RRsat Reports Second Quarter 2012 Revenues
Sequential revenue improvement with gross & operating margins at 2 year highs
AIRPORT CITY BUSINESS PARK, Israel, August 9, 2012 /PRNewswire/ --
2012 Second Quarter Highlights
- Revenues totaled $28.1 million, representing 2.2% sequential growth;
- Gross margin at 23.8% and operating margin of 8.8%, at the highest level since Q2 of 2010;
- Adjusted EBITDA of $4.8 million, representing 13.1% sequential growth;
- Operating cash flow, net of capital expenditures, of $3.7 million; ended the quarter with $34.2 million in cash and equivalents;
- Backlog as of June 30, 2012 at $193 million.
- Third quarter revenue guidance of $28.2 - $29.2 million.
- Board of Directors declared a cash dividend of $1.7 million or $0.10 per share.
RRsat Global Communications Network Ltd. (NASDAQ: RRST), a leading provider of comprehensive content management and global distribution services to the television and radio broadcasting industries, today announced its financial results for the quarter ended June 30, 2012.
Second Quarter 2012 Results
Revenues in the second quarter of 2012 totaled $28.1 million, compared with $28.5 million in the second quarter of 2011 and a sequential increase of 2.2% compared with $27.5 million in the previous quarter. The strengthening of the US Dollar versus the Euro during the 12 months period ended June 2012 had a negative impact of approximately $1 million to the Company's revenue in the quarter compared to the second quarter of 2011.
Gross profit in the second quarter of 2012 totaled $6.7 million, compared with $6.6 million in the second quarter of 2011 and $6.1 million in the previous quarter. Gross margin in the second quarter of 2012 was 23.8%, compared with 23.0% in the second quarter of 2011 and 22.3% in the previous quarter.
Operating income for the second quarter of 2012 totaled $2.5 million, compared with $2.5 million in the second quarter of 2011 and $2.0 million in the previous quarter. Operating margin in the second quarter of 2012 was 8.8%, compared with 8.7% in the second quarter of 2011 and 7.1% in the previous quarter.
Net income on a GAAP basis for the second quarter of 2012 was $1.1 million, compared with $2.1 million in the second quarter of 2011 and $2.3 million in the previous quarter. Net income per share on a fully diluted basis under GAAP for the second quarter of 2012 was $0.07, compared with $0.12 in the second quarter of 2011 and $0.13 in the previous quarter. Net income was negatively affected by the strengthening of the US Dollar versus the Euro and Israeli shekel which increased financial expenses and income tax during the second quarter.
Adjusted net income totaled $1.5 million for the second quarter of 2012, compared with $2.3 million in the second quarter of 2011 and $1.9 million in the previous quarter. Adjusted net income per share on a fully diluted basis totaled $0.08 in the second quarter of 2012, compared with $0.13 in the second quarter of 2011 and $0.11 in the previous quarter. Adjusted net income was negatively affected by the strengthening of the US Dollar versus the Euro and Israeli shekel which increased financial expenses and income tax during the second quarter.
Adjusted EBITDA for the second quarter of 2012 totaled $4.8 million, compared with $4.5 million in the second quarter of 2011 and $4.2 million in the previous quarter.
Cash, cash equivalents and marketable securities as of June 30, 2012 totaled $34.2 million compared with $34.4 million as of March 31, 2012. The change in cash position during the quarter was mainly attributable to a positive operating cash flow of $4.6 million, capital expenditure of $0.9 million and a dividend payment to shareholders of $4.0 million.
Backlog of signed agreements, as of June 30, 2012, totaled $193 million, compared with a backlog of $194 million at the end of the previous quarter. Exchange rates changes in the second quarter had a negative impact of $3 million on the backlog level.
Guidance
Guidance for the third quarter of 2012 calls for sequential revenue growth, with revenues coming in the range of $28.2 - $29.2 million. For the full year of 2012, revenues are expected to be in the range of $112 - $115 million. Management expects similar gross margin in the third quarter.
Dividend Distribution
On August 8, 2012, the Board of Directors declared a cash dividend in the amount of $0.10 per ordinary share, and in the aggregate amount of approximately $1.7 million. The dividend will be payable on September 5, 2012 to all of the Company's shareholders of record at the end of the trading day on the NASDAQ on August 20, 2012.
In accordance with Israeli tax law, the Company will withhold 25% of the dividend amount payable to each shareholder at source, subject to applicable exemptions. The Company's dividend policy is described in detail in its most recent Annual Report on Form 20-F for the year ended December 31, 2011.
Management Comment
Shlomo Shamir, Chairman of RRsat commented, "The second quarter showed improvement in many parameters, particularly in the margins which reached their highest levels in two years. We met our top line targets in the quarter and we grew our revenues sequentially, despite significant negative currency effects. Most significantly our capital expenditures have substantially declined compared with last year. This has had a very positive impact and has allowed us to generate almost $10 million in free cash flow in the past 9 months since our major infrastructure investments ended. Given our strong backlog, we maintain good visibility into the coming quarters even against the background of a weaker global economy. Finally, after the close of the second quarter, we welcomed Avi Cohen to RRsat as the new CEO, replacing David Rivel. I very much look forward to Avi's contributions in the coming quarters and I would like to thank David for leading RRsat's growth and development over the many years."
Avi Cohen, CEO of RRsat commented, "I am privileged to join RRsat and impressed by the people, technical capabilities and state-of-the-art infrastructure. While there are always business challenges, I believe RRsat is in a strong position to leverage its infrastructure to capture and develop new business. I look forward to working with this talented team, at a company with such potential."
Conference Call Information
Conference call scheduled later today, August 9, 2012 at 9:00 am ET (4:00 pm Israel time). On the call, Shlomo Shamir, Chairman of the Board, Avi Cohen, CEO, Itzhak Zion, CFO, and Lior Rival, VP Sales and Marketing, will review and discuss the results and will be available to answer investor questions.
To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1-888-281-1167
UK Dial-in Number: 0-800-917-9141
Israel Dial-in Number: 03-918-0644
International Dial-in Number: +972-3-918-0644
at
9:00 am Eastern Time; 6:00 am Pacific Time; 2:00 pm UK Time; 4:00 pm Israel Time
Replay
A replay of the call will be available from the day after the call. A link to the replay will be accessible from RRsat's website at http://www.rrsat.com . In addition, a telephone replay will be available for two days following the call. To access the telephone replay dial one of the following numbers:
1-888-295-2634 (US) and +972 3-925-5921 (International).
Use of Non-GAAP Financial Measures
In addition to the GAAP results included in this press release, RRsat has also included non-GAAP measurements of results. RRsat uses three financial measures, adjusted net income, adjusted net income per share and adjusted EBITDA, which are non-GAAP financial measures. RRsat believes that these non-GAAP financial measures are principal indicators of the operating and financial performance of its business. We have provided these non-GAAP measurements to help investors better understand our core operating performance and enhance comparisons of core operating performance from period to period.
Adjusted net income is calculated based on the net income in our financial statements excluding non-cash equity-based compensation charges recorded in accordance with FASB ASC Topic 718, non-cash expense resulting from amortization of acquired intangible assets, non-cash income (loss) reflecting changes in the fair value of embedded currency conversion derivatives resulting from the application of FASB ASC Topic 815 and the resulting income tax (increase) decrease of the above items.
Adjusted EBITDA is calculated by adding to operating income, non-cash equity-based compensation charge, depreciation and amortization.
The company has excluded intangible assets amortization expense from its non-GAAP net income and EBITDA measurements, primarily because it represents a significant non-cash expense and because the company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the company's acquisitions. Investors should note that the use of intangible assets contributed to the Company's revenues earned during the periods presented and will contribute to the Company's future period revenues as well. Intangible assets amortization expense will recur in future periods.
Management uses these non-GAAP financial measures to assess its operational performance, for financial and operational decision-making, and as a means to evaluate period-to-period comparisons on a consistent basis. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance by excluding certain non-cash expenses that are not directly attributable to its core operating results.
The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for, or as superior to, measurements of financial performance prepared in accordance with GAAP.
The Company expects to continue reporting non-GAAP financial measures, adjusting for the items described above, and the Company expects to continue to incur expenses similar to the non-cash, non-GAAP adjustments described above. Accordingly, the exclusion of these and other similar items in the presentation of non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring. Moreover, because not all companies use identical measures and calculations, the presentation of adjusted net income, adjusted net income per share and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. These limitations are compensated for by using adjusted net income and adjusted EBITDA in conjunction with traditional GAAP financial measures.
Reconciliations of the non-GAAP measures (adjusted net income and adjusted EBITDA) to the most comparable GAAP measures (net income and operating income respectively), are provided in the schedules attached to this release.
Safe Harbor Statement
This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding (i) guidance for revenue for the third quarter of 2012 and full year 2012 and gross margin for the third quarter of 2012;(ii) our expectations to decrease capital expenditures in 2012, and the corresponding effect on free cash flow; (iii) our planned expectations of our direct sales to North America, Africa and Asia; (iv) our goal of offering superior services to a larger group of customers, including major television networks; (v) our expectation to expand our client base and sell additional services to our existing client base; (vi) our ability to report future successes; and (vii) our intention to distribute dividends in the future and the size of any dividends declared. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry as of the date of this press release. The company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements, including the risks indicated in our filings with the Securities and Exchange Commission (SEC). For more details, please refer to our SEC filings and the amendments thereto, including our Annual Report on Form 20-F for the year ended December 31, 2011 and our Current Reports on Form 6-K.
About RRsat Global Communications Network Ltd.
RRsat Global Communications Network Ltd. (NASDAQ: RRST) provides global, end-to-end, content management and distribution services to the rapidly expanding television and radio broadcasting industries, covering more than 150 countries. Through its RRsat Global Network, composed of satellite and terrestrial fiber optic capacity and the public Internet, RRsat provides high-quality and flexible global distribution services 24/7 to more than 630 channels reaching multiplatform operators, Internet TV and direct-to-home viewers worldwide and also offers occasional use services for sports, news and events with a fleet of flyaways and over 10 transportable satellite news gathering services (SNG) units. More than 130 television and radio channels use RRsat's advanced production and playout centers comprising comprehensive media asset management services. Visit the company's website http://www.rrsat.com
FINANCIAL TABLES FOLLOW
RRsat Global Communications Network Ltd. and its Subsidiaries
Consolidated Statements of Operations
In thousands, except share data
Three months
Six months ended ended
---------------------------------------
June June
June 30 June 30 30 30
2012 2011 2012 2011
-------- --------- --------- --------
Revenues $ 55,527 $ 55,448 $ 28,068 $ 28,518
Cost of revenues 42,726 42,692 21,401 21,955
-------- --------- --------- --------
Gross profit 12,801 12,756 6,667 6,563
-------- --------- --------- --------
Operating expenses
Sales and marketing 3,347 3,454 1,736 1,710
General and administrative 5,025 4,805 2,455 2,358
-------- --------- --------- --------
Total operating expenses 8,372 8,259 4,191 4,068
-------- --------- --------- --------
Operating income 4,429 4,497 2,476 2,495
Interest and marketable
securities income 301 222 147 106
Currency fluctuation and
other financing income (expenses), net (233) 282 (393) 92
Changes in fair value of
embedded currency
conversion derivatives 312 (1,191) (315) (191)
-------- --------- --------- --------
Income before taxes on
income 4,809 3,810 1,915 2,502
Income taxes (1,391) (861) (775) (422)
-------- --------- --------- --------
Net income $ 3,418 $ 2,949 $ 1,140 $ 2,080
======== ========= ========= ========
RRsat Global Communications Network Ltd. and its Subsidiaries
Consolidated Statements of Operations(cont'd)
In thousands, except share data
Six months ended Three months ended
----------------------------------------------------------
June 30 June 30 June 30 June 30
2012 2011 2012 2011
---------- ---------- ---------- ----------
Income per ordinary share
Basic income per ordinary
share $0.20 $0.17 $0.07 $0.12
========== ========== ========== ===========
Diluted income per
ordinary share $0.20 $0.17 $0.07 $0.12
========== ========== ========== ===========
Weighted average number
of ordinary shares used to
compute basic earnings per
ordinary share 17,346,561 17,346,561 17,346,561 17,346,561
========== ========== ========== ===========
Weighted average number
of ordinary shares used to
compute diluted earnings
per ordinary share 17,346,561 17,356,186 17,346,561 17,354,477
========== ========== ========== ===========
RRsat Global Communications Network Ltd. and its Subsidiaries
Reconciliation of Adjusted Net Income and Adjusted EBITDA
In thousands except per share data
Three months
Six months ended ended
------------------------------------------
June 30 June 30 June 30 June 30
2012 2011 2012 2011
------- ------- ------- -------
Reconciliation of Net Income to Adjusted Net
Income:
Net income - as reported $ 3,418 $ 2,949 $ 1,140 $ 2,080
Non-cash equity-based compensation charge 88 28 45 3
Intangible assets amortization expense 98 121 47 61
Changes in fair value of embedded currency
conversion derivatives (312) 1191 315 191
Change in deferred tax on embedded derivatives 78 (280) (78) (46)
------- ------- ------- -------
Adjusted net income $ 3,370 $ 4,009 $ 1,469 $ 2,289
======= ======= ======= =======
Adjusted net income
per diluted ordinary share $ 0.19 $ 0.23 $ 0.08 $ 0.13
Reconciliation of Net Income to Adjusted EBITDA:
Operating income $ 4,429 $ 4,497 $ 2,476 $ 2,495
Non-cash equity-based compensation charge 88 28 45 3
Depreciation and amortization 4,436 3,987 2,231 2,039
------- ------- ------- -------
Adjusted EBITDA $ 8,953 $ 8,512 $ 4,752 $ 4,537
======= ======= ======= =======
RRsat Global Communications Network Ltd. and its Subsidiaries
Consolidated Balance Sheets
In thousands except share data
December
June 30 31
2012 2011
--------- --------
Current assets
Cash and cash equivalents $ 17,852 $ 14,443
Marketable securities 16,366 18,764
Accounts receivable:
Trade (net of provision for doubtful accounts of $7,379
and $6,892 as of June 30, 2012 and December 31, 2011 respectively) 18,808 19,402
Other 634 686
Fair value of embedded currency conversion derivatives 229 206
Deferred taxes 2,421 2,449
Prepaid expenses 2,911 2,223
--------- --------
Total current assets 59,221 58,173
Fair value of embedded currency conversion
derivatives 910 591
Long- term prepaid expenses 1,855 2,043
Long-term land lease prepaid expenses 7,609 7,642
Assets held for employee severance payments 1,770 1,757
Fixed assets, at cost, less accumulated depreciation and amortization 43,930 45,495
Goodwill 3,734 3,734
Intangible Assets, at cost, less accumulated amortization 456 586
--------- --------
Total assets $ 119,485 $ 120,021
========= ========
RRsat Global Communications Network Ltd. and its Subsidiaries
Consolidated Balance Sheets (cont'd)
In thousands except share data
December
June 30 31
2012 2011
-------- --------
Liabilities and shareholders' equity
Current liabilities
Accounts payable:
Trade $ 9,688 $ 11,547
Other 3,382 2,335
Fair value of embedded currency
conversion derivatives 1,076 990
Deferred income 7,943 8,787
-------- --------
Total current liabilities 22,089 23,659
-------- --------
Long - term liabilities
Deferred income 8,324 7,192
Fair value of embedded currency
conversion derivatives 924 980
Liability in respect of employee severance payments 1,904 1,819
Deferred taxes 1,841 1,664
-------- --------
Total long - term liabilities 12,993 11,655
-------- --------
Total liabilities 35,082 35,314
-------- --------
Commitments, contingent liabilities and liens
Shareholders' equity
Share capital:
Ordinary share NIS 0.01 par value each (20,000,000 shares
authorized as of June 30, 2012 and
December 31, 2011; 17,346,561
shares issued and fully paid as of
June 30, 2012 and December 31, 2011) 40 40
Additional paid in capital 53,098 53,010
Retained earnings 31,155 31,727
Accumulated other comprehensive gain (loss) 110 (70)
-------- --------
Total shareholders' equity $ 84,403 $ 84,707
-------- --------
Total liabilities and shareholders' equity $ 119,485 $ 120,021
======== ========
RRsat Global Communications Network Ltd. and its Subsidiaries
Consolidated Statements of Cash Flows
In thousands
Six months ended Three months ended
--------------------------------------
June 30 June 30 June 30 June 30
2012 2011 2012 2011
------- ------- ------- -------
Cash flows from operating activities
Net income $ 3,418 $ 2,949 $ 1,140 $ 2,080
Adjustments required to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 4,436 3,987 2,231 2,039
Provision for losses in account receivable 1,545 1,101 721 507
Deferred taxes 144 121 (22) (113)
Discount accretion and premium amortization
of available- for- sale securities, net (223) (223) (110) (117)
Changes in liability for employee
severance payments, net 72 (39) 57 (50)
Stock- based compensation 88 28 45 3
Changes in fair value of embedded
currency conversion derivatives (312) 1,191 315 191
Profit from trading securities, net (55) (19) (9) (9)
Changes in assets and liabilities:
Decrease (increase) in account receivable - trade (951) (1,256) 726 (720)
Decrease in account receivable - other 52 729 567 770
Decrease (increase) in prepaid expenses (688) (274) (536) 155
Decrease in long-term prepaid expenses 188 218 235 252
Increase (decrease) in accounts payable (337) 1,686 (775) (314)
Increase (decrease) in deferred income 288 (2,260) (13) (204)
------- ------- ------- -------
Net cash provided by operating activities $ 7,665 $ 7,939 $ 4,572 $ 4,470
------- ------- ------- -------
RRsat Global Communications Network Ltd. and its Subsidiaries
Consolidated Statements of Cash Flows (cont'd)
In thousands
Six months ended Three months ended
---------------------------------------
June 30 June 30 June 30 June 30
2012 2011 2012 2011
-------- --------- -------- --------
Cash flows from investing activities
Investment in fixed assets $(3,177) $ (10,770) $ (870) $ (4,236)
Investment in long term prepaid expenses (14) (13) (1) -
Investments in securities available- for- sale (3,308) (4,140) (531) (617)
Decrease (increase) in trading securities, net 1,512 (1) - (31)
Proceeds from securities available- for- sale 4,713 5,839 1,590 544
Proceeds from sale of fixed assets 8 - - -
-------- --------- -------- --------
Net cash from (used in) investing activities $ (266) $ (9,085) $ 188 $ (4,340)
-------- --------- -------- --------
Cash flows from financing activities
Dividend paid $ (3,990) $ (2,602) $ (3,990) $ -
-------- --------- -------- --------
Net cash used in financing activities $ (3,990) $ (2,602) $ (3,990) $ -
-------- --------- -------- --------
Increase (decrease) in cash and cash equivalents $ 3,409 $ (3,748) $ 770 $ 130
Balance of cash and cash equivalents
at beginning of period 14,443 13,091 17,082 9,213
-------- --------- -------- --------
Balance of cash and cash equivalents at
end of period $ 17,852 $ 9,343 $ 17,852 $ 9,343
======== ========= ======== ========
A. Non-cash transactions
Investment in fixed assets $ 818 $ 1,190 $ 818 $ 1,190
======== ========= ======== ========
B. Supplementary cash flow information
Income taxes paid (refunded), net $ (141) $ 702 $ (751) $ 319
======== ========= ======== ========
Company Contact Information:
Itzhak Zion, CFO
Tel: +972-3-928-0777
Email: [email protected]
External Investor Relations Contacts:
Ehud Helft / Kenny Green
Tel: +1-646-201-9246
[email protected]
SOURCE RRSat Global Communications Network Ltd
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