IDT Corporation · NYSE:IDT
IDT — Investor Day (January 2007)
87 slides from IDT's investor day presentation, Jan 17, 2007
Slide 1: IDT Corporation Investor Day
IDT Corporation Investor Day January 17, 2007 Newark, NJ
Slide 2: Agenda
IDT INVESTOR DAY 8:30 Registration 9:30 Company Overview The Future of IDT- Howard Jonas IDT Corporate Q&A 11:00Break IDT Telecom Overview IDT Telecom Q&A IDT Capital Overview IDT Capital Q&A Concluding Remarks 1:15 Lunch Agenda
Slide 3: Corporate Team
CORPORATE TEAM IDT INVESTOR DAY IDT Management Participants Howard Jonas Chairman of the Board Jim Courter Chief Executive Officer Ira GreensteinPresident Motti Lichtenstein Chief Operating Officer Marcelo Fischer Chief Financial Officer Yossi Cohn Director Investor Relations
Slide 4: Telecom Team
TELECOM TEAM Yona Katz Chief Executive Officer Kathleen Timko Chief Operating Officer Norman Rosenberg Chief Financial Officer Avi Lazar President, Global Wholesale and International Emerging Businesses Michael Leibov President, Union Telecard Alliance Esti Witty SVP, Consumer Phone Services Jose Co
Slide 5: Capital Team
CAPITAL TEAM Steve Brown Co-Chief Executive Officer David Greenblatt Co-Chief Executive Officer Geoff Rochwarger President Yaacov Dior CEO, IDT Carmel Morris Berger CEO, IDT Internet Mobile Barry Luden CEO, IDT Local Media IDT Management Participants IDT INVESTOR DAY
Slide 6: Jim Courter, Chief Executive Officer
IDT Corporation Jim Courter Chief Executive Officer
Slide 7: Forward-looking statements disclaimer
This presentation highlights certain information about the Company, its businesses and its financial results and condition. It is not complete and should be considered in conjunction with the more fulsome disclosures regarding the Company and its operations in the reports the Company files with the
Slide 8: Motti Lichtenstein, Chief Operating Officer
IDT Corporation Motti Lichtenstein Chief Operating Officer
Slide 9: About IDT
About IDT IDT OVERVIEW Management and Employees Dedicated professional team with operational excellence and financial discipline Operating Businesses and Transaction IDT has continually innovated and built new operating businesses IDT will sell operating businesses for the correct price Telecom Larg
Slide 10: Company Overview
IDT Corporate IDT Telecom Calling Cards/ Prepaid Products IDT Capital IDT Spectrum Consumer Phone Services - US Wholesale Carrier Services Other Initiatives IDT Energy IDT Local Media Ethnic Grocery Brands Consumer Phone Services – International Sales IDT Carmel IDT Internet & Mobile Other Hispanic
Slide 11: Strategic Goals
EXISTING OPERATIONS OPPORTUNISTICALLY GROW BUSINESS BUILD SHAREHOLDER VALUE IDT OVERVIEW Sustainable Free Cash Flow Efficient Operations That Fit our Risk Adjusted ROI Criteria Strategically Fit with Existing Infrastructure and Businesses Utilize Balance Sheet Strategic Goals
Slide 12: Recent Events
January 26, 2006- Remaining Winstar Operations & Liabilities Divested March 3, 2006- Corbina Sold March 13, 2006- Acquisition of Net2Phone Completed 3Q06 - Overhead Reductions Initiated 4Q05 – 4Q06- Open Market Buyback of 6.4 mm Shares ($79 mm) 4Q06 - IDT Energy surpassed 200,000 meters September 29
Slide 13: IDT In Transition
FISCAL 2006 FISCAL 2007 Transactions Re-evaluation of all businesses Integration of businesses Efficiency in existing operations Cost cutting initiated in 3Q06 Projected annual SG&A savings of $35-40 million Launch of new IDT Capital businesses IDT In Transition Stabilize IDT Telecom businesses Purs
Slide 14: IDT Portfolio in Transition
TODAY FUTURE Mature Telecom Businesses -and- Many opportunities, with small amounts of capital deployed to date: Calling Card Expansion International Telecom Expansion IDT Energy IDT Carmel Ethnic Grocery Brands IDT Local Media IDT Internet Mobile IDT Spectrum, etc. IDT Portfolio in Transition Matur
Slide 15: IDT Portfolio – Plan for the Future
Operating Businesses Transaction Growth IDT Portfolio – Plan for the Future IDT OVERVIEW Efficient operations and generation of free cash flow IDT will sell operating businesses for the correct price Concentrate on specific opportunities: Build upon existing infrastructure Leverage strength of IDT’s
Slide 16: Marcelo Fischer, Chief Financial Officer
IDT Corporation Marcelo Fischer Chief Financial Officer
Slide 17: Capital Deployment
Capital Deployment IDT OVERVIEW Goal Allocate capital to the highest returning opportunities companywide Financial Metrics Absolute hurdle rate – Risk-Free Rate Targeted base hurdle rate – 15% IRR (risk adjusted); 3 year timeframe Investment Approach IDT has significant cash on hand IDT is comfortab
Slide 18: Revenue by Division
IDT OVERVIEW Revenue by Division The IDT “Portfolio” $ in millions Total IDT Corporation 1Q 05 1Q 06 1Q 07 Total IDT Telecom 1Q 05 1Q 06 1Q 07 Total IDT Capital 1Q 05 1Q 06 1Q 07 Total IDT Entertainment 1Q 05 1Q 06 1Q 07 Total IDT Solutions 1Q 05 1Q 06 1Q 07
Slide 19: Equity Structure
CLASS A CLASS B CLASS C Equity Structure 3 Votes/ Share 1/10 Vote/ Share 1 Vote / Share 9.8 mm 56.7 mm 15.2 mm Howard Jonas, Chairman and Founder of IDT, controls 17.75 mm shares 21% economic ownership 63% voting control Not Traded IDT IDT.C 6.3 mm options outstanding $9.44 average strike price Vote
Slide 20: Stock Buyback
Stock Buyback Fiscal 2005 1.2 mm shares $16 mm Fiscal 2006 5.2 mm shares $64 mm 14.9 mm shares from Liberty Media in sale of IDT Entertainment Purchased 7.9 mm options held by employees Remaining Buyback Authorization 24.5 mm shares IDT will continue to be an opportunistic purchaser of its shares on
Slide 21: Cash per Share: $8.95
Cash per Share: $8.95 Cash per Share As of October 31, 2006 Cash & Marketable Securities $808 Investments 52 Capital Lease Obligations (47) Severance Accrual (11) Regulatory Accrual (Telecom) (51) Working Capital Adjustment Accrual (Entertainment) (20) Net Cash $731 Shares Outstanding (undiluted) 81
Slide 22: Operating Cash Flow – 1Q07
Operating Cash Flow – 1Q07 Adjusted EBITDA * Telecom $23 Capital 2 Solutions - Corporate (14) Total Adjusted EBITDA $11 Capital Expenditures (10) Distributions to UTA Minority Partners (4) Interest, Taxes 1 Working Capital Changes (Telecom / Corporate) (5) Working Capital Changes (Capital / Solution
Slide 23: Adjusted EBITDA by Division
1Q 05 1Q 06 1Q 07 IDT OVERVIEW $ in millions Adjusted EBITDA by Division *Adjusted EBITDA, as calculated: Gross Profit – SG&A + Non-Cash Compensation Total IDT Corporation 1Q 05 1Q 06 1Q 07 Total IDT Telecom 1Q 05 1Q 06 1Q 07 Total IDT Capital -3 -2 -1 Total IDT Entertainment 1Q 05 1Q 06 1Q 07 Total
Slide 24: The Future of IDT
The Future of IDT Howard Jonas Chairman of the Board
Slide 25: IDT Corporate Question and Answer
IDT Corporate Question and Answer
Slide 26: IDT Telecom
IDT Telecom Yona Katz Chief Executive Officer
Slide 27: Our Mission
We will provide a full suite of high-quality, favorably-priced communications products and services to retail and wholesale customers worldwide We will be driven by innovation and we will embrace technology, in order to improve our products, services, processes and interaction with our customers We
Slide 28: Current Status
Market maturity and aggressive, price-based competition have resulted in revenue declines in several key business units New products and geographic markets have yet to gain traction, providing little incremental revenue to offset core decline Top-line pressure has continued into 2Q07 Steps to revers
Slide 29: IDT Telecom Revenues
IDT TELECOM Revenues $ in millions
Slide 30: mn 23.5% 23.0% 22.5% 22.0% 21.5% 21.0% 20.5% Q4FYDS QIFYe G2FY0e OsFY0e Gaye =
mn 23.5% 23.0% 22.5% 22.0% 21.5% 21.0% 20.5% Q4FYDS QIFYe G2FY0e OsFY0e Gaye = aiFY7 IDT Corporation
Slide 31: IDT Telecom SG&A Expenses
IDT TELECOM SG&A Expenses $ in millions
Slide 32: IDT Telecom EBITDA
Includes impact of non-cash compensation. IDT TELECOM EBITDA $ in millions
Slide 33: Businesses
Prepaid Services Calling cards (US/Europe/South America/Asia Pacific) Wireless services (US/Europe) Carrier Wholesale Services Voice (US/Europe/South America/Asia Pacific/Africa) Portfolio of Carrier Services Consumer Phone Services CPS (US) Net2Phone reseller Net2Phone Cable Telephony (NCT) IDT TEL
Slide 34: U.S. Calling Cards
Market leader in world’s #1 prepaid calling card market TTM net revenues of approximately $1.0 billion Distributed through Union Telecard Alliance joint venture Over 200,000 retail points of sale nationwide Prepaid Solutions (PPS) unit distributes cards through some of the largest retailers in the U
Slide 35: U.S. Calling Cards Risks and Responses
RISKS RESPONSES U.S. Calling Cards Distribution network still too heavily concentrated on East Coast Mature, commodity product Threatened by wireless substitution Competition intensifying, resulting in market share losses Raises question of gross margin sustainability Continued build-out of nationwi
Slide 36: U.S. Calling Cards- Geographic Breakdown
Based on minutes-of-use, FY 2007 to date. IDT TELECOM U.S. Calling Cards- Geographic Breakdown
Slide 37: Prepaid Wireless- TuYo
IDT TELECOM Prepaid Wireless- TuYo
Slide 38: Europe Calling Cards
Pan-European operation Sales in 19 countries Expanding to 21 by year-end 2007 Headquartered in London, England and Dublin, Ireland Offices in 13 countries Selling nearly 300 different cards through various distribution channels Including > 100,000 (3 rd party) point-of-sale activation (POSA) termina
Slide 39: Europe Calling Cards Risks and Responses
RISKS RESPONSES Market share losses to aggressive competitors “One-dimensional” distribution network has narrow, limited reach Changing customer needs require new products 24 month investment plan launched Allowing each market to cycle through “investment” and “harvest” phases Enabling electronic di
Slide 40: Europe Calling Cards- Geographic Breakdown
Based on minutes-of-use, November 2006 IDT TELECOM Europe Calling Cards- Geographic Breakdown
Slide 41: Carrier Wholesale
Historically an arbitrage-driven minutes trading operation Wholesale business has evolved into a multi-faceted carrier services business over the past few years Serving > 500 carrier customers worldwide Generating over $500 million in annual revenues Offers a wide variety of services, including: Voi
Slide 42: Carrier Wholesale Risks and Responses
RISKS RESPONSES Traditionally narrow margin business, with questionable customer loyalty Customers increasingly seeking IP interconnection and related services Mobile carriers accounting for a growing share of the global wholesale market Addition of higher-margin, “contracted” revenues from strong p
Slide 43: Carrier Wholesale
IDT TELECOM Carrier Wholesale $ in millions
Slide 44: Consumer Phone Services (CPS)
Local and long distance (LD) voice services Broadband Internet access VoIP services Satellite TV Sold to residential and small business customers Bundled local and LD customers: ~110,000 in 13 states (as of 12/31/06) LD-only customers: ~235,000 nationwide (as of 12/31/06) Recently launched IDT Passp
Slide 45: CPS Risks and Responses
RISKS RESPONSES With abolishment of UNE-P rules in late 2004, costs have increased, making it more difficult to compete with incumbent carriers Residential VoIP taking some market share from traditional wireline services Local calling and domestic LD markets provide little opportunity to undercut co
Slide 46: Voiceline
Voiceline Residential Internet Telephone Service Unlimited local and long distance to US, Canada and Puerto Rico $19.95 per month through 1/31/07 $5.00 less than Vonage Free modem; no installation fee Customer Pitch Value Significantly lower than traditional phone service or other VoIP competitors F
Slide 47: Consumer Phone Services (CPS)
IDT TELECOM Consumer Phone Services (CPS)
Slide 48: SIP and Packet Cable Customers
mn IDT 120,000 401,100 100,000 76.018 80,000 60,000 40,000 30a 21,647 20,000 oO QIFYOG = Q2FYDG QSFYOG G4FYOS = QIFYO7 § Q2FYO7E SIP Customers Packet Cable Customers IDT Corporation
Slide 49: The Plan
Use forward-ROI approach to determine investment potential of each business existing and potential Monetize businesses whose projected future cash flows fall below ROI threshold via sale or harvest Take advantage of existing network capacity to add incrementally profitable minutes Allocate financial
Slide 50: Global Telecom Network Capacity Utilization
January 2006: 843,594 total ports January 2007: 844,338 total ports IDT TELECOM Global Telecom Network Capacity Utilization
Slide 51: Global Network Topology
Global Network Topology IDT TELECOM
Slide 52: IDT Telecom Question and Answer
IDT Telecom Question and Answer
Slide 53: IDT Capital
IDT Capital David Greenblatt Co-Chief Executive Officer
Slide 54: What is IDT Capital?
The Business Development Incubator for IDT Provides a process-driven infrastructure for business development Assess, filter and process new opportunities for IDT With strict financial discipline and analysis IDT Capital is Focused on Businesses that Are consumer-oriented Build upon IDT’s existing in
Slide 55: IDT Capital Incubation Process
IDT Capital Incubation Process IDT CAPITAL Model the Opportunity Research Identify key assumptions Design business model/project plan based on the assumptions Create a budget to test the opportunity Test the Model Create a small test of the target business (with internal IDT business, if applicable)
Slide 56: Capital Companies
IDT Energy Gas & Electric ESCO (Energy Service Company) in New York State IDT Carmel Receivables Purchasing/Sales and Contingency Collections IDT Internet Mobile Zedge Content-focused business, at the intersection of Mobile platforms and the Internet Capital Companies IDT CAPITAL
Slide 57: Capital Companies (continued)
IDT Local Media CTM Brochure Display, WMET Radio, New Media Local advertising opportunities Ethnic Grocery Brands Vitarroz Branding and distribution of ethnic oriented grocery products IDT Global Services Call Center and BPO (Business Process Outsourcing) Services IDT Hispanic Ingles Para Hoy (ESL),
Slide 58: IDT Energy
IDT Energy IDT CAPITAL
Slide 59: IDT Energy Vision
IDT Energy Vision Create a large and robust base of retail energy customers Low customer cost of acquisition Low churn Through multiple products and services Focus on brand awareness Up-sell additional energy oriented products and services Continually enhance the customer experience IDT Energy is th
Slide 60: Deregulation
Deregulation Non-utilities can resell natural gas and energy In New York State, deregulation model offers resellers low risk programs Purchase of receivables (POR) Utility-provided billing Dual meters (natural gas and electricity) available for resell Dynamic supply management, with mature markets f
Slide 61: IDT Energy Captured Over 20% of NY Residential ESCO Market
IDT Energy has Captured Over 20% of the New York Residential ESCO Market New York State ESCO Market Landscape New York State Total Meters: Natural Gas Meters: Upstate: 1,300,000 Downstate: 1,400,000 Electric Meters: Upstate: 2,500,000 Downstate: 3,000,000 Market Breakdown of IDT Meters Upstate: 48,5
Slide 62: Where are we now?
Where are we now? Regulatory-friendly regions within NY State Upstate utility markets (NFG, NIMO/National Grid, RG&E) Downstate utility markets (Central Hudson, Con Edison, Keyspan, Orange & Rockland) How do we acquire customers? Residential consumers Door-to-door sales strategy Refer-a-friend progr
Slide 63: Risk Factors
Competition/Marketing Risks Competitors with deep pockets and large marketing budgets may enter the market Current ESCO discount may prove insufficient to convince customers to switch from incumbent providers Comparison shopping as customers and the market matures Political Risks New York State pro-
Slide 64: The Portal Opportunity
The Portal Opportunity Internet offers the infrastructure for the world to shop for energy products and information One-stop source for energy consumers Comprehensive energy information to better understand the energy industry and how it impacts their home IDT Energy Portal Multiple web environments
Slide 65: Main E-Commerce Site
www.IDTENERGY.com Main E-Commerce Site New customer acquisition Online bill pay Customer Stories Energy Saving Tips Entry to blogs/social community Green Energy Information Education News Links to energy sites Services Home Energy Audits Energy Insurance Weatherization IDT ENERGY
Slide 66: Traditional energy products
www.IDTENERGYSTORE.com Traditional energy products Batteries Thermostats Filters Energy efficient products Heat Pump Humidistats Propane Heaters Alternative energy products Hydropower Power Panels Solar Air Heating IDT ENERGY Additional products and services continuously added
Slide 67: Key Economic Drivers
Number of Customers/Meters Consumption Price per Unit Customer Acquisition Cost Key Economic Drivers Drives volume and revenues Determined by weather patterns, drives volume and revenues Generated by capturing and managing costs and rate setting Together with customer turnover determines the rate of
Slide 68: IDT Energy – Key Financials Metrics
Number of customers needed to cover fixed SG&A: ~120,000 Number of customers at end of 1Q07: ~180,000 Number of energy meters at end of 1Q07: ~258,000 Incremental Customer Acquisition Acquisition cost payback period: ~6 months IRR assuming avg. customer life of 3 years: 152% IDT Energy – Key Financi
Slide 69: IDT Energy – 1Q07 Financial Highlights
IDT Energy – 1Q07 Financial Highlights Revenue $36 Direct Cost 28 Gross Profit $8 Gross Margin 22% Impact of Market Pricing Opportunities $6 Normalized Gross Profit $2 Gross Margin 6% Model assumes ~6% gross margin In millions IDT ENERGY
Slide 70: IDT Capital
IDT CAPITAL
Slide 71: Consumer Debt Industry Overview
Consumer Debt Growth Consumer charged off debt growing at a ~14% CAGR since 1993 Charge-offs and delinquency rates have decreased over the last 5 years, with a slight increase over the last two quarters Creditors Consolidation amongst the largest issuers of credit card debt has led to larger portfol
Slide 72: The “Fit” Into IDT Capital
Consumer debt focus – opportunity still maturing Room for a big player - 95% of the players generate less than $8 mm annual revenue International opportunities - international debt markets are opening up $48B in face value was purchased in international markets in 2005 Brazil, Mexico and Poland Main
Slide 73: Strategy For Growth
Build strong management Maintain balance between purchasing and contingency collections Accelerate portfolio purchases Strategic acquisitions - niches, along with management expertise Maintain balance between collecting purchased debt in-house and through an established outsourcing collection networ
Slide 74: Risk Factors
Portfolio Pricing Margins can be impacted as excess liquidity and growth pressures may lead to aggressive portfolio purchasing, causing portfolio prices to increase Availability of Portfolios Purchase of more lucrative portfolios is often relationship driven Economic Environment Employment and gener
Slide 75: IDT Carmel - Timeline
First Half Fiscal 2005 - Launched IDT Carmel June 2006 - Acquired Big Ten Capital Management, a debt purchasing company located in Minnesota FY 2006 - Trained and built collection staff in Minnesota and Israel ~120 employees today in Minnesota and Israel, 75 collectors FY 2006 - Executed many small
Slide 76: Joint Venture Overview
January 2007 - Formed joint venture with First Financial Portfolio Management (FFPM) JV to purchase fresh credit card debt from a major financial institution Forward-flow portfolio for a total of twelve months Total over twelve months will range from $45 mm to $121 mm FFPM is a debt purchasing/colle
Slide 77: IDT Internet Mobile
IDT Internet Mobile IDT CAPITAL
Slide 78: Business Characteristics - IDT’s Opportunity
Consumer Attractive product to build a brand identity Early stages First mover advantage Zedge is the largest Internet Mobile portal today ~3.7 million users ~500,000 pieces of content Minimal Risk Small acquisition price, and minimal investment necessary for further build out Build on existing infr
Slide 79: Industry Overview
Exploding demand for content on mobile devices Driven by mobile phone penetration, and wireless broadband service Mobile content market is presently PC based Load content from PC to mobile device Nascent space No incumbent Zedge is presently the largest portal User generated content Growing populari
Slide 80: IDT Internet Mobile - Today
Global destination Users are global ~11% US and UK based Rapidly adding users Zedge has acquired over 3.7 million registered users in 2 years Adding 165,000 registered users per month Content leader ~500,000 unique pieces of mobile content Adding ~45,000 pieces per month Broad based approach We also
Slide 81: Competition
Competition Many others are making significant investments in the mobile community and content aggregation markets Low barriers to entry Revenue Model Other than ringtones, mobile content has yet to become a significant source of revenues in the US market Risk Factors IDT INTERNET MOBILE
Slide 82: The Zedge Experience
User Forums >500,000 posts Mobile Applications Screensavers Wallpapers User Generated Content ~500,00 pieces User Profiles ~100,000 The Zedge Experience IDT INTERNET MOBILE
Slide 83: Financial Overview
Financial Overview Purchase Price: $3.4 million paid over 2 years Ownership Acquired: 90% Planned Investment: $7 million IDT INTERNET MOBILE
Slide 84: IDT Internet Mobile - Strategy
Build the brand Become a household name for the purpose of obtaining mobile content Mobile portal for all types of products and services Growth User base Increase user base through viral and targeted marketing Goal is to have 5.5 million registered users by the end of FY07 Content Increase content t
Slide 85: IDT Capital Question and Answer
IDT Capital Question and Answer
Slide 86: Ira Greenstein, President
IDT Corporation Ira Greenstein President
Slide 87: Thank You for Attending
IDT Corporation Thank You for Attending