What To Keep In Mind About Restructuring At Elephant Talk Communications Corp. (NYSEMKT: ETAK)


Though Elephant Talk Communications Corp (NYSEMKT: ETAK) is still producing losses from its operations, the company’s restructuring efforts appear to be offering promise of a brighter future.

Loan restructuring

Elephant Talk Communications Corp (NYSEMKT: ETAK)’s senior lender recently agreed to restructure a $6 million loan by waiving defaults and expanding the loan facility. The lender reset the maturity of the debt to December 31, 2016, thus allowing ETAK more room to settle the debt. Additionally, the loan facility has been expanded by about $1.2 million, thus giving ETAK access to more cash.

Workforce restructuring

The other area that Elephant Talk Communications Corp (NYSEMKT: ETAK) has been trying to restructure is its workforce as it increases focus on revenue per employee. The company finished 2Q2016 with 154 full-time workers, down from 195 at the end of the previous quarter. Of the 41 workers who exited employment with ETAK, 20 surrendered their positions voluntarily.

Employing departure seems to be helping ETAK to attain its goal of increasing revenue per worker. The company said that revenue per employee stood at about $87,000 in 2Q2016, indicating an almost double growth from $47,000 at the end of 3Q2015.


Besides lifting revenue per worker, the layoffs are also helping ETAK to eliminate expenses, thus boosting its bottom-line. The company said that it incurred expenses totaling to about $2.1 million in relation to workforce reduction between November 30, 2015 and June 30, 2016. However, in the same period, the company claims to have said $6.6 million operating expenses on annualized basis.

How ETAK fared in 2Q

ETAK’s 2Q2016 revenue dipped to $3.3 million from $19.2 million in the same period last year. The management attributed the sharp decrease in topline to the loss of the Iusacell business. Iusacell was acquired by AT&T Inc. (NYSE:T).

Though ETAK logged a loss of $2.8 million in 2Q, the loss was narrower than the $9.5 million loss reported in the like quarter last year. The restructuring helped the company to eliminate expenses that in turn boosted the bottom-line.

Delisting threat – Elephant Talk Communications Corp (NYSEMKT: ETAK)

As much as Elephant Talk Communications Corp (NYSEMKT: ETAK) likes to cite the progress it is making in its restructuring efforts, it is facing delisting threat from the New York Stock Exchange. A deficient shareholders’ equity is one reason ETAK has fallen short of requirement for continued listing on NYSE.


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