· IDT Telecom Achieves Record Revenues and EBITDA
· Winstar on target for profitability by Q3 2003
· IDT Corp. Balance Sheet Features $1 Billion in Cash & Marketable Securities ($13 per Share)
NEWARK, N.J.— June 6, 2002 —IDT Corporation (NYSE: IDT.B, IDT) today reported record revenues of $401.7 million for the third quarter of its Fiscal Year 2002, the three months ended April 30, 2002. Revenues for the third quarter were up 7.4% from the second quarter, and increased 19.6% over the revenues recorded during the third quarter of Fiscal Year 2001. IDT Telcom recorded EBITDA of $25.6 million, its most successful quarter ever.
The net loss for the quarter was $49.6 million, or $0.64 per share. This compares with a net loss of $17.2 million, or $0.23 per share, in the second quarter of Fiscal Year 2002, and a net loss of $48.3 million, or $0.73 per share, in last year’s third quarter.
Our pro-forma results exclude the following three items, accounting for a loss of $55.3 million after tax:
· a loss of $26.1 million due to the results of our newly-acquired Winstar business;
· a loss of $31.4 million attributable to IDT’s noncash share of losses at Net2Phone and its subsidiaries;
· a gain of $2.2 million relating to the formation of an LLC with AT&T Corp. and Liberty Media Corp. to purchase a controlling interest in Net2Phone, Inc.
Excluding these items we would have reported a gain of $5.7 million, or $0.07 per share.
“This is the seventh consecutive quarter in which we have reported a balance sheet featuring over $1 billion in cash and marketable securities,” said Jim Courter, Vice Chairman and CEO of IDT Corporation. “Since reporting that first billion dollar balance sheet we have increased revenues by 45%. We are pleased to be reporting record Telecom EBITDA as well this quarter. Our strategy is providing stability and value in a market whose turbulence plays to our advantage.”
RESULTS OF OPERATIONS
IDT recorded a loss from operations for the third quarter of Fiscal 2002 of $42.8 million, compared to an operating loss of $27.8 million in the second quarter of Fiscal 2002, and a loss of $55.6 million in the third quarter of Fiscal 2001. Excluding the operations of the company’s Winstar division, acquired during Q2, we had an operating gain of $1.0 million, compared with a loss of $8.6 million in Q2 on that basis.
EBITDA (Earnings Before Interest, Taxes and Depreciation and Amortization, and excluding minority interests and impairment charges) in the third quarter of Fiscal 2002 amounted to a loss of $26.1 million, versus a loss of $12.9 million in the second quarter of 2002 and a loss of $36.8 million in Q3 2001. Excluding the company’s Winstar division, acquired during Q2 2002, EBITDA was a $14.8 million gain. EBITDA excluding the Winstar division was a $5.9 million gain in Q2 2002.
IDT’s core telecommunications business reported record revenues of $364.4 million for the third quarter of Fiscal 2002, representing an increase of 4.4% from the revenues recorded in the second quarter of Fiscal 2002, and up 10.0% from the same period last year. Gross margins for the Company’s core telecommunications business amounted to 24.2%, up from 21.8% in Q2 2002 (or 23.1% excluding an unusual charge related to the early termination of a bandwidth contract) and 10.4% in the prior year period. This is the highest overall gross margin reported by the Telecom division since the first quarter of Fiscal 1999. The continued improvement in Telecom gross margins reflects higher gross margins across all business lines, due to economies of scale and improved operating efficiency.
EBITDA in the quarter for the telecommunications business was $25.6 million, versus $17.0 million in the second quarter of 2002 ($21.5 million excluding the unusual charge) and a loss of $16.0 million in Q3 2001. The EBITDA margin improved from 4.9% in Q2 (or 6.2% excluding the unusual charge) to 7.0% in Q3. This was a record high in EBITDA dollars for Telecom, and the highest EBITDA margin percentage reported since Q3 of Fiscal 1999.
“During the third quarter of Fiscal 2002, we built upon our previous successes to deliver a third consecutive quarter of profits,” stated Motti Lichtenstein, CEO of IDT Telecom. “However, this is just the beginning. As we head toward Fiscal 2003, we will sharpen our competitive edge, as we seek to establish IDT Telecom as a leader in the Telecom industry’s post-apocalyptic era.”
IDT’s retail division posted $285.4 million in revenues for the third quarter, up 3.9% from the previous quarter, and 20.1% more than the retail revenues recorded during the same quarter last year.
Calling card revenues amounted to $255.3 million for the third quarter, up 3.0% from the previous quarter, and 20.4% more than the calling card revenues of the third quarter of Fiscal 2001. The growth in calling card revenues was fueled by the introduction of several new calling cards in the U.S., as well as the continued expansion of both the scale and the scope of European calling card operations. IDT Europe’s calling card operations witnessed growth in its core United Kingdom market, as well as in relatively new areas of penetration, such as Spain, Germany and the Netherlands.
Gross margins for calling cards were 24.1%, up from 21.6% in the second quarter of Fiscal 2002, and 11.6% in Fiscal 2001’s third quarter. Margins, which have now improved in four consecutive quarters, continued to benefit from increased scale, network efficiency improvements and reduced termination costs to our highest-volume calling destinations. The gross margin performance for calling cards during the third quarter was the highest since the first quarter of Fiscal 1999.
Looking ahead, we anticipate additional growth in both the U.S. and Europe, with European growth to be driven by increased penetration of our newer prepaid calling card markets, including Germany and Spain. We also anticipate the full launch of calling card operations in France and Belgium during the fourth quarter. Growth in the U.S. will be fueled by the introduction of new cards, featuring attractive rates to popular calling destinations, in an attempt to capture market share from weakened competitors. Over the next few quarters, we also expect to significantly ramp-up our early-stage South America prepaid calling card operations.
We expect that margins will remain at or near their current levels, with some margin slippage possible as a result of aggressive pricing on both new cards as well as on some existing cards. We expect that this factor will be partially offset by continued efficiency gains and an improved cost structure.
Consumer Long Distance
Consumer long distance revenues for the quarter were up 12.7% from the previous quarter, and more than doubled from the levels recorded during the same quarter in Fiscal 2001, due to the continued aggressive growth of our $0.05 per minute long distance plan. We currently have approximately 475,000 active long distance customers. Gross margins for the consumer long distance business were 55.8%, up from 54.7% in the second quarter of Fiscal 2002, as we continue to benefit from increased scale.
We anticipate that the consumer long distance business will continue on its growth track into Fiscal 2003.
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