MIND C.T.I. Ltd. (NASDAQ:MNDO)

Second Quarter 2015 Results

• Revenues were $5.2 million, compared to $6.3 million in the second quarter of 2014.
• Non-GAAP earnings per share of $0.02 vs a loss of $0.15 in the prior year.

Monica Iancu, MIND CTI CEO, commented: "As previously announced and anticipated, the delays in wins in 2014 impact our 2015 revenues. We experience this impact now and we continue to see hesitance to commit to large projects of business transformation and very long sales cycles. We are pleased with our execution of ongoing projects, with our swift response to the drop in revenues, including the efficiency steps we implemented, the strong recurrent revenue stream and our success in finally closing one of the delayed deals that we mentioned previously. We hope to close additional new deals in the near term."

One Win and Multiple Follow-on Orders

The win is with a U.S. mobile carrier that chose MIND to support their postpaid and advance pay wireless business. MIND will deploy its full solution and we expect that revenue will be recognized during the next four quarters.
In December 2013, we announced a multi-million dollar deal with an existing customer in East Europe, a carrier with close to 2 million subscribers that operates in all telecom fields -- landline, wireless, broadband and TV. As we successfully move forward with the phased implementation, the customer extended the project scope as they are deploying an LTE platform. We already replaced some platforms they used and will continue with this successful implementation until the upgraded MIND solution is used as a full real-time convergent platform. We expected to recognize revenues from this project during eight to ten quarters, but we now expect this project's revenues to be spread till Q4 of 2016.

Other follow-on orders include agreements with existing U.S. customers to support enhancements related mainly to deployment of LTE and Wi-Fi services.

Active Pursuit of Acquisitions

As we previously announced, given our strong cash position and our experienced organization, we believe that we are well positioned and have the required resources to respond to market needs and at the same time focus on targeting potential acquisitions that could benefit the company growth similar to the strategic acquisition in 2005 that strengthened our presence in the U.S. and in the mobile market. Our active pursuit is focused on acquisition targets at reasonable valuations that satisfy the criteria we defined: proven revenues, complementary technology and geography and expected accretion to earnings within two to three quarters.

Fourth Quarter 2014 Results

• Revenues of close to $6.5 million, same as the third quarter of 2014, and up 28% from $5.1 million in the fourth quarter of 2013.
• Q4 2014 Non GAAP EPS of $0.11 vs $0.05

Monica Iancu, CEO, commented: “We are pleased that in 2014 we succeeded to translate the large deals we signed in 2013 into revenues through successful execution of the implementation of our projects milestones. While in 2014 we reached exceptional revenues and operating margins, some new deals that we expected to close in 2014 were delayed, thus our booking is lower than a year ago.”
 
Since July 2003, when we first adopted a dividend policy, according to which we declare, subject to specific Board approval and applicable law, a dividend distribution once per year, we have distributed 11 yearly dividends with an average of 21 cents per share.
 
We continue to believe that our annual dividends enhance shareholders value and we plan to continue with yearly distributions.
 
Taking into consideration our dividend policy and the remaining cash after the distribution, our Board declared on February 26, 2015 a gross dividend of $0.30 per share. The record date for the dividend will be March 12, 2015 and the payment date will be March 26, 2015. Tax will be withheld at a rate of about 24%.

Third Quarter 2014 Results

• Reported record Q3 2014 revenues of $6.5 million vs $4.5 in the prior year period.
• Reported non-GAAP EPS of $0.06 vs $0.03 in prior year.

Operating Margins
The high operating margins, significantly over our target of 20%, are the result of our record revenues and a decrease in expenses. Favorable exchange rates due to the devaluation of currencies against the U.S. dollar had a meaningful contribution to the decrease in expenses. At the same time, those favorable exchange rates required provisioning for additional taxes and might have the opposite influence at some point. Such fluctuation in exchange rates contributes to volatility both in our revenues and our expenses.

Stable Workforce Size
Our workforce consists mainly of software engineers that perform different tasks related to development, testing, implementation and support of our solutions. The training of such engineers is a lengthy process. We need to plan ahead for our future needs and recruit accordingly in advance to meet our goals. In 2011 we announced that we plan to increase the company size in order to support new projects and multiple requests of engineering resources we receive from our growing customer base. In 2012 we announced that this trend is expected to continue in 2013 at approximately the same rate as we continue to encounter high demand. As mentioned a year ago, we believe we reached the size we need in order to support the growth. Thus, in the last 12 months we have maintained a stable workforce size, at around 360 employees.

Revenue Distribution for Q3 2014
Sales in the Americas represented 47.2%, sales in Europe represented 34.3% and sales in Israel represented 12.9% of our total revenue.
Revenues from customer care and billing software totaled $5.4 million, while revenues from enterprise call accounting software was $1.1 million.
Revenues from licenses were $1.2 million, or 19% of total revenues, while revenues from maintenance and additional services were $5.3 million, or 81% of total revenues.

One Modest Win and Multiple Follow-on Orders
The win is with a service provider in Africa that facilitates communications services across government agencies, including services under monthly budget limitations. Our enterprise solution, PhonEX-ONE, has been chosen since it includes a fully automated process for allocation of a monthly credit amount per telephone line, limitation of traffic when the credit is exhausted and periodic replenishment. In this project PhonEX-ONE will interface with Broadsoft centralized soft switch, performing mediation and provisioning. The usage reporting needs will be handled using the PhonEX-ONE reporting server and the traffic management dashboard modules, while financial activity will be accomplished within the customer's ERP system.

One follow-on order is with an existing customer that is looking to enhance functionality in our Point-of-Sale integrated module. Another follow-on order is with an existing customer wishing to enhance the Customer Loyalty program functionality.
Other follow-on orders from existing customers include mainly enhancing the professional services and engineering services we provide to them.
Monica Iancu, MIND President and CEO, commented: "We are thrilled to set again a new record in quarterly revenues that reflects the advancement of ongoing projects, timely completion of milestones and performance of additional services purchased by our customers. MIND's solutions enable service providers to market and generate additional revenues to all segments of the marketplace (business, retail, postpaid, prepaid, pay in advance and wholesale), improve operational efficiency and build a competitive advantage. We operate in a highly competitive space with one of the most comprehensive real-time converged billing and customer care solutions."

Dividend Update
In July 2003, our board of directors adopted our dividend policy and in October 2010 our board of directors updated this policy slightly. Under the existing policy, subject to specific board approval and applicable law, we declare a dividend distribution once per year, the amount being equal to our EBITDA plus financial income (expenses) minus taxes on income. Since 2003, we have distributed aggregate cash dividends of approximately $3.09 per share to our shareholders. We intend to continue to distribute cash dividends based on factors that include our cash position and activities.
In the last year, we needed to receive court approval formally required in order to enable a distribution since under Israeli law, a company with insufficient retained earnings is required to obtain approval from the court for such a cash distribution. Since we believe that by the end of 2014 we will have sufficient earnings to enable an additional dividend distribution, we expect to declare the 2014 dividend in February 2015, without the need for Court approval.

Second Quarter 2014 Financial Results:

• Revenues were $6.3 million, up 10% sequentially from the first quarter of 2014, and up 42% from $4.42 million in the second quarter of 2013.
• Non-GAAP diluted EPS in this quarter was $0.08 vs $0.02 in prior year.

“We are extremely pleased to set a new record in quarterly revenues and we believe that our early planning, investment in people, technology and customer satisfaction made it possible. Our record revenue reflects the progression of complex projects towards production. We continue to support our customers in their strategic initiatives and they value the managed services that MIND can deliver as operators seek greater simplicity and improved quality in their IT operations. We remain focused on our execution, which includes securing new business, improving our operating efficiency and continuously expanding our offering. We continue to see encouraging levels of interest in our solutions, while the sales cycle continues to be long and gets longer as we aim towards larger deals. As previously announced, since the fourth quarter of 2013, we closed large deals that will be significant both to our revenues and to our margins for the next few quarters.” said Monica Iancu, MIND CTI CEO.