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IDT Corporation Reports Second Quarter Fiscal 2012 Results
March 12, 2012 -

 

 Positive Year-over-Year Revenue Growth for Eighth Consecutive Quarter

 Board Increases Quarterly Dividend 15% to 15 Cents Per Share

 

NEWARK, NJ — March 12, 2012:  In its first fiscal quarter since spinning off Genie Energy, IDT Corporation (NYSE: IDT) reported diluted EPS of $0.12 and (non-GAAP) diluted EPS of $0.29 for its second quarter of fiscal 2012, the three months ended January 31, 2012. 

 

IDT’s revenue grew 7.2% to $365.4 million in 2Q12 from $340.9 million in the year ago period, representing the Company’s eighth consecutive quarter of positive year-over-year revenue growth.

 

In light of the consistent growth of key products within its core telecom business, promising non-core businesses and liquid balance sheet, IDT’s Board increased the quarterly dividend from $0.13 to $0.15 per share. 

Howard Jonas, IDT’s Chairman and CEO, said, “I was very pleased that we again increased revenue on a year-over-year basis and reported positive net income.  In light of recent results and the positive outlook for our businesses and assets, our Board has increased the dividend to 15 cents a share.”
 

FINANCIAL HIGHLIGHTS

·         Revenue totaled $365.4 million in 2Q12, up from $340.9 million in 2Q11

·         IDT Telecom’s minutes of use in 2Q12 grew 13.3% year-over-year to 7.4 billion

·         Revenue generated through the Boss Revolution platform surpassed $60.0 million for 2Q12 compared to less than $15.0 million in the year ago quarter

·         Adjusted EBITDA of $6.4 million was up from $4.6 million in the prior period and down from $7.5 million in the year ago quarter

·         Diluted EPS of $0.12 compared to $0.18 in 2Q11

·         Non-GAAP diluted EPS of $0.29 compared to $0.33 in 2Q11

·         IDT carried a net cash position of $119.2 million, consisting of $149.4 million of cash and cash equivalents and $30.2 million in notes payable at the quarter’s close

·         Net cash provided by operating activities was $19.9 million in 2Q12


OPERATIONAL HIGHLIGHTS

·         Boss Revolution international roll-out begun with a limited initial deployment in the U.K.

·         Signed exclusive pre-paid calling card distribution deals with Rite-Aid and Costco.  Follows similar agreements with CVS and Walgreens.

·         Continued success with Zedge as one of the top 10 most downloaded Android apps.

·         After quarter close, IDT Spectrum closed on a portion of its agreement to sell eight spectrum licenses covering metropolitan areas from its nationwide portfolio for $6.8 million.

 

NOTES:

·         Adjusted EBITDA for all periods presented is a non-GAAP measure representing income (loss) from operations exclusive of depreciation and amortization, severance and other charges, and other operating gains (losses).  It is one of several key metrics used by management to evaluate the operating performance of the Company and its individual business units.  See explanation and reconciliations provided below.

·         IDT’s operating results for the three months ended January 31, 2012 and all prior periods presented have been adjusted to reflect the spin-off of Genie Energy in October 2011.  Genie Energy is accounted for as a discontinued operation for all periods presented. 

·         Non-GAAP net income for all periods presented is a non-GAAP measure representing net income (loss) exclusive of depreciation and amortization, severance and other charges, other operating gains (losses), stock-based compensation,  income ( loss) from discontinued operations, and the income tax effect of these adjustments to net income (loss).

·         Non-GAAP EPS for all periods presented is a non-GAAP measure representing Non-GAAP net income divided by basic or diluted weighted-average shares.

OPERATING RESULTS BY SEGMENT

TPS

Telecom Platform Services (TPS) accounts for 97.9% of IDT’s revenue.  TPS markets and distributes multiple communications and payment services across four broad business verticals: Retail Communications, Wholesale Termination Services, Payment Services and Hosted Platform Solutions.

 

TPS’ minutes of use in 2Q12 increased to 7.4 billion, a 13.3% increase compared to the year ago quarter and increased 1.6% sequentially.  Growth in minutes of use was led by Wholesale Termination Services and, to a lesser extent, by Retail Communications.  Within Retail Communications, the increase in the minutes of use generated by Boss Revolution - our pay-as-you-go, card-less international calling service and payment platform -  was somewhat offset by a decline in minutes from traditional IDT-branded disposable calling cards.

 

TPS’ revenue in 2Q12 was $357.6 million - a 7.8% increase year over year and a 3.1% decline sequentially:

·         Retail Communications revenue of $133.2 million (37.2% of TPS’ revenue in 2Q12) grew 12.9% year over year and 0.6% sequentially.  Year over year growth was led by continued adoption of Boss Revolution within our U.S. retail distribution network, partially offset by the ongoing decline in sales of traditional IDT-branded disposable calling cards.  During the quarter, IDT Telecom launched Boss Revolution in the United Kingdom, and plans to introduce Boss Revolution in Hong Kong, Spain and other European markets this calendar year.

·         Wholesale Termination Services revenue of $173.7 million (48.6% of TPS’ revenue in 2Q12) grew 7.7% year over year and declined 7.1% sequentially.  The year over year growth represents our continued commitment and investments in being a recognized leader in the wholesale carrier marketplace.  The sequential decline is attributable primarily to the contraction in certain one-time revenue opportunities, primarily in North Africa, and to an industry wide downward shift in per minute pricing to certain Latin American destinations.

·         Payment Services revenue of $36.4 million (10.2% of TPS’ revenue in 2Q12) grew 13.8% year over year and 5.0% sequentially.  The increase reflects continued growth of International Mobile Top-Up (IMTU), which now are also sold through the Boss Revolution platform.

·         Hosted Platform Solutions revenue of $14.3 million (4.0% of TPS’ revenue in 2Q12) declined 29.7% year over year and 5.0% sequentially, reflecting the loss of revenue from IDT’s largest cable telephony customer in 4Q11.  The cable telephony product offering is in harvest mode and, as such, management anticipates near term continued declines in revenue and gross profit in Hosted Platform Solutions.

 

TPS’ gross margin totaled 15.1% of revenue in 2Q12.  Gross margin percentage rose 80 basis points sequentially but declined 70 basis points year over year.  Gross profit totaled $54.0 million, increasing roughly 3% both sequentially and year over year.  Gross profits generated by the increase in Boss Revolution’s sales more than compensated for continued declines in relatively higher margin prepaid calling card sales and continued weakening of European currencies versus the U.S. dollar.

TPS’ SG&A expense in 2Q12 was $45.6 million, an 8.9% increase year over year and a 1.5% increase compared to 1Q12.  The increases primarily reflect the impact of higher employee compensation, including sales commissions, as a result of the Company’s effort to grow its distribution network in the U.S. with an internal direct sales force, as well as increased marketing and advertising costs. As a percentage of revenue, SG&A expense was 12.8% in 2Q12, up slightly from 12.6% in the year ago quarter. 

TPS’ depreciation and amortization expense was $3.6 million in 2Q12, a 23.7% decrease from the year ago period and a 5.1% decrease sequentially, reflecting the deployment of new technologies that have reduced the rate of CAPEX required to upgrade and maintain our network.

 

TPS reported $1.8 million in other operating gains in 2Q12, consisting of a settlement with a former cable telephony customer.  In 2Q11, TPS reported net other operating gains of $4.6 million, consisting primarily of a $14.4 million gain from the termination of a cable telephony agreement and a $9.8 million loss from an alleged patent infringement.  In the prior quarter (1Q12), TPS had other operating losses of $11.3 million which included an $11.0 million loss on the settlement of litigation related to our wholesale supply agreement with T-Mobile.

 

TPS’ income from operations was $6.5 million in 2Q12, compared to income from operations of $9.4 million in 2Q11 and a loss from operations of $7.3 million in 1Q12.

CPS

Consumer Phone Services (CPS) includes sales of both bundled (unlimited local and long distance) services as well as long distance-only services.  CPS has been in “harvest mode” since fiscal 2006 - maximizing revenues from current customers while maintaining SG&A and other expenses at the minimum levels essential to operate the business. 

 

CPS reported revenues of $5.0 million compared to $6.9 million in the year ago quarter, and $5.4 million in the prior quarter.  Income from operations was $1.0 million, compared to $2.0 million in the year ago quarter, and $1.2 million in the prior quarter.  The declines in revenues and income from operations were in line with management expectations.

ALL OTHER

All Other includes Fabrix, a software development company specializing in highly efficient cloud-based video processing, storage and delivery; Zedge, a distribution platform including an Android app that allows users to share and obtain content to personalize smart phones, feature phones and tablets; IDT Spectrum, which holds, leases and sells fixed wireless spectrum; and ICTI which holds intellectual property previously held by IDT’s Net2Phone subsidiary related to computer-to-computer communications.  All Other also includes IDT’s real estate holdings.

All Other revenue grew 23.5% year over year and 24.5% sequentially to $2.9 million in 2Q12, primarily reflecting growth in Fabrix and Zedge.   

FABRIX:  During 2Q12, Fabrix’ clients continued their deployment of Fabrix’ solution suite as well as continued to purchase additional product.  In February 2012, after the close of 2Q12, Fabrix received $5.2 million in cash from sales to a current client, which will be recognized as revenue over 3 years. In addition, following its first overseas sale in 1Q12 to a European operator, Fabrix is seeing interest from prospective clients in Europe and other geographies outside of North America. Fabrix recorded $1.0 million in revenue in 2Q12.   

ZEDGE: Zedge (www.zedge.net) continues experiencing strong growth with more than 15 million active installs of the Zedge app.  The Zedge app is amongst the most popular Android apps globally. Chomp, recently purchased by Apple, ranked the Zedge app as the 4th most popular app in the world in 2011.  Zedge consistently remains among the most downloaded apps in the Android market.  Zedge recorded $1.0 million in revenue during 2Q12.

 

IDT SPECTRUM:  In March 2012, IDT Spectrum closed on a portion of its agreement to sell eight spectrum licenses covering metropolitan areas from its nationwide portfolio for $6.8 million. Approvals on the remaining sales are pending.  IDT Spectrum has recently won renewals of a majority of its licenses from the FCC, extending them until 2020 and making longer term lease agreements practicable. 

 

ICTI:  ICTI is executing on its campaign to enforce its intellectual property rights.  During 2Q12, ICTI filed complaints in a U.S. District Court against three communications companies (Stalker Software, Inc. (d/b/a CommuniGate Systems, Inc.), ooVoo, LLC, and Vivox, Inc.) claiming infringement of a number of its key patents for Voice-Over-IP technology.

 

BALANCE SHEET AND CASH FLOW STRONG POST-GENIE ENERGY SPIN

In connection with the spin-off of Genie Energy to IDT’s shareholders, IDT transferred $11.9 million in cash to Genie in 2Q12, representing the fulfillment of its commitment as set forth in Genie’s filed Registration Statement on Form 10.  Including this final transfer, cash, cash equivalents and restricted cash transferred to Genie Energy in connection with the spin-off totaled $106.0 million.

As of January 31, 2012, IDT had $149.4 million of cash and cash equivalents, including $19.0 million of short-term and long-term restricted cash and cash equivalents, compared to $146.5 million as of October 31, 2011, including $17.4 million of short-term and long-term restricted cash and cash equivalents.  Notes payable, both long and short term, totaled $30.2 million, providing IDT with a net cash position of $119.2 million.

 

Net cash provided by operating activities in 2Q12 was $19.9 million, compared to $26.7 in 2Q11 and net cash (used in) operating activities of $(13.4) million in 1Q12.  In 2Q12, IDT received $1.8 million in cash related to a legal settlement related to its cable telephony business.  In 2Q11, IDT received $14.4 million in cash from the termination of a cable telephony agreement.  In 1Q12, IDT paid $10.0 million toward the settlement of litigation related to our wholesale supply agreement with T-Mobile and annual employee performance compensation totaling $5.7 million

 

DIVIDEND INCREASED 15% TO 15 CENTS PER QUARTER

IDT’s Board of Directors increased the quarterly dividend to $0.15 from $0.13.  The Board anticipates continuing to pay quarterly dividends commensurate with the Company’s financial results, available resources and strategic goals.

 

The dividend will be paid on April 3, 2012 to shareholders of record of IDT’s Class A and Class B common stock as of the close of business on March 26, 2012.  The ex-dividend date is March 22, 2012.

   

For tax purposes, the $0.15 per share payment will be treated as a return of capital and not as a dividend.  Payments classified as returns on capital generally reduce the basis in the shares on which the payment is made, unless the basis is lower than the amount of the payment.

 

IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION

§  IDT will host a conference call at 6:00 PM ET today, March 12th to discuss financial and operational results, business outlook and strategy.  In a change from prior periods and in response to stockholder requests, management’s presentation will be followed by a live question and answer session with investors.

§  To participate in the Q&A session, dial toll-free 1-877-317-6789 (from U.S.) or 1-412-317-6789 (international) and request the IDT Corporation call.

§  A listen-only webcast will be available at http://services.choruscall.com/links/idt120312.html.  The webcast will remain available in the ‘Investor Relations’ section of the IDT Corporation website (www.idt.net/about/ir) for one year after the call.   An audio replay will also be available one hour after the call concludes through March 20, 2012 by dialing 1-877-344-7529 (conference code 10010286). 

§  Copies of this release - which includes a reconciliation of the Non-GAAP financial measures that are both used herein and referenced during management’s discussion of results - are available in the Investor Relations portion of IDT’s website, at http://www.idt.net/about/ir/overview.asp.

 

ABOUT IDT CORPORATION

IDT Corporation (NYSE: IDT) through its IDT Telecom division, provides telecommunications and financial services.  IDT Telecom’s retail products allow people to communicate and share financial resources around the world while its carrier services business is a global leader in wholesale voice termination.  For more information, visit www.idt.net.

 

 

In this press release, all statements that are not purely about historical facts, including, but not limited to, payment of dividends and those in which we use the words “believe,” “anticipate,” “expect,” “plan,” “intend,” “estimate, “target” and similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  While these forward-looking statements represent our current judgment of what may happen in the future, actual results may differ materially from the results expressed or implied by these statements due to numerous important factors, including, but not limited to, those described in our most recent report on SEC Form 10-K (under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K.  These factors include, but are not limited to, the following: potential declines in prices for our products and services; our ability to maintain and grow our telecommunication businesses; availability of termination capacity to particular destinations; our ability to maintain carrier agreements with foreign carriers; our ability to obtain telecommunications products or services required for our services; the  financial stability of our major customers; our ability to return to profitability and improve our cash flow; impact of government regulation; effectiveness of our marketing and distribution efforts; and general economic conditions.  We are under no obligation, and expressly disclaim any obligation, to update the forward-looking statements in this press release, whether as a result of new information, future events or otherwise.

Contact:

IDT Corporation Investor Relations

Bill Ulrey

william.ulrey@idt.net

973-438-3838

 
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