THIRD QUARTER LETTER TO SHAREHOLDERS BY XFONE CEO
November 27, 2006
JACKSON, MS – November 27, 2006 – The following is a
letter to shareholders of XFONE, Inc. (AMEX and TASE:
XFN).
Dear Shareholders, Partners and Friends:
I am pleased to write you with the news that XFONE has
recently reported record breaking third quarter results
with revenue growth vs. Q3 of 2005 of 60% to $9.6
million. The growth was throughout our entire
organization with all three of our major geographic
regions showing increased revenue. Furthermore,
approximately 40% of our sequential growth vs. the
second quarter was organic reflecting our improved
product offerings and services.
While top line growth is important to our management
team, we are ultimately focused on generating higher
earnings for our shareholders. During the quarter, our
growth in profits far exceeded our revenue growth for
two reasons. First, we drove organic revenue growth
through long term investments in marketing. Second, we
continued to benefit from realization of cost savings
related to our acquisition program and ongoing UNL-platform
investment. With regard to the later, it is important to
understand that during the past few years we have made
seven acquisitions in the U.S. and UK, launched a start
up and further built out our facilities based
infrastructure in Mississippi and Louisiana.
We believe that many of the synergies related to the
recent acquisitions, as well as the full cost benefit
from the new infrastructure build out in the U.S., are
just beginning to be reflected in our financial
performance.
Hence, our EBITDA increased 108% to $593,000, up from
$285,000 in Q3 last year and up 50% from Q2 2006. On a
net income basis, we earned $210,917, or $0.019 per
share, from a loss of $(208,915), or a loss of $(0.02)
per share, in the same quarter of 2005.
Our balance sheet remains strong, with approximately
$9.1 million in cash and accounts receivable and total
shareholders’ equity of $19.3 million as of September
30, 2006.
I would like to spend a moment reviewing each of our
geographical operations. XFONE USA revenues increased
150% vs. Q3 2005 to $3.8 million in the third quarter
and made considerable progress with our business
strategy of integrating our many acquisitions by
centralizing our switch and network operations, unifying
our customer billing and making improvements to our
customer service call center. These changes have enabled
XFONE USA to create uniformity and efficiencies in our
processes while increasing productivity and enhancing
our ability to respond more quickly and effectively to
the needs of our customers.
Our Israel-based operation, XFONE 018, continues to
deliver excellent results. We have gone from zero to
$1.4 million in quarterly revenues in less than two
years and have just broken through to positive EBITDA.
In August, shortly after receiving approval to start
experimental Voice over Broadband service in Israel, we
were granted a license to operate as an Internet Service
Provider. This supports our strategy to become a bundled
provider for all our Israeli customers communication
needs. This opportunity also provides us with the
platform to enhance our competitive cost differentiation
in this market.
Our UK operation also increased revenues by more than
20% over Q3 last year, contributing $4.5 million in
quarterly revenues. Our wholly owned subsidiary,
Swiftnet, experienced substantial growth in network
traffic during this quarter. In August, Swiftnet gained
20,000 new customers, primarily through its “Text &
Talk” service which enables mobile customers to make
low-cost international calls by paying through a Premium
Rate text message. XFONE is taking steps to increase
network capacity in the UK in order to accommodate
volume growth from this initiative. During the third
quarter we also successfully completed the integration
of our recent acquisition Equitalk, realizing the
planned cost saving and margin improvement.
I am also delighted to report that as of July, our
common stock is traded simultaneously on the American
Stock Exchange (AMEX) and on the Tel Aviv Stock Exchange
(TASE). We strongly believe that the dual listing will
enhance the worldwide profile of XFONE by reaching a
larger global investment audience.
In conclusion, as we move through the final quarter of
2006, we remain focused on growing revenues, increasing
profitability and continuing to successfully integrate
the synergies derived from our acquisitions. We are
committed to building on XFONE’s success by providing
our customers with industry leading, cost effective
services and by delivering shareholder value.
Thank you for your continued support of XFONE.
Sincerely,
Guy Nissenson
President and Chief Executive Officer
XFONE, Inc.
About XFONE, Inc.
A U.S.-domiciled corporation, XFONE, Inc. is an international voice, video and data communications services provider with operations in the United Kingdom, the United States and Israel that offers a wide range of services, which include: local, long distance and international telephony services; prepaid and postpaid calling cards; cellular services; Internet services; messaging services (Email/Fax Broadcast, Email2Fax and Cyber-Number); and reselling opportunities. The Company serves customers worldwide. For the Company’s website, please visit: www.xfone.com
This press release contains forward-looking statements. The words or phrases "should," "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." The Company's financial results reflected above should not be construed by any means as representative of the current or future value of its common stock. All information set forth in this press release, except historical and factual information, represents forward-looking statements. This includes all statements about the Company's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to rapidly changing technology and evolving standards in the industries in which the Company and its subsidiaries operate; the ability to obtain sufficient funding to continue operations, maintain adequate cash flow, profitably exploit new business, and license and sign new agreements; the unpredictable nature of consumer preferences; and other factors set forth in the Company's most recently filed annual report and registration statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other documents that the Company files from time to time with the U.S. Securities and Exchange Commission.
| For More Information,
Please Contact: |
| U.S. IR Contact |
Israel IR Contact |
Xfone Contact |
John Nesbett/Jennifer Belodeau
Institutional Marketing Services (IMS)
Phone: 1-203-972-9200
E-mail: jnesbett@institutionalms.com
|
Zvi Rabin
Kwan Communications
Tel: (Israel) +972 50 560 0140
E-mail: zvi@kwan.co.il |
Niv Krikov
Chief Financial Officer
Phone: + 972.39254446 (Israel)
E-mail: niv@xfone.com |
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