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MagicJack VocalTec Reports Record Fourth Quarter And Full Year 2012 Financial Results

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

Fourth quarter and full year 2012 financial tables to follow:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           
(In thousands except per share data)          
(Unaudited)   Quarter Quarter Year Year
    Ended Ended Ended Ended
    31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11
Net revenues    $ 41,427  $ 26,634  $ 158,362  $ 110,450
Cost of revenues   13,960 13,587 61,325 51,181
Gross profit   27,467 13,047 97,037 59,269
Operating expenses:          
Advertising   3,845 11,336 23,181 32,148
General and administrative   6,618 6,977 27,697 29,050
Research and development   774 743 2,594 2,716
Total operating expenses   11,237 19,056 53,472 63,914
Operating income (loss)    16,230  (6,009)  43,565  (4,645)
Other income (expense):          
(Losses) gains on investments    (2,078)  149  (738)  649
Interest expense    (93)  (119)  (411)  (277)
Fair value (loss) gain on common equity put options    (1,084)  620  3,650  2,192
Other income, net    255  688  824  1,306
Total other (expense) income    (3,000)  1,338  3,325  3,870
Income (loss) before income taxes    13,230  (4,671)  46,890  (775)
Income tax (benefit) expense    (9,039)  (14)  (8,961)  61
Net income (loss)    22,269  (4,657)  55,851  (836)
Dividends on redeemable ordinary shares    -- 955  -- 955
Net income (loss) attributable to ordinary shareholders    $ 22,269  $ (5,612)  $ 55,851  $ (1,791)
           
Income (loss) per ordinary share:          
  Basic  $ 1.17  $ (0.26)  $ 2.80  $ (0.08)
  Diluted  $ 1.17  $ (0.26)  $ 2.73  $ (0.08)
Weighted average ordinary shares outstanding:          
  Basic 18,970  21,842 19,916 23,342
  Diluted 18,981  21,842 19,985 23,342
           
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
     
(In thousands)    
(Unaudited) Year Year
  Ended Ended
ASSETS 31-Dec-12 31-Dec-11
Current Assets    
Cash and cash equivalents  $ 18,959  $ 12,961
Marketable securities, at fair value 19,390 22,135
Accounts receivable, net of allowance for doubtful accounts and billing adjustments 6,004 8,786
Inventories 5,340 8,676
Deferred costs 7,066 8,550
Deferred tax assets, current 1,114  -- 
Deposits and other current assets 1,411 1,796
Total current assets 59,284 62,904
     
Property and equipment, net 2,348 2,669
Intangible assets, net 16,136 11,494
Goodwill 32,304 32,304
Deferred tax assets, non-current 9,831  -- 
Deposits and other non-current assets 864 1,259
Total Assets  $ 120,767  $ 110,630
     
LIABILITIES AND CAPITAL DEFICIT    
Current Liabilities    
Accounts payable  $ 3,651  $ 6,845
Accrued expenses and other current liabilities 13,569 8,109
Deferred revenue, current portion 67,038 71,691
Total current liabilities 84,258 86,645
     
Deferred revenue, net of current portion 58,165 46,143
Other non-current liabilities 3,114 4,219
Total Capital Deficit (24,770) (26,377)
Total Liabilities and Capital Deficit  $ 120,767  $ 110,630
     
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
     
(In thousands)    
(Unaudited) Year Year
  Ended Ended
  31-Dec-12 31-Dec-11
Cash flows from operating activities:    
Net income (loss)  $ 55,851  $ (836)
Provision for doubtful accounts and billing adjustments  9,148  16,434
Share-based compensation  3,190  2,447
Depreciation and amortization  3,302  4,160
Deferred income tax (benefit) provision  (10,945)  93
Interest expense - non-cash  411  277
Loss (gain) on investments  738  (649)
Fair value gain on common equity put options  (3,650)  (2,192)
Contributed services  230  75
Decrease (increase) in operating assets:    
Accounts receivable  (6,366)  (14,884)
Inventories  3,336  (5,668)
Deferred costs  1,484  (1,935)
Deposits and other current assets  385  (184)
Deposits and other non-current assets  324  587
Increase (decrease) in operating liabilities:    
Accounts payable  (3,194)  4,255
Accrued expenses and other current liabilities  3,665  (2,207)
Deferred revenue  7,369  25,626
Other non-current liabilities  (16)  (69)
Net cash provided by operating activities  65,262  25,330
Cash flows from investing activities:    
Purchases of investments  (129,166)  (34,710)
Proceeds from sales of investments  130,462  28,192
Purchases of property and equipment  (217)  (974)
Acquisition of intangible assets  (5,749)  (1,548)
Net cash used in investing activities  (4,670)  (9,040)
Cash flows from financing activities:    
Purchase of treasury stock  (66,509)  (28,182)
Redemption of redeemable ordinary shares  --  (8,695)
Proceeds from sale of common equity put options  12,185  3,146
Proceeds from exercise of ordinary share options  1,230  1,774
Payment of other non-current liabilities  (1,500)  --
Net cash used in financing activities  (54,594)  (31,957)
     
Net increase (decrease) in cash and cash equivalents  5,998  (15,667)
Cash and cash equivalents, beginning of period  12,961  28,628
Cash and cash equivalents, end of period  $ 18,959  $ 12,961
     
         
RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA
         
(In thousands)        
(Unaudited) Quarter Quarter Year Year
  Ended Ended Ended Ended
  31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11
GAAP Operating income (loss)  $ 16,230  $ (6,009)  $ 43,565  $ (4,645)
Depreciation and amortization  1,162  1,024  3,302 4,160
Share-based compensation  937  1,850  3,190 2,447
Adjustment for operational change related to prepaid minutes  --  --  (2,998)  --
Additional allowances for access charge billing adjustments  --  2,700  --  6,700
Adjusted EBITDA  $ 18,329  $ (435)  $ 47,059  $ 8,662
         
         
         
RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
         
(In thousands)        
(Unaudited) Quarter Quarter Year Year
  Ended Ended Ended Ended
  31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11
GAAP Net income (loss) attributable to ordinary shareholders  $ 22,269  $ (5,612)  $ 55,851  $ (1,791)
Share-based compensation  937  1,850  3,190  2,447
Adjustment for operational change related to prepaid minutes  --  --  (2,998)  --
Additional allowances for access charge billing adjustments  --  2,700  --  6,700
Losses (gains) on investments  2,078  (149)  738  (649)
Fair value loss (gain) on common equity put options  1,084  (620)  (3,650)  (2,192)
Income tax (benefit) expense  (9,039)  (14)  (8,961)  61
Dividends on redeemable ordinary shares  --  955  --  955
Non-GAAP Net Income (Loss)  $ 17,329  $ (890)  $ 44,170  $ 5,531
         
GAAP Net income (loss) per share – Diluted  $ 1.17  $ (0.26)  $ 2.73  $ (0.08)
Share-based compensation  0.05  0.08  0.16  0.10
Adjustment for operational change related to prepaid minutes  --  --  (0.15)  --
Additional allowances for access charge billing adjustments  --  0.12  --  0.29
Losses (gains) on investments  0.11  (0.01)  0.04  (0.03)
Fair value loss (gain) on common equity put options  0.06  (0.03)  (0.18)  (0.09)
Income tax (benefit) expense  (0.48)  (0.00)  (0.45)  0.00
Gain on in-the-money equity put options  --  --  0.07  --
Dividends on redeemable ordinary shares  --  0.04  --  0.04
Non-GAAP net income (loss) per share – Diluted (2)  $ 0.91  $ (0.04)  $ 2.21  $ 0.24
         
Weighted average ordinary shares outstanding: 18,981 21,842 19,985 23,342
         
(1) GAAP Net Income attributable to ordinary shareholders for the year ended December 31, 2012 does not include a $1.3 million reduction for gains on in-the-money   
 common equity put options, which was taken into consideration for the calculation of GAAP net income per share – diluted for that period.    
         
(2) The sum of adjustments to GAAP Net income (loss) per share – Diluted may not add to the Non-GAAP Net income (loss) per share – Diluted amount due to rounding  
 in the calculation of each item.        
         
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
         
(In thousands)        
(Unaudited) Quarter Quarter Year Year
  Ended Ended Ended Ended
  31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11
Net cash provided by operating activities  20,790  18,162  $ 65,262  $ 25,330
Less: Capital expenditures  --  (159)  (217)  (974)
Free cash flow  $ 20,790  $ 18,003  $ 65,045  $ 24,356
 
CONTACT: Seth Potter
         Investor Relations
         561-749-2255
         ir@vocaltec.com

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