IDT Corp (IDT) 2016 Q4 法說會逐字稿

Hello, and welcome to the IDT Corporation's fourth quarter and full FY16 earnings conference call.

(Operator Instructions)

In today's presentation, Shmuel Jonas, CEO of IDT Corporation will discuss IDT's financial and operational results for the 3 and 12 month period ending July 31, 2016. Any forward-looking statements made during this conference call, either in the prepared remarks or in the Q&A session, whether general or specific in nature are subject to risks and uncertainties that may cause actual results to differ materially from those which the Company anticipates. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that IDT files periodically with the SEC. IDT assumes no obligation either to update any forward-looking statements that they have made or may make, or to update the factors that may cause actual results to differ materially from those that they forecast.

In the presentation, in their presentation or in the Q&A that will follow, IDT's management may make reference to the non-GAAP measures, adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS. A schedule provided in the earnings release reconciles adjusted EBITDA, non-GAAP net income, and non-GAAP diluted EPS to the nearest corresponding GAAP measures. Please note that IDT earnings release is available on the Investor Relations page at the IDT Corporation website, www.IDT.net. The earnings release has also been filed on a Form 8-K with the SEC. I would now like to turn the conference over to Mr. Jonas.

Thank you, operator. Welcome to IDT's fourth-quarter and full-year FY16 earnings conference call. My remarks today will focus on key operational and financial results for the 3 and 12 month periods ended July 31, 2016. Unless I indicate otherwise, results are for the fourth quarter of FY16, and are compared to the year ago quarter. For a comprehensive and detailed discussion of our results, please read our earnings release issued earlier today and our Form 10-K which we expect to file with the SEC on or about October 14. Following my remarks, Marcelo Fischer, IDT's Senior Vice President of Finance and IDT Telecom's Chief Financial Officer will join me, and we will be glad to take your questions.

Operational highlights of the quarter include the completion of the spinoff of Zedge in early June, and the rollout of our new BOSS Revolution retailer portal. This new portal will allow retailers to sell many of our disparate retail offerings from one place, including PIN-less IMTU money transfer, loading money, gift cards, domestic and overseas bill payments and GPR cards, as well as other products on our roadmap.

After the quarter closed, we beta launched to rave reviews two new products, PicuP, a telephony solution for very small businesses, and about two weeks ago, the next-generation of the BOSS Revolution calling app with free peer-to-peer calling and messaging.

Our financial results for the quarter were consistent with recent trends. Revenue declined $37.7 million, compared to the year ago quarter, but increased sequentially by $12.9 million, helped by the 2 additional days in the fourth quarter compared to the third. Consolidated SG&A expense for the fourth quarter was $5.1 million below the year ago level, and full-year SG&A expense was $17.6 million below FY15's level, as a result of our continuing effort to manage costs.

Income from operations for the fourth quarter was $6.2 million, compared to $7.2 million. Adjusted EBITDA was $10 million, compared to $12.4 million, and diluted EPS jumped to $0.48 from $0.05. Full year results were solid, although any comparison of GAAP results to the prior year is skewed by the gain of the sale of our interest in Fabrix recognized in FY15. For the FY16, adjusted EBITDA increased to $45 million from $44.5 million, and non-GAAP diluted EPS increased to $1.63 from $1.27 in FY15.

I am particularly pleased that we were able to achieve this level of profitability while increasing investment in growth initiatives, including the new version of the BOSS Revolution app, messaging, our BOSS Revolution international money transfer business, and a new app for them called Money that will be launched later this year. Net2Phone Office, a unified communications as a service offering, PicuP, and our national retail solutions point-of-sale initiative. Each of these initiatives is meeting or beating our early expectations, and have the potential to become significant contributors to IDT's bottom line as they reach scale. We intend to increase our investment during FY17, as their business plans merit.

Now turning to our core telecom offerings, we continued to face revenue and margin pressure, largely stemming from deregulation of the Mexico telecom market in early 2015 that essentially reduced the cost of [terminalling] calls there to zero. Because we sought to maintain our rates through most of FY16, we experienced accelerating customer attrition and declining revenue from this important corridor, as customers switched to unlimited Mexico calling plans, or free solutions.

In July of this year, we significantly lowered the Boss Revolution US to Mexico calling rate. While this reduced the rate of customer attrition, it accelerated the declines in revenue and gross profit generated on this route. Exclusive of Mexico, Boss Revolution PIN-less international calling revenue has been relatively steady throughout the year, however, it is a maturing product.

Our large investments in new businesses products and offerings, in combination with the revenue and margin pressure in some of our telecom offerings will likely increase pressure on adjusted EBITDA in the near-term. But we are building a strong foundation for growth, and we are very fortunate to have an extremely capable and dedicated team working day in and day out to make IDT successful, and I just want to say thank you.

One final note, in light of the quarter's results, and our continuing financial and operational strength, IDT's Board has declared a quarterly dividend of $0.19 for the fourth quarter to be paid on or about October 20. This is the end of my remarks. Now Marcelo and I would be happy to take your questions. Operator, back to you for Q&A.

(Operator Instructions)

This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.