MTS Announces Second Quarter 2012 Financial Results

Year over Year Quarterly Revenues Increased 10% and Operating Income Increased 170%

Earnings per Share for the Six Month Period Increased 110% to $0.17

Generated $1 Million of Free Cash Flow during the First Six Months of 2012

Ra’anana, Israel –August 16, 2012 – MTS – Mer Telemanagement Solutions Ltd. (Nasdaq Capital Market: MTSL), a global provider of business support systems (BSS) for comprehensive telecommunication management, telecommunications expense management (TEM) solutions and customer care & billing (CC&B) solutions, today announced its financial results for the second quarter of 2012.

Revenues for the second quarter of 2012 were $3.3 million, compared with $3.0 million in revenues during the same quarter last year and revenues of $3.0 million in the first quarter of 2012. The Company’s operating profit was $517,000 in the second quarter of 2012 compared to an operating profit of $191,000 for the second quarter of 2011 and $280,000 in the first quarter of 2012. Net income for the second quarter was $460,000 or $0.10 per diluted share, compared with net income of $229,000 or $0.05 per diluted share in the second quarter of 2011 and $310,000 or $0.07 per diluted share in the first quarter of 2012. Revenues for the six month period ended June 30, 2012 were $6.3 million, compared with $5.8 million for the comparable period in 2011. Net income for the six months ended June 30, 2012 was $770,000 or $0.17 per diluted share, compared with net income of $362,000 or $0.08 per diluted share in the comparable period in 2011.

As of June 30, 2012, we had cash and marketable securities of $4.3 million as compared to $3.4 million as at December 31, 2011. During the six month period ended June 30, 2012 we had positive operating cash flow of $1.0 million, as compared to positive operating cash flow of $535,000 during the six month period ended June 30, 2011.

“Our second quarter results represent continued improvements in our financial results and indicators as a result of our efforts to develop our Telecom Expense Management opportunities through partners, new customer acquisitions and expanding our existing customer base" said Eytan Bar, CEO of MTS.

"In addition, our company’s Billing and Mobile Virtual Network Operator (MVNO) activity as a managed service has grown and we were able to sign an additional managed service agreement with a new MVNO in the U.S. and we see other opportunities in this market. We are looking forward to improving both our top and bottom line performance," concluded Mr. Bar.

About MTS

Mer Telemanagement Solutions Ltd. (MTS) is a worldwide provider of innovative products and services for comprehensive telecom expense management (TEM) and enterprise mobility management (EMM) solutions, telecom billing solutions used by telecommunication service providers and mobile virtual network operators and enablers (MVNO/MVNE) solutions used by mobile service providers.

The MTS TEM Suite solution enables enterprises to gain visibility and control of strategic fixed and mobile telecom assets, services and IT security policies that drive key business processes and crucial competitive advantage. The MTS cloud, consulting and managed services solutions — including integrated management of invoices, assets, wireless, optimization, usage, mobile device management (MDM), procurement, help desk and bill payment ,along with dashboards and reporting tools — provide professionals at every level of the organization with rapid access to concise, actionable data.

MTS's solutions for telecommunication service providers are used worldwide by wireless and wireline service providers for interconnect billing, partner revenue management and for charging and invoicing their customers. MTS provides MVNE service to allow quick launch of new MVNO initiatives in a pay as you grow and revenue share models. In addition, MTS has pre-configured solutions to support emerging carriers of focused solutions (e.g. IPTV, VoIP, WiMAX, MVNO) to rapidly install a full-featured and scalable solution.

Headquartered in Israel, MTS markets its solutions through wholly owned subsidiaries in the United States, Hong Kong and The Netherlands as well as through OEM partnerships with Siemens, Phillips, NEC and other vendors. MTS shares are traded on the NASDAQ Capital Market (symbol MTSL). For more information please visit the MTS web site: www.mtsint.com.

Certain matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties including, but not limited to, risks in product development plans and schedules, rapid technological change, changes and delays in product approval and introduction, customer acceptance of new products, the impact of competitive products and pricing, market acceptance, the lengthy sales cycle, proprietary rights of the Company and its competitors, risk of operations in Israel, government regulations, dependence on third parties to manufacture products, general economic conditions and other risk factors detailed in the Company’s filings with the United States Securities and Exchange Commission.

Company Contact:

Alon Mualem

CFO

Tel: +972-9-7777-540

Email: Alon.Mualem@mtsint.com

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	June 30,		December 31,
	2012		2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,192	$	3,269
Restricted cash		242		45
Restricted marketable securities		127		127
Trade receivables, net		684		854
Other accounts receivable and prepaid expenses		143		88
Inventories		7		5
Total current assets		5,395		4,388
LONG-TERM ASSETS:
Severance pay fund		655		619
Other investments		4		6
Deferred income taxes		31		31
Total long-term assets		690		656
PROPERTY AND EQUIPMENT, NET		204		161
OTHER ASSETS:
Goodwill		3,479		3,479
Other intangible assets, net		873		1,050
Total other assets		4,352		4,529
Total assets	$	10,641	$	9,734

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share and per share data)

	June 30,			December 31,
	2012			2011
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	$	254		$	326
Accrued expenses and other liabilities		2,566			2,354
Deferred revenues		1,937			2,025
Liabilities of discontinued operations		435			435
Total current liabilities		5,192			5,140
LONG-TERM LIABILITIES -
Accrued severance pay		805			762
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:
Share capital		13			13
Additional paid-in capital		19,811			19,773
Treasury shares		(29	)		(29	)
Accumulated other comprehensive income		(15	)		(19	)
Accumulated deficit		(15,136	)		(15,906	)
Total shareholders' equity		4,644			3,832
Total liabilities and shareholders' equity	$	10,641		$	9,734

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share and per share data)

	Six months ended June 30,					Three months ended June 30,
	2012			2011		2012			2011
Revenues:
Product sales	$	1,753		$	2,007	$	921		$	994
Services		4,511			3,828		2,359			2,044
Total revenues		6,264			5,835		3,280			3,038
Cost of revenues:
Product sales		618			581		351			268
Services		1,613			1,320		795			719
Total cost of revenues		2,231			1,901		1,146			987
Gross profit		4,033			3,934		2,134			2,051
Operating expenses:
Research and development, net of grants from the OCS		704			945		330			470
Selling and marketing		1,043			1,026		519			518
General and administrative		1,489			1,768		768			872
Total operating expenses		3,236			3,739		1,617			1,860
Operating profit		797			195		517			191
Financial income (expenses), net		(21	)		90		(53	)		31
Capital gain on sale of  investment		-			78		-			1
Income before taxes on income		776			363		464			223
Tax on income (benefit), net		6			1		4			(6	)
Net income	$	770		$	362	$	460		$	229
Net Income per share:
Basic and diluted net income per Ordinary share	$	0.17		$	0.08	$	0.10		$	0.05
Weighted average number of Ordinary shares used in computing basic and diluted net income per share		4,459,057			4,459,057		4,459,057			4,459,057