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ATSI Communications: ATSI Reports FY2009 Financial Results

^{Published on 2009-10-19 16:38:36 - Market Wire}
 

SAN ANTONIO, TX--(Marketwire - October 19, 2009) - ATSI Communications, Inc. (OTCBB: [ ATSX ]) today announced financial results for the Company's fiscal year ended July 31, 2009. Revenue and gross profit for the Company's fiscal year 2009 was $19.9 million and $1.3 million, respectively. Adjusted for non-cash items, Non-GAAP net loss for the fiscal year was $763,000 compared to a non-GAAP net income of $1,097,000 in fiscal year 2008. The Company incurred $853,000 in non-cash expenses during its fiscal year ended July 31, 2009.

Comments on FY2009

As previously reported, the Company's financial results for FY2009 were impacted by three key factors including:

 -- The decline in international voice traffic due to the global economic crisis. Although management expects call volumes to increase as the economy improves, the Company has pursued selling higher revenue per minute routes while diversifying its core global VoIP business. During the 4th quarter the Company deployed a VoIP technology platform to introduce new and enhanced VoIP services that includes fully hosted IP/PBX services, IP trunking, call center applications, prepaid services, and customized VoIP solutions for specialized applications. With a current market value of nearly $500 billion, management believes there is a significant market opportunity for ATSI's diversification strategy. -- The tightening of capital markets reduced the credit worthiness of certain existing and prospective customers. To minimize risk, the Company denied or reduced credit on certain accounts resulting in a negative impact on revenue. To offset this decline, the Company is vigorously pursuing new accounts and selling additional services to its existing credit-worthy customers. -- The market shift towards improved quality for global VoIP services required the Company to hold its suppliers to a higher standard on international routes. The Company took action during the 3rd quarter to improve call quality and the average call duration ("ACD") of calls processed on its network. The action taken included eliminating underperforming suppliers from its global network. The result is improved quality that management believes will positively influence the business long-term and favorably impact future revenues. In addition, the Company deployed an automated least cost routing system during the year that prioritizes routes based on profitability and blocks non-profitable routes. The system will eliminate costly routing errors, increase productivity, and maximize the profit potential for ATSI's global VoIP business. 

Arthur L. Smith, CEO of ATSI, stated, "The decline in U.S. and World economies made FY2009 a particularly challenging year for our team. We took the corrective action necessary to overcome the difficulties we faced including streamlining operations and cutting expenses. We also launched new enhanced VoIP services and implemented the changes necessary to build a more consistent, stable and reliable global network. In May 2009, we provisioned our first account on our enhanced services platform consisting of a VoIP network to 154 cities for a Fortune 500 company. In addition, we recently provisioned several other corporate accounts and completed interoperability testing with 2 top-tier global carriers. We are positioning ATSI as an outsourced VoIP technology enabler, marketing these new and synergistic services to other carriers and to enterprise customers through established channel partners. We look forward to the future with confidence and believe our new products combined with the actions taken to improve our core VoIP service will benefit our business plan in FY2010."

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principals, or GAAP, ATSI uses non-GAAP measures of operating income (loss), net income (loss) and income (loss) per share, which are adjustments from results based on GAAP to exclude non-cash expenses, including non-cash stock-based compensation in accordance with SFAS 123R. ATSI's management believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of ATSI's on-going core operations and prospects for the future. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating business internally and as such deemed it important to provide all this information to investors.

Net income before non-cash items is not a term defined by generally accepted accounting principles (GAAP) and may not be comparable to other similarly titled measurements used by other companies. Such non-GAAP measures should be considered in addition to, and not as a substitute for, performance measures calculated in accordance with GAAP. The accompanying table includes a detailed reconciliation of net loss reported in accordance with GAAP to net loss before non-cash items.

ATSI Communications, Inc. operates through its wholly owned subsidiary, Digerati Networks, Inc. Digerati Networks is a premier global VoIP carrier serving rapidly expanding markets in Asia, Europe, the Middle East, and Latin America, with an emphasis on Mexico. Through Digerati's partnerships with established foreign carriers and network operators, interconnection and service agreements, and a NextPoint powered VoIP network, ATSI believes it has clear advantages over its competition. ATSI also owns a minority interest of a subsidiary in Mexico, ATSI Comunicaciones, S.A. de C.V., which operates under a 30-year government issued telecommunications license.

The information in this news release includes certain forward-looking statements that are based upon management's expectations and assumptions about certain risks and uncertainties that can affect future events. Although management believes these assumptions and expectations to be reasonable on the date of this news release, these risks and uncertainties may cause actual events to differ material from managements those contained in this news release. The risks and uncertainties include, but are not limited to, continuing as a going concern, availability and cost of our present vendors and suppliers, and absence of any change in government regulations or other costs associated with data transmission over the Internet or termination of transmissions in foreign countries.

 ATSI COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Years ended July 31, 2009 2008 ---------- ---------- OPERATING REVENUES: VoIP services $ 19,891 $ 41,961 ---------- ---------- Total operating revenues 19,891 41,961 ---------- ---------- OPERATING EXPENSES: Cost of services (exclusive of depreciation and amortization) 18,533 38,884 Selling, general and administrative expense (exclusive of legal and professional fees) 2,157 2,400 Legal and professional fees 353 352 Bad debt expense 2 (27) Depreciation and amortization expense 152 160 ---------- ---------- Total operating expenses 21,197 41,769 ---------- ---------- OPERATING INCOME (LOSS) (1,306) 192 ---------- ---------- OTHER INCOME (EXPENSE): Gain on early extinguishment of debt 108 41 Loss attributed to noncontrolling interest (114) - Investment loss - (16) Interest income (expense) (196) (105) ---------- ---------- Total other income (expense), net (202) (80) ---------- ---------- NET INCOME (LOSS) (1,508) 112 ---------- ---------- LESS: PREFERRED DIVIDEND - (12) ADD: REVERSAL OF PREVIOUSLY RECORDED PREFERRED DIVIDEND - 340 ---------- ---------- NET INCOME (LOSS) TO COMMON STOCKHOLDERS $ (1,508) $ 440 ========== ========== BASIC INCOME (LOSS) PER SHARE TO COMMON STOCKHOLDERS $ (0.04) $ 0.01 ========== ========== DILUTED INCOME (LOSS) PER SHARE TO COMMON STOCKHOLDERS $ (0.04) $ 0.01 ========== ========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 40,043,303 39,143,748 DILUTED COMMON SHARES OUTSTANDING 40,043,303 39,197,319 NET INCOME (LOSS) TO COMMON STOCKHOLDERS, as reported: $ (1,508) $ 440 ---------- ---------- EXCLUDING NON-CASH ITEMS: ADD: Non-cash issuance of common stock and warrants for services - 77 Non-cash stock-based compensation, employees 389 695 Bad debt expense (recovery) 2 (27) Depreciation and amortization 152 160 Investment loss - 16 Loss attributed to noncontrolling interest 114 - Interest expense 196 105 MINUS: Gain on early extinguishment of debt 108 41 Preferred dividend - 328 NET INCOME (LOSS) TO COMMON STOCKHOLDERS ---------- ---------- EXCLUDING NON-CASH ITEMS: $ (763) $ 1,097 ========== ==========