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IDT Corporation Reports Second Quarter Fiscal 2016 Results

NEWARK, NJ — March 3, 2016: IDT
Corporation (NYSE: IDT) reported diluted earnings per share (EPS) of $0.18 and
Non-GAAP diluted EPS* of $0.39 on revenue of $382.5 million for the second quarter
of its fiscal year 2016, the three months ended January 31, 2016.


(Results for 2Q16 are compared to 2Q15)

  • Consolidated revenue decreased to
    $382.5 million from $394.2 million primarily as a result of reduced traffic
    on the US to Mexico corridor;
  • IDT improved its results of operations
    year over year increasing Adjusted EBITDA to $11.7 million from $8.0
    million, income from operations to $6.4 million from $3.7 million, and diluted
    EPS to $0.18 from $0.11;
  • IDT continues to benefit from efforts
    to right size overhead. SG&A
    expense decreased to $51.1 million, its lowest level in over three years;
  • Zedge, which IDT plans to spin-off in
    the current fiscal year, had an outstanding quarter. Revenue increased to $3.5 million from
    $2.4 million. Income from
    operations increased to $1.7 million compared to a loss from operations of
    $610 thousand.

Management Remarks

IDT’s Chief Executive Officer Shmuel
Jonas said, “IDT performed well in the second quarter, generating $11.7 million
in Adjusted EBITDA, up from $8.0 million in the year ago quarter and increasing
diluted EPS to $0.18 from $0.11 a year ago.

“A sharp reduction in industry-wide
call termination costs in Mexico implemented by regulatory authorities there last
year and slowing revenue growth generated by Boss Revolution’s prepaid calling
service contributed to year over year and sequential revenue declines. However, we expect that the impact on our bottom
line will dissipate in coming quarters.

“Looking ahead, we are committed
to invest significantly in longer term growth initiatives throughout the
Company. Individually and in their
totality, these initiatives have very promising prospects and will gradually
transform our business while we continue to focus on improving the efficiency of
our operations.

“I’m pleased to report that Zedge
had a very strong quarter, with record levels of revenue, Adjusted EBITDA and
income from operations. We expect to
spin-off Zedge to our shareholders in the coming months.”

*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.


$ in
millions, except EPS




2Q16 -2Q15

Change (%/$)






Direct cost





Direct cost as a percentage of revenue




+20 BP

SG&A expense





Depreciation and amortization








Adjusted EBITDA*





Income from operations





Net income attributable to IDT





Diluted EPS





Non-GAAP net income*





Non-GAAP diluted EPS*





Net cash provided by operating activities






(Results are for 2Q16 and comparisons
are to 2Q15 unless otherwise noted)


IDT’s Telecom Platform Services (TPS) segment accounted for 98.5%
of IDT’s revenue in 2Q16. TPS markets
and distributes multiple communications and payment services across four broad
business verticals: Retail Communications, Wholesale Carrier Services, Payment
Services and Hosted Platform Solutions.

TPS’ quarterly minutes of use were
7.03 billion compared to 7.53 billion (-6.7%) in 2Q15 and to 7.16 billion (-1.9%)
in 1Q16. The decreases primarily reflect
a decline in Retail Communications minutes, led primarily by the decline in Boss
Revolution voice traffic over the US-to-Mexico corridor and reduced sales of
traditional disposable calling cards.

TPS’ revenue was $376.7 million
compared to $389.0 million (-3.2%) in the year ago quarter and $385.7 million (-2.3%)
in the prior quarter. The decreases are
primarily the result of declines in revenue within the Retail Communications

TPS Revenue by Business Vertical

($ in




2Q16 -2Q15

% Change in Revenue

% Change in Minutes of Use

2Q16 Revenue as a % of all TPS Revenue

Retail Communications







Wholesale Carrier Services







Payment Services







Hosted Platform Solutions







Total TPS







Retail Communications – Sales
of IDT’s flagship Boss Revolution international calling service, which is the
dominant offering in the Retail Communications vertical, declined 1.8% year
over year and 1.3% sequentially. Traditional
prepaid cards and other, smaller product lines also contributed significantly to
the decline in Retail Communications’ revenues.
The revenue decline at Boss Revolution reflects, in part, regulatory
changes that dramatically reduced the cost of terminating calls from the US to
Mexico – Boss Revolution’s largest calling corridor. This dynamic is likely to continue
at least for the remainder of the year but become progressively less impactful to
prior period comparisons over time. Exclusive
of the US-to-Mexico route, revenue generated by Boss Revolution’s international
calling service increased in 2Q16 by approximately 5% compared to the year ago
quarter and was unchanged sequentially.

Wholesale Carrier Services – Revenue
increased slightly year over year on a traffic mix-shift to higher revenue per
minute corridors. The increase was partially
offset by a decline in minutes of use.

Payment Services – Revenue increased year over year on growth
in sales of international airtime top-up, which is the dominant product line in
this vertical.

Hosted Platform Solutions – Revenue decreased in-line with
expectations reflecting reductions in rates for telephony services provided by
IDT to its cable operator customers.

TPS’ direct cost of revenue as a percentage of TPS’ revenue was
84.6% in 2Q16, an increase of 40 basis points year over year and 80 basis
points sequentially. The increases were driven
primarily by the wholesale carrier vertical.

TPS’ SG&A expense decreased to $46.8 million from $50.5
million (-7.3%) in 2Q15 and from $48.2 million (-3.0%) in 1Q16. Expressed as a percentage of TPS’ revenue,
TPS’ 2Q16 SG&A decreased to 12.4% from 13.0% in 2Q15 and from 12.5% in 1Q16. The year over year decrease primarily reflects
reduced employee compensation costs after headcount reductions implemented in
fiscal 2015, and reduced marketing and advertising expense compared to the year
ago quarter.

TPS’ Adjusted EBITDA increased to $11.3 million from $11.1
million (+1.4%) in 2Q15 and decreased from $14.1 million (-20.2%) in 1Q16. The year over year increase was attributable
to the decrease in SG&A expense partially offset by the decline in revenue
less direct costs. Sequentially, the
decline in revenue was only partially offset by the reduction in direct costs
and SG&A expense.

TPS’ depreciation and amortization expense was $4.7 million
in 2Q16, an increase from $3.9 million (+18.2%) in 2Q15 and $4.4 million (+5.5%)
in 1Q16. Depreciation increased due to higher
levels of capital expenditures in recent periods to support new product
development, including IDT Messaging, Net2Phone Office, and the Boss Revolution
Calling App.

TPS’ income from operations decreased to $6.3 million from
$6.9 million (-8.3%) in 2Q15 and $9.7 million (-35.2%) in 1Q16. Income from operations in 2Q16 and 2Q15
included the impact of a loss on disposal of property, plant and equipment of
$326 thousand and severance expense of $316 thousand, respectively.


Consumer Phone Services
(CPS) sells local and long distance services domestically in 11 states,
marketed under the brand name IDT America.
CPS has been in harvest mode for the last decade, maximizing revenue
from current customers while maintaining SG&A and other expenses at the minimum
levels essential to operate the business.
Results this quarter conformed to expectations.

CPS’ revenue was $1.8 million
compared to $2.2 million (-21.2%) in 2Q15 and $1.8 million (-3.4%) in the prior
quarter. CPS’ income from operations
was $290 thousand in 2Q16, compared to $307 thousand (-5.5%) in 2Q15 and $339
thousand (-14.6%) in 1Q16.


All Other includes Zedge, one of the most popular content
platforms for mobile device personalization including ringtones, wallpapers,
home screen icons and game recommendations, as well as IDT’s real estate
holdings and other small businesses.

As of January 31, 2016, Zedge’s app surpassed 189 million
cumulative installs on Android, iOS and Windows Mobile, increasing from 130
million (+45%) a year earlier and 173 million (+9%) at October 31, 2015. Zedge has averaged among the top thirty most
popular apps in the Google Play store in the U.S. for the last five years. As a result of Zedge’s large, active user
base, it offers advertisers, game developers, musicians and artists a scalable,
non-incentivized, user acquisition platform with global reach.

Zedge’s revenue in 2Q16 was $3.5 million, an increase from $2.4
million (+47.0%) in 2Q15 and from $2.6 million (+37.9%) in 1Q16. The year over year and sequential revenue
increases were driven by continued user growth, increased customer engagement and
increased revenue per impression. Zedge
generated income from operations of $1.7 million compared to a loss from
operations of $610 thousand in the year ago quarter, and income from operations
of $350 thousand in 1Q16.

All Other’s revenue was $4.0 million in 2Q16 compared to $3.0
million (+35.0%) in 2Q15 and $3.1 million (+30.5%) in 1Q16. Zedge and IDT’s real estate holdings generate all
of All Other’s revenue.

All Other’s income from operations, generated primarily by
Zedge, was $1.8 million in 2Q16 compared to a loss from operations of $602
thousand in 2Q15 and income from operations of $430 thousand in 1Q16.


Consolidated results for all periods presented include
corporate overhead. In 2Q16, corporate G&A
expense was $2.1 million compared to $2.8 million (-27.4%) in the year ago
quarter and $2.6 million (-19.8%) in the
prior quarter.

2Q16 net income attributable to IDT increased to $4.1
million from $2.5 million in the year ago quarter and decreased from $4.2
million in the prior quarter. The year
over year improvement was driven by Zedge’s increased profitability and the
reduction in corporate G&A expense. Net income attributable to IDT in 2Q16
included income tax expense of $2.0 million compared to $1.9 million in 2Q15
and $2.9 million in 1Q16. Net income in 2Q15 included a gain on the sale
of IDT’s interest in Fabrix Systems of $484 thousand for working capital and
other adjustments.

At January 31, 2016, IDT had $146.3 million in unrestricted
cash, cash equivalents and marketable securities. Additionally, at that date,
IDT reported $88.8 million in current restricted cash and cash equivalents, nearly
all of which represents customer deposits held by IDT’s Gibraltar-based
bank. Current assets totaled $323.5
million and current liabilities were $326.4 million.

Net cash provided by operating activities during 2Q16 was $11.2
million compared to $12.7 million during 2Q15 and $14.0 million in 1Q16. For the same periods, capital expenditures were
$3.7 million compared to $7.8 million and $5.5 million, respectively.

IDT repurchased $4.6 million of its Class B Common Stock
during 2Q16.


IDT’s Board of Directors has declared a dividend of $0.19
per share of Class A and Class B common stock for the second quarter of its
fiscal year 2016. The dividend will be paid
on or about March 25, 2016 to stockholders of record as of the close of
business on March 15th. The ex-dividend date will be March 11th. This distribution will be an ordinary
dividend for tax purposes.


IDT will host a conference call at 5:30 PM ET today, March 3rd,
beginning with management’s discussion of results, outlook and strategy
followed by Q&A with investors.

To listen to the call and participate in the Q&A, dial
toll-free 1-888-348-8417 (from U.S.) or 1-412-902-4243 (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 10, 2016 by dialing 1-877-870-5176
(toll free from the U.S.) or 1-858-384-5517 (international) and providing the
following replay conference code: 1007809.
The replay can also be streamed from the IDT investor relations website
( beginning shortly after the call.

Copies of the complete earnings release – including the financial
statements and reconciliation of the non-GAAP financial measures that are used
herein and referenced during management’s discussion of results – were filed on
a Form 8-K and are available in the Investor Relations portion of IDT’s website.

About IDT Corporation:

Corporation (NYSE: IDT), through its IDT Telecom division, provides
telecommunications and payment services to individuals and businesses primarily
through its flagship Boss Revolution® and Net2Phone®
brands. IDT Telecom’s wholesale business
is a leading global carrier of international long distance calls. IDT also holds a majority interest in Zedge
(, 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