Top Image Systems Reports Financial Results for the First Quarter Ended March 31, 2015

Company Makes Progress in Strategic Shift to SaaS Model; Mobile Offerings Show Accelerating Traction

Top Image Systems, Ltd. (NASDAQ:TISA) today announced its financial results for the first quarter ended March 31, 2015.

First Quarter 2015 Highlights include:

  • Revenues of $8.3 million, a 3% increase over Q1 2014;Recurring revenues of $4.8 million, an increase of 84% year over year;
    • As expected, Q1 was a seasonably slow quarter impacted by the significant strengthening of the dollar, but the Company reiterates its expectation to achieve organic revenue growth on a constant currency basis of 15% and overall revenue growth of 20% for the full year. The Company expects strong sequential and year over year revenue growth in Q2;
  • Positive adjusted EBITDA*;
    • The Company reiterates its expectation to achieve 10-12% adjusted EBITDA* margins for the year. Top Image Systems anticipates adjusted EBITDA* margin expansion in Q2, as increased revenue leverages fixed costs;
  • Mobile revenues for Q1 2015 alone amount to over 50% of total 2014 mobile revenues. Mobile progress during Q1 includes:
    • Signed a six-figure mobile identity document capture project for a financial provider in India;
    • Signed a MobiCHECK deal in the U.S. via a major partner;
    • Developed a strong North American mobile pipeline and sales in progress are promising;
  • Steady progress with SaaS solutions, including:
    • Selection of and progression to final negotiations for CloudDocs implementation at a top 10 U.S. bank;
    • Performance of Proof of Concept (POC) for eFLOW in the cloud at a multimillion dollar U.S.-based financial services vendor;
    • Both are expected to impact recurring revenue run rate in 2015;
  • Successful launch and deployment of first consolidated intelligent process application: eFLOW Lending;Appointment of accomplished industry innovator Carsten Nelk to position of CTO.
    • Integrates eFLOW, TIS Mobile and CloudDocs technologies;
    • Launch synched with successful eFLOW deployment at leading U.S. mortgage services provider Titan Lenders Corp.;

Michael Schrader, Chief Executive Officer of Top Image Systems, commented, “This has been a quarter of strategic progress against our multiple publicly stated goals and targets for 2015, and this progress reinforces our optimism for 2015. First, our mobile solutions are off to a great start this year.  Increased customer adoption and expansion of use cases offered by our mobile partners validates the ripening of the market from early adopters to broad uptake by the early majority. We have a robust North American pipeline and are actively working on numerous significant opportunities in the region, as well as worldwide, for all the applications in our mobile imaging portfolio.”

“In terms of our SaaS business, we are in advanced negotiations on several fronts and are cautiously confident that we will be able to close deals in the coming months that will have a strong positive impact on the company’s recurring revenue run rate, while also contributing to revenue stability and visibility.”

“Our pipeline for eFLOW AP and DMR solutions in North America is very strong. We plan to leverage our recent successful eFLOW solution implementations in the U.S. energy sector and in the U.S. mortgage industry as reference accounts that will aid us in anchoring our brand and spreading our solutions in North America.” 

“Despite the expected seasonally slow revenue start to the year, we believe we are on track to achieve the goals we set out to achieve for 2015,” Mr. Schrader added.  “Consolidation in the market has created some large, interesting new and time-sensitive global partnership opportunities for Top Image Systems, and through the quarter we have been aggressively pursuing these alliances. Two large projects we targeted for close with partners this quarter were delayed because of the complexities intrinsic to the partner model. Nevertheless, these deals remain in our pipeline and we expect to close them in the coming months.” 

“In summary, we see positive mobile capture results, steady growth in SaaS and promising prospects for our new eFLOW Lending solution for mortgage and loan processing,” concluded Mr. Schrader. “eFLOW Lending is the first in a series of intelligent process applications we plan to launch, each of which will leverage the combined values of eFLOW and CloudDocs technologies in one exceptional end-to-end digital business solution that simultaneously optimizes both operations and customer experience.”  

First Quarter 2015 Year over Year Results

Revenues: Total revenues for the first quarter were $8.3 million, a 3% growth over the $8.1 million achieved in the first quarter of 2014. License and SaaS revenues for the first quarter were $4.8 million, compared to $3.8 million for the first quarter last year. Recurring revenues for the first quarter were $4.8 million, an increase of 84% year-over-year.

The Company’s revenues and expenses were affected by the significant devaluation of the Euro, as well as of the British Pound and other leading Asia Pacific and Latin American currencies.  Based on our analysis, the TIS currency basket was lower by 14.4% in the first quarter this year compared to the first quarter of 2014.

Gross Profit: Gross profit for the first quarter was $4.5 million, compared to $5.2 million for the first quarter of 2014, a decrease of 13%. Gross margin for the quarter was 54%, compared to a gross margin of 64% in Q1 2014. Cash gross margin excluding depreciation, options and amortization related to the eGistics acquisition was 59%

Adjusted EBITDA and Earnings: Adjusted EBITDA was $8 thousand, compared to Adjusted EBITDA of $0.4 million for the first quarter of 2014. Non-GAAP diluted loss per share was $0.03 compared to earnings of $0.02 for the first quarter of 2014. GAAP net loss was $1.0 million compared to a GAAP net gain of $0.1 million for the first quarter of 2014. GAAP diluted loss per share was $0.06 compared to a $0.01 gain per share for the first quarter of 2014.  2015 results include the contributions from the eGistics acquisition closed in 2014.

Q2 2015 Expectations

We expect Q2 2015 revenues to grow sequentially over Q1 2015 by double digits. We continue to expect in the upcoming quarters of 2015 to grow revenues and profitability sequentially throughout the year.