NEWARK, NJ — March 6, 2017: IDT
Corporation (NYSE: IDT) reported diluted earnings per share (EPS) of $0.04 and
Non-GAAP diluted EPS* of $0.27 on revenue of $367.6 million for the second quarter
of its fiscal year 2017, the three months ended January 31, 2017.
HIGHLIGHTS
(Results for 2Q17 compared to 2Q16)
·
Revenue of $367.6 million compared to $382.5 million;
·
Income from operations of $3.1 million compared
to $6.4 million;
·
Adjusted EBITDA* of $9.3 million compared to $11.7
million;
·
Diluted EPS of $0.04 compared to
$0.18;
·
Non-GAAP diluted EPS* of $0.27 compared to $0.39;
·
IDT has declared a dividend of $0.19 per share
for 2Q17 to be paid on or about March 24, 2017.
*Throughout this release, Non-GAAP EPS, Adjusted
EBITDA, and Non-GAAP Net Income 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.
REMARKS BY SHMUEL JONAS, CEO OF IDT
CORPORATION
“We made good progress in the second quarter building,
deploying and scaling up the applications that will drive our growth going
forward. We introduced the BOSS
Revolution Money app including our flagship international money transfer
service and released a major update of the BOSS Revolution calling app including
messaging and free peer-to-peer calling. The two apps now work in tandem to
provide a seamless user experience and convenient access to many of our
consumer voice and payment offerings. We
also continued rolling out the new Boss Revolution retailer portal across our
nationwide network of stores. This upgrade makes it much easier for retailers
to sell all BOSS Revolution products and services.
“Our National Retail Solutions (NRS) and our net2phone UCaaS
businesses, for example, are posting excellent results. NRS has increased the
number of bodegas and retailers operating its POS terminals 10-fold over the
past year, while net2phone quadrupled its customer base during the same
period.
“Financial results for the second quarter were fairly
consistent with recent trends. Year over
year, our cost cutting initiatives partially offset the impact to our bottom
line resulting from the decrease in revenue.
Sequentially, we held revenue relatively flat, while SG&A expense
increased as we stepped up investment in our growth initiatives. Going forward,
we will continue to keep a close eye on our overhead expense.”
2Q17 CONSOLIDATED RESULTS
Results
(in
millions, except EPS)
|
2Q17
|
1Q17
|
2Q16
|
2Q17 - 2Q16
Change (%/$)
|
Revenue
|
$367.6
|
$369.2
|
$382.5
|
(3.9)%
|
Direct
cost of revenue
|
$310.9
|
$313.0
|
$319.7
|
(2.8)%
|
Direct cost of revenue as a percentage of revenue
|
84.6%
|
84.8%
|
83.6%
|
+100 BP
|
SG&A
expense
|
$47.3
|
$45.4
|
$51.1
|
(7.3)%
|
Depreciation
and amortization
|
$5.3
|
$5.3
|
$5.0
|
+6.6%
|
Income
from operations
|
$3.1
|
$5.2
|
$6.4
|
$(3.3)
|
Adjusted
EBITDA*
|
$9.3
|
$10.7
|
$11.7
|
$(2.4)
|
Net
income attributable to IDT
|
$0.9
|
$21.9
|
$4.1
|
$(3.2)
|
Diluted earnings
per share
|
$0.04
|
$0.96
|
$0.18
|
$(0.14)
|
Non-GAAP
net income*
|
$6.1
|
$10.1
|
$9.0
|
$(2.9)
|
Non-GAAP
diluted EPS*
|
$0.27
|
$0.44
|
$0.39
|
$(0.12)
|
Consolidated results in 2Q16 include the results of Zedge, which
was spun off to IDT stockholders on June 1, 2016. Zedge contributed $3.5 million in revenue,
$1.7 million in income from operations, and $1.6 million in Adjusted EBITDA in
2Q16, and had no contribution in fiscal 2017.
Consolidated results for all periods presented include
corporate overhead. In 2Q17, corporate
G&A expense increased to $2.8 million from $2.1 million (+35.4%) in the
year ago quarter, primarily as a result of a $0.6 million increase in non-cash
compensation.
At January 31, 2017, IDT had $130.8
million in unrestricted cash, cash equivalents and marketable securities. In
addition, the company reported $89.4 million in current restricted cash and
cash equivalents, nearly all of which represented customer deposits held by
IDT’s Gibraltar-based bank. Current
assets totaled $304.9 million and current liabilities were $310.9 million.
Net cash used in operating activities during 2Q17 was $6.3
million, compared to net cash provided by operating activities of $11.2 million
in 2Q16. For the same periods, capital expenditures were $5.0 million compared
to $3.7 million, respectively.
2Q17 RESULTS
BY SEGMENT
(Results are for 2Q17 unless otherwise
noted).
Results
(in
millions)
|
TPS
|
UCaaS
|
CPS
|
ALL OTHER
|
2Q17
|
2Q16
|
2Q17
|
2Q16
|
2Q17
|
2Q16
|
2Q17
|
2Q16
|
Revenue
|
$358.5
|
$370.6
|
$7.1
|
$6.1
|
$1.4
|
$1.8
|
$0.5
|
$4.0
|
Direct
cost of revenue
|
$307.3
|
$315.5
|
$2.9
|
$3.2
|
$0.6
|
$0.8
|
-
|
$0.3
|
SG&A
expense
|
$40.2
|
$43.9
|
$3.8
|
$2.8
|
$0.5
|
$0.7
|
-
|
$1.6
|
Depreciation
and amortization
|
$4.0
|
$4.0
|
$0.9
|
$0.7
|
-
|
-
|
$0.4
|
$0.3
|
Income (loss)
from operations
|
$6.9
|
$6.9
|
$(0.5)
|
$(0.6)
|
$0.2
|
$0.3
|
$0.1
|
$1.8
|
Adjusted
EBITDA*
|
$10.9
|
$11.2
|
$0.4
|
$0.1
|
$0.2
|
$0.3
|
$0.5
|
$2.2
|
Telecom Platform
Services (TPS)
The Telecom Platform Services segment accounted for 97.5% of
IDT’s revenue in 2Q17 compared to 96.9% in 2Q16. TPS markets and distributes multiple
communications and payment services across three broad business categories:
Retail Communications, Wholesale Carrier Services and Payment Services.
TPS’ minutes of use (MOU) in 2Q17 were 6.77 billion, a
decrease from 6.84 billion (-1.1%) in 2Q16.
TPS’ revenue in 2Q17 was $358.5 million, a decrease from
$370.6 million (-3.3%) in the year ago quarter.
Within TPS, Retail Communications’ revenue declined 8.2%
year over year to $153.2 million. TPS’
dominant offering, the popular BOSS Revolution® calling service, has been
impacted by increased competition from wireless operators’ “unlimited”
offerings and the rise of over-the-top voice and messaging. The industry-wide steep pricing declines on
the US to Mexico corridor in recent years also contributed to the year over
year decrease in TPS’ revenue, but were not a significant factor sequentially.
BOSS Revolution calls from the US to Mexico generated less than 2% of TPS’ revenue
in 2Q17.
Wholesale Carrier Services’ revenue decreased 3.1% year over
year to $145.8 million, primarily because of a decrease in sales to small and
medium sized carrier customers who utilize IDT’s self-service, web-based
prepaid termination services platform, and due to the absence of certain
exchange rate driven arbitrage-pricing opportunities that existed in the year
ago quarter.
Payment Services’ revenue jumped 11.8% to $59.6 million. The
increase in Payment Services revenue was generated predominantly by growth in our
international mobile top up and money transfer businesses.
TPS’ direct cost of revenue in 2Q17, expressed as a percentage
of TPS’ revenue, was 85.7%, an increase of 60 basis points year over, primarily
reflecting competitive margin pressure on both our BOSS Revolution and
wholesale carrier offerings.
TPS’ SG&A expense in 2Q17 of $40.2 million represented
11.2% of TPS’ revenue in 2Q17, a 70 basis points decrease compared to the year
ago quarter, primarily resulting from reduced headcount.
TPS’ income from operations was $6.9 million in both 2Q17
and 2Q16, while Adjusted EBITDA for the same periods were $10.9 million and $11.2
million, respectively, as the reduction in SG&A expense mostly offset the
impact of the decrease in revenue.
Unified
Communications as a Service (UCaaS)
The UCaaS segment is comprised of offerings from IDT’s net2phone®
division, including (1) cable telephony, (2) hosted PBX, (3) SIP trunking,
which supports inbound and outbound domestic and international calling from an
IP PBX, and (4) PicuP, a highly-automated business phone service that answers,
routes and manages voice calls.
UCaaS’ revenue in 2Q17 increased to $7.1 million from $6.1
million in 2Q16, including a 230.6% increase in revenue from net2phone’s hosted
PBX offering. The segment’s two largest
offerings - cable telephony and SIP trunking - also posted year over year gains.
UCaaS’ direct cost of revenue expressed as a percentage of revenue
decreased from 51.7% in 2Q16 to 41.0% in 2Q17, an improvement of 1070 basis
points, as its business continued to scale.
SG&A expense for the UCaaS segment increased to $3.8
million in 2Q17 from $2.8 million (+33.5%) in 2Q16. As a percentage of UCaaS’ revenue, SG&A
in 2Q17 increased 660 basis points year over year to 53.0%, as net2phone ramped
up its investment in technology and expanded the scope of its sales and
marketing efforts.
UCaaS’ loss from operations narrowed to $464 thousand in
2Q17 from $576 thousand in 2Q16. Adjusted
EBITDA increased to $430 thousand in 2Q17 from $117 thousand over the same
period.
Consumer Phone
Services (CPS)
The Consumer Phone Services segment sells local and long
distance services in the U.S., marketed under the brand name IDT America. CPS has been in harvest mode for more than a
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.
All Other
All Other includes IDT’s real estate holdings, comprised of
its public garage in Newark and commercial properties in Newark, Piscataway and
Jerusalem, as well as other small businesses and investments, including an
investment in Cornerstone Pharmaceuticals, Inc.
Cornerstone is a clinical stage, oncology-focused
pharmaceutical company committed to the development and commercialization of
therapies that exploit the metabolic differences between normal cells and
cancer cells.
All Other previously included Zedge, a platform and mobile
app centered on self-expression. Zedge
was fully spun off from IDT to IDT’s shareholders on June 1, 2016. Because the disposition of IDT’s interest in
Zedge did not meet the criteria to be reported as a discontinued operation,
Zedge’s results of operations and cash flows continue to be included in prior
comparative periods.
All Other’s revenue in 2Q17 was $0.5 million, a decrease
from $4.0 million (-87.7%) in 2Q16. Exclusive of Zedge, revenue in 2Q16 was $0.5
million.
All Other’s income from operations in 2Q17 was $82 thousand
compared to $1.8 million (-95.6%) in 2Q16. Exclusive of Zedge, income from
operations in 2Q16 was $115 thousand.
DIVIDEND
IDT’s Board of Directors has declared a quarterly dividend of
$0.19 per share of Class A and Class B common stock for 2Q17 to be paid on or
about March 24, 2017. The dividend will
be paid to stockholders of record as of the close of business on March 17th.
The ex-dividend date will be March 15th. This distribution will be treated as a return
of capital for tax purposes.
IDT EARNINGS ANNOUNCEMENT
& SUPPLEMENTAL INFORMATION
This release is available for download in the “For Investors”
section of the IDT Corporation website (http://idt.net/ir)
and has been filed on a current report (Form 8-K) with the SEC.
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 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.
A recording of the conference call can be accessed one
hour after the call, and will be available through March 13, 2017, by dialing
1-844-512-2921 (toll free from the US) or 1-412-317-6671 (international) and
providing this pin code: 10101016. The
recording will also be available via streaming audio at the IDT investor
relations website (www.idt.net/ir) following the call.
About IDT:
IDT 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. For more information on IDT, visit www.idt.net.
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.
Contact: IDT
Corporation Investor Relations Bill
Ulrey william.ulrey@idt.net 973-438-3838 PLEASE SEE ATTACHED PDF FILE OF COMPLETE EARNINGS RELEASE FOR FINANCIAL STATEMENTS AND NON-GAAP RECONCILIATION |