TISA Top Image Systems, Ltd. - Ordinary Shares

Top Image Systems Ltd. (NASDAQ:TISA), a global innovator of intelligent content processing solutions, today announced its financial results for the first and second quarters of 2018.

Brendan Reidy, CEO of Top Image Systems, commented: “We are pleased to be reporting both our first and second quarters along with the six months ended June 30, 2018, results, and we feel the appointment of John London as Interim CFO will streamline our financial reporting process moving forward. We remain focused on our three key priorities as last communicated, which are achieving continuous efficiency improvements from our operations; protecting our core receivables automation and forms processing businesses, and; investing in the cloud-based process automation solutions, with particular emphasis on accounts payable automation. We continue to enhance our core product offering to ensure customer satisfaction. We are developing a hybrid on-premise and cloud-based financial automation product that we expect to launch within approximately the next six to nine months, to be followed by the launch of our full cloud financial automation solution. We see opportunities to broaden our product offerings to our current installed base of legacy eGistics customers, and believe these initiatives, when combined with our discipline and rigorous expense management, will enable us to achieve our goal of improved operational performance and improving the Company’s financial health.”

The Company’s revenues and bottom line results for each of the three months ended March 31, 2018, and June 30, 2018, are not comparable to prior year periods due to our adoption, effective January 1, 2018, of Accounting Standards Codification 606, Revenues with Contracts from Customers (“ASC 606”). ASC 606 changed how the Company computes and records revenues and commissions from customer contracts (new and existing). Under the new method, revenues for the three months ended March 31, 2018, and June 30, 2018, were $1,000 and $59,000 lower, respectively, than they would have been had the prior accounting method been continued by the Company. Net loss for the same periods decreased by $91,000 and increased by $48,000, when compared to the prior periods, respectively, which included the net benefit of $92,000 and $11,000, respectively, resulting from the deferral of commission expense on new business signings in the periods to contract intangible assets, net of related amortization for same. Results for prior year periods reflect the previous accounting method and have not been restated to apply the new method.   First Quarter Financial Highlights

• Revenues for the quarter were $7.0 million, compared to $7.3 million in the same period in 2017 and $7.9 million in the fourth quarter of 2017;
• Quarterly operating loss was ($1.8) million, compared to ($1.7) million in the same period in 2017 and ($1.2) million in the fourth quarter of 2017;
• Adjusted EBITDA** was a loss of ($1.0) million, compared to ($0.9) million in the same period in 2017 and ($0.7) million in the fourth quarter of 2017;
• Quarterly recurring revenues were $4.4 million, representing 63% of total revenue, compared to $4.3 million, or 59% of total revenues in the same period of 2017, and $4.4 million, representing 56% of total revenues, in the fourth quarter of 2017;
• Quarterly GAAP operating expenses were $8.8 million, compared to $9.0 million in the same period of 2017 and $9.1 million in the fourth quarter of 2017.

Second Quarter Financial Highlights

• Revenues for the quarter were $7.0 million, approximately the same figure as in the first quarter of 2018, but down $0.4 million when viewed against the same period in 2017;
• Quarterly operating loss was ($0.8) million, compared to ($1.8) million in the first quarter of 2018 and ($1.3) million in the same period in 2017;
• Adjusted EBITDA** was a loss of ($0.3) million, compared to ($1.0) million in the first quarter of 2018 and ($0.5) million during the same period in 2017;
• Quarterly recurring revenues were $4.4 million, representing 63% of total revenue, essentially unchanged from the prior quarter and compared to $4.6 million, representing 63% of total revenues, in the same period of 2017;
• Quarterly GAAP operating expenses were $7.8 million, compared to $8.8 million in the first quarter of 2018, and $8.8 million in the same period of 2017.

Six Month 2018 Financial and Operational Highlights

• Revenues were $14.0 million, compared to $14.7 million in the first six months of 2017;
• Operating loss was ($2.6) million, compared to ($3.1) million in the first six months of 2017;
• Adjusted EBITDA** was a loss of ($1.3) million, compared to ($1.4) million in the first six months of 2017;
• Recurring revenues for the first six months of 2018 were $8.8 million, representing 63% of total revenue, compared to $8.9 million, representing 61% of total revenues, in the first six months of 2017;
• GAAP operating expenses were $16.6 million, compared to $17.8 million in the first six months of 2017;
• Entered into a Term Sheet with Hale Capital Partners, LP, for the provision of up to $3 million of senior debt financing;
• Entered into a secured line of credit with a U.S. Bank in the amount of $2.5M, replacing a terminated line of credit with the same bank;
• Signed a $3.2 million contract in February 2018 with a leading multinational energy company in Italy to provide eFLOW software, related implementation services, and annual maintenance.  Revenues for this contract will be recorded over the course of the next eight quarters and beyond, depending on deliveries and other factors, including future annual maintenance;
• Signed a $2.0 million contract in June 2018 with a leading Hong Kong financial institution to provide eFLOW software, hardware systems, related implementation services and annual maintenance. Revenues for this contract will be recorded over the course of the next eight quarters and beyond, depending on deliveries and other factors, including future annual maintenance.

Subsequent 2018 Highlights

• Announced the appointment of John London as Interim Chief Financial Officer;
• Effective December 31, 2018, due to conditions at June 30, 2018, the Company will no longer qualify as a foreign private issuer under applicable SEC rules. Accordingly, unless such conditions change, beginning with the Company’s filing of an Annual Report on Form 10-K for the year ending December 31, 2018, the Company will file disclosure documents (including future quarterly reports on Form 10-Q) applicable to domestic U.S. issuers;
• Showcased its next-generation accounts payable automation solution for SAP at the SAP Financials 2018 Conference;
• In the third quarter of 2018, we signed $0.6 million in contracts to provide eFLOW software for customers in Asia Pacific and the United Kingdom.

Conference CallThe Company will host a conference call and webcast on Thursday, October 25, 2018, at 10:00 am ET, during which the Company’s management will present and discuss the financial results and be available to answer questions from investors.

To join the conference call, please dial in to one of the following teleconference phone lines using the numbers listed below. Please begin placing your calls at least five minutes before the conference call commences. If you are unable to connect using the toll-free number, please try the US Toll/International dial-in number.

US Toll-Free Dial-in Number: 1-877-407-0784US Toll/INTERNATIONAL Dial-in Number: 1-201-689-8560Israel Toll-Free Dial-in Number: 809 406 247The conference call is scheduled to begin at:7:00 a.m. Pacific Time / 10:00 a.m. Eastern Time / 5:00 p.m. Israel Time

To join the live webcast, please click on the following link: http://public.viavid.com/index.php?id=131695For those unable to attend the live call or webcast, from the following day an audio recording of the call will be made available for download from the Investors section of the Top Image Systems website www.topimagesystems.com. Throughout the following three months, the recorded webcast can be viewed by clicking on the same link as for the live webcast: http://public.viavid.com/index.php?id=131695

** Non-GAAP Financial MeasuresIn addition to GAAP measures, this release includes non-GAAP financial measures, including, without limitation, Adjusted EBITDA (which eliminates the impact of interest, taxes, amortization, depreciation expenses, non-cash stock-based compensation expenses and other non-recurring items not part of regular business, resulting in a loss for each period presented), Non-GAAP Net Income (Loss) (which eliminates the impact of amortization expenses as well as non-cash stock-based compensation expenses and other non-recurring items not part of TIS’ ongoing business operations) and Non-GAAP Income (Loss) per share. Non-GAAP measures are reconciled to comparable GAAP measures in the tables below.

The presentation of these non-GAAP financial measures should be considered in addition to TIS’ GAAP results provided in the attached financial statements for the first and second quarters of 2018, the first six months of 2018 and the other periods presented, and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The tables below reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure. TIS’ management believes that these non-GAAP financial measures provide meaningful supplemental information regarding TIS’ performance by excluding the impact of certain items that may not be indicative of TIS’ core business operating results. TIS’ management believes that both management and investors benefit from referring to these non-GAAP financial measures in

assessing TIS’ performance in addition to the GAAP results. These non-GAAP financial measures also facilitate comparisons to TIS’ historical performance and its competitors’ operating results. TIS includes these non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making.

About Top Image Systems 

Top Image Systems™ (TIS™) Ltd. is a global innovator of on-premise and cloud-based applications that optimize content-driven business processes such as procure to pay operations, remittance processing, integrated receivables, customer response management and more. Whether originating from mobile, electronic, paper or other sources, TIS solutions automatically capture, process and deliver content across enterprise applications, transforming information entering an organization into useful and accessible electronic data, delivering it directly and efficiently to the relevant business system or person for action with as little manual handling as possible. TIS’ solutions are marketed in more than 40 countries through a multi-tier network of distributors, system integrators, value-added resellers and strategic partners. Visit the company's website at https://www.topimagesystems.com/ for more information.

Top Image Systems Caution Concerning Forward-Looking Statements Certain matters discussed in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results expressed or implied in those forward-looking statements. Words such as "will," "expects," "anticipates," "estimates," and words and terms of similar substance in connection with any discussion of future operating or financial performance identify forward-looking statements. These statements are based on management's current expectations or beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially including, but not limited to, risks in product development, approval and introduction plans and schedules, rapid technological change, customer acceptance of new products, the impact of competitive products and pricing, the lengthy sales cycle, proprietary rights of TIS and its competitors, risk of operations in Israel, government regulation, litigation, general economic conditions and other risk factors detailed in the Company's most recent annual report on Form 20-F and other subsequent filings with the United States Securities and Exchange Commission. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.

TIS Investors Contact: James Carbonara, Regional Vice President, Hayden IRjames@haydenir.com + 1 646 755 7412

Top Image Systems Ltd.
Statements of Operations
Unaudited
					Three months ended March 31,
					2018				2017
					U.S. dollars in thousands, except per share data
	Revenues:
	License				$	1,157			$	1,686
	Services					5,870				5,639
	Total revenues					7,027				7,325
	Cost of revenues :
	License					141				160
	Services					3,850				3,963
	Total cost of revenues					3,991				4,123
	Gross profit					3,036				3,202
	Operating expenses:
	Research and development, net					1,150				1,217
	Sales and marketing					1,507				1,774
	General and administrative					1,747				1,777
	Amortization of intangible assets					162				153
	Restructuring related costs					246				-
	Total operating expenses					4,812				4,921
	Operating loss					(1,776	)			(1,719	)
	Financial (expenses) income, net					(79	)			46
	Other income, net					-				2
	Loss before taxes on income					(1,855	)			(1,671	)
	Tax expenses					(68	)			(96	)
	Net loss				$	(1,923	)		$	(1,767	)
	Attributable to:
	The Company's shareholders				$	(1,925	)		$	(1,769	)
	Non-controlling interests					2				2
	Net loss				$	(1,923	)		$	(1,767	)
	Net loss per Ordinary share attributable to the Company's shareholders:
	Basic and diluted				$	(0.11	)		$	(0.10	)
	Weighted-average number of shares used in computation of net loss per share:
	Basic and diluted					18,216				17,932

 

Top Image Systems Ltd.
Statements of Operations
Unaudited
				Three months ended June 30,								Six months ended June 30,
				2018				2017				2018				2017
				U.S. dollars in thousands, except per share data
	Revenues:
	License			$	936			$	1,285			$	2,093			$	2,971
	Services				6,041				6,123				11,911				11,762
	Total revenues				6,977				7,408				14,004				14,733
	Cost of revenues :
	License				88				124				229				284
	Services				3,652				4,107				7,502				8,070
	Total cost of revenues				3,740				4,231				7,731				8,354
	Gross Profit				3,237				3,177				6,273				6,379
	Operating expenses:
	Research and development, net				1,020				1,228				2,170				2,445
	Sales and marketing				1,355				1,494				2,862				3,268
	General and administrative				1,482				1,645				3,229				3,422
	Amortization of intangible assets				162				153				324				306
	Restructuring related costs				10				-				256				-
	Total operating expenses				4,029				4,520				8,841				9,441
	Operating loss				(792	)			(1,343	)			(2,568	)			(3,062	)
	Financial expenses, net				(120	)			(410	)			(199	)			(364	)
	Other income, net				-				4				-				6
	Loss before taxes on income				(912	)			(1,749	)			(2,767	)			(3,420	)
	Tax expenses				(45	)			(50	)			(113	)			(146	)
	Net loss			$	(957	)		$	(1,799	)		$	(2,880	)		$	(3,566	)
	Attributable to:
	The Company's shareholders			$	(958	)		$	(1,804	)		$	(2,883	)		$	(3,573	)
	Non-controlling interests				1				5				3				7
	Net loss			$	(957	)		$	(1,799	)		$	(2,880	)		$	(3,566	)
	Net loss per Ordinary share attributable to the Company's shareholders:
	Basic and diluted			$	(0.05	)		$	(0.10	)		$	(0.16	)		$	(0.20	)
	Weighted-average number of shares used in computation of net loss per share:
	Basic and diluted				18,271				17,932				18,244				17,932

 

Top Image Systems Ltd.
Consolidated Balance Sheets
Unaudited
		June 30,			March 31,			December 31,
		2018			2018			2017
		U.S. dollars in thousands
	ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents	$	1,280		$	2,531		$	2,231
	Restricted cash		98			226			220
	Trade receivables, net		5,228			5,210			5,226
	Other accounts receivable and prepaid expenses		891			920			1,108
	Total current assets		7,497			8,887			8,785
	LONG-TERM ASSETS:
	Severance pay fund		502			502			638
	Restricted deposits		158			167			163
	Long-term deposits and long-term assets		81			79			77
	Property and equipment, net		480			624			793
	Intangible assets, net		2,176			2,334			2,353
	Goodwill		18,711			18,995			18,822
	Total long-term assets		22,108			22,701			22,846
	Total assets	$	29,605		$	31,588		$	31,631
	LIABILITIES AND SHAREHOLDERS' EQUITY
	CURRENT LIABILITIES:
	Short-term bank loan	$	800		$	800		$	800
	Trade payables		1,713			1,869			1,543
	Deferred revenues		3,661			3,656			3,033
	Accrued expenses and other accounts payable		4,421			4,993			4,324
	Total current liabilities		10,595			11,318			9,700
	LONG-TERM LIABILITIES:
	Accrued severance pay		606			628			721
	Non-current deferred revenues		1,586			1,732			1,893
	Long-term convertible note		5,225			5,079			4,936
	Other long-term liabilities		104			148			212
	Total long-term liabilities		7,521			7,587			7,762
	Total liabilities		18,116			18,905			17,462
	SHAREHOLDERS' EQUITY
	Total parent shareholders' equity		11,436			12,632			14,119
	Non-controlling interest		53			51			50
	Total shareholders' equity		11,489			12,683			14,169
	Total liabilities and shareholders' equity	$	29,605		$	31,588		$	31,631

 

Top Image Systems Ltd.
Statements of Operations
Unaudited
				Three months ended March 31,
				2018				2017
				U.S. dollars in thousands, except per share data
	Adjusted EBITDA:
	Net loss attributable to the Company's shareholders			$	(1,925	)		$	(1,769	)
	Interest				166				144
	Other financial income, net				(87	)			(190	)
	Taxes				68				96
	Depreciation				176				172
	Amortization				165				394
	Stock-based compensation expenses				199				204
	Restructuring charge				246				-
	Debt reserve adjustment				-				3
	Total Adjusted EBITDA			$	(992	)		$	(946	)
	Reconciliation of GAAP to Non-GAAP Results:
	Net loss attributable to the Company's shareholders			$	(1,925	)		$	(1,769	)
	Amortization				165				394
	Stock-based compensation expenses				199				204
	Restructuring charge				246				-
	Debt reserve adjustment				-				3
	Non-GAAP net loss			$	(1,315	)		$	(1,168	)
	Non-GAAP net loss per Ordinary share attributable to the Company's shareholders:
	Basic and diluted			$	(0.07	)		$	(0.07	)
	Weighted-average number of shares used in computation of Non-GAAP net loss per Ordinary share attributable to the Company's shareholders:
	Basic and diluted				18,216				17,932

 

Top Image Systems Ltd.
Statements of Operations
Unaudited
				Three months ended June 30,								Six months ended June 30,
				2018				2017				2018				2017
				U.S. dollars in thousands, except per share data
	Adjusted EBITDA:
	Net loss attributable to the Company's shareholders			$	(958	)		$	(1,804	)		$	(2,883	)		$	(3,573	)
	Interest				169				211				335				355
	Other financial (income) expense, net				(49	)			199				(136	)			9
	Taxes				45				50				113				146
	Depreciation				154				175				330				347
	Amortization				168				393				333				787
	Stock-based compensation expenses				183				232				382				436
	Restructuring charge				10				-				256				-
	Debt reserve adjustment				(3	)			68				(3	)			71
	Total Adjusted EBITDA			$	(281	)		$	(476	)		$	(1,273	)		$	(1,422	)
	Reconciliation of GAAP to Non-GAAP Results:
	Net loss attributable to the Company's shareholders			$	(958	)		$	(1,804	)		$	(2,883	)		$	(3,573	)
	Amortization				168				393				333				787
	Stock-based compensation expenses				183				232				382				436
	Restructuring charge				10				-				256				-
	Debt reserve adjustment				(3	)			68				(3	)			71
	Non-GAAP net loss			$	(600	)		$	(1,111	)		$	(1,915	)		$	(2,279	)
	Non-GAAP net loss per Ordinary share attributable to the Company's shareholders:
	Basic and diluted			$	(0.03	)		$	(0.06	)		$	(0.10	)		$	(0.13	)
	Weighted-average number of shares used in computation of Non-GAAP net loss per Ordinary share attributable to the Company's shareholders:
	Basic and diluted				18,271				17,932				18,244				17,932