MIND CTI Reports Third Quarter 2018 Results

 

Yoqneam, Israel, November 8, 2018 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 third quarter ended September 30, 2018.

The following will summarize our major achievements in the third quarter of 2018, as well as our business. Full financial results can be found in the Company News section of our website at https://www.mindcti.com/company/news/ and in our Form 6-K.

 

Q3 2018 Financial Highlights
  • Revenues were $4.6 million, similar to the revenues in both the third quarter of 2017 and the second quarter of 2018.
  • Operating income was $1.3 million, compared to $1.4 million in the third quarter of 2017 and similar to the operating income in the second quarter of 2018.
  • Net income was $1.4 million, or $0.07 per share, compared to $1.2 million, or $0.06 per share in the third quarter of 2017.
  • Cash flow from operating activities was $1.6 million (including a tax refund of $0.2 million related to the 2016 financial year).
  • Cash position was $15.6 million as of September 30, 2018.

 

Nine Months Financial Highlights
  • Revenues were $13.7 million, compared to $13.6 million in the first nine months of 2017.
  • Operating income was $3.9 million, or 28% of total revenues, compared to $3.6 million, or 26% of total revenues in the first nine months of 2017.
  • Net income was $3.7 million, or $0.19 per share, compared to $4.0 million, or $0.21 per share in the first nine months of 2017 (net income in the first nine months of 2017 includes a one-time net capital gain of $0.9 million).
  • Cash flow from operating activities in the first nine months of 2018 was $3.9 million.

 

As of September 30, 2018, we had 220 employees, compared with 248 as of September 30, 2017 and 216 as of June 30, 2018.

Monica Iancu, MIND CTI CEO, commented: “The environment remains the same as described in previous press releases. Communications service providers encounter major challenges, as running a network requires continuous investment while price pressure increases, and increased data traffic does not necessarily translate into increased profits. Communications service providers are expected to develop new services and offer multi-play discounted bundles and at the same time they attempt to reduce their costs as the revenue per subscriber declines. This has an effect on the markets that appear to be very active, necessitating extensive pre-sales effort. While we are encouraged by the momentary increased demand for our products and services, we encounter lower budget amounts and many processes are constantly delayed. We expect that future deals will be structured as SaaS, with low down payments for deployment services.”

 

Revenue Distribution for Q3 2018

Revenues in the Americas represented 75%, revenues in Europe represented 15% and revenues in the rest of the world represented 10% of our total revenues.

Revenues from customer care and billing software totaled $3.6 million, or 79% of total revenues, while revenues from enterprise call accounting software totaled $1.0 million, or 21% of our total revenues.

Revenues from licenses were $0.9 million, or 19% of total revenues, while revenues from maintenance and additional services were $3.7 million, or 81% of our total revenues.

 

Follow-on Orders

Similar to all previous quarters, our valued customers showed their appreciation for our technology and support. These valued customers continue to invest in order to grow their businesses and improve efficiencies, resulting in follow-on orders.

This quarter’s follow-on orders include customizations for new functionalities and additional professional services.

 

Fluctuation in Taxes

As previously mentioned, on a quarterly basis we incur fluctuation in taxes. Taxes include provisions for income taxes paid in our different locations at very different tax rates.

Also as previously mentioned, on February 18, 2018 the Company received a status of “Technologic Preferred Enterprise” starting 2017 and until 2021, the impact being that income taxable in Israel will be subject to a tax rate of 7.5% as long as this status is maintained.

One of the reasons for the fluctuation in taxes between quarters is that in the 2017 quarterly financial reports, the lower tax rate was not reflected, since the approval was received only in February 2018.

 

Update on Pursuit of Acquisitions

As we previously announced, given our strong cash position and our experienced organization, we believe that we have the required resources to respond to market needs and at the same time focus on targeting potential acquisitions that could benefit the company’s growth. Our active pursuit is focused on acquisition targets at reasonable valuations that satisfy the criteria we defined: proven revenues, complementary technology or geography and expected accretion to earnings within two to three quarters.

We made some progress with a small company that meets our criteria. We are still in the negotiations phase and we cannot estimate if this effort will bear fruit. We will update on the outcome together with the release of the full year 2018 financial results.

 

 

MIND C.T.I. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

  

Three Months Nine Months
Ended September 30, Ended September 30,
2018 2017 2018 2017
Unaudited
U.S. dollars in thousands (except per share data)
Revenues $ 4,580 $ 4,557 $ 13,677 $ 13,570
Cost of revenues 1,565 1,415 4,858 5,230
Gross profit 3,015 3,142 8,819 8,340
Research and development expenses 1,089 977 2,799 2,594
Selling and marketing expenses 290 348 1,015 944
General and administrative expenses 314 422 1,131 1,244
Operating income 1,322 1,395 3,874 3,558
Gain on disposal of a subsidiary 893
Financial income – net 161 116 145 563
Income before taxes on income 1,483 1,511 4,019 5,014
Taxes on income 111 270 325 976
Net income $ 1,372 $ 1,241 $ 3,694 $ 4,038
Earnings per share – basic and diluted $ 0.07 $ 0.06 $ 0.19 $ 0.21
Weighted average number of shares used in computation of earnings per share in thousands:
Basic 19,344 19,298 19,333 19,291
Diluted 19,348 19,312 19,617 19,521

 

 

MIND C.T.I. LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

September 30, December 31,
2018 2017
Unaudited Audited
U.S. dollars in thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents $ 1,907 $ 5,014
Short-term bank deposits 8,154 6,102
Marketable securities 4,900 5,878
Accounts receivable, net:
Trade 1,189 1,239
Other 488 843
Prepaid expenses 274 347
Deferred cost of revenues 178
Inventory 4 4
Total current assets 17,094 19,427
INVESTMENTS AND OTHER NON-CURRENT ASSETS:
Marketable securities – available-for-sale 523 544
Long-term bank deposits 98 101
Severance pay fund 1,446 1,642
Deferred income taxes 33 32
PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization 181 202
GOODWILL 5,430 5,430
Total assets $ 24,805 $ 27,378
Liabilities and shareholders’ equity
CURRENT LIABILITIES:
Accounts payable and accruals:
Trade $ 102 $ 113
Other 1,584 837
Deferred revenues 2,039 3,556
Total current liabilities 3,725 4,506
LONG-TERM LIABILITIES:
Deferred revenues 30 138
Employees’ rights upon retirement 1,530 1,712
Total liabilities 1,560 6,356
SHAREHOLDERS’ EQUITY:
Share capital 54 54
Additional paid-in capital 26,330 26,180
Accumulated other comprehensive loss (826 ) (804 )
Treasury shares (1,515 ) (1,554 )
Accumulated deficit (4,523 ) (2,854 )
Total shareholders’ equity 19,520 21,022
Total liabilities and shareholders’ equity $ 24,805 $ 27,378

 

MIND C.T.I. LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Three Months Nine Months
Ended September 30, Ended September 30,
2018 2017 2018 2017
Unaudited
U.S. dollars in thousands
Cash flows from operating activities:
Net income $ 1,372 $ 1,241 $ 3,694 $ 4,038
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 22 26 66 78
Accrued severance pay 81 39 74 (29 )
Deferred income taxes, net (1 )
Unrealized loss (gain) on marketable securities, net (2 ) 41 33 54
Employees share-based compensation expenses 50 47 151 135
Gain on disposal of a subsidiary (893 )
Changes in operating asset and liability items:
Decrease (increase) in accounts receivable:
Trade (165 ) 28 191 271
Other 212 (304 ) 341 (345 )
Decrease (increase) in prepaid expenses and deferred cost of
revenues
80 (12 ) (105 ) (192 )
Increase (decrease) in accounts payable and accruals:
Trade (48 ) 123 (11 ) 102
Other 227 463 747 164
Increase (decrease) in deferred revenues (259 ) 26 (1,331 ) (1,399 )
Net cash provided by operating activities 1,570 1,718 3,849 1,984
Cash flows from investing activities:
Purchase of property and equipment (11 ) (12 ) (45 ) (24 )
Severance pay funds (81 ) (37 ) (60 ) 54
Proceeds from sale of (investment in) marketable securities 256 198 944 (748 )
Proceeds from sale of marketable securities – available-for-sale 326
Investment in bank deposits (4,060 ) (2,756 ) (2035 ) (500 )
Proceeds from sale of subsidiary 1,169
Net cash used in investing activities (3,896 ) (2,607 ) (1,196 ) 277
Cash flows from financing activities:
Employee stock options exercised and paid 39 53
Dividend paid (5799 ) (6,173 )
Net cash used in financing activities (5,760 ) (6,120 )
Decrease in cash and cash equivalents (2,326 ) (889 ) (3,107 ) (3,859 )
Balance of cash and cash equivalents at beginning of
period
4,233 6,195 5,014 9,165
Balance of cash and cash equivalents at end of period $ 1,907 $ 5,306 $ 1,907 $ 5,306

 

 

 

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, SaaS, managed service or complete outsourced billing service) for Wireless, Wireline, Cable, IP Services and Quad-play carriers. 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