- Total net revenues of $35.5 million
- Access rights renewal revenues were $14.6 million, up 34% year-over-year
- GAAP operating income of $12.7 million, adjusted EBITDA of $14.8 million
- GAAP diluted EPS of $0.48, non-GAAP diluted EPS of $0.75
- Seventh consecutive quarter of GAAP profitability
- Generated $10.4 million in operating cash flow during Q3
- Cash and cash equivalents of $53.0 million and no debt
- Activations totaled 273,534 subscribers, a 21% quarter over quarter increase
WEST PALM BEACH, Fla. and JERUSALEM, Nov. 12, 2013 (GLOBE NEWSWIRE) -- magicJack VocalTec Ltd. (Nasdaq:CALL), a leading cloud communications company, today announced financial results for the third quarter ended September 30, 2013.
"Our business continued to generate strong operating cash flow during the third quarter. We were pleased with the ongoing market response of the New magicJack Plus and our ability to increase activations by 21% quarter-over-quarter," said magicJack VocalTec President and CEO Gerald Vento. "We expect to achieve double digit revenue growth in 2014 driven by our brand refresh including new packaging and TV campaigns, an updated website, and expanded retail and digital distribution channels. Our strong balance sheet, nationally recognized brand, established customer base, high visibility distribution channels and low cost technology platform position us well for the next phase of growth."
Third Quarter 2013 Financial Highlights:
- Net revenues: Total net revenues were $35.5 million. Net revenues from the sales of magicJack and magicJack PLUS were $13.2 million and access rights renewal revenues were $14.6 million, an increase of 34% on a year-over-year basis, and accounted for 41% of total net revenues. Prepaid minute revenues were $3.2 million and access and wholesale charges were $1.4 million during the quarter. Other revenue contributed the remaining $3.2 million of total net revenues during the third quarter of 2013.
- Operating income: GAAP operating income for the third quarter of 2013 was $12.7 million, compared to $11.2 million for the third quarter of 2012.
- Adjusted EBITDA: Adjusted EBITDA was $14.8 million for the third quarter of 2013 compared to $14.0 million for the third quarter of 2012.
- Net income: GAAP net income for the third quarter of 2013 was $8.9 million, compared to $15.1 million for the same period last year. GAAP diluted income per share for the third quarter was $0.48, based on 18.6 million weighted-average diluted shares outstanding, compared to $0.77, based on 19.5 million weighted-average diluted shares outstanding, for the same period last year. GAAP net income during the third quarter of 2013 includes $3.7 million in tax expense compared to $29,000 during the third quarter of 2012, which reflects the company's current projected effective 2013 tax rate of approximately 32.9%.
- Non-GAAP net income: Non-GAAP net income for the third quarter of 2013 was $13.9 million, compared to $13.1 million for the third quarter of 2012. Non-GAAP net income per diluted share for the third quarter was $0.75, based on 18.6 million weighted-average diluted shares outstanding, compared to $0.67 per diluted share, based on 19.5 million weighted-average diluted shares outstanding, for the same period last year.
- Cash and operating cash flow: As of September 30, 2013, magicJack VocalTec had cash and cash equivalents of $53.0 million. During the third quarter of 2013, the Company generated $10.4 million in free cash flow, an increase of 24% compared to $8.4 million during the third quarter of 2012.
A reconciliation of GAAP to non-GAAP financial measures, as well as the calculation of free cash flow has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
FY 2013 Financial Guidance:
As of November 12, 2013, magicJack is providing the following guidance for the full-year 2013:
- Net revenues: Total net revenues for the full year 2013 are projected to be in the range of $140 and $142 million.
- Adjusted EBITDA: Adjusted EBITDA for the full year 2013 is expected to come in at the high end of the range of previously issued guidance of $52 to $55 million.
- Effective tax rate: For the full year 2013 the effective tax rate is expected to be approximately 32.9%.
Additional Third Quarter 2013 and Recent Highlights:
- magicJack activated 273,534 subscribers during the third quarter of 2013, an increase of approximately 21% compared to the second quarter of 2013. Activations are defined as devices that become activated on to a subscription contract during a given period.
- As of September 30, 2013, magicJack had an estimated 3.30 million active MJ subscribers, which we define as users of MJ or MJP that are under an active subscription contract.
- magicJack's magicJack APP had 5.61 million registered APP users as of September 30, 2013.
- In November 2013, repurchased in a privately negotiated transaction 1,062,092 of the Company's ordinary shares at $12.24 per share, for an aggregate purchase price of approximately $13 million.
Quarterly Conference Call:
magicJack VocalTec will host a conference call today at 5:00 p.m. EST to review the company's financial results for the third quarter 2013. To access this call, dial 1-800-289-0487 (United States), or 1-913-312-0636 (international), with conference ID #1881136. 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 November 26, 2013, by dialing 1-877-870-5176 (United States), or 1-858-384-5517 (international). The recording access code is #1881136.
About magicJack VocalTec Ltd.
magicJack VocalTec Ltd. (Nasdaq:CALL), the inventor of the magicJack, is a leading cloud communications company. The Company has sold more than 10 million of the easy-to-use, award-winning magicJack since the device's launch in 2007, and has the use of more than 30 patents. 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.
Non-GAAP Measures
The non-GAAP measures shown in this release exclude various items detailed further below.
magicJack defines Non-GAAP net revenues as GAAP net revenues excluding: a gain in operational change related to prepaid minutes, a gain in adjustment for a favorable settlement with a retail sales broker, transition costs related to introduction of New magicJack Plus, and certain tax matters. magicJack defines adjusted EBITDA as GAAP operating income excluding: depreciation and amortization, share-based issuances, a gain in adjustment for operational change related to prepaid minutes, a gain in adjustment for a favorable settlement with a retail sales broker, transition costs related to introduction of New magicJack Plus, former executive severance payments, and certain tax matters. magicJack defines non-GAAP net income as GAAP net income excluding: share-based issuances, a gain in adjustment for operational change related to prepaid minutes, a gain in adjustment for a favorable settlement with a retail sales broker, transition costs related to introduction of New magicJack Plus, former executive severance payments, and certain tax matters, a change in gain on investments, a change in fair value loss (gain) on common equity put options, and income tax expense. 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 revenues, income, 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.
Third quarter 2013 financial tables follow:
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands except per share data) | ||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months |
| Ended | Ended | Ended | Ended | |
| 30-Sep-13 | 30-Sep-12 | 30-Sep-13 | 30-Sep-12 | |
| Net revenues | 35,533 | $ 40,789 | 105,312 | $ 116,935 |
| Cost of revenues | 12,134 | 16,746 | 35,333 | 47,365 |
| Gross profit | 23,399 | 24,043 | 69,979 | 69,570 |
| Operating expenses: | ||||
| Advertising | 2,866 | 4,892 | 8,437 | 19,336 |
| General and administrative | 6,892 | 7,373 | 20,386 | 21,079 |
| Research and development | 990 | 592 | 3,626 | 1,820 |
| Total operating expenses | 10,748 | 12,857 | 32,449 | 42,235 |
| Operating income | 12,651 | 11,186 | 37,530 | 27,335 |
| Other income (expense): | ||||
| Gain on investments | -- | 508 | 722 | 1,340 |
| Interest and dividend income | 45 | 86 | 275 | 538 |
| Interest expense | (65) | (94) | (242) | (318) |
| Fair value gain (loss) on common equity put options | -- | 3,449 | (1,047) | 4,734 |
| Other income, net | 15 | 10 | 16 | 31 |
| Total other (expense) income | (5) | 3,959 | (276) | 6,325 |
| Income before income taxes | 12,646 | 15,145 | 37,254 | 33,660 |
| Income tax expense | 3,743 | 29 | 12,257 | 78 |
| Net income | $ 8,903 | $ 15,116 | $ 24,997 | $ 33,582 |
| Income per ordinary share: | ||||
| Basic | $ 0.48 | $ 0.78 | $ 1.34 | $ 1.66 |
| Diluted | $ 0.48 | $ 0.77 | $ 1.34 | $ 1.64 |
| Weighted average ordinary shares outstanding: | ||||
| Basic | 18,552 | 19,407 | 18,596 | 20,234 |
| Diluted | 18,560 | 19,507 | 18,604 | 20,447 |
| CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION | ||
| (In thousands) | ||
| (Unaudited) | ||
| As of | As of | |
| ASSETS | 30-Sep-13 | 31-Dec-12 |
| Current Assets | ||
| Cash and cash equivalents | $ 53,017 | $ 18,959 |
| Marketable securities, at fair value | 7,151 | 19,390 |
| Accounts receivable, net of allowance for doubtful accounts and billing adjustments | 4,189 | 6,004 |
| Inventories | 4,565 | 5,340 |
| Deferred costs | 7,217 | 7,066 |
| Deferred tax assets, current | 1,843 | 1,114 |
| Prepaid income taxes | -- | 98 |
| Deposits and other current assets | 1,378 | 1,313 |
| Total current assets | 79,360 | 59,284 |
| Property and equipment, net | 2,073 | 2,348 |
| Intangible assets, net | 13,116 | 16,136 |
| Goodwill | 32,304 | 32,304 |
| Deferred tax assets, non-current | 9,831 | 9,831 |
| Deposits and other non-current assets | 685 | 864 |
| Total Assets | $ 137,369 | $ 120,767 |
| LIABILITIES AND CAPITAL DEFICIT | ||
| Current Liabilities | ||
| Accounts payable | $ 3,363 | $ 3,651 |
| Accrued expenses and other current liabilities | 9,482 | 13,569 |
| Deferred revenue, current portion | 65,367 | 67,038 |
| Total current liabilities | 78,212 | 84,258 |
| Deferred revenue, net of current portion | 57,489 | 58,165 |
| Other non-current liabilities | 2,674 | 3,114 |
| Total Capital Deficit | (1,006) | (24,770) |
| Total Liabilities and Capital Deficit | $ 137,369 | $ 120,767 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
| (Unaudited) | Nine Months | Nine Months |
| Ended | Ended | |
| 30-Sep-13 | 30-Sep-12 | |
| Cash flows from operating activities: | ||
| Net income | $ 24,997 | $ 33,582 |
| Provision (recovery) for doubtful accounts and billing adjustments | (3,827) | 6,042 |
| Share-based issuances | 1,631 | 2,253 |
| Depreciation and amortization | 3,496 | 2,140 |
| Deferred income tax provision | 70 | 71 |
| Interest expense - non-cash | 242 | 318 |
| Gain on investments | (722) | (1,340) |
| Fair value loss (gain) on common equity put options | 1,047 | (4,734) |
| Contributed services | -- | 60 |
| Changes in operating assets and liabilities | 1,907 | 6,080 |
| Net cash provided by operating activities | 28,841 | 44,472 |
| Cash flows from investing activities: | ||
| Purchases of investments | -- | (77,365) |
| Proceeds from sales of investments | 12,622 | 92,140 |
| Purchases of property and equipment | (84) | (217) |
| Acquisition of intangible assets | (117) | (5,732) |
| Net cash provided by investing activities | 12,421 | 8,826 |
| Cash flows from financing activities: | ||
| Purchase of treasury stock | (5,704) | (52,308) |
| Proceeds from sale of common equity put options | -- | 11,722 |
| Proceeds from exercise of ordinary share options | -- | 1,210 |
| Payment of other non-current liabilities | (1,500) | (1,500) |
| Net cash used in financing activities | (7,204) | (40,876) |
| Net increase in cash and cash equivalents | 34,058 | 12,422 |
| Cash and cash equivalents, beginning of period | 18,959 | 12,961 |
| Cash and cash equivalents, end of period | $ 53,017 | $ 25,383 |
| RECONCILIATION OF NET REVENUES TO ADJUSTED NET REVENUES | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months |
| Ended | Ended | Ended | Ended | |
| 30-Sep-13 | 30-Sep-12 | 30-Sep-13 | 30-Sep-12 | |
| Net revenues | $ 35,533 | $ 40,789 | $ 105,312 | $ 116,935 |
| Operational change related to prepaid minutes | -- | -- | -- | (2,998) |
| Favorable settlement with a retail sales broker | -- | -- | (1,192) | -- |
| Transition costs related to introduction of New magicJack Plus | -- | -- | 1,200 | -- |
| Certain tax matters | -- | -- | 750 | -- |
| Non-GAAP net revenues | $ 35,533 | $ 40,789 | $ 106,070 | $ 113,937 |
| RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months |
| Ended | Ended | Ended | Ended | |
| 30-Sep-13 | 30-Sep-12 | 30-Sep-13 | 30-Sep-12 | |
| GAAP Operating income | $ 12,651 | $ 11,186 | $ 37,530 | $ 27,335 |
| Depreciation and amortization | 965 | 890 | 3,496 | 2,140 |
| Share-based issuances | 1,231 | 1,881 | 1,631 | 2,253 |
| Operational change related to prepaid minutes | -- | -- | -- | (2,998) |
| Favorable settlement with a retail sales broker | -- | -- | (1,192) | -- |
| Transition costs related to introduction of New magicJack Plus | -- | -- | 1,200 | -- |
| Former executive severance payments | -- | -- | 798 | -- |
| Certain tax matters | -- | -- | 750 | -- |
| Adjusted EBITDA | $ 14,847 | $ 13,957 | $ 44,213 | $ 28,730 |
| RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months |
| Ended | Ended | Ended | Ended | |
| 30-Sep-13 | 30-Sep-12 | 30-Sep-13 | 30-Sep-12 | |
| GAAP Net income | $ 8,903 | $ 15,116 | $ 24,997 | $ 33,582 |
| Share-based issuances | 1,231 | 1,881 | 1,631 | 2,253 |
| Operational change related to prepaid minutes | -- | -- | -- | (2,998) |
| Favorable settlement with a retail sales broker | -- | -- | (1,192) | -- |
| Transition costs related to introduction of New magicJack Plus | -- | -- | 1,200 | -- |
| Former executive severance payments | -- | -- | 798 | -- |
| Certain tax matters | -- | -- | 750 | -- |
| Gain on investments | -- | (508) | (722) | (1,340) |
| Fair value loss (gain) on common equity put options | -- | (3,449) | 1,047 | (4,734) |
| Income tax expense | 3,743 | 29 | 12,257 | 78 |
| Non-GAAP Net income | $ 13,877 | $ 13,069 | $ 40,766 | $ 26,841 |
| GAAP Net income per share – Diluted | $ 0.48 | $ 0.77 | $ 1.34 | $ 1.64 |
| Share-based issuances | 0.07 | 0.10 | 0.09 | 0.11 |
| Operational change related to prepaid minutes | -- | -- | -- | (0.15) |
| Favorable settlement with a retail sales broker | -- | -- | (0.06) | -- |
| Transition costs related to introduction of New magicJack Plus | -- | -- | 0.06 | -- |
| Former executive severance payments | -- | -- | 0.04 | -- |
| Certain tax matters | -- | -- | 0.04 | -- |
| Gain on investments | -- | (0.03) | (0.04) | (0.07) |
| Fair value loss (gain) on common equity put options | -- | (0.18) | 0.06 | (0.23) |
| Income tax expense | 0.20 | 0.00 | 0.66 | 0.00 |
| Non-GAAP Net income per share – Diluted | $ 0.75 | $ 0.67 | $ 2.19 | $ 1.31 |
| Weighted average ordinary shares outstanding: Diluted | 18,560 | 19,507 | 18,604 | 20,447 |
| RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months |
| Ended | Ended | Ended | Ended | |
| 30-Sep-13 | 30-Sep-12 | 30-Sep-13 | 30-Sep-12 | |
| Net cash provided by operating activities | $ 10,392 | $ 8,352 | $ 28,841 | $ 44,472 |
| Less: Capital expenditures | -- | -- | (84) | (217) |
| Free cash flow | $ 10,392 | $ 8,352 | $ 28,757 | $ 44,255 |