29th Apr 2005 10:00
Emblaze Ltd29 April 2005 Emblaze Ltd. Preliminary Results for the year ended 31 December 2004 Ra'anana, Israel, 29 April 2005: Emblaze Ltd (Emblaze or "the Group") (LSE:BLZ), the wired and wireless telecoms technology group, announces its financialresults for the 12 months ended 31 December 2004: Financial Highlights •Revenues increase more than six-fold to $45.1m (2003: $7.3m) and projecting more than doubling of revenues to $120m in 2005 •Trading in the first quarter of 2005 was ahead of management expectations with the Group achieving $29m revenues over the period (Q1 2004: $2m). •Moved to profit of $6.3m in second half of 2004 (H1 2004 loss of $29.4m), halving the full year loss to $23.2m •Cash burn stopped; net cash increased by $2.9m •Strong balance sheet with total assets amounting to $349.8m (2003: $289.4m) •The Group reiterates that it anticipates a continuation in profitability from the last two quarters and expects to be profitable for the full year 2005 Operational Highlights •Strong business growth across all group business units •Three Group companies achieve Admission to AIM. Orca Interactive was admitted in October 2004, Adamind in February 2005 with Visual Defence expected in May 2005 •Strategic restructuring refocuses Group for upturn in global telecoms sector Eli Reifman, Chief Executive Officer of Emblaze, said: "As the results for 2004demonstrate, Emblaze has emerged from the long downturn in the telecoms industrywith a stronger and better-focussed business. We now have the scale, technology,financial strength and above all the people to capitalise on the industry upturnby delivering further strong growth and shareholder value. "Trading in the first quarter of 2005 was ahead of management expectations withthe Group achieving $29m revenues over the period. This gives us theconfidence to state that revenues are on track to more than double to $120m andbecome profitable for the full year 2005." Enquiries: Emblaze LtdDoron Cohen/Hagit Gal +972 9 7699831/339 Corfin CommunicationsHarry Chathli, Neil Thapar +44 20 7929 8989 Chairman's Statement 2004 was a year of fundamental change which has positioned the Group for anupturn in the telecoms industry. The reorganisation within the group has enabledEmblaze to leverage its wide ranging expertise in wired and wireless productsand services that help telecom companies and mobile networks to boost theiraverage revenue per user (ARPU). Revenues increased six-fold to $45.1m for the year representing the consolidatedfigures from our Group companies. The restructuring has led to the Group to endits cash burn during the year. Net cash generated during 2004 amounted to $2.9m,reflecting net profit of $6.3m in the second half thus reducing the Group netloss for the full year to $23.2m. Following the restructuring, the Group comprises four separate businesses:Emblaze Mobile; Orca Interactive; Adamind and Visual Defence. All the Groupcompanies share a common vision and sell products and solutions mostly to thesame sector and share a similar customer base, primarily in the telecomsindustry. They interact and work together leveraging each other's strengths andtechnical know-how. We chose to create this structure of companies as a strategic convenience forbringing in partners and raising the profile of each individual Group company.To this end three of the business units have achieved separate quotations on theAlternative Investment Market of the London Stock Exchange. Orca Interactive, the Group's IPTV software and services subsidiary, was floatedon AIM in October 2004. Since its admission to AIM, Orca has signed severalmajor deals establishing it as a leading middleware player in the IPTV market. During the year Emblaze Transcoding was merged with the Transcoding business ofPhilips to create Adamind, a global leader in media adaptation softwaresolutions. Adamind was floated on AIM in February 2005. Emblaze Defence was merged with Canadian-based Girit Projects Inc. and AVLogicInc. to create Visual Defence Inc. as a global leader in visual securitysolutions over wireless and fixed IP networks. Today we announced that VisualDefence has submitted its application for admission to AIM and is expected tomake its market debut on 6 May 2005. Results Turnover for the 12 month period ending 31 December 2004 was $45.1m comparedwith $7.3m for the same period last year. The net loss halved to $23.2m for theperiod (2003: $46m). The Company moved to net profit of $6.3m in the second halfof the year. The net loss from continuing operations decreased to $11.2m (2003 loss: $16.1m). Cash burn stopped and net cash increased by $2.9m. Operating expenses includecost of $11.4m for R&D expenses, $11.5m for sales & marketing expenses, $10.2 mfor general and administrative expenses and $6.8m from amortization ofintangible assets restructuring and other charges and impairment of property andequipment. The Group has a strong balance sheet with $245.1 million in totalshareholders' equity, $250.7 million of cash portfolio. Cash investments portfolio of $250.7m is presented in the balance sheet underthe following breakdown: 31 Dec 2004 $mCash and cash equivalents 45.5Short-term bank deposits, marketable securities and accruedinterest 43.6 ==========Long-term (over 1 year to maturity) marketable securities*,deposits and other long term investments 161.6 ==========Total: 250.7 * Marketable securities are mainly comprised of US Government Treasuries andother agencies and highly rated corporate debentures. In accordance with the Israeli Court's approval to repurchase up to 13% of theissued ordinary shares of the Group, Emblaze has to date purchased approximately4.64% of the ordinary share capital. During the year 2004 the Group utilised$3.5 million for the repurchase of 1.8 million shares representing 1.29% of theissued share capital. We continue to regularly review costs in relation to our view on how our marketsare developing. Operational Review Emblaze Mobile During 2004 the company implemented a radical re-focussing of the business intonew geographies, customer profiles and channel strategy. Emblaze Mobile providesend-to-end server and handset solutions to global operators for the introductionof rich-media value added services over 2.5G and 3G networks. Its unique newbusiness model addresses directly the needs of the operators for ARPU-generatingdevices built around next generation applications, operators' requirements andspecific market segments. This approach provides operators specific added valueand higher ARPU per handset that in-turn enables Emblaze Mobile to sustainhealthy margins over time without going into "price wars" with competitors.Emblaze Mobile is a unique combination of Israeli and Korean technology, designand manufacturing with highly experienced European management. The company has achieved penetration in the Far East via distribution partnersand looking to penetrate predominantly European markets over the next year. In October 2004, Emblaze Mobile acquired a majority of the shares of a handsetdesign and manufacturing factory in Korea in order to secure production anddesign capacity for 2005 against growth in demand and the need for lower unitcosts. Laurence Alexander, the former UK Director of products at O2, wasrecruited to become CEO of Emblaze Mobile and expand the business into Europeand other regions. Orca Interactive Orca provides a software solution that enables fixed-line telecom operators tooffer TV entertainment services such as broadcast TV, video-on-demand, games andother interactive services over telephone lines (xDSL, FTTH etc.). This markethas emerged as a consequence of cable operators moving into the telephonybusiness on top of TV and data/internet (all three services combined are calledthe "Triple Play") and thus taking away business and subscribers from thetelecom operators. The operators that historically provide telephony and data/internet services now need to match their offer to the cable companies with afull triple play solution that includes TV services as well. Orca's products areeffectively the management software ("Middleware") of all the components in thesolution such as set-top boxes, video servers, billing, electronic programmingguide (EPG), xDSL modems, conditional access technologies etc. The company'ssolutions are embedded in the heart of the IPTV infrastructure and manage manythird party vendor components to provide a one comprehensive solution for TelcoIPTV. Orca works with numerous technology and IPTV component vendors and hasstrong alliances with top tier players in the field such as HP, Nokia, Samsungand many others. 2004 was a significant year in the ongoing growth of Orca culminating in oursuccessful listing and fundraising in October. It was also the year that theIPTV market began to experience significant growth and, as one of the leadingproviders of middleware solutions to this market, we were well positioned tobenefit. Three new customers were won during the year, including one for which Orca actedas the prime contractor. This emphasizes the strong positioning of its productoffering and provides further evidence of the exciting and rapid growth in ourmarket place. Their partner programme has also continued to develop and includessome of the most high profile names in the industry. Adamind In September 2004, the Group announced the merger of Emblaze Transcoding withPhilips Transcoding business unit (MP4NET Ltd.) to create Adamind at a 70/30holding structure respectively. Multimedia Messaging (MMS) is the natural evolution from SMS text messagingwhere you can send messages between mobile phones that include images, audio andvideo on top of text. SMS was an extremely successful service adopted byhundreds of millions of users worldwide generating billions of dollars inrevenue for the operators and increasing ARPU (Average Revenue Per User).Operators believe that MMS is the next revenue and ARPU driver for the next 10years. However, sending images or other media between mobile devices is not assimple technologically as establishing a voice call primarily because of lack ofinteroperability between the handsets. Different phones have different screens,different resolutions and support different media formats. This creates"misunderstanding" between the devices where the receiving device cannot displayan MMS message sent by another. The need rising from this conflict is for a sortof "translation" in the middle where a mechanism will intercept each and everyMMS message in mid-way and "convert" or "translate" it in a way that thereceiving phone will be able to "understand" and display the message. This type of a technology is named Transcoding or Media Adaptation and it has toreside at the heart of each and every MMSC (MMS center) to effectively enableMMS. Adamind is the global leader in Media Adaptation software with over 40%market share, over 80 commercial deployments with global operators and top tierMMSC vendors and OEM partners such as Ericsson, LogicaCMG and OpenWave. Since its flotation Adamind, working with its strategic partner Motorola, hasbeen named as the media adaptation solutions provider for MMS services to thelargest US mobile network operator. Visual Defence In January 2005, Emblaze Ltd. announced the merger of its defence wireless videodivision, Emblaze Defence, with Girit Projects Inc. and AVLogic Inc. ("Girit"),the security and surveillance divisions of Canadian based GiritHoldCo. By thecombination of the two complementary divisions, Visual Defence provides the nextgeneration in visual security solutions specialized in the convergence ofsecurity video systems from analog to digital platforms. Following a successful institutional placing completed earlier this week, VisualDefence is expected to formally join AIM in early May. Visual Defence has won multi-million dollar key tenders in European airports,Israeli Defence Forces and US Homeland Security for the management and provisionof secured video surveillance over wireless and fixed IP networks. The groupexpects further significant growth in this business over the year. Visual Defence's major projects include, among others, Toronto's and Zurich International airports. Similar systems are being deployed at other major European and US public transport centres. It recently entered into a three-year commercial relationship with Bell Canada, Canada's largest telecommunication provider, to deliver 'end-to-end' physical security solutions with an estimated C$35 million total value already in the pipeline from the Canadian marketplace. In addition Visual Defence and its partner VisioWave, also signed a major dealto install a visual security management system at a new terminal being built byEurope's largest and busiest airports. Outlook Emblaze has emerged from the long downturn in the telecoms industry with astronger and better-focused business. We now have the scale, technology,financial strength and above all the people to capitalise on the industry upturnand Group remains on track to deliver significant growth this year. Trading in the first quarter of 2005 was ahead of management expectations withthe Group achieving $29m revenues over the period. This gives us theconfidence to state that revenues are on track to more than double to $120m andbecome profitable for the full year 2005. CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands, except share data December 31, ---------------- 2003 2004 -------- --------ASSETSCURRENT ASSETS:Cash and cash equivalents $ $ 26,192 45,458Short-term bank deposits - 1,862Accrued interest 3,207 2,332Short-term available-for-sale marketable securities - 15,338Short-term held-to-maturity marketable securities 84,932 24,104Trade receivables 3,343 4,414Other receivables and prepaid expenses 2,374 7,197Inventories 432 6,872Assets of discontinued operations 23,465 769 -------- -------- Total current assets 143,945 108,346---------------------- -------- -------- LONG-TERM INVESTMENTS:Long-term available-for-sale marketable securities - 20,585Long-term held-to-maturity marketable securities 28,908 77,219Restricted deposit - 51,955Other long-term investments 4,536 11,840Severance pay fund 1,385 1,194 -------- -------- Total long-term investments 134,829 162,793----------------------------- -------- -------- PROPERTY AND EQUIPMENT, NET 7,147 6,539 -------- -------- GOODWILL, NET 2,532 67,264 -------- -------- INTANGIBLE ASSETS, NET 907 4,853 -------- -------- $ $ 289,360 349,795 ======== ========LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Trade payables $ $ 1,090 37,708Short-term loans - 15,042Deferred revenues 241 1,262Other payables and accrued expenses 7,325 29,473Liabilities of discontinued operations 8,587 1,585 -------- -------- Total current liabilities 17,243 85,070--------------------------- -------- -------- ACCRUED SEVERANCE PAY 2,100 3,488 -------- -------- LONG-TERM LOAN - 479 -------- -------- LONG-TERM RESTRUCTURING ACCRUAL 1,881 4,559 -------- -------- MINORITY INTERESTS - 11,115 -------- -------- SHAREHOLDERS' EQUITY:Share capital:Ordinary shares of NIS 0.01 par value: 414 416Authorized - 200,000,000 shares as of December 31, 2003and 2004, Issued - 139,669,227 shares as of December31, 2003 and 140,562,700 shares as of December 31,2004; Outstanding - 135,600,624 shares as of December31, 2003 and 134,971,692 shares as of December 31,2004Additional paid-in capital 465,056 465,896Foreign currency translation adjustment - 1,785Deferred stock compensation (219) -Treasury stock, at cost (5,702) (8,623)Accumulated other comprehensive income 66 252Accumulated deficit (191,479) (214,642) -------- -------- Total shareholders' equity 268,136 245,084 -------- -------- $ $ 289,360 349,795 ======== ======== CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands, except share and per share data Year ended December 31, ----------------------- 2002 2003 2004 -------- -------- -------- Revenues $ 3,154 $ 7,294 $ 45,146Cost of revenues 3,715 3,344 38,220 -------- -------- -------- Gross profit (loss) (561) 3,950 6,926 -------- -------- -------- Operating expenses:Research and development, 16,819 8,975 11,386netSales and marketing 18,325 11,054 11,547General and administrative 7,739 8,108 10,240Amortization of intangible 835 1,823 509assetsRestructuring and other 5,617 - 6,338charges and impairment of -------- -------- --------property and equipment Total operating expenses 49,335 29,960 40,020--------------------------- -------- -------- -------- Operating loss (49,896) (26,010) (33,094)Financial income, net 13,041 9,940 9,540Other income (loss), net (5,446) (12) 12,345 -------- -------- -------- Loss before equity in losses (42,301) (16,082) (11,209)of an affiliate and minorityinterests in losses ofsubsidiariesEquity in losses of an (229) - -affiliateMinority interests in losses - - 61of subsidiaries -------- -------- -------- Net loss from continuing (42,530) (16,082) (11,148)operations, before cumulativeeffect of a change in anaccounting principleNet loss from cumulative (23,055) - -effect of a change in an -------- -------- --------accounting principle Net loss from continuing (65,585) (16,082) (11,148)operationsNet loss from discontinued (25,421) (29,964) (12,015)operations -------- -------- -------- Net loss $ (91,006) $ (46,046) $ (23,163) ======== ======== ======== Basic and diluted net loss pershare:From continuing operations $ (0.31) $ (0.12) $ (0.08) ======== ======== ========From cumulative effect of a $ (0.17) $ - $ -change in an accounting ======== ======== ========principle From discontinued operations $ (0.18) $ (0.22) $ (0.09) ======== ======== ======== Basic and diluted net loss per $ (0.66) $ (0.34) $ (0.17)share ======== ======== ======== Weighted average number of 137,452,524 135,628,372 134,953,259shares used in computing basic ======== ======== ========and diluted net loss pershare STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY U.S. dollars in thousands Accumu -lated other Foreign Deferred compre Total Additonal currency stock Treasury -hensive Accumu compre Share paid-in translation compen Stock income -lated -hensive capital capital adjustments -sation at cost (loss) deficit loss TotalBalance as of January 1, $ 411 $ 463,239 $ - $ - $ (423) $ (784) $ (54,427) $408,0162002 Repurchase of shares, net - - - - (3,566) - - (3,566)Re-issuance of shares upon - (139) - - 1,080 - - 941acquisition ofassets fromUCnGO Ltd. and UCnGo Inc.Issuance of shares upon 1 143 - - - - - 144exercise of stock optionsStock compensation - 55 - - - - - 55expenses in respect ofoptions which terms havebeen modifiedDeferred stock - 1,500 - (1,500) - - - -compensationAmortization of deferred - - - 300 - - - 300stock compensationComprehensive loss:Unrealized gain on forward - - - - - 803 - $ 803 803and put-option contracts,netNet loss - - - - - - (91,006) (91,006) (91,006) Total comprehensive loss $ (90,203) Balance as of December 31, 412 464,798 - (1,200) (2,909) 19 (145,433) 315,6872002 Repurchase of shares, net - - - - (2,793) - - (2,793)Issuance of shares upon 2 258 - - - - - 260exercise of stock optionsAmortization of deferred - - 981 - - - 981stock compensationComprehensive loss:Unrealized gain on put and - - - - - 47 - $ 47 47call option contracts, netNet loss - - - - - - (46,046) (46,046) (46,046) Total comprehensive loss $ (45,999) Balance as of December 31, 414 465,056 - (219) (5,702) 66 (191,479) 268,1362003 Repurchase of shares, net - - - - (3,539) - - (3,539)Issuance of shares upon 2 848 - - 618 - - 1,468exercise of stock optionsAmortization of deferred - (8) - 219 - - - 211stock compensationComprehensive loss:Unrealized losses on put - - - - - (66) - $ (66) (66)and call option contracts,netUnrealized gains from - - - - - 252 - 252 252available-for-salesecurities, netForeign currency - - 1,785 - - - - 1,785 1,785translation adjustmentsNet loss - - - - - - (23,163) (23,163) (23,163) Total comprehensive loss $(21,192) Balance as of December 31, $416 $465,896 $1,785 $ - $(8,623) $252 $(214,642) $245,0842004 CONSOLDIATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Year ended December 31, ---------------------------- 2002 2003 2004 -------- -------- --------Cash flows from operating activities:--------------------------------------- $ $ $ Net loss (91,006) (46,046) (23,163)Less: net loss from discontinued (25,421) (29,964) (12,015)operation -------- -------- -------- Net loss from continuing operations (65,585) (16,082) (11,148) Adjustments to reconcile net loss fromcontinuing operations to net cash usedin operating activities fromoperations:Impairment of property and equipment 634 - 1,646Depreciation and amortization 3,691 4,718 4,825Amortization of marketable debt 3,135 2,743 1,669securities premiums and accretion ofdiscounts, netStock compensation expenses 355 981 211Net loss (gain) on sales of marketable 3 (140) (1,267)securitiesEquity in losses of an affiliate 229 - -Write-down of investments in 5,419 97 30companiesCumulative effect of a change in an 23,055 - -accounting principle, netDecrease (increase) in trade (1,854) 1,374 8,702receivables, other receivables andprepaid expenses, inventories andaccrued interest incomeIncrease (decrease) in trade payables, 3,539 (4,777) (6,600)other payables and accrued expenses andaccrued severance pay, netIncrease (decrease) in deferred (468) (298) 934revenuesIncrease (decrease) in long-term 2,247 (366) 2,678restructuring accrualGain from issuance of subsidiaries' - - (12,613)shares to third partiesMinority interest in losses of - - (61)subsidiariesOther 48 (97) 69 -------- -------- -------- Net cash used in operating activities (25,552) (11,847) (10,925)from continuing operationsNet cash used in operating activities (15,992) (25,282) (37,616)from discontinued operations -------- -------- -------- Net cash provided by operating (41,544) (37,129) (48,541)activities -------- -------- -------- Cash flows from investing activities:---------------------------------------Purchase of property and equipment, (5,922) (1,366) (252)netProceeds from sale of property and 25 435 13equipmentInvestment in short-term bank - - (240)depositsProceeds from short-term bank 10,334 - -depositsInvestment in short-term marketable (35,598) (17,020) (10,783)securitiesProceeds from maturity of short-term 84,389 55,126 1,032marketable securitiesInvestment in long-term marketable (98,879) (59,473) (68,147)securitiesProceeds from sales, calls and maturity 34,102 33,880 154,344of long-term marketable securitiesShort-term loan to a third party, net 3,386 - -Long-term loan to a third party - - (929)Investment in long-term bank deposits - (571) (4,140)Investment in restricted deposit - - (51,955)Proceeds from long-term bank deposits 1,400 64 -Payment for the acquisition of assets (2,621) - -from UCnGO Ltd. and UCnGO Inc.Payment for the acquisition of 60% - - (11,433)holding percentage of InnostreamInc.Payment for the acquisition of - - (500)additional holding percentage ofAdamind Ltd.Investment in companies (979) (21) - -------- -------- -------- Net cash provided by (used in) (10,363) 11,054 7,010investing activities from continuingoperationsNet cash provided by (used in) (4,022) (2,222) 43,897investing activities from discontinued -------- -------- --------operations Net cash provided by (used in) (14,385) 8,832 50,907investing activities -------- -------- -------- CONSOLDIATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Cash flows from financing activities:Repurchase of shares, net (3,566) (2,793) (3,539)Short-term loans - - (3,327)Proceeds from Initial Public Offering of - - 22,621Orca Interactive Ltd, netProceeds from exercise of stock options, 339 223 405net -------- -------- -------- Net cash provided by (used in) financing (3,227) (2,570) 16,160activities from continuing operations Effect of exchange rate translation - - 237adjustments on cash -------- -------- -------- Increase (decrease) in cash and cash (39,142) (3,363) 12,482equivalents from continuing operationsIncrease (decrease) in cash and cash (20,014) (27,504) 6,281equivalents form discontinuingoperationsCash and cash equivalents form continuing 116,437 45,988 26,192operations at the beginning of the yearCash and cash equivalents form 281 11,574 503discontinuing operations at the beginning -------- -------- --------of the year Cash and cash equivalents from continuing $ $ $operations at the end of the year 45,988 26,192 45,458 ======== ======== ======== Cash and cash equivalents from $ $ $discontinuing operations at the end of the 11,574 503 -year ======== ======== ======== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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