I.D. Systems' CEO Discusses Q1 2013 Results - Earnings Call Transcript

May. 9.13 | About: I.D. Systems, (IDSY)

I.D. Systems, Inc. (NASDAQ:IDSY)

Q1 2013 Earnings Call

May 9, 2013 4:45 pm ET

Executives

Jeffrey M. Jagid – Chairman, Chief Executive Officer and Director

Ned Mavrommatis – Chief Financial Officer and Treasurer

Kenneth S. Ehrman – President

Analysts

Morris Ajzenman – Griffin Securities

Matthew Hoffman – Cowen & Co.

Operator

Good day, ladies and gentlemen and welcome to the I.D. Systems’ Incorporated Q1 2013 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at time. (Operator Instructions) I would like to introduce your host for today’s conference, Mr. Jeffery Jagid. Mr. Jagid, you may begin.

Jeffrey M. Jagid

Thank you. Welcome to I.D. Systems Fiscal 2013 First Quarter Conference Call. Thank you for joining us today. I’m Jeffrey Jagid, the Chairman and CEO of I.D. Systems. Joining me today are our CFO, Ned Mavrommatis; and Ken Ehrman, the President of I.D. Systems. I will provide an overview of our results for the quarter, Ned will detail our financials, and Ken will review our recent sales and operational highlights. We will then open the call to your questions.

Before we begin, let me remind everyone regarding forward-looking statements. The following discussion contains forward-looking statements made within the meaning of federal securities laws, which is subject to risks and uncertainties, including, but not limited to, the impact of competitive products, product demand and market acceptance risks, fluctuations in operating results, and other risks detailed from time to time in I.D. Systems’ filings with the Securities and Exchange Commission. These risks could cause the company’s actual results for the current fiscal year and beyond to differ materially from those expressed in any forward-looking statements made by or on behalf of the company.

In the first quarter of 2013, I.D. Systems revenue was $8 million, although this reflects the slower start in our record first quarter revenue of $9.8 million in 2012. 2013 sales pipeline is very robust and we remain encouraged about our growth opportunities for the year. The year-over-year revenue decrease in Q1 was attributable primarily to the timing of the industrial vehicle management business in the U.S., as well as a revenue shortfall from our European operations reflecting the overall economic conditions in the EU.

However, our recurring revenue stream continued to grow increasing to $4.4 million in Q1 2013 from $4.2 million in the first quarter of 2012. We remain focused on the revenue growth strategy that has proven successful over the past three years. We’re committed to deepening the penetration of our solutions with core customers especially through our enterprise analytic software, which Ken will expand on later in the call.

We will strive to continue diversifying revenue sources by winning new customers through both direct sales and channel partners. And we will continue our efforts to extend our market leadership especially through solution innovations and intellectual property. With respect to our IP, we continue to evaluate our patent portfolio and the protections it provides against competition especially in the rental car management space.

I know many of our listeners have special interest and the status of our relationship with the Avis Budget Group. To date as most of you know, I.D. Systems has deployed its rental car management technology on approximately 30,000 Avis Budget vehicles in North America and is part of our contract between our two companies. Avis Budget Group acquired an approximately 9% equity stake in I.D. Systems. These factors are important when evaluating the role we expect to play with Avis Budget going forward.

We’re confident that our business with Avis Budget will continue to evolve in a positive direction as indicated by the public comments of Avis Budget CEO, Ron Nelson in January of this year following Avis Budget’s acquisition of Zipcar, the car sharing company which also uses a remote wireless technology to manage its fleet. Since that time, we’ve been actively engaged with senior management at Avis Budget to analyze their technology roadmap and explore a variety of ways to integrated I.D. Systems’ capabilities into Avis Budget vehicles including those used by Zipcar.

We believe that these new opportunities could be even more exciting for our company than the original technology roll out plan envisioned in our contract with Avis Budget. We also continued to discuss the timing of exclusivity with Avis Budget, which is due to expire in July of 2013. Nothing has been concluded at this point, but we expect to be able to provide an update in advance of the exploration.

I have a couple of final thoughts to leave you with. I would like to emphasize that we continue to work hard on many active growth opportunities with large enterprise customers in addition to Avis Budget, including Procter & Gamble, Nestlé, Ford, Walgreens, Wal-Mart, Caterpillar, Deere, CNH, Toyota, Audi, BMW, Bridgestone, Firestone, Kuehne + Nagel, Kellogg’s, General Mills, American Airlines and many other Fortune 500 companies.

Our wireless asset management solution remain the most flexible and robust in the markets we serve and as these markets for our wireless solutions continue to mature, there are many reasons for us to be excited about I.D. Systems opportunities for continued growth.

To give ourselves maximum flexibility to act on growth opportunities particularly in organic growth, we recently filed a self registration statement as many of you know. Filing the shelf now will enable us enable us to act in a timely manner if we encounter the right acquisition opportunity going forward.

Thank you for your time today, I look forward to your questions later on the call. Now let me turn the discussion over Ned Mavrommatis our CFO to detail our financial results for the quarter.

Ned Mavrommatis

Thank you, Jeff and hello to everyone on the call today. As Jeff noted revenue in Q1 2013 was $8 million compared to $9.8 million in the first quarter of 2012. The decrease was attributable primarily to a decline in industrial vehicle management system orders in the U.S. due in large part to the timing of deal closings. And the revenue shortfall from our operations in Europe, where we believe macro economic conditions are affecting our business.

Revenue from Europe declined by $644,000 in Q1 2013 compared to the prior year first quarter. Recurring revenue in Q1 2013 was $4.4 million, up 4% from $4.2 million in the first quarter a year ago.

Recurring revenue represented 54% of total revenue in Q1 2013 compared to 43% of total revenue in the first quarter a year ago. Our vehicle management business contributed $3.8 million in revenue in Q1 2013, reflecting the majority of our delayed deal closings while our transportation asset management business contributed $4.2 million.

Gross margin for Q1 was 48%, down slightly from 50% in the first quarter of 2012, primarily due to higher contribution of revenue from channel partners. SG&A expenses and R&D expenditures were $5.5 million and $1.1 million respectively in Q1 2013 essentially flat compared to $5.6 million and $1.1 million respectively in Q1 of 2012. Excluding stock-based compensation and depreciation and amortization, non-GAAP net loss was $1.8 million, or $0.15 per basic and diluted share, compared to a non-GAAP net loss of $840,000, or $0.07 per basic and diluted share, in the same period a year ago.

Net loss was $2.6 million, or $0.22 per basic and diluted share, compared to a net loss of $1.6 million, or $0.14 per basic and diluted share in the first quarter of 2012. Our balance sheet remained strong. As of March 31, I.D. Systems had $15.2 million in cash, cash equivalents and marketable securities, and no debt. And during the first quarter of 2013, we used only approximately $200,000 in cash from operating activities. Thank you for dialing in today, I look forward to your questions and to reporting further on our financial progress in the future.

With that let me the turn the call over to Ken Ehrman, President of I.D. Systems to review highlights of our sales and operations.

Kenneth S. Ehrman

Thank you, Ned. And thanks again for everyone joining us on the call today. I’d like to review just a few highlights from the first quarter of 2013. We continue to receive repeat orders for many of our core customers including Caterpillar, Continental Tire, Ford Motor Company, Forward Air, John Deere, Kellogg’s, Nestlé, Procter & Gamble, Swift Transportation, and Walmart among others.

Clearly these world-class companies are deriving substantial economic benefits from our technology that sustain their investments. A number of these enterprise customers have indicated that they have near-term plans to continue expanding the use of our solutions throughout their enterprise in 2013, which is one of the reasons we remain very enthusiastic about our growth prospects for this year. As we have noted on previous calls, our new analytic software is in increasingly important part of our offering for enterprise customers. Several of them are either currently testing analytics or in discussions to deploy this year.

I.D. Systems Analytics provides an integrated view of enterprise-wide asset activity, site to site comparisons and the industry benchmarks. It helps to qualify best practices for asset utilization and safety, reveal inefficiencies and activity across sites and geographic regions and uncover hidden opportunities to eliminate or reallocate assets to reduce capital and operating costs.

Based on the positive feedback we have received on our analytic software, it now plays a leading role in our sales presentation to prospects with enterprise scale operations. It’s also an important differentiator for us beyond the functional advantages for us solutions that we emphasis for site specific operations.

As a leader in the wireless asset management technology space, I.D. Systems has accumulated the largest data base of historical asset activity that we know of across the most diverse range of industries. The unique depth and breath of our data enables to customers to compare general industry and facility type benchmarks to the performance of their own sites and enterprise.

We expect that as more and more customers deploy analytics we’ll be able to extent this competitive advantage because the depth and breath of our data base will also expand, which will enable us to provide a deeper, more meaningful industry benchmark. In addition, the cultivating business with existing enterprise customers, we continue to diversify our sources of revenue by winning business from new ones. Recent examples include Bridgestone, Firestone, C&H and Rio Tinto Alcan. In addition, we are very pleased to be working closely with one of the world’s largest specialty retailers on a significant rollout opportunity for 2013.

On the transportation asset management side our business, one of our new customer wins in the first quarter was from a leading publicly held U.S. transportation service company, which entered into a three-year contract for our VeriWise Track and Trace system to manage the diverse fleet of approximately 1,000 cargo carrying assets including dry vans, flatbeds and refrigerated trailers. Our suite of VeriWise Solutions remains the broadest in the trailer tracking industry and we expect continued solid performance from this business as a market share leader.

As Jeff pointed out, we hold a market leadership position in each of our business segment including with respect to our technology and intellectual property. One of our most exciting internal initiatives this year will be the development of our next generation industrial vehicle management system, which we believe will lead to broader market appeal, more pricing flexibility and at the same time, an opportunity for higher margins.

The introduction of this new system should be well timed to meet the continued growing demand for wireless industrial vehicle management solutions as best practiced in manufacturing, distribution and airport operations. We also remain enthusiastic about the airport applications of our solutions. The combine power of our vehicle and transportation asset management technologies offers compelling benefits for airlines and other companies with airport operations and we have a number of exciting prospects for growth in this market in 2013.

Our technological expertise in patent dissolutions also continued to enhance our prospects in the Rampa Car management market as Jeff mentioned. I will echo Jeff’s excitement about our ongoing efforts with Avis Budget Group; we are exploring many ways in which we can participate in the Avis Budget’s large scale plans for rental car technology deployment including the integration of Zipcar. We believe that the ability to deploy multiple flexible technological capabilities will be strategically as well as tactically important for Avis Budget going forward, particularly in light of effort is recent indication that the indent to expand their car sharing activities. Our solutions get write into Zipcar’s technology roadmap and the synergies of the integration is readily apparent to both organizations.

On that note, let me turn the call back over to Jeff, for the Q&A segment on the call.

Jeffrey M. Jagid

Thank you, Ken. That concludes our prepared remarks. We are now pleased to open the call for your questions. Thanks again for participating today. Michelle.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Morris Ajzenman with Griffin Securities. Your line is now open.

Morris Ajzenman – Griffin Securities

Good afternoon, guys.

Jeffrey M. Jagid

Hi, Morris

Morris Ajzenman – Griffin Securities

Hi, question on the fundamentals, if Avis Budget but going forward no one is going to care about the disappointing in this quarter, but nonetheless let me ask about this quarter, you talking about timing of closing industrial vehicle management business particularly for the shortfall. Can you give some color of that, what is that mean as far as what is additional being pushed out into the second quarter?

Again it’s my presumption you don’t give guidance during for last year $8.7 million revenues in the second quarter, I have been looking for sort of double-digit sort of growth rate going forward again quarter-to-quarter could be (inaudible). But how does that play out into the second quarter with, let’s put Europe to the side with the timing of closing of the BMS, how does that play out into the second quarter

Ned Mavrommatis

Morris, I appreciate the question and let me comment on that. Let me start by saying, at the end of the year, I made remarks regarding the strength of our pipeline, the fact that our pipeline could facilitate double-digit growth year-over-year. We still feel fairly confident in the strength of our pipeline, but obviously, we dug ourselves into a little bit of a hole in Q1 especially as compared to Q1 of 2012.

So we certainly have our work cut out for us, having said that, Q2 has started and obviously, we’ve always been very hesitant to give that level of granularity because of some of the uncertainty in the near-term. But what I will say and what I feel comfortable saying is that Q2 started fairly relatively strong, I don’t say very strong, but it started relatively strong compared to our own internal plan but remember we have to catch up from what on our internal plan from Q1 and then we have to again meet the need or meet our goals for Q2 and beyond.

So what I can tell you is that a number of the initiatives that we are working on Q1 didn’t close, they were timing related and then they subsequently closed in the month of April. And the pipeline again is very, very strong and again remember, while on a percentage basis, the number seem somewhat meaningful but on an absolute dollar standpoint, we are not talking about big numbers.

The difference between $8 million in Q1 of 2013 and $9.8 million in Q1 of 2012 is not a massive dollar amount difference and that’s not really, obviously we’re happy with the slow start to the year, for a number of reasons. But what makes the business interesting is that if you look at the companies with whom we’re dealing, these are companies that obviously have the resources to do business with whoever they want, they are driving economic benefit from the use of our product, they’re referenceable and I am pretty comfortable in saying that we can use that success to as kind of a transition to larger deals with out existing customers as well as beyond.

Morris Ajzenman – Griffin Securities

And Jeff do you stick with double-digit growth or do you think that’s up from nine months

Jeffrey M. Jagid

I think that it definitely gets trickier because we’re four months in, but we certainly have the pipeline that can facilitate and accommodate that double-digit growth rate. But definitely gets a little more, it’s get a little challenging later our big issue is that, as we exited the year, and had such a nice year in 2012, things slowed down a bit heading into this year and now the body language seems to be a bit more positive and as I said April was a very nice months for us. I don’t want to suggest, however, that that means that you know all of a sudden it’s going to be a blow out in Q2 we definitely have our work in out for us, but we’re cautiously optimistic in light of the pipeline.

Morris Ajzenman – Griffin Securities

Okay, then Europe you touched on some $644,000 year-over-year, do you have a break out revenues overseas, percent of revenues have come for the company?

Ned Mavrommatis

Are you taking Martin for Q1 how much the revenue was overseas?

Morris Ajzenman – Griffin Securities

Yeah in total. You are (inaudible) 644 from a year ago, what is that, what’s total revenues in Europe, overseas?

Ned Mavrommatis

First quarter the revenue from Europe was $223,000 which was down by $644,000 last year Q1 was $867,000.

Morris Ajzenman – Griffin Securities

Okay. And just one other question here, when you, you talk about gross margins being under pressure, you got high contribution of revenue from channel partners, is that something we should model going forward as you work with all channel partners the gross margins in past overall over the low to mid 50% range should be lower now as channel partners become more important part of your distribution?

Ned Mavrommatis

No, the issue here, obviously when you sell through the channel the margins are a few points lower and we had a strong contribution in Q1 from the channel partners. I think the issue in Q1 that affected the margins were the weak sales from our direct sales force; I think as the sales from our direct teams get stronger the margins should be closer to the historical levels or at the 50%.

Morris Ajzenman – Griffin Securities

One last question I will get back in queue, the shelf registration you are now saying, looking for acquisitions, isn’t (inaudible) you played right now where, it was pleasure going forward or what have you that, you would have enough core on working capital to not want to get involved with an acquisition at this point?

Unidentified Company Representative

I think it depends on the specifics of the opportunity. One of our, if you look at what we’re trying to as an organization, it’s really I would characterize it into two primary objectives, right, further penetration of existing base of customers, revenue diversification, and we want to get into a position where our recurring revenue base is growing and there maybe opportunities to expedite the achievement of some of those goals through some inorganic means. So you really have to balance that opportunity against what you currently have on your plate as well as what’s it what we believe to be in the best interest of the shareholder as far as any potential dilution.

So that’s the way we look at things that was really from our perspective other than potential having the opportunity to answer questions and be confronted with some questions, we really didn’t see any bound side to having the shelf. It really just there is only there is only upside as far as we were able to tell.

Morris Ajzenman – Griffin Securities

Thank you.

Unidentified Company Representative

Thank you.

Operator

Thank you. Our next question comes from the line of Matthew Hoffman with Cowen & Co. Your line is open.

Matthew Hoffman – Cowen & Co.

Hi first up question for Ned before I forget I need to ask you to split PowerFleet very wide in services?

Ned Mavrommatis

Hey Matt, the AI revenue was $4.2 million in the quarter, $1.3 million was product and $2.9 million was service, VMS business $3.8 million in revenue, $2.4 million was product, $1.1 million was service and then we had an additional $270,000 in service revenue from the rental car product.

Matthew Hoffman – Cowen & Co.

Okay, great. Okay so as you think about the very wide services it’s kind of tracking around the $3 million little over, is this kind of your new run rate. What are the opportunities to expand that services component for the AI?

Unidentified Company Representative

I think that number should increase as we go forward. We have a pretty healthy backlog of units how we’re going to deliver throughout the year, and as they get installed they will just start contributing to the service revenue, so we should see the service revenue coming from very light increases moving forward.

Matthew Hoffman – Cowen & Co.

Little bit of the soft economy, soft – higher gas price throughout a lot of the first quarter, we intact that...

Unidentified Company Representative

I don’t know that I would, that business did actually fairly well in the first quarter. And I think that we the pipeline for that organization is looking pretty strong as well, so I am hesitant to attribute any issues there to fuel prices are economy, I actually think that the trailer business is actually improving I think that were some low last year that we are work through and we are pretty optimistic about the outlook for that business. The issue really in Q1 to a large extend was focused very much on VMS.

Matthew Hoffman – Cowen & Co.

Okay, let’s go down there, because obviously – focus here because that’s really where a lot of opportunity is and when you talk about pipeline Jeff, and we talk about that side of the business. I assume that you’re talking about that when you’re with all those Fortune 500 companies, just adjusting that those are incremental pipeline outside of it’ correct?

Jeffrey M. Jagid

Yeah, these conversion regarding VMS is separate and distinct from any discussion around car rental and Avis Budget.

Matthew Hoffman – Cowen & Co.

Now, do any of these have the opportunity to turn into an AVIS side or a public store or your margins taking your reference customers over the last decade, do any of these prospects of the potential to become one of those another head quarter spend franchise.

Unidentified Company Representative

Absolutely, but I can’t tell you that we’re currently working in an account that has a large of an opportunity as to something like an Avis Budget. I mean that’s north of 300,000 units. So that’s definitely the largest opportunity we’re currently working. But yeah, as far as opportunities in VMS that could translate into a deal size like a postal or a Wal-Mart; yes there are number of accounts in the pipeline that could move in that direction.

Matthew Hoffman – Cowen & Co.

All right, so my last question here will be around Avis Budget.

Unidentified Company Representative

Sure.

Matthew Hoffman – Cowen & Co.

And I know that you’re not going to give the technology and product road map for your Asian customer here to us. But maybe you can talk about the overlaps and the open space if will in the two product – if you look at the old Zipcar portfolio, which kind of unlock cars, and make sure you can get in and out of the car and kind of track the usage versus any very costly system versus the I.D. Systems which is really very targeted at fuel and making the check-in and check-out process quite efficient. And talk to us about the two technologies, I think there is a lot of investors probably don’t understand how they’re different and where the potential synergies are or opportunities are? Thanks.

Jeffrey M. Jagid

I’ll make a couple of remarks and Ken is very much involved in some of that development effort with the Zipcar. So he can certainly add some additional color if he so chooses or you’ve additional questions, but here is essentially what’s happening there? That acquisition for all the Zipcar by Avis Budget Group from my perspective was a very, very smart move and I think we’ve driven in large part by the vision of Ron Nelson and his desire to leapfrog his way into the car sharing business.

But it’s not only, it doesn’t only give them the ability to benefit from the most powerful brand in Zipcar in car sharing but it also gives them the ability to take the Zipcar fleet which is about 9000 or 10000 vehicles and because of the size of the either fleet and Mr. Nelson has commented on this publicly with they would like to be able to do that neither company was really able to do on their own, is they would like to be able to take about 30,000 vehicles and use them based on demand in the Zipcar model as well as the conventional airport model.

So that basically means is that (inaudible) they would move vehicles either vehicles from the airport, and they would essentially become the Zipcars and would be the Zipcar brand and zip stores would be renting them and then during the week, they would move those vehicles back into the conventional airport environment and that is a very innovative approach to the handling of the fleet.

In order to be able to do that, we need to deploy technology, so that when the vehicle is out in the car sharing world, it knows that a zip store is going to approach it and it’s going to take the zip store is going to gain access through the membership card and the entire process is going to be the exact same thing that the Zipcar customers always been used to. Then when the car gets moved back into the airport and then wanted to use a different technology to automate the rental and return of the vehicle. So when I commented in my opening remarks that there is a new opportunity for us. The new opportunity is really the idea of integrating the solutions so that now not only are we on Avis’s fleet, but we have this additional opportunity to be on the Zipcar fleet. So that division as far as the differences and technology are concerned, I’ll turn it over to Ken for that.

Kenneth S. Ehrman

Thanks, Jeff. And that I definitely just would like to emphasize the ability to move the cars between the various applications is a very key component of meeting the various levels of demand. So the I.D. Systems core technology will provide the integration with cars computer as well as the radio frequency communications, the local communications when the car is on the Avis car lots or the budget car lots. And then Zipcar technology would be used for cellular communication when the car is in remote locations.

So what it does when you put the two technologies together, it allows you to really have the best of both worlds, ultimately, you probably would not able to put or justify the expense of putting of these Zipcar technology into the entire Avis Budget fleet. But on the other hand, by doing kind of a growing – by basically growing that technology, making – using the integration capabilities that we have, the ability to integrate with the vehicles computer, you can actually reduce the installation time, reduce the cost of the hardware platform that Zip has and ultimately create a product that could even justify a larger roll out.

Matthew Hoffman – Cowen & Co.

So is there still the prospect putting I.D. Systems’ original technology to baseline on 300,000 plus Avis cars and then you have the incremental (inaudible) opportunity on top of that, it’s just a question of timing and about all that happened

Jeffrey M. Jagid

That’s exactly right; the only change in the conversation has been around this integration with Zipcar they have not changed their desire regarding the full fleet and fuel collection in automation so that is still part of dialog.

Matthew Hoffman – Cowen & Co.

Do you still enjoy a substantial cost advantage over competing technology such as those used in sailor unlock, lock unlock sytems that Zipcar has, a system like Zipcar have generally the first statement.

Jeffrey M. Jagid

Absolutely I would like to just make two more comments in response to that, your question. First of all, it is definitely the most cost effective. In addition, the car state-of-the-art does not allow the Zipcar product to collect fuel and odometer information, which is obviously integral to automating the return of the vehicle.

In addition I was pretty vocal about this at year end; we have a patent that covers the concept of using a device in the vehicle to determine the vehicles availability for a rental, which is obviously a fundamental concept in the world of car sharing. So think there is lot going on here as far technology adoption in the car rental industry. I think that every all of the large companies involved in the car rental industry are deploying technology. So, I really just think for us it’s a question of when and not if.

Matthew Hoffman – Cowen & Co.

Great. I look forward to continue the conversation with conference at the end of this month. Thanks.

Unidentified Company Representative

Thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of (inaudible). Your line is open.

Unidentified Analyst

Good afternoon. Two different questions first in the self-registration that was filed, it just became effective. There is an unset of coding for power (inaudible). We have no present plans or intentions on when we may use a portion of the net proceeds to acquire or invest. So you have not at this point identified an acquisition something may occur in the future but there are not current plans as per the SEC filing at this point we’re doing something.

Jeffrey M. Jagid

Let me just be clear on that because I think that’s a good point you raised. Part of it is to grow the company organically in order to complement doing organically. I’m actively engaged valuating a number of opportunities. I just want to be clear on that. We’re proactive it’s not we are not reactive, if a program in place in the market looking at potential targets. Having said that, understand the implications deploying our cash as well as our stock, taking those decisions and we view opportunistic (inaudible) most favorable to the shareholder. Of which we have opportunistic of our shareholders, so we certainly as many of these decision to be driven by our desire shareholder value.

Kenneth S. Ehrman

Okay. Okay. And the following question then is if we look at what’s happening to this company over the last five years, the shareholder value both by stock price and book value had both declined during that period. Book value is gone from 650 to 350 – with some 650 and changed to 350. We had a basic vehicle management business, which we believe could have become profitable and grow, we layer on to that acquisition, which hopefully would then bring us to enough revenue and profitability in which we could grow.

The AI business, which when GE had it, again we first bought it, was speculated as an industry with $100 million, multi $100 million potential (inaudible) but one of the major players. And during the period we had it is grown de minimis. We really hasn’t fulfilled its promise, the vehicle management business hasn’t fulfilled its promise.

And so, that the real question is do we have a business, which actually will be profitable and has good growth, because I realize you grown somewhat the disaster at the bottom. What do we actually have to put a third leg or later on to get enough critical mass and if we have to I mean our core structure is to high relative to the businesses we now have, biggest strategic question, Jeffery.

Jeffrey M. Jagid

Yes, those are very good point Walter. I would obviously characterize the situation a little bit differently. I think that one of the big issues with the VMS business is that it doesn’t have significant recurring revenue. Despite that we’ve managed to string together some record years, it is not specifically referring to the price of the stock. Although, I think that there was opportunity to make money in the stock, although we’re not managing the paper, business. Last year was a record for us. However, we do understand that some of our business is to generate earnings.

You also believe that there is a massive market opportunity of a unique technology and as when you combine that or supplement it if you will with some inorganic growth opportunity; we’re very bullish on the business. So I think if you want to look at certain points and time and parse the data in a way that makes it for struggling you can certainly do that. but I’m a bit more of an optimist and I would look at it a little bit differently and I would look at it – over the last two years what our growth rate was in revenue, what we’ve managed to do would this which could be revolutionary not only to just [in terms of] shareholders, but with history and I or front of that, and if the proud of what we’ve accomplished. Am I happy with the price of those items awfully? My job is to create shareholder value that’s how we say, and that’s what I hope to continue to focus upon, and we’re in a good position to do it.

Unidentified Analyst

Let me just give – my trend less to since then, I believe that I’m not complaining about the price of stock, I’m complaining about the consistent lack of profits, so that the asset value, the book well has declined steadily over this period. And so, while it’s nice to grow, it’s also nice to make money and that’s the one thing that’s been lacking for the last five years?

Ned Mavrommatis

Right. What we’ve said and what again despite the fact that we don’t give specific guidance. What I can tell you is that with our current cost structure add about $15 million revenue rate we would earn nearly $10 million to the bottom line. We were approaching those levels towards year end. Our margins are very healthy and the expenses are fixed. I think the issues is growing the revenue and I think we have capital on the pipeline and the current cost; we don’t have an opportunity to do that, is there execution risk? But I think we are (inaudible).

Unidentified Analyst

Okay. Thank you.

Ned Mavrommatis

You’re welcome.

Operator

Thank you. I’m showing no further questions in the queue at this time. I’d like to turn the call back over to management for any further remarks.

Jeffrey M. Jagid

Thank you very much. Needless to say, I appreciate everyone’s participation today. On a final note, I would just like to reiterate some of our comments. First, although the year certainly started a bit slow on the revenue side. The pipeline continues to be somewhat strong. We started the second quarter also on a positive note. So while we have our work cutout, if I do stand by the remarks, I made at year end that the pipeline can facilitate double-digit growth. And then of course there is the activity with Avis Budget and we look forward to reporting to you in the near future on the progress on that program.

And lastly, I would just again like to thank everyone for participating on the call today.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. And you may all disconnect. Everyone have a great day.

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I.D. Systems (IDSY): Q1 EPS of -$0.15 misses by $0.12. Revenue of $8.01M misses by $2.08M. (PR)