IDT Corporation

Good evening and welcome to IDT Corporation's fourth quarter and full fiscal year 2022 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, 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 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. After my remarks, Marcella Fisher, IDT's Chief Financial Officer, will join me and will be available to answer questions. My discussion today focuses on the fourth quarter of our fiscal year 2022. The three months ended July 31st. For a more detailed discussion on our financial and operational results, including our full fiscal year 2022 results, please read our earnings release filed earlier today and our Form 10-K that we expect to file with the Securities and Exchange Commission by Friday, October 14th. In the fourth quarter and for the full 2022 fiscal year, our high margin, rapidly growing fintech and cloud communications businesses delivered impressive gains. For several years, we have invested in these businesses to develop the next generation of IDTs value creation. This dynamic and ongoing transformation helped drive IDTs consolidated quarterly and annual adjusted EBITDA to their highest levels in our history. Within our FinTech segment, NRS had another outstanding quarter, increasing recurring revenue by 157% year-over-year to $17.7 million. Monthly average recurring revenue per terminal, which excludes POS terminal hardware sales, nearly doubled to $316. Each of NRS's key offerings contribute to the quarter's growth. Looking ahead, we are entering what is typically a seasonally strong period for advertising generally. However, macroeconomic-driven headwinds are buffeting the advertising market. As a result, we will likely encounter some volatility from quarter to quarter, even as we expect to continue to generate strong year-over-year revenue increases. NRS Merchant Services and SASP revenue also grew nicely. We are continuing to convert our existing POS customers, and we are signing up new POS customers to NRS Pay at a very good clip. On the SaaS side, we are upselling store owners to premium features and bundles, and we have many exciting features coming soon. NRS also again achieved strong growth in its POS terminal network footprint, adding over 1,400 net new terminals in the fourth quarter. All in all, we are more excited than ever by the potential of this business. Also in our FinTech segment, BOSS money performed exceptionally well. Revenue increased 56% to $17 million. Transaction volumes grew by 31% year-over-year, and revenue per transaction increased 19%. We continue to attract new customers, grow revenue, and improve margins by focusing on several strategic priorities. Cross-selling within the larger BOSS revolution ecosystem expanding our payout networks and enhancing our retailer and digital transaction platforms to improve the user experience and enable more sophisticated pricing strategy tools. During fiscal 2023, we are planning on taking the first step to expand our origination service internationally, introducing our BOSS money remittance service in Canada and then expanding from there. Overall, our FinTech segment generated income from operations of $5.4 million in the fourth quarter, compared to a loss from operations of $2.9 million in the year-ago quarter. NRS is now contributing meaningfully to our bottom line profitability and BOSS money delivered impressive growth while moving significantly closer to profitability. Net to phone likewise delivered another very good quarter. Fourth quarter subscription revenue increased 37% year over year to $15.1 million, expanding at a faster clip than many industry players. We added approximately 12,000 net seats and boosted revenue per seat for the third consecutive quarter. Following the acquisition of Integra this spring, we brought its contact center as-a-service offerings to market under the Netto Phone umbrella in the fourth quarter. We expect that CCAST will drive additional increases in per-seat revenue. As I noted last quarter, we are laser-focused on accelerating Netto Phone's path to profitability by streamlining operations and optimizing our investment and growth capital. We are making very good progress. Netophone's loss from operations decreased to $1.8 million in the fourth quarter, half the level of a year-ago quarter. And we expect that Netophone's segment will achieve EBITDA profitability by the fourth quarter of fiscal 2023, while continuing to grow robustly. Turning now to our traditional communications segment, Fourth quarter revenue decreased 23% to $276 million. Boss revolution calling decreased by $22 million, or 20%, while IDT Global's wholesale carry revenue declined by $34 million, or 35%. We have long compared the paid minute international voice communications market, which is the basis for both our boss revolution calling and IDT global carrier businesses to a slowly melting ice cube. The fourth quarter results reflect the acceleration of the melt rate as a result of fading COVID boosted demand and by weaker consumer purchasing in this economy. Also within the traditional communication segment, our mobile top of business was again impacted by the deterioration of foreign exchange conditions in our largest revenue corridor. Total mobile top-up sales decreased $24 million, or 18%, from the year-ago quarter to $113 million. However, thinking about the future of mobile top-up, which is now the largest revenue generator within the traditional communications segment, it's instructive to look at our fourth quarter results exclusive of that volatile corridor. Mobile top-up revenue would have increased if not for that. We continue to be bullish about the long run growth prospects for mobile top-up. We have now substantially worked through the quarter's year-over-year comparative negative foreign exchange impacts. Global demand for broadband bundles continues to increase, and we are making progress developing new digital offerings. Traditional communications fourth quarter income from operations decreased by $8 million, or 33%, to $17 million. We have been very successful in recent years minimizing the bottom line impact of the volume declines from boss calling and IDT Global by optimizing our pricing strategies and distribution channels, as well as by right-sizing operating expenses. We will remain sharply focused on streamlining these businesses going forward so as to maintain as much cash flow as possible. Nevertheless, we do believe that our payment of business will continue to be pressured, and as a result, both segment revenue and EBITDA will continue to decline in fiscal 2023, though moderated by a return to stability in our mobile top-up businesses. For IDT as a whole, the outlook remains very positive. We anticipate that the continued growth of high-margin fintech and cloud communications businesses and our mobile top offerings will further significantly improve IDT's consolidated adjusted EBITDA, more than offsetting the decreasing contributions that we expect from our bus revolution calling and IDT global businesses within the lower-margin traditional communications segment. Reflecting on our progress this quarter and positive outlook, IDT repurchased over 554,000 shares of its Class B common stock in the open market for approximately $13.4 million during the fourth quarter. In fiscal 2023, as always, we will continue to look for opportunities to return value to our stockholders. The quarter and the fiscal year's strong results would not have been possible without the hard work of IDT's employees worldwide, who continue to rise to the challenges and beat expectations. I want to wrap up by acknowledging their success and thanking them. 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 one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two at this time.