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Second Quarter 2009 Financial Highlights:
-- Revenues for the second quarter of 2009 increased by 5% to $3,733 thousand compared to $3,568 thousand in the second quarter of 2008.
-- Net income in accordance with US Generally Accepted Accounting Principles (US GAAP) for the second quarter of 2009 was $696 thousand, as compared with $582 thousand in the second quarter of 2008.
-- Non-GAAP net income for the second quarter of 2009 was $1,027 thousand, as compared with non-GAAP net income of $938 thousand for the second quarter of 2008. Non-GAAP net income for the second quarter of 2009 excludes $331 thousand of stock-based compensation expenses, recorded in accordance with Financial Accounting Standards No. 123R.
-- Deferred Revenues (long-term and short-term) as of June 30, 2009 amounted to $2,776 thousand, compared to $2,976 in deferred revenues as of December 31, 2008.
-- Operating cash flow for the second quarter of 2009 was $773 thousand, compared to $591 thousand in the second quarter of 2008.
-- The Company made a $477 thousand follow-on investment in Mirapoint, a secure messaging and archiving vendor and an OEM licensee. This is the Company's second investment in Mirapoint, bringing the total to date that the Company has invested to $1.2 million.
-- During the second quarter of 2009, the company continued executing its share buy-back program. As of June 30, 2009, the company had used a total of $2,788 thousand out of the original buy-back program of $4 million for the repurchase of 1,463 thousand shares at an average price of $1.91. The company intends to continue to implement the buy-back program under the guidance of its Board of Directors, which decided to increase the program by $1 million (bringing the total in the program to $5 million). The parameters for the program announced in the company's press release of July 30, 2008 remain applicable to this additional allocation.
-- Cash, short-term cash deposits and marketable securities as of June 30, 2009, amounted to $16,058 thousand, compared to $16,401 thousand as of December 31, 2008. The change is primarily the result of the positive operating cash flow as offset by the above-mentioned investment in Mirapoint and the buy-back program.
-- The Company signed agreements with eight new OEM partners during the second quarter, resulting in a total of 125 OEM partners using Commtouch messaging and/or Web security technologies.
"In the second quarter, we met or exceeded all of the operational and financial goals we had set for ourselves," commented Gideon Mantel, chief executive officer and chairman of the board. "We achieved our revenue goals, our operating expense targets, our planned number of new customers, the number of deals signed for the new Web security product and our buy-back plan objectives. In fact, the second quarter is the best we have ever had in terms of non-GAAP profit. Looking ahead, our improving results plus the growing sales of our new Web security product indicate that the next quarter will be even stronger."
Business Outlook
Based on current business activities and general economic conditions, Commtouch's management reiterates its full year 2009 guidance, as follows:
Full year 2009 revenues are expected to grow to between $15 million and $16 million. Net income for 2009 is expected to be approximately $4 million on a non-GAAP basis.
The above outlook is as of the date of this release, and the company undertakes no obligation to update its estimates in the future.
Use of Non-GAAP Measures
Commtouch's non-GAAP net income differs from results reported under U.S. GAAP due to non-cash items; since it is too early to determine the impact of stock-based compensation expense for the rest of the 2009 year, Commtouch is not providing guidance on GAAP net income. Stock-based compensation expense has a negative impact on net income.
This press release includes financial measures for net income (loss), basic and diluted earnings per share that exclude stock-based compensation expenses and are therefore not calculated in accordance with generally accepted accounting principles (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance that enhances management's and investors' ability to evaluate the company's net income or loss and earnings or loss per share and to compare it with historical net income or loss and earnings or loss per share.
The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management uses both GAAP and non-GAAP measures when evaluating the business internally and therefore felt it important to make these non-GAAP adjustments available to investors.
Financial Results Conference Call
The company has scheduled a conference call later today, Wednesday, July 29, 2009 at 11 a.m. ET.
To participate in the call, please dial one of the following numbers ten minutes prior to the start time of the call:
U.S.: 1 888 281 1167; ISRAEL: 03 918 0644; INTERNATIONAL: +972 3 918 0644.
For those unable to listen to the live call, a replay of the call will be available the day after the call in the investor relations section of Commtouch's website, at: www.commtouch.com/investor-relations.
About Commtouch
Commtouch(R) (NASDAQ:CTCH) provides proven messaging and Web security technology to more than 100 security companies and service providers for integration into their solutions. Commtouch's patented Recurrent Pattern Detection(TM) (RPD(TM)) and GlobalView(TM) technologies are founded on a unique cloud-based approach, and work together in a comprehensive feedback loop to protect effectively in all languages and formats. Commtouch technology automatically analyzes billions of Internet transactions in real-time in its global data centers to identify new threats as they are initiated, protecting email infrastructures and enabling safe, compliant browsing. The company's expertise in building efficient, massive-scale security services has resulted in mitigating Internet threats for thousands of organizations and hundreds of millions of users in 190 countries. Commtouch was founded in 1991, is headquartered in Netanya, Israel, and has a subsidiary in Sunnyvale, Calif.
Stay abreast of the latest news at the Commtouch Cafe: http://blog.commtouch.com. For more information about enhancing security offerings with Commtouch technology, see http://www.commtouch.com or write to info@commtouch.com.
Recurrent Pattern Detection, RPD, Zero-Hour and GlobalView are trademarks, and Commtouch is a registered trademark, of Commtouch Software Ltd. U.S. Patent No. 6,330,590 is owned by Commtouch.
This press release contains forward-looking statements, including projections about our business, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements in the future tense, and statements including words such as "expect," "plan," "estimate," "anticipate," or "believe" are forward-looking statements. These statements are based on information available to us at the time of the release; we assume no obligation to update any of them. The statements in this release, including those relating to a) the expectation of stronger third quarter and b) the company's business outlook for 2009, are not guarantees of future performance and actual results could differ materially from our current expectations as a result of numerous factors, including business conditions and growth or deterioration in the Internet market, commerce and the general economy, both domestic as well as international; fewer than expected new-partner relationships; competitive factors, including pricing pressures; technological developments, and products offered by competitors; the ability of our OEM partners to successfully penetrate markets with products integrated with Commtouch technology; a slower than expected acceptance rate for our newer product offerings; availability of qualified staff; and technological difficulties and resource constraints encountered in developing new products, as well as those risks described in the text of this press release and the company's Annual Reports on Form 20-F and reports on Form 6-K, which are available through www.sec.gov.
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 December 31
2009 2008
Unaudited Audited
In US$ thousands
Assets:
Current Assets:
Cash and cash equivalents $ 10,632 $ 13,661
Short term cash deposit 498 740
Short term marketable securities - 2,000
Trade receivables 1,640 1,614
Prepaid expenses and other accounts receivable 502 389
Total current assets 13,272 18,404
Long term marketable securities 4,928 -
Long-term lease deposits 47 64
Severance pay fund 717 720
Property and equipment, net 717 771
Investment in affiliate 1,227 750
Total assets 20,908 20,709
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable 283 253
Employees and payroll accruals 724 726
Accrued expenses and other liabilities 188 237
Short-term deferred revenue 2,235 2,341
Total current liabilities 3,430 3,557
Long-term deferred revenue 541 635
Accrued severance pay 884 857
Total liabilities 1,425 1,492
Shareholders' equity 16,053 15,660
Total liabilities and shareholders' equity $ 20,908 $ 20,709
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In US$ thousands, except per share amounts)
Three months ended Six months ended
June 30 June 30
2009 2008 2009 2008
Unaudited Unaudited Unaudited Unaudited
Revenues $ 3,733 $ 3,568 $ 7,276 $ 6,969
Cost of revenues 516 459 1,029 908
Gross profit 3,217 3,109 6,247 6,061
Operating expenses:
Research and development 765 792 1,551 1,573
Sales and marketing 1,022 967 2,020 1,982
General and administrative 746 839 1,478 1,708
Total operating expenses 2,533 2,598 5,049 5,263
Operating profit 684 511 1,198 798
Financial (expenses) income, net 12 71 (66 ) 191
Income before taxes 696 582 1,132 989
Taxes on income - - - 7
Net income attributable to ordinary and equivalently participating $ 696 $ 582 $ 1,132 $ 982
shareholders
Earning per share- basic $ 0.03 $ 0.02 $ 0.05 $ 0.04
Earning per share- diluted $ 0.03 $ 0.02 $ 0.04 $ 0.04
Weighted average number of shares outstanding:
Basic 24,717 25,662 24,887 25,529
Diluted 25,069 26,725 25,230 26,928
Supplementary Financial Information
Unaudited Reconciliation of GAAP Financial Information to NON-GAAP
(In US$ thousands)
Three months ended
June 30
GAAP FAS123R Non GAAP GAAP FAS123R Non GAAP
2009 Adjustments 2009 2008 Adjustments 2008
Unaudited
Revenues $ 3,733 $ 3,733 $ 3,568 $ 3,568
Cost of revenues 516 10 506 459 12 447
Gross profit 3,217 (10 ) 3,227 3,109 (12 ) 3,121
Operating expenses:
Research and development 765 75 690 792 67 725
Sales and marketing 1,022 74 948 967 68 899
General and administrative 746 172 574 839 209 630
Total operating expenses 2,533 321 2,212 2,598 344 2,254
Operating profit 684 331 1,015 511 356 867
Financial (expenses) income, net 12 12 71 71
Income before taxes 696 1,027 582 938
Net income $ 696 $ 1,027 $ 582 $ 938
Earning per share- basic $ 0.03 $ 0.04 $ 0.02 $ 0.04
Earning per share- diluted $ 0.03 $ 0.04 $ 0.02 $ 0.04
Weighted average number of shares outstanding:
Basic 24,717 24,717 25,662 25,662
Diluted 25,069 25,069 26,725 26,725
Supplementary Financial Information
Unaudited Reconciliation of GAAP Financial Information to NON-GAAP
(In US$ thousands)
Six months ended
June 30
GAAP FAS123R Non GAAP GAAP FAS123R Non GAAP
2009 Adjustments 2009 2008 Adjustments 2008
Unaudited
Revenues $ 7,276 $ 7,276 $ 6,969 $ 6,969
Cost of revenues 1,029 20 1,009 908 24 884
Gross profit 6,247 (20 ) 6,267 6,061 (24 ) 6,085
Operating expenses:
Research and development 1,551 146 1,405 1,573 182 1,391
Sales and marketing 2,020 146 1,874 1,982 149 1,833
General and administrative 1,478 347 1,131 1,708 535 1,173
Total operating expenses 5,049 639 4,410 5,263 866 4,397
Operating profit 1,198 659 1,857 798 890 1,688
Financial (expenses) income, net (66 ) (66 ) 191 191
Income before taxes 1,132 1,791 989 1,879
Taxes on income - - 7 7
Net income 1,132 $ 1,791 $ 982 $ 1,872
Earning per share- basic $ 0.05 $ 0.07 $ 0.04 $ 0.07
Earning per share- diluted $ 0.04 $ 0.07 $ 0.04 $ 0.07
Weighted average number of shares outstanding:
Basic 24,887 24,887 25,529 25,529
Diluted 25,230 25,230 26,928 26,928
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED CASH FLOW DATA
(In US$ thousands)
Three months ended Six months ended
June 30 June 30
2009 2008 2009 2008
Cash flow from operating activities Unaudited Unaudited Unaudited Unaudited
Net income $ 696 $ 582 $ 1,132 $ 982
Adjustments:
Depreciation 127 117 245 223
Compensations related to options issued to employees and consultants 337 366 666 915
Changes in assets and liabilities:
(Increase) Decrease in trade receivables 47 (235 ) (26 ) (191 )
(Increase) Decrease in prepaid expenses and other receivables (144 ) 65 (130 ) 100
Increase in accounts payable 43 72 14 45
(Decrease) increase in employees and payroll accruals, accrued 2 (145 ) (51 ) 37
expenses and other liabilities
Decrease in deferred revenues (359 ) (225 ) (200 ) (430 )
Increase (decrease) in accrued severance pay, net 24 (6 ) 30 6
Net cash provided by operating activities 773 591 1,680 1,687
Cash from investing activities
Change in short term cash deposit 241 - 242 1,300
(Purchase) sales of marketable securities (4,949 ) - (2,949 ) -
Change in long-term lease deposits 13 (19 ) 17 (29 )
Investment in affiliate (477 ) - (477 ) -
Purchase of property and equipment (80 ) (173 ) (158 ) (272 )
Net cash (used in) provided by investing activities (5,252 ) (192 ) (3,325 ) 999
Cash flows from financing activities
Buyback of outstanding shares (815 ) - (1,454 ) -
Proceeds from options and warrants exercises 15 579 70 802
Net cash (used in) provided by financing activities (800 ) 579 (1,384 ) 802
(Decrease) increase in cash and cash equivalents (5,279 ) 978 (3,029 ) 3,488
Cash and cash equivalents at the beginning of the period 15,911 13,317 13,661 10,807
Cash and cash equivalents at the end of the period $ 10,632 $ 14,295 $ 10,632 $ 14,295
SOURCE: Commtouch Software Ltd.
Commtouch Ron Ela, 650-864-2291 (US) +972-9-8636813 (int'l) Chief Financial Officer ron.ela@commtouch.com or GK Investor Relations Ehud Helft or Kenny Green, 646-201-9246 (US) +972-3-607-4717 (Israel) info@gkir.com
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