IDT (IDT) Q4 2007 earnings summary

Executive summary

• FY07 revenue $2.013bn, down 9.6% YoY; net income $58.6m versus a $178.7m loss, including $205.2m from the Entertainment sale and $44.7m from the Toucan sale. Continuing-operations loss was $139.4m.

• Telecom weakness drove lower consolidated revenue; management emphasized cost control, profitability and predictable results while shifting investment toward businesses with growth potential.

Financial highlights

• Operating loss was $172.7m versus $220.8m in FY06; direct costs fell 9.3% and SG&A fell 9.8%, while restructuring and impairment charges rose to $33.4m from $23.6m.

• Operating cash flow was negative $102.1m; cash, cash equivalents, marketable securities and investments totaled $661.0m at July 31, 2007.

• Net income included $23.9m of income from pooled investment vehicles and realized gains on marketable securities; net interest income was $18.1m.

Outlook and guidance

• FY08 calling-card revenue was expected to decline further, but at a slower rate; Latin America and Asia growth and European stabilization were expected to be outweighed by continued U.S. weakness.

• IDT Energy expected FY08 revenue growth at a slower rate than FY07 and gross margin of 6%–7%; SG&A was expected to be similar to FY07.

• FY08 capital expenditures were projected at $20m–$30m, focused near term on streamlining and hybridizing the Net2Phone and IDT networks.

• Existing cash resources were expected to cover anticipated working capital, capex and operating cash deficits for at least 12 months, based on the current plan.

• Annualized savings of $45m–$50m were expected from workforce reductions; aged-receivables operations were expected to contribute positively in the coming fiscal year.