Howard Jonas - Founder, Chairman, Chief Executive Officer and Chairman of Nominating Committee
Bill Ulrey - Vice President of Investor Relations & External Affairs
Jonathan Reich - Chief Executive Officer - Net2Phone Global Services LLC
IDT (IDT) Q2 2011 Earnings Call March 15, 2011 5:15 PM ET
Welcome to IDT Corporation's Second Quarter Fiscal 2011 Earnings Presentation. This is Bill Ulrey, IDT's Investor Relations Officer. IDT's Chairman and Chief Executive Officer, Howard Jonas; and Chief Financial Officer, Bill Pereira, will discuss IDT's financial and operational results for the three months ended January 31, 2011. In addition, during today's presentation and from time to time during future quarterly discussions, key managers and executives will provide investors with updates on their respective businesses.
Today, you'll hear from Jonathan Reich, Vice President for Sales and Business Development at Fabrix. He will speak following Howard Jonas. Both this audio file, consisting of management's prerecorded remarks, and our earnings release are available on the Investor Relations page of the IDT Corporation website, www.idt.net. The earnings release has also been filed on a Form 8-K with the SEC.
If, after listening to management’s presentation and reading the company’s earnings release, you have any questions for management related to the announced results, please email them to us at the following address, firstname.lastname@example.org, no later than the close of business on Friday, March 18. Please include your name and firm name, if applicable, in your email. If we can constructively answer your question, we will post your question along with your name, your firm’s name and our answer on the IDT Investor Relations page as early as next Wednesday, March 23, after market close. We will also file a Form 8-K with the SEC containing the questions and answers.
Any forward-looking statements made during this audio presentation or in the written Q&A, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those which we anticipate. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that we file periodically with the SEC. We assume no obligation either to update any forward-looking statements that we have made or may make or to update the factors that may cause actual results to differ materially from those that we forecast.
In this presentation and in our written responses to questions thereafter, we may make references to adjusted EBITDA. Adjusted EBITDA for all periods discussed during our remarks is a non-GAAP measure, representing operating income or loss from operations, exclusive of depreciation and amortization, severance and other charges and other operating gains net. Adjusted EBITDA is one of several key financial metrics management uses to evaluate the operating performances of the company and its segments. A schedule provided in the earnings release reconciles adjusted EBITDA to the nearest corresponding GAAP measure income from operations for each of our segments and to both income from operations and net income for the company as a whole. Now, to begin the discussion of our financial and operating results, here is IDT Corporation's Chairman and CEO, Howard Jonas.
As some of you listening in know, we held an Investor's Day in New York in February. I thought our management team did a wonderful job discussing all the great work being done in the company, and I want to thank and congratulate them. If you haven't listened to their Investor Day presentations nor seen the slides, do yourself a favor and go to the IDT website and get them. After listening to the presentations, you can't help but conclude that IDT is doing extremely well and has great upside potential. There is no better example of that than Fabrix. Jonathan Reich, a Senior Executive of Fabrix, is going to talk to you in greater detail about the company and the opportunity after I'm done with my remarks.
By way of background, Fabrix has developed groundbreaking video management software that is changing the way video is stored, delivered and optimized. For example, Fabrix software is now being used to power major North American cable operators' cloud-based DVR offering. We're eliminating the need for cable MSOs to provide and service DVR boxes in the home.
Fabrix also won a second contract from another large North American cable provider, who is using the Fabrix platform to greatly expand its video storage library so it can compete with the likes of Netflix and Hulu. Fabrix offers world-class technology and has outperformed the established players in this market to win business for major MSOs. The potential market is enormous, and it is not limited to cable operators. Telcos, satellites, over-the-top providers, as well as other industries with heavy video management requirements, are in our target market, including players in the life sciences, oil and gas, motion picture and surveillance industries. All can benefit from our technology. And I should also point out that other players in this market, with less established credentials and forward solutions, have sold for hundreds of millions of dollars and more in recent years.
Another IDT business that's on the verge of doing great things is Zedge. Here again, there is a tremendous opportunity. Zedge has a huge base of just under 40 million unique visitors a month and is growing its global use of base very rapidly. But most importantly, Zedge will soon be getting into new areas to leverage and monetize all this traffic.
The most important new territory is apps. The world is moving to apps. In fact, many people are hardly using the Web any more. They're just using their apps instead. And by the way, our very own Zedge app is one of the most downloaded and popular apps on the Android platform. The apps themselves are prolif. [ph] writing. Already, there are 100,000 on Google's Android marketplace. While it's easy to find the most popular apps, it's really hard to find the very best apps.
Zedge, in addition to being the natural base of about 40 million users, knows enough about them to help them find the apps that are best suited to their unique tastes and needs. If we get that right, we're not just a content platform any more. We will be taking a leading role in the next big wave of search. And there is one thing the market now understands the value of, it's search.
After the spin-off of Genie Energy we expect to complete this year, these two businesses, Fabrix and Zedge, which both are now operating pretty much at breakeven, will remain with IDT Telecom under the IDT umbrella. In Telecom itself, there is fantastic growth potential. You can already see that opportunity in the performance of our wholesale carrier business, for example. Revenues in that business are up 23% in this quarter alone compared to the same quarter last year. And while the market for the sale of physical calling cards are shrinking, we've been creating new sources of revenue from products such as BOSS Revolution and IMTU on the retail side.
Looking ahead, we will be introducing mobile money remittance services, potentially a huge market with healthy margins. We already have the basic elements needed to succeed in this huge global market. We have access to immigrant communities throughout our global retail distribution network. We have relationships with mobile carriers around the globe. And we have a sophisticated network platform capable of processing the transactions. The market is huge, the need is great and we have our key assets in place. I expect we'll be talking much more about international money remittance in the near future.
I know some people are thinking that post spin-off, Genie Energy is poised to be the growth company. Now you have to be forewarned. Both IDT and Genie have huge upside, neither one should be overlooked. So let me discuss Genie.
So for starters, I don't think many people understand just how good our oil shale technical teams are. I told this story at Investors Day, but it's worth repeating for the sake of new listeners. Last year, a few of us, including Doctor Harold Vinegar, the Chief Scientist at IEI and formerly Chief Scientist at Shell, went in to Exxon to meet with their CEO, Rex Tillerson. Tillerson shook Doctor Vinegar's hand and said, "At Exxon, we're the best in the world at what we do. There's only one place we come up short, and that's we don't have you, Doctor Vinegar. If we had you in this building, then we would have everything."
Exxon also doesn't have Alan Burnham, the CEO of our AMSO project and the leading researcher on oil shale from Laurence Livermore National Labs. And they don’t have Roger Day, who's been a leader in advanced drilling techniques in nahcolite in the Piceance Basin for many years. Now we believe that our team can outpace the majors and that, eventually, other oil companies will come to us for the IP we are developing and the resources we have in place.
Why is this so important? Well, because there are 13 trillion barrels of unconventional oil reserves in the world and most of that is in shale oil. Oil shale is going to be developed and the cost of producing it is going to fall. It's already competitive with other unconventionals. And with oil, once again, over $100 per barrel it’s not going to be long before even the policy magnates in Washington begin to realize that oil shale development is imperative to keep the U.S. and world economies on track.
While our oil shale projects will eventually change the world for the better and move America, Israel and our allies closer to energy independence, IDT Energy is producing cash here and now. IDT Energy, which started out in New York, is expanding into New Jersey and Pennsylvania. This expansion, along with our efforts to limit churn, are part of the reason that IDT Energy's margins were pressured downward this quarter. We will sometimes have to accept lower margins to enroll new customers and keep existing ones. In Q2, this decline was exacerbated by an increase in electric cost, we chose not to pass along to our customers. In the longer term, though, we will benefit hugely from these new markets and if we feel there is a shift in the direction of commodity costs, we can easily, efficiently hedge some of our naturally short positions.
Considered in its totality, Genie Energy marries the strong cash generating power of IDT Energy to the longer-term opportunities in shale. That combination will help Genie meet its capital requirements in the near term and ensure that shareholders realize the full potential of oil shale over the long-run.
To wrap it up, I want to briefly address the spin-off of our VoIP technology IP to shareholders. This is yet another area that is overlooked when evaluating IDT. We will soon begin the process of spinning off a portfolio of certain telephony IP to our shareholders by making the initial filings with the SEC. This includes a widely used VoIP-related technology, whose patent was recently upheld by the Patent and Trademark office during our litigation with eBay. Because the value of that IP will be much greater in a separate public company than as part of IDT, we are moving ahead with the spin-off. Now I am going to turn the call over to Jonathan Reich to discuss Fabrix. Jonathan?
Thanks, Howard. I'm grateful for the opportunity to share the Fabrix story with our investors. As you know, we have developed an enterprise class software-based, clustered-storage platform that pulls together all resources in the storage system or cluster to optimize for cost, performance, ease of use and scalability. This design, sometimes referred to as scale-out NAS, is advantageous for verticals including media and entertainment, oil and exploration and life sciences, that utilize large, unstructured and sequential data sets for business purposes.
Our solution runs on commercial off-the-shelf equipment, is resilient, self-healing and fault tolerant. Our software can be implemented on a stand-alone basis or can complement legacy systems. We support a multitude of standards and protocols guaranteeing inter-operability. In short, the market is taking an interest in our technology because of the outstanding price performance metrics that we bring to the table. Let's use video as an example to highlight some of these points.
Content distribution has changed radically over the past couple of years. With viewers wanting access to any content across any delivery network, from any device, at any time, what is known as the “Four Any’s.” Many of the traditional networks and production houses offer their titles online. Operators are increasing their content libraries. New television networks abound and services like YouTube have experienced exponential growth. Furthermore, accessibility is ubiquitous as the variety of video-enabled devices, including mobile phones, tablets, gaming consoles and Web-connected televisions, grows and they become ever present in the market. At the core, the “Four Any’s” hinge upon the need that service providers have to materially increase their storage capacity, streaming throughput and processing power. And this is exactly where Fabrix fits into the picture.
We have built our technology to support an array of features and services that are in high demand. Some of these include the end-to-end video workflow, that is: creation, editing, rendition and archiving. Cloud-based DVR, where the DVR functionality and storage sits in the cloud, negating the need for an in-home DVR. Video-on-Demand augmentation, time -shifted television, over-the-top video delivery, multi-screened television and personalized ad insertion. Up until now, many of these capabilities weren't achievable and others required disparate vendor solutions being stitched together resulting in lower performance, higher cost and more complicated operating environments. With Fabrix, the customer is able to scale linearly, take advantage of off-the-shelf equipment, simplify its deployment and benefit from the wide array of value-added features.
Furthermore, we are leading the charge in this revolution. To date, our field deployments are multi-petabytes in size with each system being optimized for capacity and throughput. The petabyte is around 1 million gigabytes. In North America, we are empowering a Tier 1 MSO’s cloud-based DVR offering and another operator's video-on-demand expansion. We were successful in uprooting well-entrenched vendors in these implementations due to our improved performance, lower cost, ease of management and scalability. Again, it's important to highlight that video is but one vertical where our technology has relevance. Others include media and entertainment, life sciences and security and surveillance.
Moving to strategy for a moment, we market directly to the customer whether through sales calls, trade shows and lab trials, among other channels. To date, our customer base is located in North America, but we are starting to see opportunities prop up in other regions of the world. When right for the opportunity, we partner with one of the large IT vendors and deliver a holistic solution including Fabrix software and know-how and the IT vendor's hardware, management software and systems integration expertise. It's a great combination, with Fabrix benefiting from the global brand name and reputation of the IT vendor, and the IT vendor generating revenues from a product line that they do not carry in their portfolios.
Insofar as business model is concerned, we generate revenues from three areas: software licensing, maintenance and support agreements and professional services. Analysts are predicting that the U.S. scale-out NAS market will exceed $6 billion by 2014. Likely, this was one of the key drivers behind EMC's recent acquisition of Isilon Systems.
With our expertise, we believe that we can ride this wave as a leader with a differentiated solution set that is well positioned for market dominance. Our future is bright, and we look forward to sharing details as they unfold. Thank you for your time.
Thanks, Jonathan. IDT generated healthy increases in cash from operating activities and in free cash flow in Q2, and we further strengthened our balance sheet even while paying out $10 million in dividends during the quarter. And for the fifth consecutive quarter, IDT reported net income. So with this backdrop of strong value creation defined by cash flow generation, let's now begin a more detailed analysis on the second quarter's results starting with a look at top line growth.
At IDT Telecom during Q2, we sought to grow revenue and market share aggressively, particularly in the traditional Wholesale Carrier business. At IDT Energy, we decided to sacrifice gross margin to accelerate growth into new markets in New Jersey and Pennsylvania and to insulate our customers from an upward spike in the cost of electricity, which would have negatively impacted our ability to retain customers in New York against aggressive competition. IDT's revenue increased 10.7% year-over-year and 12.4% sequentially to $401.5 million.
The growth was generated within IDT Telecom and, specifically, within our core Telecom Platform Services segment. TPS revenues jumped $44 million year-over-year or 15.2% and $31.9 million sequentially, 10.6%, to $334.4 million. Within TPS, all four sales channels, wholesale carrier, retail, reseller and direct sales, reported year-over-year revenue increases with the wholesale carrier channel accounting for most of the increase.
You may recall that the wholesale carrier channel had relatively flat top line performance throughout fiscal 2010, but then grew revenue 12% sequentially during fiscal Q1. I mentioned during last quarter's call that we were not prepared to confirm whether this indicated a fundamental change in the marketplace. Well, the verdict is still not in, but the indicators are looking pretty good. In Q2, revenues for the wholesale carrier channel grew 15% sequentially and 23% year-over-year.
Retail, the other dominant channel within TPS, also had a strong quarter with revenues growing 5% year-over-year and 8% sequentially. Both BOSS Revolution, a cardless pay-as-you-go international long-distance service and International Mobile Top-Up, IMTU, continue to do extremely well. Revenue growth in these products more than made up for declines in the sales of traditional prepaid IDT-branded calling cards, as well as for the revenue lost as a result of our decision to exit the low-margin domestic mobile wireless top-up business earlier last year. TPS' minutes of use increased to 6.6 billion, a 28.9% jump compared to 2Q '10 and a 7.7% increase sequentially. Minutes of use grew in all four channels during Q2, led by wholesale carrier. For the first half of fiscal 2011, so far, the story, if anything, is even more remarkable. Minutes of use increased by 2.9 billion in the first six months of the year, compared to the first half of fiscal 2010, a nearly 30% increase.
That suggests we are gaining market share in a very big way, particularly in the wholesale carrier channel, where minutes in Q2 were up 36% year-over-year and 12% sequentially. While we may be sacrificing some margins to achieve these gains, gross profits were up, and we believe that the increased market share will provide future benefits.
Turning now to IDT Energy. Here, I'll focus on year-over-year comparisons. Because this business is highly seasonal, sequential comparisons are not very informative. Investors should also be careful about drawing inferences about the performance of this business based on revenue, which fluctuates significantly with changes in the market prices of the underlying electric and gas commodities, and is, therefore, not a good indicator of performance. Instead, IDT Energy management is focused on unit margin and growing the consumption base. It measures IDT Energy’s performance based on these metrics.
IDT Energy's revenues in Q2 were $57.8 million, a 4.8% decline compared to the year ago quarter. Although electric revenues increased by 1.8% year-over-year to $29.6 million, gas revenues declined 10.8% to $28.2 million, a modest increase in the number of electric meters helped us sell 2.8% more kilowatt hours than we did in the second quarter of fiscal 2010, but the increase in consumption was partially offset by a 1% decline in revenue per kilowatt hour. For natural gas, revenue dropped as a result of a decline in revenue per therm, which fell 10.1% year-over-year, reflecting a decline in the underlying commodity price. The number of therms sold decreased just slightly by 7/10 of 1%, although IDT Energy grew its test meter count year-over-year.
That discrepancy results from the fact that newly acquired meters in New York, over the past year, were lower gas-consuming meters. More recent acquisitions of gas meters, both in New York and New Jersey, have been higher consumption meters, though, we have not yet started to fully recognize the consumption impacts from these more recently acquired meters. At the end of the quarter on January 31, IDT Energy served 373,000 meters. Total meters served increased by 8,000 during the quarter. Both New Jersey and Pennsylvania offer good prospects for future growth, and we continue to enter new utility territories in each state. IDT Energy has also broadened its sales and marketing efforts with the objective of increasing customer acquisition rates, moderating churn and attracting higher consumption customers.
Last quarter, we began reporting on residential customer equivalents or RCEs. RCEs are a standard measure of throughput for the current customer base. IDT Energy's electric customer RCEs totaled 124,000 at January 31, 2011, compared to 98,000 a year earlier, a 27% annual growth rate. Gas customer RCEs totaled 91,000, a 4% annual growth rate year-over-year. The healthy increase in electric RCEs, in particular, indicates that IDT Energy has enjoyed considerable success migrating its customer base to higher-consumption electric meters. By the way, the RCE figures from prior quarters were revised slightly from last quarter's presentation to reflect a correction in the calculation with respect to one utility.
In terms of gross margins, those of you who have followed IDT over the past several years know that our core businesses operate in highly competitive markets. Management frequently is engaged in a balancing act, seeking to fully exploit opportunities for long-term growth on one hand, while improving short-term operational results on the other hand. This quarter, that balance tipped toward long-term growth. Both IDT Telecom and IDT Energy sacrificed gross margin to advance their respective strategic positions in key markets. On a consolidated basis, gross profit at IDT fell 2.7%, both year-over-year and sequentially, to $72.2 million. IDT Telecom's gross profit increased 4.4% year-over-year and 2% sequentially to $59 million. That increase, however, was offset by a decline in IDT Energy's gross profit of 30.8% year-over-year and 23.2% sequentially to $11.3 million.
Gross margin on a consolidated basis fell 250 basis points year-over-year and 280 basis points sequentially to 18%. Gross margin at IDT Telecom declined 150 basis points year-over-year and 140 basis points sequentially to 17.3%. TPS reported gross margins of 16.5%, a 110-basis point decline year-over-year and a 130-point drop sequentially. Gross margin for the wholesale carrier business declined 10 basis points, while retail’s margin increased 50 basis points. Changes in product mix were a key factor. Revenues derived from the sale of traditional higher-margin IDT-branded prepaid calling cards declined year-over-year and sequentially, while revenue from wholesale carrier traffic and IMTU, both of which have relatively lower margin, have increased significantly.
At IDT Energy, gross margin was 19.6%. That represents a 730-basis point decline year-over-year and a 1,280-basis point decline sequentially. The reduction in margin came primarily in electricity sales. Gross margin from electricity was 17.2% in Q2, a 1,420-basis point decline year-over-year. Our cost per kilowatt hour of electricity increased 19.5% compared to the year ago quarter, while our revenue per kilowatt hour actually declined by 1%. Electric cost increased early on in the quarter, right after we had decided to lower rates to be more competitive and capture market share. Management chose to keep its pricing competitive to facilitate customer acquisition, particularly in New Jersey and Pennsylvania, and to minimize customer churn in New York. And as we have stated before, margins in this business are susceptible to rising commodity costs. Going forward, if we feel there is a shift in the trend for commodity cost, we may choose to increase the hedging of our naturally short positions to mitigate some of the impact of rising energy costs.
Consolidated SG&A increased $5.2 million or 9.4% year-over-year and 4.8% sequentially to $60.3 million. Of the $5.2 million increase, $1.5 million was due to higher non-cash compensation. SG&A at IDT Telecom increased 4.8% year-over-year to $46.5 million, partially reflecting the additional costs of growing our global distribution network, in particular, a direct route sales force within our retail channel. SG&A expense increased 2.2% sequentially. IDT Energy reported SG&A of $5.9 million, a 32.1% increase compared to the year ago quarter and a 4/10 of 1% increase compared to the prior quarter. As I have noted before, much of the year-over-year increase reflects customer acquisition costs incurred by our expansion into New Jersey and Pennsylvania which began in the third quarter last year.
SG&A at Genie Oil and Gas was $1.3 million, including $820,000 in non-cash compensation compared to SG&A of $350,000, including non-cash compensation of $190,000, in the year ago quarter. The non-cash portion of the increase is primarily the result of valuations of Genie Oil and Gas warrants issued in November 2010, using a Black-Schole's valuation estimation model. The warrants were issued to third-party minority investors in Genie Oil and Gas in a previously disclosed transaction in November 2010. Corporate, general and administrative costs totaled $4.1 million for the quarter, a $419,000 increase over last quarter and a $1.3 million increase over Q2 last year. In both instances, the increase is mainly due to $1.2 million in non-cash compensation recorded during Q2 of this year.
Research and development expense totaled $2.1 million in the second quarter, a 52% increase year-over-year but a 13.9% decline sequentially. R&D costs incurred by Genie Oil and Gas totaled $1.8 million. These were incurred entirely by IEI as our interest in the AMSO oil seat is accounted for using the equity method and is reported as other income expense net in our consolidated statement of operations. Research and development costs at IEI rose 137.3% year-over-year, and we expect that they will continue to increase as we begin construction of the pilot test as early as the second half of this calendar year and begin pilot test operations as early as calendar 2012. IDT generated $9.8 million in adjusted EBITDA for the quarter, a 44.6% decline compared to 2Q '10 and a 30.8% decline sequentially.
IDT Telecom generated $12.4 million in adjusted EBITDA. Of that, $10.4 million came from the TPS segment, representing a 16.9% increase year-over-year and a 2.1% increase sequentially. CPS contributed an additional $2 million in adjusted EBITDA. IDT Energy contributed adjusted EBITDA of $5.4 million, a 54.5% decline year-over-year. This is largely as a result of the reduction in the gross margin for electricity sales I mentioned earlier. And they represented a 38.6% decrease sequentially. The adjusted EBITDA loss at Genie Oil and Gas was $3.1 million, a 178.7% increase year-over-year and a 46.2% increase sequentially. As I mentioned earlier, we expect the spend level to continue to increase as we prepare for pilot test operations next calendar year.
Depreciation and amortization expense for IDT was $5.5 million, $4.7 million of which was incurred by IDT Telecom. At IDT Telecom, D&A expense declined 35.5% compared to the year ago period and by 4/10 of 1% compared to the first quarter of this year. These declines reflect the fact that a larger portion of IDT Telecom's fixed asset base has now been fully depreciated, as well as the impact of significantly lower CapEx spend in recent years.
Income from operations was $8.1 million, including $5.5 million in depreciation, amortization expense, $1.1 million in restructuring cost and $4.9 million in other gains. IDT Telecom's income from operations was $11.4 million compared to $4.1 million in the year ago quarter and $7.5 million in the prior quarter, representing increases of 176% and 51.4%, respectively. Within IDT Telecom, TPS generated income from operations of $9.4 million, net of $4.7 million in depreciation and amortization expense, $900,000 in restructuring costs and a one-time net gain of $4.6 million. The net gain reflected a $14.4 million cash payment we received after a cable telephony customer, Bresnan Broadband, was acquired by Cablevision. As a result of this acquisition, Bresnan terminated its cable telephony agreement with us and the payment was required pursuant to the terms of our contract. This gain was partially offset by a $9.1 million jury damage award in a patent infringement case. Income from operations at TPS was $2 million. At IDT Energy, income from operations was the same as its adjusted EBITDA, $5.4 million as IDT Energy had insignificant depreciation and amortization expense and no restructuring costs. Net income attributable to IDT was $3.9 million in the second quarter or $0.18 per diluted share. That is a modest increase from net income of $3.7 million in the year ago quarter, but a decrease from the $15.6 million generated in Q1 when several nonrecurring events benefited our bottom line.
Turning now in more detail to our balance sheet and statement of cash flows. During the second quarter of fiscal 2011, we once again significantly strengthened our balance sheet and liquidity. At January 31, 2011, we reported $262.8 million of cash, cash equivalents and certificates of deposit, a $28.9 million increase compared to $233.9 million at the beginning of the fiscal year and a $20.1 million gain over Q1. Current assets at January 31 totaled $435.7 million. Our working capital now totals $121.8 million compared to $96.1 million six months ago. Noncurrent liabilities totaled just $46.5 million, of which $33.4 million is nonrecourse mortgage debt. Net cash provided by operating activities for the six months ending January 31, 2011, was $29.5 million and CapEx was $6.1 million. Net cash provided by operating activities during the comparable period a year ago was $15.3 million, while CapEx totaled $4.9 million. For the quarter, operating cash flow totaled $23.9 million.
Our cash position was impacted by several non-routine events during the quarter. We received $10 million in Q2 from the sale of an equity position in Genie Oil and Gas. We paid the dividends for the first two quarters of fiscal 2011 for an aggregate $10 million in cash. And finally, as I mentioned earlier, we received $14.4 million in cash pursuant to our contractual arrangement with Bresnan Cable after they terminated our contracts for cable telephony services.
In summary, IDT delivered another strong operational quarter. IDT Telecom continued to capture minutes in the carrier business at an extraordinary pace, while at the same time, substituting traditional prepaid calling card revenue with innovative new products, all the while increasing profitability. IDT Energy required investment in our customer base during Q2, but we believe this decision will deliver long-term benefits. And finally, our cash position grew substantially even after delivering $10 million in dividends to our shareholders during the quarter. That about concludes my remarks.
Before leaving you, I want to remind our shareholders that we welcome the opportunity to answer your questions about this quarter's results or the company in general. Please e-mail them to us at email@example.com by the close of business this Friday, March 18, along with your name and firm's name. Where we can provide a constructive answer, we will post our response on the Investor Relations page of the IDT website and by filing a Form 8-K with the SEC as early as Wednesday, March 23, following the market close. Thank you very much.
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