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Wednesday, May 18, 2016 5:49:39 AM
Top Image Systems' (TISA) CEO Michael Schrader on Q1 2016 Results - Earnings Call Transcript
Michael Schrader
Thank you, Shelly and thanks to everyone on the call for joining us today. My remarks today would focus on the measures we have taken to return our company to profitability. And then I will turn the call over to our CFO, Yossi Dagan, to review Q1 results in more detail.
We are pleased to report that Q1 was a solid quarter with revenue growing 28% sequentially to $8.5 million. During the quarter, we focused on realizing operational efficiencies while positioning our company for profitable growth. We implemented our restructuring plan with an aim to substantially reduce 2016 costs. As we reported in the earnings release this morning, we reduced the cost by $608,000 or quarterly non-GAAP operational cost in comparison to Q4 2015. This lower cost level is due primarily to carefully review an optimization of the workforce along with product enhancement that reduce relying on third-party resources.
As a result we achieved quarterly results of approximately breakeven adjusted EBITDA. This solid financial performance was achieved in part due to the changes initiated in 2015 led by our expanded executive management team. In order to carry out the restructuring plan that we're potentially reutilizing the company and returning us to long-term profitability, in the immediate term we have had to expand additional cash. These costs began in Q1 and will continue in the next quarters. In Q1 we recorded pre-tax employee severance cost of $1.2 million related to the restructuring initiative.
Another parameter that we have in tracking over the past years and which we believe is an important indicator of steady growth going forward is dealt between revenue. This quarter recurring revenue reached $5 million, accounting for 60% of total revenue, an increase from $4.7 million in Q4 of 2015. This quarter we completed the first stage of the launch of our new generation financial process automation solutions fleet bringing to the market the on-premise version of eFLOW AP Automation for SAP which we introduced to the market in March at the SAP financial event in Las Vegas. The solution provided SAP was with the uniquely immersed experience that enables company to achieve improved breakthrough processing of invoices, reduced AP cycle times, and higher visibility into cash flow without having to leave the familiar SAP interface.
We received very positive feedback from the industry analysts and from conference participants. We are encouraged by the growth and strength of our lead pipeline in regards to that product. This quarter we have developed opportunities for the new solution by upsetting to two existing customers that are now planning to upgrade and has three others that are in advanced stages of the pipeline. These upgrades have multiple positive impact. First, they provide a new stream of revenues. Secondly, our solution does not rely on licensing and software [ph], therefore these license costs are eliminated through higher gross margins. Third, being able to reference customers that are exclusively deploying the new solution we proved valuable for further marketing promotion as we accelerate our demand generation activities.
We were pleased this quarter to announce several AP Automation wins including the deal with the technology provider in the U.S. and invoice processing win to an automotive component supplier based in Austria, as well as a win to provide a supplementary much channel processing solution to an e-invoicing vendor in Israel. The permanent marketing campaign promoting the new premise solution has also contributed to growing the sales pipeline with respect to addition to the upsell wins to result soon in new wins [ph].
Looking ahead, the cloud ERP adoption trend is accelerating within the mid-markets with 60% of companies in the $25 million to $1 billion range, expected to adopt cloud ERP within the next three to five years. In response to this trend, in Q3 we are planning the launch of the next phase of our solution roll out, bringing to market a burden of product for hybrid and cloud environment, extremely modular and flexible, able to fit into an integrated evenly with the existing environment of most and accounts payable organization. We are confident our focus on the underserved mid-market for financial process automation provides us the foundation for sustainable growth.
The demand for accounts payable automation solutions continues to be healthy. An influential survey published in January 2016 by the Hackett Group indicates that to be competitive enterprises today are expecting their business service operations less by tightening them to see whole to improve working capital management and better utilize cash in times of low interest rate to take cost out of the business in order to fund innovation. Here AP Automation would have financed into C4 to achieve these aims.
Turning to the banking process automation market, moving ahead and expanding our focus to mid-level banks as well, to reach this large and disperse mid-market space, especially in the U.S. we have hired an experienced consultant to identify and deliver these opportunities. In addition to our remittance processing solution, we continue to market our mobile banking process automation platform and aps primarily via financial service provider partners. Recently we announced wins with partners at leading banking institutions in Italy with contract value over $700,000. In one of the year the company signed a partnership with a leading Italian financial service provider serving more than 100 banks to jointly deliver the pay solution to a top Italian retail bank. In parallel, all of Italy's top five banks has contracted TIS and other local partner to implement digital mortgage processing solution.
We also announced the Mobi service, including a mobile enrollment project in the U.S. and mobile loan processing pilot at the recent consumer bank in Belgium, and a mobile check deposit implementation in the UK. This quarter we also announced an upgrade to eFLOW5 at a Chinese bank in Hong Kong. During the quarter we announced our partnership with iStream Financial Services and with content-based best-in-class payment processing and solutions provider. iStream is looking to leverage MobiFLOW to expand the wide range of payment options customers can select as the most appropriate payment channel for each and every transaction. We are enthusiastic about working with forward thinking payments provider such as iStream; we expand the exposure to MobiFLOW to mid-range banks.
In addition to financial and banking automation, we continue to sell our core eFLOW platform, both directly as in the project we announced this quarter for exempt processing in Latin America, and primarily via partners with whom we collaborate to deliver content process automation solutions. During this quarter, Xerox and Top Image Systems announced a global reseller agreement to jointly provide customers with end-to-end workflow automation solutions for industry-specific content driven processes. According to this agreement, solutions from top image systems will be integrated into Xerox's workflow automation suite which helps simplify end-to-end processes for a range of industries including financial services, healthcare and government.
During the quarter we attended to different Xerox kick-off in North America and Europe where we educated some 400 Xerox sales and technical personnel regarding the challenges and benefit of deploying process automation solutions in different used cases across various industry sectors. The companies we work together to market in sales software via different Xerox sales organizations to enterprises seeking to optimize business processes and working to replace manual with digital data management whether in digital opportunities or as a component of Xerox's market-leading managed content services offering.
In a flash published by leading industry analyst firm, IDC, this past March; IDC applauded the global partnership as a win for both parties and noted that for Xerox this relationship was both expansion of workflow automation solutions for its enterprise sized businesses. Together the two companies are ready for actively pursuing live sales opportunities. While the potential of this partnership is large, we expect any material impact to appear overtime. At the same time we continue to execute our strategy of developing and supporting collaboration with other partners worldwide. As an example during the first quarter together with our UK partner, TerraQuest, we announced the deployment of a large-scale content processing automation project at British Government agency to digitally capture personal applications and related documents for security examination. The project has a total contract value of $350,000 for TIS and we processed approximately 1.3 million documents per year.
I would also like to note that the company has invested significant attention and resources to strengthen our project management activities, applying that method to enable rapid development and collaboration closely to enable optimum consolidation of our products portfolio going forward which will enable even stronger integration and allow us to leverage our cloud and mobile capabilities across all our end-to-end solutions. Our marketing machine is now more efficient with new personal and stronger focus on digital marketing and social media, enabling more effectively generation, as well as a better view of which activity is for revenue and create pipeline of sales opportunities.
Going forward, also the appointment of Kristian Niklasson to the position of CSO or Chief Services Officer will contribute to cross-controls and efficient effective deployments, as well as increased profitability on the professional services side. Altogether we believe that the impact of the restructuring initiative, the strong leadership from our new management team, and our enhanced solution portfolio lead by our new end-to-end on-premise, cloud and hybrid financial process automation solutions fleet for the mid-market together with our promising new partnerships, expanding channel business, and our steady cloud and mobile banking and content process automation sales supported by enhanced sales and marketing methods including the launch of our new branded website, the block and the social media presence will enable TIS to deliver revenue growth and profitability.
As an insight but also showing the current state of mind within the company, this quarter in an effort to show a tangible personal expression of confidence and support for the company, several members of the management team voluntarily co-chased open shares of the company's stock on the open market.
At this point, I turn it over to our CFO, Yossi Dagan, to provide details about quarterly financial results. Yossi?
Yossi Dagan
Thank you, Michael. Let's take a look at our Q1 results. Total revenues for the first quarter of 2016 were $8.5 million, an increase of 28% compared to $6.6 million in the first quarter of 2015. And an increase of 2% compared to the first quarter of 2015.
Recurring revenues for the first quarter of 2016 were $5 million compared to $4.7 million in the fourth quarter of 2015, and $4.8 million in the same period last year. In March we announced that company would undertake restructuring programs, reduce cost and bring the company back to financial levels and profitability. In continuation from the activities we initiated in Q4, to monitor costs and manage our working capital, in Q1 we reduced our non-GAAP operational costs by $680,000. As a result the quarterly results were approximately breakeven on adjusted EBITDA. We utilized cash off $0.2 million in connection with these restructuring Q1 2016. Without these one-time payments, our cash balance would have been $2.5 million as compared to a cash balance of $2.7 million in the fourth quarter of 2015 and $5.1 million in the same period last year.
Adjusted EBITDA was zero compared to an adjusted EBITDA loss of $2.5 million in the fourth quarter of 2015 and breakeven in the same period last year. Gross profits for the first quarter of 2016 was $4.2 million compared to $2.4 million in the fourth quarter of 2015 and $4.5 million in the first quarter last year. Gross margin for the first quarter of 2015 was 50% compared to 36% in the fourth quarter of 2015 and 54% in the same period last year. First quarter 2016 GAAP loss per share was $0.12 compared to per share loss of $0.34 for the fourth quarter of 2015, and $0.06 for the same period of last year.
First quarter 2016 non-GAAP loss per share was $0.02 compared to a loss per share of $0.13 in the fourth quarter of 2015 and $0.03 in the same period last year. GAAP loss for the first quarter of 2016 was $2.1 million compared to a loss of $6.1 million in the fourth quarter of 2015, and $1 million in the same period last year. Non-GAAP net loss for the first quarter of 2016 was significantly impacted by the employee severance [ph] cost of $1.2 million. Going forward we continue our efforts to provide management with real-time visibility into our financial results, emerging true efficiencies and mixed volumes and timely financial decisions, steps which ultimately contribute to the company's long-term value.
This concludes my remarks and I would like to turn the call back to Michael for his closing statement. Michael?
Michael Schrader
Thank you very much, Yossi. We expect our improved financial performance to be sustainable and we have numerous opportunities ahead of us including sales from the first stage launch of our on-premise STA solution, subsequent launches for the cloud and hybrid environments, continued traction in mobile, new partnerships and improved sales and marketing processes.
Furthermore as I mentioned, at the beginning and Yossi reiterated, we have improved our cost controls and achieved approximately breakeven level already this quarter. Consequently Top Image Systems is in a good position to improve the shareholder value.
Thank you all very much for your time and attention so far. I would like to open the call for questions and answers. Thank you all for listening.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question is coming from Richard Baldry of ROTH Capital Partners. Please proceed with your question.
Richard Baldry
Thanks. Can you talk about what the full quarter expected impact of the cost productions are, assume that $680,000 was probably only a partial quarter impact. Have you scaled what that would be for maybe 2Q in a fall?
Michael Schrader
Hi Rich. This is correct, we initiated the restructuring in March so definitely this is partial quarter but as I mentioned we started to look at our costs also in Q4 and we look at the cost level also going forward in the next quarters. So we monitor on an ongoing basis our working capital now. So other than the restructuring, we manage to reduce the costs in Q1 significantly versus Q4 because of these controls and working capital management. In the next quarters, we expect to have additional reductions in cost due to the restructuring initiative.
Richard Baldry
And is there a way to scale, or could it be 2X $680,000 -- could it be 3X since it's was only a one month impact?
Michael Schrader
I don't know what to say, it's a 3X or 2X but going forward in 2016, we expect to reduce significantly our costs and so it will sum up with a few million dollars.
Richard Baldry
Okay. And from a top line perspective, typically Q1 has been your seasonally lowest in a normal year and sequentially revenues are lying on the balance of the year. Do you think that same seasonal pattern should play out this year? Is there a way to get a feel for whether this is sort of the low point for '16 and we should be sequentially up higher from here?
Michael Schrader
So as we already said in the last call, I mean, we do a lot of changes during Q1. We basically changed the product portfolio with the new launch of the new product, we changed marketing programs for the new product, we focused on certain areas, we had to cut the workforce in other area. So what I want to say is that we did a lot of changes. So it's probably hard to predict the revenue on a longer term at this point, probably in the next quarter we can, but definitely what you need to look at, if we're comparing the company for instance from Q1 2014, I believe we did a revenue around $8.1 million with a recurring revenue basis of around 32%. Right now as I look at a constant currency basis, we are at $9.5 million with 60% recurring, so we changed the company in a way that revenues will be more predictable and we also know that if we are succeeding or in the next quarters to have revenues around at $8 million, we will be going back to profitability.
Richard Baldry
Great, thanks.
Operator
Thank you. Our next question is coming from Mark Scheffel of Benchmark. Please proceed with your question.
Mark Scheffel
Hi, thanks for taking my question and nice job on the expense front in the quarter here. Michael, I was wondering if you could just go into additional details on some of the cost reductions you made in the quarter.
Michael Schrader
Yes, so as we also already mentioned of course like -- as with other software companies, a high part of our cost is related to payrolls, of course, there is lot of reductions from the payroll but it's not the only thing. The other thing that we mentioned we've already started in the quarters before to reduce costs for the next quarters. Some of this has to do with a fact that we are now having our own end-to-end solution, so we are not relying on parts from third-parties anymore, which also is reducing cost from the third-party side. So we reviewed -- we did not just review only the payroll, we reviewed all parts of our costs and we for instance also changed some of the marketing programs, more from events to digital marketing as this is anyway more successful in those case. So if I summarize, it's basically payroll and third-party are the two big components.
Mark Scheffel
Okay, great. And going forward, what line items can we expect additional operating leverage on like sales and marketing, G&A, R&D?
Michael Schrader
You mean in terms of expense level?
Mark Scheffel
Yes, on the expense front, I mean where can we expect additional leverage going forward?
Michael Schrader
So going forward as I mentioned before in the first question, we expect to have additional reductions in the next quarters following the restructuring we initiated in March -- so there are additional $300,000 that were going to reduce relatively over the quarters in 2016 until we complete the entire restructuring program.
Mark Scheffel
Okay, great. And then one final question, I didn't catch the FX impact on revenue in the quarter. I was wondering Yossi if you had that handy?
Michael Schrader
Yes, so the cost is still against us, absolutely. This is still the case but it's not the same -- that we saw in 2015 versus 2014. If I compare Q1 2015 to Q1 2014, so the impact is 5%. So it's much lower than the rate that we saw in the previous year. But it stay against us but not significantly as it was in 2015.
Mark Scheffel
Thank you.
Operator
Thank you. Our next question is coming from Kevin Dede of Rodman & Renshaw. Please proceed with your question.
Kevin Dede
Michael, can you talk a little bit about the iStream deal and the Xerox deal, I guess what I'd like to know is how you're customers or how their customers see you as you're brand offered separately? Is there any note to the end-use customer that you're involved in the integrated solution that's offered to them? Give us some insight on how much of a profile Top Image Systems is being seen and what do you think might come of it vis-à-vis relationships with end customers and other partners?
Michael Schrader
Okay, maybe I'll start like this, I'm giving like a very high level explanation of all product portfolio again, and then I turn into where iStream and Xerox is actually placed in that. So you can say that today we are selling or we are relaunch this new product, and as far as automation, this is our main product in the direct salesforce. So we are like -- most of our marketing programs today, our social marketing programs today are really focusing on that product, the end-to-end solution for financial process automation, it's also the first time TIS really has an end-to-end solutions. Usually we were known as a technology provider and now we are becoming step-by-step an end-to-end solution provider for financial process automation. So this is one thing, this is the new product that we launched; it has nothing to do with iStream.
Secondly, we have our content process automation and banking process automation where we are a part of -- an end-to-end solution of our partner. For instance, Xerox, Xerox has an offering for -- as they call it workflow automation, so they are offering to improve digital processes for end-to-end digital levels for instance. So we are a part, the technology part in that offering of Xerox. So when Xerox -- it feels that this is eFLOW is our product, its part of their overall offering, and we are supporting them to sell it to their clients. Then we have the Mobile SDK which on one hand can be part of our end-to-end solution offering, so it can be part of our end-to-end financial process automation but we can also sell it as an SDK. So we are selling it to -- like some big partners, Henry [ph] and so on, but we also -- and now we are also selling it smaller partners or partners that are focusing more on the mid-range banks like iStream. So iStream is using our SDK, our mobile SDK in their product. So this is a pure technology savvy concept. I hope this makes it clear.
Kevin Dede
Yes, absolutely helpful. Now a part of your evolution from technology partner to end-to-end was the elimination of third-party suppliers. You've talked to this point -- I think a couple of times over the past couple of years, I was wondering if you could be a little bit more specific, whose software were you using and how have you replaced it, through your own internal development or some other means?
Michael Schrader
So first of all, the most important is we have replaced it and we continue to replace it with our own developments. This is where we think investments on the product side and on the product management side and we basically planned a new road map and in this new road map the new solutions that we are building are end-to-end solutions. Which on the other hand because you mentioned before the technology side of TIS, it doesn't mean that this would doubt that we would stop doing due to some interim project or stuff like this, it's still a big part of our business. We believe drawing forward we need to end-to-end solutions as well; this is why we have that new product mix. And specifically with the first launch that we did, we did now the first launch at the SAP financials which is an end-to-end SAP solution. So in this case we replaced a part of solution from the company where we acquired the SAP part of the solution, so this part we replaced our own solution.
Kevin Dede
Okay, thanks. So Yossi mentioned that the restructuring process was ongoing. I'm curious to know when you think you'll have it complete?
Michael Schrader
As you know our stock trading is not a one shot and that's it, it's mostly related to employees, all the other costs you can shutdown at once but things that relates to the employees, you have the severance payments, and you have the multi-serials and so, you have some conflicts with some other employees, so we are aiming to close -- to complete this by the end of the year. The major part of it will be in Q2.
Kevin Dede
Okay. Yossi, do you have your arms around how large you think the charge might be associated with the Q2 restructuring?
Yossi Dagan
Yes, I don't have it in front of me but I guess it was approximately -- it will be approximately $600,000 if I remember correctly, but this is what I remember. The total cost as we mentioned in the call is the part of our financial results is $1.2 million for severance payments and multi [ph] to employee and so on.
Kevin Dede
Okay. So Yossi, also separated license and services revenue and you gave us for the two March quarters and also the cost of goods associated with them, is there a chance you could offer that same data for Q2, Q3, and Q4 last year, so we have comps for the report coming up as they come up this year?
Yossi Dagan
Yes, sure, we can do this.
Kevin Dede
Okay. I guess that's all I have for now. So thank you very much gentlemen.
Yossi Dagan
Thank you, Kevin.
Operator
[Operator Instructions] Thank you. Our next question is coming from Anthony Makenzie [ph], a private investor. Please proceed with your question.
Unidentified Analyst
Hi, first of all, congratulations, great results. You mentioned -- and I saw you guys put out a press release that some insiders bought stock. I never saw any of the formed fours filed. I don't know if you're required to but could you share with us who bought what? And how many shares at what price? It would just be helpful. In the future, I think it's to your benefit to publish the form fours, I -- rather than put out a press release people do see it.
Michael Schrader
Yes, first of all, I understand the request. We actually issued a PR with who acquired the shares; it was members of the EMPC, our executive management team and the board. We decided as a team that we are not going into details, we are not required as full and final to 5% that you are mentioning and we tried not to file that but it was a significant number of shares that the team bought. And some of the members of the team will continue to buy shares as seen. This team joined us -- not 5 years or 10 years ago, it's the team that joined us last year. They are all here for a journey to turn this company into new company and to turn it into an end-to-end solution provider in a big different positioning. And we believe that we will drive this forward and I think the team has shown their trust in the comp.
Unidentified Analyst
Listen, I think that's fantastic. I'm just giving away a comment, I think in terms of transparency, virtually every American company is required to file the Form-4s, I just think in my opinion, to be consistent with your peers, it would be helpful to see specifics as opposed to generality but I'll leave it at that. In any case, it's great that you've bought stock but just -- I just think that you guys needs to be a little more transparent with respect to those. But thanks anyway.
Michael Schrader
Yes, we understand your comment, thank you.
Michael Schrader
Thank you, Shelly and thanks to everyone on the call for joining us today. My remarks today would focus on the measures we have taken to return our company to profitability. And then I will turn the call over to our CFO, Yossi Dagan, to review Q1 results in more detail.
We are pleased to report that Q1 was a solid quarter with revenue growing 28% sequentially to $8.5 million. During the quarter, we focused on realizing operational efficiencies while positioning our company for profitable growth. We implemented our restructuring plan with an aim to substantially reduce 2016 costs. As we reported in the earnings release this morning, we reduced the cost by $608,000 or quarterly non-GAAP operational cost in comparison to Q4 2015. This lower cost level is due primarily to carefully review an optimization of the workforce along with product enhancement that reduce relying on third-party resources.
As a result we achieved quarterly results of approximately breakeven adjusted EBITDA. This solid financial performance was achieved in part due to the changes initiated in 2015 led by our expanded executive management team. In order to carry out the restructuring plan that we're potentially reutilizing the company and returning us to long-term profitability, in the immediate term we have had to expand additional cash. These costs began in Q1 and will continue in the next quarters. In Q1 we recorded pre-tax employee severance cost of $1.2 million related to the restructuring initiative.
Another parameter that we have in tracking over the past years and which we believe is an important indicator of steady growth going forward is dealt between revenue. This quarter recurring revenue reached $5 million, accounting for 60% of total revenue, an increase from $4.7 million in Q4 of 2015. This quarter we completed the first stage of the launch of our new generation financial process automation solutions fleet bringing to the market the on-premise version of eFLOW AP Automation for SAP which we introduced to the market in March at the SAP financial event in Las Vegas. The solution provided SAP was with the uniquely immersed experience that enables company to achieve improved breakthrough processing of invoices, reduced AP cycle times, and higher visibility into cash flow without having to leave the familiar SAP interface.
We received very positive feedback from the industry analysts and from conference participants. We are encouraged by the growth and strength of our lead pipeline in regards to that product. This quarter we have developed opportunities for the new solution by upsetting to two existing customers that are now planning to upgrade and has three others that are in advanced stages of the pipeline. These upgrades have multiple positive impact. First, they provide a new stream of revenues. Secondly, our solution does not rely on licensing and software [ph], therefore these license costs are eliminated through higher gross margins. Third, being able to reference customers that are exclusively deploying the new solution we proved valuable for further marketing promotion as we accelerate our demand generation activities.
We were pleased this quarter to announce several AP Automation wins including the deal with the technology provider in the U.S. and invoice processing win to an automotive component supplier based in Austria, as well as a win to provide a supplementary much channel processing solution to an e-invoicing vendor in Israel. The permanent marketing campaign promoting the new premise solution has also contributed to growing the sales pipeline with respect to addition to the upsell wins to result soon in new wins [ph].
Looking ahead, the cloud ERP adoption trend is accelerating within the mid-markets with 60% of companies in the $25 million to $1 billion range, expected to adopt cloud ERP within the next three to five years. In response to this trend, in Q3 we are planning the launch of the next phase of our solution roll out, bringing to market a burden of product for hybrid and cloud environment, extremely modular and flexible, able to fit into an integrated evenly with the existing environment of most and accounts payable organization. We are confident our focus on the underserved mid-market for financial process automation provides us the foundation for sustainable growth.
The demand for accounts payable automation solutions continues to be healthy. An influential survey published in January 2016 by the Hackett Group indicates that to be competitive enterprises today are expecting their business service operations less by tightening them to see whole to improve working capital management and better utilize cash in times of low interest rate to take cost out of the business in order to fund innovation. Here AP Automation would have financed into C4 to achieve these aims.
Turning to the banking process automation market, moving ahead and expanding our focus to mid-level banks as well, to reach this large and disperse mid-market space, especially in the U.S. we have hired an experienced consultant to identify and deliver these opportunities. In addition to our remittance processing solution, we continue to market our mobile banking process automation platform and aps primarily via financial service provider partners. Recently we announced wins with partners at leading banking institutions in Italy with contract value over $700,000. In one of the year the company signed a partnership with a leading Italian financial service provider serving more than 100 banks to jointly deliver the pay solution to a top Italian retail bank. In parallel, all of Italy's top five banks has contracted TIS and other local partner to implement digital mortgage processing solution.
We also announced the Mobi service, including a mobile enrollment project in the U.S. and mobile loan processing pilot at the recent consumer bank in Belgium, and a mobile check deposit implementation in the UK. This quarter we also announced an upgrade to eFLOW5 at a Chinese bank in Hong Kong. During the quarter we announced our partnership with iStream Financial Services and with content-based best-in-class payment processing and solutions provider. iStream is looking to leverage MobiFLOW to expand the wide range of payment options customers can select as the most appropriate payment channel for each and every transaction. We are enthusiastic about working with forward thinking payments provider such as iStream; we expand the exposure to MobiFLOW to mid-range banks.
In addition to financial and banking automation, we continue to sell our core eFLOW platform, both directly as in the project we announced this quarter for exempt processing in Latin America, and primarily via partners with whom we collaborate to deliver content process automation solutions. During this quarter, Xerox and Top Image Systems announced a global reseller agreement to jointly provide customers with end-to-end workflow automation solutions for industry-specific content driven processes. According to this agreement, solutions from top image systems will be integrated into Xerox's workflow automation suite which helps simplify end-to-end processes for a range of industries including financial services, healthcare and government.
During the quarter we attended to different Xerox kick-off in North America and Europe where we educated some 400 Xerox sales and technical personnel regarding the challenges and benefit of deploying process automation solutions in different used cases across various industry sectors. The companies we work together to market in sales software via different Xerox sales organizations to enterprises seeking to optimize business processes and working to replace manual with digital data management whether in digital opportunities or as a component of Xerox's market-leading managed content services offering.
In a flash published by leading industry analyst firm, IDC, this past March; IDC applauded the global partnership as a win for both parties and noted that for Xerox this relationship was both expansion of workflow automation solutions for its enterprise sized businesses. Together the two companies are ready for actively pursuing live sales opportunities. While the potential of this partnership is large, we expect any material impact to appear overtime. At the same time we continue to execute our strategy of developing and supporting collaboration with other partners worldwide. As an example during the first quarter together with our UK partner, TerraQuest, we announced the deployment of a large-scale content processing automation project at British Government agency to digitally capture personal applications and related documents for security examination. The project has a total contract value of $350,000 for TIS and we processed approximately 1.3 million documents per year.
I would also like to note that the company has invested significant attention and resources to strengthen our project management activities, applying that method to enable rapid development and collaboration closely to enable optimum consolidation of our products portfolio going forward which will enable even stronger integration and allow us to leverage our cloud and mobile capabilities across all our end-to-end solutions. Our marketing machine is now more efficient with new personal and stronger focus on digital marketing and social media, enabling more effectively generation, as well as a better view of which activity is for revenue and create pipeline of sales opportunities.
Going forward, also the appointment of Kristian Niklasson to the position of CSO or Chief Services Officer will contribute to cross-controls and efficient effective deployments, as well as increased profitability on the professional services side. Altogether we believe that the impact of the restructuring initiative, the strong leadership from our new management team, and our enhanced solution portfolio lead by our new end-to-end on-premise, cloud and hybrid financial process automation solutions fleet for the mid-market together with our promising new partnerships, expanding channel business, and our steady cloud and mobile banking and content process automation sales supported by enhanced sales and marketing methods including the launch of our new branded website, the block and the social media presence will enable TIS to deliver revenue growth and profitability.
As an insight but also showing the current state of mind within the company, this quarter in an effort to show a tangible personal expression of confidence and support for the company, several members of the management team voluntarily co-chased open shares of the company's stock on the open market.
At this point, I turn it over to our CFO, Yossi Dagan, to provide details about quarterly financial results. Yossi?
Yossi Dagan
Thank you, Michael. Let's take a look at our Q1 results. Total revenues for the first quarter of 2016 were $8.5 million, an increase of 28% compared to $6.6 million in the first quarter of 2015. And an increase of 2% compared to the first quarter of 2015.
Recurring revenues for the first quarter of 2016 were $5 million compared to $4.7 million in the fourth quarter of 2015, and $4.8 million in the same period last year. In March we announced that company would undertake restructuring programs, reduce cost and bring the company back to financial levels and profitability. In continuation from the activities we initiated in Q4, to monitor costs and manage our working capital, in Q1 we reduced our non-GAAP operational costs by $680,000. As a result the quarterly results were approximately breakeven on adjusted EBITDA. We utilized cash off $0.2 million in connection with these restructuring Q1 2016. Without these one-time payments, our cash balance would have been $2.5 million as compared to a cash balance of $2.7 million in the fourth quarter of 2015 and $5.1 million in the same period last year.
Adjusted EBITDA was zero compared to an adjusted EBITDA loss of $2.5 million in the fourth quarter of 2015 and breakeven in the same period last year. Gross profits for the first quarter of 2016 was $4.2 million compared to $2.4 million in the fourth quarter of 2015 and $4.5 million in the first quarter last year. Gross margin for the first quarter of 2015 was 50% compared to 36% in the fourth quarter of 2015 and 54% in the same period last year. First quarter 2016 GAAP loss per share was $0.12 compared to per share loss of $0.34 for the fourth quarter of 2015, and $0.06 for the same period of last year.
First quarter 2016 non-GAAP loss per share was $0.02 compared to a loss per share of $0.13 in the fourth quarter of 2015 and $0.03 in the same period last year. GAAP loss for the first quarter of 2016 was $2.1 million compared to a loss of $6.1 million in the fourth quarter of 2015, and $1 million in the same period last year. Non-GAAP net loss for the first quarter of 2016 was significantly impacted by the employee severance [ph] cost of $1.2 million. Going forward we continue our efforts to provide management with real-time visibility into our financial results, emerging true efficiencies and mixed volumes and timely financial decisions, steps which ultimately contribute to the company's long-term value.
This concludes my remarks and I would like to turn the call back to Michael for his closing statement. Michael?
Michael Schrader
Thank you very much, Yossi. We expect our improved financial performance to be sustainable and we have numerous opportunities ahead of us including sales from the first stage launch of our on-premise STA solution, subsequent launches for the cloud and hybrid environments, continued traction in mobile, new partnerships and improved sales and marketing processes.
Furthermore as I mentioned, at the beginning and Yossi reiterated, we have improved our cost controls and achieved approximately breakeven level already this quarter. Consequently Top Image Systems is in a good position to improve the shareholder value.
Thank you all very much for your time and attention so far. I would like to open the call for questions and answers. Thank you all for listening.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question is coming from Richard Baldry of ROTH Capital Partners. Please proceed with your question.
Richard Baldry
Thanks. Can you talk about what the full quarter expected impact of the cost productions are, assume that $680,000 was probably only a partial quarter impact. Have you scaled what that would be for maybe 2Q in a fall?
Michael Schrader
Hi Rich. This is correct, we initiated the restructuring in March so definitely this is partial quarter but as I mentioned we started to look at our costs also in Q4 and we look at the cost level also going forward in the next quarters. So we monitor on an ongoing basis our working capital now. So other than the restructuring, we manage to reduce the costs in Q1 significantly versus Q4 because of these controls and working capital management. In the next quarters, we expect to have additional reductions in cost due to the restructuring initiative.
Richard Baldry
And is there a way to scale, or could it be 2X $680,000 -- could it be 3X since it's was only a one month impact?
Michael Schrader
I don't know what to say, it's a 3X or 2X but going forward in 2016, we expect to reduce significantly our costs and so it will sum up with a few million dollars.
Richard Baldry
Okay. And from a top line perspective, typically Q1 has been your seasonally lowest in a normal year and sequentially revenues are lying on the balance of the year. Do you think that same seasonal pattern should play out this year? Is there a way to get a feel for whether this is sort of the low point for '16 and we should be sequentially up higher from here?
Michael Schrader
So as we already said in the last call, I mean, we do a lot of changes during Q1. We basically changed the product portfolio with the new launch of the new product, we changed marketing programs for the new product, we focused on certain areas, we had to cut the workforce in other area. So what I want to say is that we did a lot of changes. So it's probably hard to predict the revenue on a longer term at this point, probably in the next quarter we can, but definitely what you need to look at, if we're comparing the company for instance from Q1 2014, I believe we did a revenue around $8.1 million with a recurring revenue basis of around 32%. Right now as I look at a constant currency basis, we are at $9.5 million with 60% recurring, so we changed the company in a way that revenues will be more predictable and we also know that if we are succeeding or in the next quarters to have revenues around at $8 million, we will be going back to profitability.
Richard Baldry
Great, thanks.
Operator
Thank you. Our next question is coming from Mark Scheffel of Benchmark. Please proceed with your question.
Mark Scheffel
Hi, thanks for taking my question and nice job on the expense front in the quarter here. Michael, I was wondering if you could just go into additional details on some of the cost reductions you made in the quarter.
Michael Schrader
Yes, so as we also already mentioned of course like -- as with other software companies, a high part of our cost is related to payrolls, of course, there is lot of reductions from the payroll but it's not the only thing. The other thing that we mentioned we've already started in the quarters before to reduce costs for the next quarters. Some of this has to do with a fact that we are now having our own end-to-end solution, so we are not relying on parts from third-parties anymore, which also is reducing cost from the third-party side. So we reviewed -- we did not just review only the payroll, we reviewed all parts of our costs and we for instance also changed some of the marketing programs, more from events to digital marketing as this is anyway more successful in those case. So if I summarize, it's basically payroll and third-party are the two big components.
Mark Scheffel
Okay, great. And going forward, what line items can we expect additional operating leverage on like sales and marketing, G&A, R&D?
Michael Schrader
You mean in terms of expense level?
Mark Scheffel
Yes, on the expense front, I mean where can we expect additional leverage going forward?
Michael Schrader
So going forward as I mentioned before in the first question, we expect to have additional reductions in the next quarters following the restructuring we initiated in March -- so there are additional $300,000 that were going to reduce relatively over the quarters in 2016 until we complete the entire restructuring program.
Mark Scheffel
Okay, great. And then one final question, I didn't catch the FX impact on revenue in the quarter. I was wondering Yossi if you had that handy?
Michael Schrader
Yes, so the cost is still against us, absolutely. This is still the case but it's not the same -- that we saw in 2015 versus 2014. If I compare Q1 2015 to Q1 2014, so the impact is 5%. So it's much lower than the rate that we saw in the previous year. But it stay against us but not significantly as it was in 2015.
Mark Scheffel
Thank you.
Operator
Thank you. Our next question is coming from Kevin Dede of Rodman & Renshaw. Please proceed with your question.
Kevin Dede
Michael, can you talk a little bit about the iStream deal and the Xerox deal, I guess what I'd like to know is how you're customers or how their customers see you as you're brand offered separately? Is there any note to the end-use customer that you're involved in the integrated solution that's offered to them? Give us some insight on how much of a profile Top Image Systems is being seen and what do you think might come of it vis-à-vis relationships with end customers and other partners?
Michael Schrader
Okay, maybe I'll start like this, I'm giving like a very high level explanation of all product portfolio again, and then I turn into where iStream and Xerox is actually placed in that. So you can say that today we are selling or we are relaunch this new product, and as far as automation, this is our main product in the direct salesforce. So we are like -- most of our marketing programs today, our social marketing programs today are really focusing on that product, the end-to-end solution for financial process automation, it's also the first time TIS really has an end-to-end solutions. Usually we were known as a technology provider and now we are becoming step-by-step an end-to-end solution provider for financial process automation. So this is one thing, this is the new product that we launched; it has nothing to do with iStream.
Secondly, we have our content process automation and banking process automation where we are a part of -- an end-to-end solution of our partner. For instance, Xerox, Xerox has an offering for -- as they call it workflow automation, so they are offering to improve digital processes for end-to-end digital levels for instance. So we are a part, the technology part in that offering of Xerox. So when Xerox -- it feels that this is eFLOW is our product, its part of their overall offering, and we are supporting them to sell it to their clients. Then we have the Mobile SDK which on one hand can be part of our end-to-end solution offering, so it can be part of our end-to-end financial process automation but we can also sell it as an SDK. So we are selling it to -- like some big partners, Henry [ph] and so on, but we also -- and now we are also selling it smaller partners or partners that are focusing more on the mid-range banks like iStream. So iStream is using our SDK, our mobile SDK in their product. So this is a pure technology savvy concept. I hope this makes it clear.
Kevin Dede
Yes, absolutely helpful. Now a part of your evolution from technology partner to end-to-end was the elimination of third-party suppliers. You've talked to this point -- I think a couple of times over the past couple of years, I was wondering if you could be a little bit more specific, whose software were you using and how have you replaced it, through your own internal development or some other means?
Michael Schrader
So first of all, the most important is we have replaced it and we continue to replace it with our own developments. This is where we think investments on the product side and on the product management side and we basically planned a new road map and in this new road map the new solutions that we are building are end-to-end solutions. Which on the other hand because you mentioned before the technology side of TIS, it doesn't mean that this would doubt that we would stop doing due to some interim project or stuff like this, it's still a big part of our business. We believe drawing forward we need to end-to-end solutions as well; this is why we have that new product mix. And specifically with the first launch that we did, we did now the first launch at the SAP financials which is an end-to-end SAP solution. So in this case we replaced a part of solution from the company where we acquired the SAP part of the solution, so this part we replaced our own solution.
Kevin Dede
Okay, thanks. So Yossi mentioned that the restructuring process was ongoing. I'm curious to know when you think you'll have it complete?
Michael Schrader
As you know our stock trading is not a one shot and that's it, it's mostly related to employees, all the other costs you can shutdown at once but things that relates to the employees, you have the severance payments, and you have the multi-serials and so, you have some conflicts with some other employees, so we are aiming to close -- to complete this by the end of the year. The major part of it will be in Q2.
Kevin Dede
Okay. Yossi, do you have your arms around how large you think the charge might be associated with the Q2 restructuring?
Yossi Dagan
Yes, I don't have it in front of me but I guess it was approximately -- it will be approximately $600,000 if I remember correctly, but this is what I remember. The total cost as we mentioned in the call is the part of our financial results is $1.2 million for severance payments and multi [ph] to employee and so on.
Kevin Dede
Okay. So Yossi, also separated license and services revenue and you gave us for the two March quarters and also the cost of goods associated with them, is there a chance you could offer that same data for Q2, Q3, and Q4 last year, so we have comps for the report coming up as they come up this year?
Yossi Dagan
Yes, sure, we can do this.
Kevin Dede
Okay. I guess that's all I have for now. So thank you very much gentlemen.
Yossi Dagan
Thank you, Kevin.
Operator
[Operator Instructions] Thank you. Our next question is coming from Anthony Makenzie [ph], a private investor. Please proceed with your question.
Unidentified Analyst
Hi, first of all, congratulations, great results. You mentioned -- and I saw you guys put out a press release that some insiders bought stock. I never saw any of the formed fours filed. I don't know if you're required to but could you share with us who bought what? And how many shares at what price? It would just be helpful. In the future, I think it's to your benefit to publish the form fours, I -- rather than put out a press release people do see it.
Michael Schrader
Yes, first of all, I understand the request. We actually issued a PR with who acquired the shares; it was members of the EMPC, our executive management team and the board. We decided as a team that we are not going into details, we are not required as full and final to 5% that you are mentioning and we tried not to file that but it was a significant number of shares that the team bought. And some of the members of the team will continue to buy shares as seen. This team joined us -- not 5 years or 10 years ago, it's the team that joined us last year. They are all here for a journey to turn this company into new company and to turn it into an end-to-end solution provider in a big different positioning. And we believe that we will drive this forward and I think the team has shown their trust in the comp.
Unidentified Analyst
Listen, I think that's fantastic. I'm just giving away a comment, I think in terms of transparency, virtually every American company is required to file the Form-4s, I just think in my opinion, to be consistent with your peers, it would be helpful to see specifics as opposed to generality but I'll leave it at that. In any case, it's great that you've bought stock but just -- I just think that you guys needs to be a little more transparent with respect to those. But thanks anyway.
Michael Schrader
Yes, we understand your comment, thank you.
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