IDT Corporation

Good evening and welcome to the IDT Corporation's first quarter fiscal year 2024 earnings call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the three-month period ended October 31, 2023. 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 they 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 very much, Operator. Welcome to IDT's earnings conference call. My remarks today will focus on the first quarter of fiscal year 2024. The three months ended October 31st. For a more detailed discussion of our financial and operational results for the first quarter, please read our earnings release filed earlier today and our Form 10-K that we expect to file with the SEC a week from today. Our three primary high-growth, high-margin businesses delivered strong revenue growth in the first quarter. while the businesses in our traditional communications segment performed as expected. In the first quarter, the ongoing growth of Boss Money NRS and NetPhone drove a 370 basis point year-over-year increase in gross profit margin and record gross profit. They are steadily becoming more significant contributors to our top and bottom lines. while the cash generation of our paid-minute businesses has been relatively resilient. Boss money continued to grow at a rapid clip, helped by the accelerating expansion of our retail money transfer channel. Retail money transfer channel revenue increased 55% year-over-year, while digital channel revenue for transactions initiated on the Boss Money and Boss Revolution calling apps increased 31% year-over-year. We continue to improve the user experience for both retailer agents and digital customers, and we see that investment paying off in Boss Money's robust top line growth. Much of the investment we've made in money transfer to date is in the expectation that we are only in the early innings of our money transfer growth. As we continue to expand, we expect to realize more of the benefit of our expanding revenue and gross profits in our bottom line profitability. NRS continued to expand its network and upgrade existing accounts, helping to drive strong increases in merchant services and SaaS fee revenues, while advertising and data revenue increased sequentially, propelled by seasonal tailwinds and a gradual recovery of advertising in the digital out-of-home advertising space, a trend which has accelerated since the quarter closed. NRS income from operations was a record $5.5 million in the first quarter. We are also in the process of introducing some of the new POS formats that I've mentioned previously, and I'm excited about their potential to help us drive long-term expansion. Netaphone delivered steady sequential customer base and top line growth, while its unit economics are strengthening as the business scales and our higher ARPU, higher margin CCAS offerings gradually become a more significant part of the business. Netaphone generated positive adjusted EBITDA of $1.4 million and was near cash flow positive. Now in the second quarter, our beta rollout of Netaphone AI is underway and it has been very well received by customers. We are very optimistic that NetFone AI and NetFone's forthcoming premium plans will help to drive meaningful art pool and margin expansion. We're working very hard to innovate exciting new offerings, features, and functionalities, and not just in our growth businesses. At Boss Revolution Calling, we've redesigned the look and feel of our popular calling app and added a bunch of new products and features. We have also introduced advertising placements into the app, and we have already begun to generate some nice revenue from it as a result. In addition to our new product offerings, we continue to focus on streamlining overhead and wringing significant costs out of our operations in the quarters ahead, especially in our traditional communications segment. This effort will help preserve the cash generation of our paid minute businesses despite their continued expected top line declines. It also allows us to continue investing in innovative new products and promising initiatives in our existing growth businesses. We also returned value directly to our stockholders in the first quarter, repurchasing 125,470 shares of Class B common stock for approximately $2.8 million. Going forward, we will continue to purchase shares opportunistically. We are very well positioned as we head into the second quarter of our fiscal year 2024. To wrap up, I want to wish our employees, stockholders, and their families a very joyous holiday season and thank each of you for everything you do for the IDT family. Now, Marcel 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 one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the star keys. To withdraw your question, please press star then two. We will now pause momentarily to assemble our roster.