EBITDA (Adjusted) Increases to NIS 62 Million
Gross Margin to 33% and EBITDA Margin to 24%
PETACH TIKVA, Israel, May 13 /PRNewswire-FirstCall/ -- 012
Smile.Communications (NASDAQ Global Market and TASE: SMLC), a
growth-oriented provider of communication services in Israel, today
reported its financial results for the quarter ended March 31, 2008.
Highlights
- Revenues: NIS 263 million ($74 million): an increase of 10% in core
services revenues compared with Q1 2007 after exclusion of revenues from
hubbing services and the impact of the shekel-dollar exchange rate
- Record EBITDA (adjusted): NIS 62 million ($17.4 million), up 7%
year-over-year
- Improved cash-flow from operations : Operating cash-flow for the
quarter reached NIS 47 million ($13.2 million)
- Continued strong margin improvement: gross margin reached 33% compared
with 29% in Q1 2007; adjusted EBITDA margin reached 24% compared with
21% in Q1 2007
- VOB-based domestic telephony business growth in line with goals and
business plan
- Mobile WiMAX trials to be expanded to the Tel Aviv area in Q3 '08 as
part of strategy to enter the Israeli mobile market
Results for the First Quarter
Revenues: Revenues for the first quarter of 2008 were NIS 263 million
($74 million) compared with revenues of NIS 276 million for the first
quarter of 2007. The decrease reflects a significant year-over-year decline
in revenues from hubbing (wholesale traffic), services due to Management's
decision in late 2007 to de-emphasize this low-margin business, and a 14%
year-over-year decline in the average shekel-dollar exchange rate compared
to the first quarter of 2007, which significantly reduced the shekel value
of the Company's dollar-linked revenues, which account for 36% of the
Company's sales. Excluding these two factors, revenues from core activities
increased by approximately 10% on a year-over-year basis.
Operating Income: Operating Income for the first quarter increased by
1% to a record NIS 31 million ($8.6 million). Operating margin for the
quarter reached a record 12% compared with 11% in the first quarter of
2007. Excluding the effect of one-time merger-related expenses, operating
income reached NIS 35 million ($9.9 million), a 15% increase compared with
the first quarter of 2007.
Adjusted EBITDA(A): Adjusted EBITDA for the first quarter increased by
7% to a record NIS 62 million ($17.4 million) compared with NIS 58 million
for the first quarter of 2007. Adjusted EBITDA margin for the quarter
reached a record 24% compared with 21% in the first quarter of 2007.
For more information regarding the use of non-GAAP financial
measurements, please see the notes contained in this press release.
Merger-Related Expenses: One-time expenses related to the merger of 012
Golden Lines and Smile.Communications were NIS 4.8 million ($1.4 million)
in the first quarter of 2008 compared with NIS 0.5 million in the first
quarter of 2007. The Company expects that final merger-related expenses of
up to NIS 2 million ($ 563,000 ) will be recorded in the second quarter of
2008.
Financing Expenses: For the first quarter of 2008 the Company incurred
a relatively high level of non cash financing expenses. This derived from
exchange rate differentials of NIS 18 million related to the effect of the
quarter's 8% decrease in the shekel-dollar exchange rate (the rate on March
31, 2008 compared to rate on December 31, 2007) on the Company's
dollar-denominated balances. For the first quarter of 2008, total financing
expenses were NIS 22.6 million ($6.4 million) compared with NIS 11.1
million in the first quarter of 2007.
Net Results: Net income for the first quarter of 2008 was NIS 5.7
million ($1.6 million), or NIS 0.22 ($0.06) per share compared to NIS 15.8
million, or NIS 0.86 per share, in the first quarter of 2007. Excluding
one-time expenses related to the merger and the effect of the shekel-dollar
exchange rate on financial expenses, the Company's non-GAAP earnings per
share for the quarter were NIS 0.88 ($0.25).
Segment Overview
- Broadband: first quarter revenues from core broadband activities were
NIS 129.7 million ($36.5 million), an increase of 13% compared with NIS
114.9 million for the first quarter of 2007. The Company's rate of
recruitment of new VOB-based telephony subscribers for the quarter was
in line with its plan for achieving a 5% market share by the end of 2009.
- Traditional telephony: first quarter revenues from traditional
telephony services were NIS 133.7 million ($37.6 million), a decrease
of 17% compared with NIS 161.2 million for the first quarter of 2007.
The decrease derived from a reduced level of hubbing services and the
decline in the average shekel-dollar exchange rate, as mentioned above.
Balance Sheet: The Company's cash, cash equivalents and short term
investments as of March 31, 2008 were NIS 302 million ($85.1 million),
compared with NIS 41 million as of March 31, 2007.In addition, the
Company's bank debt decreased by 80%, from NIS 312 million as of March 31,
2007 to NIS 61 million ($17.2 million) as of the end of the first quarter
of 2008.
Comments of Management
Commenting on the results, Ms. Stella Handler, CEO of 012
Smile.Communications, said, "The first quarter was another period of strong
performance across all operational parameters. One of our main activities
during the quarter was the completion of the merger of our brands under the
'012 Smile' brand, an important strategic step which was accompanied by a
major media campaign. This campaign has succeeded in increasing the
market's recognition and ToM (Top of Mind) of our brand, while also taking
our VOB domestic telephony marketing to the next level. In addition, we are
expanding our Mobile WiMAX trials to the Tel Aviv area, a preliminary step
in our strategy for entering Israel's mobile market. As we announced
recently, we have applied for a license for facility-based MVNO, Mobile
WiMAX and Mobile VOB technologies to enter the mobile business with a
complete solution. In addition, we are proud to have successfully completed
all the operational, financial and marketing aspects of our complex
merger."
Ms. Handler concluded, "Taken as a whole, we are pleased with our
performance during the first quarter and with the steady progress we have
made in executing on our long-term plan for growth."
Conference Call Information
Management will host an interactive teleconference to discuss the
results today, May 13, 2008, at 09:00 a.m. EDT. To participate, please call
one of the following access numbers several minutes before the call begins:
1-888-668-9141 from within the U.S. or 1866-485-2399 from within Canada,
0-800-32-33-67 from within the U.K., or +972-3-918-0691 from other
international locations. The call will also be broadcast live through the
company's Website, http://www.012.net, and will be available there for
replay during the next 30 days.
Non-GAAP Measurements
Reconciliation between the Company's results on a GAAP and non-GAAP
basis is provided in a table immediately following the Consolidated
Statement of Operations (Non-GAAP Basis). Non-GAAP financial measures
consist of GAAP financial measures adjusted to exclude amortization of
acquired intangible assets, as well as certain business combination
accounting entries. The purpose of such adjustments is to give an
indication of our performance exclusive of non-cash charges and other items
that are considered by management to be outside of our core operating
results. Our non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for comparable GAAP measures, and should be
read only in conjunction with our consolidated financial statements
prepared in accordance with GAAP.
Our management regularly uses our supplemental non-GAAP financial
measures internally to understand, manage and evaluate our business and
make operating decisions. These non-GAAP measures are among the primary
factors management uses in planning for and forecasting future periods. We
believe these non-GAAP financial measures provide consistent and comparable
measures to help investors understand our current and future operating cash
flow performance. These non-GAAP financial measures may differ materially
from the non-GAAP financial measures used by other companies.
Reconciliation between results on a GAAP and non-GAAP basis is provided in
a table immediately following the Consolidated Statement of Operations.
Notes:
A: EBITDA
EBITDA is a non-GAAP financial measure generally defined as earnings
before interest, taxes, depreciation and amortization. We define adjusted
EBITDA as net income before financial income (expenses), net, impairment
and other charges, income tax expenses, depreciation and amortization.
We present adjusted EBITDA as a supplemental performance measure
because we believe that it facilitates operating performance comparisons
from period to period and company to company by backing out potential
differences caused by variations in capital structure (most particularly
affecting our interest expense given our recently incurred significant
debt), tax positions (such as the impact of changes in effective tax rates
or net operating losses) and the age of, and depreciation expenses
associated with, fixed assets (affecting relative depreciation expense).
Adjusted EBITDA should not be considered in isolation or as a substitute
for net income or other statement of operations or cash flow data prepared
in accordance with GAAP as a measure of our profitability or liquidity.
Adjusted EBITDA does not take into account our debt service requirements
and other commitments, including capital expenditures, and, accordingly, is
not necessarily indicative of amounts that may be available for
discretionary uses. In addition, adjusted EBITDA, as presented in this
press release, may not be comparable to similarly titled measures reported
by other companies due to differences in the way that these measures are
calculated.
B: Convenience Translation to Dollars
For the convenience of the reader, the reported NIS figures of March
31, 2008 have been presented in thousands of U.S. dollars, translated at
the representative rate of exchange as of March 31, 2008 (NIS 3.553 = U.S.
Dollar 1.00). The U.S. Dollar ($) amounts presented should not be construed
as representing amounts receivable or payable in U.S. Dollars or
convertible into U.S. Dollars, unless otherwise indicated.
About 012 Smile.Communications
012 Smile.Communications is a growth-oriented communication services
provider in Israel with a leading market position, offering a wide range of
broadband and traditional voice services. Its broadband services include
broadband Internet access with a suite of value-added services, specialized
data services and server hosting, as well as new innovative services such
as local telephony via voice over broadband and a WiFi network of hotspots
across Israel. Traditional voice services include outgoing and incoming
international telephony, hubbing, roaming and signaling and calling card
services. 012 Smile.Communications services residential and business
customers, as well as Israeli cellular operators and international
communication services providers through its integrated multipurpose
network, which allows it to provide services to almost all of the homes and
businesses in Israel.
012 Smile is a 72.4 % owned subsidiary of Internet Gold Golden Lines
Ltd. (NASDAQ: IGLD) one of Israel's leading communications groups with a
major presence across all Internet-related sectors. In addition to 012
Smile, its 100% owned Smile.Media subsidiary manages a growing portfolio of
Internet portals and e-Commerce sites. Internet Gold and 012 Smile are part
of the Eurocom Communications Group. 012 Smile's shares trade on the NASDAQ
Global Market and on the Tel Aviv Stock Exchange.
For additional information about 012 Smile.Communications Ltd., please
visit the Company's investors' site at http://www.012.net.
Forward-Looking Statements
This press release contains forward-looking statements that are subject
to risks and uncertainties. Factors that could cause actual results to
differ materially from these forward-looking statements include, but are
not limited to, general business conditions in the industry, changes in the
regulatory and legal compliance environments, the failure to manage growth
and other risks detailed from time to time in 012 Smile.Communications'
filings with the Securities Exchange Commission. These documents contain
and identify other important factors that could cause actual results to
differ materially from those contained in our projections or
forward-looking statements. Stockholders and other readers are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. We undertake no
obligation to update publicly or revise any forward-looking statement.
012 Smile.Communications Ltd.
Consolidated Balance Sheets
Convenience
translation
into
U.S. dollars
$1 = NIS
3.553
March 31 December 31 March 31
2008 2007 2008
(Unaudited) (Unaudited) (Unaudited)
NIS thousands $ thousands
Current assets
Cash and cash equivalents 229,755 229,895 64,665
Short-term investments 72,687 - 20,458
Trade receivables, net 197,868 190,604 55,690
Parent company receivable 1,579 6,553 444
Related parties receivables 2,088 2,161 588
Prepaid expenses and other 27,632 19,804 7,777
current assets
Deferred taxes 8,462 7,247 2,382
Total current assets 540,071 456,264 152,004
Investments
Long-term trade receivables 3,150 3,460 887
Deferred taxes 12,700 14,648 3,574
Assets held for employee 19,093 18,453 5,374
severance benefits
Total investments 34,943 36,561 9,835
Property and equipment, net 166,176 160,211 46,771
Other assets, net 289,436 295,592 81,462
Other intangible assets, net 195,440 202,376 55,007
Goodwill 411,171 411,171 115,725
Total assets 1,637,237 1,562,175 460,804
012 Smile.Communications Ltd.
Consolidated Balance Sheets (cont'd)
Convenience
translation
into
U.S. dollars
$1 = NIS
3.553
March 31 December 31 March 31
2008 2007 2008
(Unaudited) (Unaudited)(Unaudited)
NIS thousands $ thousands
Current liabilities
Short-term bank credit 61,080 4,750 17,191
Current maturities of long-term 80,634 3,558 22,695
obligations
Accounts payable 142,156 156,332 40,010
Loan from the parent company 107,216 105,733 30,176
Other payables and accrued 128,249 102,096 36,096
expenses
Total current liabilities 519,335 372,469 146,168
Long-term liabilities
Debentures 383,306 437,460 107,882
Long-term obligations 1,826 2,836 514
Long-term trade and other - 20,458 -
payables
Deferred taxes 40,430 41,526 11,379
Liability for employee severance 31,550 32,318 8,880
benefits
Total long-term liabilities 457,112 534,598 128,655
Total liabilities 976,447 907,067 274,823
Shareholders' equity and parent
company investment 660,790 655,108 185,981
Total liabilities, shareholders'
equity
and parent company investment 1,637,237 1,562,175 460,804
012 Smile.Communications Ltd.
Consolidated Statements of Operations
Convenience
translation
into
dollars
$1 = NIS
3.553
Three-month
period ended
Three-month period ended March 31
March 31
2008 2007 2008
(Unaudited)(Unaudited) (Unaudited)
NIS thousands $ thousands
Revenues 263,357 276,053 74,122
Costs and expenses
Cost of revenues 176,690 194,973 49,730
Selling and marketing expenses 38,516 37,689 10,840
General and administrative 12,802 12,561 3,603
expenses
charges Impairment and other 4,802 463 1,352
Total costs and expenses 232,810 245,686 65,525
Income from operations 30,547 30,367 8,597
Financial expenses, net 22,587 11,120 6,357
Income before tax expenses 7,960 19,247 2,240
Tax expenses 2,278 3,488 641
Net income 5,682 15,759 1,599
Income (loss) per share
Basic and diluted earnings per
share
(in NIS) 0.22 0.86 0.06
Weighted average number of
ordinary
shares used in calculation of
basic and
diluted earnings per share 25,360,000 18,370,000 25,360,000
012 Smile.Communications Ltd.
Reconciliation Table of Non-GAAP Measures (NIS in thousands)
Convenience
translation
into
dollars
$1 = NIS
3.553
Three-month
period ended
Three-month period ended March 31
March 31
2008 2007 2008
(Unaudited) (Unaudited)(Unaudited)
NIS thousands $ thousands
GAAP operating income 30,547 30,367 8,598
Adjustments
Amortization of acquired 6,820 7,985 1,919
intangible assets
Non-recurring expenses 4,802 463 1,352
Non-GAAP adjusted operating 42,169 38,815 11,869
income
GAAP tax expenses (benefit), net 2,278 3,488 641
Adjustments
Amortization of acquired
intangible assets
Included in tax expenses, net 1,841 2,315 518
Non-GAAP tax expenses (benefit), 4,119 5,803 1,159
net
Net income as reported 5,682 15,759 1,599
Taxes on income 2,278 3,488 641
Non-recurring expenses 4,802 463 1,352
Financial expenses 22,587 11,120 6,357
Depreciation and amortization 26,543 27,033 7,471
Adjusted EBITDA 61,892 57,863 17,420
For further information, please contact:
Ms. Idit Azulay
012 Smile.Communications Ltd
+972-72-2003848
i.azulay@smile.net.il
SOURCE 012 Smile.Communications Ltd
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CONTACT:
For further information, please contact: Ms.
Idit Azulay, 012 Smile.Communications Ltd, +972-72-2003848,
i.azulay@smile.net.il
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