RRsat Global Communications Network Ltd., a leading provider of comprehensive digital content management and global content distribution services to the broadcasting industry, announced today financial results for the third quarter and nine months ended September 30, 2013.

Highlights

• Record revenues of $30.6 million, up 7.3% year-over-year
• Gross margin for the quarter was 24.5%, similar to Q3 2012
• Non-GAAP net income per share was $0.12, similar to last year
• Adjusted EBITDA was $5.0 million compared to $4.9 million last year
• Year-to-date cash flow from operations was $13.2 million; $2.5 million in Q3
• Board adopts new quarterly dividend policy: distribution of 50% of net profit,
• Board announces a cash dividend of $0.03 per share, representing a dividend yield of 3.6%
• Q4 Guidance: revenues in the range of $31.5 million to $33.5 million representing 7% to 14% year-over-year growth.

“This was another strong quarter for RRsat, with record revenue based on organic and inorganic growth,” commented Avi Cohen, CEO of RRsat. “Our strategy of getting closer to content will fuel our future growth as we become the partner of choice for managing and globally distributing this content for broadcasters. The acquisition of JCA in September gave us a stronger presence in Western Europe, particularly with the large concentration of content creators in London. Our Q3 results reflect only one month’s contribution from that acquisition, but our cash balance decreased by the $7.6 million resulting from the JCA acquisition. Already, this accretive and strategically important acquisition is helping us dialogue with higher-tier broadcasters, and we are increasingly confident we can grow this operation.”

“Since the acquisition of SM2 in November 2012, we have more than doubled our quarterly revenue from sports and live events,” continued Mr. Cohen. “As expected, this change in our revenue mix is driving incremental improvements in our gross margin and contributing to strong profitability and cash flow generation. We continue to invest for the future, including by the acquisition of JCA, short-term capital expenditures designed to increase the efficiency as well as to maintain the technological advantage of our service infrastructure, and an incremental $112,000 in sales and marketing to increase our presence in strategically important markets. We expect these investments, to result in incremental profitability and improved growth in 2014 and beyond, and our expansion into the United States and Western Europe has significantly expanded RRsat’s addressable market.”

Third Quarter 2013 Financial Results

Revenues in the third quarter of 2013 were a record $30.6 million an increase of 7.3% compared to $28.5 million in the third quarter of 2012 and up from $29.5 million in the second quarter of 2013. The revenue growth was due to a combination of organic growth, and one month of contribution from JCA, which was acquired September 3, 2013.

Gross profit in the third quarter of 2013 was $7.5 million, an increase of 7.2% compared to $7.0 million in the third quarter of 2012 and up from $7.4 million in the second quarter of 2013. The gross profit in the third quarter was impacted by $40,000 in expense related to foreign currency adjustments, $100,000 in depreciation related to the new play-out facility and $80,000 in non-recurring recuperation expense. Gross margin in the third quarter of 2013, inclusive of these factors, was 24.5%, unchanged from the third quarter of 2012 and slightly down compared to 24.9% in the second quarter of 2013.

The third quarter of 2013 included $0.9 million in non-recurring acquisition expenses related to the JCA transaction, in addition to the foreign currency impact described above. The third quarter also included an additional $112,000 in increased sales and marketing investments designed to expand the Company’s addressable market. The Company does not expect any acquisition expenses in the fourth quarter, and the initiative to consolidate facilities was completed in the third quarter.

Non-GAAP operating income, excluding non-cash stock based compensation, amortization of acquisition-related intangibles, acquisition related expenses and amortization of acquisition related prepaid compensation expenses but inclusive of foreign currency impact and increased investment in sales and marketing, was $2.7 million during the third quarter of 2013, compared to $2.7 million in the third quarter of 2012 and $2.5 million for the second quarter of 2013. Non-GAAP operating margin in the third quarter was 8.8% compared to 9.6% in the third quarter of 2012 and 8.6% in the second quarter of 2013.

GAAP operating income for the third quarter of 2013 was $1.5 million, inclusive of the investments and expenses described above, compared to $2.6 million in the third quarter of 2012 and compared to $2.4 million in the second quarter of 2013. GAAP operating margin in the third quarter of 2013 was 5.0% compared to 9.0% in the third quarter of 2012 and 8.1% in the second quarter of 2013.

Non-GAAP net income for the third quarter ended September 30, 2013 was $2.1 million, inclusive of the foreign currency impact and increased sales and marketing investments described above, essentially unchanged compared to $2.1 million in the third quarter of 2012 and compared to $1.9 million for the second quarter of 2013. Non-GAAP net income per share on a fully diluted basis was $0.12 for the third quarter of 2013, compared to $0.12 in the third quarter last year and compared to $0.11 in the second quarter of 2013.

GAAP net income for the third quarter of 2013 was $1.1 million, inclusive of the investments and expenses described above, compared to $2.4 million in the third quarter of 2012 and $1.7 million in the second quarter of 2013. GAAP net income per share on a fully diluted basis was $0.06 for the third quarter of 2013 compared to $0.14 in the third quarter of 2012 and $0.10 in the second quarter of 2013.

Adjusted EBITDA for the third quarter of 2013, inclusive of the foreign currency impact and increased sales and marketing investments described above, was $5.0 million compared to $4.9 million in the third quarter of 2012 and $4.6 million in the second quarter of 2013.

Cash, cash equivalents and marketable securities as of September 30, 2013 totaled $19.6 million compared with $26.4 million as of December 31, 2012. The change in cash position during the period was mainly attributable to the acquisition of JCA and the distribution of a cash dividend.

Backlog of signed agreements as of September 30, 2013 expected to be recognized as revenues during the next four quarters was $88 million, compared to $84 million at the end of the third quarter last year. Total backlog, which includes all signed agreements to provide all of the Company’s broadcasting services and mobile satellite services, was approximately $197 millionas of September 30, 2013, compared to $184 million at the end of the third quarter of 2012 and $205 million at the end of the second quarter of 2013. Typically, larger, tier-1 and tier-2 customers prefer contracts of shorter duration, so the backlog beyond 24 months reflects a decrease in long-term agreements.

Fourth Quarter and Full Year 2013 Guidance

For the fourth quarter of 2013, management expects revenues in the range of $31.5 million to $33.5 million representing 7% to 14% year-over-year growth.

Management reiterated its expectation of full-year 2013 revenues in the range of $120 million to $125 million representing 6% to 10% year-over-year growth and gross margin for the year to improve over 2012. Given some level of seasonality associated with the revenue outside of the 24/7 services, management expects some level of variation in mix from quarter to quarter leading to some fluctuations in revenues and gross margin between quarters.

Year-to-Date 2013 Financial Results

Revenues for the nine months ended September 30, 2013 were $89.3 million compared to $84.0 million for the nine months ended September 30, 2012.

Gross profit for the nine months ended September 30, 2013 was $21.9 million compared to $19.8 million for the nine months ended September 30, 2012. Gross margin was 24.5% compared to 23.5% in 2012.

The first nine months of 2013 included approximately $5.0 million in capital expenditures related to the consolidation of two teleports at RRsat’s Israel headquarters and $0.9 million in non-recurring acquisition expenses related to the JCA transaction. The first nine months of 2013 also included an additional $1.7 million in increased sales and marketing investments designed to expand the Company’s addressable market.

Non-GAAP operating income, excluding non-cash stock based compensation, amortization of acquisition-related intangibles, acquisition related expenses and amortization of acquisition related prepaid compensation expenses but inclusive of foreign currency impact and increased investment in sales and marketing, was $7.8 million for the nine months compared to $7.4 million for the nine months ended September 30, 2012. Non-GAAP operating margin for the nine months was 8.7% versus 8.8% in 2012.

GAAP operating income, inclusive of the investments and expenses described above, was $6.2 million compared to $7.0 million in 2012. GAAP operating margin was 7.0% compared to 8.3% in 2012.

Non-GAAP net income, inclusive of the foreign currency impact and increased sales and marketing investments described above, was $5.9 million, an increase of 6.7% compared to $5.5 million in 2012. Non-GAAP net income per share on a fully diluted basis was $0.34 compared to $0.32 in 2012.

GAAP net income, inclusive of the investments and expenses described above, was $4.4 million compared to $5.9 million in 2012. GAAP net income per share on a fully diluted basis was $0.25 compared to $0.34 in 2012.

Adjusted EBITDA, inclusive of the foreign currency impact and increased sales and marketing investments described above, was $14.2 million, up 2.6% compared with $13.9 million in 2012.

New Dividend Policy and Quarterly Dividend

The Board of Directors has adopted a new dividend policy pursuant to which, subject to applicable law and the discretion of the Board of Directors from time to time, it shall distribute a dividend to the shareholders at the end of each calendar quarter equal to 50% of the net income recorded in the Company’s quarterly financial statements for the quarter. In accordance with the new policy, on November 11, 2013, the Board of Directors declared a cash dividend in the amount of $0.03 per ordinary share, and in the aggregate amount of approximately $550,000, representing 50% of the Company’s net income for the third quarter of 2013. The dividend will be payable on December 11, 2013 to all of the Company’s shareholders of record at the end of the trading day on the NASDAQ on November 25, 2013.

Conference Call Information
The Company will conduct a conference call today, November 12, 2013 at 9 a.m. ET (4 p.m. Israel time). On the call, Mr. Avi Cohen, Chief Executive Officer and Mr. Shmulik Koren, Chief Financial Officer will review and discuss the results and will be available to answer investor questions.

Call time: 9 a.m. Eastern Time; 4 p.m. Israel Time

• Dial-in number from within the United States: 1-877-941-1427
• Dial-in number from Israel: 1-809-21-4368
• Dial-in number from the UK: 0800-358-5279
• Dial-in number (other international): 1-480-629-9664
• Playback, available until November 19, 2013 by calling 1-877-870-5176 (United State) or 1-858-384-5517 (international). Please use pin number 4646464 for the replay.

Use of Non-GAAP Financial Measures
In addition to reporting results in accordance with generally accepted accounting principles, or GAAP, RRsat has also included in this press release non-GAAP measurements of net income, operating income, operating margin, fully diluted net income per share and adjusted EBITDA. RRsat believes that these non-GAAP financial measures are principal indicators of the operating and financial performance of its business. We have provided these non-GAAP measurements to help investors better understand our core operating performance and enhance comparisons of core operating performance from period to period.

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: non-cash stock based compensation, amortization of acquisition-related intangibles, acquisition-related expenses, amortization of acquisition related prepaid compensation expenses, non-cash income (loss) reflecting changes in the fair value of embedded currency conversion derivatives resulting from the application of FASB ASC Topic 815 and the resulting income tax (increase) decrease of the above items.

Adjusted EBITDA is calculated by adding to operating income, non-cash equity-based compensation charge, depreciation and amortization and amortization of acquisition related prepaid compensation expenses.

Management uses these non-GAAP financial measures to assess its operational performance, for financial and operational decision-making, and as a means to evaluate period-to-period comparisons on a consistent basis. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s performance by excluding certain non-cash expenses that are not directly attributable to its core operating results.

The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non- GAAP measurements in addition to, and not in substitution for, or as superior to, measurements of financial performance prepared in accordance with GAAP.

The Company expects to continue reporting non-GAAP financial measures, adjusting for the items described above, and the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above. Accordingly, the exclusion of these and other similar items in the presentation of non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent or non- recurring. Moreover, because not all companies use identical measures and calculations, the presentation of non-GAAP measurements of net income, operating income, operating margin and fully diluted net income per share and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. These limitations are compensated for by using non-GAAP measures and adjusted EBITDA in conjunction with traditional GAAP financial measures.

Reconciliations of the non-GAAP measures (non-GAAP net income, non-GAAP operating income and adjusted EBITDA) to the most comparable GAAP measures (net income and operating income respectively), are provided in the schedules attached to this release.

Safe Harbor Statement
This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding (i) guidance for revenue and margins for the third quarter of 2013 and guidance for full year 2013 revenues or any future periods; (ii) ourexpectations and ability to strengthen our offering and capabilities in order to allow us to accelerate our growth; (iii) ourexpectations to generate higher margins from our sports and events business compared to our other businesses ; (iv) our expectation that our sports and events business will be a major contributor to our growth and that the demand for this type of content will continue to increase globally; (v) our expectation and ability to further improve our margins over time by changing our product mix, coupled with more value-added services and better utilization of our infrastructure; (vi) our ability to continue to experience strong interest in our services, leading to new customer wins for our digital media broadcasting services and to report future successes; (vii) our expectation that our backlog will materialize into revenue on the projected timeline and (viii) our ability to continue to benefit from a strong business model, featuring a notable percentage of recurring revenues, long-term contracts, high renewal rate, a multi-year backlog, and strong free cash flow. These forward- looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry as of the date of this press release. The company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements, including the risks indicated in our filings with the Securities and Exchange Commission (SEC). For more details, please refer to our SEC filings and the amendments thereto, including our Annual Report on Form 20-F for the year ended December 31, 2012 and our Current Reports on Form 6-K.