Company posts $87.1 million in revenues, and EPS of $0.15

Hackensack, NJ.—May 21, 1998-- IDT Corporation (NASDAQ: IDTC), a leader in international telecommunications, today reported its fifth consecutive profitable quarter as a public company. For the third quarter ended April 30, 1998, the Company reported revenues of $87.1 million, a 153% increase over the same period year-ago revenues of $34.5 million. Net income for the quarter was $4.8 million or $0.15 per diluted share as compared with the same quarter year-ago net income of $0.2 million or $0.01 per share. EBITDA for the third quarter was $7.3 million, or $0.22 per share as compared to the same quarter year-ago EBITDA of $1.6 million or $0.07 per share. A quarter to quarter comparison shows a 23% revenue increase to $87.1 million from $71.0 million in the prior quarter. Net income for the quarter of $0.15 per share is a 25% sequential increase over the prior quarter's net income of $0.12 per share. On an absolute basis net income for the quarter of $4.8 million increased 53% over the prior quarter’s net income of $3.2 million. The Company was able to improve earnings even though it recorded approximately $0.6 million in net interest expense from its recently completed debt offering. Excluding the offering, the Company would have recorded net income of approximately $5.5 million or $0.17 per share. EBITDA in the third quarter increased 29% sequentially to $7.3 million or $0.22 per share as compared to $5.6 million or $0.21 per share in the prior quarter. "We continue to demonstrate our ability to execute our aggressive business plan, and have managed to grow all aspects of our business. In particular, we continue to expand our wholesale carrier business, and penetrate the retail market with especially strong growth in our debit card division. I think this proves the efficacy of our business model of a diversified – yet complementary – business mix, providing for lower risk and higher return," said Howard Jonas, CEO of IDT. "I am especially proud of our employees who continue to make this all possible." This marks the 14th consecutive quarter of double-digit revenue growth quarter to quarter, and the ninth consecutive quarter of improved profitability, the last five of which have been profitable. IDT continues to differentiate itself from its peers, by demonstrating continued strong results, notably: · 23% sequential revenue growth, and 153% year-over-year growth · 29% EBITDA improvement quarter to quarter, and 352% year-over-year increase · 25% net income per share growth quarter to quarter, and a 29 times increase year-over-year · 4.2% increase in gross margins to 31.7% from the prior quarter’s 27.5% "I believe this quarter was truly outstanding for IDT, and one in which we truly differentiated ourselves from our peers," said Ilan Slasky, Executive Vice President of Finance. "I think we are unique in our sector in that we continue to demonstrate our ability to grow the business on the top line exceptionally well, while simultaneously expanding gross margins, and enhancing profitability. We have proven it is possible to maintain an aggressive growth strategy, that doesn’t disregard our shareholders’ interest in profitability." TELECOMMUNICATIONS IDT's telecommunications operations continued its rapid pace of growth. Telecom revenues for the quarter increased to $79.0 million, up 203% over same period year-ago revenues of $26.1 million and a 25% sequential increase over revenues of $63.0 million in the prior quarter. Telecom gross margins in the third quarter increased to 30.6% up from 21.2% in the same period year-ago and up from 23.8% for the prior quarter, reflecting a healthy balance between wholesale and retail services, and expanded carrier services and debit card margins. Telecom minutes of use grew to approximately 222 million minutes for the quarter, a 246% increase over the 64.1 million minutes of use in the same quarter year ago, and a 38% increase over the prior quarter's 161 million minutes of use. This past quarter, IDT acquired the Interexchange group of companies. The acquisition provides IDT with additional termination agreements into many of the Company’s largest markets, significantly enhancing the profitability on these routes. In addition, Interexchange operates the largest debit card platform in the country, allowing IDT to now fully vertically integrate all aspects of this fast-growing component of the Company’s business. Furthermore, IDT formed a joint venture with its largest prepaid card distributor to better manage the company’s national distribution efforts, and to reduce overall sales and marketing expenses for this product line. These acquisitions were a critical step towards achieving the Company’s strategic initiative of expanding its worldwide telecom network infrastructure and broadening its distribution channels. Revenues from IDT’s retail division saw strong growth over the past quarter. In particular, pre-paid calling card revenues for the third quarter increased to $27.0 million, up 49% from $18.1 million in revenues for the prior quarter. The pre-paid calling card division began to contribute to revenues in July 1997. The strong growth in this relatively new business for IDT is due to the Company’s successful implementation of its marketing strategy to target high call-volume ethnic markets by launching a variety of country-specific cards targeted aggressively to this demographic segment. The Company intends to continue to aggressively grow the pre-paid division to complement its wholesale services with high-margin retail products. "This past quarter was a very exciting one for IDT. We acquired the Interexchange companies, and welcome their addition to the IDT family. We have very high expectations of them, and strongly believe this acquisition to be integral to our continued success and profitability. In addition, we welcomed the Honorable Jack Kemp as a senior strategic advisor to the Company whom we feel will be instrumental in furthering our international expansion plans," said IDT’s President Jim Courter. INTERNET TELEPHONY Revenues for IDT’s Internet telephony division in the third quarter were $2.8 million, up 237% over same-period year-ago revenues of $0.8 million, and a 4% sequential increase over revenues of $2.7 million for the prior quarter. Excluding $750,000 in equipment sales in the prior quarter, core service revenues increased approximately 44% from $2.0 million to $2.8 million in the third quarter. Total Net2Phone minutes of use grew to 10.7 million minutes for the quarter, an 88% increase over the prior quarter's 5.7 million minutes. The division's growth is due to continued worldwide demand for IDT’s Internet telephony products and services. To date, over 20 million minutes of use have been routed using IDT’s Internet telephony services by more than 600,000 customers in over 200 countries. The Company confirms it has signed an agreement under which IBM will refer its enterprise and Internet access customers to the IDT Web site, making it easier for them to subscribe to the Net2Phone service. We are not in a position to discuss the particulars until any joint offerings or initiatives are ready for availability. INTERNET IDT's Internet division recorded revenues of $5.2 million. Revenues remained flat sequentially from the prior quarter’s revenues of $5.2 million, and decreased 33% from $7.6 million in the same quarter year-ago, in line with the Company’s strategy of focussing on building its core telecommunications businesses. FINANCIAL DETAILS Total expenses for the third quarter of fiscal 1998 were $82.6 million as compared to $67.3 million for the second quarter of fiscal 1998. Gross margins improved to 31.7% as compared to 27.5% for the prior quarter. SG&A for the quarter was $20.4 million as compared to the same quarter year-ago $9.2 million, and $13.9 million for the prior quarter. SG&A, as a percentage of revenues, was 23.4% in the third quarter, as compared to 26.6% in the same quarter year-ago, and 19.6% in the prior quarter. The increase in SG&A from the prior quarter is due primarily to increased sales and marketing efforts for retail services specifically pre-paid calling cards whose revenues grew 50% quarter to quarter, while general and administrative expenses decreased quarter to quarter. As a percentage of revenues, sales and marketing expenses increased from 10.0% to 13.2% in the prior quarter, while general and administrative expenses declined quarter to quarter from 10.4 to 10.3%. Depreciation for the third quarter was $2.8 million as compared to $1.3 million in the same quarter year-ago, and $2.0 million for the prior quarter. As a percentage of revenues, depreciation increased to 3.2% of revenues for the quarter as compared to 2.4% in the same quarter year-ago, and decreased from 3.8% for the prior quarter. EBITDA margins, as a percentage of revenues, for the third quarter increased to 8.3% as compared to 4.7% in the same period year-ago, and increased from 7.9% in the prior quarter. Operating margins, as a percentage of revenues, increased to 5.2%, up from 0.8% in the same period year ago, and up from 5.1% in the prior quarter. Net margins increased to 5.6% from 0.5% in the same period year-ago, and increased from 4.4% in the prior quarter. Net income per basic share was $0.17. Net income per diluted share was $0.15. Shares used to calculate earnings per share for the second quarter were 28,881,382 million on a basic basis and 32,693,177 million on a fully diluted basis. The Company has approximately $180 million in cash and equivalents, $322 million in total assets, and $173 million in stockholders equity. IDT CORPORATION IDT is a leading emerging multinational carrier that combines its position as an international telecommunications operator, its experience as an Internet service provider and its leading position in Internet telephony to provide a broad range of telecommunications services to its wholesale and retail customers worldwide. The Company provides its customers with integrated and competitively priced international and domestic long distance, Internet access and, through its Net2Phone product offerings, Internet telephony services. Except for historical information, all of the expectations and assumptions contained in the foregoing are forward-looking statements involving risks and uncertainties. Important factors that could cause actual results to differ materially from such forward-looking statements, include, but are not limited to, the competitive environment for Internet telephony, changes of rates of all related telco rates and services, legislation that may affect the Internet Telephony industry, IDT's ability to operate the services described on a large scale commercial level. For additional information regarding these and other risks associated with the Company's business refer to the Company's reports filed with the SEC.