IDT Corporation

Good evening and welcome to the IDT Corporation's fourth quarter and full fiscal year 2024 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 31, 2024. 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 Fischer, IDT's Chief Financial Officer, will join Mr. Jonas for Q&A with investors. 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 per share. A schedule provided in IDT earnings release reconciles adjusted EBITDA, non-GAAP net income, and non-GAAP earnings 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. My remarks today focus on the fourth quarter and full fiscal year 2024. The -and-twelve months ended July 31st. For more detailed discussion of our financial and operational results for the quarter, please read our earnings release filed earlier today and our Form 10K that we expect to file with the SEC next Tuesday. IDT delivered a strong fourth quarter highlighted by record adjusted EBITDA to cap off our 2024 fiscal year. NRS, Boss Money, and NetFone all performed well, while our traditionally communication segment businesses delivered solid cash flow. At NRS, we continue to make good progress in our strategic priorities, expanding our independent retailer market, increasing the penetration of NRS pay, developing pointed sale solutions for new verticals, and building out our advertising tech, all while deploying hundreds of new locations every month. At Boss Money, we again achieved -over-year transaction volume and revenue growth of over 40% during the fourth quarter. Boss Money's economics continue to improve as the business scales, which enabled our FinTech segment to achieve its first quarter of positive cash flow generation. NetFone is steadily building its customer base, again adding approximately 12,000 net new seats, including 2,000 CCAS seats in the fourth quarter, while also doing a good job of controlling its costs. As a result, NetFone's adjusted EBITDA margin more than doubled compared to the year-ago quarter. We are focused on further improving NetFone's bottom line for continued volume growth and revenue per user, driven by expansion of our higher revenue, higher margin CCAS offering, and by migrating customers to premium plans and features, including plans with new AI-powered functionalities. In our traditional communications segment, we significantly improved the economics of our business and began to see the expected payoffs from cost reduction initiatives we implemented throughout fiscal year 2024. In fiscal 2025, we will continue to pursue opportunities to improve the performance of our businesses and lower costs, while maximizing cash flows and reinvesting in customer acquisition. IDT enters fiscal 2025 with strong momentum. NRS, Boss Money, and NetFone are all profitable, and each has a long growth runway. In the year ahead, we will drive their continued expansion and invest in new exciting growth initiatives that leverage our strategic assets and expertise. We remain committed to maximizing the cash generation from each of our segments, building businesses for long-term value creation, and returning value to our stockholders through our investments in new initiatives, share buybacks, and dividends. Lastly, I would like to thank everyone at IDT who has really worked very, very hard to deliver the numbers that we deliver to you today. Oftentimes, it just looks like numbers on a paper, but it's really a lot of work. Now Marcel and I will 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 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. We will now pause momentarily to assemble our roster. Okay, our first question comes from Anigo Alonzo with Morum Capital. Please proceed.

Hello. Congratulations once again on the amazing results. I had a question first, well, I got a lot of questions on Netsu phone. I wanted to ask about the MetaSwitch end of life. Is this going to be a tailwind for your business, or you don't really share the platform that you own with other UGAS players?

As far as I know, it has no effect on our business.

Okay. Regarding the migration in Netsu phone from your rented platform to your own platform, how in a percentage, how complete are you with the migration? Are you expecting to have synergies there?

Yeah, we expect to actually start migrating more customers over the next quarter. Basically, no new customers go on to any other platform other than our own. We hope to see savings from it and better satisfaction from our users once they're on Netsu phone's homegrown platform.

Do you have any hard timeline on when you would like to see the full transition into your own platform?

No.

Okay. The last question is about NRS. In previous calls, you have talked about a potential future NRS spin-off. Obviously, market circumstances are not the best today, but what type of circumstances would you like to see in the market and in your own business in order to do the spin-off?

Again, right now, we're focused on building NRS into a multi-billion dollar company. When the time is right, we'll have the ability to spin-off or do some other type of transaction. However, at the moment, we're very happy with how it's doing internally.

Okay. The next question comes from Greg McKinley. Please announce your affiliation and pose your question.

Yeah. Good afternoon. Greg McKinley with Asymmetric Management. A couple of questions. First of all, on the money transfer business, it looked like we crossed the threshold there and we're now EBITDA and operating income positive. Can you help us understand how we should think about incremental margins there now that we've crossed that line? We're growing very rapidly on the top line. What's your view for margin expansion there and what kind of big investments, if any, do you need to make there to continue to support growth or is it more of a margin leverage business now?

I'm going to let Marcelo answer most of the question, but I will say that from a very high level. I don't think that our goal is to expand margins tremendously on a per transaction basis. I think our main goal is to make sure that our customers stay with us for very, very long term. Even if that means slightly lower margins than we could achieve tomorrow if we decided to do so. To us, it's really about growing the number of customers and making sure that every time that they think about sending a money transfer, they only think about using us. Just to

clarify my question, I wasn't really asking so much from a customer standpoint. I was thinking more of the business unit. It looks like now it's flipped to EBITDA positive. Just wanted to make sure I was clear on that.

Hi, Greg. It's Marcelo. Hi. Correct. I think 2024 was just a fantastic year for BOSS money from all angles. As you see, it's the year that we crossed the $100 million revenue mark. We are now doing more than 20 billion transactions a year on a run rate. It's also the first year that BOSS money became EBITDA positive. It came strongly EBITDA positive. It generated about $4 million in positive EBITDA. By doing so, it lifted the entire FinTech segment, which includes also some other businesses which are much more on investment mode. Some of them are still pre-revenue. BOSS money has been a great engine for both top line and bottom line growth. We finished our budgeting process for 2025. I didn't know if this year had just begun about a month ago. We believe that BOSS money for 2025 will probably deliver more than $10 million of EBITDA, more than double the EBITDA that they generated in 2024. What's driving that is all the things that you're seeing. It's the continued around 40% growth both in transactions and in revenues coming both from the digital channel and the retail channel. We continue to see that strength on the top line as we go into Q1, during the month of August, September. More importantly, notice the leadership of Schmuel and Bu Pereira. We really have tackled the business in terms of improving operational efficiencies, a lot of automation. That's starting to show itself on the bottom line on managing that FGNA to allow the business to scale at a faster clip. Our focus is going to be shifting a little bit now as we start the new year. Not necessarily to push for continued 40% type of growth, but a little bit of a focus on trying to improve what for us is the most important metric in this business, which is growth profit, growth margin for transactions, what we call GMPT. We are starting to make some changes in pricing to generate higher GMPT, even if that costs a little bit in terms of top line growth, but that's going to further yield better and stronger bottom line cash flows.

The one thing I would say is I think Marcelo might be being a little bit conservative on his projections, but again, as I said in the beginning, it's really a question of whether or not you want to have expanded GMPT or a longer lifetime value of every customer. We try to balance that, both having good profitability as well as many happy customers that stay with us for a very long time.

To that extent, when we think about assistive business in many ways, like our mobile top up business, our MTU business, which is our largest revenue business of the corporation in our traditional segment. Also, over there, you're going to start seeing some very nice growth on the top line. We have made some pricing changes to the portfolio, and that's really going to help contribute in terms of the overall decline in traditional communications to be a lot less than what you have seen in the past year.

Great, thank you. This is my first time dialing in for this call. I'm not sure historically what topics you guys are willing to comment on from a forward outlook standpoint, but you just mentioned the decline in the traditional business, and you think maybe that rate of decline will moderate. I'm wondering if you could comment a little bit on that and then how much of an improvement in the rate of decline, and then it also looked like the high growth businesses more than offset the decline in the mature business. Can you talk a little bit about what that means in your view for revenue growth, if you expect that in 2025, and if you do provide forward commentary on that, I'm not sure. Thank you.

Sure, let me take one thing at a time. Let's start with the traditional segment and then look at the consolidated picture. As it's not a new story, in our traditional segment, most of the businesses there are legacy long-distance voice businesses. Those businesses have been in decline for now many years. We expect the revenues in both revolution of calling business and also carrier to continue that rate of top-line decline to be double digits. We are managing those businesses for maximum efficiency, strong cash flow generation. We do not allocate significant capital towards those businesses. You saw in fiscal 2024, those businesses, the traditional segment, declined. It's even down by about $11 million. Thinking about for this new year 2025, both as a result of the large cost-cutting exercises that we did during 2024, they were quite painful, but we executed on them. As I had mentioned in prior calls, we were going to start seeing the impact of those cuts in Q4 and beyond. As a result of that, as well as what I mentioned earlier, as a result of the fact that the mobile top-up business, the digital payments business, which is part of that segment, which is now in a faster growth mode, both in terms of volume as well as due to very strategic pricing changes, the conventional cost-cutting and that will probably make the decline in traditional EBITDA for this coming year to be a lot less than $11 million, maybe around $5, $6 million for this coming year. It will probably be estimated about $60 million of EBITDA coming from the traditional businesses. That leads really to the combined picture. I believe that fiscal 2025 will probably see a slight increase in consolidated revenue. As the new businesses, as the growth businesses start generating more revenue, then the decline in the traditional side. But more important than that, when you look at the bottom line, one of the things that we have been very focused on for many years is to be able to demonstrate that we are able to increase bottom line consolidated EBITDA every year, despite the fact that our core businesses, EBITDA, have been coming down and been coming down strong. I think now it's about five or six years that we have grown EBITDA on a consolidated basis. We finished 2024 with a record $90 million in EBITDA. Our Q4 that we just announced today, EBITDA of $25 million, I've been with the company for about more than 20 years. This is our highest EBITDA ever in IT's history. And looking into 2025 with all the businesses now being EBITDA positive, we believe it could definitely surpass $100 million in EBITDA for 2025 as a soft guidance.

Yeah. Great. Thank you.

Again, if you have a question, please press star, then one. Okay, we have a couple of questions in queue. The first coming from Will Carter, private investor. Please proceed.

Yes. On boss money, obviously, really strong growth again this quarter and continues a really strong year. Where are you guys seeing a lot of this growth from? Are you taking share from competitors? Is this a growth pocket within the market? Interesting to just understand where that's coming from within the larger kind of competitive space.

I mean, the truth is I don't really know. I mean, you know, we do surveys of customers, you know, to find out who they've previously used for money transfer. And definitely, you know, most of them have used others. So I guess to some degree, we're taking that business away from competitors. I think that, you know, we do a very good job, you know, cross selling our customers, you know, amongst all of our different services and making sure that they're happy so that when they're sitting around talking, they tell their friends about it. And that drives them to us, you know, as opposed to some of our competitors who spend wildly on customer acquisition. We really try to sort of have a, you know, be tame, I'll say, about it and really not overspend. You know, we're very focused on making sure that, you know, as I said, that we drive profitable customer relationships, long term customer relationships. And, you know, we just make sure that, you know, things work for our customers and that, you know, we're not better than, you know, all of the competitors that we track against. And that's, you know, really the simple answer. Yeah,

I believe that the Boss Money brand is becoming a stronger presence in the customers that we're trying to attract for this service. Like until recently, you know, we used to get comments that, oh, you guys at IEP, you do Boss Evolution calling. And, oh, we didn't know that you guys also offer a money transfer business called Boss Money. More recently, it's the other way around. You know, we hear some customers saying, oh, you guys do Boss Money, money transfer. I didn't know that you guys also do international long distance calling. Right. So Boss is becoming a more stronger brand in the marketplace right now.

Yeah. Are there certain payment corridors where you guys feel you have outsized share or is it sort of across the different corridors between the US and other countries?

Well, I mean, again, we today, you know, are almost, you know, almost 100 percent, you know, US outbound. I mean, we do do from Canada as well, but it's a small percentage. And I would say that, you know, again, we have some countries that we have, you know, a high share of transactions to. You know, and our goal is to try to make every country, you know, a country that we have a high share of transactions to. Obviously, you know, you get to a certain scale and it becomes, you know, more, I'll say, self-fulfilling. You know, you have a big enough share and, you know, customers start telling each other about it. And, you know, and we definitely have reached that, you know, in one or two of the markets. But hopefully we'll get to, you know, a couple more this year.

I mean, part of the irony is that most money transfer operations in the US, for them, the largest corridor obviously is Mexico. And for us at IDT, actually, Mexico is not yet a very large corridor. It's not one of the top three corridors. We are growing our presence in Mexico. So we actually view Mexico as an opportunity at this point, you know, to try to get even more market share from some competitors.

Got it. That's really helpful. And then my last question is on NRS. Another amazing year. Congratulations, guys. It would be helpful just, you know, kind of maybe similar to the overview that Marcelo gave on what you're thinking about 2025. You know, any goals around terminal deployments, kind of revenue targets, and then maybe SG&A levels that would be required to get there?

Yeah, I mean, NRS continues to be very robust. We expect and we budget to continue to grow the network, the POS network, by that roughly about 500 POS a month, right? 6,000 POS a year, which is what has been the trend for the past few years on a net basis. That's our objective going forward. That's going to be driven by the growth in merchant services by selling more NRS pay accounts together with our POS service, continue to increase the operating leverage of the business. I think right now you're doing about 24 percent net margins, probably growth maybe 25 percent net margins. This coming year is always a balancing act of how much you want to be increasing net margins and the bottom line growth. So I think we have gotten a good balance level of investment and growth at the same time. So I would not be surprised if EBITDA or NRS grows another 30 percent this coming year on top of the rest of $25 million that we delivered for this year.

Yeah, I mean the only thing I would add to that is that we have some products that we only recently launched that we really don't know yet how they are going to impact our numbers long term. I mean I can tell you just we launched kiosks in our stores for doing self-ordering and we're sold out of them. I mean hopefully we'll have more of them in the next month or so. But I mean there are a lot of pockets of growth that I think will continue to make volume in every store be greater than what it is today. I mean the interesting thing to me about kiosks is that it actually increases the amount of merchant services that are done in the store quite significantly. I mean when people are going to a counter and paying they're much more likely to pull out cash from their wallet versus paying at a kiosk. And we launched our Panther POS which is our tablet-based POS system a couple months ago and it's going very, very well. And we're about to launch it in a couple of new form factors as well as we're now developing it for iOS as well. And we expect to launch pay on the tablet as well probably by the end of this fiscal year. So there's a lot of demand and that will also be able to be self-signed up from our website. You can go on and fill out a form either that or download it from the App Store, fill out a form that comes in the app and start doing transactions. And it's also been a very good product for our existing retailers to help them move the queue faster, especially on days when they're busier and they need an extra register. They just pull up a tablet and start moving the line. So yeah, those are some of the new things that are happening.

Okay, our next question comes from Max Martiniuk, private investor. Max, please proceed.

Hi, guys. First of all, just congratulations on the quarter. My question is relating to the remarks you guys said on the NRS, deploying hundreds of screens and new locations outside of our independent retail market. And I think you actually just covered a little bit in the previous question mentioning the kiosk and the Panther tablets for the screens. Is it all POS-related screens or are you guys looking to kind of like offer screens where it's just pure digital out of home advertising? And the second part of the question is just on the new locations, like what verticals are you guys looking at? Do you still see like a lot of rungs in your core market? Are you guys looking to really expand into the verticals now? Thank you.

Okay, so there's a bunch of questions there, so I'll try to remember all of them when I give you an answer. You know, as far as the new locations for screens, you know, we're doing right now, hotel lobbies is actually a big push for screens. We just, I mean, we placed a couple hundred over the, you know, this past quarter. You know, we just ordered a thousand more for, you know, today for that vertical alone. And as far as, you know, new verticals, you know, again, you know, we're definitely trying to go to things that are adjacent to us, you know, whether or not that's, you know, hardware stores or, you know, quick service restaurants. Anything that's SKU-based is really, you know, still our main focus. You know, liquor stores is definitely a big focus. We just hired, you know, someone to run, I'll call it our liquor store division to really make sure that it's, you know, completely customized for everything that they need. You know, we continue going after, you know, gas stations, you know, we continue, you know, testing the waters, you know, in some other, you know, verticals. But again, you know, QSR is probably our biggest, you know, vertical that is adjacent to where we are now. And, you know, that's, as I said, unfortunately, we're sold out of our kiosks for right now. But, you know, we'll be getting more shortly.

Okay. We have a follow-up coming from Anigo Alonzo with Morum Capital. Please proceed. Hey again.

I wanted to ask about Boss Money. It looks like you have a way stronger presence in the Northeast with more retailers. I was wondering what's the strategy to grow nationwide? And if you have considered tracking in the public information that you released, the number of retail locations that you have over the country and maybe the areas just like you're doing in NRS. Thank you.

Okay. I don't know if we released that information or not. I mean, I don't consider it to be a state secret, but we're, you know, slightly under 2,000 retailers that we do retail money transfer at. You know, again, similar to the comments that I made about, you know, lifetime customer value and GMPT, you know, we're not focused on the number of locations that we have, but we're focused on making sure that the locations that we have, you know, are profitable and are doing a lot of transactions. That's really our goal. We don't want retailers that do a handful of transactions. They cost us more to have than they're worth the effort in having. So, you know, we do open and close a lot of locations, you know, for that reason. You know, however, you know, what I would say is that, you know, we were, you know, we are definitely focused on, you know, growing our retailer base, but the, you know, the majority of the growth, you know, that you're seeing is really in the digital verticals. And, you know, that can, you know, continues to be our main focus and that continues to be where we're having, you know, you know, solid profitability, you know, from.

That's it. As there are no more questions, this concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.