Elephant Talk Communications' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Elephant Talk Communications Corp. (ETAK)

Q2 2012 Earnings Call

August 1, 2012 11:00 a.m. ET

Executives

Steven van der Velden - Chairman & CEO
Pat Carroll - CEO ValidSoft

Mark Nije – CFO

Peter Salkowski – Investor Relations

Analysts

Justin Colatosti - Dawson James Securities

Presentation

Operator

Good morning ladies and gentlemen and thank you for standing by. Welcome to the Elephant Talk Communications Corp.’s Second Quarter 2012 Conference Call. At this time, all participants are in a listen-only mode. Following the presentation we will conduct a question and answer session and instructions will be provided at that time. (Operator Instructions). I will now turn the conference over to Mr. Peter Salkowski. Go ahead, sir.

Peter Salkowski

Thank you, Ron. Good morning everyone in the United States and good afternoon to our European listeners and thank you for joining us on Elephant Talk Communications' Second Quarter Shareholder Update Conference Call. On our call today will be Steven van der Velden, Chairman & CEO of Elephant Talk; Mark Nije, CFO; and Pat Carroll - CEO ValidSoft Limited. Following management’s discussion, there will be a Q & A session open to all participants on the call.

Remarks made on this call may contain forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933 as amended and Section 21-E of the Securities Act of 1934 also as amended. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. In evaluating these such statements, perspective investors should review carefully various risks and uncertainties identified on this conference call in the manner stated in the Company’s SEC filings. These risks and uncertainties could cause the Company's actual results to differ materially from those indicated in the forward-looking statements. The Company undertakes no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of the information or future events.

During our call today we will discuss adjusted EBITDA and other non-GAAP financial measures in our press release issued this morning in the United States and this afternoon in Europe and our filings with the ICC each of which is posted on our website. You'll find additional disclosures regarding non-GAAP financial measures including reconciliation of these measures with comparable GAAP measures. With that out of the way, I would now like to turn the call over to Elephant Talk's Chairman and CEO, Mr. Steven van der Velden.

Steven van der Velden

Hello?

Peter Salkowski

Steven, are you there? We can hear you.

Steven van der Velden

You hear me? Okay. Sorry. Thank you, Peter. And thanks to everyone who joined us today for our shareholders update call. The Company’s mobile and Security business has a successful second quarter generating revenue of $2.8 million. This is the highest quarterly revenue produced from this side of the Company and has resulted in the fourth consecutive quarter of sequential growth for mobile and security revenue.

Mobile and Security Solutions accounted for nearly 40% of our total second quarter revenue and was the significant contributor to the Company's margin of $1.9 million. Contributing to the strength of the second quarter, Mobile and Security revenue were two recent accomplishments. One accomplishment came from Elephant Talk and the other one came from ValidSoft as illustrating the Company's unique product offerings in expertise in mobile and fraud solutions market segments.

Our first accomplishment was reaching the milestone of 1 million active mobile subscribers that we fully manage on behalf of Vodafone in Spain. approximately 400,000 mobile users were added to the Elephant Talk platform since the beginning of the year. This accomplishment illustrates the unparalleled and advanced capabilities of our mobile platform. Our second accomplishment was generating a full quarter of high margin revenue from ValidSoft's strategic partnership with Adeptra to provide SIM swap fraud solutions to one of the world's largest banks.

We are product of what we have achieved technically and commercially with these large clients and believe the Company is well positioned for future growth through the expansion of our existing relationships and the creation of new opportunities with the world's largest banks and mobile network operators.

In Germany, we recently announced that the Company began generating revenue from a two year MVNO contract that was singed in the second quarter. Under this agreement Elephant Talk will provide mobile services including airtime to at least 65,000 mobile users. On July 24th, we announced getting to approximately 4,000 mobile users on our platform. The number of mobile users on our platform as of today has already increased to approximately 10,000 and we expect to gradually implement the remaining users over the next five months.

This is the first contact Elephant Talk has signed with a large MVNO in Germany, Europe's largest telecom market. Based on the strong relationship the Company has developed with Toture [ph] Telecom to do mobile, we expect Germany to serve as the strong contributor to our future financial growth. In fact, this contract is expected to generate at least $30 million in revenue for Elephant Talk over the contract period.

In early July, we successfully executed the migration of 100,000 additional mobile users in Spain to the Elephant Talk platform. This migration was accomplished in a single night representing the strength and flexibility of our platform. Elephant Talk now supports over 1.1 million mobile users in Spain. Additionally, we are announcing here for the first time the Elephant Talk was recently selected to provide our mobile platform services to one of the world's largest global mobile operators. For competitive reasons, at this time, we are not permitted to release the name of the operator. What we can mentioned is the initial phase of this agreement has Elephant rolling out mobile services across three major markets. We expect this agreement to go live and to begin generating revenue for the Company by the end of this year with the potential to add several million subscribers to our mobile platform during the lifetime of that agreement.

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