Orcadian Engy Regulatory News (ORCA)

24 Mar 2006 07:02

Orca Interactive Ltd24 March 2006 Orca Interactive Ltd Preliminary Results for the year ended 31 December 2005 Ra'anana, Israel, 24 March 2006 - Orca Interactive Ltd ("Orca"), a global leaderin the IPTV middleware market, announces its preliminary results for the yearended 31 December 2005. Financial Highlights: • Revenue of $5.3 million (2004: $5.2 million) • Gross profit increased by 18.8% to $4.7 million (2004: $3.9 million) • Gross margin at 87.9% (2004: 75.7%) • Healthy balance sheet with net cash of $21.3 million at year end • 3 year order book of $5.8m at year end Operational Highlights: • New deals signed with Lucent, Jazztel, a tier one operator in theAmericas, Dansk Bredband, Chunghwa Telecom and one of the world's leading mediacompanies during the year • Partnership agreements signed with Lucent, IBM and Tata ConsultancyServices in 2005 • Significant product investment during 2005 - including the launch ofthe Home Media application, a new Flash SUI (Subscriber User Interface) and aFlash based SUI SDK (Software Development Kit) and RiGHTv version 4.5,introducing an IPTV SDP (Service Delivery Platform) to enable true open platformcapabilities Haggai Barel, Orca's CEO, said: "2005 was a year of further significant operational progress for Orca, as we sawfurther contract wins, partner agreements and product development. However,our reported financial performance failed to match our expectations underliningthe nascent nature of the IPTV market and the difficulties we face in accuratelypredicting revenues for our business." "Even so, we remain confident that we are strongly positioned to benefit fromthis market opportunity and our pipeline of opportunities gives us confidencethat we can effectively leverage our leading product and strong market positionover the coming years. To this end, the board believes that expectations forthe year to December 2006 remain a realistic target." Enquiries: Orca Interactive LtdHaggai Barel, Chief Executive Officer +972 9 769 9400 Financial DynamicsJames Melville-Ross / Cass Helstrip +44 20 7831 3113 About Orca Interactive Orca Interactive (LSE: ORCA) is a leading provider of IPTV middleware andapplications for broadband network operators and service providers. Orca enablestriple-play providers to deliver a full array of attractive video-over-IPservices that generate new revenue streams and strengthen customer loyalty.Leveraging a flexible telco-grade middleware platform, Orca empowers operatorsto deliver broadcast TV, video on demand (VOD), personal video recording (PVR),home media and other compelling interactive services. Orca's SI-enabledsolutions are designed for easy outsourcing of integration services by anoperator's preferred systems integrator. Orca has formed strategic partnershipswith leading players across the IPTV value chain to ensure best-of-breedsolutions with low total cost of ownership. For more information, please visitwww.orcainteractive.com. Analyst conference call: A conference call for analysts will be held at 9.30am today. Please use thefollowing dial-in details: UK international no: +44 (0)1452 556 640 US number: +1 866 434 1089 Chief Executive's Review Overview 2005 was a year of further significant operational progress for Orca. Duringour first full year as a listed company, we made significant strides inconsolidating our position as one of the leading suppliers of IPTV middleware tothe world's ever-evolving communications market. New contracts were signed with service providers across all the regions in whichwe are active, namely the Americas, EMEA and APAC, and we also saw a number ofblue chip vendors signing up to our partner programme. One of these Partner agreements, with Lucent, as well as a notable increase ininterest from operators in the North and South American market, encouraged us tocommit resources to address the American market in the middle of the year.Since then we have seen significant interest for our offering in this region. Perhaps the most disappointing element of our performance in 2005 was the factthat we missed our revenue expectations for the year. Whilst it is clear thatthere is a very significant market for IPTV, the timing for this market isuncertain and it remains a challenge to accurately predict our financialperformance going forward. The contract extensions and roll-outs that we hadpredicted coming from our existing customers failed to materialise during 2005and we have become increasingly reliant on new customer wins to support revenuegrowth. Furthermore, reported revenues of $5.3m were below our expectations ofapproximately $6.0m, given at the time of our trading update on 30 December2005. This shortfall in revenues relates to the contract which we announced onthe same date, to supply one of the world's leading media companies with a fullvideo-on-demand service. At the time of the announcement in December, weexpected to recognise a small portion of the contract's revenues in the 2005financial year. However, following further consultation with our auditors, itwas yesterday decided that the most appropriate treatment of the revenues was todefer revenues from 2005. We have therefore taken the step of bringing forwardour preliminary results statement, in order to update the market on this matter. We enter 2006 with a stronger orderbook than at any time in the Company'shistory. I am excited about the opportunities ahead of us as we seek to furtherconsolidate our position in this rapidly evolving marketplace. Financial performance Revenue for the year ended 31 December 2005 was $5.3 million, compared to $5.2million in 2004. In terms of regional breakdown, 62.4% of our revenues came fromthe Americas (2004: 0.7%), 36.5% from Europe & the Middle East (2004: 30.3%) and1.1% from the Far East (2004: 69.0%). Gross profit for the fiscal year was$4.7million (2004: $3.9 million), up 18.8%. Total operating expenses for the year increased by 48.1% to $9.0 million (2004:$ 6.0 million) as we sought to consolidate our market position throughadditional expenditure on sales and marketing, especially in the US, and productdevelopment. Research & Development expenses were $2.6 million (2004: $2.0million). Our operating loss therefore increased to $ 4.3 million (2004: $ 2.1 million)and our net loss increased from $1.9 million in 2004 to $3.5 million in 2005.This resulted in a net loss per share of $0.10 (2004: $ 0.11 net loss pershare). Commencing on 1 January 2005, the Company adopted IFRS 2, "Share Based Payments". The effect of the adoption of IFRS 2 on the 12 months ended December 2005 and2004 is an increase in the employee benefits expenses of $0.3 million and $0.1million respectively, with a corresponding increase in additional paid-incapital. Operating cash outflow during the period was $2.5 million (2004: $0.6 million).At 31 December 2005, the Company had cash balances of $21.3 million. As at 31 December 2005, the Company had 79 employees, an increase of 44% overthe end of 2004. Partnerships One of the most significant events of 2005 was the signing of the partnershipagreement with Lucent. This deal encouraged us to enter the Americas in June.We believe that the arrangement provides us a high level of exposure throughLucent's first class relationships within the American service providercommunity, but at the same time, minimizes the investment risk we take inentering this new market. The current signs are positive. Partnerships were also initiated during 2005 with IBM and Tata ConsultancyServices ("TCS"). Our global co-marketing agreement with IBM will help Orca topromote its products in telco tenders worldwide. The arrangement with TCSenables them to offer worldwide IPTV system integration and service developmentover our RiGHTv IPTV middleware. License deals We signed a number of licenses during 2005, including deals with serviceproviders across the three major regions in which we now operate. As part of our agreement with Lucent, it committed to a multi million dollarlicense purchase for Orca's RIGHTv middleware solution on behalf of itscustomers. Equally significant in terms of scale, was the announcement at the year end thatwe had signed a $3.0m license deal with a franchise of one of the world'sleading media companies, to become the sole provider to the franchise of a fullvideo-on-demand service. We believe that this deal has the potential togenerate substantial further revenues over the coming years. In addition, Orcaagreed to acquire a minority stake in the franchise for an investment of $2.5million. We also announced smaller license sales with a range of operators during theyear, including Chunghwa Telecom, Jazztel and Dansk Bredband. Chunghwa Telecomis Taiwan's largest telecom operator with approximately three million ADSLsubscribers. Our sale to Dansk Bredband, a Danish broadband internet services provider, willsee us provide our middleware to power their proposed IPTV service, which willinitially involve subscribers in the Copenhagen area with planned expansion forover 100,000 subscribers across Denmark and other parts of Scandinavia withinthree years. Orca also announced on 18 August that it will provide its RiGHTv middleware toone of Spain's leading telecommunications and broadband providers, Jazztel, aspart of a multi-million Euro deal to allow Jazztel to penetrate the residentialbroadband market. Jazztel has more than one million access lines in operation or54% of the total of lines in Spain. Product development 2005 saw our highest level of expenditure on R&D as we sought to further stretchthe lead of our technology over that of our competitors. Closing 2005, webelieve that Orca's core RIGHTv middleware remains the most scalable, flexibleand technologically advanced solution on the market. In June, we announced the launch of Home Media, a digital entertainmentapplication that brings digital media content from the PC to the TV. Home Mediaenables subscribers to view photos and listen to music via the TV, and empowersIPTV operators to gain a bigger share of the large digital entertainment market. We also launched a Flash-based SUI (Subscriber User Interface) designed to spurthe evolution from passive TV watching to active on-demand mode and deliver anew compelling, interactive user experience for the broadband televisionindustry. Along with the new SUI, Orca released a SUI SDK (Software DevelopmentKit) for Flash which incorporates Macromedia FlashTM technology for third-partydevelopment of IPTV applications, enabling service providers and systemintegrators to build branded, feature-packed TV interfaces that provide anoptimised user experience. During the year we also launched RiGHTv version 4.5, introducing an evolution ofthe middleware's architecture into a Service Delivery Platform (SDP) a servicecreation and delivery system for accelerating time to market of interactive TVapplications and services to enable true open platform capabilities. Board In June, we announced a further strengthening of our Board with the appointmentof Nina Admoni as a non-executive director of the Company. Nina's career spansfour decades of involvement in the international business community, includingseveral senior posts that she held in the service of the Israeli government andon behalf of the United Nations. Recently, she has pursued a career as anindependent business consultant and prior to that served as Executive Directorof the Israel-America Chamber of Commerce & Industry Ltd. Outlook The IPTV market is a nascent market and predicting revenues for our businessremains a challenge. Even so, we remain confident that we are stronglypositioned to benefit from this market opportunity and our pipeline ofopportunities gives us confidence that we can effectively leverage our leadingproduct and strong market position over the coming years. Given the current level of our orderbook, we believe that our expectations for2006 remain a realistic target, although we expect the majority of 2006 revenuesto be recognised during the second half of the year. Haggai Barel, CEO BALANCE SHEETS U.S. dollars in thousands, except share data 31 December 2004 2005ASSETS CURRENT ASSETS: Cash and cash equivalents $10,029 $961 Short-term available-for-sale marketable securities 13,550 6,395 Trade receivables and unbilled accounts 1,335 1,568 Other accounts receivable and prepaid expenses 121 511 Total current assets 25,035 9,435 NON-CURRENT ASSETS: Long-term available-for-sale marketable securities 1,000 13,938 Severance pay funds 445 578 Property and equipment, net 494 488 Total non-current assets 1,939 15,004 Total assets $26,974 $24,439 LIABILITIES AND EQUITY CURRENT LIABILITIES: Trade payables $343 $480 Deferred revenues 15 599 Other accounts payable and accrued expenses 2,477 2,954 Parent company 875 336 Total current liabilities 3,710 4,369 ACCRUED SEVERANCE PAY 687 844 Total liabilities 4,397 5,213 EQUITY: Share capital: Ordinary shares of NIS 0.01 par value: Authorized: 55,000,000shares at 31 December 2004 and 2005, respectively; Issuedand outstanding: 35,323,799 shares and 35,477,299 at31 December 2004 and 2005, respectively 81 81 Additional paid-in capital 45,425 45,755 Net unrealized loss reserve - (163) Accumulated deficit (22,929) (26,447) Total equity 22,577 19,226 Total liabilities and equity $26,974 $24,439 STATEMENTS OF OPERATIONS U.S. dollars in thousands, except share and per share data Year ended 31 December 2004 2005 Revenues $5,202 $5,325 Cost of revenues 1,262 643 Gross profit 3,940 4,682 Operating expenses: Research and development, net 2,039 2,585 Sales and marketing 3,218 4,430 General and administrative 815 1,979 Total operating expenses 6,072 8,994 Operating loss 2,132 4,312 Financial income, net 200 794 Net loss $1,932 $3,518 Basic and diluted net loss per share $0.11 $0.10 Weighted average number of shares used incomputing basic and diluted net loss per share 17,145,648 35,412,746 STATEMENT OF CHANGES IN EQUITY U.S. dollars in thousands, except share data Net Total Additional unrealized recognized Preferred shares Ordinary shares paid-in loss Accumulated income and Shares Amount Shares Amount capital reserve deficit Total expenses equity Balance as of 1 12,098,327 29 23,900 **) - 3,003 - (20,997) (17,965)January, 2004 Effect of adopting - - - - 86 - (86) -IFRS2 Conversion ofconvertible loansfrom Parent Companyinto Class A Preferredshares 8,968,643 20 - - 20,286 - - 20,306 Conversion of Class APreferredshares into Ordinaryshares upon Initial PublicOffering (21,066,970) (49) 21,066,970 49 - - - - Issuance of Ordinarysharesupon Initial PublicOffering, net *) - - 14,141,414 32 22,025 - - 22,057 Issuance of sharesupon exerciseof employees' shareoptions, net - - 91,515 **) - 25 - 25 Net loss - - - - - - (1,846) (1,846) (1,846) Balance as of 31 - - 35,323,799 81 45,425 - (22,929) 22,577 (1,846)December 2004 Issuance of sharesupon exerciseof employees' shareoptions, net - - 153,500 **) - 42 - - 42 Unrealized losses onavailable-for-sale marketablesecurities, net - - - - - (163) - (163) (163) Share-based compensation - - - - 288 - - 288 Net loss - - - - - - (3,518) (3,518) (3,518) Balance as of 31 December 2005 - $- 35,477,299 $81 $45,755 $(163) $(26,447) $19,226 (3,681) *) Net of issuance costs in the amount of approximately $ 3,125. **) Represents an amount lower than $ 1. STATEMENTS OF CASH FLOWS U.S. dollars in thousands Year ended 31 December 2004 2005Cash flows from operating activities: Net loss $(1,932) $(3,518) Adjustments to reconcile net loss to net cash used in operatingactivities:Depreciation 382 295 Share-based compensation 86 288 Decrease (increase) in trade receivables, unbilled accounts, other accounts receivables and prepaid expenses 168 (623) Increase in trade payable and other accounts payable and accrued expenses 747 431 Increase (decrease) in deferred revenues (55) 584 Increase in accrued severance pay, net 11 24 Net cash used in operating activities (593) (2,519) Cash flows from investing activities: Investment in short-term available-for-salemarketable securities (13,550) - Investment in long-term available-for-salemarketable securities (1,000) (14,012) Proceeds from maturity of short-term available-for-salemarketable securities - 8,066 Purchase of property and equipment (48) (289) Net cash used in investing activities (14,598) (6,235) Cash flows from financing activities: Refundable grants received from Chief Scientist Office 200 292 Parent Company 875 (539) Issuance of shares upon exercise of employees'share options, net 25 42 Issuance of shares upon Initial Public Offering 25,182 - Issuance expenses (2,561) (109) Convertible loans from Parent Company 1,396 - Net cash provided by (used in) financing activities 25,117 (314) Increase (decrease) in cash and cash equivalents 9,926 (9,068) Cash and cash equivalents at the beginning of the year 103 10,029 Cash and cash equivalents at the end of the year $10,029 $961 Supplemental disclosure of cash flow activities: Cash received during the year for: Interest, net $200 $656 Non-cash activities: Conversion of convertible loans from ParentCompany into shares $20,306 $- Issuance expenses payable $564 $- This information is provided by RNS The company news service from the London Stock Exchange