Record Results for Q3: Revenues Up 44% (YOY) to NIS 105 Million,
Operating Income Up 106% (YOY) to NIS 12 Million PETACH TIKVA,
Israel, November 6 /PRNewswire-FirstCall/ -- Internet Gold, (Nasdaq
and TASE: IGLD) today reported its financial results for the third
quarter and nine months ended September 30, 2006. Highlights -
Record revenues: Q3 sales crossed the NIS 100 million milestone -
Record operating income: more than doubled compared with Q3 2005 -
Strong growth in Smile.Communications: broadband customer base grew
by 16,500 new subscribers during the quarter; International Long
Distance traffic reached a new high; continued strong demand for
business services - Smile.Media achieved slight growth despite
difficult e-Advertising environment: rise in e-Commerce revenues
compensated for temporarily reduced e-Advertising budgets during
the war period - Pending merger of 012-Golden Lines with
Smile.Communications Ltd. continues to progress on track: the
Company is working closely with regulators to finalize process as
soon as possible. Financial Results Revenues for the third quarter
of 2006 reached a new high of NIS 105.3 million (US$ 24.5 million),
an increase of 44% compared with NIS 73.3 million in the third
quarter of 2005, and 8% compared with the second quarter of 2006.
Operating income for the quarter reached a record of NIS 11.8
million (US$ 2.7 million), an increase of 106% compared to NIS 5.7
million in the third quarter of 2005 and 4% compared to the second
quarter of 2006. Net income for the quarter reached NIS 7.0 million
(US $1.6 million), or NIS 0.38 (US$ 0.09) per share, an increase of
327% compared to NIS 1.6 million, or NIS 0.09 per share, for the
third quarter of 2005, and 5% compared to the second quarter of
2006. The Company's net results for the third quarter were
significantly impacted by two one-time expenses: - A provision of
NIS 1.5 million (US $0.35 million) taken in respect of a regulatory
dispute (currently we plan to appeal) with Israel's Ministry of
Communications. - A one-time expense of NIS 1.3 million (US $0.3
million) reflecting the legal and other costs associated with the
Company's reorganization and spin-off of Smile.Media and
Smile.Communications. Comments of Management Commenting on the
results, Eli Holtzman, Internet Gold's CEO, said, "We are extremely
pleased to have delivered another quarter of record revenues and
operating profits despite the summer's wartime environment, which
we feared would negatively impact our business. Although it did
reduce our e-Advertising revenues, the rise in revenues generated
by our e-Commerce properties and International Telephony businesses
more than compensated. In parallel, we continue to benefit from the
emergence of the Internet during this challenging period as the
most reliable source of up-to-date news and the most convenient
'place' to go for shopping and entertainment. In response, we
focused on effective marketing, and were rewarded with one of our
strongest-ever quarters of new-user subscriptions. "The quarter was
equally productive from a strategic point of view. We were pleased
to have completed the spin-off of our two fully-owned pure-play
subsidiaries, and later announced the 012-Golden Lines merger plan.
These are the critical first steps of a plan that we believe will
build the Company to the next level with a revenue base of more
than a billion shekels per year and increasing profitability. As
such, we believe we are on a road that will create significant
value for our shareholders, customers and employees already in the
year ahead and over the long term." Business Segment Overview
Smile.Communications Ltd.: During the third quarter, the continued
growth of all Smile.Communications' activities delivered a 10%
increase in revenues compared with the second quarter of 2006, and
a 44% increase year-over-year compared with the third quarter of
2005. - Smile.Net - ISP: The Company's customer base grew by
approximately 16,500 (net) new broadband subscribers during the
third quarter, a reflection of the success of its aggressive
marketing efforts. Sales of Value-Added Services (Anti-Virus,
Anti-Spam and Safety Net) during the nine month period increased by
38% compared with the first nine months of 2005. - Smile.015 -
International Telephony: Telephony revenues grew significantly
during the quarter. This reflected both the wartime environment,
which boosted telephone traffic, and the ongoing organic growth of
Israel's International Long Distance (ILD) market. In fact, during
the first half of 2006, Israel's overall ILD traffic increased by
12% compared to the comparable period in 2005. - Smile.Biz -
Business Services: The Group's business service revenues for the
nine-month period were up 23% compared with the parallel period of
2005. This reflected the Company's success in capturing market
share for its value-added IT infrastructure deployment and
integration services, and the continued strong growth of its sales
of corporate communication packages. Smile.Media Ltd.: Despite the
temporary slowdown of Israel's entire Media industry during the war
in Lebanon, Smile.Media's third quarter revenues rose by
approximately 1% compared with the second quarter of 2006. This
reflected the strong growth in e-Commerce revenues, which more than
compensated for the decline in e-Advertising revenues. For the
nine-month period, Smile.Media's revenues rose by 33% compared with
the parallel period in 2005. - e-Advertising / Content: During the
third quarter, revenues from the Group's 12 portal properties
declined by less than 5% compared to the second quarter of 2006.
This reflected the temporary slowdown in the e-Advertising market
during the war period. On a year-over-year basis, the Group's
e-Advertising revenues rose by 35%. - Smile.Shops: Third quarter
revenues from the Group's e-Commerce properties rose by 33%
compared to the second quarter of 2006, reflecting an increase of
all online activities during the war months. For the nine month
period, e-Commerce sales were up by 21% compared to the first nine
months of 2005. About Internet Gold Internet Gold is Israel's
leading IP Group with a major presence across all Internet-related
sectors. Its Smile.Communications segment offers a variety of
Internet access and related value-added services, international
telephony and enterprise/IT integration services. Its Smile.Media
segment manages a growing portfolio of Internet portals and
e-Commerce sites. Internet Gold has entered into an agreement to
acquire 60% of the control and equity in 012 Golden Lines Ltd
("012") based on a valuation of US$ 140 million. 012 is a major
Internet Service Provider with revenues of $ 138.8 million in 2005
and is also a leader in Israel's Voice Over Broadband domestic
telephony. The agreement is subject to the approval of both boards
of directors and the relevant regulatory authorities. According to
the agreement, following the acquisition, 012 will merge with
IGLD's Smile.Communications activities. Internet Gold is part of
the Eurocom communications group. Its shares trade on the Nasdaq
Global Market and on the Tel Aviv Stock Exchange. For additional
information about Internet Gold, please visit its investors' site
at http://www.igld.com/. NOTE A: Convenience Translation to Dollars
For the convenience of the reader, the reported NIS figures of
September 30, 2006 have been presented in thousands of U.S.
dollars, translated at the representative rate of exchange as of
September 30, 2006 (NIS 4.302 = U.S. Dollar 1.00). The U.S. Dollar
($) amounts presented should not be construed as representing
amounts receivable or payable in U.S. Dollars or convertible into
U.S. Dollars, unless otherwise indicated. Certain statements made
herein that use the words "estimate," "project," "intend,"
"expect," "believe" and similar expressions are intended to
identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve known and unknown risks and
uncertainties which could cause the actual results, performance or
achievements of the Company to be materially different from those
which may be expressed or implied by such statements, including,
among others, changes in general economic and business conditions
and specifically, decline in demand for the Company's services,
inability to timely develop and introduce new technologies,
services and applications and loss of market share and pressure on
prices resulting from competition. For additional information
regarding these and other risks and uncertainties associated with
the Company's business, reference is made to the Company's Annual
Report filed with the Securities and Exchange Commission and its
other reports as filed from time to time with the Securities and
Exchange Commission. For further information, please contact: Lee
Roth KCSA Worldwide +1-212-896-1209 In Israel: Mor Dagan Investor
Relations +972-3-516-7620 Ms. Idit Azulay, Internet Gold
+972-3-939-9848 Consolidated Balance Sheets Convenience translation
into U.S. dollars September September December September 30 30 31
30 2006 2005 2005 2006 (Unaudited) (Unaudited) (Audited)
(Unaudited) New Israeli Shekels - in thousands US$ in thousands
Current assets Cash and cash equivalents 261,322 260,124 265,488
60,744 Short-term investments 883 1,156 804 205 Trade receivables,
net 78,380 67,160 67,988 18,219 Other receivables 19,955 13,421
12,201 4,639 Deferred taxes 732 1,359 1,111 170 Total current
assets 361,272 343,220 347,592 83,977 Investments Deferred taxes
139 40 40 32 Other investments 200 275 275 46 339 315 315 78
Property and equipment, net 37,509 38,340 36,222 8,719 Other assets
and deferred charges 114,506 119,508 117,889 26,617 Assets
allocated to discontinued operations - 150 - - Total assets 513,626
501,533 502,018 119,391 Internet Gold - Golden Lines Ltd.
Convenience translation into U.S. dollars September September
December September 30 30 31 30 2006 2005 2005 2006 (Unaudited)
(Unaudited) (Audited) (Unaudited) New Israeli Shekels - in
thousands US$ in thousands Current liabilities Short-term bank
loans 16,188 7,080 12,684 3,763 Accounts payable 57,731 65,784
55,987 13,419 Other payables 24,431 19,662 23,877 5,679 Accured
liabilities from marketable securities - 398 1,045 - Total current
liabilities 98,350 92,924 93,593 22,861 Long-term liabilities
Long-term obligations under lease agreement 22,035 41,148 33,570
5,122 Liability for termination of employer- employee relations,
net 7,276 7,124 7,506 1,691 Long term obligation under forward
contract - 140 - - Convertible debentures 208,148 216,632 218,676
48,384 Total long-term liabilities 237,459 265,044 259,752 55,197
Liabilities allocated to discontinued operations - 265 - -
Shareholders' equity Ordinary shares 197 197 197 45 Additional
paid-in capital 216,864 215,040 216,864 50,410 Proceeds from option
debentures and warrants 15,612 8,499 6,675 3,629 Accumulated
deficit (54,856) (80,436) (75,063) (12,751) Total shareholders'
equity 177,817 143,300 148,673 41,333 Total liabilities and 513,626
501,533 502,018 119,391 shareholders' equity Internet Gold - Golden
Lines Ltd. Consolidated Statements of Operations Nine month period
ended Three month period ended September 30 September 30 2006 2005
2006 2005 (Unaudited) (Unaudited) (Unaudited) (Unaudited) New
Israeli Shekels - in thousands Revenues 297,346 216,613 105,275
73,273 Costs and expenses: Cost of revenues 182,274 113,372 65,112
39,159 Selling and marketing expenses 56,679 57,589 19,533 20,023
General and administrative 25,581 23,892 8,843 8,360 expenses Total
costs and 264,534 194,853 93,488 67,542 expenses Income from 32,812
21,760 11,787 5,731 operations Financing expenses, 8,627 7,838
1,809 3,523 net Other (income) expenses, net 2,792 (207) 2,825 (75)
Income after financing expenses 21,393 14,129 7,153 2,283 Company's
share in net loss of unconsolidated 240 - 27 - investee Minority
interest in operations of consolidated (121) - (94) - subsidiaries
Tax expenses 1,067 1,221 264 653 Net income 20,207 12,908 6,956
1,630 Income per share, basic and diluted Net income per share (in
NIS) 1.10 0.70 0.38 0.09 Weighted average number of shares
outstanding (in thousands) 18,432 18,432 18,432 18,432 Consolidated
Statements of Operations (continued...) Convenience translation
into U.S. dollars Nine month Year ended period ended December 31
September 30 2005 2006 (Audited) (Unaudited) New Israeli US$ in
Shekels - in thousands thousands Revenues 297,707 69,118 Costs and
expenses: Cost of revenues 159,943 42,370 Selling and marketing
expenses 75,710 13,175 General and administrative expenses 33,156
5,946 Total costs and expenses 268,809 61,491 Income from
operations 28,898 7,627 Financing expenses, net 9,403 2,005 Other
(income) expenses, net (237) 649 Income after financing expenses
19,732 4,973 Company's share in net loss of unconsolidated investee
- 56 Minority interest in operations of consolidated - (28)
subsidiaries Tax expenses 1,451 248 Net income 18,281 4,697 Income
per share, basic and diluted Net income per share (in NIS) 0.99
0.25 Weighted average number of shares outstanding (in thousands)
18,432 18,432 DATASOURCE: Internet Gold CONTACT: Ms. Idit Azulay,
Internet Gold, +972-3-939-9848,
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