NEWARK, NJ — December 9, 2010: IDT
Corporation (NYSE: IDT; IDT.C) reported net income of $15.6 million ($0.70 per
diluted share) for its first quarter of fiscal 2011, the three months ended
October 31, 2010.
FIRST QUARTER FISCAL 2011 SUMMARY
|
$ in
millions, except EPS
|
1Q11
|
4Q10
|
1Q10
|
YoY Change (%/$)
|
|
Revenues
|
$357.4
|
$356.0
|
$327.3
|
+9.2%
|
|
Gross
profit
|
$74.2
|
$73.2
|
$69.2
|
+7.3%
|
|
Gross
margin percentage
|
20.8%
|
20.6%
|
21.1%
|
(40 basis points)
|
|
Total SG&A expense (including research and
development expense)
|
$60.0
|
$58.1
|
$59.7
|
+0.6%
|
|
Adjusted
EBITDA
|
$14.2
|
$15.1
|
$9.5
|
+49.2%
|
|
Income from
operations
|
$11.0
|
$7.8
|
$0.2
|
+$10.8
|
|
Net income
(loss) attributable to IDT
|
$15.6
|
$7.5
|
$(3.5)
|
+$19.1
|
|
Diluted
EPS attributable to IDT
|
$0.70
|
$0.33
|
$(0.17)
|
+$0.87
|
|
Net cash provided
by operating activities
|
$5.6
|
$8.7
|
$2.2
|
+$3.4
|
NOTE:
Adjusted EBITDA for all periods presented is a non-GAAP measure representing
income (loss) from operations exclusive of depreciation and amortization, restructuring
and severance charges, and gains on settlements and other, net. It is one of several key metrics used by
management to evaluate the operating performance of the Company and its
individual business units. See
reconciliations provided below.
MANAGEMENT COMMENTS
Howard Jonas,
IDT's Chairman and CEO, said, “IDT had an outstanding quarter, delivering $15.6
million in net income and a fourth consecutive quarter of revenue growth. We recently announced and commenced several
significant, strategic steps designed to realize shareholder value and promote
long term growth and profitability. We
have begun to pay regular quarterly dividends, and we have offered to exchange
shares of Class B Common Stock for Common Stock, with the objective of simplifying
our equity structure. We also intend to spin-off
Genie Energy in the current fiscal year and are exploring strategic options with
respect to our valuable VoIP intellectual property. This quarter's results indicate that both the
telecom business remaining at IDT and Genie Energy have the capacity to
generate cash, and have excellent prospects for continued growth.”
IDT's Chief Financial Officer, Bill
Pereira, added, “Our core businesses continue to perform
extremely well despite facing strong competitive pressures and a tough economic
climate. IDT Telecom had another very
good quarter, with year over year revenue and Adjusted EBITDA improvements
fueled by exceptional growth in minutes carried on our network. IDT Energy grew revenues year over year and
maintained strong gross margins even while conducting disciplined expansion into
additional territories in New Jersey and Pennsylvania.”
BALANCE SHEET AND CASH FLOW HIGHLIGHTS
Liquidity increased significantly compared to the prior
quarter. At October 31, 2010, IDT reported $242.7 million of cash, cash equivalents and
certificates of deposit, including $11.1 million of restricted cash and cash
equivalents. Current assets totaled
$397.7 million, and current liabilities totaled $289.7 million.
At July 31, 2010, IDT reported $234.1 million of cash,
cash equivalents, certificates of deposit, and marketable securities, including
$11.8 million of restricted cash and cash equivalents. Current assets totaled $381.1 million, and
current liabilities totaled $285.0 million.
Net cash provided by operating activities was $5.6 million
in 1Q11, compared to $2.2 million during the year ago quarter. Capital expenditures in 1Q11 totaled $3.3
million, compared to $2.8 million in the year ago quarter.
OPERATING RESULTS BY SEGMENT
IDT TELECOM
IDT Telecom includes two reporting segments: Telecom
Platform Services (TPS) and Consumer Phone Services (CPS). TPS provides various telecommunications
services including prepaid and
rechargeable calling cards, a range of voice over Internet protocol (VoIP)
communications services and wholesale carrier services. CPS provides both bundled (unlimited local
and long distance) services as well as long distance-only services to consumers
in the United States. 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.
IDT TELECOM:
Telecom Platform Services (TPS)
TPS – FIRST QUARTER FISCAL 2011 SUMMARY
|
$ in
millions
|
1Q11
|
4Q10
|
1Q10
|
YoY Change (%/$)
|
|
Revenues
|
$302.5
|
$299.7
|
$275.2
|
+9.9%
|
|
Minutes of use (in millions)
|
6,086
|
5,603
|
4,676
|
+30.2%
|
|
Gross profit
|
$53.9
|
$55.7
|
$47.3
|
+13.9%
|
|
Gross margin
percentage
|
17.8%
|
18.6%
|
17.2%
|
+60 basis points
|
|
SG&A expense
|
$43.6
|
$44.4
|
$42.9
|
+1.8%
|
|
Adjusted
EBITDA
|
$10.2
|
$11.3
|
$4.4
|
+130.4%
|
|
Income (loss)
from operations
|
$5.5
|
$4.5
|
$(3.9)
|
+$9.4
|
For the first quarter of fiscal 2011, TPS' minutes of use
rose to 6.1 billion, a 30.2% increase compared to the year ago quarter, and a
8.6% increase over the prior quarter, driven primarily by increases in minutes
carried by both the wholesale carrier
and VoIP solutions businesses.
TPS' revenues in 1Q11 were $302.5 million, a 9.9% increase
compared to the first quarter of fiscal 2010. Revenues increased sequentially
by 0.9%, continuing the trend of sequential quarterly increases that began in the
fiscal second quarter of 2010.
Year over year, wholesale carrier revenues, which had been
relatively flat throughout fiscal 2010, increased 11.3% reflecting more
successful sales and marketing efforts.
Revenues from prepaid services businesses increased 3.8%. Modest growth in traditional prepaid IDT
branded calling cards and online prepaid calling products more than compensated
for revenue lost as a result of the discontinuation of third party provided
domestic mobile top-up card sales during 4Q10.
International mobile top-up (IMTU) card revenues continued to grow, but
at a reduced rate compared to prior quarters.
Geographically, prepaid services revenues grew modestly in the U.S. and Europe, strongly in South America, and
declined in Asia.
Sequentially, the increase in wholesale carrier sales was
mostly offset by a decline in prepaid services sales, primarily reflecting the
discontinuation of domestic mobile top-up sales and a decline in the sales of
traditional IDT branded prepaid calling cards. Geographically, prepaid services
revenues declined in all geographic regions except South
America.
Gross profit at TPS was $53.9 million, a 13.9% increase
compared to 1Q10 and a 3.3% decrease sequentially.
Gross margin at TPS was 17.8%, a 60 basis point increase
compared to the year ago quarter.
Prepaid services and wholesale carrier both increased gross margins
compared to the prior year, with prepaid services benefiting from the
discontinuation of the low margin domestic mobile top-up card sales. Gross
margin fell 80 basis points compared to 4Q10, partially as a result of certain
non-routine factors which favorably impacted margins in the prior quarter, and
partially as a result of changes in product mix.
TPS' SG&A costs were $43.6 million, a 1.8% increase
year over year and a 1.8% decrease sequentially. Year over year, reductions in card printing
costs, facilities and equipment maintenance, and consulting fees were partially
offset by increases in bad debt expense, compensation and benefits, and
third-party commissions incurred partially as a result of the continuing
expansion of IDT Telecom's global distribution network.
TPS' Adjusted EBITDA for 1Q11 was $10.2 million, a 130.4%
increase year over year and a 9.2% decline sequentially.
TPS' depreciation and amortization expense was $4.8
million in 1Q11, a 43.1% decline from the year ago period and a 32.1% decline
sequentially, primarily due to more of IDT Telecom's fixed asset base becoming
fully depreciated and to lower levels of capital expenditures in recent periods.
TPS' income from operations was $5.5 million in 1Q11,
compared to a $3.9 million loss in 1Q10.
Sequentially, TPS' income from operations increased by $1.0 million, or
21.1%.
IDT TELECOM: Consumer
Phone Services (CPS)
CPS' 1Q11 revenues were $7.5 million, a 28.0% decline year
over year, and a 9.7% decline sequentially.
Gross margin for CPS in Q1 was 53.5%, a 450 basis point decline year
over year, and a 660 basis point decrease sequentially. In both the prior quarter and the previous
year comparative quarter, CPS' gross margin benefited from the reversal of
certain regulatory and connectivity related accruals. The current quarter's results are more reflective
of expected gross margin run rates for this segment going forward.
CPS' SG&A expense was $1.9 million, an 8.9% decline
year over year, but a 3.3% increase sequentially.
CPS' Adjusted EBITDA was $2.1 million, a 47.1% decline
year over year, and a 33.4% decrease sequentially, due in part to the reversal
of certain accruals in prior quarters, as noted above.
CPS' income from operations for 1Q11 was $2.0 million, a
47.2% decline year over year, and a 32.1% decrease sequentially.
GENIE ENERGY
Genie Energy is comprised of IDT Energy and Genie
Oil and Gas. IDT Energy operates our energy services company that resells
electricity and natural gas to residential and small business customers in New York State, New Jersey
and Pennsylvania.
Genie Oil and Gas consists mainly of (1) American Shale Oil
Corporation (AMSO) which holds and manages our 50% interest in American Shale
Oil, LLC (AMSO, LLC), our shale oil initiative in Colorado,
and (2) our 89% interest in Israel Energy Initiatives, Ltd. (IEI), our
shale oil initiative in Israel.
GENIE ENERGY: IDT Energy
IDT ENERGY – FIRST QUARTER FISCAL 2011 SUMMARY
|
$ in
millions
|
1Q11
|
4Q10
|
1Q10
|
YoY Change (%/$)
|
|
Revenues
|
$45.5
|
$46.5
|
$40.3
|
+12.9%
|
|
Gross profit
|
$14.7
|
$11.2
|
$14.6
|
+0.6%
|
|
Gross margin
percentage
|
32.4%
|
24.0%
|
36.3%
|
(390 basis points)
|
|
SG&A expense
|
$5.9
|
$5.5
|
$4.1
|
+44.0%
|
|
Adjusted
EBITDA
|
$8.8
|
$5.7
|
$10.5
|
(16.4)%
|
|
Income
from operations
|
$8.8
|
$5.6
|
$10.5
|
(16.3)%
|
IDT Energy's revenues in 1Q11 were $45.5 million, a 12.9% increase
compared to 1Q10 primarily reflecting higher average revenue per kilowatt-hour
(kWh) in sales of electricity partially offset by a decline in natural gas therms
(THM) sold. Revenues declined 2.1% sequentially
primarily as the result of a decline in average revenue per kWh and kWh sold
related primarily to seasonal factors.
IDT Energy served approximately 365,000 meters (207,000
electric and 158,000 natural gas) as of October 31, 2010, a decline of 1.9%
compared to the total a year earlier, and a 1.2% decline sequentially as net
acquisitions in New Jersey and Pennsylvania partially offset net churn in New York State.
Looking ahead, IDT Energy intends to pursue targeted customer
acquisition programs in select utility territories in both New
Jersey and Pennsylvania, while
anticipating a continued decline in its New York State
meter count as a result of intensified competition and escalating customer
acquisition costs.
Despite the reduction in meter count, the average rates of
annualized energy consumption, as measured by residential customer equivalents
(RCE's), increased 19.5% year over year and 2.2% sequentially. (An RCE represents a natural gas customer
with annual consumption of 100MMBtus or an electricity customer with annual
consumption of 10 MWhrs.) The increases
reflect a gradual shift in IDT's customer base to customers with higher
electric consumption per meter as a result of targeted customer acquisition
programs.
|
|
1Q11
|
4Q10
|
3Q10
|
2Q10
|
1Q10
|
|
RCE's at end of quarter:
|
|
|
|
|
|
|
Electricity customers
|
129,169
|
123,044
|
104,898
|
97,670
|
95,175
|
|
Natural gas
customers
|
87,609
|
89,047
|
88,680
|
87,202
|
86,291
|
|
Total
|
216,778
|
212,091
|
193,578
|
184,872
|
181,466
|
Electric revenues in 1Q11 were $38.7 million, an 18.0% increase
compared to 1Q10 as a result of increases in both average revenue per kWh and
kWh sold. Electric revenues declined $2.1
million sequentially reflecting cooler fall weather and the associated decrease
in air conditioning. Average revenue per
kWh increased 13.0% year over year, and kWh sold increased 4.5%. The year over year increase in kWh sold
resulted from a 10.4% increase in kWh sold per electric meter, partially offset
by a 5.4% decline in the average electric meters served during the same period.
At October 31, 2010, IDT Energy served approximately 207,000 electric meters
(129,000 RCE's) compared to approximately 213,000 (95,000 RCE's) at October 31,
2009.
Natural gas revenues
in 1Q11 were $6.8 million, a 9.5% decline year over year. Sequentially, natural gas revenues increased 20.2%,
primarily as a result of seasonal factors which increased THM sold per
meter. Year over year, average revenues
per THM increased 5.6% compared to the year ago quarter, but THM sold decreased
14.3%. The decrease in THM sold resulted
from an 11.4% decline in THM sold per meter, while the average number of gas meters
declined 3.3%. At October 31, 2010, IDT
Energy served approximately 158,000 gas meters (88,000 RCE's) compared to
approximately 159,000 (86,000 RCE's) at October 31, 2009.
IDT Energy's gross
margin in 1Q11 was 32.4%, a 390 basis point decline year over year as electric
cost increases outpaced electric rate increases. Gross margin for
electric sales was 33.4%, a 540 basis point decline, while gross margins for natural
gas increased by 100 basis points to 26.5%. Year over year, gross margin was
pressured by increasing competition in New York State and the impact of
expansion into new territories in New Jersey and Pennsylvania, where margin was
sacrificed to facilitate customer acquisitions.
Although these
factors are expected to pressure gross margin for the foreseeable future,
gross margin increased 830 basis points sequentially. Electric sales
recorded a 790 point gross margin increase sequentially as falling
electric prices outpaced a modest decline in electric rates. The gross margin for gas, which also
increased significantly, reflected falling costs augmented by the impact of
non-routine adjustments related to commodity natural gas purchases which had a
disproportionate impact given the comparatively low level of seasonal natural gas
sales.
SG&A expense in 1Q11 was $5.9 million, a 44.0%
increase year over year and a 7.9% increase sequentially primarily reflecting
increases in customer acquisition costs incurred in New
Jersey and Pennsylvania.
Gross meter acquisitions in 1Q11 were 42,000 compared to 13,600 in the same
period a year ago. Purchase of
receivables (POR) program costs also increased year over year reflecting higher
revenues and increases by some utilities in the POR fees charged.
IDT Energy generated $8.8 million in Adjusted EBITDA in
1Q11, a 16.4% decline year over year but a 55.2% increase compared to the prior
quarter. Income from operations was also
$8.8 million in 1Q11.
GENIE ENERGY: Genie Oil and
Gas
Genie Oil and Gas' operating expenses consist primarily of
costs incurred by IEI. IDT accounts for
its 50% stake in AMSO, LLC using the equity method.
Genie Oil and Gas reported a loss from operations of $2.1
million in 1Q11 including research and development (R&D) expenses of $1.7
million. In the year ago quarter, the
loss from operations was $1.5 million including $1.2 million in R&D expense.
IDT's equity in the net loss of AMSO, LLC – $0.8 million in
1Q11 – is included in “Other income (expense), net” in IDT's consolidated
statement of operations.
During 1Q11, AMSO, LLC, continued construction and ongoing
research and development work to prepare an oil shale pilot test to be
conducted in calendar 2011. Specifically, the AMSO team finalized the pilot
well drilling plan and continued construction work on the surface oil and gas
processing facilities. The pilot test is
intended to confirm the accuracy of several of the key underlying assumptions
of AMSO, LLC's proposed in-situ heating and retorting process.
During 1Q11, IEI continued work on the resource
appraisal and characterization study phase of the project, which management
expects to finalize during calendar 2011. To date, the results from the
appraisal process confirm IEI's expectations as to the attractiveness of the
oil shale in the 238 square kilometer License area from the standpoint of
richness, thickness and hydrology. IEI
is also continuing permitting and other preparatory work required prior to
construction of a pilot plant and operation of a pilot test. The pilot test
will provide a basis to determine the technical, environmental and economic
viability of IEI's proposed commercial process for extracting oil from shale.
Pilot test construction could begin as early as calendar 2011, and pilot test
operations could begin as early as calendar 2012. Pilot test operations are
contingent on receipt of an extension to the current three year License which
was awarded in July 2008. The License may
be extended to a total of seven years. Separately, the validity of the License
has been challenged in the Israeli courts.
Assuming IEI receives an extension to the current License, the lawsuit
is favorably resolved, and IEI successfully demonstrates a commercially viable
technology, management intends to apply for a long-term commercial lease and to
build a commercial production project.
OTHER RECENT DEVELOPMENTS
In October 2010, IDT received $7.7 million from the
settlement of an arbitration claim it had brought related to certain auction
rate securities holdings. The securities' original cost was $14.3 million. At July 31, 2010, the carrying value of these
securities was $0.2 million. IDT
incurred legal fees and other costs in connection with the arbitration and
settlement of $2.0 million. IDT
recognized a gain of $5.4 million from the settlement which is included in
“Other income (expense), net” in the consolidated statement of operations. Also during the quarter, IDT received $2.7
million from its insurance carrier pursuant to claims it made related to water
damage at its building located at 520
Broad Street, Newark, New Jersey. IDT recorded a gain of
$1.9 million during the quarter from this insurance claim which is included in
“Other operating gains” in the consolidated statement of operations.
On November 2, 2010, IDT's Board of Directors:
§
Authorized a cash dividend of $0.22 per share for
the first quarter of its 2011 fiscal year that was paid on November 23, 2010 to
shareholders of record at the close of business on November 15, 2010 of IDT
Corporation Common Stock, Class A Common Stock and Class B Common Stock. The
aggregate dividend paid was $5.0 million.
The Board also stated its intent for IDT Corporation to pay future
quarterly dividends based on operating performance and available resources,
including a comparable dividend for the second quarter of fiscal 2011 (see
below).
§
Approved the launch of an offer to exchange one
share of Class B Common Stock for each share of Common Stock outstanding (see
below).
§
Directed management to pursue a spin-off of IDT's
Genie Energy division. The spinoff of
Genie Energy under consideration is intended to be tax-free to IDT
stockholders. No date has been set for the spin-off as yet.
§
Directed management to explore options to
license and defend certain intellectual property rights currently owned by IDT
Telecom and Net2Phone related to VoIP and other aspects of the
telecommunications industry including a possible spin-off of a separate
entity.
On November 15, 2010, after the close of the first quarter
of fiscal 2011, IDT's Genie Energy division announced that Lord (Jacob) Rothschild
and Rupert Murdoch had each
purchased separate equity stakes equivalent to a cumulative 5.5% stake in Genie
Oil and Gas Inc., for a total of $11.0 million.
Genie Oil and Gas Inc., consists mainly of IDT's interests in AMSO and
IEI. Jacob Rothschild will also join Rupert Murdoch and other members previously
announced on Genie Energy's Strategic Advisory Board.
On December 2, 2010, IDT commenced an offer to exchange
one share of Class B Common Stock (NYSE: IDT) for each share of Common Stock
(NYSE: IDT.C) outstanding. As of December
1, 2010 there were 3,728,655 shares of
IDT Common Stock outstanding. The offer
will expire on January 4, 2011 unless extended. The exchange offer is being
made to simplify IDT's equity structure in light of the limited liquidity in
the market for the Common Stock and the resulting disparity in the trading
prices for the two classes despite the fact
that the equity rights associated with the shares of each class are identical. IDT's Chairman and CEO, Howard
Jonas, who controls approximately 76% of the combined voting
power of IDT's outstanding capital stock, will adjust his holdings of Class A
Common Stock and Common Stock so as not to increase his combined voting power
as a result of this exchange offer. The
consummation of the exchange offer is conditioned on at least 1,115,970 shares
of Common Stock being tendered and not properly withdrawn in the exchange offer
by IDT stockholders other than Mr. Jonas and his affiliates.
Following the consummation of the exchange offer, if a
sufficient number of shares of Common Stock are tendered, the New York Stock Exchange
(the “NYSE”) may delist or IDT may seek to delist the Common Stock from the NYSE
and de-register the Common Stock. If
less than all of the Common Stock is tendered, IDT intends to seek approval from
its stockholders to amend its certificate of incorporation so that each
remaining share of Common Stock will automatically be converted and
reclassified into one share of Class B Stock. In that event, IDT would no
longer have shares of Common Stock authorized or outstanding and only two
classes of common stock would remain – Class A Common Stock, which is not
publicly traded, and Class B Common Stock.
On December 6, 2010, IDT's Board
declared a cash dividend of $0.22 per share for the second quarter of
its 2011 fiscal year. The dividend will
the paid or about December 28, 2010 to shareholders of record at the
close of business on December 16, 2010.
Holders of IDT Corporation Common Stock, Class A Common Stock and Class
B Common Stock will receive the dividend.
The ex-dividend date is December 14, 2010.
IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
§
Management's discussion of IDT's financial and
operational results is posted in an audio file on the IDT website at https://www.idt.net/about/ir/overview.asp. The audio file (in MP3 format) may be played
directly from the website or downloaded for later playback.
§
An archived copy of this audio file will be
available on the Investor Relations page of the IDT website, under the
“Presentations” heading, for at least one year after the webcast.
§
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 https://www.idt.net/about/ir/overview.asp.
§
Q&A will be in a written format. Investors and others interested in IDT are
invited to e-mail questions for management to invest@idt.net. IDT will accept questions received through the
close of business on Monday, December 13, 2010. Questioners must identify
themselves by name and (if applicable) firm. When management can constructively
answer the question, the initial question, the questioner's name and firm, and
management's response will be posted in a document available on IDT
Corporation's website and in a Form 8-K filing as early as Thursday, December
16, 2010 following the market close.
ABOUT IDT CORPORATION
IDT Corporation
(www.idt.net) is a consumer services company with
operations primarily in the telecommunications and energy industries. IDT Corporation's Class B Common Stock and
Common Stock trade on the New York Stock Exchange under the ticker symbols IDT
and IDT.C, respectively.
In this press release, all statements that are not
purely about historical facts, including, but not limited to, 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 calling card business, our wholesale
telecommunication businesses and our retail energy business; 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 products and services;
the business and regulatory evolution of and competition and unfair business
practices in, the energy services business in New York State, New Jersey and
Pennsylvania; financial stability of our major customers; our ability to maintain
our income 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
Click on attachment to download entire earnings release including financial statements and Non-GAAP reconciliation tables.
