30th Apr 2009 11:13
Emblaze Ltd. ("Emblaze" or "the Group") FINAL results for the year ENDED 31 December 2008 Ra'anana, Israel, 30 April 2009: Emblaze Ltd , today announces itsfinal results for the 12 months ended 31 December 2008. All references to $
areto US Dollars. Financial Highlights: Growth Arm - Formula:
* Continued strong growth despite the global slowdown
* Revenues increased to $590.8 million ($378.9 for the nine months
consolidated in 2007)
* Operating income increased to $30.4 ($17.2 for the nine months consolidated
in 2007) Innovation Arm:
* Continued investment in the Monolith and EMOZE projects
* Loss of $27.8 million in 2008 mostly from the investment in Monolith and
EMOZE according to plans * The Monolith device is expected to be launched in 2009 with cellular operators worldwide Consolidated Results:
Revenue totaled $595.6 million (2007: $387.3 million);
Net loss amounted to $27.1 million (2007: $3.2 million);
Net assets totaled $639.3 million as at 31 December 2008 (2007: $695.2 million);
Continued the divestment of non-core businesses with the completion of sale in May 2008 of the entire holding in Orca Interactive;
Maintained a strong balance sheet, supported by good working capital management
Guy Bernstein, Chief Executive Officer of Emblaze said: "Whilst the market conditions have been challenging, we are pleased that we continued to grow Formula. In the New Year, the positive momentum in Formula is continuing and it is well prepared to navigate this turbulent period in the global environment.
We expect that in 2009 the investments in the Innovation Arm, in particular, the Monolith, will come to fruition."
Operational Review
2008 was a challenging year. Virtually every area of the global economy was impacted by one of the most volatile economic environments we have seen in decades.
Despite the global economic volatility, we have managed to maintain our groupas a strong mix of mature, profitable, cash generating businesses under theFormula group ("Formula" or the "Growth arm") together with a number ofexciting technology businesses that we believe to have excellent prospects forcreating significant shareholder value (the "Innovation arm").
We plan to launch the Monolith - our next generation mobile handset in the second half of 2009 which we believe has the potential to dramatically enhance the position of the Company.
GROWTH ARM - FORMULA The Group's Growth arm, Formula, continued to increase its revenues and profitsthroughout 2008 as a whole and all Formula subsidiaries reported revenue growthtogether with positive cash flow and operating profits.The Group began consolidation of Formula in Q2 2007. Revenues of the Group'sGrowth arm for the year ended 31 December 2008 totaled $590.8 million comparedto $378.9 million in the nine months ended 31 December 2007 with operatingincome in 2008 of $30.4 million compared to $17.2 million in the nine monthsended 31 December 2007.
The table below summarises the 2008 performance of Formula in comparison to its 2007 twelve months performance (selected items):
Formula - Financial Highlights Twelve months ended (audited) December 31, 2008 2007 US$ in thousands % of change Revenues 590,807 493,350 19.75 Gross profit 138,544 124,240 11.51 Operating income 33,373 27,235 22.54
Income (loss) from continuing 11,869 12,461
(4.75) operation Income from discontinued operations - 24,798 - Net income 11,869 37,259 (68.14)
The steady growth of Formula since the acquisition of its controlling stake byEmblaze is the direct result of efforts invested by Emblaze. The Emblazemanagement has been highly involved in the strategy formation andimplementation throughout the Formula group and played an integral in achievingthe improvement demonstrated across the Formula group.
The achievements of Formula since the acquisition of its controlling stake (50.1%) by Emblaze are demonstrated below:
Formula consolidated results from continuing operations - 2006 vs. 2008(US$000) 2006 2008 % Difference Revenues: 416,807 590,807 41.7
Operating Profits: 10,097 33,373 230.5
Net Profit (Loss): (492) 11,869 N/A
Formula consolidated balance sheet (selected items) - December 31 2006 vs.December 31, 2008 (US$000) 31 December 2006 31 December 2008 % Difference
Cash & Short term investments:
132,486 156,760 18.3 Shareholders' Equity: 153,290 169,937 10.9
The Emblaze management team has been integral in achieving this improvement. The achievements included the following:
* increased revenues in all subsidiaries; * closed down loss making projects; * improved control over costs;
* moved Sapiens to profitability after years of heavy losses and improved its
cash position significantly; * moved Magic to profitability after years of heavy losses; and * improved Matrix's profitability
During 2008 Formula increased its holdings in Magic to 58.19% and in Sapiens to 70.4%
Innovation Arm
The innovation activities, mainly Emblaze Mobile and EMOZE, represent investments of the Company in research and development. We believe there is high potential for Emblaze to increase shareholder value as a result of these investments.
Both activities are in very advanced stages of development: the Monolith isexpected launch and to go into production in the second half of 2009 and Emozeis already offering its solutions world-wide with first flow of revenues fromoperators and other users. The Monolith Project
Following five years of research, Emblaze Mobile, a wholly owned subsidiary ofthe Group, has embarked on an ambitious project to design the ultimate holisticmobile device - the Monolith. Emblaze Mobile signed contracts in 2007 withJapanese giants Sharp and ACCESS to build, manufacture, and globally market thenew device. In addition, Emblaze Mobile is partnering with over 20 third-partymobile technology vendors, all of whom are the leading innovators in theirspecific field of mobile ingenuity. Together, Emblaze Mobile, is creating whatis aimed to be the most sophisticated and revolutionary device in the market. The driving principle behind this futuristic project is to create an integratedcommunications device with a unique user interface and graphics design, thelikes of which has never been seen in the industry. This Linux based device isnot a mere phone, but rather an application centric device that acts as a fullblown media and communications center. Built upon a brand new mobile softwareplatform, the Monolith seamlessly integrates telephony and messaging, personalinformation management, push-technology information and media, mobile officeaccess, GPS navigation and location based services, web browsing, mobile mediaplayer, and more.
The Monolith is designed as a true ARPU (Average Revenues per User) drivingmachine that is so needed these days by operators combining built-in servicessuch as music store, family tracker,BlackBerryâ„¢-like push-email and more in amanner never to date done by any other vendor. Operators have for years beenseeking value added services to increase ARPU in addition to air-time, but sofar have not made much progress. Together with the Monolith device, we intendto provide operators with a bundled package of services that enables theoperators to generate recurring revenues per user in the form of monthly fees,in addition to any previous payments by the user. Product development is now in its final stage. Emblaze Mobile has alreadypresented working samples to leading operators and has received excellentresponses. The Company is currently in various stages of negotiations with thetop ranked global operators for sizeable orders. Commencement of production bySharp to fulfill such potential orders from operators is expected in the secondhalf of 2009.
The Group strongly believes in this project and expects that once Sharp commences manufacturing to supply Monolith orders from operators, Emblaze Mobile will start generating substantial revenues and profits for the Company.
EMOZE
EMOZE Ltd., a 95% subsidiary of Emblaze, is a provider of a BlackBerryâ„¢-type service of Push e-mail for the masses and for small and mid-size enterprises.
EMOZE supports nearly all leading operating systems (Symbian, WindowsMobile andJava) and has recently released its first social community messaging solutionfor Facebook. This achievement extends EMOZE's reach as any Facebook member cannow communicate not only from his/her PC but also from any mobile handset theyown.EMOZE provides its service world-wide and is already generating revenues fromoperators, value added resellers and individual users. Management expects EMOZEto break-even before the end of 2009.There are approximately 1.4 billion email users world-wide; many of them wouldlike to have their emails pushed to their handsets. We estimate that today onlyaround 30 million email users are provided with such a service. The Boardtherefore considers EMOZE to present an excellent opportunity to createshareholder value through its efficient technology and competitive pricing.
ZONE-IP
ZONE-IP Ltd. is a 65% held subsidiary of Emblaze and holds all of theissued shares of Emblaze VCON Ltd., which is engaged in the development anddeployment of high-performance, end-to-end videoconferencing solutions over IPand ISDN networks for enterprises of all sizes.The world of video conferencing is changing from the traditional videoconferencing meeting rooms to personal computers in organisations. This changewill create a new paradigm for using video conferencing in medium to largecorporations. With its new desk top solutions, Emblaze VCON is well placed tolead this market. The current turmoil in the financial markets is producing atrend towards cutting corporate travel costs in favour of video conferencingsolutions.
The contribution of the principal divisions to the Emblaze Group is presented in the table below (selected items):
Emblaze Group - Financial Twelve months ended Highlights US$ in thousands December 31, 2008 Growth Innovation Unidentified Consolidated Activity Arm Revenues 590,807 4,810 - 595,617 Gross profit 137,966 3,524 - 141,490 Operating income (loss) 30,439 (32,203) - (1,764) Income (loss) from 3,322 (30,628) (2,620) (29,926) continuing operation Income from discontinued Operations - 2,862 - 2,862 Net income (loss) 3,322 (27,766) (2,620) (27,064) Outlook
The positive momentum in the Group's Growth business is continuing. Formula andits subsidiaries are not operating in a vacuum and therefore they are notimmune to the global economic crisis. However, thanks to the implementation ofour strategy, we believe that Formula and its subsidiaries are well prepared tonavigate through the troubled waters of the current global environment as wellas to explore new acquisitions, compatible with its strategy and currentportfolio companies. The activity of the Innovation arm is closely monitored inorder to mitigate the risks. We expect that in 2009 our investments in theInnovation Arm, in particular the Monolith, will come to fruition. Copies of the Report and Accounts are available from the Company's website atwww.Emblaze.com Enquiries:Hagit Gal, Emblaze Ltd. +972 9 7699302
Harry Chathli, Corfin Communications +44 (0)20 7977 0020
About Emblaze
Emblaze Ltd is a group of technology companies addressing both growth and innovation activities thus combining the stability of "bread and butter" mature technology enterprises with "high-risk / high-reward" investments in innovation.
Our Growth arm includes Formula Systems , whichharbors the following subsidiaries: Magic Software Enterprises Ltd. develops, markets and supports composite application developmentand deployment platforms with a service-oriented architecture (SOA), includingapplication integration and business process management (BPM), with existingand legacy systems; Matrix IT Ltd. (TASE: MTRX) is one of Israel's leadingintegration and information technology services companies, active in fourprincipal areas: software solutions and services, software products,infrastructure solutions and hardware products, and training and assimilation.;Sapiens International Corporation N.V. is a provider ofIT solutions that modernize business processes to enable insurance and othercompanies to quickly adapt to changes; and nextSource Inc., designs, developsand implements web-based, high quality, innovative human capital managementsolutions.Our Innovation arm includes Emblaze Mobile, a designer of advanced mobiledevices; EMOZE, a provider of Push Email and synchronisation technology formobile devices; and ZONE-IP (Emblaze V CON), a provider of wirelessvideo communications technologies and conferencing solutions for operators andenterprise markets over IP networks.
The Emblaze Group is traded on the London Stock Exchange since 1996. www.Emblaze.com
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands December 31, 2007 2008 ASSETS CURRENT ASSETS: Cash and cash equivalents $172,456 $122,197 Short-term investments 56,900 48,377
Trade receivables (including unbilled receivables of $27,208
and $27,377 as of December 31, 2007 and 2008, respectively) 141,922
159,508
Other receivables and prepaid expenses 37,220
17,309 Inventories 5,887 5,320
Assets held for sale and assets of discontinued operations 17,307
31 Totalcurrent assets 431,692 352,742
LONG-TERM RECEIVABLES AND INVESTMENTS 25,481
20,983 SEVERANCE PAY FUND 37,599 39,047 PROPERTY AND EQUIPMENT, NET 16,297 15,716 GOODWILL 130,734 154,757 OTHER ASSETS, NET 53,443 56,022 Total assets $695,246 639,267 CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
December 31, 2007 2008
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES: Trade payables $60,689 $60,011
Short-term liabilities to banks and others 34,284
13,014
Other payables and accrued expenses 77,727
103,311
Liability due to activities acquisition
6,954
Liabilities held for sale and liabilities of discontinued
operations 9,726 483 Convertible debt 3,524 5,157 Total current liabilities 185,950 188,930 LONG-TERM LIABILITIES
Convertible and non-convertible debts 71,880
56,004
Liabilities to banks and other 23,685
16,640 Deferred tax liability 5,764 6,819
Other long term liabilities 4,287
1,216
Liability due to acquisition of a business operation -
1,010 Accrued severance pay 44,002 51,518 Totallong-term liabilities 149,618 133,207 MINORITY INTEREST 208,602 190,556
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY: Share capital: Ordinary shares of NIS 0.01 par value - Authorized: 200,000,000 shares at December 31, 2007 and 2008; Issued: 140,578,154 shares at December 31, 2007 and 2008; Outstanding: 111,476,687 and 111,718,432 shares at December 31, 2007 and 2008, respectively 416
416 Additional paid-in capital 470,891 470,716 Treasury stock, at cost (76,433) (75,654)
Accumulated other comprehensive income 4,993
6,951 Accumulated deficit (248,791) (275,855) Totalshareholders' equity 151,076 126,574
Total liabilities and shareholders' equity $ 695,246
$ 639,267
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
Year ended December 31, 2006 2007 2008 Revenues $ 7,629 $ 387,276 $ 595,617 Cost of revenues 4,071 288,327 454,126 Gross profit 3,558 98,949 141,491 Operating expenses:
Research and development, net 5,571 13,742
33,157 Selling and marketing 7,185 36,681 50,153 General and administrative 6,634 43,474 59,945 Total operating expenses 19,390 93,898 143,255 Operating Income (loss) (15,832) 5,051 (1,764) Financial income (expenses) 5,830 (3,873) (7,097) Other income (expenses) (3,600) 7,408 (885) Income (loss) before taxes on income (13,602) 8,586 (9,746) Taxes on income - 718 4,339
Income (loss) before minority interest and
equity earnings (loss) (13,602) 7,868 (14,085)
Equity in earnings (losses) of affiliated
companies, net 327 528 (216) Minority interest 2,174 (11,400) (15,625)
Loss from continuing operations (11,101) (3,004)
(29,926)
Gain (loss) from discontinued operations,
net 1,262 (232) 2,862 Net loss $ (9,839) $ (3,236) $ (27,064)
Basic and diluted loss per share:
From continuing operations $(0.09) $(0.03) $(0.27) From discontinued operations 0.01 0.00 0.03 Net loss per share $(0.08) $(0.03) $(0.24)
Weighted average number of shares used in computing basic and diluted loss per share 123,595,330 111,476,440 111,522,295
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands Accumulated other Total Additional Treasury Share comprehensive comprehensive paid-in Stock, Accumulated capital capital at cost income (loss) deficit income (loss) Total Balance as of January 1, 2006 416 463,848 (7,381) (2,187) (235,716) 218,980 Repurchase of shares from related parties, net - - (70,953) - - (70,953) Issuance of shares upon exercise of stock options - 49 182 - - 231 Issuance of shares upon business combinations, net - 1,139 1,711 - - 2,850 Debt security from related party - 2,500 - - - 2,500 Share based compensation expense - 864 - - - 864 Comprehensive loss: Unrealized gains from available-for-sale marketable securities, net - - - 1,905 - $1,905 1,905 Foreign currency translation adjustments - - - (46) - (46) (46) Net loss - - - - (9,839) (9,839) (9,839) Total comprehensive loss $(24,762) Balance as of December 31, 2006 416 468,400 (76,441) (328) (245,555) 146,492 Issuance of shares upon exercise of stock options - (1) 8 - - (70,953) Tax benefits related to exercise of options in a subsidiary - 243 - - - 231 Increase of investment due to decrease in percentage in holding in a development stage subsidiary - 1,897 - - - 2,850 Share based compensation expense - 352 - - - 2,500 Comprehensive loss: 864 Unrealized gains from available-for-sale marketable securities, net - - - 752 - $752 Foreign currency translation adjustments - - - 4,569 - 4,569 1,905 Net loss (3,236) (3,236) (46) (9,839) Total comprehensive income $ 2,085 Balance as of $ December 31, 2007 416 $470,891 (76,433) $4,993 $(248,791) $151,076 Issuance of shares upon exercise of stock options (803) 803 - Purchase of treasury stock (24) (24) Tax benefits related to exercise of options in a subsidiary 58 58 Share based compensation expense 570 570 Comprehensive loss: Realized gains and unrealized losses from available-for-sale marketable securities, net (961) $(961) (961) Foreign currency translation adjustments 2,919 2,919 2,919 Net loss (27,064) (27,064) (27,064) Total comprehensive loss $ (25,106) Balance as of $ December 31, 2008 416 $470,716 (75,654) $6,951 $(275,855) $126,574
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Year ended December 31, 2006 2007 2008
Cash flows from operating activities:
Net loss $(9,839) $(3,236) (27,063)
Less: loss (gain) from discontinued
operations (1,262) 232 (2,862) Loss from continuing operations (11,101) (3,004) (29,925) Depreciation and amortization 639 11,459 14,632 Capital gain from sale of intangible assets - -
(1,616)
Amortization of marketable debt securities premiums and accretion of discounts, net 511 380
608
Share based compensation expense 300 577
570
Share based compensation expense of
subsidiaries 461 577 1,768
Net loss on sales of marketable securities, decrease in value of marketable securities and changes in accrued interest, net 778 2,019
6,016
Impairment of investment in marketable
securities and others 1,244 4,215 2,970 Equity (gain) losses, net (327) (528) 216
Revaluation of long term loans and deposits,
net - 708 (129) Other income and capital losses (gains), net 2,356 (8,580) 65 Minority interests (2,174) 11,400 15,624
Decrease (increase) in trade receivables, other receivables and prepaid expenses and
inventories 6,863 (3,730) (1,581)
Increase (decrease) in trade payables, other payables and accrued expenses , accrued severance pay, net and other long term
liabilities 2,491 (15,437) 13,361 Changes in deferred tax, net - (1,903) (2,218) Other 205 (349) 728
Net cash provided by (used in) operating activities from continuing operations 2,246 (2,196)
21,089
Net cash provided by (used in) operating activities from discontinued operations 18,601 (10,429) (2,170) Net cash provided by (used in) operating activities 20,847 (12,625)
18,919
Cash flows from investing activities: Purchase of property and equipment (395) (3,176)
(4,310)
Proceeds from sale of intangible assets - -
1,622
Proceeds from sale of property and equipment 54 108
1,011
Investment in (proceeds from) short-term bank deposits and deposits held in escrow 396 5,899
(1,570)
Investment in short-term marketable
securities (111,945) (27,391) (7,249)
Proceeds from sales, calls and maturity of
marketable securities 197,633 77,718 16,999
Investment in long-term marketable securities (12,994) (2,680) (250)
Proceeds from (investment in) long-term bank deposits and restricted deposits 3,751 (10,233)
-
Capitalization of software development and
other costs of subsidiaries - (4,355) (6,683) Purchase of minority interest in subsidiaries - (4,368)
(16,983)
Proceeds from sale of subsidiary's operations - -
170 .
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Year ended December 31, 2006 2007 2008
Proceeds from realization of investment in
BluePhoenix Solutions Ltd. - 62,279 -
Investment in loans to affiliated and other
companies (1,215) (2,319) (1,157)
Payments to former stockholders of subsidiary in respect to a purchase liability
(5,973)
Cash paid for the acquisition of subsidiaries thereof , net of cash acquired - (5,305)
(13,633)
Purchase of intangible assets by subsidiaries - (499) Payment for acquisition of Formula (84,414) - - Cash acquired in conjunction with the acquisition of Formula , net of cash paid - 88,865 -
Other investments - - (756)
Net cash provided by (used in) investing activities from continuing operations (9,129) 174,543
(38,762)
Net cash provided by (used in) investing activities from discontinued operations 2,038 11,447 25,081
Net cash provided by (used in) investing
activities (7,091) 185,990 (13,681)
Cash flows from financing activities: Proceeds from exercise of stock options in
subsidiaries - 1,626 876
Proceeds from exercise of stock options 257 7 - Issuance of convertible debt in a subsidiary - 64,602 - Dividend to minority shareholders in
subsidiaries - (3,498) (10,683) Short-term borrowing and bank credit, net 44,759 (37,793)
(20,928)
Repayment of long-term loans in subsidiaries - (61,717) (10,855)
Receipt of long-term loans in subsidiaries - 13,000 (628)
Issuance of ordinary shares in a subsidiary to
minority shareholders, net - 14,898 -
Deposits - SWAP deal in a subsidiary - (1,040) - Repayment and repurchase of debts in a
subsidiaries - (7,818) (18,128)
Purchase of treasury stock in a subsidiary by
a subsidiary thereof - 3,017 Purchase of treasury stock (70,953) - (24)
Net cash (used in) financing activities from
continuing operations (25,937) (14,716) (59,764)
Net cash provided by financing activities from
discontinued operations 713 7 - Net cash (used in) financing activities (25,224) (14,709) (60,370)
Effect of exchange rate on cash of continuing
operations - 3,517 2,481
Effect of exchange rate on cash of
discontinued operations (966) - -
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Year ended December 31, 2006 2007 2008
Increase (decrease) in cash and cash
equivalents from continuing operations (32,820) 161,148 (75,562)
Increase (decrease) in cash and cash equivalents from discontinued operations 20,386 1,025 22,911 Cash and cash equivalents from continuing
operations at the beginning of the year 15,238 10,784 172,456
Cash and cash equivalents from discontinued operations at the beginning of the year 9,872 1,892 2,393
Cash and cash equivalents from continuing operations at the end of the year $10,784 $172,456 $
122,197
Cash and cash equivalents from discontinued operations at the end of the year $1,892 $2,393 $1
Year ended December 31, 2006 2007 2008
Supplemental disclosure of cash flow
information:
(a) Cash paid during the year for:
Interest $ 599 $ 6,322 $ 5,983 Income taxes $ - $ 5,109 $ 5,207
(b) Significant non cash activities:
Sale of a subsidiary $ - $ 16,000 $ - (c) Acquisition of Formula: Working capital, excluding cash and cash equivalent $ - $(11,991)
$ -
Other long term assets and investments - (70,053) - Investment in Formula - 86,575 - Goodwill - (117,387) - Other intangible assets - (47,781) - Minority interest - 159,677 - Other long term liabilities - 89,825 - Cash acquired, net of amount paid $ - $ 88,865
$ -
vendorRelated Shares:
BSD.L