- Total net revenues of $29.5 million
- Access rights renewal revenues were $16.1 million, up from $15.4 million in Q114
- GAAP operating income of $3.4 million, adjusted EBITDA of $7.0 million
- GAAP diluted EPS of $0.13; non-GAAP diluted EPS of $0.31
- Generated $5.6 million in free cash flow
- Cash and cash equivalents of $72.0 million and no debt
WEST PALM BEACH, Fla. and JERUSALEM, Aug. 11, 2014 (GLOBE NEWSWIRE) -- magicJack VocalTec Ltd. (Nasdaq:CALL), a leading cloud-based communications company, today announced financial results for the second quarter ended June 30, 2014.
"The second quarter marked a transition point for the Company, as we began to execute our turn-around plan to return the company to growth," said Gerald Vento, President and CEO of magicJack VocalTec "While we have made progress in several areas, much work remains ahead. In the second half of the year, we will begin generating new revenues through the release of international calling features through our App."
Second Quarter 2014 Financial Highlights:
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Net revenues: Total net revenues for the second quarter of 2014 were $29.5 million. Net revenues from the sales of magicJack devices were $6.5 million and access rights renewal revenues were $16.1 million, an increase of 5% on a quarter-over-quarter basis, and accounted for 55% of total net revenues. Prepaid minute revenues were $2.6 million and access and wholesale charges were $1.6 million during the quarter. Other revenue contributed the remaining $2.6 million of total net revenues during the second quarter of 2014.
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Operating income: GAAP operating income for the second quarter of 2014 was $3.4 million, compared to $9.6 million for the second quarter of 2013.
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Adjusted EBITDA: Adjusted EBITDA was $7.0 million for the second quarter of 2014 compared to $13.8 million for the second quarter of 2013.
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Net income: GAAP net income for the second quarter of 2014 was $2.3 million, compared to $6.5 million for the same period last year. GAAP diluted income per share for the second quarter was $0.13, based on 17.8 million weighted-average diluted shares outstanding, compared to $0.35, based on 18.6 million weighted-average diluted shares outstanding, for the same period last year.
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Non-GAAP income before tax: Non-GAAP income before tax for the second quarter of 2014 was $5.5 million, compared to $12.4 million for the second quarter of 2013. Non-GAAP pre-tax earning per diluted-ordinary share for the second quarter was $0.31, based on 17.8 million weighted-average diluted shares outstanding, compared to $0.67 per diluted share, based on 18.6 million weighted-average diluted shares outstanding, for the same period last year.
- Cash and free cash flow: As of June 30, 2014, magicJack VocalTec had cash and cash equivalents of $72.0 million. During the second quarter of 2014, the Company generated $5.6 million in free cash flow, an increase of 206% compared to $1.8 million generated in the second quarter of 2013.
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."
Additional Second Quarter 2014 and Recent Highlights:
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magicJack APP had 3.4 million monthly active unique APP users as of June 30, 2014.
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As of June 30, 2014, magicJack had an estimated 2.9 million active MJ subscribers, which we define as users of MJ or MJP that are under an active subscription contract.
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magicJack activated 165,000 subscribers during the second quarter of 2014. Activations are defined as devices that become activated on to a subscription contract during a given period.
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During the second quarter ended June 30, 2014, magicJack's average monthly churn was 3.1%.
- magicJack launched magicJackGO, an ultra low cost voice service that provides customers with a single number that can be used on both traditional phones and smartphones.
Quarterly Conference Call:
magicJack VocalTec will host a conference call today at 5:00 p.m. EDT to review the company's financial results for the second quarter 2014. To access this call, dial 1-888-218-8176 (United States), or 1-913-312-1375 (international), with conference ID #5069935. 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 25, 2014, by dialing 1-877-870-5176 (United States), or 1-858-384-5517 (international). The recording access code is #5069935.
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 10 million award-winning magicJack devices, now in its fourth generation, has millions of downloads of its free calling app, 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.
Non-GAAP Measures
The non-GAAP measures shown in this release exclude various items detailed further below.
magicJack defines adjusted EBITDA as GAAP operating income excluding: depreciation and amortization, share-based issuances and compensation, a gain in adjustment for a favorable settlement with a retail sales broker, transition costs related to introduction of the new magicJack device, a reversal of unused price protection accrual and reserves for device returns and bad debt expense, former executive severance payments, and certain tax matters. magicJack defines non-GAAP income before tax as GAAP net income excluding: share-based issuances and compensation, a gain in adjustment for a favorable settlement with a retail sales broker, transition costs related to introduction of the new magicJack device, a reversal of unused price protection accrual and reserves for device returns and bad debt expense, 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; our ability to develop, introduce and market innovative products, services and applications; our ability to increase sales of magicJack devices; our ability to successfully integrate the magicJack GO device with our mobile app; our ability to successfully monetize our mobile app; delays in development we may experience with respect to magicJack devices or our mobile app; 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, our Quarterly Reports on Form 10-Q 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.
Second quarter 2014 financial tables follow:
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands except per share data) | ||||
| (Unaudited) | Quarter | Quarter | Six Months | Six Months |
| Ended | Ended | Ended | Ended | |
| 30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | |
| Net revenues | $ 29,480 | $ 32,902 | $ 64,793 | $ 69,779 |
| Cost of revenues | 11,392 | 12,056 | 24,414 | 23,199 |
| Gross profit | 18,088 | 20,846 | 40,379 | 46,580 |
| Operating expenses: | ||||
| Marketing | 4,690 | 2,757 | 8,986 | 5,571 |
| General and administrative | 8,669 | 6,676 | 17,319 | 13,494 |
| Research and development | 1,375 | 1,774 | 3,119 | 2,636 |
| Total operating expenses | 14,734 | 11,207 | 29,424 | 21,701 |
| Operating income | 3,354 | 9,639 | 10,955 | 24,879 |
| Other income (expense): | ||||
| Gains on investments | 37 | 195 | 37 | 722 |
| Interest and dividend income | 49 | 74 | 95 | 230 |
| Interest expense | (55) | (84) | (120) | (177) |
| Fair value loss on common equity put options | -- | -- | -- | (1,047) |
| Other income, net | 2 | -- | 3 | 1 |
| Total income (expense) | 33 | 185 | 15 | (271) |
| Income before income taxes | 3,387 | 9,824 | 10,970 | 24,608 |
| Income tax expense | 1,118 | 3,316 | 3,382 | 8,514 |
| Net income | $ 2,269 | $ 6,508 | $ 7,588 | $ 16,094 |
| Earnings per ordinary share: | ||||
| Basic | $ 0.13 | $ 0.35 | $ 0.43 | $ 0.86 |
| Diluted | $ 0.13 | $ 0.35 | $ 0.43 | $ 0.86 |
| Weighted average ordinary shares outstanding: | ||||
| Basic | 17,832 | 18,552 | 17,830 | 18,618 |
| Diluted | 17,835 | 18,560 | 17,833 | 18,627 |
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In thousands) | ||
| (Unaudited) | ||
| As of | As of | |
| ASSETS | 30-Jun-14 | 31-Dec-13 |
| Current Assets | ||
| Cash and cash equivalents | $ 72,029 | $ 45,997 |
| Marketable securities, at fair value | 367 | 8,782 |
| Accounts receivable, net of allowance for doubtful accounts and billing adjustments | 4,264 | 3,626 |
| Inventories | 3,534 | 4,490 |
| Deferred costs | 1,765 | 4,662 |
| Deferred tax assets, current | 10,540 | 11,267 |
| Prepaid income taxes | 9,746 | 11,956 |
| Deposits and other current assets | 2,715 | 818 |
| Total current assets | 104,960 | 91,598 |
| Property and equipment, net | 3,405 | 1,959 |
| Intangible assets, net | 13,106 | 15,656 |
| Goodwill | 32,304 | 32,304 |
| Deferred tax assets, non-current | 31,753 | 29,684 |
| Deposits and other non-current assets | 757 | 693 |
| Total Assets | $186,285 | $171,894 |
| LIABILITIES AND CAPITAL EQUITY | ||
| Current Liabilities | ||
| Accounts payable | $ 6,860 | $ 4,237 |
| Accrued expenses and other current liabilities | 8,879 | 9,236 |
| Deferred revenue, current portion | 55,023 | 54,541 |
| Total current liabilities | 70,762 | 68,014 |
| Deferred revenue, net of current portion | 59,547 | 59,951 |
| Other non-current liabilities | 6,025 | 6,487 |
| Total Capital Equity | 49,951 | 37,442 |
| Total Liabilities and Capital Equity | $186,285 | $171,894 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
| (Unaudited) | Six Months | Six Months |
| Ended | Ended | |
| 30-Jun-14 | 30-Jun-13 | |
| Cash flows from operating activities: | ||
| Net income | $ 7,588 | $ 16,094 |
| Provision for doubtful accounts and billing adjustments | 298 | 2,000 |
| Share-based issuances and compensation | 4,252 | 400 |
| Depreciation and amortization | 2,830 | 2,531 |
| Deferred income tax (provision) benefit | (1,342) | 47 |
| Interest expense - non-cash | 120 | 177 |
| Gains on investments | (37) | (722) |
| Fair value loss on common equity put options | -- | 1,047 |
| Changes in operating assets and liabilities | 6,369 | (3,125) |
| Net cash provided by operating activities | 20,078 | 18,449 |
| Cash flows from investing activities: | ||
| Proceeds from sales of investments | 9,094 | 12,622 |
| Purchases of property and equipment | (1,667) | (84) |
| Acquisition of intangible assets | -- | (117) |
| Net cash provided by investing activities | 7,427 | 12,421 |
| Cash flows from financing activities: | ||
| Purchase of treasury stock | -- | (5,704) |
| Proceeds from exercise of ordinary share options | 27 | -- |
| Payment of other non-current liabilities | (1,500) | (1,500) |
| Net cash used in financing activities | (1,473) | (7,204) |
| Net increase in cash and cash equivalents | 26,032 | 23,666 |
| Cash and cash equivalents, beginning of period | 45,997 | 18,959 |
| Cash and cash equivalents, end of period | $ 72,029 | $ 42,625 |
| RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Six Months | Six Months |
| Ended | Ended | Ended | Ended | |
| 30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | |
| GAAP Operating income | $ 3,354 | $ 9,639 | $ 10,955 | $ 24,879 |
| Depreciation and amortization | 1,439 | 1,368 | 2,830 | 2,531 |
| Share-based issuances and compensation | 1,583 | -- | 4,252 | 400 |
| Favorable settlement with a retail sales broker | -- | -- | -- | (1,192) |
| Transition costs related to introduction of new magicJack device | 206 | 1,200 | 206 | 1,200 |
| Former executive severance payments | -- | 798 | -- | 798 |
| Certain tax matters | -- | 750 | -- | 750 |
| Reversal of unused price protection accrual | -- | -- | (123) | -- |
| Reserve for device returns | 217 | -- | 317 | -- |
| Reserve for bad debt expense | 167 | -- | 262 | -- |
| Adjusted EBITDA | $ 6,966 | $ 13,755 | $ 18,699 | $ 29,366 |
| RECONCILIATION OF NET INCOME TO NON-GAAP INCOME BEFORE TAX | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Six Months | Six Months |
| Ended | Ended | Ended | Ended | |
| 30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | |
| GAAP Net income | $ 2,269 | $ 6,508 | $ 7,588 | $ 16,094 |
| Share-based issuances and compensation | 1,583 | -- | 4,252 | 400 |
| Favorable settlement with a retail sales broker | -- | -- | -- | (1,192) |
| Transition costs related to introduction of new magicJack device | 206 | 1,200 | 206 | 1,200 |
| Former executive severance payments | -- | 798 | -- | 798 |
| Certain tax matters | -- | 750 | -- | 750 |
| Reversal of unused price protection accrual | -- | -- | (123) | -- |
| Reserve for device returns | 217 | -- | 317 | -- |
| Reserve for bad debt expense | 167 | -- | 262 | -- |
| Gains on investments | (37) | (195) | (37) | (722) |
| Fair value loss (gain) on common equity put options | -- | -- | -- | 1,047 |
| Income tax expense | 1,118 | 3,316 | 3,382 | 8,514 |
| Non-GAAP Income before tax | $ 5,523 | $ 12,377 | $ 15,847 | $ 26,889 |
| GAAP Earnings per ordinary share – Diluted | $ 0.13 | $ 0.35 | $ 0.43 | $ 0.86 |
| Share-based issuances and compensation | 0.09 | -- | 0.24 | 0.02 |
| Favorable settlement with a retail sales broker | -- | -- | -- | (0.06) |
| Transition costs related to introduction of new magicJack device | 0.01 | 0.06 | 0.01 | 0.06 |
| Former executive severance payments | -- | 0.04 | -- | 0.04 |
| Certain tax matters | -- | 0.04 | -- | 0.04 |
| Reversal of unused price protection accrual | -- | -- | (0.01) | -- |
| Reserve for device returns | 0.01 | -- | 0.02 | -- |
| Reserve for bad debt expense | 0.01 | -- | 0.01 | -- |
| Gains on investments | (0.00) | (0.01) | (0.00) | (0.04) |
| Fair value loss (gain) on common equity put options | -- | -- | -- | 0.06 |
| Income tax expense | 0.06 | 0.18 | 0.19 | 0.46 |
| Non-GAAP Pre-tax earnings per share – Diluted | $ 0.31 | $ 0.67 | $ 0.89 | $ 1.44 |
| Weighted average ordinary shares outstanding: Diluted | 17,835 | 18,560 | 17,833 | 18,627 |
| RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Six Months | Six Months |
| Ended | Ended | Ended | Ended | |
| 30-Jun-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | |
| Net cash provided by operating activities | $ 5,888 | $ 1,823 | $ 20,078 | $ 18,449 |
| Less: Capital expenditures | (307) | -- | (1,667) | (84) |
| Free cash flow | $ 5,581 | $ 1,823 | $ 18,411 | $ 18,365 |