Press Releases

magicJack Reports Second Quarter 2018 Financial Results

August 6, 2018

  • Total net revenues of $20.0 million
  • GAAP operating income of $4.8 million, Adjusted EBITDA of $7.1 million
  • GAAP diluted EPS of $0.25, non-GAAP diluted EPS of $0.33
  • Cash and cash equivalents of $58.9 million and no debt as of June 30, 2018

WEST PALM BEACH, Fla. and NETANYA, Israel, Aug. 06, 2018 (GLOBE NEWSWIRE) -- magicJack VocalTec Ltd. (Nasdaq: CALL), a leading VoIP cloud-based communications and UCaaS company, today announced financial results for the second quarter ending June 30, 2018.

Second Quarter 2018 Financial Highlights:

  • Net revenues: Total net revenues for the second quarter of 2018 were $20.0 million. Net revenues from the sales of magicJack devices were $1.8 million and access rights renewal revenues were $12.4 million, and accounted for 62% of total net revenues. Prepaid minute revenues were $1.0 million and access and wholesale charges were $0.7 million during the quarter. Broadsmart Global, Inc. contributed $2.8 million in revenues to the second quarter of 2018. Other revenue items contributed the remaining $1.3 million of total net revenues during the second quarter of 2018.
     
  • Operating Income: GAAP operating income for the second quarter of 2018 was $4.8 million, which included $0.6 million in charges primarily related to non-recurring professional and legal costs and severances expenses.
     
  • Adjusted EBITDA: Adjusted EBITDA for the second quarter of 2018 was $7.1 million.
     
  • Net Income: GAAP net income attributable to common shareholders for the second quarter of 2018 was $4.1 million or $0.25 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 $0.2 million impact from certain tax items, which included an increase to uncertain tax positions and an increase to deferred tax assets related foreign currency revaluation.
     
  • Non-GAAP net income: Non-GAAP net income attributable to common shareholders for the second quarter of 2018 was $5.4 million or $0.33 non-GAAP net income per diluted share based on 16.2 million weighted-average diluted ordinary shares outstanding.
     
  • Cash: As of June 30, 2018, magicJack VocalTec had cash and cash equivalents of $58.9 million and no debt. During the second quarter of 2018, the company generated $5.1 million in net cash provided by operating activities.

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 Second Quarter 2018 Highlights:

  • As of June 30, 2018, magicJack had an estimated 1.85 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
     
  • magicJack activated 72,000 subscribers during the Second quarter of 2018. Activations are defined as devices that become activated on to a subscription contract during a given period.
     
  • During the quarter ended June 30, 2018, magicJack's average monthly churn was 2.0%.

Update on B. Riley Merger:

  • The closing of the acquisition of the Company by B.Riley remains pending final regulatory approval. The Company will communicate additional updates once closing conditions have been satisfied.

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 a provision for legal settlements, transaction related expenses, costs related to Broadsmart acquisition matters and employment of its founders, provision for restructuring and a provision for certain tax matters.
     
  • 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 a provision for legal settlements, transaction related expenses, costs related to Broadsmart acquisition matters and employment of its founders, provision for restructuring, a provision for certain tax matters, 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   Six Months   Six Months
          Ended   Ended   Ended   Ended
          30-Jun-18   30-Jun-17   30-Jun-18   30-Jun-17
  Net revenues       $   20,022   $   22,381     $   40,037   $   45,578  
  Cost of revenues           7,100       8,166         14,263       17,617  
  Gross profit         12,922     14,215       25,774     27,961  
  Operating expenses:                    
  Marketing           893       2,120         2,085       4,527  
  General and administrative           5,799       9,544         13,301       22,369  
  Research and development           1,404       1,462         2,861       2,961  
  Impairment of intangible assets and goodwill         -        -          131       31,527  
  Total operating expenses         8,096     13,126       18,378     61,384  
  Operating income (loss)           4,826       1,089         7,396       (33,423 )
  Other income (expense):                    
  Interest and dividend income           187       17         280       23  
  Other income (expense)           5       (13 )       3       (30 )
  Total other income (expense)           192       4         283       (7 )
  Income (loss) before income taxes           5,018       1,093         7,679       (33,430 )
  Income tax expense (benefit)           922       2,587         1,617       (8,768 )
  Net income (loss)           4,096       (1,494 )       6,062       (24,662 )
  Net loss attributable to noncontrolling interest         -        (67 )       -        -   
  Net income (loss) attributable to common shareholders   $   4,096   $   (1,561 )   $   6,062   $   (24,662 )
                       
                       
  Earnings (loss) per ordinary share:                    
      Basic   $   0.25   $   (0.10 )   $   0.37   $   (1.54 )
      Diluted   $   0.25   $   (0.10 )   $   0.37   $   (1.54 )
  Weighted average ordinary shares outstanding:                
      Basic       16,205       16,078         16,199       16,056  
      Diluted       16,205       16,078         16,199       16,056  
                       

 

           
  CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION
           
  (In thousands)        
  (Unaudited)        
      As of   As of
  ASSETS   30-Jun-18   31-Dec-17
  Current Assets        
  Cash and cash equivalents   $   58,896   $   52,638
  Investments, at fair value       369       369
  Accounts receivable, net       2,153       2,428
  Inventories       1,825       1,880
  Contractual Cost - Current       301       1,936
  Prepaid income taxes       844       2,016
  Deposits and other current assets       1,753       1,874
  Total current assets       66,141       63,141
           
  Property and equipment, net       2,264       2,772
  Intangible assets, net       8,820       10,190
  Goodwill       32,304       32,304
  Deferred tax assets       31,467       31,726
  Deposits and other non-current assets       814       909
  Contractual Cost - Non Current       541       - 
  Total Assets   $   142,351   $   141,042
           
  LIABILITIES AND CAPITAL EQUITY        
  Current Liabilities        
  Accounts payable   $   2,289   $   3,199
  Accrued expenses and other current liabilities       5,111       6,454
  Contract liabilities - Current       39,129       42,243
  Total current liabilities       46,529       51,896
           
  Contract liabilities - Non Current       36,602       38,797
  Other non-current liabilities       13,994       13,787
  Total Capital Equity       45,226       36,562
  Total Liabilities and Capital Equity   $   142,351   $   141,042
           

 

             
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
             
  (In thousands)          
  (Unaudited)   Six Months   Six Months  
      Ended   Ended  
      30-Jun-18   30-Jun-17  
  Cash flows from operating activities:          
  Net (loss) income   $   6,062     $   (24,662 )  
  Provision for doubtful accounts and billing adjustments       21         126    
  Share-based compensation       1,985         1,303    
  Depreciation and amortization       1,777         2,419    
  Impairment of intangible assets       131         31,527    
  Increase of uncertain tax position       (56 )       1,809    
  Deferred income tax (benefit) provision       119         (9,091 )  
  Loss on sale of assets       -         18    
  Changes in operating assets and liabilities       (3,698 )       (7,575 )  
  Net cash provided by (used in) operating activities       6,341         (4,126 )  
  Cash flows from investing activities:          
  Proceeds from sales of investments       -         245    
  Purchases of property and equipment       30         (248 )  
  Acquisition of intangible assets       -         (1,089 )  
  Net cash (used in) investing activities       (30 )       (1,092 )  
  Cash flows from financing activities:          
  Repurchase of ordinary shares to settle withholding liability       (53 )       (135 )  
  Net cash (used in) financing activities       (53 )       (135 )  
             
  Net increase (decrease) in cash and cash equivalents       6,258         (5,353 )  
  Cash and cash equivalents, beginning of period       52,638         52,394    
  Cash and cash equivalents, end of period   $   58,896     $   47,041    
             

 

                   
  RECONCILIATION OF OPERATING INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
                   
  (In thousands)                
  (Unaudited)   Quarter   Quarter   Six Months   Six Months
      Ended   Ended   Ended   Ended
      30-Jun-18   30-Jun-17   30-Jun-18   30-Jun-17
  GAAP Operating income (loss)   $   4,826     $   1,089     $   7,396     $   (33,423 )
  Depreciation and amortization       818         894         1,777         2,419  
  Share-based compensation       892         567         1,985         1,303  
  Impairment of intangible assets       -         -         131         31,527  
  Asset impairment       -         104         -         490  
  Proxy contest related expenses       -         25         -         1,042  
  Severance and senior management transition expenses       30         16         143         2,928  
  Write-down of inventory components       -         -         -         386  
  Other Items       541         1,697         1,192         1,895  
  Non- GAAP Adjusted EBITDA   $   7,107     $   4,392     $   12,624     $   8,567  
                   
                   
                   
  RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP NET INCOME
                   
  (In thousands)                
  (Unaudited)   Quarter   Quarter   Six Months   Six Months
      Ended   Ended   Ended   Ended
      30-Jun-18   30-Jun-17   30-Jun-18   30-Jun-17
  GAAP Net income (loss) attributable to common shareholders   $   4,096     $   (1,561 )   $   6,062     $   (24,662 )
  Share-based compensation       892         567         1,985         1,303  
  Impairment of intangible assets       -         -         131         31,527  
  Asset impairment       -         104         -         490  
  Proxy contest related expenses       -         25         -         1,042  
  Severance and senior management transition expenses       30         16         143         2,928  
  Write-down of inventory components       -         -         -         386  
  Other Items       541         1,697         1,192         1,895  
  Tax related items       (168 )       2,594         (53 )       (8,089 )
  Non-GAAP Net income   $   5,391     $   3,442     $   9,460     $   6,820  
                   
                   
  GAAP earnings (loss) per ordinary share - Diluted   $   0.25     $   (0.10 )   $   0.37     $   (1.54 )
  Share-based compensation       0.06         0.04         0.12         0.08  
  Impairment of intangible assets       -         -         0.01         1.96  
  Asset impairment       -         0.01         -         0.03  
  Consideration adjustment / Gain on mark-to-market       -         -         -         -  
  Transaction related expenses       -         -         -         -  
  Proxy contest related expenses       -         0.00         -         0.06  
  Severance and senior management transition expenses       0.00         0.00         0.01         0.18  
  Write-down of inventory components       -         -         -         0.02  
  Other Items       0.03         0.11         0.07         0.12  
  Tax related items       (0.01 )       0.16         (0.00 )       (0.50 )
  Non-GAAP Net income per share - Diluted   $   0.33     $   0.21     $   0.58     $   0.42  
                   
  Weighted average ordinary shares outstanding - Diluted:     16,205       16,078       16,199       16,056  
                   

 

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Source: magicJack VocalTec Ltd

 

 

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