magicJack Announces Launch of New SMB Subsidiary

  • Plans to make investment in new subsidiary of approximately $10-12 million in 2016
  • Launching sales of first SMB product offering in Q2 2016
  • Projecting immaterial revenues in 2016 and annualized exit revenues of $15-20 million for 2017
  • Expecting consistent double digit year over year revenue growth after 2017
  • Targeting gross and EBITDA margins for SMB operations of 65-70% and 20-25%, respectively

WEST PALM BEACH, Fla. and NETANYA, Israel, Feb. 19, 2016 (GLOBE NEWSWIRE) – magicJack VocalTec Ltd. (Nasdaq:CALL), a leading VoIP cloud-based communications company, today announced the launch of a new SMB (Smallto Medium-Sized Business) subsidiary.

The new SMB subsidiary will leverage magicJack’s ultra-low cost network infrastructure and proprietary telecom software to deliver easy-to-buy, simple-to-use VOIP services to small- and medium-sized businesses at disruptive prices.

The company has conducted in-depth market research on product positioning, pricing, go-to-market strategy and competition and is committed to making a significant investment to enter the fast-growing SMB VOIP category. The company plans to spend approximately $10-12 million in the SMB subsidiary in fiscal year 2016.

The company is currently in final stages of product development for its first SMB product offering and expects to begin sales in Q2 2016. While 2016 revenues from the new SMB subsidiary are not expected to be material, the company projects annualized exit revenues for 2017 in the range of $15-20 million, with double digit year-over-year revenue growth targeted for subsequent years.

The company is targeting gross margins for the new SMB business subsidiary to be in the range of 65-70% and EBITDA margins to settle in the range of 20-25%.

“We are pleased to be extending our value proposition for enterprise beyond the hotel initiative which we launched in Q4 2015,” said Gerald Vento, President and CEO of magicJack VocalTec. “Our new SMB subsidiary will leverage our core assets, including our proprietary ultra-low cost termination structure, our softswitch assets and the enterprise software we have developed, to sell VOIP services to small and medium sized businesses at disruptive pricing. We believe we are well positioned to strongly compete for market share in the SMB VOIP category, which is expected to experience continuing growth for years to come. We look forward to reporting fourth quarter 2015 financial results and issuing 2016 guidance for our core business in March.”

The new SMB business subsidiary will be led by Keith Reed, who joined magicJack in December 2015 as its General Manager and Senior Vice President of Enterprise Sales. Reed has over 15 years of experience building and leading enterprise sales, business development and channel sales teams to maximize growth and market penetration. Prior to joining magicJack, Reed was at Intuit, where he spent the majority of his career in various sales positions, most recently as Vice President Sales Marketing for the Americas.

magicJack plans to classify the new SMB subsidiary as a separate operating segment for financial reporting purposes. This will allow current and potential investors to track the performance of the SMB subsidiary separately from the financial results of magicJack’s core consumer VOIP business.