VOCL Vocaltec Communications Ltd (MM)

VocalTec Communications Ltd. (NasdaqCM: VOCL) (the “Company” or “VocalTec”), a global provider of VoIP and convergence solutions for communication service providers, today reported results for the fourth quarter and full year ended December 31, 2009.

Revenues for the fourth quarter of 2009 were $2.0 million, an increase of 4% over the $1.9 million reported in the third quarter of 2009, resulting from continued growth in product sales.

Gross margin for the fourth quarter of 2009 was 60% compared with 64% for the prior quarter, in line with the Company’s normal expected level of around 60%.

On a non-GAAP basis, excluding the amortization of intangible assets and share based compensation expenses, the operating expenses in the fourth quarter were $1.1 million compared with $1.6 in the prior quarter. Operating expenses were lower in the quarter primarily due to the recording of a R&D grant for 2009 from the Office of the Chief Scientist of the Israeli Ministry of Trade, Industry and Labor amounting to $0.4 million.

The Company reported a non-GAAP operating income in the fourth quarter of 2009 of $0.1 million compared to an operating loss of $0.4 million in the prior quarter.

On a non-GAAP basis, net income for the fourth quarter was $0.7 million or $0.12 per share, compared with a net loss of $0.4 million, or $0.07 per share, in the third quarter of 2009. Net income on a GAAP basis for the fourth quarter of 2009 was also $0.7 million or $0.12 per share, compared with a net loss of $0.7 million, or $0.12 per share, in the third quarter of 2009. Both GAAP and non-GAAP net income for the fourth quarter of 2009 included a tax benefit of $0.6 million.

For the full year, 2009 revenues were $6.4 million compared with $6.1 million in 2008. Non-GAAP gross margin was 64% for 2009 compared with 58% in 2008. Non-GAAP operating loss for 2009 was $2.2 million, compared with an operating loss of $5.5 million in 2008 which excludes a one-time income from the sale of patents and an impairment of intangible assets. The improvement in 2009 was due to a higher gross profit and a significant reduction in operating expenses.

As of December 31, 2009, the Company had net cash and cash equivalents, short-term bank deposits and restricted cash, in the amount of $10.6 million, or $1.82 per share.

Commenting on the results, Ido Gur, VocalTec’s President and CEO, said, “We are pleased with our results, especially since despite a tough year in the Telecom industry, we showed continued growth in revenue and a reduction in costs. This demonstrates that we are very much on the right track to achieving sustained profitability. We also saw a high level of bookings in 2009 and our year-end backlog going into 2010 is strong, providing us with an increased level of visibility.”

Mr. Gur continued, “Our fourth quarter was also eventful from an M&A standpoint. We purchased substantially all of the assets of Outsmart, and we are happy to already report a first order. The acquired technology enables us to capitalize on the convergence between mobile and VoIP - a trend that is becoming increasingly prevalent, with global mobile VoIP users expected to exceed 280 million by 2013.”

Mr. Gur concluded, “For 2010, we expect to continue growing our revenues organically compared to 2009, and also capitalize on sales into the convergence and mobile VoIP markets. While we expect the first quarter to show the normal seasonal decline in revenues, we believe that our 2010 revenues will show accelerated annual growth. At the same time, we continue exploring M&A opportunities that will provide us with additional growth engines for the long-term.”

Conference Call

Mr. Ido Gur, President and CEO of VocalTec, invites investors to participate in a conference call scheduled for later today, Wednesday, February 24, 2010. The conference call will be held at 9:00am ET. On the call, VocalTec's management will review and discuss the fourth quarter and full year results of operations and will be available to answer questions.

To participate, please call one of the following teleconferencing numbers, 5 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Number: 1 888 281 1167

ISRAEL Dial-in Number: 03 918 0644

INTERNATIONAL Dial-in Number: +972 3 918 0664

For those unable to listen to the live call, a replay of the call will be available from a link in the investor relations section of VocalTec’s website, at: www.vocaltec.com

About VocalTec

VocalTec Communications (NasdaqCM: VOCL) is a global provider of carrier-class Voice-over-IP and Convergence solutions for fixed and wireless service providers. A pioneer in VoIP technology since 1994, VocalTec develops and markets an extensive VoIP offering enabling the flexible deployment of next-generation networks (NGNs). Partnering with prominent system integrators and equipment manufacturers, VocalTec serves an installed base of dozens of leading carriers worldwide. VocalTec is led by a management team comprised of respected industry veterans.

www.vocaltec.com

Forward Looking Statements

This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business, financial condition and results of operations of VocalTec. The words "believe," "expect," "intend," "plan," "should" and similar expressions are intended to identify forward-looking statements. Such statements reflect the current views, assumptions and expectations of the Company with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in the telecommunications and VoIP markets and in general economic and business conditions, loss of key customers and unpredictable sales cycles, competitive pressures, market acceptance of new products, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this press release. Various risks and uncertainties may affect the Company and its results of operations, as described in reports filed by the Company with the Securities and Exchange Commission from time to time. Should one or more of these or other risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended, planned or projected. The Company does not intend or assume any obligation to update these forward-looking statements.

 

 

          CONSOLIDATED STATEMENT OF OPERATIONS   Reconciliation of GAAP to non GAAP results * All data in thousands of U.S. dollars     Three months ended Twelve months ended December 31, September 30, December 31, 2009 2009 2009 2008 GAAP results

(as reported)

GAAP results

(as reported)

GAAP results

(as reported)

  GAAP results

(as reported)

  Sales Products 1,573 1,270 4,218 3,980 Services 415   644   2,189   2,134   1,988   1,914   6,407   6,114   Cost of sales Products 655 552 1,768 2,027 Services 137   142   569   580   792 694 2,337 2,607 Amortization of intangible assets -   -   -   328   792   694   2,337   2,935   Gross profit 1,196   1,220   4,070   3,179     Operating Expenses Research and development, net. (22 ) 624 2,056 4,154 Selling and marketing 610 778 3,020 3,374 General and administrative 498 535 2,147 2,704 Income from sale of Patents, net - - - (14,913 ) Impairment of goodwill and intangible assets - - - 3,993 Amortization of intangible assets 6   6   24   180   Total Operating Expenses 1,092   1,943   7,247   (508 )   Operating income (loss) 104   (723 ) (3,177 ) 3,687     Financial Income, net 2   27   132   90  

Net income (loss) before income taxes

106   (696 ) (3,045 ) 3,777   Income taxes (tax benefit) (590 ) -   (590 ) 69   Net income (loss) 696   (696 ) (2,455 ) 3,708             GAAP net income (loss) 696 (696 ) (2,455 ) 3,708 Adjustments   Impairment of goodwill - - - 3,993 Amortization of intangible assets included in cost of sales - - - 328 included in operating expenses 6 6 24 180   Equity based compensation expense (income) included in cost of sales (6 ) 5 9 17 included in research and development (160 ) 94 120 357 included in sales and marketing (58 ) 62 127 263 included in general and administrative 189   158   680   532   Non-GAAP net income (loss) 667   (371 ) (1,495 ) 9,378          

*To supplement our consolidated financial statement presented in accordance with generally accepted accounting principles (GAAP), we use NON-GAAP measures of operating results, net income, which are adjusted from results based on GAAP to exclude the expense we  recorded for share-based compensation and amortization of intangible assets. These NON-GAAP financial measures are provided to enhance overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the NON-GAAP  results provide useful information to both management and investors as these NON- GAAP results exclude matters that we believe are not indicative of our core operating results. Further, these NON-GAAP results are one of the primary indicators management uses for assessing our performance, allocating resources and planning and forecasting future periods. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. These NON-GAAP measures may be different than the NON-GAAP measures used by other companies.

          VOCALTEC COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars)     December 31 December 31 2009 2008 Current Assets Cash and Cash equivalents 7,510 5,090 Short term deposits 3,049 9,900 Restricted cash 23 554 Trade receivables, net 199 214 Other receivables 459 483 Severance pay funds 3 489 Inventories 63 38 Work in progress 762 - Total Current Assets 12,068 16,768   Severance pay funds 823 618 Equipment, net 487 614 Intangible assets, net 480 160 Total Assets 13,858 18,160       Current Liabilities Trade payable 851 1,707 Accrued expenses 2,053 3,300 Accrued severance pay 3 756 Deferred revenues 1,313 885 Total Current Liabilities 4,220 6,648 Long Term Liabilities Accrued severance pay 1,027 870 Other long term liabilities 107 - Total Long Term 1,134 870 Total Liabilities 5,354 7,518     Shareholders Equity Share capital 216 213 Other comprehensive income - 76 Additional paid-in capital 95,820 94,761 Treasury stock (669) - Accumulated deficit (86,863) (84,408) Total Shareholders Equity 8,504 10,642 Total Liabilities and Shareholders Equity 13,858 18,160