MIND CTI Reports First Quarter 2017 Results

*MIND CTI to Host Annual Meeting of Shareholders

Yoqneam, Israel, May 4, 2017 MIND C.T.I. LTD. – (NasdaqGM: MNDO), a leading provider of convergent end-to-end prepaid/postpaid billing and customer care product based solutions for service providers as well as unified communications analytics and call accounting solutions for enterprises, today announced results for its first quarter ended March 31, 2017.

 

The following will summarize our major achievements in the first quarter of 2017 as well as our business. The financial results can be found in the Investor Information section of our website at  https://www.mindcti.com/investor-information/ and in our Form 6-K.

 

Financial Highlights

  • Revenues were $4.5 million, compared with $4.6 million in the first quarter of 2016, and compared with $4.7 million in the fourth quarter of 2016.
  • Operating income was $0.9 million, or 21% of total revenues, compared with $1.1 million, or 25% of total revenues in the first quarter of 2016.
  • Net income was $0.9 million, or $0.05 per share, compared with $1.2 million, or $0.06 per share in the first quarter of 2016.
  • Multiple follow-on orders.
  • Cash flow from operating activities during the quarter was $0.5 million, compared with $0.7 million in the first quarter of 2016. In addition, the cash flow from investing activities includes a down payment of $1.2 million on a one-time transaction described below.

As of March 31, 2017 we had 250 employees in our offices, compared with 319 as of March 31, 2016.

 

Monica Iancu, MIND CTI CEO, commented: “To succeed in the age of digital services, carriers need fast and agile ways of digital transformation. We understand our customers’ business, their needs and challenges. We have the teams and the expertise to provide timely upgrades and customizations required to support our customers in the ever changing market place. Competition in our industry is intense. We compete against global billing vendors with greater name recognition. We compete against vendors that offer network equipment as well as billing software and against vendors that focus on specific markets. At all levels, there is severe pricing pressure.  We are pleased with our execution of ongoing projects and the recurrent revenue stream. We plan to further enhance the professional services component of our business, to continue investing in technology, seeking to enter new markets and focusing on our profitability targets.”

 

Multiple Follow-on Orders

Similar to all other quarters, our valued customers show their appreciation for our technology and support and increase their relationship with us and we receive follow-on orders. This quarter’s follow-on orders include maintenance renewals, agreements to support enhancements related to deployment of LTE networks and support of Voice over LTE (VoLTE), hardware platform upgrades, as well as specific customizations and additional professional services.

 

Sale of a Subsidiary

In 2004, when MIND was growing rapidly in Romania, there was no available office space for rent and we decided to buy land and build our own office building. We started the process with buying a suitable piece of land and invested around 230,000 Euro. We deserted that plan at some point as we preferred to focus on our business and were able to locate suitable office space that we rented. The land was owned by our subsidiary, Dirot Comp SRL, a Romanian wholly-owned subsidiary.


As now there are many companies extending operations in Romania, the value of the land increased and will probably continue to change. We decided at this point to sell the subsidiary that owned the land for 1.1 million Euro (around $1.2 million).


Our cash position as of March 31, 2017 includes the $1.2 million we received as guarantee, in advance of the closing of the transaction. The transaction was concluded in the second quarter of 2017 and the capital gain will be recorded in that quarter. The tax on the capital gain which is estimated to be $0.2 million will be paid in May 2017.

 

Cash Position and Annual Dividend Distribution

Our cash position, including long-term available-for-sale securities, was $15.4 million as of March 31, 2017, after the payment of the annual cash dividend and the related withholding taxes and includes the $1.2 million we received as a guarantee as described above.


As previously announced, the Board declared on February 23, 2017 a cash dividend of $0.32 per share before withholding tax, which was paid in full in March 2017.


The dividend declared and distributed was approximately $6.2 million.

 

Revenue Distribution

Revenues in the Americas represented 71%, revenues in Europe represented 20% and revenues in the rest of the world represented 9% of our total revenues.


Revenues from customer care and billing software totaled $3.8 million, or 85% of total revenues, while revenues from enterprise call accounting software totaled $0.7 million, or 15% of total revenues.


Revenues from licenses were $0.5 million, or 11% of total revenues, while revenues from maintenance and additional services were $4.0 million, or 89% of total revenues.

 

Fluctuation in Taxes

On a quarterly basis, we incurred high fluctuation in taxes. For example, the taxes in the first quarter of 2017 were $0.2 million, compared to $0.7 million in the fourth quarter of 2016, and compared to $0.2 million in the first quarter of 2016.


Taxes include provisioning for income taxes paid in our different locations at very different tax rates.


Fluctuations in tax expenses on similar total revenues usually result from differences in intercompany charges among the various quarters. Intercompany charges of the parent company for its subsidiary or among subsidiaries are in accordance with existing transfer pricing study.

 

AGM

MIND also announced today that its 2017 Annual General Meeting of Shareholders will be held on Wednesday, August 9, 2017 at 10:00 A.M. (Israel time), at the offices of the Company, Industrial Park, Building 7, Yoqneam 2069202, Israel.


Shareholders of record at the close of business on July 6, 2017 are entitled to vote at the Meeting. All shareholders are cordially invited to attend the Meeting in person. Proxy statements and proxy cards for use by shareholders that cannot attend the meeting in person will be sent by mail to shareholders that hold shares registered with the American Stock Transfer & Trust Company, including shares held via DTC members.


The agenda of the meeting is as follows:
(i)     to re-appoint Brightman Almagor Zohar (member of Deloitte Touche Tohmatsu), as the Company’s independent auditor until the close of the following Company’s Annual General Meeting and to authorize the Board of Directors of the Company to determine its remuneration or to delegate the Audit Committee thereof to do so;
(ii)    to approve the re-election of Mr. Mihail Rotenberg as a Class II director of the Company until the 2020 Annual General Meeting;
(iii)   to approve the election of Mr. Meir Nissensohn as a Class III director of the Company until the 2018 Annual General Meeting;
(iv)    to approve the election of Mr. Joseph Tenne as a Class II director of the Company until the 2020 Annual General Meeting;
(v)     to approve the compensation of each non-executive director;
(vi)    to approve Ms. Monica Iancu’s bonus plan; and
(vii)   to discuss the Company’s audited financial statements for the year ended December 31, 2016.

 

MIND
C.T.I. LTD.

CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

Three
Months Ended
    Year
Ended
 
    March
31,
    December
31,
 
    2017     2016     2016  
    (Unaudited)     (Audited)  
    U.S.
dollars in thousands
 
    (except
per share data)
Revenues $ 4,455 $ 4,564 $ 18,052
Cost of revenues 2,032 1,888 6,831
Gross profit 2,423 2,676 11,221
Research and development expenses 786 991 3,517
Selling and marketing expenses 310 206 1,105
General and administrative expenses 383 357 1,393
Operating income 944 1,122 5,206
Financial income – net 184 260 166
Income before taxes on income 1,128 1,382 5,372
Taxes on income 215 208 1,169
Net income for the period $ 913 $ 1,174 $ 4,203
Earnings per ordinary share-
Basic and diluted $ 0.05 $ 0.06 $ 0.22
Weighted average number of ordinary shares used in computation of earnings per ordinary share – in thousands:
Basic 19,270 19,118 19,234
Diluted 19,477 19,183 19,307

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MIND
C.T.I. LTD.

CONDENSED
CONSOLIDATED BALANCE SHEETS

 

March 31, December 31,
2017 2016
(Unaudited) (Audited)
U.S. dollars in thousands
A  s  s  e  t  s
CURRENT ASSETS:
Cash and cash equivalents $ 7,176 $ 9,165
Short-term bank deposits 2,637 5,033
Marketable securities 4,710 4,784
Accounts receivable, net:
Trade 727 1,098
Other 171 176
Prepaid expenses 349 319
Deferred cost of revenues 38
Inventories 5 5
Total current assets 15,813 20,580
INVESTMENTS AND OTHER NON-CURRENT ASSETS:
Marketable securities – available-for-sale 866 832
Severance pay fund 1,705 1,565
Deferred income taxes 95 95
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization
482 498
GOODWILL 5,430 5,430
Total assets $ 24,391 $ 29,000
Liabilities and shareholders’ equity
CURRENT LIABILITIES :
Accounts payable and accruals:
Trade $ 327 $ 51
Other 1,853 1,233
Deferred revenues 3,801 4,079
Total current liabilities 5,981 5,363
LONG-TERM LIABILITIES :
Deferred revenues 405 665
Employee rights upon retirement 1,845 1,687
Total liabilities 8,231 7,715
SHAREHOLDERS’ EQUITY:
Share capital 54 54
Additional paid-in capital 26,042 25,998
Accumulated other comprehensive loss (829 ) (867 )
Accumulated deficit (7,553 ) (2,293 )
Treasury shares (1,554 ) (1,607 )
Total shareholders’ equity 16,160 21,285
Total liabilities and shareholders’ equity $ 24,391 $ 29,000

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MIND
C.T.I. LTD.

CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Three Months Ended Year Ended
March 31, December 31,
2017 2016 2016
(Unaudited) (Audited)
U.S. dollars in thousands
Cash flows from operating activities:
Net income $ 913 $ 1,174 $ 4,203
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 28 46 161
Deferred income taxes, net 146
Accrued severance pay 66 18 (123 )
Realized loss (gain)  from marketable securities available-for-sale 4 (44 )
Foreign currency exchange rate loss from marketable securities available-for-sale 128
Unrealized loss (gain) from marketable securities, net (14 ) (18 ) 23
Employees share-based compensation expenses 44 30 136
Changes in operating asset and liability items:
Decrease (increase) in accounts receivable:
Trade 371 674 1,145
Other 5 (171 ) 37
Increase in prepaid expenses and deferred cost of revenues (68 ) (157 ) (9 )
Decrease in inventories 4
Increase (decrease) in accounts payable and accruals:
Trade 276 113 (186 )
Other (549 ) (750 ) (1,031 )
Increase (decrease) in deferred revenues (538 ) (221 ) 654
Net cash provided by operating activities 538 738 5,244
Cash flows from investing activities:
Purchase of property and equipment (12 ) (11 ) (68 )
Severance pay funds (48 ) (35 ) 82
Deferred consideration from sale of subsidiary 1,169
Proceeds from sale of marketable securities 88 91 344
Investment in marketable securities available-for-sale (186 ) (1,000 )
Proceeds from sale of marketable securities available-for-sale 1,730
Proceeds from (investment in) short-term bank deposits 2,396 140 (3,535 )
Net cash provided by (used in) investing activities 3,593 (1 ) (2,447 )
Cash flows from financing activities:
Employee stock options exercised and paid 53 31 85
Dividend paid (6,173 ) (5,192 ) (5,192 )
Net cash used in financing activities (6,120 ) (5,161 ) (5,107 )
Decrease in cash and cash equivalents (1,989 ) (4,424 ) (2,310 )
Balance of cash and cash equivalents at beginning of period 9,165 11,475 11,475
Balance of cash and cash equivalents at end of period $ 7,176 $ 7,051 $ 9,165

 

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About MIND
MIND CTI Ltd. is a leading provider of convergent end-to-end billing and customer care product based solutions for service providers as well as unified communications analytics and call accounting solutions for enterprises. MIND provides a complete range of billing applications for any business model (license, managed service or complete outsourced billing service) for Wireless, Wireline, Cable, IP Services and Quad-play carriers in more than 40 countries around the world. A global company, with over twenty years of experience in providing solutions to carriers and enterprises, MIND operates from offices in the United States, Romania and Israel.
Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995: All statements other than historical facts included in the foregoing press release regarding the Company’s business strategy are “forward-looking statements.” These statements are based on management’s beliefs and assumptions and on information currently available to management. Forward-looking statements are not guarantees of future performance, and actual results may materially differ. The forward-looking statements involve risks, uncertainties, and assumptions, including the risks discussed in the Company’s filings with the United States Securities Exchange Commission. The Company does not undertake to update any forward-looking information.

For more information please contact:
Andrea Dray
MIND CTI Ltd.
Tel: +972-4-993-6666
investor@mindcti.com