Pointer Telocation Reports Third Quarter 2018 Financial Results

ROSH HAAYIN, Israel, Nov. 15, 2018 /PRNewswire/ -- Pointer Telocation Ltd. (NASDAQ: PNTR) (TASE: PNTR), a leading provider of telematic services and technology solutions for Fleet Management, Mobile Asset Management and Internet of Vehicles, announced its financial results for third quarter and nine months ended September 30, 2018.

Financial Highlights for Third Quarter 2018 Compared to Third Quarter 2017

    --  Total revenues of $18.7 million, down 7% as reported due to foreign
        currency exchange headwinds and up 1% on a constant currency basis
    --  Service revenues of $12.8 million, down 4% as reported and up 8% on a
        constant currency basis
    --  Operating income of $2.5 million (13% of revenue), down 13%
    --  Net income of $1.8 million, down 4%
    --  Cash, net of debt, totaled $2 million. Generated $3.1 million in
        operating cash flow during the quarter
    --  Total subscribers reached 274,000, an increase of 10%

Financial Highlights for First Nine Months of 2018 Compared to First Nine Months of 2017

    --  Total revenues of $59.4 million as reported, up from $59.3 million, and
        up 4% on a constant currency basis
    --  Service revenues of $39.8 million, up 3% as reported, and up 9% on a
        constant currency basis
    --  Operating income of $7.8 million (13% of revenue), down 2%
    --  Net income of $5.5 million, up 1%

Management Commentary

David Mahlab, Pointer's Chief Executive Officer, commented:
"This was another solid quarter for Pointer. We delivered improved service margins, strong earnings and impressive cash flow generation while facing tough headwinds from foreign currency exchange rates in our markets in Latin America, which negatively impacted reported revenue. Our bottom line performance is good, and it demonstrates our underlying strength.

"During the period, we continued to advance our capabilities in the IOT space and in providing our safety and driver behavior solution through our machine learning technology. Our platform will harness our real-time driver data to deliver more efficient, cost-effective products and services to our customers, many of whom have already provided positive initial feedback on these upcoming offerings. Initial introduction of the solution has been well received by our customers. We are also currently beta testing our asset tracking solution in North America and intend to start shipping before the end of the year.

"As reported recently, in India, we have been officially certified to the AIS 140 standard, which we believe will drive a substantial increase in telematics adoption in this growing market. We expect to start delivering Cello CANiQ IN devices in India by the end of the year, and we should benefit from deliveries in the Americas as well. We expect a significant ramp up in North America in 2019 and beyond. Meanwhile, in Brazil we secured several new contracts during the third quarter that will have an impact in 2019 as well.

"Our markets, while highly fragmented, continue to expand, and we are positioned around the globe to pursue them."

Yaniv Dorani, Pointer's Chief Financial Officer, commented:
"During the period, we continued to strengthen our balance sheet and improve our capital structure. In the third quarter, we generated $3.1 million in operating cash flow and ended the quarter with $2.0 million in net cash, achieving positive net cash for the first time in more than a decade. Over the past nine months, we have reduced our long-term debt by $3.8 million."


                   Third Quarter 2018 Financial Summary Compared
                    to Third Quarter 2017




                                 (in
                                 millions,
                                 except
                                 per
                                 share
                                 amounts)                         Q3/2018       Q3/2017

    ---                                                                             ---

         Total
         Revenues                                                   $18.7          $20.2

    ---

         Service
         Revenues                                                   $12.8          $13.3

    ---

         Operating
         Income
         (%
         of
         Revenue)                                     
            $2.5 (13%) 
     $2.9 (14%)

    ---                                                                             ---

         Diluted
         EPS                                                        $0.22          $0.23

    ---

         Non-
         GAAP
         Diluted
         EPS                                                        $0.31          $0.28

    ---

        EBITDA                                                       $3.1           $3.6

    ---



       
                First Nine Months of 2018 Financial Summary Compared to First Nine Months of 2017




                                                                        (in millions, except per share amounts) 
     
       1-9/2018 
      
        1-9/2017

    ---                                                                                                                                     ---


       Total Revenues                                                                                                   $59.4             $59.3

    ---


       Service Revenues                                                                                                 $39.8             $38.6

    ---


       Operating Income (% of Revenue)                                                                           
     $7.8 (13%)   
      $8.0 (13%)

    ---                                                                                                                                     ---


       Diluted EPS                                                                                                      $0.67             $0.67

    ---


       Non-GAAP Diluted EPS                                                                                             $0.91             $0.89

    ---


       EBITDA                                                                                                            $9.8             $10.1

    ---

Revenues from services decreased 4% as reported to $12.8 million as compared to $13.3 million in the third quarter of 2017. In local currency terms, revenues from services increased by 8%. Revenues from products decreased 14% as reported in the third quarter of 2018 to $5.9 million from $6.9 million. In local currency terms, revenues from products decreased by 11%. The currency exchange rate impact on total revenues for the third quarter of 2018 compared to the third quarter of 2017 was approximately $1.8 million.

Conference Call Information

As previously announced, Pointer Telocation's management will host a conference call today, at 10:00 a.m. Eastern Time, 3:00 p.m. UK time, 17:00 p.m. Israel time. On the call, management will review and discuss the results. To listen to the call, please dial in to one of the following teleconferencing numbers. Please begin placing your call a few minutes before the conference call commences.

Dial in numbers are as follows:

From the USA +1-877-407-0789 or 1-201-689-8562
From Israel 1-809-406-247
From the UK 0-800-756-3429

A replay will be available a few hours following the call on the company's website for one year.

The call will also be accompanied by a live webcast over the Internet and accessible at http://public.viavid.com/index.php?id=131448.

Reconciliation between results on a GAAP and Non-GAAP basis

Reconciliation between results on a GAAP and Non-GAAP basis is provided in a table immediately following the Condensed Interim Consolidated Statements of Cash Flows.

Pointer uses EBITDA, Non-GAAP operating income and Non-GAAP net income as Non-GAAP financial performance measurements.

Pointer calculates EBITDA by adding back to net income financial expenses, taxes and depreciation and amortization of intangible assets.

Pointer calculates Non-GAAP operating income by adding back to operating income the effects of non-cash stock-based compensation expenses, amortization of long-lived assets, other expenses of retirement costs and losses and acquisition related one-time costs.

Pointer calculates Non-GAAP net income by adding back to net income the effects of non-cash stock-based compensation expenses, amortization of long lived assets, non-cash tax expenses, other expenses of retirement costs and acquisition related one-time costs.

The purpose of such adjustments is to give an indication of the Company's performance exclusive of Non-GAAP charges that are considered by management to be outside of the Company's core operating results.

EBITDA and Non-GAAP operating and net income are provided to investors to complement the results provided in accordance with GAAP, as management believes these measures help to illustrate underlying operating trends in the Company's business and uses these measures to establish internal budgets and goals, manage the business and evaluate performance. Management believes that these Non-GAAP measures help investors to understand the Company's current and future operating cash flow and performance, especially as the Company's acquisitions have resulted in amortization and non-cash items that have had a material impact on the Company's GAAP profits. EBITDA and Non-GAAP operating and net income should not be considered in isolation or as a substitute for comparable measures calculated and should be read in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. These Non-GAAP financial measures may differ materially from the Non-GAAP financial measures used by other companies.

About Pointer Telocation
For over 20 years, Pointer has rewritten the rules for the Mobile Resource Management (MRM) market and is a pioneer in the Connected Car segment. Pointer has in-depth knowledge of the needs of this market and has developed a full suite of tools, technology and services to respond to them. The vehicles of the future will be intimately networked with the outside world, enhancing and optimizing the in-car experience.

Pointer's innovative and reliable cloud-based software-as-a-service (SAAS) platform extracts and captures an organization's critical mobility data points - from office, drivers, routes, points-of-interest, logistic-network, vehicles, trailers, containers and cargo. The SAAS platform analyzes the raw data converting it into valuable information for Pointer's customers providing them with actionable insights and thus enabling the customers to improve their bottom line and increase their profitability.

For more information, please visit http://www.pointer.com, the content of which does not form a part of this press release.

Risks Regarding Forward Looking Statements
Certain statements made herein that use words such as "estimate", "project", "intend", "expect", "believe", "may", "might", "predict", "potential", "anticipate", "plan" or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. For example, when the Company discusses its platform that will harness its real-time driver data to deliver better products and services, the Company's strength, adoption of the Company's solutions and other trends in the markets and various territories, it is using forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties that could cause the actual results, performance or achievements of the Company to be materially different from those that may be expressed or implied by such statements, including, among others, changes in general economic and business conditions. For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the U.S. Securities and Exchange Commission. The Company does not undertake to revise or update any forward-looking statements for any reason.



       
                INTERIM CONSOLIDATED BALANCE SHEETS

    ---


       
                U.S. dollars in thousands


                                                          September 30, December 31,
                                                                   2018          2017



                                             
              
       Unaudited



                     ASSETS





       CURRENT ASSETS:


        Cash and cash equivalents                                 8,315         7,375


        Trade and unbilled
         receivables                                             12,527        13,660


        Other accounts receivable and
         prepaid expenses                                         3,349         2,865



       Inventories                                               6,217         6,551




        Total current assets                                     30,408        30,451








       LONG-TERM ASSETS:


        Long-term loan to related
         party                                                      968           973


        Long-term unbilled and other
         accounts receivable                                      1,290         1,116



       Severance pay fund                                        3,184         3,546


        Property and equipment, net                               5,756         5,848


        Other intangible assets, net                              1,299         1,935



       Goodwill                                                 38,246        41,010



       Deferred tax asset                                        8,323         9,585





        Total long-term assets                                   59,066        64,013






       Total assets                                             89,474        94,464



             
                INTERIM CONSOLIDATED BALANCE SHEETS

    ---


             
                U.S. dollars in thousands


                                                                
       
       September 30,  
     
     December 31,


                                                                                  2018               2017



                                                                  
       
       Unaudited



                           LIABILITIES AND SHAREHOLDERS' EQUITY





             CURRENT LIABILITIES:


              Short-term bank credit and current maturities
               of long-term                                                      3,249              5,101
        loans



             Trade payables                                                     5,353              6,204


              Deferred revenues and customer advances                              709                777


              Other accounts payable and accrued expenses                        7,728              9,117




                           Total current liabilities                            17,039             21,199

    ---






             LONG-TERM LIABILITIES:



             Long-term loans from banks                                         3,048              5,015


              Deferred taxes and other long-term
               liabilities                                                         416                838



             Accrued severance pay                                              3,633              3,996




                           Total long term liabilities                           7,097              9,849

    ---



              COMMITMENTS AND CONTINGENT LIABILITIES





             EQUITY:


              Pointer Telocation Ltd.'s shareholders'
               equity:



             Share capital                                                      6,049              5,995



             Additional paid-in capital                                       129,895            129,076


              Accumulated other comprehensive income                           (7,104)           (2,340)



             Accumulated deficit                                             (63,738)          (69,597)





              Total Pointer Telocation Ltd.'s shareholders'
               equity                                                           65,102             63,134






             Non-controlling interest                                             236                282






             Total equity                                                      65,338             63,416






             Total liabilities and equity                                      89,474             94,464



             
                INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

    ---


             
                U.S. dollars in thousands, except for share and per share information


                                                                                                           Nine months ended                       Three months ended            Year ended
                                                                                                                                                       December 31,
                                                                                                           September
            30,                            September
        30,


                                                                                                      2018           2017             2018               2017               2017



                                                                                                           Unaudited                       Unaudited




             Revenues:



             Products                                                                              19,555         20,725            5,918              6,896             26,182



             Services                                                                              39,798         38,579           12,812             13,336             51,973






             
                Total revenues                                                           59,353         59,304           18,730             20,232             78,155

    ---




             Cost of revenues:



             Products                                                                              11,740         12,831            3,551              4,078             16,073



             Services                                                                              16,309         16,294            5,160              5,673             21,914





             Total cost of revenues                                                                28,049         29,125            8,711              9,751             37,987






             Gross profit                                                                          31,304         30,179           10,019             10,481             40,168






             Operating expenses:



             Research and development                                                               3,446          3,024            1,087              1,037              4,051



             Selling and marketing                                                                 10,983         10,360            3,438              3,599             14,038



             General and administrative                                                             8,400          8,463            2,852              2,827             11,275



             Amortization of intangible assets                                                        367            339              119                112                463



             One-time acquisition related costs                                                       262                                                                 32





             Total operating expenses                                                              23,458         22,186            7,496              7,575             29,859






             Operating income                                                                       7,846          7,993            2,523              2,906             10,309



             Financial expenses, net                                                                  856            708              190                288              1,004



             Other expenses (income)                                                                   13            (7)             (2)               (4)                 5






             Income before taxes on income                                                          6,977          7,292            2,335              2,622              9,300



             Taxes on income                                                                        1,481          1,877              531                739            (7,221)






             Net income                                                                             5,496          5,415            1,804              1,883             16,521








             Earnings per share from continuing
        operations attributable to Pointer
        Telocation Ltd.'s shareholders:



             Basic net earnings per share                                                            0.68           0.68             0.22               0.24               2.07






             Diluted net earnings per share                                                          0.67           0.67             0.22               0.23               2.03






             Weighted average -Basic number of shares                                           8,088,700      7,977,376        8,131,988          7,989,398          7,997,684






             Weighted average - fully diluted number of shares                                  8,273,532      8,104,756        8,274,676          8,172,362          8,130,566



              
                INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

    ---


              
                U.S. dollars in thousands


                                                                              Nine months ended                  Three months ended             
            
         Year ended

                                                                              September                  September
                                                                                 30,                       30,                
              
            December 31,


                                                                         2018     2017             2018     2017                           2017



                                                                              Unaudited                  Unaudited





                            Cash flows from operating activities:

    ---




              Net income                                               5,496    5,415            1,804    1,883                         16,521


               Adjustments required to reconcile net
                income to
         net cash provided by operating
          activities:


               Depreciation and amortization                            1,939    2,142              593      691                          2,924


               Accrued interest and exchange rate
                changes of                                                  7                     (18)                                    52
    debenture and long-term loans



              Accrued severance pay, net                                  15      134             (30)      22                             93


               Gain from sale of property and
                equipment, net                                           (73)    (85)            (24)    (18)                         (113)



               Stock-based compensation                                  792      299              406       83                            380


               Decrease (increase) in trade and
                unbilled                                                   69  (2,271)             857    (144)                       (1,616)
    receivables, net


               Decrease (increase)  in other
                accounts                                              (1,039)   (569)             330     (89)                         (206)
         receivable and prepaid expenses


               Decrease (increase) in inventories                       1,017    (807)             266    (240)                       (1,170)


               Decrease (increase) in deferred
                income taxes                                              616    1,096              276      274                        (8,018)


               Decrease (increase) in long-term
                unbilled and                                             (99)       4              103     (48)                           165
    other accounts receivable



              Decrease in trade payables                               (479) (1,558)           (726)   (347)                       (1,597)


               Increase (decrease) in other accounts
                payable                                               (1,095)   2,200            (713)   1,206                          2,285
         and accrued expenses




               Net cash provided by operating
                activities                                              7,166    6,000            3,124    3,273                          9,700





                            Cash flows from investing activities:

    ---

               Purchase of property and equipment                     (2,061) (1,987)           (428)   (875)                       (3,033)


               Purchase of other intangible assets                                                                                    (233)


               Proceeds from sale of property and
                equipment                                                  72       86               23       31                            114




               Net cash used in investing activities                  (1,989) (1,901)           (405)   (844)                       (3,152)



              
                INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

    ---


              
                U.S. dollars in thousands


                                                                          Nine months ended                          Three months ended        
         
     Year ended
                                                                                                                      December 31,
                                                                          September                          September
                                                                             30,                            30,


                                                             2018             2017               2018             2017                    2017



                                                                          Unaudited                          Unaudited





                            Cash flows from financing
                             activities:

    ---



               Repayment of long-term
                loans from banks                          (3,810)         (3,369)           (1,165)         (1,356)                (4,875)


               Proceeds from issuance of
                shares and exercise of                         80              387                                111                     395
    options, net of issuance
     costs


               Short-term bank credit,
                net                                          (41)           (305)             (120)             (3)                  (231)




               Net cash used in financing
                activities                                (3,771)         (3,287)           (1,285)         (1,248)                (4,711)





               Effect of exchange rate on
                cash and cash equivalents                   (466)             126              (287)             123                   (528)





               Decrease in cash and cash
                equivalents                                   940              938              1,147            1,304                   1,309


               Cash and cash equivalents
                at the beginning of the
                period                                      7,375            6,066              7,168            5,700                   6,066





               Cash and cash equivalents
                at the end of the period                    8,315            7,004                    8,315                 7,004                7,375



              
                ADDITIONAL INFORMATION

    ---


              
                U.S. dollars in thousands, except share and per share data





              The following table reconciles GAAP to non-GAAP operating results:


                                                                                 Nine
                 months
                                                                                  ended                                  Three months ended    
             
               Year ended

                                                                                 September                                  September
                                                                                  30,                                    30,               
     
              December 31,


                                                                2018                      2017                      2018               2017               2017





                            GAAP gross profit                 31,304                    30,179                    10,019             10,481             40,168


               Stock-based compensation
                expenses                                          65                         2                        32                  1                  3



                            Non-GAAP gross profit             31,369                    30,181                    10,051             10,482             40,171







                            GAAP operating income              7,846                     7,993                     2,523              2,906             10,309


               Stock-based compensation
                expenses                                         792                       299                       406                 83                380


               Amortization and impairment of
                long lived assets                                367                       339                       119                112                463


               Other expenses of retirement
                costs                                                                     125                                                           125


               Acquisition related one-time
                costs                                            262                                                                                    154


                            Non-GAAP operating income          9,267                     8,756                     3,048              3,101             11,431





                            GAAP net income                    5,496                     5,415                     1,804              1,883             16,521


               Stock-based compensation
                expenses                                         792                       299                       406                 83                380


               Amortization and impairment of
                long lived assets                                367                       339                       119                112                463


               Other expenses of retirement
                costs                                                                     125                                                           125


               Non cash tax expenses                             613                     1,030                       238                229            (8,213)


               Acquisition related one-time
                costs                                            262                                                                                    154



                            Non-GAAP net income                7,530                     7,208                     2,567              2,307              9,430




               Non-GAAP net income per share
                from continuing                                 0.91                      0.89                      0.31               0.28               1.16
    operations - Diluted



               Non-GAAP weighted average
                number of shares - Diluted*                8,273,532                 8,104,756                 8,274,676          8,172,362

                                                                                                                                                 8,130,566





              * In calculating diluted non-GAAP net income per share, the diluted weighted average number of shares
    outstanding excludes the effects of stock-based compensation expenses in accordance with FASB ASC 718.



             
                EBITDA

    ---


             
                U.S. dollars in thousands


                                                                 Nine months ended               Three months ended            
        
     Year ended
                                                                                                                       December 31,
                                                                 September               September
                                                                    30,                    30,


                                                            2018    2017            2018   2017                        2017






             GAAP Net income as reported:                 5,496   5,415           1,804  1,883                      16,521





             Financial expenses, net                        856     708             190    288                       1,004



             Tax on income                                1,481   1,877             531    739                     (7,221)



             Depreciation, amortization and impairment of 1,939   2,142                                            2,924
        goodwill and  intangible assets
                                                                                   593    691






             
                EBITDA                          9,772  10,142           3,118  3,601                      13,228

Company contact:

Yaniv Dorani, CFO
Tel: +972-3-5723111
E-mail: yanivd@pointer.com

Investor Relations Contact at Hayden IR, LLC:

Brett Maas
Tel: +1-646-536-7331
E-mail: brett@haydenir.com

Dave Fore
Tel: +1-206-395-2711
E-mail: dave@haydenir.com

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SOURCE Pointer Telocation Ltd.