Elephant Talk Communications Announces Increased Revenues for First Quarter 2012
- Implementation with a Leading Global Bank for SIM-Swap Fraud Solution Gone Live
· Contract with Telekom Deutschland to provide Mobile Services in Germany
SCHIPHOL, THE NETHERLANDS—May 10, 2012 - Elephant Talk Communications, Corp. (NYSE Amex: ETAK) (www.elephanttalk.com), an international provider of business software and services to the telecommunications and financial services industries, today announced total revenue of $8.6 million for the first quarter ended March 31, 2012. Revenue in the higher margin mobile and security solutions business increased 105.4% to $2.4 million in this first quarter of 2012.
“We recently went live with the first large-scale commercial contract with one of the world's largest banks for the utilization of ValidSoft’s authentication and verification transaction solution,” said Steven van der Velden, Chairman and Chief Executive Officer. “We began to generate revenue from this contract through our partner relationship with Adeptra during the first quarter and it will positively impact our revenues in the second quarter and beyond. We are pleased that this first contract is with one of the most recognizable banks in the world and believe this agreement provides strong validation of our antifraud technology. We are confident that this contract combined with our partnership with Utiba, a global leader in mobile payments that processes over 12 billion transactions annually, will lead to additional contracts in financial services, as well as additional growth in the high volume mobile money industry.”
Mr. van der Velden continued, “We believe our newly implemented banking contract, the additional planned SIM migrations with Vodafone in Spain and our recently signed MVNO contract in Germany will, including revenues for network usage, double our mobile and security revenue by the third quarter in comparison to our first quarter this year. We can realize such immediate growth in Germany due to the MVNE acquisition of Ensercom, and the integration we therefore have with Deutsche Telekom, which allows us to immediately begin providing mobile services to our clients. The addition of these new contracts materially impacts our financial results and enhances our shareholder value.”
Key Operational Highlights
- Secured first large-scale commercial implementation with one of the world's largest banks for the utilization of ValidSoft’s authentication and verification transaction solution.
- Announced a new, global partnership with Utiba (www.utiba.com), a global leader in mobile payments and mobile financial services solutions.
- This partnership stands to impact more than 40 Mobile Network Operators (MNOs) and banking customers and 500 million subscribers, worldwide.
- Completed the acquisition of the assets of Ensercom, a German based Mobile Virtual Network Enabling (MVNE) company.
- Ensercom hosts Mobile Services in the network of Telekom Deutschland and the contract between Telekom Deutschland and Elephant Talk has recently been renewed.
Financial Results for the First Quarter Ended March 31, 2012
Total revenue for the three months ended March 31, 2012 was $8,580,968, an increase of $72,954 or 0.9%, compared to $8,508,014 for the three months ending March 31, 2011. The rise in revenues was led by an increase of $1,245,539 (or 105.4%) in revenues in the higher margin mobile and security solutions business, including revenues derived from the commencement of the operation phase of our agreement with Adeptra and one of the ten largest financials institutions’ implementation of Validsoft’s SIM Swap solution. We expect that revenue from this contract will continue. This rise in revenues was off-set by the expected continued decrease in our low margin legacy landline business by $1,172,585 (or 16.0%). The increase in higher margin mobile and security solutions business is mainly due to the increasing revenues of already existing customers and a customer with a large consumer base with monthly recurring revenues coming on to the mobile platform at the end of the 4th quarter 2011.
Cost of service for the three months ended March 31, 2012 was $6,889,217, a decrease of $668,268 or 8.8%, compared to $7,557,485 for the three months ending March 31, 2011. This decrease is fully related to the decline in landline revenue. Cost of service as a percent of the total revenue was 80.3% and 88.8% for the three months ended March 31, 2012 and 2011, respectively.
Selling, general and administrative (“SG&A”) expense for the three months ended March 31, 2012 and 2011 were $4,569,958 and $3,416,357, respectively. SG&A expenses increased by $1,153,601, or 33.8%, in the first three months 2012 compared to the same period 2011. This was led by an increase of 31.6% in staffing levels on March 31, 2012 compared to March 31, 2011, largely in sales force and European hires, as well as by higher investor relation and marketing & communication related expenses. The increases in staffing levels and higher marketing and selling costs are mainly related to the expected future revenues.
Negative adjusted EBITDA (a non-GAAP measure) slightly increased from ($2,465,828) in the three months ended 2011 to ($2,878,207) for the three months ended 2012. Adjusted EBITDA improved with $ 682,578 when compared to the $3,560,785 negative adjusted EBITDA of the fourth quarter 2011.
Net Loss was ($6,005,189) and ($4,713,224) for the three months ended March 31, 2012 and 2011 respectively. The increase in loss of ($1,291,965) was the result of a ($949,856) increase in loss from operations and a higher other expense of ($342,109). Net Loss improved with $599,792 when compared to the $6,604,981 Net Loss of the fourth quarter 2011.
Conference Call Reminder
As a reminder, Elephant Talk Communications will host a Shareholder Update Conference Call on May 10, 2012 at 11:00 a.m. (EDT). Anyone interested in participating should 1-480-629-9665 approximately 5 to 10 minutes prior to 11:00 a.m. Participants should ask for the Elephant Talk Shareholder Update conference call. To listen to the playback please utilize the webcast by visiting the company's website at www.elephanttalk.com.
This call is being webcast by ViaVid Broadcasting and can be accessed at either Elephant Talk's website at www.elephanttalk.com or ViaVid's website at http://www.viavid.net. To access the webcast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player, please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp
ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF March 31, 2012 AND 2011
March 31, December 31,
2012 2011
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,118,890 $ 6,009,576
Financing receivables 6,484,188 --
Restricted cash 1,963,428 190,844
Accounts receivable, net of an allowance for
doubtful accounts of $585,761 and $436,546 at
March 31, 2012 and December 31, 2011
respectively 8,146,260 6,441,528
Prepaid expenses and other current assets 2,251,278 1,522,461
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Total current assets 21,964,044 14,164,409
OTHER ASSETS 1,828,922 1,392,837
DUE FROM RELATED PARTIES 460,655 --
PROPERTY AND EQUIPMENT, NET 13,967,824 13,315,687
INTANGIBLE ASSETS, NET 12,763,508 12,784,199
GOODWILL 3,252,408 3,154,971
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TOTAL ASSETS $ 54,237,361 $ 44,812,103
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Overdraft $ 321,250 $ 312,236
Accounts payable and customer deposits 7,329,064 4,490,455
Deferred Revenue 337,880 132,467
Accrued expenses and other payables 4,296,009 3,035,758
8% Convertible Note 56,552 --
Loans payable 961,439 960,869
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Total current liabilities 13,302,194 8,931,785
LONG TERM LIABILITIES
8% Convertible Note 5,254,411 --
Conversion feature 2,695,643 --
Trade note payable 175,070 271,915
Loan from related party 523,638 513,303
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Total long term liabilities 8,648,762 785,218
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Total liabilities 21,950,956 9,717,003
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STOCKHOLDERS' EQUITY
Common stock, no par value, 250,000,000 shares
authorized, 111,026,233 issued and
outstanding as of March 31, 2012 compared to
110,525,229 shares issued and outstanding as
of December 31, 2010 218,511,536 216,188,899
Accumulated other comprehensive income (loss) (273,512) (1,143,295)
Accumulated deficit (186,133,560) (180,128,371)
------------- -------------Elephant Talk Communications, Corp.
stockholders' equity 32,104,464 34,917,233
------------- -------------
NON-CONTROLLING INTEREST 181,941 177,867
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Total stockholders' equity 32,286,405 35,095,100
------------- -------------
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 54,237,361 $ 44,812,103
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ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE QUARTERS ENDED MARCH 31, 2012, 2011
March 31, March 31,
2012 2011
------------ ------------
REVENUES $ 8,580,968 $ 8,508,014
COST AND OPERATING EXPENSES
Cost of service 6,889,217 7,557,485
Selling, general and administrative expenses 4,569,958 3,416,357
Non cash compensation to officers, directors and
employees 1,691,746 1,130,063
Depreciation and amortization of intangibles
assets 1,278,469 1,302,675
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Total cost and operating expenses 14,429,390 13,406,580
LOSS FROM OPERATIONS (5,848,422) (4,898,566)
OTHER INCOME (EXPENSE)
Interest income 105,162 22,986
Interest expense (90,607) (66,764)
Other income & (expense) (163,331) 230,000
Interest expense related to debt discount (7,683) --
Change in fair value of conversion feature 3,669 --
Amortization of deferred financing costs (3,977) --
------------ ------------
Total other income (expense) (156,767) 186,222
LOSS BEFORE PROVISION FOR INCOME TAXES (6,005,189) (4,712,344)
Provision for income taxes - (800)
------------ ------------
NET LOSS BEFORE NONCONTROLLING INTEREST (6,005,189) (4,713,144)
Net (loss) income attributable to noncontrolling
interest - (80)
------------ ------------
NET LOSS (6,005,189) (4,713,224)
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation gain (loss) 869,783 2,319,564
------------ ------------
869,783 2,319,564
COMPREHENSIVE LOSS $ (5,135,406) $ (2,393,660)
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Net loss per common share and equivalents -
basic and diluted $ (0.05) $ (0.05)
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Weighted average shares outstanding during the
period - basic and diluted 110,656,531 96,282,943
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ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 2012, 2011
March 31, March 31,
2012 2011
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,005,189) $ (4,713,224)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,278,469 1,302,675
Provision for doubtful accounts 143,849 8,726
Stock based compensation 1,691,746 993,256
Provision for holiday leave 25,059 --
Noncontrolling interest -- 80
Amortization of shares issued for
consultancy -- 136,807
Financial Investments in Joint Venture 163,331 --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (1,632,045) (587,020)
Decrease (increase) in prepaid expenses,
deposits and other assets (678,765) (542,804)
Increase (decrease) in accounts payable,
proceeds from related parties and customer
deposits 2,558,360 130,751
Increase (decrease) in deferred revenue 200,202 --
Increase (decrease) in accrued expenses and
other payables 368,189 (181,854)
------------ ------------
Net cash used in operating activities (1,886,794) (3,452,607)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (889,775) (2,352,854)
Restricted cash (256,102) 11
Issuance of stock -- 242,418
Loans to related party (449,476)
Loan to third party (121,870) --
------------ ------------
Net cash used in investing activities (1,717,223) (2,110,425)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft -- (4,481)
Deferred financing costs (50,000) --
Loan from related party Bridge SPA -- 9,543
Exercise of warrants & options 694,090 6,927,724
Placement & solicitation fees -- (193,201)
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Net cash provided by financing activities 644,090 6,739,585
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EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS 69,241 745,016
NET INCREASE IN CASH AND CASH EQUIVALENTS (2,890,686) 1,921,569
CASH AND CASH EQUIVALENTS, BEGINNING OF THE
PERIOD 6,009,576 2,245,697
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CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 3,118,890 $ 4,167,266
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ -- $ 6,262
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