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Costar Technologies, Inc. Announces Financial Results For the Fourth Quarter and Year Ended December 31, 2019

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COPPELL, Texas, March 30, 2020 /PRNewswire/ -- Costar Technologies, Inc. (the "Company") (OTC Markets Group: CSTI) announced today its financial results for the fourth quarter and year ended December 31, 2019 that have been audited by the independent accounting firm BKD, LLP.

Financial Results for the Quarter Ended December 31, 2019

  • Revenues of $16,938, a 0.6% decrease compared to the fourth quarter of 2018. The decrease is primarily due to decreases in revenue generated by the CohuHD Costar business segment partially offset by increases in revenue from the Costar Video Systems' business segment.
  • Operating expenses were down 15.2% to $6,348, compared to $7,485 in the fourth quarter of 2018.
  • GAAP net loss of $1,467, or ($0.94) per diluted share, compared to a GAAP net loss of $2,948, or ($1.91) per diluted share, in the fourth quarter of 2018.
  • Adjusted earnings of ($531), or ($0.34) per diluted share, compared to ($1,214), or ($0.79) per diluted share for the quarter ended December 31, 2018. Adjusted earnings, a non-GAAP measure, is defined below.
  • Adjusted EBITDA of ($286), compared to ($1,702) for the quarter ended December 31, 2018. Adjusted EBITDA, a non-GAAP measure, is defined below.

The Company completed the acquisition of Arecont Vision, LLC on July 13, 2018. The financial results of Arecont Vision, LLC are included beginning July 14, 2018.  

Financial Results for the Year Ended December 31, 2019

  • Revenues of $69,526, a 18.0% increase compared to 2018. The increase is due to increases in the Costar Video Systems' business segment.
  • Operating expenses were up 24.6% to $28,117 compared to $22,558 in of 2018.
  • GAAP net loss of $2,698, or ($1.72) per diluted share, compared to a GAAP net loss of $2,880, or ($1.87) per diluted share, in 2018.
  • Adjusted earnings of ($494), or ($0.32) per diluted share, compared to $1,118, or $0.73 per diluted share for the year ended December 31, 2018. Adjusted earnings, a non-GAAP measure, is defined below.
  • Adjusted EBITDA of $617, compared to $1,513 for the year ended December 31, 2018. Adjusted EBITDA, a non-GAAP measure, is defined below.

Scott Switzer, the Company's Chief Operating Officer and Chief Financial Officer, stated, "Revenues in the fourth quarter of 2019 were consistent with the prior year despite budget restrictions and construction delays impacting CohuHD's sales. During 2019 we drastically reduced expenses due to cost reduction efforts implemented at Arecont Vision Costar. I am encouraged by our strong start in the first quarter of 2020 driven by release of the previously delayed CohuHD orders. The impact from the COVID-19 pandemic cannot be forecasted on future quarters due to uncertainty surrounding the virus, but we are monitoring this daily."

James Pritchett, the Company's Chief Executive Officer, went on to say, "All of our facilities are in full operations under the Essential Service Business Exception of the Shelter in Place orders. Our people are our greatest resource and we are working diligently to safeguard our employees while maintaining support for our customers. The majority of our office staff are working from home, we are practicing social distancing and have increased our sanitation efforts. We will continue to monitor the impact to our business and make the necessary modifications as the situation develops. I am confident in our ability to execute and build long-term value for our customers, shareholders and employees as we navigate in these uncertain times."

The Company's outside independent auditors completed their analysis of the Company's financial condition. The Independent Auditor's Review Report, including financial statements and applicable footnote disclosures, is available on our website at www.costartechnologies.com.

Non-GAAP Financial Measures

The Company defines adjusted earnings, a non-GAAP measure, as net income (loss) excluding stock-based compensation and amortization of acquisition-related intangible assets. The Company defines adjusted EBITDA, a non-GAAP measure, as earnings before interest, taxes, depreciation, amortization and stock-based compensation. The following tables reconcile the non-GAAP financial measures disclosed in this release to GAAP net income (loss):


Year Ended
12/31/2019

Year Ended
12/31/2018


Q4 2019

Q4 2018

Adjusted Earnings

(494)

1,118


(531)

(1,214)

Less:






    Stock-Based Compensation

(412)

(227)


(115)

(49)

    Intangible Amortization

(1,294)

(1,270)


(323)

(331)

    Contingent Consideration Fair Value Adjustment

(498)

(932)


(498)

(932)

    Transaction and Related Expenses


(729)



(422)

    Loan Forgiveness Required Under AVC Purchase Agreement


(410)




    Payments Routed to a Non-Company Bank Account


(430)




Net Loss

(2,698)

(2,880)


(1,467)

(2,948)








Year Ended
12/31/2019

Year Ended
12/31/2018


Q4 2019

Q4 2018

Adjusted EBITDA

617

1,513


(286)

(1,702)

Less:






    Interest

(1,320)

(804)


(314)

(283)

    Income Taxes 

661

806


187

887

    Depreciation

(452)

(397)


(118)

(116)

    Intangible Amortization

(1,294)

(1,270)


(323)

(331)

    Stock-Based Compensation

(412)

(227)


(115)

(49)

    Contingent Consideration Fair Value Adjustment

(498)

(932)


(498)

(932)

    Transaction and Related Expenses


(729)



(422)

    Loan Forgiveness Required Under AVC Purchase Agreement


(410)




    Payments Routed to a Non-Company Bank Account


(430)




Net Loss

(2,698)

(2,880)


(1,467)

(2,948)

These reconciliations of GAAP to non-GAAP measures should be considered together with the Company's financial statements. These non-GAAP measures are not meant as a substitute for GAAP, but are included solely for informational and comparative purposes. The Company's management believes that this information can assist investors in evaluating the Company's operational trends, financial performance, and cash generating capacity. Management believes these non-GAAP measures allow investors to evaluate the Company's financial performance using some of the same measures as management. However, the non-GAAP financial measures should not be regarded as a replacement for (or superior to) corresponding, similarly captioned, GAAP measures.

About Costar Technologies, Inc.

Costar Technologies, Inc. develops, designs, manufactures and distributes a range of security solution products including surveillance cameras, lenses, digital video recorders and high-speed domes. The Company also develops, designs and distributes industrial vision products to observe repetitive production and assembly lines, thereby increasing efficiency by detecting faults in the production process. Headquartered in Coppell, Texas, the Company's shares currently trade on the OTC Markets Group under the ticker symbol "CSTI". Costar was ranked as the 35th largest company in a&s magazine's Security 50 for 2019. Security 50 is an annual ranking by the magazine of the world's largest security manufacturers in the areas of video surveillance, access control and intruder alarms, based on sales revenue.

Cautionary Statement Regarding Forward Looking Statements

This press release contains forward-looking statements, including statements regarding the Company's ability to grow revenue and earnings, that are subject to substantial risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements, including but not limited to risks related to the ability to diversify business across vertical markets, secure new customer wins, and launch new products. You can often identify forward-looking statements by words such as "believe," "may," "estimate," "continue," "anticipate," "intend," "plan," "expect," "predict," "potential," or the negative of these terms or other comparable terminology. These forward-looking statements are based on management's current expectations but they involve risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of the risks and uncertainties.

You should not place undue reliance on any forward-looking statements. The Company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable laws.

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

(AMOUNTS SHOWN IN THOUSANDS)





December 31, 2019


December 31, 2018








ASSETS







Current assets






   Cash and cash equivalents

$

1


$

189

   Accounts receivable, less allowance for doubtful accounts of $471 and $859 in 2019 and 2018, respectively


9,056



9,333

   Inventories, net of reserve for obsolescence of $1,264 and $1,101 in 2019 and 2018, respectively


20,196



20,618

   Prepaid expenses and other current assets


2,295



1,531


Total current assets


31,548



31,671








Non-current assets






   Property and equipment, net


910



915

   Deferred financing costs, net


59



99

   Deferred tax asset, net


4,514



3,766

   Trade names, net


2,198



2,561

   Distribution agreements, net


801



905

   Customer relationships, net


4,187



4,884

   Covenants not to compete, net


60



92

   Patents, net


169



200

   Technology, net


268



335

   Goodwill



6,513



6,513

   Right of use assets


3,131




   Other non-current assets


149



109


Total non-current assets


22,959



20,379


Total assets

$

54,507


$

52,050








LIABILITIES AND STOCKHOLDERS' EQUITY













Current liabilities






   Accounts payable

$

5,639


$

5,786

   Accrued expenses and other


5,879



7,075

   Line of credit


15,953



11,738

   Current maturities of long-term debt, net of unamortized financing fees


781



773

   Contingent purchase price


1,490



1,048

   Current maturities of notes payable, unrelated party


583




   Current maturities of notes payable, related party





805

   Current maturities of lease liabilities


990





Total current liabilities


31,315



27,225








Long-Term liabilities






   Long-term debt, net of current maturities and unamortized financing fees


3,592



4,373

   Contingent purchase price, net of current portion





992

   Non-current maturities of lease liabilities


2,389





Total long-term liabilities


5,981



5,365


Total liabilities


37,296



32,590








Stockholders' Equity






   Preferred stock






   Common stock


3



3

   Additional paid-in capital


157,478



157,029

   Accumulated deficit


(135,749)



(133,051)

Less common stock held in treasury, at cost


(4,521)



(4,521)


Total stockholders' equity


17,211



19,460


Total liabilities and stockholders' equity

$

54,507


$

52,050

 

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS SHOWN IN THOUSANDS, EXCEPT NET INCOME PER SHARE)





Three Months Ended December 31,


Years Ended December 31,



2019


2018


2019


2018



























Net revenues

$

16,938


$

17,042


$

69,526


$

58,906

Cost of revenues


11,433



11,756



42,960



37,156














Gross profit


5,505



5,286



26,566



21,750














Selling, general and administrative expenses


5,037



6,185



22,395



18,512













Engineering and development expense


1,311



1,300



5,722



4,046

Transaction and related expense





422






729














Change in fair value of contingent purchase price


498



932



498



932




6,846



8,839



28,615



24,219

Income (loss) from operations


(1,341)



(3,553)



(2,049)



(2,469)














Other expenses













Interest expense


(314)



(283)



(1,320)



(804)


Other income (expense), net


1



1



10



(413)

Total other expenses, net


(313)



(282)



(1,310)



(1,217)














Income (loss) before taxes


(1,654)



(3,835)



(3,359)



(3,686)

Current income tax expense 


597



36



123



117

Deferred income tax benefit


(784)



(923)



(784)



(923)














Net loss

$

(1,467)


$

(2,948)


$

(2,698)


$

(2,880)














Net loss per share:













Basic

$

(0.94)


$

(1.91)


$

(1.72)


$

(1.87)















Diluted

$

(0.94)


$

(1.91)


$

(1.72)


$

(1.87)














Weighted average shares outstanding:













Basic


1,568



1,542



1,568



1,542















Diluted


1,568



1,542



1,568



1,542

 

Cision View original content:http://www.prnewswire.com/news-releases/costar-technologies-inc-announces-financial-results-for-the-fourth-quarter-and-year-ended-december-31-2019-301032208.html

SOURCE Costar Technologies, Inc.

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