NEWARK, N.J., Dec. 5, 2017 /PRNewswire/ -- 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
% Change in
Minutes of Use
|
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.
Wholesale Carrier
Services: Wholesale Carrier Services' revenue increased
19% and minutes of use increased 20% compared to the year ago
quarter even as the market for international voice calling
continued to contract. Wholesale Carrier Services' revenue
has historically been more volatile than Retail Communications'
revenue, and changes in revenue do not necessarily generate
corresponding changes in gross profit.
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.
IDT
CORPORATION
CONSOLIDATED BALANCE SHEETS
|
|
|
October 31,
2017
|
July 31,
2017
|
|
(Unaudited)
|
|
|
(in
thousands)
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
52,755
|
$
90,344
|
Marketable
securities
|
54,291
|
58,272
|
Trade accounts
receivable, net of allowance for doubtful accounts of $2,408 at
October 31, 2017 and $2,657 at July 31, 2017
|
78,949
|
64,979
|
Prepaid
expenses
|
15,796
|
14,506
|
Other current
assets
|
29,961
|
18,749
|
Assets held for
sale
|
110,666
|
124,267
|
|
|
|
Total current
assets
|
342,418
|
371,117
|
Property, plant and
equipment, net
|
88,617
|
88,994
|
Goodwill
|
11,303
|
11,326
|
Investments
|
26,390
|
26,894
|
Deferred income tax
assets, net
|
10,524
|
11,841
|
Other
assets
|
3,774
|
3,657
|
Assets held for
sale
|
5,146
|
5,134
|
|
|
|
Total
assets
|
$
488,172
|
$
518,963
|
|
|
|
Liabilities and
equity
|
|
|
Current
liabilities:
|
|
|
Trade accounts
payable
|
$
47,220
|
$
40,989
|
Accrued
expenses
|
109,155
|
125,359
|
Deferred
revenue
|
74,849
|
76,451
|
Other current
liabilities
|
5,272
|
4,659
|
Liabilities held for
sale
|
101,943
|
115,318
|
|
|
|
Total current
liabilities
|
338,439
|
362,776
|
Other
liabilities
|
1,169
|
1,080
|
Liabilities held for
sale
|
515
|
550
|
|
|
|
Total
liabilities
|
340,123
|
364,406
|
Commitments and
contingencies
|
|
|
Equity:
|
|
|
IDT Corporation
stockholders' equity:
|
|
|
Preferred stock, $.01
par value; authorized shares—10,000; no shares issued
|
—
|
—
|
Class A common
stock, $.01 par value; authorized shares—35,000; 3,272 shares
issued and 1,574 shares outstanding at October 31,
2017 and July 31, 2017
|
33
|
33
|
Class B common stock,
$.01 par value; authorized shares—200,000; 25,566 and 25,561 shares
issued and 23,267 and 23,264 shares
outstanding at October 31, 2017 and
July 31, 2017, respectively
|
256
|
256
|
Additional paid-in
capital
|
395,272
|
394,462
|
Treasury stock, at
cost, consisting of 1,698 and 1,698 shares of Class A common stock
and 2,299 and 2,297 shares of Class B
common stock at October 31, 2017 and
July 31, 2017, respectively
|
(83,327 )
|
(83,304 )
|
Accumulated other
comprehensive loss
|
(2,741)
|
(2,343)
|
Accumulated
deficit
|
(170,182 )
|
(163,370 )
|
|
|
|
Total IDT Corporation
stockholders' equity
|
139,311
|
145,734
|
Noncontrolling
interests
|
8,738
|
8,823
|
|
|
|
Total
equity
|
148,049
|
154,557
|
|
|
|
Total liabilities and
equity
|
$
488,172
|
$
518,963
|
|
|
|
IDT
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
Three Months
Ended
October 31,
|
|
2017
|
2016
|
|
(in thousands,
except per share data)
|
|
|
Revenue
|
$
393,555
|
$
369,151
|
Costs and
expenses:
|
|
|
Direct cost of revenue
(exclusive of depreciation and amortization)
|
336,510
|
313,029
|
Selling, general and
administrative (i)
|
50,071
|
45,438
|
Depreciation and
amortization
|
5,673
|
5,299
|
Severance
|
439
|
—
|
|
|
|
Total costs and
expenses
|
392,693
|
363,766
|
Other operating
expense
|
(779)
|
(199)
|
|
|
|
Income from
operations
|
83
|
5,186
|
Interest income,
net
|
362
|
301
|
Other (expense)
income, net
|
(826)
|
2,392
|
|
|
|
(Loss) income before
income taxes
|
(381)
|
7,879
|
(Provision for)
benefit from income taxes
|
(1,416)
|
14,415
|
|
|
|
Net (loss)
income
|
(1,797)
|
22,294
|
Net income
attributable to noncontrolling interests
|
(295)
|
(376)
|
|
|
|
Net (loss) income
attributable to IDT Corporation
|
$
(2,092)
|
$
21,918
|
|
|
|
|
|
|
(Loss) earnings per
share attributable to IDT Corporation common
stockholders:
|
|
|
Basic
|
$
(0.08)
|
$
0.97
|
|
|
|
Diluted
|
$
(0.08)
|
$
0.96
|
|
|
|
|
|
|
Weighted-average
number of shares used in calculation of (loss) earnings
per
share:
|
|
|
Basic
|
24,628
|
22,712
|
|
|
|
Diluted
|
24,628
|
22,899
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
0.19
|
$
0.19
|
|
|
|
|
|
|
(i) Stock-based
compensation included in selling, general and
administrative
expenses
|
$
810
|
$
702
|
|
|
|
|
|
|
IDT
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
Three Months
Ended
October 31,
|
|
2017
|
2016
|
|
(in
thousands)
|
Operating
activities
|
|
|
Net (loss)
income
|
$
(1,797)
|
$
22,294
|
Adjustments to
reconcile net (loss) income to net cash (used in) provided by
operating activities:
|
|
|
Depreciation and
amortization
|
5,673
|
5,299
|
Deferred income
taxes
|
1,317
|
(14,483)
|
Provision for doubtful
accounts receivable
|
566
|
260
|
Realized gain on
marketable securities
|
(7)
|
—
|
Interest in the equity
of investments
|
104
|
(263)
|
Stock-based
compensation
|
810
|
702
|
Change in assets and
liabilities:
|
|
|
Restricted cash and
cash equivalents
|
14,742
|
9,939
|
Trade accounts
receivable
|
(13,952)
|
(13,132)
|
Prepaid expenses,
other current assets and other assets
|
(12,832)
|
(10)
|
Trade accounts
payable, accrued expenses, other current liabilities and other
liabilities
|
(9,359)
|
6,125
|
Customer
deposits
|
(14,226)
|
(9,127)
|
Deferred
revenue
|
(1,556)
|
(2,114)
|
|
|
|
Net cash (used in)
provided by operating activities
|
(30,517)
|
5,490
|
Investing
activities
|
|
|
Capital
expenditures
|
(5,324)
|
(5,515)
|
Proceeds from sale of
interest in Straight Path IP Group Holding, Inc
|
6,000
|
—
|
Purchase of IP
Interest from Straight Path Communications Inc
|
(6,000)
|
—
|
Cash used for
investments
|
—
|
(8,008)
|
Proceeds from sale and
redemption of investments
|
—
|
2
|
Purchases of
marketable securities
|
(15,671)
|
(10,969)
|
Proceeds from
maturities and sales of marketable securities
|
19,560
|
6,001
|
|
|
|
Net cash used in
investing activities
|
(1,435)
|
(18,489)
|
Financing
activities
|
|
|
Dividends
paid
|
(4,720)
|
(4,379)
|
Distributions to
noncontrolling interests
|
(380)
|
(389)
|
Proceeds from exercise
of stock options
|
—
|
407
|
Proceeds from sale of
member interests in CS Pharma Holdings, LLC
|
—
|
1,250
|
Repurchases of Class B
common stock
|
(23)
|
(23)
|
|
|
|
Net cash used in
financing activities
|
(5,123)
|
(3,134)
|
Effect of exchange
rate changes on cash and cash equivalents
|
(173)
|
(1,476)
|
|
|
|
Net decrease in cash
and cash equivalents
|
(37,248)
|
(17,609)
|
Cash and cash
equivalents at beginning of period, including $5,716 held for sale
at July 31, 2017
|
96,060
|
109,537
|
|
|
|
Cash and cash
equivalents at end of period, including $6,057 held for sale at
October 31, 2017
|
$
58,812
|
$
91,928
|
|
|
|
Supplemental
schedule of non-cash financing activities
|
|
|
Reclassification of
liability for member interests in CS Pharma Holdings,
LLC
|
$
—
|
$
8,750
|
|
|
|
Reconciliation of Non-GAAP Financial Measures for
the First Quarter Fiscal 2018 and 2017
In addition to disclosing financial results that are determined
in accordance with generally accepted accounting principles in
the United States of America
(GAAP), IDT also disclosed, for 1Q18, 4Q17 and 1Q17, Adjusted
EBITDA, non-GAAP net income and non-GAAP diluted earnings per
share, or EPS, which are non-GAAP measures. 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 revenues less
direct cost of revenues and selling, general and administrative
expense. Another way of calculating Adjusted EBITDA is to start
with income from operations, add depreciation and amortization,
severance expense and other operating expense, and subtract other
operating gain.
IDT's measure of non-GAAP net income starts with net (loss)
income in accordance with GAAP and adds severance expense,
stock-based compensation, other operating expense, and the tax
expense from the increase in the valuation allowance on deferred
tax assets, and subtracts other operating gain, and the tax benefit
from the release of the valuation allowance and full recognition of
deferred tax assets.
IDT's measure of non-GAAP diluted EPS is calculated by dividing
non-GAAP net income by the diluted weighted-average shares.
These additions and subtractions are non-cash and/or non-routine
items in the relevant fiscal 2018 and fiscal 2017 periods.
Management believes that IDT's Adjusted EBITDA, non-GAAP net
income and non-GAAP EPS measures provide useful information to both
management and investors by excluding certain expenses and
non-routine gains and 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,
non-GAAP net income and non-GAAP EPS to evaluate operating
performance in relation to IDT's competitors. Disclosure of these
financial measures 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. 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 income (loss) from operations and net income, 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. IDT's Adjusted
EBITDA, which is exclusive of depreciation and amortization, is a
useful indicator of its current performance.
Severance expense is excluded from the calculation of Adjusted
EBITDA, non-GAAP net income and non-GAAP EPS. Severance expense is
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. 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.
Other operating expense and other operating gain are components
of income from operations. In fiscal 2018, other operating expense
included legal fees related to potential liabilities and claims
under agreements related to IDT's spin-off of Straight Path
Communications Inc. in 2013. In the fourth quarter of fiscal 2017,
other operating gain was primarily the result of insurance proceeds
related to the claims. Other operating expense and other operating
gain are excluded from the calculation of Adjusted EBITDA, non-GAAP
net income and non-GAAP EPS. From time-to-time, IDT may incur costs
related to non-routine legal and regulatory matters. However, such
legal and regulatory matters do not occur each quarter. IDT does
not believe the gains or losses from non-routine legal and
regulatory matters are components of IDT's or the relevant
segment's core operating results.
The other calculation of Adjusted EBITDA consists of revenues
less direct cost of revenues and selling, general and
administrative 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.
Stock-based compensation recognized by IDT and other companies
may not be comparable because of the variety of types of awards as
well as the various valuation methodologies and subjective
assumptions that are permitted under GAAP. Stock-based compensation
is excluded from IDT's calculation of non-GAAP net income and
non-GAAP EPS because management believes this allows investors to
make more meaningful comparisons of the operating results per share
of IDT's core business with the results of other companies.
However, stock-based compensation will continue to be a significant
expense for IDT for the foreseeable future and an important part of
employees' compensation that impacts their performance.
In 1Q17, IDT recorded a foreign income tax benefit of
$16.6 million from the release of the
valuation allowance and full recognition of certain deferred tax
assets, and in 4Q17, IDT recorded a federal income tax expense of
$11.1 million from the increase in
the valuation allowance on deferred tax assets. The income tax
benefit and expense are excluded from IDT's calculation of non-GAAP
net income and non-GAAP EPS because neither was directly related to
the current results of IDT's core operations. These income tax
benefit and expense are not expected to be reoccurring items.
Adjusted EBITDA, non-GAAP net income and non-GAAP EPS should be
considered in addition to, not as a substitute for, or superior to,
income (loss) from operations, cash flow from operating activities,
net income, basic and diluted earnings per share or other measures
of liquidity and financial performance prepared in accordance with
GAAP. In addition, IDT's measurements of Adjusted EBITDA, non-GAAP
net income and non-GAAP EPS may not be comparable to similarly
titled measures reported by other companies.
Following are reconciliations of Adjusted EBITDA, non-GAAP net
income and non-GAAP EPS to the most directly comparable GAAP
measure, which are, (a) for Adjusted EBITDA, income (loss) from
operations for IDT's reportable segments and net income for IDT on
a consolidated basis, (b) for non-GAAP net income, net income and,
(c) for non-GAAP EPS, basic and diluted earnings per share.
IDT
Corporation
Reconciliation of
Adjusted EBITDA to Net (Loss) Income
(unaudited)
in
millions
Figures may not foot
or cross-foot due to rounding to millions.
|
|
|
Total IDT
Corporation
|
|
Telecom
Platform
Services
|
net2phone
-UCaaS
|
All
Other
|
Corporate
|
Three Months Ended
October 31, 2017
(1Q18)
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
7.0
|
|
$
8.9
|
$
0.6
|
$
(0.2)
|
$
(2.4)
|
Subtract:
|
|
|
|
|
|
|
Depreciation and
amortization
|
5.7
|
|
4.0
|
1.3
|
0.4
|
-
|
Severance
expense
|
0.4
|
|
0.4
|
-
|
-
|
-
|
Other operating
expense
|
0.8
|
|
-
|
-
|
-
|
0.8
|
Income (loss) from
operations
|
0.1
|
|
$
4.6
|
$
(0.7)
|
$
(0.6)
|
$
(3.2)
|
Interest
income, net
|
0.4
|
|
|
|
|
|
Other
expense, net
|
(0.8)
|
|
|
|
|
|
Loss before income
taxes
|
(0.4)
|
|
|
|
|
|
Provision for income taxes
|
(1.4)
|
|
|
|
|
|
Net loss
|
(1.8)
|
|
|
|
|
|
Net income
attributable to noncontrolling
interests
|
(0.3)
|
|
|
|
|
|
Net loss attributable
to IDT Corporation
|
$
(2.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total IDT
Corporation
|
|
Telecom
Platform
Services
|
net2phone
-UCaaS
|
All
Other
|
Corporate
|
Three Months Ended
July 31, 2017
(4Q17)
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
8.6
|
|
$
9.7
|
$
0.4
|
$
0.6
|
$
(2.2)
|
Subtract
(Add):
|
|
|
|
|
|
|
Depreciation and
amortization
|
5.6
|
|
4.0
|
1.2
|
0.4
|
-
|
Other
operating gain
|
(0.8)
|
|
-
|
-
|
-
|
(0.8)
|
Income (loss) from
operations
|
3.7
|
|
$
5.7
|
$
(0.8)
|
$
0.2
|
$
(1.4)
|
Interest
income, net
|
0.3
|
|
|
|
|
|
Other
expense, net
|
(0.7)
|
|
|
|
|
|
Income before income
taxes
|
3.3
|
|
|
|
|
|
Provision for income taxes
|
(12.8)
|
|
|
|
|
|
Net loss
|
(9.5)
|
|
|
|
|
|
Net income
attributable to noncontrolling
interests
|
(0.4)
|
|
|
|
|
|
Net loss attributable
to IDT Corporation
|
$
(9.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
IDT
Corporation
Reconciliation of
Adjusted EBITDA to Net Income
(unaudited)
in
millions
Figures may not foot
or cross-foot due to rounding to millions.
|
|
|
Total IDT
Corporation
|
|
Telecom
Platform
Services
|
net2phone
-UCaaS
|
All
Other
|
Corporate
|
Three Months Ended
October 31, 2016
(1Q17)
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
10.7
|
|
$
10.7
|
$
0.6
|
$
0.5
|
$
(1.1)
|
Subtract:
|
|
|
|
|
|
|
Depreciation
and amortization
|
5.3
|
|
4.2
|
0.7
|
0.4
|
-
|
Other operating
expense
|
0.2
|
|
-
|
-
|
-
|
0.2
|
Income (loss) from
operations
|
5.2
|
|
$
6.5
|
$
(0.2)
|
$
0.1
|
$
(1.3)
|
Interest
income, net
|
0.3
|
|
|
Other
income, net
|
2.4
|
|
|
Income before income
taxes
|
7.9
|
|
|
Benefit from income
taxes
|
14.4
|
|
|
Net income
|
22.3
|
|
|
Net income
attributable to noncontrolling
interests
|
(0.4)
|
|
|
Net income
attributable to IDT Corporation
|
$
21.9
|
|
|
|
|
|
|
|
|
|
|
IDT
Corporation
Reconciliations of
Net (Loss) Income to Non-GAAP Net Income and Diluted
EPS to Non-GAAP Diluted EPS
(unaudited)
in millions, except
per share data
Figures may not foot
due to rounding to millions.
|
|
|
1Q18
|
4Q17
|
1Q17
|
|
|
|
|
Net (loss)
income
|
$
(1.8)
|
$
(9.5)
|
$
22.3
|
Adjustments (add)
subtract:
|
|
|
|
Stock-based
compensation
|
(0.8)
|
(0.9)
|
(0.7)
|
Severance
expense
|
(0.4)
|
-
|
-
|
Other operating
(expense) gain
|
(0.8)
|
0.8
|
(0.2)
|
Income tax (expense)
benefit
|
-
|
(11.1)
|
16.6
|
Total
adjustments
|
(2.0)
|
(11.3)
|
15.7
|
Income tax effect of
total adjustments
|
-
|
(0.1)
|
(0.3)
|
|
2.0
|
11.3
|
(16.0)
|
Non-GAAP net
income
|
$
0.2
|
$
1.8
|
$
6.3
|
|
|
|
|
Earnings per
share:
|
|
|
|
Basic
|
$
(0.08)
|
$
(0.41)
|
$
0.97
|
Total
adjustments
|
0.09
|
0.48
|
(0.69)
|
Non-GAAP EPS -
basic
|
$
0.01
|
$
0.07
|
$
0.28
|
|
|
|
|
Weighted-average number
of shares used in
calculation
of basic earnings per share
|
24.6
|
24.2
|
22.7
|
|
|
|
|
Diluted
|
$
(0.08)
|
$
(0.41)
|
$
0.96
|
Total
adjustments
|
0.09
|
0.48
|
(0.68)
|
Non-GAAP EPS -
diluted
|
$
0.01
|
$
0.07
|
$
0.28
|
|
|
|
|
Weighted-average number
of shares used in
calculation
of diluted earnings per share
|
24.7
|
24.3
|
22.9
|
|
|
|
|
|
|
|
|
|
|
|
|
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SOURCE IDT Corporation