Commtouch Rolls Along - Analyst Blog
November 03 2011 - 11:18AM
Zacks
Commtouch Rolls Along
Ken Nagy, CFA
On November 2, 2011, Commtouch Software Ltd.
(CTCH), a cloud-based Internet security
provider, reported financial results for its third quarter and nine
months ended September 30, 2011.
Commtouch reported mixed results with year over year third quarter
revenues increasing $1.254 million or 27.3 percent to $5.855
million from $4.601 million for the comparable quarter of 2010.
Third quarter 2011 GAAP net income dropped 16.1 percent or $170,000
to $887,000 from $1.057 million during the three months ended
September 30, 2010.
The decrease was primarily due to slightly lower gross margin as
well as a $711,000 year over year increase in total operating
expense and an income tax provision of $275,000 in the third
quarter of 2011 compared to an income tax benefit of $128,000 for
the comparable quarter of 2010.
Still, non-GAAP net income for the third quarter of 2011 increased
year over year by 13.1% to $1.773 million and non-GAAP earnings per
diluted share for the third quarter of 2011 were $0.07 compared to
$0.06 for the three months ended September 30, 2010.
Gross margin decreased moderately year over year from 84.4 percent
to 82.6 percent for the three months ended September 30, 2011.
This marked the Company’s third consecutive quarter of increasing
operating margin as a result of increased revenue growth, execution
of efficiency and improved synergies from acquisitions.
Based on a weighted average number of diluted common shares of
24.726 million, GAAP basic net income per share resulted in $0.04
per share. This compared to diluted net income per share of
$0.04 on a weighted average number of diluted shares of 24.581
million during the three months ended September 30, 2010.
Commtouch’s balance sheet continued to improve with cash and
equivalents increasing by $4.214 million since the beginning of the
year to $17.646 million and working capital improving by $1.487
million to $15.080 million for the period ended September 30,
2011.
Although results for the three months were mixed, Commtouch saw
growing demand for its products, including the signing of a new
agreement with a global communications leader, as well as
increasing contracts with existing customers.
Additionally, management reaffirmed its guidance for its fiscal
2011 full year results and continues to expect revenues and net
income to be in the mid-range of its previously provided guidance
of revenues of between $22.5 million and $23.5 million, and net
income of between $6.2 million and $6.7 million on a non-GAAP
basis.
It should also be noted that in October, 2011, Mr. Shlomi Yanai was
appointed as the Company’s chief executive officer.
Mr. Yanai was previously the vice president of corporate
development strategy at SafeNet, were he led strategic decisions
regarding product and solution partnerships, as well as mergers and
acquisitions.
Moreover, Mr. Yanai expects to further develop untapped potential
and leverage the Company’s strong key assets which include its top
tier customer base in cloud technology, its strong market traction
in the internet security space and its top quality global
team.
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