XFONE, Inc. (NYSE Amex and TASE: XFN) (�XFONE� or �the
Company�) today released the following letter to shareholders:
Dear Xfone Shareholders, Customers and Friends,
I am pleased to report our 2009 first quarter results. In spite
of the challenging economic landscape, we reported a solid first
quarter performance with revenues increasing 36% to $21.5 million
and EBITDA (earnings before interest, taxes, depreciation and
amortization) of $2 million. Since last year we have dramatically
enhanced the size and scope of our Company with the acquisition of
NTS Communications in Texas and positioned Xfone to realize a
growing revenue percentage from the higher margin
Fiber-To-The-Premise (FTTP) offering. We have an exceptional
customer base, industry leading technology and a diverse revenue
stream. Furthermore, a new growth engine has emerged with the rural
broadband build-out initiative from Washington. While still early
in the process, we believe this presents an opportunity for Xfone
to accelerate its penetration of new markets with an extremely low
cost of capital for current shareholders.
Earnings for the quarter benefited from a favorable exchange
rate. Net financing income increased to $1.5 million in the quarter
ended March 31, 2009 compared to a net financing expense of
$903,169 in the quarter ended March 31, 2008, primarily attributed
to the effect of fluctuation in the exchange rate of the New
Israeli Shekel (NIS) on the Company�s bonds which are stated in NIS
and linked to the Israeli Consumer Price Index (CPI). The Bonds,
which are traded in Israel on the Tel Aviv Stock Exchange, were
issued to facilitate the acquisition of NTS.
Net income was $2.3 million, or $0.13 per share assuming 18.4
million diluted shares through March 31, 2009, compared to net
income of $81,130 or $0.005 per share, assuming 15.4 million
diluted shares outstanding through March 31, 2008.
Our non-U.S. subsidiaries continued to contribute cash flow to
the business even in this global economic slowdown. Nonetheless,
currency fluctuation significantly impacted their reported
revenues. For example, our UK revenues showed a decline of 24% to
$3.7 million compared to the same quarter last year.
Notwithstanding the currency valuation, nominal revenues in the UK
were flat compared to the same quarter last year. Likewise,
revenues at Xfone 018, our Israeli division, decreased 4.6% to $2.2
million for the first quarter of 2009 compared to the first quarter
of 2008 due to the revaluation of the U.S. Dollar to the New
Israeli Shekel in the quarter ended March 31, 2009. Notwithstanding
this currency valuation, the nominal revenues in Israel
demonstrated an increase of 11% as a result of Xfone 018�s new
marketing initiatives.
Looking forward, we believe that there are two strategic
initiatives that will be important for building shareholder value
over the next few years:
Growing Our FTTP Business
FTTP is a key profitability driver for our Company and we
believe there are significant opportunities for our services in
select communities. Our ability to provide a voice, video and data
"triple play" offering attracts customers who, because they are
subscribing to three services rather than one, generate higher
monthly revenue per customer. For example, Average Revenue Per User
(ARPU), at March 31, 2009 for our non-FTTP U.S. customers
approximated $75 per month, while ARPU for residential FTTP
customers exceeded $175 per month with business FTTP customers
exceeding $300 per month. Furthermore, these customers tend to
stay; monthly business and residential FTTP had an attrition rate
of approximately just 1% and 1.7%, respectively during the
quarter.
In addition to building out the Levelland network and beginning
the initial sales process in this market, we have applied for
additional RUS broadband grants/loans. If approved, these new
projects will extend our FTTP footprint to include six communities
in southern Louisiana and will add approximately 20,000 additional
passings to our "triple play" network.
Stimulus Plan Offers a New Opportunity for Grants and Low
Cost Capital
We remain highly focused on obtaining both grants and loans
currently being made available under the federal government's
stimulus plan for the construction of advanced broadband networks
in select secondary markets in the United States. We believe that
our previous experience working with the government on the buildout
of our Levelland network positions us very competitively as a
potential recipient of federal funding.
A major challenge with FTTP is the capital expense associated
with building out the network. One of the few advantages that have
come out of the recession is the $790 billion Economic Stimulus
Package. In part, it addresses the need for investment in broadband
Internet access so that business and residential customers in rural
and other underserved areas can link to the global economy. At
Xfone, we are well aware of the need for improved communications
infrastructure for rural and underserved markets. A cornerstone of
our long term growth plan is to provide improved voice, video and
data services to these markets across the U.S.
On a separate note, we recently announced the appointment of
Virchow, Krause & Company, LLP and Baker Tilly (Horowitz Idan
Goldstein Sabo Tevet), independent members of Baker Tilly
International, as our new auditors. Baker Tilly International is
the eighth largest accounting network in the world with 145 members
in 110 countries. With a presence in the United States, United
Kingdom and Israel, our new auditors have the scale and expertise
to handle Xfone�s audit requirements as we continue to grow our
business.
Thank you for your continued support of Xfone.
Sincerely,
Guy Nissenson
President and Chief Executive Officer
Xfone, Inc.
This letter contains forward-looking statements. The words or
phrases "should," "would be," "will allow," "intends to," "will
likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are
intended to identify "forward-looking statements." The Company's
financial results reflected above should not be construed by any
means as representative of the current or future value of its
common stock. All information set forth in this letter, except
historical and factual information, represents forward-looking
statements. This includes all statements about the company's plans,
beliefs, estimates and expectations. These statements are based on
current estimates and projections, which involve certain risks and
uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. These risks and
uncertainties include issues related to rapidly changing technology
and evolving standards in the industries in which the Company and
its subsidiaries operate; the ability to obtain sufficient funding
to continue operations, maintain adequate cash flow, profitably
exploit new business, and license and sign new agreements; the
unpredictable nature of consumer preferences; and other factors set
forth in the Company's most recently filed annual report and
registration statement. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the
date hereof. Readers should carefully review the risks and
uncertainties described in other documents that the Company files
from time to time with the U.S. Securities and Exchange
Commission.
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