3rd Quarter Results
Orad Hi-Tec Systems
21 November 2006
Orad Hi-Tec Systems Ltd. ('Orad' or 'the Company')
Results for the nine months and third quarter of 2006
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 announces its results for the nine months ended September 30,
2006.
• Fourth consecutive quarter of profitability
• Revenues increased to $13.1 million in the nine months of 2006 and $4.2
million in Q3/06
• Cash, cash equivalents and restricted cash at $8.9 million
• Gross margin improved to 60% for the nine month of 2006 and to 62% in
Q3/06
• Net profit improved to $0.45 million in the nine months of 2006 and
$0.05 million in Q3/06
• Net profit per share of $0.04 in the nine months of 06 and 0.01 in Q3/ 06
• Significant improvement in the graphic segment with an order worth over
€1 million from a German broadcaster, Deutsche Welle.
'We are pleased to present the results for the third quarter of 2006. The
results for this quarter continue our improvement since a year ago. The results
show a 23% improvement in sales volume, both in Q3/06 and in the nine months of
2006 compared to the same periods in 2005. Net profit and cash flow continue to
improve', commented Avi Sharir, Orad's President and Chief Executive Officer and
added, 'During the third quarter of 2006 we increased our back-log, wining a
number of important contracts, which will be recognized in Q4/06 and during
2007.
For further information:
Orad (www.orad.tv)
Ehud Ben-Yair, CFO + 972 976 768 62
Shore Capital (London)
Graham Shore + 44 20 7408 4090
Edicto Investor Relations 49 608494859-1
Dr. Sonke Knop, Frankfurt Germany
Orad Hi-Tec Systems Ltd ('Orad' or 'the Company)
Results for the nine months and third quarter ended September 30, 2006
Chief Executive's Statement
Revenues for the third quarter of 2006 increased by 23% to $4.2 million,
compared to $3.4 million in the third quarter of 2005 and $13.1 million in the
nine months of 2006 compared to $10.7 millions in the nine months of 2005. Gross
margin in the third quarter of 2006 was 62% and the net profit amounted to $0.05
million.
'The results for the third quarter of 2006 and the first nine months of 2006
compared to same periods in 2005 show an increase in sales volume and positive
cash flow while maintaining the same cost level. This is our fourth consecutive
quarter of profitability. The backlog for 2006-7 has further increased compared
to the backlog a year ago' commented Avi Sharir, Orad's President and Chief
Executive Officer and added: 'during the third quarter we saw the results of our
investments in the graphic segment by signing a €1 million contract with a major
German broadcaster- Deutsch Welle. During IBC we presented two new products: the
'Ad-Vision' which is the new generation of Virtual Advertisement. The second one
is 'Channel Branding' solution which strengthen our graphic offering. These new
products and the major contracts that we signed will further build on our growth
during 2007.
Financial and Operational highlights for the three and nine months ended
September 30, 2006 compared to the same periods ended September 30, 2005:
Revenues, net profit and cash status:
Revenues in Q3/06 increased by 23% to $4.2 million compared to $3.4 million on
Q3/2005. Revenues in the nine months of 2006 increased by 23% to $13.1 million
compared to $10.7 million in the nine months of 2005.
Net profit in the third quarter of 2006 was $0.05 million compared to net loss
of $0.8 in the third quarter of 2005. Net profit of Q3/06 improved by $0.85
million compared to Q3/05. In the nine months of 2006 net profit was $0.45
million compared to net loss of $3.1 million in the first nine months of 2005,
an improvement of $3.6 million.
In the first nine months of 2006 cash, cash equivalents and restricted cash
increased to $8.9 million.
The table below reflects the trend in the last five quarters
US $'000 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06
Revenue 3,407 4,715 4,276 4,640 4,196
Net Profit (804) 256 132 264 54
Cash Status 4,964 5,838 8,279 9,487 8,940
Gross Margin
Gross margin for the third quarter of 2006 improved significantly to 62%,
compared to 51% in the third quarter of 2005, mainly as a result of different
sales mix and increasing in sales volume.
Gross margin in the first nine months of 2006 improved significantly to 60%
compared to 47% in the first nine months of 2005.
Operational expenses:
Operational expenses in Q3/06 were stable compared to the second quarter of 2006
and compared to the third quarter of 2005. Operational expenses for the nine
months of 2006 were similar to the same period in 2005.
Q3/06 Q2/06 Q3/05 Q1-3/06 Q1-3/05
Research and Development 625 571 471 1,847 1,868
Sales and Marketing 1,602 1,706 1,552 4,791 4,638
General and Administrative 376 417 507 1,145 1,331
Total Operating expenses: 2,603 2,694 2,530 7,783 7,837
Contact:
Orad Hi-Tec Systems Ltd.
Ehud Ben-Yair
Chief Financial Officer
PO Box 2177
Kfar Saba 44425, Israel
Tel: +972-9-767-6862
Fax: +972-9-767-6861
E-Mail: ehudb@orad.tv
www.orad.tv
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December 31, September 30,
2005 2006
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $5,338 $8,690
Restricted cash 500 250
Trade receivables, net 3,754 1,898
Other accounts receivables and prepaid expenses 719 761
Inventories 2,817 2,740
Work in process, net of advances from customers 466 623
Total current assets 13,594 14,962
SEVERANCE PAY FUND 817 1,021
PROPERTY AND EQUIPMENT, NET 1,914 1,677
Total assets $16,325 $17,660
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $1,262 $1,500
Deferred revenues 1,201 1,614
Other accounts payables and accrued expenses 4,182 4,097
Total current liabilities 6,645 7,211
ACCRUED SEVERANCE PAY 1,173 1,448
SHAREHOLDERS' EQUITY:
Share capital 28 28
Additional paid-in capital 75,281 75,325
Accumulated other comprehensive loss (547) (547)
Accumulated deficit (66,255) (65,805)
Total shareholders' equity 8,507 9,001
Total liabilities and shareholders' equity $16,325 $17,660
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
Year Nine months Three months
ended ended ended
December September September 30,
31, 30,
2005 2005 2006 2005 2006
Unaudited
Revenues:
Product sales $14,485 $9,770 $13,112 $3,407 $4,196
Long term
contracts 916 916 - - -
Total revenues 15,401 10,686 13,112 3,407 4,196
Cost of
revenues:
Cost of
products sales*) 6,646 4,846 5,210 1,664 1,581
Cost of long
term contracts 1,047 847 - - -
Total cost of
revenues 7,693 5,693 5,210 1,664 1,581
Gross profit 7,708 4,993 7,902 1,743 2,615
Operating
expenses:
Research and
development,
net *) 2,451 1,868 1,847 471 625
Sales and
marketing *) 6,078 4,638 4,791 1,552 1,602
General and
administrative
*) 1,754 1,331 1,145 507 376
Total
operating
expenses 10,283 7,837 7,783 2,530 2,603
Operating
income (loss) (2,575) (2,844) 119 (787) 12
Financial
income
(expenses),
net (316) (303) 335 (19) 41
Other income
(expenses),
net - - (4) 2 1
Net income
(loss) $(2,891) $(3,147) $450 $(804) $54
Basic net
earnings
(loss) per
share $(0.27) $(0.29) $0.04 $(0.07) $0.01
Diluted net
earnings
(loss) per
share $(0.27) $(0.29) $0.04 $(0.07) $0.01
Weighted
average number
of shares used
in computing
basic net
earnings
(loss) per
share (in
thousands) 10,781 10,779 10,791 10,779 10,791
Weighted
average number
of shares used
in computing
diluted net
earnings
(loss) per
share (in
thousands) 10,781 10,779 10,817 10,779 10,819
*) Reclassified, see Note a.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Number of Share Additional Accumulated Accumulated Total
outstanding capital paid-in other deficit
ordinary capital comprehensive
shares income (loss)
Balance as of January 1, 2005 10,750,726 $28 $75,241 $(547) $(63,364) $11,358
Comprehensive loss:
Net loss - - - - (2,891) (2,891)
Total comprehensive loss (2,891)
Issuance of earn-out shares 28,645 *) - 31 - - 31
Issuance of shares upon
exercise of employees' share
options 11,250 *) - 9 - - 9
Balance as of December 31, 2005 10,790,621 28 75,281 (547) (66,255) 8,507
Comprehensive income: - -
Net income 450 450
Total comprehensive income 450
Share-based compensation 44 44
Balance as of September 30, 10,790,621 28 75,325 (547) (65,805) 9,001
2006 (unaudited)
Balance as of January 1, 2005 10,750,726 $28 $75,241 $(547) $(63,364) $11,358
Issuance of earn-out shares 28,645 *) - 31 - - 31
Comprehensive loss:
Net loss - - - - (3,147) (3,147)
Total comprehensive loss (3,147)
Balance as of September 30,
2005 (unaudited) 10,779,371 $28 $75,272 $(547) $(66,511) $8,242
*) Represent an amount lower than $1.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended Nine months ended
December 31, September 30,
2005 2005 2006
Unaudited
Cash flows from operating activities:
Net income (loss) $(2,891) $(3,147) $450
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation 623 490 420
Share-based compensation - - 44
Decrease in trade receivables, other accounts receivables
and prepaid expenses 591 1,598 1,814
Decrease (increase) in inventories 591 275 (37)
Decrease (increase) in work in process, net of advances from
customers 597 273 (157)
Increase (decrease) in trade payables, other accounts
payable and accrued expenses and accrued severance pay, net 429 (166) 224
Increase in deferred revenues 460 287 413
Other 31 27 4
Net cash provided by (used in) operating activities 431 (363) 3,175
Cash flows from investing activities:
Purchase of property and equipment (231) (201) (110)
Proceeds from sale of property and equipment 127 26 37
Decrease in restricted cash 250 250 250
Net cash provided by investing activities 146 75 177
Cash flows from financing activities:
Issuance of shares upon exercise of employees' share options 9 - -
Net cash provided by financing activities 9 - -
Increase (decrease) in cash and cash equivalents 586 (288) 3,352
Cash and cash equivalents at beginning of period 4,752 4,752 5,338
Balance of cash and cash equivalents at end of period $5,338 $4,464 $8,690
Supplemental disclosure of cash flows activities:
Cash received during the period for:
Interest, net $109 $67 $208
SUPPLEMENTARY INFORMATION
a. The Company reclassified certain expenses which in 2005 were recorded
in the general and administrative expenses ('G&A') and sales and marketing
expenses ('S&M') to other operating expenses and to the cost of product sales
('COS'). The influence on the consolidated statements of operations for the
three months and for the nine months ended September 30, 2005 is a decrease of
the G&A in the amount of $ 0.2 million and $0.59 million, respectively, an
increase in COS of $ 0.33 million and $ 1.04 million, respectively, an increase
(decrease) in research and development costs ('R&D') of $ (0.07) million and
$0.08 million, respectively, and a decrease in S&M of $ 0.06 million and $ 0.53
million, respectively. The influence on the consolidated financial statements
for the year ended December 31, 2005 was a decrease in G&A of $ 0.8 million, an
increase of $ 1.4 million of COS, an increase of $ 0.2 million in R&D and a
decrease of $ 0.8 in S&M. These changes had no effect on the reported operating
loss, net loss, basic and diluted loss per share and shareholders equity.
b. The Company's shares and options held by members of the Board of
Directors and officers of the Company:
Number of Number of
Ordinary share
shares options *)
Avi Sharir 2,143,238 184,932
Daniel Furman 753,300 10,000
Ehud Ben-Yair - 45,000
Orna Nehustan - 40,000
Moshe Nissim - 35,000
Dan Falk - 20,000
Anat Segal - 20,000
Amos Horev - 10,000
Uzi Peled - 10,000
Shimon Ravid - 10,000
*) Each share option is exercisable into one Ordinary share.
c. As of September 30, 2006, the Company employs 122 employees.
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