2020 Second Quarter Financial Results

Kristine GlancyCEO

MINNEAPOLIS, MN August 6, 2020 Insignia Systems, Inc. (Nasdaq: ISIG) (“Insignia”) today reported financialresults for the second quarter ended June 30, 2020 (“Q2”).

 

Overview

  • COVID-19 adversely impacted our industry and Q2 2020
  • Q2 2020 net sales decreased 0% to $3.4 million from $5.8 million in Q2 2019, driven primarily by decreases in POPS revenue.
  • Q2 2020 operating loss was $1.8 million compared to operating loss of $683,000 in Q2
  • Q2 2020 net loss was $1.8 million, or ($0.15) per basic and diluted share, compared to a net loss of

$488,000, or ($0.04) per basic and diluted share in Q2 2019.

 

Insignia’s President and CEO, Kristine Glancy, commented, “COVID-19 substantially affected our business in thesecond quarter and all signs indicate that will continue for the foreseeable future. Many of our clients shifted programming to laterin the year or stopped marketing spend as they shifted their focus to their internal supply chain and employee safety. In-store signage was most significantly impacted, with revenue down 50% as foot traffic to stores declined during the shelter-at-home time period, brands opted out of spending and overall competitive pressures. Our non-signage sales were down 14%for the quarter, in contrast to growth in recent quarters, largely due to the COVID-19 impact and clients’ slowing discussions anddecisions. With foot traffic returning to stores and our increase in outreach, we anticipate regaining momentum for the remainder of 2020.”

 

Ms. Glancy continued, “There remains a high level of uncertainty with COVID-19 and the impact to not only ourbusiness but the overall industry and how our clients are reacting to manage their own businesses. We continue to feel confidentin the long-term benefits of our portfolio diversification and the impact the new lines of business have had to our overall sales. Weexpect by the end of 2020, these new businesses will exceed 50% of our overall sales, as our POPS business continues toexperience declines. For the remainder of the year, we are focused on simplifying our business to improve results by reviewingour products and services and how to streamline our operations to reduce expenses. We are focused on amplifying our salesoutreach with customer acquisition and retention offers to rebuild the overall sales pipeline. While 2020 has been a challenging year thus far, the team continues to prove how relentless they are in rebuilding the company for future growth. I’mextremely thankful for the team and the work they have done, especially during a very challenging timeframe in our industry.”

 

Q2 2020 Results

Net sales decreased 42.0% to $3,388,000 in Q2 2020, from $5,842,000 in Q2 2019, due to decreases in both POPS solutionrevenue and innovation initiatives revenue. The decreases are the result of significantly reduced or delayed spending from our CPGcustomers during the ongoing COVID 19 pandemic. POPS decreases are also due to the loss of a significant retailer in 2019 as aresult of competitive pressures, contributing to a decrease in signs placed.

 

Gross profit in Q2 2020 decreased to $373,000, or 11.0% of net sales, from $1,465,000, or 25.1% of net sales, in Q2 2019. Thedecrease in gross profit was primarily due to a decrease in POPS solution sales as our gross profit is highly dependent on saleslevels due to the relatively fixed nature of a portion of our payments to retailers. Decreased sales from innovation solutions alsocontributed to the decrease in gross profit, partially offset by improved margin rates from innovation solutions.

 

Selling expenses in Q2 2020 were $927,000, or 27.3% of net sales, compared to $693,000, or 11.9% of net sales, in Q2 2019due to staff restructuring-related expenses.

 

Marketing expenses in Q2 2020 were $243,000, or 7.2% of net sales, compared to $585,000, or 10.0% of net sales, in Q22019. Decreased marketing expense for the period was primarily the result of reduced staffing and variable staff-relatedexpenses, and due to decreased consulting expenses.

 

General and administrative expenses in Q2 2020 were $980,000, or 28.9% of net sales, compared to

$870,000, or 14.9% of net sales, in Q2 2019 due to increased litigation expenses.

 

Income tax expense for Q2 2020 was 0.6% of pretax loss, or an expense of $11,000, compared to income tax benefit of 25.3% ofpretax loss, or $165,000, in Q2 2019.

 

As a result of the items above, the net loss for Q2 2020 was $1,772,000, or $0.15 per basic and diluted share, compared to a netloss of $488,000, or $0.04 per basic and diluted share, in Q2 2019.

 

As of June 30, 2020, cash and cash equivalents totaled $8.0 million, compared to $7.5 million as of December 31, 2019.

 

 

About Insignia Systems, Inc.

Insignia Systems, Inc. sells product solutions ranging from in-store to digital advertising. Consumer-packaged goods (CPG)manufacturers and retailers across the country rely on our deep expertise in the dynamic retail environment to provide a fullsuite of shopper engagement solutions.

 

For additional information, contact (800) 874-4648, or visit the Insignia website at www.insigniasystems.com Investor inquiriescan be submitted to investorrelations@insigniasystems.com.

 

Cautionary Statement for the Purpose of Safe Harbor Provisions of the Private Securities Litigation Reform Act of1995

 

Statements in this press release that are not statements of historical or current facts are considered forward- lookingstatements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, asamended. The words “anticipate,” “continue,” “expect,” “intend,” “remain,” “seek,” “will” and similar expressions identifyforward-looking statements. Readers are cautioned not to place undue reliance on these or any forward-looking statements,which speak only as of the date of this press release. Statements made in this press release regarding, for instance, anticipatedfuture profitability, future service revenues, innovation and transformation of Insignia’s business, allocations of resources,benefits of new relationships, and the impacts of the COVID-19 pandemic and efforts to mitigate the same are forward-looking statements. These forward-looking statements are based on current information, which we have assessed and whichby its nature is dynamic and subject to rapid and even abrupt changes. As such, actual results may differ materially from theresults or performance expressed or implied by such forward-looking statements. Forward-looking statements involveknown and unknown risks, uncertainties and other factors, including those set forth in our Annual Report on Form 10-K for theyear ended December 31, 2019 and additional risks, if any, identified in our Quarterly Reports on Form 10-Q and our CurrentReports on Forms 8-K filed with the SEC. Such forward- looking statements should be read in conjunction with ’Insignia’sfilings with the SEC. Insignia assumes no responsibility to update the forward-looking statements contained in this pressrelease or the reasons why actual results would differ from those anticipated in any such forward-looking statement, otherthan as required by law.

 

Insignia Systems, Inc.

STATEMENTS OF OPERATIONS

(Unaudited)

 

Three Months Ended                               Six Months Ended June 30,                    June 30,

           2020                      2019                     2020                      2019       

 

Net sales $      3,388,000 $        5,842,000 $      8,070,000 $      10,982,000
Cost of sales      3,015,000        4,377,000      6,728,000        8,743,000
Gross profit 373,000 1,465,000 1,342,000 2,239,000
Operating expenses:

Selling

 

927,000

 

693,000

 

1,647,000

 

1,431,000

Marketing 243,000 585,000 608,000 1,250,000
General and administrative         980,000           870,000      1,973,000        1,578,000
Operating loss (1,777,000) (683,000) (2,886,000) (2,020,000)
Other income, net           16,000             30,000           40,000             67,000
Loss before taxes (1,761,000) (653,000) (2,846,000) (1,953,000)
Income tax expense (benefit)           11,000          (165,000)        (211,000)          (369,000)
Net loss     (1,772,000)          (488,000)     (2,635,000)       (1,584,000)
Net loss per share: Basic  

 

$             (0.15)

 

 

$               (0.04)

 

 

$             (0.22)

 

 

$               (0.13)

Diluted $             (0.15) $               (0.04) $             (0.22) $               (0.13)

 

Shares used in calculation of net loss per share:

Basic 12,078,000 11,888,000 12,072,000 11,872,000
Diluted 12,078,000 11,888,000 12,072,000 11,872,000

 

 

 

SELECTED BALANCE SHEET DATA

 

(Unaudited)

June 30,

 

December 31,

           2020             2019
 

Cash and cash equivalents

 

$       7,974,000

 

$         7,510,000

Working capital 9,891,000 11,395,000
Total assets 14,983,000 16,990,000
Total liabilities 5,696,000 5,196,000
Shareholders’ equity 9,287,000 11,794,000

 

Working capital represents current assets less current liabilities.