NEWARK, N.J., Dec. 7, 2016 /PRNewswire/ -- IDT Corporation
(NYSE: IDT) reported diluted earnings per share (EPS) of
$0.96 and Non-GAAP diluted EPS* of
$0.44 on revenue of $369.2 million for the first quarter of its
fiscal year 2017, the three months ended October 31, 2016.
HIGHLIGHTS
(Results for 1Q17 compared
to 1Q16)
- Revenue was $369.2 million
compared to $390.6 million;
- Income from operations was $5.2
million compared to $7.9
million;
- Adjusted EBITDA* was $10.7
million compared to $13.0
million;
- Diluted EPS was $0.96 - including
a net benefit from income taxes of $14.4
million - compared to $0.18;
- Non-GAAP diluted EPS* was $0.44
compared to $0.35;
- IDT has declared a dividend of $0.19 per share for 1Q17 to be paid on or about
December 23, 2016.
*Throughout this release, Adjusted EBITDA, Non-GAAP Net
Income, and Non-GAAP diluted EPS for all periods presented are
non-GAAP measures intended to provide useful information that
supplements IDT's or the relevant segment's core results in
accordance with GAAP. Please refer to the Reconciliation of
Non-GAAP Financial Measures at the end of this release for an
explanation of these terms and their respective reconciliation to
the most directly comparable GAAP measure.
Management Remarks
Shmuel
Jonas, IDT's Chief Executive Officer, said, "IDT's financial
results for the first quarter fiscal 2017 include a year over year
decline in revenue and a decrease in SG&A expense. Our
continuing efforts to reduce overhead expense and streamline our
operations mitigated the impact of the revenue loss on our bottom
line. Our net income was impacted positively by a one-time benefit
from income taxes among other factors.
"Operationally, we had a productive first quarter highlighted by
the introduction of several new retail and wholesale
products. Significantly, our key growth initiatives -
Net2Phone Office, PicuP, National Retail Solutions and our Boss
Revolution international money transfer business - all performed
well. Beginning this quarter, we are expanding our reporting
segment disclosure to provide additional visibility into some of
these initiatives."
1Q17 CONSOLIDATED RESULTS
Results
(in millions,
except EPS)
|
1Q17
|
4Q16
|
1Q16
|
1Q17 -
1Q16
Change
(%/$)
|
Revenue
|
$369.2
|
$368.1
|
$390.6
|
(5.5)%
|
Direct cost of
revenue
|
$313.0
|
$309.1
|
$324.5
|
(3.5)%
|
Direct cost of
revenue as a percentage of revenue
|
84.8%
|
84.0%
|
83.1%
|
+170 BP
|
SG&A
expense
|
$45.4
|
$48.9
|
$53.1
|
(14.4)%
|
Depreciation and
amortization
|
$5.3
|
$5.0
|
$5.1
|
+4.9%
|
Severance
expense
|
-
|
$6.3
|
-
|
-
|
Other (expense)
gains
|
$(0.2)
|
$7.5
|
-
|
$(0.2)
|
Income from
operations
|
$5.2
|
$6.2
|
$7.9
|
$(2.7)
|
Adjusted
EBITDA*
|
$10.7
|
$10.0
|
$13.0
|
$(2.3)
|
Net income
attributable to IDT
|
$21.9
|
$11.0
|
$4.2
|
+$17.7
|
Diluted
EPS
|
$0.96
|
$0.48
|
$0.18
|
+$0.78
|
Non-GAAP net
income*
|
$10.1
|
$11.5
|
$8.1
|
+$2.0
|
Non-GAAP diluted
EPS*
|
$0.44
|
$0.50
|
$0.35
|
+$0.09
|
Net cash provided by
operating activities
|
$5.5
|
$13.2
|
$14.0
|
$(8.5)
|
1Q17 OPERATING RESULTS BY SEGMENT
(Results are for
1Q17 unless otherwise noted).
Effective this quarter, IDT is creating a new reportable
segment, Unified Communications as a Service (UCaaS). This
new segment consists predominantly of the business lines formerly
comprising the Hosted Platform Solutions product category within
the Telecom Platform Services (TPS) segment. Accordingly, the
TPS segment will now consist of three business categories: Retail
Communications, Wholesale Carrier Services and Payment Services.
All comparative periods presented have been reclassified and
restated to reflect this new segment presentation.
Telecom Platform Services (TPS)
The Telecom Platform Services segment accounted for 97.5% of IDT's
revenue in 1Q17 compared to 96.9% in 1Q16 and 97.3% in 4Q16.
TPS markets and distributes multiple communications and
payments services across three broad business categories: Retail
Communications, Wholesale Carrier Services and Payment
Services. Most of the lines of business revenue previously
reported in TPS' Hosted Platform Services category are now included
in the new UCaaS segment and the remainder has been shifted into
the Wholesale Carrier Services category.
TPS' quarterly minutes of use (MOU) in 1Q17 were 5.91 billion, a
decrease from 6.72 billion (-12.1%) in 1Q16 and from 6.62 billion
(-10.8%) in 4Q16. MOU in both Wholesale Carrier Services and
Retail Communications decreased year over year and sequentially. In
Retail Communications, MOU decreased for both BOSS Revolution voice
products and traditional calling cards sold domestically and
overseas.
TPS' revenue in 1Q17 was $360.0
million, a decrease from $378.6
million (-4.9%) in the year ago quarter and an increase from
$358.1 million (+0.5%) in the prior
quarter. The year over year revenue decline resulted from softness
in both Retail Communications and Wholesale Carries Services,
partially offset by growth in Payment Services. The
sequential quarterly increase reflects growth in both Wholesale
Carrier Services' and Payment Services' revenue offset by a decline
in Retail Communications' revenue.
TPS Revenue by
Product
Category
(in
millions)
|
1Q17
|
4Q16
|
1Q16
|
1Q17-1Q16
% Change in
Revenue
|
1Q17 Revenue
as
a % of Total
TPS Revenue
|
Retail
Communications
|
$157.0
|
$163.6
|
$171.3
|
(8.3)%
|
43.6%
|
Wholesale Carrier
Services
|
$143.3
|
$139.1
|
$151.8
|
(5.6)%
|
39.8%
|
Payment
Services
|
$59.7
|
$55.4
|
$55.5
|
+7.4%
|
16.6%
|
Total TPS
|
$360.0
|
$358.1
|
$378.6
|
(4.9)%
|
100.0%
|
Retail Communications' revenue in 1Q17 declined $14.3 million (-8.4%) year over year to
$157.0 million. Sales of BOSS
Revolution voice products, which accounted for over 85% of Retail
Communications' revenue, decreased 5.1%, reflecting continued
declines in revenue generated in the US - Mexico corridor. Sales of traditional
calling card products in the U.S. and overseas also decreased year
over year in line with expectations.
Wholesale Carrier Services' revenue in 1Q17 decreased
$8.5 million (-5.6%) year over year
to $143.3 million. The decrease
resulted primarily from the absence in 1Q17 of a Latin American
pricing opportunity pertaining to local currency exchange rate
disparities, which existed in the year ago period.
Payment Services' revenue in 1Q17 increased $4.2 million (+7.4%) year over year to
$59.7 million. The sale of
international mobile top-up (IMTU) minutes, which allows customers
in the US to purchase air time for mobile phone users overseas, is
currently the dominant line of business in the Payment Services
vertical. IMTU revenue increased 4.2% compared to the year
ago quarter, and was augmented by revenue gains generated by the
BOSS Revolution international money remittance business (where
revenue increased 151.8% year over year) and the smaller but also
rapidly growing retail point-of-sale based services business,
National Retail Solutions.
TPS' direct cost of revenue in 1Q17, expressed as a percentage
of TPS' revenue, was 85.9%, an increase of 150 basis points year
over year and 80 points sequentially, primarily reflecting margin
pressure on Retail Communications and Wholesale Carrier Services
offerings.
The year over year decreases in TPS' MOU and revenue, as well
the increase in direct cost as a percentage of revenue, reflect the
collapse of rates industry-wide on the US to Mexico corridor as well as longer term secular
trends impacting the telecom industry. These include increased
competition from wireless network operators and MVNOs and
alternative communications solutions such as over-the-top voice and
messaging. In anticipation of these developments, IDT has increased
investment in long term growth initiatives in recent years while
reducing SG&A expense and streamlining operations.
TPS' SG&A expense in 1Q17 decreased to $40.5 million from $45.2
million (-10.4%) in 1Q16 and from $41.9 million (-3.2%) in 4Q16. The year
over year and sequential decreases primarily reflect reduced
employee compensation costs and lower bad debt expense. TPS'
SG&A expense was 11.3% of TPS' revenue in 1Q17, a 60 basis
points decrease compared to the year ago quarter and a 40 basis
point decrease compared to the prior quarter.
TPS' depreciation and amortization expense in 1Q17 increased to
$4.2 million from $3.8 million (+10.5%) in 1Q16 and from
$3.9 million (+7.9%) in 4Q16.
Depreciation increased year-over-year due to higher levels of
capital expenditures in recent periods to support investments in
new products, including our payment services' offerings, Net2Phone
Office, National Retail Solutions and the new BOSS Revolution
calling app with messaging.
TPS' income from operations in 1Q17 decreased to $6.2 million from $10.0
million (-37.7%) in 1Q16 and from $9.1 million (-31.1%) in 4Q16. TPS'
Adjusted EBITDA decreased to $10.4
million from $13.8 million
(-24.6%) in 1Q16 and from $11.4
million (-8.8%) in 4Q16.
Unified Communications as a Service (UCaaS)
The UCaaS
segment is comprised of offerings from IDT's Net2Phone division,
including (1) cable telephony (2) Net2Phone Office, a hosted PBX
service, (3) SIP trunking which supports inbound and outbound
domestic and international calling from an IP PBX and, 4) PicuP, a
highly-automated business phone service that answers, routes and
manages voice calls. PicuP is currently in open beta. UCaaS' lines
of business were previously included in the TPS segment.
UCaaS' revenue was $7.1 million in
1Q17 compared to $7.0 million in both
1Q16 and 4Q16. Year over year, revenue of Net2Phone Office
increased by over 350%, but was mostly offset by a decrease in SIP
trunking revenue. Sequentially, both Net2Phone Office and SIP
trunking revenues increased.
UCaaS' direct cost of revenue in 1Q17 expressed as a percentage
of UCaaS' revenue was 46.1%, a significant improvement from 53.2%
in 1Q16 and from 49.5% in 4Q16.
SG&A expense for the segment was $3.3
million compared to $2.9
million (+11.9%) in 1Q16 and $3.0
million in 4Q16 (+8.0%). As a percentage of UCaaS'
revenue, SG&A in 1Q17 increased to 46.1%, compared to 41.8% in
1Q16 and 43.6% in 4Q16. The increases resulted from
investments in both technology development and customer acquisition
costs for Net2Phone Office and PicuP.
Depreciation and amortization expense in 1Q17 was $726 thousand compared to $657 thousand (+10.5%) in 1Q16 and $673 thousand (+7.9%) in 4Q16, reflecting the
increase in capitalized costs relating to new products
offerings.
UCaaS' loss from operations was $174
thousand in 1Q17 compared to $302
thousand (-42.2%) in 1Q16 and $190
thousand (-8.2%) in 4Q16.
UCaaS' Adjusted EBITDA in 1Q17 was $552
thousand compared to $355
thousand (+55.2%) in the year ago quarter and $483 thousand (+14.2%) in the sequential
quarter.
Consumer Phone Services (CPS)
Consumer Phone Services
sells local and long distance services domestically in 11 states,
marketed under the brand name IDT America. 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. Results
this quarter conformed to expectations.
CPS' revenue decreased to $1.5
million in 1Q17 from $1.8
million (-18.5%) in 1Q16. CPS' income from operations
and Adjusted EBITDA in both 1Q17 and 1Q16 were $0.3 million.
All Other
All Other includes IDT's real estate
holdings comprised of its public garage in Newark and commercial properties in
Newark, Piscataway and Jerusalem, as well as other small businesses
and investments including a minority interest in Cornerstone
Pharmaceuticals, Inc.
During 1Q17, IDT invested $8
million in Cornerstone, 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. IDT
has invested $10 million in
Cornerstone to date.
All Other previously included Zedge, a platform and mobile app
centered on self-expression. Zedge was fully spun off from
IDT to IDT's shareholders on June 1,
2016. Because the disposition of our interest in Zedge did
not meet the criteria to be reported as a discontinued operation,
Zedge's results of operations and cash flows continue to be
included in prior comparative periods.
All Other's revenue in 1Q17 was $0.5
million, a decrease from $3.1
million (-83.6%) in 1Q16. Exclusive of Zedge, revenue
in 1Q16 was also $0.5
million.
All Other's income from operations in 1Q17 was $90 thousand compared to $430 thousand in 1Q16.
Exclusive of Zedge, income from operations in 1Q16 was
$79 thousand.
OTHER CONSOLIDATED RESULTS
Consolidated
results for all periods presented include corporate overhead.
In 1Q17, corporate G&A expense decreased to $1.1 million from $2.6
million (-58.1%) in the year ago quarter and from
$2.7 million (-59.6%) in the prior
quarter. The year over year and sequential reductions
resulted from lower compensation costs and legal expenses,
primarily due to non-routine reversals that may not be repeated in
future periods.
Net income attributable to IDT in 1Q17 was $21.9 million, an increase from $4.2 million in the year ago quarter and from
$11.0 million in 4Q16. Net
income attributable to IDT in 1Q17 included a $2.1 million gain resulting from 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. Net income attributable to IDT in 1Q16 of
$4.2 million included a provision for
income taxes of $2.9 million. Net
income attributable to IDT in 4Q16 was $11.0
million, including a $2.7
million gain on foreign currency transactions and a benefit
from income taxes of $2.1
million.
At October 31, 2016, IDT had
$149.7 million in unrestricted cash,
cash equivalents and marketable securities. Additionally, at that
date, IDT reported $81.1 million in
current restricted cash and cash equivalents, which included
$80.8 million of customer deposits
held by IDT's Gibraltar-based
bank. Current assets and current liabilities were
$318.7 million and $320.2 million, respectively.
Net cash provided by operating activities during 1Q17 was
$5.5 million, compared to
$14.0 million in 1Q16 and
$13.2 million in 4Q16. For the same
periods, capital expenditures were $5.5
million compared to $5.5
million and $4.4 million,
respectively.
DIVIDEND
IDT's Board of Directors has declared a
quarterly dividend of $0.19 per share
of Class A and Class B common stock for 1Q17 to be paid on or about
December 23, 2016. The dividend
will be paid to stockholders of record as of the close of business
on December 19, 2016. The ex-dividend
date will be December 15, 2016.
This distribution will be treated as an ordinary dividend for tax
purposes.
IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL
INFORMATION
IDT will host an earnings conference call
beginning at 5:30 PM ET today 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
14, 2016 by dialing 1-844-512-2921 (toll free from the US)
or 1-412-317-6671 (international) and providing this pin code:
10096086. The recording will also be available via streaming
audio at the IDT investor relations website (www.idt.net/ir)
following the call.
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 also
available in the Investor Relations portion of IDT's website.
About IDT:
IDT Corporation (NYSE: IDT), through its
IDT Telecom division, provides telecommunications 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,
2016
|
July 31,
2016
|
|
(Unaudited)
|
|
|
(in
thousands)
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
91,928
|
$
109,537
|
Restricted cash and
cash equivalents
|
81,133
|
98,822
|
Marketable
securities
|
57,754
|
52,949
|
Trade accounts
receivable, net of allowance for doubtful accounts of $4,851
at October 31, 2016 and $4,818 at July 31, 2016
|
59,420
|
49,283
|
Prepaid
expenses
|
15,093
|
15,189
|
Other current
assets
|
13,345
|
13,273
|
|
|
|
Total current
assets
|
318,673
|
339,053
|
Property, plant and
equipment, net
|
87,350
|
87,374
|
Goodwill
|
11,179
|
11,218
|
Other intangibles,
net
|
740
|
843
|
Investments
|
22,294
|
14,024
|
Deferred income tax
assets, net
|
24,033
|
9,554
|
Other
assets
|
7,387
|
7,592
|
|
|
|
Total
assets
|
$
471,656
|
$
469,658
|
|
|
|
Liabilities and
equity
|
|
|
Current
liabilities:
|
|
|
Trade accounts
payable
|
$
33,186
|
$
30,253
|
Accrued
expenses
|
119,212
|
117,434
|
Deferred
revenue
|
83,764
|
86,178
|
Customer
deposits
|
79,518
|
95,843
|
Income taxes
payable
|
319
|
578
|
Other current
liabilities
|
4,168
|
13,534
|
|
|
|
Total current
liabilities
|
320,167
|
343,820
|
Other
liabilities
|
1,559
|
1,635
|
|
|
|
Total
liabilities
|
321,726
|
345,455
|
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, 2016 and July
31, 2016
|
33
|
33
|
Class B common stock,
$.01 par value; authorized shares—200,000; 25,421 and 25,383 shares
issued and 21,489 and 21,452 shares outstanding at October 31, 2016
and July 31, 2016, respectively
|
254
|
254
|
Additional paid-in
capital
|
397,352
|
396,243
|
Treasury stock, at
cost, consisting of 1,698 and 1,698 shares of Class A common stock
and 3,932 and 3,931 shares of Class B common stock at October 31,
2016 and July 31, 2016, respectively
|
(115,339 )
|
(115,316 )
|
Accumulated other
comprehensive loss
|
(6,629)
|
(3,744)
|
Accumulated
deficit
|
(136,134 )
|
(153,673 )
|
|
|
|
Total IDT Corporation
stockholders' equity
|
139,537
|
123,797
|
Noncontrolling
interests
|
10,393
|
406
|
|
|
|
Total
equity
|
149,930
|
124,203
|
|
|
|
Total liabilities and
equity
|
$
471,656
|
$
469,658
|
|
|
|
IDT
CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
|
|
|
Three Months
Ended
October 31,
|
|
2016
|
2015
|
|
(in thousands,
except per share data)
|
|
|
Revenues
|
$
369,151
|
$
390,578
|
Costs and
expenses:
|
|
|
Direct cost of
revenues (exclusive of depreciation and amortization)
|
313,029
|
324,511
|
Selling, general and
administrative (i)
|
45,438
|
53,090
|
Depreciation and
amortization
|
5,299
|
5,052
|
|
|
|
Total costs and
expenses
|
363,766
|
382,653
|
Other operating
expense
|
(199)
|
—
|
|
|
|
Income from
operations
|
5,186
|
7,925
|
Interest income,
net
|
301
|
158
|
Other income
(expense), net
|
2,392
|
(610)
|
|
|
|
Income before income
taxes
|
7,879
|
7,473
|
Benefit from
(provision for) income taxes
|
14,415
|
(2,898)
|
|
|
|
Net income
|
22,294
|
4,575
|
Net income
attributable to noncontrolling interests
|
(376)
|
(382 )
|
|
|
|
Net income
attributable to IDT Corporation
|
$
21,918
|
$
4,193
|
|
|
|
|
|
|
Earnings per share
attributable to IDT Corporation common stockholders:
|
|
|
Basic
|
$
0.97
|
$
0.18
|
|
|
|
Diluted
|
$
0.96
|
$
0.18
|
|
|
|
|
|
|
Weighted-average
number of shares used in calculation of earnings per
share:
|
|
|
Basic
|
22,712
|
22,935
|
|
|
|
Diluted
|
22,899
|
22,969
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
0.19
|
$
0.18
|
|
|
|
|
|
|
(i) Stock-based
compensation included in selling, general and administrative
expenses
|
$
702
|
$
771
|
|
|
|
|
|
|
IDT
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
Three Months
Ended
October 31,
|
|
2016
|
2015
|
|
(in
thousands)
|
Operating
activities
|
|
|
Net income
|
$
22,294
|
$
4,575
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
5,299
|
5,052
|
Deferred income
taxes
|
(14,483)
|
2,785
|
Provision for doubtful
accounts receivable
|
260
|
873
|
Realized gain on
marketable securities
|
—
|
(543)
|
Interest in the equity
of investments
|
(263)
|
155
|
Stock-based
compensation
|
702
|
771
|
Change in assets and
liabilities:
|
|
|
Restricted cash and
cash equivalents
|
9,939
|
8,395
|
Trade accounts
receivable
|
(13,132)
|
(2,091)
|
Prepaid expenses,
other current assets and other assets
|
(10)
|
2,352
|
Trade accounts
payable, accrued expenses, other current liabilities and other
liabilities
|
6,384
|
(3,465)
|
Customer
deposits
|
(9,127)
|
(4,985)
|
Income taxes
payable
|
(259)
|
148
|
Deferred
revenue
|
(2,114)
|
(69)
|
|
|
|
Net cash provided by
operating activities
|
5,490
|
13,953
|
Investing
activities
|
|
|
Capital
expenditures
|
(5,515)
|
(5,519)
|
Proceeds from sale of
interest in Fabrix Systems Ltd
|
—
|
4,769
|
Cash used for
investments
|
(8,008)
|
—
|
Proceeds from sale and
redemption of investments
|
2
|
17
|
Purchases of
marketable securities
|
(10,969)
|
(14,911)
|
Proceeds from
maturities and sales of marketable securities
|
6,001
|
8,861
|
|
|
|
Net cash used in
investing activities
|
(18,489)
|
(6,783)
|
Financing
activities
|
|
|
Dividends
paid
|
(4,379)
|
(4,199)
|
Distributions to
noncontrolling interests
|
(389)
|
(600)
|
Proceeds from sale of
member interests in CS Pharma Holdings, LLC
|
1,250
|
—
|
Proceeds from exercise
of stock options
|
407
|
—
|
Repayment of note
payable
|
—
|
(6,353)
|
Repurchases of Class B
common stock
|
(23)
|
(23)
|
|
|
|
Net cash used in
financing activities
|
(3,134)
|
(11,175)
|
Effect of exchange
rate changes on cash and cash equivalents
|
(1,476)
|
(884)
|
|
|
|
Net decrease in cash
and cash equivalents
|
(17,609)
|
(4,889)
|
Cash and cash
equivalents at beginning of period
|
109,537
|
110,361
|
|
|
|
Cash and cash
equivalents at end of period
|
$
91,928
|
$
105,472
|
|
|
|
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 2017 and 2016
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 1Q17, 4Q16 and 1Q16, 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 the
gain on the sale of member interest in Visa Europe Ltd.
IDT's measure of non-GAAP net income starts with net income in
accordance with GAAP and adds depreciation and amortization,
severance expense, stock-based compensation and other operating
expense, and subtracts the gain on the sale of member interest in
Visa Europe Ltd. and the tax benefit from group relief.
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 2017 and fiscal 2016 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 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 operating
results exclusive of depreciation and amortization charges are
useful indicators of its current performance.
Severance expense is also 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.
The other operating expense and the gain on the sale of member
interest in Visa Europe Ltd., which are components of income from
operations, are excluded from the calculation of Adjusted EBITDA,
non-GAAP net income and non-GAAP EPS. From time-to-time, IDT may
dispose of certain assets or incur costs related to non-routine
legal and regulatory matters. However, such disposals and legal and
regulatory matters do not occur each quarter. IDT does not believe
the gains or losses from asset sales or from non-routine legal and
regulatory matters should be included in 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.
The tax benefit from group relief is excluded from IDT's
calculation of non-GAAP net income and non-GAAP EPS because it only
indirectly related to the current results of IDT's core
operations. Group relief is only available after all prior net
operating losses are utilized by one entity and that entity is able
to utilize the current period losses of a related entity. The
income tax benefits were recorded by Elmion Netherlands B.V., a
Netherlands subsidiary, in 1Q17
and IDT Global, a U.K. subsidiary, in 4Q16. Group relief is not
anticipated to be ongoing and the related entities are expected to
have a valuation allowance in future periods.
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 Income
(unaudited)
in
millions
Figures may not foot
or cross-foot due to rounding to millions.
|
|
|
Total IDT
Corporation
|
|
Telecom Platform
Services
|
UCaaS
|
Consumer Phone
Services
|
All
Other
|
Corporate
|
Three Months Ended
October 31, 2016
(1Q17)
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
10.7
|
|
$
10.4
|
$
0.6
|
$
0.3
|
$
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
|
|
$
6.2
|
$
(0.1)
|
$
0.3
|
$
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total IDT
Corporation
|
|
Telecom Platform
Services
|
UCaaS
|
Consumer Phone
Services
|
All
Other
|
Corporate
|
Three Months Ended
July 31, 2016
(4Q16)
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
10.0
|
|
$
11.4
|
$
0.5
|
$
0.2
|
$
0.6
|
$
(2.7)
|
Subtract
(Add):
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
5.0
|
|
3.8
|
0.7
|
-
|
0.5
|
-
|
Severance
expense
|
6.3
|
|
6.0
|
-
|
-
|
-
|
0.3
|
Gain on sale of member
interest in Visa Europe Ltd.
|
(7.5)
|
|
(7.5)
|
-
|
-
|
-
|
-
|
Income (loss) from
operations
|
6.2
|
|
$
9.1
|
$
(0.2)
|
$
0.2
|
$
0.1
|
$
(3.0)
|
Interest
income, net
|
0.3
|
|
|
|
|
|
|
Other
income, net
|
2.8
|
|
|
|
|
|
|
Income before income
taxes
|
9.3
|
|
|
|
|
|
|
Benefit
from income taxes
|
2.1
|
|
|
|
|
|
|
Net income
|
11.4
|
|
|
|
|
|
|
Net income attributable
to noncontrolling interests
|
(0.4)
|
|
|
|
|
|
|
Net income
attributable to IDT Corporation
|
$
11.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
UCaaS
|
Consumer Phone
Services
|
All
Other
|
Corporate
|
Three Months Ended
October 31, 2015
(1Q16)
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
13.0
|
|
$
13.7
|
$
0.4
|
$
0.3
|
$
1.1
|
$
(2.5)
|
Subtract:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
5.1
|
|
3.7
|
0.7
|
-
|
0.7
|
-
|
Income (loss) from
operations
|
7.9
|
|
$
10.0
|
$
(0.3)
|
$
0.3
|
$
0.4
|
$
(2.5)
|
Interest
income, net
|
0.2
|
|
|
Other
expense, net
|
(0.6)
|
|
|
Income before income
taxes
|
7.5
|
|
|
Provision for income
taxes
|
(2.9)
|
|
|
Net income
|
4.6
|
|
|
Net income
attributable to noncontrolling interests
|
(0.4)
|
|
|
Net income
attributable to IDT Corporation
|
$
4.2
|
|
|
|
|
|
|
|
|
|
|
|
IDT
Corporation
Reconciliations of
Net 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.
|
|
|
1Q17
|
4Q16
|
1Q16
|
|
|
|
|
Net income
|
$
22.3
|
$
11.4
|
$
4.6
|
Adjustments (add)
subtract:
|
|
|
|
Stock-based
compensation
|
(0.7)
|
(0.4)
|
(0.8)
|
Depreciation and
amortization
|
(5.3)
|
(5.0)
|
(5.0)
|
Other operating
expense
|
(0.2)
|
-
|
-
|
Gain on sale of member
interest in Visa Europe Ltd.
|
-
|
7.5
|
-
|
Tax benefit from group
relief
|
16.6
|
0.9
|
-
|
Severance
expense
|
-
|
(6.3)
|
-
|
Total
adjustments
|
10.4
|
(3.3)
|
(5.8)
|
Income tax effect of
total adjustments
|
1.8
|
3.2
|
2.3
|
|
(12.2)
|
0.1
|
3.5
|
Non-GAAP net
income
|
$
10.1
|
$
11.5
|
$
8.1
|
|
|
|
|
Earnings per
share:
|
|
|
|
Basic
|
$
0.97
|
$
0.49
|
$
0.18
|
Total
adjustments
|
(0.53)
|
0.02
|
0.17
|
Non-GAAP EPS -
basic
|
$
0.44
|
$
0.51
|
$
0.35
|
|
|
|
|
Weighted-average
number of shares used in calculation of basic earnings per
share
|
22.7
|
22.7
|
22.9
|
|
|
|
|
Diluted
|
$
0.96
|
$
0.48
|
$
0.18
|
Total
adjustments
|
(0.52)
|
0.02
|
0.17
|
Non-GAAP EPS -
diluted
|
$
0.44
|
$
0.50
|
$
0.35
|
|
|
|
|
Weighted-average
number of shares used in calculation of diluted earnings per
share
|
22.9
|
22.8
|
23.0
|
|
|
|
|
|
|
|
|
|
|
|
|
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SOURCE IDT Corporation