Good Luck to all here with CALL. I wish you the best. It is one of the only stocks of Saul’s that I do not like. I am trying to get rid of my phone at home, the only people who call me there are tele-marketers or my wife’s family.
Joe C
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Good Luck to all here with CALL. I wish you the best. It is one of the only stocks of Saul’s that I do not like.
I can sure see where CALL could turn out to be a dead end, but I am willing to give them a chance.
After all, with earnings of 53 cents for the quarter we’re looking at a run rate of $2.12. With a Price of $16.50, that gives them a current PE ratio of about 8 times earnings!!! (Their actual trailing earnings are even more than that. They are $2.64, to be exact, with a trailing PE of six.)
They generated free cash flow of more than a third of revenue!!! Renewable revenue is up to 44% of the total!!! And they are totally remaking the business.
I’m posting my notes on the quarter below. Be sure to read down to my conference call excerpts. The feeling of excitement and enthusiasm is palpable. Please remember though that all their enthusiasm doesn’t guarantee success (even if it does help it along a bunch).
Saul
May 2015 Announced Mar quarter results
Revenues of $35.3 million
Renewal revenues of $15.4 million, up from $14.8 million.
Operating cash flow generated was $14.2 million, up 120%.
Adjusted earnings of 53 cents down from 79 cents.
Cash of $67.3 million and No Debt
Maintaining revenue and profitability guidance for FY14
“Our performance in the first quarter provides us with a stable position from which to manage our on-going transformation of magicJack. We generated strong free cash flow, strengthened our management team and balance sheet and further deepened our retail relationships in support of our upcoming product refresh. While we recognize that Q2 is a transition quarter, we are excited about the opportunity to renew growth in the second half of 2014.”
First Quarter Financial Highlights:
Net revenues: Total net revenues were $35.3 million.
Revenues from the sales of magicJack devices were $12.0 million
Renewal revenues were $15.4 million, up 4%, and accounted for 44% of total net revenues.
Prepaid minute revenues were $2.8 million
Access and wholesale charges were $1.7 million.
Other revenue contributed the remaining $3.4 million
Free cash flow: During the first quarter of 2014, the Company generated $12.8 million in free cash flow, up 102% from $6.3 million generated in the fourth quarter of 2013.
Financial Guidance:
Net revenues: Total net revenues for the full year 2014 are projected to be in the range of $158 and $163 million.
Adjusted EBITDA: Adjusted EBITDA for the full year 2014 is projected to be in the range of $48 and $52 million.
Effective tax rate: For the full year 2014 the effective tax rate is expected to be approximately 30% – 31%.
Additional First Quarter and Recent Highlights:
magicJack APP had 8.4 million registered APP users, a quarter-over-quarter increase of 21%.
An estimated 3.1 million active MJ subscribers, which we define as users of MJ or MJP that are under an active subscription contract.
magicJack activated 196,000 subscribers during the quarter. Activations are defined as devices that become activated on to a subscription contract during a given period.
During first quarter ended March 31, 2014, magicJack’s average monthly churn was 3.3%, down from 3.6% the previous quarter.
We announced a strategic commercial relationship with Telefonica to sell magicJack products and services in Latin America.
We released the updated magicApp for free calling on Android devices. The updated magicApp offers free worldwide over-the-top calling and more streamlined account activation as well as a refreshed look and user experience.
Conference Call Notes.
We are moving rapidly implementing changes that affect every dimension of the business. You’ll see us continue to invest in people, infrastructure, product development, customer care, creative and media. We are recruiting strong people with extraordinary skillsets to supplement our outstanding team and to bring upon the company the opportunity we seek to grow the business.
We are introducing a newly simplified device as a competitive price point with features designed to appeal to both our core customer base as well as newly targeted consumer, freelancer, and small business segments. We are targeting customers at home, on-the-go and in-an-office who have high interest in magicJack but to-date have low awareness of our offer. We are on the eve of launching this new device.
We advised on our last call that, when ready with substantial change, a new device launch app redesign attribute to a better customer care experience, we would invigorate our television and digital marketing campaign. We’re close to completing that chapter. By the end of Q2, the last vestige of the old magicJack will be behind us. The total refresh of magicJack brand and product platform will see us expand our marketing to a broader set of customer segments than the company has ever done in the past.
To begin our international expansion, today we announce the strategic commercial agreement with Telefónica, S.A. to sell our products and services in Latin America. This agreement provides a framework for entering into multiple Latin American markets and contemplates the sell both the magicJack device and the app.
We’re in a process of fundamental transformation of the magicJack service, one that touches on one every dimension of our platform. This transformation was long overdue. We’ve made a great deal of progress over the first 120 days of this transformation and the hard work of our dedicated team will become increasingly visible to the market over the course of remainder of Q2.
As discussed on our first quarter call, in the second quarter, we will reintroduce the magicJack brand to consumers with top-to-bottom redesign of our offer. By the end of Q2, this transformation will largely be complete. As we’ve discussed in our first quarter call, the central element of this repositioning of magicJack service is creating a tighter linkage in the mind of the consumer between the device and the app. The mobility provided by the app is a key feature of our service. For consumers, that maybe one of our compelling features of our offer.
Our new service will be marketed under the name magicJack GO, reinforcing the at-home and on-the-go positioning of our offer. The new GO features enhanced core quality, simplified device design, updated packaging and quick start guide both in English and Spanish, free conference calling for family and business, and importantly the GO enables subscribers to have one number accessible via both the device and their mobile phone.
Our initial launch partners Wal-Mart, RadioShack and Best Buy will be rolling out the GO in June and July.
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Good Luck to all here with CALL. I wish you the best. It is one of the only stocks of Saul’s that I do not like. I am trying to get rid of my phone at home, the only people who call me there are tele-marketers or my wife’s family.
Joe C
Thanks Joe,
Magic Jack is morphing from the landline business to the mobile business (21% increase Q sequentially) with no advertising of the app and not yet strated to monetize it…building the base so to speak. They do have a few tricks that will help them succeed in that transition.
The story is too long (and certainly a risk though at these prices it’s looking like the bottom is in sight). They also are spreading out internationally and have signed some nice contracts with Telefonica for latin america distribution. One of their big sale points is you can have the same number on your mobile phone as your home phone. That way your in laws can get to you on the go or while at home. Nice, hey?
Mykie
Just FYI
PS I own some so don’t believe anything I say 
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I read through the CC transcript as well and there is a lot of excitement and optimism about the major product refresh (overdue) and the distribution agreement with Telefonica (could be huge). But I noticed they did not guide higher for revenue in light of all these coming catalysts. Maybe they are playing the expectations game you described in one of your posts, Saul, but the in-line guidance certainly allows for more upside down the road if they do see some of the fruits of these catalysts.
I’m in for a 1.5% position now and may add up to 3%.
Maybe they are playing the expectations game you described in one of your posts, Saul, but the in-line guidance certainly allows for more upside down the road if they do see some of the fruits of these catalysts.
Hi DJska,
I believe the reason for lowered revenue next quarter was due to closing out the MJ Plus and introducing the MJ Go and simultaneously launching new marketing/packaging/products going forward…seeding the pipeline. This seems reasonable given that they have slowed the churn on device subscribers and had a 21% increase in APP subscribers (I don’t think those subs are monetized yet but will be before the end of the year).
The best info is that they are moving according to what I think is a great marketing plan which could have been NOT so great and then executed poorly.
Also, I don’t think there’s much further to go to the downside. I bought in high but don’t expect to sell lower…yet.
Nos Vemos, as we say in Mexico
Mykie
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Magic Jack is morphing from the landline business to the mobile business (21% increase Q sequentially) with no advertising of the app and not yet strated to monetize it…building the base so to speak. They do have a few tricks that will help them succeed in that transition.
Hey Mykie,
Could you point me to some articles on this? I found an article from 2010 but I imagine alot has changed since then.
Thnaks.
Jeb
Could you point me to some articles on this? I found an article from 2010 but I imagine alot has changed since then.
Thnaks.
Jeb
Hi Jeb,
GO here,
http://seekingalpha.com/symbol/CALL?s=call
and browse around. I think, other than the company website, (Magicjack.com, investor relations) you’ll find a plethora of helpful articles. If you haven’t used this site before, be careful in accepting what you read as there’s a lot of biased views here, possibly hidden.
Also, an activist Whitney Tilson, (google him too, he has a blog and wrote a good article on them originally) ,was where I discovered the stock.
I bought in quite a bit higher than where it is today and I am considering a larger position though I usually limit my position size in a turnaround situation. I’m torn on adding more but you’ll see there’s not much downside here and if you use my buy in price, pretty good upside.
Mykie
PS Make sure I have not biased you in any way as this is a risk but one I have decided to take.
Jeb,
Let me add that surely a lot has changed since 2010 with a new management team and the old Pres/founder squeezed out.
So all the old stuff is based upon what we now know was due to bad management but with what some think is a good product, VOIP telephony. To invest here you’ll have to figure out if the turnaround team and plan is a good one.
Mykie
Mykie,
Thanks for your reply. I didn’t come back to the thread until now. Overall I feel good about new management, but it looks as if we need to keep them on a short leash. The key assessment here for us is to decide whether CALL is a great business that was clouded by poor management, or if it is just a mediocre business that cannot be saved. The uptake of the new products over the next few quarters will tell us all we need to know.
Anyone want to comment on the recent drift down to 14? It appears there is support here, but I am in for my full 3% position.
-Sameer
Thanks for your reply. I didn’t come back to the thread until now. Overall I feel good about new management, but it looks as if we need to keep them on a short leash.
Hi Sameer,
I agree, a short leash. I am going to watch their churn rate (I have to create a SS on this as I think this is one of the important components going forward, to keep them healthy while they successfully monetize the App.)
The recent dip probably is due to no news or the law suit. I don’t think the company has deserved anything that puts it 9 points below where I own it (How do you tell who is a pioneer? Pioneers are the ones with arrows sticking out of their backs).
End of June should be telling us something. They really have a difficult marketing message to tell but if it is told half decently, and with the expanded distribution, they should be able to keep the cash rolling in.
Mykie
PS I also have some cheaper and lower Strike price Puts that I wrote, just in case the stock stays down there.
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