Phonetime reports third quarter results

16:00 EST Wednesday, November 05, 2008

MISSISSAUGA, ON, Nov. 5 /CNW/ - Phonetime Inc. (TSX: PHD), a leading global supplier of international long distance telecommunication services, today reported its financial results for the third quarter and nine months ended September 30, 2008. All figures are in Canadian currency.

    <<
    Highlights of the Third Quarter
        -  Sales were $39.2 million, an increase of 64% over $23.9 million in
           the third quarter of 2007.
        -  Gross profit was $5.6 million, up 115% over $2.6 million in Q3
           2007.
        -  EBITDA(1) (earnings before interest, taxes, depreciation,
           amortization, misappropriation of funds, and stock compensation
           expenses) was $1.9 million compared to a loss of $22,000 in the
           third quarter of 2007.
        -  Net income was $751,000 compared to a net loss of $833,000 in the
           third quarter of 2007.
        -  Paid down $4.2 million of long-term debt and other loans payable
           related to the Symphony acquisition.
        -  Processed approximately 1.4 billion minutes of long-distance
           calls.
        -  Grew the number of its retail customers to more than 100,000.
        -  Increased the number of customers and suppliers of its Wholesale
           Division to more than 350.
        -  Participated in a number of international telecommunications
           conferences, including Asian Carriers' Conference and Carriers
           World.
    >>

Overview

"In a typically slow period in the wholesale market, we realized significant improvements to a number of our key financial metrics in the third quarter, including a year-over-year revenue growth of 64%, an increase in gross profit of 115% and a record net income of $751,000," said Wayne Silver, President and CEO of Phonetime Inc. "These gains are being made possible by our call trading platform which allows us to better identify and respond to customer opportunities while extracting improved margins. Against a backdrop of global economic uncertainty, our trading platform will continue to serve as a competitive advantage since it will help us limit our exposure to risk and allow us to focus our efforts on strategic markets where sales volumes may be lower but will produce higher margins."

Results for the Third Quarter

Consolidated sales for the third quarter of 2008 were $39.2 million, up 64% over $23.9 million in the third quarter of 2007. Sales for the first nine months of 2008 were $115.0 million, an increase of 68% when compared to $68.3 million for the same period of 2007. The growth is attributable primarily to higher sales volumes of the Company's Wholesale Division, which buys and resells telecommunications long-distance services to telephone carriers around the world using Phonetime's proprietary call trading platform. Phonetime also generates revenues through its Retail Division, which provides pre-paid calling cards and long-distance services to targeted ethnic consumer groups across Canada.

Gross profit for the third quarter was $5.6 million or 14.2% of sales compared to $2.6 million or 10.7% of sales for the third quarter of 2007. Gross profit for the year to date in 2008 was $15.6 million compared to $7.9 million for 2007. The increase is due to higher sales volumes experienced by both the Wholesales and Retail Divisions.

The net income for the third quarter of 2008 was $751,000 or $0.01 per basic share compared to a net loss of $833,000 or $0.01 per basic share for the third quarter of 2007. Net income for the first nine months of 2008 was $2.1 million or $0.02 per basic share, compared to a net loss of $1.7 million or $0.02 per basic share for the same period in 2007. The improvement was principally due to performance gains by the Company's Wholesale Division as well as a gain on foreign exchange of more than $120,000.

In the third quarter of 2008, Phonetime had cash flow from operating activities of $1.8 million compared to negative cash flow of $550,000 for 2007. For the first nine months of 2008, Phonetime had cash flow from operations of $3.0 million compared to negative cash flow from operations of $2.7 million for the same period of 2007.

Outlook

"Although global economic conditions appear unfavourable, we have not experienced any softening of demand for our international long distance services," Mr. Silver added. "In fact, the month of October was the strongest ever for the Company and bodes well for the balance of the fourth quarter and a strong finish to 2008. We are extremely pleased with our year to date net income of $2.2 million, which represents a dramatic increase of $3.8 million over a net loss of $1.7 million for 2007. Based on our recent results and our focus on emerging markets, we are on track to reach approximately $160 million of revenue for 2008."

    <<
    Financial Highlights
    (000's except share data)

                                 Three Months Ended      Nine Months Ended
                                     (unaudited)
                                Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
                                    2008        2007        2008        2007

    Sales                      $  39,204   $  23,928   $ 115,011   $  68,306

    Gross profit               $   5,552   $   2,553   $  15,647   $   7,894

    Gross profit percentage         14.2%       10.7%       13.6%       11.6%

    EBITDA                     $   1,883   $     (22)  $   5,572   $     789

    Net Income                 $     751   $    (833)  $   2,104   $  (1,671)

    Cash flow from operating
     activities                $   1,781   $    (550)  $   3,041   $  (2,734)
    Cash and cash equivalents  $  (3,331)  $     240   $  (3,331)  $     240
    Total long-term
     liabilities               $   2,875   $     298   $   2,875   $     298
    Weighted average number
     of common shares basic         107.5        94.6       107.5        94.6
    >>

Phonetime will file its consolidated financial statements for the third quarter 2008 and related management's discussion and analysis with securities regulatory authorities within the applicable timelines. The material will be available through SEDAR at www.sedar.com and the Company's website, www.phonetime.com

Phonetime will host a conference call on Thursday, November 6 at 11:00 a.m. (ET) to discuss its third quarter 2008 financial results. To access the conference call by telephone, dial 416-646-3097 or 1-866-249-2157. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Thursday, November 13, 2008 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21287659 followed by the number sign.

A live audio webcast of the conference call will be available at www.phonetime.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web site for 30 days.

About Phonetime Inc.

Established in 1994, Phonetime is a leading supplier of international wholesale and retail long distance telecommunications services with network facilities in Canada, the U.S., Europe, Africa and Asia. Through its Wholesale Division, Phonetime buys and resells long-distance services to major telephone carriers around the world using its proprietary call trading platform. Through its Retail Division, Phonetime competitively markets a range of pre-paid and subscription-based long distance services to targeted ethnic consumers across Canada. Phonetime's common shares trade on the Toronto Stock Exchange under the symbol PHD. More information can be found at the Company's website, www.phonetime.com