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2022-02-27 2022-03-01 0001005731 us-gaap:SubsequentEventMember IDT:IDTInternationalTelecomIncMember 2022-03-01 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure IDT:Integer

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2022

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

Commission File Number: 1-16371

 

IDT CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   22-3415036

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

     
520 Broad Street, Newark, New Jersey   07102
(Address of principal executive offices)   (Zip Code)

 

(973) 438-1000

(Registrant’s telephone number, including area code)

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Name of each exchange on which registered
Class B common stock, par value $.01 per share   New York Stock Exchange

 

Trading symbol: IDT

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

       
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No

 

As of March 9, 2022, the registrant had the following shares outstanding:

 

   
Class A common stock, $.01 par value: 1,574,326 shares outstanding (excluding 1,698,000 treasury shares)
Class B common stock, $.01 par value: 24,330,161 shares outstanding (excluding 2,392,072 treasury shares)

 

 

 

 
 

 

IDT CORPORATION

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION 3
     
Item 1. Financial Statements (Unaudited) 3
     
  Consolidated Balance Sheets 3
     
  Consolidated Statements of Income 4
     
  Consolidated Statements of Comprehensive Income 5
     
  Consolidated Statements of Equity 6
     
  Consolidated Statements of Cash Flows 8
     
  Notes to Consolidated Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
     
Item 3. Quantitative and Qualitative Disclosures About Market Risks 34
   
Item 4. Controls and Procedures 34
     
PART II. OTHER INFORMATION 35
     
Item 1. Legal Proceedings 35
     
Item 1A. Risk Factors 35
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36
     
Item 3. Defaults Upon Senior Securities 36
   
Item 4. Mine Safety Disclosures 36
     
Item 5. Other Information 36
     
Item 6. Exhibits 36
     
SIGNATURES 37

 

2
 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

IDT CORPORATION

 

CONSOLIDATED BALANCE SHEETS

 

  

January 31, 2022

  

July 31, 2021

 
   (Unaudited)   (Note 1) 
   (in thousands) 
Assets        
Current assets:           
Cash and cash equivalents  $ 104,268   $107,147 
Restricted cash and cash equivalents    116,284    119,769 
Debt securities    15,490    14,012 
Equity investments    28,494    42,434 
Trade accounts receivable, net of allowance for doubtful accounts of $4,896 at January 31, 2022 and $4,438 at July 31, 2021    53,247    46,644 
Disbursement prefunding    29,226    27,656 
Prepaid expenses    17,408    13,694 
Other current assets    22,582    16,779 
            
Total current assets    386,999    388,135 
Property, plant, and equipment, net    31,639    30,829 
Goodwill    15,081    14,897 
Other intangibles, net    6,940    7,578 
Equity investments    8,355    11,654 
Operating lease right-of-use assets    7,100    7,671 
Deferred income tax assets, net    39,539    41,502 
Other assets    10,241    10,389 
            
Total assets  $ 505,894   $512,655 
            
Liabilities and equity           
Current liabilities:           
Trade accounts payable  $ 23,800   $24,502 
Accrued expenses    122,372    129,085 
Deferred revenue    40,592    42,293 
Customer deposits    109,862    115,524 
Other current liabilities    30,744    27,930 
            
Total current liabilities    327,370    339,334 
Operating lease liabilities    5,014    5,473 
Other liabilities    467    1,234 
            
Total liabilities    332,851    346,041 
Commitments and contingencies           
Redeemable noncontrolling interest    10,063     
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 January 31, 2022 and July 31, 2021    33    33 
Class B common stock, $.01 par value; authorized shares—200,000; 26,684 and 26,379 shares issued and 24,292 and 24,187 shares outstanding at January 31, 2022 and July 31, 2021, respectively    267    264 
Additional paid-in capital    278,613    278,021 
Treasury stock, at cost, consisting of 1,698 and 1,698 shares of Class A common stock and 2,392 and 2,192 shares of Class B common stock at January 31, 2022 and July 31, 2021, respectively    (69,387)   (60,413)
Accumulated other comprehensive loss    (11,088)   (10,183)
Accumulated deficit    (37,843)   (42,858)
Total IDT Corporation stockholders’ equity    160,595    164,864 
Noncontrolling interests    2,385    1,750 
Total equity    162,980    166,614 
Total liabilities and equity  $ 505,894   $512,655 

 

See accompanying notes to consolidated financial statements.

      

3
 

 

IDT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

   2022   2021   2022   2021 
   Three Months Ended
January 31,
   Six Months Ended
January 31,
 
   2022   2021   2022   2021 
   (in thousands, except per share data) 
     
Revenues  $337,058   $339,766   $707,141   $683,191 
Costs and expenses:                    
Direct cost of revenues (exclusive of depreciation and amortization)   257,325    269,145    548,950    542,319 
Selling, general and administrative (i)   61,070    54,298    121,177    106,442 
Depreciation and amortization   4,378    4,464    8,825    8,956 
Severance   29    143    67    255 
                     
Total costs and expenses   322,802    328,050    679,019    657,972 
Other operating (expense) gain, net (see Note 10)   (442)   1,207    (530)   955 
                     
Income from operations   13,814    12,923    27,592    26,174 
Interest income, net   119    139    132    98 
Other (expense) income, net   (2,949)   3,170    (19,165)   1,792 
                     
Income before income taxes   10,984    16,232    8,559    28,064 
Provision for income taxes   (2,734)   (3,027)   (2,648)   (6,444)
                     
Net income    8,250    13,205    5,911    21,620 
Net (income) attributable to noncontrolling interests   (763)   (97)   (896)   (224)
                     
Net income attributable to IDT Corporation  $7,487   $13,108   $5,015   $21,396 
                     
Earnings per share attributable to IDT Corporation common stockholders:                    
Basic  $0.29   $0.52   $0.20   $0.84 
Diluted  $0.28   $0.51   $0.19   $0.83 
                     
Weighted-average number of shares used in calculation of earnings per share:                    
Basic   25,652    25,362    25,609    25,448 
Diluted   26,542    25,713    26,580    25,787 
                     
(i) Stock-based compensation included in selling, general and administrative expenses  $310   $434   $595   $940 

 

See accompanying notes to consolidated financial statements.

 

4
 

 

IDT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

   2022   2021   2022   2021 
  

Three Months Ended

January 31,

  

Six Months Ended

January 31,

 
  

2022

  

2021

  

2022

  

2021

 
   (in thousands) 
Net income   $8,250   $13,205   $5,911   $21,620 
Other comprehensive (loss) income:                    
Change in unrealized loss on available-for-sale securities   (212)   46    (323)    17 
Foreign currency translation adjustments   (1,650)   (1,815)   (582)   (1,564)
                     
Other comprehensive loss   (1,862)   (1,769)   (905)   (1,547)
Comprehensive income    6,388    11,436    5,006    20,073 
Comprehensive (income) attributable to noncontrolling interests   (763)   (97)   (896)   (224)
                     
Comprehensive income attributable to IDT Corporation  $5,625   $11,339   $4,110   $19,849 

 

See accompanying notes to consolidated financial statements.

 

5
 

 

IDT CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

 

                                 
   Three Months Ended January 31, 2022
(in thousands)
 
   IDT Corporation Stockholders         
   Class A
Common Stock
   Class B
Common Stock
   Additional
Paid-In
Capital
   Treasury
Stock
   Accumulated
Other
Comprehensive
Loss
   Accumulated
Deficit
   Noncontrolling
Interests
   Total
Equity
 
BALANCE AT OCTOBER 31, 2021  $33   $264   $278,306   $(60,439)  $(9,226)  $(45,330)  $1,690   $165,298 
Restricted Class B common stock purchased from employees               (8,948)               (8,948)
Stock-based compensation       3    307                    310 
Distributions to noncontrolling interests                           (15)   (15)
Other comprehensive loss                   (1,862)           (1,862)
Net income                       7,487   710    

8,197

BALANCE AT JANUARY 31, 2022  $33   $267   $278,613   $(69,387)  $(11,088)  $(37,843)  $2,385   $162,980 

 

   Six Months Ended January 31, 2022
(in thousands)
 
   IDT Corporation Stockholders         
   Class A
Common Stock
   Class B
Common Stock
   Additional
Paid-In
Capital
   Treasury
Stock
   Accumulated
Other
Comprehensive
Loss
   Accumulated
Deficit
   Noncontrolling
Interests
   Total
Equity
 
BALANCE AT JULY 31, 2021  $33   $264   $278,021   $(60,413)  $(10,183)  $(42,858)  $1,750   $166,614 
Restricted Class B common stock purchased from employees               (8,974)               (8,974)
Stock-based compensation       3    592                    595 
Distributions to noncontrolling interests                           (198)   (198)
Other comprehensive loss                   (905)           (905
Net income                       

5,015

   833    

5,848

BALANCE AT JANUARY 31, 2022  $33   $267   $278,613   $(69,387)  $(11,088)  $(37,843)  $2,385   $162,980 

 

6
 

 

IDT CORPORATION

 

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)—Continued

 

                                 
   Three Months Ended January 31, 2021
(in thousands)
 
   IDT Corporation Stockholders         
   Class A
Common Stock
   Class B
Common Stock
   Additional
Paid-In
Capital
   Treasury
Stock
   Accumulated
Other
Comprehensive
Loss
   Accumulated
Deficit
   Noncontrolling
Interests
   Total
Equity
 
BALANCE AT OCTOBER 31, 2020  $33   $260   $278,134   $(59,077)  $(7,188)  $(131,045)  $(3,534)  $77,583 
Exercise of stock options           501                    501 
Restricted Class B common stock purchased from employees               (1,336)               (1,336)
Grant of restricted equity in subsidiary           (2,195)               2,195     
Business acquisition                           2,188    2,188 
Stock-based compensation       3    431                    434 
Distributions to noncontrolling interests                           (390)   (390)
Other comprehensive loss                   (1,769)           (1,769)
Net income                       13,108    97    13,205 
BALANCE AT JANUARY 31, 2021  $33   $263   $276,871   $(60,413)  $(8,957)  $(117,937)  $556   $90,416 

 

   Six Months Ended January 31, 2021
(in thousands)
 
   IDT Corporation Stockholders         
   Class A
Common Stock
   Class B
Common Stock
   Additional
Paid-In
Capital
   Treasury
Stock
   Accumulated
Other
Comprehensive
Loss
   Accumulated
Deficit
   Noncontrolling
Interests
   Total
Equity
 
BALANCE AT JULY 31, 2020  $33   $260   $277,443   $(56,221)  $(7,410)  $(139,333)  $(3,633)  $71,139 
Exercise of stock options           686                    686 
Repurchases of Class B common stock through repurchase program               (2,849)               (2,849)
Restricted Class B common stock purchased from employees               (1,343)               (1,343)
Grant of restricted equity in subsidiary           (2,195)               2,195     
Business acquisition                           2,188    2,188 
Stock-based compensation       3    937                    940 
Distributions to noncontrolling interests                           (418)   (418)
Other comprehensive loss                   (1,547)           (1,547)
Net income                       21,396    224    21,620 
BALANCE AT JANUARY 31, 2021  $33   $263   $276,871   $(60,413)  $(8,957)  $(117,937)  $556   $90,416 

 

See accompanying notes to consolidated financial statements.

 

7
 

 

IDT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

  

2022

  

2021

 
  

Six Months Ended

January 31,

 
  

2022

  

2021

 
   (in thousands) 
Operating activities          
Net income   $5,911   $21,620 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   8,825    8,956 
Deferred income taxes   1,683    5,881 
Provision for doubtful accounts receivable   1,289    1,069 
Net unrealized loss (gain) from marketable securities   16,242    (286)
Stock-based compensation   595    940 
Other   

2,850

   269 
Change in assets and liabilities:          
Trade accounts receivable   (8,045)   (7,330)
Disbursement prefunding, prepaid expenses, other current assets, and other assets   (8,551   4,965 
Trade accounts payable, accrued expenses, other current liabilities, and other liabilities   (6,313   1,631 
Customer deposits at IDT Financial Services Limited (Gibraltar-based bank)   (1,862)   (11,136)
Deferred revenue   (960)   (968)
           
Net cash provided by operating activities   11,664    25,611 
Investing activities          
Capital expenditures   (8,991)   (8,825)
Purchase of convertible preferred stock in equity method investment   (1,051)    
Payments for acquisitions, net of cash acquired   (100)   (2,388)
Purchase of Rafael Holdings, Inc. Class B common stock and warrant   

   (5,000)
Purchases of debt securities and equity investments   (10,825)   (34,436)
Proceeds from maturities and sales of debt securities and redemptions of equity investments   6,068    11,575 
           
Net cash used in investing activities   (14,899)   (39,074)
Financing activities          
Distributions to noncontrolling interests   (198)   (418)
Proceeds from other liabilities   2,301     
Repayment of other liabilities.   (1,291)   (56)
Proceeds from borrowings under revolving credit facility   2,488      
Repayment of borrowings under revolving credit facility   (2,488    
Proceeds from sale of redeemable equity in subsidiary   10,000     
Proceeds from exercise of stock options       686 
Repurchases of Class B common stock   (8,974)   (4,192)
           
Net cash provided by (used in) financing activities   1,838   (3,980)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents   (4,967)   5,560 
Net decrease in cash, cash equivalents, and restricted cash and cash equivalents   (6,364)   (11,883)
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  $220,552   $189,339 
           
Supplemental schedule of non-cash investing and financing activities          
Liabilities incurred for acquisition  $   $393 

 

See accompanying notes to consolidated financial statements.

 

8
 

 

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1—Basis of Presentation

 

The accompanying unaudited consolidated financial statements of IDT Corporation and its subsidiaries (the “Company” or “IDT”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended January 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2022. The balance sheet at July 31, 2021 has been derived from the Company’s audited financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021, as filed with the U.S. Securities and Exchange Commission (the “SEC”).

 

The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2022 refers to the fiscal year ending July 31, 2022).

 

Note 2—Business Segment Information

 

The Company has three reportable business segments, Fintech, net2phone-Unified Communications as a Service (“UCaaS”), and Traditional Communications. The Company’s reportable segments are distinguished by types of service, customers, and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker. The accounting policies of the segments are the same as the accounting policies of the Company as a whole. There are no significant asymmetrical allocations to segments. The Company evaluates the performance of its business segments based primarily on income (loss) from operations.

 

The Fintech segment is comprised of National Retail Solutions (“NRS”), an operator of a nationwide point of sale (“POS”) network providing payment processing, digital advertising, transaction data, and ancillary services, and BOSS Revolution Money Transfer, a provider of international money remittance and related value/payment transfer services.

 

The net2phone-UCaaS segment is comprised of net2phone’s cloud communications offerings.

 

The Traditional Communications segment includes Mobile Top-Up, which enables customers to transfer airtime and bundles of airtime, messaging, and data to international and domestic mobile accounts, BOSS Revolution Calling, an international long-distance calling service marketed primarily to immigrant communities in the United States and Canada, and Carrier Services, a wholesale provider of international voice and SMS termination and outsourced traffic management solutions to telecoms worldwide. Traditional Communications also includes other smaller businesses, many in harvest mode.

 

Corporate costs include compensation, consulting fees, treasury, tax and accounting services, human resources, corporate purchasing, corporate governance including Board of Directors’ fees, internal and external audit, investor relations, corporate insurance, corporate legal, business development, charitable contributions, travel, and other corporate-related general and administrative expenses. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.

 

Operating results for the business segments of the Company were as follows:

 

(in thousands)  Fintech   net2phone-UCaaS   Traditional Communications   Corporate   Total 
Three Months Ended January 31, 2022                         
Revenues  $23,082   $13,535   $300,441  $   $337,058 
(Loss) income from operations   (173)   (2,866)   19,857    (3,004)   13,814 
                          
Three Months Ended January 31, 2021                         
Revenues  $18,498   $10,866   $310,402   $   $339,766 
(Loss) income from operations   (247)   (3,658)   19,122    (2,294)   12,923 
                          
Six Months Ended January 31, 2022                         
Revenues  $45,650   $26,448   $635,043   $   $707,141 
(Loss) income from operations   (220)   (7,058)   39,984    (5,114)   27,592 
                          
Six Months Ended January 31, 2021                         
Revenues  $38,585   $20,568   $624,038  $   $683,191 
Income (loss) from operations   2,889    (7,538)   34,981    (4,158)   26,174 

 

9
 

 

Note 3—Revenue Recognition

 

The Company earns revenue from contracts with customers, primarily through the provision of retail telecommunications and payment offerings as well as wholesale international voice and SMS termination. BOSS Revolution Money Transfer, NRS, and net2phone-UCaaS are technology-driven, synergistic businesses that leverage the Company’s core assets, and revenue is primarily recognized at a point in time, and in some cases (mainly net2phone-UCaaS) is recognized over time. Traditional Communications are mostly minute-based, paid-voice communications services, and revenue is primarily recognized at a point in time. The Company’s most significant revenue streams are from Mobile Top-Up, BOSS Revolution Calling, and Carrier Services. Mobile Top-Up and BOSS Revolution Calling are sold direct-to-consumers and through distributors and retailers.

 

Disaggregated Revenues

 

The following table shows the Company’s revenues disaggregated by business segment and service offered to customers:

 

   2022   2021   2022   2021 
  

Three Months Ended

January 31,

  

Six Months Ended

January 31,

 
   2022   2021   2022   2021 
   (in thousands) 
BOSS Revolution Money Transfer  $12,462   $13,280   $24,958   $28,438 
National Retail Solutions   10,620    5,218    20,692    10,147 
                     
Total Fintech   23,082    18,498    45,650    38,585 
                     
net2phone-UCaaS   13,535    10,866    26,448    20,568 
                     
Mobile Top-Up   116,246    96,562    244,731    192,397 
BOSS Revolution Calling   99,951    113,903    205,920    231,253 
Carrier Services   73,117    87,155    162,312    174,928 
Other   11,127    12,782    22,080    25,460 
                     
Total Traditional Communications   300,441    310,402    635,043    624,038 
Total  $337,058   $339,766   $707,141   $683,191 

 

The following table shows the Company’s revenues disaggregated by geographic region, which is determined based on selling location. On February 1, 2021, the Company changed the geographic sourcing of certain revenues from the United States to the United Kingdom.

 

(in thousands)  Fintech   net2phone-UCaaS   Traditional Communications   Total 
Three Months Ended January 31, 2022                    
United States  $

23,082

   $

7,157

   $

210,694

   $

240,933

 
Outside the United States:                    
United Kingdom           

77,894

    

77,894

 
Other       6,378    

11,853

    

18,231

 
                     
Total outside the United States       6,378    

89,747

    

96,125

 
                     
Total  $

23,082

   $

13,535

   $

300,441

   $

337,058

 

 

(in thousands)  Fintech   net2phone-UCaaS   Traditional Communications   Total 
Three Months Ended January 31, 2021                    
United States  $18,498   $5,680   $265,315   $289,493 
Outside the United States:                    
United Kingdom           31,929    31,929 
Other       5,186    13,158    18,344 
                     
Total outside the United States       5,186    45,087    50,273 
                     
Total  $18,498   $10,866   $310,402   $339,766 

 

10
 

 

(in thousands)  Fintech   net2phone-UCaaS   Traditional Communications   Total 
Six Months Ended January 31, 2022                    
United States  $

45,650

   $

13,981