Emblaze Ltd.
("Emblaze" or "the Group")
FINAL results for the year ENDED 31 December 2008
Ra'anana, Israel, 30 April 2009: Emblaze Ltd (LSE: BLZ), today announces its
final results for the 12 months ended 31 December 2008. All references to $ are
to 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 group
as a strong mix of mature, profitable, cash generating businesses under the
Formula group ("Formula" or the "Growth arm") together with a number of
exciting technology businesses that we believe to have excellent prospects for
creating 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 profits
throughout 2008 as a whole and all Formula subsidiaries reported revenue growth
together with positive cash flow and operating profits.
The Group began consolidation of Formula in Q2 2007. Revenues of the Group's
Growth arm for the year ended 31 December 2008 totaled $590.8 million compared
to $378.9 million in the nine months ended 31 December 2007 with operating
income in 2008 of $30.4 million compared to $17.2 million in the nine months
ended 31 December 2007.
The table below summarises the 2008 performance of Formula in comparison to its
2007 twelve months performance (selected items):
Formula - Financial Highlights Twelve months ended
(audited) December 31,
2008 2007
US$ 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 by
Emblaze is the direct result of efforts invested by Emblaze. The Emblaze
management has been highly involved in the strategy formation and
implementation throughout the Formula group and played an integral in achieving
the 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 is
expected launch and to go into production in the second half of 2009 and Emoze
is already offering its solutions world-wide with first flow of revenues from
operators and other users.
The Monolith Project
Following five years of research, Emblaze Mobile, a wholly owned subsidiary of
the Group, has embarked on an ambitious project to design the ultimate holistic
mobile device - the Monolith. Emblaze Mobile signed contracts in 2007 with
Japanese giants Sharp and ACCESS to build, manufacture, and globally market the
new device. In addition, Emblaze Mobile is partnering with over 20 third-party
mobile technology vendors, all of whom are the leading innovators in their
specific field of mobile ingenuity. Together, Emblaze Mobile, is creating what
is aimed to be the most sophisticated and revolutionary device in the market.
The driving principle behind this futuristic project is to create an integrated
communications device with a unique user interface and graphics design, the
likes of which has never been seen in the industry. This Linux based device is
not a mere phone, but rather an application centric device that acts as a full
blown media and communications center. Built upon a brand new mobile software
platform, the Monolith seamlessly integrates telephony and messaging, personal
information management, push-technology information and media, mobile office
access, GPS navigation and location based services, web browsing, mobile media
player, and more.
The Monolith is designed as a true ARPU (Average Revenues per User) driving
machine that is so needed these days by operators combining built-in services
such as music store, family tracker,BlackBerry™-like push-email and more in a
manner never to date done by any other vendor. Operators have for years been
seeking value added services to increase ARPU in addition to air-time, but so
far have not made much progress. Together with the Monolith device, we intend
to provide operators with a bundled package of services that enables the
operators 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 already
presented working samples to leading operators and has received excellent
responses. The Company is currently in various stages of negotiations with the
top ranked global operators for sizeable orders. Commencement of production by
Sharp to fulfill such potential orders from operators is expected in the second
half 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 BlackBerry™-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 and
Java) and has recently released its first social community messaging solution
for Facebook. This achievement extends EMOZE's reach as any Facebook member can
now communicate not only from his/her PC but also from any mobile handset they
own.
EMOZE provides its service world-wide and is already generating revenues from
operators, value added resellers and individual users. Management expects EMOZE
to break-even before the end of 2009.
There are approximately 1.4 billion email users world-wide; many of them would
like to have their emails pushed to their handsets. We estimate that today only
around 30 million email users are provided with such a service. The Board
therefore considers EMOZE to present an excellent opportunity to create
shareholder value through its efficient technology and competitive pricing.
ZONE-IP
ZONE-IP Ltd. (LSE:ZIP)is a 65% held subsidiary of Emblaze and holds all of the
issued shares of Emblaze VCON Ltd., which is engaged in the development and
deployment of high-performance, end-to-end videoconferencing solutions over IP
and ISDN networks for enterprises of all sizes.
The world of video conferencing is changing from the traditional video
conferencing meeting rooms to personal computers in organisations. This change
will create a new paradigm for using video conferencing in medium to large
corporations. With its new desk top solutions, Emblaze VCON is well placed to
lead this market. The current turmoil in the financial markets is producing a
trend towards cutting corporate travel costs in favour of video conferencing
solutions.
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 and
its subsidiaries are not operating in a vacuum and therefore they are not
immune to the global economic crisis. However, thanks to the implementation of
our strategy, we believe that Formula and its subsidiaries are well prepared to
navigate through the troubled waters of the current global environment as well
as to explore new acquisitions, compatible with its strategy and current
portfolio companies. The activity of the Innovation arm is closely monitored in
order to mitigate the risks. We expect that in 2009 our investments in the
Innovation Arm, in particular the Monolith, will come to fruition.
Copies of the Report and Accounts are available from the Company's website at
www.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 (NASDAQ: FORTY and TASE: FORT), which
harbors the following subsidiaries: Magic Software Enterprises Ltd. (NASDAQ &
TASE: MGIC) develops, markets and supports composite application development
and deployment platforms with a service-oriented architecture (SOA), including
application integration and business process management (BPM), with existing
and legacy systems; Matrix IT Ltd. (TASE: MTRX) is one of Israel's leading
integration and information technology services companies, active in four
principal areas: software solutions and services, software products,
infrastructure solutions and hardware products, and training and assimilation.;
Sapiens International Corporation N.V. (NASDAQ & TASE: SPNS) is a provider of
IT solutions that modernize business processes to enable insurance and other
companies to quickly adapt to changes; and nextSource Inc., designs, develops
and implements web-based, high quality, innovative human capital management
solutions.
Our Innovation arm includes Emblaze Mobile, a designer of advanced mobile
devices; EMOZE, a provider of Push Email and synchronisation technology for
mobile devices; and ZONE-IP (LSE: ZIP) (Emblaze V CON), a provider of wireless
video communications technologies and conferencing solutions for operators and
enterprise markets over IP networks.
The Emblaze Group is traded on the London Stock Exchange (LSE: BLZ) 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 $ -