Phonetime reports second quarter 2009 results



    MISSISSAUGA, ON, Aug. 14 /CNW/ - Phonetime Inc. (TSX: PHD), a leading
global supplier of international long distance telecommunication services,
today reported its financial results for the three and six month periods ended
June 30, 2009. All figures are in Canadian currency.

    
    Financial and Operational Highlights

    -   Revenue for Q2 2009 was $41.3 million, down 3.0% from $42.6 million
        for Q1 2009 and up 5.0% from $39.3 million for Q2 2008. On a
        segmented basis(1), Wholesale Division revenue for Q2 $39.3 million
        while Consumer Division revenue was $8.8 million compared to $42.8
        million and $8.0 million for Q1 2009 respectively. Consolidated year-
        to-date revenue was $ 83.9 million up 11% from $75.8 million for
        2008.

    -   Operating income(2) for Q2 2009 was $0.9 million, compared to $1.0
        million for Q1 2009 and $1.9 million for 2008. Year-to-date operating
        income for 2009 was $2.0 million, compared to $3.5 million for 2008.

    -   Net income was $0.2 million for Q2 2009, compared to $0.2 million for
        Q1 2009 and $0.7 million for Q2 2008. Year-to-date net income for
        2009 was $0.4 million compared to $1.4 million for 2008.

    -   Total long term debt and bank indebtedness was $8.9 million with an
        average interest rate of 7.33% at Q2 2009 compared to $7.9 million at
        Q1 2009 and $11.4 million at Q2 2008 and with respective average
        interest rates of 8.25% and 9.66%. The Company is currently
        restructuring its debt and expected to have this completed in Q3
        2009.

    -   Shareholders' Equity was $12.9 million for Q2 2009 compared to $12.1
        million for Q4 2008. Subsequent to the end of the quarter, Phonetime
        completed a private placement for gross proceeds of $0.6 million at
        $0.15 per common share.
    

    Overview

    "We are very pleased with our Q2 results given recent economic
conditions," said Mr. Wayne Silver, Phonetime's President and CEO. "In a
challenging period for our industry, we continue to attract new carriers to
our network quarter-over-quarter, grow market share and expand our operations
- all with a customer base that is financially solid."

    Financial Results

    Consolidated revenue for the second quarter ended June 30, 2009 was $41.3
million, representing an increase of 5% when compared to $39.3 million for the
second quarter of 2008. For the six month period of 2009, Phonetime's revenue
was $83.9 million, up 11% from $75.8 million for the same period of 2008.
    The growth is chiefly due 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 Consumer
Division, which provides pre-paid calling cards and long-distance services to
targeted ethnic consumer groups across Canada. Phonetime currently has more
than 125,000 customers using its long-distance retail services.
    On a segmented basis, Wholesale Division revenue for Q2 2009 was $39.3
million while Consumer Division revenue was $8.8 million prior to
inter-segment eliminations of $6.9 million. This compares respectively to
$42.8 million and $8.0 million prior to inter-segment eliminations of $8.2
million for Q1 2009. Total number of international long-distance minutes
processed by both the Wholesale and Consumer Divisions for Q2 2009 grew by 14%
over the same period in 2008.
    Gross profit for the second quarter of 2009 was $5.1 million or 12.3% of
sales compared to $5.2 million or 13.2% of sales for the second quarter of
2008. The year-over-year decrease was principally due to higher cost of sales
as a result of a decline in the value of the Canadian currency against the
U.S. dollar, which chiefly impacted the high margin Consumer Division. On a
year-to-date basis, gross profit for 2009 was $10.9 million compared to $10.1
million for 2008.
    Phonetime generated operating income of $0.9 million for the second
quarter of 2009, down from $1.8 million for the second quarter of 2008. For
the first six months of 2009, operating income was $2.0 million, down from
$3.6 million of 2008. The year-over-year decrease is attributable to a number
of higher operating costs, which were paid primarily in U.S. dollars,
including increased marketing costs stemming from promotional and trade show
events, increased professional services fees relating to legal, audit and
financing activities, increased salaries due to a growth in the number of
international sales representatives, and new investments to support the
Company's continued expansion in Hong Kong. Sequentially, Phonetime's
operating costs have been reduced from the first quarter of 2009 by $0.6
million.
    Income before taxes for the second quarter of 2009 was $0.2 million
compared to $1.1 million for the second quarter of 2008. On a year-to-date
basis, income before taxes for 2009 was $0.8 million compared to $2.1 million
for 2008.
    Net income after taxes for Q2 2009 was $0.2 million or $0.00 per basic
share after a nominal tax recovery was recorded. This compared to $0.7 million
or $0.01 per basic share for Q2 2008. For the six month period of 2009, net
income after taxes was $0.5 million, compared to $1.4 million for 2008.
    As at June 30, 2009, Phonetime held cash and short-term investments of
$0.03 million as well as accounts receivable of $11.1 million. Subsequent to
quarter end, Phonetime completed a private placement that raised gross
proceeds of $0.6 million through the sale of units, consisting of common
shares and warrants. The funds will be used primarily for working capital
purposes.

    Outlook

    "Our financial and market positions continue to strengthen," said Mr.
Rodney Franklin, Phonetime's Chairman and Chief Financial Officer. "We expect
our revenue and profits to grow throughout the remainder of 2009 at a modest
rate despite current economic conditions. We believe our customer base is
financially sound and we expect to restructure and consolidate our debt with
our financial partners in Q3."

    
    Financial Highlights

    (000's except share data)

                                    Three Months Ended     Six Months Ended
                                        (unaudited)           (unaudited)
                                    June 30,   June 30,   June 30,   June 30,
                                      2009       2008       2009       2008

    Revenue                         $41,280    $39,311    $83,856    $75,806

    Gross profit                    $ 5,062    $ 5,178    $10,897    $10,095

    Gross profit as a percentage
     of revenue                       12.3%      13.2%      13.0%      13.3%

    Operating income                $   913    $ 1,914    $ 1,951    $ 3,548

    Net income before income
     taxes                          $   223    $ 1,118    $   843    $ 2,087

    Net income after income
     taxes                          $   247    $   734    $   483    $ 1,353

    Earnings per share              $ 0.002    $  0.01    $ 0.004    $  0.01

    Weighted average number of
     common shares basic              108.0      106.7      108.0      106.7
    

    Phonetime will file its consolidated financial statements for the second
quarter 2009 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 to discuss its 2009 second quarter
financial results on Monday, August 17 at 4:00 p.m. (ET).
    To access the conference call by telephone, dial 416-644-3419 or
1-800-731-5319. Please connect approximately 15 minutes prior to the beginning
of the call to ensure participation. The conference call will be archived for
replay until Monday, August 24, 2008 at midnight. To access the archived
conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation
number 21313132 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 Consumer 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

    Caution Regarding Forward Looking Information:

    This press release contains forward-looking statements, which may be
identified by words like "expects", "anticipates", "plans", "intends",
"indicates" or similar expressions. These statements are not a guarantee of
future performance and are inherently subject to risks and uncertainties.
Phonetime's actual results could differ materially from those currently
anticipated due to a number of factors set forth in reports and other
documents filed by the Company with Canadian securities regulatory authorities
from time to time.

    
    -------------------------------------------------------------------------
    (1) Before inter-segment eliminations.
    (2) Operating income is income before loss on foreign exchange,
        misappropriation of assets, stock compensation costs, interest, taxes
        and depreciation and amortization. However, operating income is not a
        term that has specific meaning in accordance with generally accepted
        accounting principles, and may be calculated differently by other
        companies. Phonetime reconciles operating income to its net earnings.
    





For further information:

For further information: Wayne Silver, Phonetime, President & CEO, (905)
361-8304, wayne@phonetime.com; Rodney Franklin, Phonetime, Chairman & CFO,
(905) 361-8305, rodney@phonetime.com; Joe Racanelli, Equicom Group, (416)
815-0700 x 243, jracanelli@equicomgroup.com

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PHONETIME INC.

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