On Track Innovations Ltd. Reports First Quarter 2019 Financial Results

ROSH PINA, Israel, May 7, 2019 /PRNewswire/ -- On Track Innovations Ltd. ("OTI") (NASDAQ: OTIV) (the "Company" or "OTI"), a global provider of near field communication (NFC) and cashless payment solutions, today provided a business update and announced financial results for the first quarter ended March 31, 2019.

Highlights of the quarter

• Revenues of $3.0 million of which the recurring portion accounted for 43%, versus 26% in the prior quarter; on an absolute dollar basis recurring revenues increased sequentially by 12%;
• OTI completed the production relocation from China to the Philippines at the end of the first quarter of 2019; and revenues are expected to resume growth in the second quarter;
• Improvement in the gross margins to 55%, compared with 52% in the same year-ago quarter;
• Reduction in the expenses: operating expenses totaled $3.1 million in the first quarter, compared to $3.4 million in the same year-ago quarter;
• Received order for more than 6,000 advanced payment systems to the Russian market;

Management Commentary

Mr. Cohen commented, "As we had expected, our first quarter was weak from the revenue standpoint, as we focused on moving our production out of China to the Philippines, where there is no impact from US tariffs. I recently returned from our new production facility which was up and running as of the beginning of the second quarter. I therefore believe that the issue which has affected us for the past two quarters is now behind us and we can look forward to a return of sequential revenue growth in the second quarter and beyond. I am pleased by the high level of gross margins as well as the relative increase in our recurring revenue levels, which sets us up positively as our revenues return to growth. "

Following OTI's sale of its MediSmart division in the fourth quarter of 2018, the financial results of Medismart are included as discontinued operations and all the prior periods' information has been reclassified to conform with the current period's presentation.

First quarter 2019 financial results summary

• Total revenue in the quarter was $3.0 million, compared to $5.5 million in the same year-ago quarter. The revenues in the quarter were affected primarily by the impact of tariffs implemented by the United States on imports from China, where the Company manufactured its products until the end of the first quarter. Over the past 6 months, OTI has taken steps to relocate manufacturing to the Philippines, and the process was completed at the end of the first quarter of 2019. Additionally, the revenues were also impacted by the lower level of orders from the Asia-Pacific region, compared with the same year-ago quarter.
• Recurring revenues were $1.3 million (43% of total revenues), compared to $1.3 million (23% of total revenues) in the first quarter of 2018.
• Gross profit in the quarter was $1.6 million, or 55% of revenues, compared to $2.9 million, or 52% of revenues, in the first quarter of 2018.
• Operating expenses totaled $3.1 million in the first quarter, compared to $3.4 million in the same year-ago quarter.
• Loss from continuing operations were $1.6 million compared to $400,000 in the same year-ago quarter.
• Net loss was $1.7 million, or $0.04 per share, compared to a net loss of $333,000, or $0.01 per share in the same year-ago quarter.
• Adjusted EBITDA loss from continuing operations of $1.1, compared to adjusted EBITDA loss of $104,000 in the same year-ago quarter.
• Positive net cash provided by continuing operation activities totaled $186,000 in the first quarter of 2019, compared to positive net cash provided by continuing operation activities which totaled $591,000 in the same year-ago period.

Conference Call

Management will host an investor conference call at 9:00 a.m. EDT on May 7, 2019, to discuss the financial results, provide a corporate update, and conclude with a Q&A session with participants. To participate, please use the following dial-in information:

U.S. Dial-in: 1-888-317-6002
International Dial-in: +1-412-317-5245
Webcast: https://www.webcaster4.com/Webcast/Page/1720/30371

Please dial in a few minutes before the start of the call and request to join the "On Track Innovations Earnings Conference Call" to ensure timely participation.

The conference call will be available for replay by clicking here and via the investor relations section of the company's website.

About On Track Innovations Ltd

On Track Innovations (OTI) is a global leader in the design, manufacture, and sale of secure cashless payment solutions using contactless NFC technology. OTI's field-proven innovations have been deployed around the world to address cashless payment, automated retail and petroleum markets. OTI distributes and supports its solutions through a global network of regional offices and alliances. OTI is the proud recipient of the 2017 AI Award for Best Cashless Payment Solutions Provider – Israel. For more information, visit www.otiglobal.com.

Safe Harbor / Forward-Looking Statements

This press release contains express or implied 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 "will," "look forward," "expect," "anticipate," "intend," "plan," "estimate," "believe," "should," "can" or similar expressions, we are making forward-looking statements. For example, we are using forward-looking statements when we discuss, among others: the Company's expectations to return to sequential revenue growth in the second quarter and beyond, the Company's belief that the impact of the U.S. tariffs on import from China is now behind it, improvement in profitability, positive trends and 2019 revenue growth.  Additional factors that could cause actual results to differ materially from those anticipated by our forward-looking statements are stated under the captions "Risk Factors" in our most recent Annual Report (Form 10-K) and other known and unknown uncertainties and risk factors including those detailed from time to time in the Company's filings with the Securities and Exchange Commission.  Forward-looking statements are made as of the date of this release, and we expressly disclaim any obligation or undertaking to update forward-looking statements. The reader is cautioned not to place undue reliance on forward-looking statements.

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 patent litigation expenses, stock-based compensation expense and other expenses. Patent litigation expenses and other expenses are presented only at the end of each year, as we do not consider their impact on quarterly results to be material. OTI believes that adjusted EBITDA from continuing operations should be considered in evaluating the Company's operations since it provides a clear indication of the Company's operating results. This measure should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for the U.S. GAAP results. The non-GAAP measures included in this press release have been reconciled to the U.S. GAAP results in the tables below.

SOURCE On Track Innovations Ltd. (OTI)