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RRsat Reports Third Quarter 2012 Results and Declares a Special DividendAIRPORT CITY BUSINESS PARK, Israel, November 12, 2012 /PRNewswire via COMTEX/ -- 2012 Third Quarter Highlights Revenues totaled $28.5 million, representing sequential growth; Gross margin at 24.5%, operating margin of 9.0% and adjusted EBITDA margin of 17.2%, at the highest level in the last 9 quarters; Adjusted EBITDA of $4.9 million, representing sequential growth; Operating cash flow, net of capital expenditures, of $4.1 million; ended the quarter with $36.9 million in cash and equivalents; Backlog as of September 30, 2012 at $184 million; Fourth quarter revenue guidance of $28.5- $29.5 million; Board of Directors declared a cash dividend of $10 million or $0.58 per share. RRsat Global Communications Network Ltd. (NASDAQ: RRST), a leading provider of comprehensive digital content management and global distribution services to the television and radio broadcasting industries, today announced its financial results for the quarter ended September 30, 2012. Third Quarter 2012 Results Revenues in the third quarter of 2012 totaled $28.5 million, compared with $28.6 million in the third quarter of 2011 and a sequential increase compared with $28.1 million in the previous quarter. The strengthening of the US Dollar versus the Euro over the past year had a negative impact of approximately $1.4 million on third quarter revenues, compared with the revenues of the third quarter of 2011. The US Dollar-Euro volatility during the third quarter of 2012 had a negative impact of approximately $0.4 million on the Company's revenues compared with that of the prior quarter. Gross profit in the third quarter of 2012 totaled $7.0 million, compared with $6.4 million in the third quarter of 2011 and $6.7 million in the previous quarter. Gross margin in the third quarter of 2012 was 24.5%, compared with 22.3% in the third quarter of 2011 and 23.8% in the previous quarter. Operating income for the third quarter of 2012 totaled $2.6 million, compared with $1.8 million in the third quarter of 2011 and $2.5 million in the previous quarter. Operating margin in the third quarter of 2012 was 9.0%, compared with 6.4% in the third quarter of 2011 and 8.8% in the previous quarter. Net income on a GAAP basis for the third quarter of 2012 was $2.4 million, compared with a net loss on a GAAP basis of $180 thousand in the third quarter of 2011 and net income of $1.1 million in the previous quarter. Net income per share on a fully diluted basis under GAAP for the third quarter of 2012 was $0.14, compared with a net loss per share of $0.01 in the third quarter of 2011 and net income per share of $0.07 in the previous quarter. Adjusted net income totaled $2.1 million for the third quarter of 2012, compared with $0.8 million in the third quarter of 2011 and $1.5 million in the previous quarter. Adjusted net income per share on a fully diluted basis totaled $0.12 in the third quarter of 2012, compared with $0.05 in the third quarter of 2011 and $0.08 in the previous quarter. Adjusted EBITDA for the third quarter of 2012 totaled $4.9 million, compared with $4.0 million in the third quarter of 2011 and $4.8 million in the previous quarter. Cash, cash equivalents and marketable securities as of September 30, 2012 totaled $36.9 million compared with $34.2 million as of June 30, 2012. The change in cash position during the quarter was mainly attributable to a positive operating cash flow of $5.4 million, partially offset by capital expenditure of $1.3 million and a dividend payment to shareholders of $1.7 million. Backlog of signed agreements, as of September 30, 2012, totaled $184 million, compared with a backlog of $193 million at the end of the previous quarter, of which $24.6 million is expected to be recognized as revenues in the fourth quarter of 2012. The reduction in the backlog amount is mainly attributed to the decrease in the average length of service contracts received during the quarter. Guidance Guidance for the fourth quarter of 2012 expects continued sequential revenue growth, with revenues in the range of $28.5 - $29.5 million. Management expects gross and EBITDA margins in the fourth quarter to be at similar levels to the margins reported in the third quarter of 2012. Dividend Distribution On November 11, 2012, the Board of Directors declared a cash dividend in the amount of $0.58 per ordinary share, and in the aggregate amount of approximately $10 million. The dividend will be payable on December 13, 2012 to all of the Company's shareholders of record at the end of the trading day on the NASDAQ on November 22, 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 Avi Cohen, CEO of RRsat commented, "The third quarter results demonstrate that we are on track with continued improvement across all our financial and operational parameters. We met our top line targets despite continued negative currency effects, growing our revenues sequentially. Most importantly, our gross, operating and EBITDA margins reached their highest levels in over two years. Given our strong backlog, we maintain relatively good visibility into the next few quarters. Looking ahead to the fourth quarter, we believe we will continue our sequential revenue growth." Continued Mr. Cohen, "We continue to see solid interest and new customer wins for our digital media broadcasting services. In addition, over the past two years, we have strengthened our ability to provide customers with an end-to-end content delivery service for sports and special events on an occasional use (OU) basis. Based on our enhanced abilities in this area, we were recently selected by the European Broadcasting Union (EBU), as their main partner for Asia-Europe digital media distribution, covering major European events, including live sports and news events. We see the occasional use segment of our market as a strong growth engine for RRsat over the coming years." Conference Call Information Conference call scheduled later today, November 12, 2012 at 9:00 am ET (4:00 pm Israel time). On the call, Avi Cohen, CEO and Itzhak Zion, CFO, 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: 1-888-668-9141 UK Dial-in Number: 0-800-917-5108 Israel Dial-in Number: 03-918-0609 International Dial-in Number: +972-3-918-0609 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: 1-888-326-9310 (US) and +972-3-925-5901 (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 and margins for the fourth quarter of 2012 or any future periods; (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 Nine months ended Three months ended ---------------------- ---------------------- September September September September 30 30 30 30 2012 2011 2012 2011 --------- ---------- --------- ---------- Revenues $ 84,035 $ 84,094 $ 28,508 $ 28,646 Cost of revenues 64,250 64,964 21,524 22,272 --------- ---------- --------- ---------- Gross profit 19,785 19,130 6,984 6,374 --------- ---------- --------- ---------- Operating expenses Sales and marketing 5,269 5,332 1,922 1,878 General and administrative 7,519 7,463 2,494 2,658 --------- ---------- --------- ---------- Total operating expenses 12,788 12,795 4,416 4,536 --------- ---------- --------- ---------- Operating income 6,997 6,335 2,568 1,838 Interest and marketable securities income 432 319 131 97 Currency fluctuation and other financing income (expenses), net (153) (367) 80 (649) Changes in fair value of embedded currency conversion derivatives 923 (2,359) 611 (1,168) Other expenses, net - (6) - (6) --------- ---------- --------- ---------- Income before taxes on income 8,199 3,922 3,390 112 Income taxes (2,337) (1,153) (946) (292) --------- ---------- --------- ---------- Net income (loss) $ 5,862 $ 2,769 $ 2,444 $ (180) ========= ========== ========= ========== RRsat Global Communications Network Ltd. and its Subsidiaries Consolidated Statements of Operations (cont'd) In thousands, except share data Nine months ended Three months ended ----------------------- --------------------------- September September September September 30 30 30 30 2012 2011 2012 2011 --------- ---------- --------- ---------- Income (loss) per ordinary share Basic income (loss) per ordinary share $0.34 $0.16 $0.14 $(0.01) ========= ========== ========= ========== Diluted income (loss) per ordinary share $0.34 $0.16 $0.14 $(0.01) ========= ========== ========= ========== Weighted average number of ordinary shares used to compute basic income 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 income per ordinary share 17,346,561 17,346,561 17,346,561 17,346,561 ========= ========== ========= ========== RRsat Global Communications Network Ltd. and its subsidiaries Reconciliation of Adjusted Net Income and Adjusted EBITDA In thousands except share data Nine months ended Three months ended -------------------------- -------------------------- September September September September 30 30 30 30 2012 2011 2012 2011 --------- --------- --------- --------- Reconciliation of Net Income to Adjusted Net Income: Net income (loss) - as reported $ 5,862 $ 2,769 $ 2,444 $ (180) Non-cash equity-based compensation charge 189 73 101 45 Intangible assets amortization expense 138 179 41 58 Changes in fair value of embedded currency conversion derivatives (923) 2,359 (611) 1,168 Change in deferred tax on embedded derivatives 231 (560) 152 (280) --------- --------- --------- --------- Adjusted net income $ 5,497 $ 4,820 $ 2,127 $ 811 ========= ========= ========= ========= Adjusted net income per diluted ordinary share $ 0.32 $ 0.28 $ 0.12 $ 0.05 Reconciliation of Net Income to Adjusted EBITDA: Operating income $ 6,997 $ 6,335 $ 2,568 $ 1,838 Non-cash equity-based compensation charge 189 73 101 45 Depreciation and amortization 6,677 6,089 2,241 2,102 --------- --------- --------- --------- Adjusted EBITDA $13,863 $12,497 $4,910 $3,985 ========= ========= ========= ========= RRsat Global Communications Network Ltd. and its Subsidiaries Consolidated Balance Sheets In thousands except share data September December 30 31 2012 2011 --------- -------- Current assets Cash and cash equivalents $ 21,620 $ 14,443 Marketable securities 15,265 18,764 Accounts receivable: Trade (net of provision for doubtful accounts of $8,112 and $6,892 as of September 30, 2012 and December 31, 2011, respectively) 19,325 19,402 Other 475 686 Fair value of embedded currency conversion derivatives 241 206 Deferred taxes 2,389 2,449 Prepaid expenses 2,845 2,223 --------- -------- Total current assets 62,160 58,173 Fair value of embedded currency conversion derivatives 668 591 Long-term prepaid expenses 1,930 2,043 Long- term land lease prepaid expenses 7,586 7,642 Assets held for employee severance payments 1,783 1,757 Fixed assets, at cost, less accumulated depreciation and amortization 42,688 45,495 Goodwill 3,734 3,734 Intangible Assets, at cost, less accumulated depreciation and amortization 402 586 --------- -------- Total assets $ 120,951 $ 120,021 ========= ======== RRsat Global Communications Network Ltd. and its Subsidiaries Consolidated Balance Sheets (cont'd) In thousands except share data September December 30 31 2012 2011 --------- --------- Liabilities and shareholders' equity Current liabilities Accounts payable: Trade $ 11,562 $ 11,547 Other 3,305 2,335 Fair value of embedded currency conversion derivatives 635 990 Deferred income 6,895 8,787 --------- --------- Total current liabilities 22,397 23,659 --------- --------- Long - term liabilities Deferred income 8,799 7,192 Fair value of embedded currency conversion derivatives 524 980 Liability in respect of employee severance payments 1,919 1,819 Deferred taxes 1,971 1,664 --------- --------- Total long - term liabilities 13,213 11,655 --------- --------- Total liabilities 35,610 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 September 30, 2012 and December 31, 2011; 17,346,561 shares issued and fully paid as of September 30, 2012 and December 31, 2011) 40 40 Additional paid in capital 53,199 53,010 Retained earnings 31,864 31,727 Accumulated other comprehensive gain (loss) 238 (70) --------- --------- Total shareholders' equity $ 85,341 $ 84,707 --------- --------- Total liabilities and shareholders' equity $ 120,951 $ 120,021 ========= ========= RRsat Global Communications Network Ltd. and its Subsidiaries Consolidated Statements of Cash Flows In thousands Nine months ended Three months ended --------------------------- -------------------------- September 30 September 30 September 30 September 30 2012 2011 2012 2011 ------------ ------------ ------------ ------------ Cash flows from operating activities Net income (loss) $ 5,862 $ 2,769 $ 2,444 $ (180) Adjustments required to reconcile net income to net cash provided by operating activities Depreciation and amortization 6,677 6,089 2,241 2,102 Provision for doubtful account 2,278 1,645 733 544 Deferred taxes 264 (55) 120 (176) Discount accretion and premium amortization of available- for- sale securities, net (317) (338) (94) (115) Changes in liability for employee severance payments, net 74 9 2 48 Stock- based compensation 189 73 101 45 Changes in fair value of embedded currency conversion derivatives (923) 2,359 (611) 1,168 Loss (Profit) from trading securities, net (64) 138 (9) 157 Capital gains on sale of fixed assets, net - 6 - 6 Changes in assets and liabilities: Increase in account receivable - trade (2,202) (2,536) (1,251) (1,280) Decrease in account receivable - other 213 871 161 112 Decrease (increase) in prepaid expenses (622) (183) 66 91 Decrease (increase) in long- term prepaid expenses 113 181 (75) (37) Increase (decrease) in account payables 1,847 587 2,184 (1,069) Increase (decrease) in deferred income (285) (1,575) (573) 685 ------------ ------------ ------------ ------------ Net cash provided by operating activities $ 13,104 $ 10,040 $ 5,439 $ 2,101 ------------ ------------ ------------ ------------ RRsat Global Communications Network Ltd. and its Subsidiaries Consolidated Statements of Cash Flows (cont'd) In thousands Nine months ended Three months ended September September September September 30 30 30 30 2012 2011 2012 2011 Cash flows from investing activities Investment in fixed assets $(4,485) $(12,853) $ (1,308) $ (2,083) Investment in long term prepaid expenses (15) (22) (1) (9) Investments in securities available- for- sale (3,513) (4,781) (205) (641) Decrease (increae) in trading securities, net 1,512 (21) - (20) Proceeds from securities available- for- sale 6,291 7,944 1,578 2,105 Proceeds from sale of fixed assets 8 24 - 24 ---------- ---------- ---------- ---------- Net cash used in investing activities $ (202) $ (9,709) $ 64 $ (624) ---------- ---------- ---------- ---------- Cash flows from financing activities Dividend paid $ (5,725) $ (4,163) $ (1,735) $ (1,561) ---------- ---------- ---------- ---------- Net cash used in financing activities $ (5,725) $ (4,163) $ (1,735) $ (1,561) ---------- ---------- ---------- ---------- Increase (decrease) in cash and cash equivalents $ 7,177 $ (3,832) $ 3,768 $ (84) Balance of cash and cash equivalents at beginning of period 14,443 13,091 17,852 9,343 ---------- ---------- ---------- ---------- Balance of cash and cash equivalents at end of period $ 21,620 $ 9,259 $ 21,620 $ 9,259 ========== ========== ========== ========== A. Non-cash transactions Investment in fixed assets $ 431 $ 724 $ 431 $ 724 ========== ========== ========== ========== B. Supplementary cash flow information Income taxes paid, net $ 798 $ 1,104 $ 939 $ 402 ========== ========== ========== ========== Company Contact Information: Itzhak Zion, CFO Tel: +972-3-928-0777 Email: [email protected] Investor Relations Contacts: Ehud Helft & Kenny Green at CCG Israel Tel: +1-646-201-9246 [email protected] SOURCE RRSat Global Communications Network Ltd |