NEWARK, NJ — September 27, 2012: IDT Corporation (NYSE: IDT) reported diluted EPS of $1.69 and Non-GAAP diluted EPS of $0.23 for its fourth quarter of fiscal 2012, the three months ended July 31, 2012. For FY 2012, diluted EPS was $1.75 and Non-GAAP diluted EPS was $1.33.
Howard Jonas, IDT’s Chairman and CEO, said, “We delivered positive results throughout fiscal 2012, increasing revenues strongly and delivering consistent gross profits and Adjusted EBITDA. In fiscal 2013, we intend to build on this success while investing in several long term growth initiatives. We will add to our portfolio of retail products, enhance our retail presence in underserved immigrant communities in the U.S., expand Boss Revolution’s footprint in Europe and into Asia, and augment the scope of services we provide to carriers and operators around the globe. We intend to do all of this while continuing to reward our shareholders by paying a steady dividend and, when market conditions warrant, by repurchasing our stock as we did in the fourth quarter of fiscal 2012.”
4Q12 AND FULL YEAR HIGHLIGHTS
(All comparisons are to the comparable period in the prior year unless otherwise noted).
· Revenue in 4Q12 increased 6.6% to $384.9 million; FY 2012 revenue increased 11.5% to $1,506.8 million.
· Gross profit in 4Q12 increased 3.0% to $60.9 million; FY 2012 gross profits increased 2.2% to $237.4 million.
· Adjusted EBITDA in 4Q12 increased 34.7% to $6.4 million; FY 2012 Adjusted EBITDA declined 1.6% to $24.9 million.
· Income from operations in 4Q12 was $2.6 million compared to a loss from operations of $0.8 million; FY 2012 loss from operations was $2.2 million compared to income from operations of $9.7 million.
· Net income attributable to IDT in 4Q12 was $37.3 million compared to $0.2 million; FY 2012 net income attributable to IDT was $38.6 million compared to $26.8 million. Net income attributable to IDT in 4Q12 and FY 2012 included tax benefits of $36.5 million and $42.8 million, respectively.
· Diluted EPS in 4Q12 increased to $1.69 from $0.01; FY 2012 diluted EPS was $1.75 compared to $1.19. EPS for 4Q12 and FY 2012 included tax benefits of $1.65 and $1.94, respectively, per fully diluted share.
· Non-GAAP net income in 4Q12 was $5.1 million compared to $3.3 million; FY 2012 Non-GAAP net income was $29.3 million compared to $39.4 million.
· Non-GAAP diluted EPS in 4Q12 increased to $0.23 compared to $0.15; FY 2012, Non-GAAP diluted EPS was $1.33 compared to $1.75.
· Net cash provided by operating activities in 4Q12 was $10.2 million compared to $14.1 million; 2012 net cash provided by operating activities was $41.2 million compared to $56.4 million.
· IDT repurchased 269,148 shares of IDT Class B common stock for $2.6 million during 4Q12.
Adjusted EBITDA, Non-GAAP net income and Non-GAAP EPS for all periods presented are non-GAAP measures intended to provide useful information that may be more indicative of IDT’s or the relevant segment’s core operating results than the applicable GAAP measures. 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.
IDT’s operating results for fiscal 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.
4Q12 AND FULL YEAR OPERATING RESULTS BY SEGMENT
Telecom Platform Services (TPS), which accounts for 98% of IDT’s revenue, 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 4Q12 increased 17.1% year over year and 3.9% sequentially to 8.2 billion minutes. For FY 2012, TPS’ minutes of use increased to 30.8 billion minutes, a 17.3% increase compared to FY 2011.
TPS’ revenue in 4Q12 increased 7.1% year over year and 1.7% sequentially to $378.3 million. For FY 2012, revenue increased by 12.2% compared to FY 2011 to $1,477.1 million:
- Retail Communications 4Q12 revenue increased 15.2% year over year and 5.5% sequentially to $147.0 million (38.9% of total TPS revenue in 4Q12). Increases in sales of pin-less calling services on the Boss Revolution platform continued to more than offset declines in sales of traditional disposable calling cards and the modest impact of a decline in retail sales in Europe. FY 2012 Retail Communications revenue increased 14.4% compared to the prior year to $551.7 million. IDT expects Retail Communications’ growth to continue in FY 2013 with revenue increases from Boss Revolution calling services more than offsetting the expected decline of traditional disposable calling card product sales.
- Wholesale Termination Services revenue of $175.2 million (46.3% of total TPS revenue in 4Q12) decreased a slight 0.2% compared to 4Q11 reflecting a strategic decision to reduce traffic on some lower margin routes. FY 2012 Wholesale revenues increased 11.8% compared to FY 2011 to $715.4 million. IDT expects that Wholesale revenues will increase modestly during FY 2013 as expected increases in minutes of use continue to offset expected declines in average revenue per minute.
- Payment Services revenue of $42.3 million (11.2% of total TPS revenue in 4Q12) increased 28.9% year over year and 7.6% sequentially. The increase primarily reflects continued growth of international mobile top-up (IMTU) sales. Payment Services revenue for FY 2012 increased 29.1% compared to FY 2011 to $153.0 million and IDT expects that Payment Services revenues will again increase strongly in FY 2013 as IDT continues to increase IMTU sales and introduce new payment products.
- Hosted Platform Solutions revenue of $13.8 million (3.6% of total TPS revenue in 4Q12) declined 19.3% year over year and 1.4% sequentially. The majority of Hosted Platform Solutions revenue is generated by IDT’s cable telephony business which is in harvest mode. FY 2012 revenue decreased 24.9% compared to FY 2011 to $57.0 million.
TPS’ gross profit in 4Q12 was $56.8 million, an increase of 4.8% from $54.2 million in 4Q11 and an increase of 3.6% from $54.9 million in 3Q12. For FY 2012, gross profit increased to $218.3 million from $210.6 million in FY 2011.
Gross margin in 4Q12 was 15.0%, a 40 basis point decrease compared to the year ago quarter but a 30 basis point increase sequentially. Gross margin for FY 2012 was 14.8%, a decline of 120 basis points year over year. TPS’ year over year gross margin decline reflects the continued evolution of our product mix. Specifically, revenues of relatively higher margin traditional disposable calling cards and cable telephony services have been supplanted by revenue growth from relatively lower margin sales of IMTU products, Boss Revolution calling services and Wholesale Termination services. The sequential increase primarily reflects improvement in Retail Communications’ margin.
For FY 2013, IDT anticipates that TPS will deliver moderate increases in gross profit dollars reflecting continued revenue growth sufficient to compensate for anticipated incremental declines in TPS’ gross margin.
TPS’ SG&A expense was $46.7 million, a 1.6% decrease compared to the year ago quarter as a result of unusually high legal expenses incurred in 4Q11, and a 3.8% increase sequentially. TPS’ SG&A as a percentage of TPS’ revenue declined to 12.3% compared to 13.4% in the year ago quarter but increased from 12.1% in 3Q12. For FY 2012, TPS’ SG&A was $182.2 million, a 4.7% increase compared to FY 2011. As a percentage of TPS’ revenue, TPS’ SG&A was 12.3% for FY 2012, compared to 13.2% in FY 2011. The growth of both Retail Communications and Wholesale Termination sales has allowed IDT to better leverage its fixed cost infrastructure. However, IDT expects to continue to invest in long term TPS growth initiatives which will increase TPS’ SG&A expense in FY 2013. The initiatives include build out of IDT Telecom’s retail sales force, expansion of Boss Revolution in Europe and Asia, development of new payment and remittance services, and expansion of Wholesale Terminations’ service offerings.
TPS’ Adjusted EBITDA in 4Q12 was $10.2 million, a 50.1% increase compared to 4Q11 and a 2.7% increase sequentially. For FY 2012, Adjusted EBITDA was $36.1 million, a 1.3% decrease compared to the prior year reflecting relatively stable gross profits matched against the higher levels of SG&A spending.
TPS’ depreciation and amortization expense continued to decrease, reflecting the deployment over the past several years of technologies that require less CAPEX to upgrade and maintain the network. In 4Q12 depreciation and amortization expense was $3.2 million, a 15.8% decrease from the year ago period and an 8.4% decrease sequentially. IDT anticipates modest additional decreases in depreciation and amortization expense during the course of fiscal 2013.
TPS’ income from operations was $6.9 million compared to $1.8 million in 4Q11 when TPS recorded a charge of $1.1 million to adjust an accrual for certain legal matters. Absent this charge, income from operations in 4Q11 would have been $2.9 million. In 3Q12, TPS’ loss from operations was $0.1 million reflecting a non-routine charge of $6.5 million to accrue for certain legal matters. Absent this charge, TPS’ income from operations in 3Q12 would have been $6.3 million. For FY 2012, TPS’ income from operations was $5.9 million compared to $21.6 million in FY 2011. The decrease was primarily due to non-routine charges in FY 2012 of $16.0 million for certain legal matters.
Consumer Phone Services (CPS) sells local and long distance services. 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’ 4Q12 revenue was $4.4 million, compared to $5.8 million in the year ago quarter and $4.6 million in the prior quarter. For FY 2012, revenue decreased 27.0% compared to FY 2011 to $19.3 million. Income from operations decreased in 4Q12 to $0.9 million from $1.5 million in the year ago quarter, and from $1.0 million in the prior quarter. For FY 2012, income from operations decreased 42.8% compared to FY 2011 to $4.1 million. The declines in revenue and income from operations were in line with management expectations and are expected to continue in fiscal 2013.
All Other includes: Fabrix, a software development company specializing in highly efficient cloud-based video processing, storage and delivery; Zedge, a platform, including a popular Android app, that allows users to share and obtain content to personalize mobile phones and tablets; IDT Spectrum, which holds, leases and sells fixed wireless spectrum; ICTI, which holds and enforces intellectual property previously held by IDT’s Net2Phone subsidiary; and IDT’s real estate holdings.
All Other’s 4Q12 revenue was $2.2 million, unchanged compared to 4Q11 and a sequential decrease from revenue of $3.0 million. The sequential decline primarily reflects a decline in Fabrix’s revenues, reflecting the timing of revenue recognition of certain licensing and maintenance agreements. In 4Q12, All Other reported a loss from operations of $2.3 million compared to an operating loss of $1.3 million in the year ago quarter and income from operations of $4.3 million in the prior quarter. In 3Q12, income from operations included a $5.3 million gain recorded by IDT Spectrum from the sale of wireless spectrum licenses. For fiscal 2012, the increase in Fabrix’ revenue compared to fiscal 2011 drove an increase in All Other’s revenue of 17.6% compared to the year ago to $10.4 million, and income from operations increased to $0.9 million from a loss from operations of $2.9 million in the prior year.
ZEDGE: Zedge (www.zedge.net) has surpassed 40 million downloads of its Android app. The Zedge game channel, launched earlier in calendar 2012, is already generating over 10 million game downloads per month. Zedge generated revenue of $1.0 million in 4Q12 compared to $0.9 million in 4Q11. Zedge’s revenue in FY 2012 was $3.8 million, a 17.9% increase compared to the prior year.
FABRIX: Fabrix’s revenue was $0.6 million in both 4Q12 and 4Q11. Revenue for FY 2012 totaled $3.6 million, a 48.9% increase compared to the prior year. Following the close of the fiscal year, Fabrix collected $12.0 million in cash from a system integrator partner pursuant to an expanded statement of work signed during 4Q12. Fabrix’s revenue is generally recognized over three years from the date on which delivered orders are accepted by the customer.
CONSOLIDATED RESULTS AND BALANCE SHEET
IDT’s 4Q12 results were consistent with recent trends and with IDT’s general outlook for FY 2013. Strong revenue growth generated within both IDT Telecom’s Retail Communications and Wholesale Termination verticals, resulted in steady to modestly increasing gross profits. In FY 2013, the Company anticipates investing in several long-term, strategic growth initiatives, resulting in moderate increases in SG&A expense and relatively stable levels of Adjusted EBITDA.
Consolidated results in 4Q12 and all prior periods presented include the impact of corporate overhead. Corporate G&A expense was $2.9 million in 4Q12, a 4.5% increase compared to the year ago quarter but a 3.2% decrease sequentially. For the full year fiscal 2012, corporate G&A expense decreased by 12.6% compared to the prior year to $13.0 million.
As noted above, net income in 4Q12 attributable to IDT was $37.3 million, compared to $0.2 million in 4Q11. Net income attributable to IDT in 4Q12 includes a tax benefit of $36.5 million. IDT, due to its profitability in the United States and expected future profitability, reversed a portion of the valuation allowance that had been applied against its U.S. deferred income tax assets. Reversal of a portion of the valuation allowance does not impact IDT’s cash position.
Non-GAAP Net Income and diluted Non-GAAP EPS exclude the reversal of the deferred tax asset valuation allowance and certain other components of GAAP EPS that are detailed in the reconciliation provided at the end of this release. Non-GAAP net income was $5.1 million in 4Q12, compared to $3.3 million in the year ago quarter. For the full year, Non-GAAP net income totaled $29.3 million compared to $39.4 million in FY 2011 reflecting the impact of non-routine other income in FY 2011. Diluted Non-GAAP EPS was $0.23 in 4Q12 compared to $0.15 in the year ago quarter and $0.44 in the prior quarter. For FY 2012, diluted Non-GAAP EPS was $1.33 compared to $1.75 in FY 2011.
As of July 31, 2012, IDT had $151.5 million of cash and cash equivalents. In addition, IDT had an aggregate of $22.1 million of current and long-term restricted cash and cash equivalents, which included $11.2 million in customer deposits held at IDT’s Gibraltar based bank. Long term and current notes payable, consisting of mortgage loans against IDT-owned real estate, totaled $30.3 million.
DIVIDEND AND SHARE REPURCHASES
IDT’s Board of Directors declared an ordinary cash dividend of $0.15 for 4Q12, unchanged from the prior quarter. The Board anticipates continuing to pay quarterly dividends at this level commensurate with the Company’s financial results, strategic goals and available resources.
The dividend will be paid on or about October 16, 2012 to stockholders of record of IDT’s Class A and Class B common stock as of the close of business on October 9, 2012. The ex-dividend date is October 4, 2012.
During 4Q12, IDT re-purchased 269,148 shares of IDT Class B Common Stock for $2.6 million. IDT expects to continue to repurchase shares under an existing authorization when warranted by market conditions and the Company’s financial position and outlook.
IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
· IDT will host a conference call at 6:00 PM ET today, September 27th beginning with management’s discussion of financial and operational results, business outlook and strategy followed by Q&A with analysts and investors.
· To listen to the conference call and/or participate in the Q&A, dial toll-free 1-877-317-6789 (from U.S.) or 1-412-317-6789 (international) and request the IDT Corporation call.
· An audio replay of the conference call will be available one hour after the call concludes through October 9, 2012 by dialing 1-877-344-7529 (conference code 10018367), and by streaming from the IDT website investor relations site: www.idt.net/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/ir.
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 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 email@example.com
for financial tables and Non-GAAP reconciliations)