Press Releases

magicJack Reports First Quarter 2016 Financial Results

May 10, 2016

  • Total net revenues of $23.7 million, access rights renewal revenues were $15.2 million
  • GAAP operating income of $4.2 million, Adjusted EBITDA of $7.4 million
  • GAAP diluted EPS of $0.05, non-GAAP diluted EPS of $0.34
  • Generated $6.9 million in free cash flow
  • Cash and cash equivalents of $45.5 million and no debt as of March 31, 2016

WEST PALM BEACH, Fla. and NETANYA, Israel, May 10, 2016 (GLOBE NEWSWIRE) -- magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications and UCaaS company, today announced financial results for the first quarter ended March 31, 2016.

"We were pleased with our execution during the first quarter highlighted by our ability to generate strong free cash flow," said Gerald Vento, President and CEO of magicJack VocalTec. "During the quarter, we made great progress with all of our growth initiatives while the addition of Broadsmart successfully diversified the company into UCaaS targeting high end SMB and enterprise customers."

First Quarter 2016 Financial Highlights:

  • Net revenues: Total net revenues for the first quarter of 2016 were $23.7 million. Net revenues from the sales of magicJack devices were $3.6 million and access rights renewal revenues were $15.2 million, and accounted for 64% of total net revenues. Prepaid minute revenues were $1.7 million and access and wholesale charges were $1.4 million during the quarter. Broadsmart Global, Inc. contributed $0.5 million in revenues to the first quarter since the acquisition closed on March 17, 2016. Other revenue contributed the remaining $1.3 million of total net revenues during the first quarter of 2016.
     
  • Operating income: GAAP operating income for the first quarter of 2016 was $4.2 million.  
     
  • Adjusted EBITDA: Adjusted EBITDA for the first quarter of 2016 was $7.4 million.
     
  • Net income: GAAP net income for the first quarter of 2016 was $0.7 million or $0.05 GAAP diluted net income per share based on 15.6 million weighted-average diluted ordinary shares outstanding.
     
  • Non-GAAP net income: Non-GAAP net income for the first quarter of 2016 was $5.3 million or $0.34 non-GAAP net income per share based on 15.6 million weighted-average diluted ordinary shares outstanding.
     
  • Cash and free cash flow: As of March 31, 2016, magicJack VocalTec had cash and cash equivalents of $45.5 million and no debt. During the first quarter of 2016, the company generated $6.9 million in free cash flow.

A reconciliation of GAAP to non-GAAP measures, as well as the calculation of free cash flow 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 2016 and Recent Highlights:

  • As of March 31, 2016, magicJack had an estimated 2.34 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
     
  • magicJack activated 112,000 subscribers during the first quarter of 2016. Activations are defined as devices that become activated on to a subscription contract during a given period.
     
  • During the quarter ended March 31, 2016, magicJack's average monthly churn was 3.0%.   

Quarterly Conference Call:

In conjunction with this announcement, magicJack VocalTec will host a conference call on Tuesday, May 10, 2016, at 5:00 p.m. EDT to review the company's financial results for the first quarter 2016. To access this call, dial 1-800-967-7140 (United States), or 1-719-457-2652 (international), with conference ID #4922571. A live webcast of the conference call will be accessible from the investor relations page of magicJack VocalTec's website at http://www.vocaltec.com and a recording will be archived and accessible at http://www.vocaltec.com/events.cfm. A recording of this conference call will also be available through May 24, 2016, by dialing 1-877-870-5176 (United States), or 1-858-384-5517 (international). The recording access code is #4922571.

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, now in its fifth generation, has millions of downloads of its free calling app, and holds more than 30 technology patents. magicJack is the largest-reaching CLEC (Competitive Local Exchange Carrier) in the United States in terms of area codes available and number of states in which it is certified.

In March 2016, magicJack VocalTec Ltd. Acquired Broadsmart, a leading hosted UCaaS (Unified Communication as a Service) provider for medium-to-large multi-location enterprise customers. 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.

Non-GAAP Measures

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

  • magicJack defines adjusted net revenues as net revenues minus the impact of certain tax matters.
     
  • magicJack defines adjusted EBITDA as GAAP operating income excluding: depreciation and amortization, share-based compensation, transaction related expenses, severance payments, transition costs related to introduction of a new device, the net change to provision for bad debt expense, a legal settlement and certain tax matters.
     
  • magicJack defines non-GAAP net income as GAAP net income excluding: share-based compensation, transaction related expenses, severance payments, transition costs related to introduction of a new device, the net change to provision for bad debt expense, a legal settlement, decrease in tax valuation allowance, foreign currency revaluations on tax assets, net uncertain tax positions, tax impact due to expiration of stock options and impact of income tax rate reduction in Israel.
     
  • magicJack defines free cash flow as net cash provided by operating activities minus capital expenditures.

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.

Forward Looking Statements

This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this press release, including statements about our projected cash flows, strategy, future operations, new product introductions and customer acceptance, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. These factors include, among other things: changes to our business resulting from increased competition; our ability to develop, introduce and market innovative products, services and applications; our ability to expand our network of retail partners and to increase sales of magicJack devices; our ability to successfully integrate the magicJack GO and magicJack Express devices with our mobile app; our ability to successfully monetize our products, services and applications and market them globally; delays in development we may experience with respect to magicJack devices, our mobile app, our first SMB product and Broadsmart's products; our customer turnover rate and our customer acceptance rate; the risk that Broadsmart's assets will not be integrated successfully or that such integration may be more difficult, time consuming or costly than expected; the risk that expected increased revenues and EBITDA and expected synergies from the Broadsmart acquisition may not be fully realized or may take longer to realize than expected; the risk that magicjJack will experience any difficulty maintaining relationships with Broadsmart's customers, employees or suppliers; our ability to expand our network of small, medium-sized and large businesses; changes in general economic, business, political and regulatory conditions; availability and costs associated with operating our network and business and our ability to control costs; potential liability resulting from pending or future litigation, or from changes in the laws, regulations or policies; the degree of legal protection afforded to our products; changes in the composition or restructuring of us or our subsidiaries and the successful completion of acquisitions, divestitures and joint venture activities; and the various other factors discussed in the "Risk Factors" section of our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission. Such factors, among others, could have a material adverse effect upon our business, results of operations and financial condition. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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

First quarter 2016 financial tables follow:

 

       
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
       
(In thousands except per share data)       
(Unaudited)   Quarter Quarter
    Ended Ended
    31-Mar-16 31-Mar-15
Net revenues    $  23,699  $  25,512 
Cost of revenues      8,209     9,467 
Gross profit     15,490   16,045 
Operating expenses:      
Marketing      1,221     2,750 
General and administrative      8,935     7,700 
Research and development      1,100     1,162 
Total operating expenses     11,256   11,612 
Operating income       4,234     4,433 
Other income (expense):      
Interest and dividend income      7     11 
Interest expense      -      (34)
Other expense      (7)    -  
Total other expense      -      (23)
Income before income taxes      4,234     4,410 
Income tax expense      3,500     3,102 
Net income   $  734  $  1,308 
       
Earnings per ordinary share:      
  Basic $  0.05  $  0.07 
  Diluted $  0.05  $  0.07 
Weighted average ordinary shares outstanding:      
  Basic    15,647     17,868 
  Diluted    15,649     17,877 
       


   
 CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION 
       
 (In thousands)     
 (Unaudited)     
   As of As of 
 ASSETS 31-Mar-16 31-Dec-15 
 Current Assets     
 Cash and cash equivalents $  45,500  $  78,589  
 Marketable securities, at fair value    367     367  
 Accounts receivable, net of allowance for doubtful accounts and billing adjustments    2,571     2,925  
 Inventories    5,238     5,723  
 Deferred costs    1,884     2,097  
 Prepaid income taxes     1,552     2,747  
 Deposits and other current assets    2,097     2,655  
 Total current assets    59,209     95,103  
       
 Property and equipment, net    3,891     3,302  
 Intangible assets, net    32,529     6,687  
 Goodwill    47,485     32,304  
 Deferred tax assets, non-current    29,748     30,689  
 Deposits and other non-current assets    859     751  
 Total Assets $  173,721  $  168,836  
       
 LIABILITIES AND CAPITAL EQUITY     
 Current Liabilities     
 Accounts payable $  3,663  $  1,086  
 Accrued expenses and other current liabilities    5,700     6,284   
 Deferred revenue, current portion    51,815     52,554  
 Total current liabilities    61,178     59,924  
       
 Deferred revenue, net of current portion    49,134     50,146  
 Other non-current liabilities     12,328     11,098  
 Total Capital Equity    51,081     47,668  
 Total Liabilities and Capital Equity $  173,721  $  168,836  
       


       
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
       
 (In thousands)     
 (Unaudited) Three Months Three Months 
   Ended Ended 
   31-Mar-16  31-Mar-15 
 Cash flows from operating activities:     
 Net income $  734  $  1,308  
 Provision for doubtful accounts and billing adjustments    1     33  
 Share-based compensation    1,002     1,283  
 Depreciation and amortization    792     1,016  
 Increase of uncertain tax position    1,150     -  
 Deferred income tax provision    1,016     602  
 Interest expense - non-cash    -     34  
 Changes in operating assets and liabilities    2,239     3,257  
 Net cash provided by operating activities    6,934     7,533  
 Cash flows from investing activities:     
 Purchases of property and equipment    (5)    (543) 
 Acquisition of Broadsmart    (40,019)    -  
 Net cash used in investing activities    (40,024)    (543) 
 Cash flows from financing activities:     
 Proceeds from exercise of ordinary share options    1     -  
 Net cash provided by financing activities    1     -  
       
 Net (decrease) increase in cash and cash equivalents    (33,089)    6,990  
 Cash and cash equivalents, beginning of period    78,589     75,945  
 Cash and cash equivalents, end of period $  45,500  $  82,935  
       


        
 RECONCILIATION OF NET REVENUES TO ADJUSTED NET REVENUES  
        
 (In thousands)      
 (Unaudited) Quarter Quarter  
   Ended Ended  
   31-Mar-16 31-Mar-15  
 Net revenues $  23,699  $  25,512   
 Certain tax matters    57     -   
 Non-GAAP net revenues $  23,756  $  25,512   
        
        
 RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA  
        
 (In thousands)      
 (Unaudited) Quarter Quarter  
   Ended Ended  
   31-Mar-16 31-Mar-15  
 GAAP Operating income $  4,234  $  4,433   
 Depreciation and amortization     792     1,016   
 Share-based compensation    1,002     1,283   
 Transaction related expenses    799     551   
 Severance payments    548     -   
 Transition costs related to introduction of new device    -     5   
 Net change to provision for bad debt expense    (8)    32   
 Legal settlement     -     675   
 Certain tax matters     57     -   
 Adjusted EBITDA $  7,424  $  7,995   
        
        
        
 RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME  
        
 (In thousands)      
 (Unaudited) Quarter Quarter  
   Ended Ended  
   31-Mar-16  31-Mar-15  
 GAAP Net income $  734   $  1,308   
 Share-based compensation    1,002     1,283   
 Transaction related expenses    799     551   
 Severance payments    548     -   
 Transition costs related to introduction of new device    -     5   
 Net change to provision for bad debt expense    (8)    32   
 Legal settlement    -     675   
 Decrease in tax valuation allowance    -     (195)  
 Foreign currency revaluations on tax assets    -     1,847   
 Uncertain tax positions, net    668     105   
 Tax impact due to expiration of stock options    150     -   
 Impact of income tax rate reduction in Israel     1,411     -   
 Non-GAAP Net income $  5,304  $  5,611   
        
        
 GAAP earnings (loss) per ordinary share - Diluted $  0.05  $  0.07   
 Share-based compensation    0.06      0.07   
 Transaction related expenses    0.05     0.03   
 Severance payments    0.04     -   
 Transition costs related to introduction of new device    -     0.00   
 Net change to provision for bad debt expense    (0.00)    0.00   
 Legal settlement    -     0.04   
 Release of tax valuation allowance    -      (0.01)  
 Foreign currency revaluations on tax assets    -     0.10   
 Uncertain tax positions, net    0.04      0.01   
 Tax impact due to expiration of stock options    0.01     -   
 Impact of income tax rate reduction in Israel    0.09     -   
 Non-GAAP Net income per share - Diluted $  0.34  $  0.31   
        
 Weighted average ordinary shares outstanding - Diluted:  15,649   17,877   
        
        
 RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW  
        
 (In thousands)      
 (Unaudited) Quarter Quarter  
   Ended Ended  
    31-Mar-16 31-Mar-15  
 Net cash provided by operating activities $  6,934  $  7,533   
 Less: Capital expenditures    (5)    (543)  
 Free cash flow $  6,929  $  6,990   
        

 

Contact:



Seth Potter

Investor Relations

561-749-2255

ir@vocaltec.com

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Source: magicJack VocalTec Ltd.

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