IDT Reports Results for First Quarter Fiscal 2010

• Revenues of $327.3 million – down 18.9%.
• Gross profit of $69.2 million – down 23.9%.
• Gross margin percentage of 21.1% – down 140 basis points.
• Selling, general and administrative (SG&A) expense of $57.1 million – down 33.3%.
• Adjusted EBITDA of $9.5 million – increased from $2.0 million.
• Income from operations of $0.2 million – compared to a loss from operations of $12.1 million.
• Net loss attributable to IDT of $3.5 million – down from a loss of $37.3 million.
• Net loss attributable to IDT per share of $0.17 – down from a loss per share of $1.53.
• Cash, cash equivalents and marketable securities were $187.0 million at October 31, 2009, including $20.3 million in restricted cash, cash equivalents and marketable securities.
• Net cash provided by operating activities of $2.2 million.

IDT Energy
IDT Energy’s revenues, were $40.3 million during Q1 2010, a 40.0% decline compared to Q1 2009, primarily reflecting declines in the average rates charged to customers for both electricity and gas. Electric rates declined 37.8%, while gas rates declined 41.1% corresponding to declines in the underlying commodity costs. Revenues rose 9.0% sequentially primarily on the strength of somewhat higher gas and electric rates compared to the prior quarter.

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States of America (GAAP), IDT’s earnings release for the first quarter of fiscal 2010 also disclosed Adjusted EBITDA, which is a non-GAAP measure that contains certain adjustments to net loss or income (loss) from operations to eliminate the impact of certain items that management believes do not truly reflect IDT’s performance.

Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. IDT’s measure of Adjusted EBITDA consists of gross profit less selling, general and administrative expense, research and development expense and bad debt expense. Another way of calculating Adjusted EBITDA is to start with income (loss) from operations and (1) add depreciation and amortization and (2) deduct/add restructuring and impairment charges. These additions and deductions are non-cash and/or non-recurring items in the relevant fiscal 2010 and fiscal 2009 periods.

Management believes that IDT’s Adjusted EBITDA measure provides useful information to both management and investors by excluding certain expenses and non-recurring gains or losses that may not be indicative of IDT’s or the relevant segment’s core operating results. Management uses Adjusted EBITDA, among other measures, as a relevant indicator of core operational strengths in its financial and operational decision making. In addition, management uses Adjusted EBITDA to evaluate operating performance in relation to IDT’s competitors. Disclosure of this financial measure may be useful to investors in evaluating performance and allows for greater transparency to the underlying supplemental information used by management in its financial and operational decision-making. Adjusted EBITDA may also be an indicator of the strength and performance of IDT’s and the segment’s ongoing business operations, including the ability to fund capital expenditures, and meet working capital needs from current operations (as opposed to cash resources), and to incur and service debt. In addition, IDT has historically reported similar financial measures and believes such measures are commonly used by readers of financial information in assessing performance, therefore the inclusion of comparative numbers provides consistency in financial reporting at this time.

Management refers to Adjusted EBITDA, as well as the GAAP measures gross profit, income (loss) from operations and net loss, on a segment and/or consolidated level to facilitate internal and external comparisons to the segments’ and IDT’s historical operating results, in making operating decisions, for budget and planning purposes, and to form the basis upon which management is compensated.

While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. While IDT’s business may be capital intensive, IDT has significantly reduced its capital expenditures to date and going forward intends to incur capital expenditures at the reduced levels. Accordingly, IDT’s telecommunications network is less costly than in the past, therefore exclusion of depreciation and amortization charges from IDT’s operating results is a useful indicator of its current performance.

The restructuring and impairment charges are also excluded in the calculation of Adjusted EBITDA. Restructuring charges are substantially non-recurring and are reflective of decisions made by management in each period regarding the aspects of IDT’s and its segments’ businesses to be focused on in light of changing market realities and other factors. In addition, restructuring charges are decreasing and are expected to remain at the reduced levels for the foreseeable future. Impairments are primarily dictated by events and circumstances outside the control of management that trigger an impairment analysis. While there may be similar charges in other periods, the nature and magnitude of these charges can fluctuate markedly and do not reflect the performance of IDT’s core and continuing operations.

The other calculation of Adjusted EBITDA consists of gross profit less selling, general and administrative expense, research and development expense and bad debt expense. As the other excluded items are not reflected in this calculation, they are excluded automatically and there is no need to make additional adjustments. This calculation results in the same Adjusted EBITDA amount and its utility and significance is as explained above.

Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, gross profit, income (loss) from operations, cash flow from operating activities, net loss or other measures of liquidity and financial performance prepared in accordance with GAAP. In addition, IDT’s measurement of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. Following are reconciliations of Adjusted EBITDA to the most directly comparable GAAP measure – income (loss) from operations for both IDT’s reportable segments and for IDT on a consolidated basis.