IDT Corporation Reports First Quarter Fiscal Year 2020 Results

NEWARK, N.J., Dec. 5, 2019 /PRNewswire/ -- IDT Corporation (NYSE: IDT) reported a loss per diluted share of $0.06 and Non-GAAP earnings per diluted share* of $0.10 on revenue of $340.2 million for the first quarter of FY 2020, the three months ended October 31, 2019.

1Q20 OPERATIONAL HIGHLIGHTS 
(Results are for 1Q20 and are compared to 1Q19)

• net2phone's cloud-based Unified Communications as a Service (UCaaS) offering served 112,000 seats at October 31^st compared to 68,000 a year earlier. Subscription revenue increased 87.0% to $5.9 million. The results include the acquisition of Versature, a Canadian UCaaS provider, during 1Q19;
• National Retail Solutions (NRS) had deployed over 10,600 point-of-sale (POS) terminals with independent retailers nationwide by October 31^st of which approximately 8,200 were active compared to 5,900 a year earlier. NRS revenue increased 93.4% to $2.4 million; 
• BOSS Revolution Money Transfer transactions increased to 1.1 million from 715,000 in the year ago quarter.  Revenue increased 55.8% to $7.4 million with solid growth from both direct-to-consumer (DTC) and retail channels.  DTC revenue increased 68.9% to $4.6 million.

REMARKS BY SHMUEL JONAS, CEO
"IDT delivered consistent results in the first quarter of our 2020 fiscal year highlighted by expansion of our higher-margin growth initiatives and our lower margin Mobile Top-Up services offset by decreases of our BOSS Revolution Calling and Carrier Service revenues in line with our expectations.

"In IDT's growth initiatives, net2phone's cloud-based UCaaS offering increased revenue 50% year-over-year, and 35% exclusive of our acquisition of Versature.  National Retail Solutions turned in a strong quarter, increasing revenue by 93% year-over-year.  NRS' advertising, data analytics and credit card processing offerings drove the expansion as they began to gain traction in their respective markets.  BOSS Revolution Money Transfer boosted revenue by 56% year-over-year to $7.4 million.  DTC revenue increased 69% year-over-year to $4.6 million while retail channel revenue increased 38% to $2.8 million.

"In IDT's Core operations, Mobile Top-Up revenue increased 18% year-over-year to $76.8 million boosted by expanded sales of bundled offerings.

"Expansion of our growth initiatives and Mobile Top-Up drove an increase in gross profit for the fourth consecutive quarter, while Adjusted EBITDA* climbed to $7.3 million from $7.1 million a year ago."

Notes on Consolidated Results and Balance Sheet
Consolidated results for all periods presented include corporate overhead.  Corporate G&A expense decreased to $2.2 million in 1Q20 from $2.3 million in 1Q19.

At October 31, 2019, IDT held $77.8 million in unrestricted cash, cash equivalents, debt securities and current equity investments. Current assets totaled $373.7 million and current liabilities totaled $396.4 million.

Net cash used in operating activities during 1Q20 was $5.0 million, including the impact of a $1.8 million increase in customer deposits at IDT's Gibraltar-based bank, compared to net cash provided by operating activities of $8.2 million in the year ago quarter, including a $5.6 million increase in customer deposits at the bank.  The year-over-year decrease in cash-flow from operations is mostly due to the timing of prepayments made to disbursement agents in the BOSS Revolution Money Transfer business. 

Capital expenditures were $3.9 million and $4.5 million in 1Q20 and 1Q19, respectively. 

RESULTS BY SEGMENT
(Results are for 1Q20 and are compared to 1Q19)

Telecom & Payment Services (TPS)
IDT's TPS segment accounted for 96.3% and 97.1% of IDT's consolidated revenue in 1Q20 and 1Q19, respectively.  The segment includes Core and Growth verticals: 

Core includes IDT's three largest communications and payments offerings by revenue: BOSS Revolution Calling, an international long-distance calling service marketed primarily to immigrant communities in the U.S., Carrier Services, which provides international long-distance termination and outsourced traffic management solutions to telecoms worldwide, and Mobile Top-Up, which enables customers to transfer airtime and bundles of airtime, messaging and data credits to mobile accounts internationally and domestically. Core also includes smaller communications and payments offerings, many in harvest mode.

Growth comprises National Retail Solutions, which operates a POS, terminal-based network for independent retailers, BOSS Revolution Money Transfer, an international money remittance service for customers in the U.S., and BOSS Revolution Mobile, a mobile virtual network operator.

net2phone
IDT's net2phone segment accounted for 3.7% and 2.9% of IDT's consolidated revenue in 1Q20 and 1Q19, respectively.  The segment comprises two verticals: 

net2phone-UCaaS, a unified cloud communications service for businesses in North and South America and certain other international markets.

net2phone-Platform Services provides telephony services to cable operators and other businesses by leveraging a common technology platform.

Revenue in 1Q20 and comparative periods for all verticals and for the most significant core offerings is provided in the following chart:

Segment level financial results are summarized in the following chart:

TPS Segment Takeaways:

• BOSS Revolution Calling revenue decreased 5.9% to $116.2 million and Carrier Services revenue decreased 20.2% to $113.5 million, in line with expectations; 
• Mobile Top-Up revenue increased 17.6% to $76.8 million boosted by expanded sales of bundled offerings;
• NRS revenue increased by 93.4% to $2.4 million led by increased sales of advertising capacity to digital-out-of-home advertisers, transaction data to data analytics and consumer package goods marketers, and credit card processing services to retailers operating NRS terminals.  NRS increased the number of active terminals in its POS network at October 31, 2019 to 8,200 from 5,900 a year earlier;
• BOSS Revolution Money Transfer revenue increased 55.8% to $7.4 million with solid growth from both DTC and retail channels. 

net2phone Segment Takeaways:

• net2phone-UCaaS revenue increased 50.3% to $7.2 million led by growth in South American markets. The year-over-year increases include the impact of the acquisition of Versature, a Canadian UCaaS provider, during 1Q19.  Exclusive of the Versature acquisition, net2phone-UCaaS revenue increased 34.9%.
• net2phone-UCaaS subscription revenue for its cloud communications offering - exclusive of equipment sales and SIP-trunking offerings - increased 87.0% to $5.9 million inclusive of the Versature acquisition;
• net2phone's cloud communications offering served 112,000 seats at October 31st, compared to 68,000 a year earlier, including seats served by Versature.

IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
This release is available for download in the "Investors & Media" section of the IDT Corporation website (http://ir.idt.net/) and has been filed on a current report (Form 8-K) with the SEC.

IDT will host an earnings conference call beginning at 5:30 PM Eastern 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 US) or 1-412-902-4243 (international) and request the IDT Corporation call.

A replay of the conference call will be available approximately three hours after the call concludes through December 12, 2019. To access the replay, dial toll free 1-844-512-2921 (from US) or 1-412-317-6671 (international) and provide this replay number: 10137108.  A replay will also be accessible via streaming audio at the IDT investor relations website (http://ir.idt.net/).

ABOUT IDT:
IDT Corporation (NYSE: IDT) provides communications and payment services to individuals and businesses primarily through its Boss Revolution^®, net2phone^® and National Retail Solutions^® brands.  IDT's wholesale carrier services 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.

Reconciliation of Non-GAAP Financial Measures for the
First Quarter Fiscal 2020 and 2019

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 1Q20, 4Q19, and 1Q19, Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP earnings (loss) per share, 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 revenue less direct cost of revenues and selling, general and administrative expense. Another way of calculating Adjusted EBITDA is to start with income (loss) from operations, add depreciation and amortization, severance expense, and other operating expense, and deduct other operating gains.

IDT's measure of non-GAAP net income (loss) starts with net income (loss) in accordance with GAAP and adds severance expense, stock-based compensation, and other operating expense, net. 

IDT's measure of non-GAAP earnings (loss) per share is calculated by dividing non-GAAP net income (loss) by the diluted weighted-average shares.

These additions and subtractions are non-cash and/or non-routine items in the relevant fiscal 2020 and fiscal 2019 periods.

Management believes that IDT's Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP earnings (loss) per share 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 (loss) and non-GAAP earnings (loss) per share 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.

Management refers to Adjusted EBITDA, as well as the GAAP measures income (loss) from operations and net income (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 capitalized 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 (loss) and non-GAAP earnings (loss) per share. 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, net, which is a component of income (loss) from operations, is excluded from the calculation of Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP earnings (loss) per share. Other operating expense, net includes accruals for non-income related taxes related to one of IDT's foreign entities, legal fees related to Straight Path Communications Inc.'s stockholders' putative class action and derivative complaint, and expense for the indemnification of a net2phone cable telephony customer related to patent infringement claims brought against the customer. From time-to-time, IDT may incur costs related to non-routine tax and legal matters. However, these matters do not occur each quarter. IDT does not believe the gains or losses from these non-routine matters are components of IDT's or the relevant segment's core operating results.

The other calculation of Adjusted EBITDA consists of revenue 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 (loss) and non-GAAP earnings (loss) per share 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.

Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP earnings (loss) per share 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 (loss), basic and diluted earnings (loss) 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 (loss) and non-GAAP earnings (loss) per share may not be comparable to similarly titled measures reported by other companies.

Following are reconciliations of Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP earnings (loss) per share 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 (loss) for IDT on a consolidated basis, (b) for non-GAAP net income (loss), net income (loss), and (c) for non-GAAP earnings (loss) per share, basic and diluted earnings (loss) per share.

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SOURCE IDT Corporation