magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based
communications and UCaaS company, today announced financial results
for the second quarter ended June 30, 2017.
“We’re very pleased with our progress against
our top priorities in the second quarter,” said Don C. Bell, CEO of
magicJack VocalTec. “During the quarter, we improved retention,
identified opportunities to increase ARPU, proceeded on-plan toward
our launch of a competitive offer in the growing SOHO UCaaS market,
and improved sales momentum in Broadsmart.”
Second Quarter 2017 Financial
Highlights:
- Net revenues: Total net
revenues for the second quarter of 2017 were $22.4 million. Net
revenues from the sales of magicJack devices were $2.5 million and
access rights renewal revenues were $13.0 million, and accounted
for 58% of total net revenues. Prepaid minute revenues were $1.2
million and access and wholesale charges were $1.0 million during
the quarter. Broadsmart Global, Inc. contributed $3.0 million in
revenues to the second quarter of 2017. Other revenue items
contributed the remaining $1.7 million of total net revenues during
the second quarter of 2017.
- Operating income: GAAP
operating income for the second quarter of 2017 was $1.1 million
which included $1.7 million in charges primarily related to
non-recurring legal costs and settlements and senior management
transition expenses.
- Adjusted EBITDA:
Adjusted EBITDA for the second quarter of 2017 was $4.4
million.
- Net loss: GAAP net loss
attributable to common shareholders for the second quarter of 2017
was ($1.6) million or ($0.10) GAAP diluted net income per share
based on 16.1 million weighted-average diluted ordinary shares
outstanding. GAAP net loss included the following items:
- $2.6 million tax-related items, which included a $2.4 million
tax impact due to expiration of stock options;
- $0.6 million accrual for a state tax settlements;
- $0.5 million in costs related to the strategic process;
- $0.4 million accrual for costs related to an expected class
action suit settlement, which represents the remainder of costs we
do not expect to recover from insurance; and
- $0.2 million in severance and executive management transition
expenses
- Non-GAAP net income: Non-GAAP
net income attributable to common shareholders for the second
quarter of 2017 was $3.4 million or $0.21 non-GAAP net income per
share based on 16.1 million weighted-average diluted ordinary
shares outstanding.
- Cash: As of June 30, 2017,
magicJack VocalTec had cash and cash equivalents of $47.0 million
and no debt. During the second quarter of 2017, the company used
$0.3 million net cash in operating activities, which reflects the
impact of $2.4 million spent on severances and senior management
transition costs, approximately $1.0 million in payments of
expenses associated with the proxy dispute and lower renewal
sales.
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 Second Quarter 2017 and
Recent Highlights:
- As of June 30, 2017, magicJack had an
estimated 2.04 million active MJ subscribers, which are defined as
device users that are under an active subscription contract.
- magicJack activated approximately 87,000
subscribers during the second quarter of 2017. Activations are
defined as devices that become activated onto a subscription
contract during a given period.
- During the quarter ended June 30, 2017,
magicJack’s average monthly churn was 2.1%.
Quarterly Conference Call:
In conjunction with this announcement, magicJack
VocalTec will host a conference call on Wednesday, August 9, 2017,
at 5:30 p.m. EDT to discuss the company's financial results for the
second quarter 2017 and other company business. To access this
call, dial 1-888-857-6930 (United States), or 1-719-325-2435
(international), with conference ID #2787062. 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 August 23, 2017, by dialing
1-844-512-2921 (United States), or 1-412-317-6671 (international).
The recording access code is #2787062.
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. 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.
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.
Non-GAAP Measures
The Non-GAAP measures shown in this release
exclude various items detailed further below.
- magicJack defines adjusted EBITDA as GAAP
operating (loss) income excluding: depreciation and amortization,
share-based compensation, impairment of intangible assets, asset
impairment, transaction related expenses, proxy contest related
expenses, severance and senior management transition expenses,
write-down of inventory components and other items.
- magicJack defines non-GAAP net income as GAAP
net (loss) income attributable to common shareholders excluding:
share-based compensation, impairment of intangible assets, asset
impairment, transaction related expenses, proxy contest related
expenses, severance and senior management transition expenses,
write-down of inventory components, other items 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-17 |
|
30-Jun-16 |
|
30-Jun-17 |
|
30-Jun-16 |
|
|
Net revenues |
|
|
|
$ |
22,381 |
|
|
$ |
25,301 |
|
$ |
45,578 |
|
|
$ |
49,000 |
|
|
|
Cost of
revenues |
|
|
|
|
8,166 |
|
|
|
9,838 |
|
|
17,617 |
|
|
|
18,047 |
|
|
|
Gross profit |
|
|
|
|
14,215 |
|
|
|
15,463 |
|
|
27,961 |
|
|
|
30,953 |
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
|
|
2,120 |
|
|
|
1,758 |
|
|
4,527 |
|
|
|
2,979 |
|
|
|
General
and administrative |
|
|
|
|
9,544 |
|
|
|
8,252 |
|
|
22,369 |
|
|
|
17,187 |
|
|
|
Research
and development |
|
|
|
|
1,462 |
|
|
|
1,247 |
|
|
2,961 |
|
|
|
2,347 |
|
|
|
Impairment of intangible assets and goodwill |
|
|
|
|
- |
|
|
|
- |
|
|
31,527 |
|
|
|
- |
|
|
|
Total
operating expenses |
|
|
|
|
13,126 |
|
|
|
11,257 |
|
|
61,384 |
|
|
|
22,513 |
|
|
|
Operating income (loss) |
|
|
|
|
1,089 |
|
|
|
4,206 |
|
|
(33,423 |
) |
|
|
8,440 |
|
|
|
Other
income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income |
|
|
|
|
17 |
|
|
|
9 |
|
|
23 |
|
|
|
16 |
|
|
|
Other
(expense) income |
|
|
|
|
(13 |
) |
|
|
2 |
|
|
(30 |
) |
|
|
(5 |
) |
|
|
Total
other income (expense) |
|
|
|
|
4 |
|
|
|
11 |
|
|
(7 |
) |
|
|
11 |
|
|
|
Income (loss) before income taxes |
|
|
|
|
1,093 |
|
|
|
4,217 |
|
|
(33,430 |
) |
|
|
8,451 |
|
|
|
Income
tax expense (benefit) |
|
|
|
|
2,587 |
|
|
|
1,702 |
|
|
(8,768 |
) |
|
|
5,202 |
|
|
|
Net (loss) income |
|
|
|
|
(1,494 |
) |
|
|
2,515 |
|
|
(24,662 |
) |
|
|
3,249 |
|
|
|
Net (gain) loss attributable to noncontrolling
interest |
|
|
|
(67 |
) |
|
|
304 |
|
|
- |
|
|
|
304 |
|
|
|
Net (loss)
income attributable to common shareholders |
|
$ |
(1,561 |
) |
|
$ |
2,819 |
|
$ |
(24,662 |
) |
|
$ |
3,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per ordinary share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.10 |
) |
|
$ |
0.18 |
|
$ |
(1.54 |
) |
|
$ |
0.23 |
|
|
|
|
|
Diluted |
|
$ |
(0.10 |
) |
|
$ |
0.18 |
|
$ |
(1.54 |
) |
|
$ |
0.22 |
|
|
|
Weighted average ordinary shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
16,078 |
|
|
|
15,853 |
|
|
16,056 |
|
|
|
15,750 |
|
|
|
|
|
Diluted |
|
|
16,078 |
|
|
|
15,872 |
|
|
16,056 |
|
|
|
15,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
INFORMATION |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
As of |
|
As of |
|
ASSETS |
|
30-Jun-17 |
|
31-Dec-16 |
|
Current
Assets |
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
47,041 |
|
$ |
52,394 |
|
Investments, at fair value |
|
|
369 |
|
|
447 |
|
Accounts
receivable, net |
|
|
2,095 |
|
|
3,171 |
|
Inventories, net |
|
|
2,646 |
|
|
4,441 |
|
Deferred
costs |
|
|
1,918 |
|
|
2,319 |
|
Prepaid
income taxes |
|
|
2,713 |
|
|
527 |
|
Receivable from earnout escrow |
|
|
2,000 |
|
|
2,000 |
|
Deposits
and other current assets |
|
|
4,465 |
|
|
1,970 |
|
Total
current assets |
|
|
63,247 |
|
|
67,269 |
|
|
|
|
|
|
|
Property and equipment,
net |
|
|
3,173 |
|
|
3,805 |
|
Intangible assets, net |
|
|
11,533 |
|
|
28,854 |
|
Goodwill |
|
|
32,304 |
|
|
47,185 |
|
Deferred
tax assets |
|
|
35,659 |
|
|
26,568 |
|
Deposits
and other non-current assets |
|
|
793 |
|
|
836 |
|
Total
Assets |
|
$ |
146,709 |
|
$ |
174,517 |
|
|
|
|
|
|
|
LIABILITIES AND CAPITAL EQUITY |
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
Accounts
payable |
|
$ |
1,846 |
|
$ |
2,790 |
|
Income
tax payable |
|
|
- |
|
|
1,527 |
|
Accrued
expenses and other current liabilities |
|
|
10,549 |
|
|
8,426 |
|
Deferred
revenue, current portion |
|
|
44,886 |
|
|
48,507 |
|
Total
current liabilities |
|
|
57,281 |
|
|
61,250 |
|
|
|
|
|
|
|
Deferred revenue, net
of current portion |
|
|
41,510 |
|
|
44,201 |
|
Other non-current
liabilities |
|
|
12,577 |
|
|
10,866 |
|
Total Capital
Equity |
|
|
35,341 |
|
|
58,200 |
|
Total Liabilities and Capital Equity |
|
$ |
146,709 |
|
$ |
174,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
(Unaudited) |
|
Six Months |
|
Six Months |
|
|
|
Ended |
|
Ended |
|
|
|
30-Jun-17 |
|
30-Jun-16 |
|
Cash flows from
operating activities: |
|
|
|
|
|
Net (loss) income |
|
$ |
(24,662 |
) |
|
$ |
3,249 |
|
|
Provision
for doubtful accounts and billing adjustments |
|
|
126 |
|
|
|
152 |
|
|
Share-based compensation |
|
|
1,303 |
|
|
|
2,250 |
|
|
Depreciation and amortization |
|
|
2,419 |
|
|
|
2,182 |
|
|
Impairment of intangible assets |
|
|
31,527 |
|
|
|
- |
|
|
Increase
of uncertain tax position |
|
|
1,809 |
|
|
|
1,187 |
|
|
Deferred
income tax (benefit) provision |
|
|
(9,091 |
) |
|
|
935 |
|
|
Loss on
sale of assets |
|
|
18 |
|
|
|
- |
|
|
Changes
in operating assets and liabilities, net of business
acquisitions |
|
|
(7,575 |
) |
|
|
(1,606 |
) |
|
Net cash (used in) provided by operating
activities |
|
|
(4,126 |
) |
|
|
8,349 |
|
|
Cash flows from
investing activities: |
|
|
|
|
|
Purchases
of investments |
|
|
- |
|
|
|
(80 |
) |
|
Proceeds
from sales of investments |
|
|
245 |
|
|
|
- |
|
|
Purchases
of property and equipment |
|
|
(248 |
) |
|
|
(159 |
) |
|
Acquisition of Broadsmart, net of cash acquired |
|
|
- |
|
|
|
(40,019 |
) |
|
Acquisition of intangible assets |
|
|
(1,089 |
) |
|
|
- |
|
|
Net cash used in investing activities |
|
|
(1,092 |
) |
|
|
(40,258 |
) |
|
Cash flows from
financing activities: |
|
|
|
|
|
Repurchase of ordinary shares to settle withholding liability |
|
|
(135 |
) |
|
|
- |
|
|
Proceeds
from exercise of ordinary share options |
|
|
- |
|
|
|
1 |
|
|
Net cash (used in) provided by financing
activities |
|
|
(135 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
Net (decrease)
increase in cash and cash equivalents |
|
|
(5,353 |
) |
|
|
(31,908 |
) |
|
Cash and cash
equivalents, beginning of period |
|
|
52,394 |
|
|
|
78,589 |
|
|
Cash and cash
equivalents, end of period |
|
$ |
47,041 |
|
|
$ |
46,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF OPERATING INCOME TO ADJUSTED
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Quarter |
|
Quarter |
|
Six Months |
|
Six Months |
|
|
|
|
Ended |
|
Ended |
|
Ended |
|
Ended |
|
|
|
|
30-Jun-17 |
|
30-Jun-16 |
|
30-Jun-17 |
|
30-Jun-16 |
|
|
GAAP Operating income (loss) |
|
$ |
1,089 |
|
|
$ |
4,206 |
|
|
$ |
(33,423 |
) |
|
$ |
8,440 |
|
|
Depreciation and amortization |
|
|
894 |
|
|
|
1,390 |
|
|
|
2,419 |
|
|
|
2,182 |
|
|
Share-based compensation |
|
|
567 |
|
|
|
1,248 |
|
|
|
1,303 |
|
|
|
2,250 |
|
|
Impairment of intangible assets |
|
|
- |
|
|
|
- |
|
|
|
31,527 |
|
|
|
- |
|
|
Asset
impairment |
|
|
104 |
|
|
|
- |
|
|
|
490 |
|
|
|
- |
|
|
Transaction related expenses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
799 |
|
|
Proxy
contest related expenses |
|
|
25 |
|
|
|
- |
|
|
|
1,042 |
|
|
|
- |
|
|
Severance
and senior management transition expenses |
|
|
242 |
|
|
|
63 |
|
|
|
3,154 |
|
|
|
611 |
|
|
Write-down of inventory components |
|
|
- |
|
|
|
- |
|
|
|
386 |
|
|
|
- |
|
|
Other
Items |
|
|
1,471 |
|
|
|
225 |
|
|
|
1,669 |
|
|
|
274 |
|
|
Adjusted EBITDA |
|
$ |
4,392 |
|
|
$ |
7,132 |
|
|
$ |
8,567 |
|
|
$ |
14,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME TO NON-GAAP NET
INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Quarter |
|
Quarter |
|
Six Months |
|
Six Months |
|
|
|
|
Ended |
|
Ended |
|
Ended |
|
Ended |
|
|
|
|
30-Jun-17 |
|
30-Jun-16 |
|
30-Jun-17 |
|
30-Jun-16 |
|
|
GAAP Net (loss) income attributable to common
shareholders |
|
$ |
(1,561 |
) |
|
$ |
2,819 |
|
|
$ |
(24,662 |
) |
|
$ |
3,553 |
|
|
Share-based compensation |
|
|
567 |
|
|
|
1,248 |
|
|
|
1,303 |
|
|
|
2,250 |
|
|
Impairment of intangible assets |
|
|
- |
|
|
|
- |
|
|
|
31,527 |
|
|
|
- |
|
|
Asset
impairment |
|
|
104 |
|
|
|
- |
|
|
|
490 |
|
|
|
- |
|
|
Transaction related expenses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
799 |
|
|
Proxy
contest related expenses |
|
|
25 |
|
|
|
- |
|
|
|
1,042 |
|
|
|
- |
|
|
Severance
and senior management transition expenses |
|
|
242 |
|
|
|
63 |
|
|
|
3,154 |
|
|
|
611 |
|
|
Write-down of inventory components |
|
|
- |
|
|
|
- |
|
|
|
386 |
|
|
|
- |
|
|
Other
Items |
|
|
1,471 |
|
|
|
225 |
|
|
|
1,669 |
|
|
|
274 |
|
|
Tax
related items |
|
|
2,594 |
|
|
|
(7 |
) |
|
|
(8,089 |
) |
|
|
2,222 |
|
|
Non-GAAP Net income |
|
$ |
3,442 |
|
|
$ |
4,348 |
|
|
$ |
6,820 |
|
|
$ |
9,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP (loss) earnings per ordinary share –
Diluted |
|
$ |
(0.10 |
) |
|
$ |
0.18 |
|
|
$ |
(1.54 |
) |
|
$ |
0.22 |
|
|
Share-based compensation |
|
|
0.04 |
|
|
|
0.08 |
|
|
|
0.08 |
|
|
|
0.14 |
|
|
Impairment of intangible assets |
|
|
- |
|
|
|
- |
|
|
|
1.96 |
|
|
|
- |
|
|
Asset
impairment |
|
|
0.01 |
|
|
|
- |
|
|
|
0.03 |
|
|
|
- |
|
|
Transaction related expenses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.05 |
|
|
Proxy
contest related expenses |
|
|
0.00 |
|
|
|
- |
|
|
|
0.06 |
|
|
|
- |
|
|
Severance
and senior management transition expenses |
|
|
0.02 |
|
|
|
0.00 |
|
|
|
0.20 |
|
|
|
0.04 |
|
|
Write-down of inventory components |
|
|
- |
|
|
|
- |
|
|
|
0.02 |
|
|
|
- |
|
|
Other
Items |
|
|
0.09 |
|
|
|
0.01 |
|
|
|
0.10 |
|
|
|
0.02 |
|
|
Tax
related items |
|
|
0.16 |
|
|
|
(0.00 |
) |
|
|
(0.50 |
) |
|
|
0.14 |
|
|
Non-GAAP Net income per share – Diluted |
|
$ |
0.21 |
|
|
$ |
0.27 |
|
|
$ |
0.42 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average ordinary shares outstanding - Diluted: |
|
|
16,078 |
|
|
|
15,872 |
|
|
|
16,056 |
|
|
|
15,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact:
Seth Potter
Investor Relations
561-749-2255
ir@vocaltec.com
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