3rd Quarter Results
Orad Hi-Tec Systems
24 November 2004
Orad Hi-Tec Systems Ltd. ('Orad' or the 'Company')
Results for the nine month period and the quarter ended September 30 2004
Tel Aviv, November 24th, 2004 - Orad Hi-Tec Systems Ltd. (Frankfurt - Prime
Standard; London - AIM. Symbol: OHT), a leading developer, marketer and
distributor of state-of-the-art, 3D graphical solutions for the broadcasting,
advertising and visual simulation markets, today announced its results for the
third quarter and nine month period of 2004.
• Revenues of $4.1 million in Q3 2004
• Improved gross margin - 64% in Q3 2004
• Increased revenues from Visual Simulations market, deals with
Volkswagen and Peugeot
• Increased marketing efforts in HK and China
For further information:
Orad (www.orad.tv)
Avi Sharir 00 972 976 768 62
Shore Capital (London)
Graham Shore 00 44 20 7408 4090
Haubrok IR GmbH (Frankfurt)
Michael Kempkes 00 49 211 301 260
Orad Hi-Tec Systems Ltd ('Orad' or the 'Company')
Results for the nine months period and the quarter ended September 30 2004
Chief Executive's Statement
Revenues for the third quarter of 2004 were $4.1 million, compared to $3.7
million in both the second quarter of 2004 and the third quarter of 2003. Gross
margin in the third quarter of 2004 increased to 64%, compared to 60% in the
second quarter of 2004 and 62% in the third quarter of 2003. Net loss was $1
million compared to the loss of $1.5 million in the third quarter of 2003.
Revenues for the nine months of 2004 were $11.2 million, compared to $12.3
million for the first nine months of 2003. Operational expenses in the nine
months of 2004 decreased to $10.1 million, compared to $11.5 million in 2003.
The net loss was $3.5 million in the nine months of 2004, compared to $3.8
million in 2003.
Operational Highlights for the third quarter of 2004:
• Growing revenues from the Visual Simulation market is a result of Orad's
strategy to apply its core technology to other markets other than the
broadcasting industry. With important sales to Volkswagen and Peugeot, Orad
has successfully penetrated the automotive industry, which represents the
second largest market segment of the visualization industry.
• Significant deal with RTS Serbia, Serbia's public channel and one of
the largest broadcasters in Southeast Europe for virtual set and 3D graphics
equipment to be used to broadcast sport, elections and other programming
requiring sophisticated digital effects.
• Orad became the sole owner of its Hong Kong and China subsidiary
(previously held 60% of the shares).
Financial & Operational Highlights for the third quarter 2004 compared to second
quarter 2004:
Revenues
Revenues for the third quarter of 2004 were $4.1 million, compared to $3.7
million in the second quarter of 2004, an increase of 8% mainly due to increased
revenues from Visual Simulation market.
Gross Margin
Gross margin in the third quarter of 2004 was 64%, compared to 60% in the second
quarter of 2004. The increase in gross margin is the result of improved sales
volumes.
Research & Development
R&D expenses in the third quarter of 2004 were $0.8 million compared to $0.6
million in the second quarter of 2004, an increase of $0.2 million resulting
from one-time expenses related to organizational changes in the French
subsidiary.
Selling & Marketing
S&M expenses in the third quarter of 2004 increased to $2.2 million, compared to
$1.9 million in the previous quarter, mainly due to increase sales related
expenses.
General & Administrative
G&A expenses were $0.6 million in the second quarter of 2004, compared to $0.5
million in the second quarter of 2004.
Other Expenses
Other expenses in the third quarter of 2004 amounted to $ 0.1 million, mainly as
a result of costs related to share transfer agreement of Orad's subsidiary in
Hong Kong under which Orad became sole owner of the company.
Financial income (expenses)
Financial income consists primarily of exchange rate differences related to
non-US dollar balances and interest income earned on short-term deposits offset
by bank charges. Financial income for the third quarter of 2004 was $0.05
million, compared to financial expenses of $0.06 million in the second quarter
of 2004. The change is explained by exchange rate differences resulting mainly
from devaluation of the Euro against the Dollar.
Net Loss
Net loss for the third quarter of 2004 amounted to $1 million, compared to $0.9
million in the second quarter of 2004.
Net loss per share
Net loss per share for the third quarter of 2004 was 10 cents, compared to a net
loss per share of 9 cents for the second quarter of 2004.
Financial & Operational Highlights for the nine months and the quarter ended
September 30, 2004 compared to the same period in 2003:
Revenues
The revenues for the first nine months of 2004 were $11.2 million, compared to
$12.3 million for the first nine months of 2003, a decrease of 10%. The revenues
for the third quarter of 2004 were $4.1 million, compared to $3.7 million for
the third quarter of 2003, an increase of 10%.
Gross Margin
Gross margin for the first nine months of 2004 was 61% and 64% for the third
quarter of 2004, compared to 63% in the first nine months of 2003 and 62% in the
third quarter of 2003. Gross margin changes in 2004 were mainly the result of
sales volumes.
Research & Development
Research and development (R&D) expenses were $2.2 million in the first nine
months of 2004, compared to $2.7 million in the first nine months of 2003. The
decrease is mainly the result of measures taken by the Company to increase
efficiency and consolidate the R&D efforts of subsidiaries having complementary
technologies, as well as cost reductions from other organizational changes.
R&D expenses in the third quarter of 2004 were similar to R&D expenses in the
third quarter of 2003 and amounted to $0.8 million.
Selling & Marketing
Selling and Marketing (S&M) expenses were $6.2 million in the first nine months
of 2004, compared to $6.1 million in the first nine months of 2003, an increase
of $0.1 million, reflecting one time expenses in 2004 connected to
organizational changes and a one-off reduction in 2003. S&M expenses in the
third quarter of 2004 were $2.2 million, compared to $2.3 million in the third
quarter of 2003.
General & Administrative
General & Administrative (G&A) expenses were $1.7 million in the first nine
months of 2004, compared to $1.9 million in the first nine months of 2003. G&A
expenses in the third quarter of 2004 were $0.6 million, compared to $0.7
million in the third quarter of 2003. In both cases the decrease is mainly from
a reduction in the bad debts allowance.
Financial income (expenses)
Financial income (expenses) consists primarily of exchange rate differences
related to non-US dollar balances and interest income earned on short-term
deposits offset by bank charges. Financial expenses for the first nine months of
2004 were $0.04 million, compared to financial income of $0.1 million in the
first nine months of 2003. Financial income for the third quarter of 2004 was
$0.05 million compared to financial expenses of $0.02 million in the third
quarter of 2003. The financial income (expenses) in 2004 derived mainly from
exchange rate differences resulting from changes in the Euro compared to the
Dollar.
Other Expenses
Other expenses in the first nine months of 2004 amounted to $0.1 million, mainly
because of costs related to the share transfer agreement of Orad's subsidiary in
Hong Kong under which Orad became sole owner of the company. In 2003 other
expenses amounted to $0.2 million connected to the Company's admission to AIM.
Net Loss
Net loss for the first nine months of 2004 was $3.5 million compared to $3.8
million for the first nine months of 2003.
Net loss for the third quarter of 2004 was $1 million compared to $1.5 million
for the third quarter of 2003. The decrease in losses is the result of the cost
reduction measures taken by the Company.
Net loss per share
Net loss per share for the third quarter of 2004 was 10 cents, compared to a net
loss per share of 14 cents for the third quarter of 2003. Net loss per share for
the first nine months of 2004 was 33 cents, compared to a net loss per share of
36 cents for the first nine months of 2003.
Cash Position
As of September 30, 2004, cash and short-term bank deposits amounted $4.9
million, compared to $5.6 million at the end of the second quarter of 2004.
Contact:
Orad Hi-Tec Systems Ltd.
Sarit Sagiv
Chief Financial Officer
PO Box 2177
Kfar Saba 44425, Israel
Tel: +972-9-767-6862 ext. 578
Fax: +972-9-767-6861
E-Mail: sarit@orad.tv
www.orad.tv
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December 31, September 30,
2003 2004
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,801 $ 4,413
Restricted cash 523 500
Trade receivables, net 4,649 4,044
Other accounts receivable and prepaid expenses 1,018 947
Inventories 4,115 4,008
Work in process, net of advances from customers 1,340 1,003
Total current assets 18,446 14,915
SEVERANCE PAY FUNDS 848 744
PROPERTY AND EQUIPMENT, NET 2,869 2,330
$ 22,163 $ 17,989
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturity of long-term bank loan $ 16 $ -
Trade payables 2,025 1,695
Deferred revenues 524 373
Other accounts payable and accrued expenses 3,657 3,231
Total current liabilities 6,222 5,299
ACCRUED SEVERANCE PAY 1,129 1,046
MINORITY INTEREST (287) -
SHAREHOLDERS' EQUITY:
Share capital 28 28
Additional paid-in capital 75,107 75,145
Accumulated other comprehensive loss (547) (547)
Accumulated deficit (59,489) (62,982)
Total shareholders' equity 15,099 11,644
$ 22,163 $ 17,989
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
Year ended Nine months ended Three months ended
December 31, September 30, September 30,
2003 2003 2004 2003 2004
Unaudited
Revenues $ 15,439 $ 12,343 $ 11,157 $ 3,701 $ 4,065
Cost of revenues 5,608 4,576 4,373 1,415 1,462
Gross profit 9,831 7,767 6,784 2,286 2,603
Operating expenses:
Research and development 3,502 2,710 2,177 800 764
Sales and marketing 8,296 6,057 6,179 2,255 2,179
General and administrative 2,700 1,981 1,739 738 626
Amortization of deferred share 784 784 - - -
compensation
Total operating expenses 15,282 11,532 10,095 3,793 3,569
Operating loss 5,451 3,765 3,311 1,507 966
Financial income (expenses), net 433 148 (43) (18) 50
Other expenses, net 333 235 139 1 124
Loss before minority interest in 5,351 3,852 3,493 1,526 1,040
losses of a subsidiary
Minority interest in losses of a 199 83 - 39 -
subsidiary
Net loss $ 5,152 $ 3,769 $ 3,493 $ 1,487 $ 1,040
Basic and diluted net loss per $ 0.49 $ 0.36 $ 0.33 $ 0.14 $ 0.10
share
Weighted average number of shares
used in computing basic and
diluted net loss per share (in
thousands) 10,582 10,562 10,679 10,562 10,679
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Share Additional Warrants Deferred Accumulated Accumulated
capital paid-in share other deficit
capital compensation comprehensive
loss Total
Balance as of January 1, 2003 $ 28 $ 74,682 $ 425 $ (784) $ (547) $ (54,337) $19,467
Comprehensive loss:
Net loss - - - - - (5,152) (5,152)
Total comprehensive loss (5,152)
Amortization of deferred share - - - 784 - - 784
compensation
Forfeiture of warrants - 425 (425) - - - -
Balance as of December 31, 2003 28 75,107 - - (547) (59,489) 15,099
Comprehensive loss:
Net loss - - - - - (3,493) (3,493)
Total comprehensive loss (3,493)
Compensation expenses in respect of - 38 - - - - 38
share options whose terms have been
modified
Balance as of September 30, 2004 $ 28 $ 75,145 $ - $ - $ (547) $ (62,982) $ 11,644
(unaudited)
Balance as of January 1, 2003 $ 28 $ 74,682 $ 425 $ (784) $ (547) $ (54,337) $ 19,467
Comprehensive loss:
Net loss - - - - - (3,769) (3,769)
Total comprehensive loss (3,769)
Amortization of deferred share - - - 784 - - 784
compensation
Forfeiture of warrants - 425 (425) - - - -
Balance as of September 30, 2003 $ 28 $ 75,107 $ - $ - $ (547) $ (58,106) $ 16,482
(unaudited)
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended Nine months ended
December 31, September 30,
2003 2003 2004
Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,152) $ (3,769) $ (3,493)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 1,534 1,206 911
Amortization of deferred share compensation 784 784 -
Compensation expenses in respect of share options whose - - 38
terms have been modified
Minority interest in losses of a subsidiary (199) (83) -
Decrease (increase) in trade receivables, other accounts 709 (382) 963
receivables and prepaid expenses
Decrease (increase) in inventories 262 597 (79)
Decrease (increase) in work in process, net of advances from (825) (556) 337
customers
Decrease in trade payables, other accounts payable and (88) (314) (735)
accrued expenses and accrued severance pay, net
Increase (decrease) in deferred revenues 34 84 (151)
Other 1 1 17
Net cash used in operating activities (2,940) (2,432) (2,192)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (156) (94) (269)
Proceeds from sale of property and equipment 32 23 66
Restricted cash (23) - 23
Net cash used in investing activities (147) (71) (180)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term bank credit, net (30) (25) -
Repayment of long-term loan (116) (96) (16)
Net cash used in financing activities (146) (121) (16)
Decrease in cash and cash equivalents (3,233) (2,624) (2,388)
Balance of cash and cash equivalents at beginning of period 10,034 10,034 6,801
Balance of cash and cash equivalents at end of period $ 6,801 $ 7,410 $ 4,413
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
SUPPLEMENTARY INFORMATION
a. The Company's shares and options held by members of the Board of
Directors and officers of the Company:
Number of Number of
Ordinary shares share options *)
Avi Sharir 1,228,578 184,932
Moshe Nissim - 56,428
Sarit Sagiv - 15,000
Orna Nehustan - 20,000
Yehuda Bronicki - 10,000
Amos Horev - 10,000
Dan Falk - 10,000
Anat Segal - 10,000
*) Each share option is convertible into one Ordinary share.
b. As of September 30, 2004, the Company employs 106 employees.
c. During October 2004, 100,000 options were exercised into Ordinary
shares of the Company.
Copies of this announcement are available from the Company's website www.orad.tv
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