NEWARK, NJ — June 9, 2014: IDT
Corporation (NYSE: IDT) reported diluted earnings per share (EPS) of $0.22 and Non-GAAP
diluted EPS* of $0.37 on revenue of $403.8 million for the third quarter of
fiscal 2014, the three months ended April 30, 2014.
3Q14 HIGHLIGHTS
(Results for 3Q14 are compared to 3Q13 unless
otherwise noted.)
·
Revenue increased 1.7% to $403.8 million from $396.9
million, the 16th year over year quarterly increase in the last 17
quarters;
·
Adjusted EBITDA* increased 32.5% from $10.1
million to $13.3 million, the highest level of quarterly Adjusted EBITDA that IDT
has achieved since prior to the spin-off of Genie Energy in 2011;
·
Income from operations – decreased 41.5% to $9.2
million from $15.7 million. (3Q13 income
from operations included non-routine gains of $9.6 million);
·
Net income attributable to IDT was $5.0 million
compared to $8.7 million. (3Q13 net
income included non-routine gains of $6.1 million net of tax);
·
Diluted EPS of $0.22 compared to
$0.39. (3Q13 diluted EPS included non-routine
gains of $0.27 net of tax);
·
Non-GAAP net income* of $8.6 million
compared to $7.3 million;
·
Non-GAAP diluted EPS* of $0.37 compared to $0.33.
Shmuel Jonas, IDT’s Chief Executive
Officer, said, “I am pleased with our operational and financial performance
this quarter. In particular, Boss
Revolution fueled another quarter of year over year revenue increases. Company-wide and at IDT Telecom, we increased
Adjusted EBITDA* year over year for the ninth consecutive quarter. Operationally, we continued the roll out of our
international money transfer service and acquired the assets of a small but
technologically sophisticated over-the-top messaging provider. We are now working to integrate its messaging
capabilities into our wholesale and retail offerings.
“We have also decided to postpone
our planned spin-off of Zedge to shareholders until Zedge is able to realize
additional revenues from its rapidly growing user base. Zedge reached 44 million active downloads in
the quarter, up from 29 million a year ago, and has promising new features and
offerings under development that we expect will accelerate both user and
revenue growth.
“We continue to be very pleased
with Fabrix’s performance. During Q3, Fabrix
achieved the highest level of revenue in its history, was Adjusted EBITDA
positive, and collected $5.4 million in cash from sales of software licenses
and support services. Fabrix now has ten
active clients in North America and Europe for its cloud-based DVR and deep
video content storage solutions. It
continues to win new business from cable system operators, media content
providers and system integrators due to the technical strength of its products,
operational performance and the quality of its customer support.”
*Throughout this release, Adjusted
EBITDA, Non-GAAP net income and Non-GAAP diluted EPS for all periods presented
are non-GAAP measures intended to provide useful information that supplements
IDT’s or the relevant segment’s core results in accordance with GAAP. Please refer to the Reconciliation of
Non-GAAP Financial Measures at the end of this release for an explanation of
these terms and their respective reconciliation to the most directly comparable
GAAP measure.
Also throughout this release, IDT’s
operating results for fiscal 2013 have been adjusted to reflect the spin-off of
Straight Path Communications Inc. in July 2013. Straight Path Communications
Inc. is accounted for as a discontinued operation for all periods presented.)
3Q14 OPERATING
RESULTS BY SEGMENT
(Results are for 3Q14 unless otherwise
noted).
TPS
IDT’s Telecom Platform Services (TPS) segment accounted for 97.7%
of IDT’s revenue in 3Q14. 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 were 7.59
billion, a decrease from 7.84 billion (-3.2%) in 3Q13 and an increase from 7.36
billion (+3.2%) in 2Q14. TPS’ revenue was
$394.6 million, an increase from $389.0 million (1.4%) in the year ago quarter
and a decrease from $398.1 million (-0.9%) in the prior quarter.
·
Retail Communications’ minutes of use were 2.37 billion,
an increase from 2.33 billion (+1.4%) in 3Q13 and a decrease from 2.39 billion
(-0.9%) in 2Q14. Revenue was $172.5 million, an increase from $165.4 million (+4.3%)
in 3Q13 and from $169.8 million (+1.6%) in 2Q14. Sales of international calling services on the
Boss Revolution platform increased 18.3% year over year and 3.3% sequentially
due to growth in both the number of active Boss Revolution retailers and customers. Boss Revolution PIN-less growth more than
offset continued declines in revenue from the sale of traditional disposable
prepaid calling cards in the U.S.
and overseas. Retail Communications’
revenue comprised 43.7% of TPS’ total revenue.
·
Wholesale Termination Services’ minutes of use
were 5.03 billion, a decline from 5.29 billion (-4.9%) in 3Q13 and an increase from
4.77 billion (+5.4%) in 2Q14. Revenue was $160.6 million, an increase from $159.3
million (+0.8%) in 3Q13 and a decrease from $167.8 million (-4.3%) in 2Q14. Year over year, the decline in minutes at the
same time that revenue increased reflects partially the impact of industry-wide
market price increases in termination rates into certain South Asian nations, which
were imposed towards the end of 3Q13, and resulted in a decline in minute
traffic to those countries. In addition,
the year over year revenue growth resulted from increased sales of higher
revenue-per-minute traffic in Latin America,
as IDT took advantage of certain pricing shift opportunities resulting from disparities
in local currency exchange rates. The
sequential increase in minutes of use reflects an opportunistic pricing
advantage enjoyed by IDT’s wholesale carrier business to certain lower revenue
per minute destinations. Revenue
decreased sequentially primarily as a result of narrowing exchange rate related
pricing opportunities in Latin America compared to the prior quarter, and thus
a decline in high revenue-per-minute traffic in that region. This decline more than offset increased
minutes of use and revenues from our traditional wholesale carrier services
operations. Wholesale Termination
Services’ revenue comprised 40.7% of TPS’ total revenue.
·
Payment Services’ revenue was $50.2 million, a
decrease from $51.3 million (-2.1%) in 3Q13 and an increase from $48.9 million (+2.7%)
in 2Q14. The year over year decrease
primarily reflects a decline in international and domestic airtime top-up sales
reflective of increased competition generally among resellers, while the sequential
increase reflects slightly more aggressive pricing for IDT’s international
airtime top-up offerings. Payment
Services revenue comprised 12.7% of total TPS revenue.
·
Hosted Platform Solutions’ revenue was $11.3
million, a decrease from $13.0 million (-12.8%) in 3Q13 and from $11.6
million (-2.8%) in 2Q14. A significant
portion of Hosted Platform Solutions revenue is generated from IDT’s cable
telephony business, which is in harvest mode. Hosted Platform Solutions’
revenue comprised 2.9% of total TPS revenue.
TPS’ direct cost of revenue expressed as a
percentage of TPS’ revenue was 83.7% in 3Q14, a decrease of 90 basis points
year over year from 84.6%, and unchanged compared to the prior quarter. The
year over year improvement primarily reflects higher Wholesale Termination
Services’ margins, as a result of an increase in carrier revenue-per-minute, as
well as the positive effect of the overall revenue mix, as the relatively higher
margin Retail Communications business comprised a larger share of TPS’ total revenue
compared to Wholesale Termination Services.
TPS’ SG&A expense increased to $48.3 million
from $46.6 million (+3.7%) in 3Q13 and decreased from $49.5 million (-2.4%) in 2Q14. Expressed as a percentage of TPS’ revenue,
TPS’ 3Q14 SG&A was 12.2%, compared to 12.0% in 3Q13 and 12.4% in 2Q14. The year over year increase is due primarily to
higher marketing and advertising costs.
The sequential decrease is due primarily to lower employee compensation costs.
TPS’ Adjusted EBITDA increased to $15.9 million
from $13.3 million (+19.7%) in 3Q13 and from $15.5 million (+2.7%) in 2Q14.
TPS’ income from operations decreased to $12.4
million from $19.6 million (-36.8%) in 3Q13 and was unchanged compared to 2Q14. Income from operations in 3Q13 and 2Q14 included
non-routine gains of $9.6 million and $0.4 million, respectively, reflecting reversals
of previous accruals made for potential legal settlements. There were no such
material non-routine adjustments in 3Q14.
Zedge
Zedge owns and operates a popular online
platform for mobile phone consumers interested in obtaining free, high quality
games, apps, and mobile phone customization content including ringtones,
wallpapers, and notification sounds.
Zedge’s app, available on Android, iOS and Windows Mobile boasts more
than 100 million downloads. Zedge has
averaged among the top 20 most popular apps in the Google Play store for the
last four years and recently became a top 20 app in the Windows Mobile
store. As a result of Zedge’s large,
active user base, it is able to offer advertisers, game developers, musicians
and artists a scalable, non-incentivized, user acquisition platform with global
reach. IDT currently owns approximately
83% (69% on a fully diluted basis) of Zedge.
Zedge’s revenue is generated by selling
advertising inventory across its apps and websites and from mobile game
installations on Android. Zedge’s
revenue was $1.6 million in 3Q14, an increase compared to $1.4 million (+15.4%)
in 3Q13 and a decrease from $1.7 million (-5.6%) in 2Q14. The year over year
increase is due primarily to the growth of Zedge’s smartphone user base on both
Android and iPhone. The sequential
decrease relates to the seasonal nature of the advertising business, which
typically experiences lower spending budgets in the beginning of the calendar
year. As of April 30, 2014, active
installs on Android and iOS were 44 million compared to 29 million a year
earlier.
Zedge’s SG&A expense was $1.2 million, an
increase compared to $0.9 million (+28.3%) in 3Q13 and $1.1 million (+12.2%) in
2Q14. The increases reflect growth in
Zedge’s developer headcount and related payroll costs, higher business
development costs and non-routine audit fees.
Zedge is developing new features focused on increasing user engagement
and new products to extend its leadership in device customization.
Zedge’s Adjusted EBITDA was $0.2 million,
compared to $0.3 million in 3Q13 and $0.4 million in 2Q14. Zedge’s loss from operations was $0.1
million, compared to income from operations of $0.1 million in 3Q13 and $0.2
million in 2Q14.
CPS
Consumer Phone Services (CPS) sells local and long distance
services in the United
States.
CPS has been in harvest mode since fiscal 2006 — maximizing revenue
from current customers while maintaining SG&A and other expenses at the
minimum levels essential to operate the business.
CPS’ revenue was $2.6 million
compared to $3.4 million (-23.4%) in 3Q13 and $2.9 million (-7.9%) in the prior
quarter. Income from operations was $0.5
million in 3Q14 compared to $0.3 million in 3Q13 and $0.4 million in 2Q14.
ALL OTHER
All Other includes Fabrix, a software development
company specializing in highly efficient cloud-based video processing, storage
and delivery, IDT’s real estate holdings and other small businesses.
All Other’s revenue was $4.9 million, an
increase from $3.0 million (+62.1%) in 3Q13, and from $3.7 million (+32.0%) in 2Q14. The increases were due to Fabrix’s product sales
to cable system operators and other media content providers, who utilize Fabrix’s
software to efficiently store, process and distribute video for both remote DVR
and deep storage applications.
All Other’s direct cost of revenue expressed as
a percentage of revenue was 13.3%, a deterioration from 9.4% in 3Q13 and improvement
from 16.1% in 2Q14.
All Other’s SG&A expense was $1.7 million,
an increase from $1.5 million (+13.7%) in 3Q13, and from $1.6 million (+6.0%) in
2Q14.
Research and development expense, which is
entirely incurred by Fabrix, was $2.5 million, compared to $1.7 million in 3Q13
and $2.6 million in 2Q14.
All Other generated a break-even Adjusted EBITDA,
compared to an Adjusted EBITDA loss of $0.5 million in 3Q13 and an Adjusted EBITDA
loss of $1.1 million in 2Q14, primarily due to Fabrix’s revenue increase.
All Other’s loss from operations was $0.4
million, compared to losses from operations of $0.9 million in 3Q13 and $1.5
million in 2Q14.
CONSOLIDATED RESULTS AND BALANCE SHEET
Consolidated results in all periods presented include
corporate overhead. Corporate G&A
expense achieved its lowest level since 1Q13, $3.3 million, compared to $3.4
million in 3Q13 and $3.9 million in 2Q14. The year over year and sequential reductions primarily
reflect lower levels of non-cash compensation, reflecting the expiration of the
period covered by former CEO Howard Jonas’ stock based compensation agreement.
Net income attributable to IDT was $5.0 million, compared to
$8.7 million in 3Q13 and $2.5 million in 2Q14. Diluted EPS was $0.22 compared to $0.39 in
3Q13 and $0.11 in 2Q14.
Non-GAAP net income was $8.6 million, compared to $7.3
million in the year ago quarter and $6.4 million in the prior quarter. Non-GAAP diluted EPS was $0.37, compared to $0.33
in the year ago quarter and $0.28 in the prior quarter.
As of April 30, 2014, IDT had $159.4
million in unrestricted cash, cash equivalents and marketable securities. In
addition, IDT had $56.1 million in current and long-term restricted cash and
cash equivalents, which included $50.5 million in customer deposits held by
IDT’s wholly-owned Gibraltar based bank. Notes payable, consisting primarily of a mortgage
loan against IDT-owned real estate, totaled $7.0 million. In addition, at April 30, 2014, total current
liabilities included $13.0 million borrowed under IDT Telecom’s revolving
credit facility. Total current assets
were $310.9 million and total current liabilities were $340.5 million.
Net cash provided by operating activities during 3Q14 was $20.5
million, compared to $18.5 million during 3Q13.
Net cash provided by operating activities in the first nine months of FY
2014 was $29.6 million, compared to $45.1 million in the year ago period. Capital
expenditures in the corresponding periods were $12.4 million compared to $10.9
million.
DIVIDEND
On June 6, 2014, IDT’s Board of Directors declared a
quarterly dividend of $0.17 per share of Class A and Class B common stock for
the third quarter of fiscal year 2014.
The dividend will be paid on or about June 27, 2014 to stockholders of
record as of the close of business on June 20, 2014. The ex-dividend date will be
June 18, 2014. The distribution will be
treated as an ordinary dividend for tax purposes.
IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
·
IDT will host a conference call at 5:30 PM ET today,
June 9th, beginning with management’s discussion of financial and
operational results, business outlook and strategy, followed by Q&A.
·
To listen to the conference call and/or
participate in the Q&A, dial toll-free 1-877-418-5260 (from U.S.) or 1-412-717-9589
(international) and request the IDT Corporation call.
·
An audio replay of the conference call will be
available one hour after the call concludes through March 20, 2013 by dialing
1-877-344-7529 (conference code #10045759), or by streaming from the IDT
website investor relations site: www.idt.net/about/ir.
·
Copies of this release – including the 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 https://www.idt.net/about/ir.
ABOUT IDT CORPORATION
IDT
Corporation (NYSE: IDT), through its IDT Telecom division, provides retail
telecommunications and payment services to help immigrants and the under-banked
to conveniently and inexpensively communicate and share resources around the
world. IDT Telecom’s wholesale business
is a leading global carrier of international long distance voice calls. IDT also holds majority interests in two
companies focused on high growth industries:
Zedge (www.zedge.net), a mobile
content discovery and acquisition platform, that includes one of the most
popular Apps for Android and iOS; and Fabrix Systems (www.fabrixsystems.com), a cloud based
storage and computing platform, that provides a scalable solution optimized for
media and big data processing and delivery.
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 remain
profitable 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
PLEASE SEE COMPLETE EARNINGS RELEASE ATTACHED FOR FINANCIAL STATEMENTS AND NON-GAAP RECONCILIATIONS
