Deltathree (Nasdaq: DDDC), the IP communications network and provider of a Hosted Communications Solution for service providers worldwide, today announced results for the fourth quarter and full year 2000.
Deltathree recorded fourth quarter 2000 revenues of $7.4 million, representing a gain of $2.8 million or a 60 percent increase over the corresponding $4.6 million in revenue recorded in the fourth quarter of 1999. Revenues for the full year 2000 totaled a record $30.4 million compared to $11.1 million for all of 1999, an increase of $19.3 million or 175 percent.
Non-affiliate revenues during the fourth quarter accounted for $5.8 million or 78 percent of total revenues compared to $1.3 million or 27 percent of total revenue in the fourth quarter of 1999. Affiliate revenues accounted for $1.6 million or 22 percent of revenues in the fourth quarter of 2000 compared with $3.4 million or 73 percent of total revenue in the fourth quarter of 1999. deltathree remains focused on continuing this trend of increasing its non-affiliate revenues and broadening its revenue mix.
Highlights of the fourth quarter 2000
- Revenues increased 60 percent to $7.4 million compared to Q4
1999, bringing F/Y 2000 revenues to $30.4 million.
- Delivered positive gross profits of $1.4 million, bringing F/Y
2000 gross profits to $5.4 million and gross margins of 18
percent in both Q4 2000 and F/Y 2000.
- Operational cash burn rate drops $3 million or 30 percent to
approximately $7.0 million a quarter.
- Earnings Per Share target exceeded by $0.07
- Deltathree reaches debt-free status in Q4 2000 with the elimination of $13 million debt to RSL.
- Total subscriber base increased by over 1,000,000 to over 5.1 million, up 26 percent in Q4 2000.
- The number HCS customers rose from six to nine during Q4 2000.
- HCS minutes across the deltathree network surge 68 percent in Q4 2000.
- Commenced testing of broadband Hosted Communication Solution.
Excluding the effects of non-cash compensation costs and a one time non-cash charge for the impairment of goodwill of $8.9 million related to Yourday.com, deltathree's fourth quarter 2000 net loss was $8.6 million or ($0.30) per diluted share compared to a net loss of $6.1 million or ($0.21) per diluted share for the fourth quarter ended 1999. On an annual basis, excluding the effects of non-cash compensation costs and the impairment loss on goodwill, deltathree posted a net loss of $33.0 million or ($1.15) per diluted share during 2000 compared with a net loss of $14.7 million or ($0.72) per diluted share in fiscal 1999.
Including non-cash compensation and the impairment of goodwill related to Yourday.com, net loss for the fourth quarter 2000 was $18.3 million or a net loss of ($0.63) per diluted share compared to a loss of $16.3 million or ($0.57) per diluted share in the fourth quarter of 1999. For the full year 2000, deltathree posted a net loss of $48.3 million or ($1.67) per diluted share compared to a loss of $33.8 million or ($1.65) per diluted share for the full year 1999.
Deltathree operational overview
Noam Bardin, president and CEO of deltathree, stated, "As we look back on the year 2000 and ahead into 2001, deltathree has never been better positioned in the global telecommunications marketplace than we are today. deltathree executed a fundamental shift in our business model during the year 2000 from a primarily retail oriented VOIP provider to an end-to-end hosted telecommunications infrastructure provider. This hosted solution has been the key underlying driver of our growth and the valuable relationships we have announced in early 2001. I believe we are now uniquely positioned in the marketplace with significant opportunities ahead."
Equally as important as deltathree's fundamental positioning in the telecommunications space is the company's execution on its financial goals. deltathree was very successful in achieving financial objectives during the quarter. The company reported better than expected earnings per share for the fourth quarter and full year 2000 and delivered revenues inline with the company's quarterly and full year guidance. deltathree made significant progress in diversifying overall revenue streams and replaced low margin revenues with more strategically important revenues from Hosted Communications initiatives. With the elimination or deltathree's free VOIP call promotion and the growth in Hosted Communications Solution revenues, the company produced higher margins and began to diversify its revenue base through the generation of monthly recurring charges from customer care, billing, hosting, fraud protection and e-commerce services. While improving the overall quality of revenue, deltathree generated $5.4 million in positive gross margins for the year and reduced the quarterly operational cash burn rate by over 30 percent, providing clear progress on the company's path to profitability.
Deltathree business metrics
Subscriber growth in the fourth quarter of 2000 increased by more than one million to over 5.1 million subscribers worldwide, an increase of 26 percent. This marks the second consecutive quarter in which deltathree added over one million subscribers. Of those new subscribers, roughly 320,000 resulted from new hosted customer bases bringing the total number of Hosted Communications Solution subscribers to 973,000, an increase of 49 percent from the third quarter of 2000. In the fourth quarter of 2000, deltathree signed 2 additional Hosted Communications Solution customers bringing the total number of signed customers to 9 with 5 online with live implementations.
Deltathree in early 2001
Noam Bardin, stated, "As we enter 2001, deltathree has made significant progress in expanding the reach of our Hosted Communications Solution as well as laying the foundation for future growth with the roll out of our Hosted Communications Solution for Broadband Service Providers. Our announcement earlier today regarding Shell Europe Oil Products Limited's selection of deltathree's turnkey telecommunications offering as part of their overall brand strategy reflects the value proposition deltathree can offer well branded companies looking to leverage their combined 'click and mortar' assets more effectively."
On January 9th, deltathree announced that nine leading edge broadband service providers began evaluating deltathree's latest Hosted Communications Solution. As of today the broadband customer evaluation group has grown by five and there are now 14 leading edge broadband service providers testing the Hosted Communications Solution Broadband offering. deltathree provides a new phone number and allows end users to plug their regular telephone into their broadband connection and make or receive a standard phone call. Each broadband phone call is placed over deltathree's award winning network with all the functionality offered by the traditional public switched telephone network. Broadband customers also receive the benefits and cost savings that can only be offered through a VOIP enabled broadband pipe.
Published by Israel's Business Arena on February 15, 2001.