IDT (IDT) Q4 2011 earnings summary

Executive summary

• FY11 revenue rose 11.5% to $1,555.5M, led by telecom volume and energy customer growth; operating income fell 32.0% to $21.9M as gross margin narrowed.

• Net income attributable to IDT Corporation was $26.8M, up 32.1%; results included notable tax benefits and non-recurring gains and charges.

• A tax-intended Genie spin-off was targeted for late October or early November 2011, with approximately $115M in cash expected to transfer to Genie.

Financial highlights

• Revenue increased to $1,555.5M from $1,394.9M; direct costs rose 14.3% to $1,269.4M, faster than revenue.

• Gross margin declined to 18.4% from 20.4%; operating income was $21.9M versus $32.2M.

• Net income attributable to IDT Corporation was $26.8M versus $20.3M; diluted EPS was $1.19 versus $0.94.

• Other operating gains, net, were $6.3M, including $14.4M from Cablevision's contract termination, offset by a $10.8M Alexsam-related expense.

• Other income included a $5.4M gain on auction-rate securities arbitration; income taxes included reversals of $2.8M in valuation allowance and $3.5M in tax expense.

Outlook and guidance

• FY12 capex expected at $10M–$12.5M; anticipated cash, cash equivalents, certificates of deposit and short-term investments were expected to cover FY12 working capital and capex needs.

• Genie Oil and Gas expected to incur higher costs for construction, drilling, IEI pilot operations and staffing; IEI pilot work was expected to require $25M–$30M over two years.

• Consumer Phone Services revenue and customer base expected to keep declining; positive cash flow was expected to end sometime in calendar 2013, followed by an intended exit.

• Corporate G&A was expected to remain $16M–$18M annualized through the proposed Genie spin-off; telecom direct sales investment was expected to continue in FY12.