Orad Hi -Tec Systems Ltd. (Neuer Markt: OHT.f), a world-leader in the field of broadcast production systems, sports broadcasting products, and sports webcasting products, today reported results for the third quarter of 2000. Revenues grew by 76% to $16.28 million in the first nine months of 2000 from $9.23 million in the first nine months of 1999. Revenues for the third quarter of 2000 increased by 52% to $6.73 million from $4.42 million in the third quarter of 1999 and 23% from second quarter 2000.
The revenues results exceed projections. Net of the impact of the acquisitions of ELSET, Getris and Numeric Video, and net of the operating expenses of these three companies, Orad recorded positive net income for the first nine months of 2000 of $1.26 million. A strong and stable average gross margin of over 60% was achieved across all of Orad’s products.
The Company has substantially increased its research & development activities as well as sales and marketing efforts as a result of its acquisitions. The increased R&D efforts will solidify Orad’s position as a leader in the broadcasting and webcasting markets. The Company is successfully integrating products and technologies of ELSET, Getris and Numeric Video into its existing product offering and is starting to leverage the combined marketing and sales network. This has enabled the Company to offer a broader and more comprehensive product offering and integrated product solutions for broadcasters and webcasters.
Commenting on the financial results for the third quarter of 2000, Avi Sharir, President and Chief Executive Officer of Orad said: ‘I am proud to announce that Orad has managed to continue its growth momentum, show very positive sales growth, and close acquisitions in this quarter. We have solidified our position as a market leader and will continue to do so. Orad maintains and expects to continue to maintain gross margins at these levels. It was a great honor for us to be awarded the Emmy for implementation of real time virtual imaging for live events on television using our IMadGINE and CyberSport products earlier this month’.
Mr. Sharir continued, ‘We have also made significant headway in further penetrating new markets especially in Europe, North America and Asia. We have increased our involvement in high-profile events such as the Sydney 2000 Olympics. So far, the Olympics have been the most significant global exposure of Orad’s technology enhancing the viewers’ enjoyment and sports understanding. We were pleased by the selection of our systems for use by the most significant international broadcasters for the Sydney 2000 Olympic Games such as USA’s NBC, Germany’s ARD, Japan’s NHK, China’s CCTV, France2, and Australia’s Seven Network, just as we are eager to provide a global audience with timely information during these world-class events. We intend to increase our participation in global events and will continue to provide cutting edge technologies to the broadcasting and webcasting communities.’
Dr. Michael Tamir, Orad’s Co-founder and Executive Vice-President noted: ‘We have seen a strong increase in sales for NT platform-based CyberSet used by broadcasters and webcasters. Xync provides us with unrivalled infra-red tracking technology while Getris and ART complement our on-air graphics capabilities. Numeric Video’s Forum provides Orad with slow motion tools to complement our current offering. These acquisitions will enable us to provide our customers with a total production solution. Orad now has R&D centers outside Israel, mainly in France and Poland, and with the new acquisitions also in Austria and Germany.
Dr. Tamir continued, ‘We have managed to add many new customers, among them USA’s NBC and BET, UK’s BBC, Korea’s KBS, and Belgium’s RTBF. We have seen our systems used in a variety of high profile events. This past weekend for example, IMadGINE was used on the 17th hole during AFLAC LPGA Ladies Golf Championship. We are further penetrating different markets and have significantly increased our sales in the USA. OradNet, our wholly owned subsidiary dedicated to sports webcasting has made several sales to customers such as Canal Plus in Spain and Jumpy in Italy.’
This quarter’s financial statements include Getris operations. The Company’s acquisition of Getris was accounted for as a pooling of interests. Therefore, all current as well as historical figures were adjusted to include the results of operations of Getris. This quarter’s financial statements include Numeric Video operations as well.
Revenues for the third quarter 2000 increased by 52% to $6.73 million from $4.42 million in the third quarter of 1999. Sales for the third quarter increased by 23% from the second quarter of 2000. The revenues results exceed projections for the quarter.
Orad reported a loss in the first nine months of 2000. ELSET, Getris and Numeric Video are loss-making historically on an operational basis. Net of the impact of these three acquisitions and net of the operating expenses of these three companies, Orad recorded net profit for the first nine months of 2000 of $1.26 million. Orad’s operations included a further investment and increase in R&D costs generated by the acquisition of Getris and Numeric Video, continued integration of ELSET into the Company’s R&D activities and increased sales and marketing expenses associated with market introduction of ELSET, Getris and OradNet’s products.
Gross margin for the first nine months of 2000 was 61% compared to 59% in the first nine months of 1999. Gross margin in the third quarter of 2000 was 60% compared with 62% in the second quarter of 2000. Gross margin remained strong and stable at an average level of 60% and above, mainly due to the fact that Orad’s products are based on technologies which are developed in-house, a substantial advantage which Orad will continue to leverage upon. The Company anticipates that gross margins for 2000 will remain at these high levels with the continuing mix of the product offering including the products from the recently acquired Getris and Numeric Video.
R&D expenses increased in the third quarter of 2000 to $1.41 million compared to $517 thousand in the third quarter of 1999. For the first nine months of 2000, R&D expenses increased to $2.87 million compared to $1.88 million in the first nine months of 1999. R&D expenses increased from the second quarter of 2000 by 172%, from $822 thousand. The Company is continuing its R&D programme and aims to complete the interface between ELSET, Getris, Numeric Video and Orad’s line of products as well as continue the development of its interactive webcasting applications. The Company decided to strongly focus on its sports products offering in view of the forthcoming Football World Cup in 2002. The Company decided to continue to increase its research and development activities in order to maintain its position as the market leader.
Selling, general and administrative expenses increased in the third quarter of 2000 to $3.46 million compared with $2.44 million in the third quarter of 1999. The Company has established a new sales and marketing subsidiary in Paris, France.
The Company has also increased its presence at trade shows, conventions and other industry events, with the objective of enhancing coverage of Orad’s key markets and activities. The Company anticipates a significant increase in sales and marketing efforts both due to Orad’s expanding product line and due to the acquisitions of Getris and Numeric Video S.A. and the integration of their respective product lines and technologies into Orad’s existing product offering. In addition, the promotion of OradNet’s sports webcasting application in view of the forthcoming launch of TOPlay, has resulted in and is expected to continue to generate increased sales and marketing expenses. The Company intends to continue investments in sales and marketing in the medium term and expects this will lead to substantial growth from 2001 onwards.
Financial income and other income in the third quarter of 2000 was $417 thousand compared with a financial income and other income of $7 thousand in the third quarter of 1999.
Adjusted EBITDA was negative $993 thousand in the first nine months of 2000 compared with negative $2.0 million in the first nine months of 1999.
Acquisition of Numeric Video
Inline with its strategy of pursuing strategic acquisitions and strengthening its hold on the sports broadcasting market, the Company has completed the acquisition of Numeric Video S.A. in September 2000. The acquisition provides Orad with a broad range of innovative professional television equipment including video servers and a live slow motion system for sports replay applications. It will also increase the product offering available for sports users by providing them with more product options. Both Getris and Numeric Video are expected to contribute significant building blocks for a battery of new analysis, replay and production tools to be launched in the near future in view of the forthcoming 2002 Football World Cup. The transaction was an all-share purchase based on a valuation of €2.2 million as of the day of the announcement. Orad will continue to support existing Numeric Video customers which include, among many others: France2, Canal+, BBC, ABC, Plaza Media, and Thomson Broadcast.
Acquisition of Xync GmbH
In October 2000, Orad signed a Memorandum of Understanding to acquire Xync GmbH of Bonn, Germany – a world leader in infra-red tracking and calibration technologies and a technology enabling provider for virtual set vendors. Orad expects to acquire Xync GmbH based on a valuation of €14.0 million.
Xync’s shareholders are management and founders. Xync’s cooperation agreement with the German national research center for information technology (GMD), Germany’s leading governmental research and development organization with a staff of over 1000 people, is a valuable alliance providing the company with access to some of the leading technological minds and facilities in the continent. Xync customers include, among many TV broadcasters around the world: Sat.1, SZM, RTL in Germany, ORF in Austria, and NHK in Japan. The Company expects that the combination of Orad and Xync’s technologies will result in further market leading virtual set tracking technologies.
Acquisition of ARTS Computer Technologies
In September 2000, Orad signed a Memorandum of Understanding to acquire the assets of Austrian-based ARTS Computer Technologies GmbH. The purchase price is expected to be $4 million in cash and shares plus an additional $2 million in shares conditional on whether the product development by ARTS meets certain revenue targets. ARTS comprises of 3D-graphic solutions for various application areas like business graphics, virtual studio, postproductions and digital video effects. ARTS specialises in animating 3D-representation of bar-, pie- and line-charts or any other 3D-element. It is particularly suited for news, sports, weather and other broadcast applications. ARTS on-air-graphics requires only 2D graphic skills for operation and runs on both NT and UNIX platforms.
New Technological Innovations
The Company revealed its latest technological innovations at IBC2000 in early September. Among the many innovations shown are:
Clickable Video: The Company has developed an interactive platform that uses the Company’s camera and object tracking technologies to generate clickable zones on a live video. Clicking on an object in a video, users can access application or information concerning that object. The Company expects that during a live fashion show, for example, broadcast on the Internet or over interactive TV, the user could click on a moving model and from various applications available can choose to instantly purchase his/her’s jacket. Clickable Video can be used for news, sports, auctions, shopping, game shows, children’s shows and many other program types. The Clickable Video is also available for interactive television and via set top boxes.
SporTrack: a system based on microwave radar technology to track and identify players and the ball in real time for broadcast programme enhancement and for live webcasting. SporTrack provides a deeper analysis of events in a more attractive means of presentation. The Company’s first application for SporTrack will be horse-race webcasting for on-line gaming and betting applications. SporTrack complements Orad’s CyberSport system by adding the objects tracking dimension.
Orad and the Sydney 2000 Olympics
Orad’s technology has been chosen by leading international broadcasters such as USA’s NBC, Germany’s ARD, Japan’s NHK, France2, Australia’s Seven Network – the official broadcaster of the Sydney 2000 Olympics, and China’s CCTV in the broadcast of the Sydney 2000 Olympic Games. Orad’s CyberSport systems were deployed in the track & field, swimming and other venues in Sydney and used to insert graphics and special effects into the live broadcasts of the events. Lines representing world records, ‘virtual runners’, ‘virtual swimmers’ and many other graphical and analysis tools were viewed by millions watching the Olympic broadcasts.
‘We knew that the action from the swimming venue was going to be terrific in Sydney and the viewing experience was significantly enhanced by both the lane identification and the world record line,’ said NBC Sports and Olympics Chairman Dick Ebersol. ‘The flags turned out to be one of the greatest advances in Olympic television ever.’
Orad’s virtual sets were deployed at the International Broadcast Centre in Sydney and used live by high profile broadcasters such as Japan’s NHK, Mexico’s TV Azteca and Israel’s Channel 1. Many other broadcasters used Orad’s virtual sets to cover the Olympics in their home studios. The Olympics reflected Orad’s position as a leader in sports production and analysis and in virtual set production.
Cooperation with Intel
In the course of the quarter, OradNet has also entered its first Project Statement Addendum (‘PSA’) within the framework of Orad’s cooperation agreement with Intel Corporation, in order to jointly develop a bandwidth friendly, high-performance, scalable, 3D graphics sports webcasting tools for soccer.
Guy Blair Ph.D, Marketing Manager at Intel Architecture Labs said that: ‘Although this technology is still evolving, the seeds have been planted. Sports, broadcasting, games and affiliated industries will see significant developments over the next few years. New interactive capabilities and innovative interfaces, such as those that OradNet develops, will simplify the client’s use of sports immersion technologies and enhance their experience.’
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