Costar Technologies, Inc. Announces Financial Results For the Third Quarter Ended September 30, 2021

Rhea-AI Summary

Costar Technologies reported Q3 2021 revenues of $12,646, marking a 19.6% decrease from Q3 2020. Operating expenses fell 18.0% to $4,152. The company shifted from a GAAP net loss of $8,292 in Q3 2020 to a net income of $364 or $0.22 per diluted share. Adjusted earnings stood at (237), compared to 372 in Q3 2020. The company emphasized improved customer order activity, a strong backlog, and a reduction in debt by $800 during the quarter, despite ongoing supply chain challenges.

Positive

• Returned to profitability with net income of $364 after a substantial loss in Q3 2020.
• Reduced operating expenses by 18.0%, enhancing financial efficiency.
• Debt reduction of $800 indicates improved financial health.

Negative

• Revenue decreased 19.6% year-over-year, signaling potential ongoing demand issues.
• Adjusted EBITDA fell to $74 from 974, indicating challenges in operational performance.

COPPELL, Texas, Nov. 15, 2021 /PRNewswire/ -- Costar Technologies, Inc. (the "Company") (OTC Markets Group: CSTI) announced today its financial results for the third quarter ended September 30, 2021.

Financial Results for the Quarter Ended September 30, 2021

• Revenues of $12,646, a 19.6% decrease compared to the third quarter of 2020.

• Operating expenses, excluding a third quarter 2020 impairment loss of $939, were down 18.0% to $4,152, compared to $5,062 in the third quarter of 2020.

• GAAP net income of $364 or $0.22 per diluted share, compared to GAAP net loss of $8,292, or ($5.17) per diluted share, in the third quarter of 2020.

• Adjusted earnings of ($237), or ($0.14) per diluted share, compared to $372, or $0.23 per diluted share, for the quarter ended September 30, 2020. Adjusted earnings, a non-GAAP measure, is defined below.

• Adjusted EBITDA of $74, compared to $974 for the quarter ended September 30, 2020. Adjusted EBITDA, a non-GAAP measure, is defined below.

Scott Switzer, the Company's Interim Chief Executive Officer, stated, "Increased customer order activity throughout the second and third quarters of 2021 contributed to one of our strongest backlogs entering the fourth quarter, which we began to realize in the month of October. The Costar transformation of providing compelling products, leveraging strengths across the organization, reducing debt, and driving profitability remains on track."

Sarah Ryder, the Company's Chief Financial Officer, went on to say, "Sustained cost and cash flow management drove decreases in operating expenses, allowing us to further reduce our debt position by $800 over the prior quarter. We addressed the difficult global supply chain environment in two primary ways: by limiting expenses and standardizing demand planning across our organization to provide better visibility of inventory. With product demand improving, as reflected in our quotation and bookings activity, we are actively managing supply chain challenges to fulfill existing orders and meet strengthening customer demand." 

The Company's 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, amortization of acquisition-related intangible assets, restructuring costs, impairment loss, revaluation of deferred tax asset, modification to inventory reserve policy, 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, impairment loss, modification to inventory reserve policy, 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 9/30/21	Quarter Ended 9/30/20	Nine Months Ended 9/30/21	Nine Months Ended 9/30/20
Adjusted Earnings	(237)	372	(357)	1,036
Less:
Stock-Based Compensation	(29)	(27)	(54)	(112)
Intangible Amortization	(254)	(318)	(882)	(953)
Restructuring Costs				(635)
Impairment Loss		(939)		(939)
Revaluation of Deferred Tax Asset		(4,614)		(4,614)
Modification to Inventory Reserve Policy		(2,766)		(2,766)
PPP Loan Forgiveness			3,060
Accrual of Employee Retention Credit	884		2,660
Net Income (Loss)	364	(8,292)	4,427	(8,983)
	Quarter Ended 9/30/21	Quarter Ended 9/30/20	Nine Months Ended 9/30/21	Nine Months Ended 9/30/20
Adjusted EBITDA	74	974	729	2,124
Less:
Interest	(240)	(205)	(740)	(703)
Income Taxes (Benefit)	16	(4,896)	(51)	(4,653)
Depreciation	(87)	(115)	(295)	(346)
Intangible Amortization	(254)	(318)	(882)	(953)
Stock-Based Compensation	(29)	(27)	(54)	(112)
Restructuring Costs				(635)
Impairment Loss		(939)		(939)
Modification to Inventory Reserve Policy		(2,766)		(2,766)
PPP Loan Forgiveness			3,060
Accrual of Employee Retention Credit	884		2,660
Net Income (Loss)	364	(8,292)	4,427	(8,983)

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)
				September 30 2021			December 31, 2020
					(Reviewed)			(Audited)
ASSETS
Current assets
Cash and cash equivalents				$	5		$	480
Accounts receivable, less allowance for doubtful accounts
of $217 and $175, respectively					6,581			8,579
Inventories					13,889			14,225
Prepaid expenses and other current assets					3,829			2,170
	Total current assets				24,304			25,454
Non-current assets
Property and equipment, net					238			533
Deferred financing costs, net								20
Intangible assets, net					5,529			6,411
Goodwill					5,574			5,574
Right of use assets, net					1,461			2,185
Other non-current assets					109			149
					(661)
	Total non-current assets				12,911			14,872
	Total assets			$	37,215		$	40,326
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable				$	6,204		$	4,591
Accrued expenses and other current liabilities					3,819			5,141
Line of credit					9,502			13,024
Current maturities of long-term debt, net of unamortized
financing fees					3,003			3,592
Current maturities of lease liabilities					843			1,049
	Total current liabilities				23,371			27,397
Long-Term liabilities
Payroll Protection Program loan								3,025
Deferred tax liability					116			116
Non-current maturities of lease liabilities					764			1,340
	Total long-term liabilities				880			4,481
	Total liabilities				24,251			31,878
Stockholders' Equity
Preferred stock
Common stock					3			3
Additional paid-in capital					157,775			157,686
Accumulated deficit					(140,293)			(144,720)
Less common stock held in treasury, at cost					(4,521)			(4,521)
	Total stockholders' equity				12,964			8,448
	Total liabilities and stockholders' equity			$	37,215		$	40,326

 

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS SHOWN IN THOUSANDS, EXCEPT NET INCOME PER SHARE)
					Three Months Ended September 30,						Nine Months Ended September 30,
				2021			2020			2021			2020
					(Reviewed)			(Reviewed)			(Reviewed)			(Reviewed)
Net revenues				$	12,646		$	15,727		$	38,145		$	47,395
Cost of revenues					8,789			12,917			25,479			32,449
Gross profit					3,857			2,810			12,666			14,946
Selling, general and administrative expenses					3,413			4,065			10,778			13,448
Engineering and development expense					739			997			2,357			3,552
Restructuring costs														635
Impairment loss								939						939
					4,152			6,001			13,135			18,574
Loss from operations					(295)			(3,191)			(469)			(3,628)
Other income (expenses)
	Interest expense				(240)			(205)			(740)			(703)
	Other income, net				883						5,687			1
Total other income (expenses), net					643			(205)			4,947			(702)
Income (loss) before taxes					348			(3,396)			4,478			(4,330)
Income tax provision (benefit)					(16)			4,896			51			4,653
Net income (loss)				$	364		$	(8,292)		$	4,427		$	(8,983)
Net income (loss) per share:
	Basic			$	0.22		$	(5.17)		$	2.68		$	(5.63)
	Diluted			$	0.22		$	(5.17)		$	2.68		$	(5.63)
					5879						5879
Weighted average shares outstanding:
	Basic				1,652			1,603			1,649			1,596
	Diluted				1,655			1,603			1,652			1,596

 

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SOURCE Costar Technologies, Inc.

FAQ

What were Costar Technologies' financial results for Q3 2021?

Costar Technologies reported Q3 2021 revenues of $12,646, a 19.6% decline from Q3 2020, but turned a profit with a net income of $364.

How did Costar Technologies manage its expenses in Q3 2021?

Operating expenses decreased by 18.0% to $4,152 compared to Q3 2020, contributing to improved profitability.

What is the adjusted EBITDA for Costar Technologies in Q3 2021?

The adjusted EBITDA for Q3 2021 was $74, down from $974 in Q3 2020.

How much debt did Costar Technologies reduce in Q3 2021?

Costar Technologies reduced its debt by $800 during Q3 2021.

What challenges did Costar Technologies face in Q3 2021?

The company is dealing with ongoing supply chain challenges despite improved customer orders and backlog.