IDT Corporation Reports First Quarter Fiscal Year 2021 Results
NEWARK, N.J., Dec. 3, 2020 /PRNewswire/ -- IDT Corporation (NYSE: IDT) reported net income per diluted share of $0.32 and Non-GAAP earnings per diluted share* of $0.35 on revenue of $343 million for the first quarter of FY 2021, the three months ended October 31, 2020.
1Q FY21 HIGHLIGHTS
REMARKS BY SHMUEL JONAS, CEO
"All three of our high growth, higher margin businesses - BOSS Revolution Money Transfer, NRS and net2phone's cloud communications offerings - generated impressive year over year revenue growth.
"In aggregate, these businesses have been contributing an increasing share of our consolidated revenue less direct cost of revenue, and this quarter their contribution topped 30%. Our money transfer business again benefitted, although less significantly, from the favorable foreign exchange market conditions that boosted its results last quarter.
"As a result of strong operational cash generation, IDT closed the quarter with a stronger balance sheet, even as we continued to invest in our businesses and repurchase our stock."
RESULTS BY SEGMENT
IDT has revised its segment reporting for FY 2021 to reflect the growth of its fintech and cloud communications businesses and their increased contributions to the Company's consolidated results. The Company is reporting results for three new reporting segments. Comparative results have been reclassified and restated for all periods presented. The revised reportable business segments reflect management's approach to analyzing results, its resource allocation strategy and its assessment of business performance.
Fintech – Comprises BOSS Revolution Money Transfer, a provider of international money remittance and related value/payment transfer services and National Retail Solutions (NRS), operator of a nationwide point-of-sale retail network providing payment processing, digital advertising, transaction data and ancillary services. BOSS Revolution Money Transfer and NRS were formerly reported in the Company's Telecom & Payment Services (TPS) segment as TPS' Growth vertical.
net2phone-UCaaS - Comprises net2phone's cloud communications offerings, which were previously reported in the net2phone segment.
Traditional Communications - Comprises lines of business participating in whole or in part in the paid minute telecommunications market and other smaller lines of business.
Traditional Communications businesses were previously reported in the former TPS segment except for net2phone-Platform Services, which was previously included within the former net2phone segment.
IDT continues to report its corporate overhead separately.
Segment Financial Results
Traditional Communications Takeaways:
NOTES ON FINANCIAL STATEMENTS
As of October 31, 2020, IDT held $119.0 million in unrestricted cash, cash equivalents, debt securities and current equity investments. Current assets totaled $325.3 million and current liabilities totaled $319.9 million.
Net cash provided by operating activities during 1Q21 was $18.8 million, compared to net cash used in operating activities of $5.0 million in the year ago quarter. Exclusive of changes in customer deposit balances at the Gibraltar bank, net cash provided by operating activities during 1Q21 was $19.3 million, compared to net cash used in operating activities of $6.7 million in 1Q20.
Capital expenditures (CAPEX) were $4.6 million and $3.9 million in 1Q21 and 1Q20, respectively.
IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION
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 U.S.) 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 10, 2020. To access the call replay, dial toll free 1-844-512-2921 (from U.S.) or 1-412-317-6671 (international) and provide this replay number: 10149919. A replay will also be accessible via streaming audio at the IDT investor relations website.
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
Non-GAAP Financial Measures
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 1Q21, 4Q20, 1Q20, Adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per diluted share, all of 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 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 per diluted share 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 2021 and fiscal 2020 periods.
Management believes that IDT's Adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per diluted share are measures which 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 earnings per diluted 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, and non-GAAP earnings per diluted 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, and non-GAAP earnings per diluted share. Other operating expense, net includes accruals for non-income related taxes related to one of IDT's foreign entities, expense for the indemnification of a net2phone cable telephony customer related to patent infringement claims brought against the customer, legal fees related to Straight Path Communications Inc.'s stockholders' putative class action and derivative complaint, expenses for other legal matters, and the write-off of certain assets. From time-to-time, IDT may incur costs related to non-routine legal and tax matters, and write-off assets, however, these various items generally do not occur each quarter. IDT believes the losses from these non-routine matters are not 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 and non-GAAP earnings per diluted 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.
In 4Q20, due to continued and projected profitability in the Unites States, IDT was able to release a portion of its valuation allowance that was recorded against its U.S. deferred tax assets. This income tax benefit is excluded from IDT's non-GAAP net income and non-GAAP EPS because it only indirectly related to the current results of IDT's core operations.
Adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per diluted 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 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 earnings per diluted share 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 earnings per diluted 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, net income (loss), and (c) for non-GAAP earnings per diluted share, diluted earnings per share.
Key Performance Metrics
Revenue less direct cost of revenue as a percentage of revenue is a financial metric that measures changes in our revenue relative to changes in direct cost of revenue during the same period. Revenue and direct cost of revenue in this metric are from IDT's consolidated statements of income in accordance with GAAP. Revenue less direct cost of revenue as a percentage of revenue is a ratio in which revenue less direct cost of revenue is the numerator and revenue are the denominator. It is useful for monitoring trends in the generation of revenue as well as for evaluating the net contribution of IDT's revenue.
Adjusted EBITDA less CAPEX is also a financial metric, which is calculated by deriving Adjusted EBITDA as described above and subtracting capital expenditures in accordance with GAAP as reported in the consolidated statements of cash flows. Management uses Adjusted EBITDA less CAPEX to evaluate the level of capital investment needed to support operations, and as a reasonable proxy for the cash generated by IDT's businesses. Because IDT's capital expenditures reflect an allocation of capital for longer term growth, IDT seeks to strike an appropriate balance between near-term and long-term financial performance as reflected in Adjusted EBITDA less CAPEX. IDT's measurement of Adjusted EBITDA less CAPEX may not be comparable to similarly titled measures reported by other companies.
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