NEWARK, NJ — September 28, 2016: IDT
Corporation (NYSE: IDT) reported diluted earnings per share (EPS) of $0.48 and
Non-GAAP diluted EPS* of $0.50 on revenue of $368.1 million for the fourth
quarter of its fiscal year 2016, the three months ended July 31, 2016. For FY 2016, IDT reported diluted EPS of $1.03 and
Non-GAAP diluted EPS* of $1.63 on revenue of $1,496.3 million.
FOURTH QUARTER AND FULL FISCAL YEAR 2016 HIGHLIGHTS
(Results for 4Q16 are compared to 4Q15, and
results for FY 2016 are compared to FY 2015).
- Revenue in 4Q16 was $368.1 million compared to $405.8
million. FY 2016 revenue was $1,496.3
million compared to $1,596.8 million;
- Income from operations in 4Q16 was $6.2 million compared
to $7.2 million. FY 2016 income from
operations was $26.2 million compared to $93.1 million;
-
Adjusted EBITDA* in 4Q16 was $10.0 million compared
to $12.4 million. FY 2016 Adjusted
EBITDA* was $45.0 million compared to $44.5 million;
- Diluted EPS in 4Q16 was $0.48 compared
to $0.05. FY 2016 diluted EPS was $1.03 compared
to $3.63;
- Non-GAAP diluted EPS* in 4Q16 was $0.50 compared
to $0.25. FY 2016 Non-GAAP diluted EPS*
was $1.63 compared to $1.27;
- IDT has declared a dividend of $0.19 per share
for 4Q16 to be paid on or about October 20, 2016;
- · On June 1, 2016, IDT completed the spin-off of
Zedge to its stockholders.
Management Remarks
Shmuel Jonas, IDT’s Chief Executive Officer, said, “Our
financial results in the fourth quarter were consistent with recent
trends. Our core telecom offerings
continued to face revenue and margin pressure stemming in significant part from
deregulation of the Mexico telecom market.
The impact was mitigated by our continued focus on reducing SG&A
expense.”
“Operationally, our BOSS Revolution international money
transfer business, Net2Phone’s unified communications as a service offerings
and our National Retail Solutions initiative are all meeting or beating
expectations. As they achieve scale,
each of these initiatives has the potential to become a significant contributor
to IDT’s bottom line. In addition, we
beta launched two new products after the quarter close -- PicuP, a telephony
solution for very small businesses and, just two weeks ago, the next generation
of the BOSS Revolution app with free peer-to-peer calling and messaging. Both are getting rave reviews. Across the IDT enterprise, we are
intensifying our commitment to developing, deploying, investing and supporting
innovative growth initiatives,” Mr. Jonas added.
*Throughout this release, Adjusted EBITDA,
Non-GAAP Net Income, and Non-GAAP diluted EPS for all periods presented are
non-GAAP measures intended to provide useful information that supplements IDT’s
or the relevant segment’s core results in accordance with GAAP. Please refer to the Reconciliation of
Non-GAAP Financial Measures at the end of this release for an explanation of
these terms and their respective reconciliation to the most directly comparable
GAAP measure.
4Q16
AND FULL FISCAL YEAR 2016 CONSOLIDATED RESULTS
Results
(in
millions, except EPS)
|
4Q16
|
3Q16
|
4Q15
|
4Q16 -4Q15
Change (%/$)
|
FY 2016
|
FY 2015
|
Fiscal 2016 -Fiscal 2015
Change (%/$)
|
Revenue
|
$368.1
|
$355.2
|
$405.8
|
(9.3)%
|
$1,496.3
|
$1,569.8
|
(6.3)%
|
Direct
cost of revenue
|
$309.1
|
$293.2
|
$339.3
|
(8.9)%
|
$1,246.6
|
$1,328.4
|
(6.2)%
|
Direct cost of revenue as a percentage of revenue
|
84.0%
|
82.6%
|
83.6%
|
+40 BP
|
83.3%
|
83.2%
|
+10 BP
|
SG&A
expense
|
$48.9
|
$51.6
|
$54.1
|
(9.5)%
|
$204.7
|
$222.2
|
(7.9)%
|
Depreciation
and amortization
|
$5.0
|
$5.5
|
$5.0
|
+0.7%
|
$20.5
|
$18.4
|
+11.5%
|
Severance
expense
|
$6.3
|
$0.2
|
$0.2
|
+$6.1
|
$6.5
|
$8.4
|
-$1.9
|
Other
gains
|
$7.5
|
$1.1
|
-
|
+$7.5
|
$8.2
|
$75.3
|
-$67.1
|
Income
from operations
|
$6.2
|
$5.7
|
$7.2
|
-$1.0
|
$26.2
|
$93.1
|
-$66.9
|
Adjusted
EBITDA*
|
$10.0
|
$10.3
|
$12.4
|
(19.4)%
|
$45.0
|
$44.5
|
+1.1%
|
Net
income attributable to IDT
|
$11.0
|
$4.2
|
$1.3
|
+$9.7
|
$23.5
|
$84.5
|
-$61.0
|
Diluted
EPS
|
$0.48
|
$0.19
|
$0.05
|
+$0.43
|
$1.03
|
$3.63
|
($2.60)
|
Non-GAAP
net income*
|
$11.5
|
$8.6
|
$5.7
|
+$5.8
|
$37.3
|
$29.5
|
+$7.8
|
Non-GAAP
diluted EPS*
|
$0.50
|
$0.38
|
$0.25
|
+$0.25
|
$1.63
|
$1.27
|
+$0.36
|
Net cash
provided by operating activities
|
$13.2
|
$10.7
|
$2.8
|
+$10.4
|
$49.1
|
$30.5
|
+60.7%
|
4Q16 AND
FY 2016 OPERATING RESULTS BY SEGMENT
(Results are for 4Q16 unless otherwise
noted).
TPS
IDT’s Telecom Platform Services (TPS) segment accounted for 99.2%
of IDT’s revenue in 4Q16 and 98.8% in FY 2016.
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
(MOU) were 7.08 billion, a decrease from 7.47 billion (-5.1%) in 4Q15 and an increase
from 6.97 billion (+1.6%) in 3Q16. The
year over year decrease reflects declines in MOU in Retail Communications
including both BOSS Revolution and traditional calling cards, and in Wholesale
Carrier Services, while the sequential increase was due mostly to 4Q16 having 92
days compared to 90 in the prior quarter. For FY 2016, TPS’s MOU were 28.25 billion, a
decrease from 29.31 billion (-3.6%) in FY 2015, primarily due to a decrease in
Retail Communications MOU.
TPS’ revenue was $365.1 million,
a decrease from $400.8 million (-8.9%) in the year ago quarter and an increase
from $350.4 million (+4.2%) in the prior quarter. The sequential quarterly
increase was driven by the greater number of days in the fourth quarter and an
increase in Wholesale Carrier Services’ revenue. For FY 2016, TPS’ revenue was $1,477.9
million, a decrease from $1,572.7 million (-6.0%) in FY 2015.
TPS
Revenue by Product Category
(in
millions)
|
4Q16
|
3Q16
|
4Q15
|
4Q16-4Q15 % Change in Revenue
|
4Q16 Revenue as a % of Total TPS Revenue
|
Retail Communications
|
$165.3
|
$164.5
|
$185.0
|
(10.6)%
|
45.3%
|
Wholesale Carrier Services
|
$136.5
|
$123.3
|
$151.5
|
(9.9)%
|
37.4%
|
Payment Services
|
$55.5
|
$55.0
|
$55.7
|
(0.5)%
|
15.2%
|
Hosted Platform Solutions
|
$7.8
|
$7.6
|
$8.6
|
(9.9)%
|
2.1%
|
Total TPS
|
$365.1
|
$350.4
|
$400.8
|
(8.9)%
|
100.0%
|
TPS
Revenue by Product Category
(in
millions)
|
FY 2016
|
FY 2015
|
FY16-FY15 % Change in Revenue
|
FY16 Revenue as a % of Total TPS Revenue
|
Retail Communications
|
$672.2
|
$735.0
|
(8.6)%
|
45.5%
|
Wholesale Carrier Services
|
$555.1
|
$590.9
|
(6.1)%
|
37.6%
|
Payment Services
|
$219.2
|
$208.3
|
+5.2%
|
14.8%
|
Hosted Platform Solutions
|
$31.4
|
$38.5
|
(18.5)%
|
2.1%
|
Total TPS
|
$1,477.9
|
$1,572.7
|
(6.0)%
|
100.0%
|
Retail Communications revenue was $165.3 million
in 4Q16, a decrease from $185.0 million (-10.6%) in the year ago quarter, due
to declines in our BOSS Revolution PIN-less service’s sales on the US - Mexico
corridor and in sales of our legacy traditional card products both in the U.S.
and overseas. For FY
2016, Retail Communications revenue totaled $672.2 million, a decrease from
$735.0 million (-8.6%) in FY 2015.
Wholesale Carrier Services’ revenue
decreased to $136.5 million from $151.5 million (-9.9%) in 4Q15. For the full year, Wholesale Carrier
Services’ revenue decreased to $555.1 million from $590.9 million (-6.1%) in FY
2015. The quarterly and full year decreases resulted primarily from the
termination of a Latin American pricing opportunity pertaining to local currency
exchange rate disparities coupled with declining sales of traditional carrier
services.
Payment Services’ revenue decreased to $55.5 million from
$55.7 million (-0.5%). The decrease
reflected declines in revenue from IDT’s Gibraltar-based bank and in sales of
International Mobile Top-Up (IMTU) products, partially offset by a 52% increase
in revenue from the BOSS Revolution international money transfer business. FY 2016 Payment Services’ revenue increased
to $219.2 million from $208.3 million (+5.2%) in FY 2015. The full year
increase was driven primarily by continued growth of both IMTU products and international
money transfer sales.
Hosted Platform Solutions’ revenue decreased to $7.8 million
from $8.6 million (-9.9%) while full year revenue declined to $31.4 million
from $38.5 million (-18.5%) for FY 2015.
The decreases were in-line with expectations as they reflected lower
rates incorporated into contract renewals with key cable telephony customers.
TPS’ direct cost of revenue as a percentage of TPS’ revenue was
84.4% in 4Q16, an increase of 10 basis points year over year and an increase of
100 basis points sequentially. For FY
2016, TPS’ direct cost of revenue was 84.1% of TPS’ revenue – unchanged from
the prior year.
TPS’ SG&A expense decreased to $44.9 million
from $49.4 million (-8.9%) in 4Q15 and from $46.7 million (-3.8%) in 3Q16. The year over year and sequential decreases
primarily reflect reduced employee compensation and legal costs. Expressed as a percentage of TPS’ revenue,
TPS’ 4Q16 SG&A remained at 12.3% compared to the year ago quarter and
dropped 100 basis points compared to the prior quarter. TPS’ SG&A expense in FY 2016 decreased to
$186.6 million from $199.6 million (-6.5%) in FY 2015, reflecting reduced
employee headcount and compensation expense, marketing and advertising costs, and
call center expense. As a percentage of
revenue, SG&A expense in FY 2016 decreased 10 basis points to 12.6% compared
to FY 2015.
TPS’ depreciation and amortization expense increased
to $4.5 million from $4.3 million (+4.1%) in 4Q15 and decreased from $4.9
million (-8.5%) in 3Q16. Depreciation increased
year-over-year due to higher levels of capital expenditures in recent periods to
support investments in new products, including Net2Phone’s ‘unified
communications as a service’ offerings, National Retail Solutions and the new BOSS
Revolution calling app with messaging. For
FY 2016, depreciation and amortization expense increased to $18.5 million from
$16.2 million (+14.7%) in FY 2015 for the same reason.
TPS’ income from operations increased to $8.9
million from $8.8 million (+0.7%) in 4Q15 and from $6.3 million (+40.3%) in 3Q16. For FY 2016, TPS’ income from operations
totaled $31.2 million compared to $27.0 million (+15.8%) in FY 2015. Income from operations in 4Q16 and FY 2016
include severance expense of $6.0 million (compared to $0.2 million in both
4Q15 and 3Q16) and a gain of $7.5 million on the sale of IDT’s Gibraltar based bank’s
member interest in Visa Europe. In FY
2015, TPS’ income from operations also included $7.7 million in severance
expense.
TPS’ Adjusted EBITDA decreased to $11.9 million
from $13.4 million (-11.3%) in 4Q15 and increased from $11.5 million (+3.4%) in
3Q16. For FY 2016, Adjusted EBITDA
decreased to $48.8 million from $50.8 million (-3.9%) in FY 2015.
CPS
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 since fiscal
2006 - maximizing revenue from current customers while maintaining SG&A and
other expenses at the minimum levels essential to operate the business. Results this quarter and fiscal year
conformed to expectations.
CPS’ revenue decreased to $1.6
million from $2.0 million (-19.2%) in 4Q15 and from $1.7 million (-5.0%) in the
prior quarter. FY 2016 revenue decreased
to $6.9 million from $8.6 million (-20.3%) in FY 2015. CPS’ income from operations decreased to $0.2
million from $0.3 million (-12.3%) in 4Q15 and $0.4 million (-31.7%) in 3Q16. Income from operations in FY 2016 was $1.2
million compared to $1.3 million (-3.2%) in FY 2015.
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.
All Other previously included Zedge, a platform and mobile
app centered on self-expression, and Fabrix, a software development company
specializing in cloud-based video storage and processing. Zedge was spun off from IDT to IDT’s
shareholders on June 1, 2016. Because the
disposition of Zedge did not meet the criteria to be reported as a discontinued
operation, Zedge’s assets, liabilities, results of operations and cash flows were
not reclassified. Accordingly, 4Q16 and FY 2016 results of operations for All
Other include only one month and ten months of Zedge activity,
respectively.
Fabrix was included in All Other until it was sold and
deconsolidated in October 2014. In FY 2015,
All Other includes two months of Fabrix’ results of operations compared to none
in FY 2016 and none in the fourth quarter of either fiscal year.
All Other’s revenue was $1.4 million, a decrease from $3.0
million (-54.5%) in 4Q15. Zedge contributed revenue of $0.8 million in 4Q16 and
$2.4 million in 4Q15. All Other’s FY 2016
revenue was $11.5 million compared to $15.4 million (-25.5%) in FY 2015. Zedge contributed $9.5 million and $9.1
million of All Other’s revenue in FY 2016 and FY 2015, respectively. In FY 2015,
Fabrix contributed revenue of $4.2 million.
All Other’s income from operations in 4Q16 was $86 thousand
compared to $449 thousand in 4Q15. Zedge generated a loss from operations of
$32 thousand in 4Q16 and income from operations of $270 thousand in the year
ago quarter. All Other’s income from
operations was $4.2 million in FY 2016 compared $78.0 million in FY 2015. Zedge contributed $2.3 million to income from
operations in FY 2016 and $100 thousand in FY 2015. Fabrix’s income from operations in FY 2015
was $948 thousand. All Other’s results also included a gain of $1.1 million in
FY 2016 and $76.9 million in FY 2015 on the sale of IDT’s interest in Fabrix.
OTHER CONSOLIDATED RESULTS
Consolidated results for all periods presented include
corporate overhead. In 4Q16, corporate G&A
expense increased to $2.7 million from $2.3 million (+15.9%) in the year ago
quarter and decreased from $2.8 million (-5.0%) in the prior quarter. Corporate G&A expense was $10.1 million
in FY 2016 compared to $10.9 million (-7.8%) in FY 2015.
4Q16 net income attributable to IDT increased to $11.0
million from $1.3 million in the year ago quarter and from $4.2 million in 3Q16.
Net income attributable to IDT in 4Q16
included a $2.7 million gain on foreign currency transactions and a benefit
from income taxes of $2.1 million. For
4Q15, net income attributable to IDT was $1.3 million including a foreign currency
transaction loss of $0.9 million and a provision for income taxes of $3.8 million. Net income attributable to IDT in 3Q16
included a foreign currency transaction gain of $0.6 million and a provision
for income taxes of $1.3 million. FY
2016 net income attributable to IDT was $23.5 million including a $1.0 million gain
on foreign currency transactions and a provision for income taxes of $4.1
million. In FY 2015, net income
attributable to IDT was $84.5 million including a $1.7 million loss on foreign
currency transactions and a provision for income taxes of $6.1 million. The full
year decrease primarily reflects the $76.9 million gain on the sale of IDT’s interest
in Fabrix in FY 2015.
At July 31, 2016, IDT had $162.5 million in unrestricted
cash, cash equivalents and marketable securities. Additionally, at that date, IDT
reported $98.8 million in current restricted cash and cash equivalents, which
included $98.5 million of customer deposits held by IDT’s Gibraltar-based
bank. Current assets and liabilities
were $339.1 million and $343.8 million, respectively.
Net cash provided by operating activities during 4Q16 was $13.2
million, compared to $2.8 million during 4Q15 and $10.7 million in 3Q16. For the same periods, capital expenditures
were $4.4 million compared to $5.7 million and $4.7 million, respectively. For FY 2016, cash provided by operating
activities was $49.1 million compared to $30.5 million in FY 2015. Capital expenditures for FY 2016 totaled
$18.4 million compared to $28.6 million in the prior year. The full year decrease in capital
expenditures pertains primarily to investments made in FY 2015 to refurbish IDT’s
headquarters building at 520 Broad Street in Newark, New Jersey.
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 the fourth quarter of
FY 2016 to be paid on or about October 20, 2016. The dividend will be paid to stockholders of
record as of the close of business on October 11, 2016. The ex-dividend date will
be October 7, 2016. This distribution will
be treated as an ordinary dividend for tax purposes.
IDT EARNINGS ANNOUNCEMENT
& SUPPLEMENTAL INFORMATION
IDT will host an earnings conference call today beginning at
5:30 PM ET 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 concludes through October 5, 2016 by dialing 1-877-870-5176
(toll free from the US) or 1-858-384-5517 (international) and providing this
conference code: 10091025. The recording
will also be available via streaming audio at the IDT investor relations
website (www.idt.net/ir) following the call.
Copies of this release - including the reconciliation of the
non-GAAP financial measures that are both used herein and referenced during
management’s discussion of results - are also available in the Investor
Relations portion of IDT’s website.
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 OF COMPLETE EARNINGS RELEASE FOR FINANCIAL STATEMENTS AND NON-GAAP RECONCILIATIONS |