2007 Results: Revenues Reach NIS 1.2 Billion , 21% Adjusted EBITDA,
14% Non-GAAP EBIT PETACH TIKVA, Israel, February 26
/PRNewswire-FirstCall/ -- Internet Gold Golden Lines Ltd., (NASDAQ
NMS and TASE: IGLD) today reported its financial results for the
fourth quarter and full year ended December 31, 2007. Highlights -
Continued revenue growth and significant improvement in
profitability: for the quarter, revenues were NIS 286 million
($74.4 million), adjusted EBITDA margin was 21%, non-GAAP EBIT
margin was 14%, and net income was a record NIS 108 million ($28.1
million) - Balance sheet strength: cash, cash equivalents and short
term investments as of the end of the year increased to NIS 763
million ($198 million). Shareholders' Equity increased by 183%. -
$30 million capital gain: the IPO of 012 Smile.Communications gave
IGLD a NIS 115 million ($30 million) capital gain, improving its
capital structure - Cash flow strength: operating cash flow for the
year reaches ~NIS 225 million ($59 million) - 012
Smile.Communications growing in line with plan: Q4 revenues from
core broadband businesses up by 14%; 33% gross margin; 23% adjusted
EBITDA margin Financial Results for the Fourth Quarter Revenues for
the fourth quarter of 2007 were NIS 286.0 million ($74.4 million),
a 147% increase compared with NIS 115.8 million for the fourth
quarter of 2006, and a 4% decrease compared with pro-forma sales of
the fourth quarter of 2006. Excluding wholesale international
traffic revenues, which declined significantly in 2007 due to
Management's decision to reduce its emphasis on this low margin
business, the Company's revenues for the quarter increased by 8.1%.
Note: pro-forma results are provided to assist the reader in
comparing Internet Gold's 2007 results, which include the full
contribution of the merger as of January 1, 2007 of
Smile.Communications with 012 Golden Lines, with 2006 results which
do not include the results of 012 Golden Lines. Pro-forma results
combine 012 Golden Lines' results for 2006 with Internet Gold's
results for the same period. Net income for the fourth quarter of
2007 increased to NIS 108 million ($28.1 million), or NIS 4.63
($1.20) per share, compared with NIS 6.0 million, or NIS 0.33 per
share, for the fourth quarter of 2006. The increase was due to a
one-time capital gain of NIS 115 million ($30 million) related to
the IPO of the Company's subsidiary, 012 Smile.Communications,
mitigated partially by tax expense of NIS 16 million ($4.2 million)
related primarily to former year tax liabilities of 012
Smile.Communications. Adjusted EBITDA (b) for the quarter reached
NIS 60.4 million ($15.7 million), an 8% increase compared with the
adjusted pro-forma EBITDA(b) of the fourth quarter of 2006.
Financial Results for 2007 Revenues for the twelve months ended
December 31, 2007 were NIS 1,177.0 million ($306.0 million), an
increase of 188% compared with NIS 408.0 million in 2006. On a
pro-forma basis, 2007 revenues increased by 6.6% compared with NIS
1,104.0 million in 2006. Net income for 2007 increased to NIS 158
million ($41.1 million), or NIS 7.33 ($1.91) per share, compared
with NIS 26.3 million, or NIS 1.43 per share, for 2006. Net income
included a one-time capital gain of NIS 115 million ($30 million)
related to the IPO of 012 Smile.Communications, and non-recurring
operating expenses of NIS 10.4 million ($2.7 million) related to
charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines. Adjusted EBITDA(b) for
the year reached NIS 246 million ($64.0 million), a 15% increase
compared with the adjusted pro-forma EBITDA(b) for 2006. For a
detailed reconciliation of GAAP to non-GAAP financial information
and for more information regarding the use of non-GAAP financial
measures, please see the table titled "Reconciliation between GAAP
and non-GAAP Statements of Operations" as well as the notes
contained in this press release. Balance Sheet The Company's cash,
cash equivalents and short term investments as of December 31, 2007
were NIS 763 million ($198 million), an increase of 138% compared
with NIS 321 million at the end of 2006. In addition, Internet
Gold's bank debt decreased by 75% during the year, from NIS 381
million at the end of 2006 to NIS 96 million ($25 million) at the
end of 2007. The Company's improved financial condition resulted
from 012 Smile.Communications' NIS 425 million debt offering in the
first quarter; the Company's NIS 423 million debt offering in the
third quarter; the NIS 308 million raised by 012
Smile.Communications in its IPO; ~ NIS 225 million in cash flow
from operating activities generated during the year; and NIS 104
million received from the exercise of warrants. In 2007, the
Company utilized NIS 585 million for the acquisition of 012 Golden
Lines. As of the end of 2007, the Company's primary balance sheet
ratios showed significant improvement as compared to 2006: As of
December 31, 2007 2006 Shareholders' Equity divided by Total Assets
25% 11% Net Debt to EBITDA Ratio 1.2 3.3 Current Ratio (Current
Assets divided by Current 2.8 0.5 liabilities) Comments of
Management Commenting on the results, Eli Holtzman, Internet Gold's
CEO, said, "2007 was a transformational year during which we built
Internet Gold into one of Israel's major communications and
Internet groups that is well-positioned for accelerated growth.
During the year, Management focused on the merger and IPO of 012
Smile.Communications, a process which tripled the Company's
revenues, improved its profitability and increased Shareholders'
Equity by 183%, enhancing the positioning of our group as we move
into the next growth phase." Mr. Holtzman continued, "We are very
pleased with the performance of the entire 012 Smile team -
particularly their success in continually growing core businesses
while carrying out the complex merger - and are confident in their
ability to deliver additional growth in the years ahead. In the
coming quarters, we will be focusing on the performance of
Smile.Media, working to expand its market share in Israel's
rapidly-growing, but highly competitive marketplace. We are
re-working Smile.Media's strategic plan with the goal of realizing
its full potential." Mr. Holtzman concluded, "In parallel, we have
set the Company on a course aimed at capitalizing on new
opportunities over the next several years. In the domestic market,
we are evaluating potential acquisitions for their ability to
contribute to our results and to give us entry into adjacent
business segments. In the international arena, we have begun
investigating potential partners in several mid-to-large sized
emerging markets, and are building our penetration strategy. Our
moves in this direction will be carefully charted and executed, a
process that will take time, but that we expect it to pay off
handsomely over the next few years." Business Segments 012
Smile.Communications Ltd. (NASDAQ and TASE: SMLC): Revenues for the
twelve months ended December 31, 2007 were NIS 1,103 million
($286.8 million), an increase of 221% compared with NIS 343.1
million in 2006. On a pro-forma basis, 2007 revenues increased by
6.3% compared with 2006. Revenues for the fourth quarter of 2007
were NIS 271.3 million ($70.5 million), a slight decrease compared
with pro-forma revenues for the fourth quarter of 2006. However,
excluding the decline of wholesale international traffic sales,
which management elected to de-emphasize due to very low margins,
revenues for the quarter increased by 11%, reflecting a 14%
increase in core broadband activities. 012 Smile.Communications'
successful merger significantly improved its profitability.
Adjusted EBITDA(b) for 2007 increased by 24% to NIS 237.1 million
($61.6 million) compared with NIS 191.7 million in 2006 on a
pro-forma basis. Adjusted EBITDA(b) for the fourth quarter
increased by 30% year-over-year compared to pro-forma results, and
adjusted EBITDA margin for the quarter rose to 23%. Smile.Media
Ltd.: Revenues for the twelve months ended December 31, 2007 were
NIS 75 million (US$ 19.5 million), an increase of 12.6% compared
with NIS 66.6 million in 2006. Revenues for the fourth quarter of
2007 were NIS 15.7 million (US $4.1 million). Adjusted EBITDA(b)
for the period was NIS 0.5 million. Q4 revenues and operating
margins reflects a market share loss in several of the
e-Advertising business segments that Management is now working to
reverse. Also impacting the results were investments in technical
platforms and applications aimed to accelerate the segment's
growth. Management is currently re-working Smile.Media's strategic
plan with the goal of building its market share and realizing its
full potential. Other: In addition to the operations of 012
Smile.Communications and Smile.Media, Internet Gold incurred
operating expenses of approximately NIS 0.7 million (US $0.2
million) for the quarter. These expenses reflect activities related
to the Company's listing on public securities exchanges, including
Sarbanes Oxley compliance, Directors and Officers insurance and
others, together with expenses related to business development
activities. Changes in the Number of Outstanding Shares 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 were exercisable until
October 15, 2007. The bonds are convertible into ordinary shares at
a conversion price of NIS 40 ($10.40) per share until March 2008,
at which time the conversion price will increase to NIS 50
($13.00). From the beginning of 2007 through October 15, 2007, all
of the outstanding warrants were exercised. The Company's proceeds
from the exercise of warrants totaled NIS 104 million ($27
million). As of December 31, 2007, bondholders converted NIS 103.6
million of the bonds into 2,592,069 shares. Subsequent to the
balance sheet date, through February 20, 2008, an additional NIS
43,000 of bonds was converted into 1,086 shares. Share and
Convertible Bond Buyback Programs Initiated During the past several
months, the Company's Board of Directors authorized buyback plans
in view of the current market price of the Company's shares and
convertible bonds, which it believes are far below the Company's
true value and its future growth prospects. - Share Buyback
Program: on November 29, 2007, the Board of Directors authorized
the repurchase of up to NIS 70 million (approximately $18.2
million) of the Company's ordinary shares from both the Nasdaq
Global Market and Tel Aviv Stock Exchange. The timing and amount of
any shares repurchased will be determined by Management based on
market conditions and other factors, including volume limitations
imposed by Rule 10b-18. As of December 31, 2007, the Company had
repurchased 144,138 shares, and as of February 20, 2008, the
Company had repurchased 658,469 shares. - Convertible Bond Buyback
Program: After the reporting period, on January 28, 2008, the Board
of Directors authorized the repurchase of up to NIS 112 million
(approximately $29 million) of the Company's convertible bonds. As
of February 20, 2008, the Company had repurchased convertible bonds
valued at approximately NIS 1.4 million. Reconciliation Between
Results on a GAAP and Non-GAAP Basis Reconciliation between the
Company's results on a GAAP and non-GAAP basis is provided in a
table immediately following the Consolidated Statement of
Operations (Non-GAAP Basis). Non-GAAP financial measures consist of
GAAP financial measures adjusted to exclude amortization of
acquired intangible assets, as well as certain business combination
accounting entries. The purpose of such adjustments is to give an
indication of our performance exclusive of non-cash charges and
other items that are considered by management to be outside of our
core operating results. Our non-GAAP financial measures are not
meant to be considered in isolation or as a substitute for
comparable GAAP measures, and should be read only in conjunction
with our consolidated financial statements prepared in accordance
with GAAP. Our management regularly uses our supplemental non-GAAP
financial measures internally to understand, manage and evaluate
our business and make operating decisions. These non-GAAP measures
are among the primary factors management uses in planning for and
forecasting future periods. We believe these non-GAAP financial
measures provide consistent and comparable measures to help
investors understand our current and future operating cash flow
performance. These non-GAAP financial measures may differ
materially from the non-GAAP financial measures used by other
companies. Reconciliation between results on a GAAP and non-GAAP
basis is provided in a table immediately following the Consolidated
Statement of Operations. Purchase Price Allocation In the year
ended 2007, the Company recorded NIS 32 million (US$ 8.3 million)
in amortization costs, relating to the acquisition of 012 Golden
Lines, according to the economic benefit expected from those
intangible assets. In the three months ended December 31, 2007,
amortization costs were NIS 8 million (US$ 2.1 million). NOTE A:
Convenience Translation to Dollars For the convenience of the
reader, the reported NIS figures of December 31, 2007 have been
presented in thousands of U.S. dollars, translated at the
representative rate of exchange as of December 31, 2007 (NIS 3.8460
= 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. NOTE B: Non-GAAP Financial Measurements 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 72.4%
owned subsidiary, 012 Smile.Communications Ltd., is one of Israel's
major Internet and international telephony service providers, and
one of the largest providers of enterprise/IT integration services.
Its 100% owned subsidiary, Smile.Media Ltd., manages a growing
portfolio of Internet portals and e-Commerce sites. Forward-Looking
Statements This press release contains forward-looking statements
that are subject to risks and uncertainties. Factors that could
cause actual results to differ materially from these
forward-looking statements include, but are not limited to, general
business conditions in the industry, changes in the regulatory and
legal compliance environments in the industries it is engaged, the
failure to manage growth and other risks detailed from time to time
in Internet Gold's filings with the Securities Exchange Commission,
including Internet Gold's Annual Report on Form 20-F. These
documents contain and identify other important factors that could
cause actual results to differ materially from those contained in
our projections or forward-looking statements. Stockholders and
other readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on
which they are made. We undertake no obligation to update publicly
or revise any forward-looking statement. Consolidated Balance
Sheets Convenience translation into U.S. dollars $1=NIS 3.846
December 31 December 31 2007 2006 2007 (Unaudited) (Audited)
(Unaudited) NIS thousands NIS thousands $ thousands Current assets
Cash and cash equivalents 601,926 320,479 156,507 Short-term
investments 161,353 883 41,953 Trade receivables, net 221,602
220,734 57,619 Other receivables 26,947 26,489 7,006 Deferred taxes
8,003 2,393 2,081 Total current assets 1,019,831 570,978 265,166
Investments Long-term trade receivables 3,460 2,951 900 Deferred
taxes 20,534 157 5,339 Investments in investee companies 291 552 76
24,285 3,660 6,315 Property and equipment, net 163,949 159,692
42,628 Goodwill, other assets and deferred 941,266 949,267 244,739
charges Total assets 2,149,331 1,683,597 558,848 Consolidated
Balance Sheets (cont'd) Convenience translation into U.S. dollars
$1=NIS 3.846 December 31 December 31 2007 2006 2007 (Unaudited)
(Audited) (Unaudited) NIS thousands NIS thousands $ thousands
Current liabilities Short-term bank credit 46,091 364,862 11,984
Current maturities of long- term 10,735 18,674 2,791 obligations
Accounts payable 200,069 193,144 52,020 Payables in respect of 012
- 584,621 - acquisition Current maturities of convertible 15,354 -
3,992 debentures Other current liabilities 93,317 46,224 24,264
Total current liabilities 365,566 1,207,525 95,051 Long-term
liabilities Long-term loans and other long-term 66,485 20,386
17,287 obligations Liability for termination of employer-employee
relations, net 15,220 14,844 3,957 Deferred taxes 41,526 51,512
10,797 Debentures 839,434 - 218,262 Convertible debentures 97,375
198,998 25,319 Total long-term liabilities 1,060,040 285,740
275,622 Total liabilities 1,425,606 1,493,265 370,673 Minority
interest 184,998 89 48,101 Shareholders' equity 538,727 190,243
140,074 Total liabilities and shareholders' 2,149,331 1,683,597
558,848 equity Consolidated Statements of Operations Convenience
translation into U.S. dollars $1=NIS 3.846 Year ended Year ended
December 31 December 31 2007 2006 2005 2007 (Unaudited) (Audited)
(Audited)(Unaudited) NIS thousands $thousands Revenues 1,177,284
408,359 *288,770 306,106 Costs and expenses Cost of revenues
800,795 252,413 *154,781 208,215 Selling and marketing 176,250
75,576 *71,935 45,827 General and administrative 69,777 33,957
33,156 18,143 Non - recurring expenses 10,433 12,813 - 2,712 Total
costs and expenses 1,057,255 374,759 *259,872 274,897 Income from
operations 120,029 33,600 28,898 31,209 Financial expenses, net
57,414 5,615 9,403 14,928 Other expenses (income), net 3,117 -
(237) 811 Gain from issuance of shares in (115,387) - - (30,002)
subsidiary Income before tax expenses 174,885 27,985 19,732 45,472
Tax expense (benefit) 14,934 1,286 1,451 3,883 Income after tax
expenses 159,951 26,699 18,281 41,589 Company's share in net loss
of unconsolidated investee - (334) - - Minority interest in
operations of consolidated subsidiaries (1,465) (34) - (381) Net
income 158,486 26,331 18,281 41,208 Income (loss) per share, basic
Net income per share (in NIS) 7.33 1.43 0.99 1.91 Weighted average
number of shares outstanding (in thousands) 21,617 18,438 18,432
21,617 Income (loss) per share, diluted Net income per share (in
NIS) 6.82 1.43 0.99 1.77 Weighted average number of shares
outstanding (in thousands) 24,795 18,438 18,432 24,795
Reconciliation Table of Non-GAAP Measures Year ended December 31
2007 2006 2005 (Unaudited) (Unaudited) (Unaudited) NIS thousands
GAAP operating income 120,029 33,600 28,898 Adjustments
Amortization of acquired intangible assets 31,938 - - Non-recurring
expenses 10,433 12,813 - Non-GAAP adjusted operating income 162,400
46,413 28,898 GAAP tax expenses 14,934 1,286 1,451 Adjustments
Amortization of acquired intangible assets Included in tax
expenses, (benefit) 9,262 - - Non-GAAP tax expenses 24,196 1,286
1,451 Net Income As Reported 158,486 26,331 18,281 Minority
Interest In Operations Of Consolidated Subsidiaries 1,465 34 -
Company's Share In Net Loss Of Investees - 334 - Taxes On Income
14,934 1,286 1,451 Gain from issuance of shares in subsidiary
(115,387) - - Other (income)expenses, net 3,117 - (237)
Non-recurring Expenses 10,433 12,813 - Financial Expenses, net
57,414 5,615 9,403 Depreciation & Amortization 115,648 31,178
27,630 Adjusted EBITDA 246,110 77,591 56,528 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:
+972-200-3848 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:
+972-200-3848
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