Highest-Ever Non-GAAP Adjusted Operating Income, Net Income &
Adjusted EBITDA (1) PETACH TIKVA, Israel, August 14
/PRNewswire-FirstCall/ -- Internet Gold, (NASDAQ:IGLD)(TASE:IGLD)
today reported its financial results for the second quarter and six
months ended June 30, 2007. Major Events of the Second Quarter -
Rising profitability due to synergies of merger with 012 Golden
Lines - Continued ARPU stability in a consolidated marketplace -
Launch of VOB services and entry into $1B domestic telephony market
- Highest-Ever Non-GAAP Adjusted Operating Income of NIS 42M and
adjusted EBITDA of NIS 65M. - Continued growth in e-Advertising
activity - Transition process of P1000 e-Commerce site to new
Commerce Server platform and weakness of the dollar together
reduced revenues by approximately NIS 6M Results for the Second
Quarter Revenues for the second quarter of 2007 were NIS 296.3
million (US $69.7 million), an increase of 209% compared with NIS
95.8 million for the second quarter of 2006. On a pro-forma basis,
this represented an increase of 12% compared with the second
quarter of 2006. Note: pro-forma results are provided to assist the
reader in comparing Internet Gold's 2007 results, which include the
full contribution of its merger with 012 Golden Lines, with 2006
results, which were before the merger. Pro-forma results combine
012 Golden Lines' results for the second quarter of 2006 with
Internet Gold's results for the same period. Revenues for the
quarter were impacted by two factors: the temporary intermediate
closures of the Company's P1000 e-Commerce site during its platform
upgrade, resulting in lost revenues of approximately NIS 2.5
million; and the weakness of the dollar compared with the shekel
during April and May, which reduced revenues as expressed in
shekels by approximately NIS 3.5 million. Operating income for the
quarter increased by 163% to a record NIS 30.3 million (US $7.1
million) compared with NIS 11.5 million for the second quarter of
2006. Operating margin for the period on a GAAP basis was 10%,
while on a non-GAAP basis it was 14%, and reached NIS 42 million.
The difference between GAAP and non-GAAP operating income relates
amortization of NIS 10.3 million (US $2.4 million) with regard to
the intangible assets acquired as part of the acquisition of 012
Golden Lines and non-recurring expenses of NIS 1.5 million (US$
0.35 million), relating to charges incurred in connection with the
merger of Smile.Communications and 012 Golden Lines. Net income for
the second quarter of 2007 increased by 233% to a record NIS 22.5
million (US $5.3 million), or NIS 1.06 (US$ 0.25) per share,
compared with NIS 6.8 million, or NIS 0.37 per share, for the
second quarter of 2006. Impacting net income were non-recurring
operating expenses of NIS 1.5 million (US$ 0.35 million), relating
to charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines. In addition, net income
also includes an income tax benefit of NIS 6.5 million (US $1.5
million), which is primarily attributable to the tax benefit
associated with Smile.Communications' tax loss carry forward.
Adjusted EBITDA (1) for the quarter reached NIS 65 million (US
$15.3 million), an increase of 19% compared with the second quarter
of 2006 adjusted pro-forma EBITDA (1). Comments of Management
Commenting on the results, Eli Holtzman, Internet Gold's CEO, said,
"We are pleased to report that the progress on our merger plan
continues to be on-track, and we are now entering its final stage.
The synergies that we have achieved to date have already increased
our profitability to a record level; however, we expect to realize
the full effect of the merger's synergies towards early 2008. As we
move beyond the merger, our focus will be to continue building our
share of our growing communications and media markets." Overview of
the Company's Activities By Subsidiary 012 Smile.Communications
Ltd.: Revenues for the second quarter of 2007 increased by 250%
compared with Q2 2006, reaching NIS 277.3 million (US $65.3
million). However, revenues were negatively impacted by the
weakness of the dollar as compared to the shekel during April and
May, which reduced the subsidiary's sales as expressed in shekel
terms by approximately NIS 3.5 million. Non-GAAP adjusted operating
income for the second quarter reached NIS 40.3 million (US $9.5
million) and adjusted EBITDA reached NIS 62 million (US $14.6
million). Commenting on the results, Ms. Stella Handler, CEO of 012
Smile.Communications, said, "We are pleased to report another solid
quarter marked by record profits, rising profitability and a
stronger-than-ever platform for our future growth. The merger has
taken our revenues and profitability to a new level, while also
leveraging our launch of local telephony - VOB (Voice Over
Broadband). This has positioned us as a growth-oriented
communications group that is well-positioned to identify, lead and
benefit from long-term market trends, particularly the
stabilization of ARPUs (Average Revenues Per User) and the steady
growth of data and voice service outlays. The goal of our work plan
is to take full advantage of each of these innovative services to
drive significant future growth." ISP (Internet Access Services):
the Company continues to benefit from the consolidated market's
stable ARPUs and a steadily rising broadband customer base. - VOB
(Voice Over Broadband Domestic Telephony Services): during the
quarter, the Company became the first ISP to launch domestic VOB
services. As a result of a legal claim made by one of its
competitors against the Ministry of Communications, after the end
of the quarter, on July 8, 2007, the Company was ordered by the
Supreme Court to temporarily discontinue its mass-media advertising
campaigns for its VOB service until a final ruling is made. As
such, the Company is now limited its VOB marketing to its existing
customer base through direct channels. The company is on track with
its original VOB work plan in regards to number of new subscribers
acquired - ILD (International Long Distance Services): the merger
of 012 Golden Lines and Smile.Communications has enabled the
consolidation of 012- and 015-branded services, contributing
significantly to the Company's profitability. Smile.Media Ltd.:
Revenues for the second quarter of 2007 were NIS 19.6 million (US
$4.6 million) reflecting the temporary and intermittent closures of
the Company's P1000 e-Commerce site that occurred during its
platform upgrade, resulting in lost revenues of approximately NIS
2.5 million. Operating margin for the period was 15%, while EBITDA
(1) margin was 21%. Mr. Holtzman concluded, "We continue to benefit
from a significant ramp-up of Internet media budgets, a trend which
we believe has the power to become a significant driver of our
growth over the long-term. We believe the strong and diversified
portfolio of Internet properties that we have built over the past
few years is positioning us to take full advantage of the online
advertising market's accelerating momentum." Internet Gold - Golden
Lines Ltd.: In addition to the activities of Smile.Communications
and Smile.Media, the Company incurred operating expenses of
approximately NIS 1.2 million (US 0.3 million) for the quarter.
These expenses were primarily for the development of new joint
ventures, and for activities related to the Company's listing on
public securities exchanges, including expenses such as: Investor
Relations, Sarbanes Oxley compliance, insurance and legal expenses.
Results for the First Half Revenues for the first half of 2007 were
NIS 592.6 million (US$ 139.5 million), an increase of 214% compared
with NIS 188.7 million recorded in the first half of 2006. On a
pro-forma basis, this represented an increase of 14%. Operating
income for the first half of 2007 increased by 199% to a record NIS
63.4 million (US $14.9 million) compared with NIS 21.2 million for
the first half of 2006. Operating margin for the period on a GAAP
basis was 11%, while on a non-GAAP basis it was 14%, and reached
NIS 81.3 million. The difference between GAAP and non-GAAP
operating income relates amortization of NIS 16 million (US $3.8
million) with regard to the intangible assets acquired as part of
the acquisition of 012 Golden Lines and non-recurring expenses of
NIS 1.9 million (US$ 0.45 million), relating to charges incurred in
connection with the merger of Smile.Communications and 012 Golden
Lines. Net income for the first half of 2007 increased by 206% to a
record NIS 41 million (US $9.6 million), or NIS 2 (US$ 0.47) per
share, compared with NIS 13.4 million, or NIS 0.73 per share, for
the first half of 2006. Impacting net income were non-recurring
operating expenses of NIS 1.9 million (US$ 0.45 million), relating
to charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines. In addition, Net income
also includes net income tax incurred during the first half of NIS
3 million (US $0.7 million) including the tax benefit associated
with Smile.Communications' tax loss carry forward. Increase in
Number of IGLD Shares Outstanding: In April 2005, Internet Gold
completed an offering in Israel of NIS 220 million of convertible
bonds that were scheduled to be repaid during the period April 2008
through April 2015 and warrants to purchase 2.5 million ordinary
shares that are exercisable until October 15, 2007. The bonds are
convertible into ordinary shares at a conversion price of NIS 40
($9.41) per share until March 2008, at which time the conversion
price will increase to NIS 50 ($11.80). The exercise price of the
warrants is currently NIS 41.5 ($9.80), which price is linked to
Israeli Consumer Price Index. Beginning in the fourth quarter of
2006 holders of the bonds and warrants began to convert their bonds
and exercise the warrants. As at June 30, 2007, bond and warrant
holders had converted NIS 93.5 million ($22.0 million) of the bonds
into 2,338,415 ordinary shares and exercised 1,095,009 warrants.
Subsequent to Jun 30, 2007 and through August 5, 2007, bond holders
had converted an additional NIS 10.1 million ($2.4 million) of the
bonds into 252,026 ordinary shares and warrants to purchase an
additional 62,248 ordinary shares had been exercised, with the
Company receiving NIS 2.6 million ($0.6 million) in proceeds from
the exercise of the warrants. Reconciliation Between Results on a
GAAP and Non-GAAP Basis Reconciliation between the Company's
results on a GAAP and non-GAAP basis is provided in a table
immediately following the Consolidated Statement of Operations
(Non-GAAP Basis). Non-GAAP financial measures consist of GAAP
financial measures adjusted to exclude amortization of acquired
intangible assets, as well as certain business combination
accounting entries. The purpose of such adjustments is to give an
indication of our performance exclusive of non-cash charges and
other items that are considered by management to be outside of our
core operating results. Our non-GAAP financial measures are not
meant to be considered in isolation or as a substitute for
comparable GAAP measures, and should be read only in conjunction
with our consolidated financial statements prepared in accordance
with GAAP. Our management regularly uses our supplemental non-GAAP
financial measures internally to understand, manage and evaluate
our business and make operating decisions. These non-GAAP measures
are among the primary factors management uses in planning for and
forecasting future periods. We believe these non-GAAP financial
measures provide consistent and comparable measures to help
investors understand our current and future operating cash flow
performance. These non-GAAP financial measures may differ
materially from the non-GAAP financial measures used by other
companies. Reconciliation between results on a GAAP and non-GAAP
basis is provided in a table immediately following the Consolidated
Statement of Operations. Purchase Price Allocation Final
determination of the purchase price allocation of certain
intangible assets acquired as part of the acquisition of 012 Golden
Lines is not yet complete, and is subject to revision. Any
revisions made to the current calculation will change the amount of
the purchase price allocable to goodwill. We are still evaluating
the amortization method to be utilized with regard to the
intangible assets acquired. In the interim, the Company recorded
NIS 16 million (US $3.8 million) in amortization costs in the first
half of year 2007, reflecting a conservative amortization according
to the economic benefit expected from those intangible assets. (1)
EBITDA is a non-GAAP financial measure generally defined as
earnings before interest, taxes, depreciation and amortization. We
define adjusted EBITDA as net income before financial income
(expenses), net, impairment and other charges, income tax expenses,
depreciation and amortization. On a pro forma basis, we define
adjusted EBITDA as net income before financial income (expenses),
net, impairment and other charges, income tax expenses,
depreciation and amortization and income from discontinued
operations. We present adjusted EBITDA as a supplemental
performance measure because we believe that it facilitates
operating performance comparisons from period to period and company
to company by backing out potential differences caused by
variations in capital structure (most particularly affecting our
interest expense given our recently incurred significant debt), tax
positions (such as the impact on periods or companies of changes in
effective tax rates or net operating losses or, most recently, our
provision for tax expenses) and the age of, and depreciation
expenses associated with, fixed assets (affecting relative
depreciation expense). Adjusted EBITDA should not be considered in
isolation or as a substitute for net income or other statement of
operations or cash flow data prepared in accordance with GAAP as a
measure of our profitability or liquidity. Adjusted EBITDA does not
take into account our debt service requirements and other
commitments, including capital expenditures, and, accordingly, is
not necessarily indicative of amounts that may be available for
discretionary uses. In addition, adjusted EBITDA, as presented in
this prospectus, may not be comparable to similarly titled measures
reported by other companies due to differences in the way that
these measures are calculated. Our use of adjusted EBITDA is
detailed more fully in "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Non-GAAP Financial
Measures" and reflects our belief that the non-GAAP financial
information is important for the understanding of our operations.
We define non-GAAP adjusted EBIT (earnings before interest and
taxes) as net income before interest and taxes net amortization
with regard to the intangible assets acquired as part of the
acquisition of 012 Golden Lines and non-recurring expenses relating
to charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines. About Internet Gold
Internet Gold is one of Israel's leading communications groups with
a major presence across all Internet-related sectors. Its 012
Smile.Communications 100% owned subsidiary is one of Israel's major
Internet and International Telephony service providers, and one of
its largest providers of enterprise/IT integration services. Its
100% owned Smile.Media subsidiary manages a growing portfolio of
Internet portals and e-Commerce sites. Internet Gold is part of the
Eurocom Communications Group and its shares trade on the Nasdaq
Global Market and on the Tel Aviv Stock Exchange. For additional
information about Internet Gold, please visit its investors' site
at http://www.igld.com/. Certain statements made herein that use
the words "estimate," "project," "intend," "expect," "believe" and
similar expressions are intended to identify forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve known
and unknown risks and uncertainties which could cause the actual
results, performance or achievements of the Company to be
materially different from those which may be expressed or implied
by such statements, including, among others, changes in general
economic and business conditions and specifically, decline in
demand for the Company's services, inability to timely develop and
introduce new technologies, services and applications and loss of
market share and pressure on prices resulting from competition. For
additional information regarding these and other risks and
uncertainties associated with the Company's business, reference is
made to the Company's Annual Report filed with the Securities and
Exchange Commission and its other reports as filed from time to
time with the Securities and Exchange Commission. NOTE A:
Convenience Translation to Dollars For the convenience of the
reader, the reported NIS figures of June 30, 2007 have been
presented in thousands of U.S. dollars, translated at the
representative rate of exchange as of June 30, 2007 (NIS 4.2490 =
U.S. Dollar 1.00). The U.S. Dollar ($) amounts presented should not
be construed as representing amounts receivable or payable in U.S.
Dollars or convertible into U.S. Dollars, unless otherwise
indicated. Consolidated Balance Sheets Convenience translation into
US Dollars NIS 4.249=US$1 June 30 June 30 December 31 June 30 2007
2006 2006 2007 (Unaudited) (Unaudited) (Audited) (Unaudited) New
Israeli Shekels US$ thousands - in thousands Current assets Cash
and cash equivalents 96,477 257,512 320,479 22,706 Short-term
investment 418 1,264 883 98 Trade receivables, net 244,016 76,786
220,734 57,429 Other receivables 31,813 15,867 26,489 7,487
Deferred taxes 2,199 742 2,393 518 Total current assets 374,923
352,171 570,978 88,238 Long-term trade receivables 1,800 - 2,951
424 Investments in investee companies 579 406 552 136 Deferred
taxes 192 148 157 45 2,571 554 3,660 605 Property and equipment,
net 161,254 35,855 159,692 37,951 Goodwill, other assets and
deferred charges 945,187 110,021 949,267 222,449 Total assets
1,483,935 498,601 1,683,597 349,243 Internet Gold - Golden Lines
Ltd. Consolidated Balance Sheets Convenience translation into US
Dollars NIS 4.249=US$1 June 30 June 30 December 31 June 30 2007
2006 2006 2007 (Unaudited) (Unaudited) (Audited) (Unaudited) New
Israeli Shekels US$ thousands - in thousands Liabilities and other
obligations Short-term bank loans 189,949 13,067 372,039 44,704
Accounts payable 229,725 55,841 204,641 54,066 Other payables
60,911 22,262 630,845 14,335 Current maturities from convertible
debentures 16,278 - 3,831 Debentures 433,115 - - 101,933
Convertible debentures 102,382 206,969 198,998 24,096 Long-term
loans and other long-term obligations 51,452 22,236 20,386 12,109
Liability for termination of employer- employee relations, net
13,987 7,229 14,844 3,292 Deferred taxes 26,529 - 51,512 6,244
Total liabilities 1,124,328 327,604 1,493,265 264,610 Minority
interest - - 89 - Shareholders' equity 359,607 170,997 190,243
84,633 Total liabilities and shareholders' equity 1,483,935 498,601
1,683,597 349,243 Internet Gold - Golden Lines Ltd. Consolidated
Statements of Operations Six-month period ended Three-month period
ended June 30 June 30 2007 2006 2007 2006 (Unaudited) (Unaudited)
(Unaudited) (Unaudited) NIS thousands (except per share data)
Revenues 592,562 188,694 296,310 95,849 Costs and expenses: Cost of
revenues 406,612 114,023 202,501 56,921 Selling and marketing
expenses 88,415 36,837 45,624 19,052 General and administrative
expenses 32,229 16,623 16,446 8,329 Non - recurring expenses 1,905
- 1,445 - Total costs and expenses 529,161 167,483 266,016 84,302
Income from operations 63,401 21,211 30,294 11,547 Financing
expenses, net 25,425 6,814 14,273 4,255 Other income, net - (33) -
(10) Net income after financing expenses 37,976 14,430 16,021 7,302
Tax expenses (benefit) (2,981) 803 (6,501) 205 Income after tax
40,957 13,627 22,522 7,097 Company's share in net loss of
unconsolidated investee 1 240 - 240 Minority interest in operations
of consolidated subsidiaries (26) - 18 95 Net income 40,982 13,387
22,504 6,762 Earnings per share -basic Net income per share 2.0
0.73 1.06 0.37 Weighted average number of shares used in the
calculation (in thousands) 20,463 18,432 21,178 18,432 Earnings per
share - diluted Net income per share 1.92 0.73 1.06 0.37 Weighted
average number of shares used in the calculation (in thousands)
24,064 18,432 24,765 18,432 Convenience translation into US Dollars
NIS 4.249=US$1 Six month Year ended period ended December 31 June
30 2006 2007 (Audited) (Unaudited) US$ thousands Revenues 408,359
139,459 Costs and expenses: Cost of revenues 252,413 95,696 Selling
and marketing expenses 75,576 20,808 General and administrative
33,957 7,585 expenses Non - recurring 12,813 448 expenses Total
costs and 374,759 124,537 expenses Income from 33,600 14,922
operations Financing 5,615 5,984 expenses, net Other income, net -
- Net income after financing expenses 27,985 8,938 Tax expenses
1,286 (702) (benefit) Income after tax 26,699 9,640 Company's share
in net loss of unconsolidated investee 334 - Minority interest in
operations of consolidated subsidiaries 34 (6) Net income 26,331
9,646 Earnings per share -basic Net income per 1.43 0.47 share
Weighted average number of shares used in the calculation (in
18,438 20,463 thousands) Earnings per share - diluted Net income
per 1.43 0.45 share Weighted average number of shares used in the
calculation (in 18,438 24,064 thousands) Internet Gold - Golden
Lines Ltd. Reconciliation Table Of Non-Gaap Measures (NIS In
thousands) Six Months Period Three Months Ended June 30, Period
Ended June 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) GAAP
operating income 63,401 21,211 30,294 11,547 Adjustments
Amortization of acquired intangible assets 15,969 10,264
Non-recurring expenses 1,905 - 1,445 - Non-GAAP adjusted operating
income 81,275 21,211 42,003 11,547 GAAP tax expenses (benefit), net
(2,981) 803 (6,501) 205 Adjustments Amortization of acquired
intangible assets Included In tax expenses, net 4,631 - 2,976 -
Non-GAAP tax expenses (benefit), net 1,650 803 (3,525) 205 Net
Income As Reported 40,982 13,387 22,504 6,762 Minority Interest In
Operations Of Consolidated Subsidiaries (26) - 18 95 Company's
Share In Net Income (Loss) Of Investees 1 240 - 240 Taxes On Income
(2,981) 803 (6,501) 205 Other income, net (33) - (10) Non-recurring
Expenses 1,905 - 1,445 - Financial Expenses 25,425 6,814 14,273
4,255 Depreciation & Amortization 62,756 12,727 33,250 6,300
Adjusted EBITDA 128,062 33,938 64,989 17,847 For further
information, please contact: Lee Roth - KCSA Worldwide Tel:
+1-212-896-1209 Mor Dagan - Investor Relations Tel:+972-3-516-7620
Ms. Idit Azulay, Internet Gold Tel: +972-3-939-9848 DATASOURCE:
Internet Gold CONTACT: For further information, please contact: Lee
Roth - KCSA Worldwide, , Tel: +1-212-896-1209; Mor Dagan - Investor
Relations, , Tel:+972-3-516-7620; Ms. Idit Azulay, Internet Gold, ,
Tel: +972-3-939-9848
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