Q1 CEO MESSAGE
FOR SHAREHOLDERS
June 1, 2006
Dear shareholders, partners and friends
I’m pleased to confirm that 2006 is indeed off to a
great start as evidenced by our strong and profitable
first quarter results. Through the implementation of
our carefully crafted global growth strategy, XFONE,
Inc. has improved its top and bottom line results and
expanded its business. Total revenues increased to $7.8
million for the three months ended March 31, 2006 –
up 26% over $6.2 million in revenues reported for the
first quarter of 2005. Net income also improved, rising
35% to $111,000 from $82,000.
Driven largely by operational improvements and investments,
we believe that we have only begun to realize the value
inherent in our worldwide business operations and are
actively engaged in fostering an environment for those
businesses to grow rapidly and profitably.
Quarterly revenues (in
$ millions)
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We are particularly enthused by the progress we made
on the U.S. operations acquisition front in the first
quarter. XFONE USA not only completed the acquisitions
of I-55 Internet Services and I-55 Telecommunications
(both acquisitions began in late 2005), but it also
closed on the asset purchases of EBI Comm, Inc. and
Canufly.net, Inc., both internet service providers operating
in Mississippi.
Collectively, these four acquisitions are serving to
greatly strengthen XFONE USA’s growth platform in the
U.S. Gulf Coast region, providing for a much broader
customer service footprint that now spans Mississippi,
Alabama and Louisiana. Moreover, through cross-marketing
of bundled communications products and services to our
expanded customer base, XFONE USA is focused on materially
increasing recurring revenue in the quarters ahead,
while actively promoting enhanced customer loyalty to
the XFONE brand.
During the three months ended March 31, 2006, XFONE
USA increased its revenues 125% to $3.6 million – rising
from $1.6 million posted in the same quarter of the
prior year. Through continued organic growth of our
expanded US operations, coupled with ongoing execution
of our growth through acquisition strategy within the
Gulf Coast region, we remain highly confident that XFONE
USA will be a very strong performer for our Company
in the year ahead. Moreover, we have reason to believe
that the U.S. market will represent the greatest long
term growth potential for XFONE, Inc.
XFONE 018, our Israel-based business, also enjoyed a
strong first quarter. Having now served over 230,000
registered and non-registered users of our international
telecommunications services since it launched operations
in December 2004, XFONE 018 booked revenues of $1.1
million in the first quarter of 2006; more than tripling
revenues when compared to the $373,000 reported in the
first quarter of 2005. XFONE 018 was also able to breakeven
on an EBITDA basis during the first quarter, compared
to a loss of $160,000 in the prior year period helping
to support our belief that this business will prove
to be a material contributor to XFONE, Inc.’s overall
growth and profitability in 2006.
Although revenues from Swiftnet, our United Kingdom
operations, fell 24% to $3.2 million in the first quarter,
down from $4.2 million in the 2005 first quarter period,
our management team has been engaged in a series of
strategic activities in order to strengthen our long
term growth prospects in that region of the world, Of
particular note is our recent purchase of a majority
stake in Story Telecom and our recent acquisition of
Equitalk.co.uk Limited, a privately held telephone company
that holds the distinction of being the U.K.’s first
fully automated e-telco.
Swiftnet and Equitalk will be re-branded and combined
under “XFONE U.K.” Through the appointment of Equitalk’s
founder John Burton as the new Managing Director of
XFONE U.K., we are confident that we have the right
leadership, the right mix of products and services,
and the right execution strategy to position XFONE U.K.
as a noted leader in the U.K. telecom industry, as well
as a customer-preferred supplier of a comprehensive
range of low cost, high quality voice, video and data
products.
Clearly the stage for growth in 2006 has been set. Early
indications are very encouraging across each of our
businesses, supporting our position that we are poised
to achieve a record year of revenue growth. In fact,
I’m pleased to reiterate revenue guidance for the year
of $36 million to $38 million, and note that we remain
very optimistic that 2006 will mark our seventh-consecutive
year of profitability.
With strong cash and accounts receivable positions,
approximately $8.7 million as of March 31, 2006, as
well as a defined road map to reach our ambitious growth
objectives in each of our businesses, XFONE is off to
a very exciting year. I would like to reiterate that,
the ongoing support and dedication of our employees,
partners, customers and shareholders has been our most
valuable asset and will continue to playa leading role
in driving our long term success.
I look forward to keeping you updated on all of our
accomplishments in future quarterly letters.
Yours truly,
Guy Nissenson
President and Chief Executive Officer
XFONE, Inc.
About XFONE, Inc.
A U.S.-domiciled corporation, XFONE, Inc. is an international voice, video and data communications services provider with operations in the United Kingdom, the United States and Israel that offers a wide range of services, which include: local, long distance and international telephony services; prepaid and postpaid calling cards; cellular services; Internet services; messaging services (Email/Fax Broadcast, Email2Fax and Cyber-Number); and reselling opportunities. The Company serves customers across Europe, Asia, North, Central and South America, Australia and Africa.
This press release 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 press release, 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 Securities and Exchange Commission.
| For More Information, Please Contact: |
 |
| U.S.
IR Contact |
John Nesbett/Jennifer Beloeau
Institutional Marketing Services (IMS)
Phone: 1.203.972.9200.
E-mail: jnesbett@institutionalms.com |
|
| Xfone Contact |
|
Niv Krikov
Chief Financial Officer
Phone: + 972.39254446 (Israel)
E-mail: E-mail: niv@xfone.com |
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