MagicJack VocalTec Communications: B Riley's Benefit But Tradeable

MagicJack VocalTec Ltd. (Nasdaq:CALL) is the company behind the invention of the magicJack and a pioneer in Voice over IP (VoIP) technology and services. Remember the majicJack commercials? We have followed this company on and off for years. The future growth of this company is now more dependent on its cloud communications strategies.

However, it has not abandoned its roots. The company still has low cost solutions for telecommunications. We are not talking just about the old magicJack devices, which is now are now in their fifth generation, but the company has millions of downloads of its free calling apps, and holds more than 30 technology patents. What is more, the company actually makes money. But what about the stock?

Source: Yahoo Finance

As you can see, the stock has been rangebound the last several months. This is because the company is being bought out by B. Riley. Still, while the stock is stuck near the buyout offer price, profitable trades can be made riding the stock up and down 1%. Moreover, it is important to assess the performance of magicJack to understand how it will benefit B. Riley.

Sales are impressive from this once infomercial-like company. Total net revenues for the fourth quarter of 2017 were $20.8 million. Net revenues from the sales of magicJack devices were $2.4 million and access rights renewal revenues were $12.6 million, and accounted for 61% of total net revenues.

Further, prepaid minute revenues were $1.0 million and access and wholesale charges were $0.8 million during the quarter. It is also important to add that the addition of Broadsmart Global, Inc. contributed $2.5 million in revenues to the fourth quarter of 2017. Expenses have also weighed however, limiting operating margins.

Operating income for the fourth quarter of 2017 was $1.3 million, which included $2.7 million in net charges primarily related to non-recurring professional and legal costs, provision for closure of its distribution warehouse, and executive management transition expenses and severance expenses. When excluding these, operating income, would have been close to $4.0 million. Adjusted EBITDA for the fourth quarter of 2017 was $5.6 million, which was better than we anticipated.

On the bottom line, GAAP net loss was $2.8 million or $0.17 per share. However, we need to account for items impacting comparability. Doing so, we see income attributable to common was $7.0 million or $0.43. Finally, we think it is important to note the company had cash and cash equivalents of $52.6 million and absolutely no debt.

So what does this mean? We think B. Riley made a good acquisition here. Shareholders of CALL should continue to hold, while details of the buyout are finalized. We believe that traders can take advantage of the small moves we have seen in the stock. The gains are small, but there is nearly no downside in these trades, unless something falls apart with the buyout.


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Danny Straus 5 years ago Member's comment

I use Magicjack and have for years. While not perfect, it's so affordable that I've overall been pretty very happy with the service. Amazed more people don't use it. Makes me bullish on $CALL.