NEWARK, NJ — March 9, 2015: IDT
Corporation (NYSE: IDT) reported diluted earnings per share (EPS) of $0.11 and an
increase in Non-GAAP diluted EPS* to $0.33 on revenue of $394.2 million for the
second quarter of its fiscal year 2015, the three months ended January 31, 2015.
SECOND QUARTER FISCAL
2015 CONSOLIDATED HIGHLIGHTS*
Revenue decreased to $394.2 million from $406.4 million;
Direct costs decreased to $328.7 million from $335.3
SG&A expense was essentially flat at $57.4
million compared to $57.3 million;
Adjusted EBITDA* decreased to $8.0 million from
Income from operations decreased to $3.7 million
from $7.6 million;
Net income attributable to IDT remained unchanged
at $2.5 million;
Diluted EPS remained unchanged
Non-GAAP net income* increased to $7.5 million
from $6.4 million;
Non-GAAP diluted EPS* increased to $0.33 from $0.28;
Net cash provided by operating activities was $12.7
million, compared to net cash used by operating activities of $1.9 million.
Shmuel Jonas, IDT’s Chief Executive
Officer, said, “Our core telecommunications segment performed to expectations,
generating $11.1 million in Adjusted EBITDA, led by our flagship Boss
Revolution calling service, which achieved solid 14% revenue growth year over
year. Meanwhile, we are making good
progress on our international money transfer business and other important long
term growth initiatives, such as the addition of new features and services to our
Boss Revolution app including instant messaging, which is scheduled for release
later this calendar year.”
*Throughout this release, unless
otherwise noted, results are for 2Q15 and are compared to 2Q14. Non-GAAP
diluted EPS, Non-GAAP net income and Adjusted EBITDA 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
RESULTS BY SEGMENT*
IDT’s Telecom Platform Services (TPS) segment accounted for 98.7%
of IDT’s revenue in 2Q15. 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 increased
to 7.53 billion from 7.36 billion (+2.3%).
TPS’ 2Q15 revenue was $389.0 million, a decrease from $398.1 million (-2.3%)
in the year ago quarter.
Retail Communications’ revenue increased to $181.3
million from $169.8 million (+6.8%). Sales of international calling services on
the Boss Revolution platform increased 14.3% year over year primarily due to
growth in the number of active Boss Revolution customers, partially offset by a
decline in revenue per customer. Boss
Revolution calling services growth more than offset continued declines in
revenue from the sale of traditional disposable prepaid calling cards in the
U.S. and Europe. Retail Communications’
revenue comprised 46.6% of TPS’ total revenue in 2Q15.
Wholesale Termination Services’ minutes of use
grew by 3.5% compared to the year ago quarter.
Revenue was $147.8 million, a decrease from $167.8 million (-11.9%) in 2Q14.
Compared to the year ago quarter,
arbitrage pricing opportunities in Latin America resulting from disparities in
local currency exchange rates continued to decline. In addition, sales denominated in foreign
currencies, particularly the Euro, were negatively impacted by the stronger
U.S. dollar. Finally, the overall traffic
mix tilted towards lower revenue but higher margin per minute destinations. Wholesale Termination Services’ revenue
comprised 38.0% of TPS’ total revenue in 2Q15.
Payment Services’ revenue was $50.0 million, an
increase from $48.9 million (+2.2%) in 2Q14. The year over year increase is due
primarily to more aggressive pricing on international airtime top-up sales. Revenue
from IDT’s international money transfer business was not yet material, although
it contributed to the revenue increase. Payment
Services revenue comprised 12.8% of total TPS revenue in 2Q15.
Hosted Platform Solutions’ revenue was $9.9
million, a decrease from $11.6 million (-14.8%) in 2Q14. Within IDT’s cable telephony business, IDT
renewed multi-year contracts with key cable telephony customers in the second
half of fiscal 2014, but at lower rates, reflecting the long-term decline in
the underlying costs of hosted telephony services. Hosted Platform Solutions’ revenue comprised 2.6%
of total TPS revenue in 2Q15.
TPS’ direct cost of revenue as a percentage of TPS’ revenue was
84.2% in 2Q15, an increase of 50 basis points year over year. This increase was caused primarily by the loss
of revenue from the relatively high margin South American arbitrage
opportunity, by the decline in margin contribution from the cable telephony
business, and by margin pressure on airtime top-up offerings.
TPS’ SG&A expense increased to $50.5 million from $49.5
million (+1.9%) in 2Q14 due primarily to higher marketing and advertising
expense and to higher levels of investment in the Company’s international money
transfer service business.
TPS’ Adjusted EBITDA decreased to $11.1 million from $15.5
million (-28.1%) in 2Q14, primarily reflecting the decrease in Wholesale
Termination Services and Hosted Platform Solutions’ revenue and the increase in
TPS’ depreciation and amortization expense increased to
$3.9 million compared to $3.4 million (+15.0%) in 2Q14, due to increased capital
investment in recent quarters in new products, including IDT Messaging,
Net2Phone Office, and feature-rich enhancements to the Boss Revolution app.
TPS’ income from operations in 2Q15 decreased to $6.9
million from $12.4 million (-44.6%) in 2Q14.
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 in 2Q15 was $2.2
million compared to $2.9 million (-21.3%) in 2Q14. Income from operations was $307 thousand
compared to $421 thousand. The results
were in line with expectations.
All Other’s results for 2Q15
include Zedge – a popular platform for mobile phone consumers to obtain free customization
content, IDT’s real estate holdings and other small businesses. Zedge’s results were previously reported
separately. All Other’s results
previously included Fabrix, a software development company specializing in
highly efficient cloud-based video processing, storage and delivery. In early October 2014, IDT sold its majority
stake in Fabrix. Consequently, Fabrix’s
operations were consolidated in all prior periods up to the first two months of
1Q15, at which point Fabrix was deconsolidated.
Zedge’s app, available on
Android, iOS and Windows Mobile, boasts more than 130 million installs. Zedge has averaged among the top twenty most
popular apps in the Google Play store in the U.S. for the last five years and
is currently in the top five most popular free apps in the iTunes Entertainment
category. 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. Zedge’s revenue was $2.4 million, a 39.0% increase from $1.7 million in
All Other’s revenue, including Zedge, was $3.0 million, a decrease
from $5.5 million (-45.9%) in 2Q14. In
the year ago quarter, Fabrix contributed $3.3 million to All Other’s aggregate revenue. All Other’s loss from operations was $602
thousand compared to a loss from operations of $1.3 million in 2Q14, which
included a loss from operations of $1.1 million generated by Fabrix.
OTHER CONSOLIDATED RESULTS*
Consolidated results for all periods presented include
corporate overhead. In 2Q15, Corporate general
& administrative expense decreased to $2.8 million compared to $3.9 million
(-27.2%) in the year ago quarter.
Following the close of 2Q15, IDT completed a reduction of approximately
7% in its global compensation costs.
This cost-cutting initiative is expected to reduce IDT’s current annual
SG&A run rate by approximately $10 million.
As a result of this reduction in headcount, the Company expects to incur
severance expense of approximately $6.6 million in 3Q15.
Adjusted EBITDA on a consolidated basis in 2Q15 was $8.0
million compared to $11.3 million in 2Q14, reflecting primarily the decline in
Adjusted EBITDA generated by TPS, partially offset by the reduction in
corporate G&A expense. Income from
operations was $3.7 million compared to $7.6 million in 2Q14.
Net income in 2Q15 was $2.5 million and diluted EPS was
$0.11, unchanged from the year ago quarter.
As of January 31, 2015, IDT had $152.2
million in unrestricted cash, cash equivalents and marketable securities. In
addition, IDT had $69.2 million in current restricted cash and cash equivalents,
which included $65.7 million in customer deposits held by IDT’s Gibraltar-based
bank. Notes payable, consisting of a mortgage
on real estate, totaled $6.5 million. Total
current assets were $334.1 million and total current liabilities were $331.4
Net cash provided by operating activities during 2Q15 was
$12.7 million, compared to net cash used by operating activities of $1.9
million during 2Q14. For the same
periods, capital expenditures were $7.8 million and $4.2 million, respectively.
Following the sale of its Fabrix Systems business, IDT paid
special dividends to holders of its Class A and Class B common stock, of $0.68 per
share and $0.64 per share in November 2014 and January 2015, respectively. Separately, in December 2014, the Company
raised its quarterly dividend to $0.18 per share. In aggregate, IDT distributed $34.9 million
to its shareholders during 2Q15.
The Board of Directors of IDT has declared a dividend of
$0.18 per share for the second quarter of its fiscal year 2015. The dividend will be paid on or about March
27, 2015 to Class A and Class B common stockholders of record as of the close
of business on March 20, 2015. The ex-dividend date will be March 18, 2015. This
distribution will be treated as an ordinary dividend for tax purposes.
IDT EARNINGS ANNOUNCEMENT
& SUPPLEMENTAL INFORMATION
IDT will host an earnings conference call beginning at 5:30 PM ET today with
management’s discussion of results, outlook and strategy followed by Q&A
To listen to the call and participate in the Q&A, dial toll-free
1-877-300-8521 (from U.S.)
or 1-412-317-6026 (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 16, 2015 by dialing 1-877-870-5176 (toll free
from the U.S.)
or 1-858-384-5517 (international) and providing the conference code:
10059848. The replay will also be
available by streaming from the IDT website investor relations site: www.idt.net/ir shortly after the call
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 conveniently and inexpensively communicate and
share resources around the world. IDT
Telecom’s wholesale business is a leading global carrier of international long
distance calls. IDT also holds a
majority interest in Zedge (www.zedge.net), developer of the popular, eponymous
app for mobile content discovery and acquisition. For more information on IDT, visit
All statements above 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. Our filings with the SEC
provide detailed information on such statements and risks, and should be
consulted along with this release. To the extent permitted under applicable
law, IDT assumes no obligation to update any forward-looking statements.
Corporation Investor Relations
Please see attached pdf file for complete earnings release including financial statements and non-GAAP reconciliations