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Top Image Systems Reports Fourth Quarter and Full Year 2017 Results and Announces That It Has Entered into a Term Sheet with Hale Capital Partners, LP, for the Provision of Up to $3 Million of Senior Debt Financing

TEL AVIV, Israel and PLANO, Texas, May 17, 2018 (GLOBE NEWSWIRE) -- Top Image Systems, Ltd. (TISA), a global innovator of intelligent content processing solutions, today announced its financial results for the fourth quarter of 2017 and year ended December 31, 2017.

Fiscal 2017 represented an important inflection point for the Company. The over-arching priority for the Company during the year was to deliver improved operational performance and restore the Company to financial health by focusing on achieving continuous efficiency improvements from operations, protecting its core receivables automation and forms processing business, and accelerating investment in higher-velocity hybrid cloud-based process automation solutions, with particular emphasis on accounts payable automation. 

“I am pleased to report that, as of the end of fiscal 2017, we have made significant progress toward our goal to achieve break-even EBITDA from operations and delivered sequential quarter over quarter growth in our top line revenue, as well as revenue growth over the same period in fiscal 2016, enabling us to position our company for stronger financial performance in fiscal 2018,” commented Brendan Reidy, CEO of Top Image Systems.  

The Company entered into a Term Sheet with Hale Capital Partners, LP, for the provision of up to $3 million of senior debt financing, bearing interest at a rate of prime plus 5% per annum, in order to provide the Company with additional liquidity if needed. The Company will issue to the HCP Lenders 10-year warrants with an exercise price of 115% of the market price to purchase a number of shares of common stock equal to 40% of the sum of the New Senior Debt Facility.

“The investment by Hale Capital Partners, LP, confirms their confidence in and support of the transformational measures that we have undertaken to restore the company to financial health and to pave the way toward profitable operations,” commented Brendan Reidy, CEO of Top Image Systems.

Fourth Quarter Highlights

• Revenues for the quarter were $7.9 million, compared to $7 million in the same period in 2016 and $7 million in the third quarter of 2017, representing 13% quarter over quarter growth in our top line revenue;
• Quarterly operating loss was ($1.2) million, compared to $(1.5) million in the third quarter of 2017 and $3.2 million in the same period in 2016;
• Adjusted EBITDA* was a loss of $(0.7) million, the same as in the third quarter of 2017 and $(1.1) million during the same period in 2016;
• Quarterly recurring revenues were $4.6 million, representing 58% of total revenue, compared to $4.9 million, representing 70% of total revenues, in the third quarter of 2017 and $4.6 million, representing 65% of total revenues, in the same quarter of 2016;
• Quarterly GAAP total expenses were $9.1 million, compared to $8.5 million in the third quarter of 2017.

Full Year Fiscal 2017 Highlights

• Annual revenues were $29.7 million, compared to $31.6 million last year;
• Net loss was $(6.6) million, the same as fiscal 2016;
• Operating loss was $(5.8) million, the same as in 2016.
• Adjusted EBITDA* was a loss of $(2.8) million, compared to a loss of $(0.6) million for fiscal 2016;
• Recurring revenues were $18.7 million, representing 63% of total revenues in fiscal 2017, compared to $19.4 million, representing 61% of total revenues, in 2016;
• GAAP total expenses for fiscal 2017 were $35.4 million, compared to total expenses of $37.4 million for fiscal 2016.
• Successfully extended multi-year subscription agreements with our top financial service providers, which will generate high-value private cloud recurring revenue streams;
• Closed a multi-year, seven-figure agreement with a leading business process outsource service provider in EMEA, providing call center financial process automation and digital mailroom solutions;
• Successfully upgraded one of our largest customers, Bosch, to the latest version of eFLOW AP, processing more than 450,000 invoices per month, which was featured by IDC in a published case study;
• Closed a two-year, $3.3 million transaction with a leading multinational energy company to upgrade its existing accounts payable solution to eFLOW AP for SAP;
• Selected by a Japanese personal care company with subsidiaries worldwide to implement an accounts payable solution that automates the capture and processing of over 180,000 supplier invoices annually; and
• Closed two strategic deals for eFLOW AP for SAP in the US including a multi-year, six-figure transaction processing over 65,000 invoices annually in a hybrid cloud environment.
• During fiscal 2017, TIS announced and implemented additional measures to achieve cost reductions through consolidation and restructuring:

  • Consolidation of sales and marketing functions for the Americas into our US headquarters in Plano, Texas, under the leadership of John McCaffrey, Vice President and General Manager of TIS Americas;
  • Integration of the global Engineering teams under Arvind Sharma, Senior Vice President of Engineering; and
  • Implementation of a Customer Success initiative designed to improve customer service levels and to maximize high-value recurring revenue from our installed base of customers.
  • These measures instituted in fiscal 2017 have resulted in a reduction of the Company’s operating expenses by $2 million. 

Brendan Reidy, CEO of Top Image Systems, commented: “We are confident that we built the foundation for achieving a balance between delivering improved operating results and delivering growth from the applications software business. Our strategy going forward is to continue on our path to return the company to profitable operations. It has not been an easy path toward attaining this goal. Our business transformation journey requires a careful balancing of priorities, beginning with the challenges associated with reducing expenses while delivering modest revenue growth. We are confident that we have rationalized our expense structure, and have the right focus on managing our expenses. Now, we are in a better position to make the necessary prudent investments to grow revenues in our three target market segments where we have demonstrated competitive advantages.”  

Conference Call

The Company will host a conference call and webcast on Thursday, May 17, 2018, at 10:00 am ET, during which the Company’s management will present and discuss the financial results and be available to answer questions from investors.

To join the conference call, please dial in to one of the following teleconference phone lines using the numbers listed below. Please begin placing your calls at least five minutes before the conference call commences. If you are unable to connect using the toll-free number, please try the US Toll/International dial-in number.

US Toll-Free Dial-in Number: 1-877-407-0784

US Toll/INTERNATIONAL Dial-in Number: 1-201-689-8560

Israel Toll-Free Dial-in Number: 1-809-406-247

The conference call is scheduled to begin at:

7:00 a.m. Pacific Time / 10:00 a.m. Eastern Time / 5:00 p.m. Israel Time

To join the live webcast, please click on the following link: https://viavid.webcasts.com/starthere.jsp?ei=1194240&tp_key=41503318e5

For those unable to attend the live call or webcast, from the following day an audio recording of the call will be made available for download from the Investors section of the Top Image Systems website www.topimagesystems.com.
Throughout the following three months, the recorded webcast can be viewed by clicking on the same link as for the live webcast: https://viavid.webcasts.com/starthere.jsp?ei=1194240&tp_key=41503318e5

* GAAP and Non-GAAP Financial Measures

This release includes GAAP and non-GAAP financial measures, including, without limitation, Adjusted EBITDA (which eliminates the impact of interest, taxes, amortization and depreciation expenses, as well as non-cash stock-based compensation expenses and other non-recurring items not part of regular business), Non-GAAP Net Income (Loss) (which eliminates the impact of amortization expenses as well as non-cash stock-based compensation expenses and other non-recurring items not part of TIS’ ongoing business operations) and Non-GAAP Income (Loss) per share. Non-GAAP measures are reconciled to comparable GAAP measures in the tables below.

The presentation of these non-GAAP financial measures should be considered in addition to TIS’ GAAP results provided in the attached financial statements for the fourth quarter ended December 31, 2017, and the other periods presented, and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The tables below reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure. TIS’ management believes that these non-GAAP financial measures provide meaningful supplemental information regarding TIS’ performance by excluding the impact of certain items that may not be indicative of TIS’ core business operating results. TIS’ management believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing TIS’ performance in addition to the GAAP results. These non-GAAP financial measures also facilitate comparisons to TIS’ historical performance and its competitors’ operating results. TIS includes these non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making.

TIS Investors Contact:
James Carbonara
Partner, Hayden IR
james@haydenir.com (646) 755-7412

About Top Image Systems
Top Image Systems™ (TIS™) Ltd. is a global innovator of on-premise and cloud-based applications that optimize content-driven business processes such as procure to pay operations, remittance processing, integrated receivables, customer response management and more. Whether originating from mobile, electronic, paper or other sources, TIS’ solutions automatically capture, process and deliver content across enterprise applications, transforming information entering an organization into useful and accessible electronic data, delivering it directly and efficiently to the relevant business system or person for action with as little manual handling as possible. TIS’ solutions are marketed in more than 40 countries through a multi-tier network of distributors, system integrators, value-added resellers and strategic partners. Visit the company's website at https://www.topimagesystems.com/ for more information.

Forward-Looking Statements

Certain matters discussed in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results expressed or implied in those forward-looking statements. Words such as "will," "expects," "anticipates," "estimates," and words and terms of similar substance in connection with any discussion of future operating or financial performance identify forward-looking statements. These statements are based on management's current expectations or beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially including, but not limited to, risks in product development, approval and introduction plans and schedules, rapid technological change, customer acceptance of new products, the impact of competitive products and pricing, the lengthy sales cycle, proprietary rights of TIS and its competitors, risk of operations in Israel, government regulation, litigation, general economic conditions and other risk factors detailed in the Company's most recent annual report on Form 20-F and other subsequent filings with the United States Securities and Exchange Commission. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.

       
Top Image Systems Ltd.      
Consolidated Balance Sheet as of      
  December 31,   December 31,
   2017    2016
           
  In thousands
       
Assets      
       
Current Assets:      
Cash and Cash Equivalents $   2,231   $   7,636
Restricted Cash   220     119
Trade Receivables, net   5,226     6,717
Other Accounts Receivable and Prepaid Expenses   1,108     829
       
Total Current Assets   8,785     15,301
       
Long-Term Assets:      
Severance Pay Funds   638     1,029
Restricted Cash   163     145
Long-term Deposits and Long-term Assets   77     136
Property and Equipment, net   793     1,000
Intangible Assets, net   2,353     3,623
Goodwill   18,822     18,405
       
Total Long-term Assets   22,846     24,338
       
Total Assets $   31,631   $   39,639
       
Liabilities and Shareholders' Equity      
       
Current Liabilities:      
       
Short-term Bank Loans $   800   $   3,017
Trade Payables   1,543     1,237
Deferred Revenues   3,033     3,594
Accrued Expenses and Other Accounts Payable   4,324     3,430
       
Total Current Liabilities   9,700     11,278
       
Long-Term Liabilities:      
       
Accrued Severance Pay $   721   $   1,214
Non-current Deferred Revenues   1,893     2,626
Other Long-term Liabilities    5,148     4,528
       
Total Long-term Liabilities   7,762     8,368
       
Total Liabilities $   17,462   $   19,646
       
Total Parent Shareholders' Equity  $   14,119   $   19,955
Non-controlling Interest    50     38
Shareholders' Equity   14,169     19,993
       
Total Liabilities and Shareholders' Equity $   31,631   $   39,639


               
Top Image Systems Ltd.              
Statement of Operations for the              
  Three months ended   Three months ended   Twelve months ended   Twelve months ended
  December 31,   December 31,   December 31,   December 31,
   2017    2016    2017    2016
                               
  In thousands, except per share data
               
License Revenues   1,612       1,232       5,236       5,973  
Services Revenues   6,263       5,779       24,432       25,662  
Revenues $ 7,875     $ 7,011     $ 29,668     $ 31,635  
Cost of License Revenues   143       (575 )     562       701  
Cost of Services Revenues   3,984       4,874       16,093       16,119  
Cost of Revenues    4,127       4,299       16,655       16,820  
Gross Profit   3,748       2,712       13,013       14,815  
Expenses              
Research & Development   1,260       1,025       4,997       4,581  
Sales & Marketing   1,927       1,702       6,586       7,448  
General & Administrative   1,657       3,104       6,593       6,910  
Amortization Costs    153       124       613       502  
Restructuring Charges   -       (44 )     -       1,142  
    4,997       5,911       18,789       20,583  
Operating (Loss) Profit      (1,249 )       (3,199 )       (5,776 )       (5,768 )
Financing income (expenses), net     (288 )       (513 )       (603 )       (956 )
Other Income (expenses), net     -         6         7         12  
(Loss) profit  Before Taxes on Income     (1,537 )       (3,706 )       (6,372 )       (6,712 )
Tax (expenses) Income     40         (306 )       (204 )       115  
Net (Loss) Profit      (1,497 )       (4,012 )       (6,576 )       (6,597 )
Net Income Attributable to Noncontrolling Interest      (3 )       (2 )       (12 )       (13 )
               
Net (Loss) Profit  $ (1,500 )   $ (4,014 )   $ (6,588 )   $ (6,610 )
Earnings per Share               
Basic (Loss) Earnings per Share  $ (0.08 )   $ (0.22 )   $ (0.37 )   $ (0.37 )
Weighted Average Number of Shares Used in Computation of Basic Net (Loss) Income  per Share     18,120         17,932         18,007         17,926  
Diluted (Loss) Earnings  per Share  $ (0.08 )   $ (0.22 )   $ (0.37 )   $ (0.37 )
Weighted Average Number of Shares Used in Calculation of Diluted Net (Loss) Earnings per Share     18,120         17,932         18,007         17,926  
                               
   
  Three months ended   Three months ended   Twelve months ended   Twelve months ended
  December 31,   December 31,   December 31,   December 31,
  2017   2016   2017   2016
                               
  In thousands, except per share data
               
Adjusted EBITDA:               
Net (Loss) Profit $ (1,500 )   $ (4,014 )   $ (6,588 )   $ (6,610 )
Interest      171         69         691         143  
Other Financial Expenses      117         444         (88 )       813  
Taxes     (40 )       306         204         (115 )
Depreciation      178         158         704         668  
Amortization     159         359         1,294         1,441  
Stock-based Compensation Expenses     125         402         797         1,121  
Acquisition Related Costs     -         -         -         -  
Restructuring Charge     -         (44 )       -         1,142  
One time termination expenses     -         -         -         117  
Debt Reserve Adjustment     128         1,129         183         719  
Other     -         -         -         -  
Total Adjusted EBITDA $ (663 )   $ (1,191 )   $ (2,804 )   $ (561 )
               
Reconciliation of GAAP to Non-GAAP Results:               
               
Net (Loss) Profit $ (1,500 )   $ (4,014 )   $ (6,588 )   $ (6,610 )
Amortization     159         359         1,294         1,441  
Stock-based Compensation Expenses     125         402         797         1,121  
Acquisition Related Costs     -         -         -         -  
Deferred Tax Assets Amortization      -         -         -         -  
Debt Reserve Adjustment     128         1,129         183         719  
Restructuring Charge     -         (44 )       -         1,142  
               
Non-GAAP Net Profit $ (1,089 )   $ (2,168 )   $ (4,315 )   $ (2,187 )
               
Non-GAAP Net income used for basic earnings per share  $ (1,089 )   $ (2,168 )   $ (4,315 )   $ (2,187 )
                               
Shares Used in Basic Earnings per Share Calculation      18,120         17,932         18,007         17,926  
                               
Non-GAAP Basic Earnings per Share $ (0.06 )   $ (0.12 )   $ (0.24 )   $ (0.12 )
                               
Non-GAAP Net Income Used for Diluted Earnings per Share  $ (1,089 )   $ (2,168 )   $ (4,315 )   $ (2,187 )
Shares Used in Diluted Earnings per Share Calculation      18,120         17,932         18,007         17,926  
               
Non-GAAP Diluted Earnings per Share $ (0.06 )   $ (0.12 )   $ (0.24 )   $ (0.12 )