Telehop Announces Second Quarter 2012 Financial Results

Management targets margins and consumer credit requirements to deliver positive operating income and EBITDA

TORONTO, Aug. 23, 2012 /CNW/ - Telehop Communications Inc. ("Telehop" or the "Company"), (TSX-V: HOP) today announced its financial performance during the second quarter ended June 30, 2012.

During the second quarter of 2012, the Company increased EBITDA to $27,149 from $(141,760) and increased operating income to $5,210 from an operating loss of $(178,929) during the same period last year.   This is the first quarter in six quarters that the Company has been EBITDA and operating income positive.

The Company has focused on increasing gross margins specifically on the Retail revenue, reducing low margin wholesale customers and tightening credit requirements to the entire installed base. Continued performance improvements are expected as the Company has developed a more sophisticated marketing database to gain further customer insights and drive programs to increase the average revenue per user and reduce churn.

"We are beginning to see a return on our efforts over the past year," said Rajiv Jagota, President CEO, Telehop. "The structure and programs are now in place for us to move ahead on a constructive footing. We look forward to making further progress as we execute on our plan for growth."

The Company's financials reflected a number of events of note.  Details of these events are summarized below:

• Telecommunication customer payment of $102,863 was delayed until July 3rd resulting in higher accounts receivable levels and lower cash provided by operating activities,
• Additional second quarter costs incurred in the amount of $32,907  as a result of termination costs for prior executive.

FINANCIAL OVERVIEW

Consolidated Highlights	Three months ended June 30		Six months ended June 30
	2012	2011	2012	2011
Revenue	$2,385,727	$2,647,490	$4,837,802	$5,318,594
Gross margin	$1,095,969	$1,173,560	$2,714,642	$2,312,092
Gross margin %	45.9%	44.3%	43.9%	43.5%
EBITDA^1	$27,149	$(141,760)	$(13,975)	$(290,336)
Operating income (loss)	$5,210	$(178,929)	$(64,386)	$(382,400)
Net income (loss)	$15,312	$(149,901)	$(78,248)	$(307,880)
Basic and diluted loss per share	$0.00	$(0.01)	$0.00	$(0.02)

¹ Earnings before interest, taxes, depreciation and amortization ("EBITDA") should not be considered as a substitute for net loss determined in accordance with IFRS. A reconciliation of EBITDA to net loss is detailed in a separate section.  EBITDA is a standard used in the telecommunications industry to assist in understanding and comparing operating results.  The Company believes that EBITDA is a useful measure of the Company's ability to service debt, invest in capital equipment or distribute dividends to its shareholders.

Revenue decreased by 9.9% to $2.4 million in the second quarter of 2012 compared to $2.7 million in 2011. This decrease was driven by declines mainly in lower margin and credit challenged wholesale services. Retail revenues declined 4.4% as a result of increased credit requirements for new customers along with decrease in subscription services.  To combat this decline the Company has repriced its home phone offering in August to a much simpler three tier plan offering unlimited calling.

Subscription revenue and the launch of the new #100 mobile phone calling services will be the driving force for next quarter's earnings with simple product choices and features, price plans and marketing initiatives geared towards subscriber retention and cross promotion.

The increase in gross margin was primarily due to a decline in wholesale revenue coupled with decreased telecommunication costs related to the new switch implementation.

A complete financial reporting package, including the 2011 Audited Annual Consolidated Financial Statements and Notes to the Financial Statements and MD&A, is available at our corporate website (www.telehop.com), at SEDAR website www.sedar.com or via email to [email protected] or via phone at 416-494-4490.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein regarding the Company and its plans constitute "forward-looking statements" within the meaning of Canadian securities laws.  By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties.  The forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any performance or achievement expressed or implied by such forward-looking statements.  We direct you to our Company's Management's Discussion and Analysis filed for the period ended December 31, 2011.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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About Telehop

Telehop Communications Inc. (TSX-V: HOP), was founded and headquartered in Toronto, Ontario, in 1993, and has grown into one of the largest alternative telecommunications providers to both residential and business customers.

Telehop originally began offering residential and business two-way monthly 'flat rate' calling services in the Greater Toronto area between communities where a call would otherwise be a long distance call. In 1994, Telehop became one of Canada's few Equal Access Long Distance Providers, allowing it to offer its customers full service long distance calling globally at significantly lower rates. The Canadian Radio-television and Telecommunications Commission ("CRTC") has licensed Telehop as a Class "A" telecommunications carrier. 

Telehop's dedication and priority is providing residential and businesses with exceptional phone services at competitive rates without sacrificing quality service.

SOURCE: Telehop Communications Inc.

Mr. Rajiv Jagota
President and CEO
[phone]
[email protected]