Commtouch Reports Financial Results for Second Quarter of 2006; Achieves Profitability (non-GAAP) Following 12 Consecutive Quarters of Growth.MOUNTAIN VIEW, Calif. -- Commtouch(R) (Nasdaq:CTCH CTCH Common Traffic Channel ), the leading provider of real time anti-spam Spam elimination. See spam filter, spambot and e-mail obfuscator. and Zero-Hour(TM) virus protection technology, today announced its second quarter results for the period ending June June: see month. 30, 2006. Highlights for the quarter ending June 30: --Revenues: $1,698,000, an increase of 93% compared to revenues of $880,000 in the second quarter of 2005, and a 15% increase compared to revenues of $1,473,000 in the first quarter of 2006. --GAAP Net Loss: $114,000, an improvement of 92% compared to net loss of $1,368,000 in the same quarter in 2005, and an improvement of 70% compared to net loss of $378,000 in the first quarter of 2006. --Non-GAAP Net Income: $51,000, achieved after 12 consecutive quarters of double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. growth. This is compared to a Non-GAAP loss of $737,000 in the same quarter in 2005, and compared to a Non-GAAP loss of $214,000 in the first quarter of 2006 (Refer to the "Use of Non-GAAP Measures" section and accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. financial table for reconciliation of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial information to Non-GAAP). --Deferred Revenues (long term and short term): $2,483,000, an increase of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 6% compared to deferred revenues of $2,349,000 as of March 31, 2006. --Cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has : an increase of approximately $499,000, to approximately $8,197,000, due to the Company being cash positive for the third consecutive quarter and receipt of proceeds from warrant and option exercises (approximately $396,000). "We have achieved a major milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. in attaining profitability in the second quarter of 2006, following three consecutive quarters of positive cash flow and 12 consecutive quarters of double-digit revenue growth," said Gideon Gideon (gĭd`ēən), or Jerubbaal (jērŭb`āəl, –rəbā`əl) Mantel, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Commtouch. "Most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , we have achieved growth while maintaining virtually flat expenses. It is our intention to leverage this strong foundation for the future growth of the company." Use of Non-GAAP Measures This press release includes financial measures for net income (loss), basic and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of that exclude stock-based compensation expense and are therefore not calculated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (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 loss and loss per share and to compare it with historical net loss and loss per share prior to the adoption of FAS 123R by the Company effective January January: see month. 1, 2006. 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. About Commtouch Commtouch Software Ltd. (Nasdaq:CTCH) is dedicated to protecting and preserving the integrity of the world's most important communications tool -- email. Commtouch has over 15 years of experience developing messaging software and is a global developer and provider of proprietary anti-spam and Zero-Hour virus protection solutions. Using core technologies including RPD RPD Rapid RPD Radiation Protection Dosimetry RPD Rapid Product Development RPD Rochester Police Department RPD Recurrent Pattern Detection (Commtouch anti-spam engine) RPD Relative Percent Difference RPD Removable Partial Denture (Recurrent recurrent /re·cur·rent/ (re-kur´ent) [L. recurrens returning] 1. running back, or toward the source. 2. returning after remissions. re·cur·rent adj. 1. Pattern Detection(TM)), the Commtouch Detection Center analyzes billions of email messages per month to identify new spam E-mail that is not requested. Also known as "unsolicited commercial e-mail" (UCE), "unsolicited bulk e-mail" (UBE), "gray mail" and just plain "junk mail," the term is both a noun (the e-mail message) and a verb (to send it). and malware (MALicious softWARE) Software designed to destroy, aggravate and otherwise make life unhappy. See crimeware, virus, worm, logic bomb, macro virus and Trojan. outbreaks within minutes of their introduction into the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . Integrated by more than 40 OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and partners, Commtouch technology protects thousands of organizations, with over 35 million users in over 100 countries. Commtouch is headquartered in Netanya Netanya (nətän`yə), city (1994 pop. 144,900), W central Israel, on the Mediterranean Sea; also spelled Nathania. It is a beach resort and the trade center for agricultural settlements in the region. , Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. , and has a subsidiary in Mountain View, CA. For more information, see: www.commtouch.com, including the Commtouch online lab detailing spam statistics and charts. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , 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 future tense n. A verb tense expressing future time. Noun 1. future tense - a verb tense that expresses actions or states in the future future , 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 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 de·te·ri·o·ra·tion n. The process or condition of becoming worse. 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 real time AV solutions in general and the Commtouch Zero-Hour(TM) Virus Protection product in particular; availability of qualified staff for expansion; technological difficulties and resource constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. encountered in developing new products, such as the Zero-Hour solution; and the failure of Commtouch to meet The NASDAQ Capital Market's listing standards in the future, 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 See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . Recurrent Pattern Detection, RPD and Zero-Hour are trademarks, and Commtouch is a registered trademark, of Commtouch Software Ltd. U.S. Patent No. 6,330,590 is owned by Commtouch.
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(USD in thousands)
June 30, December 31,
2006 2005
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 5,697 $ 3,986
Marketable Securities $ 2,500 $ 2,500
Trade receivables, net 451 355
Prepaid expenses and other accounts
receivable 142 168
------------ ------------
Total current assets 8,790 7,009
------------ ------------
Long-term lease deposits 12 18
Equity investment in Imatrix - 48
Severance pay fund 561 547
Property and equipment, net 428 373
------------ ------------
$ 9,791 $ 7,995
============ ============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable 236 321
Employees and payroll accruals 523 617
Accrued expenses and other liabilities 434 301
Short-term deferred revenue 1,957 1,533
------------ ------------
Total current liabilities 3,150 2,772
------------ ------------
Long-term deferred revenue 526 386
Accrued severance pay 654 638
------------ ------------
1,180 1,024
------------ ------------
Shareholders' equity 5,461 4,199
------------ ------------
$ 9,791 $ 7,995
============ ============
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(USD in thousands, except per share amounts)
Three Months Six Months
ended ended
June 30, June 30,
-------------------- ------------------
2006 2005(a) 2006 2005(a)
--------- --------- --------- ---------
Revenues $ 1,698 $ 880 $ 3,171 $ 1,620
Cost of revenues 214 145 438 339
--------- --------- --------- ---------
Gross profit 1,484 735 2,733 1,281
--------- --------- --------- ---------
Operating expenses:
Research and development 457 395(a) 874 795(a)
Sales and marketing 671 627 1,401 1,305
General and administrative 504 472(a) 1,014 986(a)
--------- --------- --------- ---------
Total operating expenses 1,632 1,494 3,289 3,086
--------- --------- --------- ---------
Operating loss (148) (759) (556) (1,805)
Interest and other expense,
net 49 63 113 56
Equity -- loss of affiliate (15) (41) (49) (60)
--------- --------- --------- ---------
Net loss (114) (737) (492) (1,809)
Amortization of beneficial
conversion feature relating
to convertible Series A
Preferred Shares - (631) - (1,308)
--------- --------- --------- ---------
Net loss attributable to
ordinary and equivalently
participating shareholders $ (114) $ (1,368) $ (492) $ (3,117)
========= ========= ========= =========
Basic and diluted net loss per
share $ (0.002) $ (0.029) $ (0.008) $ (0.070)
========= ========= ========= =========
Weighted average number of
shares used in computing
basic and diluted net loss
per share 64,575 46,585 61,390 44,792
========= ========= ========= =========
(a) -- Certain amounts from prior years have been reclassified to
conform to the current presentation.
COMMTOUCH SOFTWARE LTD.
RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP
(USD in thousands)
Three Months Six Months
ended ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
GAAP Net loss attributable to
ordinary and equivalently
participating shareholders $ (114) $ (1,368) $ (492) $ (3,117)
Stock-based compensation (b) 165 - 329 -
Amortization of beneficial
conversion feature relating
to convertible Series A
Preferred Shares - 631 - 1,308
--------- --------- --------- ---------
Non-GAAP Net income (loss) $ 51 $ (737) $ (163) $ (1,809)
========= ========= ========= =========
(b) Stock-based compensation:
Cost of revenues $ 9 $ - $ 18 $ -
Research and development 65 - 127 -
Sales and marketing 57 - 119 -
General and administrative 34 - 65 -
--------- --------- --------- ---------
Stock-based compensation $ 165 $ - $ 329 $ -
========= ========= ========= =========
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