EX-99.1 2 exhibit_99-1.htm EXHIBIT 99.1

Exhibit 99.1
 
 
NEWS RELEASE
www.vocaltec.com
 
 
magicJack Reports Second Quarter 2018 Financial Results

·
Total net revenues of $20.0 million
·
GAAP operating income of $4.8 million, Adjusted EBITDA of $7.1 million
·
GAAP diluted EPS of $0.25, non-GAAP diluted EPS of $0.33
·
Cash and cash equivalents of $58.9 million and no debt as of June 30, 2018

West Palm Beach, Fla. and Netanya, Israel, August 6, 2018 – magicJack VocalTec Ltd. (Nasdaq: CALL), a leading VoIP cloud-based communications and UCaaS company, today announced financial results for the second quarter ending June 30, 2018.

Second Quarter 2018 Financial Highlights:

Net revenues: Total net revenues for the second quarter of 2018 were $20.0 million. Net revenues from the sales of magicJack devices were $1.8 million and access rights renewal revenues were $12.4 million, and accounted for 62% of total net revenues. Prepaid minute revenues were $1.0 million and access and wholesale charges were $0.7 million during the quarter. Broadsmart Global, Inc. contributed $2.8 million in revenues to the second quarter of 2018. Other revenue items contributed the remaining $1.3 million of total net revenues during the second quarter of 2018.

Operating Income: GAAP operating income for the second quarter of 2018 was $4.8 million, which included $0.6 million in charges primarily related to non-recurring professional and legal costs and severances expenses.

Adjusted EBITDA: Adjusted EBITDA for the second quarter of 2018 was $7.1 million.

Net Income: GAAP net income attributable to common shareholders for the second quarter of 2018 was $4.1 million or $0.25 GAAP diluted net income per share based on 16.2 million weighted-average diluted ordinary shares outstanding. GAAP net income included the aforementioned items under the Operating Income section above, as well as a $0.2 million impact from certain tax items, which included an increase to uncertain tax positions and an increase to deferred tax assets related foreign currency revaluation.

Non-GAAP net income: Non-GAAP net income attributable to common shareholders for the second quarter of 2018 was $5.4 million or $0.33 non-GAAP net income per diluted share based on 16.2 million weighted-average diluted ordinary shares outstanding.

Cash: As of June 30, 2018, magicJack VocalTec had cash and cash equivalents of $58.9 million and no debt. During the second quarter of 2018, the company generated $5.1 million in net cash provided by operating activities.

A reconciliation of GAAP to non-GAAP measures 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 2018 Highlights:

As of June 30, 2018, magicJack had an estimated 1.85 million active MJ subscribers, which are defined as device users that are under an active subscription contract.

magicJack activated 72,000 subscribers during the Second quarter of 2018. Activations are defined as devices that become activated on to a subscription contract during a given period.

During the quarter ended June 30, 2018, magicJack’s average monthly churn was 2.0%.


Update on B. Riley Merger:

The closing of the acquisition of the Company by B. Riley remains pending final regulatory approval. The Company will communicate additional updates once closing conditions have been satisfied.
 
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:

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, proxy contest related expenses, severance and senior management transition expenses, write-down of inventory components and other items, which include a provision for legal settlements, transaction related expenses, costs related to Broadsmart acquisition matters and employment of its founders, provision for restructuring and a provision for certain tax matters.

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, proxy contest related expenses, severance and senior management transition expenses, write-down of inventory components and other items, which include a provision for legal settlements, transaction related expenses, costs related to Broadsmart acquisition matters and employment of its founders, provision for restructuring, a provision for certain tax matters, 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-18
   
30-Jun-17
   
30-Jun-18
   
30-Jun-17
 
Net revenues
 
$
20,022
   
$
22,381
   
$
40,037
   
$
45,578
 
Cost of revenues
   
7,100
     
8,166
     
14,263
     
17,617
 
Gross profit
   
12,922
     
14,215
     
25,774
     
27,961
 
Operating expenses:
                               
Marketing
   
893
     
2,120
     
2,085
     
4,527
 
General and administrative
   
5,799
     
9,544
     
13,301
     
22,369
 
Research and development
   
1,404
     
1,462
     
2,861
     
2,961
 
Impairment of intangible assets and goodwill
   
-
     
-
     
131
     
31,527
 
Total operating expenses
   
8,096
     
13,126
     
18,378
     
61,384
 
Operating income (loss)
   
4,826
     
1,089
     
7,396
     
(33,423
)
Other income (expense):
                               
Interest and dividend income
   
187
     
17
     
280
     
23
 
Other income (expense)
   
5
     
(13
)
   
3
     
(30
)
Total other income (expense)
   
192
     
4
     
283
     
(7
)
Income (loss) before income taxes
   
5,018
     
1,093
     
7,679
     
(33,430
)
Income tax expense (benefit)
   
922
     
2,587
     
1,617
     
(8,768
)
Net income (loss)
   
4,096
     
(1,494
)
   
6,062
     
(24,662
)
Net loss attributable to noncontrolling interest
   
-
     
(67
)
   
-
     
-
 
Net income (loss) attributable to common shareholders
 
$
4,096
   
$
(1,561
)
 
$
6,062
   
$
(24,662
)
 
                               
Earnings (loss) per ordinary share:
                               
Basic
 
$
0.25
   
$
(0.10
)
 
$
0.37
   
$
(1.54
)
Diluted
 
$
0.25
   
$
(0.10
)
 
$
0.37
   
$
(1.54
)
Weighted average ordinary shares outstanding:
                               
Basic
   
16,205
     
16,078
     
16,199
     
16,056
 
Diluted
   
16,205
     
16,078
     
16,199
     
16,056
 

– More –

CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION
 
             
(In thousands)
           
(Unaudited)
           
   
As of
   
As of
 
 
30-Jun-18
   
31-Dec-17
 
ASSETS
           
Current Assets
           
Cash and cash equivalents
 
$
58,896
   
$
52,638
 
Investments, at fair value
   
369
     
369
 
Accounts receivable, net
   
2,153
     
2,428
 
Inventories
   
1,825
     
1,880
 
Contractual Cost - Current
   
301
     
1,936
 
Prepaid income taxes
   
844
     
2,016
 
Deposits and other current assets
   
1,753
     
1,874
 
Total current assets
   
66,141
     
63,141
 
                 
Property and equipment, net
   
2,264
     
2,772
 
Intangible assets, net
   
8,820
     
10,190
 
Goodwill
   
32,304
     
32,304
 
Deferred tax assets
   
31,467
     
31,726
 
Deposits and other non-current assets
   
814
     
909
 
Contractual Cost - Non Current
   
541
     
-
 
Total Assets
 
$
142,351
   
$
141,042
 
                 
LIABILITIES AND CAPITAL EQUITY
               
Current Liabilities
               
Accounts payable
 
$
2,289
   
$
3,199
 
Accrued expenses and other current liabilities
   
5,111
     
6,454
 
Contract liabilities - Current
   
39,129
     
42,243
 
Total current liabilities
   
46,529
     
51,896
 
                 
Contract liabilities - Non Current
   
36,602
     
38,797
 
Other non-current liabilities
   
13,994
     
13,787
 
Total Capital Equity
   
45,226
     
36,562
 
Total Liabilities and Capital Equity
 
$
142,351
   
$
141,042
 
– More –


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
           
(In thousands)
           
(Unaudited)
 
Six Months
   
Six Months
 
 
 
Ended
   
Ended
 
 
 
30-Jun-18
   
30-Jun-17
 
Cash flows from operating activities:
           
Net (loss) income
 
$
6,062
   
$
(24,662
)
Provision for doubtful accounts and billing adjustments
   
21
     
126
 
Share-based compensation
   
1,985
     
1,303
 
Depreciation and amortization
   
1,777
     
2,419
 
Impairment of intangible assets
   
131
     
31,527
 
Increase of uncertain tax position
   
(56
)
   
1,809
 
Deferred income tax (benefit) provision
   
119
     
(9,091
)
Loss on sale of assets
   
-
     
18
 
Changes in operating assets and liabilities
   
(3,698
)
   
(7,575
)
Net cash provided by (used in) operating activities
   
6,341
     
(4,126
)
Cash flows from investing activities:
               
Proceeds from sales of investments
   
-
     
245
 
Purchases of property and equipment
   
30
     
(248
)
Acquisition of intangible assets
   
-
     
(1,089
)
Net cash (used in) investing activities
   
(30
)
   
(1,092
)
Cash flows from financing activities:
               
Repurchase of ordinary shares to settle withholding liability
   
(53
)
   
(135
)
Net cash (used in) financing activities
   
(53
)
   
(135
)
 
               
Net increase (decrease) in cash and cash equivalents
   
6,258
     
(5,353
)
Cash and cash equivalents, beginning of period
   
52,638
     
52,394
 
Cash and cash equivalents, end of period
 
$
58,896
   
$
47,041
 

– More –


RECONCILIATION OF OPERATING INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
 
 
                       
(In thousands)
                       
(Unaudited)
 
Quarter
   
Quarter
   
Six Months
   
Six Months
 
 
 
Ended
   
Ended
   
Ended
   
Ended
 
 
 
30-Jun-18
   
30-Jun-17
   
30-Jun-18
   
30-Jun-17
 
GAAP Operating income (loss)
 
$
4,826
   
$
1,089
   
$
7,396
   
$
(33,423
)
Depreciation and amortization
   
818
     
894
     
1,777
     
2,419
 
Share-based compensation
   
892
     
567
     
1,985
     
1,303
 
Impairment of intangible assets
   
-
     
-
     
131
     
31,527
 
Asset impairment
   
-
     
104
     
-
     
490
 
Proxy contest related expenses
   
-
     
25
     
-
     
1,042
 
Severance and senior management transition expenses
   
30
     
16
     
143
     
2,928
 
Write-down of inventory components
   
-
     
-
     
-
     
386
 
Other Items
   
541
     
1,697
     
1,192
     
1,895
 
Non- GAAP Adjusted EBITDA
 
$
7,107
   
$
4,392
   
$
12,624
   
$
8,567
 
 
RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP NET INCOME
 
 
                       
(In thousands)
                       
(Unaudited)
 
Quarter
   
Quarter
   
Six Months
   
Six Months
 
 
 
Ended
   
Ended
   
Ended
   
Ended
 
 
 
30-Jun-18
   
30-Jun-17
   
30-Jun-18
   
30-Jun-17
 
GAAP Net income (loss) attributable to common shareholders
 
$
4,096
   
$
(1,561
)
 
$
6,062
   
$
(24,662
)
Share-based compensation
   
892
     
567
     
1,985
     
1,303
 
Impairment of intangible assets
   
-
     
-
     
131
     
31,527
 
Asset impairment
   
-
     
104
     
-
     
490
 
Proxy contest related expenses
   
-
     
25
     
-
     
1,042
 
Severance and senior management transition expenses
   
30
     
16
     
143
     
2,928
 
Write-down of inventory components
   
-
     
-
     
-
     
386
 
Other Items
   
541
     
1,697
     
1,192
     
1,895
 
Tax related items
   
(168
)
   
2,594
     
(53
)
   
(8,089
)
Non-GAAP Net income
 
$
5,391
   
$
3,442
   
$
9,460
   
$
6,820
 
 
                               
GAAP earnings (loss) per ordinary share – Diluted
 
$
0.25
   
$
(0.10
)
 
$
0.37
   
$
(1.54
)
Share-based compensation
   
0.06
     
0.04
     
0.12
     
0.08
 
Impairment of intangible assets
   
-
     
-
     
0.01
     
1.96
 
Asset impairment
   
-
     
0.01
     
-
     
0.03
 
Consideration adjustment / Gain on mark-to-market
   
-
     
-
     
-
     
-
 
Transaction related expenses
   
-
     
-
     
-
     
-
 
Proxy contest related expenses
   
-
     
0.00
     
-
     
0.06
 
Severance and senior management transition expenses
   
0.00
     
0.00
     
0.01
     
0.18
 
Write-down of inventory components
   
-
     
-
     
-
     
0.02
 
Other Items
   
0.03
     
0.11
     
0.07
     
0.12
 
Tax related items
   
(0.01
)
   
0.16
     
(0.00
)
   
(0.50
)
Non-GAAP Net income per share – Diluted
 
$
0.33
   
$
0.21
   
$
0.58
   
$
0.42
 
 
                               
Weighted average ordinary shares outstanding - Diluted:
   
16,205
     
16,078
     
16,199
     
16,056