NEW YORK, March 31, 2016 /PRNewswire/ -- Elephant Talk Communications Corp. (NYSE MKT: ETAK) ("ET" or the "Company"), a provider of cloud-based mobile network solutions, today announced its financial results for the year ended December 31, 2015.
"2015 was an eventful and challenging year for Elephant Talk," commented Hal Turner, Executive Chairman of the Board of ET. "Since joining the Company in November 2015, we have undertaken a major restructuring of our Company and while elements of this transition are still in process, several areas of our business have been greatly improved, giving us confidence that 2016 will be better for all stakeholders. Moving swiftly, our team evaluated all aspects of our business and laid out a very detailed three-pronged strategy to improve our operating results, strengthen the financial condition and position the Company for profitable growth."
Operational and Financial Restructuring:
Since November 2015, the Company has undertaken a three pronged restructuring strategy;
- Phase I: Establish revenue baseline and 'right-size' the cost structure – With annualized fourth quarter 2015 revenue being approximately $13 million, operating expenses needed to be significantly curtailed. Every aspect of the business was evaluated, top to bottom. Every savings/reduction considered viable was taken, every employee was reviewed, every location was evaluated, every customer communicated with and every process was reviewed and improved. Phase I is essentially complete.
- Phase II: Reaffirm relationships with current customers and key partners including providing clarity regarding current and future products and services – The absolute highest priority for the Company is to preserve its existing customer relationships through this transition. Meetings with all customers have been held to keep them apprised of our commitment to their service needs. Phase II, while largely complete, is ongoing through the second quarter 2016.
- Phase III: Establish clear business plan targets and staff key positions with proven leaders. In addition to expecting these steps to yield higher revenues per employee, we will be targeting increased subscribers and SIM cards. The Company has initiated Phase III, but the full effects will become apparent during the later part of the second quarter 2016 and through third quarter 2016.
Results from Restructuring to Date:
- In November of 2015, the Company had 264 employees. Today, headcount has been reduced by 65 people to 199 employees. By the end of the second quarter of 2016, excluding ValidSoft, the Company anticipates having approximately 160 employees in ET reflecting a reduction in headcount of 104, or approximately 40 percent.
- At the end of third quarter 2015, revenue per employee was approximately $52.8 thousand.
- Projected for the end of the second quarter 2016 revenue per employee is expected to total approximately $89.6 thousand.
- On that basis we will have improved, in just six months, our revenue per employee ratio by 70 percent.
Operational Highlights:
- Existing customers have promotional plans in place for the balance of the year;
- Subscriber growth within underlying MVNO's are expected to increase, enabled by the Elephant Talk managed services pipeline;
- New sales opportunities are being evaluated, predominately within the existing customer base and pipeline;
- We have evaluated every line item in our P/L to ensure maximum cost efficiency;
- ET is evaluating its strategic alternatives for ValidSoft, which may include a potential divestiture of the business and is taking the necessary steps including, but not limited to, engaging a new investment bank.
Financial Highlights for the Period Ended December 31, 2015:
Revenue for the year ended December 31, 2015 totaled $31.0 million, an increase of $10.7 million or 52 percent, as compared with $20.4 million for the year ended December 31, 2014. This increase was a result of the accelerated recognition of deferred revenue triggered by the termination of the Iusacell contract in June 2015 of $11.6 million, increases in the Company's other mobile and security business revenue of $1.6 million, somewhat offset by a negative foreign currency impact of $2.5 million, primarily related to the change in the value of the U.S. dollar relative to the Euro. In 2015, total billings were $21.3 million of which $19.4 million was recognized as revenue with the remainder of $1.8 million deferred over the remaining contract period. In addition, $11.6 million was released from the balance sheet line item deferred revenue to revenue following the termination of the Iusacell contract. Total revenue for 2015 was therefore $31.0 million. In 2014, the total billings were $29 million and $20.4 million was recognized as revenue with the difference being accounted for within deferred revenues over remaining contract periods. The reduction of actual billings from $29 million in 2014 to $21.3 million in 2015 partially illustrates the impact of the termination of the contract with our Mexican customer, particularly as of the third quarter 2015.
Net loss for the twelve months period ended December 31, 2015, was $5.0 million, a decrease of $16.9 million or 77 percent, compared with the loss of $21.9 million for the same period in 2014. This improvement was mainly caused by the full release of deferred revenue of $11.6 million related to the termination of the contract with Iusacell.
Commenting on the outlook for 2016 and in particular the status of the restructuring, Mr. Turner remarked, "We are cognizant that fourth quarter 2015 annualized revenues of $13.1 million is more reflective of the size of current operations. Taking action to reduce headcount and facilities is never easy but these expenses needed to be realigned with reality in order to sustain the Company. Based primarily on the reduction in headcount, which is substantially complete, we are reaffirming our intent to achieve EBITDA breakeven, during the second quarter 2016. The delay in the sale of ValidSoft has impacted the timing to a degree, but we continue to pursue the monetization of this asset with confidence that it will provide the necessary cash infusion to strengthen our balance sheet and position us for sustainable growth."
Please refer to the Company's Form 10-K filed with the Securities and Exchange Commission for further details.
Conference Call Information: | |
Date: | Thursday, March 31, 2016 |
Time: | 11:00 a.m. ET |
Domestic Dial-in Number: | (888) 468-2440 |
International Dial-in Number: | (719) 325-2484 |
Live webcast: |
All interested participants should dial in approximately 5 to 10 minutes prior to the 11:00 a.m. ET conference call and an operator will register your name and organization.
About Elephant Talk Communications Corp.:
Elephant Talk Communications Corp. (NYSE MKT: ETAK) has developed a proprietary software and telecoms platform to provide cloud-based mobile network solutions to Communications Services Providers (MNOs, MVNOs), Enterprise, Government/Education Organizations, Application/Content and Retail Providers.
Elephant Talk was founded by experienced software and telecom professionals to commercialize its pure software-based telecom platform (long before Software Defined Networks (SDN) and network function virtualization (NFV) were recognized concepts). The Company deployed its first virtual network (MVNO) platform for a major mobile carrier in 2008. Elephant Talk's turnkey mobile services platform is capable of supporting millions of subscribers. The new Executive Management team enhances the Company with a wealth of experience in the telecoms, software and technology sectors and has a proven track record in achieving rapid, financial and commercial growth. Please visit www.elephanttalk.com for more information.
About ValidSoft UK Ltd.:
ValidSoft, a subsidiary of Elephant Talk Communications Corp., secures transactions using personal authentication and device assurance. We enable our customers to enhance their security while improving their user experience, utilizing our multi-factor authentication platform, Voice Biometric engine and Device Trust technology, all of which may be used as 'stand-alone' or integrated into multi-vendor solutions. ValidSoft serves multiple clients across the financial services, government and enterprise sectors and is the only company to have been granted four European Privacy Seals, reflecting its commitment to strong data privacy. Visit: www.validsoft.com.
Forward-Looking Statements:
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements with respect to Elephant Talk's plans and objectives, projections, expectations and intentions (including, without limitation, Elephant Talk's plans in regard to its ValidSoft subsidiary). These forward-looking statements are based on current expectations, estimates and projections about Elephant Talk's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of Elephant Talk may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, Elephant Talk also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from those projected or suggested in Elephant Talk's filings with the Securities and Exchange Commission, copies of which are available from the SEC or may be obtained upon request from Elephant Talk.
Investor Contact:
Capital Markets Group, LLC
Alan Sheinwald or Valter Pinto
PH: (914) 669-0222
valter@capmarketsgroup.com
www.CapMarketsGroup.com
ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
AS AT DECEMBER 31, 2015 AND 2014 | ||||||||
December 31, | December 31, | |||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 369,250 | $ | 1,904,160 | ||||
Financing receivable | 272,425 | 2,000,000 | ||||||
Restricted cash | 246,151 | 312,935 | ||||||
Accounts receivable, net of an allowance for doubtful accounts of $269,608 at December 31, 2015 | 1,112,032 | 8,877,213 | ||||||
Prepaid expenses and other current assets | 2,016,236 | 2,478,681 | ||||||
Total current assets | 4,016,094 | 15,572,989 | ||||||
NON-CURRENT ASSETS | ||||||||
OTHER ASSETS | 473,893 | 917,457 | ||||||
PROPERTY AND EQUIPMENT, NET | 13,051,375 | 17,351,626 | ||||||
INTANGIBLE ASSETS, NET | 258,630 | 704,667 | ||||||
ASSETS HELD FOR SALE | 4,564,972 | 6,339,117 | ||||||
GOODWILL | 3,027,422 | 3,352,264 | ||||||
TOTAL ASSETS | $ | 25,392,386 | $ | 44,238,120 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Overdraft | $ | - | $ | 433,366 | ||||
Accounts payable and customer deposits | 2,639,863 | 1,856,014 | ||||||
Obligations under capital leases (current portion) | 310,403 | 1,831,050 | ||||||
Deferred Revenue | 1,259,545 | 8,813,385 | ||||||
Accrued expenses and other payables | 5,031,712 | 4,061,652 | ||||||
Loans payable | - | 962,269 | ||||||
2014 10% + libor 3rd Party Loan (net of Debt Discount and Debt Issuance) | 5,580,277 | 10,518,228 | ||||||
Total current liabilities | 14,821,800 | 28,475,964 | ||||||
LONG TERM LIABILITIES | ||||||||
2014 10% + libor 3rd Party Loan (net of OID of $660,467 at September 30, 2015) | - | - | ||||||
Derivative liabilities | 945,618 | 2,087,992 | ||||||
Non-current portion of obligation under capital leases | 5,621 | 272,460 | ||||||
Other long term liabilities | 260,290 | 354,880 | ||||||
9% Unsecured Subordinated Convertible Promissory Note (net of Debt Discount and Debt Issuance) | 238,829 | - | ||||||
Non-current portion of deferred revenue | 1,066,687 | 2,434,257 | ||||||
Total long term liabilities | 2,517,045 | 5,149,589 | ||||||
Total liabilities | 17,338,845 | 33,625,553 | ||||||
Commitments and Contingencies (See Notes) | - | - | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred Stock $0.00001 par value, 50,000,000 shares authorized, 0 issued and outstanding | - | - | ||||||
Common Stock $0.00001 par value, 250,000,000 shares authorized, 161,376,387 issued and outstanding as of December 31, 2015 and 154,671,258 shares issued and outstanding as of December 31, 2014 | 269,470,165 | 264,359,674 | ||||||
Accumulated other comprehensive loss | (5,789,975) | (3,127,132) | ||||||
Accumulated deficit | (255,635,531) | (250,629,296) | ||||||
Elephant Talk Communications, Corp. stockholders' equity | 8,044,659 | 10,603,246 | ||||||
NON-CONTROLLING INTEREST | 8,882 | 9,321 | ||||||
Total stockholders' equity | 8,053,541 | 10,612,567 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 25,392,386 | $ | 44,238,120 | ||||
ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||||||||
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 | ||||||||
2015 | 2014 | |||||||
REVENUES | $ | 31,015,453 | $ | 20,356,447 | ||||
COST AND OPERATING EXPENSES | ||||||||
Cost of service (excluding depreciation and amortization) | 5,926,291 | 6,688,674 | ||||||
Product development | 4,543,492 | 7,228,663 | ||||||
Sales and marketing | 2,633,958 | 2,393,676 | ||||||
General and administrative | 12,904,512 | 12,602,601 | ||||||
Depreciation and amortization of intangibles assets | 6,623,985 | 8,220,219 | ||||||
Impairment for assets held and used | 2,681,407 | - | ||||||
Total cost and operating expenses | 35,313,645 | 37,133,833 | ||||||
LOSS FROM OPERATIONS | (4,298,192) | (16,777,386) | ||||||
OTHER INCOME (EXPENSE) | ||||||||
Interest income | 106,028 | 127,793 | ||||||
Interest expense | (1,488,203) | (1,240,590) | ||||||
Interest expense related to debt discount and conversion feature | (682,389) | (3,935,839) | ||||||
Gain (loss) on changes in fair value of derivative liabilities | 299,948 | (114,458) | ||||||
Gain on Extinguishment of Debt | 2,475,799 | 626,108 | ||||||
Other income & (expense), net | (922,894) | 176,981 | ||||||
Amortization of debt issuance costs | (513,557) | (507,595) | ||||||
Total other income (expense) | (725,268) | (4,867,600) | ||||||
LOSS BEFORE PROVISION FOR INCOME TAXES | (5,023,460) | (21,644,986) | ||||||
(Benefit) / provision for income taxes | (17,225) | 216,931 | ||||||
NET LOSS | (5,006,235) | (21,861,917) | ||||||
OTHER COMPREHENSIVE LOSS | ||||||||
Foreign currency translation loss | (2,662,843) | (3,397,001) | ||||||
COMPREHENSIVE LOSS | $ | (7,669,078) | $ | (25,258,918) | ||||
Net loss per common share and equivalents - basic | $ | (0.03) | $ | (0.15) | ||||
Net loss per common share and equivalents - diluted | $ | (0.03) | $ | (0.15) | ||||
Weighted average shares outstanding during the period - basic | 158,202,074 | 147,700,233 | ||||||
Weighted average shares outstanding during the period - diluted | 158,202,074 | 147,700,233 | ||||||
ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 | ||||||||
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Loss | $ | (5,006,235) | $ | (21,861,917) | ||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 6,623,985 | 8,220,219 | ||||||
Provision for doubtful accounts | 269,608 | 17,410 | ||||||
Stock based compensation | 3,481,908 | 3,888,275 | ||||||
Change in fair value of derivative liabilities | (299,948) | 114,458 | ||||||
Amortization of deferred financing costs | 513,557 | 507,595 | ||||||
Interest expense relating to debt discount and conversion feature | 682,389 | 3,935,839 | ||||||
Unrealized foreign currency translation gain loss | 922,894 | (176,981) | ||||||
(Gain) on Extinguishment of Debt | (2,475,799) | (626,108) | ||||||
Impairment for assets held and used | 2,681,407 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Decrease (increase) in accounts receivable | 6,566,499 | (4,464,754) | ||||||
Decrease (increase) in prepaid expenses, deposits and other assets | 759,275 | (94,528) | ||||||
Increase (decrease) in accounts payable and customer deposits | 2,627,745 | (565,040) | ||||||
Increase (decrease) in deferred revenue | (9,753,225) | 8,623,960 | ||||||
Increase (decrease) in accrued expenses and other payables | 1,385,775 | 378,637 | ||||||
Net cash provided by (used in) operating activities | 8,979,835 | (2,102,935) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (7,709,972) | (7,851,460) | ||||||
Cash paid for 100% acquisition of subsidiary | - | (36,465) | ||||||
Loan to third party | - | (100,000) | ||||||
Net cash used in investing activities | (7,709,972) | (7,987,925) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from November 2014 10% + libor 3rd Party Loan, net of OID | - | 11,620,000 | ||||||
(Repayments)/Proceeds from 10% 3rd Party Loan | - | (2,492,400) | ||||||
Financing receivable | 1,645,000 | (2,000,000) | ||||||
Exercise of warrants & options | 5,861 | 4,462,885 | ||||||
Equity and Debt issuance costs paid | (532,558) | (815,437) | ||||||
Principal payment on 2014 10% + libor 3rd Part Loan | (5,500,000) | - | ||||||
Proceeds from 9% Unsecured Subordinated Convertible Promissory Note | 1,275,000 | - | ||||||
Net cash (used in) provided by financing activities | (3,106,697) | 10,775,048 | ||||||
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 301,924 | (32,343) | ||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (1,534,910) | 651,845 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 1,904,160 | 1,252,315 | ||||||
CASH AND CASH EQUIVALENTS, END OF THE PERIOD | $ | 369,250 | $ | 1,904,160 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for interest | $ | 1,136,021 | $ | 954,123 | ||||
Increase in Share Capital due to Telnicity Acquisition | 14,771 | - | ||||||
Increase in Share Capital for third party settlement | - | 271,350 | ||||||
Cash paid during the period for income taxes | - | 56,881 | ||||||
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SOURCE Elephant Talk Communications Corp.
