On Track Innovations Ltd. Reports Third Quarter 2018 Financial Results

Third Quarter Revenues Increase 39% to $6.5 Million; Debt Reduced by 89% to $0.5 Million

Rosh Pina, Israel – November 7, 2018 – On Track Innovations Ltd. (OTI) (NASDAQ: OTIV) (the “Company” or “OTI”), a global provider of near field communication (NFC) and cashless payment solutions, has provided a business update and announced financial results for the third quarter ended September 30, 2018.

Operational Updates:

  • OTI delivered a total of more than 3,000 advanced payment systems to Japan.
  • OTI delivered approximately 8,000 advanced contactless readers to the widespread Russian retail self-service market.
  • The Company received the MIR National Card Payment System organization certification, a key component of effectively penetrating the strategic Russian unattended payment market.
  • In August, Apriva released a white paper affirming its ongoing partnership with OTI for deploying next generation self-serve and vending technologies, enabling OTI to offer merchants a pre-certified, off-the-shelf EMV solution for self-service kiosks.
  • In October, OTI was granted the Interbank Network Interac certification, allowing Canadian businesses to integrate OTI’s secure cashless payment solutions into vending machines, kiosks and other unattended devices throughout the significant Canadian market.

Management Commentary

“I am pleased to announce another quarter of continued operational execution, highlighted by our robust sequential and year-over-year revenue growth,” said Shlomi Cohen, Chief Executive Officer of On Track Innovations. “The third quarter revenue of $6.5 million represents the highest third quarter revenue achieved since 2013. We continued to make notable progress on several key fronts, primarily through successful sales efforts in Japan and the United States.

 

“Alongside success in our existing markets, we continued to expand our efforts to new international markets – as evidenced through the granting of the MIR certification in Russia, where we delivered almost 8,000 advanced contactless readers in the third quarter, as well as the Interac certification in Canada. Both of these certifications are crucial to successfully operating in these countries, allowing our sales team to now focus their efforts on well-suited opportunities abroad.

 

“We also experienced our fourth consecutive quarter of positive adjusted EBITDA while expanding our recurring revenue base by 19% on an absolute dollar basis to $1.5 million per quarter, compared to $1.2 million in same year ago period. We also reduced our debt by 89% in the quarter when compared to the prior quarter, with total debt now standing at just $0.5 million.

 

“Our ability to maintain a significant technological advantage over the competition while diligently managing our expenses has positioned us well for continued revenue growth and shareholder value creation over the long-term,” concluded Cohen.

 

Q3 2018 Financial Highlights

  • Total revenue in the third quarter of 2018 increased 39% to $6.5 million, compared to $4.7 million in the same year-ago period.
  • Recurring revenues, on an absolute dollar basis, increased by 19% to $1.5 million, compared to $1.2 million in the same year-ago period.
  • Gross profit in the third quarter of 2018 was $3.4 million, or 53% of revenues, compared to $2.5 million, or 53% of revenues, in the same year-ago period.
  • Net loss from continuing operations in the third quarter of 2018 was $158,000, or $(0.00) per share, compared to a net loss from continuing operations of $573,000, or ($0.01) per share, in the same year-ago period.
  • Adjusted EBITDA in the third quarter of 2018 was $362,000, compared with adjusted EBITDA loss of $74,000 in the same year-ago period.
  • Cash, cash equivalents and short-term investments at September 30, 2018 totaled $5.9 million, compared to $8.8 million at June 30, 2018 and $8.7 million at September 30, 2017. Debt at the end of the third quarter of 2018 decreased by 89% to $0.5 million, compared to $4.5 million at the end of the second quarter of 2018.

 

Conference Call

Management will host an investor conference call at 9:00 a.m. EST on November 7, 2018, to discuss OTI’s third quarter 2018 financial results, provide a corporate update, and conclude with a Q&A from participants. To participate, please use the following information:

 

Date: Wednesday, November 7, 2018

Time: 9:00 a.m. Eastern Standard Time (6:00 a.m. Pacific Standard Time)

U.S. Dial-in: 1-888-317-6002

International Dial-in: 1-412-317-5245

Webcast: https://www.webcaster4.com/Webcast/Page/1720/27970

 

Please dial in at least 10 minutes before the start of the call and request to join the “On Track Innovations Q3 2018 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 and other expenses. 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.

 

ON TRACK INNOVATIONS LTD.

RECONCILIATION OF NON-GAAP ADJUSTMENTThe following table reflects selected On Track Innovations Ltd. non-GAAP results reconciled to GAAP results: (US dollars in thousands)

 

  Three months ended Sept. 30, Nine months ended Sept. 30,
  2018 2017 2018 2017
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Net (loss) income $       (184)  $        868  $       (797)   $        96  
Net loss (income) from discontinued operations 26 (1,441) 114 (1,365)
Financial expenses, net 2 126 129 236
Depreciation 342 295 1,022 878
Taxes on income  111 12 73 68
Total EBITDA FROM CONTINUING OPERATIONS $     297 $      (140) $           541 $           (87)
Other expenses 70                           –
Stock-based compensation          65          66             180             240
Total adjusted EBITDA FROM CONTINUING OPERATIONS $        362 $      (74) $         791 $         153

 

 

 

 

 

 

 

 

 

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,” “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 importance of the MIR certification in Russia and the Interac certification in Canada for the successful operation in these countries, future opportunities and revenue growth and shareholder value creation over the long-term due to our ability to maintain a significant technological advantage over the competition while diligently managing our expenses.  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.

 

Investor Relations Contact:

Greg Falesnik

MZ North America

1-949-385-6449

Greg.Falesnik@mzgroup.us

 

 

 

ON TRACK INNOVATION LTD.INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET(US dollars in thousands)

 

 

September 30, December 31,
2018 2017

 

Assets

 

Current assets

Cash and cash equivalents $     4,514 $      6,742
Short-term investments 1,391  3,331
Trade receivables (net of allowance for doubtful
 accounts of $619 and $568 as of September 30, 2018
 and December 31, 2017, respectively) 4,026 5,827
Other receivables and prepaid expenses 2,676  1,563
Inventories 3,356 3,009
Total current assets 15,963 20,472

Long-term restricted deposit for employees benefit

468 498
Severance pay deposits 358 405

Property, plant and equipment, net

5,246 5,859

Intangible assets, net

              264                 336

 

Total Assets

 $      22,299 $      27,570

 

 

 

 

 

 

 

 

ON TRACK INNOVATION LTD.INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET(US dollars in thousands) 

September 30, December 31,
2018 2017

 

Liabilities and Equity  

 

Current Liabilities

 
Short-term bank credit and current maturities
  of long-term bank loans $          504 $          4,181
Trade payables 6,670  6,264
Other current liabilities 2,133 2,421
Total current liabilities 9,307  12,866

Long-Term Liabilities

Long-term loans, net of current maturities 8    814
Accrued severance pay 874               939
Deferred tax liability 452               500
Total long-term liabilities 1,334            2,253
Total Liabilities 10,641        15,119

Commitments and Contingencies

Equity

Shareholders’ Equity

Ordinary shares of NIS 0.1 par value:
Authorized: 50,000,000 shares as of September 30, 2018 and
December 31, 2017; issued: 42,473,076 and 42,353,077 shares as
of September 30, 2018 and December 31, 2017, respectively;
outstanding: 41,294,377 and 41,174,378 shares
as of September 30, 2018, and December 31, 2017, respectively 1,068  1,064
Additional paid-in capital 224,968  224,758
Treasury shares at cost – 1,178,699 shares as of September 30,
   2018 and December 31, 2017 (2,000)         (2,000)
Accumulated other comprehensive loss (901)            (691)
Accumulated deficit (211,477)      (210,680)
Total Equity 11,658          12,451
Total Liabilities and Equity $       22,299 $     27,570

 

 

 

 

 

 

 

ON TRACK INNOVATION LTD.INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(US dollars in thousands, except share and per share data)

 

 

  Three months ended
September 30,
Nine months ended
September 30,
  2018 2017 2018 2017
   
Revenues  
Sales  $      5,020  $      3,445  $     14,157  $     11,871
Licensing and transaction fees 1,453  1,225 4,332 3,765
Total revenues  6,473  4,670 18,489 15,636
Cost of revenues
Cost of sales 3,051 2,192 8,778 7,468
Total cost of revenues 3,051 2,192 8,778 7,468
Gross profit 3,422 2,478 9,711 8,168
Operating expenses
Research and development 777 823 2,422 2,414
Selling and marketing 1,592 1,332 4,700 4,166
General and administrative 1,098 758 3,070 2,553
 
Total operating expenses 3,467 2,913 10,192 9,133
Operating loss from continuing operations (45) (435) (481) (965)
Financial expenses, net  (2)  (126)  (129)  (236)
 
Loss from continuing operations
 before taxes on income (47) (561) (610) (1,201)
Income tax  (111)  (12)  (73)  (68)
 
Net loss from continuing operations (158) (573) (683) (1,269)
Net (loss) income from discontinued operations (26) 1,441 (114) 1,365
 
Net (loss) income (184) 868 (797) 96
 
 

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

From continuing operations (*) (0.01) (0.02) (0.03)
From discontinued operations (*) 0.03 (*) 0.03
$           (*) $         0.02 $       (0.02)  $            (*)
Weighted average number of ordinary shares
 used in computing basic and diluted net (loss)
 income per ordinary share 41,294,377 41,122,965 41,260,426 41,099,603

 

(*) Less than $0.01 per ordinary share.

 

 

 

 

ON TRACK INNOVATION LTD.INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW(US dollars in thousands) 

Nine months ended September 30,
2018 2017
Cash flows from continuing operating activities
Net loss from continuing operations  $              (683)  $              (1,269)
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 180 238
Depreciation and amortization 978 878
Deferred tax, net (20) 37
Gain on sale of property and equipment (25) (9)
Accrued interest and linkage differences, net (41)
Changes in operating assets and liabilities:
Accrued severance pay, net (19) 72
Decrease in trade receivables, net 1,744 187
Increase in other receivables and prepaid expenses (1,162) (435)
Increase in inventories (381) (710)
Increase (decrease) in trade payables 668 (611)
Decrease in other current liabilities (273) (777)
Net cash provided by (used in) continuing operating activities 1,007 (2,440)
Cash flows from continuing investing activities
Purchase of property and equipment (467) (160)
Proceeds from sale of property and equipment 52 14
Change in short-term investments, net 1,195 2,917
Investment in capitalized certification costs (92) (185)
Proceeds from restricted deposit for employees benefit 8 44
Net cash provided by continuing investing activities 696 2,630
Cash flows from continuing financing activities
Decrease in short-term bank credit, net (3,449) (72)
Repayment of long-term bank loans (979) (469)
Proceeds from exercise of options and warrants 34 25
Net cash used in continuing financing activities (4,394) (516)
Cash flows from discontinued operations
Net cash used in discontinued operating activities (115) (86)
Total net cash used in discontinued operations (115) (86)
Effect of exchange rate changes on cash and cash equivalents (187) 460
 
(Decrease) increase in cash, cash equivalents and restricted cash (2,993) 48
 
Cash, cash equivalents and restricted cash – beginning of the period 7,799 (*) 7,500
 
Cash, cash equivalents and restricted cash – end of the period $               4,806 $           (*) 7,548

 

(*) Reclassified to conform with the current period presentation.