NEWARK, NJ — June
2, 2016: IDT Corporation (NYSE: IDT)
reported diluted earnings per share (EPS) of $0.19 and Non-GAAP diluted EPS* of
$0.38 on revenue of $355.2 million for the third quarter of its fiscal year
2016, the three months ended April 30, 2016.
3Q16
HIGHLIGHTS
(Results for 3Q16 are
compared to 3Q15)
·
IDT
completed the spin-off of its majority interest in Zedge to IDT shareholders on
June 1, 2016. Zedge now trades on the
NYSE MKT under the ticker symbol “ZDGE”; ·
Consolidated
revenue decreased to $355.2 million from $383.9 million; ·
Adjusted
EBITDA* decreased to $10.3 million from $13.6 million; ·
Income
from operations increased to $5.7 million from $2.5 million. In 3Q15, IDT recorded severance expense of
$6.2 million; ·
Diluted
EPS increased to $0.19 from $0.02; ·
Non-GAAP
diluted EPS* decreased to $0.38 from $0.43.
Management Remarks
IDT’s Chief Executive Officer
Shmuel Jonas said, “Yesterday,
IDT spun off to our stockholders our interest in Zedge as an independent public
company. The hugely popular and fast growing Zedge app for mobile device
personalization began trading the regular way on the NYSE MKT today.
“I want to congratulate the entire Zedge team, and
particularly Tom Arnoy and Jonathan Reich, and wish them good luck and much
success as an independent company. We believe Zedge has tremendous potential
and the right team to fully realize it.
“IDT delivered solid bottom line results this quarter. The sequential revenue decrease – primarily
from our wholesale carrier business – was disappointing but had a muted impact
on our bottom line. That’s largely
because the revenue we lost was very low margin, and because we continue to manage
our overhead spending even as we invest more heavily in our growth initiatives.”
3Q16 CONSOLIDATED RESULTS
$ in millions, except
EPS
|
3Q16
|
3Q15
|
2Q16
|
3Q16 -3Q15
Change (%/$)
|
Revenue
|
$355.2
|
$383.9
|
$382.5
|
(7.5)%
|
Direct
cost
|
$293.2
|
$316.5
|
$319.7
|
(7.4)%
|
Direct
cost as a percentage of revenue
|
82.6%
|
82.4%
|
83.6%
|
+20 BP
|
SG&A
expense
|
$51.6
|
$53.8
|
$51.1
|
(4.1)%
|
Depreciation
and amortization
|
$5.5
|
$4.6
|
$5.0
|
+19.5%
|
Severance
|
$0.2
|
$6.2
|
-
|
$(6.0)
|
Adjusted
EBITDA*
|
$10.3
|
$13.6
|
$11.7
|
(24.1)%
|
Income
from operations
|
$5.7
|
$2.5
|
$6.4
|
+$3.2
|
Net income
attributable to IDT
|
$4.2
|
$0.6
|
$4.1
|
+$3.6
|
Diluted
EPS
|
$0.19
|
$0.02
|
$0.18
|
+$0.17
|
Non-GAAP
net income*
|
$8.6
|
$10.1
|
$9.0
|
$(1.5)
|
Non-GAAP
diluted EPS*
|
$0.38
|
$0.43
|
$0.39
|
$(0.05)
|
Net cash
provided by operating activities
|
$10.7
|
$6.8
|
$11.2
|
$3.9
|
*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.
3Q16
OPERATING RESULTS BY SEGMENT
(Results are for 3Q16
and comparisons are to 3Q15 unless otherwise noted)
TPS
IDT’s Telecom Platform Services (TPS) segment accounted for
98.7% of IDT’s revenue in 3Q16 compared to 98.8% in 3Q15 and 98.5% in the prior
quarter. 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
totaled 6.97 billion compared to 7.15 billion (-2.5%) in 3Q15 and 7.03 billion
(-0.8%) in 2Q16. The year-over-year
decrease primarily reflects a decline in Retail Communications minutes, led
primarily by the decline in Boss Revolution voice traffic over the US-to-Mexico
corridor. Adjusting for the lower number
of days in our fiscal Q3 as compared to our fiscal Q2, TPS minutes of use,
including Boss Revolution voice traffic, actually increased by 1.4%.
TPS’ revenue was $350.4 million
compared to $379.1 million (-7.6%) in the year ago quarter and $376.7 million
(-7.0%) in the prior quarter. The year
over year decrease is the result of declines in revenue within the Retail
Communications and Wholesale Carrier Services verticals. The sequential decrease was generated
predominantly by a decline in Wholesale Carrier Services’ revenues.
TPS Revenue by Business Vertical
($
in millions)
|
3Q16
|
3Q15
|
2Q16
|
3Q16 -3Q15
% Change
in Revenue
|
3Q16-3Q15
% Change in Minutes of Use
|
3Q16
Revenue as a % of all TPS Revenue
|
Retail Communications
|
$164.5
|
$183.0
|
$168.6
|
(10.1)%
|
(11.5)%
|
46.9%
|
Wholesale Carrier Services
|
$123.3
|
$134.9
|
$147.2
|
(8.6)%
|
2.6%
|
35.2%
|
Payment Services
|
$55.0
|
$51.6
|
$53.3
|
+6.5%
|
na
|
15.7%
|
Hosted Platform Solutions
|
$7.6
|
$9.5
|
$7.6
|
(20.1)%
|
(16.0)%
|
2.2%
|
Total TPS
|
$350.4
|
$379.1
|
$376.7
|
(7.6)%
|
(2.5)%
|
100.0%
|
·
Retail Communications – Revenue decreased 10.1%
year over year, driven primarily by lower sales of traditional prepaid cards in
the US and overseas. Sales of IDT’s flagship Boss Revolution international
calling service, which is the dominant offering in the Retail Communications
vertical, declined 4.5% year over year.
The year over year revenue decline at Boss Revolution primarily reflects
the impact of a move toward deregulation of Mexico’s telecommunications
markets. As discussed in prior quarters,
deregulation led to a dramatic reduction in the cost of terminating calls from
the US to Mexico-- formerly Boss Revolution’s largest calling corridor. Exclusive of the US to Mexico route, revenue generated
by Boss Revolution’s international calling service increased in 3Q16 by
approximately 1% compared to the year ago quarter. On a per-day basis, Retail Communications
revenue decreased 0.3% compared to 2Q16.
Sales of the Boss Revolution calling service increased 1.1% on a per-day
basis but the increase did not fully offset the continued decline in sales of
traditional prepaid card products.
- Wholesale Carrier
Services – Revenue decreased 8.6% year over year on a traffic mix-shift to
lower revenue per minute corridors that more than offset a 2.6% increase
in minutes of use. Sequentially,
revenue decreased 16.3% reflecting the loss of several high volume, but
very low margin, customers.
- Payment Services – Revenue increased 6.5% year over
year on continued increases in sales of airtime top-up services
supplemented by the expansion of IDT’s early stage international money
transfer business.
- Hosted Platform Solutions - Revenue decreased by
20.1% year over year, in-line with expectations and reflective of
reductions in rates and subscribers for telephony services provided by IDT
to its cable operator customers.
TPS’
direct cost of revenue as a percentage of TPS’ revenue was 83.4% in 3Q16, an
increase of 30 basis points year over year, and a decrease of 120 basis points
sequentially, in both cases mostly due to changes in the revenue mix between
sales of higher margin Retail Communications revenues as compared to relatively
lower margin Wholesale Carrier Services revenues.
TPS’
SG&A expense decreased to $46.7 million from $48.6 million (-3.9%) in 3Q15
and from $46.8 million (-0.1%) in 2Q16.
The year over year decrease primarily reflects reduced employee
compensation costs, after headcount reductions implemented in fiscal 2015,
lower marketing and advertising expense, and a reduction in legal fees.
TPS’
Adjusted EBITDA decreased to $11.5 million from $15.3 million (-24.8%) in 3Q15
and increased from $11.3 million (+1.8%) in 2Q16. The year over year decrease was mostly due to
the decrease in revenues and increase in direct cost as a percentage of
revenue, partially offset by the reduction in SG&A expense.
TPS’
depreciation and amortization expense was $4.9 million in 3Q16, an increase
from $4.1 million (+20.9%) in 3Q15 and $4.7 million (+6.1%) in 2Q16. Depreciation increased due to higher levels
of capital expenditures in recent periods to support new product development,
including IDT Messaging, PICUP, and the Boss Revolution Calling App.
TPS’
income from operations increased to $6.3 million from $5.6 million (+12.8%) in
3Q15 and was unchanged compared to 2Q16.
Income from operations included the impact of severance expense of $0.2
million in 3Q16 and $5.6 million in 3Q15.
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 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 $1.7 million
and income from operations was $351 thousand.
ALL OTHER
All
Other included 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. Zedge was spun off from IDT on June 1, 2016.
Zedge’s
revenue in 3Q16 was $2.6 million, an increase from $2.2 million (+17.0%) in
3Q15 and a decrease from $3.5 million (-27.1%) in 2Q16. The year over year increase was driven by
continued user growth and increased customer engagement. The sequential
decrease conformed to expectation and reflected seasonal factors that increased
revenue in the second quarter. Zedge
generated income from operations of $239 thousand in 3Q16 compared $123
thousand in the year ago quarter, and $1.7 million in 2Q16.
All
Other’s revenue was $3.1 million in 3Q16 compared to $2.7 million (+14.1%) in
3Q15 and to $4.0 million (-23.1%) in 3Q16.
Zedge and IDT’s real estate holdings generated all of All Other’s
revenue in each of these periods.
All
Other’s income from operations was $1.8 million in 3Q16 compared to $1.6
million in 3Q15 and unchanged compared to 2Q16.
Income from operations in 3Q16 and 3Q15 included gains of $1.1 million
and $1.2 million, respectively on the sale of Fabrix.
OTHER CONSOLIDATED RESULTS
Consolidated
results for all periods presented include corporate overhead. In 3Q16, corporate G&A expense was $2.8
million compared to $2.9 million (-2.0%) in the year ago quarter and $2.1
million (+35.9%) in the prior quarter.
The sequential increase reflected increased legal expense.
Net
income attributable to IDT increased to $4.2 million from $565 thousand in the
year ago quarter and $4.1 million in the prior quarter. The year over year improvement was due
primarily to severance expense of $6.2 million in the year ago quarter and the
reduction in SG&A expense.
At
April 30, 2016, IDT had $147.8 million in unrestricted cash, cash equivalents
and marketable securities. Additionally, at that date, IDT reported $99.8
million in current restricted cash and cash equivalents, nearly all of which
represents customer deposits held by IDT’s Gibraltar-based bank. At quarter end, current assets totaled $336.8
million and current liabilities were $335.3 million.
Net
cash provided by operating activities during 3Q16 was $10.7 million compared to
$6.8 million during 3Q15 and $11.2 million in 2Q16. For the same periods, capital expenditures were
$4.7 million compared to $8.9 million and $3.7 million, respectively.
DIVIDEND
IDT’s
Board of Directors has declared a dividend of $0.19 per share of Class A and
Class B common stock for the third quarter of its fiscal year 2016. The dividend will be paid on or about June
17, 2016 to stockholders of record as of the close of business on June 13th.
The ex-dividend date will be June 9th. This distribution will be an ordinary
dividend for tax purposes.
IDT
EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
IDT
will host an earnings conference call at 5:30 PM ET today 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’.
A
recording of the conference call can be accessed one hour after the call
concludes through June 9, 2016 by dialing 1-877-870-5176 (toll free from the
US) or 1-858-384-5517 (international) and providing this conference code:
10086892. The recording will also be
available via streaming audio at the IDT investor relations website (www.idt.net/ir) shortly after the call
concludes.
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 on the investor relations portion of IDT’s website.
About IDT Corporation:
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
invest@idt.net
(973) 438-3034
NOTE: PLEASE SEE ATTACHED PDF OF COMPLETE RELEASE FOR FINANCIAL STATEMENTS AND NON-GAAP RECONCILIATIONS |