3rd Quarter Results
Orad Hi-Tec Systems
28 November 2003
28 November 2003
Embargoed for 7.00 am
Orad Hi-Tec Systems Ltd ('Orad' or the 'Company')
Results for the nine month period and the quarter ended September 30 2003
Tel Aviv, November 28th, 2003 - 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, announced today its results for the
third quarter and first nine month period of 2003.
Highlights :
• Revenues amounted to $12.3 million for the first nine months of 2003, an
increase of 20% compared to the first nine months of 2002.
• Third quarter revenues increased by 41% compared to third quarter of 2002
• Gross margin remains high at 63%.
• Significant decrease in net losses compared to the relevant periods in 2002.
• Shareholders appoint new external director
For further information:
Orad
Avi Sharir 00 972 976 768 62
Shore Capital (London)
Graham Shore 00 44 20 7408 4090
Alex Borrelli
Haubrok IR GmbH (Frankfurt) 00 49 211 301 260
Michael Kempkes
Orad Hi-Tec Systems Ltd ('Orad' or the 'Company')
Results for the nine month period and the quarter ended September 30 2003
Chief Executive's Statement
Revenues for the first nine months of 2003 were $12.3 million, compared to $10.3
million for the first nine months of 2002. Gross margin for the first nine
months of 2003 increased to 63% compared to 55 % for the first nine months of
2002. Net loss for the first nine months of 2003 decreased significantly to $3.8
million compared to a net loss of $7.2 million in the first nine months of 2002.
Revenues for the third quarter were $3.7 million compared to $2.7 million in the
third quarter of 2002. Gross margin for the quarter was 62% compared to 38% in
the third quarter of 2002. Operational expenses in the third quarter decreased
to $3.8 million compared to $4.3 in the third quarter of 2002. Net loss for the
quarter was $1.5 million compared to $3.3 million in the third quarter of 2002.
Cash position as of September 30, 2003 is $7.9 million.
'We are pleased with the current performance of the company' said Avi Sharir,
Orad's President & CEO, 'In the reported period we have acquired some new
important customers such as Casablanca, the biggest production house in Brazil
and HRT, Croatia's public broadcaster. We are also proud to report a sale of
additional two CyberGraphics systems to the French Lottery for their new show.
With the release of new product versions planned for the first half of 2004 we
look forward to an improved performance in the future' added Mr. Sharir.
Furthermore, at the extraordinary meeting of shareholders held yesterday, all
resolutions proposed in the Company's proxy statement were adopted: Mr. Amos
Horev was reelected as an external director and Ms. Anat Segal was elected as an
external director, both for a three year term commencing November 27, 2003;
options for the Company's directors were approved; the Company's Articles of
Association were replaced; and the shareholders approved indemnity agreement to
be entered into with the Company's directors.
Ms. Anat Segal (maiden name: Tsour), aged 37, has over 13 years of experience in
various corporate finance and managerial areas. Her expertise concentrates in
strategic business planning, business development and fund raising, including
public offerings on NASDAQ, Tel Aviv and European stock exchanges, private
equity, and other M&A transactions. Ms. Segal is part of the managing team and a
board member of Xenia Ventures, a high-tech incubator based in Kiryat Gat,
Israel. She also serves on the board of directors of Attunity (Nasdaq: ATTU) and
AVT (Frankfurt). In addition, Ms. Segal served as a director of Digital
Verification LTD. Prior to establishing her independent practice in January
2000, Ms. Segal was Managing Director and Head of Corporate Finance with Tamir
Fishman & Co., the Israeli strategic affiliate of Hambrecht & Quist. Prior to
that, she was VP Investment Banking with Evergreen, the Robertson Stephens & Co.
Israeli practice. Between 1990 and 1995 Ms. Segal worked for the Bank Hapoalim
Group International Division and for its Investment Banking arm, Poalim Capital
Markets. Ms. Segal holds a B.A degree in Economics and Management, an MBA in
Finance and an L.L.B., all from Tel-Aviv University.
No further information falls to be disclosed within the AIM Rules.
Financial & Operational Highlights for the first nine months and the quarter
ended September 30, 2003 compared to the same periods in 2002:
Revenues
The revenues for the first nine months of 2003 were $12.3 million, compared to
$10.3 million for the first nine months of 2002, an increase of 20%. The
revenues for the third quarter of 2003 were $3.7 million, compared to $2.7
million for the third quarter of 2002, increase of 41%. Third quarter is usually
weaker due to seasonality.
Gross Margin
Gross margin for the first nine months of 2003 was 63% compared to 55% in the
first nine months of 2002. Gross margin for the third quarter was 62% compared
to 38% in the third quarter of 2002. The Company managed to achieve higher
margins compared to previous year due to increased sales volume and cost
savings, mainly due to Orad's Digital Video Graphic (DVG) engine that is now
powering all the company's software applications, replacing 3rd-party computers.
In addition, in Q3/02 the company closed its manufacturing operation in France
and wrote-off inventory of $0.4 million.
Research & Development
Research and development (R&D) expenses were $2.7 million in the first nine
months of 2003, compared to $3.5 million in the first nine months of 2002. R&D
expenses in the third quarter of 2003 were $0.8 compared to $1.1 million in the
third quarter of 2002. The decrease is mainly due to measures taken by the
Company towards increasing efficiency and consolidation of R&D efforts of
subsidiaries having complementary technologies.
Selling & Marketing
Selling and Marketing (S&M) expenses were $6.1 million in the first nine months
of 2003 compared to $5.9 million in the first nine months of 2002, an increase
of $0.2 million. S&M expenses in the third quarter of 2003 were $2.3 million
compared to $1.9 million in the third quarter of 2002, an increase of $0.4
million. In both cases the increase is mainly due to higher sales volume.
General & Administrative
General & Administrative (G&A) expenses were $2.0 million in the first nine
months of 2003, compared to $2.6 million in the first nine months of 2002, a
decrease of $0.6 million, mainly due to a decrease in bad debts allowance
expenses and to expenses cuts.
G&A expenses in the third quarter of 2003 were $0.7 million compared to $0.8
million in the third quarter of 2002.
Other Expenses
Other expenses in the nine months of 2003 were $0.2 million and are attributed
to Orad's costs of admission to AIM.
Financial income (expenses)
Financial income consists primarily of interest income earned on short-term
deposits offset by bank charges and of exchange rate differences related to
non-US dollar balances. Financial income for the first nine months of 2003 was
$0.1 million, compared to financial income of $0.9 million in the first nine
months of 2002. Financial expenses for the third quarter of 2003 were $0.02
million compared to financial income of $0.02 million in the third quarter of
2002. The decrease in financial income is due to exchange rate differences
resulting from strengthening of the Euro in a lesser degree compared to the
Dollar, and the decrease in interest from short-term bank deposits.
Net Loss
Net loss for the first nine months of 2003 was $3.8 million compared to $7.2
million for the first nine months of 2002. Net loss for the third quarter of
2003 was $1.5 million compared to $3.3 million for the third quarter of 2002.
The decrease in losses is due to increase in revenues, improved gross margins
and the continued implementation of cutting expenses and increasing efficiency.
Net loss per share
Net loss per share for the first nine months of 2003 was $0.36, compared to a
net loss per share of $0.68 for the first nine months of 2002. Net loss per
share for the third quarter of 2003 was $0.14, compared to a net loss per share
of $0.32 for the third quarter of 2002.
Cash Position
As of September 30, 2003, cash and short-term bank deposits amounted $7.9
million compared to $8.5 million at the end of the second quarter of 2003, a
decrease of $0.6 million mainly in order to finance operation.
Financial & Operational Highlights of third quarter 2003 compared to second
quarter 2003:
Revenues
Revenues for the third quarter of 2003 amounted to $3.7 million compared to $4.4
million in the second quarter of 2003, a decrease of 17% mainly due to orders
amounting to more than $0.5 million that were received from customers but
postponed to the fourth quarter of 2003 according to accounting principles.
Third quarter is usually weaker due to seasonality.
Gross Margin
Gross margin in the third quarter of 2003 is 62% compared to 63% in the second
quarter of 2003. The Company maintained this high margin due to increased sales
volumes and expenses savings obtained by centralizing all manufacturing
activities in one location.
Research & Development
Research and development (R&D) expenses in the third quarter of 2003 were $0.8
million compared to $0.9 million in the second quarter of 2003.
Selling & Marketing
Selling and Marketing (S&M) expenses in the third quarter of 2003 were similar
to the level in the second quarter of 2003 and amounted $2.3 million.
General & Administrative
General & Administrative (G&A) expenses were $0.7 million in the third quarter
of 2003 compared to $0.6 million in the second quarter of 2003.
Financial income (expenses)
Financial income consists primarily of interest income earned on short-term
deposits offset by bank charges and of exchange rate differences related to
non-US dollar balances. Financial expenses for the third quarter of 2003 were
$0.02 million, compared to financial income of $0.1 million in the second
quarter of 2003. The change is explained by the influence of the exchange rate
differences resulting from devaluation of the Dollar versus the Euro (in Q3 the
Euro strengthened by 2.1% compared to the Dollar while in Q2 it strengthened
compared to the Dollar by 4.6%), offset by the weakening of the NIS compared to
the Dollar.
Net Loss
Net loss for the third quarter of 2003 amounted to $1.5 million, compared to
$1.3 million in the second quarter of 2003.
Net loss per share
Net loss per share for the third quarter of 2003 was $0.14, compared to a net
loss per share of $0.12 for the second quarter of 2003.
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,
2002 2003
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,034 $ 7,410
Restricted cash 500 500
Trade receivables, net 5,062 5,670
Other receivables and prepaid expenses 1,314 1,088
Inventories and work in process 4,984 4,911
Total current assets 21,894 19,579
SEVERANCE PAY FUNDS 482 841
EQUIPMENT LEASED TO CUSTOMERS, NET 354 143
PROPERTY AND EQUIPMENT, NET 3,834 2,941
$ 26,564 $ 23,504
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit and current maturities of long-term bank loans $ 149 $ 41
Trade payables 2,242 2,099
Deferred revenues 490 574
Other payables and accrued expenses 3,194 3,338
Total current liabilities 6,075 6,052
LONG-TERM BANK LOANS, NET OF CURRENT MATURITIES 13 -
ACCRUED SEVERANCE PAY 1,097 1,141
MINORITY INTEREST (88) (171)
SHAREHOLDERS' EQUITY:
Share capital 28 28
Additional paid-in capital 74,682 75,107
Warrants 425 -
Deferred share compensation (784) -
Accumulated other comprehensive loss (547) (547)
Accumulated deficit (54,337) (58,106)
Total shareholders' equity 19,467 16,482
$ 26,564 $ 23,504
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except per share data
Year ended Nine months ended Three months ended
December 31, September 30, September 30,
2002 2002 2003 2002 2003
Unaudited
Revenues $ 14,506 $ 10,326 $ 12,343 $ 2,618 $ 3,701
Cost of revenues 6,091 4,606 4,576 1,620 1,415
Gross profit 8,415 5,720 7,767 998 2,286
Operating expenses:
Research and development, net 4,527 3,451 2,710 1,089 800
Sales and marketing, net 7,639 5,882 6,057 1,879 2,255
General and administrative 3,573 2,607 1,981 751 738
Amortization of deferred share 2,400 1,800 784 600 -
compensation
Total operating expenses 18,139 13,740 11,532 4,319 3,793
Operating loss 9,724 8,020 3,765 3,321 1,507
Financial expenses (income), net (962) (876) (148) (16) 18
Other expenses, net 8 9 235 9 1
Loss before minority interest in
losses of a subsidiary 8,770 7,153 3,852 3,314 1,526
Minority interest in losses of a
subsidiary 28 3 83 13 39
Net loss $ 8,742 $ 7,150 $ 3,769 $ 3,301 $ 1,487
Basic and diluted net loss per
share $ 0.84 $ 0.68 $ 0.36 $ 0.32 $ 0.14
Weighted average number of shares
used in computing basic and
diluted net loss per share 10,461 10,457 10,562 10,474 10,562
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Accumulated
Additional Deferred other
Share paid-in share comprehensive Accumulated
capital capital Warrants compensation loss deficit Total
Balance as of January 1, 2002 $ 28 $ 74,518 $ 535 $ (3,184) $ (154) $ (45,595) $ 26,148
Comprehensive loss:
Net loss - - - - - (8,742) (8,742)
Other comprehensive loss
- foreign currency translation
adjustments - - - - (393) - (393)
Total comprehensive loss (9,135)
Amortization of deferred share
compensation - - - 2,400 - - 2,400
Issuance of contingent shares *) - 54 - - - - 54
Forfeiture of warrants - 110 (110) - - - -
Balance as of December 31, 2002 28 74,682 425 (784) (547) (54,337) 19,467
Comprehensive loss:
Net loss for the period - - - - - (3,769) (3,769)
Total comprehensive loss (3,769)
Amortization of deferred share
compensation - - - 784 - - 784
Forfeiture of warrants - 425 (425) - - - -
Balance as of September 30, 2003
(unaudited) $ 28 $ 75,107 $ - $ - $ (547) $ (58,106) $ 16,482
Balance as of January 1, 2002 $ 28 $ 74,518 $ 535 $ (3,184) $ (154) $ (45,595) $ 26,148
Comprehensive loss:
Net loss for the period - - - - - (7,150) (7,150)
Other comprehensive loss
- foreign currency translation
adjustments - - - - (393) - (393)
Total comprehensive loss (7,543)
Amortization of deferred share - - - 1,800 - - 1,800
compensation
Issuance of contingent shares - 54 - - - - 54
Forfeiture of warrants - 110 (110) - - - -
Balance as of September 30, 2002
(unaudited) $ 28 $ 74,682 $ 425 $ (1,384) $ (547) $ (52,745) $ 20,459
*) represent an amount lower than $1.
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,
2002 2002 2003
Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,742) $ (7,150) $ (3,769)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 1,880 1,384 1,206
Amortization of deferred share compensation 2,400 1,800 784
Minority interest in losses of a subsidiary (28) (3) (83)
Accrued interest on short-term bank deposits (49) (81) -
Decrease (increase) in trade receivables, other receivables 1,439 2,942 (382)
and prepaid expenses
Decrease (increase) in inventories and work in process (511) (95) 41
Decrease in trade payables, other payables and accrued
expenses, deferred revenues and accrued severance pay, net (1,024) (1,009) (230)
Other 8 - 1
Net cash used in operating activities (4,627) (2,212) (2,432)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (248) (204) (94)
Proceeds from sale of property and equipment 78 46 23
Proceeds from short-term bank deposits, net 10,131 7,131 -
Restricted cash (500) (500) -
Net cash provided by (used in) investing activities 9,461 6,473 (71)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term bank credit, net (53) (29) (25)
Payment of long-term loans (175) (138) (96)
Payment of long-term loan from shareholders (125) - -
Net cash used in financing activities (353) (167) (121)
Increase (decrease) in cash and cash equivalents 4,481 4,094 (2,624)
Balance of cash and cash equivalents at beginning of the
year 5,553 5,553 10,034
Balance of cash and cash equivalents at end of the period $ 10,034 $ 9,647 $ 7,410
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
SUPPLEMENTARY INFORMATION
a. 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 1,214,982 184,932
Michael Tamir 1,214,982 184,932
Moshe Nissim - 56,428
Sarit Sagiv - 15,000
Orna Nehustan - 20,000
*) Each share option is convertible into one Ordinary share.
b. As of September 30, 2003, the Company employs 117 employees.
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