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IDT Corporation IDT Corporation 2015 Annual Report Dear Fellow Stockholders: IDT delivered a strong performance in fi scal 2015. We generated over $44 million in Adjusted EBITDA* thanks to robust contributions by our Retail Communications, Wholesale Carrier Services and Payments Services businesses within IDT Telecom. The sale of our stake in Fabrix, a provider of video storage and processing software, helped boost diluted EPS to $3.63. We also returned over $47 million in cash to our stockholders through our quarterly and special dividends. At IDT Telecom, by far our largest business, our success was due in part to our sharpened focus on serving the communications and payments needs of foreign born residents here in the United States. Because our business is inextricably linked to immigration, I read with interest that the Pew Research Center estimates that 59 million immigrants have arrived in the U.S. since 1965. The foreign born population in the U.S. continues to both increase and diversify, with the fastest growth coming from Asia and Africa. Under the banner of our Boss Revolution brand, we have already established a very strong position in some foreign-born communities, but in many others we have plenty of room to run. To seize this opportunity, we will continue to develop and deploy new offerings tailored to meet the unique communications and payments needs of these newcomers to America. In fi scal 2016, we will expand the Boss Revolution portfolio with peer-to-peer messaging, virtual gift cards, and international money transfer via mobile devices. We’ll support all of our Boss Revolution offerings with our extensive (45,000 U.S. locations) retail presence, innovations in our technology platform, further improvements to the Boss Revolution app, and comprehensive sales and marketing efforts. Meanwhile, we will continue to expand our Wholesale Carrier and VoIP enterprise telephony businesses as well as invest in our promising international money transfer initiative. In addition to our organic growth plans, in 2015 we announced a strategic re-organization plan. Next year, we intend to spin off two businesses to our stockholders: our stake in Zedge - the popular app for mobile device personalization, and our real estate holdings together with several early stage business initiatives and a signifi cant amount of IDT’s cash. At that point, IDT will be a relatively pure telecommunications play, and will be signifi cantly easier for the investment community to understand and value. All in all, we have an exciting year ahead, and we are glad you have chosen to invest in IDT. Sincerely, Shmuel Jonas Chief Executive Offi cer * Revenue less direct cost of revenue, SG&A expense and R&D expense. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K 6 Annual report pursuant to section 13 or 15(d) of the securities exchange act of 1934 for the fi scal year ended July 31, 2015, 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 specifi ed in its charter) Delaware 22-3415036 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 520 Broad Street, Newark, New Jersey 07102 (Address of principal executive offi ces, 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 Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defi ned in Rule 405 of the Securities Act. Yes No 6 Indicate by check mark if the registrant is not required to fi le reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 6 Indicate by check mark whether the registrant (1) has fi led all reports required to be fi led 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 fi le such reports), and (2) has been subject to such fi ling requirements for the past 90 days. Yes 6 No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 fi les). Yes 6 No Indicate by check mark if disclosure of delinquent fi lers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in defi nitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated fi ler, an accelerated fi ler, a non-accelerated fi ler, or a smaller reporting company. See defi nitions of “large accelerated fi ler,” “accelerated fi ler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer 6 Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defi ned in Rule 12b-2 of the Act). Yes No 6 The aggregate market value of the voting and non-voting stock held by non-affi liates of the registrant, based on the adjusted closing price on January 30, 2015 (the last business day of the registrant’s most recently completed second fi scal quarter) of the Class B common stock of $21.36 per share, as reported on the New York Stock Exchange, was approximately $401.2 million. As of October 6, 2015, the registrant had outstanding 21,752,240 shares of Class B common stock and 1,574,326 shares of Class A common stock. Excluded from these numbers are 3,522,835 shares of Class B common stock and 1,698,000 shares of Class A common stock held in treasury by IDT Corporation. DOCUMENTS INCORPORATED BY REFERENCE The defi nitive proxy statement relating to the registrant’s Annual Meeting of Stockholders, to be held December 14, 2015, is incorporated by reference into Part III of this Form 10-K to the extent described therein. Index IDT Corporation Annual Report on Form 10-K Part I Item 1. Business. 1 Item 1A. Risk Factors. 18 Item 1B. Unresolved Staff Comments. 26 Item 2. Properties. 26 Item 3. Legal Proceedings. 27 Item 4. Mine Safety Disclosures. 27 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 28 Item 6. Selected Financial Data. 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 30 Item 7A. Quantitative and Qualitative Disclosures about Market Risks. 47 Item 8. Financial Statements and Supplementary Data. 47 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 47 Item 9A. Controls and Procedures. 48 Item 9B. Other Information. 48 Part III Item 10. Directors, Executive Officers and Corporate Governance. 49 Item 11. Executive Compensation. 49 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 50 Item 13. Certain Relationships and Related Transactions, and Director Independence. 50 Item 14. Principal Accounting Fees and Services. 50 Part IV Item 15. Exhibits, Financial Statement Schedules. 51 Signatures 53 i Part I As used in this Annual Report, unless the context otherwise requires, the terms the “Company,” “IDT,” “we,” “us,” and “our” refer to IDT Corporation, a Delaware corporation, its predecessor, International Discount Telecommunications, Corp., a New York corporation, and its subsidiaries, collectively. Each reference to a fi scal year in this Annual Report refers to the fi scal year ending in the calendar year indicated (for example, fi scal 2015 refers to the fi scal year ended July 31, 2015). Item 1. Business. OVERVIEW We are a multinational holding company with operations primarily in the telecommunications and payment industries. Since our inception, we have derived the majority of our revenues and operating expenses from IDT Telecom’s businesses, with IDT Telecom’s revenues representing 99.0% of our total revenues from continuing operations in fi scal 2015. IDT Telecom’s primary businesses market and distribute multiple communications and payment services across four businesses: • Retail Communications provides international long-distance calling products primarily to foreign-born communities worldwide, with its core markets in the United States; • Wholesale Carrier Services is a global telecom carrier, terminating international long distance calls around the world for Tier 1 fi xed line and mobile network operators, as well as other service providers; • Payment Services provides payment offerings, including international and domestic airtime top-up and international money transfer sold over our Boss Revolution platform and other channels; and • Hosted Platform Solutions provides customized communications services that leverage our proprietary networks, platforms and/or technology to cable companies and other service providers. Our Retail Communications and Payment Services businesses provide prepaid international long distance calling services and payment services primarily to foreign-born and underbanked consumers in the United States, with smaller retail operations serving customers in Europe, Asia, South America and Canada. These offerings are sold predominantly under our fl agship ‘Boss Revolution’ brand and include a variety of international long distance calling services and plans, as well as synergistic payment services including international and domestic airtime top-up, international money transfer, bill payment, virtual gift cards and other payment services.
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