Final Results
Orad Hi-Tec Systems
03 March 2005
Orad Hi-Tec Systems Ltd ('Orad' or the 'Company')
Results for the year and the quarter ended ended 31 December 2004
Tel Aviv, 3 March, 2005 - Orad Hi-Tec Systems Limited (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
fiscal year 2004 and the quarter ended 31 December 2004.
Highlights :
• $15.7 million annual revenues in 2004 compared to $15.4 million in 2003
• 48% increase in Q4/04 revenues compared to Q4/03
• Significant increase in sales to the visual simulation market
• Important new sales of Orad's virtual studio system and Sport systems
• Significant decrease in net loss in Q4/04 and 2004 compared to Q4/03
and 2003
'We are pleased with the fourth quarter results which represent significant
improvements in sales, operational expenses and cash status compared to previous
quarter. With increased sales to the automotive industry visualization market,
we begin to see the fruits of our strategy to expand our business by deploying
our core technology in the visualization market' commented Avi Sharir, Orad's
President and Chief Executive Officer, and added: 'We are also optimistic that
'Horse Track', Orad's revolutionary system, will be handed over to the Hong Kong
Jockey Club in the first half of 2005 and this will enable us to investigate
further opportunities in this field'.
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) 00 49 211 301 260
Michael Kempkes
Orad Hi-Tec Systems Ltd ('Orad' or the 'Company')
Results for the fiscal year 2004 and the quarter ended December 31 2004
Chief Executive's Statement
Fourth quarter results represent improvement in revenues, operational expenses
and cash status. Revenues for the fourth quarter of 2004 were $4.6 million,
compared to $3.1 million in the fourth quarter of 2003 (an increase of 48%) and
$4.1 million in the third quarter of 2004 (an increase of 12%). Operational
expenses for the fourth quarter of 2004 amounted $3.4 million, compared to $3.8
million in the fourth quarter of 2003. Net loss for the fourth quarter of 2004
decreased significantly and amounted to $0.4 million, compared to $1.4 million
in the fourth quarter of 2003 and $1 million in the previous quarter.
Revenues for the year 2004 were $15.7 million, compared to $15.4 million for the
year 2003. Gross margin for 2004 was $9.5 million, which represents 61% of
revenues. Operational expenses decreased significantly and amounted to $13.5
million in 2004, compared to $15.3 million in 2003. Net loss for the year 2004
decreased to $3.9 million, compared to a net loss of $5.2 million in the year
2003.
Financial and Operational Highlights of 2004:
• Orad has taken pole position in the automotive industry visualization
market with important sales to Volkswagen and Peugeot. Orad successfully
penetrated the automotive industry, which represents the second largest market
segment of the visualization industry, as part of its strategy to deploy its
core technology in other markets in addition to the broadcasting industry. In
2004 the revenues from products sold to visualization industry represented 13%
of the annual revenues, compared to 4% in 2003. We expect that sales for
visualization will continue to grow in 2005 in absolute terms and as a
percentage of total revenue.
• Major European deal for 2004 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's Graphic Enhancements Technologies partners with NBC Olympics for
2004 Athens Olympic games for the implementation of Virtual Graphic Enhancement
tools for swimming and track and field events at the 2004 Olympic Games, in
Athens, Greece.
• 2004 revenues do not take account of a major project for the Hong Kong
Jockey Club which the Company had hoped to be able to recognize as revenue in
2004. The project entered its final acceptance testing in November 2004 with the
aim of final handover of the system by the end of the year 2004. However,
certain technical issues arose during the final acceptance test, which required
modifications and the final handover of the system was therefore delayed.
Currently, all known technical issues have been resolved and final acceptance
testing was resumed on 12 January 2005. The handover of the Horse Track System
to the Hong Kong Jockey Club is due to be completed in the first half of 2005.
'We are pleased with the fourth quarter results which represent significant
improvements in sales, operational expenses and cash status compared to previous
quarter. With increased sales to the automotive industry visualization market,
we begin to see the fruits of our strategy to expand our business by deploying
our core technology in the visualization market' commented Avi Sharir, Orad's
President and Chief Executive Officer, and added: 'We are also optimistic that '
Horse Track', Orad's revolutionary system, will be handed over to the Hong Kong
Jockey Club in the first half of 2005 and this will enable us to investigate
further opportunities in this field'.
Financial & Operational Highlights for the fiscal year of 2004 and the quarter
ended December 31, 2004 compared to the same periods in 2003:
Revenues
The revenues for the year 2004 were $15.7 million, compared to $15.4 million for
the year 2003. The revenues for the fourth quarter of 2004 were $4.6 million,
compared to $3.1 million for the fourth quarter of 2003, an increase of 48%. In
2004 the sales from visualization products increased significantly and
represented 13% of 2004 revenues (4% in 2003).
Gross Margin
Gross margin for the year 2004 was 61% compared to 64% in the year 2003. Gross
margin for the fourth quarter of 2004 was 60% compared to 67% in the fourth
quarter of 2003. Despite the fact that the gross margin in 2004 suffered from
higher costs related to few deals, the Company maintained a high margin in 2004.
Research & Development
Research and development ('R&D') expenses were $2.8 million in the year 2004,
compared to $3.5 million in the year 2003. R&D expenses in the fourth quarter of
2004 were $0.7 million compared to $0.8 million in the fourth quarter of 2003.
The decrease is mainly the results of continuing actions taken by the Company to
consolidate the R&D efforts of subsidiaries using complementary technologies.
Selling & Marketing
Selling and Marketing ('S&M') expenses were $8.2 million in the year of 2004,
compared to $8.3 million in the year of 2003. S&M expenses in 2004 include
one-time expenses of $0.3 million related to changes in organization, after
which level of S&M expenses were reduced significantly.
S&M expenses in the fourth quarter of 2004 were $2.0 million, compared to $2.2
million in the fourth quarter of 2003.
General & Administrative
General & Administrative ('G&A') expenses were $2.4 million in the year of 2004,
compared to $2.7 million in the year of 2003, a decrease of $0.3 million mainly
due to a decrease in bad debts allowance expenses.
G&A expenses in the fourth quarter of 2004 were $0.6 million, compared to $0.7
million in the fourth quarter of 2003.
Other Expenses
Other expenses in the year of 2004 (in Q3/04) were $0.2 million, mainly because
of costs related to the share transfer agreement of Orad's subsidiary in Hong
Kong under which Orad became the sole owner of the Company. Other expenses in
the year of 2003 were $0.3 million and are attributed to Orad's admission to
trading on AIM.
Financial income
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 year of 2004 was $0.2 million,
compared to financial income of $0.4 million in the year of 2003. The decrease
in financial income is mainly due to exchange rate differences resulting from
strengthening of the Euro compared to the Dollar in 2004, which was to a lesser
degree than in 2003, and the decrease in interest from short-term bank deposits.
Financial income for the fourth quarter of 2004 was $0.2 million compared to
financial income of $0.3 million in the fourth quarter of 2003.
Net Loss
Net loss for the year 2004 was $3.9 million, compared to $5.2 million for the
year 2003. Net loss for the fourth quarter of 2004 was $0.4 million, compared to
$1.4 million for the fourth quarter of 2003. The reduced losses are the result
of increased revenues and the continued implementation of cutting expenses and
increasing efficiency.
Net loss per share
Net loss per share for the year of 2004 was $0.36, compared to a net loss per
share of $0.49 for the year of 2003.
Net loss per share for the fourth quarter of 2004 was $0.04, compared to a net
loss per share of $0.13 for the fourth quarter of 2003.
Cash Position
As of December 31, 2004, cash and short-term bank deposits amounted $5.5 million
compared to $4.9 million at the end of the third quarter of 2004, an increase of
$0.6 million.
Financial & Operational Highlights for the fourth quarter of 2004 compared to
third quarter of 2004:
Revenues
Revenues for the fourth quarter of 2003 amounted to $4.6 million, compared to
$4.1 million in the third quarter of 2004.
Gross Margin
Gross margin in the fourth quarter of 2004 is 60%, compared to 64% in the third
quarter of 2004. Despite the fact that the gross margin in the fourth quarter of
2004 suffered from higher costs related to few deals, the Company maintained a
high margin in the quarter.
Research & Development
R&D expenses in the fourth quarter of 2004 were $0.7 million, compared to $0.8
million in the third quarter of 2004.
Selling & Marketing
S&M expenses in the fourth quarter of 2004 were $2.0 million, compared to $2.2
million in the third quarter of 2004.
General & Administrative
G&A expenses amounted to $0.6 million in the fourth quarter of 2004, the same as
in the third quarter of 2004.
Financial income
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 fourth quarter of 2004 was $0.2
million, compared to financial income of $0.05 million in the third quarter of
2004. The change is explained by exchange rate differences resulting from
devaluation of the Dollar versus the Euro (in Q4/04 the Euro strengthened by
9.6% compared to the Dollar, while in Q3/04 it strengthened compared to the
Dollar by 1.4%).
Net Loss
Net loss for the fourth quarter of 2004 amounted to $0.4 million, compared to
$1.0 million in the third quarter of 2004.
Net loss per share
Net loss per share for the fourth quarter of 2004 was $0.04, compared to a net
loss per share of $0.10 for the third 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,
2003 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$6,801 $4,752
Restricted cash 523 750
Trade receivables, net 4,649 4,106
Other accounts receivables and prepaid expenses 1,018 910
Inventories 4,115 3,646
Work in process, net of advances from customers 1,340 1,111
Total current assets 18,446 15,275
SEVERANCE PAY FUNDS 848 773
PROPERTY AND EQUIPMENT, NET 2,869 2,195
$22,163 $18,243
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturity of long-term bank loan $16 $ -
Trade payables 2,025 1,761
Deferred revenues 524 741
Other accounts payables and accrued expenses 3,657 3,280
Total current liabilities 6,222 5,782
ACCRUED SEVERANCE PAY 1,129 1,103
MINORITY INTEREST (287) -
SHAREHOLDERS' EQUITY:
Share capital 28 28
Additional paid-in capital 75,107 75,241
Accumulated other comprehensive loss (547) (547)
Accumulated deficit (59,489) (63,364)
Total shareholders' equity 15,099 11,358
$22,163 $18,243
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 Three months ended
December 31, December 31,
2003 2004 2003 2004
Revenues $ 15,439 $ 15,728 $ 3,096 $ 4,571
Cost of revenues 5,608 6,188 1,032 1,815
Gross profit 9,831 9,540 2,064 2,756
Operating expenses:
Research and development 3,502 2,844 792 667
Sales and marketing 8,296 8,224 2,239 2,045
General and administrative 2,700 2,388 719 649
Amortization of deferred share compensation 784 - - -
Total operating expenses 15,282 13,456 3,750 3,361
Operating loss 5,451 3,916 1,686 605
Financial income, net 433 189 285 232
Other expenses, net 333 148 98 9
Loss before minority interest in losses of a 5,351 3,875 1,499 382
subsidiary
Minority interest in losses of a subsidiary 199 - 116 -
Net loss $ 5,152 $ 3,875 $ 1,383 $ 382
Basic and diluted net loss per share $ 0.49 $ 0.36 $ 0.13 $0.04
Weighted average number of shares used in 10,582 10,698 10,582 10,756
computing basic and diluted net loss per share
(in thousands)
ORAD HI-TEC SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Share Additional Warrants Deferred Accumulated Accumulated Total
capital paid-in share other deficit
capital compensation comprehensive
loss
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 - - - - - (3,875) (3,875)
Total comprehensive loss (3,875)
Compensation expense in respect of share
options whose terms have been modified - 38 - - - - 38
Issuance of shares upon exercise of 96 - - - - - 96
employees' share options*)
Balance as of December 31, 2004 $ 28 $ 75,241 $ - $ - $ (547) $ (63,364)$ 11,358
*) Represents 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 December 31,
2003 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,152) $ (3,875)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 1,534 1,091
Amortization of deferred share compensation 784 -
Compensation expense in respect of share options whose terms have been modified - 38
Minority interest in losses of a subsidiary (199) -
Decrease in trade receivables, other accounts receivables and prepaid expenses 709 938
Decrease in inventories 262 234
Decrease (increase) in work in process, net of advances from customers (825) 229
Decrease in trade payables, other accounts payable and accrued expenses and (88) (592)
accrued severance pay, net
Increase in deferred revenues 34 217
Other 1 28
Net cash used in operating activities (2,940) (1,692)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (156) (298)
Proceeds from sale of property and equipment 32 88
Restricted cash (23) (227)
Net cash used in investing activities (147) (437)
CASH FLOWS FROM FINANCING ACTIVITIDES:
Short-term bank credit, net (30) -
Repayment of long-term loan (116) (16)
Issuance of shares upon exercise of employees' share options - 96
Net cash provided by (used in) financing activities (146) 80
Increase (decrease) in cash and cash equivalents (3,233) (2,049)
Balance of cash and cash equivalents at beginning of year 10,034 6,801
Balance of cash and cash equivalents at end of year $ 6,801 $ 4,752
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 1,298,738 184,932
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 31 December, 2004, the Company employs 107 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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