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MagicJack VocalTec Communications' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Okay, now that we have got that out of the way. I will go over some of the major items in the most recent quarter. Firstly, the company reported revenue in Q2 of $38.6 million compared to $28.8 million in the same period a year ago representing growth year-on-year of almost 34%. Sequentially, compared to Q1 2012 revenue growth was almost 10%, if one excludes the approximately $2.5 million in revenue associated with the implementation of international prepaid billing rules from the Q1 numbers.

Secondly, reducing costs is a [man] curve at the company. So let me discuss improvements in several of the cost categories. Advertising expenditures have been reduced over the last few quarters, we continue to use very cost effective remnant TV advertising and the efficiency of these short form TV swaps is clear from our ongoing sales volumes.

With respect to network costs. As we expected, we have been a beneficiary of the recent FCC access charge reforms. Net-net the cost per customer is about $1.50 per year, while our renewal rates might be the best in the industry. On the G&A line item, we did also share improvement here mainly due to reduced legal expenses. As a result operating income for Q2 was $10.3 million up from $3.3 million in Q1 2012 again excluding the IPP one-time items in Q1.

Next, let me turn to our share repurchase program. Our share repurchase program continues to be very successful and we are now down to 19.4 million shares outstanding at the end of the quarter. In terms of our new product pipeline, let me discuss a few of the exciting items we are focused on here. So as many of you know, we are gearing up for the production of the magicJack WiFi for fourth quarter introduction. The company is also completing the rollout of the magicJack APP for the Google Android platforms. We have been very pleased with the success of the magicJack APP on the Apple iOS devices. We will also be adding texting to our apps later this year and at that point, we will really start promoting the apps. We will seek ways to monetize the apps next year in 2013.

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