Back to press releasesPRESS RELEASE
IDT Corporation – Results for Second Quarter Fiscal 2010
IDT Reports Positive Income from Operations, Cash Flow from Operations and Net Income
NEWARK, NJ — March 11, 2010: IDT Corporation (NYSE: IDT; IDT.C) reported net income of $3.7 million ($0.17 per diluted share) for its second quarter of fiscal 2010 – the three months ended January 31, 2010.
SECOND QUARTER HIGHLIGHTS
|
$ in millions, except EPS |
Q2 2010 |
Q2 2009 |
Change (%/$) |
|
Revenues |
362.7 |
403.9 |
-10.2% |
|
Gross Profit |
74.2 |
93.9 |
-21.0% |
|
Gross Margin Percentage |
20.5% |
23.3% |
-280 basis points |
|
SG&A expenses |
54.7 |
66.3 |
-17.6% |
|
Adjusted EBITDA |
17.7 |
20.7 |
-14.7% |
|
Income from Operations |
7.6 |
(6.2) |
+$13.8 |
|
Net Income attributable to IDT |
3.7 |
(62.0) |
+$65.7 |
|
Diluted EPS attributable to IDT |
$0.17 |
($2.71) |
+$2.88 |
|
Net cash provided by (used in) operating activities |
13.0 |
(40.5) |
+$53.5 |
|
|
Jan. 31, 2010 |
July 31, 2009 |
Change |
|
Cash, cash equivalents and marketable securities |
194.3 |
188.6 |
+3.0% |
NOTE: Adjusted EBITDA for all periods presented is a non-GAAP measure representing income (loss) from operations exclusive of depreciation and amortization, restructuring charges, and impairments. It is one of several key metrics used by management to evaluate the operating performance of the Company and its individual business units.
MANAGEMENT COMMENTS
Howard Jonas, IDT’s Chairman and CEO, said, “For the past year and a half, we have been very focused on cutting costs and improving the performance of our core businesses. I am very proud of our employees for making an extraordinary effort to get us back in the black. In the second half of fiscal 2010, we will focus on growing our core businesses while at the same time remaining committed to being a lean and disciplined company.”
IDT’s Chief Financial Officer, Bill Pereira, said, “IDT’s bottom line and financial strength continue to improve. Strong contributions from both our IDT Telecom and IDT Energy businesses and substantial reductions in overhead generated positive income from operations, positive cash flow from operating activities and net income. We also attained good revenue growth quarter over quarter as a result of improved operational performance, expanded sales and marketing efforts in our Telecom business, and various seasonal factors. This strong performance improved our balance sheet and liquidity.”
OVERALL OPERATIONAL RESULTS
Supplementary information and explanation of the operational results is contained in the discussion of results for our operating segments. Unless otherwise indicated, all operational results in this release refer to the second quarter of IDT’s 2010 fiscal year – the quarter ended January 31, 2010, and all comparisons are for the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009.
IDT revenues for the second quarter of fiscal 2010 were $362.7 million, a decline of 10.2% compared to Q2 2009 but a 10.8% increase sequentially. Historically, seasonal factors typically have had a positive impact on second quarter revenues at both IDT Telecom and IDT Energy – all other factors being equal. Nevertheless, the $35.3 million quarter over quarter increase in company-wide revenue during Q2 2010 far exceeds the $149 thousand revenue increase from Q1 2009 to Q2 2009 and the $7.2 million increase from Q1 2008 to Q2 2008.
IDT generated $74.2 million in gross profit, a 21.0% decline year over year and a 7.3% increase sequentially.
The Company-wide gross margin percentage of 20.5% decreased 280 basis points year over year and decreased 60 basis points sequentially.
SG&A expense totaled $54.7 million, a 17.6% reduction compared to the year ago quarter and a 4.3% reduction sequentially. Corporate SG&A of $2.8 million represents a 53.2% reduction compared to the year ago quarter and a 49.3% reduction from the prior quarter. The reduction in corporate SG&A compared to the year ago quarter is primarily attributable to decreases in compensation and related benefits, consulting fees and charitable contributions. The sequential reduction in corporate SG&A is mostly due to decreases in legal fees, compensation and related benefits and stock-based compensation. In addition, non-recurring reductions in medical benefits expense as a result of a smaller workforce and changes to our healthcare plan contributed to the company-wide SG&A decline compared to the year ago quarter and sequentially.
Adjusted EBITDA totaled $17.7 million, a 14.7% decline compared to the same period a year ago, but an 86.2% increase sequentially.
Income from operations was $7.6 million, including the impact of $8.4 million in depreciation and amortization costs and $1.6 million in restructuring charges. In the year ago quarter, IDT’s loss from operations was $6.2 million, including the impact of $12.2 million in depreciation and amortization costs, $6.0 million in restructuring charges, and impairments of $8.8 million. In the prior quarter, income from operations was $0.2 million including the impact of $9.4 million in depreciation and amortization costs.
Income from continuing operations was $4.1 million during Q2 2010 compared to a $23.7 million loss from continuing operations in Q2 2009.
Net income attributable to IDT (formerly referred to as net income after minority interest) was $3.7 million, or $0.18 per basic share and $0.17 per diluted share, compared to net loss attributable to IDT in the year ago quarter of $62.0 million, or $2.71 per basic and diluted share.
The weighted-average numbers of shares outstanding used to calculate basic earnings per share were 20.6 million and 22.9 million for Q2 2010 and Q2 2009, respectively. For diluted earnings per share, the comparable numbers of shares were 21.5 million and 22.9 million.
BALANCE SHEET AND STATEMENT OF CASH FLOWS HIGHLIGHTS
At January 31, 2010, IDT reported cash, cash equivalents and marketable securities of $194.3 million, including $19.7 million in restricted cash and cash equivalents. The comparable figures at July 31, 2009 were $188.6 million and $70.1 million, respectively.
Net cash provided by operating activities during the six months ended January 31, 2010 totaled $15.3 million, compared to net cash used in operating activities of $92.9 million in the comparable year ago period.
OPERATING RESULTS BY SEGMENT
IDT TELECOM
Revenues at IDT Telecom were $300.3 million in Q2 2010, down 2.5% from the year ago quarter, but up 5.2% sequentially.
Gross margin percentage was 18.8%, down 370 basis points from the year ago quarter and up 10 basis points sequentially, on gross profit of $56.5 million, an 18.7% decline year over year, but a 6.0% increase sequentially.
SG&A expense declined to $44.1 million, a 14.6% reduction year over year, and a 0.9% decline compared to the prior quarter.
Adjusted EBITDA was $11.3 million, a 27.3% decline year over year, but a 51.1% increase sequentially.
Depreciation and amortization expense declined to $7.4 million, a 31.4% decline year over year and a 12.0% decline sequentially.
Income from operations was $3.3 million, compared to $0.1 million for the same period a year ago and a loss from operations of $0.9 million in the prior quarter.
Telecom Platform Services – TPS (Wholesale Carrier and Retail Communications Services)
Telecom Platform Services (TPS) minutes of use totaled 5.3 billion for Q2 2010, a 13.2% increase year over year and a 10.0% increase over the prior quarter as a result of improved distribution and lower price offerings across both the wholesale carrier and retail business lines. Minutes of use growth year over year was led by the wholesale carrier business, augmented by increased minutes of use from retail calling card sales in both Europe and Asia. These were partially offset by declines in U.S. retail card minutes. On a sequential basis versus the previous quarter, most business units contributed to the increase in minutes of use.
TPS’ revenues for the quarter declined 1.2% year over year to $290.4 million, but increased 5.5% sequentially. Compared to the year ago quarter, U.S. retail sales declined significantly, more than offsetting strong growth in European retail which was aided by the positive effect of changes in foreign currency exchange rates, and by modest growth in wholesale carrier revenues. Sequentially, most business units contributed to revenue growth. This revenue growth was driven by both seasonal factors and by expanded retail sales and marketing activities in U.S. retail following the purchase of the remaining interests in UTA.
TPS’ gross margin fell to 17.6%, a 280 basis point decrease from the year ago period but a 40 basis point increase sequentially. The year over year decline reflects continued margin pressures on the sales of international long distance products and services, as a result of lower price offerings across both the wholesale carrier and retail business lines and the launch of new, lower margin, calling card offerings, as well as growth in the sales of international mobile top-up — a relatively low margin product that enables customers to transfer minutes purchased in the U.S. directly to accounts held by friends and family at participating wireless carriers overseas. Sequentially, gross margin benefitted from the mixed impact to total TPS revenues of higher margin retail sales in Q2, and by the impact of U.S. gift card sales during the year-end holiday season.
TPS’ SG&A expense was reduced to $42.2 million in Q2 2010, down 13.6% compared to Q2 2009, and a 0.9% decrease compared to the prior quarter. Reductions in employee compensation, as well as certain production costs accounted for most of the year-over-year improvement. With its restructuring and reductions in force largely completed, compensation costs in TPS will likely stabilize during the second half of fiscal 2010 while remaining below comparable year ago periods.
TPS generated $8.1 million in Adjusted EBITDA, a 13.1% decline compared to the year-ago period, but a 127.5% increase compared to the prior quarter.
TPS’ income from operations was $0.1 million, compared to a loss from operations of $6.1 million in the year ago period and a loss from operations of $4.8 million in the prior quarter. Decreases in depreciation and amortization expense to $7.4 million in Q2 2010 compared to $10.7 million in the year ago period and $8.4 million in the prior quarter contributed to the improvement in income from operations.
Consumer Phone Services – CPS
Consumer Phone Services, which includes both bundled (unlimited local and long distance) services customers as well as long distance-only customers, has been in “harvest mode” since fiscal 2006. Revenues declined at a slower than expected rate, to $9.9 million for Q2 2010, 29.8% below Q2 2009’s revenues.
Gross margin for CPS declined to 53.8% from 66.5% in the year ago quarter when several one time factors boosted the gross margin above the normalized range.
CPS’ SG&A expenses were reduced to $1.9 million, a 31.8% reduction year over year, as operational costs are being continuously adjusted to the needs of the declining revenues generated by this business.
CPS’ Adjusted EBITDA was $3.2 million, down 48.7% from the year ago period.
Income from operations was also $3.2 million, a 48.6% decline year over year.
GENIE ENERGY
Genie Energy includes the IDT Energy and Alternative Energy segments. The Alternative Energy segment consists of IDT’s interest in AMSO, LLC – a U.S. joint venture to develop oil shale on federal lands in Colorado, and Israel Energy Initiatives, Ltd. (IEI), an alternative energy venture in Israel.
IDT Energy
IDT Energy’s revenues were $60.7 million during Q2 2010, a 35.3% decline compared to Q2 2009 but a 50.7% increase sequentially. Revenues for gas and electricity were $31.6 million and $29.1 million respectively, compared to $53.1 million and $40.8 million in the year ago quarter.
In the aggregate, revenue was primarily impacted by decreases in the average rates charged to customers for both electricity and gas as a result of reductions in the underlying commodity costs and, secondarily, by decreased consumption. Gas rates declined 26.3% from the comparable year ago period while electric rates declined 25.7%. Gas consumption declined 19.1% and electric consumption declined by 4.1% compared to the year ago period, reflecting lower per meter consumption and a decline in meters served.
Gross meter acquisitions strengthened from Q1, while remaining below year ago levels. Gross meter acquisitions for the quarter were 28,000 compared to 68,100 in the year ago quarter and 13,600 during Q1 2010. The sales and marketing restructuring undertaken in Q4 of fiscal 2009 in combination with generally lower energy prices has substantially decreased customer churn. The churn rate for Q2 2010 was 2.6% compared to 5.0% in the year ago quarter, and to 2.7% in Q1 2010.
As of January 31, 2010, IDT Energy served approximately 366,000 meters, comprised of 158,000 gas and 208,000 electric meters. Total meters were down 10.4% year over year but declined by a more modest 1.7% sequentially, reflecting lower relative churn rates and an increase in the rate of gross meter acquisition following the sales and marketing restructuring. IDT Energy expects to return to net meter growth during the latter part of fiscal 2010, but does not anticipate returning to the gross acquisition levels in New York State attained during the early part of fiscal 2009. In other states with deregulatory initiatives, IDT Energy continues to monitor developments and has begun to test several new markets for potential growth opportunities.
Gross margin for IDT Energy rose to 26.9%, a 260 basis point increase compared to the year ago period, but a 940 basis point decline compared to the prior quarter. The levels of gross margin achieved during fiscal 2009 and in the first half of fiscal 2010 may not be sustainable on a consistent basis going forward.
SG&A expense was reduced to $4.5 million; a 22.9% decline compared to the year ago period, primarily due to decreases in customer acquisition costs, compensation expense and Purchase of Receivables, or POR, fees.
Adjusted EBITDA was $11.9 million, a 27.9% decline compared to Q2 2009. Sequentially, Adjusted EBITDA increased 12.8%.
Income from operations was $11.8 million, a 28.3% decline compared to Q2 2009, and a 12.3% increase sequentially.
Alternative Energy
Alternative Energy reported total costs, and a loss from operations of $1.1 million including research and development expenses of $0.8 million compared to a loss from operations of $4.0 million in Q2 2009. Alternative Energy’s operating expenses currently consist of costs of the IEI business only, since AMSO, LLC is accounted for using the equity method. IEI began the resource appraisal and characterization study on its exclusive Shale Oil Exploration and Production License area in the third quarter of calendar 2009. IEI anticipates that a subsequent pilot test will be conducted to determine technical and economic viability of its process and as a basis for application for the required permits and approvals for a future commercial lease and project.
During Q2 2010, AMSO, LLC, a joint venture oil shale exploration and production initiative with Total, SA began initial construction work to prepare an oil shale pilot heating test to be conducted late in calendar 2010 or early in 2011. 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.
IDT accounts for its 50% stake in AMSO, LLC using the equity method. IDT’s equity in the net loss of AMSO, LLC in Q2 2010 of $0.3 million is included in “Other income (expense), net” in its consolidated statement of operations.
OTHER RECENT DEVELOPMENTS
On September 30, 2008, IDT received a notice from the New York Stock Exchange (NYSE) that it was no longer in compliance with the NYSE’s $100 million average market capitalization threshold over a 30-day trading period required for continued listing. The Company submitted a plan, which was accepted by the NYSE, to regain compliance with the continued listing standard by March 30, 2010 (18 months after IDT fell out of compliance). In the event that either IDT’s market capitalization is below $100 million on March 30, 2010, or its average market capitalization for the 30 trading days preceding and including March 30, 2010 (the period beginning February 17, 2010) is below $100 million, the NYSE is likely to initiate the delisting process for IDT’s stock. Should the NYSE commence the delisting process, the Company would seek to transition IDT stock listings to an alternative exchange. Currently, IDT meets the initial quantitative listing standards for the NASDAQ Global Market and NYSE Amex. As of March 10, 2010, IDT had a market capitalization of $105.4 million and its average market capitalization for the period beginning February 17, 2010 through and including March 10, 2010 was $105.0 million.
During Q2 2010, IDT purchased an aggregate of 65,800 shares of its common stock for $254,000 under an existing stock buyback program. As of January 31, 2010, 5.4 million shares remained authorized for repurchase under the current stock buyback program.
IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
§ Management’s discussion of the Company’s financial and operational results is posted in an audio file on the Company’s website at https://www.idt.net/about/ir/overview.asp. The audio file is in an MP3 format and 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.
§ As in recent quarters, Q&A will be in a written format. Investors and others interested in the Company are invited to e-mail questions for management to invest@idt.net. The Company will accept questions received through the close of business on Friday, March 12, 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’s name, 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 Wednesday, March 17, 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; financial stability of our major customers; our ability to reduce our losses 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
