Talk America Reports Fourth Quarter and Full Year 2005 Results Unprecedented Migration of Customers to Network

New Hope, PA - February 17, 2006 - Talk America (NASDAQ: TALK) today announced fourth quarter and full year results for 2005. For the fourth quarter 2005, we reported net income of $2.0 million, or $0.07 per share on a diluted basis, as compared to net income of $11.1 million, or $0.40 per share on a diluted basis, for the fourth quarter 2004. For the fourth quarter 2005, on-net revenues, off-net revenues, and long distance only and other revenues were $40.2 million, $58.2 million and $16.2 million, respectively.

Talk America Chief Executive Officer and President, Ed Meyercord, commented, “We strengthened our competitive position in 2005 by transitioning to a network-based services provider and by expanding our reach into the commercial customer segment. Given the fundamental changes in our business throughout the year, we are pleased to deliver financial results ahead of plan.”

For the full year 2005, we reported net income of $26.1 million, or $0.89 per share on a diluted basis, as compared to net income of $36.8 million, or $1.32 per share on a diluted basis, for the full year 2004. For the full year 2005, on-net revenues, off-net revenues, and long distance only and other revenues were $75.2 million, $331.2 million and $56.3 million, respectively. Results for the year include the operations of LDMI from July 13, 2005, the closing date of the acquisition.

(Note: See the schedule accompanying this news release for reconciliation to generally accepted accounting principles (GAAP) for the non-GAAP financial measure mentioned in this release)

With the build out of our network, that now covers 313 end offices in 10 states, including Network Telephone, and the migration of over 200,000 customers, approximately 57% of our current customer lines, at year-end, are served on our network. In the fourth quarter alone, we successfully provisioned an unprecedented 120,000 voice and data equivalent lines onto our network for a year end total of 341,000. We are not aware of any company in our industry that has ever undertaken a migration of customer lines of this scale. Our success is a testament to the quality and talent of our employees and an extraordinary team effort.

In addition, with the acquisition of LDMI and NTC, we now have the reach and product portfolio to deliver integrated voice and data services to commercial customers in our networked markets. The integration initiatives continue to proceed according to plan. We are realizing the expected synergies from combined operations while improving the quality of service to our commercial customers. We are now focused on “best-in-class” service initiatives and the expansion of our product portfolio.

FINANCIAL GUIDANCE

Our financial guidance for 2006 reflects the acquisition of NTC, which closed on January 3, 2006. Guidance for 2006 EBITDA before Option Expense excludes the impact from the expensing of options pursuant to FAS 123(R). We expect that option expense will be approximately $1.5 million in the first quarter 2006 and $5.0 million for the full year 2006. Our financial targets are as follows:

CONFERENCE CALL

Talk America management will host a conference call to discuss the fourth quarter 2005 operating results at 10:00 a.m. ET on February 17, 2006. The call can be accessed by dialing the following: US ###-###-####, International, 212 ###-###-####. A replay of the call will be available through 12:00 p.m. ET on February 24, 2006 by dialing the following: 800 ###-###-####, International ###-###-####. The reservation number for the replay is 21283512.

 

 

Additionally, a live web simulcast of the conference call will be available online at www.talkamerica.com and www.streetevents.com.

 

Talk America is a leading competitive communications provider that offers phone services and high speed internet access to both residential and business customers.  Talk America delivers value in the form of savings, simplicity and quality service to its customers through its leading edge network and award-winning back office.

Please Note: The statements contained herein regarding the future results of operations of Talk America should be, and certain other of the statements contained herein may be, considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are identified by the use of forward-looking words or phrases, including, but not limited to, "estimates," "expects," "expected," "anticipates," "anticipated," "forecast," "guidance," and "targets". These forward-looking statements are based on our current expectations. Although we believe that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Forward-looking statements involve risks and uncertainties and our actual results could differ materially from our expectations. In addition to those factors discussed in the foregoing, important factors that could cause such actual results to differ materially include, among others, our inability to integrate effectively and as anticipated the business of NTC upon the completion of the acquisition, dependence on the availability and functionality of local exchange carriers' networks as they relate to the unbundled network element platform, failure to establish and deploy our own local network as we plan to do or to operate it in a profitable manner, increased price competition for long distance and local services, failure of the marketing of the bundle of local and long distance services and long distance services under our direct marketing channels to a smaller marketing footprint, attrition in the number of end users, failure to manage our collection management systems and credit controls for customers, interruption in our network and information systems, failure to provide adequate customer service, and changes in government policy, regulation and enforcement and/or adverse judicial or administrative interpretations and rulings relating to regulations and enforcement, including, but not limited to, the continued availability of the unbundled network element platform of the local exchange carriers network and unbundled network element pricing methodology.

For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see the discussions contained in our Quarterly Report on Form 10-Q filed November 9, 2005, our Annual Report on Form 10-K for the year-ended December 31, 2004, filed on March 16, 2005, as amended by our Form 10-K/A filed March 30, 2005, and any subsequent filings. We undertake no obligation to update our forward-looking statements.