IDT : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

Published: 2021-10-14 16:57:09 ET IDT

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report.

CRITICAL ACCOUNTING POLICIES

Allowance for Doubtful Accounts

Valuation of Long-Lived Assets

? significant actual underperformance relative to expected performance or

projected future operating results;

? significant changes in the manner or use of the asset or the strategy of our

? significant adverse changes in the business climate in which we operate; and

? loss of a significant contract.

Income Taxes, Sales Taxes, and Regulatory Agency Fees

RECENTLY ISSUED ACCOUNTING STANDARD NOT YET ADOPTED

Coronavirus Disease (COVID-19)

We continue to monitor and respond to the impacts of the COVID-19 pandemic on all aspects of our business, including our customers, employees, suppliers, vendors, and business partners.

Explanation of Performance Metrics

Year Ended July 31, 2021 compared to Year Ended July 31, 2020

The following table sets forth certain items in our statements of income as a percentage of our total revenues:

COSTS AND EXPENSES: Direct cost of revenues (exclusive of depreciation and amortization)

80.5

Direct cost of revenues as a percentage of revenues 35.2 % 32.1 %

Direct Cost of Revenues. Direct cost of revenues increased in fiscal 2021 compared to fiscal 2020 primarily due to the increase in revenues, with the largest increases in the United States and Latin America.

Change

Direct cost of revenues as a percentage of revenues 18.5 % 20.2 %

Traditional Communications Segment

Direct cost of revenues as a percentage of revenues 84.3 % 84.4 %

Depreciation and Amortization. Depreciation and amortization expense decreased in fiscal 2021 compared to fiscal 2020 as more of our property, plant, and equipment became fully depreciated, partially offset by depreciation of equipment added to our telecommunications network and capitalized costs of consultants and employees developing internal use software.

Severance Expense. We incurred severance expense of $0.4 million and $3.5 million in fiscal 2021 and fiscal 2020, respectively.

General and administrative expenses $ (7.5 ) $ (9.1 ) $ 1.6 16.6 % Depreciation and amortization

The following is a discussion of certain of our consolidated expenses, and our consolidated income and expense line items below income from operations.

LIQUIDITY AND CAPITAL RESOURCES

As of the date of this Annual Report, including the impact of COVID-19, we currently expect our cash from operations and the balance of cash, cash equivalents, debt securities, and current equity investments that we held on July 31, 2021 will be sufficient to meet our currently anticipated working capital and capital expenditure requirements during fiscal 2022.

At July 31, 2021, we had cash, cash equivalents, debt securities, and unrestricted current equity investments of $161.4 million and working capital (current assets in excess of current liabilities) of $48.8 million.

11.7

Increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents

We distributed cash of $0.9 million and $0.9 million in fiscal 2021 and fiscal 2020, respectively, to the noncontrolling interests in certain of our subsidiaries.

In fiscal 2021 and fiscal 2020, we received proceeds from financing-related other liabilities of $0.7 million and nil, respectively.

In fiscal 2021 and fiscal 2020, we repaid financing-related other liabilities of $0.1 million and $0.5 million, respectively.

In fiscal 2021 and fiscal 2020, we received proceeds from the exercise of stock options of $0.7 million and $0.3 million, respectively, for which we issued 81,041 and 32,551 shares, respectively, of our Class B common stock.

In fiscal 2021 and fiscal 2020, we paid $1.3 million and $0.3 million, respectively, to repurchase 109,381 and 37,348 shares, respectively, of our Class B common stock that were tendered by employees of ours to satisfy the employees' tax withholding obligations in connection with the lapsing of restrictions on awards of deferred stock units and restricted stock. Such shares are repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.

Other Sources and Uses of Resources

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table quantifies our future contractual obligations and other commercial commitments at July 31, 2021:

(1) The above table does not include an aggregate of $19.6 million in performance

bonds and $1.7 million in potential contingent consideration related to

business acquisitions due to the uncertainty of the amount and/or timing of

OFF-BALANCE SHEET ARRANGEMENTS

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