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Commtouch Reports Third Quarter 2012 Results

Stocks in this article: CTCH

"In addition to enhanced execution and posting a sharp increase in new bookings activity compared to the year ago, Commtouch made significant progress towards our strategic evolution into a cloud-driven 'security as a service' solutions provider.  We remain on track with the planned rollout of Commtouch's new Mobile Security SDK product for Android devices in the current quarter as well as our next generation cloud-based 'security as a service' offerings for web and email which are targeted for release in the first half of 2013. Our progress to date in the development of these new growth engines, and our continued success in significantly increasing Commtouch's new business bookings, are combining to provide us increased confidence in our strategy and a solid foundation for future growth," concluded Mr. Yanai.

Today the company also announced that Mr. Ron Ela has indicated his intention to transition out of his current role as Chief Financial Officer by December 31, 2012. The company has initiated a comprehensive executive search process and intends to appoint the new incoming Chief Financial Officer by year end.

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 third quarter Commtouch repurchased 297,000 shares at an aggregate cost of approximately $828,000. As of September 30, 2012, approximately 495,000 shares have been repurchased through the program at an aggregate cost of approximately $1.4 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."

Third Quarter 2012 Business Highlights:

  • Commtouch announced the acquisition of FRISK Software International's Antivirus business, helping accelerate the company's strategy to deploy an expanded range of antivirus solutions for the OEM and service provider market, including private label solutions.  
  • Commtouch's enhanced global sales and marketing team continued to deliver sharply higher new booking activity during the third quarter.  Overall, new booking activity over the last six months has already exceeded total new booking activity in the preceding twelve month period.  Under Commtouch's long-term agreement model, the majority of contracts signed average approximately three years in length.  These new multi-year contracts are expected to begin coming online and positively impacting Commtouch's revenue growth as they ramp in the coming quarters.
  • Key new client wins during the quarter reflected our enhanced international sales and marketing penetration, including:
    • Highlighting penetration into Latin America, a new managed service provider customer headquartered in Brazil awarded Commtouch a three year contract valued at $2.2 million for Internet security solutions supporting their customers throughout Brazil and Latin America.  
    • AVG Technologies, a leading vendor of security software, and Commtouch announced a strategic long-term partnership during the quarter. AVG has deployed Commtouch's GlobalView Web URL technology into AVG Family Safety and AVG CloudCare™ underscoring Commtouch's uniquely innovative approach to protection.
    • One of the world's leading Internet search engine and web portal companies selected Commtouch to provide targeted URL filtering data services. 
    • Commtouch was selected by a French provider information security offerings and Unified Threat Management solutions to provide its GlobalView URL Classification Technology in a three year contract.  
    • In Germany, a provider of custom solutions for optimized security and workflow added Commtouch's Command antivirus solution to their suite of Commtouch solutions.
    • Customer renewal activity during the quarter was strong with more than 95% of eligible customers renewing.

Business Outlook

Based on the company's nine month year-to-date results and the projected influence of the acquisition of FRISK Software International's Antivirus business which was announced late in the third quarter and closed on October 1, 2012, as well as current expectations for the remainder of 2012, the company is updating its current outlook for 2012.  The company now anticipates full year 2012 revenue will be approximately $23.0 million, in line with the prior full year 2011.  Commtouch expects to return to sequential revenue growth beginning in the current fourth quarter of 2012.  Full year 2012 non-GAAP net income is expected to be greater than $4.0 million as the company accounts for the initial ramp of the FRISK business as well as higher costs associated with the company's investment and integration around FRISK within Commtouch, among other factors.

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

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