Top Image Systems Reports Third Quarter 2008 Results

12 November 2008

Top Image Systems, Ltd. (TIS) (NASDAQ: TISA, TASE: TISA), the leading innovator of data capture solutions, today announced its financial results for the third quarter, ended September 30, 2008. Highlights - Revenues reached $8.5 million, up 30% year-over-year - Operating income of $213 thousand - Improved gross margin to 54% from 39% in third quarter of last year - Continued strong sales pipeline - Operating profit over first 9 months of 2008 totaled $945 thousand Third Quarter 2008 Results Revenues for the quarter increased 30% reaching $8.5 million, compared to $6.5 million in the third quarter of last year, and a sequential increase of 1% over the $8.3 million reported in the prior quarter.

Approximately, 50% of third quarter revenues were generated from products and 50% from services. Operating income for the quarter totaled $213 thousand, a substantial improvement from the operating loss of $1,828 thousand for the third quarter of 2007 and a decrease of 28% compared to the operating income of $297 thousand reported in the prior quarter. On a GAAP basis, net loss for the quarter totaled $1.0 million compared to a net loss of $2.0 million in the third quarter of last year, and a net loss of $1.3 million in the prior quarter. GAAP loss per share in the third quarter totaled $0.113, compared to a loss per share of $0.229 in the third quarter of 2007, and a loss per share of $0.140 in the prior quarter. Non-GAAP net loss for the quarter totaled $0.9 million, compared to a non-GAAP net loss of $1.7 million in the third quarter of 2007 and a net loss of $1.3 million in the prior quarter. Non-GAAP net income (loss) excludes stock option compensation and amortization of intangible acquired assets, which totaled $0.1 million in the third quarter of, $0.3 million in the third quarter of 2007 and a negligible amount in the prior quarter. A reconciliation between net income (loss) on a GAAP basis and a non-GAAP basis is included in the financial tables below.

Dr. Ido Schechter, Top Image Systems’ CEO, commented: “The first nine months of 2008 were a very exciting period and the strongest in our Company’s history. In only the first three quarters of 2008, with $26.1 million in total revenues so far, we have already surpassed TIS’s record annual revenue level. In fact, our growth in revenues of 30% over last year is all organic, and was driven by the robust performance of our branch offices worldwide, all of which are profitable. Our pipeline remains healthy and strong, and reflects our efforts to transition from a sales mix favoring hardware and third party components to software and services, especially in Asia Pacific. Thus, our pipeline now includes a higher proportion of projects based on solutions sales rather than hardware and third party components, and represents good ongoing revenue potential for us.”

Dr. Schechter continued, “Nevertheless, we are aware that the world economy has deteriorated in a short period. While our results, our pipeline and visibility remain strong despite this development, we are taking preemptive steps to minimize any effects of a potentially sharp slowdown and to be prepared for the future. Over the past few months, we have strengthened our cooperation with our existing as well as new major partners throughout the world. Through these partnerships, we diversify and gain better access to many different local and vertical markets, thus building our pipeline and increasing the number of opportunities we approach.” Dr. Schechter concluded: “TIS has established itself as the clear global technological leader in document capture solutions. We strongly believe in the company’s stability and look forward to maintaining our positive momentum going forward.”

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