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Image Sensing Systems Incorporated (ISNS) |
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CEOCFO Current
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This is a printer friendly page! Image Sensing Systems is the world
leader in video-based vehicle detection and traffic data collection with applications for
bridges, tunnels, highways, and surveillance BIO: The Autoscope Solo® Pro II is a unique
product in the market, setting the industry standard in video vehicle detection systems
for high performance combined with ease of use and cost-effectiveness. The Autoscope Solo
Pro integrates a robust zoom-lens color camera that can operate in low light with a
powerful video image processor. The Autoscope Solo® Pro NC uses the same
high-performance detection algorithms and network communications as the Autoscope Solo
Pro, but in a self-contained unit that can be shelf- or rack- mounted. The Autoscope
RackVision™ is a single-camera video detection system that is available in two
models, Euro Model and US Model. The Autoscope 2020™ is the successor to the
four-camera Autoscope 2004. The Autoscope 2020 can be shelf or rack mounted in a
traffic cabinet or in a central office. The AIS (Autoscope Image Sensor)
Camera™ is a durable, high-resolution traffic camera specially optimized for the
Autoscope RackVision models, Autoscope Solo Pro NC, and Autoscope 2020. The AIS
Camera has a built in zoom lens and color imager with high sensitivity to ensure accurate
vehicle detection at night. Autoscope Software Suite version 7 is now shipping
with all Autoscope products. A major feature of version 7 is the Autoscope WIZARD which
automates setup and configuration of Autoscope video vehicle detection systems. This
initial version of the Autoscope WIZARD simplifies setup for intersection control
stop-line detection applications. Additionally, Version 7 now provides the German
standard TLS Protocol used for traffic data communications for highway applications. The
TLS protocol is used in Germany, Austria, and Switzerland.” CEOCFOinterviews: Mr.
Murdakes, when interviewed last year, you were listed as the Interim CEO of Image Sensing
Systems. Is that title still in effect and if so, are there plans in the future for the
title to become permanent? Mr. Murdakes: “Interim was the title we agreed upon back in April of 2002. I indicated at the time that it would take six quarters to get the Company back on track and profitable. We have done that. The interim portion of the title has been dropped. As of now, I am going to stay as long as the good Lord and the Board want me to stick around.” CEOCFOinterviews: Do you still maintain the exclusive license with the University of Minnesota and will the exclusivity continue after the term expires? Mr. Murdakes: “The exclusive license was signed with the University of Minnesota back in July of 1989 and runs through July of 2006, at which point that patent expires and we will no longer be required to pay royalties. By that time, we will have paid them in excess of three million dollars. The technology has evolved over the past 15 years and today we have a totally different product. Eliminating royalty cost will obviously add to our bottom line.” CEOCFOinterviews: Has the competitive environment in the machine vision products market changed over the last year? Mr. Murdakes: “I would say that the competitive environment has indeed changed. Recently Quixote Corporation (QUIX) purchased the North American operation of Peek Traffic (Peek Corporation). They were not in the machine business before but they are now. CITY LOG is a French company who has opened an office on the East coast. Odetics, now known only as Iteris Holdings Inc. (ITRSA & ITRSB) eliminated a number of non-profitable operations and are totally focused on machine vision. As new entries come into the market it only enhances the overall perception that this is a big market. They are confirming that there is a significant machine vision market. Having companies entering what we like to think was our space is great and I have no problem with it. Yes, the competitive environment has changed over the last year.” CEOCFOinterviews: Are you selling to governments or private companies? Mr. Murdakes: “We sell to the Departments of Transportation (DOTs). We are really selling to the metropolitan city governments and the state governments, which are funded primarily by federal and state government. We also sell through consultants, systems integrators and distributors but, as I said, the money comes from the federal and state governments.” CEOCFOinterviews: Has the implementation of your new products affected sales and has it made a big difference? Mr. Murdakes: “The Autoscope Solo Pro II and the RackVision Products are doing great. The 2020 is a 2004 replacement that is sold primarily in North America. The TLS Protocol was released along with the WIZARD in October of 2003. The WIZARD is a GUI interface that allows you to automatically lay out detectors. The TLS is a communications protocol. It is a German/Austrian/ Switzerland requirement, which we believe will help us in those markets. The Autoscope RackVision™ has also been selling well.” CEOCFOinterviews: Would you say that revenue growth is more through current customers with newer implementations and upgrades or would you say it is because of newer customers? Mr. Murdakes: “The answer to your question is a bit of both. To give you an example, we have doubled the business in Europe. We have two new distributors, SWARCO Holding AG and Weiss-Electronics GmbH (part of the M-Tech AG (ISIN: DE0007236309) group of companies). Graham Heywood, our managing director there, doubled his business in 2003. These are new customers who have purchased our new RackVision product. The Autoscope Solo Pro has been a phenomenal product for us. It will continue to sell, but that does not mean we are going to quit coming up with new products. I already said to stay competitive you must continue to invest and build new products. We started the development process for two new hardware products in August of 2003 and we hope by the end of the third quarter of 2004 we will have these products to take to market. We are also building a new product for 2005. Again, if you want to continue to grow both revenue and profit, you must continue to invest in technology.” CEOCFOinterviews: What is your current R&D spending? Mr. Murdakes: “We are consistently spending from 18-20% of the sales dollar for R&D. As I preach fundamentals, high-tech companies have to focus on technology, marketing, and on what you are good at, which in our case is traffic machine vision. We also have two excellent strategic partners. Add to these fundamentals, managing financials such as cash management, and continued growth of shareholder value. You’ll have a viable company.. You have to balance shareholder value, employees, and technology. Last July, we developed a three-year bottom-up product strategy. You have to listen and make sure you can meet the market requirements of what your customers need.” CEOCFOinterviews: Is Econolite Control Products your only distributor in North and Latin America? Mr. Murdakes: “Absolutely, Econolite Control Products Inc. of Anaheim, California has a great direct sales force. In North America they have distributors working with their direct sales force. In Latin America, we are represented in Venezuela, Argentina, Peru, and Brazil with local distributors. Econolite has a professional who manages those local distributors; he speaks fluent Portuguese and Spanish. When you ask if Econolite is our only North American distributor, the answer is a resounding yes.” CEOCFOinterviews: How does your distribution system work in the European and Eastern markets? Mr. Murdakes: “A
few years ago, we bought our Asian distributor (Flow Traffic Limited). We have nine (sales
and engineers) working in China, three in Hong Kong and six on the mainland. We are adding
three more in 2004. We are the dominant player in Korea. China is a huge
emerging market. Our Managing Director, Johan Billow, is located in Hong Kong. Johan
is Swedish and speaks two or three different Chinese dialects. Flow Traffic Limited is a
wholly owned subsidiary of ISS and profitable, I might add. In Europe, our Managing
Director is located in the U.K. We have technical support headquartered in Barcelona
and are budgeting for additional sales and support personnel in 2004. Graham has
done a great job in Europe. He has gotten SWARCO that handles northern Europe,
Weiss-Electronics that handles Germany and we have expanded their territory to include
Russia. We have distributors in the Netherlands, the U.K., Poland, Switzerland, Austria,
Spain, Italy and Greece. We are well represented in all of Europe.” CEOCFOinterviews: When we talked last year you were in about forty countries, how many countries are you in now? Mr. Murdakes: “We are now in fifty countries. I mentioned Europe and Norh and Latin America earlier. In Asia, Flow Traffic Ltd, is focused primarily in China and Korea however they have activities in New Zealand, Australia and Malaysia.” CEOCFOinterviews: How many cameras do you have out there now and is that the full story of your product sales? Mr. Murdakes: “We believe we have 25,000 cameras out there but that does not tell the full story. For example, in China and parts of Europe we sell Autoscope Solo® Pro NC without cameras. The reason is that they can buy cameras locally. So we developed a product a couple years ago called the Autoscope NC (No Camera), where customers can buy and install their own camera locally. We also sell the Autoscope RackVision with no camera.” CEOCFOinterviews: Do you have recurring revenue from this? Mr. Murdakes: “I’m not sure what you mean by recurring revenue. Our revenue is mainly derived from replacement and new accounts. The market is huge. I don’t know if we even have 15 or 20% of the available market. We have (as an example) not even touched the Freeway market which we need to look into as a company.” CEOCFOinterviews: When we spoke last we talked about flame detection markets and homeland security markets; has there been any movements in those areas? Mr. Murdakes: “There has been no hardware or software activity as far as homeland security. Econolite keeps abreast of what is going on in that sector. If you look at homeland security, the majority if not all of the budgeting by the federal government is being allocated to terrorism and very little, if any, is for machine vision per se. I know Econolite has attended a number of seminars and meetings but as far as any real business, the answer is no. That is on the back burner for now. Econolite has the lead and we will follow suit.” As far
as DetTronics (a division of Kiddie PLC), they submitted their explosion proof product to
the European Regulatory Agency for approval. They also have submitted to a different
laboratory for an independent evaluation against their competitors. Based on the findings
of the regulatory agency and the independent laboratory, DetTronics will then put together
their launch plan. Am I disappointed? Yes, I’m not surprised what one has to go
through for this kind product. Flame detection is not the easiest thing to do. Right
now it is in DetTronics court, and not in ours. If it happens sooner than later
that’s great. It is incremental revenue for ISS in 2004.” disclaimers |
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