IDT Corporation

Good evening and welcome to the IDT Corporation's fourth quarter and full fiscal year 2021 earnings call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the three and 12 month periods ended July 31st, 2021. During remarks by IDT's Chief Executive Officer, Shmuel Jonas, all participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After the prepared remarks, Marcelo Fisher, IDT's Chief Financial Officer, will join Mr. Jonas for Q&A. Any forward-looking statements made during this conference call, either in the prepared remarks or in the Q&A session, whether general or specific in nature, are subjected to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that IDT files periodically with the SEC. IDT assumes no obligation either to update any forward-looking statements that they have made or may make, or to update the factors that may cause actual results to differ materially from those that they forecast. In the presentation or in the Q&A session, IDP management may make reference to the non-GAAP measures, including adjusted EBITDA, adjusted EBITDA less capex, non-GAAP net income, and non-GAAP earnings per share. A schedule provided in the IDP earnings release reconciles adjusted EBITDA, adjusted EBITDA less capex, non-GAAP net income, and non-GAAP earnings per share to the nearest corresponding GAAP measures. Please note, that the IDT earnings release is available on the investor relations page of the IDT Corporation website. The earnings release has also been filed on a form 8K with the SEC. I will now turn the conference over to Mr. Jonas.

Thank you, Operator. Welcome to IDT's fourth quarter and full fiscal year 2021 earnings call, covering results for the three and 12 months ended July 31st, 2021. I'm joined today on the call by Marcella Fisher, IDT's Chief Financial Officer, and we'll both be available to answer questions after my remarks. My discussions today focus on the fourth quarter fiscal 2021 results. For a more detailed report and discussion on our financial and operational results for both Q4 and the full fiscal year 2021, please read our earnings release filed earlier today and our Form 10-K. We expect to file the 10-K with the SEC on or about October 14th. We continue to drive strong improvement in IBT's results during the fourth quarter, powered by growth at Netophone, NRS, and our mobile top-up business. Let's focus first on Netophone. Netophone subscription revenue growth accelerated in the fourth quarter, increasing 46% year-over-year. Growth in our Latin American, U.S., and Canadian markets was, again, very strong. Our subscription revenue margin remained robust, increasing 10 basis points to 83.5%. Netophone's strategic focus on mid-sized businesses, our multi-channel go-to-market strategies, and deeply localized in-country offerings consistently generate gross margins and revenue growth metrics above UCAS industry averages. But really, the exceptional results at Netophone are the collective efforts of the focused customer-centric group of people around the globe that is Netophone. Customers of Netophone don't hear no very often, If they want or need something to help them better communicate, we find a solution for them. Netaphone is becoming a big company, but we are not becoming the kind of big company that has different departments for large enterprises and a different department for small companies. And we don't have SLAs that differ depending on what you pay us. At Netaphone, no matter whether you are running a large global enterprise from Texas or a five-person startup in Brazil, you are going to get a truly localized, custom-tailored communication solution with outstanding service and reliability. Of course, we continue to work on the spinoff of Netophone. We believe the financial and legal preparations will be substantially completed by calendar year end to enable a tax-free spinoff early in 2022, should our board authorize it. Within our FinTech segment, NRS revenue increased by 76% year over year, led by increased sales of merchant services, and specifically, NRS pay payment processing. Advertising and data sales at NRS were also robust in the fourth quarter. At July 31st, NRS had over 14,000 active terminals and over 5,600 payment processing accounts, more than double the number of accounts a year earlier. Average revenue per terminal exclusive of terminal sales increased from $126 in the year-ago quarter to $169 in the fourth quarter of 2021. We believe that ARPA will continue to climb with the addition of new NRS pay accounts, increased utilization of our enormously powerful advertising network, and further utilization of data offerings by our consumer packaged goods partners, just to name a few. Also within our FinTech segment, money transfer revenue decreased 49% compared to the year-ago quarter. As we have discussed previously, a transitory foreign exchange market condition materially boosted revenue and gross profit in the fourth quarter of fiscal 2020, and persisted through the second quarter of fiscal 2021. Absent that impact, fourth quarter fiscal 2021 revenue would have increased by 36% compared to the year-ago quarter. Sequentially, money transfer revenue increased by over 6%. And finally, turning to our largest segment, traditional communications continued to exceed our expectations. Traditional communications revenue in the fourth quarter increased 10% year-over-year, Within traditional communications, mobile top-up revenue increased by 41%, powered by increases in sales in its B2B channel. We expect that our efforts over the past year to expand our mobile top-up business into the African market, led by the recent acquisition of a majority stake in a mobile top-up operator with an extensive footprint in Africa, our increased focus in the B2B space, as well as the growing demand for data-heavy services worldwide, will continue to drive mobile top-up revenue growth. Fourth quarter earnings per diluted share increased to 146 from 82 cents in the fourth quarter last year. The increase reflects the positive impact of an income tax valuation allowance reversal in addition to the strong improvements in the underlying profitability of several of our business units. Cash generation during the quarter helped to drive an increase in cash and current investments of $34 million during the quarter and $52 million during the fiscal year. to $161 million as of July 31st, and we have no debt. Following the quarter close, our NRS business sold a 2.5% stake to a private investment fund for $10 million, implying a $400 million valuation for that business. That was based on approximately 19 times NRS's trailing 12-month revenue at the end of our third quarter. I want to wrap up by thanking and congratulating everyone in our organization on what was, by any standard, a remarkable ending to a very strong fiscal year. We have not only endured COVID's multifaceted challenges, but over the past several quarters we have dealt, like many other companies across the country and across the globe, with supply chain issues that impacted our inventories of phones, POS terminals, and other hardware. Throughout, we have maintained our focus and succeeded in executing on our key objectives. Now, Marcel and I will be happy to take your questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2.