NEWARK, NJ — December 10, 2012: IDT Corporation (NYSE: IDT) reported diluted EPS of $0.16 and non-GAAP diluted EPS of $0.45 for its first quarter of fiscal 2013 (1Q13), the three months ended October 31, 2012. Howard Jonas, IDT’s Chairman and CEO, said, “We again delivered positive results this quarter. IDT Telecom generated healthy revenue, gross profit and bottom line increases, while Fabrix and Zedge are also making excellent progress. Looking ahead, we are confident that the investments we are making in technology, new product development and other initiatives will continue to drive growth.” 1Q13 HIGHLIGHTS (All comparisons are for 1Q13 to 1Q12 unless otherwise noted). · Revenue increased 6.3% to $400.6 million, the 11th consecutive quarter of year over year revenue growth · Minutes of use increased 19.0% to 8.7 billion · Gross profit increased 13.8% to $65.3 million, the highest level since fiscal 2009 · Gross margin increased 110 basis points to 16.3% · SG&A expense increased 6.7% to $55.2 million · Adjusted EBITDA increased 88.1% to $8.7 million · Income from operations of $5.2 million compared to a loss from operations of $11.1 million · Net income attributable to IDT increased to $3.6 million compared to a net loss attributable to IDT of $4.3 million · Non-GAAP net income increased to $9.9 million from $8.3 million · Diluted non-GAAP EPS of $0.45 compared to $0.37 · Net cash provided by operating activities was $25.7 million (including $12.8 million generated by Fabrix) compared to cash used in operating activities of $13.4 million · IDT re-purchased 77,843 shares of IDT Class B Common Stock for $0.8 million NOTES: Adjusted EBITDA, non-GAAP net income and non-GAAP EPS for all periods presented are non-GAAP measures intended to provide useful information that may be more indicative of IDT’s or the relevant segment’s core operating results than the nearest GAAP measures. 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. IDT’s operating results for all prior periods presented have been adjusted to reflect the spin-off of Genie Energy in October 2011. Genie Energy is accounted for as discontinued operations for all periods presented. OPERATING RESULTS BY SEGMENT TPS Telecom Platform Services (TPS), which accounted for 98% of IDT’s revenue in 1Q13, markets and distributes multiple communications and payment services across four business verticals: Retail Communications, Wholesale Termination Services, Payment Services and Hosted Platform Solutions. TPS’ revenue in 1Q13 increased 6.2% year over year and 3.6% sequentially, to $392.0 million. · Retail Communications revenue in 1Q13 increased 16.4% year over year and 4.6% sequentially to $153.7 million (39.2% of total TPS revenue in 1Q13). Continuing the trend of recent quarters, sales of pin-less calling services over the Boss Revolution platform more than offset declines in sales of traditional disposable calling cards and in retail sales in Europe. · Wholesale Termination Services revenue of $181.7 million (46.3% of total TPS revenue in 1Q13) decreased 2.8% year over year and increased 3.7% sequentially. Revenue per minute, reflecting declining per minute connectivity costs globally, continued to decline, only partially offset by an increase in minutes of use. · Payment Services revenue of $43.8 million (11.2% of total TPS revenue in 1Q13) increased 25.2% year over year and 3.6% sequentially reflecting continued growth of international mobile top-up (IMTU) sales. · Hosted Platform Solutions revenue of $12.8 million (3.3% of total TPS revenue in 1Q13) declined 14.6% year over year and 6.8% sequentially. Managed services and cable telephony, which is in harvest mode, contributed to the revenue decline. TPS’ gross profit in 1Q13 was $59.0 million, an increase of 12.1% year over year and 3.9% sequentially. TPS’ gross margin in 1Q13 was 15.1%, an 80 basis point increase compared to the year ago quarter and a 10 basis point increase sequentially. The gross margin increase in part reflects the rapid growth of relatively higher margin Retail Communications revenue compared to the slower growth of relatively lower margin Wholesale Termination Services revenue. Within Retail Communications, gross margins generated by Boss Revolution calling services strengthened during the quarter. These trends are expected to stabilize or slightly improve TPS’ gross margin throughout 2013. TPS’ SG&A expense was $47.1 million, a 4.8% increase compared to 1Q12 and 0.9% increase compared to 4Q12. The year over year increase was driven by higher legal expenses and increased employee compensation costs including sales commission. These were partially offset by a decrease in marketing expenses. IDT continues to expect that TPS’ SG&A expense will increase moderately during the remainder of fiscal 2013 as the impact of previously announced growth initiatives is fully realized. These initiatives include increased marketing, expansion of the Company’s internal sales force, and development of new technologies and products. TPS’ SG&A expense as a percentage of TPS’ revenue declined to 12.0% compared to 12.2% in the year ago quarter and 12.3% in the prior quarter. TPS’ Adjusted EBITDA in 1Q13 was $11.9 million, a 54.7% increase year over year and a 17.5% increase sequentially, largely reflecting continued revenue increases and improving gross margins generated by Retail Communications. TPS’ depreciation and amortization expense continued to decrease as IDT has deployed technologies that require less CAPEX over the past several years. In 1Q13, depreciation expense was also reduced by $0.7 million due to a non-routine adjustment of estimated capital expenditures subject to sales and use tax as a result of an audit. Depreciation and amortization expense in 1Q13 was $2.5 million, a 33.3% decrease from the year ago period and a 21.8% decrease sequentially. TPS’ income from operations was $9.0 million including the impact of a $0.4 million legal settlement charge. This compares to a loss from operations of $7.3 million in 1Q12 when TPS recorded a charge of $11.2 million for settlement of legal claims. Absent these non-routine charges, income from operations for 1Q13 would have been $9.4 million compared to $3.9 million in 1Q12. In 4Q12, TPS’ income from operations was $6.9 million. CPS Consumer Phone Services (CPS) sells local and long distance services. 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’ 1Q13 revenue was $4.0 million, compared to $5.4 million in the year ago quarter and $4.4 million in the prior quarter. Income from operations was $0.6 million, $1.2 million and $0.9 million for the same periods, respectively. The declines in revenue and income from operations were in line with management expectations. ALL OTHER All Other includes: Fabrix, a software development company specializing in highly efficient cloud-based video processing, storage and delivery; Zedge, a platform - including a popular Android app - that allows users to share and obtain content to personalize mobile phones and tablets; IDT Spectrum, which holds, leases and sells fixed wireless spectrum; ICTI, which licenses and enforces intellectual property rights primarily related to Voice-over-Internet Protocol technology; and IDT’s real estate holdings. All Other’s 1Q13 revenue was $4.5 million, a 95.6% increase compared to the year ago quarter and a 106.5% increase sequentially. The increases primarily reflect strong revenue growth at Fabrix and, to a lesser extent, at Zedge. All Other’s loss from operations was $1.6 million compared to a loss from operations of $0.9 million in the year ago quarter and a loss of $2.3 million in 4Q12. FABRIX: Fabrix’s revenue was $2.4 million in 1Q13 compared to $0.6 million in both 1Q12 and 4Q12. During the quarter, Fabrix collected $12.8 million in cash primarily from a system integrator partner pursuant to an expanded statement of work signed during 4Q12. Fabrix’s revenue is generally recognized over three years from the date on which delivered orders are accepted by the customer. ZEDGE: Zedge's Android app is rapidly approaching 50 million downloads, putting it in a very select class of most downloaded android apps. In Google Play, Zedge currently ranks among the top 10 most popular free apps. Users are now downloading in excess of 3 million games a month through Zedge's game channel. Because of the high value of its users, Zedge has developed direct relationships with a stable of premium publishers who are helping to propel revenue growth. Zedge generated revenue of $1.2 million in 1Q13 compared to $0.9 million in 1Q12 and $1.0 million in 4Q12. NOTES ON CONSOLIDATED RESULTS AND BALANCE SHEET Corporate G&A expense was $2.8 million in 1Q13, a 3.9% decrease sequentially. In 1Q12, corporate G&A expense was $3.9 million. The $1.1 million decrease primarily reflects fees charged to Genie for services provided in 1Q13. Provision for income taxes in 1Q13 was $2.1 million, compared to a benefit from income taxes of $3.3 million in the year ago quarter, which represented an effective rate of 33.0% and 28.7% of income (loss) from continuing operations before income taxes in 1Q13 and 1Q12, respectively. In 4Q12, IDT reversed a portion of the valuation allowance that had been applied against its U.S. deferred income tax assets due to the current and expected future profitability of its operations in the United States. Because of this reversal, IDT will record a provision for federal income tax in periods when IDT has pretax income. This provision will be offset by the utilization of IDT’s federal net deferred tax assets. Actual cash taxes paid are expected to be minimal as IDT continues to utilize its NOLs. As of October 31, 2012, IDT had $33.9 million in net deferred income tax assets. NOLs totaled $182 million as of October 31, 2012. Net income attributable to IDT in 1Q13 was $3.6 million, compared to a net loss attributable to IDT of $4.3 million in 1Q12 and net income attributable to IDT of $37.3 million in 4Q12, which reflected an income tax benefit of $36.5 million. Non-GAAP net income and diluted non-GAAP EPS exclude certain components of GAAP net income (loss) that are not necessarily indicative of core operations. The excluded components are detailed in the reconciliation provided at the end of this release. Non-GAAP net income was $9.9 million in 1Q13, compared to $8.3 million in the year ago quarter and $5.1 million in the prior quarter. Diluted non-GAAP EPS was $0.45 in 1Q13 compared to $0.37 in the year ago quarter and $0.23 in the prior quarter. As of October 31, 2012, IDT had $166.1 million of cash and cash equivalents. In addition, IDT had an aggregate of $27.5 million of current and long-term restricted cash and cash equivalents, which included $21.2 million in customer deposits and other restricted balances held for IDT’s Gibraltar based bank. Long term notes payable including the current portion, consisting of mortgage loans against IDT-owned real estate, totaled $30.3 million. Following the close of 1Q13, IDT contributed $0.9 million to the IDT Charitable Foundation. DIVIDENDS IDT’s Board of Directors declared a special cash dividend of $0.60 per share which was paid on November 13, 2012, and suspended payment of the Company’s regular $0.15 per share quarterly dividend for fiscal 2013. Future dividends will be at a level commensurate with the Company’s financial results, strategic goals and available resources. IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION · IDT will host a conference call at 8:30 AM ET this morning, December 10th beginning with management’s discussion of financial and operational results, business outlook and strategy followed by Q&A. · To listen to the conference call and/or participate in the Q&A, dial toll-free 1-877-317-6789 (from U.S.) or 1-412-317-6789 (international) and request the IDT Corporation call. · An audio replay of the conference call will be available one hour after the call concludes through December 17, 2012 by dialing 1-877-344-7529 (conference code 10021044), and by streaming from the IDT website investor relations site: www.idt.net/ir. · 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/ir. ABOUT IDT CORPORATION IDT Corporation (NYSE: IDT), through its IDT Telecom division, provides telecommunications and payment services. IDT Telecom’s retail products allow people to communicate and share financial resources around the world while its carrier services business is a global leader in wholesale voice termination. For more information, visit www.idt.net. Other IDT holdings include several promising technology initiatives: Fabrix Systems (www.fabrixsystems.com), Zedge (www.zedge.net), IDT Spectrum (www.idtspectrum.com), and Innovative Communications Technologies, Inc. In this press release, all statements that are not purely about historical facts, including, but not limited to, payment of dividends and 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, including, but not limited to, those described in our most recent report on SEC Form 10-K (under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. These factors include, but are not limited to, the following: potential declines in prices for our products and services; our ability to maintain and grow our telecommunication businesses; availability of termination capacity to particular destinations; our ability to maintain carrier agreements with foreign carriers; our ability to obtain telecommunications products or services required for our services; the financial stability of our major customers; our ability to remain profitable and improve our cash flow; impact of government regulation; effectiveness of our marketing and distribution efforts; and general economic conditions. We are under no obligation, and expressly disclaim any obligation, to update the forward-looking statements in this press release, whether as a result of new information, future events or otherwise. Contact: IDT Corporation Investor Relations Bill Ulrey william.ulrey@idt.net 973-438-3838 Please see attachment for financial statements and non-GAAP reconciliations. |