OTI Reports FY 2008 First Half and Second Quarter Financial Results

FORT LEE, N.J. , Aug. 28 /PRNewswire-FirstCall/ -- On Track Innovations Ltd. (OTI) (Nasdaq: OTIV), a global leader in contactless microprocessor-based smart card solutions for homeland security, payments, petroleum payments and other applications, today announced its consolidated financial results for the first half and second quarter ended June 30, 2008 . Revenues for the first half were $20.3 million, compared to $20.6 million during the first half of 2007. Second quarter revenues increased by 18% to $11 million compared to $9.3 million in the first quarter of 2008. Gross margin for the first half was 36%, compared to 41% for the first half of 2007. Second quarter gross margin increased to 39% from 32% in the first quarter of 2008. First half net loss on a GAAP basis was $12.5 million. Net loss on a Non-GAAP basis for the first half was $8 million. Net loss on a GAAP basis for the second quarter decreased by 17% to $5.7 million compared to $6.8 million in the first quarter of 2008. On a non-GAAP basis, net loss significantly decreased by 35% in the second quarter to $3.1 million from $4.8 million in the preceding quarter. See below for a reconciliation of GAAP to non-GAAP information.

"These results are due to a shift in the revenue mix in the payment sector from components intended for the US contactless card payments market to greater sales of readers, solutions for the mass transit market, EasyPark and more, as well as contactless payments in non-US markets," said Oded Bashan , OTI Chairman and CEO.

Mr. Bashan continued: "We continue to focus on controlling and reducing our operating expenses to the most efficient and effective level required to carry out our current and pending pipeline of projects for 09' and 10'. While we have steadily reduced headcount, the resultant savings take two to three quarters to show up in the P& L. We continue to shift our focus toward high margin projects with recurring revenues combined with commercial rollouts. We believe our actions will pave a clear path to profitability for OTI. We continue to have a strong and healthy balance sheet with $110 Million in total assets and $34.3 Million in cash, cash equivalents, and short term investments."

"As we've indicated before, it is our belief that most of the significant delays are behind us and we are confident about the Company's growth," said Mr. Bashan. "We still believe that 2008 will be a turning point for OTI in terms of showing a clear path to profitability and will reflect revenue growth of about 10% over 2007, with most of the growth expected in the fourth quarter of the year."

Conference call and Webcast Information

The Company has scheduled a conference call and simultaneous Webcast for Thursday, August 28, 2008 , which will be hosted by Oded Bashan , Chairman and CEO, Ohad Bashan , President, and Guy Shafran , CFO, for 9:30 AM EDT to discuss operating results and future outlook. To participate, call: 1-866-345-5855 (U.S. toll free), 1-800-270-345 ( Israel toll free), 0-800-182-6846 ( Germany toll free). To listen to the Webcast, use the following link: http://www.otiglobal.com/content.aspx?id=226

For those unable to participate, the teleconference will be available for replay until midnight September 4th , by calling U.S.: 1-877-456-0009 on the web at: http://www.otiglobal.com/content.aspx?id=226

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, OTI uses non-GAAP measures of gross profit, net income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges in accordance with SFAS 123(R) and EITF 96-18, and amortization of intangible assets in 2008 and exclude non-cash equity-based compensation charges in accordance with SFAS 123(R), and amortization of intangible assets in 2007 . OTI management believes the non-GAAP financial information provided in this release provides meaningful supplemental information regarding our performance and enhances the understanding of the Company's on-going economic performance. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating the business and as such deemed it important to provide all this information to investors.

About OTI

Established in 1990, OTI (Nasdaq: OTIV) designs, develops and markets secure contactless microprocessor-based smart card technology to address the needs of a wide variety of markets. Applications developed by OTI include product solutions for petroleum payment systems, homeland security solutions, electronic passports and IDs, payments, mass transit ticketing, parking, loyalty programs and secure campuses. OTI has a global network of regional offices to market and support its products. The company was awarded the Frost & Sullivan 2005 and 2006 Company of the Year Award in the field of smart cards.

For more information on OTI, visit www.otiglobal.com, the content of which is not part of this press release.

Safe Harbor for Forward-Looking Statements:

This press release contains 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 "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions, we are making forward-looking statements. Forward-looking statements include statements regarding our goals, beliefs, future growth strategies, objectives, plans or current expectations. For example, when we discuss our continuing focus on controlling and reducing our operating expenses, or the shift of our focus toward high margin projects with recurring revenues combined with commercial rollouts, or our belief that our actions will pave a clear path to profitability for OTI, or our belief that most of the significant delays are behind us and we are confident about our growth, or that 2008 will be a turning point for us in terms of showing a clear path to profitability and will reflect a revenue growth of about 10% over 2007, with most of the growth expected in the fourth quarter of the year, we are using a forward looking statement. Because such statements deal with future events and are based on OTI's current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of OTI could differ materially from those described in or implied by the statements in this press release. Forward-looking statements could be impacted by the effects of the protracted evaluation and validation period in the U.S. contactless payment cards market, our inability to successfully integrate the purchase of assets of SuperCom or to otherwise achieve the expected benefits of the acquisition, to close to due a failure to satisfy closing conditions, market acceptance of new and existing products and our ability to execute production on orders, as well as the other risk factors discussed in OTI's Annual Report on Form 20-F for the year ended December 31, 2007 , which is on file with the Securities and Exchange Commission. Although OTI believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Except as otherwise required by law, OTI disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date hereof, whether as a result of new information, future events or circumstances or otherwise.

SOURCE On Track Innovations Ltd.



Loading