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Press Release -- July 30th, 2012
Source: magicJack VocalTec
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magicJack Reports Record-Breaking Revenue and Income in the Second Quarter

West Palm Beach, FL, and Netanya, Israel – July 30, 2012 - magicJack VocalTec, Ltd. (NASDAQ:CALL, news, filings), the Voice Experts and inventor of VoIP with over nine million magicJacks® sold, today announced record breaking financial results for the quarter ending June 30, 2012. Q2, 2012 revenue was $38.6 million and net income was $10.3 million. Basic operating earnings per share (EPS) were $0.51 per share. There are19.4 million shares outstanding.

Alert: Please also read the Joint Press release from earlier today describing the acquisition of VoIP foundational U.S. Patent No. 5,825,771.

For more information, please view our current filings with the Securities and Exchange Commission and the soon-to-be-filed Form 10-Q.

magicJack will host a conference call for investors at 10:00 a.m. ET on Monday, July 30th, 2012. Conference call details are as follows:

U.S. Toll Free:                          1.877.251.1860

International:                            +1.253.237.1123

Conference ID:                        14665831


Certain Unaudited Condensed Statements of Operations and Comparison (in thousands, except per share information)

Three Months Ended June 30,

2012 Compared to

2012

2011

2011

Revenues
Sale of magicJack and magicJack PLUS

$19,059

$11,381

$7,678

67.5

%
License renewals

10,653

8,913

1,740

19.5

Shipping and handling

1,420

537

883

164.4

magicJack-related products

2,096

812

1,284

158.1

Prepaid minutes

3,086

3,017

69

2.3

Access and termination charges

1,798

2,672

(874)

(32.7)

Other

447

1,486

(1,039)

(69.9)

Total Operating Revenue

38,559

28,818

9,741

33.8

Cost of Revenues

  

Cost of magicJack and magicJack PLUS

6,116

2,995

3,121

104.2

Shipping and handling

565

305

260

85.2

Credit card processing fees

680

638

42

6.6

Network and carrier charges

6,947

6,752

195

2.9

Other

751

1,406

(655)

(46.6)

Total Cost of Revenues

15,059

12,096

2,963

24.5

Gross Profit

23,500

16,722

6,778

40.5

Operating expenses:
Advertising

5,740

6,835

(1,095)

(16.0)

General and administrative

6,872

7,283

(411)

(5.6)

Research and development

570

670

(100)

(14.9)

Total operating expenses

13,182

14,788

(1,606)

(10.9)

Operating Income

10,318

1,934

8,384

433.5

Total other income

(29)

1,044

(1,073)

*

Net Income

$10,270

$2,954

$7,316

247.7

Operating Income per share

$0.51

$0.08

$0.43

537.5

Certain Unaudited Condensed Statements of Operating Cash Flows (in thousands)

For the Six Months Ended

June 30,

2012

2011

(Unaudited)

(Unaudited)

Cash flows from operating activities:
Net income

$18,466

$4,782

Non Cash Items:
Provision for doubtful accounts, billing
adjustments and sales

4,550

5,071

Stock-based compensation

372

324

Depreciation and amortization

1,250

2,055

Deferred income tax provision

46

46

Interest expense - non-cash

224

40

Other income

(2,117)

(145)

Contributed services

40

38

Decrease (increase) in operating assets:
Accounts receivable

(3,583)

(6,397)

Inventories

658

(3,126)

Deferred costs

(1,978)

1,445

Deposits and other current assets

(551)

(4)

Deposits and other non-current assets

146

59

Increase (decrease) in operating liabilities:
Accounts payable

(2,338)

1,888

Accrued expenses and other current liabilities

12,329

(915)

Deferred revenue

18,283

968

Other non-current liabilities

(1,506)

(52)

Net cash provided by operating activities

$44,291

$6,077

Certain Unaudited Balance Sheet Items (in thousands)

June 30,

December 31,

2012

2011

(Unaudited)

Cash and cash equivalents

$34,030

$12,961

Marketable securities, at fair value

5,483

22,135

Deferred revenue, current portion

83,249

71,691

Deferred revenue, net of current portion

52,868

46,143

Ordinary shares outstanding

19,401

21,174

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, 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; any operational or cultural difficulties associated with the continuing integration of the businesses of VocalTec and YMax; potential adverse reactions or changes to business relationships resulting from the 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 our Annual Report on Form 10-K  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.

About magicJack VocalTec Ltd. magicJack VocalTec Ltd. (NASDAQ: CALL), 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 nine 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.

Contact: Investor Relations Andrew MacInnes, President 561-749-2255 ir@magicJack.com

Media Relations

Kari Hernandez, INK Public Relations for magicJack

512-382-8982

magicjack@ink-pr.com

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