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IDT Reports Fourth Quarter and Year-End Earnings; Company records $122.6 million in revenues, and pro forma recurring EPS of $0.20, excluding one-time items
Business Wire - September 28, 1998 07:45
HACKENSACK, N.J.--(BUSINESS WIRE)--Sept. 28, 1998--IDT Corporation (NASDAQ: IDTC), a leader in international telecommunications, today reported its fourth quarter and annual results for the period which ended on July 31, 1998. IDT closed its fiscal year with revenue of $335.4 million, an increase of 148% over the previous year.
Revenues for the fourth quarter were $122.6 million, compared with $41.0 million for the same period last year, an increase of 199%. Pro forma net income, which excludes the write-off of purchased in-process R&D and other one-time items discussed below, was $7.1 million or $0.20 per share, compared with net income of $0.9 million or $0.04 per share for the fourth quarter of 1997, a six-fold increase in net income and a four-fold increase in EPS.
During the fourth quarter of fiscal 1998, IDT completed the acquisition of InterExchange and took a one-time charge of $25 million, or $0.70 per share on an after-tax basis, as a write-off of purchased in-process R&D.
In addition, IDT incurred a one-time extraordinary charge of $0.22 million, or $0.01 per share for the retirement of convertible debt and a one-time tax credit of $1.8 million, or $0.05 per share.
Actual net income for the fourth quarter, including the above- mentioned write-off of purchased in-process R&D and other one- time items, was ($16.3) million or ($0.46) per share, compared with $1.5 million or $0.04 per share in the same period last year.
Revenues for fiscal 1998 were $335.4 million, compared with $135.2 million for the same period last year, an increase of 148%. Pro forma net income was $17.1 million or $0.56 per share, compared with a net loss of $3.8 million or ($0.18) per share during fiscal 1997.
Actual net income for fiscal 1998 was ($6.4) million or ($0.21) per share, versus actual net loss of $3.8 million or ($0.18) per share for the same period last year. All earnings per share amounts represent diluted earnings per share as defined within Statement of Financial Accounting Standards No. 128 (FAS 128).
Pro forma EBITDA for the fourth quarter improved significantly to $11.7 million or $0.33 per share as compared to EBITDA of $2.8 million or $0.12 per share for the same quarter year-ago, and $7.3 million or $0.22 per share in the third quarter of fiscal year 1998, more than a three-fold increase year over year, and a 60% sequential increase quarter to quarter.
Actual EBITDA for the fourth quarter was ($13.3) million or ($0.37) per share as compared to EBITDA of $2.8 million or $0.12 per share for the same quarter year-ago, and $7.3 million or $0.22 per share for the third quarter of fiscal year 1998.
"This was another milestone year in IDT's history," said IDT Chairman and CEO Howard Jonas. "1998 was a year of continued innovation and success. We've introduced new product lines, invented new technologies, and have taken them all to market successfully."
This marks the 15th consecutive quarter of double-digit revenue growth quarter to quarter, and the tenth consecutive quarter of improved profitability, not including one-time charges and benefits.
IDT's fiscal year 1998 highlights include the following year-over- year internal growth statistics and events:
-- 148% increase in total revenues to $335.4 million from $135.2 million
-- 204% increase in telecom revenues and a 259% increase in telecom minutes of use
-- 379% increase in Net2Phone revenues and a 881% increase in Internet telephony minutes of use
-- Purchase of transatlantic cable and intra-European fiber- optic capacity
-- Acquisition of the InterExchange group of companies and Union Telecard
Telecommunications
IDT's telecommunications operations continued to demonstrate rapid growth. Telecom revenues for the quarter increased to $113.9 million, up 237% over same period year-ago revenues of $33.8 million and a 44% sequential increase over revenues of $79.0 million for the prior quarter. Telecommunications revenues for the fiscal year ended July 31, 1998 increased by 204% to $304 million, up from $100 million for the fiscal year ended July 31, 1997.
Telecom minutes of use grew to approximately 356 million minutes for the quarter, a 314% increase over the 86 million minutes of use for the same quarter year ago, and a 60% increase over the prior quarter's 222 million minutes of use. Telecommunications minutes of use for fiscal year 1998 were 850 million, a 259% increase from the 237 million minutes of use for fiscal year 1997.
Carrier gross margins continued to increase to approximately 19%, primarily due to the migration of more traffic on the Company's proprietary network, and synergies from the InterExchange acquisition, which closed at the beginning of the quarter. Due to accounting consolidation of the joint venture interest with the Company's pre-paid distribution entity, gross margins for pre- paid calling cards declined to 31%, thereby affecting overall telecom gross margins and gross margins for the Company as a whole. However, this adjustment was more than offset by a reduction of SG&A as a percentage of revenues to 14.6% due to the above mentioned accounting consolidation.
Telecom gross margins in the fourth quarter increased to 27% up from 22% in the same period year-ago and down from 31% for the prior quarter, reflecting the effect of the consolidation.
Revenues from IDT's retail division grew significantly over the past quarter. In particular, pre-paid calling card revenues for the fourth quarter increased to $57.7 million, up 114% from $27.0 million in revenues for the prior quarter, and a 37-times increase over revenues of $1.5 million for the same quarter year ago. The strong growth in this relatively new business for IDT is due to the Company's successful implementation of its marketing strategy to target high call-volume ethnic markets by launching a variety of country-specific cards targeted to this demographic segment. The Company intends to continue to aggressively grow the pre-paid division in order to complement its wholesale services with high-margin retail products.
Strategic Focus on Retail
Approximately 60% of the Company's total revenues were from its retail products and services, with the balance being wholesale. The Company has focused on providing retail services directly to the end user, given the competitive climate in the wholesale marketplace as well as the Company's aggressive rates that it is able to pass on directly to its customers.
To that end, the Company acquired a 50% interest in Union Distribution Company, the parent company of a group of companies currently handling nationwide distribution of IDT's pre-paid calling cards. The agreement provides for guaranteed distribution of IDT's domestic and international pre-paid phone cards in key markets nationwide, and is expected to reduce overall costs and improve margins.
Network Buildout
The Company also is continuing to expand its network both domestically and internationally. Capacity in IDT's U.S. international gateway has been more than doubled and the Company's UK facility has been fully upgraded and is fully operational.
The Company has already received licensing to provide switched voice services in the Netherlands, and has licenses pending in both France and Germany. Facilities throughout Western Europe are expected to be operational pending licensing, where the Company intends to sell both wholesale and retail services, mirroring its success in the United States.
Internet Telephony
Net2Phone revenues for fiscal year 1998 were $11.5 million, a 379% increase over $2.4 million for fiscal year 1997. Revenues for IDT's Internet telephony division in the fourth quarter were $3.9 million, up 290% over same-period year-ago revenues of $1.0 million, and a 39% sequential increase over revenues of $2.8 million for the prior quarter.
Net2Phone minutes of use for Fiscal Year 1998 were 42.2 million, an 881% increase over 4.3 million minutes for the fiscal year 1997. Total Net2Phone minutes of use grew to 22 million minutes for the quarter, a 106% increase over the prior quarter's 10.7 million minutes and a 10-fold increase over 2.2 million minutes for the same quarter year-ago. The division continues to experience worldwide demand for IDT's Internet telephony products and services. To date, over 50 million minutes of use have been routed using IDT's Internet telephony services by more than one million customers in over 200 countries.
Net2Phone's marketing efforts have been accelerated through newly announced relationships with Packard Bell NEC Europe, IBM Global Services, broadcast.com (formerly Audionet), and more than 200 agents worldwide.
In a September 15, 1998 release, IBM announced that through an expanded relationship that is planned with IDT, IBM intends to offer telecommunications companies software and services designed to utilize Internet telephony. IBM plans to offer IDT's Net2Phone PC-to-phone software and its phone-to-phone services to telecommunications carriers seeking a cost-effective way to enter the IP telephony business. IDT would manage the authorization, routing and settlement charges for each call.
Mergers and Acquisitions
This past fiscal year, IDT acquired the InterExchange group of companies. The acquisition provides IDT with additional routes into many of the Company's largest markets, enhancing gross margins. In addition, InterExchange operates one of the largest pre-paid card platforms in the country, allowing IDT to fully integrate all aspects of this fast-growing component of the Company's business.
Internet
Revenues from IDT's Internet division were $4.7 million, a 10% decrease from the prior quarter's revenues of $5.2 million, and a 23% decrease from $6.1 million for the same quarter year-ago, consistent with the Company's strategic focus of building its core telecommunications businesses.
Financial Details
Gross margins were 27.4% as compared to 31.7% for the prior quarter. However, this was offset by a decrease in SG&A as a percentage of revenues, to 14.6% in the fourth quarter, as compared to 23.4% for the prior quarter.
Depreciation for the fourth quarter was $4.7 million as compared to $1.5 million in the same quarter year-ago, and $2.8 million for the prior quarter. As a percentage of revenues, depreciation increased to 3.9% of revenues for the quarter as compared to 3.7% in the same quarter year-ago, and increased from 3.2% for the prior quarter.
Pro forma EBITDA margins, as a percentage of revenues, for the fourth quarter increased to 9.6% as compared to 6.8% in the same period year-ago, and increased from 8.3% for the prior quarter.
Pro forma operating margins, as a percentage of revenues, increased to 5.7%, up from 3.2% in the same period year ago, and up from 5.2% in the prior quarter. Pro forma net margins increased to 5.8% from 2.3% in the same period year-ago, and from 5.6% for the prior quarter.
Shares used to calculate earnings per share for the second quarter were 32.3 million on a basic basis and 35.9 million on a fully diluted basis.
This year, the Company completed a secondary offering of 5.1 million shares of equity, inclusive of the over-allotment option. Net proceeds to the Company were approximately $120 million. In addition, the Company offered $100 million in a privately placed debt financing at a rate of 8.75%. Proceeds of the financing will be used to expand the Company's international and domestic telecommunications network. Facilities in the US and the UK are already fully functional, and plans for additional mirror sites throughout the U.S. and Europe are scheduled for launch by the end of the year.
IDT Corporation
IDT is a leading emerging multinational carrier that combines its position as an international telecommunications operator, its experience as an Internet service provider and its leading position in Internet telephony to provide a broad range of telecommunications services to its wholesale and retail customers worldwide. The company provides its customers with integrated and competitively priced international and domestic long distance, pre-paid calling cards, Internet access and, through its Net2Phone product offerings, Internet telephony services including Net2Phone Direct, Net2Fax, and Click2Talk. For more information about IDT's Internet telephony services, please visit www.net2phone.com
Except for historical information, all of the expectations and assumptions contained in the foregoing are forward-looking statements involving risks and uncertainties. Important factors that could cause actual results to differ materially from such forward-looking statements, include, but are not limited to, the competitive environment for Internet telephony, changes of rates of all related telco rates and services, legislation that may affect the Internet Telephony industry, IDT's ability to operate the services described on a large scale commercial level. For additional information regarding these and other risks associated with the Company's business refer to the Company's reports filed with the SEC.
IDT CORPORATION
PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA
Excluding one-time charge, extraordinary item, and income tax benefit(a)
YEAR ENDED THREE MONTHS ENDED
07-31-98 07-31-97 07-31-98 07-31-97
STATEMENT OF OPERATIONS:
REVENUES 335,372,915 135,187,227 122,557,548 41,013,177
COST OF SALES 240,837,657 92,214,223 89,033,712 29,659,103
GROSS PROFIT 94,535,258 42,973,004 33,523,836 11,354,074
SG&A 61,969,890 41,544,987 17,909,180 8,538,575
MINORITY INTEREST 3,895,669 0 3,895,669 0
DEPRECIATION &
AMORTIZATION 11,288,974 4,873,142 4,735,810 1,509,899
TOTAL OPERATING 77,154,533 46,418,129 26,540,659 10,048,474
EXPENSES
OPERATING INCOME 17,380,725 (3,445,125) 6,983,177 1,305,600
OTHER (NET) (314,746) (391,645) 130,841 (366,040)
NET INCOME (LOSS) 17,065,979 (3,836,770) 7,114,018 939,560
EBITDA 28,669,699 1,428,017 11,718,987 2,815,499
EBITDA PER SHARE $0.94 $0.07 $0.33 $0.12
NET INCOME (LOSS)
PER SHARE - WEIGHTED $0.56 ($0.18) $0.20 $0.04
AVERAGE
WEIGHTED AVE. NO. OF
SHARES - DILUTED 30,656,400 21,152,927 35,902,507 23,468,176
NET INCOME (LOSS)
PER SHARE - WEIGHTED $0.60 ($0.18) $0.22 $0.04
AVERAGE
WEIGHTED AVE. NO. OF
SHARES - BASIC 28,571,421 21,152,927 32,361,382 21,641,090
BALANCE SHEET DATA
07-31-98 07-31-97
CASH, EQUIVALENTS
& ST INVESTMENTS 175,592,286 7,674,313
FIXED ASSETS (NET) 75,332,476 25,725,805
TOTAL ASSETS 417,196,204 58,537,101
TOTAL STOCKHOLDERS
EQUITY 238,748,071 25,259,144
(a) Excluding effect of $25 million write-off for in-process R&D,
$0.2 million extraordinary loss on early retirement of convertible
debt, and a $1.76 million tax credit.
IDT Corporation
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(including effects of one-time charge, extraordinary item, and income
tax benefit)
YEAR ENDED THREE MONTHS ENDED
07-31-98 07-31-97 07-31-98 07-31-97
STATEMENT OF OPERATIONS:
REVENUES 335,372,915 135,187,227 122,557,548 41,013,177
COST OF SALES 240,837,657 92,214,223 89,033,712 29,659,103
GROSS PROFIT 94,535,258 42,973,004 33,523,836 11,354,074
SG&A 61,969,890 41,544,987 17,909,180 8,538,575
MINORITY INTEREST 3,895,669 0 3,895,669 0
IN-PROCESS R&D
WRITE-OFF 25,000,000 0 25,000,000 0
DEPRECIATION &
AMORTIZATION 11,288,974 4,873,142 4,735,810 1,509,899
TOTAL OPERATING
EXPENSES 102,154,533 46,418,129 51,540,659 10,048,474
OPERATING INCOME
(LOSS) (7,619,275) (3,445,125) (18,016,823) 1,305,600
OTHER (NET) (314,746) (391,645) 130,841 (366,040)
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (7,934,021) (3,836,770) (17,885,982) 939,560
EXTRAORDINARY ITEM -
EARLY RETIREMENT OF
CONVERTIBLE DEBT (221,376) 0 (221,376) 0
NET INCOME (LOSS) BEFORE
INCOME TAX EFFECT (8,155,397) (3,836,770) (18,107,358) 939,560
INCOME TAX BENEFIT 1,760,000 0 1,760,000 0
NET INCOME (LOSS) (6,395,397) (3,836,770) (16,347,358) 939,560
EBITDA 3,669,699 1,428,017 (13,281,013) 2,815,499
EBITDA PER SHARE $0.12 $0.07 ($0.37) $0.12
NET INCOME (LOSS) PER SHARE -
WEIGHTED AVERAGE ($0.21) ($0.38) ($0.46) $0.04
WEIGHTED AVERAGE NO. OF
SHARES - DILUTED 30,656,400 21,152,927 35,902,507 23,468,176
NET INCOME (LOSS) PER SHARE -
WEIGHTED AVERAGE ($0.22) ($0.18) ($0.51) $0.04
WEIGHTED AVERAGE NO.
OF SHARES - BASIC 28,571,421 21,152,927 32,361,382 21,641,090
BALANCE SHEET DATA:
07-31-98 07-31-97
CASH, EQUIVALENTS, & ST
INVESTMENTS 175,592,286 7,674,313
FIXED ASSETS (NET) 75,332,476 25,725,805
TOTAL ASSETS 417,196,204 58,537,101
TOTAL STOCKHOLDERS EQUITY 238,748,071 25,259,144
CONTACT: Sarah Hofstetter
IDT Public Relations
201-928-2882
or
Ilan Slasky
IDT Investor Relations
201-928-4316
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