Pointer Telocation Reports Q2 2015 Financial Results

Highlights of the second quarter of 2015

- Total revenue of $25.3 million

- MRM revenue of $16.4 million: in local currency terms MRM revenue grew 9% and MRM service revenue grew by 23%

- Strong MRM margin profile: gross margins of 45% and operating margin of 10%

Aug 13, 2015, 08:45 ET from Pointer Telocation Ltd.

ROSH HAAYIN, Israel, Aug. 13, 2015 /PRNewswire/ -- Pointer Telocation Ltd. (Nasdaq CM: PNTR) - a leading developer, manufacturer and operator of Mobile Resource Management (MRM) services, announced today its financial results for the second quarter of 2015.

Financial Highlights

Revenue for the second quarter of 2015 decreased 2.2% to $25.3 million as compared to $25.9 million in the second quarter of 2014.

The significant strengthening of the US Dollar, in particular versus the Brazilian Real and Israeli Shekel, reduced the revenue level in US Dollars compared with the second quarter of 2014. In local currency terms in the territories where Pointer's subsidiaries operate, revenue showed an increase of 9%, year-over-year.

Revenue from products in the second quarter of 2015 decreased 10.9% to $7.2 million (28% of revenue) compared to $8.1 million (31% of revenue) in the comparable period of 2014. In local currency terms, revenue from products decreased by 7% over the same period last year.

Revenue from services in the second quarter of 2015 increased 1.8% to $18.1 million (72% of revenue) compared to $17.8 million (69% of revenue), in the comparable period of 2014. In local currency terms, revenue from services increased by 16% over the same period last year. 

Gross profit in the second quarter of 2015 was $8.5 million (33.6% of revenue), a decrease of 0.8% compared to $8.6 million (33.2% of revenue) in the second quarter of 2014.

Operating income in the second quarter of 2015 was $1.6 million (6.5% of revenue), a decrease of 1.7% compared to $1.7 million (6.4% of revenue) in the second quarter of 2014.

Net income in the second quarter was $1.0 million, or $0.13 per share, compared to $1.1 million, or $0.15 per share, in the second quarter of 2014.

Non-GAAP net income in the second quarter was $1.4 million, a decrease of 17% as compared to non-GAAP net income of $1.7 million in the second quarter of 2014.

Adjusted EBITDA for the second quarter of 2015 was $2.7 million, a decrease of 10.4% compared to $3.0 million in the second quarter of 2014.

In connection with Pointer's plan to spin-off its Shagrir business to shareholders, pro-forma information providing certain details of the financial performance of the Shagrir RSA business and Pointer MRM business is provided separately in Exhibit A and is for informational purposes only.

Management Comment

David Mahlab, Pointer's Chief Executive Officer, commented: "We faced some significant currency headwinds in the second quarter, which eliminated our solid growth in local currency terms when expressed in US dollars. In particular, in local currency terms, we are pleased with our MRM revenue growth of 9% and specifically the 23% growth in MRM service revenue. This is despite the weakness we are seeing in our Brazilian operations due to the sharp economic slowdown there. The MRM business will remain with us following the planned divestment of Shagrir next year and our focus is the service segment, where we see most of the growth potential going forward."

Continued Mr. Mahlab, "We are continuing to develop new products and services within our MRM business for the Asset Tracking and IOT (Internet of Things) markets. We believe that our ongoing investments will strengthen our long-term competitive advantage in the MRM market and we look forward to continued growth in our MRM business."

Conference Call Information:

Pointer Telocation's management will host a conference call today, August 13, 2015, at 6:30am Pacific Time, 9:30am Eastern Time, 4:30pm Israel time. On the call, management will review and discuss the results.  To listen to the call, please dial in to one of the following teleconferencing numbers. Please begin placing your call a few minutes before the conference call commences.

Dial in numbers are as follows:

From USA: + 1-888-407-2553

From Israel and International: +972 3-918-0644

A replay will be available a few hours following the call on the company's website.

Reconciliation between results on a GAAP and Non-GAAP basis
Reconciliation between results on a GAAP and Non-GAAP basis is provided in a table immediately following the Condensed Interim Consolidated Statements of Cash Flows.

Pointer uses adjusted EBITDA and non-GAAP net income as  non-GAAP financial performance measurements.

We calculate adjusted EBITDA by adding back to net income, net loss from discontinued operations, financial expenses, taxes, depreciation, amortization and impairment of goodwill and intangible assets, the effects of non-cash stock-based compensation expense, profit raise from gaining control in subsidiary previously treated by the equity method and related goodwill adjustment.

We calculate non-GAAP net income by adding back to net income, net loss from discontinued operations, the effects of non-cash stock based compensation expenses, amortization and impairment of long lived assets, non-cash tax expenses resulting from timing differences relating to the amortization of acquisition-related intangible assets and goodwill, profit raise from gaining control in subsidiary previously treated by the equity method, acquisition related goodwill adjustment, onetime 'other expense' related to the termination cost of a former general manger of a Pointer subsidiary and restructuring in a subsidiary, loss from sale of subsidiary, one time financial expenses resulting from the devaluation of Israeli Shekel denominated bank deposits and non-cash tax income from raised tax asset.

The purpose of such adjustments is to give an indication of our performance exclusive of non-GAAP charges that are considered by management to be outside of our core operating results.

Adjusted EBITDA and non-GAAP net income are provided to investors to complement results provided in accordance with GAAP, as management believes the measure helps illustrate underlying operating trends in the Company's business and uses the measure to establish internal budgets and goals, manage the business and evaluate performance. We believe that these non-GAAP measures help investors to understand our current and future operating cash flow and performance, especially as our acquisitions have resulted in amortization and non-cash items that have had a material impact on our GAAP profits. Adjusted EBITDA and non GAAP net income should not be considered in isolation or as a substitute for comparable measures calculated and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies.

About Pointer Telocation:
Pointer Telocation is a leading provider of technology and services to the automotive and insurance industries, offering a set of services including Road Side Assistance, Stolen Vehicle Recovery and Fleet Management. Pointer has a growing list of customers and products installed in more than 45 countries. Cellocator, a Pointer Products Division, is a leading AVL (Automatic Vehicle Location) solutions provider for stolen vehicle retrieval, fleet management, car & driver safety, public safety, vehicle security and more. The Company's top management and the development center are located in the Afek Industrial Area of Rosh Ha'ayin, Israel.

For more information: http://www.pointer.com

Forward Looking Statements
This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business, financial condition and results of operations of the Company. The words "believe," "expect," "anticipate," "intend," "seems," "plan," "aim," "should" and similar expressions are intended to identify forward-looking statements. Such statements reflect the current views, assumptions and expectations of the Company with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in the markets in which the Company operates and in general economic and business conditions, loss or gain of key customers and unpredictable sales cycles, competitive pressures, market acceptance of new products, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this press release. Various risks and uncertainties may affect the Company and its results of operations, as described in reports filed by the Company with the Securities and Exchange Commission from time to time. The Company does not assume any obligation to update these forward-looking statements.

 


INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands




June 30,
2015


December 31,
2014



Unaudited








ASSETS










CURRENT ASSETS:





Cash and cash equivalents


$       8,447


$         8,557

Restricted cash


-


62

Trade receivables


19,738


19,032

Other accounts receivable and prepaid expenses


2,416


1,853

Inventories


6,025


6,133

Deferred tax asset


544


901

Property and equipment held for sale


706


1,034






Total current assets


37,876


37,572











LONG-TERM ASSETS:





Long-term accounts receivable


438


408

Severance pay fund


8,662


8,609

Property and equipment, net


9,592


10,075

Other intangible assets, net


1,469


1,950

Goodwill


49,709


48,941

Deferred tax asset


3,185


3,449






Total long-term assets


73,055


73,432






Total assets


$    110,931


$      111,004

 

 


INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share and per share data)




June 30,


December 31,



2015


2014



Unaudited



LIABILITIES AND SHAREHOLDERS' EQUITY










CURRENT LIABILITIES:





Short-term bank credit and current maturities of long-term loans


$        5,206


$         7,478

Trade payables


12,070


11,460

Deferred revenues and customer advances


7,085


6,420

Other accounts payable and accrued expenses


8,343


8,972






Total current liabilities


32,704


34,330











LONG-TERM LIABILITIES:





Long-term loans from banks


10,802


12,046

Long-term loans from shareholders and others


921


997

Deferred taxes and other long-term liabilities


301


298

Accrued severance pay


9,575


9,537






Total long term liabilities


21,599


22,878






COMMITMENTS AND CONTINGENT LIABILITIES










EQUITY:





Pointer Telocation Ltd's shareholders' equity:





Share capital 


5,707


5,705

Additional paid-in capital


129,797


129,618

Accumulated other comprehensive income


(2,961)


(2,909)

Accumulated deficit


(72,901)


(75,767)






Total Pointer Telocation Ltd's shareholders' equity


59,642


56,647






Non-controlling interest


(3,014)


(2,851)






Total equity


56,628


53,796






Total liabilities and equity


$    110,931


$      111,004

 

 


INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands



Six months ended

June 30,


Three months ended

June 30,


Year ended
December 31,


2015


2014


2015


2014


2014


Unaudited


Unaudited













Revenues:










Products

$        14,256


$         17,170


$        7,173


$            8,054


$          33,099

Services

36,031


35,719


18,137


17,820


72,191











Total revenues

50,287


52,889


25,310


25,874


105,290











Cost of revenues:










Products

8,428


10,342


4,345


4,946


19,279

Services

24,742


24,553


12,454


12,344


50,461











Total cost of revenues

33,170


34,895


16,799


17,290


69,740











Gross profit

17,117


17,994


8,511


8,584


35,550











Operating expenses:










Research and development

1,718


1,766


824


908


3,390

Selling and marketing

5,906


5,523


3,100


2,832


11,219

General and administrative

5,392


5,901


2,756


2,944


11,883

Other general and administrative  expenses

-


-


-


-


683

Other income

-


-


-


-


(288)

Amortization of intangible assets

390


567


190


230


994

 Impairment of intangible and tangible assets

-


-


-


-


1,122











Total operating expenses

13,406


13,757


6,870


6,914


29,003











Operating income

3,711


4,237


1,641


1,670


6,547

Financial expenses,  net

177


812


371


308


2,424

Other expenses (income), net

14


(6)


14


(9)


232











Income before taxes on income

3,520


3,431


1,256


1,371


3,891

Taxes on income

755


1,014


355


414


(8,849)











Net income

$         2,765


$         2,417


$           901


$               957


$         12,740

 

 


INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands












Six months ended

June 30,


Three months ended

June 30,


Year ended

December 31,


2015


2014


2015


2014


2014


Unaudited













Profit  (loss) from continuing operations attributable to:










Equity holders of the parent

2,866


2,612


1,001


1,146


13,453

Non-controlling interests

(101)


(195)


(100)


(189)


(713)












$      2,765


$      2,417


$      901


$       957


$   12,740





















Earnings per share attributable to Pointer Telocation Ltd's shareholders:










Basic net earnings (loss) per share

$        0.37


$       0.36


$     0.13


$    0.15


$    1.81











Diluted net earnings (loss) per share

$        0.36


$       0.35


$    0.13


$    0.14


$    1.74











Weighted average -Basic number of shares

7,694,976


7,200,842


7,701,317


7,688,564


7,446,707











Weighted average – fully diluted number of shares

7,961,010


7,542,146


7,957,222


8,029,615


7,726,653












 

 


INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands



Six months ended

June 30,


Three months ended

June 30,


Year ended

December 31,


2015


2014


2015


2014


2014


Unaudited


Unaudited













Cash flows from operating activities:




















Net income

$         2,765


$       2,417


$       901


$       957


$        12,740

Adjustments required to reconcile net income

to net cash provided by operating activities:










Depreciation and amortization

1,985


2,475


979


1,194


4,767

Impairment of tangible and intangible assets

-


-


-


-


1,122

Gain from a bargain purchase

-


-


-


-


(288)

Accrued interest and exchange rate changes of debenture and long-term loans

10


9


 

376


 

4


17

Accrued severance pay, net

(38)


125


(6)


138


56

Gain from sale of property and equipment, net

(72)


(97)


(38)


(32)


(95)

 Stock-based compensation

174


175


83


127


375

Decrease  in restricted cash

62


16


-


1


19

Increase (decrease) in trade receivables, net

(513)


(1,705)


(10)


378


(1,141)

Increase in other accounts receivable

 and prepaid expenses

(1,060)


(629)


 

(1,106)


 

(69)


(21)

Increase in inventories

(180)


(217)


(171)


(481)


(462)

Decrease (increase) Deferred income taxes

387


804


197


319


(9,120)

Decrease (increase) in long-term accounts receivable

14


(9)


 

12


 

(50)


126

Increase (decrease) in trade payables

900


493


837


1,117


(654)

Decrease in other accounts payable

and accrued expenses

(291)


(1,342)


 

(701)


 

(988)


(1,845)











Net cash provided by operating activities

4,143


2,515


1,353


2,615


5,596











Cash flows from investing activities:










Purchase of property and equipment

(1,354)


(2,248)


(769)


(1,094)


(4,458)

Proceeds from sale of property and equipment

648


867


337


160


1,529

Investment and loans/ Repayments in affiliate

-


(7,740)


-


-


-

Acquisition of subsidiary (a)

-


-


-


-


(688)

Proceeds from sale of investments in previously

consolidated subsidiaries (b)

-


-


 

-


 

-


(41)











Net cash used in investing activities

(706)


(9,121)


(432)


(934)


(3,658)

 

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands



Six months ended

June 30,


Three months ended

June 30,


Year ended
December 31,


2015


2014


2015


2014


2014


Unaudited


Unaudited













Cash flows from financing activities:




















Receipt of long-term loans from banks

15,103


12,927


 

4,546


1,490


12,577

Repayment of long-term loans from banks

(17,729)


(4,803)


(6,335)


(2,597)


(8,986)

Repayment of long-term loans from shareholders

(32)


(366)


(19)


(251)


(301)

Repurchase of shares from non-controlling interests

-


-


-


-


(7,740)

Proceeds from issuance of shares and exercise of options, net of issuance costs

6


10,065


-


6


10,074

Short-term bank credit, net

(486)


(2,582)


(18)


(1,382)


(1,640)











Net cash provided (used) in financing activities

(3,138)


15,241


(1,826)


(2,734)


3,984











Effect of exchange rate on cash and cash equivalents

(409)


(194)


1,098


(227)


(714)











Increase (decrease) in cash and cash equivalents

(110)


8,441


193


(1,280)


5,208

Cash and cash equivalents at the beginning of the period

8,557


3,349


8,254


13,070


3,349











Cash and cash equivalents at the end of the period

$     8,447


$     11,790


$     8,447


$     11,790


$          8,557






















(a)

Acquisition of subsidiary:






















Working capital (Cash and cash equivalent excluded)

$         -


$           -


 

$           -


$           -


$             221


Property and equipment

-


-


-


-


565


Other intangible assets

-


-


-


-


190


Goodwill

-


-


-


-


(288)














$          -


$           -


$           -


$           -


$             688

 

 


INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands




Six months ended

June 30,


Three months ended

June 30,


Year ended
December 31,



2015


2014


2015


2014


2014



Unaudited


Unaudited














(b)

Proceeds from sale of investments in previously consolidated subsidiaries:
























The subsidiaries' assets and liabilities at date of sale:
























Working capital (excluding cash and cash equivalents)


$                -


$                -


$                -


$                -


$             (18)


Property and equipment


-


-


-


-


(30)


Long term loans from banks and others


-


-


-


-


5


Non-controlling interests


-


-


-


-


(125)


Loss from sale of subsidiaries


-


-


-


-


209
















$               -


$              -


$               -


$               -


$              41

























(c)

Non-cash investing activity:
























Purchase of property and equipment


$        264


$        179


$             208


$        179


$              45


Issuance of shares in respect of acquisition of
non-controlling interests in subsidiary


$             -


$      11,385


$             -


$             -


$      11,368

























 

 

ADDITIONAL INFORMATION

U.S. dollars in thousands


The following table reconciles the GAAP to non-GAAP operating results:



Six months ended

June 30,


Three months ended

June 30,


Year ended
December 31,


2015


2014


2015


2014


2014











GAAP gross profit

$       17,117


$       17,994


$      8,511


$      8,584


$       35,550

Stock-based compensation expenses

6


4


3


3


10

Non-GAAP gross profit

$       17,123


$       17,998


$      8,514


$     8,587


$      35,560





















GAAP operating expenses

$       13,406


$       13,757


$     6,870


$     6,914


$       29,003

Stock-based compensation expenses

168


178


80


130


380

Amortization and impairment of long lived assets

390


567


190


230


2,116

Other expenses of termination costs and restructuring in subsidiary

 

-


 

-


 

-


 

-


 

683

Acquisition related goodwill adjustment

-


-


-


-


(288)

Non-GAAP operating expenses

$       12,848


$       13,012


$      6,600


$     6,554


$       26,112











GAAP operating income

$       3,711


$       4,237


$      1,641


$     1,670


$         6,547











Non-GAAP operating income

$       4,275


$       4,986


$      1,914


$     2,033


$         9,448











GAAP net income

$       2,765


$       2,417


$      901


$       957


$      12,740

Stock-based compensation

174


182


83


133


390

Amortization and impairment of long lived assets

390


567


190


230


2,116

Acquisition related goodwill adjustment

-


-


-


-


(288)

Other expenses of termination costs and restructuring in subsidiary

-


-


-


-


683

Loss from sale of subsidiary

-


-


-


-


209

Financial expenses resulting from the devaluation of Israeli Shekel denominated bank deposits

 

-

 


 

-


 

-


 

-


 

498

Non-cash tax expenses resulting from timing differences relating to the amortization of acquisition-related intangible assets and goodwill

 

 

453


 

 

708


 

 

211


 

 

356


 

 

1,379

Non cash tax income from raised tax asset

-


-


-


-


(9,799)

Non-GAAP net income

$       3,782


$       3,874


$      1,385


$     1,676


$        7,928











Non-GAAP net income per share - Diluted

$          0.48


$          0.51


$        0.17


$         0.21


$          1.02

Non-GAAP weighted average number of shares - Diluted*

7,961,010


7,542,146


7,957,222


8,029,615


7,726,653


* In calculating diluted non-GAAP net income per share, the diluted weighted average number of shares outstanding excludes the effects of stock-based compensation expenses in accordance with FASB ASC 718.

 

 

ADDITIONAL INFORMATION

U.S. dollars in thousands


Adjusted EBITDA




Six months ended

June 30,


Three months ended

June 30,


Year ended
December 31,



2015


2014


2015


2014


2014












GAAP Net income as reported:

$    2,765


$    2,417


$    901


$    957


$    12,740











Financial expenses (income), net

177


812


371


307


2,424

Tax on income

755


1,014


355


414


(8,849)

Profit raise from gaining control in subsidiary previously treated by the equity method and acquisition related goodwill adjustment

-


-


-


-


(288)

Stock based compensation expenses

174


182


83


133


390

Loss from sale of subsidiary

-


-


-


-


209

Depreciation, amortization and impairment of goodwill and  intangible assets

1,985


2,475


 

979


 

1,194


5,889











Adjusted EBITDA

$    5,856


$    6,900


$    2,689


$    3,005


$     12,515












 

 

Exhibit A (*)


U.S Dollars in Thousands















Three months ended
June 30, 2015


Three months ended
June 30, 2014



Year ended
December 31, 2014 (**)


Unaudited


Unaudited


Unaudited


MRM

RSA

Total 


MRM

RSA

Total 


MRM

RSA

Total 













Revenues:












Products

5,760

1,413

7,173


6,837

1,217

8,054


27,855

5,244

33,099

Services

10,629

7,508

18,137


9,904

7,916

17,820


41,267

30,925

72,191

Total Revenues

16,389

8,921

25,310


16,741

9,133

25,874


69,122

36,168

105,290













Non-GAAP Cost of Revenues

8,984

7,812

16,796


9,301

7,986

17,287


37,653

32,078

69,730













Non-GAAP Gross Profit

7,405

1,109

8,514


7,440

1,147

8,587


31,469

4,091

35,560


45.2%

12.4%

33.6%


44.4%

12.6%

33.2%


45.5%

11.3%

33.8%













Non-GAAP Operating Expenses

5,784

816

6,600


5,669

885

6,554


22,711

3,401

26,112













Non-GAAP Operating  Income

1,621

293

1,914


1,771

262

2,033


8,758

690

9,448















(*)  

See reconciliation information on p. 12 herein



(**) 

Note that certain figures for the year ended December 31, 2014 have been slightly revised from the previously reported figures as a result of allocation between segments

 

Contact:


Zvi Fried, V.P. and Chief Financial Officer                

              Ehud Helft, GK Investor & Public Relations

Tel: 972-3-572 3111                                        

              Tel: +1 646 201 9246

E-mail: zvif@pointer.com                              

              E-mail: pointer@gkir.com

SOURCE Pointer Telocation Ltd.



RELATED LINKS

http://www.pointer.com