Press Releases

magicJack Reports First Quarter 2018 Financial Results

May 10, 2018
  • Total net revenues of $20.0 million
  • GAAP operating income of $2.6 million, Adjusted EBITDA of $5.5 million
  • GAAP diluted EPS of $0.12, non-GAAP diluted EPS of $0.25
  • Cash and cash equivalents of $53.9 million and no debt as of March 31, 2018

WEST PALM BEACH, Fla. and NETANYA, Israel, May 10, 2018 (GLOBE NEWSWIRE) -- magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications and UCaaS company, today announced financial results for the first quarter ending March 31, 2018.

First Quarter 2018 Financial Highlights:

  • Net revenues: Total net revenues for the first quarter of 2018 were $20.0 million. Net revenues from the sales of magicJack devices were $1.9 million and access rights renewal revenues were $12.3 million, and accounted for 62% of total net revenues. Prepaid minute revenues were $1.0 million and access and wholesale charges were $0.8 million during the quarter. Broadsmart Global, Inc. contributed $2.6 million in revenues to the first quarter of 2018. Other revenue items contributed the remaining $1.4 million of total net revenues during the first quarter of 2018.
     
  • Operating Income: GAAP operating income for the first quarter of 2018 was $2.6 million, which included $0.9 million in net charges primarily related to non-recurring professional and legal costs, executive management transition and severances expenses, and the impairment of a licensing agreement.
     
  • Adjusted EBITDA: Adjusted EBITDA for the first quarter of 2018 was $5.5 million.
     
  • Net Income: GAAP net income attributable to common shareholders for the first quarter of 2018 was $2.0 million or $0.12 GAAP diluted net income per share based on 16.2 million weighted-average diluted ordinary shares outstanding. GAAP net income included the aforementioned items under the Operating Income section above, as well as a $0.1 million impact from certain tax items, which included an increase to uncertain tax positions, increase in the Company’s tax valuation allowance, and increase to deferred tax assets related to expiration and forfeiture of stock options and restricted stock awards.
     
  • Non-GAAP net income: Non-GAAP net income attributable to common shareholders for the first quarter of 2018 was $4.1 million or $0.25 non-GAAP net income per diluted share based on 16.2 million weighted-average diluted ordinary shares outstanding.
     
  • Cash: As of March 31, 2018, magicJack VocalTec had cash and cash equivalents of $53.9 million and no debt. During the first quarter of 2018, the company generated $1.3 million in net cash provided by operating activities, which reflects the impact of paying out annual executive and employee bonuses, as well as legal and professional fees related to the strategic process.

A reconciliation of GAAP to non-GAAP measures has been provided in the tables included below in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Measures.”

Additional First Quarter 2018 Highlights and Recent Updates:

  • As of March 31, 2018, magicJack had an estimated 1.89 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
     
  • magicJack activated 84,000 subscribers during the first quarter of 2018. Activations are defined as devices that become activated on to a subscription contract during a given period.
     
  • During the quarter ended March 31, 2018, magicJack’s average monthly churn was 2.3%.
     
  • On November 9, 2017, the Company entered into a Merger Agreement with B. Riley Financial, Inc., in which B. Riley has agreed to acquire all of the outstanding shares of the Company for $8.71 per share (the “Transaction”). The Company has received all required consents and approvals from the state public service commissions and is waiting for approval from the Federal Communications Commission. The Company expects the Transaction to close in the next three months.

About magicJack VocalTec Ltd.

magicJack VocalTec Ltd. (Nasdaq:CALL), the inventor of magicJack and a pioneer in Voice over IP (VoIP) technology and services, is a leading cloud communications company. With its easy-to-use, low cost solution for telecommunications, the Company has sold more than 11 million award-winning magicJack devices, which is now in its fifth generation, has millions of downloads of its free calling apps, and holds more than 30 technology patents.

Broadsmart, a leading hosted UCaaS (Unified Communication as a Service) provider for medium-to-large multi-location enterprise customers, is a division of magicJack VocalTec Ltd. Broadsmart has a track record of designing, provisioning and delivering complex UCaaS solutions to blue chip corporate customers on a nationwide basis. Broadsmart has expertise in servicing enterprises with hundreds-to-thousands of locations.

magicJack® is a registered trademark of magicJack VocalTec Ltd. All other product or company names mentioned are the property of their respective owners.

Contact:

Investor Relations
561-749-2255
ir@vocaltec.com

Non-GAAP Measures

The Non-GAAP measures shown in this release exclude various items detailed further below.

  • magicJack defines non-GAAP adjusted EBITDA as GAAP operating income (loss) excluding: depreciation and amortization, share-based compensation, impairment of intangible assets, asset impairment, proxy contest related expenses, severance and senior management transition expenses, write-down of inventory components and other items, which include transaction related expenses and a provision for restructuring.
     
  • magicJack defines non-GAAP net income as GAAP net income (loss) attributable to common shareholders excluding: share-based compensation, impairment of intangible assets, asset impairment, proxy contest related expenses, severance and senior management transition expenses, write-down of inventory components and other items, which include transaction related expenses and a provision for restructuring, and tax related items.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included with the financial information included in this press release. These measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP measures used by other companies. Management believes that the presentation of non-GAAP results, when shown in conjunction with corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends related to the company's results of operations. Further, management believes that these non-GAAP measures improve management's and investors' ability to compare the company's financial performance with other companies in the technology industry. Because these items vary significantly between companies, it is useful to compare results excluding these amounts as identified below.


             
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             
  (In thousands except per share data)          
  (Unaudited)     Quarter   Quarter
        Ended   Ended
        31-Mar-18   31-Mar-17
  Net revenues     $   20,015     $   23,197  
  Cost of revenues         7,163         9,451  
  Gross profit       12,852       13,746  
  Operating expenses:          
  Marketing         1,192         2,407  
  General and administrative         7,502         12,825  
  Research and development         1,457         1,499  
  Impairment of intangible assets and goodwill         131         31,527  
  Total operating expenses       10,282       48,258  
  Operating income (loss)         2,570         (34,512 )
  Other income (expense):          
  Interest and dividend income         93         6  
  Other (expense) income         (2 )       (17 )
  Total other income (expense)         91         (11 )
  Income (loss) before income taxes         2,661         (34,523 )
  Income tax expense (benefit)         695         (11,355 )
  Net (loss) income         1,966         (23,168 )
  Net loss attributable to noncontrolling interest         -          67  
  Net (loss) income attributable to common shareholders   $   1,966     $   (23,101 )
             
             
  (Loss) earnings per ordinary share:          
    Basic   $   0.12     $   (1.44 )
    Diluted   $   0.12     $   (1.44 )
  Weighted average ordinary shares outstanding:        
    Basic       16,192         16,034  
    Diluted       16,211         16,034  
             

 

           
  CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION
           
  (In thousands)        
  (Unaudited)        
      As of   As of
  ASSETS   31-Mar-18   31-Dec-17
  Current Assets        
  Cash and cash equivalents   $   53,850   $   52,638
  Investments, at fair value       369       369
  Accounts receivable, net       2,037       2,428
  Inventories       1,700       1,880
  Contractual Cost - Current       258       1,936
  Prepaid income taxes       1,328       2,016
  Deposits and other current assets       1,840       1,874
  Total current assets       61,382       63,141
           
  Property and equipment, net       2,521       2,772
  Intangible assets, net       9,371       10,190
  Goodwill       32,304       32,304
  Deferred tax assets       31,496       31,726
  Deposits and other non-current assets       825       909
  Contractual Cost - Non Current       523       - 
  Total Assets   $   138,422   $   141,042
           
  LIABILITIES AND CAPITAL EQUITY        
  Current Liabilities        
  Accounts payable   $   1,426   $   3,199
  Accrued expenses and other current liabilities       4,722       6,454
  Contract liabilities - Current       39,957       42,243
  Total current liabilities       46,105       51,896
           
  Contract liabilities - Non Current       37,915       38,797
  Other non-current liabilities       14,164       13,787
  Total Capital Equity       40,238       36,562
  Total Liabilities and Capital Equity   $   138,422   $   141,042
           

 

             
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
             
  (In thousands)          
  (Unaudited)   Three Months   Three Months  
      Ended   Ended  
      31-Mar-18   31-Mar-17  
  Cash flows from operating activities:          
  Net (loss) income   $   1,966     $   (23,168 )  
  Provision for doubtful accounts and billing adjustments       1         54    
  Share-based compensation       1,093         736    
  Depreciation and amortization       959         1,525    
  Impairment of intangible assets       131         31,527    
  Increase of uncertain tax position       112         1,427    
  Deferred income tax (benefit) provision       79         (10,911 )  
  Changes in operating assets and liabilities       (3,062 )       (5,001 )  
  Net cash provided by (used in) operating activities       1,279         (3,811 )  
  Cash flows from investing activities:          
  Purchases of property and equipment       (14 )       (225 )  
  Acquisition of intangible assets       -         (48 )  
  Net cash (used in) investing activities       (14 )       (273 )  
  Cash flows from financing activities:          
  Repurchase of ordinary shares to settle withholding liability       (53 )       -    
  Net cash (used in) financing activities       (53 )       -    
             
  Net increase (decrease) in cash and cash equivalents       1,212         (4,084 )  
  Cash and cash equivalents, beginning of period       52,638         52,394    
  Cash and cash equivalents, end of period   $   53,850     $   48,310    
             

 

           
  RECONCILIATION OF OPERATING INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA  
           
  (In thousands)        
  (Unaudited) Quarter   Quarter  
    Ended   Ended  
    31-Mar-18   31-Mar-17  
  GAAP Operating income (loss) $   2,570   $   (34,512 )  
  Depreciation and amortization     959       1,525    
  Share-based compensation     1,093       736    
  Impairment of intangible assets     131       31,527    
  Asset impairment     -       386    
  Proxy contest related expenses     -       1,017    
  Severance and senior management transition expenses     113       2,912    
  Write-down of inventory components     -       386    
  Other Items     651       198    
  Non- GAAP Adjusted EBITDA $   5,517   $   4,175    
           
           
           
  RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP NET INCOME  
           
  (In thousands)        
  (Unaudited) Quarter   Quarter  
    Ended   Ended  
    31-Mar-18   31-Mar-17  
  GAAP Net income (loss) attributable to common shareholders $   1,966   $   (23,101 )  
  Share-based compensation     1,093       736    
  Impairment of intangible assets     131       31,527    
  Asset impairment     -       386    
  Proxy contest related expenses     -       1,017    
  Severance and senior management transition expenses     113       2,912    
  Write-down of inventory components     -       386    
  Other Items     651       198    
  Tax related items     115       (10,683 )  
  Non-GAAP Net income $   4,069   $   3,378    
           
           
  GAAP earnings (loss) per ordinary share – Diluted $   0.12   $   (1.44 )  
  Share-based compensation     0.07       0.05    
  Impairment of intangible assets     0.01       1.97    
  Asset impairment     -       0.02    
  Proxy contest related expenses     -       0.06    
  Severance and senior management transition expenses     0.01       0.18    
  Write-down of inventory components     -       0.02    
  Other Items     0.04       0.01    
  Tax related items     0.01       (0.67 )  
  Non-GAAP Net income per share – Diluted $   0.25   $   0.21    
           
  Weighted average ordinary shares outstanding - Diluted:   16,211     16,034    
           

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Source: magicJack VocalTec Ltd

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