation and amortization, and non-recurring items, non-GAAP net loss totaled $1.5 million or $(0.11) per basic and diluted share, compared to non-GAAP net loss of $1.3 million or $(0.10) per basic and diluted share in the same year-ago quarter.

Net loss totaled $2.1 million or $(0.16) per basic and diluted share, compared to a net loss of $1.9 million or $(0.15) per basic and diluted share in the same year-ago quarter.

At quarter-end, the company had $5.5 million in cash, cash equivalents and marketable securities, compared to $6.1 million at the end of the prior quarter. The balance on the company’s $7.5 million credit facility was $586,000 at quarter end.

Nine Month 2016 Financial Results

Revenue decreased 13% to $27.6 million from $31.6 million in the same year-ago period. The decline was largely due to a decrease in the company’s sales of TAM spare parts during the first nine months of 2016.

Recurring revenue decreased 3% to $13.6 million (49% of total revenue) from $14.0 million (44% of total revenue) in the same period a year ago. The decrease in recurring revenue dollars was primarily attributable to customer contract renewals at lower prices per unit.

Gross margin improved by 1,116 basis points to 50.5% from 39.3% in the same period a year ago. The improvement was primarily due to the increased efficiency of the company’s VAC4 installation, analytics software, and online training process implemented in Q4 2015, as well as customers signing long-term, higher-margin service contracts.

Selling, general and administrative expenses decreased 19% to $14.8 million from $18.2 million in the same year-ago period, driven by headcount reductions and other cost-cutting measures implemented in the second half of 2015.

Research and development expenses were $3.4 million compared to $3.5 million in same year-ago period.

Excluding stock-based compensation, depreciation and amortization, and non-recurring items, non-GAAP net loss totaled $2.3 million or $(0.18) per basic and diluted share, an improvement from a non-GAAP net loss of $6.5 million or $(0.52) per basic and diluted share in the same year-ago period.

Net loss totaled $4.3 million or $(0.33) per basic and diluted share, an improvement from a net loss of $9.0 million or $(0.72) per basic and diluted share in the same year-ago period.

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, 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, including rental cars, industrial vehicles, 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.