OTI Reports Third Quarter 2016 Financial Results

ROSH PINA, Israel, Nov. 09, 2016 (GLOBE NEWSWIRE) -- On Track Innovations Ltd. (OTI) (NASDAQ:OTIV), a global provider of near field communication (NFC) and cashless payment solutions, today reported financial results for the third quarter ended September 30, 2016.

Q3 2016 Operational & Financial Highlights
  • Achieved GAAP net profits from continuing operations in Q3 and EBITDA profitability for Q3  
  • Increased revenues and gross profits compared to prior quarter, marking 4th consecutive quarter of financial improvements in continuing operations 
  • Increased focus on core businesses by completing the divestiture of its parking business 
  • Increased new purchase orders for future deliveries of cashless payment readers during Q3 by 288% compared to Q2 2016 
  • Achieved FeliCa certification for OTI SATURN 8700 contactless reader, opening opportunities for large sales in Japanese market 
  • Received Letter of Intent from a major Japanese retailer to purchase 10,000 FeliCa-certified contactless readers and telemetry systems; initial units to be delivered in 2017

Q3 2016 Financial Details

Total revenues increased 16% to $5.6 million from $4.8 million in the prior quarter, and increased 64% from $3.4 million in the same year-ago period.

Gross profit was $3.0 million (54.3% of revenue) compared to $1.9 million (54.5% of revenue) in the same year-ago period. This marked an increase in gross profits of 24% over the prior quarter and 64% from the same period a year ago.

Operating expenses decreased 32% to $2.8 million from $4.1 million in the same year-ago period.

Net income from continuing operations totaled $207,000, or $0.01 per share, an improvement from a net loss from continuing operations of $2.4 million, or $(0.06) per share, in the same year-ago period.

Net loss totaled $72,000, an improvement from a net loss of $2.0 million, or $(0.05) per share, in the same year-ago period.

Adjusted EBITDA from continuing operations improved to a profit of $713,000, up from a loss of $1.1 million in the same year-ago period (see discussion about the presentation of adjusted EBITDA from continuing operations, a non-GAAP financial measure, below).

At quarter-end, cash and cash equivalents and short-term investments increased 16% to $12.9 million, compared to $11.2 million at the end of the prior quarter.

Management Commentary "In the third quarter we achieved profitability both in our continuing operations on a GAAP basis and overall profitability in non-GAAP EBITDA. Moreover, our adjusted EBITDA profit spans the first nine months of 2016. This is a significant accomplishment, given that we have achieved this while aligning our business into high-margin, recurring revenue products and solutions and divesting businesses that are not aligned with our long term growth strategy," said Shlomi Cohen, OTI CEO. "Profits were driven by double digit growth in revenues, increased gross profits, and reductions in operating expenses."

"Our continued commitment to cost cutting and operational efficiencies decreased operating expenses when compared both to the prior quarter and the year-ago period. The third quarter of 2016 marked the lowest quarterly operating expenses for OTI in more than two years. Focusing resources on our core technologies, we sold our parking business which reduced expenses and freed up cash for reinvestment into our faster growing, higher margin businesses."

"Over the past four quarters, our most important and significant focus has been on moving from being a product company to a leading solutions company in the unattended payment market. Significant new contracts and our corresponding financial improvements reflect this change. During the third quarter we achieved a significant growth in the sale of our cashless readers and received purchase orders for future deliveries in the coming quarters including a letter of intent for the sale of 10,000 contactless readers in Japan, where we expect a larger number of opportunities to develop as a result of our recent receipt of FeliCa certification."

"Looking ahead to what we anticipate will become a multi-billion dollar market in the Internet of Things and wearable payment devices, during the third quarter we made significant progress toward launching Pay Capsule-Flex. One of the smallest payment devices in the world, Pay Capsule-Flex can turn any product and fashion garment into a payment device.  We expect to launch our wearable payment ring product in the next few months."

"As a result of our efforts during the last year and our intended continuation of these efforts, we anticipate a stable, long term adjusted EBITDA profitability in the beginning of 2017."

Conference Call OTI will hold a conference call today (November 9, 2016) at 10:30 a.m. Eastern time to discuss these results. OTI CEO Shlomi Cohen and CFO Yishay Curelaru will host the presentation, followed by a question and answer period.

Date: Wednesday, November 9, 2016 Time: 10:30 a.m. Eastern time U.S. dial-in: (844) 348-3791 International dial-in: +1 (216) 562-0484Conference ID: 5955774

The conference call will be broadcast simultaneously and available for replay via the investor relations section of the company's website here, the content of which is not part of this press release.

Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization.

A replay of the call will be available after 1:30 p.m. Eastern time on the same day through December 9, 2016.

U.S. replay dial-in: (855) 859-2056 International replay dial-in: (404) 537-3406 Replay ID: 5955774

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, patent litigation and maintenance expenses and other expenses. OTI believes that adjusted EBITDA from continuing operations should be considered in evaluating the company's operations since it provides a clearer indication of OTI's operating results. This measure should be considered in addition to results prepared in accordance with US GAAP, but should not be considered a substitute for the US GAAP results. The non-GAAP measures included in this press release have been reconciled to the US GAAP results in the tables below.
ON TRACK INNOVATIONS LTD.
INTERIM UNAUDITED  RECONCILIATION OF NON-GAAP ADJUSTMENT
The following tables reflect selected On Track Innovations Ltd. non-GAAP results reconciled to GAAP results:
(In thousands, except share and per share data)
 
  Three months ended September 30,   Nine months ended September 30,
    2016       2015       2016       2015  
    (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)  
Net (loss) Income $ (72 )   $ (1,986 )   $ 349     $ (5,795 )
                                 
Net income (loss) from discontinued operations   279       (391 )     (1,525 )     (538 )
Financial expenses, net   30       108       185       511  
Depreciation   293       316       911       918  
Taxes on income   28       35       60       38  
Total EBITDA FROM CONTINUING OPERATIONS $ 558     $ (1,918 )   $ (20 )   $ (4,866 )
                                   
Patent litigation and maintenance   3       351       37       802  
Other expenses   83       408       83       918  
Stock-based compensation   69       37       174       369  
Total adjusted EBITDA FROM CONTINUING OPERATIONS $ 713     $ (1,122 )   $ 274     $ (2,777 )
                               

About OTIOn Track Innovations Ltd. (OTI) is a leader in contactless and NFC applications based on its extensive patent and IP portfolio. OTI's field-proven innovations have been deployed around the world to address NFC and other cashless payment solutions, petroleum payment and management, and mass transit ticketing. OTI markets and supports its solutions through a global network of regional offices and alliances. For more information, visit www.otiglobal.com.

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. For example, we are using forward-looking statements when we discuss our expectations regarding our growth or future profitability, plans for our existing and new products and services, and future deliveries, opportunities and launches. 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 periods in the U.S. and other markets for contactless payment cards, or new and existing products and our ability to execute production on orders, as well as other risks and uncertainties, including those discussed in the "Risk Factors" section and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2015, and in subsequent filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our 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 INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share data)
 
    September 30,     December 31,  
      2016       2015  
                 
Assets                
                 
Current assets                
Cash and cash equivalents   $ 6,937     $ 5,450  
Short-term investments     5,984       5,454  
Trade receivables (net of allowance for doubtful                
accounts of $769 and $778 as of September 30, 2016                
and December 31, 2015, respectively)     3,692       2,418  
Other receivables and prepaid expenses     1,903       2,183  
Inventories     2,704       3,330  
Total current assets     21,220       18,835  
                 
                 
Long-term restricted deposit for employees benefit     477       524  
                 
Severance pay deposits     328       455  
                 
Property, plant and equipment, net     6,292       8,668  
                 
Intangible assets, net     255       180  
                 
                 
Total Assets   $ 28,572     $ 28,662  
                 

ON TRACK INNOVATION LTD.  
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET  
(In thousands, except share and per share data)  
   
  September 30,   December 31,
    2016     2015
               
Liabilities and  Equity              
               
Current Liabilities              
Short-term bank credit and current maturities              
of long-term bank loans $ 3,780     $ 3,815  
Trade payables   6,472       5,441  
Other current liabilities   2,227       2,724  
Total current liabilities   12,479       11,980  
               
Long-Term Liabilities              
Long-term loans, net of current maturities   1,435       2,359  
Accrued severance pay   849       1,148  
Deferred tax liability   407       352  
Total  long-term liabilities   2,691       3,859  
               
Total Liabilities   15,170       15,839  
               
               
Equity              
Shareholders' Equity              
Ordinary shares of NIS 0.1 par value: Authorized -              
50,000,000 shares as of September 30, 2016 and              
December 31, 2015; issued: 42,120,075 and 42,014,673              
shares as of September 30, 2016 and December 31, 2015, respectively;              
outstanding: 40,941,376 and 40,835,974 shares              
as of September 30, 2016 and December 31, 2015, respectively   1,057       1,055  
Additional paid-in capital   224,214       225,925  
Treasury shares at cost - 1,178,699 shares as of September 30,              
2016 and December 31, 2015   (2,000 )     (2,000 )
Accumulated other comprehensive loss   (996 )     (1,084 )
Accumulated deficit   (208,873 )     (209,254 )
Total Shareholder's equity   13,402       14,642  
Non-controlling interest   -       (1,819 )
               
Total Equity   13,402       12,823  
               
Total Liabilities and Equity $ 28,572     $ 28,662  
               

ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
 
  Three months ended September 30,   Nine months ended September 30,
  2016     2015*   2016   2015*
                               
Revenues                              
Sales $ 3,463     $ 2,207     $ 10,409     $ 9,503  
Licensing and transaction fees   2,133       1,195       4,569       3,540  
                               
Total revenues   5,596       3,402       14,978       13,043  
                               
Cost of revenues                              
Cost of sales   2,307       1,548       6,917       6,487  
Cost of licensing   250       -       250       -  
Total cost of revenues   2,557       1,548       7,167       6,487  
                               
Gross profit   3,039       1,854       7,811       6,556  
Operating expenses                              
Research and development   604       781       2,072       2,596  
Selling and marketing   1,300       1,523       3,974       4,688  
General and administrative   784       1,025       2,576       3,336  
Patent litigation and maintenance   3       351       37       802  
Other expenses   83       408       83       918  
                               
Total operating expenses   2,774       4,088       8,742       12,340  
                               
Operating income (loss) from continuing operations   265       (2,234 )     (931 )     (5,784 )
Financial expenses, net   (30 )     (108 )     (185 )     (511 )
                               
Profit (loss) from continuing operations                              
 before taxes on income   235       (2,342 )     (1,116 )     (6,295 )
Income tax   (28 )     (35 )     (60 )     (38 )
                               
Net income (loss) from continuing operations   207       (2,377 )     (1,176 )     (6,333 )
Net (loss) income from discontinued operations   (279 )     391       1,525       538  
                               
Net (loss) income   (72 )     (1,986 )     349       (5,795 )
                               
Net loss (income) attributable to noncontrolling interest   5       (23 )     32       3  
Net (loss) income attributable to shareholders $ (67 )   $ (2,009 )   $ 381     $ (5,792 )
                               
Basic and diluted net gain (loss) attributable to shareholders per ordinary share                              
From continuing operations   0.01       (0.06 )     (0.03 )     (0.15 )
From discontinued operations   (0.01 )     0.01       0.04       0.01  
  $ **     $ (0.05 )   $ 0.01     $ (0.14 )
                               
Weighted average number of ordinary shares                              
used in computing basic net (loss)                              
income per ordinary share   40,914,258       40,874,474       40,895,268       40,868,252  
                               
Weighted average number of ordinary shares                              
used in computing diluted net (loss)                              
income per ordinary share   41,667,258       40,874,474       40,895,268       40,868,252  
                               

*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
(In thousands, except share and per share data)
 
  Nine months ended September 30,
  2016   2015 (**)
Cash flows from continuing operating activities              
Net loss from continuing operations $ (1,176 )   $ (6,333 )
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   174       369  
Loss (gain) on sale of property and equipment   83       (8 )
Accrued interest and linkage differences, net   19       30  
Depreciation   911       918  
               
Changes in operating assets and liabilities:              
Accrued severance pay, net   (152 )     (39 )
Deferred tax, net   60       36  
(Increase) decrease in trade receivables, net   (1,376 )     1,885  
(Increase) decrease in other receivables and prepaid expenses   (16 )     133  
Decrease (increase) in inventories   246       (267 )
Increase in trade payables   1,024       445  
(Decrease) increase in other current liabilities   (408 )     194  
Net cash used in continuing operating activities   (611 )     (2,637 )
               
Cash flows from continuing investing activities              
               
Purchase of property and equipment   (185 )     (1,117 )
Proceeds from sale of property and equipment   1,779       31  
Change in short-term investments, net   (502 )     3,998  
Investment in capitalized product costs   (139 )     (153 )
Investment in restricted deposit for employees benefit   -       (281 )
Proceeds from restricted deposit for employees benefit   142       144  
Net cash provided by continuing investing activities   1,095       2,622  
               
Cash flows from continuing financing activities              
Increase (decrease) in short-term bank credit, net   287       (783 )
Proceeds from long-term bank loans   27       716  
Repayment of long-term bank loans   (1,368 )     (606 )
Proceeds from exercise of options and warrants   37       (* )
Net cash  used in continuing financing activities   (1,017 )     (673 )
               
Cash flows from discontinued operations              
Net cash used in discontinued operating activities   (183 )     (433 )
Net cash provided by discontinued investing activities   2,152       387  
               
Total net cash provided by (used in) discontinued operations   1,969       (46 )
               
Effect of exchange rate changes on cash and cash equivalents   51       (198 )
               
Increase (decrease) in cash and cash equivalents   1,487       (932 )
Cash and cash equivalents at the beginning of the period   5,450       5,351  
               
Cash and cash equivalents at the end of the period $ 6,937     $ 4,419  
               

(*) Less than $1.(**) Reclassified to conform with the current period presentation.

 

OTI Investor Contactir@otiglobal.comOTI Press Contact:Neil BarrDirector of Marketing+972-4-686-8004press@otiglobal.com

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