deltathree Strengthens Position as Digital Voice and Video Service Provider
Recently Established $1.2 Million Line of Credit Provides Improved Financial Stability
NEW YORK, March 25, 2010 (GLOBE NEWSWIRE) -- deltathree, Inc. (OTCBB:DDDC), a global provider of Voice over Internet Protocol (VoIP) hosted communications solutions for service providers, resellers and end-users, today announced financial results for the fourth quarter and full year 2009 ended December 31, 2009.
Mr. Effi Baruch, interim Chief Executive Officer and President, and Senior Vice President of Operations and Technology of deltathree, stated, "While 2009 presented challenging global economic and telecommunications market conditions, deltathree made material progress in terms of improving our bottom line performance, reducing operating costs and strategically strengthening our suite of next generation communications services and back-end services to provide a foundation for future growth. Our cost reduction initiatives allowed the company to significantly reduce its full year net loss by 73% as well as reduce core operating expenses (consisting of general and administrative, sales and marketing and research and development costs) by 49% year-over-year. We were able to accomplish all this while our total revenues declined only 6% in 2009 compared to 2008. In addition, strategically in 2009 we were able to refocus our go-to-market approach to concentrate on white-label digital video and voice offerings to customers and partners."
"Our overall service provider enabling business strategy remains focused on deploying innovative, differentiated and higher value IP-based communications solutions. In the fourth quarter we secured our second milestone agreement to provide digital video and voice services, extending the international reach of our next generation communications offerings. For 2010, we are expanding the focus of our service package to include enhanced video content and new mobile phone applications, as well as improved back-end services. With our world-class international VoIP network at the core, we believe these new offerings will strengthen our market position in some of the most attractive and fastest growing segments of the global communications marketplace."
"2009 was also notable as we successfully secured a strategic investment from D4 Holdings, LLC, which established D4 Holdings as the majority stockholder of deltathree and whose ownership includes the owners of ACN, Inc., an international direct seller of telecommunications services. Subsequent to year end, we also secured a new $1.2 million line of credit from D4 Holdings, providing us important near-term financial stability," concluded Mr. Baruch.
For the fourth quarter of 2009, deltathree reported total revenues of $3.7 million compared with $4.6 million reported for the fourth quarter of 2008. For the full year 2009, deltathree reported total revenues of $19.0 million compared to $20.2 million for the full year 2008.
Fourth quarter 2009 GAAP net loss totaled $1.1 million, or $(0.02) per basic share, compared to a GAAP net loss for the fourth quarter of 2008 of $1.8 million, or $(0.05) per basic share. Full year 2009 GAAP net loss totaled $3.2 million, or $(0.05) per basic share, compared to a GAAP net loss for the full year 2008 of $11.9 million, or $(0.36) per basic share. The fourth quarter and full year 2008 periods include the impact of $0.3 million and $1.2 million in restructuring expenses, respectively.
Fourth quarter 2009 non-GAAP adjusted EBITDA (as defined below) loss was $1.2 million, or $(0.02) per basic share, compared to a non-GAAP adjusted EBITDA loss of $0.2 million, or $(0.01) per basic share, for the fourth quarter of 2008. Full year 2009 non-GAAP adjusted EBITDA loss was $2.5 million, or $(0.04) per basic share, compared to a non-GAAP adjusted EBITDA loss of $3.5 million, or $(0.11) per basic share, for the full year 2008.
deltathree defines adjusted EBITDA as earnings before restructuring expenses, restatement of deferred revenue, write-off of goodwill and intangible assets, stock-based compensation, interest, income taxes, depreciation and amortization. deltathree uses adjusted EBITDA as a measure of the company's operating trends. The adjusted EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. Consistent with Regulation G under the U.S. federal securities laws, 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" following the Condensed Consolidated Statements of Cash Flows included in this press release.
As of December 31, 2009, deltathree held approximately $1.9 million in cash, cash equivalents, restricted cash and short-term investments, with no outstanding debt, negative working capital equal to approximately $2.0 million and negative stockholders' equity equal to approximately $1.4 million. While deltathree's cost reduction activities continue to yield measurable improvements, the company is continuing to draw upon its cash reserves on a monthly basis.
On March 1, 2010, deltathree entered into a loan and security agreement with D4 Holdings, securing a line of credit in a principal amount of $1.2 million. The line of credit, combined with significant improvements in operating cost efficiency and the strategic repositioning of the company's core business to drive revenues, are all aimed at strengthening deltathree's near-term financial stability. The company is continuing to explore potential capital initiatives aimed at further strengthening its balance sheet and remedying its negative working capital.
Adjusted EBITDA Financial Disclosure
Investors are cautioned that adjusted EBITDA is not a measure of liquidity or financial performance under generally accepted accounting principles ("GAAP"). In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with GAAP, 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. Adjusted 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 adjusted 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.
About deltathree
Founded in 1996, deltathree, Inc. is a global provider of integrated Voice over Internet Protocol (VoIP) hosted communications solutions for service providers, resellers and end-users. Supporting tens of thousands of active users around the world, deltathree serves customers through its two primary distribution channels: the service provider/reseller channel and the direct-to-consumer channel. deltathree's advanced solutions offer resellers and service providers a full spectrum of private label IP-based digital voice and video products and services, as well as a back-office suite of services. Utilizing advanced Session Initiation Protocol (SIP) technology, deltathree provides all the components to support a complete VoIP service deployment. deltathree's direct-to-consumer channel consists of the iConnectHere direct-to-consumer offering and joip, which powers the VoIP service of Panasonic's Globarange hybrid phone.
For more information about deltathree please visit: www.deltathree.com.
For more information about iConnectHere, please visit our website at www.iconnecthere.com.
For more information about joip, please visit our website at www.joip.com.
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: our ability to obtain additional capital in the near-term to finance operations; our ability to reduce our costs and expenses and expand our revenues; our ability to retain key personnel and employees needed to support our services and ongoing operations; our failure to retain key customers; decreasing rates of telecommunications services; the public's acceptance of VoIP telephony, and the level and rate of customer acceptance of our new products and services; the competitive environment of Internet telephony and our ability to compete effectively; fluctuations in our quarterly financial results; our ability to maintain and operate our computer and communications systems without interruptions or security breaches; our ability to operate in international markets; our ability to provide quality and reliable service, which is in part dependent upon the proper functioning of equipment owned and operated by third parties; the uncertainty of future governmental regulation; the need for ongoing product and service development in an environment of rapid technological change; and other risks referenced from time to time in our filings with the SEC and available on the Internet at 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.
| DELTATHREE, INC. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| ($ in thousands) | ||
| December 31, | ||
| 2009 | 2008 | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $1,514 | $1,788 |
| Restricted cash and short-term investments | 366 | 317 |
| Accounts receivable, net | 270 | 760 |
| Prepaid expenses and other current assets | 409 | 398 |
| Inventory | 29 | 33 |
| Total current assets | 2,588 | 3,296 |
| Property and equipment: | ||
| Telecommunications equipment | 17,070 | 17,806 |
| Furniture, fixtures and other | 628 | 623 |
| Leasehold improvements | 793 | 787 |
| Capital leases | 422 | 422 |
| Computers hardware and software | 9,175 | 9,181 |
| 28,088 | 28,819 | |
| Less accumulated depreciation | (27,434) | (27,378) |
| Property and equipment, net | 654 | 1,441 |
| Deposits | 67 | 117 |
| Total assets | $3,309 | $4,854 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | ||
| Current liabilities: | ||
| Current portion of capital leases | $144 | $148 |
| Accounts payable | 1,912 | 1,485 |
| Deferred revenues | 657 | 771 |
| Other current liabilities | 1,868 | 1,615 |
| Total current liabilities | 4,581 | 4,019 |
| Long-term liabilities: | ||
| Capital leases - net of current portion | 3 | 147 |
| Severance pay obligations | 150 | 140 |
| Total current liabilities | 153 | 287 |
| Total liabilities | 4,734 | 4,306 |
| Stockholders' equity (deficiency): | ||
| Share capital: | ||
| Common Stock, par value $0.001 per share; authorized 75,000,000 shares; issued and outstanding: 72,030,505 at December 31, 2009, and 32,870,105 at December 31, 2008. | 72 | 33 |
| Additional paid-in capital | 174,324 | 173,137 |
| Accumulated deficit | (175,821) | (172,622) |
| Total stockholders' equity (deficiency) | (1,425) | 548 |
| Total liabilities and stockholders' equity | $3,309 | $4,854 |
| DELTATHREE, INC. | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| ($ in thousands, except share and per share data) | ||||
|
Three Months Ended December 31, |
Year Ended December 31, |
|||
| 2009 | 2008 | 2009 | 2008 | |
| (Unaudited) | ||||
| Revenues | $ 3,683 | $ 4,646 | $ 19,002 | $ 20,226 |
| Costs and operating expenses: | ||||
| Cost of revenues | 3,329 | 3,475 | 16,127 | 14,744 |
| Research and development expenses | 130 | 499 | 464 | 3,356 |
| Selling and marketing expenses | 287 | 581 | 1,201 | 3,636 |
| General and administrative expenses | 887 | 1,233 | 3,514 | 3,130 |
| Restructuring expenses | -- | 266 | -- | 1,223 |
| Write-off of goodwill | -- | -- | -- | 2,002 |
| Write-off of intangible assets | -- | -- | -- | 1,564 |
| Change in deferred revenue relating to previous years | -- | -- | -- | 596 |
| Depreciation and amortization | 167 | 342 | 890 | 1,836 |
| Total costs and operating expenses | 4,800 | 6,396 | 22,196 | 32,087 |
| Loss from operations | (1,117) | (1,750) | (3,194) | (11,861) |
| Capital gain | -- | 39 | 86 | 39 |
| Other non-operating income | -- | -- | 15 | 19 |
| Interest expense | 8 | 57 | 72 | 35 |
| Net loss before taxes | (1,125) | (1,768) | (3,165) | (11,866) |
| Income taxes | 5 | 1 | 34 | 28 |
| Net loss | $ (1,130) | $ (1,769) | $ (3,199) | $ (11,866) |
| Basic and diluted net loss per share | $ (0.02) | $ (0.05) | $ (0.05) | $ (0.36) |
| Basic and diluted weighted average number of shares outstanding |
71,999,255 |
32,870,105 |
67,877,743 |
32,870,105 |
|
DELTATHREE, INC. |
||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| ($ in thousands) | ||
| 2009 | 2008 | |
| Cash flows from operating activities: | ||
| Net loss | $ (3,199) | $ (11,866) |
|
Adjustments to reconcile net loss for the year to net cash (used in) provided by operating activities: |
||
| Write-off of intangible assets | -- | 3,566 |
| Depreciation and amortization | 890 | 1,537 |
| Amortization of intangible asset | -- | 338 |
| Write-off of office equipment | 20 | 357 |
| Write-off of long-term deposits | 50 | -- |
| Tax provision | (400) | 700 |
| Stock-based compensation | 142 | 390 |
| Capital gain, net | (86) | (39) |
| Liability for severance pay, net | 10 | (201) |
| Provision for losses on accounts receivable | 253 | 121 |
| Exchange rates differences on deposits, net | -- | (1) |
| Change in deferred revenues relating to previous years | -- | 596 |
| Changes in operating assets and liabilities: | ||
| Decrease in accounts receivable | 237 | 180 |
| (Increase) decrease in prepaid expenses other current assets | (59) | 128 |
| Decrease (increase) in inventory | 4 | 160 |
| Increase (decrease) in accounts payable | 427 | (1,020) |
| Decrease in deferred revenues | (114) | (376) |
| Increase (decrease) in other current liabilities | 645 | (750) |
| 2,019 | 5,686 | |
| Net cash (used in) operating activities | (1,180) | (6,180) |
| Cash flows from investing activities: | ||
| Purchase of property and equipment | (192) | (358) |
| Proceeds from sale of property and equipment | 156 | 141 |
| Long term investment, net | -- | 1,085 |
| Decrease (increase) in short-term investments | (49) | 5,566 |
| Purchase of Go2Call operations, net | -- | -- |
| Net cash (used in) provided by investing activities | (85) | 6,434 |
| Cash flows from financing activities: | ||
| Payment of capital leases | (140) | (115) |
| Proceeds from exercise of options | 14 | -- |
| Proceeds from issuance of shares, net | 1,070 | -- |
| Release of restricted cash | 47 | -- |
| Net cash provided by (used in) financing activities | 991 | (115) |
| Decrease (increase) in cash and cash equivalents | (274) | 139 |
| Cash and cash equivalents at beginning of year | 1,788 | 1,649 |
| Cash and cash equivalents at end of year | 1,514 | 1,788 |
| DELTATHREE, INC. | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) | ||
| ($ in thousands) | ||
| 2009 | 2008 | |
| Supplemental disclosures of cash flow information: | ||
| Cash paid for: | ||
| Taxes | $25 | $48 |
| Supplemental schedule of investing and financing activities: | ||
| Acquisition of capital leases | -- | $197 |
| Cash received from: | ||
| Proceeds from issuance of shares | 1,170 | -- |
| Direct costs paid for services due to issuance of shares | (100) | -- |
| Total proceeds | (1,070) | -- |
| DELTATHREE, INC. | ||||
| RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP | ||||
| (Unaudited) | ||||
| ($ in thousands, except share and per share data) | ||||
|
Three Months Ended December 31, |
Year Ended December 31, |
|||
| 2009 | 2008 | 2009 | 2008 | |
| Net loss in accordance with generally accepted accounting principles | $ (1,130) | $ (1,769) | $ (3,199) | $ (11,866) |
| Add/(less): | ||||
| Depreciation and amortization | 167 | 342 | 890 | 1,836 |
| Write-down of goodwill | -- | -- | -- | 2,002 |
| Write-down of intangible assets | -- | -- | -- | 1,564 |
| Change in deferred revenue relating to previous years | -- | -- | -- | 596 |
| Restructuring expenses | -- | 266 | -- | 1,223 |
| Tax provision | (400) | 700 | (400) | 700 |
| Stock-based compensation | 107 | 157 | 142 | 390 |
| Interest expense | 8 | 57 | 72 | 35 |
| Income taxes | 5 | 1 | 34 | 28 |
| Adjusted EBITDA | $ (1,243) | $ (246) | $ (2,461) | $ (3,492) |
| Basic and diluted adjusted EBITDA per share | $ (0.02) | $ (0.01) | $ (0.04) | $ (0.11) |
| Basic and diluted weighted average number of shares outstanding |
71,999,255 |
32,843,752 |
67,877,743 |
32,870,105 |
| deltathree defines adjusted EBITDA as earnings before restructuring expenses, restatement of deferred revenue, write-off of goodwill and intangible assets, stock-based compensation, interest, income taxes, depreciation and amortization. | ||||