FORT LEE, N.J. , Dec. 1 /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 nine months and third quarter ended September 30, 2008 . Revenues for the first nine months were $31.1 million, compared to $30.5 million during the first nine months of 2007. Third quarter revenues increased by 10% to $10.9 million compared to $9.9 million in the third quarter of 2007. Gross margin for the first nine months was 39%, the same as the last period last year. Third quarter gross margin increased to 44% from 36% in the third quarter of 2007. Operating expenses on GAAP basis decreased by 24% to $9.5 million from $12.6 million in the third quarter of 2007; on non-GAAP basis, operating expenses decreased by 26% to $7.9 million from $10.7 million in the third quarter of 2007. Net loss for the first nine months on a GAAP basis increased by 14% to $17.4 million compared to $15.2 million for the first nine months of 2007. Net loss on a Non-GAAP basis for the first nine months increased by 8% to $11.2 million compared to $10.4 million for the first nine months of 2007. Net loss on a GAAP basis for the third quarter decreased by 39% to $4.8 million compared to $7.9 million in the third quarter of 2007. On a non-GAAP basis, net loss significantly decreased by 46% in the third quarter to $3.2 million from $6.0 million in the third quarter of 2007. See below for a reconciliation of GAAP to non-GAAP information. Total cash used in operating activities for the third quarter of 2008 decreased by 31% to $1.7 million from $2.5 million in the third quarter of 2007 and decreased by 59% from $4.2 million in the second quarter of 2008.
"We are primarily focusing 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," said Oded Bashan , OTI Chairman and CEO. "We believe that our strong and healthy balance sheet with $106 Million in total assets and $32 Million in cash, cash equivalents, and short term investments together with the continued shift in focus toward high margin projects with recurring revenues combined with commercial rollouts will pave a clear path to profitability for OTI."
Conference call and Webcast Information
The Company has scheduled a conference call and simultaneous Web cast for Monday, December 1, 2008 at 9:00 a.m. Eastern Standard Time to discuss operating results and future outlook which will hosted by Oded Bashan , Chairman and CEO, Ohad Bashan , President and Tanir Horn, CFO. To participate, call: 1-888-407-2553 (U.S. toll free), 1-800-270-345 ( Israel toll free), 0-800-182-3010 ( Germany toll free). To listen to the Web cast, 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 December 8th , 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.
OTI Contact: Investor Relations: Galit Mendelson Paul Holm Vice President of Corporate Relations portfoliopr 201 944 5200 ext. 111 212 888 4570
[email protected] [email protected] (TABLES TO FOLLOW)
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 belief that our strong and healthy balance sheet with $106 Million in total assets and $32 Million in cash, cash equivalents, and short term investments together with the continued shift in focus toward high margin projects with recurring revenues combined with commercial rollouts will pave a clear path to profitability for OTI, 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, 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.
ON TRACK INNOVATIONS LTD CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except share and per share data) Nine months ended Three months ended September 30 September 30 2008 2007 2008 2007 (Unaudited) (Unaudited) (Unaudited)(Unaudited) Revenues Sales $29,265 $28,617 $10,317 $9,328 Licensing and transaction fees 1,884 1,852 546 527 Total revenues 31,149 30,469 10,863 9,855 Cost of revenues Cost of sales 19,093 18,467 6,052 6,260 Total cost of revenues 19,093 18,467 6,052 6,260 Gross profit 12,056 12,002 4,811 3,595 Operating expenses Research and development 8,909 8,203 3,008 3,050 Selling and marketing 8,086 6,858 2,911 2,797 General and administrative 10,559 13,444 3,210 6,397 Amortization of intangible assets 1,025 986 367 329 Total operating expenses 28,579 29,491 9,496 12,573 Operating loss (16,523) (17,489) (4,685) (8,978) Financial income (expense), net (667) 1,472 (101) 281 Other expense, net - (111) - - Loss before taxes on income and minority interests (17,190) (16,128) (4,786) (8,697) Taxes on income 177 197 55 66 Minority interest - 1,037 - 847 Equity in loss of affiliate (342) (271) (92) (109) Net loss $(17,355) $(15,165) $(4,823) $(7,893) Basic and diluted net loss per ordinary share $(0.86) $(0.81) $(0.23) $(0.41) Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share 20,091,808 18,788,245 20,857,776 19,080,884 ON TRACK INNOVATIONS LTD RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF OPERATIONS (In thousands, except share and per share data) Nine months ended September 30, 2008 GAAP Adjustments Non-GAAP Revenues Sales $29,265 - $29,265 Licensing and transaction fees 1,884 - 1,884 Total revenues 31,149 31,149 Cost of Revenues Cost of sales 19,093 (45) (a) 19,048 Total cost of revenues 19,093 (45) 19,048 Gross profit 12,056 45 12,101 Operating Expenses Research and development 8,909 (2,368) (a) 6,541 Selling and marketing 8,086 (1,064) (a) 7,022 General and administrative 10,559 (1,657) (a) 8,902 Amortization of intangible assets 1,025 (1,025) (b) - Total operating expenses 28,579 (6,114) 22,465 Operating loss (16,523) 6,159 (10,364) Financial expenses, net (667) - (667) Loss before taxes on income and minority interests (17,190) 6,159 (11,031) Taxes on income 177 - 177 Equity in loss of affiliate (342) - (342) Net loss $(17,355) $6,159 $(11,196) Basic and diluted net loss per ordinary share $(0.86) $0.30 $(0.56) Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share 20,091,808 20,091,808 (a) The effect of stock-based compensation in accordance with SFAS 123( R ) and EITF 96-18. (b) The effect of amortization of intangible assets. ON TRACK INNOVATIONS LTD RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF OPERATIONS (In thousands, except share and per share data) Three months ended September 30, 2008 GAAP Adjustments Non-GAAP Revenues Sales $10,317 - $10,317 Licensing and transaction fees 546 - 546 Total revenues 10,863 10,863 Cost of Revenues Cost of sales 6,052 (15) (a) 6,037 Total cost of revenues 6,052 (15) 6,037 Gross profit 4,811 15 4,826 Operating Expenses Research and development 3,008 (633) (a) 2,375 Selling and marketing 2,911 (139) (a) 2,772 General and administrative 3,210 (432) (a) 2,778 Amortization of intangible assets 367 (367) (b) - Total operating expenses 9,496 (1,571) 7,925 Operating loss (4,685) 1,586 (3,099) Financial expenses, net (101) - (101) Loss before taxes on income and minority interests (4,786) 1,586 (3,200) Taxes on income 55 - 55 Equity in loss of an affiliate (92) - (92) Net loss $(4,823) $1,586 $(3,237) Basic and diluted net loss per ordinary share $(0.23) $0.07 $(0.16) Weighted average number of ordinary shares in computing basic and diluted net loss per ordinary share 20,857,776 20,857,776 (a) The effect of stock-based compensation in accordance with SFAS 123( R ) and EITF 96-18. (b) The effect of amortization of intangible assets. RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF OPERATIONS (In thousands, except share and per share data) Nine months ended September 30, 2007 GAAP Adjustments Non-GAAP (unaudited) (unaudited) (unaudited) Revenues Sales $28,617 - $28,617 Licensing and transaction fees 1,852 - 1,852 Total revenues 30,469 30,469 Cost of Revenues Cost of sales 18,467 (39) (a) 18,428 Total cost of revenues 18,467 (39) 18,428 Gross profit 12,002 39 12,041 Operating Expenses Research and development 8,203 (1,633) (a) 6,570 Selling and marketing 6,858 (240) (a) 6,618 General and administrative 13,444 (1,896) (a) 11,548 Amortization of intangible assets 986 (986) (b) 0 Total operating expenses 29,491 (4,755) 24,736 Operating loss (17,489) 4,794 (12,695) Financial income, net 1,472 - 1,472 Other expenses, net (111) - (111) Loss before taxes on income and minority interests (16,128) 4,794 (11,334) Taxes on income 197 - 197 Minority interests 1,037 - 1,037 Equity in loss of an affiliate (271) - (271) Net loss $(15,165) $4,794 $(10,371) Basic and diluted net loss per ordinary share $(0.81) $0.26 $(0.55) Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share 18,788,245 18,788,245 (a) The effect of stock-based compensation in accordance with SFAS 123( R ). (b) The effect of amortization of intangible assets. RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF OPERATIONS (In thousands, except share and per share data) Three months ended September 30, 2007 GAAP Adjustments Non-GAAP (unaudited) (unaudited) (unaudited) Revenues Sales $9,328 - $9,328 Licensing and transaction fees 527 - 527 Total revenues 9,855 9,855 Cost of Revenues Cost of sales 6,260 (14) (a) 6,246 Total cost of revenues 6,260 (14) 6,246 Gross profit 3,595 14 3,609 Operating Expenses Research and development 3,050 (572) (a) 2,478 Selling and marketing 2,797 (72) (a) 2,725 General and administrative 6,397 (859) (a) 5,538 Amortization of intangible assets 329 (329) (b) 0 Total operating expenses 12,573 (1,832) 10,741 Operating loss (8,978) 1,846 (7,132) Financial income, net 281 - 281 Other expenses, net - - - Loss before taxes on income and minority interests (8,697) 1,846 (6,851) Taxes on income 66 - 66 Minority interests 847 - 847 Equity in loss of an affiliate (109) - (109) Net loss $(7,893) $1,846 $(6,047) Basic and diluted net loss per ordinary share $(0.41) $0.10 $(0.31) Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share 19,080,884 19,080,884 (a) The effect of stock-based compensation in accordance with SFAS 123( R ). (b) The effect of amortization of intangible assets. ON TRACK INNOVATIONS LTD CONDENSED CONSOLIDATED BALANCE SHEET (In thousands, except share and per share data) September 30 December 31 2008 2007 (Unaudited) (Audited) Assets Current Assets Cash and cash equivalents $21,633 $35,470 Short-term investments 10,323 6,379 Trade receivables (net of allowance for doubtful accounts of $ 2,837 and $2,767 as of September 30, 2008 and December 31, 2007, respectively) 7,158 8,028 Other receivables and prepaid expenses 3,472 3,636 Inventories 12,131 13,242 Total current assets 54,717 66,755 Severance pay deposits fund 2,091 1,576 Investment in an affiliated company 1,217 1,382 Property, plant and equipment, net 19,179 20,851 Intangible assets, net 4,285 4,509 Goodwill 24,569 23,387 Total Assets $106,058 $118,460 ON TRACK INNOVATIONS LTD CONDENSED CONSOLIDATED BALANCE SHEET (In thousands, except share and per share data) September 30 December 31 2008 2007 (Unaudited) (Audited) Liabilities and Shareholders' Equity Current Liabilities Short-term bank credit and current maturities of long-term bank loans $5,662 $5,336 Trade payables 7,886 10,291 Other current liabilities 4,720 5,344 Total current liabilities 18,268 20,971 Long-Term Liabilities Long-term loans, net of current maturities 2,097 2,432 Accrued severance pay 4,862 3,981 Deferred tax liabilities 730 728 Total long-term liabilities 7,689 7,141 Total liabilities 25,957 28,112 Minority interests 352 - Shareholders' Equity Ordinary shares of NIS 0.1 par value: authorized - 50,000,000 shares as of September 30, 2008 and December 31, 2007; issued 21,135,190 and 19,627,068 shares as of September 30, 2008 and December 31, 2007, respectively; Outstanding 21,021,838 and 19,434,011 as of September 30, 2008 and December 31, 2007, respectively 497 454 Additional paid-in capital 181,438 174,494 Accumulated other comprehensive income 615 846 Accumulated deficit (102,801) (85,446) Total shareholders' equity 79,749 90,348 Total Liabilities and Shareholders' Equity $106,058 $118,460 ON TRACK INNOVATIONS LTD CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands, except share and per share data) Nine months ended September 30 2008 2007 (Unaudited)(Unaudited) Cash flows from operating activities Net loss $(17,355) $(15,165) Adjustments required to reconcile net loss to net cash used by operating activities: Stock-based compensation related to options and shares issued to employees and others 5,134 5,053 Equity in loss of an affiliate company 342 271 Amortization of intangible assets 1,025 986 Depreciation 2,578 1,792 Minority interest - (1,037) Accrued severance pay, net 366 190 Decrease in deferred tax liabilities (183) (197) Decrease in trade receivables 878 4,400 Decrease (increase) in other receivables and prepaid expenses 240 (768) Decrease (increase) in inventories 1,127 (2,312) Increase (decrease) in trade payables (2,420) 83 Increase (decrease) in other current liabilities (631) 579 Other, net 17 (257) Net cash used in operating activities $(8,882) $(6,382) Cash flows from investing activities Acquisition of consolidated subsidiaries, net of cash acquired (565) - Proceeds from maturity of available -for sale securities 24,621 67,569 Purchase of available-for sale securities (28,574) (64,356) Purchase of property and equipment (1,176) (2,795) Receipts on account of loans and receivables - 237 Other, net 21 (19) Net cash provided by (used in) investing activities $(5,673) $636 Cash flows from financing activities Increase in short-term bank credit, net 333 2,003 Exercise of options and warrants 768 8 Repayment of long-term bank loans (389) (257) Net cash provided by financing activities 712 1,754 Effect of exchange rate changes on cash 6 88 Decrease in cash and cash equivalents (13,837) (3,904) Cash and cash equivalents at the beginning of the period 35,470 30,049 Cash and cash equivalents at the end of the period $21,633 $26,145
SOURCE On Track Innovations Ltd.
