magicJack VocalTec Reports Record Fourth Quarter and Full Year 2012 Financial Results

magicJack VocalTec Reports Record Fourth Quarter and Full Year 2012 Financial
Results

Fourth Quarter Highlights

  oTotal net revenue increased 56% year-over-year to $41.4 million
  oAccess rights renewal revenue of $12.0 million or 29% of total net revenue
  oGAAP Operating Income of $16.2 million, Adjusted EBITDA of $18.3 million
  oGAAP Diluted EPS of $1.17, Non-GAAP Diluted EPS of $0.91
  oGenerated $20.8 million in Free Cash Flow

WEST PALM BEACH, Fla. and NETANYA, Israel, April 2, 2013 (GLOBE NEWSWIRE) --
magicJack VocalTec, Ltd (Nasdaq:CALL), a cloud communications leader that
invented voice over IP (VoIP) technology, today announced record financial
results for the fourth quarter and full year ended December 31, 2012.

"We are very pleased with these outstanding financial results," said magicJack
VocalTec President and CEO Gerald Vento. "For the year, we grew total revenue
by 43% and had $43.6 million in operating income and $55.9 million in net
income. We generated $65.0 million in free cash flow for the year, used $54.3
million of cash to repurchase 3.0 million shares. We ended the year with $38.3
million in cash and marketable securities and no debt."

Vento added, "We have a terrific business with recurring revenue, a strong
balance sheet and a robust pipeline of products under development. We are
excited about our 2013 product roadmap which we expect will further
differentiate the company in the marketplace. We are very pleased to be
launching the new Magic Jack Plus with many expanded features. We are also
very excited about the adoption rate of our MagicJack APP which has
experienced over 8 million activations since its launch in 2011. Looking
forward, we believe that the combination of our technology advantage,
continued product innovation, efficient cost structure and strong balance
sheet and free cash flow generation, position us well to continue to gain
market share."

Fourth Quarter 2012 Financial Highlights:

– Net Revenue: Total net revenue was $41.4 million, an increase of 56% on a
year-over-year basis. Net revenue from the sales of magicJack and magicJack
PLUS, increased 88% to $19.1 million. Access rights renewal revenue was $12.0
million, an increase of 19% on a year-over-year basis, and accounted for 29%
of total revenue. Prepaid minute revenue was $3.3 million and access and
wholesale charges were $3.4 million during the quarter. Other revenue
contributed the remaining $3.6 million of total revenue during the fourth
quarter of 2012.

– Operating Income (Loss): GAAP operating income for the fourth quarter was
$16.2 million, compared to a GAAP operating loss of $6.0 million for the
fourth quarter of 2011.

– Adjusted EBITDA: Adjusted EBITDA was $18.3 million for the fourth quarter
compared to a loss of $0.4 million for the fourth quarter of 2011.

– Net Income (Loss): GAAP net income for the fourth quarter was $22.3
million, compared to a net loss of $4.7 million for the same period last year.
GAAP diluted income per share attributable to ordinary shareholders for the
fourth quarter was $1.17, based on 19.0 million weighted-average diluted
shares outstanding, compared to a net loss per share attributable to ordinary
shareholders of $0.26, based on 21.8 million weighted-average diluted shares
outstanding, for the same period last year.

– Non-GAAP Net Income (Loss): Non-GAAP net income for the fourth quarter was
$17.3 million, compared to non-GAAP net loss of $0.9 million for the fourth
quarter of 2011. Non-GAAP net income per diluted share for the fourth quarter
was $0.91 compared to $0.04 non-GAAP net loss per diluted share for the same
period last year.

– Cash and Free Cash Flow: As of December 31, 2012, magicJack VocalTec had
cash, cash equivalents and marketable securities of $38.3 million, an increase
of $4.0 million from the end of the prior quarter. During the fourth quarter
of 2012, the company generated $20.8 million in free cash flow, which was
primarily offset by the use of $13.7 million in net cash for the repurchase of
ordinary shares.

Full Year 2012 Financial Highlights:

– Net Revenue: Total net revenue was $158.4 million, an increase of 43% on a
year-over-year basis. Revenues from the sale of magicJack and magicJack PLUS,
increased 66% to $73.8 million. Access rights renewal revenue was $43.9
million, an increase of 20% on a year-over-year basis and accounted for 28% of
total revenue. Prepaid minute revenue was $15.5 million and access and
wholesale charges were $9.1 million compared to $11.6 million and $3.6
million, respectively, for the full year of 2011. Revenues from shipping and
handling and other sources contributed the remaining $16.1 million of total
revenue during the full year of 2012.

– Operating Income (Loss): GAAP operating income for the full year 2012 was
$43.6 million, compared to a GAAP operating loss of $4.6 million for 2011.

– Adjusted EBITDA: Adjusted EBITDA was $47.1 million compared to $8.7
million for 2011.

– Net Income (Loss): GAAP net income for the full year 2012 was $55.9
million, compared to a net loss of $0.8 million for 2011. GAAP net income per
diluted share attributable to ordinary shareholders was $2.73 based on 20.0
million weighted-average diluted shares outstanding for the full year 2012,
compared to a loss of $0.08 per diluted share attributable to ordinary
shareholders, based on 23.3 million weighted-average diluted shares
outstanding for 2011.

– Non-GAAP Net Income (Loss): Non-GAAP net income for the full year 2012 was
$44.2 million compared to $5.5 million for 2011. Non-GAAP net income per
diluted share for 2012 was $2.21 compared to $0.24 for 2011.

– Total Deferred Revenues: Deferred revenues increased to $125.2 as of
December 31, 2012, from $117.8 million as of December 31, 2011.

– Free Cash Flow: The Company generated $65.0 million in free cash flow
during the full year 2012, compared to $24.4 million in 2011, which was
primarily offset by the use of $54.3 million in net cash for the repurchase of
ordinary shares.

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 Fourth Quarter 2012 and Recent Highlights:

– magicJack earned Frost & Sullivan's 2013 North American Consumers' Choice
Award for Overall Best VoIP Service Provider.

– magicJack appointed Gerald T. Vento as President and Chief Executive
Officer effective January 1, 2013. In connection with Mr. Vento's appointment,
Mr. Donald A. Burns who has served on the Board of Directors since 2010,
became chairman of the Board of Directors.

– magicJack announced that the U.S. Patent and Trademark Office granted the
Company U.S. Patent No. 8,306,201 for telephone number sharing.

– magicJack announced that RadioShack^® awarded magicJack as its Consumer
Electronics Vendor of the Year.

– magicJack announced that the U.S. Patent and Trademark office (the "PTO")
has issued a first office action rejecting all 3 claims for a patent owned by
a Company competitor and that is undergoing reexamination at the PTO. The
PTO's rejection, which was in response to a reexamination request filed by the
Company with the PTO, was based in part on prior art created by the Company's
founder.

– magicJack disclosed in its Form 10-K that as of March 31, 2013, there were
approximately 18.6 million ordinary shares outstanding.

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 fourth quarter and full year
2012 and business outlook. To access this call, dial 1-888-609-5704 (United
States), or 1-913-312-1236 (international), with conference ID #4629002. 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 April 16, 2013, by dialing 1-877-870-5176 (United
States), or 1-858-384-5517 (international). The recording access code is
#4629002.

About magicjack VocalTec Ltd.

magicJack VocalTec Ltd. (Nasdaq:CALL), the inventor of VoIP, including the
softphone and magicJack, has the goal of becoming the leading international
provider of global voice over many platforms. The Company has achieved sales
of more than 10 million of the easy-to-use, award-winning magicJack products
since the first device's launch in 2008, and has the use of more than 30
patents, some dating to when the Company invented VoIP. 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 Adjusted EBITDA as GAAP Operating Income
(Loss) excluding: depreciation and amortization, share-based expense, a gain
in adjustment for operational change related to prepaid minutes, and a loss
from additional allowances for access charge billing adjustments. magicJack
defines Non-GAAP Net Income (Loss) as GAAP net income (loss) attributable to
ordinary shareholders excluding: share-based compensation, a gain in
adjustment for operational change related to prepaid minutes, a loss from
additional allowances for access charge billing adjustments, a change in
losses (gains) on investments, a change in fair value loss (gain) on common
equity put options, the income tax (benefit) expense, a gain on in-the-money
common equity put options, and dividends on redeemable ordinary shares.
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, 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.

Fourth quarter and full year 2012 financial tables to follow:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                               
(In thousands except per                                        
share data)
(Unaudited)                        Quarter   Quarter    Year       Year
                                  Ended     Ended      Ended      Ended
                                  31-Dec-12 31-Dec-11  31-Dec-12  31-Dec-11
Net revenues                       $41,427 $26,634  $158,362 $110,450
Cost of revenues                   13,960    13,587     61,325     51,181
Gross profit                       27,467    13,047     97,037     59,269
Operating expenses:                                             
Advertising                        3,845     11,336     23,181     32,148
General and administrative         6,618     6,977      27,697     29,050
Research and development           774       743        2,594      2,716
Total operating expenses           11,237    19,056     53,472     63,914
Operating income (loss)            16,230   (6,009)   43,565    (4,645)
Other income (expense):                                         
(Losses) gains on                  (2,078)  149       (738)     649
investments
Interest expense                   (93)     (119)     (411)     (277)
Fair value (loss) gain on          (1,084)  620       3,650     2,192
common equity put options
Other income, net                  255      688       824       1,306
Total other (expense)              (3,000)  1,338     3,325     3,870
income
Income (loss) before income        13,230   (4,671)   46,890    (775)
taxes
Income tax (benefit)               (9,039)  (14)      (8,961)   61
expense
Net income (loss)                  22,269   (4,657)   55,851    (836)
Dividends on redeemable            --       955        --        955
ordinary shares
Net income (loss)
attributable to ordinary           $22,269 $(5,612) $55,851  $(1,791)
shareholders
                                                               
Income (loss) per ordinary                                      
share:
                           Basic   $1.17   $(0.26)  $2.80    $(0.08)
                           Diluted $1.17   $(0.26)  $2.73    $(0.08)
Weighted average ordinary                                       
shares outstanding:
                           Basic   18,970    21,842    19,916     23,342
                           Diluted 18,981    21,842    19,985     23,342
                                                               

CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
                                                                  
(In thousands)                                                     
(Unaudited)                                              Year       Year
                                                        Ended      Ended
ASSETS                                                   31-Dec-12  31-Dec-11
Current Assets                                                     
Cash and cash equivalents                                $18,959  $12,961
Marketable securities, at fair value                     19,390     22,135
Accounts receivable, net of allowance for doubtful       6,004      8,786
accounts and billing adjustments
Inventories                                              5,340      8,676
Deferred costs                                           7,066      8,550
Deferred tax assets, current                             1,114      --
Deposits and other current assets                        1,411      1,796
Total current assets                                     59,284     62,904
                                                                  
Property and equipment, net                              2,348      2,669
Intangible assets, net                                   16,136     11,494
Goodwill                                                 32,304     32,304
Deferred tax assets, non-current                         9,831      --
Deposits and other non-current assets                    864        1,259
Total Assets                                             $120,767 $110,630
                                                                  
LIABILITIES AND CAPITAL DEFICIT                                    
Current Liabilities                                                
Accounts payable                                         $3,651   $6,845
Accrued expenses and other current liabilities           13,569     8,109
Deferred revenue, current portion                        67,038     71,691
Total current liabilities                                84,258     86,645
                                                                  
Deferred revenue, net of current portion                 58,165     46,143
Other non-current liabilities                            3,114      4,219
Total Capital Deficit                                    (24,770)   (26,377)
Total Liabilities and Capital Deficit                    $120,767 $110,630
                                                                  

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                 
(In thousands)                                                    
(Unaudited)                                             Year       Year
                                                       Ended      Ended
                                                       31-Dec-12  31-Dec-11
Cash flows from operating activities:                             
Net income (loss)                                       $55,851  $(836)
Provision for doubtful accounts and billing adjustments 9,148     16,434
Share-based compensation                                3,190     2,447
Depreciation and amortization                           3,302     4,160
Deferred income tax (benefit) provision                 (10,945)  93
Interest expense - non-cash                             411       277
Loss (gain) on investments                              738       (649)
Fair value gain on common equity put options            (3,650)   (2,192)
Contributed services                                    230       75
Decrease (increase) in operating assets:                          
Accounts receivable                                     (6,366)   (14,884)
Inventories                                             3,336     (5,668)
Deferred costs                                          1,484     (1,935)
Deposits and other current assets                       385       (184)
Deposits and other non-current assets                   324       587
Increase (decrease) in operating liabilities:                     
Accounts payable                                        (3,194)   4,255
Accrued expenses and other current liabilities          3,665     (2,207)
Deferred revenue                                        7,369     25,626
Other non-current liabilities                           (16)      (69)
Net cash provided by operating activities               65,262    25,330
Cash flows from investing activities:                             
Purchases of investments                                (129,166) (34,710)
Proceeds from sales of investments                      130,462   28,192
Purchases of property and equipment                     (217)     (974)
Acquisition of intangible assets                        (5,749)   (1,548)
Net cash used in investing activities                   (4,670)   (9,040)
Cash flows from financing activities:                             
Purchase of treasury stock                              (66,509)  (28,182)
Redemption of redeemable ordinary shares                --        (8,695)
Proceeds from sale of common equity put options         12,185    3,146
Proceeds from exercise of ordinary share options        1,230     1,774
Payment of other non-current liabilities                (1,500)   --
Net cash used in financing activities                   (54,594)  (31,957)
                                                                 
Net increase (decrease) in cash and cash equivalents    5,998     (15,667)
Cash and cash equivalents, beginning of period          12,961    28,628
Cash and cash equivalents, end of period                $18,959  $12,961
                                                                 

                                                      
RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA
                                                      
(In thousands)                                         
(Unaudited)          Quarter     Quarter      Year        Year
                    Ended       Ended        Ended       Ended
                    31-Dec-12   31-Dec-11    31-Dec-12   31-Dec-11
GAAP Operating       $16,230   $(6,009)   $43,565   $(4,645)
income (loss)
Depreciation and     1,162      1,024       3,302      4,160
amortization
Share-based          937        1,850       3,190      2,447
compensation
Adjustment for
operational change   --         --          (2,998)    --
related to prepaid
minutes
Additional
allowances for       --         2,700       --         6,700
access charge
billing adjustments
Adjusted EBITDA      $18,329   $(435)     $47,059   $8,662
                                                      
                                                      
                                                      
RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
                                                      
(In thousands)                                         
(Unaudited)          Quarter     Quarter      Year        Year
                    Ended       Ended        Ended       Ended
                    31-Dec-12   31-Dec-11    31-Dec-12   31-Dec-11
GAAP Net income
(loss) attributable  $22,269   $(5,612)   $55,851   $(1,791)
to ordinary
shareholders
Share-based          937        1,850       3,190      2,447
compensation
Adjustment for
operational change   --         --          (2,998)    --
related to prepaid
minutes
Additional
allowances for       --         2,700       --         6,700
access charge
billing adjustments
Losses (gains) on    2,078      (149)       738        (649)
investments
Fair value loss
(gain) on common     1,084      (620)       (3,650)    (2,192)
equity put options
Income tax (benefit) (9,039)    (14)        (8,961)    61
expense
Dividends on
redeemable ordinary  --         955         --         955
shares
Non-GAAP Net Income  $17,329   $(890)     $44,170   $5,531
(Loss)
                                                      
GAAP Net income
(loss) per share –   $1.17     $(0.26)    $2.73     $(0.08)
Diluted
Share-based          0.05       0.08        0.16       0.10
compensation
Adjustment for
operational change   --         --          (0.15)     --
related to prepaid
minutes
Additional
allowances for       --         0.12        --         0.29
access charge
billing adjustments
Losses (gains) on    0.11       (0.01)      0.04       (0.03)
investments
Fair value loss
(gain) on common     0.06       (0.03)      (0.18)     (0.09)
equity put options
Income tax (benefit) (0.48)     (0.00)      (0.45)     0.00
expense
Gain on in-the-money --         --          0.07       --
equity put options
Dividends on
redeemable ordinary  --         0.04        --         0.04
shares
Non-GAAP net income
(loss) per share –   $0.91     $(0.04)    $2.21     $0.24
Diluted ^(2)
                                                      
Weighted average
ordinary shares      18,981      21,842       19,985      23,342
outstanding:
                                                      
^(1) GAAP Net Income attributable to ordinary shareholders for the year
ended December 31, 2012 does not include a $1.3 million reduction for gains  
on in-the-money
common equity put options, which was taken into consideration for the    
calculation of GAAP net income per share – diluted for that period.
                                                      
^(2) The sum of adjustments to GAAP Net income (loss) per share – Diluted
may not add to the Non-GAAP Net income (loss) per share – Diluted amount due 
to rounding
in the calculation                                    
of each item.
                                                      
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE
CASH FLOW
                                                      
(In thousands)                                         
(Unaudited)          Quarter     Quarter      Year        Year
                    Ended       Ended        Ended       Ended
                    31-Dec-12   31-Dec-11    31-Dec-12   31-Dec-11
Net cash provided by 20,790     18,162      $65,262   $25,330
operating activities
Less: Capital        --         (159)       (217)      (974)
expenditures
Free cash flow       $20,790   $18,003    $65,045   $24,356



CONTACT: Seth Potter
         Investor Relations
         561-749-2255
         ir@vocaltec.com

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