Value Microcaps Motherboard

[jaybird249]

deltathree Reports Record First Quarter 2006 Revenue and Net Income
Thursday April 27, 8:30 am ET
Revenues Increased 63% Year-Over-Year and 18% Sequentially to $10.7 Million
Net Income Increased to $88,000 or $0.00 Per Diluted Share
Quarterly Cash Flow From Operations Increased to $700,000


NEW YORK, April 27 /PRNewswire-FirstCall/ -- deltathree, Inc. (Nasdaq: DDDC - News), a leading provider of SIP-based Voice Over Internet Protocol (VoIP) solutions for service providers, resellers and end users worldwide, today announced financial results for the first quarter 2006 ended March 31, 2006.

First Quarter 2006 Highlights

-- Revenues increased 63% year-over-year and 18% sequentially to a record
$10.7 million.
-- Net income increased to a record $88,000 or $0.00 per diluted share.
-- Adjusted EBITDA increased to a record $485,000 or $0.02 per diluted
share.
-- Quarterly cash flow from operations increased to $700,000.
-- Agreement extended with Verizon Communications to provide management
services for Verizon's VoiceWing consumer VoIP service.

Revenues for the first quarter of 2006 were a record $10.7 million, an increase of $4.1 million, or 63%, from the $6.6 million reported for the first quarter of 2005. In the sequential comparison, first quarter 2006 revenues increased $1.6 million or 18%, compared to revenues of $9.1 million reported for the fourth quarter ended December 31, 2005.

deltathree reported record net income for the first quarter of 2006 of $88,000 or $0.00 per share. First quarter 2006 net income reflects an improvement over the first quarter 2005 net loss of $427,000 or ($0.01) per share, and compared to net income of $22,000 or $0.00 per share in the fourth quarter of 2005. First quarter 2006 net income includes approximately $144,000 of stock-based compensation expense related to the Company's adoption of Financial Accounting Standards Board (SFAS) No. 123R. The Company applied the modified prospective method as the transition method to adopting SFAS No. 123R. The year ago and sequential quarterly periods did not include comparable stock-based compensation expenses.

Gross margin for the first quarter of 2006 was 33%, compared with a gross margin of 36% for the year-over-year and sequential quarter comparisons. The decline in gross margin was primarily attributable to promotions in support of increased sales and marketing activities conducted during the first quarter of 2006.

deltathree reported record adjusted EBITDA, or earnings before non-cash stock-based compensation, interest, taxes, depreciation and amortization, for the first quarter of 2006 of $485,000 or $0.02 per share, compared to EBITDA of $106,000 or $0.00 per share in the first quarter of 2005 and EBITDA of $291,000 or $0.01 per share in the fourth quarter of 2005. The year ago and sequential quarterly periods did not include the comparable non-cash stock- based compensation expense reflected in adjusted EBITDA.

deltathree defines adjusted EBITDA as earnings before non-cash stock-based compensation, interest, taxes, depreciation and amortization. The Company uses adjusted EBITDA as a measure of the Company's operating trends. Investors are cautioned that adjusted EBITDA is not a measure of liquidity or of financial performance under Generally Accepted Accounting Principles (GAAP). The adjusted EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with the SEC Regulation G, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the heading "Reconciliation of Non-GAAP Financial Information to GAAP" following the Condensed Consolidated Statements of Operations included in this press release.

Quarterly cash flow from operations increased to $700,000 during the first quarter of 2006. As of March 31, 2006, deltathree held approximately $16.2 million in cash, cash equivalents, short-term and long-term investments, and had no outstanding debt, representing an increase $501,000 compared to the $15.7 million held as of December 31, 2005.

deltathree Operational Review

Shimmy Zimels, President and Chief Executive Officer of deltathree, stated, "Our first quarter results establish an excellent foundation for 2006 as reflected by our record quarterly revenue and net income. This exceptional performance reflects the strength of our VoIP offerings in the market and our expanding customer base among service providers and resellers worldwide. As the demand for comprehensive VoIP communications platforms continues to rise, the reseller and service provider segment of our business remains deltathree's primary growth driver. We are seeing excellent traction among our global base of resellers as they increasingly look for more sophisticated VoIP offerings to deliver to their end customers, as well as solid interest from wireline and cable service providers seeking to offer broadband VoIP services.

"We are pleased to announce that we have successfully extended our working agreement with Verizon Communications to provide management services for Verizon's VoiceWing consumer VoIP service. deltathree has worked with Verizon since the launch of their VoiceWing service in July of 2004 and we look forward to continuing our relationship with Verizon to deliver their customers the best possible VoIP experience. deltathree also experienced a solid ramp-up of private label VoIP platforms with service provider customers, such as Velocity Services, Inc. (VSI), which is helping build momentum for us in 2006 and beyond.

"The success of our increased sales and marketing activities and the seasonal strength we historically see in the first quarter were also key factors in first quarter sales exceeding the high end of our expectations. Our ongoing focus on profitability and cash flow contributed to our second consecutive profitable quarter and increased quarterly cash flow from operations. Gross margin was modestly lower during the quarter reflecting our increased sales and marketing activities aimed at driving deltathree's market presence closer to our end customers in key geographic regions. With our improving cash flow, strong balance sheet and the ability to scale our VoIP infrastructure to accommodate rising call volumes, deltathree is well positioned to leverage the rising demand for customized broadband VoIP services around the world," continued Mr. Zimels.

deltathree Financial Guidance

For the second quarter of 2006, deltathree expects sequential revenue growth to be within the range of 5% to 10%. deltathree forecasts quarterly net income within the range of $0.01 per share to $0.02 per share, excluding the impact of stock-based compensation expense. The Company expects to record stock-based compensation expense of between $0.00 to 0.01 per share related to Financial Accounting Standard Board (SFAS) No. 123R.

Conference Call Details

The deltathree first quarter 2006 earnings conference call will be webcast live at 10:00 a.m. ET [7:00 a.m. PT] today, April 27, 2006. Investors are invited to listen to the live call by dialing 1-888-423-3275 in the United States or by dialing 1-612-332-0923 when calling internationally. Investors worldwide can also listen to the call live via deltathree's Website, http://www.deltathree.com. Please go to the Website at least 15 minutes early to register, download, and install any necessary audio software. A replay of the call will also be available through the deltathree corporate Website.

About deltathree