EX-99.1 2 ex99-1.htm EX-99.1
Exhibit 99.1
 
Earnings News

 

Arotech Reports First Quarter 2018 Results
Ann Arbor, Michigan – May 9, 2018 – Arotech Corporation (NasdaqGM: ARTX) today announced financial results for the quarter ended March 31, 2018.
First Quarter 2018 Financial Summary:
U.S. $ in thousands, except per share data
  
Three months ended March 31,
      
   
2018
    
2017
    
Three months ended December 31, 2017
  
GAAP Measures
                  
Revenue          
  
$
27,249
    
$
22,347
    
$
28,996
  
Net income (loss)          
  
$
596
    
$
(768
)
  
$
4,409
  
Diluted net income (loss) per share          
  
$
0.02
    
$
(0.03
)
  
$
0.17
  
                         
Non-GAAP Measures (reconciliation to GAAP measures appears in the tables below)
                        
Adjusted EBITDA          
  
$
2,161
    
$
998
    
$
3,230
  
Adjusted EPS          
  
$
0.05
    
$
0.01
    
$
0.08
  

First Quarter 2018 Business Highlights:
Training and Simulation Division
·
Continued its fourth quarter momentum with higher first quarter revenues. In addition, it procured two new weapon simulation software awards worth $3.7 million.
Power Systems Division
·
Our Israeli operation secured an international award for innovative battery chargers worth approximately $3.0 million for the project’s initial phase.
·
The U.S. operation received supplemental funding of $1.9 million to continue production of Communication Emitter Sensing and Attack Systems (CESAS) for the United States Marine Corps. It also passed an AS9100D audit and achieved a Capability Maturity Model Integration (CMMI) level three appraisal for its product development processes.
“Our first quarter results were much more robust than a year ago and reflect the continuation of the solid sales performance we reported in the second half of last year,” commented CEO Dean Krutty. “Our Training and Simulation Division is benefitting from strong commercial sales and consistent program execution for our MILO use of force products and our driving simulators and public safety products. At the same time, our steadily performing weapon simulation group is adding consistent system and software engineering based revenues that provide a growing foundation for this division.
“Our Power Systems Division has been investing in new product developments and new sales channels that we believe will further diversify and grow our battery product portfolio. Recent awards validate our efforts to generate sales for these products beyond our base in Israel,” concluded Mr. Krutty.
First Quarter Financial Summary
Revenues for the first quarter of 2018 were $27.2 million, compared to $22.3 million for the corresponding period in 2017, an increase of 21.9%. The year-over-year increase was due to higher revenues in both our divisions.
Gross profit for the first quarter of 2018 was $7.7 million, or 28.3% of revenues, compared to $6.5 million, or 29.0% of revenues, for the corresponding period in 2017.
Operating expenses were $6.7 million, or 24.4% of revenues, in the first quarter of 2018, compared to operating expenses of $6.7 million, or 30.0% of revenues, for the corresponding period in 2017. Operating income for the first quarter was $1.1 million compared to an operating loss of $(227,000) for the corresponding period in 2017.
The Company’s net income from operations for the first quarter of 2018 was $596,000, or $0.02 per basic and diluted share, compared to a net loss of $(768,000), or $(0.03) per basic and diluted share, for the corresponding period in 2017.
Adjusted Earnings per Share (Adjusted EPS) for the first quarter of 2018 was $0.05, compared to $0.01 for the corresponding period in 2017.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the first quarter of 2018 was $2.2 million, compared to $1.0 million for the corresponding period of 2017.
The Company believes that information concerning Adjusted EBITDA and Adjusted EPS enhances overall understanding of the Company’s current financial performance. The Company computes Adjusted EBITDA and Adjusted EPS, which are non-GAAP financial measures, as reflected in the tables below.
Balance Sheet Metrics
As of March 31, 2018, the Company had $8.2 million in cash and cash equivalents, as compared to December 31, 2017, when the Company had $5.5 million in cash and cash equivalents.
As of March 31, 2018, the Company had total debt of $16.5 million, consisting of $6.2 million in short-term bank debt under the Company’s credit facility and $10.3 million in long-term loans. This is in comparison to December 31, 2017, when the Company had total debt of $15.9 million, consisting of $5.1 million in short-term bank debt under its credit facility and $10.8 million in long-term loans.
The Company also had $7.6 million in available, unused bank lines of credit with its primary bank as of March 31, 2018, under a $15.0 million revolving credit facility.
The Company maintained its current ratio (current assets/current liabilities) of 2.0 for the comparative periods.
As of December 31, 2017, the Company had net operating loss carryforwards for U.S. federal income tax purposes of $40.7 million, which are available to offset future taxable income, if any, expiring in 2021 through 2032. Utilization of U.S. net operating losses is subject to annual limitations due to provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
Arotech had a backlog as of March 31, 2018 of $54.0 million. This compares to a backlog of $52.2 for the same period last year and a backlog of $61.1 as of December 31, 2017.
2018 Guidance
The Company’s 2018 guidance range continues to be: Total revenue of $100 million to $105 million; Adjusted EBITDA of $7.0 million to $8.0 million; and Adjusted EPS of $0.15 to $0.18. The financial guidance provided is as of today and the Company undertakes no obligation to update its estimates in the future.
Conference Call
The Company will host a conference call tomorrow, Thursday, May 10, 2018 at 9:00 a.m. Eastern time, to review its financial results and business outlook.
To participate, please call one of the following telephone numbers. Please dial in at least 10 minutes before the start of the call:
·
US: 1-877-407-9205
·
International: +1-201-689-8054
 
The conference call will also be broadcast live as a listen-only webcast on the investor relations section of Arotech’s website at http://www.arotech.com/.
The online playback of the conference call will be archived on Arotech’s website for at least 90 days and a telephonic playback of the conference call will also be available by calling 1-877-481-4010 within the U.S. and +1-919-882-2331 internationally. The telephonic playback will be available beginning at 12:00 p.m. Eastern time on Thursday, May 10, 2018, and continue through 9:00 a.m. Eastern time on Thursday, May 17, 2018. The replay passcode is 28485.
About Arotech Corporation
Arotech Corporation is a defense and security company engaged in two business areas: interactive simulation and mobile power systems.
Arotech is incorporated in Delaware, with corporate offices in Ann Arbor, Michigan, and research, development and production subsidiaries in Michigan, South Carolina, and Israel. For more information on Arotech, please visit Arotech’s website at www.arotech.com.
Investor Relations Contact:
Scott Schmidt
Arotech Corporation
1-800-281-0356
Scott.Schmidt@arotechusa.com
Except for the historical information herein, the matters discussed in this news release include forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect management’s current knowledge, assumptions, judgment and expectations regarding future performance or events. Although management believes that the expectations reflected in such statements are reasonable, readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties that may cause actual results to vary materially. These risks and uncertainties include, but are not limited to, risks relating to: product and technology development; the uncertainty of the market for Arotech’s products; changing economic conditions; delay, cancellation or non-renewal, in whole or in part, of contracts or of purchase orders (including as a result of budgetary cuts resulting from automatic sequestration under the Budget Control Act of 2011); and other risk factors detailed in Arotech’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and other filings with the Securities and Exchange Commission. Arotech assumes no obligation to update the information in this release. Reference to the Company’s website above does not constitute incorporation of any of the information thereon into this press release.

CONDENSED CONSOLIDATED BALANCE SHEET SUMMARY (UNAUDITED)
(U.S. Dollars)
 
   
March 31,
2018
    
December 31,
2017
  
ASSETS
            
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
8,220,279
    
$
5,488,754
  
Trade receivables
    
14,329,092
      
19,258,960
  
Unbilled receivables
    
18,608,467
      
16,094,515
  
Other accounts receivable and prepaid
    
1,797,475
      
2,342,220
  
Inventories
    
8,972,001
      
8,654,878
  
TOTAL CURRENT ASSETS
    
51,927,314
      
51,839,327
  
LONG TERM ASSETS:
                
Property and equipment, net
    
9,124,343
      
9,276,088
  
Other long term assets
    
3,926,052
      
3,939,120
  
Intangible assets, net
    
4,690,694
      
5,205,605
  
Goodwill
    
46,138,036
      
46,138,036
  
TOTAL LONG TERM ASSETS
    
63,879,125
      
64,558,849
  
TOTAL ASSETS
  
$
115,806,439
    
$
116,398,176
  
LIABILITIES AND STOCKHOLDERS' EQUITY
                
CURRENT LIABILITIES:
                
Trade payables
  
$
5,270,494
    
$
5,560,196
  
Other accounts payable and accrued expenses
    
5,156,714
      
6,640,154
  
Current portion of long term debt
    
2,244,816
      
2,248,043
  
Short term bank credit
    
6,223,506
      
5,092,088
  
Deferred revenues
    
6,500,046
      
6,778,313
  
TOTAL CURRENT LIABILITIES
    
25,395,576
      
26,318,794
  
LONG TERM LIABILITIES:
                
Accrued Israeli statutory/contractual severance pay
    
4,744,908
      
4,709,807
  
Long term portion of debt
    
8,010,160
      
8,570,524
  
Other long-term liabilities
    
5,936,908
      
5,705,833
  
TOTAL LONG-TERM LIABILITIES
    
18,691,976
      
18,986,164
  
TOTAL LIABILITIES
    
44,087,552
      
45,304,958
  
STOCKHOLDERS' EQUITY:
                
TOTAL STOCKHOLDERS' EQUITY (NET)
    
71,718,887
      
71,093,218
  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  
$
115,806,439
    
$
116,398,176
  
 


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 (U.S. Dollars, except share data)
   
Three months ended March 31,
  
   
2018
    
2017
  
Revenues          
  
$
27,248,509
    
$
22,347,445
  
                 
Cost of revenues          
    
19,537,081
      
15,867,498
  
Research and development expenses          
    
1,036,702
      
995,434
  
Selling and marketing expenses
    
1,878,073
      
1,995,967
  
General and administrative expenses          
    
3,225,934
      
3,017,218
  
Amortization of intangible assets          
    
514,911
      
697,993
  
Total operating costs and expenses          
    
26,192,701
      
22,574,110
  
                 
Operating income (loss)          
    
1,055,808
      
(226,665
)
                 
Other income          
    
3
      
12,154
  
Financial expenses, net          
    
(213,108
)
    
(333,857
)
Total other expense          
    
(213,105
)
    
(321,703
)
Income (loss) before income tax expense          
    
842,703
      
(548,368
)
                 
Income tax expense          
    
247,114
      
219,940
  
Net income (loss)          
    
595,589
      
(768,308
)
                 
Other comprehensive income (loss), net income tax:
                
Foreign currency translation adjustment          
    
(24,260
)
    
915,032
  
Comprehensive income          
  
$
571,329
    
$
146,724
  
                 
Basic net income (loss) per share          
  
$
0.02
    
$
(0.03
)
                 
Diluted net income (loss) per share          
  
$
0.02
    
$
(0.03
)
Weighted average number of shares used in computing basic net income/loss per share
    
26,447,090
      
26,169,228
  
Weighted average number of shares used in computing diluted net income/loss per share
    
26,447,090
      
26,169,228
  

Reconciliation of Non-GAAP Financial Measure – Continuing Operations
To supplement Arotech’s consolidated financial statements presented in accordance with U.S. GAAP, Arotech uses a non-GAAP measure, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). This non-GAAP measure is provided to enhance overall understanding of Arotech’s current financial performance. Reconciliation of the nearest GAAP measure to adjusted EBITDA follows:
   
Three months ended March 31,
  
   
2018
    
2017
  
Net income (loss) (GAAP measure)          
  
$
595,589
    
$
(768,308
)
Add back:
                
Financial expense – including interest          
    
213,105
      
321,703
  
Income tax expense
    
247,114
      
219,940
  
Depreciation and amortization expense
    
996,402
      
1,117,462
  
Other adjustments*          
    
108,495
      
106,833
  
Total adjusted EBITDA          
  
$
2,160,705
    
$
997,630
  


*Includes stock compensation expense, one-time transaction expenses and other non-cash expenses.



CALCULATION OF ADJUSTED EARNINGS PER SHARE
(U.S. $ in thousands, except per share data)


   
Three months ended March 31,
  
   
2018
    
2017
  
             
Revenue (GAAP measure)          
  
$
27,249
    
$
22,347
  
Net income (loss) (GAAP measure)          
  
$
596
    
$
(768
)
Adjustments:
                
Amortization          
    
515
      
698
  
Stock compensation
    
108
      
107
  
Non-cash taxes
    
227
      
229
  
Income tax impact on adjustments          
    
–
      
–
  
Net adjustments          
  
$
850
    
$
1,034
  
Adjusted net income
  
$
1,446
    
$
266
  
Number of diluted shares
    
26,447
      
26,402
  
Adjusted EPS          
  
$
0.05
    
$
0.01