Science & Technology
Science and Technology
Science and Technology
Wed, May 19, 2010
Tue, May 18, 2010 Elephant Talk Communications Inc. Reports First Quarter 2010 Results and Provides Business Update
AMSTERDAM, THE NETHERLANDS--(Marketwire - May 18, 2010) - Elephant Talk Communications Inc. (
Elephant Talk has recently completed several milestones that management believes have positioned the company for future success and growth. Since the beginning of 2010, we have achieved the following:
1. Signed a Mobile Virtual Network Operating (MVNO) Agreement with T-Mobile Netherlands BV. This hosting agreement is to service a new MVNO initiative of T-Mobile Netherlands using the Elephant Talk MVNO platform.
2. Vizzavi Spain (part of the Vodafone Group) is beginning the migration of their MVNO customers to the Elephant Talk Network.
3. Signed 6 Heads of Term Agreements with new MVNOs in the Netherlands since January 1st 2010. The implementation phase for most of these new MVNOs are currently in the final stage.
4. Completed the acquisition of ValidSoft. This acquisition of ValidSoft provides Elephant Talk with technology for combating the $100+ billion worldwide bank credit and debit card fraud crises.
5. Valid-POS, ValidSoft's proprietary product, received the European Privacy Seal. Official European certification demonstrating full compliance with all European data protection and privacy laws.
6. Margin Improvements. Our investments in software development in the mobile arena are beginning to pay off in the overall margin contribution which has virtually doubled compared with the previous year quarter.
"These achievements are expected to result in improved results as we progress through 2010," commented, Mr. Steven van der Velden, President and CEO. "After 3 years of heavily investing in the mobile capabilities of our company we are now entering a new phase of roll-out of our innovative mobile services and customized solutions."
Elephant Talk's Loss from Operations for the quarter increased by 31% to ($2,721,080) compared to ($ 2,081,703) for the quarter ended March 31, 2009, with adjusted EBITA at ($ 1,335, 473) in 2010 compared to ($ 1,225,981) the previous year in constant currency. Net loss for the quarter was ($12,338,995), a substantial increase compared to ($2,144,321) for the quarter ended March 31, 2009. These increasing losses were primarily caused by derivative accounting rules. Non cash expensing of interest expense related to amortization of debt discount on promissory notes, change in fair value of warrant liabilities and amortization of deferred financing costs. Excluding the abovementioned non cash expenses, the Net loss came to $ 3,135,021 for March 31, 2010 and $ 2,143,418 for the same period in 2009.
97% of our revenues are invoiced and paid in Euro, therefore current US Dollar / Euro exchange rates have had an impact on the figures presented. To eliminate this exchange rate effect we show in the table below the comparison first quarter of 2009 figures in constant currency.
March 31, March 31, March 31, Variance March 31, 2010 2010 2009 2009 versus March 31, 2009 filed filed in constant filed in constant Revenue currency currency ----------- ----------- ----------- ----------- ----------- Landline Business $ 9,059,182 $ 9,000,043 $ 9,519,911 $ 59,139 $ -460,729 Mobile Services 884,583 428,841 454,156 455,742 430,427 Total Revenue $ 9,943,765 $ 9,428,884 $ 9,974,067 $ 514,881 $ -30,302 =========== =========== =========== =========== ===========
In constant currency, the revenues remained relatively stable, despite the decreases in the traditional landline business. This decrease was almost fully offset by the increased mobile services revenues compared to Q1 the previous year.
Three months ended March 31, ---------------------------------------- 2009 in constant 2010 2009 currency ----------- ----------- ---------------- (unaudited) Revenue $ 9,943,765 $ 9,428,884 $ 9,974,068 Cost of Service 9,373,888 9,147,797 9,677,147 ----------- ----------- ---------------- Margin $ 569,877 $ 281,087 $ 296,920 =========== =========== ================
As a result of the increase of our mobile business, which carries a much higher margin than our landline business, our overall margin has almost doubled in comparison with the same quarter the previous year.
Elephant Talk employs Adjusted EBITDA, defined as earnings before interest, taxes, depreciation and amortization as well as to market adjustments related to our warrant liabilities and conversion features which are accounted under derivative accounting rules as required by US GAAP, for several purposes, including as a measure of our operating performance. We use Adjusted EBITDA because it removes the impact of items not directly resulting from our core operations, thus allowing us to better assess whether the elements of our growth strategy are yielding positive results.
A reconciliation of Adjusted EBITDA to net income, the most directly comparable measure under accounting principles generally accepted in the United States, for each of the fiscal periods indicated, is as follows:
Three months ended March 31, ---------------------------------------------- 2009 in constant 2010 2009 currency ------------- ------------- ---------------- (unaudited) Net loss $ (12,338,995) $ (2,144,321) $ (2,211,236) Provision for income taxes 800 800 800 Net loss attributable to noncontrolling interest 498 103 103 Depreciation and amortization 844,694 630,182 656,650 Stock-based compensation 540,913 269,460 269,460 Other expenses 9,616,617 61,715 58,242 ------------- ------------- ---------------- Adjusted EBITDA $ (1,335,473) $ (1,182,061) $ (1,225,981) ============= ============= ================
Other expenses are for $ 9.2 million (or 96%) related to non cash expensing of interest expense related to amortization of debt discount on promissory notes, change in fair value of warrant liabilities and amortization of deferred financing costs. The remaining 4% other expenses are interest expenses.
SEC REGULATION G -- NON-GAAP INFORMATION
This press release includes non-GAAP revenues, non-GAAP cost of service and non-GAAP SG&A. These non-GAAP financial measures exclude the impact of currency translation adjustments. We have reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in the text of this release. We believe that these non-GAAP financial measures provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of our quarterly and FY 10 actual results.
About Elephant Talk Communications
Elephant Talk Communications, Inc. (
About ValidSoft
ValidSoft, a member of Elephant Talk Communications, Inc. (
Forward-Looking Statements
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here; however, readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.
