Quarterly Earnings

2017 Fourth Quarter
On Track Innovations Ltd. Reports Fourth Quarter and Full Year 2017 Financial Results
Q4 2017 Year Over Year Revenue Growth of 21% to $6.7 Million
ROSH PINNA, Israel, March 21, 2018 /PRNewswire/ -- On Track Innovations Ltd. (OTI) (NASDAQ: OTIV), a global provider of near field communication (NFC) and cashless payment solutions, has provided a business update and announced financial results for the fourth quarter and full year ended December 31, 2017.

ROSH PINNAIsraelMarch 21, 2018 /PRNewswire/ -- On Track Innovations Ltd. (OTI) (NASDAQ: OTIV), a global provider of near field communication (NFC) and cashless payment solutions, has provided a business update and announced financial results for the fourth quarter and full year ended December 31, 2017.

2017 Company Highlights:

  • Revenues in 2017 grew by 9% to $22.4 million, compared to $20.6 million in 2016.
  • Recurring revenues accounted for 23% of total revenues in 2017,
  • Gross margin in 2017 increased by 125 basis points to 50.9%, compared to 49.6% in 2016.
  • Net loss totaled $598,000, or $(0.01) per share, compared to a net loss of $860,000 or $(0.02) per share in 2016.
  • Adjusted EBITDA (a non-GAAP financial metric) improved significantly to $240,000, compared to adjusted EBITDA loss of $241,0002017 marks OTI's first year of positive adjusted EBITDA in the Company's 28-year operating history.
  • Sales of contactless NFC readers to the "smart" ATM market in 2017 increased significantly to 10,000 units, compared to 1,800 units in 2016.
  • OTI's fueling division grew revenues by 24% to $5.1 millionin 2017, compared to $4.1 in 2016.

Management Commentary

"Two years ago, we decided to make a strategic shift from being a product company, to one focused on utilizing software and offering a complete, turnkey solution for customers," said Shlomi Cohen, Chief Executive Officer of OTI. "Although this process took time, we were confident that this strategy would ultimately increase our value proposition, while generating steady, recurring revenues at higher margins than we've previously experienced. Over this two-year period, we increased our revenues by more than 21%, reduced our debt by 11%, cut operating costs by more than 21% and decreased our net losses by 92%.

"In 2017 alone, we grew revenue by 9%, which is particularly impressive given that 24% of sales in 2016, or $4.9 million, did not re-occur in 2017 due to certain customer transitions.

Cohen, continued: "We expect 2018 to be a breakout year for OTI, driven by particular strength in our 'smart' cashless ATM readers -- which grew five-fold in 2017, continued growth in our fueling division -- which grew revenues over 24% in 2017, traction with our cryptocurrency efforts, and accelerated penetration in Japan."

"As a pioneer and leader in the cashless payment solutions arena, we strongly believe that our technology will continue bringing tremendous value to our industry while generating predictable, high-margin, recurring revenues for the Company and great value for our shareholders."

Full Year 2017 Financial Details

  • Revenue increased to $22.4 million in 2017, compared to $20.6 million in 2016.
  • Gross margin increased to 50.9% of revenue in 2017, compared to 49.6% in 2016.
  • Operating expenses in 2017 totaled $12.7 million, compared to $12.1 million in 2016.
  • Net loss in 2017 totaled $0.6 million, or $(0.01) per share, compared to a net loss of $0.9 million or $(0.02) per share in 2016.
  • Adjusted EBITDA (a non-GAAP financial term as noted below) totaled $240,000 in 2017, compared with adjusted EBITDA loss of $241,000 in 2016.

Q4 2017 Financial Details

  • Total revenue in the fourth quarter increased to $6.7 million, compared to $4.7 million for the prior quarter and $5.6 million in the same year-ago period.
  • Gross margin totaled 48% of revenue in the fourth quarter, compared to 43% in the same year-ago period.
  • Operating expenses totaled $3.5 million in the fourth quarter, compared to $3.4 million in the same year-ago period.
  • Net loss in the fourth quarter totaled $0.7 million, or $(0.02) per share, compared to a net loss of $1.2 million or $(0.03) per share in the same year-ago period.
  • Adjusted EBITDA totaled $63,000 in the fourth quarter, compared with an adjusted EBITDA loss of $ 515,000 in the same year-ago period.

Conference Call

Management will host an investor conference call at 9:00 a.m. Eastern time on March 21, 2018, to discuss OTI's fourth quarter and full year 2017 financial results, provide a corporate update, and conclude with a Q&A from participants. To participate, please use the following information:

Date: Wednesday, March 21, 2018
Time: 9:00 a.m. Eastern time 
U.S. Dial-in: 1-877-870-4263
International Dial-in: 1-412-317-0790
Webcast: https://www.webcaster4.com/Webcast/Page/1720/24729

Please dial in at least 10 minutes before the start of the call and request to join the "On Track Innovations Q4 2017 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.

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 the Company'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 table reflects selected On Track Innovations Ltd. non-GAAP results reconciled to GAAP results:

(US dollars in thousands)

 
   

Year ended December 31

Three months ended December 31

   

2017

2016

2017

2016

           

 Net loss

 

$        (598)

$        (860)

$                (693)

$          (1,209)

           

 Net (income) loss from discontinued operations

 

(1,085)

(1,509)

280

16

 Financial expenses, net

 

340

396

104

211

 Depreciation

 

1,172

1,172

293

261

 Taxes on income

 

74

82

6

22

           

Total EBITDA FROM CONTINUING OPERATIONS

 

$          (97)

$        (719)

$                  (10)

$            (699)

           

Patent litigation and maintenance

 

$            31

$            48

$                      7

$                 11

Other expenses, net

 

52

191

52

108

Stock based compensation

 

254

239

14

65

Total adjusted EBITDA FROM CONTINUING OPERATIONS

 

$          240

$        (241)

$                   63

$            (515)

 

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 with an extensive patent and IP portfolio. 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 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," "would," "should," "will," "can" or similar expressions, we are making forward-looking statements. For example, we are using forward-looking statements when we discuss, among others:  our expectations regarding our growth or profitability, traction with our cryptocurrency efforts, and accelerated penetration in Japan and our expectation of bringing tremendous value to our industry while generating predictable, high-margin, recurring revenues for the Company and great value for our shareholders.  Forward-looking statements are made as of the date of this document and are inherently subject to risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements.  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.

 

 

ON TRACK INNOVATION LTD.

CONDENSED CONSOLIDATED BALANCE SHEET

(US dollars in thousands)

 
   

December 31

   

2017

2016

Assets

     
       

Current assets

     

Cash and cash equivalents

 

$      6,742

$      5,952

Short-term investments

 

3,331

5,585

Trade receivables (net of allowance for doubtful

     

  accounts of $568 and  $720 as of December 31, 2017

     

  and December 31, 2016, respectively)

 

5,827

5,620

Other receivables and prepaid expenses

 

1,563

1,638

Inventories

 

3,009

3,069

       

Total current assets

 

 

 

20,472

21,864

Long term restricted deposit for employees benefit

 

498

453

       

Severance pay deposits

 

405

322

       

Property, plant and equipment, net

 

5,859

5,788

       

Intangible assets, net

 

336

278

       
       

Total Assets

 

$      27,570

$      28,705

       

 

 

 

ON TRACK INNOVATION LTD.

 

CONDENSED CONSOLIDATED BALANCE SHEET

 

(US dollars in thousands except share data)

   
     

December 31

     

2017

 

2016

 

Liabilities and  Equity

       
           
 

Current Liabilities

       
 

Short-term bank credit and current maturities

       
 

  of long-term bank loans

 

$          4,181

 

$           4,369

 

Trade payables

 

6,264

 

6,957

 

Other current liabilities

 

2,421

 

2,822

 

Total current liabilities

 

12,866

 

14,148

           
 

Long-Term Liabilities

       
 

Long-term loans, net of current maturities

 

814

 

1,215

 

Accrued severance pay

 

939

 

811

 

Deferred tax liability

 

500

 

373

 

Total long-term liabilities

 

2,253

 

2,399

           
 

Total Liabilities

 

15,119

 

16,547

           
           
 

Commitments and Contingencies

       
           
 

Equity

       
 

Shareholders' Equity

       
 

Ordinary shares of NIS 0.1 par value: Authorized –

       
 

  50,000,000 shares as of December 31, 2017 and

       
 

  2016; issued: 42,353,077 and 42,243,075  

       
 

  shares as of December 31, 2017 and 2016,

       
 

  respectively; outstanding: 41,174,378 and 41,064,376 shares

       
 

  as of December 31, 2017 and 2016, respectively

 

1,064

 

1,061

 

Additional paid-in capital

 

224,758

 

224,415

 

Treasury shares at cost - 1,178,699 shares as of December 31,

       
 

  2017 and 2016

 

(2,000)

 

(2,000)

 

Accumulated other comprehensive loss

 

(691)

 

(1,236)

 

Accumulated deficit

 

(210,680)

 

(210,082)

           
 

Total Equity

 

12,451

 

12,158

           
 

Total Liabilities and Equity

 

$      27,570

 

$        28,705

 

 

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ON TRACK INNOVATIONS LTD.

 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 

(US dollars in thousands except share data)

 
   
 

Year ended December 31

Three months ended December 31

 
 

2017

2016

2017

2016

 

Revenues

         

Sales

$    17,299

$    14,721

$          5,428

$          4,312

 

Licensing and transaction fees

5,083

5,843

1,318

1,274

 

Total revenues

22,382

20,564

6,746

5,586

 
           

Cost of revenues

         

Cost of sales

10,996

10,111

3,528

3,194

 

Cost of licensing and transaction fees

-

250

-

-

 

Total cost of revenues

10,996

10,361

3,528

3,194

 
           

Gross profit

11,386

10,203

3,218

2,392

 

Operating expenses

         

Research and development

3,305

2,810

891

738

 

Selling and marketing

5,633

5,546

1,487

1,572

 

General and administrative

3,633

3,499

1,084

923

 

Patent litigation and maintenance

31

48

7

11

 

Other expenses (income), net

52

191

52

108

 
           

Total operating expenses

12,654

12,094

3,521

3,352

 
           

Operating loss from continuing operations

(1,268)

(1,891)

(303)

(960)

 

Financial expense, net

(341)

(396)

(104)

(211)

 
           

Loss from continuing operations before taxes on income

(1,609)

(2,287)

 

(407)

 

(1,171)

 

Taxes on income

(74)

(82)

(6)

(22)

 
           

Net loss from continuing operations

(1,683)

(2,369)

(413)

(1,193)

 

Total income (loss) from discontinued operations

 

1,085

1,509

(280)

(16)

 

Net loss

(598)

(860)

(693)

(1,209)

 
           

Net loss (income) attributable to no controlling interest

-

32

-

-

 

Net loss attributable to shareholders

$        (598)

$        (828)

$         (693)

$         (1,209)

 
           

Basic and diluted net income (loss) attributable to

         

 shareholders per ordinary share

         

From continuing operations

$          (0.04)

$          (0.06)

$           (0.01)

$           (0.03)

 

From discontinued operations

$            0.03

$            0.04

$           (0.01)

$                  *

 
 

$          (0.01)

$          (0.02)

$           (0.02)

$           (0.03)

 

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

41,109,875

40,914,558

41,140,356

40,972,006

 
 

* Less than $0.01 per ordinary share.

 

 

ON TRACK INNOVATION LTD.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(US dollars in thousands)

 
 

Year ended December 31

 

2017

2016

2015

Cash flows from continuing operating activities

     

Net loss from continuing operations

$      (1,683)

$      (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

254

239

463

Loss (gain) on sale of property and equipment

52

83

(4)

Accrued interest and linkage differences, net

(6)

56

27

Depreciation

1,172

1,172

1,224

Deferred tax, net

47

82

122

       

Changes in operating assets and liabilities:

     

Accrued severance pay, net

45

(183)

(109)

(Increase) decrease in trade receivables, net

(225)

(3,493)

2,020

(Increase) decrease in other receivables and prepaid expenses

(110)

290

394

Decrease (increase) in inventories

112

(112)

370

(Decrease) increase in trade payables

(1,428)

1,793

(1,298)

(Decrease) increase in other current liabilities

(518)

300

325

Net cash used in continuing operating activities

(2,288)

(2,142)

(3,958)

       

Cash flows from continuing investing activities

     
       

Purchase of property and equipment

(293)

(311)

(1,515)

Proceeds from sale of property, plant and equipment

17

1,779

38

Change in short-term investments, net

2,264

(116)

5,598

Investment in capitalized product costs

(239)

(188)

(200)

Investment in restricted deposit for employee benefits

-

(44)

(281)

Proceeds from restricted deposit for employee benefits

44

142

144

Net cash provided by continuing investing activities

1,793

1,262

3,784

       

Cash flows from continuing financing activities

     

(Decrease) increase in short-term bank credit, net

(335)

1,018

(422)

Proceeds from long-term bank loans

-

27

1,480

Repayment of long-term bank loans

(632)

(1,581)

(747)

Proceeds from exercise of options and warrants

92

177

*

       

Net cash (used in) provided by continuing financing activities

(875)

(359)

311

       

Cash flows from discontinued operations

     

Net cash provided by (used in) discontinued operating activities

1,473

(283)

(581)

Net cash provided by discontinued investing activities

-

2,292

795

Total net cash provided by discontinued operations

1,473

2,009

214

       

Effect of exchange rate changes on cash and cash equivalents

687

(268)

(252)

       

Increase in cash and cash equivalents

790

502

99

Cash and cash equivalents at the beginning of the year

5,952

5,450

5,351

       

Cash and cash equivalents at the end of the year

$      6,742

$      5,952

$      5,450

       

  * Less than $1.

SOURCE On Track Innovations Ltd. (OTI)

For further information: Investor Relations Contact: Greg Falesnik MZ North America +1-949-385-6449 Greg.Falesnik@mzgroup.us