CommerceTel Announces Fourth Quarter 2011 Financial Results

SAN DIEGO, CA--(Marketwire - Apr 17, 2012) - CommerceTel Corporation (OTCBB: MFON), an award-winning provider of proprietary mobile marketing technologies and solutions, announced today record revenue, gross profit and reduced operating losses for the three and twelve month periods ending December 31, 2011.

• 2011 revenues increased 175% to $2,524,265, from $919,216 in 2010.
• Q4 2011 revenue increased to $987,635 from $141,000 in Q1, 2011, a 600% increase.
• 2011 gross profit increased 207% to $1,537,411.
• Gross margins for 2011 increased to 60.9% from 54.5% in 2010.

Dennis Becker, President & CEO was quoted as saying -- "2011 was a year of successful growth and expansion for CommerceTel. In 2011, we completed three acquisitions and successfully integrated the companies to yield organic growth and drive our annual revenue run rate up 400%. For example, the Txtstation and Mobivity acquisitions added almost $2 million in incremental revenues and increased our revenue run rate more than 100% despite paying less than twenty percent of our outstanding shares in equity consideration for the assets. For the twelve months ending December 31^st, 2011 our SaaS technology was implemented into 2,500 plus local advertiser locations compared to less than 100 in 2010. The growth of the business has continued through the March 2012 quarter, where we have exceeded 3,000 locations. We continue to see strong interest in our service and technology with major sports and entertainment brands. We believe the Company will produce record revenues in 2012."

Overview

CommerceTel is a provider of technology that enables major brands and enterprises to engage consumers via their mobile phone. The Company's proprietary "C4" Mobile Marketing and Customer Relationship Management (CRM) platform is a hosted solution enabling clients to develop, execute, and manage a variety of engagements to a consumer's mobile phone. CommerceTel generates revenue from licensing its software to clients through its Software-as-a-Service (SaaS) model, per-message and per-minute transactional fees, and customized professional services.

Fourth Quarter 2011 Financial Results

Quarterly revenue growth through 2011 increased 600% from $141,000 in the first quarter of 2011 to $987,635 in the fourth quarter of 2011. Fourth quarter revenues were up 17% sequentially from the third quarter of 2011 and exceeded all of 2010 revenues of $919,216. The Company steadily reduced its monthly cash burn from operating activities from approximately $108,500 per month in the first quarter of 2011 to $32,500 per month in the fourth quarter of 2011.

Cost of goods sold was $416,249 in the fourth quarter of 2011 compared to $80,513 in the fourth quarter of 2010, with a gross margin profit of $571,386 in the fourth quarter of 2011 compared to a gross profit of $155,608 in the same period a year ago. The main reason for the decrease in the gross margin was increased mobile termination costs as compared to the fourth quarter 2010 resulting from redundant services obtained from the three acquisitions completed in 2011. These costs are expected to decrease significantly in 2012 as pricing synergies are obtained by consolidating the operations of the acquired companies.

Operating expenses for the fourth quarter of 2011 were $1,392,185, consisting of approximately $158,000 in selling expenses and approximately $1.06 million in general and administrative expenses. Operating expenses include $250,532 in share-based compensation. Operating loss was $11,609,047 in the three months ended December 31, 2011 compared to an operating loss of $455,456 in the corresponding period a year ago. Excluding non-cash compensation expenses and impairment charges to goodwill and intangible assets, operating income was approximately ($570,000) for the fourth quarter of 2011 compared to approximately ($405,000) in the fourth quarter 2010.

Net loss attributable to common shareholders was $12,429,846 for the fourth quarter of 2011, with diluted net loss per share of $0.45 compared to $457,769 net loss and net loss per share of $0.03 in the fourth quarter of 2010. Excluding non-cash charges, including goodwill and intangible asset impairment charges and stock-based compensation expenses, and changes in the fair market value of derivatives, non-GAAP adjusted net loss was $1,048,030 in 2011 compared to $476,987 in 2010. The weighted average shares outstanding increased from 8.9 million a year ago to 20.9 million in the fourth quarter of 2011.

Full Year 2011 Financial Results

For the year ended December 31, 2011, sales were $2,525,265, an increase of $1,605,049, or 175%, compared to 2010. Acquired businesses, Txtstation, Mobivity and BoomText, added $1,953,833 to 2011 revenues. The Company had 1,063 customers at the end of 2011, up from 18 at December 31, 2010.

Cost of revenue for the year ended December 31, 2010 was $986,854, an increase of $568,984, or 136% compared to the same period in 2010. This increase is due to increased costs for SMS transmission, short code fees, sales commissions, co-location costs, and merchant fees resulting from the three acquired businesses.

Gross profit increased from $501,346 in 2010 to $1,537,411 in 2011, an increase of 207%. Gross margins were 60.9% in 2011 compared to 54.5% in 2010 as a result of better leverage of fixed costs.

Operating expenses for 2011 were $5,308,039 compared to $1,795,081 in 2010 due to higher costs related to the acquired businesses and higher non-cash stock compensation expenses of $1,380,256. Research and development expenses were $347,884 and $405,819 for 2011 and 2010, respectively.

CommerceTel had an operating loss of $15,530,932 in 2011 compared to $1,293,735 in 2010. Excluding goodwill and intangible assets impairment charges and non-cash stock compensation expenses, operating losses were $2,390,372 and $1,136,950 in 2011 and 2010, respectively.

The Company recorded net loss attributable to shareholders of $16,312,989, representing a $0.78 loss per share for 2011 compared to $1,229,583 net loss and $0.14 net loss per share in 2010, respectively. The weighted average diluted shares outstanding increased by 134% to 20,910,334. Please see the non-GAAP adjusted NI and earnings per share reconciliation table for details regarding non-operating items that affected the financial results for 2010 and 2011.

Balance Sheet and Cash Flows

The Company had $396 of cash at December 31, 2011 compared to $373,439 at December 31, 2010. Total accounts receivable increased from $49,215 in 2010 to $243,846 in 2011. Total notes payable outstanding were $1,825,714 at December 31, 2011 compared to $1,071,984 at December 31, 2010.

For 2011, the Company had $890,684 in cash outflows from operations, up from $818,957 in 2010. The Company paid $209,833 in cash to acquire a technology patent and the three aforementioned companies.

The Company raised $1,033,002 through equity issuance in 2011 to fund its growth.

Business Updates

Since January 1, 2012, the Company has signed several new customers for its mobile marketing solutions.

Company		# of Retail Locations
United States Tennis Assoc.		N/A
Quick service restaurant		3,500+
Retail Beverage		600+
Miami Dolphins		N/A
Utah State University		N/A
Ultimate Fighting Champ (UFC)		N/A

In 2012, the Company expects to realize significant cost savings synergies by consolidating providers and software platforms across the three companies. Mobile Termination costs are expected to decline $40,000 per month, $480,000 annually by consolidating volume to our lower cost provider from the acquired providers.

Financial Summary

$000s ex-EPS		Q4 2011		Q4 2010	Chg.		FY 2011		FY 2010		Chg.
Net Revenues		$988		$236	418%		$2,524		$919		175%
Gross Profits		$571		$156	366%		$1,537		$501		207%
Net Income (loss)		$(12,430)		$(458)	-2,713%		$(16,313)		$(1,230)		-1227%
Adjusted Net Income (loss)		$(1,048)(1)		$(477)	-219%		$(2,566,821) (1)		$(1,257,338) (1)		104%
EPS (Diluted)		$(0.57)		$(0.03)	-1800%		$(0.78)		$(0.14)		-468%
Adjusted EPS (Diluted)		$(0.05) (1)		$(0.03)	-66%		$(0.12) (1)		$(0.14) (1)		-12%
Diluted Shares O/S		21,720		13,916	56%		20,910		8,950		134%

(1) Please see non-GAAP reconciliation table below

Non-GAAP reconciliations:
		Q4 2011				Q4 2010				FY 2011				FY 2010
Reported Net Income		$	(12,429,846	)		$	(392,663	)		$	(16,312,989	)		$	(1,229,583	)
Change in FMV of derivatives		$	247,929			$	14,861			$	1,234,145			$	14,861
Gain on debt extinguishment														$	(199,401	)
Goodwill impairment		$	10,435,170							$	10,435,170
Intangible asset impairment		$	1,325,134							$	1,325,134
Non-cash stock comp expenses		$	250,532			$	49,997			$	1,380,256			$	156,785
Gain on contingent considerations		$	999,347							$	(999,347	)
Amortization of note discount		$	122,398							$	370,810
Non-GAAP adjusted net income		$	(1,048,030	)		$	(476,987	)		$	(2,566,821	)		$	(1,257,338	)
Weighted avg. diluted shares			21,719,993				13,915,900				20,910,334				8,950,585
Non-GAAP adjusted EPS		$	(0.05	)		$	(0.03	)		$	(0.12	)		$	(0.14	)

About CommerceTel:

CommerceTel is an award-winning provider of proprietary mobile marketing technologies and the inventor of C4, a unique, enterprise-grade platform empowering brands to engage mobile consumers via multiple channels. The only system of its kind, C4 is a cloud-based solution providing broad mobile communications and extensive CRM features. It is integrated with multiple tier-one PSTN/ IP carriers and micropayment processing facilities as well as with carrier premium SMS billing systems. Customers include CNN, Disney, Sony Pictures, AT&T, Verizon, USA Network, numerous professional sports franchises, the Golf Channel, and NBC Universal. For further information visit www.commercetel.com or follow us on Twitter @CommerceTelinc.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: adjusted net income and adjusted EPS (basic and diluted). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our "recurring core business operating results". We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

Cautionary Statement Regarding Forward-Looking Information

This press release may contain certain "forward-looking statements" relating to the business of CommerceTel Corporation, and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the impact of the proceeds from the private placement on the Company's short term business and operations, the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf months are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.