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Press Release -- October 28th, 2011
Source: magicJack VocalTec
Tags: CLEC, Earnings, Equipment, Exchange, Merger, VoIP

magicJack VocalTec Reports Third Quarter Financial Results

Quarterly Net Income of $3.9 Million Up $3.1 Million Year-Over-Year Third Quarter GAAP Basic Earnings Per Share of $0.35 up $0.26 Year-Over-Year

Press Release Source: magicJack VocalTec Ltd. On Friday October 28, 2011, 12:07 pm EDT

WEST PALM BEACH, Fla. and NETANYA, Israel, Oct. 28, 2011 (GLOBE NEWSWIRE) -- magicJack VocalTec, Ltd. (The Voice Experts), the company that invented voice over IP (VoIP) and sold over eight million magicJacks(R), today reported financial results for the third quarter of fiscal 2011 ended September 30, 2011.

Record quarterly net income for the third quarter of fiscal 2011 was $3.9 million, or $0.35 per share, compared to $0.8 million, or $0.09 per share, for the third quarter of fiscal 2010 while revenue from renewals increased 73% and operating income grew 175% for the same comparative quarters. Revenue for the third quarter was $28.9 million. As previously announced, revenue is expected to grow at 20% - 30 % from full year 2011 to 2012.

Daniel Borislow, the Company's President and Chief Executive Officer, gives a brief update: "The new magicJack PLUS has been selling very well in our first retail outlet, Radio Shack, and on our internet site www.magicJack.com. The magicJack APP(TM) for Apple devices has been downloaded hundreds of thousands of times since BETA was introduced last month, without any advertising spend. Various marketing and media outlets have been proven efficient, and we expect even more efficiency in first quarter 2012. Needless to say, I am quite pleased with the progress we have been making. We also expect to bring to market new products and services quicker and more frequently in the future, contributing to the top and bottom line. It continues to be an honor to serve magicJack VocalTec and its investors."

The above statements are based on current targets. These statements are forward-looking, and actual results may differ materially.

The following unaudited consolidated financial information presents summary information and does not include notes and other information required by Generally Accepted Accounting Principles (GAAP) in the United States. This information should be read in conjunction with magicJack VocalTec's audited consolidated financial statements included in the annual report on Form 20-F for the year ended December 31, 2010.

MAGICJACK VOCALTEC LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
December 31, September 30,
2010 2011
ASSETS (Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 28,628 $ 11,081
Marketable securities, at fair value 19,331 21,940
Accounts receivable, net of allowance for doubtful accounts and billing adjustments
of $8,498 and $15,403, respectively 10,336 14,421
Inventories 3,008 8,064
Deferred costs 6,615 5,033
Deposits and other current assets 1,541 2,037
Total current assets 69,459 62,576
Property and equipment, net 3,771 3,082
Intangible assets, net 7,275 11,931
Goodwill 32,304 32,304
Deposits and other non-current assets 1,739 1,281
Total assets $ 114,548 $ 111,174
LIABILITIES AND CAPITAL DEFICIT
Current liabilities:
Accounts payable $ 2,590 $ 3,808
Accrued expenses and other current liabilities 9,834 7,501
Accrued bonuses 1,000 --
Deferred revenue, current portion 58,087 55,589
Total current liabilities 71,511 66,898
Deferred revenue, net of current portion 34,121 40,075
Other non-current liabilities 664 4,081
Total liabilities 106,296 111,054
Commitments and contingencies
Redeemable ordinary shares, No par value; 333 shares issued and outstanding 8,373 7,733
Capital deficit:
Ordinary shares, No par value; 100,000 shares authorized; 11,476 and 10,836 shares
issued, respectively; 11,473 and 10,836 shares outstanding, respectively 91,527 74,985
Additional paid-in capital 1,971 4,091
Accumulated other comprehensive income (loss) 989 (1,031)
Treasury stock (3 and 0 shares, respectively) (81) --
Deficit (94,527) (85,658)
Total capital deficit (121) (7,613)
Total liabilities and capital deficit $ 114,548 $ 111,174
MAGICJACK VOCALTEC LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
(in thousands, except per share information)
Three Months
Ended
Nine Months
Ended
Three Months
Ended
Nine Months
Ended
September 30,
2010
September 30,
2010
September 30,
2011
September 30,
2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ 29,788 $ 91,165 $ 28,912 $ 87,816
Cost of revenues 13,750 42,854 12,505 37,594
Gross profit 16,038 48,311 16,407 50,222
Operating expenses:
Advertising 7,480 25,281 7,301 20,812
General and administrative 6,257 21,432 5,880 19,453
Research and development 1,362 2,933 647 1,973
Total operating expenses 15,099 49,646 13,828 42,238
Operating income (loss) 939 (1,335) 2,579 7,984
Other income (expense):
Realized (losses) gains on marketable securities (200) (437) 1,257 500
Interest and dividend income 253 833 210 592
Interest expense -- (146) (118) (158)
Other income, net 4 19 4 26
Gain on extinguishment of debt -- 234 -- --
Total other income 57 503 1,353 960
Net income (loss) before income taxes 996 (832) 3,932 8,944
Income tax expense 180 187 23 75
Net income (loss) $ 816 $ (1,019) $ 3,909 $ 8,869
Income (loss) per ordinary share:
Basic $ 0.09 $ (0.10) $ 0.35 $ 0.77
Diluted $ 0.09 $ (0.10) $ 0.34 $ 0.76
MAGICJACK VOCALTEC LTD AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CAPITAL DEFICIT INFORMATION
For the Nine Months Ended September 30, 2011
(in thousands)
Number
Common
Stock
Amount

Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)

Treasury
Stock
Amount
Deficit Total
Capital Deficit
Balance, January 1, 2011 11,473 $ 91,527 $ 1,971 $ 989 $ (81) $ (94,527) $ (121)
Exercise of ordinary share options 255 1,720 -- -- -- -- 1,720
Share based compensation 24 613 168 -- -- -- 781
Purchase of treasury stock (916) -- 1,256 -- (18,794) -- (17,538)
Retirement of treasury stock -- (18,875) -- -- 18,875 -- --
Contributed services -- -- 56 -- -- -- 56
Unrealized loss on marketable securities -- -- -- (2,020) -- -- (2,020)
Adjustment of redemption value of redeemable
ordinary shares -- -- 640 -- -- -- 640
Net income -- -- -- -- -- 8,869 8,869
Balance, September 30, 2011 10,836 $ 74,985 $ 4,091 $ (1,031) $ -- $ (85,658) $ (7,613)
MAGICJACK VOCALTEC LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION
(in thousands)
Nine Months Ended
September 30,
2010 2011
Cash flows from operating activities: (Unaudited) (Unaudited)
Net (loss) income $ (1,019) $ 8,869
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Provision for doubtful accounts and billing adjustments 3,209 6,998
Stock-based compensation 5,105 597
Depreciation and amortization 2,127 3,136
Deferred income tax provision -- 70
Interest expense - non-cash 85 158
Realized loss (gain) on sale of securities 437 (500)
Gain on extinguishment of debt (234) --
Contributed services -- 56
Decrease (increase) in operating assets:
Accounts receivable (6,251) (11,083)
Inventories 506 (5,056)
Deferred costs 1,197 1,582
Deposits and other current assets 1,443 (425)
Deposits and other non-current assets (644) 571
Increase (decrease) in operating liabilities:
Accounts payable (2,023) 1,203
Accrued expenses and other current liabilities (1,668) (1,256)
Accrued bonuses -- (1,000)
Deferred revenue 13,055 3,456
Other non-current liabilities 181 (66)
Net cash provided by operating activities 15,506 7,310
Cash flows from investing activities:
Purchase of marketable securities (37,584) (12,780)
Sales of marketable securities 32,147 8,223
Purchases to cover short investment positions -- (15,917)
Sales of short investment positions -- 13,768
Purchases of property and equipment (961) (815)
Merger with Vocaltec 7,777 --
Acquisition of other intangible assets (37) (1,518)
Net cash provided by (used in) investing activities 1,342 (9,039)
Cash flows from financing activities:
Repurchase of ordinary shares to settle
bonus withholding liability (3,981) --
Purchase of treasury stock (81) (17,538)
Repayment of debt (4,766) --
Proceeds from exercise of ordinary share options 28 1,720
Net cash used in financing activities (8,800) (15,818)
Net increase (decrease) in cash and cash equivalents 8,048 (17,547)
Cash and cash equivalents, beginning of period 13,335 28,628
Cash and cash equivalents, end of period $ 21,383 $ 11,081

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 revenues, cash flows, strategy, future operations, 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; any operational or cultural difficulties associated with the integration of the businesses of VocalTec and YMax; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; unexpected costs, charges or expenses resulting from the merger; the ability of the combined company to achieve the estimated potential synergies or the longer time it may take, and increased costs required, to achieve those synergies; our ability to develop, introduce and market innovative products, services and applications; our customer turnover rate and our customer acceptance rate; changes in general economic, business, political and regulatory conditions; availability and costs associated with operating our network; 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 the Forms 6-K and 20-F filed 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(R) is a registered trademark of magicJack VocalTec Ltd. All other product or company names mentioned are the property of their respective owners.

About magicJack VocalTec Ltd.

magicJack VocalTec Ltd. (NASDAQ:CALL - News), the inventor of VoIP including the softphone and magicJack, has the goal of becoming the leading international provider of global voice over many platforms. The company has achieved sales of over eight million of the easy-to-use, award-winning magicJack since the device's launch in 2008, and has the use of over 30 patents, some dating to when the company invented VoIP. It is the largest reaching CLEC (Competitive Local Exchange Carrier) in the United States in terms of area codes available and certification in number of states, and the network has historically had uptime of over 99.99 percent.

The magicJack VocalTec Ltd. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=10116

Contact:

Michael Tribolet
Investor Relations
201.301.5604
mt@magicjack.com

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