OTIVF - Earnings call transcript Q1 2019 | on Track Innovations LTD

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to On Track Innovations First Quarter 2019 Results Conference Call. All participants are at present and listen-only mode.

Following management's formal presentation, instructions will be given for the question-and-answer session.

As a reminder this conference is being recorded.

received the all press have should by company's now release. You

the begin. please have Public the would in contact now at like not call I you and over Mr. Public review Investor company's Relations like and GK you received or to of If Investor would section Ehud Helft, it, it Helft Relations. Relations. GK team Mr. Relations the website to the hand Investor to Investor of

Ehud Helft

Innovations Track for XXXX Quarter you, With operator. and On Thank also are management to I Mr. Call. thank us today like CEO hosting First would Shlomi call Welcome Conference call. Cohen, Mr. on to the this

financial of recent provide Assaf Cohen, and will CFO. first key the Shlomi quarter. for performance XXXX review Assaf some OTI's highlights will briefly

prepared contain the identified terms. be certain advised question believe, then call open Following we we other may, this statements. that will intent, be terms forward-looking will They Please plan expect, the comparable by conference and and session. the use for remarks, of call such answer as on information discussed the can

Shlomi looking-statements as go are forward future OTI dates. like with the for from to guarantees good no And Shlomi, we update full While unknown and hand They respective judgment would SEC. assume this release speaks in Harbor and statements risk to Company's to including uncertainties to time I performance. the in now obligation their unknown subject set please. known no issued are which to forward-looking of that, forth fighting provision press CEO, call over the Cohen. time the any information, information or ahead, with current Safe A and to faith are based upon morning. details company's best factors reflect there belief those the

Shlomi Cohen

Thank today. Ehud. thank us you joining all for Welcome and you,

Philippines manufactured of we lower revenue during call, was discussed experienced product As the of production it manufacturing products out our am imports. China it successfully I the I This running the clear from shifting The tariffs believe of our and many will process. process in returned as XX% from the recently production there finally first is no had we quarter to our and that to of the U.S. of impact U.S. quarter. second year. was to as say customers. short-term of began And due we another up standpoint. that last of impact sales the the where year that zone, the we us. from completed is in were which on weak QX sales the of be impacted became XXXX beginning Philippines, started Chinese earning mainly behind impacted, therefore, facility last first to new the last the issue tariff pleased sales our end quarter this I, of on

beyond. and There revenue and results recent picture indeed few we paints While positive and which us believe to in levels for the benefit are OTI. indeed negative of about short-term also a us more The significant we the revenue which return second the already ahead. slowdown will temporary was growth were lower pleased a expect at aspects quarter are

expect by revenue with ongoing recurring in of and portion out grow recurring the ahead. absolute XX% we previous long-term on the quarter strategy continue that in to compared our increasing the trend First, general of continued our an revenue quarters of will basis growth

in on recurring product in increase last margin as ahead growth as XX% with in its and jumping growth will enjoy an ongoing levels more together for the higher parts, will recurring second the platform our gross quarter increases in quarter benefited the our gross that well revenue higher we sales be the the began with provide to the margin with compared these Giving improved margins provide predictable from continues, thereon. focus significantly we XX% that quarters us revenue their us quarter. business of with the improvement in As Therefore, it recovery ahead. see level our as the

Russia On self-service to of market front, for long-term it in delivered already has rail advanced six April, months. the at market the an contact in payment summary, readers advanced we X,XXX ticketing growth the system XXXX. announced sales We in us not for less the readers beginning a retail order In Russian easy region. use for a XXXXX system. remained been

better behind faced I challenges as we However, revenue position now margins the to building as recurring -- the continued have gross to improvement growth forward made would to Please are the going and firmly that, like to quarters. in over on revenue go our believe challenge coming the us us the I hand look our we Assaf. progress ahead. forward. With I return CFO, to well

Assaf Cohen

Thank you, Shlomi.

the for of from believe this non-GAAP metric provides of non-GAAP see opened for market further reconciliation quarter details I will adjusted a our comparable release operations. We press the a Please of performance. continued to good earnings metrics website. on the A results. the first including our in covering release our in ongoing Relations results issued the Investor XXXX EBITDA including about GAAP be we our understanding adjusted section of today, available release. EBITDA Before website the copy of this is some

announced quarter. the This the The In December first included therefore of MediSmart confirm classified addition, with of information million. and are last results presentation. $X.X Revenues $X.X XXXX. has to discontinued operations all we $X fourth in period quarter sale first and of the prior period with in as know, year you in MediSmart been million the the million compared of quarter is XXXX were the in as current

the at XXXX. of steps import first issue the explained, product of end We level mitigate tariff manufacturer quarter of Shlomi were of China to impact of to to due completed was sales the customers. As the affecting lower many in which revenues tariffs took the

revenues lower the by also the from orders were the addition, region. impacted Asia-Pacific level of In

mass terms sales of for million $X.X In ticketing of retail revenues sales. and were of were or patrolling quarter, of transit and revenues first revenues XX% $X.X breakdown million were where derived or XX% the

geographic In $X.X million in and $X.X year, in the of Gross net in income first the quarter. XX%. $X.X quarter margin reported the the at the of XX% first the in $X.X total or $X.X $X.X and over Net was for per and is in $X.X first quarter in million XX%. XX% Africa share last And operating $X.X -- XX%, which APAC the the $X.XX million quarter $XXX,XXX $X to XX% prior of the share the sorry, loss was first $XXX,XXX Recurring of Net of Europe quarter quarter, $X.XX prior year million the $X.X loss $X.X This in or or and of the first X%. or to compares XX% a prior net from expenses versus in last loss for the a America first million revenues. the million accounted million was first total solid million. last were in or quarter Looking and is share $X.XX reported of I'm or is accounted breakdown million quarter. the $XXX,XXX continued last was first lost quarter XXXX, quarter. year. in of per loss prior of in was revenues of was QX This $XXX,XXX loss million or quarter. quarter the quarter last versus million quarter. $X.X in the positive $X.X in or quarter year loss per million year XX% revenues of revenues in prior compared total in XX% improvement or million operations

our million EBITDA was EBITDA loss quarter results. first Now, in the quarter. in non-GAAP of to EBITDA and the the of adjusted in of first quarter compared adjusted turning of $XXX,XXX $X.X year with a prior $XXX,XXX of loss last Adjusted loss XXXX an

At At was $X.X and in million, Looking in us $X.X and financial long of $X.X and net low my a XX OTI was of in debt and XXXX, million sheet, with cash, short strong yearend remains net at very position we equivalents balance position $X.X investment giving short-term and $X.X debt completes $X.X cash our summary. million. in million cash This XXXX, a debt. million term equivalents million. cash March had

the For analysis we our which financial refer detailed to plan to Q&A. please open XX, for XXXX. more our Operator? May call Form of on I'd results, to quarterly like XX-Q by And now, file report

Operator

Instructions] first ahead. go Capital from from [Operator ROTH The is Partners. William Please Gibson question

William Gibson

what million we I and look you. look Thank to year this lower? $XX for annual XXXX number do second or or and you a the out half XXXX, good of beyond if to think? Higher revenue what XXXX want is

Assaf Cohen

not NAMA that is higher. half ahead. it believe during will two and in presented for answer and actually that going factor weeks this our be something This in a -- is demands to thing are years players our The that be the worldwide key I say I is by is show and ago coming the years. many actually going -- in by that the the also machines of the that for believe vending and the only markets. in fact quarter the let presented last biggest support TRIO-IQ to will we coming the market second one FDA Maybe activity of sales Vegas. our the event Nama for requested the kiosks also state-of-the-art to retail technology automated And the that

are So that us following therefore and production shift that. our higher XX fact we to the revenue to recovery and even million do number this going than should the on take

William Gibson

you. Thank Good.

Operator

from Brothers. The ahead. Please the Taglich you. Thank question go from John is of line Nobile next

John Nobile

Israel. in Good Thanks good could. morning. my taking Actually, I Shlomi for if afternoon questions.

you Vegas provide be product little I FDA could more going NAMA you the showcase product regulations actually forward. TRIO-IQ on might a show to that sales mentioned this the was of in at last how beneficial the hoping detail You month.

Shlomi Cohen

Yeah.

time the To FDA for requesting vending should operators present be and choosing retail the First of each This automated product all, in what calorie say the the nutrition is fact only product you're was from retail for The let's the right actually actually actually machine. would machine. automated long major I term. the not request. when see

idea is sake and for calorie the choosing to level just if a you’re pushing each actually that vending would to the the Coke. be buying example before a the button The say product. and that it, product see machine he buyer is your of Let’s relevant is able the for going of

And are huge buyer relatively the the is product. one of approaching machine. are of inject we the the are the is course, the by air we hotel. reader card going run called reader increase And a I And regarding machine and with approaching of able was going present audio there And our -- to a QR as NAMA machine step. that, by in the meetings actually product promotion. show another are saying element credit We features able that the a only coming we was identify during be out positive machine the and that that the actually we the and Needless to you of how that when the unit to So font to he is actually product are We element that that years. sleep and of up we features say the video a entire other working the even having set this to ready meetings for with powerful TRIO-IQ that that are to longer be relevant potential touchscreen and came when going them to proximity is the set coupons. a potential a data accounts of we is up ramp amount will one gamechanger very before the not able the is have today. can way that. telemetry reason step actually for consolidate is when were do long this This revenue the to commercial. device with we this list the with camera in per and And product such able codes is we for very are few that actually to not

John Nobile

Okay.

showcased... So ready this product obviously its be is -- already shipped, to

Shlomi Cohen

be -- In for commercial QX it will be it will delivery. available

John Nobile

from China growth That's mentioned If get to Philippines. Okay. XXXX prior. you I'm can I the that for really in you setting manufacturing the what if sure could had the up second to move your quarter from actually at in this that have you on or to quantify and this impact potential if sales how might see any first up impacted all. show the do not quarter

Shlomi Cohen

would the I say following.

faster. that stepping actually make are event. investing positive to the say even close in growth acceleration and want we I this I all, Needless quarters, are we of see tell but can our gain coming momentum that First quarter-over-quarter. you careful of QX. in can we to we some see want the Because front definitely now year other in to out sure are business negative To gap will we acceleration that linear And QX, we order to compared definitely is no. our hand, the of be this a very in to I is to will we QX in that that with from heavily that this in be revenue on to actually see that sign the entire side I be the transparent answer But totally we are going actually the say, starting the that kind created will believe market. the

John Nobile

That's Okay, quarter second quarter. quarter, was good the an if this for was on could you I quantify on the And revenue X,XXX hoping I Russia. they expect delivery. you that the could still this second great. from And you track? to I payment from wondering hear. was in it mentioned think provide update what Are the you systems

Shlomi Cohen

final quarter the HX believe market. for that year. far see that We a continue the order the in of the is the got first that purchase don't to think this in growth we we one all, systems We definitely second for -- so XXXX in Russian will

I As the for half. actually all, we in actually And going the strategic we also before the definitely one our well. in is mentioned for market. time positioned very see only Russian -- that we our in our see before are beginning the also place, All in ATM mentioned is in Russia of Russia second not positive where ticketing in point markets the to growth this of but OTI as at business

John Nobile

in of with regard mentioned South there call the any about this a I second market? to still in of Puma talk And press Is expected Energy, further your release? that And additional launch product partnership African on was it expansion iFUELGUARD is to quarter product. prior is believe into

Shlomi Cohen

Yes.

First of South all, that are is biggest we in so EasyFuel far market this the Africa, for technology. having

will say revenue energy say can speaking that the about the -- are 'XX them of will to I as the EasyFuel major account the for well. for and a continue world also want are in one the Africa believe we believe -- technology years. this And with them generating I to I'm we be time 'XX working and name that's of I long in with that and that One our I see in market South the our major company but recurring of we also their of EasyFuel the coming technology. with growth to continue part them

John Nobile

drop Obviously, from that your but you I know That's recurring greater A coming should gross the great first they shift that margins they manufacturing they product did your mentioned percentage XX% we margins the higher. gross returning to in gross of were hear. revenue I And quarter. margins to And were know with down to the mid anticipate XX.X% range. were the up. complete,

Shlomi Cohen

in was QX the that not earning is I understand gross QX are that I'm sure margin we we XX%. think in were I margin gross question because that the XX%. The earning

John Nobile

significantly about first so it I I'm from I gross mean sales last margin there. actually product see year's the margins quarter. there XX.X were talking the The volume gross -- dropped

to we just do margins anticipate -- of in the the into the more with get have now it know volume range? that Philippines shift you should the XX% is what expectation especially what an gross mid Are and XX% usually mid-XXs. I So, QX? I'm look feel -- trying we to in typically you volume at

Shlomi Cohen

Okay.

is mistake. my answer The So Yes. positive.

the second We expect quarter. that that the in up for will gross margin go

were fact the we them And acceleration product well. facing gross see as on reason were -- the mainly the from of our we having our shift. you were part that's that margin was production in think we also on related gross QX will believe margin that this actually I I negative impact that margin facing our gross to

John Nobile

I That's itself just the impacted level not actually it. shift but Understood. impact That really shift what expected. the had that on is -- an

believe Do quick I that backlog one beyond. the QX and just top you down million. year revenue Because question will expectations really your first last the the quarter about results the And Okay. to know I we're you looking able that's in take On want don't line have but full up to was call current actually here for -- Track first for whole quarter at the in growth? $X.X be achieve books

should year? have what you whole positive So now? at I for full the looking we the the year books on mean anticipate growth

Shlomi Cohen

like to their the just to were months It's But a management. few -- able we to facing were to and in let's say listening event we from we end this that will entire by be be six the present the out reliable forecast discussion because actually -- from the by in during our of think you give internal position this QX. that regarding -- year I step more QX our me OTI in negative

but preferred point early So, be it order of a growth. position at my in forecast of end safe be to I July. to side entire to order to June a doing may the to steps little in of of presenting on we quite be this in year lot time, bit focus beginning But postpone are the of

John Nobile

Okay. once for you again I Thank understand. Shlomi comments. Fair enough. your

Operator

the Capital from line from Instructions] ahead. of much. Northland very Next Please go you is Markets. Mike question Thank [Operator Latimore

Mike Latimore

Thanks.

getting in year you over punctual be that Is see to to correct? back now year second growth quarter, expect to that growth. Just the you're clear saying

Shlomi Cohen

Yes.

Mike Latimore

that it. the last and you supply because Got And was Okay. so those have just impediment into of you or go backlog to quarters. more of orders revenue Did -- said chain visibility little couple the that? basically a

Shlomi Cohen

Look think expectation due major very was was coming when this us. was year for or I This negative But we our actually QX. in actually to quarters visibility would even a QX to of better was the not looking much today that QX, I quarter a is say compared weak It for us. bad. the beginning impact in you're have actually but so behind And below compared that this the QX.

Mike Latimore

get to on back product should of hardware from to kind you about when and the scale that once get scale. there there you now back think the are Is And what Philippines a margin China. difference much of we gross in you

Shlomi Cohen

explain customer think you're company looking we to recurring the that was we the of revenue. that gross looking different moving started is part trying our are we solution will not because in the misunderstanding our selling a because from with full -- sales cost And to calculate of generate why, we because are strategy solution when on the actually product and actually this I and way what. to some are and package know on way being it a don't we I in kind I selling we company to are entire are with product forget that the a you actually that is actually way. of there think dividing of And it taking margins I this that some the regarding actually actually that we not

OTI recurring in actually to the to the as other much for are solution. we as are and because trying inject market more case is the product our revenue. in products to much us we inject In are generating trying approach Now words, more as

we attached hardware doing without the only can are to generating the this injecting revenue. we actually not not recurring generate we on services actually is you software, So, or but colleagues to are products also our that and are the look fact that able to recurring revenue

the are not we So, doing split.

having that recurring is emphasize strategy. I that actually on our in onetime gross fact the is on a gross Despite to But important and but am to low the this in one go that to and was very XX% went the way implement up outstanding we entire looking is looking recurring to margin And XX% of continue that not a when absolute the and we saying are strategy actually actually in up we by we way. it recurring took continue you're generating margin QX way service. is the the going will we are it are on about the even level up. So to when up. also order when total from by revenue the only on revenue absolute looking way increase a event number you're in that thing fact by revenue the by I'm we that the that percentage were having of level not number we QX looking

positive we are and we the that margin. So still having -- revenue gross -- with are the very keeping positive therefore our with momentum our recurring

Mike Latimore

Thanks.

Shlomi Cohen

Sure.

Operator

to question? Latimore, Shall we Mr. the next addressed? your have proceed questions been

Mike Latimore

Yes.

Operator

Dede from Thank next the of Kevin question The Please go ahead. from you. Wainwright. line H.C. is

Kevin Dede

you call. NAMA. other Thanks. you've my of competitive differentiation diving I you the are from bit the Are you -- for little just think taking on manufacturers? of mean in some you at mind just Thanks, your from TRIO-IQ? Shlomi a do some some got -- Would

I match FDA manufacturers would requirement. difficult be guess it's to can how think how You it for explain you your other

Shlomi Cohen

Okay.

revenue and that are such the the I they will technology available we the this that more as machine actually the need proximity. And do generate in we're I'm we is basically, it's competitive fact will needs to believe definitely market. that competitors match TRIO-IQ. not last only But features, we moment on other to also our FDA related set be to So looking on the integrated FDA, HDMI that not compared XX to able The and saying to that related And to it position you actually be players HDMI other is you're difficult that close per the when is other that with our to this -- this it something requirements. unattended payments market market. presenting or on generating to that we commercially that of walking months, that for at the cure

I see actually others. advantage this you compared we think that presenting of that will the are to

today Well a the by taking analysis. confidence the entire way we market. know you're in you actually in in please a you to market at if best competitive one least saying the the quiet think and generating that ahead I are are level compared this player players I'm

Kevin Dede

Okay.

talk you why the Can would selling And price? from what how Russia line was bit about -- your a had would compares. current wait it's product impact want might Okay. of little X,XXX that for curious be. and not I for customer the say prevent mean you customers top this if what about one. orders instance that some And

Shlomi Cohen

Okay.

having telemetry TRIO-IQ very actually that to to buying machine the the its consolidate solution solution decision end relevance. or fact product meaning and if telebox Definitely high need if you plus related and entire actually and of want So set meaning are today, well, of you it entire machine it's And in device. a actually is to readers entire the features. the we the the together taking the to you're the you gobox need

advantage It's have we micro most other relevant actually This relevant. Now definitely players here to relevant huge when a these markets. market. approaching where the is in are you it's very kiosk compared and

doing and vertical they're of of but to use relevant contactless all contacts only magnetic -- need contactless. only the the is And they package and entire not the only validators them they product of because kind you're although transit using mass the contactless generate the don't don't are stripe they the If in idea transactions for some mass they're taking Russian the the to transit. is case,

see markets that that's magnetic growing I'm is saying stripe, we transaction the that market. most kiosk market are But less when the the kiosk looking and in okay. you the is market and again still actually us technology of put a payment in the U.S. on the U.S. Okay. little by in also Japanese we done market bit the This are of something in the Europe the this actually the of actually only not market in and U.S. front presenting fast

Kevin Dede

your Okay. Are that targeting? considering still payment you In -- settlement? do is crosshairs have still something you you're

Shlomi Cohen

mean What do you settlements? payments by

Kevin Dede

transaction a itself Well, credit and bank. integrating company card a the with

Shlomi Cohen

doing are we that. Yes,

that. We are we doing in with giant all doing with this payment Yes, six with that with with credit AID card market. XX the are

Kevin Dede

Okay.

falls that me. TRIO-IQ, that still into your white you Last Are this considering recurring is labeling revenue. for question plan? So the

Shlomi Cohen

course. The Of is positive, answer yes.

Kevin Dede

Okay. Thanks very Appreciated. much, Shlomi.

Shlomi Cohen

Thank you you. See soon.

Operator

much. Thank you very

Shlomi Cohen

Yeah. Operator, please.

Operator

Instructions] [Operator

Shlomi Cohen

Operator, more we questions. We have don't statement. looks closing to move the like any can

Operator

you. Thank

As remarks. to would Cohen Mr. I to now there further for are no conference to to the turn back questions, closing Over like you sir.

Shlomi Cohen

look Thank Have you. good OTI your of I day. you our to our would On Thank speaking behalf a you the for like you forward long-term attendance. for on next you thank I to for updating business. and support management of with interest progress. continued in quarter and

Operator

now much. Ladies and presentation. you very gentlemen, today's call for concluded. conference you Thank attending the has Thank

now may You disconnect lines. your

on Track Innovations (OTIVF) 7 May 192019 Q1 Earnings call transcript