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News and Information Article
Reports Increase in Revenues and Further Improvements in Gross Margins
ROSH HAAYIN, Israel, February 23 /-FirstCall/ -- ECtel Ltd.
(NASDAQ: ECTX), a leading global provider of Integrated Revenue
Management(TM) (IRM(TM)) solutions, today reported financial results for the
fourth quarter and year ended December 31, 2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20010807/FLTU015LOGO )
Fourth Quarter and Full-Year 2005 Highlights
- Fourth Quarter revenues increased 6% sequentially to $6.5 million and
62% year- over-year.
- 2005 revenues totaled $23.2 million, representing 84% growth compared
to 2004.
- Fourth quarter pro forma net income (excluding acquisition related
restructuring cost) of $550 thousand (GAAP net income was $23 thousand).
- Cash flow generated from operating activities for the fourth quarter of
2005 was $1.3 million.
- Fourth quarters gross margin improved to 58% from 53% in Q3/05. Annual
gross margins grew from 19% in 2004 to 53% in 2005.
- Acquisition of Elron Telesoft - a prominent revenue assurance solution
provider.
Revenues for the fourth quarter of 2005 were $6.5 million, compared to
$6.2 million for the third quarter of 2005, and $4 million for the fourth
quarter of 2004.
Pro forma net income for the fourth quarter of 2005 (excluding
acquisition related restructuring cost) reached $0.55 million, or $0.03
earnings per share, compared to a net loss of $0.26 million, or $0.01 loss
per share for the third quarter of 2005 and net loss of $1.7 million, or
$0.09 per share for the fourth quarter of 2004. Please see the accompanying
Table for a full reconciliation of GAAP to non-GAAP results for the fourth
quarter and full year results.
Net income (GAAP) for the fourth quarter of 2005 was $0.02 million, or $0
income per share, compared to a net loss of $0.1 million, or $0.01 loss per
share, for the third quarter of 2005, and a net loss of $1.7 million, or
$0.09 per share, for the fourth quarter of 2004.
Revenues for the year ended December 31, 2005 increased by 84% to $23.2
million from $12.6 million in the comparable period of 2004.
Pro forma net loss for the year (excluding acquisition related items and
restructuring income) ended December 31, 2005 dropped to $1 million from
$20.2 million in the comparable 2004 period.
Net loss (GAAP) for the year ended December 31, 2005 dropped to $1.4
million from $13.5 million in the comparable 2004 period.
Cash flow generated from operating activities for the fourth quarter of
2005 was $1.3 million. Overall 2005 cash flow from operating activities was
$4.4 million, compared to a cash burn of $23 million in 2004.
ECtel ended 2005 with $51.3 million in cash and marketable securities, or
$2.82 per share, with no debt. This compares to $49.2 million at the end of
2004.
On December 29, 2005 ECtel announced the closing of the acquisition of
Elron Telesoft, a prominent revenue assurance solution provider. ECtel
purchased all of the outstanding share capital of Elron Telesoft Ltd. and
Elron Telesoft Export Ltd. for $2.1 million in cash. ECtel is obligated to
pay up to an additional $0.4 million if certain milestones are achieved by
Telesoft during 2006. As a result of this acquisition ECtel recorded in its
P&L a one-time charge of $0.5 million relating to acquisition related
restructuring costs. On the balance sheet, the company recorded goodwill in
the amount of $3.6 million and an amount of $0.8 million relating to
intangible assets. We presentably estimate that this acquisition will have a
dilutive effect on our results during the first three quarters of 2006.
"This was another good quarter for ECtel" stated Eitan Naor, President
and CEO of ECtel "We have been working diligently for the last two years on:
refocusing on our main markets, improving customer relationship, launching
new products and services, increasing our revenues while closely monitoring
our expenses, and in this quarter we reached a major milestone in our growth
plan. After three years of net losses we achieved positive net income. ".
"Despite the fact that we expect lower bottom-line results for the first
quarter, due to the above mentioned dilutive effect of the Telesoft
acquisition, we are optimistic about our ability to continue in executing our
strategic growth plans"
"During the fourth quarter we acquired Elron Telesoft, a prominent
revenue assurance solution provider. The acquisition strengthens our global
sales presence and tier-one customer base in the US, Western Europe, and Asia
Pacific. It also significantly expands our Companys revenue assurance domain
expertise through the addition of Telesofts vast industry experience and
product offering".
"We announced today a major revenue assurance order in the US from one of
the largest wireless companies in the United States. The receipt of order
from this new customer is an important increase of our footprint in the North
American market. We believe there is a significant long-term opportunity for
ECtel in the revenue assurance segment though this segment is still in its
early stages".
Guidance
ECtel is providing the following preliminary guidance for 2006. Guidance
is current as of today only and ECtel undertakes no obligation to update its
estimates:
ECtel expects 2006 annual revenues in the range of $28.5 million to $31
million, or approximately 23% to 33% year-over-year growth and pro-forma net
income in the range of $2.2 million to $2.8 million. ECtels pro-forma net
income differs from results reported under U.S. GAAP due to adjustments made
for the following on-going, non-cash items - the amortization of acquired
intangible assets and the impact of share-based compensation. Since it is too
early to determine the impact of the share-based compensation expense, we are
not providing guidance on GAAP net income. The share-based compensation
expense would have a negative impact on net income.
ECtel Ltd.
Consolidated Balance Sheets
$ in thousands
Dec 31, Sep 30, Dec 31,
2005 2005 2004
Assets Audited Unaudited Audited
Current assets:
Cash and cash equivalents (including
marketable bonds) 24,860 25,541 34,436
Short-term deposits and marketable
securities 14,442 11,497 4,033
Receivables:
Trade, net 5,775 4,719 14,299
Other 1,538 2,798 1,685
Related parties 132 - 225
Inventories 2,837 2,896 4,113
Total current assets 49,584 47,451 58,791
Long-term marketable securities 11,986 14,998 10,752
Long-term receivables and deposits 1,464 1,053 1,007
Property, plant and equipment, net 2,436 2,356 2,763
Goodwill 11,701 8,143 8,143
Other assets 852 55 295
Total assets 78,023 74,056 81,751
ECtel Ltd.
Consolidated Balance Sheets
$ in thousands
Dec 31, Sep 30, Dec 31,
2005 2005 2004
Audited Unaudited Audited
Liabilities and shareholders equity
Current liabilities:
Trade payables 4,616 3,227 2,709
Related parties 151 351 -
Advances from Customers 1,445 1,413 3,534
Other payables and accrued liabilities 7,435 5,273 10,562
Total current liabilities 13,647 10,264 16,805
Long-term liability:
Liability for employee severance
benefits 3,008 2,458 2,257
Total liabilities 16,655 12,722 19,062
Shareholders equity :
Share capital 214 214 214
Capital surplus 72,664 72,653 72,618
Retained losses (11,510) (11,533) (10,143)
Total Shareholders equity 61,368 61,334 62,689
Total liabilities and shareholders
equity 78,023 74,056 81,751
ECtel Ltd.
Consolidated Statements of Income
$ in thousands except share and per share data
Three Year ended Three months
months months ended
ended
December 31, December 31, September 30,
2005 2004 2005 2004 2005
(Unaudited) (Audited) (Unaudited)
Revenues 6,528 4,030 23,151 12,605 6,156
Cost of revenues 2,745 2,347 10,985 10,271 2,912
Gross profit 3,783 1,683 12,166 2,334 3,244
Research and development
costs, net 1,121 939 3,671 5,439 780
Selling and marketing
expenses 1,536 1,755 6,917 9,071 1,906
General and administrative
expenses 1,059 861 4,099 8,500 1,191
Restructuring and related
impairment costs
(income) 523 - 360 3,358 (163)
Goodwill impairment - - - 2,186 -
Operating loss (457) (1,872) (2,881) (26,220) (470)
Financial income, net 480 224 1,494 438 374
Other (expenses) income - (8) - (3) -
Income (loss) before taxes 23 (1,656) (1,387) (25,785) (96)
Taxes on Income - (39) 20 30 -
Net income (loss) from
continuing operations 23 (1,695) (1,367) (25,755) (96)
Net income from discontinued
operations - - - 12,260 -
Net income (loss) 23 (1,695) (1,367) (13,495) (96)
Earnings (loss) per share:
Basic and diluted earnings (loss)
per share for:
Continuing operations 0.00 (0.09) (0.08) (1.42) (0.01)
Discontinued operations - - - 0.68 -
Basic and diluted earnings
(loss) per share 0.00 (0.09) (0.08) (0.75) (0.01)
Weighted average
number of
shares
outstanding used
to compute
basic earnings
(loss)
per share 18,169,089 18,151,172 18,159,277 18,112,216 18,165,673
Weighted average
number of shares
outstanding used to
compute diluted
earnings (loss)
per share 19,151,907 18,151,172 18,159,277 18,112,216 18,165,673
Non-GAAP Financial Measures
To supplement the consolidated financial results prepared in accordance
with GAAP, we include Pro-forma Net Income (Loss), Pro-forma Basic Net
Earnings (Loss) Per Share and Pro-forma Diluted Net Earnings (Loss) Per
Share, which are non-GAAP financial measures. These non-GAAP financial
measures consist of GAAP financial measures adjusted to restructuring and
related impairment (income) costs, goodwill impairment and net income from
discontinued operations.
As these non-GAAP financial measures exclude the effects of aforesaid
elements because we believe these excluded costs are not related to our
operating performance. We believe these non-GAAP financial measures provide
consistent and comparable measures to help investors understand our current
and future operating performance and management uses them as a basis for
planning and forecasting future periods.
These non-GAAP financial measures may differ materially from the non-GAAP
financial measures used by other companies and should not be regarded as a
replacement for corresponding GAAP measures.
The following table reconciles Pro-forma Net Income (Loss), Pro-forma
Basic Net Earnings (Loss) Per Share and Pro-forma Diluted Net Earnings (Loss)
Per Share to Net Income (Loss), Basic Net Earnings (Loss) Per Share and
Diluted Net Earnings (Loss) Per Share, respectively, in each case the most
directly comparable GAAP measure, ($ in thousands, except share and per share
data).
Three months ended Year ended Three months ended
December 31, December 31, September 30,
2005 2004 2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
GAAP net
income
(loss) 23 (1,695) (1,367) (13,495) (96)
Adjustments:
GAAP net
income from
discontinued
operations - - - (12,260) -
Goodwill
impairment - - - 2,186 -
Restructuring
and related
impairment
costs
(income) 523 - 360 3,358 (163)
Pro-forma net
income (loss)
(non-GAAP) 546 (1,695) (1,007) (20,211) (259)
GAAP basic net
loss per
share 0.00 (0.09) (0.08) (0.75) (0.01)
Pro-forma basic
net earnings
(loss)
per share
(non-GAAP) 0.03 (0.09) (0.06) (1.12) (0.01)
GAAP diluted
net
earnings
(loss) per
share 0.00 (0.09) (0.08) (0.75) (0.01)
Pro-forma
diluted net
earnings (loss)
per share 0.03 (0.09) (0.06) (1.12) (0.01)
(non-GAAP)
Weighted
average
number of
shares
outstanding
used to
compute:
Basic
earnings
(loss)
per share
(GAAP) 18,169,089 18,151,172 18,159,277 18,112,216 18,165,673
Basic
earnings
(loss) per
share
(non-
GAAP) 18,169,089 18,151,172 18,159,277 18,112,216 18,165,673
Diluted
earnings
(loss)
per
share
(GAAP) 18,169,089 18,151,172 18,159,277 18,112,216 18,165,673
Diluted
earnings
(loss)
per share
(non-
GAAP) 19,151,907 18,151,172 18,159,277 18,112,216 18,165,673
ECtel Ltd.
Consolidated Statements of Cash Flows
$ in thousands
Dec 31, Dec 31,
2005 2004
Cash flows from operating activities
Net loss for the year (1,367) (13,495)
Adjustments to reconcile net loss to
cash provided by (used in) operating
activities:
Depreciation and amortization 1,059 1,989
Premium amortization of long-term marketable
securities 275 134
Decrease (increase) in deferred tax - 1,902
Loss (gain) on sale of property, plant and
equipment 50 (50)
Income from discontinued operations - (12,260)
Impairment of fixed assets - 917
Goodwill impairment - 2,186
Inventory write-off - 915
Decrease in trade receivables 9,147 15,641
Decrease (increase) in other receivables 269 (209)
Decrease (increase) in inventories 1,652 1,690
Decrease in long-term receivables - -
Increase (decrease) in trade payables 762 (7,635)
Increase (decrease) in advances from
customers (2,504) 2,407
(Increase) decrease in related parties, net 244 (839)
Decrease in other payables and accrued
liabilities (5,304) (15,529)
Increase (decrease) in liability for
employee severance benefits 113 (709)
Net cash provided by (used in) operating
activities 4,396 (22,945)
Dec 31, Dec 31,
2005 2004
Cash flows from investing activities
Investment in short-term investments, net (2,388) (27)
Investment in property, plant and equipment (354) (914)
Acquisition of newly consolidated
subsidiaries, less of cash acquired (1,833) -
Long-term deposit withdrawal (funding) 50 165
Proceeds from sale of property, plant and
equipment 68 87
Proceeds from disposal of discontinued
operations - 35,000
Employee severance rights (funding)
withdrawal (31) 1,560
Proceeds from maturity of long-term
marketable securities 2,000 -
Investment in long-term marketable
securities (11,530) (6,615)
Net cash (used in) provided by investing
activities (14,018) 29,256
Cash flows from financing activities
Issuance of ordinary shares, net 46 161
Net cash provided by financing activities 46 161
Net (decrease) increase in cash and cash
equivalents (9,576) 6,472
Cash and cash equivalents at beginning of
the year 34,436 27,964
Cash and cash equivalents at end of the year 24,860 34,436
Conference call
ECtel management cordially invites you to participate in an interactive
teleconference to discuss the results today, Thursday, February 23, 2006 at
10:00 am ET (9:00 am CT; 7:00 am PT, and 5:00 pm Israel time). To
participate, please dial one of the following numbers, and request the ECtel
Q/4 2005 Earnings Results Conference call.
In the United States: 866-860-9642
In Israel 03-918-0600
In the United Kingdom: 0-800-917-5108
All Other International Callers: +972-3-918-0600
A webcast replay will be available at http://www.ectel.com
About ECtel Ltd.
ECtel (NASDAQ: ECTX) is a leading global provider of Integrated Revenue
Management(TM) (IRM(TM)) solutions for communications service providers. A
pioneering market leader for over 15 years, ECtel offers carrier-grade
solutions that enable wireline, wireless, converged and next-generation
operators to fully manage their revenue and cost processes. ECtel IRM(TM)
Product Suite features the world-leading fraud and revenue assurance
products, FraudView(R) RAP and CashView(R), that minimize operator revenue
leakage across networks and operations support systems (OSSs). ECtel serves
prominent tier one operators, and has more than 100 implementations in over
50 countries worldwide. Established in 1990, ECtel maintains offices in the
Americas, Europe and Asia Pacific.
Certain statements contained in this release contain forward-looking
information with respect to guidance, plans, projections or future
performance and products of the Company, the occurrence of which involves
certain risks and uncertainties, including, but not limited to, the Companys
ability to successfully execute a growth plan, the Companys ability to
successfully integrate the business of Elron Telesoft, the ability to
recognize revenue in future periods as anticipated, the possible slow-down in
expenditures by telecom operators, the unpredictability of the telecom
market, product and market acceptance risks, ability to complete development
and market introduction of new products, the impact of competitive pricing
and offerings, fluctuations in quarterly and annual results of operations,
dependence on several large customers, commercialization and technological
difficulties, risks related to our operations in Israel and other risks
detailed in the Companys annual report on Form 20-F and other filings with
the Securities and Exchange Commission. ECtel undertakes no obligation to
publicly release any revisions to guidance and forward-looking statements to
reflect events or circumstances following the date hereof or to reflect the
occurrence of unanticipated events.
Contacts:
ECtel Ltd. ECtel Ltd.
Ron Fainaro Danit Hakimian
Senior Vice President and CFO Investor Relations Coordinator
Tel: +972-3-9002102 Tel: +972-3-9002113
Fax: +972-3-9002103 Fax: +972-3-9002103
Email: Ronf@ectel.com Email: danith@ectel.com
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