- Total net revenues of $21.7 million, access rights renewal revenues were $12.8 million
- GAAP operating income of $4.0 million, non-GAAP adjusted EBITDA of $5.9 million
- GAAP diluted EPS of $0.15, non-GAAP diluted EPS of $0.26
- Cash and cash equivalents of $51.3 million and no debt as of September 30, 2017
WEST PALM BEACH, Fla. and NETANYA, Israel, Nov. 09, 2017 (GLOBE NEWSWIRE) -- magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications and UCaaS company, today announced financial results for the third quarter ended September 30, 2017.
Third Quarter 2017 Financial Highlights:
- Net Revenues: Total net revenues for the third quarter of 2017 were $21.7 million. Net revenues from the sales of magicJack devices were $2.6 million and access rights renewal revenues were $12.8 million, and accounted for 59% of total net revenues. Prepaid minute revenues were $1.1 million and access and wholesale charges were $0.9 million during the quarter. Broadsmart Global, Inc. contributed $2.6 million in revenues to the third quarter of 2017. Other revenue items contributed the remaining $1.6 million of total net revenues during the third of 2017.
- Operating Income: GAAP operating income for the third quarter of 2017 was $4.0 million which included $1.3 million in net charges primarily related to non-recurring legal costs, a gain on mark-to-market and senior management transition expenses.
- Non-GAAP Adjusted EBITDA: Adjusted EBITDA for the third quarter of 2017 was $5.9 million.
- Net Income: GAAP net income attributable to common shareholders for the third quarter of 2017 was $2.5 million or $0.15. GAAP diluted net income per share based on 16.1 million weighted-average diluted ordinary shares outstanding. GAAP net income included the following items:
- $1.6 million tax-related items, which included a $0.5 million tax impact due to expiration of stock options;
- $1.1 million in costs related to the strategic process;
- $0.3 million in severance and executive management transition expenses; and
- $0.9 million gain on mark-to-market.
- Non-GAAP Net Income: Non-GAAP net income attributable to common shareholders for the third quarter of 2017 was $4.2 million or $0.26. Non-GAAP net income per share based on 16.1 million weighted-average diluted ordinary shares outstanding.
- Cash: As of September 30, 2017, magicJack VocalTec had cash and cash equivalents of $51.3 million and no debt. During the third quarter of 2017, the company generated $4.5 million net cash in operating activities, which reflects the impact of $2.0 million received from escrow related to the acquisition of Broadsmart Global, Inc., $1.0 million received as a result of a dispute settlement. It also includes payments for approximately $0.7 million payout for an executive sign-on bonus and compensation accrued in prior quarters, $0.3 million in severances and senior management transition costs, a $0.3 million payment related to a legal settlement accrued in a prior quarter, as well as payments of expenses associated with the strategic process.
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 Third Quarter 2017 and Recent Highlights:
- As of September 30, 2017, magicJack had an estimated 2.00 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
- magicJack activated approximately 85,000 subscribers during the third quarter of 2017. Activations are defined as devices that become activated on to a subscription contract during a given period.
- During the quarter ended September 30, 2017, magicJack’s average monthly churn was 2.0%.
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:
Seth Potter
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, gain on mark-to-market, 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 income (loss) 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 | Nine Months | Nine Months | |||||||||||||
| Ended | Ended | Ended | Ended | ||||||||||||||
| 30-Sep-17 | 30-Sep-16 | 30-Sep-17 | 30-Sep-16 | ||||||||||||||
| Net revenues | $ | 21,657 | $ | 24,572 | $ | 67,235 | $ | 73,572 | |||||||||
| Cost of revenues | 7,830 | 9,509 | 25,447 | 27,556 | |||||||||||||
| Gross profit | 13,827 | 15,063 | 41,788 | 46,016 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Marketing | 1,933 | 2,680 | 6,460 | 5,659 | |||||||||||||
| General and administrative | 7,330 | 7,143 | 29,699 | 24,330 | |||||||||||||
| Research and development | 1,477 | 1,314 | 4,438 | 3,661 | |||||||||||||
| Impairment of intangible assets and goodwill | - | 498 | 31,527 | 498 | |||||||||||||
| Gain on mark-to-market | (894 | ) | (2,000 | ) | (894 | ) | (2,000 | ) | |||||||||
| Total operating expenses | 9,846 | 9,635 | 71,230 | 32,148 | |||||||||||||
| Operating income (loss) | 3,981 | 5,428 | (29,442 | ) | 13,868 | ||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest and dividend income | 42 | 5 | 65 | 21 | |||||||||||||
| Other income (expense) | 2 | (6 | ) | (28 | ) | (11 | ) | ||||||||||
| Total other income (expense) | 44 | (1 | ) | 37 | 10 | ||||||||||||
| Income (loss) before income taxes | 4,025 | 5,427 | (29,405 | ) | 13,878 | ||||||||||||
| Income tax expense (benefit) | 1,574 | 2,205 | (7,194 | ) | 7,407 | ||||||||||||
| Net income (loss) | 2,451 | 3,222 | (22,211 | ) | 6,471 | ||||||||||||
| Net loss attributable to noncontrolling interest | - | 177 | - | 481 | |||||||||||||
| Net income (loss) attributable to common shareholders | $ | 2,451 | $ | 3,399 | $ | (22,211 | ) | $ | 6,952 | ||||||||
| Earnings (loss) per ordinary share: | |||||||||||||||||
| Basic | $ | 0.15 | $ | 0.21 | $ | (1.38 | ) | $ | 0.44 | ||||||||
| Diluted | $ | 0.15 | $ | 0.21 | $ | (1.38 | ) | $ | 0.44 | ||||||||
| Weighted average ordinary shares outstanding: | |||||||||||||||||
| Basic | 16,114 | 15,857 | 16,076 | 15,786 | |||||||||||||
| Diluted | 16,114 | 15,865 | 16,076 | 15,935 | |||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION | |||||
| (In thousands) | |||||
| (Unaudited) | |||||
| As of | As of | ||||
| ASSETS | 30-Sep-17 | 31-Dec-16 | |||
| Current Assets | |||||
| Cash and cash equivalents | $ | 51,254 | $ | 52,394 | |
| Investments, at fair value | 369 | 447 | |||
| Accounts receivable, net | 2,521 | 3,171 | |||
| Inventories, net | 2,047 | 4,441 | |||
| Deferred costs | 1,933 | 2,319 | |||
| Prepaid income taxes | 2,374 | 527 | |||
| Receivable from earnout escrow | - | 2,000 | |||
| Deposits and other current assets | 1,267 | 1,970 | |||
| Total current assets | 61,765 | 67,269 | |||
| Property and equipment, net | 3,074 | 3,805 | |||
| Intangible assets, net | 10,877 | 28,854 | |||
| Goodwill | 32,304 | 47,185 | |||
| Deferred tax assets | 34,478 | 26,568 | |||
| Deposits and other non-current assets | 866 | 836 | |||
| Total Assets | $ | 143,364 | $ | 174,517 | |
| LIABILITIES AND CAPITAL EQUITY | |||||
| Current Liabilities | |||||
| Accounts payable | $ | 3,201 | $ | 2,790 | |
| Income tax payable | - | 1,527 | |||
| Accrued expenses and other current liabilities | 6,049 | 8,426 | |||
| Deferred revenue, current portion | 42,972 | 48,507 | |||
| Total current liabilities | 52,222 | 61,250 | |||
| Deferred revenue, net of current portion | 40,071 | 44,201 | |||
| Other non-current liabilities | 12,529 | 10,866 | |||
| Total Capital Equity | 38,542 | 58,200 | |||
| Total Liabilities and Capital Equity | $ | 143,364 | $ | 174,517 | |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | Nine Months | Nine Months | ||||||
| Ended | Ended | |||||||
| 30-Sep-17 | 30-Sep-16 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | (22,211 | ) | $ | 6,471 | |||
| Provision for doubtful accounts and billing adjustments | 8 | 210 | ||||||
| Share-based compensation | 2,053 | 3,169 | ||||||
| Depreciation and amortization | 3,397 | 3,510 | ||||||
| Impairment of intangible assets | 31,527 | 498 | ||||||
| Increase of uncertain tax position | 1,789 | 1,548 | ||||||
| Deferred income tax (benefit) provision | (7,910 | ) | 626 | |||||
| Gain on mark-to-market | - | (2,000 | ) | |||||
| Loss on sale of assets | 115 | - | ||||||
| Changes in operating assets and liabilities, net of business acquisitions | (8,433 | ) | (748 | ) | ||||
| Net cash provided by operating activities | 335 | 13,284 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of investments | - | (80 | ) | |||||
| Proceeds from sales of investments | 245 | - | ||||||
| Purchases of property and equipment | (510 | ) | (256 | ) | ||||
| Proceeds from sale of property and equipment | 15 | - | ||||||
| Acquisition of Broadsmart, net of cash acquired | - | (40,019 | ) | |||||
| Acquisition of intangible assets | (1,090 | ) | - | |||||
| Net cash used in investing activities | (1,340 | ) | (40,355 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repurchase of ordinary shares to settle withholding liability | (135 | ) | - | |||||
| Proceeds from exercise of ordinary share options | - | 8 | ||||||
| Net cash (used in) provided by financing activities | (135 | ) | 8 | |||||
| Net (decrease) increase in cash and cash equivalents | (1,140 | ) | (27,063 | ) | ||||
| Cash and cash equivalents, beginning of period | 52,394 | 78,589 | ||||||
| Cash and cash equivalents, end of period | $ | 51,254 | $ | 51,526 | ||||
| RECONCILIATION OF OPERATING INCOME TO NON-GAAP ADJUSTED EBITDA | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months | ||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| 30-Sep-17 | 30-Sep-16 | 30-Sep-17 | 30-Sep-16 | |||||||||||||
| GAAP Operating income (loss) | $ | 3,981 | $ | 5,428 | $ | (29,442 | ) | $ | 13,868 | |||||||
| Depreciation and amortization | 978 | 1,328 | 3,397 | 3,510 | ||||||||||||
| Share-based compensation | 750 | 919 | 2,053 | 3,169 | ||||||||||||
| Impairment of intangible assets | - | 498 | 31,527 | 498 | ||||||||||||
| Asset impairment | - | - | 490 | - | ||||||||||||
| Gain on mark-to-market | (894 | ) | (2,000 | ) | (894 | ) | (2,000 | ) | ||||||||
| Transaction related expenses | - | - | - | 799 | ||||||||||||
| Proxy contest related expenses | - | 496 | 1,042 | 496 | ||||||||||||
| Severance and senior management transition expenses | 40 | 24 | 2,968 | 635 | ||||||||||||
| Write-down of inventory components | - | 112 | 386 | 112 | ||||||||||||
| Other Items | 1,059 | 221 | 2,954 | 495 | ||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 5,914 | $ | 7,026 | $ | 14,481 | $ | 21,582 | ||||||||
| RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months | ||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| 30-Sep-17 | 30-Sep-16 | 30-Sep-17 | 30-Sep-16 | |||||||||||||
| GAAP Net income (loss) attributable to common shareholders | $ | 2,451 | $ | 3,399 | $ | (22,211 | ) | $ | 6,952 | |||||||
| Share-based compensation | 750 | 919 | 2,053 | 3,169 | ||||||||||||
| Impairment of intangible assets | - | 498 | 31,527 | 498 | ||||||||||||
| Asset impairment | - | - | 490 | - | ||||||||||||
| Gain on mark-to-market | (894 | ) | (2,000 | ) | (894 | ) | (2,000 | ) | ||||||||
| Transaction related expenses | - | - | - | 799 | ||||||||||||
| Proxy contest related expenses | - | 496 | 1,042 | 496 | ||||||||||||
| Severance and senior management transition expenses | 40 | 24 | 2,968 | 635 | ||||||||||||
| Write-down of inventory components | - | 112 | 386 | 112 | ||||||||||||
| Other Items | 1,059 | 221 | 2,954 | 495 | ||||||||||||
| Tax related items | 811 | 940 | (7,278 | ) | 3,162 | |||||||||||
| Non-GAAP Net income | $ | 4,217 | $ | 4,609 | $ | 11,037 | $ | 14,318 | ||||||||
| GAAP earnings (loss) per ordinary share – Diluted | $ | 0.15 | $ | 0.21 | $ | (1.38 | ) | $ | 0.44 | |||||||
| Share-based compensation | 0.05 | 0.06 | 0.13 | 0.20 | ||||||||||||
| Impairment of intangible assets | - | 0.03 | 1.96 | 0.03 | ||||||||||||
| Asset impairment | - | - | 0.03 | - | ||||||||||||
| Gain on mark-to-market | (0.06 | ) | (0.13 | ) | (0.06 | ) | (0.13 | ) | ||||||||
| Transaction related expenses | - | - | - | 0.05 | ||||||||||||
| Proxy contest related expenses | - | 0.03 | 0.06 | 0.03 | ||||||||||||
| Severance and senior management transition expenses | 0.00 | 0.00 | 0.18 | 0.04 | ||||||||||||
| Write-down of inventory components | - | 0.01 | 0.02 | 0.01 | ||||||||||||
| Other Items | 0.07 | 0.01 | 0.18 | 0.03 | ||||||||||||
| Tax related items | 0.05 | 0.06 | (0.45 | ) | 0.20 | |||||||||||
| Non-GAAP Net income per share – Diluted | $ | 0.26 | $ | 0.29 | $ | 0.69 | $ | 0.90 | ||||||||
| Weighted average ordinary shares outstanding - Diluted: | 16,114 | 15,865 | 16,076 | 15,935 | ||||||||||||