NEWARK, NJ — June 4, 2015: IDT
Corporation (NYSE: IDT), a provider of telecommunications and payment services primarily
to immigrant communities, reported income of $0.02 per diluted share (EPS) and
Non-GAAP diluted EPS* of $0.43 on revenue of $383.9 million for the third
quarter of its fiscal year 2015, the three months ended April 30, 2015. IDT has declared a dividend of $0.18 per share for the
third quarter of fiscal 2015.
THIRD QUARTER HIGHLIGHTS & CONSOLIDATED FINANCIAL RESULTS**
·
Consolidated revenue decreased to $383.9 million
from $403.8 million. In 3Q14, Fabrix contributed
$4.5 million in revenue. It was sold and
deconsolidated in 1Q15;
·
Boss Revolution international calling revenue
increased 12.2% year over year;
·
Zedge revenue increased by 34.9% year over year
to $2.2 million;
·
Direct cost decreased to $316.5 million from
$332.4 million;
·
SG&A expense decreased to $53.8 million from
$55.5 million;
·
R&D expense was $0.0 compared to $2.5
million (attributable to Fabrix);
·
Adjusted EBITDA* increased to $13.6 million from
$13.3 million;
·
Income from operations, including a non-routine charge
of $6.2 million for severance costs related to a reduction in employee
headcount, decreased to $2.5 million from $9.2 million;
·
Net income attributable to IDT decreased to $0.6
million from $5.0 million;
·
Diluted EPS decreased to $0.02 from $0.22;
·
Non-GAAP net income* increased to $10.1 million from
$8.6 million;
·
Non-GAAP diluted EPS* increased to $0.43 from
$0.37.
Shmuel Jonas,
IDT’s Chief Executive Officer, said, “We generated $13.6 million in Adjusted
EBITDA during the third quarter led by strong performance in our Telecom
business. That is a $0.3 million increase from the year ago quarter, and a $5.6
million improvement from the prior quarter, despite the fact that the third
quarter is three days shorter than the second.
In fact, we achieved the highest level of Adjusted EBITDA since before
our spin-off of Genie Energy in 2011.
Moreover, some of the factors driving our Adjusted EBITDA growth should
remain impactful going forward. Zedge
also had another good quarter, with robust year over year revenue growth and
increases in both its user base and revenue per user.”
* 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.
** Throughout
this release, unless otherwise noted, results are for 3Q15 and are compared to
3Q14. 3Q14 financial results include
Fabrix results: $4.5 million in revenue, $0.7 million in direct cost, $0.9
million in SG&A expense, $2.5 million in research and development, and $0.4
million in Adjusted EBITDA. Fabrix was
sold and deconsolidated in 1Q15.
3Q15 OPERATING RESULTS BY SEGMENT
TPS
IDT’s Telecom Platform Services (TPS) segment accounted for 98.8%
of IDT’s revenue in 3Q15 compared to 97.7% in 3Q14. TPS markets and distributes multiple
communications and payment services across four broad business verticals:
Retail Communications, Wholesale Termination Services, Payment Services and
Hosted Platform Solutions.
TPS’ minutes of use decreased
5.9% to 7.15 billion from 7.59 billion, primarily due to a decline in Wholesale
Termination Services minutes of use. TPS’
3Q15 revenue was $379.1 million, a decrease from $394.6 million (-3.9%) in the
year ago quarter.
TPS Revenue by Product Category
(in
millions)
|
3Q15
|
2Q15
|
3Q14
|
3Q15 -3Q14
Change
|
3Q15 revenue as a percentage of all TPS revenue
|
Retail Communications
|
$182.3
|
$181.4
|
$172.5
|
+5.7%
|
48.1%
|
Wholesale Termination
Services
|
$135.6
|
$147.8
|
$161.0
|
(15.7)%
|
35.8%
|
Payment Services
|
$51.7
|
$49.8
|
$50.2
|
+2.9%
|
13.6%
|
Hosted Platform Solutions
|
$9.5
|
$9.9
|
$10.9
|
(13.4)%
|
2.5%
|
Total TPS Revenue
|
$379.1
|
$388.9
|
$394.6
|
(3.9)%
|
100.0%
|
·
Retail Communications minutes of use decreased
2.9% year over year while revenue increased 5.7%. The increase in Retail Communications’ revenue
partly reflects a 12.2% year over year increase in international calling services
sales on the Boss Revolution platform. The
increase in per minute revenue reflects a shift in the composition of Retail
Communications’ calling destinations toward higher per-minute rate destinations,
a reduction in Boss Revolution promotional incentives, and a non-recurring contractual
expiration of unused calling card minutes from certain private label calling
card offerings. The growth in Boss Revolution calling services revenue was partially
offset by continued declines in sales of traditional disposable prepaid calling
cards in the U.S. and overseas.
·
Wholesale Termination Services’ minutes of use decreased
by 7.3% compared to the year ago quarter and revenue decreased 15.7%. In line with the trends that IDT has reported
over the past year, the overall wholesale traffic mix continued to shift
towards lower revenue but higher margin per minute destinations while the
average underlying cost of termination continued to decline. As a result, the decreases in the minutes of
use and in revenue had a minimal impact on gross profit. In addition, exchange-rate driven arbitrage
pricing opportunities in Latin America that existed in 3Q14 did not impact 3Q15.
TPS’ direct cost of revenue as a percentage of TPS’ revenue was
83.1% in 3Q15, a decrease of 60 basis points year over year. This improvement is due mostly to the same favorable
reasons that impacted revenue per minute growth in Retail Communications, and
also due to the shift in wholesale traffic mix to higher margin per minute
destinations.
TPS’ SG&A expense edged up to $48.6 million in 3Q15
from $48.3 million (+0.6%) in 3Q14 due primarily to slightly higher marketing,
advertising and compensation costs.
During 3Q15, IDT implemented a reduction in its workforce headcount that
is expected to reduce personnel costs, primarily in the TPS segment, by approximately
$10 million annually beginning in the fourth quarter.
TPS’ Adjusted EBITDA in 3Q15 decreased to $15.3 million from
$15.9 million (-3.8%) in 3Q14, primarily reflecting the decrease in revenue and
modest increase in SG&A expense.
TPS’ depreciation and amortization expense increased to
$4.1 million compared to $3.5 million (+16.5%) in 3Q14, due to increased
capital investment in recent quarters in new products, including IDT Messaging,
Net2Phone Office, and feature-rich enhancements to the Boss Revolution app.
As a
result of the headcount reduction mentioned earlier, TPS recorded a severance charge
of $5.6 million in 3Q15, impacting TPS’ income from operations, which declined
to $5.6 million from $12.4 million (-54.7%) in 3Q14.
CPS
Consumer Phone Services (CPS) sells local and long distance
services in the United
States.
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.
CPS’ revenue in 3Q15 was $2.1 million compared to $2.6
million (-20.1%) in 3Q14. Income from
operations was $324 thousand in 3Q15 compared to $516 thousand in 3Q14. CPS’ results were in line with expectations.
All Other
All Other includes Zedge - a
popular platform for mobile phone consumers to obtain free customization
content, IDT’s real estate holdings and other small businesses. All Other’s results previously included Fabrix,
a software development company specializing in highly efficient cloud-based
video processing, storage and delivery. Fabrix’s operations were consolidated into IDT
for all prior periods up to the first two months of 1Q15, at which point Fabrix
was sold and deconsolidated.
Zedge’s app, available on Android, iOS and Windows Mobile,
reached 146 million in cumulative installs at April 30, 2015, increasing from 101
million (+45%) a year earlier and 134 million (+9%) at January 31, 2015. Zedge has averaged among the top thirty most
popular apps in the Google Play store in the U.S. for the last six years and is
currently in the top five most popular free apps in the iTunes Entertainment
category. As a result of Zedge’s large,
active user base, it offers advertisers, game developers, musicians and artists
a scalable, non-incentivized, user acquisition platform with global reach. Zedge’s revenue in 3Q15 was $2.2 million, a
34.9% increase year over year.
All
Other’s revenue, including Zedge, was $2.7 million in 3Q15, a decrease from
$6.6 million (-59.0%) in 3Q14. In the
year ago quarter, Fabrix contributed $4.5 million to All Other’s aggregate
revenue. All Other’s income from
operations was $1.6 million in 3Q15 compared to a loss from operations of $443
thousand in 3Q14. All Other’s income from operations in 3Q15 included a gain on
sale of interest in Fabrix of $1.2 million from adjustments to Fabrix’ working
capital and estimated transaction costs. All Other’s loss from operations in 3Q14 included
income from operations of $301 thousand generated by Fabrix.
OTHER CONSOLIDATED RESULTS
Consolidated results for all periods presented include
corporate overhead. In 3Q15, corporate
general and administrative expense decreased to $2.9 million compared to $3.3
million (-12.9%) in the year ago quarter.
Corporate loss from operation in 3Q15 was $5.0 million compared to $3.3
million in 3Q14. The loss from corporate
operations in 3Q15 included severance expense of $0.6 million and an accrual of
$1.6 million for legal matters.
At April 30, 2015, IDT had $146.1
million in unrestricted cash, cash equivalents and marketable securities. (Following
the quarter close, IDT received $23.2 million in cash proceeds that was
classified within “Receivable from sale of interest in Fabrix Systems Ltd.” at
April 30, 2015). In addition, IDT had $73.6
million in current restricted cash and cash equivalents, which included $70.2
million for customer deposits held by IDT’s Gibraltar-based bank. Current notes payable, consisting of a mortgage
on real estate, totaled $6.4 million.
Total current assets were $332.7 million and total current liabilities
were $332.9 million.
Net cash provided by operating activities during 3Q15 was $6.8
million, compared to $20.5 million during 3Q14.
For the same periods, capital expenditures were $8.9 million and $4.6
million, respectively. During 3Q15,
capital expenditures included approximately $2.5 million in costs relating to
the refurbishment of IDT’s building at 520 Broad Street in Newark, NJ. During April and May, IDT moved its Newark headquarters
from rented space into the newly renovated offices.
DIVIDENDS
The Board of Directors of IDT has declared a dividend of
$0.18 per share for the third quarter of its fiscal year 2015. The dividend will be paid on or about June 23,
2015 to Class A and Class B common stockholders of record as of the close of
business on June 15, 2015. The
ex-dividend date will be June 11, 2015. This distribution will be treated as a
return of capital for tax purposes.
IDT EARNINGS ANNOUNCEMENT
& SUPPLEMENTAL INFORMATION
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
1-877-300-8521 (from U.S.)
or 1-412-317-6026 (international) and request the IDT Corporation call.
An audio replay of the conference call will be available one hour after
the call concludes through March 16, 2015 by dialing 1-877-870-5176 (toll free
from the U.S.) or 1-858-384-5517 (international) and providing the conference
code: 10066227. The replay will also be
available by streaming from the IDT investor relations website (www.idt.net/ir) shortly after the call
concludes.
ABOUT IDT CORPORATION
IDT Corporation (NYSE: IDT), through its IDT Telecom
division, provides retail telecommunications and payment services to help
immigrants and the under-banked and small businesses conveniently and inexpensively
communicate and share resources around the world. IDT Telecom’s wholesale business is a leading
global carrier of international long distance calls. IDT also holds a majority interest in Zedge
(www.zedge.net), developer of the popular, eponymous app for mobile content
discovery and acquisition. 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 the complete earnings release for financial statements and non-GAAP reconciliations.
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