Elephant Talk Communications Reports Q412 and Full Year 2012 Financial Results

Elephant Talk Communications Reports Q412 and Full Year 2012 Financial Results

Q412 Mobile and Security Revenue Grew 87% Y/Y - Sixth Consecutive Quarter of
Q/Q Revenue Growth

Full Year 2012 Mobile and Security Business Grew 103% Y/Y

PR Newswire

SCHIPHOL, The Netherlands, April 2, 2013

SCHIPHOL, The Netherlands, April 2, 2013 /PRNewswire/ --Elephant Talk
Communications, Corp. (NYSE MKT: ETAK) (www.elephanttalk.com), a leading
international provider of proprietary Software Defined Network Architecture
(Software DNA™) platforms for the telecommunications industry that empower
Mobile Network Operators (MNOs) and Mobile Virtual Network Operators (MVNOs),
Enablers (MVNEs) and Aggregators (MVNAs) and a market leader in providing
solutions to counter electronic fraud for the financial services industry,
today announced total revenue of $6.8 million for the fourth quarter ended
December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120917/MM75872LOGO)

(Logo: http://photos.prnewswire.com/prnh/20120917/MM75492LOGO)

The higher margin^1 mobile and security solutions business generated revenue
of approximately $3.6 million in Q412, a year-over-year increase of 86.6%
compared to revenue of $1.9 million reported in Q411. Mobile and security
revenue accounted for 52.1% of total company revenue in Q412 versus only 23.5%
of total company revenue in Q411. This marked the first time that mobile and
security solutions revenue made up the majority of total company revenue.

          Mobile and Security (Unaudited)
          Reported Revenue % of Total
Quarter                  Company Revenue
          ($ in millions)
Q112      2.4              28.3
Q212      2.8              39.3
Q312      2.9              43.8
Q412      3.6              52.1

Mobile and security business revenue increased 102.7% year-over-year to $11.7
million for 2012 from $5.8 million for 2011. For 2012, approximately 40% of
total company revenue was generated by mobile and security with only about 18%
of total company revenue generated by mobile and security solutions in 2011.

Total Margin for Q412 was $2.7 million, a year-over-year increase of 84.3%
when compared to the total margin of $1.5 million reported in Q411. Total
margin has increased for six consecutive quarters in dollars and as a
percentage of total revenue.

        Total Margin
                        % of Total
Quarter ($ in millions) Company Revenue

Q112    1.7             19.7
Q212    1.9             26.8
Q312    2.1             31.3
Q412    2.7             39.4

^1 Margin is defined as revenue less cost of service

"The sequential increase of mobile and security revenue to $3.6 million in
Q412 from $2.9 million in Q312 was a significant contributor to the sequential
increase of total company margin to $2.7 million in Q412 from $2.1 million in
Q312, thereby illustrating the strong operating leverage associated with these
operations," stated Steven van der Velden, CEO of Elephant Talk Communication.
"Continued year-over-year growth of the high margin mobile and security
revenue is expected to contribute to our first month of positive operational
cash flow, which we estimate using Adjusted EBITDA. While timing is dependent
on the accounting treatment on revenue from existing contracts, we expect to
achieve this company milestone in April of 2013. In addition, we are
currently in the process of finalizing additional funding, and the company
intends to close such financing in April/May, though there can be no assurance
that financing will close in such period. This financing, combined with
existing cash on hand and cashflow from operationswill be sufficient to fund
our operations and carry out our business plans."

Key Company Highlights

  oElephant Talk's Software DNA™ Platform Expected to go Live with Mobile
    Operator in a Major Latin American Market in the Second Quarter of 2013.
    The rollout of the Company's proprietary Software DNA™ platform is
    continuing on schedule. With an initial platform capacity of 10 million
    mobile subscribers, the Company expects to have at least 1.5 million
    mobile subscribers on its proprietary Software DNA™ platform by the end of
    the year. This is a 50% increase in subscriber expectations the Company
    had when the contract was first announced in January, consisting of a mix
    of the Operators existing mobile subscribers and subscribers from Mobile
    Virtual Network Operators ("MVNOs") that work with the Operator.
  oElephant Talk Expected to Achieve its First Month of Positive Operational
    Cash Flow in April of this Year. We estimate this measure using Adjusted
    EBITDA, defined as earnings before derivative accounting, such as warrant
    liabilities and conversion feature expensing, income taxes, depreciation
    and amortization, impairments, non-operating income and expenses and
    stock-based compensation.
  oElephant Talk's Acquisition of 100% of the Assets of Telnicity Closed
    April 1, 2013. The acquisition provides access to the U.S. mobile
    telecommunications market through Telnicity's relationships with several
    major U.S.-based mobile telecommunication companies. The all equity
    transaction supports Elephant Talk's strategic focus of expanding outside
    of Europe while preserving cash.
  oFICO/Adeptra Signed Agreements with a Leading UK Bank for the Provision of
    the ValidSoft SIM Swap technology and VALid-POS technology. Implementation
    is likely to commence in Q213. Discussions are ongoing with two UK banks
    for VALid-POS and VALid-SIM, through ValidSoft's partner, FICO/Adeptra.
  oValidSoft SIM Swap solution continues to run very smoothly in production
    at Santander, having now processed in excess of 7.5 million transactions,
    a 50% increase in transaction since last quarter
  oValidSoft Awarded a Contract with a Leading US Financial Institution in
    November 2012 for VALid®, its core OOB (Out of Band) Authentication and
    Transaction Verification solution which includes its market leading Voice
    Biometrics capability.
  oValidSoft client in Australia, Newcastle Permanent Building Society, has
    grown its active use base to almost 90,000 customers, and is expected to
    expand the deployment to 150,000 users in the coming months.
  oValidSoft and Partner FICO/Adeptra Receive Prestigious Banking Security
    Technology Award For SIM Swapping Fraud Solution Implemented at Santander
    UK. Award for Best Security Initiative recognizes breakthrough solution
    that prevents online banking fraud achieved through mobile phone number
  oValidSoft Awarded Winner Jury Vote from the Florin Transaction Service
    Innovation Awards. ValidSoft recognized for its SMART™
    telecommunications-based technology by a jury of five experienced industry
  oValidSoft Voice Biometrics. ValidSoft successfully participated in the
    prestigious National Institute of Standards and Technology (NIST) Speaker
    Recognition Evaluation. ValidSoft is now recognized as a world leading
    provider of Voice Biometric solutions by independent research
  oValidSoft SMART^™ Platform Shortlisted for 2013 FSTech 'Technology
    Provider of the Year' Award. Winners will be announced on April 17, 2013.

Financial results for the three and twelve months ended December 31, 2012

Revenue for the three months ended December 31, 2012 and December 31, 2011

                           Quarter Ended
($ in millions)
                           Dec. 31, 2012 Dec. 31, 2011 Y/Y % Change
Mobile & Security Revenues $3.6          $1.9          86.6%
Total Revenues             $6.8          $8.1          (16.0%)

  oThe higher margin mobile and security revenue increased 86.6%
  oIn accordance with our strategy to reduce the emphasis on this business,
    the lower margin legacy landline revenue declined 47.5% year-over-year in
    Q412 when compared to the same period a year earlier.

Revenue for the twelve months ended December 31, 2012 and December 31, 2011

($ in millions)            Twelve Months Ended (Unaudited)
                           Dec. 31, 2012   Dec. 31, 2011   Y/Y % Change
Mobile & Security Revenues $11.7           $5.8            102.7%
Total Revenues             $29.2           $32.2           (9.4%)

  oGrowth in mobile and security revenue was driven by an increased
    subscriber base hosted on the Company's platforms.
  oThe increase in mobile and security revenue was offset by the expected
    continued decline in the Company's legacy landline business.

Selected financial results for the quarter and full-year ended December 31,
2012 and December 31, 2011.

($ in millions)            Quarter Ended (Unaudited) Year Ended (Unaudited)
                           Dec. 31, Dec. 31, Y/Y %   Dec. 31, Dec. 31, Y/Y %
                           2012     2011     Chg.    2012     2011     Chg.
Cost of Services
                           $4.1     $6.7     (38.0%) $20.8    $28.7    (27.5%)

Margin                     $2.7     $1.5     84.3%   $8.4     $3.5     138.8%
Margin as a Percentage of  39%      18%              29%      11%
Selling, general &         $4.5     $5.0     (9.9%)  $17.9    $16.6    7.8%
Adjusted EBITDA (a         ($1.8)   ($3.6)   (48.6%) ($9.5)   ($13.1)  (27.4%)
non-GAAP measure)
Net Income (loss)          ($6.7)   ($6.6)   0.9%    ($23.1)  ($25.3)  (8.6%)

  oThe decline in cost of service for the full year ended December 31, 2012
    is related to the decline in landline revenue.
  oThe increase in margin for the three and twelve months ended December 31,
    2012 was primarily attributable to the increased revenue contribution from
    the higher-margin mobile and security solution business.
  oThe 7.8% year-over-year increase in SG&A to $17.9 million for the twelve
    months ended December 31, 2012 was mainly due to the 13.1% year-over-year
    increase in compensation cost following an increased number of full time
    employees, primarily European MNO operational support and technical staff
    as well as higher investor relations and sales and marketing related
    staffing and expense.
  oNet loss for the twelve months ended December 31, 2012 was reduced because
    of increased revenues from our higher margin mobile and security business
    combined with lower non-cash compensation expenses.

The table at the end of this press release includes a reconciliation of net
loss to non-GAAP Adjusted EBITDA for the three and twelve months ended
December 31, 2012 and 2011. An explanation of Adjusted EBITDA along with
margin are included below under the heading "Non-GAAP Financial Measures."

Conference call reminder

As a reminder, Elephant Talk Communications will host a Shareholder Update
Conference Call on April 2, 2013 at 11:00 a.m. (EST). Anyone interested in
participating should dial 1-480-629-9664 approximately 5 to 10 minutes prior
to the start of the call. Participants should ask for the Elephant Talk
Shareholder Update conference call. To listen to the playback please utilize
the webcast by visiting the company's website at www.elephanttalk.com.

This call is being webcast by ViaVid Broadcasting and can be accessed at
either Elephant Talk's website at www.elephanttalk.com or ViaVid's website at
http://www.viavid.net. To access the webcast, you will need to have the
Windows Media Player on your desktop. For the free download of the Media
Player, please visit:

Non-GAAP financial measures

To supplement the consolidated financial statements presented in accordance
with generally accepted accounting principles, or GAAP, Elephant Talk uses
measures of non-GAAP Adjusted EBITDA and margin. A reconciliation of the
non-GAAP Adjusted EBITDA to the closest GAAP financial measure, is presented
in the financial table below under the heading "Reconciliation of Non-GAAP
Measures to GAAP." Margin is derived from the income statements by subtracting
cost of service from revenues. These adjustments to the Company's GAAP results
are made with the intent of providing both management and investors a more
complete understanding of the Company's underlying operational results and
trends and performance.

Management uses these non-GAAP measures to evaluate the Company's financial
results, develop budgets, manage expenditures, and determine employee
compensation. The presentation of additional information is not meant to be
considered in isolation or as a substitute for or superior to net income
(loss) or net income (loss) per share determined in accordance with GAAP.

For the three and twelve months ended December 31, 2012 and 2011, non-GAAP
Adjusted EBITDA is defined as earnings before derivative accounting, such as
warrant liabilities and conversion feature expensing, income taxes,
depreciation and amortization and stock-based compensation. It is determined
by taking net loss and adding back provision for income taxes, interest income
and expense, net loss attributable to non-controlling interest, depreciation
and amortization, stock-based compensation expense, other income and expenses,
and equity in earnings of unconsolidated joint venture.

About Elephant Talk:

Elephant Talk Communications Corp. (NYSE MKT: ETAK),is a leading international
provider of proprietary Software DNA™ platforms for the telecommunications
industry that empower Mobile Network Operators (MNOs) and Mobile Virtual
Network Operators (MVNOs), Enablers (MVNEs) and Aggregators (MVNAs) with a
full suite of applications, Full OSS/BSS Systems, Delivery Platforms, Support
and Managed Services, on-site, cloud, hybrid and S/PaaS solutions, including
Network, Mobile Internet ID Solutions, Secure Remote Access Management,
Loyalty Management and Transaction Processing Services, superior Industry
Expertise and high quality Customer Service without substantial upfront
investment. Elephant Talk counts several of the world's leading Mobile
Operators amongst its customers including Vodafone, T-Mobile and Zain, and
virtually all business is focused on tier 1 and tier 2 operators worldwide.
Visit www.elephanttalk.com.

About ValidSoft:

ValidSoft Limited has been a wholly owned subsidiary of Elephant Talk since
early 2010 and underpins our mobile/cloud security offering. ValidSoft is a
market leader in providing solutions to counter electronic fraud relating to a
variety of bank, card, internet and telephone channels. ValidSoft's solutions
are used to verify the authenticity of both parties to a transaction (Mutual
Authentication), the security of the relevant telecommunication channel used
(Secure Communications), and the integrity of transactions itself (Transaction
Verification) for the mass market, in a highly cost effective and secure
manner while being very easy to use. ValidSoft counts several leading
worldwide service providers and institutions amongst its customers. ValidSoft
is the only security software company in the world that has been granted three
European Privacy Seals. Visit www.validsoft.com.

Forward-Looking Statements

Certain statements contained herein constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements may include, without limitation, statements with respect to
the Company's plans and objectives, projections, expectations and intentions.
These forward-looking statements are based on current expectations, estimates
and projections about the Company's industry, management's beliefs and certain
assumptions made by management. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict. Because such statements involve risks and uncertainties, the actual
results and performance of the Company may differ materially from the results
expressed or implied by such forward-looking statements. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. Unless otherwise required by law, the Company also
disclaims any obligation to update its view of any such risks or uncertainties
or to announce publicly the result of any revisions to the forward-looking
statements made here. Additional information concerning certain risks and
uncertainties that could cause actual results to differ materially from that
projected or suggested is contained in the Company's filings with the
Securities and Exchange Commission (SEC), copies of which are available from
the SEC or may be obtained upon request from the Company.



The below financial statements have been prepared as though the Company will
remain a going concern for the foreseeable future. As described in Note 2 of
the Form 10-K filed on or before April 2, 2013, our auditor's have included an
explanatory paragraph in their report expressing substantial doubt about the
Company's ability to continue as a going concern for the foreseeable future.

                                  2012            2011            2010
REVENUES                        $ 29,202,188    $ 32,232,981    $ 37,168,351
Cost of service                   20,819,327      28,723,265      35,120,916
Selling, general and              17,884,137      16,589,649      9,620,322
administrative expenses
Non-cash compensation to
officers, directors and           6,302,141       6,818,905       5,588,392
Depreciation and amortization     5,710,396       5,254,708       5,312,469
Intangible assets impairment      -               522,726         -
 Total cost and operating        50,716,001      57,909,253      55,642,099
LOSS FROM OPERATIONS              (21,513,813)    (25,676,272)    (18,473,748)
Interest income                   248,017         106,721         239,713
Interest expense                  (780,852)       (201,184)       (1,802,804)
Other income & (expense)          -               460,000         -
Interest expense related to      (1,089,126)     -               (21,094,104)
debt discount
Change in fair value of warrant   -               -               (48,107,969)
Change in fair value of           2,387,326       -               -
conversion feature
Impairment of related party       (1,060,784)     -               -
Amortization of deferred          (531,792)       -               (3,238,602)
financing costs
 Total other income           (827,211)       365,537         (74,003,766)
LOSS BEFORE PROVISION FOR         (22,341,024)    (25,310,735)    (92,477,514)
Provision for income taxes        (289,136)       -               (800)
NET LOSS BEFORE NONCONTROLLING    (22,630,160)    (25,310,735)    (92,478,314)
Net (loss) income attributable    -               -               (5,046)
to non-controlling interest
Equity in earnings of             (501,776)       -               -
unconsolidated joint venture
NET LOSS ATTRIBUTABLE TO          (23,131,936)    (25,310,735)    (92,483,360)
Foreign currency translation      411,205         (624,275)       (1,655,917)
gain (loss)
                                  411,205         (624,275)       (1,655,917)
COMPREHENSIVE LOSS              $ (22,720,731)  $ (25,935,010)  $ (94,139,277)
Net loss per common share and   $ (0.21)        $ (0.24)        $ (1.31)
equivalents - basic and diluted
Weighted average shares
outstanding during the period -   111,322,029     104,326,066     70,670,776
basic and diluted



                                                December 31,     December 31,
                                                2012             2011
Cash and cash equivalents                     $ 1,233,268      $ 6,009,576
Restricted cash                                 1,230,918        190,844
Accounts receivable, net of an allowance for
doubtful accounts of $559,120 and $436,546 at   5,123,803        6,441,528
December 31, 2012 and December 31, 2011
Prepaid expenses and other current assets       1,821,218        1,522,461
 Total current assets                         9,409,207        14,164,409
OTHER ASSETS                                    1,038,306        1,392,837
PROPERTY AND EQUIPMENT, NET                     13,088,271       13,315,687
INTANGIBLE ASSETS, NET                          10,503,026       12,784,199
GOODWILL                                        3,436,731        3,154,971
TOTAL ASSETS                                  $ 37,475,541     $ 44,812,103
Overdraft                                     $ 350,114        $ 312,236
Accounts payable and customer deposits          5,139,292        4,490,455
Deferred Revenue                                252,551          132,467
Accrued expenses and other payables             4,120,536        3,035,758
8% Convertible Notes                            3,067,416        -
Loans payable                                   963,051          960,869
 Total current liabilities                    13,892,960       8,931,785
8% Convertible Notes                            2,565,202        -
Conversion feature                              311,986          -
Trade note payable                              -                271,915
Loan from joint venture partner                 555,907          513,303
 Total long term liabilities                  3,433,095        785,218
 Total liabilities                            17,326,055       9,717,003

Common stock, no par value, 250,000,000
shares authorized, 111,918,386 issued and
outstanding as of December 31, 2012 compared   223,965,907      216,188,899
to 110,525,229 shares issued and outstanding
as of December 31, 2011
Accumulated other comprehensive income (loss)   (732,090)        (1,143,295)
Accumulated deficit                             (203,260,307)    (180,128,371)
 Elephant Talk Communications Corp.           19,973,510       34,917,233
stockholders' equity
NON-CONTROLLING INTEREST                        175,976          177,867
 Total stockholders' equity                   20,149,486       35,095,100
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $ 37,475,541     $ 44,812,103



                                  2012            2011            2010
Net loss                        $ (23,131,936)  $ (25,310,735)  $ (92,483,360)
Adjustments to reconcile net
loss to net cash used in
operating activities:
 Depreciation and               5,710,396       5,254,708       5,312,469
 Provision for doubtful         117,394         318,443         (584,722)
 Stock based compensation       6,302,141       6,319,314       5,080,783
 Non-controlling interest       -               -               5,046
 Equity in earnings of joint    501,776         -               -
 Amortization of shares         -               499,591         507,609
issued for consultancy
 Change in fair value of        (2,387,326)     -               48,167,991
derivative instruments
 Amortization of deferred       531,792         -               3,238,602
financing costs
 Interest expense relating to
debt discount and conversion      1,089,126       -               21,094,104
 Loans to related party         1,060,784       -               -
impairment charge
 Intangible assets impairment   -               522,726         -
Changes in operating assets and
 Decrease (increase) in         (1,040,074)     -               -
restricted cash
 Decrease (increase) in         1,292,883       (1,372,719)     (238,523)
accounts receivable
 Decrease (increase) in
prepaid expenses, deposits and    (247,443)       782,920         229,343
other assets
 Increase (decrease) in
accounts payable, proceeds from   272,500         (140,229)       (1,574,761)
related parties and customer
 Increase (decrease) in         114,673         142,309         (131,886)
deferred revenue
 Increase (decrease) in
accrued expenses and other        1,014,042       (1,587,264)     (2,730,533)
Net cash used in operating        (8,799,272)     (14,570,936)    (14,107,838)
 Purchases of property and      (2,224,923)     (7,721,307)     (3,246,057)
 Restricted cash                -               49              42
 Cash received from             36,188          -               58,253
acquisition of subsidiary
 Impairment of related party    (1,060,784)     -               -
 Payments for acquisition       -               (347,758)       -
 Loan to joint venture party    (146,496)       -               -
 Loan to third party            (111,023)       (448,195)       -
 Net cash used in investing      (3,507,038)     (8,517,211)     (3,187,762)
 Bank overdraft                 -               -               13,769
 Deferred financing costs       (543,437)       -               (205,326)
 Proceeds from 8% Convertible   8,000,000       -               -
Note, net of OID
 Restricted cash                (2,273,720)     -               -
 Payments on convertible note
installment payments and          1,531,293       -               -
 Loan from related party QAT    -               -               2,518,220
Bridge Loan
 Loan from related party        -               -               2,885,000
Bridge SPA
 Proceeds from Private          -               -               14,000,000
Placement Offering
 Trade note payable             (315,000)       271,915         -
 Proceeds from exercise of      1,081,925       26,808,067      502,621
warrants & options
 Placement & solicitation       -               (1,185,741)     (1,814,766)
 Net cash provided by            7,481,061       25,894,241      17,899,518
financing activities
EFFECT OF EXCHANGE RATES ON       48,941          957,785         183,879
NET INCREASE (DECREASE) IN CASH   (4,776,308)     3,763,879       787,797
CASH AND CASH EQUIVALENTS,        6,009,576       2,245,697       1,457,900
CASH AND CASH EQUIVALENTS, END  $ 1,233,268     $ 6,009,576     $ 2,245,697
Cash paid during the period for $ 504,718       $ 39,460        $ 1,295,298

Reconciliation of Non-GAAP Measures to GAAP

Reconciliation of Net loss to Adjusted EBITDA
EBITDA (adjusted)                               2012            2011
Net loss                                        $ (23,131,936)  $ (25,310,735)
Provision for income taxes                        289,136         -
Depreciation and amortization                     5,710,396       5,254,708
Stock-based compensation                          6,302,141       6,818,905
Net loss attributable to non-controlling          -               -
Equity in earnings of unconsolidated joint        501,776         -
Intangible assets impairment charge               -               522,726
Other income & expenses                           827,211         (365,537)
Adjusted EBITDA                                 $ (9,501,276)   $ (13,079,933)

                                               Three months ended December 31,
EBITDA (adjusted)                              2012              2011
Net loss                                       $  (6,661,173)    $ (6,604,981)
Provision for income taxes                        96,961           (800)
Depreciation and amortization                     1,943,902        1,260,808
Stock-based compensation                          1,362,010        1,218,622
Equity in earnings of unconsolidated joint        145,109          -
Intangible assets impairment charge               -                522,726
Other income & expenses                           1,281,356        42,840
Adjusted EBITDA                                $  (1,831,835)    $ (3,560,785)

Investor Relations Contacts:

Steve Gersten
Elephant Talk Communications
+1 813 926 8920

Peter Salkowski
The Blueshirt Group
+1 415 489 2184

Media Contacts:

Public Relations
UK: Fishburn & Hedges
+44 (0)20 7839 4321

US: Fishburn & Hedges
Jessica Morris
+ 1 212 459 6232

SOURCE Elephant Talk Communications, Corp.

Website: http://www.elephanttalk.com
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