Autoscope Technologies Corporation

What they do

Autoscope Technologies Corporation operates through its subsidiary, Image Sensing Systems, Inc. (ISNS), which develops video and radar detection products for traffic management. Its products include Autoscope video, RTMS radar, and IntellitraffiQ, which analyze sensor data to optimize traffic flow and enhance driver safety. The company markets its products globally, with end users primarily being governmental agencies and municipalities.

Revenue drivers

• Royalty revenue — Generated from sales of Autoscope video products by Econolite, the exclusive distributor in the U.S., Mexico, Canada, and the Caribbean. In Q3 2022, royalties were $2.6 million, representing about 81% of total revenue.
• Product sales — Direct sales of RTMS radar systems and other products through a global distributor network and the company's office in Spain. In Q3 2022, product sales were $0.5 million, about 16% of total revenue.
• International sales — Autoscope video products are sold outside the U.S., Mexico, Canada, and the Caribbean through distribution and direct sales channels, primarily via the company's office in Spain.

Recent performance

For the third quarter of 2022, total revenue decreased 3.6% to $3.2 million from $3.3 million in the prior-year period. Royalty revenue increased 5.7% to $2.6 million due to higher Autoscope Vision sales, while product sales decreased 31.9% to $0.5 million due to labor shortages and installation delays. Net income for the quarter was $644,000, up from $613,000 in the third quarter of 2021. For the first nine months of 2022, revenue decreased 13.1% to $8.7 million, and net income fell to $736,000 from $2.5 million, which included a $931,000 Paycheck Protection Program loan forgiveness in 2021.

Strategy

The company focuses on owning and supporting operating subsidiaries and investments in technology and engineering. It continues to invest in software development, with capitalized software costs of $534,000 in the first nine months of 2022, up from $178,000 in the prior-year period. It maintains exclusive distribution agreements, notably with Econolite for Autoscope video products in North America. The company also manages its cash by purchasing and selling debt and equity securities and pays a quarterly cash dividend, declaring $0.12 per share in November 2022.

Risks

• Supply chain disruptions — Global supply chain issues have caused component shortages and increased costs, leading to decreased royalty revenue in the first nine months of 2022.
• Labor shortages — Labor shortages have caused installation delays and impacted project timing, resulting in a 32% decrease in product sales in Q3 2022.
• Dependence on Econolite — Autoscope video products are marketed through exclusive agreements with Econolite, making the company reliant on this distributor for a significant portion of its revenue.
• Cash balance decline — Cash and cash equivalents decreased to $3.4 million at September 30, 2022 from $8.2 million at December 31, 2021, due to dividend payments and securities purchases.

Outlook

Management does not provide specific financial guidance but notes that cash and cash equivalents plus investments in debt and equity securities totaling $5.6 million as of September 30, 2022, are expected to satisfy working capital needs for at least one year. The company declared a quarterly dividend of $0.12 per share payable on December 5, 2022. Continued growth depends on adoption of intelligent transportation systems and government funding.