OTI Reports Second Quarter 2017 Financial Results

- Revenues increase 73% compared to prior quarter and 44% compared to same year-ago period

- Gross profit increase 56% quarter-over-quarter and 42% compared to year ago period

- Company reports net profit and improved adjusted EBITDA

- Entered strategic partnership with 365 Retail Markets to serve MicroMarket in the U.S.

News provided by

On Track Innovations Ltd (OTI)

Aug 09, 2017, 04:00 ET

ROSH PINNA, Israel, Aug. 9, 2017 /PRNewswire/ -- On Track Innovations Ltd. (OTI) (NASDAQ: OTIV), a global provider of near field communication (NFC) and cashless payment solutions, reported financial results for the second quarter ended June 30, 2017.

Q2 2017 Operational Highlights

  • Delivered first batch of 3,000 payment systems to the Japanese market.
  • Signed global supply agreement with Dover Fueling Solutions, facilitating entry into North American fueling market
  • Announced with Apriva the launch of a semi-integrated solution for unattended market

Q2 2017 Financial Details

  • Total quarterly revenue increased to $6.9 million, a 73% increase from $4.0 million in the prior quarter and a 44% increase from $4.8 million in the same year-ago period.
  • Gross profit increased to $3.5 million (50% of revenues), a 56% increase over $2.2 million (55% of revenues) in the prior quarter and an increase of 42% over $2.5 million (51% of revenues) in the same year-ago period.
  • Net income from continuing operations totaled $86,000 or $0.002 per share, an improvement from a net loss from continuing operations of $782,000 or $(0.02) per share in the prior quarter and an improvement from a net loss from continuing operations of $598,000 or $(0.02) per share in the same year-ago period.
  • Adjusted EBITDA income from continuing operations improved to $536,000, an improvement from a loss of $309,000 in the prior quarter and an improvement from a loss of $133,000 in the same year-ago period (see discussion about the presentation of adjusted EBITDA from continuing operations, a non-GAAP financial measure, below).

Management Commentary - Shlomi Cohen (OTI CEO)

"The second quarter of 2017 marks a significant milestone in our plan to bring OTI to its full potential.  We are pleased to report quarterly revenues of more than $6.9 million dollars and quarterly positive adjusted EBITDA income of more than $500,000. This represents not only the highest quarterly revenue level since we started our overhaul of OTI's operations two years ago, but also the highest quarterly revenue achieved since the second quarter of 2014."

"Our achievements for the second quarter of 2017 result from significant growth in both our retail segment and petroleum segment.  In our retail segment, we saw increased sales and the delivery of new products into new and expanding markets and verticals together with outstanding achievement to recover in very short time on lost accounts. In the US market alone we saw a growth of 200% in our reader sales compared to the prior quarter. In our PetroSmart division, we saw during the second quarter of 2017 a revenue growth of more than 100% compared to the first quarter, resulting from long-term efforts to grow existing and new opportunities. In total the second quarter of 2017 presented an increase in revenues of more than 70% compared to the prior quarter and more than 40% compared to the second quarter of 2016 together with positive adjusted EBITDA."

"We followed our plans, executed our strategy, and delivered the expected results. For the long term, I strongly believe that we will continue to see growth within our different verticals and present a positive adjusted EBITDA in 2017."

Conference Call
OTI will hold a conference call on Wednesday, August 9 at 9:00 AM EDT to discuss results for the second quarter of 2017.

OTI CEO Shlomi Cohen and CFO Yishay Curelaru will host the presentation, followed by a question and answer period.

Date:  Wednesday, August 9th, 2017
Time:  9:00 AM Eastern Daylight Time (EDT)
Toll-Free Dial-In Number:  1-877-870-4263
International Dial-In Number:  1-412-317-0790
Conference Title:  On Track Innovations Ltd. Q2 Earnings Conference Call

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

Please call the conference telephone number five minutes prior to the start time and request to be joined to the "On Track Innovations Ltd. Q2 Earnings Conference Call".

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. OTI believes that adjusted EBITDA from continuing operations should be considered in evaluating the company's operations since it provides a clear indication of OTI'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.


ON TRACK INNOVATION LTD.

INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except share data)






June 30,

December 31,


2017

2016

Assets






Current assets


Cash and cash equivalents


$     6,242

$      5,952

Short-term investments


3,084

5,585

Trade receivables (net of allowance for doubtful


 accounts of $694 and $720 as of June 30, 2017




 and December 31, 2016, respectively)

6,843

5,620

Other receivables and prepaid expenses

1,554

1,638

Inventories

3,180

3,069




Total current assets

20,903

21,864








Long-term restricted deposit for employees benefit

500

453




Severance pay deposits

355

322




Property, plant and equipment, net

5,967

5,788




Intangible assets, net


351

278












Total Assets

$      28,076

$      28,705

ON TRACK INNOVATION LTD.

INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except share data)




June 30,

December 31,

2017

2016

Liabilities and Equity




Current Liabilities

Short-term bank credit and current maturities

  of long-term bank loans

$          4,663

$          4,369

Trade payables

7,104

6,957

Other current liabilities

1,991

2,822



Total current liabilities

13,758

14,148



Long-Term Liabilities

Long-term loans, net of current maturities

1,041

1,215

Accrued severance pay

918

811

Deferred tax liability

452

373

Total long-term liabilities

2,411

2,399



Total Liabilities

16,169

16,547






Commitments and Contingencies




Equity

Shareholders' Equity

Ordinary shares of NIS 0.1 par value: Authorized –

50,000,000 shares as of June 30, 2017 and



December 31, 2016; issued: 42,288,077 and 42,243,075 shares as



of June 30, 2017 and December 31, 2016, respectively;

outstanding: 41,109,378    and 41,064,376 shares



as of June 30, 2017 and December 31, 2016, respectively

1,062

1,061

Additional paid-in capital

224,603

224,415

Treasury shares at cost - 1,178,699 shares as of June 30,

   2017 and December 31, 2016

(2,000)

(2,000)

Accumulated other comprehensive loss

(904)

(1,236)

Accumulated deficit

(210,854)

(210,082)

Total Equity

11,907

12,158



Total Liabilities and Equity

$       28,076

$      28,705

ON TRACK INNOVATION LTD.

INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands)






Three months ended June 30,

Six months ended June 30,


2017

     2016*

2017

     2016*

Revenues




Sales


$      5,646

$      3,584

$      8,426

$      6,946

Licensing and transaction fees

1,300

1,226

2,540

2,436






Total revenues


6,946

4,810

10,966

9,382






Cost of revenues




Cost of sales

3,476

2,360

5,276

4,609

Total cost of revenues

3,476

2,360

5,276

4,609






Gross profit

3,470

2,450

5,690

4,773

Operating expenses




Research and development

889

747

1,591

1,468

Selling and marketing


1,492

1,321

2,834

2,674

General and administrative


939

902

1,795

1,826

Total operating expenses

3,320

2,970

6,220

5,968






Operating income (loss) from continuing operations

150

(520)

(530)

(1,195)

Financial expenses, net

(39)

(62)

(110)

(155)

Income (loss) from continuing operations




 before taxes on income

111

(582)

(640)

(1,350)

Income tax

(25)

(16)

(56)

(32)

Net income (loss) from continuing operations

86

(598)

(696)

(1,382)

Net income (loss) from discontinued operations

7

1,947

(76)

1,803

Net income (loss)

93

1,349

(772)

421

Net (income) loss attributable to non-controlling interest

-

(36)

-

27

Net income (loss) attributable to shareholders

$      93

$     1,313

$     (772)

$     448

Basic and diluted net income (loss)
attributable to shareholders per ordinary
share




From continuing operations

**

(0.02)

(0.02)

(0.03)

From discontinued operations

**

0.05

**

0.04


 $      **

$       0.03

$    (0.02)

$    0.01






Weighted average number of ordinary shares
used in computing basic and diluted net
income (loss) per ordinary share

41,095,788

40,896,863

41,087,729

40,885,668






* Reclassified to conform with the current period presentation.

** Less than $0.01 per ordinary share.

ON TRACK INNOVATIONS LTD.

INTERIM UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENT

The following tables reflect selected On Track Innovations Ltd. non-GAAP results reconciled to GAAP results:

(In thousands)


Three months ended June 30,

Six months ended June 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)





Net Income (Loss)

$          93

$      1,349

$     (772)

$           421





Net (income) loss from discontinued operations

(7)

(1,947)

76

(1,803)

Financial expenses, net

39

62

110

155

Depreciation

302

309

583

617

Taxes on income

25

16

56

32

Total EBITDA FROM CONTINUING OPERATIONS

$        452

$       (211)

$         53

$        (578)





Stock-based compensation

84

78

174

105

TOTAL ADJUSTED EBITDA FROM CONTINUING
OPERATIONS

$        536

$       (133)

$       227

$        (473)

ON TRACK INNOVATION LTD.

INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(In thousands)



Six months ended June 30,


2017

2016*




Cash flows from continuing operating activities


Net loss from continuing operations

$              (696)

$           (1,382)

Adjustments required to reconcile net loss to




net cash used in continuing operating activities:


Stock-based compensation related to options issued


  to employees and others

174

105

Accrued interest and linkage differences, net

(47)

55

Depreciation 


583

617

Deferred tax, net

21

32

Gain on sale of fixed assets

(7)

-




Changes in operating assets and liabilities:


Accrued severance pay, net

74

(151)

Increase in trade receivables, net

(1,151)

(1,115)

Decrease in other receivables and prepaid expenses

90

215

(Increase) decrease in inventories

(47)

590

(Decrease) increase in trade payables

(396)

290

Decrease in other current liabilities

(855)

(453)

Net cash used in continuing operating activities

(2,257)

(1,197)




Cash flows from continuing investing activities


Purchase of property and equipment, net

(98)

(139)

Change in short-term investments, net


2,500

(884)

Investment in capitalized product costs

(157)

(98)

Proceeds from restricted deposit for employee benefits

44

-

Advance payment from sale of property

-

396

Proceeds from sale of fixed assets

12

-




Net cash provided by (used in) continuing investing activities

2,301

(725)




Cash flows from continuing financing activities


Increase in short-term bank credit, net

213

81

Proceeds from long-term bank loans

-

27

Repayment of long-term bank loans

(374)

(538)

Proceeds from exercise of options and warrants


15

**

Net cash used in continuing financing activities

(146)

(430)




Cash flows from discontinued operations


Net cash used in discontinued operating activities

(71)

(214)

Net cash provided by discontinued investing activities

-

1,949

Total net cash (used in) provided by discontinued operations

(71)

1,735




Effect of exchange rate changes on cash and cash equivalents

463

(17)




Increase (decrease) in cash and cash equivalents

290

(634)

Cash and cash equivalents at the beginning of the period

5,952

5,450




Cash and cash equivalents at the end of the period

$               6,242

$               4,816




(*) Reclassified to conform with the current period presentation

(**) Less than $1

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 we use words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions, we are making forward-looking statements. For example, we are using forward-looking statements when we discuss our expectations regarding our growth or profitability, new opportunities, a positive adjusted EBITDA in 2017 and delivery long-term shareholder value. Because such statements deal with future events and are 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, or 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, 2016, 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, we can give no assurance that our 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.

OTI Investor Contact
[email protected]

OTI Press Contact
Neil Barr
Director of Marketing
+972-4-686-8004
[email protected]

SOURCE On Track Innovations Ltd (OTI)