EX-99.1 2 v132689_ex99-1.htm
Exhibit 99.1
 
 
Commtouch Reports Financial Results
for the Third Quarter of 2008

Sunnyvale, Calif. – November 3, 2008 – Commtouch® (NASDAQ: CTCH), a leading email and web defense technology provider, today announced its third quarter results for the period ending September 30, 2008.
 
Third Quarter 2008 Highlights:

 
·
Revenues for the third quarter of 2008 increased by 24% to $3,622 thousand compared to $2,930 thousand in the third quarter of 2007.

 
·
Net income in accordance with US Generally Accepted Accounting Principles (US GAAP) for the third quarter of 2008 was $644 thousand compared to net income of $639 thousand in the third quarter of last year. GAAP net income for the third quarter of 2008 included $363 thousand of stock-based compensation expenses (FAS123R), compared to $250 thousand of these expenses in the third quarter of 2007.

 
·
Non-GAAP net income for the third quarter of 2008 was $1,007 thousand compared to a net income of $889 thousand in the third quarter of 2007, representing an increase of 13%.

 
·
Deferred Revenues (long-term and short-term) as of September 30, 2008 amounted to $2,818 thousand, compared to deferred revenues as of December 31, 2007 of $3,435 thousand.

 
·
Operating cash flow in the third quarter of 2008 was $671 thousand, compared to $759 thousand in the third quarter of 2007. Operating cash flow for the first nine months of 2008 was $2,358 thousand, compared to $2,140 thousand in the same period last year.

 
·
Cash, short term cash deposits and short and long-term marketable securities as of September 30, 2008 amounted to $16,939 thousand, compared to $14,407 thousand as of December 31, 2007. The increase is due mostly to the above-mentioned positive operating cash flow and the receipt of $844 thousand, representing proceeds from the exercise of warrants and options.

 
·
During the quarter, the company began to execute its share buy-back program. As of September 30, 2008, the company had expended $90 thousand for the repurchase of 36 thousand outstanding shares. As of the date of this press release, the company has repurchased a total of 339,595 shares at an average price of $2.02, investing a total of $686 thousand out of the full buy-back program of $4 million.


 
·
The company signed seven new OEM licensing agreements during the third quarter of 2008. The company’s global OEM partner count was 106 as of September 30, 2008.

Gideon Mantel, chief executive officer and chairman of the board of Commtouch said: “I am optimistic, yet, given the current environment – I’m also very cautious. Commtouch is in an excellent position, with a stable and growing group of OEM licensees, continuing profitability, no debt and a strong cash level. This allows us the flexibility to weather the difficult economic environment, and enables us to take advantage of opportunities and invest in our future.

“In 2009, based on our current strong pipeline, I expect that we will continue to see overall growth in our email business. We will also be adding the initial sales of our very recently released web security product, which should become more significant as we progress through the year. While we look forward to attaining these goals, we will also be maintaining tight control over expenses. At the same time, we expect to continue taking advantage of the strong leverage in our successful business model, which will enable us to improve our profitability, grow our EPS and ultimately increase shareholder value.”

Business Outlook 

Given the general negative economic climate and its effect on third quarter results, the company is taking a more conservative outlook and adjusting its 2008 guidance.

Full year 2008 revenues are expected to be between $14.2 million and $14.4 million, compared to the previously published guidance of between $15 million and $16 million.

Earnings per diluted share for the year are expected to be between $0.15 and $0.16 based on non-GAAP net income. Prior guidance was for earnings per diluted share of $0.16 to $0.19.
 
The above outlook is as of the date of this release, and the company undertakes no obligation to update its estimates in the future.  
 
Use of Non-GAAP Measures 
 
Commtouch’s non-GAAP net income differs from results reported under U.S. GAAP due to non-cash items; since it is too early to determine the impact of stock-based compensation expense for the rest of the 2008 year, Commtouch is not providing guidance on GAAP net income. Stock-based compensation expense has a negative impact on net income.

 
This press release includes financial measures for net income (loss), basic and diluted earnings per share that exclude stock-based compensation expenses and are therefore not calculated in accordance with generally accepted accounting principles (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 income or loss and earnings or loss per share and to compare it with historical net income or loss and earnings or loss per share.
 
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.
 
Financial Results Conference Call
 
The company has scheduled a conference call later today, Monday, November 3, 2008 at 10 a.m. ET.

To participate in the call, please dial one of the following numbers ten minutes prior to the start time of the call:
 
U.S.: 1 866 345 5855;
UK: 0 800 404 8418
ISRAEL: 03 918 0609;
INTERNATIONAL: +972 3 918 0609

For those unable to listen to the live call, a replay of the call will be available the day after the call in the investor relations section of Commtouch’s website, at: http://www.commtouch.com/ir.
 
About Commtouch
 
Commtouch® (Nasdaq: CTCH) is the source of proven messaging and web security technology for scores of security companies and service providers, founded on a unique datacenter-based approach. Commtouch’s expertise in building efficient, massive-scale security services has resulted in its patented technology being used to mitigate Internet threats for thousands of organizations and hundreds of millions of users in over 100 countries. Commtouch’s Data Centers automatically analyze billions of transactions in real-time to identify new spam, malware and zombie outbreaks as they are initiated. Commtouch’s unmatched suite of security offerings – anti-spam, virus detection, reputation and zombie intelligence services – work together in a comprehensive feedback loop. Commtouch was founded in 1991, is headquartered in Netanya, Israel, and has a subsidiary in Sunnyvale, Calif. For more information and real-time statistics and trends, see: http://www.commtouch.com the Commtouch Café blog at http://blog.commtouch.com/cafe.

Recurrent Pattern Detection, RPD, Zero-Hour and GlobalView are trademarks, and Commtouch is a registered trademark, of Commtouch Software Ltd. U.S. Patent No. 6,330,590 is owned by Commtouch. 


This press release contains forward-looking statements, 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, 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 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 our newer product offerings; availability of qualified staff; and technological difficulties and resource constraints encountered in developing new products, 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.

Company Contact
Ron Ela 
Chief Financial Officer
Tel: (US) 650-864-2291
        (int’l) +972-9-8636813
ron.ela@commtouch.com
Investor Relations Contact
Ehud Helft / Kenny Green
GK Investor Relations
Tel: (US) 646-201-9246
        (Israel) +972-3-607-4717
info@gkir.com 

** Tables to Follow **

 
COMMTOUCH SOFTWARE LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

   
September 30
  
December 31
  
 
  
2008
  
2007
  
   
Unaudited
  
Audited
  
   
In US$ thousands
  
           
Assets:
              
Current Assets:
              
Cash and cash equivalents
 
$
14,794
  
$
10,807
  
Short term cash deposit
  
$
300
  
$
1,600
  
Marketable securities
   
-
   
2,000
 
Trade receivables
    
1,370
   
1,110
 
Prepaid expenses and other accounts receivable
   
282
   
303
 
Total current assets
    
16,746
   
15,820
 
               
Long-term Marketable securities
   
1,845
   
-
 
Long-term lease deposits
   
61
   
33
 
Severance pay fund
   
773
   
821
 
Property and equipment, net
   
811
   
786
 
Investment in affiliate
    
750
   
750
 
Total assets
    
20,986
   
18,210
 
               
Liabilities and Shareholders’ Equity
              
Current Liabilities:
              
Accounts payable
   
316
   
335
 
Employees and payroll accruals
   
689
   
746
 
Accrued expenses and other liabilities
   
411
   
415
 
Short-term deferred revenue
   
2,365
   
2,534
 
Total current liabilities
   
3,781
   
4,030
 
               
Long-term deferred revenue
   
453
   
901
 
Accrued severance pay
   
889
   
931
 
Total liabilities
    
1,342
   
1,832
 
               
Shareholders’ equity
   
15,863
   
12,348
 
Total liabilities and shareholders’ equity
  
$
20,986
  
$
18,210
  


COMMTOUCH SOFTWARE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In US$ thousands, except per share amounts)

   
Three months ended
  
Nine months ended
  
   
September 30
  
September 30
  
   
2008
  
2007
  
2008
  
2007
  
   
Unaudited
 
Unaudited
 
Unaudited
 
Unaudited
  
                   
Revenues
  
$
3,622
  
$
2,930
  
$
10,591
  
$
7,952
  
Cost of revenues
    
466
   
357
   
1,374
   
989
 
Gross profit
    
3,156
   
2,573
   
9,217
   
6,963
 
                           
Operating expenses:
                          
Research and development
    
780
   
559
   
2,353
   
1,554
 
Sales and marketing
    
1,043
   
874
   
3,025
   
2,510
 
General and administrative
    
797
   
620
   
2,505
   
1,908
 
Total operating expenses
    
2,620
   
2,053
   
7,883
   
5,972
 
Operating profit
    
536
   
520
   
1,334
   
991
 
Interest and other expense, net
    
108
   
119
   
299
   
398
 
Income before taxes
    
644
   
639
   
1,633
   
1,389
 
Taxes on income
    
-
   
-
   
7
    
-
 
Net income attributable to ordinary and equivalently participating shareholders
  
$
644
  
$
639
  
$
1,626
  
$
1,389
  
                           
Earning per share- basic
  
$
0.02
  
$
0.03
  
$
0.06
  
$
0.06
  
Earning per share- diluted
  
$
0.02
  
$
0.02
  
$
0.06
  
$
0.05
  
Weighted average number of shares outstanding:
                          
Basic
    
25,908
    
25,065
    
25,666
    
24,733
  
Diluted
    
26,198
    
27,860
    
26,686
    
27,435
  
 
 
Supplementary Financial Information

Unaudited Reconciliation of GAAP Financial Information to NON-GAAP

(In US$ thousands)

   
Three months ended 
  
   
September 30
  
                           
   
GAAP
  
FAS123R
  
Non GAAP
  
GAAP
  
FAS123R
  
Non GAAP
  
 
  
2008
  
Adjustments
  
2008
  
2007
  
Adjustments 
  
2007
  
   
Unaudited
  
                           
Revenues
 
$
3,622
        
$
3,622
  
$
2,930
        
$
2,930
  
Cost of revenues
   
466
   
11
   
455
   
357
   
8
   
349
 
Gross profit
   
3,156
   
(11
)
  
3,167
   
2,573
   
(8
)
  
2,581
 
                                       
Operating expenses:
                                      
Research and development
   
780
   
68
   
712
   
559
   
64
   
495
 
Sales and marketing
   
1,043
   
78
   
965
   
874
   
45
   
829
 
General and administrative
   
797
   
206
   
591
   
620
   
133
   
487
 
Total operating expenses
   
2,620
   
352
   
2,268
   
2,053
   
242
   
1,811
 
Operating profit
    
536
   
363
   
899
   
520
   
250
   
770
 
Interest and other expense, net
   
108
         
108
   
119
         
119
 
Net income
   
644
         
1,007
   
639
         
889
 
                                       
Earning per share- basic
  
$
0.02
        
$
0.04
  
$
0.03
        
$
0.04
  
Earning per share- diluted
 
$
0.02
        
$
0.04
  
$
0.02
        
$
0.03
  
Weighted average number of shares outstanding:
                                     
Basic
   
25,908
          
25,908
    
25,065
          
25,065
  
Diluted
   
26,198
          
26,198
    
27,860
          
27,860
  
 
 
Supplementary Financial Information

Unaudited Reconciliation of GAAP Financial Information to NON-GAAP

(In US$ thousands)

   
Nine months ended 
  
   
September 30
  
                           
   
GAAP
  
FAS123R
  
Non GAAP
  
GAAP
  
FAS123R
  
Non GAAP
  
 
  
2008
  
Adjustments
  
2008
  
2007
  
Adjustments 
  
2007
  
   
Unaudited
  
                           
Revenues
 
$
10,591
        
$
10,591
  
$
7,952
        
$
7,952
  
Cost of revenues
   
1,374
   
35
   
1,339
   
989
   
21
   
968
 
Gross profit
   
9,217
   
(35
)
  
9,252
   
6,963
   
(21
)
  
6,984
 
                                       
Operating expenses:
                                      
Research and development
   
2,353
   
250
   
2,103
   
1,554
   
185
   
1,369
 
Sales and marketing
   
3,025
   
227
   
2,798
   
2,510
   
133
   
2,377
 
General and administrative
   
2,505
   
741
   
1,764
   
1,908
   
395
   
1,513
 
Total operating expenses
   
7,883
   
1,218
   
6,665
   
5,972
   
713
   
5,259
 
Operating profit
    
1,334
   
1,253
   
2,587
   
991
   
734
   
1,725
 
Interest and other expense, net
   
299
         
299
   
398
         
398
 
Income before taxes
    
1,633
         
2,886
   
1,389
         
2,123
 
Taxes on income
    
7
         
7
   
-
         
-
 
Net income
 
$
1,626
        
$
2,879
  
$
1,389
        
$
2,123
  
                                       
Earning per share- basic
  
$
0.06
        
$
0.11
  
$
0.06
        
$
0.09
  
Earning per share- diluted
 
$
0.06
        
$
0.11
  
$
0.05
        
$
0.08
  
Weighted average number of shares outstanding:
                                     
Basic
   
25,666
          
25,666
    
24,733
          
24,733
  
Diluted
   
26,686
          
26,686
    
27,435
          
27,435
  
 
 
COMMTOUCH SOFTWARE LTD.

CONDENSED CONSOLIDATED CASH FLOW DATA

(In US$ thousands)

   
Three months ended 
  
Nine months ended 
  
   
September 30
  
September 30
  
   
2008
  
2007
  
2008
  
2007
  
 
  
Unaudited
 
Unaudited
 
Unaudited
 
Unaudited
  
Cash flow from operating activities
                  
Net income
 
$
644
  
$
639
  
$
1,626
  
$
1,389
  
                           
Adjustments:
                          
Depreciation
   
120
   
108
   
343
   
280
 
Compensations related to options issued to employees and consultants
    
375
   
269
   
1,290
   
783
 
                           
Changes in assets and liabilities:
                          
Increase in trade receivables
    
(69
)
  
(314
)
  
(260
)
  
(657
)
(Increase) Decrease in prepaid expenses and other receivables
    
(39
)
  
(36
)
  
61
   
52
 
(Decrease) Increase in accounts payable
    
(75
)
  
75
   
(30
)
  
5
 
(Decrease) increase in employees and payroll accruals, accrued expenses and other liabilities
    
(98
)
  
57
   
(61
)
  
95
 
(Decrease) increase in deferred revenues
    
(187
)
  
(40
)
  
(617
)
  
197
 
Increase (Decrease) in accrued severance pay, net
    
-
   
1
   
6
   
(2
)
Other
    
-
   
-
   
-
   
(2
)
Net cash provided by operating activities
    
671
   
759
   
2,358
   
2,140
 
                           
Cash from investing activities
                          
                           
Change in short term cash deposit
    
-
   
(1,600
)
  
1,300
   
(1,600
)
Purchase of marketable securities
    
-
   
-
   
-
   
(500
)
Change in long - term lease deposits
    
1
   
(8
)
  
(28
)
  
(17
)
Proceeds from sale of Fixed Assets
    
-
   
-
   
-
   
2
 
Purchase of property and equipment
    
(125
)
  
(69
)
  
(397
)
  
(467
)
Net cash used in investing activities
    
(124
)
  
(1,677
)
  
875
   
(2,582
)
                           
Cash flows from financing activities
                          
                           
Buyback of outstanding shares
    
(90
)
  
-
   
(90
)
  
-
 
Proceeds from options and warrants exercises
    
42
   
257
   
844
   
1,386
 
Net cash provided by financing activities
    
(48
)
  
257
   
754
   
1,386
 
                           
Increase in cash and cash equivalents
    
499
   
(661
)
  
3,987
   
944
 
Cash and cash equivalents at the beginning of the period
    
14,295
   
9,609
   
10,807
   
8,004
 
Cash and cash equivalents at the end of the period
  
$
14,794
  
$
8,948
  
$
14,794
  
$
8,948