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Commtouch Reports Fourth Quarter and Full Year 2012 Results



         Commtouch Reports Fourth Quarter and Full Year 2012 Results

PR Newswire

MCLEAN, Virginia, February 20, 2013

MCLEAN, Virginia, February 20, 2013 /PRNewswire/ --

Fourth Quarter 2012 Revenues of $6.8 Million, Up 22% Sequentially, Up 14%
Versus a Year Ago

Full Year 2012 Revenues of $23.9 Million, Up 4% Year-over-Year

Formal Launch of New Cloud-Based Email Security-as-a-Service Offering in Early
2013 Highlights Execution on Strategic Roadmap and Foundation for Future
Growth

2013 Full Year GAAP Revenue Growth Forecasted to be 42% to 46% Above 2012
Level

Commtouch® (NASDAQ: CTCH), a leading provider of Internet security technology
and cloud-based services, today announced its fourth quarter and full year
2012 financial results for the period ending December 31, 2012.

     (Logo: http://photos.prnewswire.com/prnh/20120501/529254 )

Fourth Quarter & Full Year 2012 Financial Highlights:

  o Revenues in accordance with US Generally Accepted Accounting Principles
    (US GAAP) totaled $6.8 million for the fourth quarter compared to $5.6
    million for the sequential third quarter of 2012 and $6.0 million in the
    fourth quarter of 2011. Full year 2012 revenues totaled $23.9 million, an
    increase of 4.0% as compared to $23.0 million in 2011.
  o Non-GAAP revenues totaled $7.0 million for the fourth quarter compared to
    $5.6 million for the sequential third quarter of 2012 and $6.0 million in
    the fourth quarter of 2011.  Full year 2012 non-GAAP revenues totaled
    $24.1 million, an increase of 5.0% as compared to $23.0 million in 2011.
    The difference between non-GAAP and GAAP revenue is derived from the fact
    that deferred revenues consolidated from acquired companies are recorded
    based on fair value rather than book value for GAAP purposes.
  o In the fourth quarter of 2012, Commtouch closed the previously announced
    acquisitions of FRISK Software International's antivirus business as of
    October 1, 2012 and eleven GmbH as of November 16, 2012. During the fourth
    quarter and full year, the company recognized expenses totaling
    approximately $0.4 million and $0.8 million in the respective periods
    related to acquisition related costs. Fourth quarter and full year 2012
    GAAP net income (loss) and earnings per diluted share data include the
    impact of the aforementioned acquisition and related costs.
  o GAAP net income (loss) for the fourth quarter was ($0.5 million) compared
    to net income of $19,000 for the sequential third quarter of 2012 and $1.3
    million in the fourth quarter of 2011. Full year 2012 GAAP net income
    totaled $1.5 million compared to $4.6 million in 2011. Fourth quarter and
    full year 2012 data includes the aforementioned acquisition related
    expenses.
  o GAAP earnings per diluted share for the fourth quarter were ($0.02),
    compared to $0.00 for the sequential third quarter of 2012 and $0.05 in
    the fourth quarter of 2011. Full year 2012 GAAP earnings per diluted share
    were $0.06 compared to $0.19 in 2011. Fourth quarter and full year 2012
    data includes the aforementioned acquisition related expenses.
  o Non-GAAP net income for the fourth quarter was $0.3 million compared to
    $0.7 million for the sequential third quarter of 2012 and $1.7 million in
    the fourth quarter of 2011. Full year 2012 non-GAAP net income totaled
    $3.9 million compared to $6.4 million in 2011 and was marginally lower
    than anticipated primarily due to an increased strategic investment in the
    company's global sales and marketing function to leverage Commtouch's
    expanded portfolio of IT security solutions.
  o Non-GAAP earnings per diluted share for the fourth quarter were $0.01,
    compared to $0.03 for the sequential third quarter of 2012 and $0.07 in
    the fourth quarter of 2011. Full year 2012 non-GAAP earnings per diluted
    share were $0.16 compared to $0.26 in 2011.
  o Cash used for operating cash activities during the quarter was $1.6
    million, which included payments for professional service fees and other
    acquisition related costs associated with the two acquisitions that closed
    during the quarter.
  o Cash as of December 31, 2012 was $5.1 million, compared to $17.3 million
    as of September 30, 2012. Cash usage during the quarter included the net
    purchase price payments of $10.2 million, as well as payments for
    transaction and integration costs associated with the two acquisitions
    completed during the quarter.
  o Brian Briggs was appointed as Commtouch Chief Financial Officer. Briggs
    brings more than 22 years of finance and operations experience, offering
    extensive expertise in profitability building in public companies.

Shlomi Yanai, Commtouch's chief executive officer stated, "The fourth quarter
culminated 2012 with renewed revenue growth and tremendous progress on our
transformation into a provider of comprehensive SecaaS offerings, which was
accelerated by our strategic acquisitions. Commtouch's new Email
Security-as-a-Service solution marks a major launch of the Company's latest
cloud-based offerings and is complemented by new solutions focused on Email
Security On-Premise for Service Providers and Mobile Security Services for
Android. All three solutions were recently launched into the market and have
generated great initial customer interest. Our material progress on executing
this strategy and deploying our new offerings has successfully set the stage
for double-digit revenue growth in 2013.

"On the financial front, fourth quarter and full year sales marked Commtouch's
return to top-line growth, while acquisition related transaction and
integration expenses, combined with an increased investments in global sales
and marketing infrastructure, contributed to lower bottom-line profitability.
New bookings growth remained strong in the fourth quarter and full year,
doubling new bookings compared to the levels seen in the year ago period.
Organic new bookings growth, combined with the synergies of our late 2012
strategic acquisitions, put Commtouch on track to realize full year 2013
revenue growth in the range of 42% to 46% over 2012.  We remain committed to
investing in our enhanced sales and marketing platform to fully leverage the
value of our innovative new SecaaS offerings among customers and partners
worldwide, all while continuing to fund our growth through internal cash flow
generation and with a focused commitment to improving bottom line
profitability.

"Building on Commtouch's progress in 2012, we are focused on increasing our
market share in the fast growing markets for cloud-based email, Web and
antivirus solutions, including the launch of our new cloud-based web security
solution which is currently on track for release in third quarter of 2013. Our
solutions are aimed at helping our customers quickly and easily add
cloud-based offerings under their own private label brand, allowing them to
maximize performance, generate new revenue streams, reduce product launch
times and greatly lower their costs. Based on the strength of our expanded
portfolio of cloud-based IT security solutions as well as the integration and
streamlining of our recent acquisitions, we are setting a solid foundation for
growth in 2013 and beyond," concluded Mr. Yanai.

Announced in May of 2012, Commtouch's Board of Directors authorized the
initiation of a stock repurchase program of the company's ordinary shares in
the open market, in an amount in cash of up to $2.5 million. During the fourth
quarter Commtouch repurchased 105,000 shares at an aggregate cost of
approximately $0.3 million. As of December 31, 2012, approximately 767,000
shares have been repurchased through the program at an aggregate cost of
approximately $1.7 million.

For information regarding the non-GAAP financial measures discussed in this
release, please see "Use of Non-GAAP Financial Information" and
"Reconciliation of Non-GAAP to GAAP Financial Information."

Business Highlights:

  o Commtouch closed the previously announced acquisition of FRISK Software
    International's antivirus business, accelerating the deployment of an
    expanded range of OEM and service provider antivirus solutions, including
    private label solutions.
  o Commtouch announced and closed the acquisition of eleven GmbH, which has
    captured more than 36 percent of the Germany's market for managed email
    security.  eleven GmbH is currently Germany's leading provider of email
    based Security-as-a-Service (SecaaS) providing advanced email solutions
    and services to some of the largest organizations in Germany, such as BMW,
    SAP, Siemens and Deutsche Telekom / T-Online. The acquisition of eleven
    has enabled Commtouch to accelerate to early 2013 the launch of private
    label cloud-based security solutions designed for OEM and service provider
    markets, as well as extend Commtouch's global sales and marketing reach
    across Europe and beyond.
  o Significant investment in expanding the Company's global sales and
    marketing capabilities delivered sharply higher new booking activity
    during the fourth quarter.  As a result, overall new booking activity for
    the full fiscal 2012 year was approximately double the level in 2011
    setting a solid foundation for future growth.  In line with Commtouch's
    long-term agreement model, the majority of contracts signed average
    approximately three years in length.  Revenue recognition for these new
    multi-year contracts is expected to begin ramping up and positively
    impacting Commtouch's top-line in the coming quarters.
  o Key new client wins during the quarter reflected our enhanced
    international sales and marketing penetration, including:

       o Openwave Messaging Inc., the leading global provider of innovative
         messaging software solutions, selected Commtouch as its preferred
         messaging security partner for integrating Commtouch's anti-spam and
         virus outbreak detection into its messaging platform for carriers and
         service providers.
       o i7 Networks integrated Commtouch's GlobalView™ URL categorization
         technology into its i7 solutions.  India based i7 offers its
         corporate clients a suite of products that help manage Web content
         classification and bandwidth monitoring, including URL filtering
         based on the best of breed URL content categorization databases.
       o NSFOCUS Information Technology Co., Ltd, a China based global leader
         in providing enterprise-level network security solutions and
         services, selected Commtouch's antivirus and URL filtering solutions.

Business Outlook

Based on the current expectations, the company is announcing its financial
outlook for the full year 2013.  The company anticipates full year 2013
revenue will be between $34.0 million and $35.0 million, an increase of
approximately 42% to 46% compared with full year 2012. GAAP and non-GAAP net
income guidance includes a higher level of sales and marketing expense versus
2012 to support a strengthened global sales platform. Full year 2013 GAAP net
income is expected to be greater than $2.0 million and non-GAAP net income is
expected to be greater than $3.5 million.

During the first half of 2013, the company also expects to recognize
extraordinary expenses related to its previously announced acquisitions, as
well as related integration and streamlining expenses, totaling approximately
$0.8 million, the majority of which will be recognized in the first quarter of
2013. The impact of these charges is reflected in the aforementioned full year
2013 GAAP net income guidance. The company expects the impact of integration
and streamlining activities to positively impact the financial performance of
the business during the second half of 2013.

The company plans to continue to strategically invest in the build-out of its
global sales and marketing efforts.  The impact of these investments is
reflected in the full year 2013 GAAP net income guidance.

The above outlook is as of the date of this release, and the company
undertakes no obligation to update its estimates in the future.

Use of Non-GAAP Measures

Non-GAAP financial measures consist of GAAP financial measures adjusted to
exclude: share based compensation expenses, amortization and impairment of
acquired intangible assets, deferred taxes, acquisition related costs and
adjustments to earnout obligations. The purpose of such adjustments is to give
an indication of the company's performance exclusive of non-cash charges and
other items that are considered by management to be outside of the company's
core operating results. The company's non-GAAP financial measures are not
meant to be considered in isolation or as a substitute for comparable GAAP
measures, and should be read only in conjunction with the company's
consolidated financial statements prepared in accordance with GAAP. Company
management regularly uses supplemental non-GAAP financial measures internally
to understand, manage and evaluate our business and make operating decisions.

These non-GAAP measures are among the primary factors management uses in
planning for and forecasting future periods. The company believes this
adjustment is useful to investors as a measure of the ongoing performance of
our business. The company believes these non-GAAP financial measures provide
consistent and comparable measures to help investors understand the company's
current and future operating cash flow performance. These non-GAAP financial
measures may differ materially from the non-GAAP financial measures used by
other companies. Reconciliation between results on a GAAP and non-GAAP basis
is provided in a table immediately following the Consolidated Statements of
Income. The presentation of this non-GAAP financial information is not
intended to be considered in isolation or as a substitute for the financial
information prepared and presented in accordance with GAAP. Management uses
both GAAP and non-GAAP measures when evaluating the business internally and
therefore felt it important to make these non-GAAP adjustments available to
investors.

Financial Results Conference Call

The company has scheduled a conference call later today, February 20, 2013 at
10:00 a.m. ET to review the fourth quarter and full year 2012 highlights, as
well as walk through a strategic overview of the evolution of the company's
growth strategy.

To participate, please call one of the following teleconferencing numbers by
dialing in at least ten minutes before the conference call commences. If you
are unable to connect using the toll-free numbers, please try the
international dial-in number.

US Dial-in Number: 1-877-407-9210

Israel Dial-in Number: 00-800-4626-6666

International Dial-in Number: 1-201-689-8049

at:

10:00 a.m. Eastern Time, 7:00 a.m. Pacific Time, 3:00 p.m. UK Time, 5:00 p.m.
Israel Time

The call will be simultaneously webcast live from a link on Commtouch's
website at http://www.commtouch.com.

For those unable to listen to the live call, a webcast replay of the call will
be available from the day after the call in the investor relations section of
Commtouch's corporate Web site.

About Commtouch

Commtouch® (NASDAQ: CTCH) is a leading provider of Internet security
technology and cloud-based services for vendors and service providers,
increasing the value and profitability of customers' solutions by protecting
billions of Internet transactions on a daily basis. With six global data
centers and renowned technology, Commtouch's email, Web, and antivirus
capabilities easily integrate into customers' products and solutions, keeping
more than 350 million end users safe. To learn more, visit
http://www.commtouch.com.

 • Blog: http://blog.commtouch.com/cafe

 • Facebook: http://www.facebook.com/commtouch

 • LinkedIn: http://www.linkedin.com/company/commtouch

 • Twitter: @Commtouch

Recurrent Pattern Detection, RPD, Zero-Hour and GlobalView are trademarks, and
Commtouch is a registered trademark of Commtouch. U.S. Patent No. 6,330,590 is
owned by Commtouch. All other trademarks are the property of their respective
owners.

This press release contains forward-looking statements, including projections
about our business, within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. For example,
statements in the future tense, and statements including words such as
"expect," "plan," "estimate," "anticipate," or "believe" are forward-looking
statements. These statements are based on information available to us at the
time of the release; we assume no obligation to update any of them. The
statements in this release, including the company's expectations that i) it
will meet its 2013 revenue and profit forecasts, ii) its new service offerings
will impact those forecasts in the positive manner indicated, and iii) the
result of integration and efficiency activities will be to positively impact
the financial performance of the business during the second half of 2013, are
not guarantees of future performance and actual results could differ
materially from our current expectations as a result of numerous factors,
including business conditions and growth or deterioration in the Internet
market, commerce and the general economy, both domestic as well as
international; fewer than expected new-partner relationships; competitive
factors, including pricing pressures; technological developments, and products
offered by competitors; the ability of our OEM partners to successfully
penetrate markets with products integrated with Commtouch technology; a slower
than expected acceptance rate for our newer product offerings; availability of
qualified staff; and technological difficulties and resource constraints
encountered in developing new products, as well as those risks described in
the text of this press release and the company's Annual Reports on Form 20-F
and reports on Form 6-K, which are available through http://www.sec.gov.


                              COMMTOUCH SOFTWARE LTD.

                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                   (In US$ thousands, except per share amounts)

                         Three months ended            Twelve months ended
                            December 31                    December 31
                        ---------------------         ----------------------
                       2012             2011         2012              2011
                      ------           ------       ------            ------
                     Unaudited        Unaudited    Unaudited         Unaudited

     Revenues           $6,785           $5,950      $23,910           $23,016

     Cost of
     revenues            1,367            1,124        4,350             4,091
                       -------          -------      -------           -------
     Gross profit        5,418            4,826       19,560            18,925
                       -------          -------      -------           -------
     Operating
     expenses:

     Research and
     development         2,185            1,444        6,281             5,410

     Sales and
     marketing           1,866            1,639        5,860             5,486

     General and
     administrative      2,374            1,615        6,639             4,721
                       -------          -------      -------           -------
     Total operating
     expenses            6,425            4,698       18,780            15,617
                       -------          -------      -------           -------
     Operating
     profit (loss)      (1,007)             128          780             3,308

     Financial
     income
     (expenses), net       (70)             (23)          80               (27)
                       -------          -------      -------           -------
     Income (loss)
     before taxes       (1,077)             105          860             3,281

     Tax Benefit,
     net                   530            1,170          625             1,317
                       -------          -------      -------           -------
     Net income
     (loss)
     attributable to
     ordinary
     shareholders        ($547)          $1,275       $1,485            $4,598
                       =======          =======      =======           =======

     Basic earnings
     per share          ($0.02)           $0.05        $0.06             $0.19
                       =======          =======      =======           =======
     Diluted
     earnings per
     share              ($0.02)           $0.05        $0.06             $0.19
                       =======          =======      =======           =======
     Weighted
     average number
     of shares
     outstanding:
     Basic              25,357           23,854       24,610            23,620
                       =======          =======      =======           =======
     Diluted            25,598           24,828       25,140            24,654
                       =======          =======      =======           =======


                              COMMTOUCH SOFTWARE LTD.

           RECONCILIATION OF SELECTED GAAP MEASURES TO NON GAAP MEASURES

                   (In US$ thousands, except per share amounts)

                         Three months ended            Twelve months ended
                            December 31                    December 31
                        --------------------          ---------------------
                       2012             2011         2012              2011
                      ------           ------       ------            ------
                     Unaudited        Unaudited    Unaudited         Unaudited

     GAAP operating
     profit (loss)     ($1,007)            $128         $780            $3,308
     Stock-based
     compensation(1)       191              365        1,289             1,230
     Other
     acquisition
     related costs(2)      400                -          777                53
     Amortization of
     intangible
     assets (3)            286              628          589             1,003
     Executive
     terminations(4)       115              343          115               343
     Adjustment to
     deferred
     revenues (5)          227                -          227                 -
     Adjustment to
     earnout
     obligation (6)        (19)             200          (19)              396
                       -------          -------      -------           -------
     Non-GAAP
     operating
     profit               $193           $1,664       $3,758            $6,333
                       =======          =======      =======           =======
   
     GAAP net income     ($547)          $1,275       $1,485            $4,598
     Stock-based
     compensation
     (1)                   191              365        1,289             1,230
     Other
     acquisition
     related costs
     (2)                   400                -          777                53
     Amortization of
     intangible
     assets (3)            286              628          589             1,003
     Executive
     terminations
     (4)                   115              343          115               343
     Adjustment to
     deferred
     revenues (5)          227                -          227                 -
     Adjustment to
     earnout
     obligation (6)        204              240          232               541
     Income taxes
     (7)                  (607)          (1,198)        (806)           (1,385)
                       -------          -------      -------           -------
     Non-GAAP net
     income               $269           $1,653       $3,908            $6,383
                       =======          =======      =======           =======
   
     GAAP earnings
     per share          ($0.02)           $0.05        $0.06             $0.19
     Stock-based
     compensation(1)      0.01             0.01         0.05              0.05
     Other
     acquisition
     related costs(2)    0.016                -        0.031             0.002
     Amortization of
     intangible
     assets (3)          0.011            0.025        0.023             0.041
     Executive
     terminations(4)     0.004            0.014        0.005             0.014
     Adjustment to
     earnout
     obligation (5)      0.008            0.010        0.009             0.022
     Income taxes(6)    (0.024)          (0.048)      (0.032)           (0.056)
                       -------          -------      -------           -------
     Non-GAAP
     earnings per
     share               $0.01            $0.07        $0.16             $0.26
                       =======          =======      =======           =======
     Numbers of
     shares used in
     computing
     Non-GAAP
     earnings per
     share (diluted)    25,598           24,828       25,140            24,654
                       =======          =======      =======           =======
     (1) Stock-based
     compensation
     ------------
     Cost of
     revenues              $26               $7          $53               $24
     Research and
     development             9               76          231               294
     Sales and
     marketing             (69)              83          200               355
     General and
     administrative        225              199          805               557
                       -------          -------      -------           -------
                          $191             $365       $1,289            $1,230
                       =======          =======      =======           =======
     (2) Other
     acquisition
     related costs
     -------------
     General and
     administrative        400                -          777                53
                       -------          -------      -------           -------
                          $400                -         $777               $53
                       =======          =======      =======           =======
  
     (3)Amortization of
     intangible
     assets
     -------------
     Cost of
     revenues             $128              $48         $272              $195
     Sales and
     marketing             158              580          317               808
                       -------          -------      -------           -------
                          $286             $628         $589            $1,003
                       =======          =======      =======           =======
     (4) Executive
     terminations
     -------------
     Research and
     development             -              $82            -               $82
     General and
     administrative        115              261          115               261
                       -------          -------      -------           -------
                          $115             $343         $115              $343
                       =======          =======      =======           =======
     (5) Adjustment
     to deferred
     revenues
     -------------
     Revenues              227                -          227                 -
                       -------          -------      -------           -------
                          $227                -         $227                 -
                       =======          =======      =======           =======
     (6) Adjustment
     to earnout
     obligation
     -------------
     General and
     administrative       ($19)            $200          (19)             $396
     Financial
     expenses
     (income), net         223               40          251               145
                       -------          -------      -------           -------
                          $204             $240         $232              $541
                       =======          =======      =======           =======
     (7) Income
     taxes
     ------------
     Deferred tax
     asset - tax
     benefit              (607)          (1,198)        (806)           (1,385)
                       -------          -------      -------           -------
                         ($607)         ($1,198)       ($806)          ($1,385)
                       =======          =======      =======           =======


                         COMMTOUCH SOFTWARE LTD.

                  CONDENSED CONSOLIDATED BALANCE SHEETS

                                  December 31            December 31
                                  -----------            -----------
                                     2012                   2011
                                    ------                 ------
                                   Unaudited               Audited
                                           In US$ thousands

     Assets:
     Current Assets:
     Cash and cash equivalents         $5,137                $20,868
     Trade receivables, net             5,996                  2,838
     Deferred income taxes              2,239                  1,996
     Prepaid expenses and other
     accounts receivable                1,503                    463
                                      -------                -------
         Total current assets          14,875                 26,165
                                      -------                -------
     Long-term lease deposits              57                     40
     Severance pay fund                   756                  1,031
     Property and equipment, net        1,608                    885
     Deferred income taxes              3,348                  2,889
     Intangible assets, net            37,479                  7,297
     Investment in affiliate            1,403                  1,227
                                      -------                -------
             Total assets              59,526                 39,534
                                      =======                =======
     Liabilities and
     Shareholders' Equity
     Current Liabilities:
     Accounts payable                     958                    551
     Employees and payroll
     accruals                           2,280                  1,215
     Accrued expenses and other
     liabilities                        1,388                    628
     Deferred revenues                  4,535                  3,058
     Other short-term liabilities       4,247                  3,372
                                      -------                -------
      Total current liabilities        13,408                  8,824
                                      -------                -------
     Long-term deferred revenues          492                    694
     Long-term deferred tax             3,330                      -
     Other Long term liabilities        6,659                      -
     Accrued severance pay                915                  1,192
                                      -------                -------
          Total liabilities            11,396                  1,886
                                      -------                -------
     Shareholders' equity              34,722                 28,824
                                      -------                -------
        Total liabilities and
         shareholders' equity         $59,526                $39,534
                                      =======                =======


                              COMMTOUCH SOFTWARE LTD.

                       CONDENSED CONSOLIDATED CASH FLOW DATA

                                (In US$ thousands)

                         Three months ended            Twelve months ended
                            December 31                    December 31
                        --------------------          ---------------------
                       2012             2011         2012              2011
                      ------           ------       ------            ------
                    Unaudited        Unaudited    Unaudited         Unaudited
     Cash flow from
     operating
     activities

     Net income
     (loss)             ($547)          $1,275       $1,485            $4,598

     Adjustments:
     ------------
     Depreciation         129              131          561               545
     Compensation
     related to
     options issued
     to employees
     and consultants      191              365        1,289             1,213
     Amortization of
     intangible
     assets               284              629          588             1,005

     Changes in
     assets and
     liabilities:
     ------------
     Decrease
     (Increase) in
     trade
     receivables         (704)              598      (2,194)               130
     Decrease in
     deferred taxes      (608)           (1,198)       (807)            (1,385)
     Decrease
     (Increase) in
     prepaid
     expenses and
     other
     receivables          143                55        (541)               (79)
     Increase in
     accounts
     payable              259               194         297                 17
     Increase
     (decrease) in
     employees and
     payroll
     accruals,
     accrued
     expenses and
     other
     liabilities       (1,022)              419        (860)               981
     Increase
     (decrease) in
     deferred
     revenues             299              (301)       (163)              (390)
     Increase
     (decrease) in
     accrued
     severance pay,
     net                   21                59          (2)                66
                       -------          -------      -------           -------
     Net cash (used
     in) provided by
     operating
     activities        (1,555)            2,226        (347)             6,701

     Cash from
     investing
     activities

     Payments for
     business
     acquisitions,
     net of cash
     acquired         (10,243)                -     (10,243)                 -
     Change in
     long-term lease
     deposits             (12)                3         (17)                 1
     Investment in
     an affiliate
     company             (176)                -      (3,576)                 -
     Purchase of
     property and
     equipment           (176)             (104)       (805)              (526)
                       -------          -------      -------            -------
     Net cash used
     in investing
     activities       (10,607)             (101)    (14,641)              (525)

     Cash flows from
     financing
     activities

     Buyback of
     shares              (279)                -      (1,720)                 -
     Proceeds from
     options and
     warrants
     exercised            157             1,097         890              1,260
                       -------          -------      -------           -------
     Net cash (used
     in) provided by
     financing
     activities          (122)            1,097        (830)             1,260

     Effect of
     exchange rate
     changes on cash       87                 -          87                  -

     Increase
     (decrease) in
     cash and cash
     equivalents      (12,284)            3,222     (15,818)             7,436
     Cash and cash
     equivalents at
     the beginning
     of the period     17,334            17,646      20,868             13,432
                       -------          -------      -------           -------
     Cash and cash
     equivalents at
     the end of the
     period            $5,137           $20,868      $5,137            $20,868
                       =======          =======      =======           =======

Company Contact:
Brian Briggs, Chief Financial Officer
Commtouch
+1-703-760-3444
brian.briggs@commtouch.com

Israel Investor Relations Contact:
Iris Lubitch
EffectiveIR
+972-54-252-8007
Iris@EffectiveIR.co.il

U.S. Investor Contact:
Christopher Chu    
Grayling    
+1-646-284-9400    
commtouch@grayling.com

Commtouch Media Contact:
Matthew Zintel
Zintel Public Relations
+1-281-444-1590
matthew.zintel@zintelpr.com

SOURCE Commtouch
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