deltathree Reports Third Quarter 2005 Financial Results
Revenues Increased 29% Year-Over-Year to $7.1 Million
Net Loss Reduced to $40,000 or Break Even on a Per Share Basis
New York, NY - November 3, 2005 - deltathree, Inc. (NASDAQ SC: DDDC), a leading
provider of VoIP hosted communications solutions for service providers,
resellers and consumers worldwide, today announced financial results for the
third quarter ended September 30, 2005.
Third Quarter 2005 Highlights
o Revenues increased 29% versus third quarter 2004 to $7.1 million.
o Net loss reduced to $40,000 or break even on a per share basis.
o Company achieved EBITDA positive results of $175,000 or $0.01 per
share.
o Gross margin of 38% versus 34% in third quarter 2004.
o New "Launch Ready" Outsourced Platform Solution and Etail/Retail
programs announced.
o Multiple service provider trials underway covering wireline,
wireless and ISP end markets.
Revenues for the third quarter of 2005 were $7.1 million, a $1.6 million
increase or 29% improvement over the third quarter 2004 revenues of $5.5 million
and a $178,000 increase or 3% improvement over the sequential second quarter
2005 revenues of $6.9 million. Nine month year-to-date revenues for 2005 totaled
$20.6 million, up $5.8 million or 39% compared to the first nine months of 2004.
deltathree's net loss for the third quarter of 2005 was $40,000 or $0.00 per
share. Third quarter net loss reflects a 94% improvement over the third quarter
2004 net loss of $671,000 or $(0.02) per share and a 90% improvement over the
second quarter 2005 net loss of $409,000 or $(0.01) per share.
Gross margin for the third quarter of 2005 was 38%, up from a gross margin of
34% recorded for the third quarter of 2004 and in line with a gross margin of
38% in the second quarter of 2005.
deltathree reported EBITDA (earnings before interest, taxes, depreciation and
amortization) positive results for the third quarter of 2005 of $175,000 or
$0.01 per share, compared to a loss of $121,000 or $(0.01) per share in the
third quarter of 2004. The positive third quarter 2005 EBITDA results reflect a
35% improvement over the sequential second quarter 2005 EBITDA results of
$130,000 or $0.00 per share.
EBITDA is presented because it is a widely accepted performance indicator,
although it should be noted that it is not a measure of liquidity or of
financial performance under Generally Accepted Accounting Principles (GAAP). The
EBITDA numbers presented may not be comparable to similarly titled measures
reported by other companies. EBITDA, while providing useful information, should
not be considered in isolation or as an alternative to net income or cash flows
as determined under GAAP. Consistent with the SEC Regulation G, the non-GAAP
measures in this press release have been reconciled to the nearest GAAP measure,
and this reconciliation is located under the heading "Reconciliation of Non-GAAP
Financial Information to GAAP" immediately following the Condensed Consolidated
Statements of Operations included in this press release.
Page 1 of 7
As of September 30, 2005, deltathree held approximately $15.3 million in cash,
cash equivalents, short-term and long-term investments, with no outstanding
debt.
deltathree Operational Review
Shimmy Zimels, deltathree's President and Chief Executive Officer, stated,
"deltathree marked a significant milestone during the third quarter as we
achieved break even on a per share basis. This marked our twentieth consecutive
quarterly improvement in earnings per share and is concrete evidence of our
success in driving towards profitability. The strength of our service provider
and reseller business continues to be the primary growth driver as we see rising
interest in our hosted and outsourced broadband VoIP solutions.
"During the third quarter deltathree announced several new initiatives designed
to meet our customers needs for advanced VoIP solutions, while providing
deltathree additional revenue drivers to fuel future growth. Our new `Launch
Ready' Outsourced Platform Solution is a turnkey VoIP solution specifically
designed to provide medium size service providers the ability to deliver VoIP
solutions to their end customers in a matter of weeks, with low capital
investment and end-to-end deltathree implementation expertise. Initial customer
response has been extremely positive and the program has generated significant
interest from domestic as well as international service providers, including
several paid customer trials which are currently underway. During the third
quarter, we also announced the launch of our Etail/Retail Program which offers
our Broadband Phone starter kits and our iConnectHere consumer VoIP services
through retailers such as Amazon.com. Both initiatives help deltathree to meet
the rising demand for VoIP products and services," continued Mr. Zimels.
Paul White, deltathree's Chief Financial Officer, stated, "With third quarter
financial results in line with our stated guidance, we continued to ramp our
VoIP services across our service provider, reseller and consumer platforms.
Rising end market demand for our award winning solutions is allowing deltathree
to realize increased leverage within our business model as we continue to keep a
strong focus on operating efficiencies. With paid service provider trials
currently underway and continued growth within our global reseller base, our
fourth quarter 2005 guidance reflects our continued confidence in the strength
of our core business as well as our optimism for future financial performance."
deltathree Financial Guidance
For the fourth quarter of 2005, deltathree forecasts quarterly GAAP earnings per
share within the range of $0.00 per share to $0.01 per share. deltathree expects
sequential revenue growth for the fourth quarter of 2005 to be within the range
of 5% to 10%, as compared to revenue for the third quarter of 2005.
Conference Call Details
The deltathree third quarter 2005 earnings conference call will be webcast live
at 10:00 a.m. ET [7:00 a.m. PT] today, November 3, 2005. Investors are invited
to listen to the live call by dialing 1-888-639-6205 in the United States or by
dialing 1-703-925-2608 when calling internationally. Investors worldwide can
also listen to the call live via deltathree's website, www.deltathree.com.
Please go to the website at least 15 minutes early to register, download, and
install any necessary audio software. A replay of the call will also be
available through the deltathree corporate web site.
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About deltathree
Founded in 1996, deltathree is a leading provider of hosted, Session Initiation
Protocol (SIP)-based Voice over Internet Protocol (VoIP) products, services and
infrastructure. deltathree offers customers high quality Internet telephony
solutions that are viable and cost-effective alternatives to traditional
telephone services. Supporting hundreds of thousands of active users around the
world, deltathree serves customers through its three primary distribution
channels: the Outsourced Platform Solution, the Reseller Program and
iConnectHere. deltathree's customized Outsourced Platform Solution offers
service providers worldwide a broad range of private label VoIP products such as
PC Phone and Broadband Phone, as well as a robust back-office suite of services
such as billing, operations management, web development, and network management.
Supporting a global network of resellers, deltathree's Reseller Program offers a
quick and efficient solution for Internet cafes, call shops and small Internet
service providers to enter the VoIP telecommunication services market.
iConnectHere, deltathree's consumer division, provides award-winning VoIP
products directly to consumers and small businesses online.
For more information about deltathree and iConnectHere, visit our website at
www.deltathree.com.
EBITDA Financial Disclosure
Investors are cautioned that the EBITDA, or earnings before interest, taxes,
depreciation and amortization, information contained in this press release is
not a financial measure under generally accepted accounting principles. In
addition, it should not be construed as an alternative to any other measures of
performance determined in accordance with generally accepted accounting
principles, or as an indicator of the Company's operating performance, liquidity
or cash flows generated by operating, investing and financing activities, as
there may be significant factors or trends that it fails to address. EBITDA
financial information is presented because deltathree believes that it is
helpful to some investors as one measure of the Company's operations. deltathree
cautions investors that non-GAAP financial information such as EBITDA, by its
nature, departs from traditional accounting conventions; accordingly, its use
can make it difficult to compare deltathree's results with the results from
other reporting periods and with the results of other companies.
Except for historical matters contained herein, the matters discussed in this
press release are forward-looking and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that these forward-looking statements reflect numerous
assumptions and involve risks and uncertainties that may affect deltathree's
business and prospects and cause actual results to differ materially from these
forward-looking statements. Among the factors that could cause actual results to
differ are: the inherent uncertainty of financial estimates and projections; the
competitive environment of Internet telephony and deltathree's ability to
compete effectively; deltathree's limited operating history; changes in the
rates of all related telecommunications services; the level and rate of customer
acceptance of new products and services; government regulation and legal
uncertainties that may affect the Internet telephony industry; rapid
technological changes; and other risk factors contained in deltathree's periodic
reports on file with the SEC and available through http://www.sec.gov. Except as
required under the federal securities laws and the rules and regulations of the
SEC, deltathree does not have any intention or obligation to update publicly any
forward-looking statements after the distribution of this news release, whether
as a result of new information, future events, changes in assumptions, or
otherwise.
Page 3 of 7
deltathree Contact: Investor Relations Contact: Media Relations Contact:
- ------------------- --------------------------- ------------------------
Paul White Erik Knettel Adam Handelsman/Alysha Crouse
Chief Financial Officer The Global Consulting Group 5W Public Relations
(212) 500-4850 (646) 284-9415 (212) 999-5585
paul.white@deltathree.com eknettel@hfgcg.com ahandelsman@5wpr.com
acrouse@5wpr.com
(Tables follow)
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DELTATHREE, INC.CONDENSED CONSOLIDATED BALANCE SHEET
As of As of
September 30, December 31,
2005 2004
--------------- ---------------
(unaudited) ($ in thousands)
ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 4,751 $ 3,905
--------------- ---------------
Short-term investments ............................................ 473 2,723
Accounts receivable, net .......................................... 788 325
Prepaid expenses and other current assets ......................... 694 528
Inventory ......................................................... 169 193
--------------- ---------------
Total current assets ........................................... 6,875 7,674
--------------- ---------------
Long -term investments ............................................. 10,050 9,850
--------------- ---------------
Property and equipment, net ........................................ 4,295 4,642
--------------- ---------------
Deposits ........................................................... 103 107
--------------- ---------------
Total assets .................................................. $ 21,323 $ 22,273
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $ 2,880 $ 3,657
Deferred revenues ................................................. 996 453
Other current liabilities ......................................... 1,768 2,034
--------------- ---------------
Total current liabilities ...................................... 5,644 6,144
--------------- ---------------
Long-term liabilities:
Severance pay obligations ......................................... 152 104
--------------- ---------------
Total liabilities .............................................. 5,796 6,248
--------------- ---------------
Stockholders' equity:
Class A common stock, - par value $0.001 .......................... 30 29
Additional paid-in capital ........................................ 167,678 167,301
Accumulated deficit ............................................... (151,971) (151,095)
Treasury stock at cost: 257,600 shares of class A common stock as of
September 30, 2005 and December 31, 2004 ......................... (210) (210)
--------------- ---------------
Total stockholders' equity .................................... 15,527 16,025
--------------- ---------------
Total liabilities and stockholders' equity .................... $ 21,323 $ 22,273
=============== ===============
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DELTATHREE, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
------------ ------------ ------------ ------------
(unaudited) (unaudited)
($ in thousands, except share data)
Revenues ................................. $ 7,105 $ 5,530 $ 20,636 $ 14,837
Costs and operating expenses:
Cost of revenues ....................... 4,379 3,665 12,873 9,721
Research and development expenses ...... 762 703 2,353 1,842
Selling and marketing expenses ......... 1,045 737 2,910 2,362
General and administrative expenses .... 744 546 2,089 1,637
Depreciation and amortization .......... 402 619 1,546 2,083
------------ ------------ ------------ ------------
Total costs and operating expenses .. 7,332 6,270 21,771 17,645
------------ ------------ ------------ ------------
Loss from operations ..................... (227) (740) (1,135) (2,808)
Interest income, net ..................... 198 81 302 216
------------ ------------ ------------ ------------
Loss before income taxes ................. (29) (659) (833) (2,592)
Income taxes ............................. 11 12 43 56
------------ ------------ ------------ ------------
Net loss ................................. $ (40) $ (671) $ (876) $ (2,648)
============ ============ ============ ============
Net loss per share - basic and diluted ... $ 0.00 $ (0.02) $ (0.03) $ (0.09)
============ ============ ============ ============
Weighted average shares outstanding -
basic and diluted (number of shares) 29,719,899 29,319,307 29,653,238 29,304,340
============ ============ ============ ============
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DELTATHREE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
($ in thousands, except share data)
Three Months Ended September 30,
--------------------------------
2005 2004
------------ ------------
Net Loss in accordance with generally
accepted accounting principles ........... $ (40) $ (671)
Add/(less):
Depreciation and amortization .......... 402 619
Income taxes ........................... 11 12
Interest Income, net ................... (198) (81)
------------ ------------
EBITDA* .................................. $ 175 $ (121)
------------ ------------
EBITDA per share-basic and diluted ....... $ 0.01 $ (0.01)
------------ ------------
Weighted average shares outstanding-
basic and diluted (number of shares) 29,719,899 29,319,307
============ ============
* Earnings before interest, taxes, depreciation and amortization