IDT Corporation (IDT)

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IDT (IDT)

Q1 2012 Earnings Call

December 12, 2011 5:15 pm ET

Executives

Samuel Jonas - Chief Operating Officer

Howard S. Jonas - Founder, Chairman, Chief Executive Officer, Chairman of Nominating Committee and Chairman of Genie Energy Ltd

Bill Ulrey - Vice President of Investor Relations & External Affairs

Presentation

Bill Ulrey

Welcome to IDT Corporation's First Quarter Fiscal 2012 Earnings Presentation. This is Bill Ulrey, IDT's Investor Relations Officer. In this presentation, IDT's Chairman and Chief Executive Officer, Howard Jonas; and Chief Operating Officer, Samuel Jonas, will discuss IDT's financial and operational results for the 3 months ended October 31, 2011.

Both this audio file consisting of management's prerecorded remarks and our earnings release are available on the Investor Relations page of the IDT Corporation website, www.idt.net.

The earnings release has also been filed on a Form 8-K with the SEC. If you have any questions for management related to the announced results after listening to management's presentation and reading the company's earnings release, please e-mail them to us at the following address: invest@idt.net no later than the close of business on Thursday, December 15. Please include your name and firm name, if applicable, in your e-mail.

If we can constructively answer your question, we will post your question along with your name, your firm's name and our answer on the Investor Relations page of the IDT website as early as Monday, December 19, after market close. We will also file a Form 8-K with the SEC containing the questions and answers.

Any forward-looking statements made during this audio presentation or in the written Q&A, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those which we anticipate. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that we file periodically with the SEC. We assume no obligation either to update any forward-looking statements that we have made or may make or to update the factors that may cause actual results to differ materially from those that we forecast.

In this presentation and in our written responses to questions thereafter, we make reference to adjusted EBITDA. Adjusted EBITDA for all periods discussed during our remarks is a non-GAAP measure representing income from operations or loss from operations, exclusive of depreciation and amortization and other operating gains or losses.

Adjusted EBITDA is one key financial metric management uses to evaluate the operating performance of the company and its segments. A schedule provided in the earnings release reconciles adjusted EBITDA to the nearest corresponding GAAP measure, income or loss from operations for each of our segments and for the company as a whole.

Now to begin the discussion of our financial and operating results, here is IDT Corporation's Chairman and CEO, Howard Jonas.

Howard S. Jonas

Thank you, Bill. On October 28, IDT completed the spinoff of Genie Energy to our shareholders. The spinoff reflects years of effort here at IDT. We built an entire new and exciting business segment from scratch, then we separated from IDT where its long-term potential for shareholders could best be realized.

We have generated value for our shareholders in various ways during our history. From the IPO of Net2Phone to selling IDT Entertainment to paying dividends and now spinning off Genie Energy, we find the opportunities to take the bold moves necessary to realize value.

With Genie now standing on its own, IDT offers a more focused investment opportunity. There is a remarkable transformation going on within IDT Telecom that holds tremendous promise. And now, we can also shine a brighter light on Fabrix surge and our Spectrum licenses and our Net2Phone IP, all of which have upside potential.

Samuel Jonas, our Chief Operating Officer, will be going over the quarter's financial results with you shortly, but I want to point out the profitability of the first quarter of fiscal 2012 was impacted by the $10 million settlement of an outstanding legal claim by T-Mobile resulting from a dispute over a wholesale supply contract.

Also in the quarter, IDT paid fiscal 2011 performance compensation to certain employees which were accrued in the course of last year totaling $5.7 million. That payment, along with the T-Mobile settlement, represented about a $16 million reduction in cash flow from operations. Had it not been for these items, our cash from operations would have been positive on the quarter.

In light of these results and our continued confidence in the profitability of our operating businesses, earlier today, IDT's Board of Directors declared a dividend of $0.13, slightly under $3 million for the first quarter. This reflects our determination to continue to return value to shareholders as the company's performance, financial resources and strategic situation permits.

Now I'd like to talk at a high level about IDT Telecom. There are 2 competing storylines within our core businesses. One is the decline of some of the lines of business traditionally associated with IDT Telecom, our Consumer Phone Service businesses, traditional prepaid calling card sold in independent retail stores and bodegas, and our cable telephony businesses are in secular decline. Here, our strategy is simple: to reduce our cost and generate as much cash as possible for as long as possible.

On the other side of the coin are the innovative new products and services such as the Boss Revolution payment platform and international mobile top-up, which along with our revitalized wholesale carrier business, have become the key drivers of our top line growth. In fact, Boss Revolution, which we launched less than 3 years ago in the United States, already generates higher revenue than all of our traditional prepaid calling cards sold in the U.S. through comparable channels. Boss Revolution-related revenue this quarter increased over 400% compared to the year ago.

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