Exhibit 99.1
Investor contacts:
Erica Abrams, Todd Friedman
The Blueshirt Group for CallWave
415-217-7722
erica@blueshirtgroup.com
todd@blueshirtgroup.com
CallWave Announces Results for Third Quarter of Fiscal 2005
Santa Barbara, Calif., April 27, 2005 — CallWave, Inc. (Nasdaq: CALL), a leading provider of VoIP applications, today reported financial results for the three- and nine-month periods ended March 31, 2005.
For the third quarter of fiscal 2005, CallWave reported total revenue of $11.2 million, an increase of 10% over $10.2 million reported in the third quarter of fiscal 2004. Net income for the third quarter of 2005 decreased 41% to $2.3 million, or $0.11 per diluted share, from $3.9 million, or $0.25 per diluted share reported in the prior year. Net income for the 2005 third quarter includes $0.3 million, or $0.02 per diluted share of tax benefits. Weighted average fully diluted shares outstanding for the quarters ended March 31, 2005, and March 31, 2004, were 21,331,000 and 15,354,000, respectively.
Gross margins for the third quarter were 73%, and operating margins were 14%. CallWave used $0.6 million in cash in its operations and closed the quarter with $54.0 million in cash, cash equivalents and marketable securities. At March 31, 2005, CallWave had 856,000 paid subscribers who represented 958,000 lines.
For the nine months ended March 31, 2005, CallWave reported total revenue of $33.9 million, an increase of 19% over $28.5 million reported in the first nine months of fiscal 2004. Net income for the period increased 5% to $9.5 million, or $0.48 per diluted share, from $9.1 million, or $0.59 per diluted share reported in the same period of the prior year. Net income for the 2005 nine-month period includes $2.1 million, or $0.10 per diluted share of tax benefits.
“The third quarter highlighted both the opportunities and challenges in our business,” commented David Hofstatter, President and CEO of CallWave. “The performance of our core landline enhancement business showed the continued potential of that market. At the same time, we experienced the headwinds of simultaneously ramping up new indirect partners and rolling out our new mobile VoIP software. Nevertheless, we remain highly optimistic about our investments in these growth areas.
“It’s important to note that our strategy to grab market share in the mobile VoIP market is in no way an abandonment of our cash-generating landline business. To the contrary, new mobile features and services add value to the landline customer base and
to our landline carrier partners by extending customer life and increasing revenue per user. Our strategy is to continue making investments in technology and distribution partnerships that can be leveraged across both the fixed and mobile connections that consumers use.”
Conference Call Details
The CallWave Third Quarter 2005 teleconference and Webcast is scheduled to begin at 4:30 p.m. Eastern Time, on Wednesday, April 27, 2005. To access the live Webcast, please visit the investor relations section of the Company’s websitehttp://www.callwave.com at least 30 minutes prior to the scheduled time to download any necessary audio or plug-in software. An audio replay of the call will also be available to investors beginning at 8:00 p.m. ET on April 27, 2005, through May 11, 2005, by dialing (800) 405-2236 and entering the passcode 11028618.
About CallWave
CallWave is a leader in VoIP enhanced services. The company provides VoIP application services on a subscription basis that add features and functionality to the telecommunications services used in mainstream homes and small offices. CallWave’s proprietary VoIP software allows subscribers to get more out of their existing networks — landline, mobile, and IP — by adding software-based call-handling features, and by bridging all three networks to help subscribers get their important calls. Founded in 1998, CallWave is headquartered in Santa Barbara, California. For further information, please visitwww.callwave.com.
Safe Harbor Statement
Except for the historical statements contained herein, the foregoing release contains forward-looking statements, including statements regarding, among other matters, our future financial performance, including expected revenues and earnings per share for the third quarter of 2005. These forward-looking statements are subject to risks and uncertainties, and actual results could differ materially due to several factors, including but not limited to the ability to forecast consumer behavior and recognize or respond to emerging trends, changing preferences or competitive factors, the market acceptance of our new products and product enhancements, claims regarding alleged infringement of third parties’ intellectual property rights, the ability to maintain or expand our customer and partner relationships and other risks and uncertainties. Please consult the various reports and documents filed by CallWave with the U.S. Securities and Exchange Commission, including but not limited to CallWave’s prospectus on Form S-1 for factors potentially affecting the Company’s future financial results. All forward-looking statements are made as of the date hereof and CallWave disclaims any responsibility to update or revise any forward-looking statement provided in this news release. The results for the second quarter of fiscal 2005 are not necessarily indicative of CallWave’s operating results for any future periods.
CallWave is a registered trademark of CallWave, Inc. All other trademarks are the property of their respective holders.
CALLWAVE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
| | | | | | | | |
| | | As of
June 30, 2004
| | | As of March 31, 2005
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| | | | | | (unaudited) | |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 6,187 | | | $ | 13,116 | |
Marketable securities | | | 7,003 | | | | 40,850 | |
Restricted cash | | | 335 | | | | 335 | |
Accounts receivable; net of allowance for doubtful accounts of $402 and $341 | | | 3,690 | | | | 5,272 | |
Inventory | | | — | | | | 586 | |
Prepaid income tax | | | — | | | | 113 | |
Other current assets | | | 153 | | | | 778 | |
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Total current assets | | | 17,368 | | | | 61,050 | |
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Property and equipment, net | | | 1,743 | | | | 1,723 | |
Deferred tax asset | | | 1,664 | | | | 3,200 | |
Other assets | | | 853 | | | | 380 | |
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Total assets | | $ | 21,628 | | | $ | 66,353 | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 1,245 | | | $ | 661 | |
Accrued payroll | | | 758 | | | | 800 | |
Deferred revenues | | | 2,401 | | | | 1,608 | |
Income taxes payable | | | 1,158 | | | | 408 | |
Other current liabilities | | | 543 | | | | 1,042 | |
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Total current liabilities | | | 6,105 | | | | 4,519 | |
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Commitments and contingencies | | | | | | | | |
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Stockholders’ equity: | | | | | | | | |
Convertible preferred stock | | | 28,761 | | | | — | |
Common stock | | | 3,998 | | | | 69,875 | |
Deferred compensation | | | (303 | ) | | | (600 | ) |
Accumulated comprehensive income (loss) | | | — | | | | (46 | ) |
Accumulated deficit | | | (16,933 | ) | | | (7,395 | ) |
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Total stockholders’ equity | | | 15,523 | | | | 61,834 | |
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Total liabilities and stockholders’ equity | | $ | 21,628 | | | $ | 66,353 | |
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CALLWAVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
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| | | For the Three Months Ended March 31,
| | | For the Nine Months Ended March 31,
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| | | 2004
| | | 2005
| | | 2004
| | | 2005
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Revenues | | $ | 10,212 | | | $ | 11,194 | | | $ | 28,466 | | | $ | 33,908 | |
Cost of sales | | | 2,990 | | | | 3,017 | | | | 8,648 | | | | 9,160 | |
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Gross profit | | | 7,222 | | | | 8,177 | | | | 19,818 | | | | 24,748 | |
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Operating expenses: | | | | | | | | | | | | | | | | |
Sales and marketing | | | 1,503 | | | | 2,748 | | | | 4,249 | | | | 7,722 | |
Research and development | | | 1,316 | | | | 1,778 | | | | 3,713 | | | | 5,054 | |
General and administrative | | | 1,452 | | | | 2,070 | | | | 3,720 | | | | 5,151 | |
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Total operating expenses | | | 4,271 | | | | 6,596 | | | | 11,682 | | | | 17,927 | |
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Operating income | | | 2,951 | | | | 1,581 | | | | 8,136 | | | | 6,821 | |
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Interest income (expense), net | | | 24 | | | | 344 | | | | 56 | | | | 661 | |
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Income before income taxes | | | 2,975 | | | | 1,925 | | | | 8,192 | | | | 7,482 | |
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Income tax expense (benefit) | | | (887 | ) | | | (347 | ) | | | (886 | ) | | | (2,056 | ) |
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Net income | | $ | 3,862 | | | $ | 2,272 | | | $ | 9,078 | | | $ | 9,538 | |
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Net income per share: | | | | | | | | | | | | | | | | |
Basic | | | 0.64 | | | | 0.12 | | | | 1.58 | | | | 0.63 | |
Diluted | | | 0.25 | | | | 0.11 | | | | 0.59 | | | | 0.48 | |
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Weighted-average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 6,065 | | | | 19,377 | | | | 5,760 | | | | 15,033 | |
Diluted | | | 15,354 | | | | 21,331 | | | | 15,281 | | | | 20,026 | |
CALLWAVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
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| | | For the Nine Months Ended March 31,
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| | | 2004
| | | 2005
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Cash flows from operating activities: | | | | | | | | |
Net income | | $ | 9,078 | | | $ | 9,538 | |
Operating activity adjustments | | | | | | | | |
Depreciation and amortization | | | 549 | | | | 566 | |
Amortization of deferred compensation | | | 298 | | | | 185 | |
Non-employee equity based compensation | | | — | | | | 11 | |
Deferred tax asset | | | (1,059 | ) | | | (1,536 | ) |
Bad debt expense | | | 967 | | | | 929 | |
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Changes in operating assets & liabilities: | | | | | | | | |
Restricted cash | | | (335 | ) | | | — | |
Accounts receivable, net of bad debt expense | | | (1,432 | ) | | | (2,511 | ) |
Inventory | | | — | | | | (586 | ) |
Prepaid income tax | | | — | | | | (113 | ) |
Other assets | | | 15 | | | | (152 | ) |
Accounts payable | | | 103 | | | | (584 | ) |
Accrued payroll | | | (134 | ) | | | 42 | |
Deferred revenue | | | 113 | | | | (793 | ) |
Income taxes payable | | | 172 | | | | (750 | ) |
Accrued other liabilities | | | 218 | | | | 499 | |
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Net cash provided by operating activities | | | 8,553 | | | | 4,745 | |
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Cash flows from investing activities: | | | | | | | | |
Purchases of marketable securities | | | (4,800 | ) | | | (33,893 | ) |
Purchases of property and equipment | | | (358 | ) | | | (546 | ) |
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Net cash used in investing activities | | | (5,158 | ) | | | (34,439 | ) |
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Cash flows from financing activities: | | | | | | | | |
Exercises of stock options and warrants | | | 322 | | | | 1,398 | |
Proceeds from initial public offering | | | — | | | | 37,200 | |
Costs incurred in initial public offering | �� | | — | | | | (1,975 | ) |
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Net cash provided by financing activities | | | 322 | | | | 36,623 | |
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Net increase in cash and cash equivalents | | | 3,717 | | | | 6,929 | |
Cash and cash equivalents at beginning of the period | | | 2,380 | | | | 6,187 | |
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Cash and cash equivalents at end of the period | | $ | 6,097 | | | $ | 13,116 | |
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