SOURCE: On Track Innovations Ltd.

On Track Innovations Ltd.

November 12, 2015 08:31 ET

oti Reports Third Quarter 2015 Financial Results

ROSH PINA, ISRAEL--(Marketwired - Nov 12, 2015) - On Track Innovations Ltd. (oti) (NASDAQ: OTIV), a global provider of near field communication (NFC) and cashless payment solutions, reported financial results for the third quarter ended September 30, 2015.

Q3 2015 Operational Highlights

  • Appointed Shlomi Cohen as CEO, who brings more than 25 years of experience managing global organizations to advance the sales of oti's cashless payment solutions.

  • Implemented a new go-to-market strategy designed to advance the company's NFC market leadership and drive growth.

  • Filed patent infringement lawsuits against AT&T and Verizon.

Q3 2015 Financial Details 
Total revenues decreased 31% to $3.8 million from $5.4 million in the prior quarter and 29% from $5.3 million in the same year-ago period.

Gross profit declined 23% to $2.1 million (55% of revenue) from $2.7 million (50% of revenue) in the prior quarter and 21% from $2.6 million (50% of revenue) in the same year-ago period.

Operating expenses were $4.4 million, a decrease of 4% from $4.6 million in the prior quarter and 9% from $4.8 million in the same year-ago period.

Net loss from continuing operations totaled $2.4 million or $(0.06) per share, compared to a net loss from continuing operations of $2.3 million or $(0.07) per share in the same year-ago period.

Adjusted EBITDA loss from continuing operations totaled $1.2 million, an improvement from a loss of $1.5 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 totaled $11.5 million.

Management Commentary
"During the third quarter, we made meaningful progress with new key initiatives designed to optimize our manufacturing processes, accelerate growth and reduce costs," said Shlomi Cohen, CEO of oti. "These efforts resulted in lower operating expenses and improved gross margins, and an overall leaner, more efficient organization.

"While we experienced strong growth in our petroleum segment in Q3, our retail segment sales declined. The company over recent years has primarily focused on restructuring and R&D activity, and has not benefited as much as it could have from growth in the global NFC market. However, it is clear that our company has all the right elements in place, including industry leading technology and world-class R&D, to be a leader in the multi-billion dollar global cashless payments market.

"To take better advantage of these strengths, over the last few months we have begun to implement a new go-to-market strategy to transition oti into a more capable sales organization in order to capture greater market share in the NFC space. We have been actively recruiting new sales and marketing professionals to address emerging opportunities in Europe, Asia Pacific and North America.

"We recently introduced a new product lineup to support the success of our sales team, particularly as we enter new markets and industry growth verticals. One of the revolutionary new products we introduced at Money20/20 last month was the oti Pay Capsule, a wearable NFC payment device.

"Pay Capsule plays into The Internet of Things revolution, the emerging hyper-connected world that is transforming the way consumers interact and transact. Pay Capsule eliminates the boundaries of how we pay by delivering a secure digital payment experience using virtually any personal item, such as rings, fitness bands, car key fobs, and apparel. We plan to complete the rollout of Pay Capsule and other new product additions in 2016.

"Our operational progress in the third quarter along with our expanding product portfolio, sales pipeline and partner channels have set the stage for a better finish to the year and an even stronger 2016. While there is more work to be done, we are in a strong position to capitalize on the global growth in the cashless payment market."

Conference Call
oti will hold a conference call today (November 12, 2015) at 10:30 a.m. Eastern time to discuss these results. oti's CEO Shlomi Cohen and CFO Shay Tomer will host the presentation, followed by a question and answer period.

Date: Thursday, November 12, 2015
Time: 10:30 a.m. Eastern time
U.S. dial-in: 877-407-0784
International dial-in: 201-689-8560

Please call the conference telephone number 10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 949-574-3860.

A replay of the call will be available after 1:30 p.m. Eastern time through December 12, 2015.

U.S. replay dial-in: 877-870-5176
International replay dial-in: 858-384-5517
Replay ID: 13623973

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 share-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,
 
    2015     2014     2015     2014  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                                 
                                 
Net Loss   $ (1,986 )   $ (1,951 )   $ (5,795 )   $ (7,543 )
                                 
  Net income from discontinued operations     (461 )     (311 )     (823 )     (41 )
  Financial expenses, net     122       44       542       397  
  Depreciation     324       311       941       959  
  Income tax     35       29       38       202  
TOTAL EBITDA FROM CONTINUING OPERATIONS   $ (1,966 )   $ (1,878 )   $ (5,097 )   $ (6,026 )
                                 
Patent litigation and maintenance     371       194       830       1,213  
Other expenses     408       -       918       -  
Stock-based compensation     37       206       369       642  
TOTAL ADJUSTED EBITDA FROM CONTINUING OPERATIONS   $ (1,150 )   $ (1,478 )   $ (2,980 )   $ (4,171 )
                                 

About OTI
On 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, cashless parking fee collection systems 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, 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 words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions are used, the company is making forward-looking statements. For example, forward-looking statements include statements regarding our intent to rollout new products and our position to capitalize on the cashless payment market. 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, as well as oti's 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, 2014, and in subsequent filings with the Securities and Exchange Commission. Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can provide no assurance that 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,
    2015   2014
Assets            
             
Current assets            
Cash and cash equivalents   $ 4,419   $ 5,351
Short-term investments     7,056     11,048
Trade receivables (net of allowance for doubtful accounts of $696 and $671 as of September 30, 2015 and December 31, 2014, respectively)     2,719     4,299
Other receivables and prepaid expenses     2,917     2,530
Inventories     3,961     3,703
             
Total current assets     21,072     26,931
             
             
Long-term restricted deposit for employees benefit     519     555
             
Severance pay deposits     469     614
             
Property, plant and equipment, net     8,828     9,234
             
Intangible assets, net     145     -
             
Deferred tax asset     39     47
             
             
             
             
             
             
             
             
             
Total Assets   $ 31,072   $ 37,381
             
   
   
ON TRACK INNOVATION LTD.  
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET  
(In thousands, except share and per share data)  
   
    September 30,     December 31,  
    2015     2014  
Liabilities and Equity                
                 
Current Liabilities                
Short-term bank credit and current maturities of long-term bank loans   $ 3,280     $ 3,617  
Trade payables     7,297       7,306  
Other current liabilities     2,730       2,656  
Total current liabilities     13,307       13,579  
                 
Long-Term Liabilities                
Long-term loans, net of current maturities     2,050       2,161  
Accrued severance pay     1,232       1,456  
Deferred tax liability     318       302  
Total long-term liabilities     3,600       3,919  
                 
Total Liabilities     16,907       17,498  
                 
                 
                 
                 
Equity                
Shareholders' Equity                
Ordinary shares of NIS 0.1 par value: Authorized - 50,000,000 shares as of September 30, 2015 andDecember 31, 2014; issued: 42,014,673 and 41,996,602 shares as of September 30, 2015 and December 31, 2014, respectively; outstanding: 40,835,974 and 40,817,903 shares as of September 30, 2015 and December 31, 2014, respectively     1,055       1,055  
Additional paid-in capital     224,603       224,234  
Treasury shares at cost - 1,178,699 shares as of September 30, 2015 and December 31, 2014     (2,000 )     (2,000 )
Accumulated other comprehensive loss     (1,092 )     (800 )
Accumulated deficit     (207,895 )     (202,103 )
Total Shareholder's equity     14,671       20,386  
Non-controlling interest     (506 )     (503 )
                 
Total Equity     14,165       19,883  
                 
Total Liabilities and Equity   $ 31,072     $ 37,381  
                 
                 
                 
                 
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,
 
    2015     2014     2015     2014  
                                 
Revenues                                
Sales   $ 2,361     $ 3,691     $ 10,015     $ 13,381  
Licensing and transaction fees     1,394       1,564       4,131       4,226  
                                 
Total revenues     3,755       5,255       14,146       17,607  
                                 
Cost of revenues                                
Cost of sales     1,673       2,619       6,896       9,066  
                                 
Gross profit     2,082       2,636       7,250       8,541  
Operating expenses                                
Research and development     807       1,281       2,712       3,662  
Selling and marketing     1,730       1,968       5,388       6,160  
General and administrative     1,056       1,382       3,440       4,491  
Patent litigation and maintenance     371       194       830       1,213  
Other expenses     408       -       918       -  
                                 
Total operating expenses     4,372       4,825       13,288       15,526  
                                 
Operating loss from continuing operations     (2,290 )     (2,189 )     (6,038 )     (6,985 )
                                 
Financial expenses, net     (122 )     (44 )     (542 )     (397 )
                                 
Loss from continuing operationsbefore taxes on income     (2,412 )     (2,233 )     (6,580 )     (7,382 )
                                 
Income tax     (35 )     (29 )     (38 )     (202 )
                                 
Net loss from continuing operations     (2,447 )     (2,262 )     (6,618 )     (7,584 )
Net income from discontinued operations     461       311       823       41  
                                 
Net loss     (1,986 )     (1,951 )     (5,795 )     (7,543 )
                                 
Net (income) loss attributable to noncontrolling interest     (23 )     (46 )     3       (37 )
Net loss attributable to shareholders   $ (2,009 )   $ (1,997 )   $ (5,792 )   $ (7,580 )
Basic and diluted net gain (loss) attributable to shareholders perordinary share                                
From continuing operations     (0.06 )     (0.07 )     (0.16 )     (0.23 )
From discontinued operations     0.01       0.01       0.02       **  
                                 
    $ (0.05 )   $ (0.06 )   $ (0.14 )   $ (0.23 )
                                 
Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share    
40,874,474
     
33,310,672
     
 40,868,252
     
 33,245,249
 
                                 

**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,  
    2015     2014  
   
Cash flows from continuing operating activities                
Net loss from continuing operations   $ (6,618 )   $ (7,584 )
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     369       642  
Gain on sale of property and equipment     (8 )     (5 )
Accrued interest and linkage differences     30       55  
Depreciation     941       959  
                 
Changes in operating assets and liabilities:                
Accrued severance pay, net     (79 )     (112 )
Deferred tax, net     36       135  
Decrease in trade receivables     1,936       240  
Decrease (increase) in other receivables and prepaid expenses     131       (308 )
Increase in inventories     (382 )     (689 )
Increase in trade payables     402       235  
Increase (decrease) in other current liabilities     197       (772 )
Net cash used in continuing operating activities     (3,045 )     (7,204 )
                 
Cash flows from continuing investing activities                
                 
Purchase of property and equipment     (1,117 )     (340 )
Purchase of short-term investments     (4,181 )     (2,434 )
Investment in capitalized product costs     (153 )     -  
Investment in restricted deposit for employees benefit     (281 )     -  
Proceeds from restricted deposit for employees benefit     144       -  
Proceeds from maturity or sale of short-term investments     8,179       1,317  
Proceeds from sale of property and equipment     31       6  
Net cash provided by (used in) continuing investing activities     2,622       (1,451 )
                 
Cash flows from continuing financing activities                
(Decrease) increase in short-term bank credit, net     (783 )     179  
Proceeds from long-term bank loans     716       29  
Repayment of long-term bank loans     (606 )     (811 )
Proceeds from exercise of options and warrants     (* )     965  
Net cash provided by (used in) continuing financing activities     (673 )     362  
                 
Cash flows from discontinued operations                
Net cash used in discontinued operating activities     (25 )     (1,325 )
Net cash provided by discontinued investing activities     387       925  
Net cash used in discontinued financing activities     -       (154 )
Total net cash provided by (used in) discontinued operations     362       (554 )
                 
Effect of exchange rate changes on cash and cash equivalents     (198 )     (227 )
                 
Decrease in cash and cash equivalents     (932 )     (9,074 )
Cash and cash equivalents at the beginning of the period     5,351       14,962  
                 
Cash and cash equivalents at the end of the period   $ 4,419     $ 5,888  
   

(*) Less than $1.

Contact Information

  • Investor Contact:
    Scott Liolios or Matt Glover
    Liolios Group, Inc.
    949-574-3860
    Email Contact

    Press Contact:
    Nir (Neil) Barr
    oti Marketing Director
    +972-4-686-8004
    Email Contact