IDT (IDT) Q4 2008 earnings summary

Executive summary

• FY08 remained a difficult transition year: revenue fell 6.7% YoY to $1,878.0M and net loss was $224.3M; management targeted positive company-wide operating cash flow in FY09.

• Core telecom units, IDT Energy and IDT Carmel were described as generating positive operating cash flow, while cost cuts, lower-cost network technology and exits from non-core activities remained central to the turnaround plan.

Financial highlights

• Revenue was $1,878.0M vs $2,012.7M in FY07; operating loss was $198.3M vs $172.7M, and continuing-operations loss was $219.4M vs $139.4M.

• Net loss was $224.3M, or $2.95/share, vs net income of $58.6M, or $0.71/share, in FY07; FY07 included a $205.2M gain on discontinued operations.

• Operating cash flow was negative $143.2M; investing activities provided $232.2M, financing used $73.5M, and cash and equivalents ended FY08 at $169.0M.

• Cash, cash equivalents, marketable securities and investments totaled $343.3M; working capital was $51.5M at July 31, 2008.

• Adjusted context: FY08 operating results included a $40.0M Altice arbitration gain, $25.3M goodwill impairment, $36.0M severance costs and a $7.2M auction-rate note impairment.

Outlook and guidance

• FY09 target: achieve positive company-wide operating cash flow; management said core businesses were generating cash and prepaid-card revenue had stabilized in Q4 FY08.

• FY09 capital expenditures were expected at $10M-$15M; FY09 revenue at IDT Energy was expected to rise, but at a slower rate than FY08 growth.

• IDT Energy planned to reduce customer acquisition costs and target higher-usage commercial customers; total meters could decline from the July 2008 base.

• IDT Carmel anticipated resuming debt-portfolio purchases in Q1 FY09 after pausing purchases in H2 FY08 amid market uncertainty.

• Management expected available operations and liquidity to cover working capital, capex and potential segment cash-flow deficits for at least 12 months; additional financing discussions were underway.