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Press Release -- August 6th, 2018
Source: magicJack VocalTec
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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, news, filings), 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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