SOURCE: RRsat Global Communications Network Ltd.

RRsat Global Communications Network Ltd.

March 05, 2014 07:00 ET

RRsat Reports Record Revenues of $32.5 Million for the Fourth Quarter 2013; Up 10.5% Year-Over-Year

Record Full-Year Revenues of $121.8 Million, up 7.4% From Year-Ago Period; Record High Next 12-Month Backlog of $92 Million

AIRPORT CITY BUSINESS PARK, ISRAEL--(Marketwired - Mar 5, 2014) -  RRsat Global Communications Network Ltd. (NASDAQ: RRST), a leading provider of digital media services including content management and global distribution services to the broadcasting industry, announced today financial results for the fourth quarter and year ended December 31, 2013.

Fourth Quarter Highlights

  • Record revenues of $32.5 million, up 10.5% year-over-year
  • Gross margin for the quarter was 23.3%, down from 25.1% in Q4 2012 due to revenue mix and the impact of foreign currency fluctuations
  • Non-GAAP net income of $0.14 per share, unchanged from Q4 2012 despite of the negative effect of foreign currency
  • Cash flow from operations was $8.1 million in comparison to $2.8 million in Q4 2012
  • Board announces a cash dividend of $0.06 per share, representing an annual dividend yield of 2.6%, in line with previously adopted quarterly dividend policy

Full-Year Highlights

  • Record revenues of $121.8 million, up 7.4% year-over-year
  • Gross margin for the year was 24.2%, up from 23.9% in 2012 despite foreign currency impact
  • Non-GAAP net income per share was $0.48, compared to $0.46 per share in 2012, reflecting a $1.6 million foreign currency impact and higher sales and marketing spending in 2013 resulting from the continuous investment in our geographic presence, to expand our future growth opportunities.
  • Cash flow from operations was $21.3 million in comparison to $15.9 million in 2012;

"We generated record revenue and solid growth in the fourth quarter as well as full year 2013, continuing the momentum we saw throughout the year," commented Avi Cohen, CEO of RRsat. "Our efforts to transform the Company into a global leader with local services, leveraging local talent in key markets around the world and expanding our capabilities, are driving record revenue, accelerating growth and generated our highest next 12months backlog in the Company's history."

Mr. Cohen continued, "The integration of JCA Content Preparation services, following our recent acquisition, into our existing infrastructure and service platform has facilitated the establishment of our 'Global Media Services Platform.' This powerful platform offers our customers a global single point of contact for handling any media, preparing it, and delivering it to any screen, anywhere in the world, in any form of video consumption, from linear TV to video-on-demand, streaming, pay-per-view and TV-Everywhere. These expanded capabilities are helping us reach a higher tier of potential customers, including global broadcasters and leading content owners."

Quarterly Dividend

In accordance with the Company's dividend policy, on March 5, 2014, the Board of Directors declared a cash dividend in the amount of $0.06 per ordinary share, and in the aggregate amount of approximately $1.0 million, representing 50% of RRsat's net income for the fourth quarter of 2013. The dividend will be payable on April 9, 2014 to all of the Company's shareholders of record at the end of the trading day on the NASDAQ on March 19, 2014.

Fourth Quarter 2013 Financial Results

Revenues: Fourth quarter 2013 revenues were a record of $32.5 million up 10.5% from $29.4 million in the fourth quarter of 2012 and up 6.2% from $30.6 million in the third quarter of 2013.

Gross profit: Fourth quarter 2013 gross profit and gross margin were $7.6 million and 23.3% respectively, compared to $7.4 million and 25.1%, respectively, for the fourth quarter of 2012. The gross profit in the fourth quarter was mainly impacted by expenses increase related to foreign currency fluctuation, and by the impact of the revenue mix in the quarter. Excluding the foreign currency impact, gross margin would have increased compared to the fourth quarter last year. Although management continues to expect quarterly fluctuations in gross margin due to revenue mix, going forward, excluding any additional foreign currency impact, management believes gross margins should return to historical levels.

Non-GAAP operating income & operating margin, was $2.1 million and 6.5% respectively during the fourth quarter of 2013, compared to $2.9 million and 9.9% respectively in the fourth quarter of 2012. The main change was due to an extraordinary accrual for bad debt expense related to Fashion TV. Subsequent to the end of the quarter, RRsat was forced to take down the services provided to this former customer for non-payment. RRsat filed a $5 million lawsuit in Israel to recoup debt owed as well as damages to RRsat. It is important to note that the Company has been successful in signing a contract with a new customer, also in the fashion industry, utilizing the satellite capacity that was freed up as a result of the forced termination of Fashion TV. This new contract has resulted in an increase to RRsat's backlog. As a result, management does not expect any negative impact to the Company's income statement. In aggregate, the foreign currency and extraordinary bad debt expense totaled $0.9 million impact in the fourth quarter.

Inclusive of the extraordinary bad debt expense and the foreign currency impact, Non-GAAP net income for the fourth quarter ended December 31, 2013 was $2.4 million, unchanged compared to $2.4 million in the fourth quarter of 2012 and improved to $2.1 million for the third quarter of 2013. Non-GAAP net income per share on a fully diluted basis was $0.14 for the fourth quarter of 2013, compared to $0.14 in the fourth quarter last year and $0.12 in the third quarter of 2013.

GAAP net income for the fourth quarter of 2013 was $2.1 million, compared to $2.4 million in the fourth quarter of 2012 and $1.1 million in the third quarter of 2013. GAAP net income per share on a fully diluted basis was $0.12 for the fourth quarter of 2013 compared to $0.14 in the fourth quarter of 2012 and $0.06 in the third quarter of 2013.

Adjusted EBITDA for the fourth quarter of 2013 was $4.5 million compared to $5.0 million in the fourth quarter of 2012 and $5.0 million in the third quarter of 2013.

Backlog to be delivered in the next 12 months increased to a record $92 million, up from $87 million in the year-ago period and up from $88 million in the third quarter of 2013.

Full year 2013 Financial Results

Revenues: Full year 2013 revenues were a record $121.8 million up 7.4% compared to $113.4 million for 2012.

Gross profit: Full year 2013 gross profit and gross margin were $29.5 million and 24.2% respectively, compared to $27.1 million and 23.9%, respectively, for 2012. The gross profit in 2013 was mainly impacted by expenses related to foreign currency fluctuation in the amount of $1.6 million.

Non-GAAP operating income & operating margin were $9.9 million and 8.1% respectively during 2013, compared to $10.3 million and 9.1% respectively in 2012. The main change was due to an extraordinary $0.5 million bad debt expense related to a former customer and the effect of foreign currency impact in the amount of $1.6 million. Normalizing for the foreign currency fluctuations and the impact of the bad debt expense operating margin would have increased to $12 million and 9.9% respectively compared to 2012. In aggregate, the foreign currency and extraordinary bad debt expense totaled $2.1million impact for the full year.

GAAP operating income was $8.0 million compared to $9.7 million in 2012. GAAP operating margin was 6.5% compared to 8.5% in 2012.

Non-GAAP net income was $8.3 million, an increase of 4.6% compared to $7.9 million in 2012. Non-GAAP net income per share on a fully diluted basis was $0.47 compared to $0.46 in 2012.

GAAP net income was $6.5 million compared to $8.3 million in 2012. GAAP net income per share on a fully diluted basis was $0.37 compared to $0.48 in 2012.

Adjusted EBITDA was $18.7 million in 2013, down slightly compared with $18.9 million in 2012.

Cash, cash equivalents and marketable securities as of December 31, 2013 totaled $24.2 million compared with $26.4 million as of December 31, 2012. The change in cash position during the period was mainly attributable to the acquisition of JCA in the third quarter investing in CAPEX and the distribution of a cash dividend.

Full Year 2014 Guidance

Full year 2014 total revenues are expected to be in the range of $129 million to $134 million representing 6.2% to 10% year-over-year growth.

Given the increase of RRsat's revenue outside of the 24/7 services and some level of seasonality associated with that revenue, management believes that an annual revenue guidance is more appropriate than quarterly estimates. Management continues to expect some level of variation in mix from quarter to quarter leading to some fluctuations in revenues and gross margin between quarters. However, management continues to anticipate improvement in gross profit margin, and expects full-year 2014 gross margin to be higher than the margin for the full year 2013.

Conference Call Information
The Company will conduct a conference call today, March 5, 2014 at 9 a.m. ET (4 p.m. Israel time). On the call, Mr. Avi Cohen, Chief Executive Officer and Mr. Shmulik Koren, Chief Financial Officer will review and discuss the results and will be available to answer investor questions.

Call time: 9 a.m. Eastern Time; 4 p.m. Israel Time

  • Dial-in number from within the United States: 1-877-941-2068
  • Dial-in number from Israel: 1809-21-4368 
  • Dial-in number from the UK: 0800-358-5258
  • Dial-in number (other international): 1-480-629-9712
  • Playback, available until March 12, 2014 by calling 1-877-870-5176 (United States) or 1-858-384-5517 (international). Please use pin number 4669061 for the replay.
  • A live webcast is accessible at http://public.viavid.com/index.php?id=107916.

Use of Non-GAAP Financial Measures
In addition to reporting results in accordance with generally accepted accounting principles, or GAAP, RRsat has also included in this press release non-GAAP measurements of net income, operating income, operating margin, fully diluted net income per share and adjusted EBITDA. RRsat believes that these non-GAAP financial measures are principal indicators of the operating and financial performance of its business. We have provided these non-GAAP measurements to help investors better understand our core operating performance and enhance comparisons of core operating performance from period to period.

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: non-cash stock based compensation, amortization of acquisition-related intangibles, acquisition-related expenses, amortization of acquisition related prepaid compensation expenses, non-cash income (loss) reflecting changes in the fair value of currency conversion derivatives resulting from the application of FASB ASC Topic 815 and the resulting income tax (increase) decrease of the above items.

Adjusted EBITDA is calculated by adding to operating income, non-cash equity-based compensation charge, depreciation and amortization and amortization of acquisition related prepaid compensation expenses.

Management uses these non-GAAP financial measures to assess its operational performance, for financial and operational decision-making, and as a means to evaluate period-to-period comparisons on a consistent basis. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance by excluding certain non-cash expenses that are not directly attributable to its core operating results.

The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for, or as superior to, measurements of financial performance prepared in accordance with GAAP.

The Company expects to continue reporting non-GAAP financial measures, adjusting for the items described above, and the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above. Accordingly, the exclusion of these and other similar items in the presentation of non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring. Moreover, because not all companies use identical measures and calculations, the presentation of non-GAAP measurements of net income, operating income, operating margin and fully diluted net income per share and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. These limitations are compensated for by using non-GAAP measures and adjusted EBITDA in conjunction with traditional GAAP financial measures.

Reconciliations of the non-GAAP measures (non-GAAP net income, non-GAAP operating income and adjusted EBITDA) to the most comparable GAAP measures (net income and operating income respectively), are provided in the schedules attached to this release.

Safe Harbor Statement
This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding (i) guidance for revenue and margins for 2014 or any other future periods; (ii) our expectations and ability to strengthen our offering and capabilities in order to allow us to accelerate our growth; (iii) our expectations to generate higher margins from our sports and events business compared to our other businesses; (iv) our expectation that our sports and events business will be a major contributor to our growth and that the demand for this type of content will continue to increase globally; (v) our expectation and ability to further improve our margins over time by changing our product mix, coupled with more value-added services and better utilization of our infrastructure; (vi) our ability to continue to experience strong interest in our services, leading to new customer wins for our digital media broadcasting services and to report future successes; (vii) our expectation that our backlog will materialize into revenue on the projected timeline and (viii) our ability to continue to benefit from a strong business model, featuring a notable percentage of recurring revenues, long-term contracts, high renewal rate, a multi-year backlog, and strong free cash flow. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry as of the date of this press release. The company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements, including the risks indicated in our filings with the Securities and Exchange Commission (SEC). For more details, please refer to our SEC filings and the amendments thereto, including our Annual Report on Form 20-F for the year ended December 31, 2013 and our Current Reports on Form 6-K.

About RRsat
RRsat Global Communications Network Ltd. (NASDAQ: RRST) provides global, end-to-end, digital content preparation and management, as well as content distribution services to the rapidly expanding broadcasting industry, covering more than 150 countries. Through its Global Network, composed of satellite, terrestrial fiber optic capacity and the public Internet, RRsat provides high-quality and flexible global content distribution 24 by 7 services to more than 630 channels reaching multiplatform operators, Internet TV and direct-to-home viewers worldwide. In addition, the company offers worldwide content management and distribution services for sports, news and other live events. More than 130 channels use RRsat's advanced production and playout centers, comprising of comprehensive media asset management services. Visit the company's website www.rrsat.com.

RRsat Global Communications Network Ltd. and its subsidiaries

Interim Condensed Consolidated Statements of Operations
In thousands, except share data        
    Three months ended   Twelve months ended
    December 31     December 31   December 31     December 31
    2013     2012   2013     2012
    (unaudited)     (unaudited)   (unaudited)     (audited)
Revenues   $ 32,477     $ 29,365   $ 121,795     $ 113,400
                             
Cost of revenues     24,897       22,002     92,313       86,253
                             
Gross profit     7,580       7,363     29,482       27,147
                             
Operating expenses                            
                             
Sales and marketing     2,577       2,120     9,517       7,388
                             
General and administrative     3,258       2,587     12,003       10,106
                             
Total operating expenses     5,835       4,707     21,520       17,494
                             
Operating income     1,745       2,656     7,962       9,653
                             
Financial income                            
(expenses), net     173       320     (153 )     1,521
                             
Income before taxes on                            
Income     1,918       2,976     7,809       11,174
                             
Income taxes     (199 )     549     1,287       2,884
                             
Net income   $ 2,117     $ 2,427   $ 6,522     $ 8,290
                             
                             
                             
Income per ordinary share                
                 
Basic income per ordinary share   0.12   0.14   0.38   0.48
Diluted income per ordinary share   0.12   0.14   0.37   0.48
                 
Weighted average number                
of ordinary share used to                
compute basic income per                
ordinary share   17,346,561   17,346,561   17,346,561   17,346,561
                 
Weighted average number                
of Ordinary share used to                
compute diluted income                
per ordinary share   17,575,251   17,346,561   17,571,188   17,346,561
                 
                 

RRsat Global Communications Network Ltd. and its Subsidiaries

Interim Condensed Consolidated Statements of Operations  
In thousands, except share data            
    Three months ended
December 31
    Twelve months ended
December 31
 
    2013     2012     2013     2012  
    (unaudited)     (unaudited)     (unaudited)     (audited)  
Reconciliation of GAAP Income to Non-GAAP Net Income:                                
GAAP Net income   $ 2,117     $ 2,427     $ 6,522     $ 8,290  
Adjustments to reconcile GAAP net income                                
to non-GAAP net income:                                
Non-cash equity-based compensation charge     143       113       567       302  
Amortization of acquisition related intangible assets     190       68       425       241  
Changes in fair value of currency conversion derivatives     42       (259 )     192       (1,182 )
Acquisition related expenses     -       50       900       50  
Amortization of acquisition related prepaid                                
compensation expenses     42       22       168       22  
Income tax effect of non-GAAP adjustments     (93 )     26       (470 )     214  
                                 
Non-GAAP net income   $ 2,441     $ 2,447     $ 8,304     $ 7,937  
                                 
Non-GAAP net income per diluted share   $ 0.14     $ 0.14     $ 0.47     $ 0.46  
                                 
                                 
                                 
    Three months ended
 December 31
  Twelve months ended
December 31
    2013     2012   2013     2012
    (unaudited)     (unaudited)   (unaudited)     (audited)
Reconciliation of GAAP Operating Income                            
to non GAAP operating income:                            
  Operating income   $ 1,745     $ 2,656   $ 7,962     $ 9,653
  Adjustments to reconcile GAAP operating                            
  income to non-GAAP operating income:                            
  Non-cash equity-based compensation charge     143       113     567       302
Amortization of acquisition related intangible     190       68     425       241
Acquisition related expenses     -       50     900       50
Cost of sales related changes in fair value of                            
currency conversion derivatives     (11 )     -     (135 )     -
Amortization of acquisition related prepaid                            
compensation expenses     42       22     168       22
                             
    $ 2,109     $ 2,909   $ 9,887     $ 10,268
                             
                             

RRsat Global Communications Network Ltd. and its subsidiaries

Interim Condensed Consolidated Statement of Operations
In thousands, except share data        
    Three months ended
December 31
  Twelve months ended
December 31
    2013     2012   2013     2012
    (unaudited)     (unaudited)   (unaudited)     (audited)
Reconciliation of GAAP Operating Income to adjusted EBITDA:                            
                             
Operating income   $ 1,745     $ 2,656   $ 7,962     $ 9,653
  Adjustments to reconcile GAAP operating                            
income to Adjusted EBITDA:                            
Non-cash equity-based compensation charge     143       113     567       302
Depreciation and amortization     2,597       2,206     9,281       8,883
Acquisition related expenses     -       -     900       -
  Cost of sales related changes in fair value of                            
currency conversion derivatives     (11 )     -     (135 )     -
  Amortization of acquisition related prepaid                            
compensation expenses     42       22     168       22
                             
Adjusted EBITDA   $ 4,516     $ 4,997   $ 18,743     $ 18,860
                             
                             
                             

RRsat Global Communications Network Ltd. and its subsidiaries

Interim Condensed Consolidated Statements of Operations (non-GAAP results)
In thousands, except share data        
    Three months ended   Twelve months ended
    December 31     December 31   December 31   December 31
    2013     2012   2013   2012
    (unaudited)     (unaudited)   (unaudited)   (audited)
Revenues   $ 32,477     $ 29,365   $ 121,795   $ 113,400
                           
Cost of revenues     24,901       21,993     92,415     86,236
                           
Gross profit     7,576       7,372     29,380     27,164
                           
Operating expenses                          
                           
Sales and marketing     2,324       2,014     8,843     7,100
                           
General and administrative     3,143       2,449     10,650     9,796
                           
Total operating expenses     5,467       4,463     19,493     16,896
                           
Operating income     2,109       2,909     9,887     10,268
                           
Financial income                          
(expenses), net     226       61     174     339
                           
Income before taxes on                          
income     2,335       2,970     10,061     10,607
                           
Income taxes     (106 )     523     1,757     2,670
                           
Net income   $ 2,441     $ 2,447   $ 8,304   $ 7,937
                           
                           
                           
Income per ordinary share                  
                   
Basic income per ordinary share   0.14   0.14     0.48   0.46
Diluted income per ordinary share   0.14   0.14     0.47   0.46
                   
Weighted average number                  
of ordinary share used to                  
compute basic income per                  
ordinary share   17,346,561   17,346,561     17,346,561   17,346,561
                   
Weighted average number                  
of Ordinary share used to                  
compute diluted income                  
per ordinary share   17,575,251   17,346,561     17,571,188   17,346,561
                   
                   

RRsat Global Communications Network Ltd. and its subsidiaries

Interim Condensed Consolidated Balance Sheets
In thousands, except share data        
    December 31   December 31
    2013   2012
    (unaudited)   (audited)
Current assets            
Cash and cash equivalents   $ 14,165   $ 12,133
Marketable securities and short term investments     9,998     14,224
Trade receivable,(net of provision for doubtful accounts            
of $6,938 and $7,580 as of December 31, 2013 and            
December 31,            
2012, respectively)     20,731     20,898
Other receivable     2,163     1,054
Deferred taxes     2,095     2,146
Prepaid expenses     2,868     2,445
             
Total current assets     52,020     52,900
             
Long-term assets            
Long-term prepaid expenses     3,045     2,924
Long-term land lease prepaid expenses     7,469     7,563
Assets held for employee severance payments     2,120     1,845
Fixed assets, net     46,444     42,671
Goodwill and other intangible assets, net     17,480     5,364
             
Total long-term assets     76,558     60,367
             
Total assets   $ 128,578   $ 113,267
             
             

RRsat Global Communications Network Ltd. and its subsidiaries

Interim Condensed Consolidated Balance Sheets (cont'd)          
         
    December 31   December 31
    2013   2012
    (unaudited)   (audited)
Liabilities and shareholders' equity        
             
Current liabilities            
Account payable:            
Trade   $ 17,181   $ 9,816
Other     4,815     5,322
Deferred income     6,037     9,398
             
Total current liabilities     28,033     24,536
             
Long-term liabilities            
Deferred income     9,076     6,257
Liability in respect of employee severance payments and others     2,854     2,323
Contingent consideration in respect of acquisition     3,820     -
Deferred taxes     4,312     2,200
             
Total long-term liabilities     20,062     10,780
             
Total liabilities     48,095     35,316
             
Shareholders' equity            
Share capital            
Ordinary share NIS 0.01 par value each (20,000,000 authorized as of December 31, 2013 and December 31, 2012, 17,346,561 shares issued and fully paid as of December 31, 2013 and December 31, 2012)     40     40
Additional paid in capital     53,879     53,312
Retained earnings     25,723     24,231
Accumulated other comprehensive gain     841     368
             
Total shareholders' equity   $ 80,483   $ 77,951
             
Total liabilities and shareholders' equity   $ 128,578   $ 113,267
             
             

RRsat Global Communications Network Ltd. and its subsidiaries

Interim Condensed Consolidated Statements of Cash Flows  
In thousands, except share data   
  Three months ended December 31   Twelve months ended December 31  
  2013   2012   2013   2012  
  (unaudited)   (unaudited)   (unaudited)   (audited)  
Net income $ 2,117   $ 2,427   $ 6,522   $ 8,290  
                         
Adjustments required to reconcile net income to net cash provided by operating activities   1,722     2,970     9,979     11,148  
                         
Changes in assets and liabilities   4,272     (2,609 )   4,800     (3,546 )
Net cash provided by operating activities   8,111     2,788     21,301     15,892  
                         
Cash flows from investing activities   (3,920 )   (2,214 )   (14,348 )   (2,416 )
                         
Cash flows from financing activities   (520 )   (10,061 )   (5,030 )   (15,786 )
                         
Effect of translation adjustment   68     -     109     -  
                         
Increase (decrease) in cash and cash equivalents   3,739     (9,487 )   2,032     (2,310 )
                         
Balance of cash and cash equivalents at beginning of period   10,426     21,620     12,133     14,443  
                         
Balance of cash and cash equivalents at end of period   14,165     12,133     14,165     12,133  
                         
                         

Contact Information

  • Company Contact:
    Shmulik Koren
    CFO
    Tel: +972 3 928 0777
    Email: Email Contact

    Investor Contacts:
    Hayden/ MS - IR
    Brett Maas / Miri Segal-Scharia
    Tel: 646-536-7331/ 917-607-8654
    Email Contact / Email Contact