Top Image Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2014
Misses on Revenue
Top Image Systems, Ltd. (Nasdaq:TISA) today announced its financial results for the fourth quarter and year ended December 31, 2014. The quarter’s results include the impact of TIS’ July acquisition of eGistics, a leading U.S. provider of cloud-based payment and remittance records management solutions.
Fourth Quarter 2014 Highlights include:
- Revenues of $10 million, 25% growth year over year; revenues were negatively impacted by significant devaluation of certain currencies. On a constant currencies basis, Q4 revenues would have been $10.7 million – within the guided range provided by the company;
- Adjusted EBITDA* of $1.2 million;
- Q4 2014 recurring revenues comprised $5.4 million or 54% of revenue.
2014 Annual Highlights include:
- Successful acquisition of eGistics for $18 million in cash and shares; TIS Americas HQ relocated to Plano, TX;
- Promotion of COO Michael Schrader to CEO of Top Image Systems, appointment of Lyron Bentovim as COO/CFO and addition of key senior eGistics executives to TIS management team;
- Significant increase in Top Image Systems’ presence in the US in the form of employees, operational sites, sales and marketing activities and growth in revenues in the region;
- Reinforcement of TIS’ position in the mobile image processing market through additional partners, projects, awards and new product development, including the launch of Scan to Pay mobile bill pay service by Bank of the West using Fiserv’s Snap-to-Pay based on TIS’ MobiPAY technology;
- Enhancement of TIS’ cloud-based capabilities.
In 2015 Top Image Systems expects to achieve the following:
- Grow overall annual revenues by more than 20% based on current exchange rates and achieve organic constant currency growth of at least 15%;
- Achieve annual range of 10%-12% Adjusted EBITDA margin and reach positive Adjusted EBITDA in every quarter;
- Work with our partners to grow worldwide mobile revenues by 100%;
- Increase sales of our Accounts Payables Automation (AP) and Digital Mailroom (DMR) solutions in North America by 40%;
- Grow recurring revenues to a run-rate level of $5.9 million by end of 2015;
- Sign a significant multi-year contract for a CloudDocs solution with a large financial institution;
- Cross-sell our AP or DMR solutions to an existing CloudDocs customer.
Michael Schrader, Chief Executive Officer of Top Image Systems, commented, “Top Image Systems’ Q4 financial results illustrate the steady progress we made during 2014. We continued to expand our base of recurring revenues, in line with our shift in business models, and recurring revenues reached 54% of total Q4 revenue, underscoring the extension of our cloud and SaaS capabilities over the course of 2014. The United States, a key growth target area, was our largest contributor of revenues by geography, and headcount in the U.S. has more than tripled year over year to 65 employees. Our Chief Operating Officer and Chief Financial Officer, who joined our management team in 2014, as well as many members of our global management team, are based in the U.S. We also returned to a state of profitability during the quarter, a state we are dedicated to sustaining in the future.”
“Looking ahead to 2015, we are targeting 40% sales growth in North America from our AP and DMR solutions, working towards our longer term goal of achieving market penetration levels similar to those we have reached in Europe and around the globe. Although currently a smaller contributor than the AP and DMR segments, we expect our mobile revenues to grow by 100% year over year. We anticipate a sustained, robust growth trajectory for our mobile offerings in the years to come, projected to become a meaningful percentage of our revenues in 2016 and beyond. As reported in American Banker this week, banks are adding innovative mobile banking capabilities to provide the improved convenience that draws and retains customers; the article reports how Bank of the West deployed TIS’ superior mobile bill pay technology to “surprise and delight” its customers.”
Mr. Schrader concluded, “In addition, we continue to focus strongly on recurring revenue streams, currently aiming to strengthen our installed base by signing a large multi-year U.S.-based CloudDocs banking customer in 2015. Leveraging the installed base of eGistics, acquired in July of 2014, we also expect to cross-sell an AP or DMR solution to one of our CloudDocs customers this year. Overall, we anticipate organic growth of 15% in constant currency revenues, which at current currency levels is 20% overall growth, with expectations to be profitable in every quarter of the new fiscal year and achieving annual Adjusted EBITDA margins of 10% 12%.”
Fourth Quarter 2014 Year over Year Results
Revenues: Total revenues for the fourth quarter were $10.0 million, 25% growth over the $8.0 million achieved in the fourth quarter of 2013. License and SaaS revenues for the fourth quarter were $5.1 million, compared to $3.8 million for the fourth quarter last year. Recurring revenues for the fourth quarter were $5.4 million, an increase of 125% 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 leading Asia Pacific and Latin American currencies. Based on our analysis, on a constant currency basis, Q4 revenue would have been $10.7 million, within the guided range provided by the company on the Q3 conference call.
Gross Profit: Gross profit for the fourth quarter was $6.1 million, compared to $4.9 million for the fourth quarter of 2013, an increase of 26%. Gross margin for the quarter was 61%, compared to Q4 2013 gross margin of 61%.
Adjusted EBITDA and Earnings: Adjusted EBITDA was $1.2 million, compared to Adjusted EBITDA of $22 thousand for the fourth quarter of 2013. Non-GAAP diluted earnings per share was $0.04 compared to $0.01 for the fourth quarter of 2013. GAAP net income was $0.2 million compared to a GAAP net loss of $76 thousand for the fourth quarter of 2013. GAAP diluted earnings per share was $0.01 compared to a $0.01 loss per share for the fourth quarter of 2013. 2014 results include the contributions from eGistics.
Full Year 2014 Year over Year Results
The results for the full year 2014 reflect an adjustment made to reverse $1.1 million of revenues previously recognized in Q3 of 2014 and to re-classify them back into deferred revenues. The revenues will continue to be recognized as the related services are provided throughout the underlying contracts. These adjusted revenues are related to eGistics, which was acquired and consolidated for the first time in Q3. The full year 2014 numbers in this press release reflect this adjustment.
Revenues: Total revenues for the year 2014 were $35.9 million, 23.4% growth over the $29.1 million achieved in 2013. License and SaaS revenues were $17.3 million, compared to $12.5 million last year.
Gross Profit: Gross profit was $21.5 million, compared to $17.2 million in 2013, an increase of 24.9%. Gross margin for 2014 was 60%, compared to 59.3% in 2013.
Adjusted EBITDA and Earnings: Adjusted EBITDA was a loss of $0.46 million, compared to adjusted EBITDA of $0.5 million in 2013. Non-GAAP diluted loss per share was $0.1, compared to earnings per share of $0.01 in 2013. GAAP net loss was $5.3 million, compared to GAAP net loss of $0.2 million for 2013. GAAP diluted loss per share was $0.34, compared to loss per share of $0.02 for 2013. Please note that 2014 results include contributions from eGistics.
Q1 2015 Expectations
We expect Q1 2015 revenues to grow organically year over year, but as a result of the continued devaluation of the foreign currencies and seasonality, we expect Q1 2015 to have lower revenues than Q4 and slightly lower Adjusted EBITDA. We expect the quarters in 2015 to grow revenues and profitability sequentially throughout the year.