Six Month Gross Profit up 24%, Operating Loss Down 46%, Net Loss Decreased 28%
Rosh Pina, Israel – August 25, 2003 –On Track Innovations, Ltd. (NASDAQ: OTIV; Prime Standard (Frankfurt): OT5), a global leader in contactless microprocessor-based smart card solutions, today announced its consolidated financial results for the six months and second quarter ended June 30, 2003.
Revenues for the first six months of 2003 were $9.7 million, up 1% compared to the first six months of 2002. Gross profit for first half of 2003 was $5.3 million, up 24% from $4.3 million in the first half last year. Operating loss for the first half of 2003 decreased 46% to $1.1 million, from $2.0 million in the first half of last year. Net loss per share for the first half was $(1.00) compared to $(1.64) per share in the first half of 2002.
Revenues for the second quarter of 2003 were $5.0 million, compared to $4.7 million for the prior quarter, and $5.5 million for the second quarter of 2002. Gross profit for the second quarter was $2.9 million up from $2.4 million in the prior quarter and $2.3 million in the second quarter last year. Operating loss for the second quarter decreased to $450,000 from $654,000 in the previous quarter and $749,000 in the second quarter of last year. Net loss for the second quarter decreased to $724,000, or $(0.38) per share, compared to $1.1 million, or $(0.63) per share, in the previous quarter, and $1.4 million, or $(0.88) per share, in the second quarter of 2002.
The increases in gross profit, together with the sharp decrease in operating loss, are indicative of the ongoing business developments at OTI. It reflects the previously announced decision by OTI to focus on higher margin projects and recurring revenue models that generate service fees from ongoing customer services, technical support and transaction fees. In addition, for the six-months ended June 30, 2003 and for the second quarter in 2003, research and development cost net of the participation of the chief scientist compared to the same periods in 2002 decreased by 28% and 30%, respectively. The R&D decrease is also a part of the financial discipline/cost cutting program instituted company-wide.
During the second quarter of 2003, several key business developments took place that served to advance OTI towards its goal of becoming a leading provider of contactless microprocessor-based smart card solutions:
As first reported in April, the Company is providing integrated point-of-sale solutions to Loews Cineplex as part of MasterCard’s PayPass™ trial in Orlando, Florida. Representing an industry first, OTI has developed a reader for MasterCard PayPass that allows customers to pay for admission tickets, as well as their snacks at the concession stands, by simply placing their MasterCard PayPass enabled payment cards in front of a glass window. The unique OTI SMART Antenna allows the card readers to function smoothly through the glass so that the payment card never has to leave the customer’s hand. OTI’s technology is an integral part of MasterCard’s PayPass program, with different applications using varying components and services. For example, OTI has provided a turnkey PayPass drive-thru solution for one local Orlando retailer.
In April, the Company announced that ABSA, the largest commercial bank in South Africa, with the largest fuel card customer base in the country, has joined OTI’s FuelMaster Express Program that is geared towards private motorists. In 2003, the Company expects approximately 170 million liters (45 million gallons) of fuel to be dispensed through the FuelMaster Systems, where OTI receives a volume-based and monthly management fee for back-office service. In June, OTI announced the commercial launch of OTI’s next-gen EasyFuel product geared towards the U.S. and European markets: a wireless secured contactless petroleum payment solution. Recently, the Company announced that the San Francisco Bay Area Rapid Transit District (BART) has chosen OTI to provide ISO 14443 compliant contactless solutions for use in BART’s SFO Airline Employee Discount Program. In addition, OTI reported that it has delivered the SmartID products for the border control center at the Erez checkpoint between Gaza Strip and Israel, which controls the entrance and exit of approximately 120,000 daily workers while assuring a completely secure, exceptionally fast border crossing.
Commenting on the first half of 2003 operating results, Oded Bashan, President and CEO of OTI stated, “The first half of 2003, saw OTI make continuous progress in its key business areas of petroleum payment management, mass transit, ID security/access control, and micropayments.
During the first half of 2003, our operating loss decreased by 46% and our gross margin increased from 44% to 54%. Going forward, we expect to see additional initiatives come to fruition, as well as the introduction of several new products developed via our leading-edge R&D capabilities. “