JCS Communications Systems, Inc.

Management Discussion

• Consolidated sales increased 19% in the third quarter of 2019 to $18,223,000 compared to $15,292,000 in the same period of 2018.  Consolidated operating income in the third quarter of 2019 was $1,629,000 compared to an operating loss of $1,602,000 in the third quarter of 2018. Net income in the third quarter of 2019 was $1,738,000 or $0.19 per share compared to net loss of $1,545,000 or $ (0.17) per share in the third quarter of 2018. 
• Transition Networks sales increased 35% to $12,483,000 in the third quarter of 2019 compared to $9,231,000 in 2018. Transition Networks organizes its sales force by vertical markets and segments its customers geographically.  Third quarter sales by region are presented in the following table:
• Sales in North America increased $3,464,000, or 43%, primarily due to deliveries for a major metropolitan smart city IoT project that should be substantially complete by the end of 2019 and smaller security and surveillance projects, partially offset by reduced spend from a major Tier 1 telecommunications provider. International sales decreased $212,000, or 17%, primarily due to declining sales of legacy media converters in Asia, while EMEA improved year-to-date with growth of 10% driven by IoT.  Sales of Ethernet switches and adapters increased 132% or $3,394,000 related to the major metropolitan smart city IoT project and smaller security and surveillance projects. Other product sales decreased 7% or $114,000 due to reduced spend from a major Tier 1 telecommunications provider.