Back to press releasesNEWARK, NJ — December 5, 2017: IDT Corporation (NYSE: IDT) reported a loss per share of $0.08 and non-GAAP earnings per share (EPS)* of $0.01 on revenue of $393.6 million for the first quarter of FY 2018, the three months ended October 31, 2017.
HIGHLIGHTS
(1Q18 results are compared to 1Q17)
- Revenue of $393.6 million compared to $369.2 million;
- Income from operations of $0.1 million compared to $5.2 million;
- Adjusted EBITDA* of $7.0 million compared to $10.7 million;
- Loss per share of $0.08 compared to diluted EPS of $0.96, which included a net benefit from income taxes of $0.63 per share;
- Non-GAAP EPS* of $0.01 compared to $0.28;
- IDT has declared a dividend of $0.19 per share for 1Q18 to be paid on or about December 29th.
REMARKS BY SHMUEL JONAS, CEO OF IDT CORPORATION
“Revenue growth in our wholesale carrier business accelerated as we invested to gain market share, more than offsetting the measured decline in revenue from our retail voice communications offerings. Telecom margins, however, narrowed during the quarter.
“Our growth initiatives met or exceeded our expectations. BOSS Revolution money transfer – and particularly transactions initiated online or through the BOSS Money app – as well as net2phone’s cloud communications offerings and our National Retail Solutions POS network are growing rapidly. Subsequent to the quarter close, we formally launched our BOSS Revolution Mobile offering, and are in the process of rolling out this new wireless service to our retail partners nationwide.
“We are making good progress on the planned spin-off of Rafael Holdings. Rafael recently filed a registration statement, including a preliminary information statement, for the spin-off with the Securities and Exchange Commission. We expect to conclude the separation and distribution of Rafael Holdings to our shareholders in the first quarter of calendar 2018. The spin-off will more tightly focus IDT on communications and payments services, and we have begun the planning to streamline our corporate structure and operations to function more efficiently and effectively post-spin.
“Based on our results and financial condition, IDT’s Board of Directors declared a dividend of $0.19 per share for the first quarter.”
1Q18 CONSOLIDATED RESULTS
(Results are for 1Q18 and compared to 1Q17 unless otherwise noted).
|
Results (in millions, except EPS) |
1Q18 |
4Q17 |
1Q17 |
1Q18 – 1Q17 Change (%/$) |
|
Revenue |
$393.6 |
$395.0 |
$369.2 |
+6.6% |
|
Direct cost of revenue |
$336.5 |
$337.1 |
$313.0 |
+7.5% |
|
Direct cost of revenue as a percentage of revenue |
85.5% |
85.3% |
84.8% |
+70 BP |
|
SG&A expense |
$50.1 |
$49.3 |
$45.4 |
+10.2% |
|
Depreciation and amortization |
$5.7 |
$5.6 |
$5.3 |
+7.1% |
|
Income from operations |
$0.1 |
$3.7 |
$5.2 |
$(5.1) |
|
Adjusted EBITDA* |
$7.0 |
$8.6 |
$10.7 |
(34.7)% |
|
Net (loss) income attributable to IDT |
$(2.1) |
$(9.8) |
$21.9 |
$(24.0) |
|
Diluted (loss) earnings per share |
$(0.08) |
$(0.41) |
$0.96 |
$(1.04) |
|
Non-GAAP net income* |
$0.2 |
$1.8 |
$6.3 |
$(6.1) |
|
Non-GAAP EPS* |
$0.01 |
$0.07 |
$0.28 |
$(0.27) |
*Throughout this release, Non-GAAP EPS, Adjusted EBITDA, and Non-GAAP Net Income 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 reconciliations to the most directly comparable GAAP measure.
Consolidated results for all periods presented include corporate overhead. The corporate loss from operations increased to $3.2 million from $1.3 million in 1Q17 primarily as a result of increased legal expenses.
Net loss attributable to IDT in 1Q18 was $2.1 million or $0.08 per share, including a provision for income tax of $1.4 million, compared to net income attributable to IDT of $21.9 million and diluted EPS of $0.96 in 1Q17, including a $2.1 million gain on foreign currency transactions and a net benefit from income taxes of $14.4 million, mostly due to the reversal of a previous valuation allowance on foreign deferred tax assets.
At October 31, 2017, IDT held $107.0 million in unrestricted cash, cash equivalents and marketable securities, compared to $148.6 million at July 31, 2017. Current assets totaled $342.4 million and current liabilities totaled $338.4 million. The decrease in cash, cash equivalents and marketable securities primarily reflects payments during 1Q18 of previously accrued liabilities including seasonal personnel expenses, regulatory fees, and a legal settlement as well as other changes in working capital. IDT also set aside $11.8 million dollars in an escrow account pursuant to its most recent wholesale carrier outsourcing initiative, resulting in a decrease in Cash and Cash Equivalents and a corresponding increase in Other Current Assets.
Net cash used in operating activities during 1Q18 was $30.5 million compared to net cash provided by operating activities of $5.5 million in 1Q17. In the same periods, capital expenditures were $5.3 million and $5.5 million, respectively.
1Q18 RESULTS BY SEGMENT
(Results are for 1Q18 and compared to 1Q17 unless otherwise noted).
|
Quarterly Results by Segment (in millions) |
TPS |
net2phone-UCaaS |
All Other |
Corporate |
||||
|
1Q18 |
1Q17 |
1Q18 |
1Q17 |
1Q18 |
1Q17 |
1Q18 |
1Q17 |
|
|
Revenue |
$385.1 |
$361.5 |
$7.8 |
$7.1 |
$0.7 |
$0.5 |
– |
– |
|
Direct cost of revenue |
$334.0 |
$309.7 |
$2.5 |
$3.3 |
– |
– |
– |
– |
|
SG&A expense |
$42.1 |
$41.1 |
$4.7 |
$3.3 |
$0.9 |
– |
$2.4 |
$1.1 |
|
Depreciation and amortization |
$4.0 |
$4.2 |
$1.3 |
$0.7 |
$0.4 |
$0.4 |
– |
– |
|
Income (loss) from operations |
$4.6 |
$6.5 |
$(0.7) |
$(0.2) |
$(0.6) |
$0.1 |
$(3.2) |
$(1.3) |
|
Adjusted EBITDA |
$8.9 |
$10.7 |
$0.6 |
$0.6 |
$(0.2) |
$0.5 |
$(2.4) |
$(1.1) |
Telecom Platform Services (TPS)
TPS is comprised of communications and payment offerings grouped in three broad verticals: Retail Communications, Wholesale Carrier Services and Payment Services. Effective 1Q18, TPS’ Retail Communications vertical also includes the results of IDT’s Consumer Phone Services (CPS). All comparative prior periods have been adjusted to conform to the current presentation. CPS was previously reported as a separate segment. The TPS segment contributed 97.8% of IDT’s consolidated revenue in 1Q18 and 97.9% in 1Q17.
TPS’ 1Q18 revenue increased 6.5% to $385.1 million. The Wholesale Carrier Services and Payment Services verticals achieved robust revenue growth – more than offsetting a decline in Retail Communications’ revenue.
|
TPS’ Revenue by Business Vertical ($ in millions) |
1Q18 |
4Q17 |
1Q17 |
1Q18 – 1Q17 % Change |
1Q18-1Q17 |
1Q18 Revenue as % of all TPS |
|
Retail Communications |
$146.2 |
$152.6 |
$158.5 |
(7.8)% |
(19.5)% |
38.0% |
|
Wholesale Carrier Services |
$170.5 |
$167.4 |
$143.3 |
+19.0% |
+20.0% |
44.3% |
|
Payment Services |
$68.4 |
$66.0 |
$59.7 |
+14.6% |
na |
17.7% |
|
Total TPS |
$385.1 |
$386.0 |
$361.5 |
+6.5% |
(8.3)% |
100.0% |
Retail Communications: IDT’s flagship BOSS Revolution® calling service – which accounted for over 90% of Retail Communications’ revenue in 1Q18 – continued to be impacted by increased adoption of over-the-top voice and messaging, unlimited calling plans, as well as decreased immigration into the U.S. These long-term, macro trends resulted in a 5.4% reduction in BOSS Revolution calling service’s revenue compared to the year ago quarter. Revenue from other Retail Communications offerings, including the sale of traditional ‘hard’ prepaid calling cards in the U.S. and overseas, continued to decrease in line with expectations.
Payment Services: Payment services revenue increased 14.6% year over year reflecting growth in mobile top-up sales from new mobile partners and diversification of mobile top-up offerings. Sales generated by the BOSS Revolution international money transfer service and National Retail Solutions’ merchant services offerings also increased.
TPS’ direct cost of revenue expressed as a percentage of revenue increased to 86.7% from 85.7%. This increase reflects margin pressure on Wholesale Carrier Services’ offerings and a shift of revenue mix within TPS towards Wholesale Carrier Services, which generates relatively lower gross margins than Retail Communications’ offerings.
TPS’ SG&A expense – $42.1 million – increased 2.6% from 1Q17 primarily on higher personnel expense. Expressed as a percentage of revenue, SG&A expense decreased to 10.9% from 11.4% in the year ago quarter, primarily due to the significant revenue increase over the corresponding period. IDT expects to significantly streamline its operations in conjunction with the spin-off of Raphael Holdings.
TPS’ income from operations decreased to $4.6 million, including the impact of $0.4 million in severance expense, from $6.5 million in 1Q17. Margin pressure on TPS’ Wholesale Carrier Services’ offerings, the decrease in Retail Communications’ revenue and the increase in SG&A expense contributed to the decrease.
net2phone – Unified Communications as a Service (UCaaS)
The net2phone-UCaaS segment (formerly known as UCaaS) is comprised of offerings from IDT’s net2phone® division, including its cloud communications and SIP trunking offerings for businesses, and its cable telephony service.
net2phone-UCaaS’ 1Q18 revenue increased to $7.8 million from $7.1 million in 1Q17 due to continued growth from its cable telephony service and cloud-based communications offering – both in the U.S. and in South America. In light of the strong growth in net2phone’s cloud communications offering in Argentina and Brazil, net2phone anticipates additional international expansion in South America and Asia in FY 2018.
net2phone-UCaaS’ 1Q18 loss from operations was $674 thousand compared to a loss from operations of $174 thousand in 1Q17 reflecting increased SG&A spending including commissions and other personnel expenses reflecting IDT’s continued investment in this business, as well as increased depreciation and amortization expense.
All Other
All Other includes interests in clinical and early stage pharmaceutical companies, including an investment in Rafael Pharmaceuticals, Inc., as well as IDT’s real estate holdings, comprised of its public garage in Newark and commercial properties in Newark, Piscataway and Jerusalem, and other small businesses and investments.
Rafael Pharmaceuticals is a clinical stage, oncology-focused, pharmaceutical company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells.
All Other’s financial results for 1Q18 were consistent with expectations.
IDT’s subsidiary, Rafael Holdings, has filed a registration statement, including a preliminary information statement, for the spin-off to IDT’s shareholders of IDT’s real estate and pharmaceutical holdings included in All Other. IDT expects to effectuate the spin-off of Rafael Holdings in the first quarter of calendar 2018.
DIVIDEND
On December 4, 2017, IDT’s Board of Directors declared a quarterly dividend of $0.19 per share of IDT’s Class A and Class B common stock for 1Q18 to be paid on or about December 29, 2017. The dividend will be paid to stockholders of record as of the close of business on December 18th. This distribution will be treated as a return of capital for tax purposes.
IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
This release is available for download in the “For Investors” section of the IDT Corporation website (http://idt.net/ir) and has been filed on a current report (Form 8-K) with the SEC.
IDT will host an earnings conference call today beginning today at 5:30 PM Eastern 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 December 12, 2017, by dialing 1-844-512-2921 (toll-free from the US) or 1-412-317-6671 (international) and providing this call number: 10114550. The recording will also be available via streaming audio at the IDT investor relations website (http://idt.net/ir) following the call.
ABOUT IDT:
IDT Corporation (NYSE: IDT), through its IDT Telecom division, provides communications 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:
Bill Ulrey
william.ulrey@idt.net
973-438-3838
Please see the attached PDF file of the complete earnings release for financial statements and non-GAAP reconciliations
