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magicJack VocalTec Ltd. Message Board

  • johndaley404 johndaley404 Feb 16, 2014 12:30 PM Flag

    Why is deferred revenue so low?

    If they are going to grow at 10%+ next year, there's going to be ~$60 million of 2014 sales coming from deferred revenue. That leaves over $95 million that's needed in sales during 2014 to make their growth over 10% next year (like mgmt has stated). That means that they have to make almost 60% more sales during 2014 than their deferred revenue in order to hit mgmt's estimate. Over the last 3 years, they haven't had same-year sales more than 25% above their recognized deferred revenue. They would have to sell 25% more devices in 2014 than 2013 to make those #s work, which will be difficult with the new 911 policy and the lack of a new product entry like they had in 2013. Oh yeah, by the way for them to sell that many more devices they will have to aggressively ramp advertising spend as the incremental sales will probably have to come via the retail channel, which has been falling for the last 3 quarters. The marginal spend for a new customer is way over the $10 that 3Q calculated out to be. Back in 2011 it was $35 / customer.

    Would love for someone to tell me where I'm wrong as it seems like it has a ton of momentum and some great investors behind it. It just seems that there is very little chance for it to grow EBITDA in 2014.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • CALL deferred rev at 44% of last Q top line versus VG at 4.3% - what exactly are you talking about? What are your comps for what deferred revenue *should* be exactly? Looks strong to me.

    • you need to read up on the new 911 ruling again. MJ doesn't have to pay a dime.

      Sentiment: Strong Buy

    • elbit@rocketmail.com elbit Feb 16, 2014 5:16 PM Flag

      I would caution you about the credibility of anyone who calls another board contributor a "greek goat herder."

    • I can hear "BT" mother in the background ,either BT has a play mate over, or it is actually BT playing with himself

    • John, first, congratulations on asking one of the best questions here in a long time.

      Second, do not expect that you will get an answer from the people who write here - most are illiterate in accounting and business in general.

      Third, the sales of new MJs have been tanking and they should not make the numbers. Also, you can use the current portion of deferred revenue to estimate the "customers under contract" and you can see that this number has been declining, and that they are bleeding and not adding customers, and MJs are being dumped in the garbage at a 75% clip. You analysis is correct. They SHOULD not make the numbers. (There is one caveat though, and I am sorry that I can not share it here, since it is my current alpha in the research that I am putting together at the moment).

      Finally, the new "investors" are not "great". T2 is clueless about telecom and I have proven that here in past messages. They did not even write any original research on the company but they took the BULL thesis form another hedge fund manager. Their arguments in defense of the "value" of the MJ is purely anecdotal, like "my friend said this" or "management emailed me that" or "i own an MJ and my wife loves it" or "MJ has great call quality when i use it"....these are not the type of arguments you would expect from a hedge fund "manager". You should expect this type of research from people on this board, and it is embarrassing to say the least, that T2 is using anecdotal personal experience to support their "10 BAGGER" call and long position. However, they only manage under 50M and they are pedestrians in the hedge fund world, so this behavior is sort of expected.

      Again, congrats on your analysis. If you decide to go short, do not do it until right before the earnings are announced, because the stock can be pushed around by the hedge fund "managers" and you may lose money (Like I lost last April, when I uncovered the previously undisclosed 911 collect/remit settlement on this board

 
CALL
9.19+0.48(+5.51%)Oct 23 4:00 PMEDT

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