SOURCE: Brekford Corp.

Brekford Corp.

November 07, 2014 13:28 ET

Brekford Reports 44% Increase in Third Quarter 2014 Revenue

HANOVER, MD--(Marketwired - Nov 7, 2014) - Brekford Corp. (the "Company") (OTCBB: BFDI) (OTCQB: BFDI), a leading public safety technology service provider of fully integrated automated traffic safety solutions, parking enforcement citation collections and an end-to-end suite of technology equipment for public safety vehicle services, today announced its operating results for the third quarter and first nine months of 2014.

Third Quarter Highlights

  • Revenue increased 44% year-over-year reaching $5.31 million;
  • Gross profit increased 72% year-over-year reaching $1.17 million;
  • Gross margin percentage increased to 22.0%, compared to 18.4% in the same period of 2013;
  • Operating expenses decreased 20% year-over-year to $0.96 million, compared to $1.2 million in the same period of 2013;
  • Net income increased 128% year-over-year reaching $0.16 million;
  • The Company received several large purchase orders for upfitting services;
  • In October 2014 the Company's exclusive distributor in Mexico signed its first major contract to deploy 210 speed and red light camera systems throughout the city of Saltillo, Coahuila.

Management Comments

"We are very pleased with our positive operating results for the quarter," commented Rod Hillman, President and Chief Operating Officer of Brekford Corp. "With significant increases in revenue, gross profit, and net income we are beginning to realize some benefits of our efforts to control costs and expand on new business opportunities. Since the beginning of this year, Brekford has refocused on improving sales growth and gross margins in our vehicle services product line as well as rebuilding our pipeline of potential new automated traffic safety enforcement ('ATSE') recurring revenue contracts. Although recent results are a positive indicator, the management team is still focused on harnessing this momentum to accomplish our goal of sustained quarterly growth."

C.B. Brechin, Brekford's Chief Executive Officer, added, "Brekford's core competencies, which are derived from a relentless dedication to public safety and security, enable us to provide services that are extremely well received by our clients. With this quarter's improved financial results, once again we are beginning to see the benefits of that commitment. We are also very excited with the launch of our international expansion strategy as we implement our first program in Mexico, due to go live in the first quarter of 2015."

Third Quarter Financial Results

Revenues for the three months ended September 30, 2014 amounted to $5,314,554 as compared to revenues of $3,697,372 for the three months ended September 30, 2013, representing an increase of $1,617,182 or 43.74%. The increase in revenues for the three months ended September 30, 2014 when compared to the same period of last year was primarily due to increased sales for rugged IT products, electronic ticketing, and professional upfitting services for our Vehicle Services product line. ATSE sales experienced a modest decrease year over year as existing programs continue to mature, resulting in improved driver behavior and lower violation rates within communities served. The Company continues to focus on generating efficient and stable growth in our Vehicle Services offerings, while building a pipeline of future recurring revenue streams for ATSE. We anticipate increasing contributions from our ATSE product line as new clients and contracts are added.

Cost of revenues for the three months ended September 30, 2014 amounted to $4,148,130 as compared to $3,018,873 for the three months ended September 30, 2013, an increase of $1,129,257 or 37.41%. The increase was primarily due to additional purchases of Rugged IT products corresponding to increased sales, offset by decreased direct labor costs for Vehicle Services installation. Cost of revenues for Vehicle Services increased at a slightly lower rate than the revenue percentage increase, while ATSE cost of revenues decreased at a rate significantly higher than the corresponding revenue rate decrease. These improvements were due mainly to increased operational efficiencies and professional services sales for Vehicle Services and improved conversion and collection rates for ATSE.

Gross profit for the three months ended September 30, 2014 amounted to $1,166,424 as compared to $678,499 for the three months ended September 30, 2013, an increase of $487,925 or 71.91%. Gross margin percentage for the three months ended September 30, 2014 was 21.95% as compared to 18.35% for the three months ended September 30, 2013. Gross margin percentages for both Vehicle Services and ATSE increased year over year, with Vehicle Services driving a higher percentage of the sales mix contribution, resulting in the overall increase. The Company continues to work on limiting costs for all product lines; however, within a given period overall gross margin percentages will be dependent upon the sales mix contributions. 

Salaries and related expenses for the three months ended September 30, 2014 amounted to $485,530 as compared to $513,474 for the three months ended September 30, 2013, a decrease of $27,944 or 5.44%. The decrease was primarily due to a slight reduction in complement in conjunction with certain cost mitigation initiatives. The Company will continue to monitor organizational requirements on a quarterly basis to ensure that investments in personnel ultimately correspond with future sales growth.

Selling, general and administrative expenses for the three months ended September 30, 2014 amounted to $473,392 as compared to $683,899 for the three months ended September 30, 2013, a decrease of $210,507 or 30.78%, primarily due to decreases in depreciation, and bad debt expenses. Lower depreciation expense was the result of the disposal of certain obsolete ATSE equipment as reported in the second quarter of 2014. Lower bad debt expense was the result of recognizing ATSE revenue when collection efforts have been completed and the respective client has been billed.

The Company recorded net income of $161,037 for the three months ended September 30, 2014 compared to a net loss of $568,492 for the three months ended September 30, 2013, an increase of $729,529 or 128.33%, primarily due to increased sales and higher gross profit margins coupled with lower operating expenses. The positive turnaround for the three months ended September 30, 2014 is a result of continued efforts to increase Vehicle Services sales and margins and improve conversion and collection rates for existing ATSE clients, while restricting unnecessary operating costs. The Company continues to focus on building the ATSE pipeline as well with a goal to begin converting prospects to contracted clients in the future.

Nine-Month Financial Results

Revenues for the nine months ended September 30, 2014 amounted to $13,869,147 as compared to revenues of $11,759,809 for the nine months ended September 30, 2013, representing an increase of $2,109,338 or 17.94%. The increase in revenues for the nine months ended September 30, 2014 when compared to the same period of last year was primarily due to increased sales of Rugged IT products as well as professional upfitting services for our Vehicle Services product line. ATSE sales experienced a modest decrease year over year as existing programs continue to mature, resulting in improved driver behavior and lower violation rates within communities served. The Company continues to focus on generating efficient and stable growth in our Vehicle Services offerings, while building a pipeline of future recurring revenue streams for ATSE. We anticipate increasing contributions from our ATSE product line as new clients and contracts are added.

Cost of revenues for the nine months ended September 30, 2014 amounted to $11,454,502 as compared to $9,152,810 for the nine months ended September 30, 2013, an increase of $2,301,692 or 25.15%. The increase was primarily due to additional purchases of Rugged IT products corresponding to increased sales, offset by decreased direct labor costs for Vehicle Services installation. Cost of revenues for Vehicle Services increased at a slightly lower rate than the revenue percentage increase, while ATSE cost of revenues decreased at a rate slightly higher than the corresponding revenue rate decrease. These improvements were due mainly to increased operational efficiencies and professional services sales for Vehicle Services and improved conversion and collection rates for ATSE.

Gross profit for the nine months ended September 30, 2014 amounted to $2,414,645 as compared to $2,606,999 for the nine months ended September 30, 2013, a decrease of $192,354 or 7.38%. Gross margin percentage for the nine months ended September 30, 2014 was 17.41% as compared to 22.17% for the nine months ended September 30, 2013. Although gross margin percentages for both Vehicle Services and ATSE increased year over year, the overall gross margin decrease is attributable to a higher proportion of the gross margin being generated by Vehicle Services. The Company continues to work on limiting costs for all product lines; however, within a given period overall gross margin percentages will be dependent upon the sales mix contributions.

Salaries and related expenses for the nine months ended September 30, 2014 amounted to $1,419,126 as compared to $1,418,759 for the nine months ended September 30, 2013, an increase of $367 or 0.03%. The Company made a conscious decision to maintain complement levels and adjust tactical focus for the purposes of rebuilding our ATSE sales pipeline in the first two quarters of 2014, with a slight decrease in complement in the third quarter of 2014. We will continue to monitor organizational requirements on a quarterly basis to ensure that investments in personnel ultimately correspond with future sales growth.

Selling, general and administrative expenses for the nine months ended September 30, 2014 amounted to $2,114,605 as compared to $2,022,214 for the nine months ended September 30, 2013, an increase of $92,391 or 4.57%. The slight increase was primarily driven by additional corporate, professional, and consulting expenses. 

The Company recorded a net loss of $1,237,258 for the nine months ended September 30, 2014 compared to a net loss of $968,960 for the nine months ended September 30, 2013, an increase of $268,298 or 27.69%. The increase was primarily due to lower gross profit margins based on the sales mix contributions of Vehicle Services and ATSE as referenced above. Despite the increased loss year over year, growth in Vehicle Services and a renewed focus on the ATSE pipeline should enable the Company to mitigate losses moving forward.

About Brekford Corp.
Brekford Corp. provides state-of-the-art public safety technology and automated traffic enforcement solutions to municipalities, the U.S. military, various federal entities and other public safety agencies throughout the United States. Its services include automated speed and red light camera enforcement programs, parking enforcement citation collections and an end-to-end suite of technology and equipment for public safety vehicle upfitting. Brekford's combination of upfitting services, cutting-edge technology, and automated traffic enforcement services offers a unique 360-degree solution for law enforcement agencies and municipalities. The Company is headquartered in Hanover, Maryland, and its common stock is traded on the OTC Bulletin Board and the OTCQB under the symbol "BFDI." Additional information on Brekford can be accessed online at www.brekford.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of that term in Section 21E of the Securities Exchange Act of 1934, as amended. Words such as "anticipate," "expect," "project," "intend," "plan," "believe," "target," "aim," "should" and words and terms of similar substance and any financial projections used in connection with any discussion of future plans, strategies, objectives, actions, or events identify forward-looking statements. Forward-looking statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. These statements are based on the beliefs of our management as well as assumptions made by and information currently available to us and reflect our current views concerning future events. As such, they are subject to risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among many others: the risk that any projections, including earnings, revenues, expenses, synergies, margins or any other financial items that form the basis for management's plans and assumptions are not realized; a reduction in industry profit margin; requirements or changes affecting the business in which we are engaged; our ability to successfully implement new strategies; operating hazards; competition and the loss of key personnel; changing interpretations of generally accepted accounting principles; continued compliance with government regulations; changing legislation and regulatory environments; and the general volatility of the market prices of our securities and general economic conditions. Readers are referred to the documents filed by Brekford Corp. with the SEC, specifically the Company's most recent reports filed on Form 10-K and Forms 10-Q, which further identify important risks, trends and uncertainties which could cause actual results to differ materially from the forward-looking statements in this press release. Brekford Corp. expressly disclaims any obligation to update any forward-looking statements.

 
BREKFORD CORP.
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 
(All figures in U.S. Dollars)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2014     2013     2014     2013  
                                 
NET REVENUE   $ 5,314,554     $ 3,697,372     $ 13,869,147     $ 11,759,809  
                                 
COST OF REVENUE     4,148,130       3,018,873       11,454,502       9,152,810  
                                 
GROSS PROFIT     1,166,424       678,499       2,414,645       2,606,999  
                                 
OPERATING EXPENSES                                
  Salaries and related expenses     485,530       513,474       1,419,126       1,418,759  
  Selling, general and administrative expenses     473,392       683,899       2,114,605       2,022,214  
                                 
TOTAL OPERATING EXPENSES     958,922       1,197,373       3,533,731       3,440,973  
                                 
(LOSS) INCOME FROM OPERATIONS     207,502       (518,874 )     (1,119,086 )     (833,974 )
                                 
OTHER (EXPENSE) INCOME                                
  Interest expense     (46,465 )     (49,618 )     (118,172 )     (135,160 )
  Interest income     --       --       --       174  
TOTAL OTHER INCOME (EXPENSE)     (46,465 )     (49,618 )     (118,172 )     (134,986 )
                                 
NET (LOSS) INCOME   $ 161,037     $ (568,492 )   $ (1,237,258 )   $ (968,960 )
                                 
                                 
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED   $ 0.00     $ (0.01 )   $ (0.03 )   $ (0.02 )
                                 
WEIGHTED AVERAGE NUMBER OF SHARESOUTSTANDING - BASIC     44,500,569       44,273,569       44,999,287       44,268,166  
WEIGHTED AVERAGE NUMBER OF SHARESOUTSTANDING - DILUTED     48,071,998       44,273,569       44,999,287       44,268,166  
   
   
SELECTED CONSOLIDATED BALANCE SHEET DATA (UNAUDITED)  
   
    September 30,
2014
    December 31,
2013
 
             
CURRENT ASSETS   $ 5,232,558     $ 4,879,684  
TOTAL ASSETS     5,713,857       6,660,018  
CURRENT LIABILITIES     5,043,485       4,759,033  
TOTAL LIABILITIES     5,818,507       5,545,274  
STOCKHOLDERS' (DEFICIT) EQUITY   $ (104,650 )   $ 1,114,744  
   
   
SELECTED CONSOLIDATED CASH FLOW DATA (UNAUDITED)  
   
    September 30,
2014
    September 30,
2013
 
                 
(USED IN) PROVIDED BY:                
  OPERATING ACTIVITIES   $ (518,489 )   $ (957,767 )
  INVESTING ACTIVITES     (1,064,335 )     (304,792 )
  FINANCING ACTIVITIES     56,294       2,015,008  
NET CHANGE IN CASH   $ (1,526,530 )   $ 752,449  
                 

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