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 – 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 $241,000. 2017 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 million in 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 ADJUSTMENTThe 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.

 

Investor Relations Contact:

Greg Falesnik

MZ North America

1-949-385-6449

Greg.Falesnik@mzgroup.us