IDT Corporation

Good evening and welcome to the IDT Corporation's third 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 April 30th, 2022. 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 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 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 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 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 Marcella Fisher, IDT's Chief Financial Officer. We will both be available to answer questions after my remarks. My discussion today focuses on the third quarter of our fiscal year 2022. The three months ended April 30th. For a more detailed report and discussion on our financial and operational results, please read our earnings relief called earlier today and our form 10Q that we expect to file with the Securities and Exchange Commission on Thursday, June 9th. Since its inception over 30 years ago, IDT has generated IDT has generated shareholder value by incubating and growing promising business initiatives. We are currently leveraging our core strategic assets to scale three high-margin growth businesses, NRS, Netiphone, and Boss Revolution Money Transfer, while simultaneously benefiting from the significant cash generated by our traditional communications segment. Each of these Three high margin, high growth businesses had a very strong third quarter, helping us to again achieve solid levels of consolidated income from operations and adjusted EBITDA, consistent with our results from the first two quarters of our fiscal year. NRS added nearly 1,400 net POS terminals and 1,200 net payment processing accounts during the third quarter, maintaining the accelerated rate of acquisitions achieved in the second quarter. NRS recurring revenue increased 102% year-over-year, keyed by strong merchant service and advertising sales. Looking ahead, we expect that NRS will sustain robust high margin growth in the coming quarters. In particular, we expect advertising and data offerings to benefit from both long-term trends, such as the increasing allocation of advertising budgets to out-of-home venues, as well as from seasonal tailwinds, including increased political advertising heading into the second half of the calendar year. Nettofone's strategic focus on the SMB and small enterprise markets within North and South America, efficient execution, and acquisition of CCAS provider Integra all contributed to solid growth in the third quarter. Subscription revenue increased 42% year-over-year due primarily to the addition of approximately 22,000 seats during the quarter, including almost 7,000 seats from the Integra acquisition. Seed growth was again strongest in our Latin American markets, although our U.S. businesses performed very well as well. We will begin selling our CCAS offerings in North America in the current fourth quarter of our fiscal year and expect its expansion to gradually become a key driver of both seed growth and ARPU expansion. A month ago, we announced our decision to postpone the spinoff of Netaphone in light of market conditions. We believe that we can significantly enhance Netofone's value by continuing to grow the business and improving net margins. And, in fact, we are already making good progress. The Netofone UCAS segments lost from operations in the third quarter decreased to $2.3 million from nearly $4 million in the year-ago quarter. Segment CapEx in the third quarter was $1.4 million compared to $1.3 million a year earlier. Bust money, our international remittance business, increased revenue 51%, to $15.5 million, driven by a 27% year-over-year increase in transaction volumes and a comparably robust increase in revenue per transaction, including both transfer fees and revenue derived from foreign exchange. We continue to build out our disbursement networks, particularly in Africa and the Caribbean, and to fine-tune our direct-to-consumer pricing strategies to capture additional revenue and margins. In our traditional communications segment, Revenue decreased by $59.9 million, or 17%, to $285.9 million. The surge in demand for paid voice that we experienced during the COVID pandemic is now retreating and exacerbating the impact of the underlying revenue declines in retail calling and wholesale carrier services. Our mobile top-up business struggled this quarter, but we are investing in technology, marketing, and sales to improve its performance. Because traditional communications lost revenue overall with skewed to lower margin sales, income from operations from this segment decreased $3 million year over year to $17.4 million. On a consolidated basis, income from operations decreased $500,000 to $13.3 million, while adjusted EBITDA increased $100,000 to $18 million. To wrap up, all three of our high-margin, high-growth businesses had a strong quarter. Their expansion continues to offset the decline of the low-margin minute-based revenues within our traditional communications segment. We expect that as our growth business continues to expand, our consolidated bottom-line results in the coming quarters will increasingly reflect their contributions. Although we have postponed the spinoff of Net2Phone, we continue to believe that the spinoffs can be an attractive and appropriate strategy to help shareholders benefit more directly from the expansion of promising young businesses. whose assets and operations are readily separable from those of our other businesses. Now Marcel and I would be happy to take your questions.

We will now begin the question and answer session. To ask a question, you may press star then one 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 two. At this time, we will pause momentarily to assemble our roster.