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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Magicjack Vocaltec Ltd - Ordinary Shares (delisted) | NASDAQ:CALL | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 8.67 | 8.64 | 8.70 | 0 | 01:00:00 |
STATE OF ISRAEL
(State or Other Jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer ☐
|
Accelerated filer
☒
|
Non-accelerated filer ☐
|
Smaller reporting company ☐
|
Emerging growth company ☐
|
PART I
|
FINANCIAL INFORMATION
|
||
3
|
|||
3
|
|||
4
|
|||
5
|
|||
6
|
|||
8
|
|||
32
|
|||
43
|
|||
43
|
|||
PART II
|
OTHER INFORMATION
|
||
44
|
|||
44
|
|||
44
|
|||
44
|
|||
44
|
|||
44
|
|||
45
|
· |
references to “magicJack VocalTec,” the “Company,” “we,” “us” or “our” are to magicJack VocalTec Ltd., a company organized under the laws of the State of Israel (the “Registrant”), and its subsidiaries;
|
· |
references to “common shares”, “ordinary shares”, “our shares” and similar expressions refer to the Registrant’s Ordinary Shares, no par value;
|
· |
references to “$” or “dollars” are to U.S. dollars. All references to “NIS” are to New Israeli Shekels and “PLN” are to Polish Zloty. Except as otherwise indicated, financial statements of, and information regarding, magicJack VocalTec are presented in U.S. dollars; and
|
· |
references to the “magicJack devices” are to the original magicJack
®
, the magicJack PLUS
TM
, the New magicJack PLUS
TM
, the magicJackGO and the magicJackEXPRESS
TM
.
|
|
June 30,
|
December 31,
|
||||||
|
2017
|
2016
|
||||||
ASSETS
|
(Unaudited)
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
47,041
|
$
|
52,394
|
||||
Investments, at fair value
|
369
|
447
|
||||||
Accounts receivable, net of allowance for doubtful accounts and billing adjustments
|
||||||||
of $433 and $402, respectively
|
2,095
|
3,171
|
||||||
Inventories
|
2,646
|
4,441
|
||||||
Deferred costs
|
1,918
|
2,319
|
||||||
Prepaid income taxes
|
2,713
|
527
|
||||||
Receivable from earnout escrow
|
2,000
|
2,000
|
||||||
Deposits and other current assets
|
4,465
|
1,970
|
||||||
Total current assets
|
63,247
|
67,269
|
||||||
|
||||||||
Property and equipment, net
|
3,173
|
3,805
|
||||||
Intangible assets, net
|
11,533
|
28,854
|
||||||
Goodwill
|
32,304
|
47,185
|
||||||
Deferred tax assets
|
35,659
|
26,568
|
||||||
Deposits and other non-current assets
|
793
|
836
|
||||||
Total assets
|
$
|
146,709
|
$
|
174,517
|
||||
LIABILITIES AND CAPITAL EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
1,846
|
$
|
2,790
|
||||
Income tax payable
|
-
|
1,527
|
||||||
Accrued expenses and other current liabilities
|
10,549
|
8,426
|
||||||
Deferred revenue, current portion
|
44,886
|
48,507
|
||||||
Total current liabilities
|
57,281
|
61,250
|
||||||
|
||||||||
Deferred revenue, net of current portion
|
41,510
|
44,201
|
||||||
Other non-current liabilities
|
12,577
|
10,866
|
||||||
Total liabilities
|
111,368
|
116,317
|
||||||
|
||||||||
Commitments and contingencies (Note 10)
|
||||||||
Capital equity
|
||||||||
Ordinary shares, No par value; 100,000 shares authorized; 25,055 and 25,039 shares
|
||||||||
issued at June 30, 2017 and December 31, 2016, respectively
|
111,783
|
111,783
|
||||||
Additional paid-in capital
|
13,845
|
13,567
|
||||||
Treasury stock (8,942 and 8,988 shares at June 30, 2017
|
||||||||
and December 31, 2016, respectively)
|
(119,410
|
)
|
(120,300
|
)
|
||||
Retained earnings
|
29,123
|
53,785
|
||||||
Total magicJack VocalTec, LTD. shareholders's equity
|
35,341
|
58,835
|
||||||
Noncontrolling interest
|
-
|
(635
|
)
|
|||||
Total capital equity
|
35,341
|
58,200
|
||||||
Total liabilities and capital equity
|
$
|
146,709
|
$
|
174,517
|
|
For the Three Months Ended
|
For the Six Months Ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
||||||||||||||||
Net revenues
|
$
|
22,381
|
$
|
25,301
|
$
|
45,578
|
$
|
49,000
|
||||||||
Cost of revenues
|
8,166
|
9,838
|
17,617
|
18,047
|
||||||||||||
Gross profit
|
14,215
|
15,463
|
27,961
|
30,953
|
||||||||||||
|
||||||||||||||||
Operating expenses:
|
||||||||||||||||
Marketing
|
2,120
|
1,758
|
4,527
|
2,979
|
||||||||||||
General and administrative
|
9,544
|
8,252
|
22,369
|
17,187
|
||||||||||||
Impairment of intangible assets and goodwill
|
-
|
-
|
31,527
|
-
|
||||||||||||
Research and development
|
1,462
|
1,247
|
2,961
|
2,347
|
||||||||||||
Total operating expenses
|
13,126
|
11,257
|
61,384
|
22,513
|
||||||||||||
Operating income (loss)
|
1,089
|
4,206
|
(33,423
|
)
|
8,440
|
|||||||||||
|
||||||||||||||||
Other income (expense):
|
||||||||||||||||
Interest and dividend income
|
17
|
9
|
23
|
16
|
||||||||||||
Other income (expense), net
|
(13
|
)
|
2
|
(30
|
)
|
(5
|
)
|
|||||||||
Total other income (expence)
|
4
|
11
|
(7
|
)
|
11
|
|||||||||||
Income (loss) before income taxes
|
1,093
|
4,217
|
(33,430
|
)
|
8,451
|
|||||||||||
Income tax expense (benefit)
|
2,587
|
1,702
|
(8,768
|
)
|
5,202
|
|||||||||||
Net (loss) income
|
(1,494
|
)
|
2,515
|
(24,662
|
)
|
3,249
|
||||||||||
Net (loss) income attributable to noncontrolling interest
|
(67
|
)
|
304
|
-
|
304
|
|||||||||||
Net (loss) income attributable to magicJack VocalTec Ltd. common shareholders
|
$
|
(1,561
|
)
|
$
|
2,819
|
$
|
(24,662
|
)
|
$
|
3,553
|
||||||
|
||||||||||||||||
(Loss) income per share attributable to magicJack VocalTec Ltd. common shareholders:
|
||||||||||||||||
Basic
|
$
|
(0.10
|
)
|
$
|
0.18
|
$
|
(1.54
|
)
|
$
|
0.23
|
||||||
Diluted
|
$
|
(0.10
|
)
|
$
|
0.18
|
$
|
(1.54
|
)
|
$
|
0.22
|
||||||
|
||||||||||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
16,078
|
15,853
|
16,056
|
15,750
|
||||||||||||
Diluted
|
16,078
|
15,872
|
16,056
|
15,914
|
|
Additional
|
Total
|
||||||||||||||||||||||||||||||
Common Stock
|
Paid-in |
Treasury Stock
|
Retained
|
Noncontrolling
|
Capital | |||||||||||||||||||||||||||
Number
|
Amount
|
Capital |
Number
|
Amount
|
Earnings
|
Interest
|
Equity | |||||||||||||||||||||||||
Balance, January 1, 2017
|
25,039
|
$
|
111,783
|
$
|
13,567
|
(8,988
|
)
|
$
|
(120,300
|
)
|
$
|
53,785
|
$
|
(635
|
)
|
$
|
58,200
|
|||||||||||||||
|
||||||||||||||||||||||||||||||||
Share-based compensation
|
-
|
-
|
1,303
|
-
|
-
|
-
|
-
|
1,303
|
||||||||||||||||||||||||
Issuance of ordinary shares
|
-
|
-
|
(1,025
|
)
|
83
|
1,025
|
-
|
-
|
-
|
|||||||||||||||||||||||
Reclassification of shares *
|
16
|
-
|
-
|
(16
|
)
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Purchase of treasury stock
|
-
|
-
|
-
|
(21
|
)
|
(135
|
)
|
-
|
-
|
(135
|
)
|
|||||||||||||||||||||
Deconsolidation of subsidiary
|
-
|
-
|
-
|
-
|
-
|
-
|
635
|
635
|
||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(24,662
|
)
|
-
|
(24,662
|
)
|
||||||||||||||||||||||
Balance, June 30, 2017 (unaudited)
|
25,055
|
$
|
111,783
|
$
|
13,845
|
(8,942
|
)
|
$
|
(119,410
|
)
|
$
|
29,123
|
$
|
-
|
$
|
35,341
|
|
For the Six Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2017
|
2016
|
||||||
|
||||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
|
$
|
(24,662
|
)
|
$
|
3,249
|
|||
Adjustments to reconcile net (loss) income to net cash
|
||||||||
(used in) provided by operating activities:
|
||||||||
Provision for doubtful accounts and billing adjustments
|
126
|
152
|
||||||
Share-based compensation
|
1,303
|
2,250
|
||||||
Depreciation and amortization
|
2,419
|
2,182
|
||||||
Impairment of goodwill and intangible assets
|
31,527
|
-
|
||||||
Loss on sale of assets
|
18
|
-
|
||||||
Increase of uncertain tax positions
|
1,809
|
1,187
|
||||||
Deferred income tax (benefit) provision
|
(9,091
|
)
|
935
|
|||||
Change in operating assets and liabilities
|
||||||||
Accounts receivable
|
943
|
713
|
||||||
Inventories
|
1,690
|
1,595
|
||||||
Deferred costs
|
318
|
275
|
||||||
Prepaid Income taxes
|
(2,846
|
)
|
1,912
|
|||||
Deposits and other current assets
|
(2,415
|
) |
(431
|
)
|
||||
Other non-current assets
|
322
|
(40
|
)
|
|||||
Accounts payable
|
(707
|
)
|
455
|
|||||
Income taxes payable
|
38
|
-
|
||||||
Accrued expenses and other current liabilities
|
2,123
|
|
(1,016
|
)
|
||||
Deferred revenue
|
(6,038
|
)
|
(4,999
|
)
|
||||
Other non-current liabilities
|
(1,003
|
)
|
(70
|
)
|
||||
Net cash (used in) provided by operating activities
|
(4,126
|
)
|
8,349
|
|||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Purchase of investments
|
-
|
(80
|
)
|
|||||
Purchases of property and equipment
|
(248
|
)
|
(159
|
)
|
||||
Proceeds from sale of investment
|
245
|
-
|
||||||
Acquisition of Broadsmart
|
-
|
(40,019
|
)
|
|||||
Acquisition of intangible assets
|
(1,089
|
)
|
-
|
|||||
Net cash used in investing activities
|
(1,092
|
)
|
(40,258
|
)
|
||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Purchase of treasury stock
|
(135
|
)
|
-
|
|||||
Proceeds from exercise of ordinary share options
|
-
|
1
|
||||||
Net cash (used by) provided by financing activities
|
(135
|
)
|
1
|
|||||
Net (decrease) increase in cash and cash equivalents
|
(5,353
|
)
|
(31,908
|
)
|
||||
Cash and cash equivalents, beginning of period
|
52,394
|
78,589
|
||||||
Cash and cash equivalents, end of period
|
$
|
47,041
|
$
|
46,681
|
|
For the Six Months Ended
June 30, |
|||||||
|
2017
|
2016
|
||||||
|
||||||||
Supplemental disclosures:
|
||||||||
Income taxes paid
|
$
|
3,293
|
$
|
1,240
|
||||
Non-cash investing and financing activities:
|
||||||||
Ordinary shares issued for acquisition of Broadsmart
|
$
|
-
|
$
|
1,676
|
Level 1 – |
Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.
|
Level 2 – |
Valuations based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
Level 3 – |
Valuation based on inputs that are unobservable and significant to the overall fair value measurement.
|
For the Three Months Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Advertising media buys
|
$
|
664
|
$
|
751
|
$
|
1,919
|
$
|
1,416
|
||||||||
Marketing personnel related
|
412
|
199
|
1,221
|
387
|
||||||||||||
Other marketing projects
|
1,044
|
808
|
1,387
|
1,176
|
||||||||||||
Total marketing expenses
|
$
|
2,120
|
$
|
1,758
|
$
|
4,527
|
$
|
2,979
|
March 31, 2017
|
||||||||||||
Carrying Amount
|
Fair Value
|
Impairment
|
||||||||||
Customer Relationships
|
$
|
19,572
|
$
|
4,400
|
$
|
15,172
|
||||||
Process Know How
|
974
|
400
|
574
|
|||||||||
Tradename
|
1,700
|
800
|
900
|
|||||||||
Goodwill
|
14,881
|
-
|
14,881
|
|||||||||
37,127
|
5,600
|
31,527
|
June 30,
2017
|
December 31,
2016
|
|||||||
Raw materials
|
$
|
669
|
$
|
1,455
|
||||
Finished goods
|
1,977
|
2,986
|
||||||
Total
|
$
|
2,646
|
$
|
4,441
|
Estimated
|
||||||||||||
Useful Lives
|
June 30,
|
December 31,
|
||||||||||
(in years)
|
2017
|
2016
|
||||||||||
Switches
|
3 - 15
|
$
|
9,721
|
$
|
9,699
|
|||||||
Computers
|
3
|
2,629
|
2,866
|
|||||||||
Furniture
|
5 - 7
|
281
|
269
|
|||||||||
Leasehold-improvements
|
*
|
848
|
893
|
|||||||||
Accumulated depreciation
|
(10,306
|
)
|
(9,922
|
)
|
||||||||
Total
|
$
|
3,173
|
$
|
3,805
|
June 30, 2017
|
December 31, 2016
|
||||||||||||||||||||||||||||||||
Estimated | Gross | Gross | |||||||||||||||||||||||||||||||
Useful Lives
|
Carrying
|
Accumulated
|
Weighted-
|
Carrying
|
Accumulated
|
Weighted-
|
|||||||||||||||||||||||||||
(in years)
|
Amount
|
Amortization
|
Net
|
Average Life
|
Amount
|
Amortization
|
Net
|
Average Life
|
|||||||||||||||||||||||||
Technology
|
3 - 17
|
$
|
3,110
|
$
|
(2,914
|
)
|
$
|
196
|
4.76
|
$
|
3,110
|
$
|
(2,854
|
)
|
$
|
256
|
4.71
|
||||||||||||||||
Intellectual property rights
|
3 - 17
|
14,162
|
(11,377
|
)
|
$
|
2,785
|
4.71
|
14,162
|
(10,794
|
)
|
3,368
|
4.87
|
|||||||||||||||||||||
Covenants not-to-compete
and not-to-sue
|
2 - 5
|
2,185
|
(2,120
|
)
|
$
|
65
|
1.92
|
2,185
|
(2,107
|
)
|
78
|
3.17
|
|||||||||||||||||||||
Tradename
|
3 - 6
|
131
|
(131
|
)
|
$
|
-
|
0.00
|
131
|
(131
|
)
|
-
|
0.00
|
|||||||||||||||||||||
Customer relationships
|
5 - 10
|
4,900
|
(633
|
)
|
$
|
4,267
|
8.71
|
22,600
|
(2,249
|
)
|
20,351
|
9.21
|
|||||||||||||||||||||
Backlog
|
1
|
800
|
(800
|
)
|
$
|
-
|
0.00
|
800
|
(800
|
)
|
-
|
0.00
|
|||||||||||||||||||||
Software license
|
10
|
2,296
|
(211
|
)
|
$
|
2,085
|
1.95
|
1,207
|
(80
|
)
|
1,127
|
8.00
|
|||||||||||||||||||||
Process know how
|
5
|
400
|
(16
|
)
|
$
|
384
|
5.50
|
1,100
|
(87
|
)
|
1,013
|
6.08
|
|||||||||||||||||||||
Other
|
1
|
(1
|
)
|
$
|
-
|
0.00
|
-
|
-
|
-
|
0.00
|
|||||||||||||||||||||||
Intangible assets subject
to amortization
|
27,985
|
(18,203
|
)
|
9,782
|
45,295
|
(19,102
|
)
|
26,193
|
|||||||||||||||||||||||||
Tradename
|
1,700
|
-
|
$
|
1,700
|
N/A
|
2,600
|
-
|
2,600
|
N/A
|
||||||||||||||||||||||||
Domain names
|
51
|
-
|
$
|
51
|
N/A
|
61
|
-
|
61
|
N/A
|
||||||||||||||||||||||||
Total intangible assets
|
$
|
29,736
|
$
|
(18,203
|
)
|
$
|
11,533
|
$
|
47,956
|
$
|
(19,102
|
)
|
$
|
28,854
|
March 31, 2017
|
||||||||||||
Carrying Amount
|
Fair Value
|
Impairment
|
||||||||||
Customer Relationships
|
$
|
19,572
|
$
|
4,400
|
$
|
15,172
|
||||||
Process Know How
|
974
|
400
|
574
|
|||||||||
Tradename
|
1,700
|
800
|
900
|
|||||||||
$
|
22,246
|
$
|
5,600
|
$
|
16,646
|
Fiscal Year
|
Amortization
Expense
|
|||
Six months ending December 31, 2017
|
$
|
1,343
|
||
2018
|
2,231
|
|||
2019
|
1,619
|
|||
2020
|
1,079
|
|||
2021
|
766
|
|||
Thereafter
|
2,744
|
|||
$
|
9,782
|
Six Months Ended June 30, 2017
|
||||||||||||||||||||
Core Consumer
|
Enterprise
|
SMB
|
Other
|
Consolidated
|
||||||||||||||||
Balance, beginning of period
|
$
|
32,304
|
$
|
14,881
|
$
|
-
|
$
|
-
|
$
|
47,185
|
||||||||||
2017 impairment
|
-
|
(14,881
|
)
|
-
|
-
|
(14,881
|
)
|
|||||||||||||
Balance, end of period
|
$
|
32,304
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
32,304
|
|
June 30, 2017
|
December 31, 2016
|
||||||
|
||||||||
magicJack devices
|
$
|
6,313
|
$
|
7,962
|
||||
Access right renewals
|
35,187
|
36,515
|
||||||
Mobile apps
|
772
|
808
|
||||||
Prepaid minutes
|
2,426
|
2,851
|
||||||
Other
|
188
|
371
|
||||||
Deferred revenue, current
|
44,886
|
48,507
|
||||||
|
||||||||
Deferred revenue, non-current*
|
41,510
|
44,201
|
||||||
Total deferred revenue
|
$
|
86,396
|
$
|
92,708
|
Recognition Period
|
Estimated Recognition of Deferred Revenues
|
|||
|
||||
Next 12 months
|
$
|
44,886
|
||
13-24 Months
|
17,489
|
|||
25-36 Months
|
11,075
|
|||
37-48 months
|
6,940
|
|||
49-60 Months
|
3,318
|
|||
61+ Months
|
2,688
|
|||
|
$
|
86,396
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Ordinary share options
|
$
|
230
|
$
|
822
|
$
|
613
|
$
|
1,458
|
||||||||
Restricted stock units
|
337
|
425
|
690
|
792
|
||||||||||||
$
|
567
|
$
|
1,247
|
$
|
1,303
|
$
|
2,250
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Cost of revenues
|
$
|
96
|
$
|
23
|
$
|
102
|
$
|
29
|
||||||||
Marketing
|
10
|
33
|
14
|
76
|
||||||||||||
General and administrative
|
461
|
1,123
|
1,197
|
2,019
|
||||||||||||
Research and development
|
-
|
68
|
(10
|
)
|
126
|
|||||||||||
$
|
567
|
$
|
1,247
|
$
|
1,303
|
$
|
2,250
|
Date of Grant
|
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average Remaining
Contractual
Term
(in years)
|
Aggregate
Intrinsic
Value
(1)
|
||||||||||||
January 1, 2016
|
2,527,427
|
$
|
12.98
|
3.61
|
$
|
-
|
||||||||||
Granted
|
1,107,040
|
$
|
7.09
|
|||||||||||||
Exercised
|
(2,500
|
)
|
$
|
3.96
|
||||||||||||
Forfeited
|
(34,740
|
)
|
$
|
8.83
|
||||||||||||
Expired or cancelled
|
(109,168
|
)
|
$
|
13.57
|
||||||||||||
December 31, 2016
|
3,488,059
|
$
|
11.13
|
3.11
|
$
|
-
|
||||||||||
Granted
|
100,000
|
$
|
6.85
|
|||||||||||||
Exercised
|
-
|
|||||||||||||||
Forfeited
(2)
|
(2,501,614
|
)
|
$
|
11.12
|
||||||||||||
Expired or cancelled
|
-
|
|||||||||||||||
Outstanding at June 30, 2017 (unaudited)
|
1,086,445
|
$
|
10.78
|
0.86
|
$
|
-
|
||||||||||
Vested at June 30, 2017 (unaudited)
|
986,445
|
$
|
11.18
|
0.62
|
$
|
-
|
(1) |
The aggregate intrinsic value is the amount by which the market value for the Company's common stock exceeds the weighted average exercise price of the outstanding stock options on the measurement date.
|
(2) |
In 2017, two former executive officers surrendered a total of 1,244,777 ordinary share options with a weighted average exercise price of $14.57. Additionally, 1,256,837 options with a weighted average strike price of $7.70 were forfeited by terminated executives in the SMB and Enterprise segments. The surrender of options resulted in a $2.4 million increase in tax expense during the second quarter.
|
Six Months Ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Expected term (in years)
|
3.22 to 3.23
|
3.50
|
||||||
Dividend yield
|
0.00
|
%
|
0.00
|
%
|
||||
Expected volatility
|
48.77 to 49.56
|
%
|
52.15% to 52.47
|
% | ||||
Risk free interest rate
|
1.53
|
%
|
0.95% to 1.13
|
% | ||||
Forfeiture rate
|
0.00
|
%
|
0.00
|
%
|
Average
|
||||||||
Number of
|
Fair Value
|
|||||||
Shares
|
at Grant Date
|
|||||||
December 31, 2016
|
482,085
|
$
|
7.70
|
|||||
Granted
|
80,282
|
$
|
7.99
|
|||||
Vested
|
(83,210
|
)
|
$
|
12.31
|
||||
Forfeited
|
(248,876
|
)
|
$
|
7.45
|
||||
Non-vested at June 30, 2017
|
230,281
|
$
|
6.74
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Income before income taxes
|
$
|
1,093
|
$
|
4,217
|
$
|
(33,430
|
)
|
$
|
8,451
|
|||||||
Income tax expense (benefit)
|
2,587
|
1,702
|
(8,768
|
)
|
5,202
|
|||||||||||
Effective income tax rate
|
236.69
|
%
|
40.36
|
%
|
26.23
|
%
|
61.55
|
%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net income (loss) attributable to common shareholders
|
$
|
(1,561
|
)
|
$
|
2,819
|
$
|
(24,662
|
)
|
$
|
3,553
|
||||||
Denominator:
|
||||||||||||||||
Denominator for basic net income per share -
|
||||||||||||||||
weighted average ordinary shares outstanding
|
16,078
|
15,853
|
16,056
|
15,750
|
||||||||||||
Effect of dilutive share-based awards outstanding
|
-
|
17
|
-
|
157
|
||||||||||||
Effect of dilutive share-based awards vested,
|
||||||||||||||||
exercised or expired during the period
|
-
|
2
|
-
|
7
|
||||||||||||
Denominator for diluted net income per share -
|
||||||||||||||||
weighted average ordinary shares outstanding
|
16,078
|
15,872
|
16,056
|
15,914
|
||||||||||||
Net income (loss) per common share attributable to
|
||||||||||||||||
common shareholders:
|
||||||||||||||||
Basic
|
$
|
(0.10
|
)
|
$
|
0.18
|
$
|
(1.54
|
)
|
$
|
0.23
|
||||||
Diluted
|
$
|
(0.10
|
)
|
$
|
0.18
|
$
|
(1.54
|
)
|
$
|
0.22
|
||||||
Anti-dilutive share-based awards not included above
|
1,317
|
3,812
|
1,317
|
2,812
|
Six Months Ended
|
||||
June 30, 2016
|
||||
Net revenues
|
$
|
51,540
|
||
Net income
|
$
|
3,658
|
For the Three Months Ended June 30, 2017
|
||||||||||||||||||||||||||||
Previous
Core Consumer
|
SMB
|
Revised
Core Consumer
|
Enterprise
|
Other
|
Intercompany
|
Consolidated
|
||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||||||
Net revenues
|
$
|
19,334
|
-
|
$
|
19,334
|
3,088
|
(1
|
)
|
(40
|
)
|
$
|
22,381
|
||||||||||||||||
Cost of revenues
|
6,185
|
-
|
6,185
|
2,000
|
(19
|
)
|
-
|
8,166
|
||||||||||||||||||||
Gross profit (loss)
|
13,149
|
-
|
13,149
|
1,088
|
18
|
(40
|
)
|
14,215
|
||||||||||||||||||||
Marketing
|
1,884
|
-
|
1,884
|
247
|
(11
|
)
|
-
|
2,120
|
||||||||||||||||||||
General and administrative
|
8,966
|
-
|
8,966
|
755
|
(137
|
)
|
(40
|
)
|
9,544
|
|||||||||||||||||||
Impairment of goodwill and
|
||||||||||||||||||||||||||||
intangible assets
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Research and development
|
1,462
|
-
|
1,462
|
-
|
-
|
-
|
1,462
|
|||||||||||||||||||||
Operating expenses
|
12,312
|
-
|
12,312
|
1,002
|
(148
|
)
|
(40
|
)
|
13,126
|
|||||||||||||||||||
Operating income (loss)
|
837
|
-
|
837
|
86
|
166
|
-
|
1,089
|
|||||||||||||||||||||
Interest and dividend income
|
17
|
-
|
17
|
-
|
-
|
-
|
17
|
|||||||||||||||||||||
Other expenses, net
|
(13
|
)
|
-
|
(13
|
)
|
-
|
-
|
-
|
(13
|
)
|
||||||||||||||||||
Income (loss) before income taxes
|
$
|
841
|
$
|
-
|
$
|
841
|
$
|
86
|
$
|
166
|
$
|
-
|
$
|
1,093
|
||||||||||||||
Other Data:
|
||||||||||||||||||||||||||||
Capital expenditures
|
$
|
1,064
|
-
|
$
|
1,064
|
10
|
-
|
-
|
$
|
1,074
|
||||||||||||||||||
Depreciation expense
|
$
|
272
|
-
|
$
|
272
|
61
|
(2
|
)
|
-
|
$
|
331
|
|||||||||||||||||
Amortization expense
|
$
|
380
|
-
|
$
|
380
|
183
|
-
|
-
|
$
|
563
|
For the Six Months Ended June 30, 2017
|
||||||||||||||||||||||||||||
Previous
Core Consumer
|
SMB
|
Revised
Core Consumer
|
Enterprise
|
Other
|
Intercompany
|
Consolidated
|
||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||||||
Net revenues
|
$
|
39,764
|
116
|
$
|
39,880
|
5,771
|
-
|
(73
|
)
|
$
|
45,578
|
|||||||||||||||||
Cost of revenues
|
13,342
|
131
|
13,473
|
4,144
|
-
|
-
|
17,617
|
|||||||||||||||||||||
Gross profit (loss)
|
26,422
|
(15
|
)
|
26,407
|
1,627
|
-
|
(73
|
)
|
27,961
|
|||||||||||||||||||
Marketing
|
2,962
|
1,089
|
4,051
|
476
|
-
|
-
|
4,527
|
|||||||||||||||||||||
General and administrative
|
19,274
|
1,056
|
20,330
|
2,112
|
-
|
(73
|
)
|
22,369
|
||||||||||||||||||||
Impairment of goodwill and
|
||||||||||||||||||||||||||||
intangible assets
|
-
|
-
|
-
|
31,527
|
-
|
-
|
31,527
|
|||||||||||||||||||||
Research and development
|
2,364
|
596
|
2,960
|
1
|
-
|
-
|
2,961
|
|||||||||||||||||||||
Operating expenses
|
24,600
|
2,741
|
27,341
|
34,116
|
-
|
(73
|
)
|
61,384
|
||||||||||||||||||||
Operating income (loss)
|
1,822
|
(2,756
|
)
|
(934
|
)
|
(32,489
|
)
|
-
|
-
|
(33,423
|
)
|
|||||||||||||||||
Interest and dividend income
|
23
|
-
|
23
|
-
|
-
|
-
|
23
|
|||||||||||||||||||||
Other expenses, net
|
(30
|
)
|
-
|
(30
|
)
|
-
|
-
|
-
|
(30
|
)
|
||||||||||||||||||
Income (loss) before income taxes
|
$
|
1,815
|
$
|
(2,756
|
)
|
$
|
(941
|
)
|
$
|
(32,489
|
)
|
$
|
-
|
$
|
-
|
$
|
(33,430
|
)
|
||||||||||
Other Data:
|
||||||||||||||||||||||||||||
Capital expenditures
|
$
|
1,094
|
-
|
$
|
1,094
|
72
|
-
|
-
|
$
|
1,166
|
||||||||||||||||||
Depreciation expense
|
$
|
537
|
21
|
$
|
558
|
107
|
-
|
-
|
$
|
665
|
||||||||||||||||||
Amortization expense
|
$
|
723
|
-
|
$
|
723
|
1,031
|
-
|
-
|
$
|
1,754
|
June 30, 2017
|
||||||||||||||||||||||||||||
Previous
Core Consumer
|
SMB
|
Revised
Core Consumer
|
Enterprise
|
Other
|
Intercompany
|
Consolidated
|
||||||||||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||||||||||
Goodwill
|
$
|
32,304
|
-
|
$
|
32,304
|
-
|
-
|
-
|
$
|
32,304
|
||||||||||||||||||
Total assets
|
$
|
126,986
|
-
|
$
|
126,986
|
19,723
|
-
|
-
|
$
|
146,709
|
For the Three Months Ended June 30, 2016
|
||||||||||||||||||||||||||||
Previous
Core Consumer
|
SMB
|
Restated
Core Consumer
|
Enterprise
|
Other
|
Intercompany
|
Consolidated
|
||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||||||
Net revenues
|
$
|
22,361
|
-
|
$
|
22,361
|
2,967
|
7
|
(34
|
)
|
$
|
25,301
|
|||||||||||||||||
Cost of revenues
|
7,353
|
14
|
7,367
|
2,462
|
9
|
-
|
9,838
|
|||||||||||||||||||||
Gross profit (loss)
|
15,008
|
(14
|
)
|
14,994
|
505
|
(2
|
)
|
(34
|
)
|
15,463
|
||||||||||||||||||
Marketing
|
1,162
|
369
|
1,531
|
80
|
147
|
-
|
1,758
|
|||||||||||||||||||||
General and administrative
|
5,184
|
1,548
|
6,732
|
1,131
|
423
|
(34
|
)
|
8,252
|
||||||||||||||||||||
Research and development
|
947
|
295
|
1,242
|
-
|
5
|
-
|
1,247
|
|||||||||||||||||||||
Operating expenses
|
7,293
|
2,212
|
9,505
|
1,211
|
575
|
(34
|
)
|
11,257
|
||||||||||||||||||||
Operating income (loss)
|
7,715
|
(2,226
|
)
|
5,489
|
(706
|
)
|
(577
|
)
|
-
|
4,206
|
||||||||||||||||||
Interest and dividend income
|
(9
|
)
|
-
|
(9
|
)
|
-
|
-
|
-
|
(9
|
)
|
||||||||||||||||||
Other expenses, net
|
(2
|
)
|
-
|
(2
|
)
|
-
|
-
|
-
|
(2
|
)
|
||||||||||||||||||
Income (loss) before income taxes
|
$
|
7,726
|
$
|
(2,226
|
)
|
$
|
5,500
|
$
|
(706
|
)
|
$
|
(577
|
)
|
$
|
-
|
$
|
4,217
|
|||||||||||
Other Data:
|
||||||||||||||||||||||||||||
Capital expenditures
|
$
|
5
|
154
|
$
|
159
|
-
|
-
|
-
|
$
|
159
|
||||||||||||||||||
Depreciation expense
|
$
|
223
|
3
|
$
|
226
|
55
|
-
|
-
|
$
|
281
|
||||||||||||||||||
Amortization expense
|
$
|
434
|
-
|
$
|
434
|
676
|
-
|
-
|
$
|
1,110
|
For the Six Months Ended June 30, 2016
|
||||||||||||||||||||||||||||
Previous
Core Consumer
|
SMB
|
Restated
Core Consumer
|
Enterprise
|
Other
|
Intercompany
|
Consolidated
|
||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||||||
Net revenues
|
$
|
45,580
|
-
|
$
|
45,580
|
3,447
|
7
|
(34
|
)
|
$
|
49,000
|
|||||||||||||||||
Cost of revenues
|
15,295
|
14
|
15,309
|
2,729
|
9
|
-
|
18,047
|
|||||||||||||||||||||
Gross profit (loss)
|
30,285
|
(14
|
)
|
30,271
|
718
|
(2
|
)
|
(34
|
)
|
30,953
|
||||||||||||||||||
Marketing
|
2,321
|
374
|
2,695
|
77
|
207
|
-
|
2,979
|
|||||||||||||||||||||
General and administrative
|
12,259
|
3,046
|
15,305
|
1,373
|
543
|
(34
|
)
|
17,187
|
||||||||||||||||||||
Research and development
|
1,977
|
365
|
2,342
|
5
|
-
|
2,347
|
||||||||||||||||||||||
Operating expenses
|
16,557
|
3,785
|
20,342
|
1,450
|
755
|
(34
|
)
|
22,513
|
||||||||||||||||||||
Operating income (loss)
|
13,728
|
(3,799
|
)
|
9,929
|
(732
|
)
|
(757
|
)
|
-
|
8,440
|
||||||||||||||||||
Interest and dividend income
|
(16
|
)
|
-
|
(16
|
)
|
-
|
-
|
-
|
(16
|
)
|
||||||||||||||||||
Other expenses, net
|
5
|
-
|
5
|
-
|
-
|
-
|
5
|
|||||||||||||||||||||
Income (loss) before income taxes
|
$
|
13,739
|
$
|
(3,799
|
)
|
$
|
9,940
|
$
|
(732
|
)
|
$
|
(757
|
)
|
$
|
-
|
$
|
8,451
|
|||||||||||
Other Data:
|
||||||||||||||||||||||||||||
Capital expenditures
|
$
|
5
|
154
|
$
|
159
|
-
|
-
|
-
|
$
|
159
|
||||||||||||||||||
Depreciation expense
|
$
|
462
|
3
|
$
|
465
|
64
|
-
|
-
|
$
|
529
|
||||||||||||||||||
Amortization expense
|
$
|
903
|
-
|
$
|
903
|
751
|
-
|
-
|
$
|
1,654
|
December 31, 2016
|
||||||||||||||||||||||||||||
Previous
Core Consumer
|
SMB
|
Restated
Core Consumer
|
Enterprise
|
Other
|
Intercompany
|
Consolidated
|
||||||||||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||||||||||
Goodwill
|
$
|
32,304
|
-
|
$
|
32,304
|
14,881
|
-
|
-
|
$
|
47,185
|
||||||||||||||||||
Total assets
|
$
|
142,870
|
(9,447
|
)
|
$
|
133,423
|
40,839
|
255
|
-
|
$
|
174,517
|
March 31, 2017
|
||||||||||||
Carrying Amount
|
Fair Value
|
Impairment
|
||||||||||
Customer Relationships
|
$
|
19,572
|
$
|
4,400
|
$
|
15,172
|
||||||
Process Know How
|
974
|
400
|
574
|
|||||||||
Tradename
|
1,700
|
800
|
900
|
|||||||||
Goodwill
|
14,881
|
-
|
14,881
|
|||||||||
37,127
|
5,600
|
31,527
|
June 30,
|
December 31,
|
|||||||||||
2017
|
2016
|
Change
|
||||||||||
(Unaudited)
|
||||||||||||
Cash and cash equivalents
|
$
|
47,041
|
$
|
52,394
|
$
|
(5,353
|
)
|
|||||
Accounts receivable, net
|
$
|
2,095
|
$
|
3,171
|
$
|
(1,076
|
)
|
|||||
Inventories
|
$
|
2,646
|
$
|
4,441
|
$
|
(1,795
|
)
|
|||||
Prepaid income taxes
|
$
|
2,713
|
$
|
527
|
$
|
2,186
|
||||||
Deposits and other current assets | $ | 4,465 | $ | 1,970 | $ | 2,495 | ||||||
Intangible assets, net
|
$
|
11,533
|
$
|
28,854
|
$
|
(17,321
|
)
|
|||||
Goodwill
|
$
|
32,304
|
$
|
47,185
|
$
|
(14,881
|
)
|
|||||
Deferred tax asset
|
$
|
35,659
|
$
|
26,568
|
$
|
9,091
|
||||||
Income tax payable
|
$
|
-
|
$
|
1,527
|
$
|
(1,527
|
)
|
|||||
Accrued expenses and other current liabilities
|
$ | 10,549 | $ | 8,426 | $ | 2,123 | ||||||
Total deferred revenue
|
$
|
86,396
|
$
|
92,708
|
$
|
(6,312
|
)
|
|||||
Other non-current liabilities
|
$
|
12,577
|
$
|
10,866
|
$
|
1,711
|
Three Months Ended
June 30,
|
2017
Compared to
|
Six Months Ended
June 30,
|
2017
Compared to
|
|||||||||||||||||||||||||||||
2017
|
2016
|
2016
|
2017
|
2016
|
2016
|
|||||||||||||||||||||||||||
Net Revenues
|
||||||||||||||||||||||||||||||||
Sale of magicJack devices
|
$
|
2,503
|
$
|
3,227
|
$
|
(724
|
)
|
(22.4
|
)%
|
$
|
5,346
|
$
|
6,792
|
$
|
(1,446
|
)
|
(21.3
|
)%
|
||||||||||||||
Access right renewals
|
12,630
|
14,485
|
(1,855
|
)
|
(12.8
|
)
|
25,691
|
29,483
|
(3,792
|
)
|
(12.9
|
)
|
||||||||||||||||||||
Mobile apps
|
408
|
306
|
102
|
33.3
|
859
|
525
|
334
|
63.6
|
||||||||||||||||||||||||
Shipping and handling
|
395
|
172
|
223
|
129.7
|
715
|
381
|
334
|
87.7
|
||||||||||||||||||||||||
magicJack-related products
|
1,152
|
1,324
|
(172
|
)
|
(13.0
|
)
|
2,597
|
2,444
|
153
|
6.3
|
||||||||||||||||||||||
Prepaid minutes
|
1,158
|
1,526
|
(368
|
)
|
(24.1
|
)
|
2,379
|
3,216
|
(837
|
)
|
(26.0
|
)
|
||||||||||||||||||||
Access and wholesale charges
|
957
|
1,322
|
(365
|
)
|
(27.6
|
)
|
2,047
|
2,740
|
(693
|
)
|
(25.3
|
)
|
||||||||||||||||||||
UCaaS
|
3,049
|
2,933
|
116
|
4.0
|
5,698
|
3,413
|
2,285
|
66.9
|
||||||||||||||||||||||||
Other
|
129
|
6
|
123
|
*
|
246
|
6
|
240
|
*
|
||||||||||||||||||||||||
Total Net Revenue
|
22,381
|
25,301
|
(2,920
|
)
|
(11.5
|
)
|
45,578
|
49,000
|
(3,422
|
)
|
(7.0
|
)
|
||||||||||||||||||||
Cost of Revenues
|
||||||||||||||||||||||||||||||||
Cost of devices and related products
|
2,043
|
2,119
|
(76
|
)
|
(3.6
|
)
|
4,584
|
4,125
|
459
|
11.1
|
||||||||||||||||||||||
Shipping and handling
|
360
|
393
|
(33
|
)
|
(8.4
|
)
|
821
|
829
|
(8
|
)
|
(1.0
|
)
|
||||||||||||||||||||
Credit card processing fees
|
401
|
449
|
(48
|
)
|
(10.7
|
)
|
877
|
964
|
(87
|
)
|
(9.0
|
)
|
||||||||||||||||||||
Network and carrier charges
|
2,389
|
3,209
|
(820
|
)
|
(25.6
|
)
|
5,074
|
6,735
|
(1,661
|
)
|
(24.7
|
)
|
||||||||||||||||||||
UCaaS
|
2,000
|
2,461
|
(461
|
)
|
(18.7
|
)
|
4,144
|
2,729
|
1,415
|
51.9
|
||||||||||||||||||||||
Other
|
973
|
1,207
|
(234
|
)
|
(19.4
|
)
|
2,117
|
2,665
|
(548
|
)
|
(20.6
|
)
|
||||||||||||||||||||
Total Cost of Revenues
|
8,166
|
9,838
|
(1,672
|
)
|
(17.0
|
)
|
17,617
|
18,047
|
(430
|
)
|
(2.4
|
)
|
||||||||||||||||||||
Gross Profit
|
14,215
|
15,463
|
(1,248
|
)
|
(8.1
|
)
|
27,961
|
30,953
|
(2,992
|
)
|
(9.7
|
)
|
||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Marketing
|
2,120
|
1,758
|
362
|
20.6
|
4,527
|
2,979
|
1,548
|
52.0
|
||||||||||||||||||||||||
General and administrative
|
9,544
|
8,252
|
1,292
|
15.7
|
22,369
|
17,187
|
5,182
|
30.2
|
||||||||||||||||||||||||
Impairment of goodwill and intangible assets
|
-
|
-
|
-
|
-
|
31,527
|
-
|
31,527
|
100.0
|
||||||||||||||||||||||||
Research and development
|
1,462
|
1,247
|
215
|
17.2
|
2,961
|
2,347
|
614
|
26.2
|
||||||||||||||||||||||||
Total operating expenses
|
13,126
|
11,257
|
1,869
|
16.6
|
61,384
|
22,513
|
38,871
|
172.7
|
||||||||||||||||||||||||
Operating income
|
1,089
|
4,206
|
(3,117
|
)
|
(74.1
|
)
|
(33,423
|
)
|
8,440
|
(41,863
|
)
|
(496.0
|
)
|
|||||||||||||||||||
Other income (expense):
|
||||||||||||||||||||||||||||||||
Interest and dividend income
|
17
|
9
|
8
|
*
|
23
|
16
|
7
|
*
|
||||||||||||||||||||||||
Other income (expense), net
|
(13
|
)
|
2
|
(15
|
)
|
*
|
(30
|
)
|
(5
|
)
|
(25
|
)
|
*
|
|||||||||||||||||||
Total other income (expense)
|
4
|
11
|
(7
|
)
|
*
|
(7
|
)
|
11
|
(18
|
)
|
*
|
|||||||||||||||||||||
(Loss) income before income taxes
|
1,093
|
4,217
|
(3,124
|
)
|
(74.1
|
)
|
(33,430
|
)
|
8,451
|
(41,881
|
)
|
(495.6
|
)
|
|||||||||||||||||||
Income tax (benefit) expense
|
2,587
|
1,702
|
885
|
52.0
|
(8,768
|
)
|
5,202
|
(13,970
|
)
|
(268.6
|
)
|
|||||||||||||||||||||
Net (loss) income
|
$
|
(1,494
|
)
|
$
|
2,515
|
$
|
(4,009
|
)
|
(159.4
|
)
|
$
|
(24,662
|
)
|
$
|
3,249
|
$
|
(27,911
|
)
|
(859.1
|
)
|
· |
Sale of magicJack devices and access rights – represent revenues recognized from sales of the magicJack devices to retailers, wholesalers, or direct to customers, net of returns, over the period associated with the access right period. These revenues are recorded net of sales allowance, chargebacks, retailer discounts and advertising allowances;
|
· |
Access right renewals – represent revenues from customers purchasing rights to access our servers beyond the access right period included with a magicJack device or magicJack service. The extended access right ranges from one to five years. These fees charged to customers are initially deferred and recognized as revenue ratably over the extended access right period;
|
· |
Mobile apps – represent revenues from access rights granted to users of the magicApp and magicJack Connect App which are recognized ratably over the access right period;
|
· |
Shipping and handling – represent charges for shipping and handling fees for magicJack devices shipped directly to customers. The fees are initially deferred and recognized as revenues over the access right period associated with the magicJack device;
|
· |
magicJack-related products – represent revenues recognized from sale of other items related to the magicJack devices and access right renewals we offer our customers, including: (i) porting fees charged to customers to port their existing phone number to a magicJack device or service, (ii) fees charged for customers to select a custom, vanity or Canadian phone number, (iii) fees charged to customers to change their existing number, (iv) insurance covering the replacement of a damaged or lost device, and (v) sale of battery powerbanks. These revenues are recognized at the time of sale, with the exception of sales of the battery powerbank which are recognized when shipped;
|
· |
Prepaid minutes – represents revenues recognized primarily from the usage and expiration of international prepaid minutes, net of chargebacks. Revenues from prepaid minutes are recognized as minutes are used;
|
· |
Access and wholesale charges – represent revenues generated from: (i) access fees charged to other telecommunication carriers or providers for Inter-exchange Carriers (“IXC”) calls terminated to our end-users, and (ii) fees charged to telecommunication carriers or providers for origination of calls to their 800-numbers. These revenues are recorded based on rates set forth in the respective state and federal tariffs or negotiated contract rates, less provisions for billing adjustments. Revenues from access and wholesale charges are recognized as minutes are used;
|
· |
UCaaS – represents revenues recognized from: (i) recurring monthly service revenue from the sales of hosted services - customers are billed monthly in advance for these recurring services and in arrears for one time service charges and other certain usage charges, and (ii) non-recurring revenue from the sale of hardware and network equipment. Revenues for recurring monthly service are recorded in the period the services are provided over the term of the respective customer agreements and revenues from the sale of hardware and network equipment are recognized in the period that the equipment is delivered and put into service; and
|
· |
Other revenues – represent VoIP services provided to small to medium sized businesses and revenues generated by ancillary revenue sources.
|
· |
Cost of devices and related products – represent the costs of components and manufacturing of the magicJack devices, as well as production, packaging and other inventory-related costs and broker commissions on devices and mobile apps. The costs of the magicJack devices and mobile apps are recognized over the initial three, six or twelve month access right period. The cost of battery powerbanks is expensed as incurred;
|
· |
Shipping and handling – represent freight, postage and other transportation costs related to: (i) transportation of the magicJack devices from the manufacturer to our warehouse and distribution center, and (ii) freight, shipping and handling fees incurred to ship the magicJack devices to retailers and direct customers. These costs are expensed as incurred;
|
· |
Credit card processing fees – represent transaction and other fees incurred as a result of accepting credit card payments for sales of magicJack devices, access right renewals, shipping and handling charges, magicJack related products and prepaid minutes sold direct to customers through our website. These fees are expensed as incurred;
|
· |
Network and carrier charges – represent facilities charges to establish and maintain our network as well as network usage fee charges from other telecommunication carriers. These rates or charges are based upon commercial agreements or applicable state and/or federal tariffs. These charges are expensed as incurred;
|
· |
UCaaS – represents the cost of providing the recurring monthly hosted services including, network usage charges, customer internet access, amortization expense and commissions as well as the cost of hardware and network equipment related to non-recurring sales, provided by our Broadsmart subsidiary. These costs are expensed as incurred; and
|
· |
Other cost of revenues – represents allocation of personnel-related costs, amortization and depreciation expense related to assets employed in generating our revenues, as well as costs from discontinued revenue sources.
|
· |
$0.7 million decrease in revenues from the sale of magicJack devices primarily reflecting lower retail sales volume, lower average sales prices due to the increased use of promotion offers and a proposed consumer telecommunications tax settlement;
|
· |
$1.9 million decrease in access right renewal revenues due to customer churn, promotional offers and the number of long-term renewals in the customer base that are at lower average annual revenues;
|
· |
$0.4 million decrease in revenues from prepaid minutes resulting reflecting declining usage levels; and
|
· |
$0.4 million decrease in revenues from access and wholesale charges resulting from lower network traffic.
|
· |
This decrease in cost of revenues was primarily attributable to: (i) a $0.8 million decrease in network and carrier charges primarily as a result of lower traffic substantially resulting from the elimination of free app users at the end of the second quarter of 2016, and (ii) $0.5 million decrease in UCaaS related cost of goods sold, reflecting lower amortization expense due to the write-off of intangible assets in the first quarter of 2017 and cost savings associated with the ongoing integration of the UCaaS business with the Company’s network infrastructure.
|
· |
a $0.4 million increase in marketing expense, primarily related to increased advertising research in the Core Consumer segment to test market sensitivity,
|
· |
a $1.3 million increase in General and Administrative (“G&A”) expense due to several factors including:
|
i. |
a $3.1 million increase in costs related to the Core Consumer segment, primarily composed of a $2.2 million increase in legal fees related to the response to activist shareholders, strategic process and other litigation matters and a $0.6 million increase in personnel related expenses primarily reflecting severance and new executive officer compensation including accruals for anticipated CEO compensation.
|
ii. |
These increases were partially offset by a $0.4 million decrease in costs related to the Enterprise segment, primarily reflecting lower personnel related costs associated with stock based compensation and bonus accruals and a $1.5 million decrease in costs related to SMB activity due to the scaling back of the Alpharetta location.
|
Three Months Ended
|
||||||||
June 30,
|
||||||||
2017
|
2016
|
|||||||
Income before income taxes
|
$
|
1,093
|
$
|
4,217
|
||||
Income tax expense
|
2,587
|
1,702
|
||||||
Effective income tax rate
|
236.69
|
%
|
40.36
|
%
|
· |
$1.4 million decrease in revenues from the sale of magicJack devices primarily reflecting lower retail sales volume, lower average revenue per unit sold due to promotional offers and a proposed consumer telecommunications tax settlement;
|
· |
$3.8 million decrease in access right renewal revenues due to customer churn, promotional offers and the number of long-term renewals in the customer base that are at lower average annual revenues;
|
· |
$0.8 million decrease in revenues from prepaid minutes resulting from declining usage levels; and
|
· |
$0.7 million decrease in revenues from access and wholesale charges resulting from lower network traffic.
|
· |
a $31.5 million impairment of intangible assets, including goodwill, related to the Enterprise segment. Refer to Note 3, “Impairment of Intangible Assets, Including Goodwill”, Note 6, “Intangible Assets” and Note 7, “Goodwill” in the Notes to our unaudited condensed consolidated financial statements included in Item 1 herein for further details.
|
· |
a $1.5 million increase in marketing expense, primarily related to increased advertising research in the Core Consumer segment to test market sensitivity,
|
· |
a $5.2 million increase in G&A expense due to several factors including:
|
i. |
a $6.5 million increase in costs related to the Core Consumer segment, primarily composed of: a $2.3 million increase in personnel related expenses primarily reflecting severance and new executive officer compensation including sign-on bonuses and accruals for CEO compensation, a $2.9 million increase in legal fees related to the response to activist shareholders, strategic process and other litigation matters, and a $0.4 million asset impairment related to our exit from our joint venture in the home consumer product market; and
|
ii. |
a $0.7 million increase in costs related to the Enterprise segment, primarily reflecting a full six months of operations in the current year.
|
iii. |
These increases were partially offset by a $2.0 million decrease in costs related to SMB activity reflecting the scaling back of the Alpharetta location.
|
· |
a $0.6 million increase in R&D expense, primarily related to increases in personnel for product development of the new Spark mobile app and a new chip for future device upgrades.
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2017
|
2016
|
|||||||
(Loss) income before income taxes
|
$
|
(33,430
|
)
|
$
|
8,451
|
|||
Income tax (benefit) expense
|
(8,768
|
)
|
5,202
|
|||||
Effective income tax rate
|
26.23
|
%
|
61.55
|
%
|
· |
($24.7) million of net loss, which included $28.1 million in non-cash items, consisting primarily of (i) $31.5 million impairment loss on intangible assets, including goodwill, of the Enterprise reporting unit, (ii) $2.4 million of depreciation and amortization expense, (iii) $1.3 million of stock-based compensation expense, and (iv) a $1.8 million increase in uncertain tax positions, partially offset by a $9.1 million deferred income tax benefit; and
|
·
|
Changes in operating assets and liabilities of (i) a $2.8 million increase in prepaid income taxes, (ii) a $2.4 million increase in deposits and other current assets, (iii) a $6.0 million decrease in deferred revenue and (iv) a $1.0 million decrease in other non-current liabilities. These items were partially offset by (i) a $1.0 million decrease in accounts receivable, ii) a $1.7 million decrease in inventory levels, and (iii) a $2.9 million increase in accrued expenses and other current liabilities.
|
· |
$3.2 million of net income, which included $6.7 million in non-cash items consisting primarily of (i) $2.3 million of stock-based compensation expense, (ii) $2.2 million of depreciation and amortization expense, (iii) a $0.9 million increase in the deferred income tax provision, and (iv) a $1.2 million increase in uncertain tax positions, and
|
· |
Changes in operating assets and liabilities of (i) a $0.7 million decrease in accounts receivable, (ii) a $1.6 million decrease in inventory levels, (iii) a $0.3 million decrease in deferred costs, (iv) a $1.9 million decrease in prepaid income taxes, and (v) a $0.4 million increase in accounts payable. These items were partially offset by: (i) a $5.0 million decrease in deferred revenue, (ii) a $1.0 million decrease in accrued expenses and other current liabilities, (iii) a $0.4 million increase in deposits and other current assets and (iv) a $0.1 million decrease in other non-current liabilities.
|
Exhibit No.
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
magicJack VocalTec Ltd.
(Registrant)
|
||
Dated: August 9, 2017
|
By: /s/ Don C. Bell, III
Don C. Bell. III
President and Chief Executive Officer
|
|
Dated: August 9, 2017
|
By: /s/ Thomas Fuller
Thomas Fuller
Chief Financial Officer
|
Exhibit No.
|
Description
|
10.6*
|
Employment Agreement between the Company and Thomas Fuller, dated May 8, 2017***
|
10.7*
|
Stock Option Agreement between the Company and Thomas Fuller, dated May 8, 2017
|
10.8*
|
Restricted Stock Agreement between the Company and Thomas Fuller, dated May 8, 2017
|
10.11*
|
Amendments to Independent Contractor and Stock Option Agreements and Releases of Claims between the Company and Gerald Vento, dated June 17, 2017
|
31.1
|
Certification of CEO of magicJack VocalTec Ltd. required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
|
31.2
|
Certification of CFO of magicJack VocalTec Ltd. required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
|
32.1
|
Certification of CEO of magicJack VocalTec Ltd. required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934.
|
32.2
|
Certification of CFO of magicJack VocalTec Ltd. required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934.
|
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1 Month Magicjack Vocaltec Chart |
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