On Track Innovations Ltd.
(OTI) (NASDAQ:OTIV), a global provider of near field
communication (NFC) and cashless payment solutions, reported
financial results for the fourth quarter and fiscal year ended
December 31, 2016.
Q4 2016 Operational
Highlights
- Great promise and progress in Japan. Following the
execution of a letter of intent announced in Q4 2016 for 10,000
otiMetry systems during the coming three years, a formal purchase
order was received in early 2017.
- Growth in the deployment of our otiMetry solutions, which
generate recurring revenue in addition to associated product
sales.
Q4 2016 Financial
Details
- Total quarterly revenue of $5.6 million, a year-over-year
increase of 3%.
- Operating expenses decreased 10% to $3.4 million from $3.7
million in the same year-ago period.
- Cash and cash equivalents, and short-term investments at
December 31, 2016 totaled $11.5 million, which was up 6% from the
end of the prior year.
Full Year 2016
Financial Details
- Revenue increased 11% to $20.6 million from $18.5 million in
2015.
- Gross profit increased 10% to $10.2 million compared to $9.3
million in 2015.
- Operating expenses decreased $4.0 million or 25% to $12.1
million from $16.1 million last year.
- Net loss from continuing operations totaled $2.4 million or
$(0.06) per share, a 68% improvement from a net loss from
continuing operations of $7.5 million or $(0.18) per share in
2015.
- Adjusted EBITDA loss from continuing operations improved 93% to
$241,000 from a loss of $3.4 million in 2015.
Management Commentary - Shlomi Cohen (OTI
CEO)
“We are proud to report the 5th quarter in a row of improvement
in nearly all aspects of our results, as well as significant
improvement in our year-over-year results,” said Mr. Cohen. “Our
financial results for 2016 were strong across the board. We
increased our revenues by more than 11%, maintained our gross
margin levels, reduced our debt by 10%, and dramatically decreased
our net losses by 88% and our adjusted EBITDA losses by 93%.
This is a remarkable achievement as it was accomplished in a year
in which our primary focus was on restructuring and on establishing
and maintaining operational efficiency. We strongly believe
that during 2017 we will present a positive adjusted EBITDA.”
“The year-over-year improvements are very meaningful to us as
they demonstrate how far we have come over the last eighteen months
in our work to put OTI on the path towards consistent profitable
growth. Because of our significant efforts to reduce
costs, optimize our operations, focus our product offering, and
increase our sales, we were able to deliver over 90% improvement in
adjusted EBITDA loss from 2015 and reach near break-even adjusted
EBITDA for the full year.”
“We have also made significant improvements on the products,
sales and operational fronts. The most notable and promising
progress came in Japan. Following on our receipt of FeliCa
certification for our reader, we received in late 2016 a letter of
intent from a major Japanese retailer to purchase 10,000 otiMetry
systems consisting of our FeliCa certified readers and our GoBox
Multi-Service Telemetry Gateway during the coming three
years. This letter of intent was followed by a formal
purchase order in early 2017. We see this as great progress
into a very promising market. As a result of our continuing work to
develop a sales pipeline in the Japanese market together with our
partner, Billing Systems, we believe that this market will deliver
additional opportunities in the months and years to come.”
“2016 was also very productive on the product front as we got
off to a strong start in transitioning from being a simple hardware
supplier to a full solution provider offering vending operators and
other partners a one-stop-shop for their payment solutions and
services. In Europe, we have seen growth in the deployment of
our otiMetry solutions which allow us to generate recurring revenue
in addition to the revenue associated with product sales.”
“We have put greater emphasis and importance on expanding and
diversifying our customer base both globally in places such as
Japan and Europe and in North America where we have successfully
positioned OTI and our products for entry into the growing kiosk or
self-checkout market. Through our work with North American
channel partners, earlier this year we received several purchase
orders for the supply of thousands of advanced self-checkout
payment systems to leading U.S. based kiosk operators and fast food
chains. We believe that these first purchase orders are only
the beginning of OTI’s entry into this key vertical and we believe
that during the coming year we will see continued acceleration and
sales to this market.”
“We have also made progress in our wearables business.
Following the launch in May 2016 of our Pay Capsule Flex payment
enabler inserts and our Pay Enabled platform, in November we
launched a smart payment ring utilizing our technology. This
demonstrates our ability to turn any product and fashion garment
into a payment device. With our wearable cashless payments
technology successfully demonstrated, we have increased our
business development and sales efforts for our Pay Enabled products
and we believe that these efforts will yield results.”
Conference Call OTI will hold a conference call
on Wednesday, March 22nd at 9:00 AM EDT to discuss results for the
fourth quarter and fiscal year ended December 31, 2016. Financial
results will be issued in a press release prior to the call.
OTI CEO Shlomi Cohen and CFO Yishay Curelaru will host the
presentation, followed by a question and answer period.
Details
Date: Wednesday, March 22nd, 2017
Time: 9:00 AM Eastern Daylight Time (EDT)
Toll-Free Dial-In Number: (855) 422-8965
International Dial-In Number: +1 (210) 229-8821
Conference ID: 78498366
The conference call will be broadcast simultaneously and
available for replay via the investor relations section of the
company’s website here.
Please call the conference telephone number five minutes prior
to the start time. An operator will register your name and
organization.
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. |
|
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) |
|
|
Year ended December 31 |
|
|
Three months ended December 31 |
|
2016 |
|
|
2015 |
|
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
$ |
(860 |
) |
|
$ |
(7,239 |
) |
|
$ |
(1,209 |
) |
|
$ |
(1,444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(income) loss from discontinued operations |
|
(1,509 |
) |
|
|
(253 |
) |
|
|
16 |
|
|
|
285 |
|
Financial
expenses, net |
|
396 |
|
|
|
583 |
|
|
|
211 |
|
|
|
72 |
|
Depreciation |
|
1,172 |
|
|
|
1,224 |
|
|
|
261 |
|
|
|
306 |
|
Taxes on
income |
|
82 |
|
|
|
122 |
|
|
|
22 |
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EBITDA FROM CONTINUING OPERATIONS |
$ |
(719 |
) |
|
$ |
(5,563 |
) |
|
$ |
(699 |
) |
|
$ |
(697 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent litigation and
maintenance |
$ |
48 |
|
|
$ |
830 |
|
|
$ |
11 |
|
|
$ |
28 |
|
Other expenses
(income), net |
|
191 |
|
|
|
914 |
|
|
|
108 |
|
|
|
(4 |
) |
Stock based
compensation |
|
239 |
|
|
|
463 |
|
|
|
65 |
|
|
|
94 |
|
TOTAL
ADJUSTED EBITDA FROM CONTINUING OPERATIONS |
$ |
(241 |
) |
|
$ |
(3,356 |
) |
|
$ |
(515 |
) |
|
$ |
(579 |
) |
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 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 words such as “think”,
“believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or
similar expressions are used, we are making forward-looking
statements. For example, forward-looking statements include
statements regarding our expected Adjusted EBITDA for 2017, our
expectations regarding the pipeline and opportunities in Japan,
Europe and North America, and growth opportunities for new and
existing products and verticals. Because such statements deal with
future events and is 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, 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, 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. |
CONDENSED CONSOLIDATED BALANCE
SHEET |
(In thousands, except share and per share data) |
|
|
December 31 |
|
2016 |
|
2015 |
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
Cash and cash
equivalents |
$ |
5,952 |
|
$ |
5,450 |
Short-term
investments |
|
5,585 |
|
|
5,454 |
Trade receivables (net
of allowance for doubtful |
|
|
|
|
|
accounts
of $720 and $778 as of December 31, 2016 |
|
|
|
|
|
and
December 31, 2015, respectively) |
|
5,620 |
|
|
2,418 |
Other receivables and
prepaid expenses |
|
1,638 |
|
|
2,183 |
Inventories |
|
3,069 |
|
|
3,330 |
|
|
|
|
|
|
Total current
assets |
|
21,864 |
|
|
18,835 |
|
|
|
|
|
|
|
|
|
|
|
|
Long term
restricted deposit for employees benefit |
|
453 |
|
|
524 |
|
|
|
|
|
|
Severance pay
deposits |
|
322 |
|
|
455 |
|
|
|
|
|
|
Property, plant
and equipment, net |
|
5,788 |
|
|
8,668 |
|
|
|
|
|
|
Intangible
assets, net |
|
278 |
|
|
180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets |
$ |
28,705 |
|
$ |
8,662 |
ON TRACK INNOVATION LTD. |
CONDENSED CONSOLIDATED BALANCE
SHEET |
(In thousands, except share and per share data) |
|
|
December 31 |
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
Liabilities
and Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
Short-term bank credit
and current maturities |
|
|
|
|
|
|
of
long-term bank loans |
$ |
4,369 |
|
|
$ |
3,815 |
|
Trade payables |
|
6,957 |
|
|
|
5,441 |
|
Other current
liabilities |
|
2,822 |
|
|
|
2,724 |
|
Total current
liabilities |
|
14,148 |
|
|
|
11,980 |
|
|
|
|
|
|
|
|
Long-Term
Liabilities |
|
|
|
|
|
|
Long-term loans, net of
current maturities |
|
1,215 |
|
|
|
2,359 |
|
Accrued severance
pay |
|
811 |
|
|
|
1,148 |
|
Deferred tax
liability |
|
373 |
|
|
|
352 |
|
Total long-term
liabilities |
|
2,399 |
|
|
|
3,859 |
|
|
|
|
|
|
|
|
Total Liabilities |
|
16,547 |
|
|
|
15,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Shareholders'
Equity |
|
|
|
|
|
|
Ordinary shares of NIS
0.1 par value: Authorized – |
|
|
|
|
|
|
50,000,000 shares as of December 31, 2016 and |
|
|
|
|
|
|
2015;
issued: 42,243,075 and 42,014,673 |
|
|
|
|
|
|
shares as
of December 31, 2016 and 2015, |
|
|
|
|
|
|
respectively; outstanding: 41,064,376 and 40,835,974
shares |
|
|
|
|
|
|
as of
December 31, 2016 and 2015, respectively |
|
1,061 |
|
|
|
1,055 |
|
Additional paid-in
capital |
|
224,415 |
|
|
|
225,925 |
|
Treasury shares at cost
- 1,178,699 shares as of December 31, |
|
|
|
|
|
|
2016 and
2015 |
|
(2,000 |
) |
|
|
(2,000 |
) |
Accumulated other
comprehensive loss |
|
(1,236 |
) |
|
|
(1,084 |
) |
Accumulated
deficit |
|
(210,082 |
) |
|
|
(209,254 |
) |
Total
Shareholder’s equity |
|
12,158 |
|
|
|
14,642 |
|
Non-controlling
interest |
|
- |
|
|
|
(1,819 |
) |
|
|
|
|
|
|
|
Total
Equity |
|
12,158 |
|
|
|
12,823 |
|
|
|
|
|
|
|
|
Total
Liabilities and Equity |
$ |
28,705 |
|
|
$ |
28,662 |
|
ON TRACK INNOVATIONS LTD. |
CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS |
(In thousands, except share and per share data) |
|
|
Year ended
December 31 |
Three months ended December 31 |
|
2016 |
|
2015* |
|
2016 |
|
2015* |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
$ |
14,721 |
|
|
$ |
12,501 |
|
|
$ |
4,312 |
|
|
$ |
2,998 |
|
Licensing and transaction fees |
5,843 |
|
|
5,971 |
|
|
1,274 |
|
|
2,431 |
|
Total
revenues |
20,564 |
|
|
18,472 |
|
|
5,586 |
|
|
5,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
|
|
Cost
of sales |
10,111 |
|
|
8,889 |
|
|
3,194 |
|
|
2,402 |
|
Cost
of licensing and transaction fees |
250 |
|
|
325 |
|
|
- |
|
|
325 |
|
Total
cost of revenues |
10,361 |
|
|
9,214 |
|
|
3,194 |
|
|
2,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
10,203 |
|
|
9,258 |
|
|
2,392 |
|
|
2,702 |
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
2,810 |
|
|
3,436 |
|
|
738 |
|
|
840 |
|
Selling and marketing |
5,546 |
|
|
6,368 |
|
|
1,572 |
|
|
1,680 |
|
General and administrative |
3,499 |
|
|
4,497 |
|
|
923 |
|
|
1,161 |
|
Patent litigation and maintenance |
48 |
|
|
830 |
|
|
11 |
|
|
28 |
|
Other
expenses (income), net |
191 |
|
|
914 |
|
|
108 |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
12,094 |
|
|
16,045 |
|
|
3,352 |
|
|
3,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss from continuing operations |
(1,891 |
) |
|
(6,787 |
) |
|
(960 |
) |
|
(1,003 |
) |
Financial expense, net |
(396 |
) |
|
(583 |
) |
|
(211 |
) |
|
(72 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before taxes on
income |
(2,287 |
) |
|
(7,370 |
) |
|
(1,171 |
) |
|
(1,075 |
) |
Income tax |
(82 |
) |
|
(122 |
) |
|
(22 |
) |
|
(84 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations |
(2,369 |
) |
|
(7,492 |
) |
|
(1,193 |
) |
|
(1,159 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss) from discontinued
operations |
1,509 |
|
|
|
253 |
|
|
(16 |
) |
|
(285 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
(860 |
) |
|
(7,239 |
) |
|
(1,209 |
) |
|
(1,444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to noncontrolling interest |
32 |
|
|
88 |
|
|
- |
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to shareholders |
$ |
(828 |
) |
|
$ |
(7,151 |
) |
|
$ |
(1,209 |
) |
|
$ |
(1,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net profit (loss) attributable
to |
|
|
|
|
shareholders per ordinary share |
|
|
|
|
From continuing
operations |
$ |
(0.06 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.03 |
) |
From discontinued
operations |
$ |
0.04 |
|
|
$ |
** |
|
|
$ |
** |
|
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
Weighted average number of ordinary shares used in computing basic
and diluted net profit (loss) per ordinary share |
40,914,558 |
|
|
40,869,820 |
|
|
40,972,006 |
|
|
40,874,474 |
|
* Reclassified to conform with the current period
presentation.** Less than $0.01 per ordinary share.
|
ON TRACK INNOVATION LTD. |
CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOW |
(In thousands, except share and per share data) |
|
|
|
|
|
Year ended December 31 |
|
|
2016 |
|
2015* |
Cash flows from continuing operating
activities |
|
|
|
|
|
Net loss from continuing operations |
$ |
(2,369 |
) |
|
$ |
(7,492 |
) |
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 |
|
239 |
|
|
|
463 |
|
Loss (gain) on sale of property and equipment |
|
83 |
|
|
|
(4 |
) |
Accrued interest and linkage differences, net |
|
56 |
|
|
|
27 |
|
Depreciation |
|
1,172 |
|
|
|
1,224 |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
Accrued severance pay, net |
|
(183 |
) |
|
|
(109 |
) |
Deferred tax, net |
|
82 |
|
|
|
122 |
|
(Increase) decrease in trade receivables, net |
|
(3,493 |
) |
|
|
2,020 |
|
Decrease in other receivables and prepaid expenses |
|
290 |
|
|
|
394 |
|
(Increase) decrease in inventories |
|
(112 |
) |
|
|
370 |
|
Increase (decrease) in trade payables |
|
1,793 |
|
|
|
(1,298 |
) |
Increase in other current liabilities |
|
300 |
|
|
|
325 |
|
Net cash used in continuing operating activities |
|
(2,142 |
) |
|
|
(3,958 |
) |
|
|
|
|
|
|
|
|
Cash flows from continuing investing
activities |
|
|
|
|
|
Purchase of property and equipment |
|
(311 |
) |
|
|
(1,515 |
) |
Proceeds from sale of property and equipment |
|
1,779 |
|
|
|
38 |
|
Change in short-term investments, net |
|
(116 |
) |
|
|
5,598 |
|
Investment in capitalized product costs |
|
(188 |
) |
|
|
(200 |
) |
Investment in restricted deposit for employee
benefits |
|
(44 |
) |
|
|
(281 |
) |
Proceeds from restricted deposit for employee
benefits |
|
142 |
|
|
|
144 |
|
Net cash provided by continuing investing
activities |
|
1,262 |
|
|
|
3,784 |
|
|
|
|
|
|
|
|
|
Cash flows from continuing financing
activities |
|
|
Increase (decrease) in short-term bank credit, net |
|
1,018 |
|
|
|
(422 |
) |
Proceeds from long-term bank loans |
|
27 |
|
|
|
1,480 |
|
Repayment of long-term bank loans |
|
(1,581 |
) |
|
|
(747 |
) |
Proceeds from exercise of options and warrants |
|
177 |
|
|
** |
|
Net cash (used in) provided by continuing financing
activities |
|
(359 |
) |
|
|
311 |
|
|
|
|
|
|
|
Cash flows from discontinued
operations |
|
|
Net cash used in discontinued operating activities |
|
(283 |
) |
|
|
(581 |
) |
Net cash
provided by discontinued investing activities |
|
2,292 |
|
|
|
795 |
|
Total net cash provided by discontinued
operations |
|
2,009 |
|
|
|
214 |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
|
(268 |
) |
|
|
(252 |
) |
|
|
|
|
|
|
|
|
Increase in cash and cash
equivalents |
|
502 |
|
|
|
99 |
|
Cash and cash equivalents at the beginning of
the year |
|
5,450 |
|
|
|
5,351 |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the
year |
$ |
5,952 |
|
|
$ |
5,450 |
|
|
|
|
|
|
|
|
|
* Reclassified to conform with the current period
presentation. ** Less than $1.
OTI Press Contact
Neil Barr
Director of Marketing
+972-4-686-8004
press@otiglobal.com
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