Autoscope Technologies Corporation

Revenue from continuing operations totaled $3.2 million, unchanged from the prior year. Product sales increased to $1.6 million from $1.2 million in Q1 2015, and radar product sales were $1.3 million versus $1.1 million a year ago. Autoscope video product sales were $280,000 and royalties were $1.6 million in the quarter. Gross margin from continuing operations was approximately 72%, down from the prior year period due to a higher mix of lower-margin product sales. Non-GAAP net operating loss from continuing operations was $88,000 versus non-GAAP operating income of $64,000 in Q1 2015. Cash at March 31, 2016 was approximately $1.4 million, down from $2.6 million at the end of the prior period. Management expects product gross margins to improve throughout 2016 and said operating income should improve during the year as new products and execution gains come through.

Dale Parker emphasized that Q1 showed stabilization in revenue, improvement in expenses, and continued investment in new technologies and the product platform. He said the company was pleased with the quarter, though he acknowledged disappointment in the decline in royalty income and said they are working with Econolite to improve that line. His tone was constructive and confident, highlighting a renewed focus on execution, strong strategic partnerships, and a belief that the company is positioned for long-term profitable growth.

Rich Ehrich walked through the quarter’s main financial items: $3.2 million in revenue from continuing operations, 72% gross margin, $88,000 in non-GAAP operating loss, and $1.4 million in cash with no debt. He said the gross margin decline was mainly due to a higher concentration of lower-margin product sales, but he expects margins to improve through 2016. He also noted that the company capitalized about $600,000 of software development costs in the quarter, bringing total investment in the new video detection product to $1.8 million, and said that spending should fall materially as the product nears completion.

This was a prepared remarks call with no analyst Q&A included in the transcript. Management’s main follow-up point was that they expect to announce second-quarter 2016 financial results in late August. The only explicit concern raised by management was the decline in royalty income, which they said they are addressing with Econolite.