On Track Innovations Ltd. Reports First Quarter 2019 Financial Results
ROSH PINA, Israel, May 7, 2019 /PRNewswire/ -- On Track Innovations Ltd. ("OTI") (NASDAQ: OTIV) (the "Company" or "OTI"), a global provider of near field communication (NFC) and cashless payment solutions, today provided a business update and announced financial results for the first quarter ended March 31, 2019.
Highlights of the quarter
-- Revenues of $3.0 million of which the recurring portion accounted for
43%, versus 26% in the prior quarter; on an absolute dollar basis
recurring revenues increased sequentially by 12%;
-- OTI completed the production relocation from China to the Philippines at
the end of the first quarter of 2019; and revenues are expected to
resume growth in the second quarter;
-- Improvement in the gross margins to 55%, compared with 52% in the same
year-ago quarter;
-- Reduction in the expenses: operating expenses totaled $3.1 million in
the first quarter, compared to $3.4 million in the same year-ago
quarter;
-- Received order for more than 6,000 advanced payment systems to the
Russian market;
Management Commentary
Mr. Cohen commented, "As we had expected, our first quarter was weak from the revenue standpoint, as we focused on moving our production out of China to the Philippines, where there is no impact from US tariffs. I recently returned from our new production facility which was up and running as of the beginning of the second quarter. I therefore believe that the issue which has affected us for the past two quarters is now behind us and we can look forward to a return of sequential revenue growth in the second quarter and beyond. I am pleased by the high level of gross margins as well as the relative increase in our recurring revenue levels, which sets us up positively as our revenues return to growth. "
Following OTI's sale of its MediSmart division in the fourth quarter of 2018, the financial results of Medismart are included as discontinued operations and all the prior periods' information has been reclassified to conform with the current period's presentation.
First quarter 2019 financial results summary
-- Total revenue in the quarter was $3.0 million, compared to $5.5 million
in the same year-ago quarter. The revenues in the quarter were affected
primarily by the impact of tariffs implemented by the United States on
imports from China, where the Company manufactured its products until
the end of the first quarter. Over the past 6 months, OTI has taken
steps to relocate manufacturing to the Philippines, and the process was
completed at the end of the first quarter of 2019. Additionally, the
revenues were also impacted by the lower level of orders from the
Asia-Pacific region, compared with the same year-ago quarter.
-- Recurring revenues were $1.3 million (43% of total revenues), compared
to $1.3 million (23% of total revenues) in the first quarter of 2018.
-- Gross profit in the quarter was $1.6 million, or 55% of revenues,
compared to $2.9 million, or 52% of revenues, in the first quarter of
2018.
-- Operating expenses totaled $3.1 million in the first quarter, compared
to $3.4 million in the same year-ago quarter.
-- Loss from continuing operations were $1.6 million compared to $400,000
in the same year-ago quarter.
-- Net loss was $1.7 million, or $0.04 per share, compared to a net loss of
$333,000, or $0.01 per share in the same year-ago quarter.
-- Adjusted EBITDA loss from continuing operations of $1.1, compared to
adjusted EBITDA loss of $104,000 in the same year-ago quarter.
-- Positive net cash provided by continuing operation activities totaled
$186,000 in the first quarter of 2019, compared to positive net cash
provided by continuing operation activities which totaled $591,000 in
the same year-ago period.
Conference Call
Management will host an investor conference call at 9:00 a.m. EDT on May 7, 2019, to discuss the financial results, provide a corporate update, and conclude with a Q&A session with participants. To participate, please use the following dial-in information:
U.S. Dial-in: 1-888-317-6002
International Dial-in: +1-412-317-5245
Webcast: https://www.webcaster4.com/Webcast/Page/1720/30371
Please dial in a few minutes before the start of the call and request to join the "On Track Innovations 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.
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.
Press Contact:
Investor Relations Contact:
Richard Harris, OTI
Gavriel Frohwein
Director of Marketing
GK Investor & Public Relations
+972-4-686-8004
+1 646 688 3559
press@otiglobal.com
oti@gkir.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," "look forward," "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 Company's expectations to return to sequential revenue growth in the second quarter and beyond, the Company's belief that the impact of the U.S. tariffs on import from China is now behind it, improvement in profitability, positive trends and 2019 revenue growth. 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.
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 patent litigation expenses, stock-based compensation expense and other expenses. Patent litigation expenses and other expenses are presented only at the end of each year, as we do not consider their impact on quarterly results to be material. 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.
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 March 31
2019 2018
---
(Unaudited)
(Unaudited)
---
Net loss $(1,745) $(333)
Net loss (income) from discontinued operations 193 (67)
Financial expenses, net 69 322
Depreciation 320 335
Expenses (income tax benefits) 5 (124)
TOTAL EBITDA
FROM CONTINUING OPERATIONS $(1,158) $(157)
---
Stock-based compensation 46 53
---
TOTAL ADJUSTED EBITDA FROM CONTINUING OPERATIONS $(1,112) $(104)
===
ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(US dollars in thousands)
March 31
December 31
2019 2018
Assets
Current assets
Cash and cash equivalents $4,014 $4,827
Short-term investments 905 1,078
Trade receivables (net of allowance for doubtful
accounts of $560 and 555 as of March 31, 2019
and December 31, 2018, respectively) 2,707 4,530
Other receivables and prepaid expenses 1,789 2,060
Inventories 3,964 3,527
Asset held for sale 772
Total current assets 14,151 16,022
Long-term restricted deposit for employees benefit 454 451
Severance pay deposits 387 375
Property, plant and equipment, net 4,013 5,033
Intangible assets, net 241 241
Right-of-use assets 1,381
Total Assets $20,627 $22,122
ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(US dollars in thousands)
March 31
December 31
2019 2018
Liabilities and Equity
Current Liabilities
Short-term bank credit and current maturities
of long-term bank loans $518 $260
Trade payables 4,937 4,712
Other current liabilities 2,534 3,622
Total current liabilities $7,989 $8,594
---
Long-Term Liabilities
Long-term loans, net of current maturities 32 39
Long-term liabilities due to operating leases, net of current maturities 857 -
Accrued severance pay 894 853
Deferred tax liability 426 445
Total long-term liabilities 2,209 1,337
Total Liabilities 10,198 9,931
Equity
Ordinary shares of NIS 0.1 par value: Authorized -
50,000,000 shares as of March 31, 2019 and
December 31, 2018; issued: 42,473,076 shares as
of March 31, 2019 and December 31, 2018;
outstanding: 41,294,377 shares
as of March 31, 2019 and December 31, 2018 1,068 1,068
Additional paid-in capital 225,068 225,022
Treasury shares at cost - 1,178,699 shares as of March 31,
2019 and December 31, 2018 (2,000) (2,000)
Accumulated other comprehensive loss (1,019) (956)
Accumulated deficit (212,688) (210,943)
Total Equity 10,429 12,191
Total Liabilities and Equity $20,627 $22,122
===
ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(US dollars in thousands, except share and per share data)
Three months ended March 31
2019 * 2018
Revenues
Sales $1,722 $4,241
Licensing and transaction fees 1,291 1,271
Total revenues 3,013 5,512
Cost of revenues
Cost of sales 1,370 2,632
Total cost of revenues 1,370 2,632
Gross profit 1,643 2,880
Operating expenses
Research and development 871 820
Selling and marketing 1,285 1,645
General and administrative 965 907
Total operating expenses 3,121 3,372
Operating loss from continuing operations (1,478) (492)
Financial expenses, net (69) (32)
Loss from continuing operations before taxes on income (1,547) (524)
Income tax (expenses) benefits (5) 124
Loss from continuing operations (1,552) (400)
(Loss) income from discontinued operations (193) 67
Net loss $(1,745) $(333)
Basic and diluted net loss attributable to
shareholders per ordinary share
From continuing operations $(0.04) $(0.01)
From discontinued operations
$ **
$ **
$(0.04) $(0.01)
Weighted average number of ordinary shares used in computing 41,294,377 41,214,378
basic and diluted net loss per ordinary share
* Reclassified to conform with the current period presentation.
** Less than $0.01 per ordinary share.
ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(US dollars in thousands)
Three months ended March 31
2019
* 2018
Cash flows from continuing operating activities
Net loss from continuing operations $(1,552) $(400)
Adjustments required to reconcile net loss to net cash provided by continuing operating
activities:
Stock-based compensation related to options issued to employees and others 46 53
Gain on sale of property and equipment, net (2)
Accrued interest and linkage differences, net (12) 14
Depreciation and amortization 320 335
Deferred tax benefits, net (10) (124)
Changes in operating assets and liabilities:
Accrued severance pay, net 29 (3)
Decrease in trade receivables, net 1,323 886
Decrease in other receivables and prepaid expenses 264 33
Increase in inventories (457) (35)
Increase (decrease) in trade payables 423 (117)
Decrease in other current liabilities (186) (51)
Net cash provided by continuing operating activities 186 591
Cash flows from continuing investing activities
Purchase of property and equipment (115) (322)
Proceeds from sale of property, plant and equipment 10
Change in short-term investments, net 6 1,164
Proceeds from restricted deposit for employee benefits 10
Investment in capitalized certification costs (48) (13)
Net cash (used in) provided by continuing investing activities (137) 829
Cash flows from continuing financing activities
Increase in short-term bank credit, net 372 33
Repayment of long-term bank loans (119) (144)
Net cash provided by (used in) continuing financing activities 253 (111)
Cash flows from discontinued operations
Net cash (used in) provided by discontinued operating activities (1,231) 244
Total net cash (used in) provided by discontinued operations (1,231) 244
Effect of exchange rate changes on cash and cash equivalents (57) 63
Increase in cash, cash equivalents and restricted cash (986) 1,616
Cash, cash equivalents and restricted cash - beginning of the period 5,105 7,799
Cash, cash equivalents and restricted cash - end of the period $4,119 $9,415
* Reclassified to conform with the current period presentation.
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SOURCE On Track Innovations Ltd. (OTI)
