IDT Corporation

Good evening and welcome to the IDT Corporation's first quarter fiscal year 2022 earnings call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the three-month period ended October 31st, 2021. During prepared 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 Mr. Jonas' 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 subject to risks and uncertainties that may cause actual results to differ significantly. 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, IDT's management may make reference to non-GAAP measures including adjusted EBITDA, non-GAAP net income, and non-GAAP earnings or loss per share. A schedule provided in the IDT earnings release reconciles adjusted EBITDA, non-GAAP net income, and non-GAAP earnings or loss 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 Form 8K with the SEC. I will now turn the conference over to Mr. Jonas.

Thank you, Operator. Welcome to IDT's first quarter fiscal year 2022 earnings call. I'm joined on the call by Marcella Fisher, IDT's Chief Financial Officer, and we'll both be available to answer questions after my remarks My discussion today focuses on our first quarter fiscal 2022. The three months ended October 31st, 2021. For a more detailed report and discussion on our financial and operational results, please read our earnings release filed earlier today and our Form 10-Q that we expect to file with the Securities and Exchange Commission on Friday. Our first quarter operational results were, thank God, strong once again, highlighted by robust performance from our high margin Netaphone, NRS, and Boss Money businesses, as well as for mobile top-up. As a result, we delivered year-over-year increases in revenue, gross profit, income from operations, and adjusted EBITDA. At our Netaphone UCAS segment, subscription revenue increased 37.5% year-over-year, and revenue and margin increased 20 basis points to 82.3%. Both our subscription revenue growth and revenue margin rates remain well above industry averages. In the United States, our expanding network of channel partnerships drove a 42% year-over-year increase in UCAS subscription revenue. While in Latin America, our strategic focus on mid-sized businesses, multi-channel go-to-market strategies, deeply localized in-country offerings, all helped to increase UCAS subscription revenue by 58%. NetDepot has been getting especially strong traction in several markets, including Mexico. where service revenue increased nearly 150%. This quarter, we landed a leading restaurant franchise, and of course, we're also closing deals with small enterprise clients throughout Mexico. Across NetPhone's market, our commitment to provide every customer with top-notch service, regardless of size, continues to help us win new business, many as a result of referrals from existing satisfied customers. when NetDefone won the Global Partner of the Year Award from UC Today, a popular news service covering the business communications and collaborations industry. NetDefone was recognized for providing exceptional performance and solutions through our global channel partners. Never content with the status quo, we continue to work on driving channel partner penetration. In 2022, we will provide our managed service partners with real-time account access, enabling them to directly support, configure, and modify their clients' accounts. This will better enable our partners to focus more on customer experience while enabling to focus their efforts on high-value services. At NRS, strong demand for NRS Pay payment processing and our recently launched funding service provide retailers with ready working capital, digital advertising, and transaction data services, coupled with continued expansion of our POS networks boosted NRS revenue by 104% year-over-year to $10.1 million in the first quarter. Recurring revenue, which excludes revenue from the sale of new terminals, increased 126% to $8.6 million. As of October 31st, NRS had over 15,100 active terminals. One of the strategic strengths of NRS is its ability to leverage our platform to provide new offerings. This opens new markets, creates additional revenue streams to boost ARPU, and accelerates growth in our terminal network. This quarter, we deployed software that enables retailers to process electronic benefits provided by the Supplemental Nutrition Program for Women, Infants, and Children nationwide, which provides nearly $5 billion in benefits annually to over 6 million beneficiaries. Most states have transitioned or are transitioning to pay these benefits electronically, known as eWIC. Our eWIC payment processing solution is a game changer for our merchants, providing an affordable, fully integrated solution to serve this channel. Until now, only larger retail chain stores or those able to pay hefty fees for eWIC payment processing could accept eWIC transactions. We have already begun to roll out our affordable eWIC offering, working with our retailers, benefit managers, and state regulators to certify our solution state by state. Money transfer had an exceptional quarter. Revenue increased nearly 15% sequentially to $12.5 million. Although the first quarter 2022 revenue decreased 18% compared to the year-ago quarter, the decline is entirely due to the impact of our transitory foreign exchange market conditions that materially improved revenue and gross profit during calendar 2021. Absent that impact, first quarter fiscal 2022 revenue increased by 45% from the year-ago quarter. Traditional communications revenue increased 6.7% year-over-year to $334.6 million. Within traditional communications, mobile top-up revenue increased 34.1% to $128.5 million, and IDT global carrier services revenue climbed slightly. These increases more than offset a decline in Boss Revolution calling revenue in line with expectations. Our mobile top-up business generated double-digit year-over-year growth in its three largest sales channels, strengthen its unique position as the only significant omnichannel player in the top-up space. All our mobile top-up regional corridors continue to expand, led by the U.S. to Africa corridor. Sales of top-up bundles, which include both airtime and data, are key in growth. These data bundles now account for roughly 30% of our total sales, and that helped increase average revenue per transaction by 11% compared to the year-ago quarter. We forecast that demand for data packages will continue to drive revenue and revenue per transaction increases. On a consolidated basis, income from operation and adjusted EBITDA both increased modestly compared to the year-ago quarter, rising to $13.8 million and $18.3 million, respectively. This quarter, we had a loss per share of 10 cents compared to EPS of 32 cents a year ago. also an unrealized $0.49 per share loss on the marked market value of our investment in Rafael Holdings stock. Looking ahead, we are making good progress and expect to be in a position in early 2022 calendar year for the potential spin-off of Net-to-Fund should our board authorize it. To wrap up, this is a strong quarter for each of our high-margin businesses, and sales of mobile top-up continue to drive growth in our traditional communications segment. Now Marcelo and I would be happy to take your questions. Thank you.

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. At this time, we will pause momentarily to assemble our roster. Okay, the first question is coming from Daniel Koch from Alta Fox Capital. Your line is live.