Attached files
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| 8-K - CURRENT REPORT - ON TRACK INNOVATIONS LTD | f8k110718_ontrackinnov.htm |
Exhibit 99.1
On Track Innovations Ltd. Reports Third Quarter 2018 Financial Results
Third Quarter Revenues Increase 39% to $6.5 Million; Debt Reduced by 89% to $0.5 Million
Rosh Pina, Israel – November 7, 2018 – On Track Innovations Ltd. (OTI) (NASDAQ: OTIV) (the “Company” or “OTI”), a global provider of near field communication (NFC) and cashless payment solutions, has provided a business update and announced financial results for the third quarter ended September 30, 2018.
Operational Updates:
| · | OTI delivered a total of more than 3,000 advanced payment systems to Japan. |
| · | OTI delivered approximately 8,000 advanced contactless readers to the widespread Russian retail self-service market. |
| · | The Company received the MIR National Card Payment System organization certification, a key component of effectively penetrating the strategic Russian unattended payment market. |
| · | In August, Apriva released a white paper affirming its ongoing partnership with OTI for deploying next generation self-serve and vending technologies, enabling OTI to offer merchants a pre-certified, off-the-shelf EMV solution for self-service kiosks. |
| · | In October, OTI was granted the Interbank Network Interac certification, allowing Canadian businesses to integrate OTI’s secure cashless payment solutions into vending machines, kiosks and other unattended devices throughout the significant Canadian market. |
Management Commentary
“I am pleased to announce another quarter of continued operational execution, highlighted by our robust sequential and year-over-year revenue growth,” said Shlomi Cohen, Chief Executive Officer of On Track Innovations. “The third quarter revenue of $6.5 million represents the highest third quarter revenue achieved since 2013. We continued to make notable progress on several key fronts, primarily through successful sales efforts in Japan and the United States.
“Alongside success in our existing markets, we continued to expand our efforts to new international markets – as evidenced through the granting of the MIR certification in Russia, where we delivered almost 8,000 advanced contactless readers in the third quarter, as well as the Interac certification in Canada. Both of these certifications are crucial to successfully operating in these countries, allowing our sales team to now focus their efforts on well-suited opportunities abroad.
“We also experienced our fourth consecutive quarter of positive adjusted EBITDA while expanding our recurring revenue base by 19% on an absolute dollar basis to $1.5 million per quarter, compared to $1.2 million in same year ago period. We also reduced our debt by 89% in the quarter when compared to the prior quarter, with total debt now standing at just $0.5 million.
“Our ability to maintain a significant technological advantage over the competition while diligently managing our expenses has positioned us well for continued revenue growth and shareholder value creation over the long-term,” concluded Cohen.
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Q3 2018 Financial Highlights
| · | Total revenue in the third quarter of 2018 increased 39% to $6.5 million, compared to $4.7 million in the same year-ago period. |
| · | Recurring revenues, on an absolute dollar basis, increased by 19% to $1.5 million, compared to $1.2 million in the same year-ago period. |
| · | Gross profit in the third quarter of 2018 was $3.4 million, or 53% of revenues, compared to $2.5 million, or 53% of revenues, in the same year-ago period. |
| · | Net loss from continuing operations in the third quarter of 2018 was $158,000, or $(0.00) per share, compared to a net loss from continuing operations of $573,000, or ($0.01) per share, in the same year-ago period. |
| · | Adjusted EBITDA in the third quarter of 2018 was $362,000, compared with adjusted EBITDA loss of $74,000 in the same year-ago period. |
| · | Cash, cash equivalents and short-term investments at September 30, 2018 totaled $5.9 million, compared to $8.8 million at June 30, 2018 and $8.7 million at September 30, 2017. Debt at the end of the third quarter of 2018 decreased by 89% to $0.5 million, compared to $4.5 million at the end of the second quarter of 2018. |
Conference Call
Management will host an investor conference call at 9:00 a.m. EST on November 7, 2018, to discuss OTI’s third quarter 2018 financial results, provide a corporate update, and conclude with a Q&A from participants. To participate, please use the following information:
Date: Wednesday, November 7, 2018
Time: 9:00 a.m. Eastern Standard Time (6:00 a.m. Pacific Standard Time)
U.S. Dial-in: 1-888-317-6002
International Dial-in: 1-412-317-5245
Webcast: https://www.webcaster4.com/Webcast/Page/1720/27970
Please dial in at least 10 minutes before the start of the call and request to join the “On Track Innovations Q3 2018 Earnings Conference Call” to ensure timely participation.
The conference call will be available for replay by clicking here and via the investor relations section of the company’s website.
Use of Non-GAAP Financial Information
This press release contains certain non-GAAP measures, namely, adjusted EBITDA from continuing operations, or adjusted earnings from continuing operations before interest, income tax, depreciation and amortization. Adjusted EBITDA from continuing operations represents earnings before interest or financing expenses, income tax, depreciation and amortization, and further eliminates the effect of stock-based compensation expense and other expenses. OTI believes that adjusted EBITDA from continuing operations should be considered in evaluating the Company’s operations since it provides a clear indication of the Company’s operating results. This measure should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for the U.S. GAAP results. The non-GAAP measures included in this press release have been reconciled to the U.S. GAAP results in the tables below.
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ON TRACK INNOVATIONS LTD.
RECONCILIATION OF NON-GAAP ADJUSTMENT
The following table reflects selected On Track Innovations Ltd. non-GAAP results reconciled to GAAP results:
(US dollars in thousands)
| Three months ended Sept. 30, | Nine months ended Sept. 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Net (loss) income | $ | (184 | ) | $ | 868 | $ | (797 | ) | $ | 96 | ||||||
| Net loss (income) from discontinued operations | 26 | (1,441 | ) | 114 | (1,365 | ) | ||||||||||
| Financial expenses, net | 2 | 126 | 129 | 236 | ||||||||||||
| Depreciation | 342 | 295 | 1,022 | 878 | ||||||||||||
| Taxes on income | 111 | 12 | 73 | 68 | ||||||||||||
| Total EBITDA FROM CONTINUING OPERATIONS | $ | 297 | $ | (140 | ) | $ | 541 | $ | (87 | ) | ||||||
| Other expenses | - | - | 70 | - | ||||||||||||
| Stock-based compensation | 65 | 66 | 180 | 240 | ||||||||||||
| Total adjusted EBITDA FROM CONTINUING OPERATIONS | $ | 362 | $ | (74 | ) | $ | 791 | $ | 153 | |||||||
About On Track Innovations Ltd
On Track Innovations (OTI) is a global leader in the design, manufacture, and sale of secure cashless payment solutions using contactless NFC technology. OTI’s field-proven innovations have been deployed around the world to address cashless payment, automated retail and petroleum markets. OTI distributes and supports its solutions through a global network of regional offices and alliances. OTI is the proud recipient of the 2017 AI Award for Best Cashless Payment Solutions Provider – Israel. For more information, visit www.otiglobal.com.
Safe Harbor / Forward-Looking Statements
This press release contains express or implied forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. Whenever we use words such as "will," "expect," "anticipate," "intend," "plan," "estimate," "believe," "should," "can" or similar expressions, we are making forward-looking statements. For example, we are using forward-looking statements when we discuss, among others: the importance of the MIR certification in Russia and the Interac certification in Canada for the successful operation in these countries, future opportunities and revenue growth and shareholder value creation over the long-term due to our ability to maintain a significant technological advantage over the competition while diligently managing our expenses. Forward-looking statements are made as of the date of this document and are inherently subject to risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements. Additional factors that could cause actual results to differ materially from those anticipated by our forward-looking statements are stated under the captions “Risk Factors” in our most recent Annual Report (Form 10-K) and other known and unknown uncertainties and risk factors including those detailed from time to time in the Company's filings with the Securities and Exchange Commission. Forward-looking statements are made as of the date of this release, and we expressly disclaim any obligation or undertaking to update forward-looking statements. The reader is cautioned not to place undue reliance on forward-looking statements.
Investor Relations Contact:
Greg Falesnik
MZ North America
1-949-385-6449
Greg.Falesnik@mzgroup.us
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ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(US dollars in thousands)
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 4,514 | $ | 6,742 | ||||
| Short-term investments | 1,391 | 3,331 | ||||||
| Trade receivables (net of allowance for doubtful accounts of $619 and $568 as of September 30, 2018 and December 31, 2017, respectively) | 4,026 | 5,827 | ||||||
| Other receivables and prepaid expenses | 2,676 | 1,563 | ||||||
| Inventories | 3,356 | 3,009 | ||||||
| Total current assets | 15,963 | 20,472 | ||||||
| Long-term restricted deposit for employees benefit | 468 | 498 | ||||||
| Severance pay deposits | 358 | 405 | ||||||
| Property, plant and equipment, net | 5,246 | 5,859 | ||||||
| Intangible assets, net | 264 | 336 | ||||||
| Total Assets | $ | 22,299 | $ | 27,570 | ||||
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ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(US dollars in thousands)
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
| Short-term bank credit and current maturities | ||||||||
| of long-term bank loans | $ | 504 | $ | 4,181 | ||||
| Trade payables | 6,670 | 6,264 | ||||||
| Other current liabilities | 2,133 | 2,421 | ||||||
| Total current liabilities | 9,307 | 12,866 | ||||||
| Long-Term Liabilities | ||||||||
| Long-term loans, net of current maturities | 8 | 814 | ||||||
| Accrued severance pay | 874 | 939 | ||||||
| Deferred tax liability | 452 | 500 | ||||||
| Total long-term liabilities | 1,334 | 2,253 | ||||||
| Total Liabilities | 10,641 | 15,119 | ||||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Shareholders' Equity | ||||||||
| Ordinary shares of NIS 0.1 par value: Authorized: 50,000,000 shares as of September 30, 2018 and December 31, 2017; issued: 42,473,076 and 42,353,077 shares as of September 30, 2018 and December 31, 2017, respectively; outstanding: 41,294,377 and 41,174,378 shares as of September 30, 2018, and December 31, 2017, respectively | 1,068 | 1,064 | ||||||
| Additional paid-in capital | 224,968 | 224,758 | ||||||
| Treasury shares at cost - 1,178,699 shares as of September 30, 2018 and December 31, 2017 | (2,000 | ) | (2,000 | ) | ||||
| Accumulated other comprehensive loss | (901 | ) | (691 | ) | ||||
| Accumulated deficit | (211,477 | ) | (210,680 | ) | ||||
| Total Equity | 11,658 | 12,451 | ||||||
| Total Liabilities and Equity | $ | 22,299 | $ | 27,570 | ||||
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ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(US dollars in thousands, except share and per share data)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues | ||||||||||||||||
| Sales | $ | 5,020 | $ | 3,445 | $ | 14,157 | $ | 11,871 | ||||||||
| Licensing and transaction fees | 1,453 | 1,225 | 4,332 | 3,765 | ||||||||||||
| Total revenues | 6,473 | 4,670 | 18,489 | 15,636 | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Cost of sales | 3,051 | 2,192 | 8,778 | 7,468 | ||||||||||||
| Total cost of revenues | 3,051 | 2,192 | 8,778 | 7,468 | ||||||||||||
| Gross profit | 3,422 | 2,478 | 9,711 | 8,168 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | 777 | 823 | 2,422 | 2,414 | ||||||||||||
| Selling and marketing | 1,592 | 1,332 | 4,700 | 4,166 | ||||||||||||
| General and administrative | 1,098 | 758 | 3,070 | 2,553 | ||||||||||||
| Total operating expenses | 3,467 | 2,913 | 10,192 | 9,133 | ||||||||||||
| Operating loss from continuing operations | (45 | ) | (435 | ) | (481 | ) | (965 | ) | ||||||||
| Financial expenses, net | (2 | ) | (126 | ) | (129 | ) | (236 | ) | ||||||||
| Loss from continuing operations before taxes on income | (47 | ) | (561 | ) | (610 | ) | (1,201 | ) | ||||||||
| Income tax | (111 | ) | (12 | ) | (73 | ) | (68 | ) | ||||||||
| Net loss from continuing operations | (158 | ) | (573 | ) | (683 | ) | (1,269 | ) | ||||||||
| Net (loss) income from discontinued operations | (26 | ) | 1,441 | (114 | ) | 1,365 | ||||||||||
| Net (loss) income | (184 | ) | 868 | (797 | ) | 96 | ||||||||||
Basic and diluted net gain (loss) attributable to shareholders per ordinary share | ||||||||||||||||
| From continuing operations | (*) | (0.01 | ) | (0.02 | ) | (0.03 | ) | |||||||||
| From discontinued operations | (*) | 0.03 | (*) | 0.03 | ||||||||||||
$ (*) | $ | 0.02 | $ | (0.02 | ) | $ (*) | ||||||||||
| Weighted average number of ordinary shares used in computing basic and diluted net (loss) income per ordinary share | 41,294,377 | 41,122,965 | 41,260,426 | 41,099,603 | ||||||||||||
(*) Less than $0.01 per ordinary share.
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ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(US dollars in thousands)
| Nine months ended September 30, | ||||||||
| 2018 | 2017 | |||||||
| Cash flows from continuing operating activities | ||||||||
| Net loss from continuing operations | $ | (683 | ) | $ | (1,269 | ) | ||
| Adjustments required to reconcile net loss to | ||||||||
| net cash used in continuing operating activities: | ||||||||
| Stock-based compensation related to options and shares issued to employees and others | 180 | 238 | ||||||
| Depreciation and amortization | 978 | 878 | ||||||
| Deferred tax, net | (20 | ) | 37 | |||||
| Gain on sale of property and equipment | (25 | ) | (9 | ) | ||||
| Accrued interest and linkage differences, net | - | (41 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued severance pay, net | (19 | ) | 72 | |||||
| Decrease in trade receivables, net | 1,744 | 187 | ||||||
| Increase in other receivables and prepaid expenses | (1,162 | ) | (435 | ) | ||||
| Increase in inventories | (381 | ) | (710 | ) | ||||
| Increase (decrease) in trade payables | 668 | (611 | ) | |||||
| Decrease in other current liabilities | (273 | ) | (777 | ) | ||||
| Net cash provided by (used in) continuing operating activities | 1,007 | (2,440 | ) | |||||
| Cash flows from continuing investing activities | ||||||||
| Purchase of property and equipment | (467 | ) | (160 | ) | ||||
| Proceeds from sale of property and equipment | 52 | 14 | ||||||
| Change in short-term investments, net | 1,195 | 2,917 | ||||||
| Investment in capitalized certification costs | (92 | ) | (185 | ) | ||||
| Proceeds from restricted deposit for employees benefit | 8 | 44 | ||||||
| Net cash provided by continuing investing activities | 696 | 2,630 | ||||||
| Cash flows from continuing financing activities | ||||||||
| Decrease in short-term bank credit, net | (3,449 | ) | (72 | ) | ||||
| Repayment of long-term bank loans | (979 | ) | (469 | ) | ||||
| Proceeds from exercise of options and warrants | 34 | 25 | ||||||
| Net cash used in continuing financing activities | (4,394 | ) | (516 | ) | ||||
| Cash flows from discontinued operations | ||||||||
| Net cash used in discontinued operating activities | (115 | ) | (86 | ) | ||||
| Total net cash used in discontinued operations | (115 | ) | (86 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (187 | ) | 460 | |||||
| (Decrease) increase in cash, cash equivalents and restricted cash | (2,993 | ) | 48 | |||||
| Cash, cash equivalents and restricted cash - beginning of the period | 7,799 | (*)7,500 | ||||||
| Cash, cash equivalents and restricted cash - end of the period | $ | 4,806 | $ | (*)7,548 | ||||
(*) Reclassified to conform with the current period presentation.
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