ECtel Announces Third Quarter 2009 Financial Results

• Press Release
• Source: ECtel Ltd
• On 8:07 am EST, Thursday November 5, 2009

ROSH HA'AYIN, Israel, November 5 /PRNewswire-FirstCall/ -- ECtel Ltd. (NASDAQ: ECTX - News), a leading global provider of Integrated Revenue Management (TM) (IRM®) solutions, today reported its financial results for the third quarter of 2009.

(Logo: http://www.newscom.com/cgi-bin/prnh/20010807/FLTU015LOGO )

Recent Developments

On October 22, 2009, the Company announced that it has entered into a definitive merger agreement for the acquisition of the Company by cVidya Networks Inc., a global leader in telecom revenue management, risk management, and dealer management solutions, in a cash transaction valued at $21 million (less the Company's transaction-related expenses of approximately $430 thousand). Consequently, the Company recorded a non-cash $12.8 million goodwill impairment charge under operating expenses.

Third Quarter Financial Results

Revenues for the third quarter of 2009 totaled $4.2 million, compared to $7.1 million in the third quarter of 2008, and compared to $5.7 million in the second quarter of 2009. Gross margin for the third quarter of 2009 totaled 53%, compared to 50% in the third quarter of 2008, and compared to 60% in the prior quarter.

Non-GAAP operating loss for the third quarter of 2009 totaled $643 thousand, compared to a non-GAAP operating loss of $1.7 million in the third quarter of 2008, and compared to a non-GAAP operating income of $65 thousand in the second quarter of 2009.

Non-GAAP net income for the third quarter of 2009 totaled $760 thousand, or $0.05 per share, compared to a non-GAAP net loss of $1.6 million, or $0.10 per share in the third quarter of 2008, and compared to a non-GAAP net income of $51 thousand, or $0.00 per share, in the second quarter of 2009.

GAAP operating loss for the third quarter of 2009 totaled $13.6 million, compared to an operating loss of $2.0 million in the third quarter of 2008, and compared to an operating loss of $0.1 million in the prior quarter. GAAP operating loss for the quarter included the said $12.8 million goodwill impairment charge. GAAP net loss for the third quarter of 2009 totaled $12.2 million, or $0.75 loss per share, compared to a $1.9 million net loss, or $0.11 loss per share, in the third quarter of 2008, and compared to $0.2 million net loss, or $0.01 loss per share, in the second quarter of 2009. GAAP net loss for the quarter included the recognition of an unrecognized tax benefit of approximately $1.4 million (of which approximately $0.2 million is interest related to the unrecognized tax benefit, recorded under financial income), due to the settlement of tax matters.

Cash, cash equivalents, and marketable bonds and securities as of September 30, 2009 were $14.5 million or $0.89 per share, compared to $14.3 million or $0.88 per share as of June 30, 2009.

About ECtel Ltd.

ECtel (NASDAQ:ECTX - News) is a leading global provider of Integrated Revenue Management(TM) (IRM®) solutions for communications service providers. A pioneering market leader for nearly 20 years, ECtel offers carrier-grade solutions that enable wireline, wireless, converged and next generation operators to fully manage their revenue and cost processes. ECtel serves prominent Tier One operators, and has more than 100 implementations in over 50 countries worldwide. Established in 1990, ECtel maintains offices and presence in the Americas, Europe and Asia. For more information, visit http://www.ectel.com. On October 22, 2009, the Company announced that it has entered into a definitive merger agreement for the acquisition of the Company by cVidya Networks Inc., a global leader in telecom revenue management, risk management, and dealer management solutions, in a cash transaction valued at $21 million (less the Company's transaction-related expenses that exceed an aggregate amount of US$350,000 plus VAT, currently estimated to be in an approximate amount of US$430,000). The closing of the transaction is subject to the approval of ECtel's shareholders, certain regulatory approvals and notifications and the satisfaction of other customary closing conditions.

Use of Non-GAAP Measures

Non-GAAP operating income (loss) and net income (loss) are measures which do not include charges for the goodwill impairment, amortization of acquisition-related intangible assets and share-based compensation expense. 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 the Company's consolidated financial statements prepared in accordance with GAAP. The Company's management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate the Company's business and make operating decisions. A reconciliation between non-GAAP operating income (loss) and net income (loss) and GAAP operating income (loss) and net income (loss) is provided in a table immediately following the Condensed Statements of Operations.

ECtel Forward-Looking Statement

Certain statements contained in this release contain forward-looking information with respect to plans, projections or future performance and products of the Company, the occurrence of which involves certain risks and uncertainties. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviations will not be material. Such statements involve risks and uncertainties that may cause future results to differ from those anticipated. These risks include, but are not limited to, the effects of general economic conditions, the possible slow-down in expenditures by telecom operators, adverse effects of market competition and the impact of competitive pricing and offerings, the reoccurrence of sales to existing customers, the ability to recognize revenue in future periods as anticipated, the unpredictability of the telecom market, product and market acceptance risks, the ability to complete development and market introduction of new products, fluctuations in quarterly and annual results of operations, dependence on several large customers, commercialization and technological difficulties, risks related to our operations in Israel and risks associated with operating businesses in the international market. These and other risks are discussed at greater length in the Company's annual report on Form 20-F and other filings with the Securities and Exchange Commission. ECtel disclaims any obligation to update these forward-looking statements and undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

                                   ECtel Ltd.

                           Consolidated Balance Sheets

                                 $ in thousands


                                      September 30 June 30 December 31
                                           2009      2009      2008

    Assets

    Current assets
    Cash and cash equivalents             7,222     6,126     8,452
    Short-term investments                3,554     4,556     1,011
    Receivables:
    Trade, net                            9,656    11,006    10,904
    Other                                   707       606     1,177
    Related parties                         489       487       247
    Work in progress                        740       308       475
    Inventories                           2,398     2,931     2,247

    Total current assets                 24,766    26,020    24,513

    Long-term marketable securities       3,688     3,656     8,172

    Long-term other assets                1,332     1,240     1,193

    Property, plant and equipment,
    net                                   2,034     2,122     2,282

    Goodwill                                  -    12,796    12,792

    Other intangible assets, net            662       712       812

    Total assets                         32,482    46,546    49,764

    Liabilities and Shareholders'
    Equity

    Current liabilities
    Trade payables                        4,702     4,545     5,126
    Related parties                          38        57        31
    Advances from customers                 994       844       596
    Other payables and accrued
    liabilities                           2,867     5,410     6,707

    Total current liabilities             8,601    10,856    12,460

    Long-term liabilities
    Liability for employee severance
    benefits                              1,968     1,746     2,018


    Total liabilities                    10,569    12,602    14,478

    Total shareholders' equity, net      21,913    33,944    35,286

    Total liabilities and
    shareholders' equity                 32,482    45,977    49,764



                                   ECtel Ltd.

                      Consolidated Statements of Operations

                 $ in thousands except share and per share data


                              Three months         Nine months   Three months
                                 ended               ended          ended
                               September            September         June

                                  30                    30             30
                             2009      2008       2009      2008      2009


    Revenues                4,187     7,056     13,233     20,216      5,664
    Cost of revenues        1,952     3,543      6,102     10,510      2,252

    Gross profit            2,235     3,513      7,131      9,706      3,412

    Research and development
    costs                     683     1,084      2,081      3,561        609

    Selling and marketing
    expenses                1,298     2,848      4,584      6,860      1,849
    General and
    administrative
    expenses                1,002     1,502      3,009      5,061      1,047
    Goodwill impairment    12,796         -     12,796          -          -
    Amortization of
    acquisition-related
    intangible assets          50        50        150        114         50

    Operating loss       (13,594)   (1,971)   (15,489)    (5,890)      (143)
    Financial income
    (loss), net               165      72          286        587       (14)
    Other income
    (loss), net (*)           (1)       -          (1)        431        -

    Loss before taxes    (13,430)   (1,899)   (15,204)    (4,872)      (157)
    Income tax benefit      1,239       -        1,239       -           -

    Net loss             (12,191)   (1,899)   (13,965)    (4,872)      (157)


    Basic loss per share   (0.75)    (0.11)     (0.86)     (0.29)     (0.01)
    Diluted loss per
    share                  (0.75)    (0.11)     (0.86)     (0.29)     (0.01)


    Weighted average
    number of shares
    outstanding used to
    compute basic
    (loss) earnings
    per
    share              16,281,898 16,557,856 16,281,898 16,557,856 16,281,898

    Weighted average
    number of shares
    outstanding used to
    compute diluted
    (loss) earnings
    per
    share              16,281,898 16,557,856 16,281,898 16,557,856 16,281,898



    (*) includes $450 thousand gain on sale of patent.

                                   ECtel Ltd.

                   Reconciliation of GAAP to Non-GAAP Measures

                 $ in thousands except share and per share data



                              Three months         Nine months   Three months
                                 ended               ended          ended
                               September            September         June

                                  30                    30             30
                             2009      2008       2009      2008      2009


    GAAP gross profit        2,235   3,513       7,131     9,706     3,412
    Stock-based compensation     7      16          22        50         7

    Non-GAAP gross profit    2,242   3,529       7,153     9,756     3,419

    GAAP operating expenses 15,829   5,484      22,620    15,596     3,555

    Stock-based compensation:
    Research and development
    costs                        -       3           -         9         -

    Selling and marketing
    expenses                    26     135          80       193        26

    General and
    administrative
    expenses                    72      89         280       402       125

    Goodwill impairment     12,796       -      12,796         -         -

    Amortization of
    acquisition-related
    intangible assets           50      50         150       114        50

    Non-GAAP operating
    expenses                 2,885   5,207       9,314    14,878     3,354

    GAAP operating
    loss                  (13,594) (1,971)    (15,489)   (5,890)     (143)



    Non-GAAP operating
    income
    (loss)                   (643) (1,678)     (2,161)   (5,122)        65

    GAAP net loss         (12,191) (1,899)    (13,965)   (4,872)     (157)

    Stock-based
    compensation               105     243         382       654       158

    Goodwill impairment     12,796       -      12,796         -         -
    Amortization of
    acquisition-related
    intangible assets           50      50         150       114        50

    Non-GAAP net income (loss) 760 (1,606)       (637)   (4,104)        51

    Non-GAAP Basic earnings
    (loss) per share          0.05  (0.10)      (0.04)    (0.25)      0.00

    Non-GAAP Diluted earnings
    (loss) per share          0.05  (0.10)      (0.04)    (0.25)      0.00


    Weighted average
    number of shares
    outstanding used to
    compute both GAAP
    and Non-GAAP basic
    earnings (loss) per
    share              16,281,898 16,557,856 16,281,898 16,557,856 16,281,898



                                   ECtel Ltd.

                      Consolidated Statements of Cash Flows

                                 $ in thousands



                                           Three            Nine       Three
                                          months           months      months
                                           ended           ended       ended
                                         September        September     June
                                            30               30           30

                                       2009    2008     2009    2008     2009


    Cash flows from operating
    activities

    Net loss for the period        (12,191) (1,899) (13,965) (4,872)    (157)

    Adjustments to reconcile net
    (loss) income to
    cash provided by (used in)
    operating activities:

    Depreciation and amortization       184     200      552     501      189
    Goodwill impairment              12,796       -   12,796       -        -
    Loss on sale of long-term
    marketable securities                25       -       25      20        -
    Loss on disposal of property,
    plant and equipment                   -       -        -      20        -
    Premium amortization of
    long-term marketable securities       -       -        -    (21)        -
    Decrease (increase) in trade
    receivables                       1,350 (2,943)    1,244 (3,117)    (716)
    Decrease (increase) in other
    receivables                       (101)   1,272       63     485     (34)
    Share-based compensation
    expenses                            105     243      382     536      158
    Decrease (increase) in
    inventories                         533   (194)    (151)   (221)    (424)
    Decrease (increase) in work in
    progress                          (432)     293    (265)    (82)      251
    Increase (decrease) in trade
    payables                            175      51    (426)   (393)      259
    Increase (decrease) in advances
    from customers                      150      94      398   (345)      301
    Increase in related parties,
    net                                (21)   (327)    (235)   (360)    (141)
    Increase (decrease) in other
    payables and accrued
    liabilities                     (2,543)     196  (3,035)     412      248
    Increase (decrease) in
    liability for employee
    severance benefits, net             135    (29)    (597)     164    (437)

    Net cash provided by (used in)
    operating activities                165 (3,043)  (3,214) (7,273)    (503)



                                   ECtel Ltd.

                 Consolidated Statements of Cash Flows (cont'd)

                                 $ in thousands


                                           Three            Nine       Three
                                          months           months      months
                                           ended           ended       ended
                                         September        September     June
                                            30               30           30

                                          2009   2008   2009    2008    2009


    Cash flows from investing activities

    Investment in short-term
    investments, net                         -      - (3,544)   8,130 (1,997)
    Investment in property, plant and
    equipment                             (64)  (206)   (152)   (587)    (53)
    Payments in consideration with
    acquisition of the assets of
    Compwise                                 -      -       - (1,313)       -
    Long-term deposits withdrawal
    (funding)                              (5)      1      10      47     (2)
    Proceeds from maturity of long-term
    marketable securities                1,000  3,016   5,670   8,166   1,670
    Investment in long-term marketable
    securities                               -      -       - (8,841)       -

    Net cash provided by (used in)
    investing activities                   931  2,811   1,984   5,602   (382)

    Cash flows from financing activities

    Repurchase of shares                     -  (187)       -   (187)       -

    Net cash used in financing
    activities                               -  (187)       -   (187)       -

    Net increase (decrease) in cash and
    cash equivalents                     1,096  (419) (1,230) (1,858)   (885)

    Cash and cash equivalents at
    beginning of the period              6,126  4,229   8,452   5,668   7,011

    Cash and cash equivalents at end of
    the period                           7,222  3,810   7,222   3,810   6,126



    Company Contacts:                         IR Contacts:
    Mickey Neumann                            Ehud Helft \ Kenny Green
    Senior Vice President and CFO             GK Investor Relations
    Tel: +972-3-9002115                       Tel: +1-617-418-3096 \
    Email: Mickeyne@ectel.com; ir@ectel.com   +1-646-201-9246
                                              Email: info@gkir.com

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