IDT Corporation

Good evening and welcome to the IDT Corporation's second 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 January 31st, 2022. During prepared remarks by IDT's Chief Executive Officer, Shmuel Jonas, all participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After Mr. Jonas' remarks, Marcello Fisher, IDT's Chief Financial Officer, and Jonah Fink, Chief Executive Officer of IDT's Net2 Phone business, 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 risk 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 their presentation or in the Q&A session, IDT's management may make reference to the non-GAAP measures including adjusted EBITDA, non-GAAP net income, and non-GAAP earnings or loss per share. 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 a form 8K with the SEC. I will now turn the conference over to Mr. Jonas.

Thank you, operator. Welcome to IDT's earnings conference call. I'm joined on the call by Marcelo Fisher, IDT's chief financial officer, and Jonah Fink, CEO of Netophone, who is preparing to do these calls on his own. The three of us will be available to answer questions after my remarks. My discussions today will focus on the second quarter of our fiscal year 2022. The three months ended January 31st, 2022. 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 Monday, March 14th. Our second quarter financial results were highlighted by year-over-year improvements in gross profit, income from operations, and adjusted EBITDA, driven by the continued expansion of our growth businesses. In our FinTech segment, NRS accelerated the growth of its customer base, activating nearly 1,400 new POS units and 1,200 NRS pay accounts during the quarter. As of January 31, NRS served 16,500 active POS terminals and 8,000 NRS pay accounts. NRS's recurring revenue increased 118% from the year-ago quarter to $9 million, led by triple-digit gains from advertising and merchant services revenue. For purposes of sequential comparison, keep in mind that our second fiscal quarter includes January, which is invariably the slowest month of the year by far for advertising revenue. are still in the early stages of nrs development in terms of our addressable markets new service offerings and monetization of our current offerings at net phone subscription revenue increased 32 year-over-year to 12 and a half million dollars in the second quarter of 2022. growth is strong in our latin american markets particularly in mexico where we continue to find success with larger customers net phones reach into the mid-enterprise market will expand significantly in the coming quarters as we leverage the Integra acquisition that closed just last week. Integra is a fast-growing CCAS provider with an entrepreneurial team. We are delighted to welcome them to the IDT family. We will incorporate Integra's CCAS service with Netaphone's UCAS solutions to create a higher value, integrated offering that we expect will drive growth and significantly enhance Netaphone's unit economics as we become more competitive of market. We expect to pay a total of approximately $15 million in cash and stock for Integra, inclusive of an earn-out of approximately $3.5 million if the business grows as we expect it will in the next few years. In calendar 2021, Integra generated a little over $3 million in revenue and $1.2 million in EBITDA. Integra's CCAS ARPU is approximately twice that of NetFilm's UCAS offerings. Our goal is to complete the spin-off by the end of the current fiscal year on July 31st, should our Board authorize it. Also within our FinTech segment, Boss Revolution money transfer transactions increased 21% year over year, while revenue decreased 6% to $12.5 million. On an apples-to-apples basis, adjusting for the impact of transitory foreign exchange that improves second quarter fiscal 2021 results, transactions in the second quarter of fiscal 2022 would have increased 36% and revenue would have increased by 48% from the year-ago quarter. We continue to invest in the long-term growth of our payments business with the acquisition of Leaf Global Fintech, a startup with an innovative mobile wallet platform operating in Rwanda, Uganda, and Kenya. Leaf was designed to help traders, refugees, and other vulnerable populations store value and conduct financial transactions safely and securely by leveraging the stellar blockchain network to track balances and activity. Leaf also uses USSD communications protocol. It's also a viable option for 2.4 billion people worldwide who use feature phones rather than smartphones. We are excited to work with Leaf and hope that their team adds lots of stuff to IDT over the coming years. Finally, in our traditional communications segment, revenue decreased 3.2% year-over-year to $300.4 million. However, revenue less direct cost of revenue for the segment increased 6%, led by the expansion of our mobile top-up business. While still growing 20% year over year, mobile top-up revenue has declined over the past three quarters. The decline was predominantly in our lower margin wholesale B2B channel, where we capitalized on a large opportunity during the third quarter of fiscal 2021 that significantly boosted mobile top-up revenue, but which since has narrowed considerably. We continue to believe that there is large opportunity in mobile top-up, and we expect to return that channel to growth mode soon. Also within our traditional communications, segment, both Boss Calling and IDT Global, which is our wholesale carrier services business, experienced an acceleration in the rate of revenue decline, reverting back to the levels we were experiencing before the COVID pandemic. To wrap up, we continue to allocate capital to accelerate the development of our growth businesses, but through R&D and acquisitions, concurrently, our traditional communications segment continues to generate increasing margins and robust cash flow. Across all our businesses, we remain focused on creating value for our stockholders and expect that the spin-off of NetPhone will be exceptional in that regard. Now, Marcelo, Joan, and I will be happy to take your questions.

We will now begin the Q&A 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 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Brian Warner, private investor. Your line is live. Hi.

Hi. Thanks. Thanks for taking my questions. I actually have three, if I could. First one is on NRS. You've done a great job with advertising sales. And frankly, I'm surprised how well it's done. And I congratulate you, but I'm wondering sort of a couple of things. Are you surprised how well it's done? And, Can you give a little color on how you're selling it and if there's anything changing in your plans there? Are you selling direct to large advertisers now? And just sort of maybe you can give your thoughts around that. A second question relates to your UCAS business. I'm just wondering if there's pricing pressure that you're seeing in that business. Maybe you can contrast that question in both USA and international operations. And then also, if you could give us a sense of where you're trending in terms of maybe average account size, sort of number of lines, stuff like that. And lastly, if there are any material hurdles to the spinoff in your mind. And then finally, On the money transfer business, it's just a little confusing for me to sort of try and reconcile all the various numbers. I realize there was a very unusual transaction a year ago. But can you give us a little sort of the puts and takes on, you know, you point out that the revenue would have been up, I believe it's 48%, and the units would have been up maybe 36%. I'm wondering if you can sort of reconcile the difference between those two numbers and and maybe just give a little color around the calculation.

I'm going to try to answer your questions in order as I remember them. As far as the advertising sales for NRS, I don't believe that anything has changed in the way that we sell it or our expected growth for that business. So there's no material change. As we said in the earnings release, there is some seasonality to advertising in general. And that's why a year over year comparison is better than a quarter over quarter comparison. However, we are making an attempt to, I would say, increase our direct to brand Salesforce, so we hope that will increase the advertising sales over the coming quarters as more brands hear about us. I'm actually going to let Jonah take your question on Net-a-Phone, so I would warmly like to welcome Jonah Fink to our earnings conference call and take it away.

Before I respond to the question, firstly, I just want to thank Shmuel and Marcelo for inviting me on today's earnings call. I'm honored to introduce myself formally to our valued IDT and Netaphone communities. I'd also like to take this opportunity of thanking what we've coined internally Netaphone World. Netaphone has now successfully launched our UCAS product line in nine markets around the world. And it's due to the Netaphone employees that have really brought us to this point. And as we can discuss shortly, a big welcome and virtual hug to our new members in Monteviedo, Uruguay at Integra. To answer the two questions specifically in terms of, number one, pricing pressure, we are not. What we've been able to do is really maintain and sustain ARPU levels for Net2Phone UCaaS. We look at ARPU very, very carefully as an operational KPI in our dashboards. And like I said, we've been able to maintain and sustain pricing ARPUs around the world. In terms of user size, currently today, average user size for UCaaS Net2Phone is set to 11%. But we do expect, because of the CCAS offering, that CCAS will not only create a value in and of itself, we also expect a lift rate into our UCAS business, as we have an experience for our customers to get one bill at the end of the month for both UCAS, telephony, and CCAS.

What was your third question before I turn it over to Marcelo to answer your money transfer questions?

I think your question was regarding the timing on the spin-off, if there are any hurdles around that. So the answer is no. Obviously, we wanted to start the process a bit earlier, but because of the Integra acquisition, which is material for Net-to-Fone on a standalone basis, we had to wait until that acquisition process reached completion, and I'll make sure that we get audited financial statements for the standalone Integra business, which will be incorporated into our registration statements. So now that that's behind us, we could now refocus and try to get the spin-off done by the end of the fiscal year.

I see.

Okay. In terms, I think, I believe on your question about money transfer, So indeed, Q2 one year ago, as we had mentioned multiple times before, benefited significantly from special effects opportunities, particularly in Africa. Those opportunities that we have mentioned in the past are behind us. So when we look more apples to apples to what would have been, you know, same business a year ago versus now, you know, you would be seeing revenues growing about 48%. Year over year, like, fee revenues growing around 55% to 60%. FX revenues growing around the 45% rate. So on a blended basis, that 48%. rate that we shared with you. Obviously, our D2C money transfer business is growing at a much faster clip than our retail channel. Our D2C is growing at around the 55% rate year-over-year, whereas retail is growing around 35% to 40%.

Great. Thanks so much.

Thank you. Okay, the next question is coming from Jason Lustig with Jay Goldman. Jason, your line is live.

Hey, guys. Thanks for taking the questions. John, it's nice to have you on these calls. Can I start out by asking you a little bit about the Integra acquisition, the strategic rationale, and how it folds into Net2Phone and your strategy?

Yes, Jason, absolutely. Hope all is well. You know, so I'm thrilled to announce the acquisition of Integra by Net2Phone. Just in terms of the what, let's start with the what. Integra is not only a complete, modern, and robust cloud-based contact center solution. Integra is also a developer platform that will allow for items such as customizations and integrations and AI, more for the modern global contact center workspace. So really, NetPhone is getting into the foray, Jason, of selling experiences. The acquisition in general made a ton of sense for us for a variety of reasons. One, and most importantly, You know, our UCAS customers and partners are asking for a cloud-based contact sensor solution hosted by Netophone. It feels almost on a daily basis. Our customers love the idea of having a single invoice at the end of the month for all their cloud-based communication needs, UCAS plus CCAS, all under Netophone. Just as businesses across the globe have migrated and are migrating their on-premise communication systems to Netophone over the cloud, so too contact centers. and enterprise-based call centers will be migrating to Netaphone via the cloud as well. On a single bill to our valued customers, Netaphone will be serving the complete enterprise needs for UCaaS, Telephony, and CCaaS. And Jason, too, as you know, over the past five years, Netaphone has built one of the most efficient UCaaS distribution businesses in the world. Netaphone continues to act global and think local, and we've deployed talented teams locally in these markets, to now have conversations around a go-to-market for CCaaS. Netsphone has also forged over the past five years significant partnerships with leading master and direct agencies for cloud communication services. Netsphone continues to onboard new partnerships in the space with leading master agencies such as Avant, based in Chicago, that has a wonderful and current, might I add, foray into the UCaaS and now CCaaS market segments. The above stated allows for quick and efficient go-to-markets. Sales teams are in place, support teams are in place, and the customers and partners are eager to adopt our net-to-phone technologies.

I'll just add two things to it. One is that we did business with Integra before we entered into a transaction with them, so we had some first-hand dealing with them as a partner before they became part of the NetPhone team. And from everything I heard directly from the team using them, they were really great partners before they became part of the team. The second thing that I think that's important to add is that they've also developed everything internally. So besides this being... you know, a talented sales organization, it's also a very talented development team that we think we can, you know, leverage to enhance Net-to-Phone overall. So it's, you know, it's multifaceted in my opinion, you know, not just from, you know, not just from being a call center solution, but from also being a general technology solution for NetDefone.

Okay, great. And I guess moving to NRS, just a few questions about, you guys have given great disclosure about revenue and the various line items over time. Can you talk a little bit about how we should think about gross margin and maybe also the difference between the hardware gross margin and the recurring revenue gross margins?

Hi, Jason. It's Marcelo. So you hit it in the nail, right? When you think about NRS's recurring revenues, whether it's SaaS fees or advertising and data or merchant services, for all those revenue streams, our margins are approximately close to 100%. When we talk about the margins on the POLs, of the POS sales. Obviously, our goal with that is not to achieve high margins. Our goal there is just to distribute the POSs in strategic ways. We price it differently depending on different opportunities. But historically, the margins on the POS terminals have ranged anywhere between 10% to 20%. So when you add all the components together, you probably see a blended rate know of about 80 85 to 90 percent and obviously that blended rate will continue to move further towards 100 percent of the recurring revenue the terminology portion of the business yeah however we intend to sell a lot more pss so that that might pull it down a little bit can you talk about um that i mean it seems like there was a we you know the net ads for pos seem

to have taken a large tick up in the quarter, which is very nice to see. Um, can you talk about some of the changes that have gone on in the business that have allowed for, um, you know, that, that step up?

I think I'd say two things. I mean, one is it's an increase in sales. Um, and that, that has definitely helped. The other thing is in terms of, um, you know, making sure that, um, you know, that we don't have any churn, um, You know, there's nothing we can do about, you know, a store going out of business. But, you know, we really, you know, have put an emphasis on, you know, the service that we provide, you know, the stores. And that's really, you know, been helping keeping, you know, churn to as low of a level as it has. And we continue to, you know, make improvements. You know, when a business is in rapid growth mode, it's sometimes hard to, you know, I'll say solve every piece of the puzzle. But I really give the NRS team credit because they've really put a big emphasis on making sure that the service levels are where they need to be considering the growth.

Great. And then I guess just lastly, what was the adjusted EBITDA for NRS in the quarter?

For NRF, they did around a little more than $2 million in EBITDA for the quarter, so it's showing pretty nice growth compared to about $1.25 million in Q1. So the trajectory is good, and obviously that EBITDA may vary up and down depending on whether we accelerate investment or not. But all else being equal, we should see that EBITDA trend continue to move upwards.

Great. Thank you very much for the questions. Thank you.

The next question is coming from David Polanski from Immersion Investments. Your line is live.

Hey, guys. Thanks for taking my questions, and I really appreciate it. I think everybody else does appreciate you putting a hard date around the net-to-phone spend, but I actually want to talk about traditional a little bit, and I think you almost answered my question in the Commentary, do you anticipate being able to grow traditional EBITDA on a go-forward basis?

I mean, I would say that different parts of traditional are growing and different parts of it are contracting. Carrier is not in growth mode. We definitely intend to be able to squeeze out you know, more profit from Pinless than we have been. And, you know, and IMTU continues to grow. So I would say that, you know, net-net, we do intend to be able to continue to grow, you know, EBITDA. You know, whether or not we can, you know, do that for years and years to come, I can't tell you at this point. But maybe I'll let myself elaborate a drop.

Yeah, I mean, David, as you know, conditional consists of three distinct primary business, right? So the reality is when we think about the wholesale carrier business, that business revenues and, you know, operational margins have been challenged for quite a while. Even during the pandemic, you know, the wholesale business suffered quite a bit. we have been maximizing that business in terms of generating maximum gross profit. Similarly, on the Boss Evolution Pinless business, we got a fairly nice lift and a reversal of the trends during the pandemic. Now the trends towards revenues starting to decline again have come back again. That being said, gross profits for Pinless have not been impacted significantly at all. And that's both because our cost of automation have improved as well as our mix of our revenues shifting more continuously towards our D2C channel, which is higher margin, helps mitigate the revenue decline. So, and at the same time, you know, mobile capital continues to grow quite nicely at 20% year over year. And we see nice growth specifically in the D2C channel. We see mobile top-ups. So I hope there will be pressure on revenue. I think there will be tremendous focus on trying to maintain the gross profit around the current levels. And as we continue to be the greatest focus on reducing the cost structure, both FG&A and CapEx, You know, we may be seeing, I wouldn't say necessarily improvement in EBITDA, perhaps we will get so once mobile top-up starts going a little faster, but certainly we hope to maintain the current EBITDA levels until mobile top-up starts showing more in the bottom line.

Okay, so basically if I flatline EBITDA for the remainder of the year. I have traditionally EBITDA at about $100 million business. I have FinTech, which is roughly break-even. I have Net2Phone at negative $15 million in EBITDA, which is going to be gone in several months. So pro forma, I'm looking at a business that today, including Net2Phone, is $700 million in enterprise value. I have $100 million in EBITDA because I'm getting rid of Net2Phone. And then I have NRS, which as you just disclosed in the previous question, is actually EBITDA positive and growing 100% year on year and quickly on its way towards $75, $100 million in ARR. I mean, you can kind of put whatever valuation multiple you want on NRS and basically the pro forma value for all of IDT post spin is like three or four times. So I guess like how, like how low does the stock have to go before there's like some action? Like you, you do a buyback, you accelerate the NRS spin and you pull it forward a little bit and say, you know, the stock's too low. It's too cheap. We're, you know, we need to realize some value here because it, The stock fell like 10% the other day on the Integra acquisition on some ridiculous belief that you wouldn't be able to affect the spin because, oh, well, they're doing an acquisition, so they're not going to do the spin. You clearly just told everyone that you're doing the spin. So I guess where I'm going with my question, it's like the market doesn't care, right? I mean, the market clearly doesn't care. They're not willing to give you credit for anything, so... At what point do we just say, screw it, let's just gobble up all of our shares or accelerate and pull forward the NRS spend? So I guess that's where I'm coming from. So I appreciate an answer on that.

Yeah, I mean, I don't think that we have a definitive answer on that. I mean, again, as you know, we have purchased back shares before, we've paid dividends before. And, you know, all options are, you know, always on the table. You know, at this moment in time, you know, we are, you know, laser focused on, you know, completing the previously announced net to phone spin and making sure that, you know, that investment, you know, continues to, you know, to do, you know, really well even when it's no longer under, you know, IDT anymore. We're also laser focused on making sure that NRS continues to grow even more than it has previously. And that also takes additional investment in both time and resources. But if our stock continues to perform as poorly as it's done over the past couple months, it's definitely not out of the question that at some point we would start to either buy back shares or some other idea. But again, I don't want to say that we're going to do it because we haven't discussed it with our board and we do not have a plan in place at this particular moment.

Yeah, that's okay. I guess where I'm coming from is just, you know, clearly the execution is there. You're doing well. you're performing, and more importantly, you're doing what you say you're going to do, which is right now, at least, it's effective spin of Net2Phone, and you're doing it.

So that's why I ask about that.

And we think we're also putting Net2Phone on a really great foot with this acquisition. I mean, again, entering a space that arguably is significantly sexier than UCAS is at the moment. you know, I think is a major, you know, net benefit to our shareholders that, you know, unfortunately they didn't see in the release. I mean, again, I was going to, you know, say that actually, you know, before I forgot, when Jason asked his question, you know, about Integra, is that, you know, we looked at their business model, I would say, like, you know, without Net-a-Phone, and it was an amazing business model even before, you know, even before Netaphone got involved. And I would say that, you know, over the course of the next five years, you know, it is going to look like a home run, you know, irrespective of how well it gets integrated into Netaphone. So I think it's actually a very, very exciting piece of news that was unfortunately... you know, not loved by the markets, but, you know, markets are weird. I don't know what else to tell you. I mean, listen, and frankly speaking, you know, we're also going through, you know, I mean, a crazy time in the world right now that, I mean, I think is, you know, is putting a lot of pressure on, you know, a lot of companies. And, you know, we're very lucky that we don't have, you know, those kind of, you know, financial pressures affecting our decisions, you know, and that we can, you know, stay the course and make sure that we do do, you know, what we told our investors we were going to do. And, you know, we think that, you know, we'll be handsomely rewarded for that.

And David, I totally agree with your calculation that you provided before. Just bear in mind that we do also have about $10 million of corporate costs, okay, which is a negative to the EBITDA number that you gave me.

Yes, of course, still. I can split this a million different ways. This is an incredibly cheap stock with a company, a management team that's executing, and there are catalysts, and there are a lot of valuable assets in here. So I can spin it a million different ways for you. It's still cheap, but I appreciate the clarification. I do want to ask a follow-up on Integra. Shmuel, did you say that the revenue was $3 million or $30 million? Was that $3 or $3.0? $3 million.

$3 million. It will be one day, but right now it's $3.

Okay, but it's doing $1.2 and positive EBITDA, right? That's correct. And you bought it for $15 million. $15 million.

Yeah, and not all of that is paid up front. I mean, that includes a large earn out.

That's great. Well, I love seeing it. Keep doing what you do, and talk to you next quarter. Thank you. Thank you.

Okay, the next question is coming from Sean Berger with Adirondack Retirement. Your line is live.

Hi, Marcel and Shmuel. Congratulations on a good NRS quarter. question, two things. One is I'm wondering if there's any material impact from Eastern Europe as far as disruption of any tech support or employees or anything like that. And then the other question is if there's been any change in the reserves for any possible legal settlements with regard to the straight path litigation. That's it.

So I mean, You know, the answer is, you know, unfortunately, like we always joke that whatever happens in the world, somehow it affects IDT. And, you know, listen, we have a very large office in Belarus, and we have, you know, some really amazingly, you know, talented employees, you know, who work for us there. And I can tell you from speaking to many of them directly how they feel about Ukraine and how their government feels about Ukraine are completely different. However, that being said, it does create a very unstable environment for them to live in, and we are relocating many of them outside of the country. However, many of them you know, do not want to be relocated. You know, it has not affected any of our, you know, deliverables or our ability to pay people, but, you know, it's definitely, you know, a moving target, I'll say, like that. And, you know, depending on, you know, what happens with sanctions, it could eventually affect us. You know, at this moment in time, it doesn't. I'm going to let Marcel answer your second question.

Hi. No, we have not had any changes in terms of any type of provisions or anything like that as it relates to any of our litigation.

And I will say that we also have a number of employees in Ukraine, and we really feel for what's going on there. Obviously, on a you know, personal level, you know, these are our colleagues, but, you know, also from, you know, just watching the news is just terrible. So, you know, our prayers are with them.

Amen. Okay, Sean, do you have a follow-up question?

No, that was it. Thank you. My prayers go out to the people as well. I'm just wondering if there was any known business impact at this time. That was it. Thank you.

Okay, the next question is coming from Adam Wilk with Greystone Capital. Your line is live.

Hey, guys. Thank you very much for taking my questions. My condolences to your employees who are having to deal with this situation. Hopefully everything is okay. Um, I guess, uh, one of the pitfalls of going, going last or toward the end of the line here is that most of the, most of my questions have been asked some really good ones about, um, that's the phone and the tech, the acquisition and buybacks, et cetera. Um, I guess I just have a couple of hopefully quick ones. Um, I may have missed this, so I'm sorry if it's repetitive, but I'd like to dig in a little bit more to mobile top up, obviously still showing impressive growth numbers. And I'm wondering, Where you see things shaking out in a few years between wholesale versus the direct opportunity and the revenue split there because my, my sort of aim or my direction and asking that is, I think the, um, the economics could improve materially for both mobile top up and traditional as a whole. If you kind of push toward that direct channel and please correct me if I'm wrong. Thank you.

Oh, I'm going to let Marcelo also talk to it a little bit, but I mean, I will say that, you know, listen, direct definitely has higher, you know, gross profit, you know, than wholesale. That being said, you know, there's, you know, cost of acquisition and, you know, and that is, you know, usually in the, I'll call it in the early years or months, depending on, you know, how lucky we are in terms of cost of acquisition. that can affect the ability to acquire customers at the rate that we would want for direct-to-consumer. However, really where we've seen pressure of late is really in the wholesale business, not in the direct-to-consumer business. And I think a large part of that is based on some of the competitors that we've talked about recently getting large investments and them spending that money to try to make sure that we don't steal all their business. And that definitely has affected the wholesale business in the short term. However, that being said, we have some very exciting product launches that we think are going to really differentiate our wholesale business Over the next couple of months and and we think that we are going to you know gain back a lot of that business Marcel you have anything to add?

No, I just I think that you know our strategy for mobile top-up note now under the guide on the leadership of Emilio is to continue to focus and grow both to be to be channel as well as the direct-to-consumer channel. They're not independent of each other. I think that we have made large strides in improving our B2B wholesale platform. Our acquisition of Societel most recently has helped us towards that. They have a very robust platform for B2B, and we're going to be leveraging on that platform to position our products for better and faster growth in that space and to take more of a leadership space position in that area. And at the same time, Emilio continues to be very focused on trying to grow the catalog of products, trying to continue to leverage our offerings in our apps, as well as trying to penetrate further, especially into the African continent.

Great. Thank you. That's helpful. Um, and then you, Jonah answered some questions about conference center services that demand drivers there and, uh, somewhat the opportunity set. Um, and, um, I guess I'm wondering kind of as a follow on to that. Um, I heard when the question was asked about three or 30 million in revenues, I think I heard Jonah chime in in the background when you said it will be a 30 someday. So, Um, maybe you can talk a little bit about, I guess, just the conference center, um, opportunity as a whole. It's not a, you know, not a fad that everybody's piling into and there's real demand there. And then maybe it looks like, I guess you paid around four times revenue, excluding the earn out for Integra. How did you kind of derive that multiple? And, and, uh, is that kind of like, um, uh, is that kind of like correlated to market conditions or any detail there would be helpful. And then maybe. when we can see an impact to the P&L for Net2Phone. Thank you.

I mean, just in terms of the opportunity, again, the same ways that Net2Phone UCAS has successfully migrated professional businesses over to the cloud, we see that opportunity now at the right time in the world that we live in for contact centers to move from on-premise to the cloud as well. As I mentioned before, we have sales teams and partnerships in place to cater towards that. The benefit down to the contact center is not only just the cost savings, but being able to modify and configure and edit any type of settings for the contact center in the cloud instantaneously is a major value add for these call centers to move over. And might I add, it's not just contact centers, but if you think of larger enterprises, and this is why we're very hopeful that our average user per account will increase with CCaaS. We have large enterprises with call center functionality residing within the enterprise floor, call queues, support, billing, sales. So that's going to also layer in very nicely to our UCAS customers in terms of our partners as well. In terms of the acquisition and the price and the valuation, right now I can say that on our side and our teams, we're laser focused on the plan. We're laser focused on the go-to-market. We're laser focused on defining the offer and introducing this into the channel. So at this point, I will reserve discussions around the economics in terms of right now the go-to-market the channel adoption, the business integration between the two firms, us getting out there into Uruguay. A very energetic and passionate team awaits us, and we're going to focus mainly on the go-to-market.

In terms of the valuation, again, I don't think that we paid the lowest price ever for a call center company, but I think the fact that they have such a good software system And B, that they were already EBITDA positive was really two driving forces that made us pay what we paid. And as you know, we don't write checks easily, and we really thought that this was a great opportunity for NettoFone, and that's why we went ahead with it.

And I think now from the perspective of Integra, now they see the combination with UCAS in NettoFone as a great way for them to expand their product portfolio, to have a partner in that form, to allow them to grow in a way that they, on a standalone basis, cannot do so right now. So they see it as a great opportunity to partner with us. They are taking a portion of the purchase price in equity that they want to be able to ride on the opportunity to gather with us.

Yeah, that's helpful. Thanks. I certainly wasn't implying that the price paid was too high. Just curious behind the drivers there. So I appreciate that. And I guess a quick follow on to your commentary is can we maybe expect moving forward a little bit of that sort of buy and build or buy and integrate, excuse me, as part of the strategy with Metaphone either, you know, I guess post spin or is it was this kind of like a one off for you guys?

Listen, I think we're always browsing new technologies. I think the Integra acquisition is a great use case where Netsphone wants to go to market with new modern technologies in the cloud communication space. Nothing prevents us from rousing. I think the fact that I noted before in my remarks that we've built this really efficient global UCaaS distribution team and now we're layering in CCaaS, I think there's other experiences. that we could focus and concentrate on. But again, our number one focus right now is to continue growing our UCAS business and our CCAS business. And I actually think that CCAS being the top of the sphere of new conversations that we have with enterprise will actually provide a lift rate for our UCAS business as well.

And our history in Netaphone has been with a combination of both. We have made acquisitions in Canada. We have made acquisitions in Spain in growing the business. Our technology will wrap internally is a piece now It's pretty full right now and we always have to measure whether we are able to continue to build or supply so we try to get into a mix that makes sense, so Buying into secret instead of building it without upset both in terms of evaluation and speed of marketing As well as the fact that our technology roadmap is pretty full right now every day every day

great that's really helpful thanks last one uh from me maybe from our cello or whomever um i'm gonna push on this a little bit more uh nothing no no changes with the straight path litigation i'm just kind of curious where you guys stand on wanting maybe wanting to get this thing resolved and put behind you um obviously would benefit i guess both parties you know to come to some sort of settlement is there an element of like stubbornness on any one of the sides or where do you guys kind of stand on that in terms of um you know, trying to get it resolved?

So the trial is scheduled for May of this year. If that timing holds, you will probably expect a decision later in the year. We are vigorously defending ourselves, and we are optimistic about achieving a favorable resolution. You are welcome to read our disclosures on all of our pending legal matters enough, thank you. But beyond that, as a matter of policy, we really cannot comment on pending legal matters or any strategy around it.

Okay. Yeah, fair enough. Thank you very much. Great, great job, and I appreciate it.

Thank you.

Up next, we have Daniel Koch from AltaFox Capital. Daniel?

Hey, guys. Thanks for taking the question. Just quickly on Integra. Can you share a little more color on the growth profile of that business? Is it long-term accretive to the growth profile of Netufone? And then is all of that revenue outside of the U.S. today?

Yeah, the $3 million in change is pretty much all outside of the U.S. They do have a few U.S. customers, though, but pretty much in Central and South America is where the $3 million sits today. They're already accretive to your question. I think we made reference to the $1.2 million EBITDA. And, you know, there's really two prongs to the acquisition approach. One is Integra being able to continue to grow. They put together some interesting projection discussions there. And now, you know, Integra serving the markets, the service provider aspect of being able to go and serve the markets that we're in today as well.

Got it. But the, sorry if I wasn't clear, the growth profile of Integra, is that a you know, 30 plus percent top line grower, how should we think about the growth profile of the business?

Yes.

I think north of that, but yes. Oh, great. And then one last quick one. Historically at Net2Phone, have you all lost out on converting leads and deals because you did not have the offering that Integra brings to you?

Yeah. As I mentioned in my earlier remarks, you know, first and foremost, we're taking the temperature of our customers and partners and we're getting active requests you know, for Netaphone to add CCAS to our product portfolio. So absolutely, from a win-loss perspective, you know, we have the dashboards. We understand where we missed out on a few accounts, and we certainly will start, you know, reaching back. But absolutely, that's a driving force for, you know, why we're adding this product to our portfolio.

Great. Sounds like a really nice transaction. Thanks for taking the questions, and good luck in the quarter. Thank you.

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