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magicJack Appoints Industry Veteran Kerrin Parker to Broadsmart CEO

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Broadsmart COO promoted to CEO reporting directly to Don Bell

WEST PALM BEACH, Fla. and NETANYA, Israel, June 26, 2017 (GLOBE NEWSWIRE) — magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications and UCaaS company, announced today that Kerrin Parker has been promoted to CEO of Broadsmart, a division of magicJack.  Broadsmart is a leading hosted UCaaS (Unified Communication as a Service) provider for medium-to-large multi-location enterprise customers. Parker, who previously served as COO of Broadsmart, has more than 20 years of experience in the UCaaS industry and will report directly to Don Bell.

“We’re investing behind Kerrin to scale Broadsmart with an elevated focus on development, innovation and expanded product offerings to the enterprise community,” said Don Bell, CEO, magicJack. “Kerrin is a natural leader, client advocate and experienced UCaaS operating executive.  She has an impressive track record building her business by delivering for her clients.  Her passion for the business and vision for the future of Broadsmart will serve both current and future clients.”

“The UCaaS market continues to expand rapidly, with much of that growth predicted in the enterprise segment. Broadsmart stands apart by flawlessly delivering end-to-end custom solutions and personalized support to enterprise customers. With the introduction of new technology, new products and a new go-to market strategy into our existing core, we’re uniquely positioned for growth. I couldn’t be more excited to be taking on this role at this point in Broadsmart’s evolution,” said Parker.

“We look forward to leveraging Kerrin’s wealth of experience to further define how magicJack and Broadsmart combine our resources to most effectively serve our customers,” said Bell.

For more information about Broadsmart and magicJack, please visit magicJack.com

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 magicJack devices, which is now in its fifth generation, has millions of downloads of its calling apps, 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.

About Broadsmart
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

magicJack Reports First Quarter 2017 Financial Results

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  • Total net revenues of $23.2 million, access rights renewal revenues were $13.5 million
  • GAAP operating loss of $34.5 million, adjusted EBITDA of $4.2 million
  • GAAP diluted EPS of ($1.44), non-GAAP diluted EPS of $0.21
  • Cash and cash equivalents of $48.3 and no debt as of March 31, 2017

WEST PALM BEACH, Fla. and NETANYA, Israel, May 10, 2017 (GLOBE NEWSWIRE) — magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications and UCaaS company, today announced financial results for the first quarter ended March 31, 2017.

“During the first quarter, we took decisive action to advance our dual track strategy,” said Don C. Bell, CEO of magicJack VocalTec. “We recruited a new executive management team, launched a strategic alternatives process, added two new board members, concluded two proxy contests, cut costs and underperforming initiatives and renewed our strategic focus on our core market and expanding our addressable market with our mobile-first, web-first strategy. By taking the actions we did in this quarter, which resulted in some one-time costs, I believe we’ve cut off unproductive future expenditures. I continue to be very excited about our opportunity to leverage our brand, installed subscriber base, CLEC network and recent R&D investments.”

First Quarter 2017 Financial Highlights:

  • Net revenues: Total net revenues for the first quarter of 2017 were $23.2 million. Net revenues from the sales of magicJack devices were $2.8 million and access rights renewal revenues were $13.5 million, and accounted for 58% of total net revenues. Prepaid minute revenues were $1.2 million and access and wholesale charges were $1.1 million during the quarter. Broadsmart Global, Inc. contributed $2.7 millionin revenues to the first quarter of 2017. Other revenue items contributed the remaining $1.9 million of total net revenues during the first quarter of 2017.
  • Operating Loss: GAAP operating loss the first quarter of 2017 was $34.5 million which included a one-time $31.5 million charge relating to Broadsmart consisting of a $20.5 million write-down in asset carrying value grossed up for the associated tax benefit. In addition, there were one-time charges of $5.2 million primarily related to severance payments and senior management transition expenses, as well as shareholder proxy dispute costs.
  • Adjusted EBITDA: Adjusted EBITDA for the first quarter of 2017 was $4.2 million.
  • Net Loss: GAAP net loss attributable to common shareholders for the first quarter of 2017 was $23.1 million or $1.44 GAAP diluted net loss per share based on 16.0 million weighted-average diluted ordinary shares outstanding.
  • Non-GAAP net income: Non-GAAP net income attributable to common shareholders for the first quarter of 2017 was $3.4 million or $0.21non-GAAP net income per diluted share based on 16.0 million weighted-average diluted ordinary shares outstanding.
  • Cash: As of March 31, 2017, magicJack VocalTec had cash and cash equivalents of $48.3 million and no debt. During the first quarter of 2017, the company used $3.8 million net cash in operating activities. Cash used in operations included a $3.0 million estimated U.S. federal tax payment.

A reconciliation of GAAP to non-GAAP measures is 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 First Quarter 2017 and Recent Highlights:

  • As of March 31, 2017, magicJack had an estimated 2.08 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
  • magicJack activated approximately 92,000 subscribers during the first quarter of 2017. Activations are defined as devices that become activated on to a subscription contract during a given period.
  • During the quarter ended March 31, 2017, magicJack’s average monthly churn was 2.5%.

Quarterly Conference Call:

In conjunction with this announcement, magicJack VocalTec will host a conference call on Wednesday, May 10, 2017, at 5:00 p.m. EDT to review the company’s financial results for the first quarter of 2017. To access this call, dial 1-888-208-1815 (United States), or 1-719-457-0349 (international), with conference ID #6777686. 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 May 24, 2017, by dialing 1-844-512-2921 (United States), or 1-412-317-6671 (international). The recording access code is #6777686.

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. 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.

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.

Non-GAAP Measures

The Non-GAAP measures shown in this release exclude various items detailed further below.

  • magicJack defines adjusted EBITDA as GAAP operating (loss) income excluding: depreciation and amortization, 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 and other items.
  • magicJack defines non-GAAP net income as GAAP net (loss) income 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
Ended Ended
31-Mar-17 31-Mar-16
Net revenues $   23,197 $   23,699
Cost of revenues   9,451   8,209
Gross profit 13,746 15,490
Operating expenses:
Marketing   2,407   1,221
General and administrative   12,825   8,935
Research and development   1,499   1,100
Impairment of intangible assets and goodwill   31,527   –
Total operating expenses 48,258 11,256
Operating (loss) income   (34,512)   4,234
Other income (expense):
Interest and dividend income   6   7
Other income (expense)   (17)   (7)
Total other (expense) income   (11)   –
(Loss) income before income taxes   (34,523)   4,234
Income tax (benefit) expense   (11,355)   3,500
Net (loss) income   (23,168)   734
Net loss attributable to noncontrolling interest   67   –
Net  (loss) income attributable to common shareholders $   (23,101) $   734
(Loss) earnings per ordinary share:
Basic $   (1.44) $   0.05
Diluted $   (1.44) $   0.05
Weighted average ordinary shares outstanding:
Basic   16,034   15,647
Diluted   16,034   15,649
CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION
(In thousands)
(Unaudited)
As of As of
ASSETS 31-Mar-17 31-Dec-16
Current Assets
Cash and cash equivalents $   48,310 $   52,394
Investments, at fair value   447   447
Accounts receivable, net   2,687   3,171
Inventories, net   3,307   4,441
Deferred costs   2,219   2,319
Deferred tax assets, current   –   –
Prepaid income taxes   3,858   527
Receivable from earnout escrow   2,000   2,000
Deposits and other current assets   1,731   1,970
Total current assets   64,559   67,269
Property and equipment, net   3,515   3,805
Intangible assets, net   11,055   28,854
Goodwill   32,304   47,185
Deferred tax assets   37,479   26,568
Deposits and other non-current assets   890   836
Total Assets $   149,802 $   174,517
LIABILITIES AND CAPITAL EQUITY
Current Liabilities
Accounts payable $   2,555 $   2,790
Income tax payable   –   1,527
Accrued expenses and other current liabilities   8,691   8,426
Deferred revenue, current portion   47,313   48,507
Total current liabilities   58,559   61,250
Deferred revenue, net of current portion   43,292   44,201
Other non-current liabilities   12,183   10,866
Total Capital Equity   35,768   58,200
Total Liabilities and Capital Equity $   149,802 $   174,517

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(In thousands)
(Unaudited) Three Months Three Months  
Ended Ended  
31-Mar-17 31-Mar-16  
Cash flows from operating activities:      
Net (loss) income $   (23,168) $   734  
Provision for doubtful accounts and billing adjustments   54   1  
Share-based compensation   736   1,002  
Depreciation and amortization   1,525   792  
Impairment of intangible assets   31,527   –  
Increase of uncertain tax position   1,427   1,150  
Deferred income tax (benefit) provision   (10,911)   1,016  
Changes in operating assets and liabilities, net of business acquisitions   (5,001)   2,239  
Net cash (used in) provided by operating activities     (3,811)     6,934  
Cash flows from investing activities:  
Purchases of property and equipment   (225)   (5)  
Acquisition of Broadsmart, net of cash acquired   –   (40,019)  
Acquisition of intangible assets   (48)   –  
Net cash used in investing activities     (273)     (40,024)  
Cash flows from financing activities:  
Proceeds from exercise of ordinary share options   –   1  
Net cash provided by financing activities     –     1  
       
Net (decrease) increase in cash and cash equivalents   (4,084)   (33,089)  
Cash and cash equivalents, beginning of period   52,394   78,589  
Cash and cash equivalents, end of period   $   48,310   $   45,500  

RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA
   
(In thousands)  
(Unaudited) Quarter   Quarter
Ended   Ended
31-Mar-17   31-Mar-16
GAAP Operating (loss) income   $   (34,512)   $   4,234
Depreciation and amortization   1,525   792
Share-based compensation   736   1,002
Impairment of intangible assets   31,527   –
Asset impairment   386   –
Transaction related expenses   –   799
Proxy contest related expenses   1,017   –
Severance and senior management transition expenses   2,912   548
Write-down of inventory components   386   –
Other Items   198   49
Adjusted EBITDA $   4,175   $   7,424
   
 
 
RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
   
(In thousands)  
(Unaudited) Quarter Quarter
Ended Ended
31-Mar-17 31-Mar-16
GAAP Net (loss) income attributable to common shareholders   $   (23,101)   $   734
Share-based compensation   736   1,002
Impairment of intangible assets   31,527   –
Asset impairment   386   –
Transaction related expenses   –   799
Proxy contest related expenses   1,017   –
Severance and senior management transition expenses   2,912   548
Write-down of inventory components   386   –
Other Items   198   49
Tax related items   (10,683)   2,229
Non-GAAP Net income $   3,378 $   5,361
   
GAAP (loss) earnings per ordinary share – Diluted   $   (1.44)   $   0.05
Share-based compensation   0.05   0.06
Impairment of intangible assets   1.97   –
Asset impairment   0.02   –
Transaction related expenses   –   0.05
Proxy contest related expenses   0.06   –
Severance and senior management transition expenses   0.18   0.04
Write-down of inventory components   0.02   –
Other Items   0.01   0.00
Tax related items   (0.67)   0.14
Non-GAAP Net income per share – Diluted $   0.21 $   0.34
 
Weighted average ordinary shares outstanding – Diluted: 16,034 15,649
   

 

Contact:

Seth Potter

Investor Relations

561-749-2255

ir@vocaltec.com

magicJack Announces New Senior Management Team and Strategic Alternatives Process

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  • Don C. Bell, III named Chief Executive Officer
  • Gerald Vento remains on the Board of Directors
  • Dual track approach to maximize shareholder value through strategic alternatives process and the execution of new business strategy

WEST PALM BEACH, Fla. and NETANYA, Israel, March 15, 2017 (GLOBE NEWSWIRE) — magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications company, today announced the appointment of Don Carlos Bell III as Chief Executive Officer of magicJack.

Mr. Bell is an experienced technology and telecom operating executive, a public shareholder advocate with a recent track record of leading two successful company sales while serving as chairman and member of the special committees of the boards of those companies. He has successfully invested his private capital in the public equity of several wireless technology companies, including those on which he has served as a board member.

On behalf of magicJack’s Board, Chairman Donald Burns said, “We are very pleased to announce Don as CEO and believe his history of being a creative disruptor will be a valuable asset to the Company as we pursue our dual track approach to maximize shareholder value.  We thank Jerry for guiding the Company over the past four years and look forward to his ongoing contributions as a member of the Board.”

Mr. Bell said, “This year we intend to pivot our market focus from consumer to SOHO, pursuing a mobile-first, web-first strategy called “unJacked”.  We believe that because of our vertically integrated operations and CLEC network with massive excess capacity, we can be both competitively price disruptive and profitable at the same time.  That’s been the magic of our business model, and we expect to renew it with a pivot in market focus and service offering that is aligned with the needs of today’s small businesses. We believe this strategy leverages existing assets and recent R&D investment, and is a web-focused customer acquisition and UCaaS model, so we’re consolidating operations and have shut down redundant Atlanta SMB operations.  We’re also eliminating unproductive or less-promising ventures, including our partnership with Telefonica and Hotelijack, to preserve that capital to invest in online customer acquisition.  I’ve recruited a new executive team to execute this strategy, drawing the best operators from the span of my career, as well as a terrific CTO from within the Company.  In the SMB/Enterprise segment we’re focused on organic growth, and believe we have a proven operator joining the executive team.  I expect we’ll look back on March 2017 as a sharp inflection point.”

Bell continued, “In parallel with this strategy, we’ve commenced a strategic alternatives process to maximize value for public shareholders.  We have received multiple unsolicited offers which are at varying stages of diligence and financing commitment,” Bell concluded.  “We continue to evaluate and engage in discussions with the potential buyers who approached us and we will proactively seek out additional financial and strategic buyers. Through the aggressive pursuit of our dual track approach, we expect to maximize the intrinsic value of the Company and returns for our public shareholders.”

The Board has formed a Special Committee of independent directors, Izhak Gross and Richard Harris, to work daily with Mr. Bell to drive the process.  The Company is to working with BofA Merrill Lynch as its financial advisor, and has retained Bryan Cave as its legal counsel for this process.

Mr. Bell is also a Board nominee of magicJack since December 2016, and has spent the interim forming his strategy and recruiting his executive team, which includes the elevation of Tom Fuller to Chief Financial Officer in May 2017, the elevation of Dvir Salomon to Chief Technology Officer, the addition of new Chief Marketing Officer Kristin Beischel and the hiring of Kerrin Parker as Chief Operating Officer of BroadSmart.

Don Carlos Bell III, President & Chief Executive Officer
Mr. Bell is a Director of Wireless Telecom Group (NYSE:WTT). He was a Director of TeleCommunication Systems Inc. (NASDAQ:TSYS) through its 2016 sale to strategic buyer Comtech Telecommunications (NASDAQ:CMTL) for $431 million, and Chairman of the Special Committee that led the sale. He was a Director of NTS, Inc. (NYSE:NTS) through its 2014 go-private sale to a financial sponsor for $165 million, and a member of the Special Committee that led the sale. From 2007 until 2011, Mr. Bell was the Owner and President of Tidal Research, an Internet direct marketing agency whose principal business was generating leads and direct web sales on a fee-for-performance basis for national consumer brands. During the ten years prior to launching Tidal Research, Mr. Bell was a senior executive with two portfolio companies of Goldman Sachs Capital Partners(IPC Systems and Clearwire), and a member of the Investment Banking Division of Goldman Sachs Group. At IPC Systems, a VoIP telecom products and network services company serving clients in 40 countries, Mr. Bell served as Senior Vice President of Marketing and Corporate Development.  Mr. Bell led the development of the company’s IQMAX VoIP trading floor communications platform, which has been deployed on trading floors in every major financial center by the world’s leading financial institutions. Mr. Bell simultaneously identified an opportunity to increase the company’s addressable market by expanding into a contiguous segment, Command & Control, and built the division by leveraging existing VoIP technologies and service assets, combined with three acquisitions.   In 2006 Mr. Bell led the private sale of the company to SilverLake Partners for $805 million. At Clearwire, a wireless broadband services provider, Mr. Bell served as Vice President of Business Development prior to the 2003 sale of the company by Goldman Sachs Capital Partners to Craig McCaw. Mr. Bell began his career as an Assistant Account Executive in consumer advertising for Foote, Cone & Belding, and as Director of International Marketing for Time Warner Electronic Publishing.

Thomas Fuller, EVP & Chief Financial Officer
Thomas Fuller joined magicJack VocalTec in 2017 and is currently serving as EVP Finance.  He will be transitioning to Chief Financial Officer in May 2017. Prior to joining the Company, Mr. Fuller was the co-founder of Echo Financial Business Consulting, a consulting firm providing financial and operational consulting and transaction support to companies predominantly in the telecommunications industry.  From 2003 to 2014 Mr. Fuller served at IPC Systems Inc, a specialized network service and telecommunication equipment provider, in various financial and operational roles including EMEA Finance Director, VP Business Development & Operations and most recently as SVP Marketing & Sales Support.  Prior to IPC, Mr. Fuller served as the Finance Director for two Benchmark Capital funded start-ups, and as the UK Finance Director for Sterling Software Inc.  Mr. Fuller began his career at Ernst & Young where he worked as an audit manager and within the Due Diligence practice.

Kristin Beischel, EVP & Chief Marketing Officer
Ms. Beischel brings over 10 years of experience building large-scale customer acquisition programs for public and private organizations looking to drive an immediate increase in sales. From 2007 to 2015, Ms. Beischel was employee #2 at IMM, a full-service digital agency, where she helped build the business over 8 years to a 9-figure revenue organization.  She held multiple senior management and operating roles at IMM, most recently as VP & Group Partnership Director, where she consulted with CMO-level clients, managed client services teams, led business development, and built out the agency’s media capabilities and services.  Her clients included AT&T, Sprint, and T-Mobile among others.  From 2015 to 2017, Ms. Beischel served as Senior Advisor to Boulder Heavy Industries, a leading private investment and adtech incubator firm, where she led business due diligence and advised portfolio companies on sales, marketing and operations while founding a successful technology startup, Bake Like A Champ, a digital learning platform.

Dvir Salomon, EVP & Chief Technology Officer
Dvir Salomon joined magicJack VocalTec in 2010, initially leading all research and development and now serving as EVP & Chief Technology Officer.  Mr. Salomon has over 17 years of experience in complex communication systems, including VoIP, wireless service networks, and QoS.  In 2008, Mr. Salomon co-founded CityOnHand, a GPS-based multimedia tour guide for smartphones, leading all technology and business development while also co-founding CrosIT Solutions, a consulting and information technology provider.  Prior to founding the technology startups, Mr. Salomon was a manager at Airspan Ltd. and Arelnet Ltd. where he developed his VoIP and wireless service provider expertise.

Kerrin Parker, Chief Operating Officer, Broadsmart
Ms. Parker is a seasoned SaaS-business executive, and was instrumental in the growth and 2012 sale of startup M5 Networks to ShoreTel for $160 million.  Ms. Parker joined the founding members of M5 Networks in 2003 as VP, Operations and oversaw all revenue delivery at M5, generating cumulative billings of $338 million.  Ms. Parker designed, staffed, and implemented the original customer experience and quote to cash processes that were instrumental in achieving growth from inception to $116 million in annual revenue between 2003 and 2015.  Ms. Parker most recently oversaw ShoreTel’s Cloud service as Managing Director & VP of Cloud Services. In the earlier years of her career, she served as the Director of Operations for Pagoo Communications, Inc., a VoIP service provider from 2001 to 2003, and served as the Assistant Controller for a national ISP, Surfree.com, Inc. from 1999 to 2001.

http://www.vocaltec.com/management.cfm

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. 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.

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.

Important Additional Information
The Company, its directors and certain of its executive officers are participants in the solicitation of proxies from the Company’s shareholders in connection with the 2016 Annual Meeting to be held on April 19, 2017. The Company has filed a definitive proxy statement and proxy card with the SEC in connection with any such solicitation of proxies from the Company’s shareholders. SHAREHOLDERS OF THE COMPANY ARE STRONGLY ENCOURAGED TO READ SUCH PROXY STATEMENT, ACCOMPANYING PROXY CARD AND ALL OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY AS THEY WILL CONTAIN IMPORTANT INFORMATION. Information regarding the identity of the participants, and their direct or indirect interests, by security holdings or otherwise, is set forth in the definitive proxy statement and other materials to be filed with the SEC in connection with the 2016 Annual Meeting. Shareholders will be able to obtain any proxy statement, any amendments or supplements to the proxy statement and other documents filed by the Company with the SEC at no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Company’s website at www.vocaltec.com in the section “Financial Information.”

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 strategy, including our dual track approach to maximize shareholder value through a strategic alternative process and a new business strategy, future operations, new product introductions and customer acceptance, future financial position, 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: whether any potential sale of or other strategic transaction by or related to our company will be consummated and, if so, the timing and terms of any such transaction, including any possible sale price; our ability to implement our new business strategy and attain the competitive price disruption and profitability desired within our anticipated timing; 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 monetize our products, services and applications and market them globally; delays in development we may experience with respect to magicJack devices, our mobile apps, our first SMB product and Broadsmart’s products; our customer turnover rate and our customer acceptance rate; the risk that Broadsmart’s assets will not be integrated successfully or that such integration may be more difficult, time consuming or costly than expected; the risk that expected increased revenues and EBITDA and expected synergies from the Broadsmart acquisition may not be fully realized or may take longer to realize than expected; the risk that magicJack will experience any difficulty maintaining relationships with Broadsmart’s customers, employees or suppliers; our ability to expand our network of small, medium-sized and large businesses; our ability to terminate our partnerships and initiatives with Telefonica and Hotelijack with minimal costs and disruption; changes in general economic, business, political and regulatory conditions; availability and costs associated with operating our network and business 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. No timetable has been set for our strategic alternatives process. We do not expect to comment further or update the market with any further information on the process unless and until our Special Committee and Board of Directors have approved a specific transaction or otherwise deem disclosure appropriate or necessary. There is no assurance that the strategic alternatives process will result any strategic transaction.

magicJack® is a registered trademark of magicJack VocalTec Ltd. All other product or company names mentioned are the property of their respective owners.

 

For More Information:

Media

Phil Denning / Seth Potter

ICR, Inc.

561-749-2255

ir@vocaltec.com

 

Investors

Joe Mills / John Ferguson

Saratoga Proxy Consulting LLC

212-257-1311

jmills@saratogaproxy.com

magicJack Reports Third Quarter 2016 Financial Results

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  • Total net revenues of $24.6 million, access rights renewal revenues were $14.5 million
  • GAAP operating income of $5.4 million, Adjusted EBITDA of $7.0 million
  • GAAP diluted EPS of $0.21, non-GAAP diluted EPS of $0.29
  • Generated $4.9 million in cash from operating activities, $4.8 million in free cash flow
  • Cash and cash equivalents of $51.5 million and no debt as of September 30, 2016

WEST PALM BEACH, Fla. and NETANYA, Israel, Nov. 09, 2016 (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, 2016.

“We were pleased with our execution in the third quarter,” said Gerald Vento, President and CEO of magicJack VocalTec. “The results were driven by our consumer business highlighted by low churn, stabilization in activations and ongoing traction with our organic growth initiatives.”

Third Quarter 2016 Financial Highlights:

  • Net revenues: Total net revenues for the third quarter of 2016 were $24.6 million. Net revenues from the sales of magicJack devices were $2.8 million and access rights renewal revenues were
    $14.5 million, and accounted for 59% of total net revenues. Prepaid minute revenues were $1.4 million and access and wholesale charges were $1.2 million during the quarter. Broadsmart Global, Inc. contributed $2.8 million in revenues to the third quarter of 2016. Other revenue items contributed the remaining $1.9 million of total net revenues during the third quarter of 2016.
  • Operating income: GAAP operating income for the third quarter of 2016 was $5.4 million.
  • Adjusted EBITDA: Adjusted EBITDA for the third quarter of 2016 was $7.0 million.
  • Net income: GAAP net income attributable to common shareholders for the third quarter of 2016 was $3.4 million or $0.21 GAAP diluted net income per share based on 15.9 million weighted-average diluted ordinary shares outstanding.
  • Non-GAAP net income: Non-GAAP net income attributable to common shareholders for the third quarter of 2016 was $4.6 million or $0.29 non-GAAP net income per share based on 15.9 million weighted-average diluted ordinary shares outstanding.
  • Cash and free cash flow: As of September 30, 2016, magicJack VocalTec had cash and cash equivalents of $51.5 million and no debt. During the third quarter of 2016, the company generated $4.9 million in net cash provided by operating activities and $4.8 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 2016 and Recent Highlights:

  • As of September 30, 2016, magicJack had an estimated 2.21 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
  • magicJack activated 102,000 subscribers during the third quarter of 2016. Activations are defined as devices that become activated on to a subscription contract during a given period.
  • During the quarter ended September 30, 2016, magicJack’s average monthly churn was 2.4%.

Quarterly Conference Call:

In conjunction with this announcement, magicJack VocalTec will host a conference call on Wednesday, November 9, 2016, at 5:00 p.m. EST to review the company’s financial results for the third quarter 2016. To access this call, dial 1-888-204-4426 (United States), or 1-913-312-6690 (international), with conference ID #1894388. 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, 2016, by dialing 1-877-870-5176 (United States), or 1-858-384-5517 (international). The recording access code is #1894388.

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. 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.

In March 2016, magicJack VocalTec Ltd. acquired Broadsmart, a leading hosted UCaaS (Unified Communication as a Service) provider for medium-to-large multi-location enterprise customers. 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.

Non-GAAP Measures

The GAAP measures shown in this release exclude various items detailed further below.

  • magicJack defines non-GAAP net revenues as net revenues minus the impact of certain tax matters.
  • magicJack defines adjusted EBITDA as GAAP operating income excluding: depreciation and amortization, share-based compensation, impairment of intangible assets, gain on mark-to-market, non-recurring and transaction related expenses, severance payments, provision for device returns, transition costs related to introduction of a new device, the net change to provision for bad debt expense, write-down of inventory component, a legal settlement and certain tax matters.
  • magicJack defines non-GAAP net income as GAAP net income attributable to common shareholders excluding: share-based compensation, impairment of intangible assets, gain on mark-to-market, non-recurring and transaction related expenses, severance payments, provision for device returns, transition costs related to introduction of a new device, the net change to provision for bad debt expense, write-down of inventory component, a legal settlement, tax impact from gain on mark-to-market, decrease in tax valuation allowance, foreign currency revaluations on tax assets, net uncertain tax positions, tax impact due to expiration of stock options and impact of income tax rate reduction in Israel.
  • 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 strategy, future operations, new product introductions and customer acceptance, future financial position, 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 monetize our products, services and applications and market them globally; delays in development we may experience with respect to magicJack devices, our mobile apps, our first SMB product and Broadsmart’s products; our customer turnover rate and our customer acceptance rate; the risk that Broadsmart’s assets will not be integrated successfully or that such integration may be more difficult, time consuming or costly than expected; the risk that expected increased revenues and EBITDA and expected synergies from the Broadsmart acquisition may not be fully realized or may take longer to realize than expected; the risk that magicJack will experience any difficulty maintaining relationships with Broadsmart’s customers, employees or suppliers; our ability to expand our network of small, medium-sized and large businesses; changes in general economic, business, political and regulatory conditions; availability and costs associated with operating our network and business 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.

Third quarter and nine months 2016 financial tables follow:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited) Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
30-Sep-16 30-Sep-15 30-Sep-16 30-Sep-15
Net revenues $   24,572 $   25,409 $   73,572   $   76,331
Cost of revenues   9,509   8,225   27,556   26,361
Gross profit 15,063 17,184 46,016 49,970
Operating expenses:
Marketing   2,680   2,357   5,659   6,940
General and administrative   7,641   6,286   24,828   21,297
Research and development   1,314   1,088   3,661   3,418
Gain on mark-to-market   (2,000)   –   (2,000)   –
Total operating expenses 9,635 9,731 32,148 31,655
Operating income   5,428   7,453   13,868     18,315
Other income (expense):
Interest and dividend income   5   6   21   23
Interest expense   –   –   –   (57)
Other (expense) income   (6)   4   (11)   (2)
Total other (expense) income   (1)   10   10   (36)
Income before income taxes   5,427   7,463   13,878     18,279
Income tax expense   2,205   4,152   7,407   6,708
Net income   3,222   3,311   6,471     11,571
Net loss attributable to noncontrolling interest   177   –   481     –
Net income attributable to common shareholders $   3,399 $   3,311 $   6,952   $   11,571
 
Earnings per ordinary share:
Basic $   0.21 $   0.20 $   0.44 $   0.66
Diluted $   0.21 $   0.20 $   0.44 $   0.66
Weighted average ordinary shares outstanding:
Basic   15,857   16,651   15,786   17,400
Diluted   15,865   16,658   15,935   17,426

 

CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION
(In thousands)
(Unaudited)
As of As of
ASSETS 30-Sep-16 31-Dec-15
Current Assets
Cash and cash equivalents $   51,526 $   78,589
Marketable securities, at fair value   447   367
Accounts receivable, net of allowance for doubtful accounts and billing adjustments   2,626   2,925
Inventories   4,463   5,723
Deferred costs   2,316   2,097
Prepaid income taxes   602   2,747
Receivable from earnout escrow   2,000   –
Deposits and other current assets   2,508   2,655
Total current assets   66,488   95,103
Property and equipment, net   3,805   3,302
Intangible assets, net   29,924   6,687
Goodwill   47,485   32,304
Deferred tax assets, non-current   30,824   30,689
Deposits and other non-current assets   819   751
Total Assets $   179,345 $   168,836
LIABILITIES AND CAPITAL EQUITY
Current Liabilities
Accounts payable $   2,780 $   1,086
Income tax payable   1,764   –
Accrued expenses and other current liabilities   7,223   6,284
Deferred revenue, current portion   49,324   52,554
Total current liabilities   61,091   59,924
Deferred revenue, net of current portion   45,811   50,146
Other non-current liabilities   13,451   11,098
Total Capital Equity   58,992   47,668
Total Liabilities and Capital Equity $   179,345 $   168,836

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(In thousands)
(Unaudited) Nine Months Nine Months  
Ended Ended  
30-Sep-16 30-Sep-15  
Cash flows from operating activities:      
Net income $   6,471 $   11,571  
Provision for doubtful accounts and billing adjustments   210   70  
Share-based compensation   3,169   3,906  
Depreciation and amortization   3,510   2,877  
Impairment of intangible assets   498   –  
Increase (decrease) of uncertain tax position   1,548   (1,124)  
Deferred income tax provision   626   6,105  
Interest expense – non-cash   –   57  
Gain on mark-to-market   (2,000)   –  
Changes in operating assets and liabilities   (748)   (4,131)  
Net cash provided by operating activities     13,284     19,331  
Cash flows from investing activities:  
Purchases of investments   (80)   –  
Purchases of property and equipment   (256)   (548)  
Acquisition of Broadsmart   (40,019)   –  
Net cash used in investing activities     (40,355)     (548)  
Cash flows from financing activities:  
Purchase of treasury stock   –   (13,565)  
Payment of other current liabilities   –   (1,500)  
Repurchase of shares to settle withholding liability   –   (94)  
Proceeds from exercise of ordinary share options   8   –  
Net cash provided by (used in) financing activities     8     (15,159)  
       
Net (decrease) increase in cash and cash equivalents   (27,063)   3,624  
Cash and cash equivalents, beginning of period   78,589   75,945  
Cash and cash equivalents, end of period   $   51,526   $   79,569  

 

RECONCILIATION OF NET REVENUES TO ADJUSTED NET REVENUES
       
(In thousands)      
(Unaudited) Quarter Quarter Nine Months   Nine Months
Ended Ended Ended   Ended
30-Sep-16 30-Sep-15 30-Sep-16   30-Sep-15
Net revenues   $   24,572 $   25,409 $   73,572 $   76,331
Certain tax matters   –   –   57   –
Non-GAAP net revenues $   24,572 $   25,409 $   73,629 $   76,331
       
RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA
       
(In thousands)      
(Unaudited) Quarter   Quarter Nine Months   Nine Months
Ended   Ended Ended   Ended
30-Sep-16   30-Sep-15 30-Sep-16   30-Sep-15
GAAP Operating income   $   5,428   $   7,453   $   13,868 $   18,315
Depreciation and amortization   1,328   853   3,510   2,877
Share-based compensation   919   1,206   3,169   3,906
Impairment of intangible assets   498   –   498   –
Gain on mark-to-market   (2,000)   –   (2,000)   –
Non-recurring and transaction related expenses   653   75   1,514   659
Severance payments   24   148   635   1,331
Provision for device returns   –   –   –   (52)
Transition costs related to introduction of new device   –   –   –   5
Net change to provision for bad debt expense   64   (2)   219   74
Write-down of inventory component   112   –   112   –
Legal settlement   –   –   –   675
Certain tax matters   –   –   57   –
Adjusted EBITDA $   7,026   $   9,733   $   21,582   $   27,790
       
 
RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
       
(In thousands)      
(Unaudited) Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
30-Sep-16 30-Sep-15 30-Sep-16 30-Sep-15
GAAP Net income attributable to common shareholders   $   3,399   $   3,311   $   6,952 $   11,571
Share-based compensation   919   1,206   3,169   3,906
Impairment of intangible assets   498   –   498   –
Gain on mark-to-market   (2,000)   –   (2,000)   –
Non-recurring and transaction related expenses   653   75   1,514   659
Severance payments   24   148   635   1,331
Provision for device returns   –   –   –   (52)
Transition costs related to introduction of new device   –   –   –   5
Net change to provision for bad debt expense   64   (2)   219   74
Write-down of inventory component   112   –   112   –
Legal settlement   –   –   –   675
Tax impact from gain on mark-to-market   761   –   761   –
Decrease in tax valuation allowance   –   (676)   –   (149)
Foreign currency revaluations on tax assets   (135)   2,002   (228)   700
Uncertain tax positions, net   361   48   1,066   (247)
Tax impact due to expiration of stock options   (47)   –   152   –
Impact of income tax rate reduction in Israel   –   –   1,411   –
Non-GAAP Net income $   4,609 $   6,112 $   14,261 $   18,473
       
GAAP earnings (loss) per ordinary share – Diluted   $   0.21   $   0.20   $   0.44   $   0.66    
Share-based compensation   0.06   0.07   0.20   0.22
Impairment of intangible assets   0.03   –   0.03   –
Gain on mark-to-market   (0.13)   –   (0.13)   –
Non-recurring and transaction related expenses   0.04   0.00   0.10   0.04
Severance payments   0.00   0.01   0.04   0.08
Provision for device returns   –   –   –   (0.00)
Transition costs related to introduction of new device   –   –   –   0.00
Net change to provision for bad debt expense   0.00   (0.00)   0.01   0.00
Write-down of inventory component   0.01   –   0.01   –
Legal settlement   –   –   –   0.04
Tax impact from gain on mark-to-market   0.05   –   0.05   –
Decrease in tax valuation allowance   –   (0.04)   –   (0.01)
Foreign currency revaluations on tax assets   (0.01)   0.12   (0.01)   0.04
Uncertain tax positions, net   0.02   0.00   0.07   (0.01)
Tax impact due to expiration of stock options   (0.00)   –   0.01   –
Impact of income tax rate reduction in Israel   –   –   0.09   –
Non-GAAP Net income per share – Diluted $   0.29 $   0.37 $   0.89 $   1.06
 
Weighted average ordinary shares outstanding – Diluted: 15,865 16,658 15,935 17,426
             
       
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-16 30-Sep-15 30-Sep-16 30-Sep-15
Net cash provided by operating activities   $   4,935   $   5,656   $   13,284 $   19,331
Less: Capital expenditures   (97)   –   (256)   (548)
Free cash flow $   4,838   $   5,656   $   13,028   $   18,783

 

Contact:

Seth Potter

Investor Relations

561-749-2255

ir@vocaltec.com

magicJack Reports Second Quarter 2016 Financial Results

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  • Total net revenues of $25.3 million, access rights renewal revenues were $14.8 million
  • GAAP operating income of $4.2 million, Adjusted EBITDA of $7.1 million
  • GAAP diluted EPS of $0.18, non-GAAP diluted EPS of $0.27
  • Generated $1.3 million in free cash flow
  • Cash and cash equivalents of $46.7 million and no debt as of June 30, 2016

WEST PALM BEACH, Fla. and NETANYA, Israel, Aug. 09, 2016 (GLOBE NEWSWIRE) — magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications and UCaaS company, today announced financial results for the second quarter ended June 30, 2016.

“We are pleased with our second quarter results,” said Gerald Vento, President and CEO of magicJack VocalTec. “During the quarter, we continued to generate strong cash flow in our consumer business and experienced the lowest churn in our company’s history.  We also made great progress with our growth initiatives, including the integration of Broadsmart, the launch of magicJack for Business targeting SMBs and the release of our magicJack Connect mobile app.”

Second Quarter 2016 Financial Highlights:

  • Net revenues: Total net revenues for the second quarter of 2016 were $25.3 million. Net revenues from the sales of magicJack devices were $3.2 million and access rights renewal revenues were $14.8 million, and accounted for 59% of total net revenues. Prepaid minute revenues were $1.5 million and access and wholesale charges were $1.3 million during the quarter. Broadsmart Global, Inc. contributed $3.0 million in revenues to the second quarter of 2016. Other revenue items contributed the remaining $1.5 million of total net revenues during the second quarter of 2016.
  • Operating income: GAAP operating income for the second quarter of 2016 was $4.2 million.
  • Adjusted EBITDA: Adjusted EBITDA for the second quarter of 2016 was $7.1 million.
  • Net income: GAAP net income attributable to common shareholders for the second quarter of 2016 was $2.8 million or $0.18 GAAP diluted net income per share based on 15.9 million weighted-average diluted ordinary shares outstanding.
  • Non-GAAP net income: Non-GAAP net income attributable to common shareholders for the second quarter of 2016 was $4.3 million or $0.27 non-GAAP net income per share based on 15.9 million weighted-average diluted ordinary shares outstanding.
  • Cash and free cash flow: As of June 30, 2016, magicJack VocalTec had cash and cash equivalents of $46.7 million and no debt. During the second quarter of 2016, the company generated $1.3 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 Second Quarter 2016 and Recent Highlights:

  • As of June 30, 2016, magicJack had an estimated 2.27 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
  • magicJack activated 104,000 subscribers during the second quarter of 2016. Activations are defined as devices that become activated on to a subscription contract during a given period.
  • During the quarter ended June 30, 2016, magicJack’s average monthly churn was 2.5%.

Quarterly Conference Call:

In conjunction with this announcement, magicJack VocalTec will host a conference call on Tuesday, August 9, 2016, at 5:00 p.m. EDT to review the company’s financial results for the second quarter 2016. To access this call, dial 1-888-278-8469 (United States), or 1-913-312-1277 (international), with conference ID #9447773. 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 23, 2016, by dialing 1-877-870-5176 (United States), or 1-858-384-5517 (international). The recording access code is #9447773.

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. 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.

In March 2016, magicJack VocalTec Ltd. acquired Broadsmart, a leading hosted UCaaS (Unified Communication as a Service) provider for medium-to-large multi-location enterprise customers. 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.

Non-GAAP Measures

The GAAP measures shown in this release exclude various items detailed further below.

  • magicJack defines adjusted net revenues as net revenues minus the impact of certain tax matters.
  • magicJack defines adjusted EBITDA as GAAP operating income excluding: depreciation and amortization, share-based compensation, transaction related expenses, severance payments, transition costs related to introduction of a new device, the net change to provision for bad debt expense, a legal settlement and certain tax matters.
  • magicJack defines non-GAAP net income as GAAP net income attributable to common shareholders excluding: share-based compensation, transaction related expenses, severance payments, provision for device returns, transition costs related to introduction of a new device, the net change to provision for bad debt expense, a legal settlement, decrease in tax valuation allowance, foreign currency revaluations on tax assets, net uncertain tax positions, tax impact due to expiration of stock options and impact of income tax rate reduction in Israel.
  • 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 strategy, future operations, new product introductions and customer acceptance, future financial position, 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 monetize our products, services and applications and market them globally; delays in development we may experience with respect to magicJack devices, our mobile apps, our first SMB product and Broadsmart’s products; our customer turnover rate and our customer acceptance rate; the risk that Broadsmart’s assets will not be integrated successfully or that such integration may be more difficult, time consuming or costly than expected; the risk that expected increased revenues and EBITDA and expected synergies from the Broadsmart acquisition may not be fully realized or may take longer to realize than expected; the risk that magicJack will experience any difficulty maintaining relationships with Broadsmart’s customers, employees or suppliers; our ability to expand our network of small, medium-sized and large businesses; changes in general economic, business, political and regulatory conditions; availability and costs associated with operating our network and business 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.

Second quarter and six months 2016 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-16 30-Jun-15 30-Jun-16 30-Jun-15
Net revenues $ 25,301 $ 25,410 $ 49,000   $ 50,922
Cost of revenues 9,838 8,669 18,047 18,136
Gross profit 15,463 16,741 30,953 32,786
Operating expenses:
Marketing 1,758 1,833 2,979 4,583
General and administrative 8,252 7,311 17,187 15,011
Research and development 1,247 1,168 2,347 2,330
Total operating expenses 11,257 10,312 22,513 21,924
Operating income 4,206 6,429 8,440   10,862
Other income (expense):
Interest and dividend income 9 6 16 17
Interest expense (23) (57)
Other expense 2 (6) (5) (6)
Total other income (expense) 11 (23) 11 (46)
Income before income taxes 4,217 6,406 8,451   10,816
Income tax expense (benefit) 1,702 (546) 5,202 2,556
Net income 2,515 6,952 3,249   8,260
Net loss attributable to noncontrolling interest 304 304  
Net income attributable to common shareholders $ 2,819 $ 6,952 $ 3,553   $ 8,260
 
Earnings per ordinary share:
Basic $ 0.18 $ 0.39 $ 0.23 $ 0.46
Diluted $ 0.18 $ 0.39 $ 0.22 $ 0.46
Weighted average ordinary shares outstanding:
Basic 15,853 17,694 15,750 17,781
Diluted 15,872 17,721 15,913 17,816

 

CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION
(In thousands)
(Unaudited)
As of As of
ASSETS 30-Jun-16 31-Dec-15
Current Assets
Cash and cash equivalents $ 46,681 $ 78,589
Marketable securities, at fair value 447 367
Accounts receivable, net of allowance for doubtful accounts and billing adjustments 2,627 2,925
Inventories 4,430 5,723
Deferred costs 1,822 2,097
Prepaid income taxes 852 2,747
Deposits and other current assets 2,752 2,655
Total current assets 59,611 95,103
Property and equipment, net 3,773 3,302
Intangible assets, net 31,419 6,687
Goodwill 47,485 32,304
Deferred tax assets, non-current 29,829 30,689
Deposits and other non-current assets 887 751
Total Assets $ 173,004 $ 168,836
LIABILITIES AND CAPITAL EQUITY
Current Liabilities
Accounts payable $ 1,549 $ 1,086
Accrued expenses and other current liabilities 6,369 6,284
Deferred revenue, current portion 50,389 52,554
Total current liabilities 58,307 59,924
Deferred revenue, net of current portion 47,484 50,146
Other non-current liabilities 12,369 11,098
Total Capital Equity 54,844 47,668
Total Liabilities and Capital Equity $ 173,004 $ 168,836

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(In thousands)
(Unaudited) Six Months Six Months
Ended Ended
30-Jun-16 30-Jun-15
Cash flows from operating activities:    
Net income $ 3,249 $ 8,260
Provision for doubtful accounts and billing adjustments 152 71
Share-based compensation 2,250 2,700
Depreciation and amortization 2,182 2,024
Increase (decrease) of uncertain tax position 1,187 (294)
Deferred income tax provision 935 2,999
Interest expense – non-cash 57
Changes in operating assets and liabilities (1,606) (2,142)
Net cash provided by operating activities   8,349   13,675
Cash flows from investing activities:
Purchases of investments (80)
Purchases of property and equipment (159) (548)
Acquisition of Broadsmart (40,019)
Net cash used in investing activities   (40,258)   (548)
Cash flows from financing activities:
Purchase of treasury stock (5,151)
Payment of other current liabilities (1,500)
Repurchase of shares to settle withholding liability (94)
Proceeds from exercise of ordinary share options 1
Net cash provided by financing activities   1   (6,745)
     
Net (decrease) increase in cash and cash equivalents (31,908) 6,382
Cash and cash equivalents, beginning of period 78,589 75,945
Cash and cash equivalents, end of period   $ 46,681   $ 82,327
 

 

RECONCILIATION OF NET REVENUES TO ADJUSTED NET REVENUES
       
(In thousands)      
(Unaudited) Quarter Quarter Six Months   Six Months
Ended Ended Ended   Ended
30-Jun-16 30-Jun-15 30-Jun-16   30-Jun-15
Net revenues   $ 25,301 $ 25,410 $ 49,000 $ 50,922
Certain tax matters 57
Non-GAAP net revenues $ 25,301 $ 25,410 $ 49,057 $ 50,922
       
RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA
       
(In thousands)      
(Unaudited) Quarter   Quarter Six Months   Six Months
Ended   Ended Ended   Ended
30-Jun-16   30-Jun-15 30-Jun-16   30-Jun-15
GAAP Operating income   $ 4,206   $ 6,429   $ 8,440 $ 10,862
Depreciation and amortization 1,390 1,008 2,182 2,024
Share-based compensation 1,248 1,417 2,250 2,700
Transaction related expenses 62 33 861 584
Severance payments 63 1,183 611 1,183
Transition costs related to introduction of new device 5
Net change to provision for bad debt expense 163 44 155 76
Legal settlement 675
Certain tax matters 57
Adjusted EBITDA $ 7,132   $ 10,062   $ 14,556   $ 18,057
       
       
 
RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
       
(In thousands)      
(Unaudited) Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
30-Jun-16 30-Jun-15 30-Jun-16 30-Jun-15
GAAP Net income attributable to common shareholders   $ 2,819   $ 6,952   $ 3,553 $ 8,260
Share-based compensation 1,248 1,417 2,250 2,700
Transaction related expenses 62 33 861 584
Severance payments 63 1,183 611 1,183
Provision for device returns (52) (52)
Transition costs related to introduction of new device 5
Net change to provision for bad debt expense 163 44 155 76
Legal settlement 675
Decrease in tax valuation allowance 722 527
Foreign currency revaluations on tax assets (93) (3,149) (93) (1,302)
Uncertain tax positions, net 37 (400) 705 (295)
Tax impact due to expiration of stock options 49 199
Impact of income tax rate reduction in Israel 1,411
Non-GAAP Net income $ 4,348 $ 6,750 $ 9,652 $ 12,361
       
GAAP earnings (loss) per ordinary share – Diluted   $ 0.18   $ 0.39   $ 0.22   $ 0.46
Share-based compensation 0.08 0.08 0.14 0.15
Transaction related expenses 0.00 0.00 0.05 0.03
Severance payments 0.00 0.07 0.04 0.07
Provision for device returns (0.00) (0.00)
Transition costs related to introduction of new device 0.00
Net change to provision for bad debt expense 0.01 0.00 0.01 0.00
Legal settlement 0.04
Release of tax valuation allowance 0.04 0.03
Foreign currency revaluations on tax assets (0.01) (0.18) (0.01) (0.07)
Uncertain tax positions, net 0.00 (0.02) 0.04 (0.02)
Tax impact due to expiration of stock options 0.00 0.01
Impact of income tax rate reduction in Israel 0.09
Non-GAAP Net income per share – Diluted $ 0.27 $ 0.38 $ 0.61 $ 0.69
 
Weighted average ordinary shares outstanding – Diluted: 15,872 17,721 15,913 17,816
         
       
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-16 30-Jun-15 30-Jun-16 30-Jun-15
Net cash provided by operating activities   $ 1,415   $ 6,142   $ 8,349 $ 13,675
Less: Capital expenditures (154) (5) (159) (548)
Free cash flow $ 1,261   $ 6,137   $ 8,190   $ 13,127

 

 

Contact:

Seth Potter

Investor Relations

561-749-2255

ir@vocaltec.com

Broadsmart Selects BroadSoft’s Cloud Contact Center Offering

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A Broadsoft press release we are proud to share.

Broadsmart Selects BroadSoft’s Cloud Contact Center Offering

Broadsmart call center to leverage the BroadCloud Contact Center Salesforce Edition to integrate voice capabilities with Salesforce workflow

Gaithersburg, MD, June 27, 2016 – BroadSoft, Inc. (NASDAQ: BSFT), a global unified communication software as a service (UCaaS) leader, today announced that Broadsmart Global, a leading hosted UCaaS provider for medium-to-large multi-location enterprise customers, has selected the BroadCloud Contact Center Salesforce Edition for its call center – enabling Broadsmart and its affiliated companies to offer enhanced call center efficiency, customer service and agent availability. The announcement was made at Call Center Week, the world’s largest contact center conference and expo, which is taking place from June 27–July 1, 2016 in Las Vegas, Nevada.

The BroadCloud Contact Center Salesforce Edition will provide Broadsmart with deep application integration that extends beyond simple Computer Telephony Integration (CTI), with a contact center app that is fully embedded within Salesforce’s Sales and Service Clouds and that leverages Salesforce data to guide real-time routing. The BroadCloud Contact CenterSalesforce Edition seamlessly integrates voice into the Salesforce workflow, and provides agents, supervisors and administration personnel in the support call center with access to several key capabilities, including:

  • Agent screen pop for incoming calls, call control, click-to-dial and call logging
  • Customer, call and agent data integrated into the Salesforce database for unified visibility, control and reporting

“With the BroadCloud Contact Center Salesforce Edition, SMBs utilizing the Salesforce Service Cloud for their call center operations can now seamlessly integrate voice interactions into the agent and supervisor workflow,” said Prem Uppaluru, vice president and general manager, BroadSoft Contact Center. “Deploying the BroadSoft Salesforce Edition in the call center demonstrates how forward-thinking service providers such as Broadsmart can unlock new business customer revenue opportunities through a cloud-enabled contact center offering.”

In February 2016, BroadSoft acquired Transera Communications, Inc. (now called BroadSoft Contact Center), a leading provider of cloud-based contact center software for small-medium business (SMB) and large enterprises – positioning BroadSoft to lead the fast-growing Contact Center as a Service (CCaaS) market. The BroadCloud® Contact Center portfolionow enables service providers to deliver cloud-enabled contact center offerings that meet the needs of all market segments, ranging from large enterprises with multi-site operations to SMBs, with minimal new investments, rapid time-to-market, and integration with BroadSoft’s BroadWorks® and BroadCloud® platforms.

BroadCloud Contact Center Salesforce Edition provides us with a highly differentiated contact center offering that will resonate with businesses of all sizes seeking to extend application integration beyond CTI and fully leverage the benefits Salesforce Service and Sales Clouds can deliver,” said Tom Tharrigton, president, Broadsmart. “We are thrilled to work with BroadSoft in demonstrating these capabilities in our call centers.”

For service providers and businesses interested in learning more about BroadSoft’s Contact Center offerings, visit here.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by their use of terms and phrases such as “enables,” “will,” and “can” and other similar terms and phrases and includes, among others, statements regarding the benefits to Broadsmart resulting from the use of BroadSoft’s contact center offering in Broadsmart’s call center. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to, the financial and other benefits to BroadSoft resulting from the use of the contact center offering by Broadsmart as well as those factors contained in the “Risk Factors” section of BroadSoft’s Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission, or SEC, on February 29, 2016, and in BroadSoft’s other filings with the SEC. All information in this release is as of June 27, 2016. Except as required by law, BroadSoft undertakes no obligation to update publicly any forward-looking statement made herein for any reason to conform the statement to actual results or changes in its expectations.

About BroadSoft:

BroadSoft is the leading provider of software and services that enable mobile, fixed-line and cable service providers to offer Unified Communications over their Internet Protocol networks. The Company’s core communications platform enables the delivery of a range of enterprise and consumer calling, messaging and collaboration communication services, including private branch exchanges, video calling, text messaging and converged mobile and fixed-line services. For additional information, visit www.BroadSoft.com.

Twitter | LinkedIn | Work It!

Investor Relations:

Chris Martin
+ 561-404-2130
cmartin@broadsoft.com

 Media Contacts:

Americas
Brian Lustig, Bluetext PR for BroadSoft US
+1 301.775.6203
brian@bluetext.com

Europe
Andy Crisp / Jon Bawden / Kate Anderson, Cohesive for BroadSoft UK
+44 (0) 1291 626200
broadsoft@wearecohesive.com

APAC
Terry Alberstein, Navigate Communication
+61 (0) 458-484-921
terry@navigatecommunication.com.au

magicJack VocalTec Ltd acquires North American Telecommunications d/b/a Broadsmart

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On March 17th, 2016  magicJack VocalTec Ltd, a VoIP cloud-based communications company, closed the acquisition of North American Telecommunications d/b/a Broadsmart.  Todd Correll & Tom Tharrington will remain the CEO & President of the company, as a subsidiary of magicJack VocalTc Ltd.

“With the successful close of this transaction, magicJack has now diversified its operations into UCaaS with one of the fastest growing and most profitable businesses in the industry,” said Gerald Vento, President and CEO of magicJack VocalTec, Ltd. “This acquisition positions us to compete long-term in this category by utilizing the Broadsmart business and our strong balance sheet to target medium and large enterprise customers.”

Broadsmart has a proven history of designing, provisioning & delivering United Communication as a service (UCaas) solutions to blue chip corporate customers nationally. MagicJack is please to diversify its core business into targeting UCaaS high end SMB & enterprise customers & looks forward to exploring new opportunities for Broadsmart to realize synergies by leveraging magicJack’s proprietary low cost infrastructure.

‘’We are excited to be combining Broadsmart with magicJack VocalTec,” said Todd Correll, CEO.  “It will provide us greater resources to deliver additional managed services and solutions to our customers and channel partners. Tom and I look forward to providing the same high quality, high touch customer service that Broadsmart’s customer base has come to expect from the company.”

During 2015, Broadsmart generated EBITDA of USD 4.6 million. For 2016 Broadsmart is forecasting over 20 percent year-over-year growth in sales.

 

magicJack Reports First Quarter 2016 Financial Results

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  • Total net revenues of $23.7 million, access rights renewal revenues were $15.2 million
  • GAAP operating income of $4.2 million, Adjusted EBITDA of $7.4 million
  • GAAP diluted EPS of $0.05, non-GAAP diluted EPS of $0.34
  • Generated $6.9 million in free cash flow
  • Cash and cash equivalents of $45.5 million and no debt as of March 31, 2016

WEST PALM BEACH, Fla. and NETANYA, Israel, May 10, 2016 (GLOBE NEWSWIRE) — magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications and UCaaS company, today announced financial results for the first quarter ended March 31, 2016.

“We were pleased with our execution during the first quarter highlighted by our ability to generate strong free cash flow,” said Gerald Vento, President and CEO of magicJack VocalTec. “During the quarter, we made great progress with all of our growth initiatives while the addition of Broadsmart successfully diversified the company into UCaaS targeting high end SMB and enterprise customers.”

First Quarter 2016 Financial Highlights:

  • Net revenues: Total net revenues for the first quarter of 2016 were $23.7 million. Net revenues from the sales of magicJack devices were $3.6 million and access rights renewal revenues were $15.2 million, and accounted for 64% of total net revenues. Prepaid minute revenues were $1.7 million and access and wholesale charges were $1.4 million during the quarter. Broadsmart Global, Inc. contributed $0.5 millionin revenues to the first quarter since the acquisition closed on March 17, 2016. Other revenue contributed the remaining $1.3 million of total net revenues during the first quarter of 2016.
  • Operating income: GAAP operating income for the first quarter of 2016 was $4.2 million.
  • Adjusted EBITDA: Adjusted EBITDA for the first quarter of 2016 was $7.4 million.
  • Net income: GAAP net income for the first quarter of 2016 was $0.7 million or $0.05 GAAP diluted net income per share based on 15.6 million weighted-average diluted ordinary shares outstanding.
  • Non-GAAP net income: Non-GAAP net income for the first quarter of 2016 was $5.3 million or $0.34 non-GAAP net income per share based on 15.6 million weighted-average diluted ordinary shares outstanding.
  • Cash and free cash flow: As of March 31, 2016, magicJack VocalTec had cash and cash equivalents of $45.5 million and no debt. During the first quarter of 2016, the company generated $6.9 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 First Quarter 2016 and Recent Highlights:

  • As of March 31, 2016, magicJack had an estimated 2.34 million active MJ subscribers, which are defined as device users that are under an active subscription contract.
  • magicJack activated 112,000 subscribers during the first quarter of 2016. Activations are defined as devices that become activated on to a subscription contract during a given period.
  • During the quarter ended March 31, 2016, magicJack’s average monthly churn was 3.0%.

Quarterly Conference Call:

In conjunction with this announcement, magicJack VocalTec will host a conference call on Tuesday, May 10, 2016, at 5:00 p.m. EDT to review the company’s financial results for the first quarter 2016. To access this call, dial 1-800-967-7140 (United States), or 1-719-457-2652 (international), with conference ID #4922571. 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 May 24, 2016, by dialing 1-877-870-5176 (United States), or 1-858-384-5517 (international). The recording access code is #4922571.

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.

In March 2016, magicJack VocalTec Ltd. Acquired Broadsmart, a leading hosted UCaaS (Unified Communication as a Service) provider for medium-to-large multi-location enterprise customers. 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.

Non-GAAP Measures

The GAAP measures shown in this release exclude various items detailed further below.

  • magicJack defines adjusted net revenues as net revenues minus the impact of certain tax matters.
  • magicJack defines adjusted EBITDA as GAAP operating income excluding: depreciation and amortization, share-based compensation, transaction related expenses, severance payments, transition costs related to introduction of a new device, the net change to provision for bad debt expense, a legal settlement and certain tax matters.
  • magicJack defines non-GAAP net income as GAAP net income excluding: share-based compensation, transaction related expenses, severance payments, transition costs related to introduction of a new device, the net change to provision for bad debt expense, a legal settlement, decrease in tax valuation allowance, foreign currency revaluations on tax assets, net uncertain tax positions, tax impact due to expiration of stock options and impact of income tax rate reduction in Israel.
  • 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 products, services and applications and market them globally; delays in development we may experience with respect to magicJack devices, our mobile app, our first SMB product and Broadsmart’s products; our customer turnover rate and our customer acceptance rate; the risk that Broadsmart’s assets will not be integrated successfully or that such integration may be more difficult, time consuming or costly than expected; the risk that expected increased revenues and EBITDA and expected synergies from the Broadsmart acquisition may not be fully realized or may take longer to realize than expected; the risk that magicjJack will experience any difficulty maintaining relationships with Broadsmart’s customers, employees or suppliers; our ability to expand our network of small, medium-sized and large businesses; changes in general economic, business, political and regulatory conditions; availability and costs associated with operating our network and business 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.

First quarter 2016 financial tables follow:

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited) Quarter Quarter
Ended Ended
31-Mar-16 31-Mar-15
Net revenues $   23,699 $   25,512
Cost of revenues   8,209   9,467
Gross profit 15,490 16,045
Operating expenses:
Marketing   1,221   2,750
General and administrative   8,935   7,700
Research and development   1,100   1,162
Total operating expenses 11,256 11,612
Operating income   4,234   4,433
Other income (expense):
Interest and dividend income   7   11
Interest expense   –   (34)
Other expense   (7)   –
Total other expense   –   (23)
Income before income taxes   4,234   4,410
Income tax expense   3,500   3,102
Net income $   734 $   1,308
Earnings per ordinary share:
Basic $   0.05 $   0.07
Diluted $   0.05 $   0.07
Weighted average ordinary shares outstanding:
Basic   15,647   17,868
Diluted   15,649   17,877
CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION
(In thousands)
(Unaudited)
As of As of
ASSETS 31-Mar-16 31-Dec-15
Current Assets
Cash and cash equivalents $   45,500 $   78,589
Marketable securities, at fair value   367   367
Accounts receivable, net of allowance for doubtful accounts and billing adjustments   2,571   2,925
Inventories   5,238   5,723
Deferred costs   1,884   2,097
Prepaid income taxes   1,552   2,747
Deposits and other current assets   2,097   2,655
Total current assets   59,209   95,103
Property and equipment, net   3,891   3,302
Intangible assets, net   32,529   6,687
Goodwill   47,485   32,304
Deferred tax assets, non-current   29,748   30,689
Deposits and other non-current assets   859   751
Total Assets $   173,721 $   168,836
LIABILITIES AND CAPITAL EQUITY
Current Liabilities
Accounts payable $   3,663 $   1,086
Accrued expenses and other current liabilities   5,700   6,284
Deferred revenue, current portion   51,815   52,554
Total current liabilities   61,178   59,924
Deferred revenue, net of current portion   49,134   50,146
Other non-current liabilities   12,328   11,098
Total Capital Equity   51,081   47,668
Total Liabilities and Capital Equity $   173,721 $   168,836
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   
(In thousands)  
(Unaudited) Three Months Three Months  
Ended Ended  
31-Mar-16 31-Mar-15  
Cash flows from operating activities:      
Net income $   734 $   1,308  
Provision for doubtful accounts and billing adjustments   1   33  
Share-based compensation   1,002   1,283  
Depreciation and amortization   792   1,016  
Increase of uncertain tax position   1,150   –  
Deferred income tax provision   1,016   602  
Interest expense – non-cash   –   34  
Changes in operating assets and liabilities   2,239   3,257  
Net cash provided by operating activities     6,934     7,533  
Cash flows from investing activities:  
Purchases of property and equipment   (5)   (543)  
Acquisition of Broadsmart   (40,019)   –  
Net cash used in investing activities     (40,024)     (543)  
Cash flows from financing activities:  
Proceeds from exercise of ordinary share options   1   –  
Net cash provided by financing activities     1     –  
       
Net (decrease) increase in cash and cash equivalents   (33,089)   6,990  
Cash and cash equivalents, beginning of period   78,589   75,945  
Cash and cash equivalents, end of period   $   45,500   $   82,935  
 
RECONCILIATION OF NET REVENUES TO ADJUSTED NET REVENUES
   
(In thousands)  
(Unaudited) Quarter Quarter
Ended Ended
31-Mar-16 31-Mar-15
Net revenues   $   23,699 $   25,512
Certain tax matters   57   –
Non-GAAP net revenues $   23,756 $   25,512
   
RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA
   
(In thousands)  
(Unaudited) Quarter   Quarter
Ended   Ended
31-Mar-16   31-Mar-15
GAAP Operating income   $   4,234   $   4,433
Depreciation and amortization   792   1,016
Share-based compensation   1,002   1,283
Transaction related expenses   799   551
Severance payments   548   –
Transition costs related to introduction of new device   –   5
Net change to provision for bad debt expense   (8)   32
Legal settlement   –   675
Certain tax matters   57   –
Adjusted EBITDA $   7,424   $   7,995
   
   
 
RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
   
(In thousands)  
(Unaudited) Quarter Quarter
Ended Ended
31-Mar-16 31-Mar-15
GAAP Net income   $   734   $   1,308
Share-based compensation   1,002   1,283
Transaction related expenses   799   551
Severance payments   548   –
Transition costs related to introduction of new device   –   5
Net change to provision for bad debt expense   (8)   32
Legal settlement   –   675
Decrease in tax valuation allowance   –   (195)
Foreign currency revaluations on tax assets   –   1,847
Uncertain tax positions, net   668   105
Tax impact due to expiration of stock options   150   –
Impact of income tax rate reduction in Israel   1,411   –
Non-GAAP Net income $   5,304 $   5,611
   
GAAP earnings (loss) per ordinary share – Diluted   $   0.05   $   0.07    
Share-based compensation   0.06   0.07
Transaction related expenses   0.05   0.03
Severance payments   0.04   –
Transition costs related to introduction of new device   –   0.00
Net change to provision for bad debt expense   (0.00)   0.00
Legal settlement   –   0.04
Release of tax valuation allowance   –   (0.01)
Foreign currency revaluations on tax assets   –   0.10
Uncertain tax positions, net   0.04   0.01
Tax impact due to expiration of stock options   0.01   –
Impact of income tax rate reduction in Israel   0.09   –
Non-GAAP Net income per share – Diluted $   0.34 $   0.31
 
Weighted average ordinary shares outstanding – Diluted: 15,649 17,877
       
   
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
   
(In thousands)  
(Unaudited) Quarter Quarter
Ended Ended
31-Mar-16 31-Mar-15
Net cash provided by operating activities   $   6,934   $   7,533
Less: Capital expenditures   (5)   (543)
Free cash flow $   6,929   $   6,990

Contact:

Seth Potter

Investor Relations

561-749-2255

ir@vocaltec.com

How a Broadsmart/Broadsoft powered solution transformed communications for a leading law firm

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INDUSTRY: LAW

Becker and Poliakoff

How a Broadsmart/BroadSoft-powered solution transformed communications for a leading law firm 

Becker & Poliakoff is a commercial law firm with thirteen offices across Florida and a presence in New York, New Jersey, Virginia, Washington, D.C., and the Czech Republic. The company’s 170 attorneys and supporting professionals serve a diverse client base worldwide. 

The Challenge

As with all law firms, voice communication is a critical business application for Becker and Poliakoff. To address their needs, the firm had developed a telephony infrastructure of standalone PBXs at each of its locations. However, with a limited IT staff, the systems were inconsistently updated, supported and maintained, and with no redundancy for disaster recovery. In fact, an outage in a line connecting a PBX to the public network left one of the company’s offices without phone service for days.

Complicating the challenge, more than a third of Becker and Poliakoff’s work is performed off-site at client offices and other remote locations. The firm lacked a way for team members to interact seamlessly with office communications and maintain peak productivity while on the go. There was no easy way for mobile and remote workers to receive voicemail notifications, access contacts, initiate conferences, or receive calls made to their office phones.

When Ken Schultz was brought on as Becker and Poliakoff’s new CIO/CTO, he was convinced there was a better way. He had helped his previous employer move to a cloud-based communications solution and thought Becker and Poliakoff could benefit from a similar approach.

The Solution

Schultz worked with experts from Broadsmart, a BroadSoft service provider partner, to develop a business case for cloud-based unified communications (UC). An analysis showed that, for the same financial commitment required to maintain its current systems, the firm could move to a BroadSoft BroadWorks hosted UC platform – achieving much-needed operational redundancy and expanding the communications features available to its team.

Broadsmart engineers worked with Schultz to create a discreet Broadsmart-managed MPLS network for voice traffic, with the firm’s existing data network as backup. Based on his previous experience, Schultz felt strongly about separating voice and data. “Seemingly simple changes made by network engineers on the data side can have unexpected consequences on voice traffic,” he said. “Separating the two networks reduces the likelihood of an outage caused by human error.”

Becker and Poliakoff also adopted BroadSoft auto attendant and call center capabilities, as well as BroadSoft UC-One®, a comprehensive unified communication solution. UC-One provides a powerful suite of productivity applications to simplify and enhance team communication, including mobile and desktop integrated voice and video conferencing, desktop sharing, presence information, instant messaging, unified messaging, and contact center.

Broadsmart integrated other BroadSoft-compatible technologies to help the firm fully leverage its communication investment. A speech assistant application lets team members dial colleagues by spoken name, while voice-to-text transcription enables voicemail messages to be received as emails. Also, a Web-based receptionist console frees up the firm’s receptionists to perform other duties.

Solution Components

  • BroadSoft BroadWorks hosted UC platform
  • BroadSoft UC-One® Unified Communication solution
  • BroadSoft Call Center
  • BroadSoft Auto Attendant
  • BroadSoft-compatible Mobiso Speech Assistant
  • Genband Voicemail Transcription 
  • Polycom HD IP handsets
  • Broadsmart network connectivity, engineering, and support

The Impact

Adopting a cloud-based unified communication solution delivers significant new benefits to the Becker and Poliakoff team.

Business continuity / resiliency in the event of a failure. The firm now has a redundant failover path in the event of an outage. Calls can be transparently handed over from one network node to another on the voice network – or to the firm’s companion data network if required.

  • Improved productivity for mobile workers. With BroadSoft’s UC-One client, team members have a consistent user experience whether accessing UC services from a desk phone, laptop, smartphone, or tablet. They can communicate when, where, and how they want – making them more productive than ever.
  • Improved scalability. The hosted architecture easily scales to support new team members by simply adding software licenses. Phones and other communication devices are “plug and play.”
  • Expanded support, 24-7.  Previously, a single IT staff member and consultant supported the firm’s communication systems. “We had to keep our fingers crossed that nothing happened while either of them were on vacation or away from the office,” Schultz said. With hosted services delivered by Broadsmart, Becker and Poliakoff now has a team of experts providing 24-7 monitoring and support, allowing potential issues to be resolved before they escalate. The firm also benefits from a single point of accountability for both data and voice services.
  • Increased efficiency. Firm-wide gains have been realized quickly by introducing new platform features, such as inter-office extension dialing between remote locations, hoteling/hot-desking, and unified call accounting and billing to support the finance team.

About BroadSoft:

BroadSoft is the leading provider of software and services that enable mobile, fixed-line and cable service providers to offer unified communications over their Internet Protocol networks. The Company’s core communications platform enables the delivery of a range of enterprise and consumer calling, messaging and collaboration communication services, including private branch exchanges, video calling, text messaging and converged mobile and fixed-line services.  For additional information, visit www.BroadSoft.com.

About Broadsmart:

Broadsmart is a telecom service provider with a managed business class offering of SIP/IP trunking, cloud unified communications, and data solutions.  The Broadsmart network core is purpose-built for latency sensitive, real-time voice/video communication with customer options for integrating private MPLS access.  Broadsmart maintains multiple geographically redundant network operations centers (NOCs), providing the ultimate in service diversity and resiliency.  Since its founding in 2000, Broadsmart has focused on providing innovative, cost effective, customer-driven services to business customers worldwide, ranging from high profile Fortune 500 companies to one-site privately held small businesses.  The company’s ‘go to market’ approach continually refines product lines, provides high value, high quality and increased efficiencies so that Cloud Services can continue to evolve.  These scalable offerings are always backed by unparalleled support to ensure sustenance to meet, and exceed expectations.  For more information, please visit www.broadsmart.com or contact Broadsmart at (954) 449-8000 sales@broadsmart.com.