NEWARK, NJ — October 6, 2014: IDT
Corporation (NYSE: IDT) reported diluted earnings per share (EPS) of $0.33 and
Non-GAAP diluted EPS* of $0.39 on revenue of $420.7 million for the fourth
quarter of its fiscal year 2014, the three months ended July 31, 2014. For the full FY 2014, IDT earned $0.82 per diluted
share on revenue of $1,651.5 million. FY
2014 Non-GAAP diluted EPS was $1.41.
FOURTH QUARTER AND FULL YEAR 2014 HIGHLIGHTS
(Unless otherwise noted, results are
consolidated; 4Q14 are compared to 4Q13, and FY 2014 are compared to FY 2013). ·
4Q14 revenue increased to $420.7 million from $412.1
million, the 17th year over year quarterly increase in the last 18
quarters. FY 2014 revenue increased to
$1,651.5 million from $1,620.6 million;
·
4Q14 Adjusted EBITDA* increased to $10.4 million
from $9.7 million, the tenth consecutive year-over-year quarterly increase. FY
2014 Adjusted EBITDA* increased to $45.3 million from $39.4 million;
·
4Q14 income from operations increased to $5.8
million from $1.4 million (4Q13 income from operations included a non-routine impairment
of real estate of $4.4 million). FY 2014
income from operations increased to $29.8 million from $29.4 million;
·
4Q14 net income attributable to IDT increased to
$7.7 million, including a net benefit from income taxes of $4.1 million, from a
net loss of $3.7 million in 4Q13. FY 2014 net income attributable to IDT increased
to $18.8 million from $11.6 million;
·
4Q14 diluted EPS increased to
$0.33 from a diluted loss per share of $0.17. FY 2014 diluted EPS increased to $0.82 from
$0.52;
·
4Q14 non-GAAP diluted EPS* increased to $0.39 from
$0.13. FY 2014 Non-GAAP diluted EPS* increased
to $1.41 from $1.09;
·
Net cash provided by operating activities in 4Q14
increased to $16.1 million from $12.1 million; FY 2014 net cash provided by
operating activities was $45.7 million compared to $57.2 million. Shmuel Jonas, IDT’s Chief Executive
Officer, said, “Our Boss Revolution offerings continued to achieve solid year-over-year
revenue increases on both a quarterly and annual basis. During the fourth quarter, we ramped up Boss Revolution
marketing for the World Cup while working on integrating IDT Messaging into our
product offerings, which impacted SG&A and CAPEX, respectively. We also prepared to launch Net2Phone Office,
which will be our first unified communications offering targeted specifically
to small and medium sized enterprises.
“After the quarter-end, we
reached an agreement to sell our majority stake in Fabrix Systems to Ericsson and
expect the deal to close soon. While I
am sorry to see the Fabrix team leave IDT, I expect that they will continue to
be remarkably successful at Ericsson. My
IDT colleagues and I wish them all the best.
“Meanwhile, we continue to be
very excited about the organic growth at Zedge, which passed a significant
milestone this quarter, surpassing 100 million downloads on Android phones
alone. This puts Zedge in an elite group
with some of the biggest names in social media, games and mobile entertainment,”
Jonas concluded.
*Throughout this release, Adjusted EBITDA
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.
Also throughout this release, IDT’s
operating results for fiscal 2013 have been adjusted to reflect the spin-off of
Straight Path Communications Inc. in July 2013. Straight Path Communications
Inc. is accounted for as a discontinued operation for all periods presented.
4Q14 AND
FY 2014 OPERATING RESULTS BY SEGMENT
(Results are for 4Q14 unless otherwise
noted).
TPS
IDT’s Telecom Platform Services (TPS) segment accounted for 97.5%
of IDT’s revenue in 4Q14 and 97.8% in FY 2014.
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 were 7.35
billion, an increase from 7.29 billion (+0.8%) in 4Q13 and a decrease from 7.59
billion (-3.3%) in 3Q14 although the third quarter had three fewer days than
the fourth. For FY 2014, TPS’s minutes
of use were 29.59 billion, compared to 32.67 billion in FY 2013. TPS’ 4Q14 revenue was $410.1 million, an
increase from $404.2 million (+1.4%) in the year ago quarter and from $394.6
million (+3.9%) in the prior quarter. For
the full fiscal year, TPS’ revenue was $1,615.6 million, an increase from
$1,588.1 million (+1.7%) compared to FY 2013. · Retail Communications’ revenue in 4Q14 was $181.0
million, an increase from $176.7 million (+2.4%) in 4Q13 and from $172.5
million (+5.0%) in 3Q14. Sales of international calling services on the Boss
Revolution platform increased 15.9% year over year and 6.2% sequentially due to
growth in the number of active Boss Revolution retailers and customers. Year-over-year, Boss Revolution PIN-less growth
more than offset continued declines in revenue from the sale of traditional disposable
prepaid calling cards in the U.S. and overseas. Retail Communications’ revenue for FY 2014 totaled
$695.8 million compared to $656.7 million (+5.9%) in FY 2013. Retail Communications’ revenue comprised 44.1%
of TPS’ total revenue in 4Q14 and 43.1% of TPS’ FY 2014 revenue.
· Wholesale Termination Services’ revenue was $164.9
million, an increase from $164.7 million (+0.1%) in 4Q13 and an increase from $161.0
million (+2.4%) in 3Q14. For FY 2014, revenue was $672.3 million
compared to $687.9 million (-2.3%) in FY 2013. Year over year, IDT took
advantage of certain pricing shift opportunities in Latin America resulting
from disparities in local currency exchange rates to offset the decline in
revenue from other components of Wholesale Termination Services. Wholesale Termination Services’ revenue
comprised 40.2% of TPS’ total revenue in 4Q14 and 41.6% of TPS’ FY 2014 revenue.
· Payment Services’ revenue in 4Q14 was $53.2
million, an increase from $51.6 million (+3.2%) in 4Q13 and an increase from $50.2
million (+6.0%) in 3Q14. The year over
year and sequential increases primarily reflect an effort to boost market share
with more aggressive pricing on international mobile top-up sales in response
to increased competition generally among resellers. Revenue from IDT’s nascent
international money transfer business was not yet significant. For FY 2014, revenue was $202.5 million
compared to $193.5 million (+4.6%) in FY 2013.
Payment Services revenue comprised 13.0% of total TPS revenue in 4Q14
and 12.5% of TPS’ FY 2014 revenue.
·
Hosted Platform Solutions’ revenue was $10.9
million, a decrease from $11.3 million (-3.1%) in 4Q13 and relatively
unchanged from $10.9 million (+0.4%) in 3Q14.
A significant portion of Hosted Platform Solutions revenue is generated from
IDT’s cable telephony business. For FY 2014, revenue was $45.0 million compared
to $50.1 million (-10.0%) in FY 2013. During
4Q14, IDT renewed key five year contracts with some of its largest cable
clients, and intends to pursue selected growth opportunities in this line of
business that has been in harvest mode. Hosted
Platform Solutions’ revenue comprised 2.7% of total TPS revenue in 4Q14 and 2.8%
of TPS’ FY 2014 revenue. TPS’ direct cost of revenue as a percentage of TPS’ revenue was
84.6% in 4Q14, a decrease of 20 basis points year over year and an increase of
90 basis points sequentially. The year
over year improvement primarily reflects the impact from the wholesale carrier opportunity
in Latin America discussed above, and from the positive effect of the more
rapid growth of the relatively higher margin Retail Communications business compared
to the relatively lower margin Wholesale Termination Services business. For the full fiscal year, TPS’ direct cost of
revenue was 84.1% of revenue compared to 84.8% of revenue in FY 2013, primarily
reflecting the growth of relatively higher margin Retail Communications’
revenue compared to relatively lower margin Wholesale Termination Services’
revenue.
TPS’ SG&A expense increased to $51.2 million from $48.0
million (+6.6%) in 4Q13 and from $48.3 million (+5.9%) in 3Q14. Expressed as a percentage of TPS’ revenue,
TPS’ 4Q14 SG&A was 12.5%, compared to 11.9% in 4Q13 and 12.2% in 3Q14. TPS’ SG&A expense in FY 2014 increased to
$198.8 million from $189.3 million (+5.0%) in FY 2013. As a percentage of revenue, SG&A expense
in FY 2014 was 12.3% compared to 11.9% in FY 2013. The year over year,
sequential and full fiscal year increases are attributable primarily to higher
employee headcount and increased marketing and advertising expense. The latter is partially attributable to
advertising and promotions during the World Cup and to a sustained,
multi-faceted effort to continue to increase Boss Revolution’s brand awareness
and distribution reach.
TPS’ Adjusted EBITDA decreased to $12.0 million from $13.4
million (-10.6%) in 4Q13 and from $15.9 million (-24.5%) in 3Q14. The year over year and sequential decreases
reflect the increases in SG&A expense in 4Q14. For FY 2014, Adjusted EBITDA increased to $58.2
million from $51.8 million (+12.4%) in FY 2013 as the increase in revenue more
than offset the increases in direct cost of revenue and SG&A expense.
TPS’ depreciation and amortization expense was $3.6
million in 4Q14 compared to $3.3 million (+9.6%) in 4Q13 and $3.5 million (+2.6%)
in 3Q14. Depreciation increased due to
increases in capital expenditures in recent periods driven by increasing
investment in new products including IDT Messaging, Net2Phone Office, and the
Boss Revolution Calling App. For FY
2014, depreciation and amortization expense increased to $13.8 million from
$12.3 million (+11.6%) in FY 2013.
TPS’ income from operations decreased to $8.8 million from
$10.1 million (-17.1%) in 4Q13 and $12.4 million (-32.3%) in 3Q14. For FY 2014, income from operations totaled $45.1
million compared to $48.7 million (-7.4%) in FY 2013.
Zedge
Zedge owns and operates a popular online platform for
mobile phone consumers interested in obtaining free, high quality games, apps,
and mobile phone customization content including ringtones, wallpapers, and
notification sounds. Zedge’s app,
available on Android, iOS and Windows Mobile boasts more than 120 million
downloads. Zedge has averaged among the
top 20 most popular apps in the Google Play store for the last four years and
recently became a top 20 app in the Windows Mobile store. As a result of Zedge’s large, active user
base, it is able to offer advertisers, game developers, musicians and artists a
scalable, non-incentivized, user acquisition platform with global reach. IDT currently owns approximately 83% (69% on
a fully diluted basis) of Zedge.
Zedge’s revenue is generated by selling advertising
inventory across its apps and websites and from mobile game installations on
Android. Zedge’s revenue was $1.7
million in 4Q14, an increase compared to $1.62 million in 4Q13 (+7.5%) and $1.63
million in 3Q14 (+6.7%). Full year FY 2014 revenue was $6.5 million compared to
$5.8 million (+12.5%) in FY 2013. The
increases are due to the growth of Zedge’s smartphone user base on both Android
and iOS, its ability to optimize ad inventory performance and its direct
distribution relationships with premium game publishers. As of July 31, 2014, active installs on
Android and iOS were 49 million compared to 31 million a year earlier.
Zedge’s SG&A expense was $1.2 million compared to $1.1
million (+10.1%) in 4Q13 and $1.2 million (-4.2%) in the prior quarter. FY 2014 SG&A expense was $4.3 million
compared to $3.8 million (+12.7%) in FY 2013.
Zedge’s Adjusted EBITDA was $0.3 million, compared to $0.4
million in 4Q13 and $0.2 million in 3Q14.
FY 2014 Adjusted EBITDA was $1.3 million compared to $1.1 million in FY
2013. Zedge’s income from operations was
$0.1 million, compared to income from operations of $0.2 million in 4Q13 and a
loss from operations of $0.1 million in 3Q14.
Income from operations in FY 2014 and FY 2013 was $0.3 million.
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 was $2.5 million
compared to $3.4 million (-24.6%) in 4Q13 and $2.6 million (-3.5%) in the prior
quarter. FY 2014 revenue was $11.0
million compared to $14.5 million (-24.1%) in FY 2013. Income from operations was $0.4 million in 4Q14,
equal to the 4Q13 level and a slight reduction compared to $0.5 million in 3Q14. Income from operations in both FY 2014 and FY
2013 was $1.8 million. The CPS segment
business continues to decline in harvest mode.
ALL OTHER
All Other includes Fabrix, a software development company specializing
in highly efficient cloud-based video processing, storage and delivery, IDT’s
real estate holdings and other small businesses.
All Other’s revenue was $6.3 million, an increase from $3.1
million (+101.7%) in 4Q13, and from $4.9 million (+28.3%) in 3Q14. For FY 2014, revenue was $18.4 million
compared to $12.2 million (+50.7%) in FY 2013.
The quarterly and annual increases were due to Fabrix’s product sales to
cable system operators and other media content providers, who utilize Fabrix’s
software to efficiently store, process and distribute video for both remote DVR
and deep storage applications. Fabrix
generally recognizes revenue from the sale of its software licenses and support
services from the date on which the customer accepted delivered orders over the
term of the related software support agreements.
All Other’s direct cost of revenue as a percentage of
revenue was 16.3%, an improvement from 17.1% in 4Q13 but a deterioration from
13.3% in 3Q14. For FY 2014, direct cost
of revenue was 15.1% of revenue compared to 11.5% in FY 2013.
All Other’s SG&A expense was $1.9 million, an increase
from $1.5 million (+24.4%) in 4Q13, and from $1.7 million (+8.6%) in 3Q14. SG&A expense in FY 2014 was $6.8 million
compared to $5.0 million (+33.8%) in FY 2013.
Research and development expense, which is entirely incurred
by Fabrix, was $2.6 million, compared to $2.2 million in 4Q13 and $2.5 million
in 3Q14. R&D expense in FY 2014 was
$10.0 million compared to $7.2 million in FY 2013.
All Other generated Adjusted EBITDA of $0.8 million,
compared to an Adjusted EBITDA loss of $1.2 million in 4Q13 and break even in 3Q14. For FY 2014, the Adjusted EBITDA loss was
$1.1 million compared to $1.4 million in the prior year. The improvements reflect
the continued growth in Fabrix revenue.
All Other’s income from operations was $0.4 million,
compared to losses from operations of $5.9 million in 4Q13 and $0.4 million in 3Q14. For FY 2014, the loss from operations totaled
$2.0 million compared to a loss from operations of $7.4 million in FY 2013. The
loss from operations in 4Q13 and FY 2013 included a non-routine impairment of
real estate of $4.4 million.
Subsequent to the close of its fiscal year, IDT reached an
agreement to sell its interests in Fabrix to Ericsson. As previously announced, the sale price for
100% of the shares in Fabrix is $95 million, subject to working-capital and
other customary adjustments. IDT owns
approximately 78% of Fabrix on a fully diluted basis. The transaction is expected to close sometime
this month.
CONSOLIDATED RESULTS AND BALANCE SHEET
Consolidated results in all periods presented include
corporate overhead. In 4Q14, Corporate
G&A expense, was $3.1 million. Corporate
G&A was $3.4 million in 4Q13 and $3.3 million in 3Q14. For the 2014 fiscal year, Corporate G&A
expense was $14.8 million compared to $13.9 million in FY 2013.
Net income attributable to IDT in 4Q14 was $7.7 million,
compared to a net loss of $3.7 million in 4Q13.
Net income attributable to IDT in 4Q14 includes a net tax benefit of $4.1
million. Due to the recent and expected
future profitability of one of IDT’s foreign subsidiaries, IDT fully reversed the
valuation allowance that had been applied against this subsidiary’s deferred
income tax assets.
As of July 31, 2014, IDT had $166.7
million in unrestricted cash, cash equivalents and marketable securities. In
addition, IDT had $68.5 million in current and long-term restricted cash and
cash equivalents, which included $64.4 million in customer deposits held by
IDT’s Gibraltar based bank. Notes
payable, consisting of a mortgage on real estate, totaled $6.6 million. In addition, at July 31, 2014, total current
liabilities included $13.0 million outstanding under IDT Telecom’s revolving
credit facility. Total current assets
were $338.9 million and total current liabilities were $368.0 million.
Net cash provided by operating activities during 4Q14 was $16.1
million, compared to $12.1 million during 4Q13 and $20.5 million in 3Q14. Net cash provided by operating activities in
FY 2014 was $45.7 million, compared to $57.2 million in the prior year. Capital
expenditures in the corresponding full year periods were $17.0 million compared
to $14.5 million.
DIVIDEND
On October 3, 2014, IDT paid a quarterly dividend of $0.17
per share of Class A and Class B common stock for the fourth quarter of FY 2014. The dividend was paid to stockholders of
record as of the close of business on September 29, 2014. The ex-dividend date was
September 25, 2014. The distribution was
an ordinary dividend for tax purposes.
IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
IDT will host a conference call at 5:30 PM ET today, October
6th, beginning with management’s discussion of financial and
operational results, business outlook and strategy, followed by Q&A.
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 October 13, 2014 by dialing 1-877-870-5176
(toll free from the U.S.) or 1-858-384-5517 (international) and providing the
conference code: 10050706. An audio
replay will also be available by streaming from the IDT website investor
relations site: www.idt.net/ir after the
call concludes.
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 available in the Investor Relations
portion of IDT’s website, at http://www.idt.net/about/ir.
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
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 majority interests in two
companies focused on high growth industries:
Zedge (www.zedge.net), a mobile
content discovery and acquisition platform, that includes one of the most
popular Apps for Android and iOS; and Fabrix Systems (www.fabrixsystems.com), a cloud based
storage and computing platform, that provides a scalable solution optimized for
media and big data processing and delivery.
The sale of IDT’s interest in Fabrix is pending. For more information, 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 (For financial statements and Non-GAAP reconciliations, please see attached pdf document of the complete earnings release.) |