MIND CTI Reports 21% Operating Income in Q4 2004; 2004 EPS of 32 Cents

MIND CTI Reports 21% Operating Income in Q4 2004; 2004 EPS of 32 Cents; 38% Year over Year Revenue Growth; Board Declares Cash Dividend

    Business Editors

    YOQNEAM, Israel--(BUSINESS WIRE)--Feb. 8, 2005--MIND C.T.I. LTD. (Nasdaq:MNDO)

    Key Highlights

--	Fourth quarter 2004 revenues were $4.88 million, a 34% increase over the fourth quarter of 2003.
--	Fourth quarter operating income was $1.03 million, a 138% increase over the fourth quarter of 2003.
--	Net income for the fourth quarter was $2.14 million or $0.10 per diluted share.
--	Revenues for 2004 were $17.8 million, a 38% increase over 2003.
--	Net income for 2004 was $6.88 million or $0.32 per diluted share
--	11th consecutive quarter of revenue growth and improved profitability of operations.

    MIND C.T.I. LTD. (Nasdaq:MNDO), a leading global provider of real-time mediation, rating, billing and customer care solutions for pre-paid and post-paid voice, data and content, today announced results for the fourth quarter and year ended December 31, 2004.
    Monica Eisinger, President and CEO, commented: "During 2004 we continued to successfully execute on our plan of growth and improved profitability. In 2004 we have reached our goals -- sequential revenue growth, 16 new customers, over 20% operating income in Q4 2004 and expansion of the workforce.
    "Looking ahead, we expect to see four to five new customer wins per quarter, mainly in the VoIP area. At the same time the timing of both the order and revenue recognition for our solutions may be delayed as it occurs typically only after other vendors have provided the network infrastructure, a process that is subject to delay. MIND is not providing guidance for the first quarter at this time, due to uncertainty in the revenue recognition timing for two large recent wins. Delayed delivery by the equipment vendor of the hardware comprising the customer's network infrastructure might delay the acceptance process in one project and internal customer's issues might delay the delivery in the second case.
    "We have the right ingredients: our sophisticated technology, our proven ability to deliver solutions on time and our worldwide team. We believe that in the long term we will continue along the same path that we have built for over two years."

    As of December 31, 2004, we had 252 employees in our four offices.

    Financial Highlights of Q4 2004

    -- Revenues were $4.88 million, a 34% increase over the fourth
    quarter of 2003.

    -- Operating income was $1.03 million, an increase of 138% over
    the fourth quarter of 2003 and interest income was $1.14
    million.

    -- Net income was $2.14 million or $0.10 per diluted share,
    compared with a net income of $1.08 million or $0.05 per share
    in the fourth quarter of 2003.

    -- Cash position increased by $2.55 million to $48.9 million on
    December 31, 2004.

    Year 2004 Financial Highlights

    -- Revenues were $17.8 million, a 38% increase over 2003.

    -- Operating income was $3.2 million, a 168% increase over 2003.

    -- Net income was $6.88 million or $0.32 per diluted share,
    compared with a net income of $3.6 million or $0.17 per
    diluted share in 2003.

    -- Cash flow from operations was $7.67 million.

    Revenue Distribution for Q4 2004

    The geographic revenue breakdown, as a percentage of total revenues, was as follows: sales in Europe represented 80%, the Americas represented 4%, Africa represented 9%, APAC represented 3% and Israel represented 4%.
    Revenue from our customer care and billing software totaled $4.34 million, while revenue from our enterprise call management software was $536 thousand. The revenue breakdown from our business lines of products was $3.28 million, or 67%, from licenses, $1.22 million, or 25%, from maintenance and $380 thousand, or 8%, from services.

    Revenue Distribution for Full Year 2004

    The geographic revenue breakdown, as a percentage of total revenues, was as follows: sales in Europe represented 67%, the Americas represented 12%, Africa represented 10%, APAC represented 6% and Israel represented 5%.
    Revenue from our customer care and billing software totaled $15.23 million, while revenue from our enterprise call management software was $2.58 million. The revenue breakdown from our business lines of products was $11.7 million, or 66%, from licenses, $4.43 million, or 25%, from maintenance and $1.68 thousand, or 9%, from services.

    Dividend Distribution

    As previously announced, the Company adopted a dividend policy on July 15, 2003 according to which, subject to Board approval prior to each dividend declaration and subject to the Companies Law, the Company will declare a cash dividend once per calendar year in an amount equal to the Company's net profits for the preceding calendar year.
    On February 8, 2005, the Board declared a cash dividend in the amount equal to our 2004 net income, which is approximately $6.88 million. After deduction of a 25% tax payable by the Company on the amount of the dividend (because the dividend is from income that was tax exempt), a cash dividend of $0.24 per share will be distributable to shareholders, subject to an Israeli withholding tax of 15%. Accordingly, each shareholder will receive $0.204 per share after deduction of taxes required by the Israeli Tax Authority.
    The record date for the dividend will be March 1, 2004, at 5:00 p.m. Eastern Standard Time and the payment date will be March 15, 2004.

    Conference Call Information

    MIND will host a conference call on February 9, at 8:30 a.m., Eastern Standard Time, to discuss the Company's fourth quarter and 2004 results and other financial and business information. The call will be carried live on the Internet via www.fulldisclosure.com and the MIND website, www.mindcti.com. For those unable to listen to the live web cast, a replay will be available.

    About MIND

    MIND CTI Ltd. (http://www.mindcti.com) is a leading global provider of real-time billing and customer care solutions for pre-paid and post-paid voice, data and video. Since 1997 MIND has been a pioneer in enabling the VoIP technology for emerging and incumbent service providers. MIND solutions include "best-in-class" solutions for Service Enabling of IP services in the wireless arena, end-to-end convergent billing solutions and internal billing for large enterprises. MIND operates from offices in Europe, Israel, the United States and China.
    For financial information, reports and presentations, please visit the Investor Relations site: http://www.mindcti.com/ir
    Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995: All statements other than historical facts included in the foregoing press release regarding the Company's business strategy are "forward-looking statements." These statements are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements are not guarantees of future performance, and actual results may materially differ. The forward-looking statements involve risks, uncertainties, and assumptions, including the risks discussed in the Company's filings with the United States Securities Exchange Commission. The Company does not undertake to update any forward-looking information.

MIND C.T.I. LTD. CONDENSED CONSOLIDATED BALANCE SHEETS

Dec. 31, Sept. 30, 2004 2003 2004 -------------- -------- (In thousands of U.S. dollars)

Assets

CURRENT ASSETS: Cash and cash equivalents $18,687 $4,391 $7,870 Accounts receivable: Trade 3,418 2,181 3,071 Interest accrued on long-term bank deposits 242 482 1,511 Other 773 864 800 Inventories 18 11 11 ------------------------ Total current assets 23,138 7,929 13,263 ------------------------ LONG-TERM BANK DEPOSITS 30,000 40,000 47,000 PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization 1,790 1,182 1,768 OTHER ASSETS, net of accumulated amortization 788 868 785 ------------------------ Total assets $55,716 $49,979 $62,816 ========================

Liabilities and shareholders' equity CURRENT LIABILITIES - accounts payable and accruals: Trade $466 $718 $322 Deferred revenues 1,680 1,607 1,675 Other 2,124 1,116 1,944 ------------------------ Total current liabilities 4,270 3,441 3,941 ------------------------ BANK LOANS 10,000 EMPLOYEE RIGHTS UPON RETIREMENT 1,200 998 1,117 ------------------------ Total liabilities 5,470 4,439 15,058 SHAREHOLDERS' EQUITY: Share capital 53 53 53 Additional paid-in capital 59,079 58,514 58,728 Accumulated deficit (8,886)(13,027)(11,023) ------------------------ Total shareholders' equity 50,246 45,540 47,758 ------------------------ Total liabilities and shareholders' equity $55,716 $49,979 $62,816 ========================

MIND C.T.I. LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Twelve months Three months ended ended Dec. 31, Dec. 31, ------------------------------ 2004 2003 2004 2003 ------------------------------ U.S. $ in thousands (except per share data) ------------------------------ REVENUES $17,806 $12,936 $4,880 $3,642 COST OF REVENUES 4,394 3,208 1,205 902 ------------------------------ GROSS PROFIT 13,412 9,728 3,675 2,740 RESEARCH AND DEVELOPMENT EXPENSES - net 3,833 3,319 963 889 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling 4,517 4,065 1,057 1,120 General and administrative 1,864 1,149 621 296 ------------------------------ OPERATING INCOME 3,198 1,195 1,034 435 FINANCIAL AND OTHER INCOME - net 3,841 2,607 1,144 738 ------------------------------ INCOME BEFORE TAXES ON INCOME 7,039 3,802 2,178 1,173 TAXES ON INCOME 162 169 41 94 ------------------------------ NET INCOME $6,877 $3,633 $2,137 $1,079 ============================== EARNING PER SHARE: Basic $0.33 $0.18 $0.10 $0.05 ============================== Diluted $0.32 $0.17 $0.10 $0.05 ============================== WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN COMPUTATION OF EARNINGS PER ORDINARY SHARE - IN THOUSANDS: Basic 21,089 20,732 21,184 20,744 ============================== Diluted 21,468 21,143 21,585 21,170 ==============================

MIND C.T.I. LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended Three months ended December 31 December 31 2004 2003 2004 2003 ----------------- --------------- (U.S. dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES: Net income $6,877 $3,633 $2,137 $1,079 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 680 806 160 189 Deferred income taxes - net (8) Accrued severance pay - net 202 189 83 56 Capital loss (gain) on sale of property and equipment - net (7) (35) 5 (24) Changes in operating asset and liability items: Decrease (increase) in accounts receivable: Trade (1,237) (155) (347) (705) Interest accrued on short-term bank deposits 240 1,149 1,269 2,651 Other 93 (198) 27 (16) Increase (decrease) in accounts payable and accruals: Trade (252) 551 144 494 Other 1,081 214 268 (475) Decrease (increase) in inventories (7) 3 (7) 3 ------------------------------------- Net cash provided by operating activities 7,670 6,149 3,739 3,252 ------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (1,226) (499) (196) (117) Amounts funded in respect of accrued severance pay (120) (105) (53) (32) Investment in short-term bank deposits (40,000) (77,000) (30,000) (37,000) Withdrawal of long-term bank deposits 50,000 67,000 47,000 34,825 Proceeds from sale of fixed assets 145 109 59 50 ------------------------------------- Net cash provided by (used in) investing activities 8,799 (10,495) 16,810 (2,274) -------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES: Employee stock options exercised and paid 563 354 351 257 Dividend paid (2,736) (2,929) (2,929) Short term bank loans (10,083) ------------------------------------- Net cash used in financing activities (2,173) (2,575) (9,732) (2,672) -------------------------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,296 (6,921) 10,817 (1,694) BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,391 11,312 7,870 6,085 -------------------------------------

BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD $18,687 $4,391 $18,687 $4,391 =====================================

--30--KS/se*

CONTACT: MIND CTI Ltd. Andrea Dray, +972-4-993-6666 investor@mindcti.com

KEYWORD: ISRAEL INTERNATIONAL AFRICA/MIDDLE EAST INDUSTRY KEYWORD: HARDWARE TELECOMMUNICATIONS SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: MIND C.T.I. LTD.

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