- Total net revenues of $25.4 million, access rights renewal revenues were $16.2 million
- GAAP operating income of $7.5 million, Adjusted EBITDA of $9.7 million
- GAAP diluted EPS of $0.20, non-GAAP diluted EPS of $0.37
- Generated $5.7 million in free cash flow
- Churn reduced to 2.7%
- Cash and cash equivalents of $79.6 million and no debt as of September 30, 2015
- Repurchased approximately $8.4 million of stock during Q3
- Increasing FY15 Adjusted EBITDA guidance to approximately $34 million
WEST PALM BEACH, Fla. and NETANYA, Israel, Nov. 9, 2015 (GLOBE NEWSWIRE) -- magicJack VocalTec Ltd. (Nasdaq: CALL ), a leading VoIP cloud-based communications company, today announced financial results for the third quarter ended September 30, 2015.
"We were pleased with our execution during the third quarter with ongoing improvement in the company's free cash flow generation," said Gerald Vento, President and CEO of magicJack VocalTec. "We remain committed to executing on the various growth initiatives that we have underway and to maximizing overall shareholder value."
Third Quarter 2015 Financial Highlights:
- Net revenues : Total net revenues for the third quarter of 2015 were $25.4 million. Net revenues from the sales of magicJack devices were $4.5 million and access rights renewal revenues were $16.2 million, and accounted for 64% of total net revenues. Prepaid minute revenues were $2.0 million and access and wholesale charges were $1.6 million during the quarter. Other revenue contributed the remaining $1.1 million of total net revenues during the third quarter of 2015.
- Operating income: GAAP operating income for the third quarter of 2015 was $7.5 million.
- Adjusted EBITDA: Adjusted EBITDA for the third quarter of 2015 was $9.7 million.
- Net income: GAAP net income for the third quarter of 2015 was $3.3 million or $0.20 GAAP diluted net income per share based on 16.7 million weighted-average diluted ordinary shares outstanding.
- Non-GAAP net income: Non-GAAP net income for the third quarter of 2015 was $6.1 million or $0.37 non-GAAP net income per share based on 16.7 million weighted-average diluted ordinary shares outstanding. Cash and free cash flow: As of September 30, 2015, magicJack VocalTec had cash and cash equivalents of $79.6 million and no debt. During the third quarter of 2015, the company generated $5.7 million in free cash flow.
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 2015 and Recent Highlights:
- As of September 30, 2015, magicJack had an estimated 2.53 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
- magicJack activated 119,000 subscribers during the third quarter of 2015. Activations are defined as devices that become activated on to a subscription contract during a given period.
- During the quarter ended September 30, 2015, magicJack's average monthly churn was 2.7%.
- During the quarter ended September 30, 2015, magicJack VocalTec Ltd. repurchased 1,074,471 shares of common stock at an average price of $7.83 per share as part of its stock repurchase program.
- Taking into account shares repurchased through October 31, 2015, the company has repurchased a total of over 2.1 million shares at an average price of $8.34, or approximately $17.9 million as of that date.
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 of 2015. To access this call, dial 1-877-723-9522 (United States), or 1-718-325-4940 (international), with conference ID #337847. 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 23, 2015, by dialing 1-877-870-5176 (United States), or 1-858-384-5517 (international). The recording access code is #337847.
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, now in its fifth 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 compensation, impairment of intangible assets, transaction related expenses, severance payments, provision for device returns, transition costs related to introduction of a new device, a reversal of unused price protection accrual, the net change to provision for bad debt expense and a legal settlement.
- magicJack defines non-GAAP net income as GAAP net income excluding: share-based compensation, impairment of intangible asset, transaction related expenses, severance payments, provision for device returns, transition costs related to introduction of a new device, a reversal of unused price protection accrual, the net change to provision for bad debt expense, a legal settlement, gain on investments, decrease in tax valuation allowance, foreign currency revaluations on tax assets and net uncertain tax positions.
- 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 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 expand our network of retail partners and to increase sales of magicJack devices; our ability to successfully integrate the magicJack GO and magicJack Express devices with our mobile app; our ability to successfully monetize our mobile app and market it globally; 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 and our ability to control costs; 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.
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands except per share data) | ||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months |
| Ended | Ended | Ended | Ended | |
| 30-Sep-15 | 30-Sep-14 | 30-Sep-15 | 30-Sep-14 | |
| Net revenues | $ 25,409 | $ 25,813 | $ 76,331 | $ 90,606 |
| Cost of revenues | 8,225 | 9,477 | 26,361 | 33,891 |
| Gross profit | 17,184 | 16,336 | 49,970 | 56,715 |
| Operating expenses: | ||||
| Marketing | 2,357 | 6,244 | 6,940 | 15,230 |
| General and administrative | 6,286 | 9,402 | 21,297 | 26,721 |
| Research and development | 1,088 | 1,494 | 3,418 | 4,613 |
| Total operating expenses | 9,731 | 17,140 | 31,655 | 46,564 |
| Operating income | 7,453 | (804) | 18,315 | 10,151 |
| Other income (expense): | ||||
| Gains on investments | -- | -- | -- | 37 |
| Interest and dividend income | 6 | 13 | 23 | 108 |
| Interest expense | -- | (34) | (57) | (154) |
| Other income (expense), net | 4 | 1 | (2) | 4 |
| Total other income (expense) | 10 | (20) | (36) | (5) |
| Income (loss) before income taxes | 7,463 | (824) | 18,279 | 10,146 |
| Income tax expense (benefit) | 4,152 | (823) | 6,708 | 2,559 |
| Net income (loss) | $ 3,311 | $ (1) | $ 11,571 | $ 7,587 |
| Earnings (loss) per ordinary share: | ||||
| Basic | $ 0.20 | $ (0.00) | $ 0.66 | $ 0.43 |
| Diluted | $ 0.20 | $ (0.00) | $ 0.66 | $ 0.43 |
| Weighted average ordinary shares outstanding: | ||||
| Basic | 16,651 | 17,832 | 17,400 | 17,830 |
| Diluted | 16,658 | 17,832 | 17,426 | 17,832 |
| CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION | ||
| (In thousands) | ||
| (Unaudited) | ||
| As of | As of | |
| ASSETS | 30-Sep-15 | 31-Dec-14 |
| Current Assets | ||
| Cash and cash equivalents | $ 79,569 | $ 75,945 |
| Marketable securities, at fair value | 367 | 367 |
| Accounts receivable, net of allowance for doubtful accounts and billing adjustments | 2,568 | 3,903 |
| Inventories | 6,240 | 5,635 |
| Deferred costs | 1,838 | 2,765 |
| Deferred tax assets, current | 9,115 | 13,341 |
| Prepaid income taxes | -- | 12,513 |
| Deposits and other current assets | 2,079 | 1,170 |
| Total current assets | 101,776 | 115,639 |
| Property and equipment, net | 3,520 | 3,564 |
| Intangible assets, net | 7,177 | 9,473 |
| Goodwill | 32,304 | 32,304 |
| Deferred tax assets, non-current | 30,798 | 32,510 |
| Deposits and other non-current assets | 749 | 743 |
| Total Assets | $ 176,324 | $ 194,233 |
| LIABILITIES AND CAPITAL EQUITY | ||
| Current Liabilities | ||
| Accounts payable | $ 1,322 | $ 2,879 |
| Income tax payable | 2,369 | 9,197 |
| Accrued expenses and other current liabilities | 5,452 | 8,406 |
| Deferred revenue, current portion | 53,280 | 56,445 |
| Total current liabilities | 62,423 | 76,927 |
| Deferred revenue, net of current portion | 51,078 | 54,782 |
| Other non-current liabilities | 11,919 | 13,438 |
| Total Capital Equity | 50,904 | 49,086 |
| Total Liabilities and Capital Equity | $ 176,324 | $ 194,233 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
| (Unaudited) | Nine Months | Nine Months |
| Ended | Ended | |
| 30-Sep-15 | 30-Sep-14 | |
| Cash flows from operating activities: | ||
| Net income | $ 11,571 | $ 7,587 |
| Provision for doubtful accounts and billing adjustments | 70 | (64) |
| Share-based compensation | 3,906 | 5,714 |
| Depreciation and amortization | 2,877 | 3,811 |
| Impairment of intangible assets | -- | 2,464 |
| (Decrease) increase of uncertain tax position | (1,124) | 351 |
| Deferred income tax provision (benefit) | 6,105 | (1,105) |
| Interest expense - non-cash | 57 | 154 |
| Gains on investments | -- | (37) |
| Changes in operating assets and liabilities | (4,131) | 4,631 |
| Net cash provided by operating activities | 19,331 | 23,506 |
| Cash flows from investing activities: | ||
| Proceeds from sales of investments | -- | 9,094 |
| Purchases of property and equipment | (548) | (1,911) |
| Acquisition of intangible assets | -- | (15) |
| Net cash (used in) provided by investing activities | (548) | 7,168 |
| Cash flows from financing activities: | ||
| Purchase of treasury stock | (13,565) | -- |
| Payment of other current liabilities | (1,500) | (1,500) |
| Repurchase of shares to settle withholding liability | (94) | -- |
| Proceeds from exercise of ordinary share options | -- | 27 |
| Net cash used in financing activities | (15,159) | (1,473) |
| Net increase in cash and cash equivalents | 3,624 | 29,201 |
| Cash and cash equivalents, beginning of period | 75,945 | 45,997 |
| Cash and cash equivalents, end of period | $ 79,569 | $ 75,198 |
| RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months |
| Ended | Ended | Ended | Ended | |
| 30-Sep-15 | 30-Sep-14 | 30-Sep-15 | 30-Sep-14 | |
| GAAP Operating income (loss) | $ 7,453 | $ (804) | $ 18,315 | $ 10,151 |
| Depreciation and amortization | 853 | 981 | 2,877 | 3,811 |
| Share-based compensation | 1,206 | 1,462 | 3,906 | 5,714 |
| Impairment of intangible asset | -- | 2,464 | -- | 2,464 |
| Transaction related expenses | 75 | -- | 659 | -- |
| Severance payments | 148 | -- | 1,331 | -- |
| Provision for device returns | -- | 270 | (52) | 587 |
| Transition costs related to introduction of new device | -- | 152 | 5 | 358 |
| Reversal of unused price protection accrual | -- | -- | -- | (123) |
| Net change to provision for bad debt expense | (2) | (379) | 74 | (117) |
| Legal settlement | -- | -- | 675 | -- |
| Adjusted EBITDA | $ 9,733 | $ 4,146 | $ 27,790 | $ 22,845 |
| RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP NET INCOME | ||||
| (In thousands) | ||||
| (Unaudited) | Quarter | Quarter | Nine Months | Nine Months |
| Ended | Ended | Ended | Ended | |
| 30-Sep-15 | 30-Sep-14 | 30-Sep-15 | 30-Sep-14 | |
| GAAP Net income (loss) | $ 3,311 | $ (1) | $ 11,571 | $ 7,587 |
| Share-based compensation | 1,206 | 1,462 | 3,906 | 5,714 |
| Impairment of intangible asset | -- | 2,464 | -- | 2,464 |
| Transaction related expenses | 75 | -- | 659 | -- |
| Severance payments | 148 | -- | 1,331 | -- |
| Provision for device returns | -- | 270 | (52) | 587 |
| Transition costs related to introduction of new device | -- | 152 | 5 | 358 |
| Reversal of unused price protection accrual | -- | -- | -- | (123) |
| Net change to provision for bad debt expense | (2) | (379) | 74 | (117) |
| Legal settlement | -- | -- | 675 | -- |
| Gain on investments | -- | -- | -- | (37) |
| Decrease in tax valuation allowance | (676) | -- | (149) | -- |
| Foreign currency revaluations on tax assets | 2,002 | -- | 700 | -- |
| Uncertain tax positions, net | 48 | -- | (247) | -- |
| Non-GAAP Net income | $ 6,112 | $ 3,968 | $ 18,473 | $ 16,433 |
| GAAP earnings per ordinary share – Diluted | $ 0.20 | $ (0.00) | $ 0.66 | $ 0.43 |
| Share-based compensation | 0.07 | 0.08 | 0.22 | 0.32 |
| Impairment of intangible asset | -- | 0.14 | -- | 0.14 |
| Transaction related expenses | 0.00 | -- | 0.04 | -- |
| Severance payments | 0.01 | -- | 0.08 | -- |
| Provision for device returns | -- | 0.02 | (0.00) | 0.03 |
| Transition costs related to introduction of new device | -- | 0.01 | 0.00 | 0.02 |
| Reversal of unused price protection accrual | -- | -- | -- | (0.01) |
| Net change to provision for bad debt expense | (0.00) | (0.02) | 0.00 | (0.01) |
| Legal settlement | -- | -- | 0.04 | -- |
| Gain on investments | -- | -- | -- | (0.00) |
| Release of tax valuation allowance | (0.04) | -- | (0.01) | -- |
| Foreign currency revaluations on tax assets | 0.12 | -- | 0.04 | -- |
| Uncertain tax positions, net | 0.00 | -- | (0.01) | -- |
| Non-GAAP Net income per share – Diluted | $ 0.37 | $ 0.22 | $ 1.06 | $ 0.92 |
| Weighted average ordinary shares outstanding - Diluted: | 16,658 | 17,832 | 17,426 | 17,832 |
| 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-15 | 30-Sep-14 | 30-Sep-15 | 30-Sep-14 | |
| Net cash provided by operating activities | $ 5,656 | $ 3,428 | $ 19,331 | $ 23,506 |
| Less: Capital expenditures | -- | (244) | (548) | (1,911) |
| Free cash flow | $ 5,656 | $ 3,184 | $ 18,783 | $ 21,595 |
Seth Potter Investor Relations 561-749-2255
