IDT Corporation Reports Third Quarter Fiscal Year 2022


NEWARK, NJ, June 02, 2022 (GLOBE NEWSWIRE) — IDT Corporation (NYSE: IDT), a global provider of fintech, cloud communications, and traditional communications services, today reported results for the third quarter of its 2022 fiscal year, the three months ended April 30, 2022.

THIRD QUARTER FISCAL YEAR 2022 (3Q22) HIGHLIGHTS

(Throughout this release, results are for 3Q22 and are compared to 3Q21 unless otherwise noted. All ‘per share results are per diluted share. Please see the final page of this release for important supplemental information on asterisked metrics.)

  • Key business unit revenue and related metrics:
    • National Retail Solutions (NRS) recurring revenue* increased 101.9% to $10.0 million. Active terminals increased by 1,400 sequentially to approximately 17,900, and payment processing accounts increased by 1,200 sequentially to approximately 9,200.
    • net2phone subscription revenue** increased 42.0% to $14.2 million. Seats served increased by 22,000 sequentially, including nearly 7,000 through the previously announced acquisition of a CCaaS provider, to approximately 279,000.
    • Money Transfer revenue increased 51.5% to $15.5 million. Transaction volumes increased by 27.1% to 2.4 million, with solid growth in both direct to consumer and retail channels.
  • Consolidated revenue decreased 12.2% to $328 million from $374 million. Direct cost of revenue decreased 17.7% to $248 million from $301 million.
  • Consolidated income from operations decreased to $13.3 million from $13.9 million.
  • Net income attributable to IDT decreased to $4.8 million from $36.3 million, and EPS decreased to $0.18 from $1.39. In 3Q22, EPS included the impact of a $0.13 per share loss from marked-to-market investments. In 3Q21, EPS included the positive impacts of both a $0.92 per share reversal of income tax valuation allowances and a $0.21 per share gain from marked-to-market investments.
  • Adjusted EBITDA*** increased to $18.0 million from $17.9 million.
  • Non-GAAP EPS*** was $0.23 compared to $0.47.

REMARKS BY SHMUEL JONAS, CEO

“Each of our three high-margin, high-growth businesses had a very strong third quarter, helping us to again achieve solid levels of consolidated income from operations and Adjusted EBITDA, consistent with our results from the first two quarters of our fiscal year.

“NRS added nearly 1,400 net POS terminals and 1,200 net payment processing accounts during the third quarter, maintaining the accelerated rate of acquisitions achieved in the second quarter. NRS recurring revenue increased 102% year-over-year, keyed by strong merchant service and advertising sales. Looking ahead, we expect that NRS will sustain robust, high-margin growth in the coming quarters. In particular, we expect advertising and data offerings to benefit from both long-term trends such as the increasing allocation of advertising budgets to out-of-home venues, as well as from seasonal tailwinds including increased political advertising heading into the second half of the calendar year.

“net2phone’s strategic focus on the SMB and small enterprise markets within North and South America, efficient execution, and acquisition of CCaaS provider Integra all contributed to solid growth in the third quarter. Subscription revenue increased 42% year-over-year due primarily to the addition of approximately 22,000 seats during the quarter –including almost 7,000 seats from the Integra acquisition. Seat growth was again strongest in our Latin American markets although our U.S. business performed nearly as well. We will begin selling our CCaaS offering in North America in the current – fourth – quarter of our fiscal year and expect its expansion to gradually become a key driver of seat growth and ARPU expansion.

“BOSS Money, our international remittance business, increased revenue 51% to $15.5 million driven both by a 27% year-over-year increase in transaction volumes and a comparably robust increase in revenue per transaction – including both transfer fees and revenue derived from foreign exchange. We continue to build out our disbursement networks, particularly in Africa and the Caribbean, and to fine-tune our direct-to-consumer pricing strategies to capture additional revenue and margins. BOSS Money also continues to benefit from its integration into the BOSS Revolution Calling app last October, providing another example of our ability to generate growth by deploying our offerings across multiple channels and platforms.

“In our Traditional Communications segment, revenue decreased by $59.9 million or 17% to $285.9 million. The surge in demand for paid voice that we experienced during the COVID pandemic is now retreating and exacerbating the impact of the underlying declines in retail calling and wholesale carrier services. Our Mobile Top-Up business underperformed this quarter but we are investing in technology, marketing, and sales to improve its performance.

Because Traditional Communications’ lost revenue overall was skewed to lower margin sales, income from operations from this segment decreased $3.0 million year-over-year to $17.4 million. On a consolidated basis, income from operations decreased $0.5 million to $13.3 million while Adjusted EBITDA*** increased $0.1 million to $18.0 million. We expect that as our growth businesses continue to expand, our consolidated bottom-line results in the coming quarters will increasingly reflect their contributions.”

CONSOLIDATED RESULTS

Results
(in millions, except EPS)
    3Q22       2Q22       3Q21       3Q22 – 3Q21 change (%/$)  
Revenue   $ 328     $ 337     $ 374       (12.2   )%
Direct cost of revenue   $ 248     $ 257     $ 301       (17.7   )%
SG&A expense   $ 63     $ 61     $ 55       +13.8 %  
Depreciation and amortization   $ 4.5     $ 4.4     $ 4.4       +1.9 %  
Income from operations   $ 13.3     $ 13.8     $ 13.9       (3.9   )%
Net income attributable to IDT   $ 4.8     $ 7.5     $ 36.3     $ (31.5   )
Adjusted EBITDA***   $ 18.0     $ 18.7     $ 17.9       +0.7 %  
Earnings per diluted share   $ 0.18     $ 0.28     $ 1.39     $ (1.21   )
Non-GAAP net income***   $ 6.0     $ 8.8     $ 12.3     $ (6.3   )
Non-GAAP EPS***   $ 0.23     $ 0.33     $ 0.47     $ (0.24   )

RESULTS BY SEGMENT
(Results are for 3Q22 and are compared to 3Q21 except where otherwise noted)

(in millions)   Fintech     net2phone-UCaaS     Traditional Communications  
      3Q22       2Q22       3Q21       3Q22       2Q22       3Q21       3Q22       2Q22       3Q21  
Revenue   $ 26.9     $ 23.1     $ 16.6     $ 15.6     $ 13.5     $ 11.4     $ 285.9     $ 300.4     $ 345.7  
Direct cost of revenue   $ 8.2     $ 7.3     $ 6.0     $ 2.6     $ 2.4     $ 2.2     $ 236.7     $ 247.6     $ 292.6  
SG&A expense   $ 17.9     $ 15.3     $ 11.6     $ 13.8     $ 13.0     $ 11.8     $ 29.3     $ 30.4     $ 30.0  
Income (loss) from operations   $ 0.2     $ (0.2 )   $ (1.4 )   $ (2.3 )   $ (2.9 )   $ (4.0 )   $ 17.4     $ 19.9     $ 20.4  
Adjusted EBITDA***   $ 0.8     $ 0.4     $ (1.0 )   $ (0.9 )   $ (1.9 )   $ (2.6 )   $ 19.9     $ 22.4     $ 23.1  
Capital expenditures   $ 1.2     $ 1.3     $ 1.3     $ 1.4     $ 1.3     $ 1.3     $ 1.9     $ 1.9     $ 1.9  

Fintech

Fintech comprises National Retail Solutions (NRS), an operator of a nationwide Point-Of-Sale (POS) retail network providing merchant services, digital advertising, transaction data, and ancillary services, and BOSS Money, a provider of international money remittances.

In 3Q22 and 3Q21, the Fintech segment accounted for 8.2% and 4.4% of IDT’s consolidated revenue, respectively.

NRS Results
(Revenue $ in thousands)
    3Q22       2Q22       3Q21       3Q22 -3Q21 change %  
POS terminals, active – end of period     17,900       16,500       13,100       37   %
Payment processing accounts – end of period     9,200       8,000       4,900       89   %
                                 
NRS recurring revenue                                
Merchant services and other   $ 4,765     $ 3,810     $ 2,116       +125 %  
Advertising & data     3,729       3,901       1,958       +90 %  
SaaS fees     1,462       1,318       856       +71 %  
Total recurring revenue   $ 9,956     $ 9,029     $ 4,930       +102 %  
                                 
POS terminal sales     1,427       1,591       1,454       (2   )%
Total NRS revenue   $ 11,383     $ 10,620     $ 6,384       +78 %  
                                 
Monthly average recurring revenue per terminal (excl. POS terminal sales revenue)****   $ 193     $ 190     $ 131       +47 %  

NRS Take-Aways:

  • As of April 30, 2022, NRS’ POS terminal network comprised approximately 17,900 active POS terminals, an increase of 37% compared to a year earlier, and approximately 9,200 payment processing accounts, a year over year increase of 89%.
  • NRS revenue increased 78.3% to $11.4 million from $6.4 million and recurring revenue* increased by 101.9% to $10.0 million from $4.9 million. The increases were driven by the expansion of the NRS POS and payment processing networks and increased merchant services and digital-out-of-home (DOOH) advertising & data sales.
  • NRS monthly average recurring revenue per terminal**** increased to $193 from $131.
  • During 3Q22, NRS announced a partnership with OnPoint, a leading provider of scan data programs for the independent and small chain C-store market. Through the partnership, OnPoint will promote the NRS POS system and payment processing service to prospective C-store clients.

BOSS Money Take-Aways:

  • Transaction volumes increased 27% to 2.37 million from 1.86 million in the year-ago period.
  • Revenue increased 51.5% to $15.5 million from $10.3 million.
  • BOSS Money continued to expand its global payments network including announced expansions of service to Ethiopia and Jamaica.

net2phone-UCaaS

In 3Q22 and 3Q21, the net2phone-UCaaS segment accounted for 4.7% and 3.1% of IDT’s consolidated revenue, respectively.

net2phone-UCaaS Takeaways:

  • Total seats served increased 33% to 279,000 at April 30, 2022 including approximately 7,000 seats added through the Integra CCaaS acquisition, from 210,000 a year earlier.
  • Subscription revenue** increased 42.0% to $14.2 million from $10.0 million, led by strong growth in both net2phone’s South and North American regions and the addition of Integra’s CCaaS revenue for the final two months of the quarter.
  • During 3Q22, IDT announced a postponement of the planned spin-off of net2phone, in light of market conditions.

Traditional Communications

In 3Q22 and 3Q21, the Traditional Communications segment accounted for 87.1% and 92.5% of IDT’s consolidated revenue, respectively.

Traditional Communications TakeAways:

  • Mobile Top-Up revenue decreased 12.6% to $115.9 million from $132.6 million.
  • BOSS Revolution Calling revenue decreased 17.6% to $91.8 million from $111.4 million, while minutes-of-use decreased 21.2% compared to the year-ago quarter. The decreases reflect the erosion of the surge in demand for voice calls that began with the onset of the COVID pandemic, on top of the underlying decline of the paid voice communications market.
  • IDT Global’s carrier services revenue decreased 24.3% to $67.1 million from $88.6 million reflecting a 24.2% decrease in minutes-of-use as the wholesale paid voice market contracted at an accelerated rate.

NOTES ON FINANCIAL STATEMENTS

Consolidated results for all periods presented include corporate overhead. Corporate G&A expense increased to $1.8 million in 3Q22 from $1.7 million in 3Q21.

As of April 30, 2022, IDT held $136.0 million in cash, cash equivalents, debt securities, and current equity investments. Current assets totaled $371.1 million and current liabilities totaled $315.4 million.

Net cash provided by operating activities during 3Q22 was $1.6 million compared to $12.5 million during 3Q21. Exclusive of changes in customer deposit balances at our Gibraltar-based bank, net cash provided by operating activities during 3Q22 was $9.6 million compared to $12.5 million during 3Q21.

Capital expenditures increased to $4.8 million in 3Q22 from $4.6 million in 3Q21.

IDT EARNINGS ANNOUNCEMENT & SUPPLEMENTAL INFORMATION

This release is available for download in the “Investors & Media” section of the IDT Corporation website (https://www.idt.net/investors-and-media) 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 1-888-506-0062 (toll-free from the US) or 1-973-528-0011 (international) and request the IDT Corporation call (participant access code: 733921).

A replay of the conference call will be available approximately three hours after the call concludes through June 15, 2022. To access the call replay, dial 1-877-481-4010 (toll-free from the US) or 1-919-882-2331 (international) and provide this replay number: 45654. The replay will also be accessible via streaming audio at the IDT investor relations website.

ABOUT IDT:

IDT Corporation (NYSE: IDT) is a global provider of fintech, cloud and traditional communications services. We make it easy for families to communicate and support each other across international borders. We also enable businesses to transact and communicate with their customers with enhanced intelligence and insight.

Our BOSS Money international remittance and BOSS Revolution international calling services make sending money and speaking with friends and family around the world convenient and reliable. National Retail Solutions’ (NRS) point-of-sale retail network enables independent retailers to operate and process transactions more effectively while providing advertisers and consumer marketers with unprecedented reach into underserved consumer markets. net2phone’s communications-as-a-service solutions provide businesses with intelligently integrated cloud communications and collaboration tools across channels and devices. Our IDT Global and IDT Express wholesale offerings enable communications service enterprises to provision and manage international voice and SMS services.

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.

CONTACT:

IDT Corporation Investor Relations
Bill Ulrey
william.ulrey@idt.net
973-438-3838

IDT CORPORATION

CONSOLIDATED BALANCE SHEETS

      April 30,       July 31,  
      2022       2021  
      (Unaudited)          
      (in thousands)   
Assets                
Current assets:                
Cash and cash equivalents   $ 97,139     $ 107,147  
Restricted cash and cash equivalents     100,957       119,769  
Debt securities     22,706       14,012  
Equity investments     16,179       42,434  
Trade accounts receivable, net of allowance for doubtful accounts of $5,061 at April 30, 2022 and $4,438 at July 31, 2021     52,881       46,644  
Disbursement prefunding     37,111       27,656  
Prepaid expenses     16,676       13,694  
Other current assets     27,442       16,779  
                 
Total current assets     371,091       388,135  
Property, plant, and equipment, net     33,447       30,829  
Goodwill     26,490       14,897  
Other intangibles, net     10,041       7,578  
Equity investments     7,319       11,654  
Operating lease right-of-use assets     7,919       7,671  
Deferred income tax assets, net     36,598       41,502  
Other assets     10,365       10,389  
                 
Total assets   $ 503,270     $ 512,655  
                 
Liabilities and equity                
Current liabilities:                
Trade accounts payable   $ 27,817     $ 24,502  
Accrued expenses     118,285       129,085  
Deferred revenue     39,054       42,293  
Customer deposits     95,104       115,524  
Other current liabilities     35,103       27,930  
                 
Total current liabilities     315,363       339,334  
Operating lease liabilities     5,322       5,473  
Other liabilities     6,326       1,234  
                 
Total liabilities     327,011       346,041  
Commitments and contingencies                
Redeemable noncontrolling interest     10,099        
Equity:                
IDT Corporation stockholders’ equity:                
Preferred stock, $.01 par value; authorized shares—10,000; no shares issued            
Class A common stock, $.01 par value; authorized shares—35,000; 3,272 shares issued and 1,574 shares outstanding at April 30, 2022 and July 31, 2021     33       33  
Class B common stock, $.01 par value; authorized shares—200,000; 27,725 and 26,379 shares issued and 24,667 and 24,187 shares outstanding at April 30, 2022 and July 31, 2021, respectively     277       264  
Additional paid-in capital     295,915       278,021  
Treasury stock, at cost, consisting of 1,698 and 1,698 shares of Class A common stock and 3,058 and 2,192 shares of Class B common stock at April 30, 2022 and July 31, 2021, respectively     (88,175 )     (60,413 )
Accumulated other comprehensive loss     (11,341 )     (10,183 )
Accumulated deficit     (33,072 )     (42,858 )
Total IDT Corporation stockholders’ equity     163,637       164,864  
Noncontrolling interests     2,523       1,750  
                 
Total equity     166,160       166,614  
                 
Total liabilities and equity   $ 503,270     $ 512,655  

IDT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

    Three Months Ended     Nine Months Ended  
    April 30,     April 30,  
    2022     2021     2022     2021  
    (in thousands, except per share data)  
                                 
Revenues   $ 328,353     $ 373,831     $ 1,035,494     $ 1,057,022  
Costs and expenses:                                
Direct cost of revenues (exclusive of depreciation and amortization)     247,565       300,797       796,516       843,116  
Selling, general and administrative (i)     62,772       55,148       183,948       161,591  
Depreciation and amortization     4,509       4,425       13,333       13,381  
Severance           184       67       439  
                                 
Total costs and expenses     314,846       360,554       993,864       1,018,527  
Other operating (expense) gain, net     (179 )     595       (709 )     1,550  
                                 
Income from operations     13,328       13,872       40,921       40,045  
Interest income, net     85       125       217       223  
Other (expense) income, net     (5,068 )     3,815       (24,234 )     5,608  
                                 
Income before income taxes     8,345       17,812       16,904       45,876  
(Provision for) benefit from income taxes     (3,239 )     18,586       (5,887 )     12,142  
                                 
Net income     5,106       36,398       11,017       58,018  
Net (income) attributable to noncontrolling interests     (335 )     (50 )     (1,231 )     (274 )
                                 
Net income attributable to IDT Corporation   $ 4,771     $ 36,348     $ 9,786     $ 57,744  
                                 
Earnings per share attributable to IDT Corporation common stockholders:                                
Basic   $ 0.18     $ 1.42     $ 0.38     $ 2.27  
Diluted   $ 0.18     $ 1.39     $ 0.37     $ 2.23  
Weighted-average number of shares used in calculation of earnings per share:                                
Basic     25,901       25,530       25,706       25,475  
Diluted     26,205       26,136       26,455       25,903  
                                 
(i) Stock-based compensation included in selling, general and administrative expenses   $ 1,245     $ 275     $ 1,840     $ 1,215  

IDT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

    Nine Months Ended
April 30,
 
    2022     2021  
    (in thousands)  
       
Operating activities                
Net income   $ 11,017     $ 58,018  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     13,333       13,381  
Deferred income taxes     4,624       (13,811 )
Provision for doubtful accounts receivable     1,578       1,220  
Net unrealized loss (gain) from marketable securities     19,705       (508 )
Stock-based compensation     1,840       1,215  
Other     3,486       (4,415 )
Change in assets and liabilities:                
Trade accounts receivable     (8,461 )     1,626  
Disbursement prefunding, prepaid expenses, other current assets, and other assets     (20,504 )     (7,961 )
Trade accounts payable, accrued expenses, other current liabilities, and other liabilities     (2,566 )     (2,154 )
Customer deposits at IDT Financial Services Limited (Gibraltar-based bank)     (9,843 )     (11,078 )
Deferred revenue     (948 )     2,611  
                 
Net cash provided by operating activities     13,261       38,144  
Investing activities                
Capital expenditures     (13,794 )     (13,455 )
Purchase of convertible preferred stock in equity method investment     (1,051 )     (4,000 )
Payments for acquisitions, net of cash acquired     (7,546 )     (2,656 )
Purchase of Rafael Holdings, Inc. Class B common stock and warrant           (5,000 )
Exercise of warrant to purchase shares of Rafael Holdings, Inc. Class B common stock           (1,000 )
Purchases of debt securities and equity investments     (11,277 )     (39,347 )
Proceeds from maturities and sales of debt securities and redemptions of equity investments     7,752       18,670  
                 
Net cash used in investing activities     (25,916 )     (46,788 )
Financing activities                
Distributions to noncontrolling interests     (359 )     (646 )
Proceeds from other liabilities     2,301        
Repayment of other liabilities.     (1,319 )     (69 )
Proceeds from borrowings under revolving credit facility     2,566        
Repayment of borrowings under revolving credit facility.     (2,566 )      
Proceeds from sale of redeemable equity in subsidiary     10,000        
Proceeds from exercise of stock options     137       686  
Repurchases of Class B common stock     (12,832 )     (4,192 )
                 
Net cash used in financing activities     (2,072 )     (4,221 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents     (14,093 )     6,652  
                 
Net decrease in cash, cash equivalents, and restricted cash and cash equivalents     (28,820 )     (6,213 )
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period     226,916       201,222  
                 
Cash, cash equivalents, and restricted cash and cash equivalents at end of period   $ 198,096     $ 195,009  
                 
Supplemental schedule of non-cash investing and financing activities                
Liabilities incurred for acquisitions   $ 7,849     $ 393  
                 
Shares of the Company’s Class B common stock issued for acquisition   $ 1,000     $  
                 
Cashless exercise of stock options in exchange for shares of the Company’s Class B common stock   $ 14,930     $  

Reconciliation of Non-GAAP Financial Measures for the
Third Quarter Fiscal 2022 and 2021

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 3Q22, 2Q22, and 3Q21, Adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per diluted share (EPS), all of which are non-GAAP measures. Generally, a non-GAAP 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 non-GAAP net income starts with net income in accordance with GAAP and adds severance expense, stock-based compensation, and other operating expense, and deducts other operating gains. These additions and subtractions are non-cash and/or non-routine items in the relevant fiscal 2022 and fiscal 2021 periods.

IDT’s measure of non-GAAP EPS is calculated by dividing non-GAAP net income by the diluted weighted-average shares.

Management believes that IDT’s Adjusted EBITDA, non-GAAP net income, and non-GAAP EPS 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 EPS 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, 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 EPS. 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) gain, 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 EPS. Other operating (expense) gain, net includes legal fees net of insurance claims related to Straight Path Communications Inc.’s stockholders’ putative class action and derivative complaint, expense for the indemnification of a net2phone cable telephony customer related to patent infringement claims brought against the customer, a gain from the write-off of a contingent consideration liability, expense for other legal and regulatory matters, and a gain from the sale of IDT’s rights under a class action lawsuit. From time-to-time, IDT may have gains or incur costs related to non-routine legal and regulatory matters, however, these various items generally do not occur each quarter. IDT believes the gain and losses from these non-routine matters are not components of IDT’s or the relevant segment’s core operating results.

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 EPS 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 3Q21, due to continued and projected profitability, IDT was able to release a portion of its valuation allowance that was recorded against its deferred tax assets. This income tax benefit was excluded from IDT’s non-GAAP net income and non-GAAP EPS because it was only indirectly related to the current results of IDT’s core operations.

Adjusted EBITDA, non-GAAP net income, and non-GAAP EPS 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, 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 EPS 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 EPS 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 for IDT on a consolidated basis, (b) for non-GAAP net income, net income, and (c) for non-GAAP EPS, diluted earnings per share.

IDT Corporation
Reconciliation of Net Income to Adjusted EBITDA
(unaudited) in millions. Figures may not foot or cross-foot due to rounding to millions
    Total IDT
Corporation
    Traditional
Communica-tions
    net2phone-
UCaaS
    Fintech     Corporate  
Three Months Ended April 30, 2022
(3Q22)
                             
Net income attributable to IDT Corporation   $ 4.8                                  
Adjustments:                                        
Net income attributable to noncontrolling interests     0.3                                  
Net income     5.1                                  
Provision for income taxes     3.2                                  
Income before income taxes     8.3                                  
Interest income, net     (0.1 )                                
Other expense, net     5.1                                  
Income (loss) from operations     13.3     $ 17.4     $ (2.3 )   $ 0.2     $ (2.0 )
Depreciation and amortization     4.5       2.5       1.3       0.7        
Other operating expense, net     0.2                         0.2  
Adjusted EBITDA   $ 18.0     $ 19.9     $ (0.9 )   $ 0.8     $ (1.8 )
    Total IDT
Corporation
    Traditional
Communica-tions
    net2phone-
UCaaS
    Fintech     Corporate  
Three Months Ended January 31, 2022
(2Q22)
                                       
Net income attributable to IDT Corporation   $ 7.5                                  
Adjustments:                                        
Net income attributable to noncontrolling interests     0.8                                  
Net income     8.3                                  
Provision for income taxes     2.7                                  
Income before income taxes     11.0                                  
 Interest income, net     (0.1 )                                
 Other expense, net     2.9                                  
Income (loss) from operations     13.8     $ 19.9     $ (2.9 )   $ (0.2 )   $ (3.0 )
Depreciation and amortization     4.4       2.5       1.3       0.6        
Other operating expense (gain), net     0.4             (0.3 )           0.7  
Adjusted EBITDA   $ 18.7     $ 22.4     $ (1.9 )   $ 0.4     $ (2.3 )

IDT Corporation
Reconciliation of Net Income to Adjusted EBITDA
(unaudited) in millions. Figures may not foot or cross-foot due to rounding to millions.

    Total IDT
Corporation
    Traditional
Communica-tions
    net2phone-
UCaaS
    Fintech     Corporate  
Three Months Ended April 30, 2021
(3Q21)
                                       
Net income attributable to IDT Corporation   $ 36.3                                  
Adjustments:                                        
Net income attributable to noncontrolling interests     0.1                                  
Net income     36.4                                  
Benefit from income taxes     (18.6 )                                
Income before income taxes     17.8                                  
Interest income, net     (0.1 )                                
Other income, net     (3.8 )                                
Income (loss) from operations     13.9     $ 20.4     $ (4.0 )   $ (1.4 )   $ (1.1 )
Depreciation and amortization     4.4       2.5       1.4       0.5        
Severance expense     0.2       0.2                    
Other operating (gain) expense, net     (0.6 )     0.1             (0.1 )     (0.6 )
Adjusted EBITDA   $ 17.9     $ 23.1     $ (2.6 )   $ (1.0 )   $ (1.7 )

IDT Corporation
Reconciliations of Net Income to Non-GAAP Net Income and Earnings per share to Non-GAAP EPS
(unaudited) in millions, except per share data. Figures may not foot due to rounding to millions.

    3Q22     2Q22     3Q21  
                   
Net income   $ 5.1     $ 8.3     $ 36.4  
Adjustments (add) subtract:                        
Stock-based compensation     (1.2 )     (0.3 )     (0.3 )
Severance expense                 (0.2 )
Other operating (expense) gain, net     (0.2 )     (0.4 )     0.6  
Release of DTA valuation allowance                 24.0  
Total adjustments     (1.4 )     (0.7 )     24.1  
Income tax effect of total adjustments     (0.5 )     (0.2 )      
      0.9       0.5       (24.1 )
Non-GAAP net income   $ 6.0     $ 8.8     $ 12.3  
                         
Earnings per share:                        
Basic   $ 0.18     $ 0.29     $ 1.42  
Total adjustments     0.05       0.05       (0.94 )
Non-GAAP – basic   $ 0.23     $ 0.34     $ 0.48  
                         
Weighted-average number of shares used in calculation of basic earnings per share     25.9       25.7       25.5  
                         
Diluted   $ 0.18     $ 0.28     $ 1.39  
Total adjustments     0.05       0.05       (0.92 )
Non-GAAP – diluted   $ 0.23     $ 0.33     $ 0.47  
                         
Weighted-average number of shares used in calculation of diluted earnings per share     26.2       26.5       26.1  

Explanation of Key Performance Metrics

NRS’ Monthly Average Recurring Revenue per Terminal is a financial metric. Monthly Average Recurring Revenue per Terminal is calculated by dividing NRS’ recurring revenue by the average number of active POS terminals during the period. NRS’ recurring revenue is NRS’ revenue in accordance with GAAP excluding revenue from POS terminal sales. The average number of active POS terminals is calculated by adding the beginning and ending number of active POS terminals during the period and dividing by two. NRS’ recurring revenue divided by the average number of active POS terminals is divided by three when the period is a fiscal quarter. Monthly Average Recurring Revenue per Terminal is useful for comparisons of NRS’ revenue per customer to prior periods and to competitors and others in the market, as well as for forecasting future revenue from the customer base.

net2phone-UCaaS’ cloud communications offerings are priced on a per-seat basis, with customers paying based on the number of users in their organization. The number of seats served and subscription revenue trends and comparisons between periods are used in the analysis of net2phone-UCaaS’ revenues and direct cost of revenues are strong indications of the top-line growth and performance of the business.

Supplemental Information

* NRS’ recurring revenue is a key performance metric. Please refer to the Explanation of Key Performance Metrics above for an explanation of this metric.

** net2phone subscription revenue is a key performance metric. Please refer to the Explanation of Key Performance Metrics above for an explanation of this metric.

*** Throughout this release, Adjusted EBITDA, Non-GAAP net income and Non-GAAP EPS are Non-GAAP measures intended to provide useful information that supplements IDT’s or the relevant segment’s results in accordance with GAAP. Please refer to the Reconciliation of Non-GAAP Financial Measures earlier in this release for an explanation of these terms and their respective reconciliations to the most directly comparable GAAP measure.

**** NRS’ Monthly Average Recurring Revenue per Terminal is a key performance metric. Please refer to the Explanation of Key Performance Metrics above for an explanation of this metric.

# # #

IDT Corporation



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