EX-99.1 2 c10383_ex99-1.htm PRESS RELEASE Exhibit 99.1

Exhibit 99.1

Commtouch Reports Financial Results for Fourth Quarter and Fiscal Year 2006

Record Annual Revenue Growth of 84%

MOUNTAIN VIEW, Calif. – February 14, 2007 – Commtouch® (NASDAQ: CTCH), the leading OEM provider of real time anti-spam, Zero-Hour™ virus protection and IP Reputation technology, today announced its fourth quarter and full year results for the period ending December 31, 2006.

Highlights for the Fourth Quarter and Full Year 2006::

•       Revenues for the fourth quarter of 2006 increased by 75% to $2,197 thousand compared to $1,257 thousand in the fourth quarter of 2005.
     
    Revenues for fiscal year 2006 increased by 84% to $7,234 thousand compared to $3,925 thousand in fiscal year 2005.
     
•   Net Income in accordance with Generally Accepted Accounting Principles (GAAP) for the fourth quarter of 2006 was $153 thousand compared to a loss of $469 thousand in the fourth quarter of last year.
     
    Loss on a GAAP basis in fiscal year 2006 was $190 thousand compared to loss of $4,441 thousand in fiscal year 2005.
     
•   Non-GAAP net income for the fourth quarter of 2006, excluding $295 thousand of stock-based compensation expenses in connection with the company's adoption of Financial Accounting Standards No. 123R, was $448 thousand compared to a loss of $469 thousand in the same quarter of 2005.
     
    Non-GAAP net income for fiscal year 2006, excluding stock based compensation expenses of $790 thousand, was $600 thousand compared to a loss of $2,690 thousand in fiscal year 2005 (Refer to the “Use of Non-GAAP Measures” section and accompanying financial table for reconciliation of GAAP financial information to Non-GAAP).
     
•   Deferred Revenues (long term and short term) as of December 31, 2006 increased by 34% to $2,574 thousand, compared to deferred revenues of $1,919 thousand as of December 31, 2005.
     
•   Cash and marketable securities as of December 31, 2006 amounted to $10,004 thousand compared to $6,486 thousand as of December 31, 2005. The increase is due to increased operating activities and receipt of proceeds from warrant and option exercises in the amount of $2,537 thousand.
     
•   The company signed 8 OEM licensing agreements during the fourth quarter of 2006, bringing the company’s global OEM partner count to 57 at the end of year 2006.

“This was a very strong year and quarter, definitely a key year in terms of laying the foundation for strong future growth,” commented Commtouch’s CEO, Gideon Mantel. “Based on current market trends – mainly the increase in both spam and virus attacks, coupled with the strong customer base we built in 2006 – we are very confident in our ability to generate new business that will help fuel our continued revenue growth and profitability.”

Future Business Outlook

Based on current business activities and general economic conditions, Commtouch's management believes that 2007 revenues will be in the range of $11.2 million to $12.5 million. The company aims to continue to increase profit margins in fiscal year 2007, achieving overall annual non-GAAP earning per share in the range of 3 to 4 cents per diluted share.

Based on the Company’s past experience, quarterly growth rates will likely fluctuate from quarter to quarter based on seasonality and specific customer launch dates. The above outlook is as of today and the company undertakes no obligation to update its estimates in the future.

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 year; Commtouch is not providing guidance on GAAP net income. The stock-based compensation expense would have a negative impact on net income.

Use of Non-GAAP Measures

This press release includes financial measures for net income (loss), basic and diluted earnings per share that exclude stock-based compensation expense 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, including for the period prior to the adoption of FAS 123R by the company effective January 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.

Commtouch Conference Call

The company has scheduled a conference call on Wednesday, February 14, 2007, at 11 a.m. EST.

To participate in the call, U.S. callers can dial 1-888-668-9141; UK Dial-in Number: 0-800-917-9141; ISRAEL Dial-in Number: 03-918-0609; INTERNATIONAL Dial-in Number: +972-3-918-0609 ten minutes prior to the start time.

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: www.commtouch.com.

About Commtouch

Commtouch Software Ltd. (NASDAQ: CTCH) is dedicated to protecting and preserving the integrity of the world's most important communications tool -- e-mail. Commtouch has over 16 years of experience developing messaging software and is a global developer and provider of proprietary anti-spam, Zero-Hour virus protection and IP Reputation solutions. Using core technologies including RPD (Recurrent Pattern Detection™), the Commtouch Detection Center analyzes billions of email messages per month to identify new spam and malware outbreaks within minutes of their introduction into the Internet. Integrated by more than 50 OEM partners, Commtouch technology protects thousands of organizations, with over 50 million users in over 100 countries. Commtouch is headquartered in Netanya, Israel, and has a subsidiary in Mountain View, Calif. For more information, see: www.commtouch.com. The site includes the Commtouch online lab detailing spam statistics and charts.

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 for expansion; 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.

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.

Contacts:

Investor Relations:
Ron Ela
IR@commtouch.com
US: 650-864-2112
Int’l: +972-9-863-6813 		      Media :
Rebecca Steinberg Herson
rebeccah@commtouch.com
US: 650-864-2112
Int'l: +972-9-863-6877

 

######

2

COMMTOUCH SOFTWARE LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

               
   
December 31,
  
 
   
2006
 
2005
 
 
   
In US$ thousands
  

Assets
 
Current Assets:              

   Cash and cash equivalents
$
8,004
 
$
3,986
   Marketable Securities
2,000
    
2,500
  
  Trade receivables
570
 
355
  Prepaid expenses and other accounts receivable
196
 
168
 
 
  Total current assets
10,770
 
7,009
 
 
Long-term lease deposits
13
 
18
Equity investment in Imatrix
—
 
48
Severance pay fund
607
 
547
Property and equipment, net
609
 
373
 
 
  Total assets
11,999
    
7,995
  
 
 
Liabilities and Shareholders’ Equity
 
Current Liabilities:
 
  Accounts payable
344
 
321
  Employees and payroll accruals
503
 
617
  Accrued expenses and other liabilities
379
 
301
  Short-term deferred revenue
2,032
 
1,533
 
 
  Total current liabilities
3,258
 
2,772
 
 
  Long-term deferred revenue  
542
      
386
  
  Accrued severance pay
706
 
638
 
 
  Total liabilities  
1,248
      
1,024
  
 
 
  Shareholders’ equity
7,493
 
4,199
 
 
  Total liabilities and shareholders' equity $
11,999
  $
7,995
 
 
               
               

 

3

COMMTOUCH SOFTWARE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In US$ thousands, except per share amounts)

 
Year ended
December 31,
 
Three Months ended
December 31,
  
 
 
 
2006
2005
2006
2005
 
 
 
 
                    Unaudited      
Unaudited
  
                                  

    Revenues

$
7,234
 
$
3,925
 
$
2,197
 
$
1,257
                               
    Cost of revenues
901
 
700
 
255
 
181
 
 
 
Gross profit
6,333
 
3,225
 
1,942
 
1,076
  
 
 
 
 
Operating expenses:  
     
     
     
 
    Research and development  
1,763
      
1,524
      
512
      
417
  
    Sales and marketing  
2,686
      
2,476
      
727
      
602
  
    General and administrative  
2,299
      
1,881
      
632
      
540
  
 
 
 
 
    Total operating expenses  
6,748
      
5,881
      
1,871
      
1,559
  
 
 
 
 
Operating profit (loss)  
(415
 )    
(2,656
 )    
71
      
(483
 )
    Interest and other expense, net  
274
      
141
      
82
      
47
  
    Equity - loss of affiliate  
(49
 )    
(175
 )    
—
      
(33
 )
 
 
 
    Net income (loss)  
(190
 )    
(2,690
 )    
153
      
(469
 )
    Amortization of beneficial conversion feature relating to
       convertible Series A Preferred Shares 		 
—
      
(1,751
 )    
—
      
—
  
 
 
 
Net income (loss) attributable to ordinary and equivalently participating shareholders $
(190
 )   $
(4,441
 )   $
153
     $
(469
 )
 
 
 
Earning (loss) per share-basic and diluted $
(0.00
 )   $
(0.09
 )   $
0.00
     $
(0.01
 )
 
 
 

Weighted average number of shares outstanding:

                              
                               

Basic

  
66,339
      
47,406
      
71,428
      
53,148
  
 
 
 
 

Diluted

  
66,339
      
47,406
      
76,249
      
53,148
  
 
 
 
                               

 

4

 

COMMTOUCH SOFTWARE LTD.

Supplementary Financial Information

Unaudited Reconciliation of GAAP Financial Information to Non-GAAP

(In US$ thousands)

 
Year ended
December 31,
  
Year ended
December 31,
  
 
  
 
GAAP
2006

FASR123R
Adjustments

    
Non-GAAP
2006
GAAP
2005
  

*Non-GAAP
Adjustments

   
Non-GAAP
2005
  
  
   
 
 
 
                                         

  Revenues
$
7,234
       
$
7,234
 
$
3,925
     
$
3,925
  Cost of Revenues
901
 
15
    
886
 
700
     
700
       
 
     
Gross Profit
6,333
 
(15
 )  
6,348
 
3,225
       
3,225
       
 
       
Operating expenses:                                        
    Research and development
1,763
    
196
    
1,567
    
1,524
          
1,524
  
    Sales and Marketing
2,686
    
96
    
2,590
    
2,476
          
2,476
  
   General and administrative
2,299
    
483
    
1,816
    
1,881
          
1,881
  
       
 
       
  Total operating expenses
6,748
 
775
    
5,973
 
5,881
       
5,881
       
 
       

Operating profit (loss)
(415
)
        
375
 
(2,656
)
        
(2,656
)

  Interest and other expense, net

274
       
274
 
141
       
141

  Equity - loss of affiliate
(49
)
        
(49
)
  
(175
)
        
(175
)
       
 
     

  Net income (loss)

(190
)
        
600
 
(2,690
)
      
$
(2,690
)

  Amortization of beneficial conversion feature relating to convertible Series A Preferred Shares
—
       
—
 
(1,751
)
  
(1,751)
  
$
—
       
 
     

Net income (loss) attributable to ordinary and equivalently participating shareholders
$
(190
)
        
$
600
 
$
(4,441
)
      
$
(2,690
)
       
 
     
                                         
* Amortization of beneficial conversion feature relating to convertible Series A Preferred Shares  

 

5

 

COMMTOUCH SOFTWARE LTD.

Supplementary Financial Information

Unaudited Reconciliation of GAAP Financial Information to Non-GAAP

(In US$ thousands)

 
Three months ended
December 31,
 
GAAP
2006

FASR123R
Adjustments

    
Non-GAAP
2006
GAAP
2005
  
   
 
                             

  Revenues
$
2,197
       
$
2,197
 
$
1,257
  Cost of Revenues
255
 
6
    
249
 
181
 
   
 
Gross Profit
1,942
 
(6
 )  
1,948
 
1,076
 
   
 
Operating expenses:                            
    Research and development
512
    
73
    
439
    
417
  
    Sales and Marketing
727
    
36
    
691
    
602
  
   General and administrative
632
    
180
    
452
    
540
  
 
   
 
  Total operating expenses
1,871
 
289
    
1,582
 
1,559
       
 

Operating profit (loss)
71
       
366
 
(483
)

  Interest and other expense, net

82
       
82
 
47

  Equity - loss of affiliate
—
       
—
 
(33
)
       
 

  Net income (loss)

$
153
       
$
448
 
$
(469
)
       
 
                             

 

6