Phonetime Announces 2007 Financial Results 2007 revenue increases 303% to $98 million

2008-03-31 19:51:00

Phonetime Announces 2007 Financial Results

2007 revenue increases 303% to $98 million

MISSISSAUGA, ONTARIO–( EMWNews – March 31, 2008) – Phonetime Inc. (TSX:PHD), a leading supplier of international long distance telecommunication services, announces its financial results for the three-month and twelve-month periods ended December 31, 2007.

Financial Highlights

– Revenue was $97.9 million; a 303% increase from $24.3 million in 2006.

– Successfully grew global wholesale operations to $74 million in revenue.

– Q4-2007 revenue was $29.6 million, a 224% increase from Q4-2006.

– Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and stock compensation expense and loss due to misappropriation of funds) was $1.3 million, compared to adjusted EBITDA of $1.4 million in 2006.

– Q4-2007 adjusted EBITDA was $263,000, an increase from a loss, of $71,000 in Q4-2006

Operational Highlights

In late 2007, Phonetime acquired Symphony Holdings, Inc., a profitable business generating approximately $50 million annualized revenue and that expands Phonetime’s wholesale footprint in Africa and South East Asia. The Company doubled its average monthly volume to more than 300 million minutes, compared with 150 million minutes in 2006 and has implemented a major network expansion to handle more than 500 million minutes of call traffic per month. During 2007, Phonetime commenced the process of moving its stock to the Toronto Stock Exchange (“TSX”) from the TSX Venture Exchange and completed the move in early 2008.

“We experienced exponential top-line growth in 2007 due primarily to the launch of our wholesale division in early 2007,” said Wayne Silver, President and CEO of Phonetime. “In addition to driving revenue growth, the wholesale business has allowed Phonetime to expand its presence into new geographic markets, increase global awareness of the Company and led to relationship opportunities with some of the largest carriers in the world. The acquisition of Symphony supports our efforts to expand the wholesale business by further extending the reach of our operations. We look to Symphony to be an important contributor to our objective of achieving $250 million in revenue by 2009. Early in 2008 we are seeing strong evidence of our strategy unfolding; revenue for the first two months of 2008 is up by 80% over the prior year and as a result, we are continuing to invest in our low-cost network infrastructure to support expansion into new markets and the growth of existing markets.”

Revenue growth for Q4-2007 and fiscal 2007 was driven primarily by the introduction of the wholesale business at the beginning of the year. In Q4-2007, the Company completed the acquisition of Symphony, which will help to drive revenue growth in 2008 and beyond. Gross profit margin for 2007 was 12.7% compared to 36.9% for 2006. Reflecting the scale in the wholesale operations, gross profit margin rose during 2007, from 12% in Q1-2007 to 17% in Q4-2007. The decline in gross profit margin for the year reflects the rapid growth of Phonetime’s wholesale business which generates lower gross margins but higher revenue than the retail operations. However, notwithstanding its relatively slower growth, Phonetime’s retail telecommunications services (calling cards and 1+ Equal Access service) also experienced strong growth in 2007. Phonetime ended the year with approximately 60,000 subscribers all across Canada without degradation of its gross profit margin, which is stable at nearly 50% and the Company sold approximately three million calling cards representing 300 million minutes of long distance traffic.

As expected, due to Company’s acquisition of Symphony and the rapid growth of the wholesale business, cash flow from operating activities for 2007 and Q4-2007 were significantly impacted by changes in non-cash working capital items. Before taking into account working capital changes, cash flow from operating activities for 2007 was $223,000 compared to $530,000 for 2006 and cash flow from operating activities for Q4-2007 was $784,000 compared with cash used for operating activities of $79,000 for Q4-2006. This situation is expected to come into balance in 2008 and beyond as the Symphony acquisition is integrated into Phonetime’s pre-existing wholesale operations.

In March, during the audit of its 2007 results, a substantial misappropriation of funds was discovered, which reduced the Company’s cash by approximately $827,000 in 2007 and $827,000 in 2006. The Company has taken significant steps to prevent future losses of a similar nature, which was hidden by a former senior staff member in the Cost of Goods Sold. With the discovery of the theft and the subsequent commitment to improving its internal controls, the Company’s profits are expected to increase by approximately $55,000 per month.

About Phonetime Inc.

Established in 1994, Phonetime Inc. is a leading international supplier of wholesale long distance call delivery to large and small domestic and international carriers as well as providing retail international long distance telecommunication services for individual consumers and businesses. Phonetime is a publicly traded company and its common shares are listed on the TSX (TSX:PHD). Phonetime is licensed in Canada as a Class A International Carrier, and is a vertically integrated telecommunication provider of both wholesale and retail operations. Phonetime now has 125 staff located on six continents and has facilities in Canada, Europe, Africa and South East Asia. Its wholly owned subsidiaries and divisions include; Phonetime Network, with operations in Toronto and Florida offering International Long Distance to ILEC’s CLEC’s and PTT world-wide; Symphony Telecom, with operations in Oaktown, Virginia and Cape Town, South Africa, which offers “direct” telecommunications facilities to “hard to reach” but highly profitable routes in Africa and South East Asia; Call Select, with an 55-seat call centre in Vancouver, offers retail 1+ long distance home service to more than a dozen ethnic communities across Canada; Phonetime International operates one of Canada’s largest private networks with 40 Points-of-Presence, covering 85% of Canada’s population. Phonetime International sells its excess Canadian network capacity on a wholesale basis to major carriers world-wide, as well as distributing long distance calling cards via nearly 2,500 retailers across Canada.

Caution Regarding Forward Looking Information:

This press release contains forward-looking statements within the meaning of securities laws, including the “safe harbour” provisions of the Ontario Securities Act and the United States Private Securities Litigation Reform Act of 1995. Forward-looking information is often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast”, “target”, “project”, “may”, “will”, “should”, “could”, “estimate”, “predict” or similar words suggesting future outcomes or language suggesting an outlook.

Forward-looking statements and information are based on current beliefs as well as assumptions made by and information currently available to Phonetime concerning anticipated financial performance, business prospects, strategies and regulatory developments. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: incorrect assessments of value when making acquisitions; increases in debt service charges; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; changes in tax laws; and Phonetime’s ability to access external sources of debt and equity capital.

The foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Furthermore, the forward-looking statements contained in this press release are made as of the date of this press release, and Phonetime does not undertake any obligation to up-date publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

For more information, please contact

Phonetime Inc.
Ian Hochberg
Director
(416) 505-4382
Email: ian@phonetime.com

or

Phonetime Inc.
Wayne Silver
President & C.E.O.
(905) 361-8304
Email: wayne@phonetime.com

or

Phonetime Inc.
Rodney Franklin
Chairman & C.F.O.
(905) 361-8305
Email: rodney@phonetime.com

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