I.D. Systems CEO Discusses Q3 2010 Results - Earnings Call Transcript

I.D. Systems, Inc. ( IDSY)

Q3 2010 Earnings Call Transcript

November 4, 2010 4:45 pm ET


Jeffrey Jagid – Chairman & CEO

Ned Mavrommatis – CFO & Treasurer

Darryl Miller – COO

Ken Ehrman – President


Morris Ajzenman – Griffin Securities

Matthew Hoffman – Cowen and Company

Kenneth Traub – Ethos Management

Walter Schenker – MAZ Partners



Good day, ladies and gentlemen, and welcome to the I.D. Systems third quarter 2010 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference is being recorded. I would like to introduce your host for today, Mr. Jeffery Jagid. Sir, please go ahead.

Jeffrey Jagid

Thank you. Welcome to I.D. Systems fiscal 2010 third quarter conference all. Thank you for joining us today. I’m Jeffrey Jagid, the Chairman and CEO of I.D. Systems. With me are Ned Mavrommatis, our CFO; Darryl Miller, our Chief Operating Officer; and Ken Ehrman, the President of I.D. Systems.

I will provide a brief overview of the quarter. Ned will detail our financials. Darryl will update you on our Asset Intelligence and I.D. Systems’ overall operations, and Ken will review sales and technology highlights of the quarter. We will then open the call to your questions.

Before we begin, let me reiterate the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The following discussion contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of competitive products, product demand and market acceptance risks, fluctuations in operating results and other risks detailed from time-to-time in I.D. Systems’ filings with the Securities and Exchange Commission. These risks could cause the Company’s actual results for the current fiscal year and beyond to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company.

For the third quarter ended September 30th, 2010, I.D. Systems revenues increased sequentially to $6.5 million. We saw renewed growth trend in sales of our core wireless vehicle management system during the quarter, a positive indication that the market for industrial fleet management is rebounding from last year's global economic downturn. We also saw continued solid performance from our Asset Intelligence subsidiary with a steady stream of recurring revenue from service contracts for tracking and managing fleets of cargo containers and trailers.

Another cause for optimism is that we were able to surpass our expected expense reduction goals for the quarter. After acquiring the Asset Intelligence unit from GE in January of 2010, our aggregate overhead expenses were over $31 million. Our goal was to that by $8 million annually through staff consolidations and other cutting measures.

For the third quarter, our combined SG&A and R&D expenses decreased almost 30% sequentially from the second quarter for an annualized expense reduction of approximately$9 million. As a result, I.D. Systems’ net loss for the third quarter of 2010 decreased more than 50% to $1.9 million from $4 million for the second quarter.

Looking ahead, we have introduced a new go-to-market strategy for our wireless vehicle management business with a product we call PowerBox. As Ken will discuss in more detail, PowerBox is a simplified version of our industrial industry-leading power fleet wireless vehicle management system, with a host of subscription models similar to the recurring service contract model of Asset Intelligence. We believe this host of subscription approach removes significant bottleneck in our sales cycle by avoiding any implementation burden on the customers’ IT organization and eliminating the need for any upfront capital outlays. The simplification of the product also makes channel sales effective. Consequently, we expect that PowerBox will drive more rapid growth in our industrial vehicle management segment and generate smoother stream of recurring revenue for the company.

We remain committed to stimulation revenue growth, strictly controlling costs and maintaining strong gross margins with the goal of achieving profitability in 2011. As a reflection of the confidence we have in our future, I am happy to report yesterday, November 3, 2010, our Board of Directors authorized the buyback of up to $3 million worth of I.D. Systems common stock, which we think is a great long-term investment for the company, as well as the near-term enhancement of shareholder value.

On a final note, I.D. Systems will be hosting an Analyst Day on November 16 th in New York City, and I would like to invite all of our listeners on the call today to attend. It will be a happy event, including a working lunch. We will be providing further details on our strategic direction, product developments and sales highlights, as well as provide an opportunity for analysts to interact closely with I.D. Systems’ senior management team. If you are interested in attending, please contact Ned Mavrommatis or Lindsay Estelle at I.D. Systems’ corporate offices for more event details.

Thank you for your time today. I look forward to taking your questions a little later on the call. Now, let me turn it over to Ned Mavrommatis, our CFO, to detail our financial results.

Ned Mavrommatis

Thank you, Jeff and hello to everyone on the call today. As Jeff noted, I.D. Systems revenue grew 8% to $6.5 million for the three months ended September 30, 2010, compared to $6 million for the three months ended June 30, 2010. The increases were attributable primarily to increased sales from our industrial vehicle business.

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