Q2 2021 IDT Corp Earnings Call
Good evening and welcome to the Idt's Corporation second quarter fiscal year 2021 earnings call.
In today's presentation, Idt's management will discuss Idt's financial and operational results for the three month period, ending January 31st 2021.
Dorm room, Mark during remarks by Idt's, Chief Executive Officer, Shmuel Jonas all participants will be in a listen only mode. So do you need assistance. Please signal a conference specialist by pressing the star can you followed by zero. After the prepared remarks, Marcelo Fischer 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 question and answer session, whether general or specific in nature are subject to risks 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 on the reports that I D.
E files periodically with the S. E C. IDT assumes no obligation either to update any forward looking statements. They have made or may make or to update the factors that may cause actual results to differ materially from those day forecast.
In their presentation or on the question and answer session Idt's management may take reference to non-GAAP measures, including adjusted EBITDA adjusted EBITDA less capex non.
Non-GAAP net income non-GAAP.
Earnings per share.
We'll provide it in Idt's earnings release reconciles adjusted EBITDA adjusted EBITDA less Capex 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's Corporation website. The earnings release has been felt on.
Also on the form 8-K with the S. E C. I would now like to turn the call over to Mr. Jonas. Please go ahead.
Thank you operator.
Welcome to Itt's second quarter fiscal year, 2020, one earnings call covering results for the three months ended January 31, 2021, I'm joined today on the call by Marcelo Fischer Idt's Chief Financial Officer for a detailed report on our financial and operational results. Please read our earnings release filed earlier today.
And our form 10-Q, which we expect to file with the SEC on or about March 12.
The team delivered another strong quarter, including significant year over year increases in consolidated revenue.
From from operations and EPS.
Consolidated revenue increased $16 million to $340 million. He was our third consecutive quarter of year over year increases in revenue.
Sixth consecutive quarter of year over year increases in revenue less direct cost of revenue.
Consolidated income from operations increased to $11 $6 million to $12 $9 million this quarter.
Powered by $9 million year over year increase in revenue less direct cost of revenue.
SG&A expense, Meanwhile, was substantially unchanged year over year.
We are successfully reducing overhead in our traditional communications segments and redeploying those resources to support and accelerate the growth of our higher margin businesses.
Fintech and medical in the U K segment.
Fully diluted EPS increased to 51 cents from four cents in the year ago quarter.
<unk> results were highlighted by year over year revenue expansion from our three higher margin businesses National retail solution boss Revolution money transfer and that's when you can.
Within our Fintech segment and Earth added over 300 units to its P. O S terminal network this quarter in the year ago quarter, we added less than 800 units.
Pick up the pace in network expansion significantly.
On January 31st interest had over 13700 billable units in the network.
And the rest of this quarterly revenue increased by over 150% year over year to $5.2 million led by growth in payment processing services and in digital out of home advertising sales. Although we are in the early stages of monetizing both of these offerings. They helped to drive a 50 plus percent increase in revenue per P. O S terminal over there.
Last year.
Also within Fintech, our boss Revolution money transfer services increased revenue, 73% to $13 $3 million.
You need to build out our global disbursement network in this quarter passed an important milestone opening carters to southern Asia with the addition of Pakistan and Nepal.
Looking ahead, we are laying the groundwork for the first expansion of our origination market.
Hey, Richard are dispersed and they're working on significant transaction volumes into key destinations enable us to provide a highly competitive he does see service from a number of countries.
We expect to launch our expansion by offering boss Revolution money transfer in Canada, and the U K its fiscal 2022.
As we noted on our earnings release, our money transfer business continued to benefit from the unusual foreign exchange market conditions drove strong growth in the second half last year, but which diminished in the first two quarters of fiscal 'twenty 'twenty, one before dissipating by the end of the second quarter.
And our net telephone you can segment subscription revenue climbed 36% to $10 $1 billion growth has been solid in all of our markets. The U S, Canada, South America, and Spain. However.
Continued growth Nowadays, Oh, Gee, Oh, Gee geographic strategy, but also reflects the accelerated rate at which we have been able to develop and deploy enhancements to the offering itself.
Notably, adding integrations with leading CRM and communications platforms in the second quarter, we launched our integration with slack, believing channel based messaging platform building on previous integrations with Yahoo, and Microsoft team more.
More recently, we launched the powerful integration with Salesforce, the world's largest E. R M.
These integrations enable met the phone to approach higher seat count customers and position us to strength and pursued revenue without sacrificing growth the increase in the increasing sophistication of our feature set and adaptability of our offerings prompted CIO review publication for technology leaders to name that the phone is one of its top 20 companies.
Baidu transformative solutions for our retail business.
Our traditional communications segment aggregate adjusted EBITDA less capex.
We used $18 2 million $4 $6 million more than in the year ago quarter.
Year over year growth in international mobile top up sales in combination with stable boss Revolution, calling revenue more than offset a decline in carrier services revenue.
Looking beyond our established businesses and new opportunities we are prepared to relaunch the boss Revolution Mobile initiative, our initial M. P. M L effort.
Partnership with strip, but spring struggled, but we're confident that this time around we will do much better.
Okay.
Across our businesses the entrepreneurial spirit drives everything we do it will be a powerful source of value creation as we continue to build IDT.
So on I would be happy to take your questions.
Well now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
And the first question will come from Brian Warner Investor. Please go ahead.
Hi, Thanks for taking my question I have two questions and the first day as is.
Actually a two part question but.
Considering I'm just wondering if I can get a little bit of insight into your thinking about.
Maybe appropriate timing for a fin techs.
Texts being off what sort of metrics from I wanted hit operationally before you think that's ready.
And in sort of the same second part of the same question would be when when do you think the net.
Net to phone you can spend on might be ready for that and then just finally I'm wondering if you can give us a little color on your.
To your traditional phone business seem to congratulations by the way it's actually all your businesses looks good but I'm just wondering in the traditional business, where you seem to be showing a better revenue growth.
Very tight on cost from can you give us sort of any any sense on what you think the Alex weapons might hold on in this quarter you generated I think it was over $18 million.
Essentially free cash flow, there and I'm just I'm just wondering what you think sort of the the outlook for that business.
Okay. This is a small.
Oh, I will try to remember everything and answer your questions and Marcello feel free to.
Is there stuff in at any point or you on a.
To give better answers after I'm finished you're welcome to C store as well.
Yes.
So I believe that our goal is to spin off make a phone.
Sometime I would say before.
On the.
At the end of the calendar year.
Possibly slightly after.
We've done quite a number of centers as you know, but they do take a lot of work.
And Pandemics.
Building businesses.
On the comfort Unfortunately, but that is our goal.
And frankly, we don't really.
I have enough bandwidth to do Tuesday now.
On all at once I would say that we can't.
No real even start to think about the second one on until we finish the first one.
But you know we're also building you know other new businesses.
In the background as well.
Well that sounds great.
That answers the first part and then as far as.
Your question about cash flow.
And what can you expect from the.
On the business going forward or I'll call on the traditional business going forward.
You know again, we don't.
Give forecast on.
What what our growth will be but you know when we feel that our you know the.
The business is doing very well and again I don't know if some of it has to do with.
Covid and people.
People wanting to stay in touch on share resources, you know back home more than they would have.
The pandemic wasn't going on or if were just doing a good job operating the business I you know it's hard for me to give you.
You know much more insight.
Because frankly I don't know, but we are all I can say is we come in every day and we try hard and you know we feel pretty confident in the strength of the traditional business going forward.
Okay and in some on this stuff that I've read on the traditional business.
I guess I'm curious to what extent of the free services in the watch apps in the world maybe impacted that less than some people would have thought.
Well.
Maybe so you know again I believe that that that's free services.
And you know I've said this for many years is our number one competitor is not other pin less you know companies or other you know.
Our other companies it's free.
That that is our biggest competitor.
And you know again I think that you know.
We provide a great service to our customers you know the but the quality that you get you know with us versus versus them free options or are.
Our income countries night and day and in other countries. You know frankly speaking you know that the the free really you know.
Sickly.
You know made up of uncompetitive, so it's really a market by market.
Answer.
Yeah.
And two if it yeah yeah.
Yeah.
Yeah.
I'm sorry go ahead.
Yeah, Yeah, Hi, Marcelo.
Just a few comments on top of Schmalz Oh. It comes on the spin offs, obviously I'll focus right now is on microphone Oh afterwards on it.
We haven't really done much thinking about defeat techs Edmond.
And even when we start that process post net to phone.
Discussions will be held at that time after a while ago a potential spin off would occur while being cognizant that segment I'll just I'll be on they'll grass are part of the business.
But that's to be determined on top.
Are you on your plus from now on those discussions will take place.
And in terms of the traditional business.
So yes, we know the business has shown.
The stronger the resilience than what we had expected COVID-19 have helped that process as well, particularly on the peanuts business.
The margins on Peanuts have improved as more on these charges are shifting.
Well digital direct to consumer the mix looks like retail, where we have better margins.
Oh I am to you business is.
Moving to we'd be well it continues to be strong and we believe that definitely will continue to grow.
Hum in the coming years.
And and the combination of them to you together with Bemis.
We will more than offset we believe well continue to offset declines that we see.
Revenue and margins happening on the wholesale carrier side wholesale carrier.
<unk> has been affected by the Covid by the fact that.
More and more.
Calling the goes on happens or be a opinion on where the top.
Did your competency and getting on and other modes of communication. So we do expect wholesale carrier revenue.
Revenue and margins to continue to continue to decline, but hopefully we'll be able to offset those declines with the strength of the other two businesses and because of that we are.
I'm expecting that the day strong cash flow generation that we have seen from the traditional communication business.
In the $40 million to $45 million range. When you look at EBITDA less capex, that's a net debt the debt could probably continue for quite a long time.
I gotcha, Okay terrific. Thank you both so much.
Thank you.
Uh-huh.
The next question will come from James Smith Investor.
Go ahead.
Hi, Good evening. Thank you for taking the questions I had two questions from you. Thank you.
The first was mentioned in the prepared remarks, roughly 50% revenue per terminal are increasingly in our S businesses day to change in the last 12 months. If you think very directionally over the next year on the various initiatives you have going on to monetize.
That business do you have sort of a house view as to where revenue per terminal my head over the next year or two.
And then the second question was specifically as regards you cash do you have the revenue figure in mind, which you think that business potentially a breakeven at the EBITDA level.
Thank you.
Okay.
You know.
I have I guess, there's a fair amount of knowledge on on the economics of you know how much each on our terminal brings in however.
It it it it really does vary you know a tremendous amount and I mean, you know on hundreds of percents you know different from.
From what I'll call a you know.
So that is not doing merchant processing with us and is maybe in an area where advertisers aren't quite as interested at I'm talking to consumers.
Too to an area, where you know advertisers are interested in talking to the consumers there and you know where.
They're the merchant processing volume is quite high so it it's really hard for me to give you.
Very.
And exact answer like you know what I mean, it's like saying you know you know.
What does an average restaurant.
Give you an and.
I couldn't give that to you I mean, it's going to be depending on when you could have a restaurant and.
In Texas right now.
It has no mass and is completely open and doing or you can have you know a restaurant like you know in New York that that no on a.
25, or 35% capacity and and isn't doing any business. There so that there isn't very good.
And so from what what we aim for with each particular store.
What I would say that that we expect.
Overtime, our penetration from merchant services.
In source to go up significantly and we've already started to see that in and we expect it to continue and the amount of services and end.
And features you know that.
We.
Provide our merchants is really unparalleled for the price.
And we've done a lot on the pricing side to differentiate.
The price that you pay for those services when you get in merchant services.
With it and the price when you don't get merchants everything with it so where were kind of unique in the sense that we don't force you into getting our merchant services. You can you know you can get them.
Our Simpsons with without it.
But but you're going to pay you know significantly more free for the software. If you don't get our merchant services. So I hope that answered your question a little bit.
If it Didnt you you are welcome to rephrase it as far as.
The net at home business.
You know, it's a it's a different answer.
I think that that EBITDA profitability could could come you know very quickly if we wanted to slow down.
<unk> net sales I think if we wanted to increase sales you know there there's of course.
For every new sale that we bring on and for you know ramping up those sales.
And you know we tried to strike you know I'll call it a healthy balance between investing and in <unk>.
In sales and technology and you know not.
Moving on.
Hmm.
Maybe too aggressive on although some day weekend, I, I, I, I wonder whether or not.
We should be investing more.
Real quicker because we really are getting.
You know very very good returns and very very good retention and frankly, we have you know the the the money to do so so and and that's really the case in all of our growing businesses, you know where where the the the businesses are growing very very well and you know I think it's really just a question of how.
You know gasoline, we want to pour on them to help them grow quicker.
And you know again people.
Okay.
On the investors you want a balance you know they they want a company.
You know too who can throw off earnings and and you know on to operate efficiently.
And at the same time, you know grow and you know we we try to.
To do that balance, but sometimes I wonder whether or not a weird choosing the correct balance or if we should be.
Best thing more to grow these businesses.
Faster.
Hum.
Very helpful and I appreciate all the color on it so I wouldn't mind rephrasing <unk> question slightly differently I think you've mentioned in the most recent 10-K.
And this is sort of servicing into the 75000.
Merchants into which the true.
Additional.
Communications products are being distributed you know call. It 13, 14000 merchants I mean, we'd be in a restaurant on do you do you see a sort of a ceiling on that business over the next day you want to frame how do you think about the addressable market in terms of numbers of mentions potentially.
Oh, no not at all I mean, I I actually think that oftentimes people believe that that you know that that we only go after stores that that has sold you know boss Revolution, you know in the past and that's just not us.
That's just not reality.
Our reality.
You know so a large percentage of our customers I won't say originally when we started came from you know boss Revolution stores and still to this day. Obviously you know we have an easier time.
Going into historically, we've been going into four years in selling them, but a huge number of our sales are coming from stores that had never sold.
You know any IDT products before so in terms of the in terms of the amount of stores that.
You know that we believe is the addressable market. It's in the hundreds of thousands if not you know 35000 35000 store number as our addressable market.
But we have I mean, but we have done phenomenally well getting into you know the stores that have had been.
It was for a long time, because you know what.
They know that we provide great service and great product.
Understood. Thank you for all the color on net keep up the good work. Thank you very much.
Thank you.
The next question will come from Benjamin <unk> merchant, what merchant capital. Please go ahead.
Hi, congratulations on another great quarter.
I just wanted to ask like what's differentiating the national retail solutions from other point of sales companies such as square and you know there are obviously a bigger companies. So just if you could provide a little bit of color on that I'd appreciate it.
Hum it sounds like you're in the business.
Maybe you can provide some color but.
No.
I would I would say that.
Hmm.
I'm hearing an echo so if you don't mind muting I apologize.
Hmm.
I would say that a couple of things differentiate us as I as I talked about just a minute or two ago.
One thing that differentiates us is that we don't require you to get merchant services.
You know square and Clover.
And Ah Tony I'll, just three examples.
They require you to get their merchant services and therefore from merchant is already in a contract or you know is hesitant about you know switching you know from the bank that they're currently using or.
Any number you know.
But you know why a merchant wouldn't feel comfortable we don't force them to you know to switch to our merchant services, we believe that we provide.
You know better pricing better survey.
You know et cetera, then than even some of our biggest competitors you can actually you know get a human being on the phone when you call us.
But that being said you know we I I'll say have a have a softer sales.
Than some of our larger competitors.
Like the ones you mentioned.
I think that on our software is off to a actually in a certain way more purpose built.
For for the types of stores that we currently serve.
That I would say that we're you know we're planning to sort of augment.
From that in the future in the sense of like you know right now our terminals might not be the prettiest terminal that you can buy them, but we are also you know coming out with you know a line of what I'll call higher end you know terminals do you know that you know are more you know more aesthetically pleasing.
You know than the ones that we currently sell which we think will fit a whole another segment of stores that that might today not by our terminals.
But that doesn't mean that we're going to stop selling.
Well, we currently sell I mean, we're gonna have you know on an additional.
The line of hardware.
The other thing as you know we are in the process of you know building out.
You know a similar I'll call. It a in a way of getting customers to test square does which is you know you can just go and download our.
App from the App store and you know get one of our.
Not dongles, but something you know in that are in that are here.
And started using our emerging services.
And in my opinion, no like our software is really easy.
In many respects you know better than theirs I know that you know a little bit maybe kaki and an income reflect this is obviously not as good as theirs, but we really think that we have you know an excellent product, it's extremely reliable and we have.
Yeah.
Knock on wood as I say, but like your outages.
And you know it's it's.
Just look at it.
Good quality product at a good price.
Really what it comes down to it and we have a great deal you know team selling it.
Okay.
Well, thank you very much.
Okay.
Yeah.
The next question will come from Brian Warner with.
Private Investor. Please go ahead.
Hi, if I could just get a follow up on the on the MLS business. If you think about that business at some point in the future call. It maybe three or five years, and you think of sort of a reasonably healthy merchant.
<unk> healthy market and.
If you take bucket so merchant services for somebody who takes it and then another bucket I guess is advertising and maybe a third.
Analytics.
From a color on on on proportionately the size of the opportunities in your mind what are typical merchant like that might look like in terms of a revenue split between those segments.
Hmm.
I really can't give you.
A clear answer them.
As I said, it's really you know it's there's so many different dependencies I mean, you know again for from an advertising point of view you know like it could be you have a store that you know.
It has 20000 people come into it a day.
And for whatever reason, you know advertisers aren't particularly interested in the city.
You know or the street or the demographics.
Of the you know the community and in that area.
And you know in advertising is look you know and you know it could be you know the same thing for.
The data and it could be that you know I don't know.
You know a beer company really wants to know how their competitors are doing it on specific market because.
You know they their sales have declined in that market and therefore, they're willing to pay US you know a lot of money for you know for data insights into what's going on in that market and.
And a big market, where they might be doing really well. They just don't care because they think that they're doing a good job.
You know on the merchant services, it's much easier obviously to model because you know there you know there's you know on approximate amount that we.
Expect to make you know per day per dollar swiped I'll call. It.
Or tapped or however, you do it nowadays.
But and again you know that that's improved over time as we you know get bigger and better at it and we expect that to.
And again Oh.
I can't give you.
I hope I'm sort of answering your question I mean, we don't get questions from me.
Like an exciting night.
Usually I'm off the call in nine minutes after answering.
Really my speech.
So.
Yeah, I mean, if you want if you have a follow up question to it I mean, but again in terms of the market I think the market is as I said enormous like I mean, I really think that we've barely scratched.
From the surface.
And I think that yeah.
And if one day it was gonna do you know way more valuable than them and IDT is today and.
IDT today, you're getting a great deal because yeah yeah.
You know you can get or you're getting.
Three you know huge opportunities that already exist.
Yeah.
Right.
Right.
So Brian on extra Mossad, it's hard to predict what the mix will be down the road, but I don't want people sat on that'd be continued congrats COVID-19 trying to go on the tightening of analytics and on most of them services dose three channel.
Channel was obviously have significantly higher margins than just a selling day from though you'll need in the monthly recurring fee, but to get them back. So one thing that.
Oh, that's probably that probably will be very likely that F and I've got some figures to grow both network and the services is that the gross margins and net margins on these businesses will continue to increase.
Yeah, I mean, all organic.
One more piece of color I mean, you know as they turn on are they talked about a little bit earlier, you know, we you know we've changed the pricing with our software so that you know.
Or you're incentivized to go with merchant services.
That being said we've also added a ton of features and even customers that you now are getting our merchant services are now, adding more revenue to us than they ever had before because they're able to you know buy higher claims that include you know more features.
And that's really something that's only happened very very recently.
Sounds great guys. Thanks for all the color I appreciate it.
Again, if you have a question. Please press Star then one.
As there are no more quite well. This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.
Thank you.
Okay.
Yeah.
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Yeah.
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