IDT (IDT) Q4 2006 earnings summary

Executive summary

• FY2006 revenue was $2.226B, nearly flat YoY; operating loss widened to $220.8M and net loss to $178.7M, including $57.0M of telecom regulatory-fee accruals.

• Energy growth and VoIP expansion offset declining telecom revenue; management emphasized disciplined investment, cost control and improving telecom gross margins.

• Corbina generated $129.3M net sale proceeds and an $80.1M gain; IDT Entertainment and Toucan sales closed in Q1 FY2007.

Financial highlights

• Revenue: $2.226B, up $4.4M YoY; direct costs rose to $1.780B and SG&A to $556.2M.

• Operating loss was $220.8M versus $139.8M; continuing-operations loss was $222.8M versus $56.7M.

• Net loss was $178.7M, or $1.86/share, versus $43.8M, or $0.45/share; discontinued operations included $80.1M Corbina sale gain.

• Adjusted for the $57.0M regulatory-fee accrual, direct costs still reflected a shift toward lower-margin energy revenue; reported direct costs were 79.7% of revenue.

Outlook and guidance

• FY2007 capex expected at $45M–$55M, primarily for network requirements and integration; planned funding from operating cash and existing liquid resources.

• Cost reductions were expected to save $35M–$40M annually, with savings beginning in Q1 FY2007; FY2007 Telecom SG&A expected to decline.

• Wholesale carrier revenue expected to stabilize at $120M–$130M per quarter, with modest margin improvement; network integration aimed to lower per-minute costs.

• Energy customer acquisition and growth investment to continue; associated SG&A was expected to rise in FY2007.