IDT Corp: Negative ROIIC - The Good Way

(Tax) Shields Up, Powering (Growth) Engines, Ready For Warp Speed (ROIC)

Introduction

The shields are up. Source: Author, created with Microsoft Copilot.

This article ties up loose ends from the initial free article with the help of the 10-K, and also provides several approaches to value IDT 0.00%↑ roughly. For your reference, the original free (and edited due to an oversight of mine) article:

Quick Freebie: IDT Corp - Melting Ice Cube Fuels Fast Growth

Further, I see more potential as described in my information arbitrage article:

IDT Corp: A Free, Probably Unkown, Low-Cost, and Hard-To-Value High Margin Opportunity

Outline

• TL;DR

• Balance Sheet & Tax Assets

• Growth Outweighs Melting Ice Cube

• Taking on the Valuation

• So, Is There Something For Free?

• Cash Flows and ROIIC

• Conclusion

TL;DR

• The company has net operating loss carryforwards of $160M to shield future earnings from taxes.

• The company’s growth segments grew at attractive rates. In concert, their operating incomes more than offset the melting ice cube’s decline.

• Some of the growth segments alone may be enough to warrant the current total enterprise value, i.e. its other segments and the free growth options are truly for free.

• I view its NRS segment’s potential from multiple angles. In unison, they show that NRS alone should cover a sizable portion of IDT’s overall enterprise value.

  • Revenue multiples.

  • Incremental unit economics.

  • Estimates for CAC and LTV (I am very conservative on churn I believe).

  • A rough estimate of potential TAM penetration.

• The company’s capital efficiency is already high and shows signs of further improvements.

Balance Sheet & Tax Assets

The company has a dual-class share structure. If one can get comfortable with that, the balance sheet is a fortress: Excluding restricted cash, the company has cash and equivalents + debt and equity securities of approximately $200M. The company has no debt. Year on year, total equity increased by $55M or 25%.

Equity increased $55M YoY. Source: Annual report.

The tax asset situation is complicated. Repatriation of funds, re-acquisitions, etc., etc. I wrote in my earlier free article:

EDIT: The company also has $35M of tax assets on its balance sheet - at an assumed 25% tax rate these should shield $140M in profits before tax in future years. This needs to be checked against the 10-K, once it is published.