Costar Technologies, Inc. Announces Financial Results For the Second Quarter Ended June 30, 2021

Press Releases

Aug 13, 2021

COPPELL, Texas, Aug. 12, 2021 /PRNewswire/ — Costar Technologies, Inc. (the “Company”) (OTC Markets Group: CSTI) announced today its financial results for the second quarter ended June 30, 2021.

Financial Results for the Quarter Ended June 30, 2021

Revenues of $14,717, a 0.5% increase compared to the second quarter of 2020.
Operating expenses, excluding second quarter 2020 restructuring costs of $635, were down 13.3% to $4,615, compared to $5,321 in the second quarter of 2020.
GAAP net income of $4,862, or $2.94 per diluted share, compared to GAAP net loss of $498, or ($0.31) per diluted share, in the second quarter of 2020.
Adjusted earnings of $371, or $0.22 per diluted share, compared to $508, or $0.32 per diluted share, for the quarter ended June 30, 2020. Adjusted earnings, a non-GAAP measure, is defined below.
Adjusted EBITDA of $783, compared to $650 for the quarter ended June 30, 2020. Adjusted EBITDA, a non-GAAP measure, is defined below.

Scott Switzer, the Company’s Interim Chief Executive Officer stated, “The second quarter of 2021 presented a recovering but difficult global business environment. Our revenues rebounded from the first quarter of 2021 and the continued reduction in our operating expenses drove improved profitability. We launched our NDAA compliant cameras with enhanced artificial intelligence and pedestrian detection, expanding our target market and meeting customer needs. The Costar team has continued to show great resilience in a challenging situation. The strength of the team and the progress of our business transformation confirms the direction for the years ahead.”

Sarah Ryder, the Company’s Chief Financial Officer went on to say, “Our second quarter revenues were consistent with the prior year despite increases in sales quotation activity and order volumes. The global chip shortage and shipping and logistics issues experienced in the second quarter caused delays, pushing several orders to the third and fourth quarters of 2021. We enter the third quarter with a strong sales backlog as we continue to manage supply chain and logistics challenges. Our overall debt position decreased from $19,600 to $13,300 due to improved cash management and full forgiveness of our Payroll Protection Program loan in June 2021. In addition the Company is eligible to receive an Employee Retention Credit for the first three quarters of 2021. This credit results in a significant decrease in our payroll tax obligation, estimated to be approximately $2,550 over the three quarters.”

The Company’s independent auditors completed their analysis of the Company’s financial condition. The Independent Auditor’s 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, amortization of acquisition-related intangible assets, restructuring costs, PPP loan forgiveness and accrual of Employee Retention Credit. The Company defines adjusted EBITDA, a non-GAAP measure, as earnings before interest, taxes, depreciation, amortization, stock-based compensation, restructuring costs, PPP loan forgiveness and accrual of Employee Retention Credit. The following tables reconcile the non-GAAP financial measures disclosed in this release to GAAP net income (loss):

	Quarter Ended 6/30/21	Quarter Ended 6/30/20	Six Months Ended 6/30/21	Six Months Ended 6/30/20
Adjusted Earnings	371	508	(110)	664
Less:
Stock-Based Compensation	(31)	(53)	(35)	(85)
Intangible Amortization	(314)	(318)	(628)	(635)
Restructuring Costs		(635)		(635)
PPP Loan Forgiveness	3,060		3,060
Accrual of Employee Retention Credit	1,776		1,776
Net Income (Loss)	4,862	(498)	4,063	(691)

	Quarter Ended 6/30/21	Quarter Ended 6/30/20	Six Months Ended 6/30/21	Six Months Ended 6/30/20
Adjusted EBITDA	783	650	665	1,150
Less:
Interest	(255)	(207)	(500)	(498)
Income Taxes (Benefit)	(57)	178	(67)	243
Depreciation	(100)	(113)	(208)	(231)
Intangible Amortization	(314)	(318)	(628)	(635)
Stock-Based Compensation	(31)	(53)	(35)	(85)
Restructuring Costs		(635)		(635)
PPP Loan Forgiveness	3,060		3,060
Accrual of Employee Retention Credit	1,776		1,776
Net Income (Loss)	4,862	(498)	4,063	(691)

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 40^th largest company in a&s magazine’s Security 50 for 2020. 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)



		June 30 2021		December 31, 2020
		(Reviewed)		(Audited)
ASSETS

Current assets
Cash and cash equivalents		$	2	$	480
Accounts receivable, less allowance for doubtful accounts
of $225 and $175, respectively			7,677		8,579
Inventories			12,762		14,225
Prepaid expenses and other current assets			3,952		2,170
	Total current assets		24,393		25,454

Non-current assets
Property and equipment, net			325		533
Deferred financing costs, net					20
Intangible assets, net			5,783		6,411
Goodwill			5,574		5,574
Right of use assets, net			1,705		2,185
Other non-current assets			109		149
			(661)
	Total non-current assets		13,496		14,872

	Total assets	$	37,889	$	40,326


LIABILITIES AND STOCKHOLDERS’ EQUITY


Current liabilities
Accounts payable		$	5,149	$	4,591
Accrued expenses and other current liabilities			4,873		5,141
Line of credit			10,110		13,024
Current maturities of long-term debt, net of unamortized
financing fees			3,199		3,592
Current maturities of lease liabilities			955		1,049
	Total current liabilities		24,286		27,397

Long-Term liabilities
Payroll Protection Program loan					3,025
Deferred tax liability			116		116
Non-current maturities of lease liabilities			916		1,340
	Total long-term liabilities		1,032		4,481
	Total liabilities		25,318		31,878

Stockholders’ Equity
Preferred stock
Common stock			3		3
Additional paid-in capital			157,746		157,686
Accumulated deficit			(140,657)		(144,720)
Less common stock held in treasury, at cost			(4,521)		(4,521)
	Total stockholders’ equity		12,571		8,448

	Total liabilities and stockholders’ equity	$	37,889	$	40,326

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS SHOWN IN THOUSANDS, EXCEPT NET INCOME PER SHARE)



		Three Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2021		2020
		(Reviewed)		(Reviewed)			(Reviewed)		(Reviewed)

Net revenues		$	14,717		$	14,640	$	25,499		$	31,668
Cost of revenues			9,728			9,154		16,690			19,532

Gross profit			4,989			5,486		8,809			12,136

Selling, general and administrative expenses			3,764			4,198		7,365			9,383
Engineering and development expense			851			1,123		1,618			2,555
Restructuring costs						635					635
			4,615			5,956		8,983			12,573

Income (loss) from operations			374			(470)		(174)			(437)

Other expenses
	Interest expense		(255)			(207)		(500)			(498)
	Other income, net		4,800			1		4,804			1
Total other income (expenses), net			4,545			(206)		4,304			(497)

Income (loss) before taxes			4,919			(676)		4,130			(934)
Income tax provision (benefit)			57			(178)		67			(243)

Net income (loss)		$	4,862		$	(498)	$	4,063		$	(691)

Net income (loss) per share:
	Basic	$	2.94		$	(0.31)	$	2.47		$	(0.43)

	Diluted	$	2.94		$	(0.31)	$	2.46		$	(0.43)

Weighted average shares outstanding:
	Basic		1,652			1,597		1,648			1,593

	Diluted		1,655			1,597		1,650			1,593