Annual Revenues up 20% Year-Over-Year

ROSH HA'AYIN, Israel, February 17 /PRNewswire-FirstCall/ -- ECtel Ltd. (NASDAQ: ECTX), a leading global provider of Integrated Revenue Management (TM) (IRM(TM)) solutions, today reported financial results for the fourth quarter and full year of 2008.

    Fourth Quarter and Full Year 2008 Highlights
    - Annual revenues up 20% year-over-year reaching $25.0 million
    - Fourth Quarter revenues of $4.8 million, at high level of preliminary
      results revenue range
    - Strong order generation with Book-to-Bill exceeding one in the fourth
      quarter
    - Ending cash balance totaled $17.6 million
    - Initiated proactive efficiency measures with view to preserving cash
      and achieving break-even in second half of 2009

Fourth Quarter 2008

Revenues for the fourth quarter of 2008 totaled $4.8 million, compared to $6.6 million in the fourth quarter of 2007, and $7.1 million revenues in the third quarter 2008. Revenues for the fourth quarter, and subsequently the full year, were lower than initially anticipated primarily due to three factors: the longer and deeper impact of the global macroeconomic crisis on the Company's activities visible in a lengthening in sale cycles, the delay in recognizing revenues related to a major project and the impact of substantial currency fluctuations against the US Dollar.

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Gross margin for the fourth quarter 2008 totaled 34%, compared to the 55% margin in the fourth quarter of 2007, and 50% margin in the third quarter 2008. The lower gross margin primarily resulted from the revenue shortfall outlined above.

Non-GAAP operating loss for the fourth quarter of 2008 totaled $3.0 million, compared to non-GAAP operating loss of $0.8 million in the fourth quarter of 2007 and $1.7 million non-GAAP operating loss in the previous quarter. Non-GAAP net loss for the fourth quarter of 2008 totaled $2.9 million, or $0.18 loss per share, compared with a Non-GAAP net loss of $0.5 million, or $0.03 loss per share, in the fourth quarter of 2007. Non-GAAP net loss for the third quarter 2008 totaled $1.6 million, or $0.10 per share.

GAAP Operating loss for the fourth quarter of 2008 totaled $3.2 million, compared to an operating loss of $1.0 million in the fourth quarter of 2007 and an operating loss of $2.0 million for the third quarter of 2008. GAAP Net loss for the fourth quarter of 2008 totaled $3.4 million or $0.21 loss per share, compared to a net loss $2.2 million or $0.13 per share in the fourth quarter of 2007. Net loss for the third quarter 2008 totaled $1.9 million or $0.11 per share.

Cash, cash equivalents, and marketable bonds and securities as of December 31, 2008 were $17.6 million or $1.08 per share, compared to $19.3 million or $1.2 per share as of September 30, 2008.

Full Year 2008

Revenues for full year 2008 increased 20% reaching $25.0 million, compared to $20.9 million in 2007. Gross margin for 2008 was 45%, compared to the 51% margin in 2007.

Non-GAAP operating loss for 2008 totaled $8.1 million, compared to $7.2 million non-GAAP operating loss in 2007. Non-GAAP net loss for 2008 totaled $7.0 million, or $0.42 loss per share, compared to Non-GAAP net loss of $6.0 million, or $0.36 loss per share, in 2007.

GAAP operating loss for 2008 totaled $9.1 million, compared to an operating loss of $8.5 million in 2007. Net loss for 2008 totaled $8.3 million or $0.50 loss per share, compared to a net loss of $8.8 million or $0.53 per share in 2007.

ECtel's non-GAAP operating income (loss) and net income (loss) differs from results reported under U.S. GAAP. This is due to adjustments made for amortization of acquisition related intangible assets, share-based compensation expenses, expenses related to a one-time due-diligence process and the impact of the permanent impairment charge and recovery related to certain securities in December 2007 and 2008. The accompanying tables provide a full reconciliation from GAAP to Non-GAAP results.

Sale of Certain Auction Rate Securities at Full Par Value and Partial Impairment of Balance of ARS

During October 2008, the Company sold $1.725 million of Auction Rate Securities ('ARS') purchased from Credit Suisse Securities (USA) LLC for cash at full par value. By December 31, 2008 the Company received the full amount in cash, consequently the Company recorded a capital gain in the amount of $1.6 million in the fourth quarter of 2008.

As of December 31, 2008, the Company had $2.2 million of principal invested in its remaining two outstanding ARS, issued by Lehman Brothers (net of unrealized loss of $0.5 million, previously recorded as a reduction of shareholders' equity). These ARS were ranked as AA at the time of purchase. All securities continue to pay interest in accordance with their stated terms. However, since these ARS have experienced multiple failed auctions due to a lack of liquidity in the market for these securities, based on third party indications, the Company has impaired its ARS portfolio and recorded, in the fourth quarter 2008, on the GAAP basis, an impairment charge of $1.8 million in the consolidated statement of operations. All of these ARS are classified long-term investments.

'In the fourth quarter of 2008 we saw the visible impact of the lengthening and deepening of the global macroeconomic crisis which, on the one hand is causing a lengthening of sales cycles as spending tightens, while, on the other hand, we are seeing demand for cost saving products such as ECtel's, remaining intact and not being compromised,' commented Itzik Weinstein, President and CEO of ECtel. 'During the quarter though, we saw a decline in revenues, driven by these longer sales cycles as well as the delay in receiving an acceptance of a major order, subsequently impacting our profitability metrics. At the same time, we also saw an increase in our backlog as we added several key orders to our backlog contributing to a book-to-bill in excess of one, as well as good visibility for the coming quarters on certain accounts.'

'As the global markets continue to be in turmoil, we have adopted a series of proactive efficiency measures including a reduction in management and employee salaries, downsizing in workforce, cost efficiencies in the professional service (PSO) functions as well as other operating expenses. As we enter 2009, it is our clear goal to preserve cash, without compromising either our development or growth prospects, with a view to achieving break-even during the second part of 2009,' added Mr.