Q1 2024 IDT Corp Earnings Call
Sure.
Speaker 1: Good evening and welcome to the IDP Corporation's first quarter fiscal year 2024 earnings call. In today's presentation, IDP's management will discuss IDP's financial and operational results for the three month period ended October 31, 2020.
Good evening and welcome to the IDT Corporation's first quarter fiscal year 2024 earnings call.
Today's presentation, Idt's management will discuss Idt's financial and operational results for the three months period ended October 31 2023.
Speaker 1: During remarks by IDT's chief executive officer, Schmul Jonas, all participants will be in listen only mode.
During remarks by Idt's, Chief Executive Officer, Shmuel, Jonas all participants will be in listen only mode.
Speaker 1: Should you need assistance, please signal a conference special by pressing the star key followed by zero.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Speaker 1: After Mr. Jonas's remarks, Marcelo Fisher, IDT's Chief Financial Officer, will join Mr. Jonas for Q&A.
After Mr. Jonas his remarks, Marcelo Fischer Idt's, Chief Financial Officer will join Mr. Jonas for Q&A.
Speaker 1: Any forward looking statements made during this conference call, either in the prepared remarks or in the Q&A session.
Any forward looking statements made during this conference call either in the prepared remarks or in the Q&A session.
Speaker 1: with a general or specific in nature are subject to risk and uncertainties that may cause actual results to differ materially from those which the company enters
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.
Speaker 1: These risks and uncertainties include, but are not limited to specific risk and uncertainties discussed in the reports that IDT files periodically with the SEC.
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.
Speaker 1: IDT assumes no obligation either to update any forward looking statement or may make or to update the factors that they may cause actual results to different materially from those that they for
IDT assumes no obligation either to update any forward looking statements made or may make or to update the factors that may cause actual results to differ materially from those that they forecast.
Speaker 1: In their presentation or in the Q&A session, IDP's management may make reference to non- GAAP measures , including adjusted eva-da, non-GAP net income, and non-GAP earnings or loss per share.
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.
Speaker 1: Schedule provided in the IDT earnings release recon files adjusted EBITDA, non-GAPnet income, and non-GAP earnings or loss per share to the nearest corresponding GAP mesh.
Speaker 1: Please note that the IDT earnings release is available on the Investor Relations page of the IDT Corporation web
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 8-K with the S. E C.
Speaker 1: The earnings release has also been filed on Form 8K with the SEC. I will now turn the conference over to Mr. Jonas.
I will now turn the conference over to Mr. Jonas.
Thank you very much operator.
Speaker 2: 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
Welcome to Idt's earnings Conference call. My remarks today will focus on the first quarter of fiscal year 2020 for the three months ended October 31 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.
Speaker 2: For more detailed discussion of our financial and operational results for the first quarter, please read our earnings release felt earlier today and our form 10K that we expect to file with the SEC a week from today.
A week from today.
Speaker 2: Our three primary high-growth, high-margined businesses delivered strong revenue growth in the first quarter, while the businesses in our traditional communication segment performed as expected.
Our three primary high growth high margin businesses delivered strong revenue growth in the first quarter, while the business is in our traditional communications segment performed as expected.
Speaker 2: In the first quarter, the ongoing growth of boss money NRS and that the phone drove a 370 basis point year-over-year increase in growth profit margin and record growth profit.
In the first quarter, the ongoing growth of boss money interest in that phone drove a 370 basis point year over year increase in gross profit margin and record gross profit.
Speaker 2: 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.
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.
Speaker 2: 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.
Both money continue 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 bus money and boss Revolution, calling us increased 31% year over year.
Speaker 2: 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.
We continue to improve the user experience for both the retailer agents and digital customers and we see that investment paying off in money in Boston monies robust topline 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.
Speaker 2: As we continue to expand, we expect to realize more of the benefits of our expanding revenue and gross profits in our bottom line profitability.
As we continue to expand we expect to realize more of the benefit of our expanding revenue and gross profit in our bottomline profitability.
Speaker 2: 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 increase sequentially propelled by seasonal tailwinds and a gradual recovery of advertising in the digital adipome advertising space, a trend which has accelerated since the quarter close.
Interest continued to expand its network and upgrade existing accounts, helping to drive strong increases in merchant services and SaaS fee revenues, while advertising did revenue increased sequentially propelled by seasonal tailwind and a gradual recovery of advertising in the digital out of home advertising space, a trend which has accelerated.
Since the quarter close.
Speaker 2: Enterance income from operations was a record $5.5 million in the first quarter. We are also 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.
Interest income from operations was a record five and a half million dollars in the first quarter. We are also in the process of introducing some of the new formats that I've mentioned previously and I'm excited about their potential to help us drive long term expansion.
Speaker 2: Netphone 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 C-CAS offerings gradually become a more significant part of the business. Netphone generated positive adjusted EBITDA of $1.4 million and was near cashflow positive.
Net home delivered steady sequential customer base and top line growth while its unit economics are strengthening as the business scales and our higher <unk> higher margin seacoast offerings gradually become a more significant part of the business.
Net food and generated positive adjusted EBITDA of $1 $4 million and was near cash flow positive.
Speaker 2: Now in the second quarter our beta-rollet of Netefone AI is underway and it has been very well received by customers. We are very optimistic that Netefone AI and Netefone's forthcoming premium plans will help to drive meaningful artful and margin expansion.
Now in the second quarter, our beta rollout of another phone AI is underway and it has been very well received by customers we're very.
Optimistic that net net for the forthcoming premium plans that will help to drive meaningful our pool and margin expansion.
Speaker 2: We're working very hard to innovate, exciting new offerings, features and functionalities, and not just in our growth businesses.
We're working very hard to innovate exciting new offerings features and functionality and not just in our growth businesses.
Speaker 2: 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've also introduced advertising placements into the app and we've 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 ringing significant costs out of our operations in the quarters ahead, especially in our traditional communication segment.
And boss Revolution, calling we've redesigned the look and feel of our popular calling up 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 a nice revenue from it as a result in addition to our new product offerings. We continue to focus on streamlining overhead and reading significant costs out of our operations in.
The quarters ahead, especially in our traditional communications segment.
Speaker 2: This effort will help preserve the cash generation of our paid-minute businesses, despite their continued expected top-line declines.
This effort will help preserve the cash generation of our paid minute businesses. Despite the continued expected topline declines.
Speaker 2: It also allows to continue investing in innovative new products and promising initiatives in our existing growth businesses. We also return value directly to our stockholders in the first quarter, repurchasing 125,470 shares of class B common stock for approximately $2.8 million.
It also will allow 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 125470 shares of class B common stock for approximately $2 $8 million.
Speaker 2: 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 will be happy to take your questions.
Going forward, we will continue to purchase shares Opportunistically, we're 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 are very joyous holiday season, and thank each of you for everything you do for the ITT family No MRSA and I'd be happy to take your questions.
Speaker 1: 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.
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 star keys to withdraw your question. Please press Star then two we will now pause momentarily to assemble our roster.
Speaker 1: To withdraw your question, please press star then two. We will now pause momentarily to assemble our arousster.
Yeah.
Okay. The first question comes from Chris Loo with <unk> partners. Please proceed.
Speaker 3: Hi guys, congrats on the quarter. Just a few questions around FinTech and more specifically boss money. For Omantar's part, can you talk about how much of FinTech SGNA or Bob Loney SGNA is customized acquisition cost?
Hi, guys. Congrats on the quarter, just a few questions around and packing more specifically basmati.
On the first part could you talk about how much of that impact SG&A. Our robots, one yesterday was customer acquisition costs.
I don't have the number in front of me, but in terms of marketing I would say that we're probably spending.
Approximately.
$4 million a quarter.
Speaker 2: So, I mean, but there are other costs that go into customer acquisition besides marketing, but that's the main one.
So I mean, but you know there are other costs that go into customer acquisition, Besides marketing, but that's the main one.
Speaker 3: Understood. Thank you. And and then I guess the follow that in terms of payback, are you looking at the payback on this advertising and marketing spend? Obviously you're accelerating retail and digital growing as well. I'm just curious. Thank you, your thoughts there.
Understood. Thank you and then I guess a follow up to that in terms of payback are you guys looking at the payback on this advertising and marketing spend obviously youre accelerating retail and digital is growing as well I'm just curious.
Your thoughts there.
Again, I mean, I think that.
Speaker 2: Number one is we need to educate the market on the fact that we're a money transfer company. Even though our name is well known in the industry, we're not known necessarily as a money transfer company, particularly at retail where we really only relaunched it over the last 18 months.
You know number one as you know we need to educate the market on the fact that we're a money transfer company you know, even though you know our name is sort of you know.
Well known in the industry, we're not known necessarily as a money transfer company, particularly at retail are you know, we really only I'll say relaunched it over the last 18 months.
Speaker 2: And therefore, there's more of an education that's needed and some of the marketing is really like top of funnel to educate people in the fact that we are a reliable money transfer company and not just a company that you can come to for calling and top up.
And therefore, there's more of an education that's needed in some of the you know the marketing is really like top of funnel to educate people on the fact that we are a reliable money transfer company and not just a company that you can come to you for calling and top up.
Speaker 4: Hi, Chris, it's Masalo. And just to know how to watch more sad.
Hi, Chris its Marcelo.
And just to know Ed Watson will said.
Speaker 4: Indeed, in the digital channel, most of our cost of acquisition is the digital marketing that Moonmeade referenced to. But on our retail channel, we have been aggressively growing the number of retail agents in our network. We added roughly almost 50 percent the number of agents during fiscal 23.
Indeed in the digital channel most of our cost of acquisition is the digital marketing that you made a reference to look on our retail channel we have been aggressively growing the number of retail agents in our network.
We added roughly.
We grew almost 50% a number of agents during fiscal 'twenty three.
Speaker 4: And now we continue at that rate as we're going to fiscal 24.
And now with looking though at that rate as we go into fiscal 'twenty.
Speaker 4: So we are getting close to about 1800.
So.
We are getting close to about 800.
Speaker 4: with Taylor Agents in our network. And that is an investment because when we onboard a with Taylor Agents that are cost associated with opening a sub account or the compliance, credit, monitoring collections related to that agent, it takes time for a
Retail agents in our network and that is an investment because when we onboard a week.
Payload agent.
Cost associated with opening a sub account order compliance credit.
Monitoring collections related to the agents.
It takes time for a.
Speaker 4: average agent to ramp up the number of transactions in store.
Average agent to ramp up the number of transactions in store and usually we don't start making a real profit on the agent deal is averaging about 150 transactions a month and that takes time, so thats a real investment that now that we are doing on the retail channel and we are seeing the results at our retail channel is growing now.
Speaker 4: And usually we don't start making a real profit on the agent till he's averting about 150 transactions a month. And that takes time. So that's a real investment that we are doing on the retail channel. And we are seeing the results. Our retail channel is growing now at a set of Clinton digital. It's really been driving a lot of our transactions. And we hope to continue investing in that channel because the retail channel is also a great way to onboard.
The first of Cleveland digital it has really been driving a lot of outcomes actions and we hope to continue investing in that channel because.
Retail channel is also a great way to onboard boss.
Speaker 4: customers not only from any customer, but customers that eventually will also use our product in Pingless in IMTU. It's a great entry point to bring more customers at a low cost into our boss ecosystem.
Customers not only for money transfer, but customers that eventually will also.
Use.
Projecting painless in IMTT you there, it's a great point to bring more customers at a low cost into Airbus ecosystem.
Okay, great. Thanks, a lot guys.
Speaker 1: Again, if you have a question, please press star then one on your touchtone phone. The next question comes from Anigo Alanzo with Momentum Financial. Please proceed.
Again, if you have a question. Please press Star then one on your Touchtone phone. The next question comes from Nico Alonso with momentum and financial Please proceed.
Hello.
Speaker 5: Hello, in the previous presentations, you have referenced a fixed S-GNA number for NRS and two-phone. I was wondering how we should think about these fixed S-GNA number. Is this the fixed main NANDS-S-GNA that the daily operation of NRS and the two-phone need? Or is it a growth S-GNA? And the rest of it is just growth S-GNA that you are allocating.
Hello in previous presentations, you Cass reference our fixed SG&A number for <unk> and two phone I was wondering how we should think about these fixed SG&A number is the fixed maintenance SG&A that'd be daily operation off their N R. S.
Two phone need or is it a growth SG&A in the rest of it is just growth SG&A that you are allocating.
Speaker 5: and could be removed if you would like to run the business forecast for cash.
And could be removed if you would like to run the business forecasts for cash.
Speaker 2: I don't think that I've ever said a six SGNA. I mean, I think that we've stated previously that, you know, we are going to be very careful as it relates to the SGNA in even our growth businesses.
And I don't think that I've ever set a fixed SG&A I mean, I think that we've we've stated previously that we are going to be very careful as it relates to the SG&A in even our growth businesses.
Speaker 2: And as you've seen this past quarter, we continue to accelerate our growth, add on new products and keep our SGNA relatively flat, even slightly down in NRS this past quarter. That being said, it is both the NRS business and the net-owned business.
And as you've seen this past quarter, we continue to.
To accelerate our growth to add on new products and keep our SG&A relatively flat even slightly down.
And then interest this past quarter that being said it is both of them both the <unk> business and the net home business as well as the bus money business. You know have variable SG&A that will you know the.
Speaker 2: as well as the boss money business, you know, have variable SGNA that will, that, you know, the bigger it grows.
Bigger grows the <unk>.
Speaker 2: you know the SGNA will increase. That being said our goal is always to, you know.
They will increase that being said our goal is always to.
Speaker 2: you know bring bottom line results so we're very focused on making sure that the fixed S-GNA you know is as tight as possible.
Bring bottomline results. So we're very focused on making sure that the fixed SG&A.
As tight as possible.
Speaker 4: Right, if I could just explain on that a little bit, let's take one at a time. So in the case of NETO phone, NETO phone does
Right, if I could just expand on that a little bit let's take one at a time so in the case of naphtha phone.
Net of both of those have.
Speaker 4: material amounts of variable cost in terms of cost of acquisition. Primarily related to the cost of the actual IP physical, the physical IP phone that we deploy to, to our subscribers at part of the market subscription, as well as, you know, spiths and upfront commissions that we pay to our channel aid.
No material amounts of variable cost in terms of cost of acquisition primarily related to the cost of the actual IP physical the physical IP phone that we deploy to.
To our subscribers as part of the market subscription as well as.
Steve and Bob.
Strong commissions that we pay to our.
Shallow agents.
Speaker 6: As that business scales, however, I'll seek to overhead.
As that business scales. However.
Our fixed overhead.
Speaker 4: of fixed costs of the business that have been, have been continued being monitored very aggressively. We've been keeping that fixed overhead quite stable even as the business continues to grow and because of that scale really makes a difference and we have seen the benefits of that scale as the business grows in the bottom line profitability of net default.
Cost of the business have been have been continued to be monitored.
Very aggressively been keeping that fixed overhead.
Quite stable, even as the business continues to grow and because of that scale really makes a difference and we are seeing the benefits of that scale at the business grows in the bottomline profitability off of net default.
Speaker 4: In the case of an arrest, it's kind of almost the opposite or different, right? In the sense that the cost of acquisitions for an arrest are much, much lower in their model as compared to what net funds spend on acquisition. So I moved to an arrest cost of acquisitions related to commissions, some marketing, but they are relatively small.
Together with the rest is kind of.
Almost half of it are different right in the SaaS that cost of acquisition.
Yes.
Much much lower in the law in the model as compared to what <unk> spent on acquisition to our multiple.
<unk> cost of acquisitions relate to commissions, some marketing, but relatively small.
Speaker 6: relative to the business. And there is a certain amount of fixed overhead. There are TV small, that also means to be leveraged significantly as the business scales. And that's why you're seeing both at the phone and an arrest that as those businesses grow, you see the immediate impact that those are adding to the bottom line EBITDA of both of those businesses. Thank you.
Relative to.
The business and there is a certain amount of fixed overhead relatively small that also.
It needs to be leverage significantly as the business scales and Thats why youre seeing both the medical and RF, but as those businesses grow you will see the immediate impact to us having to the Bottomline EBITDA of both of those businesses.
Okay understood.
Speaker 5: Then I had a couple of net two phone specific questions.
Then I had a couple of net two phone has specific questions.
Speaker 5: So how much margin is expansion, close margin expansion? Are you hoping to get once you migrate your customers in the old platform, to a new platform that you own? And two more questions of native phone, one.
So how much margin expansion gross margin expansion are you hoping to get once you migrate your customers in the old platform to a new platform that you own.
And two more questions on that two phone one.
Speaker 5: of these two areas was the range of the length of the contract. You have your with your customers that would be the minimum and the maximum and another one of these was the backlog right now for next.
Of these two it is what's the range of the length of the contract you have with your customers that would be.
One on the maximum and another one is what's the backlog right now for net to phone.
Speaker 2: So I'm not going to answer them in particular order. I'm just going to answer them as I remember them. In terms of the backlog, I don't exactly have the answer. I mean, usually we try to get customers active as quickly as we can. But it varies depending on the.
So I am not going to answer them in particular order I'm just going to enter them as I. Remember then in terms of the backlog I don't exactly have the answer I mean, usually we try to get customers active as quickly as we can.
But it is.
It varies depending on the.
Speaker 2: I'll say the complicated nature of particular customers, you know, take longer to...
I'll say the complicated nature of particular customers take longer to.
Speaker 2: to move onto the net-to-phone platform. So we have customers that can wait as little as one to two days, and we can have customers that can wait as long as two months, depending on the complexity of their migration. As far as the margin expansion, it's
To move on to the net phone platform. So we have customers that can wait as little as one to two days and we can have customers that can wait as long as two months, depending on the complexity of their migration.
As far as the.
The margin expansion.
There probably is a little bit of margin expansion, when we move customers off of our old.
Speaker 2: There probably is a little bit of margining expansion when we move customers off of our old rented platforms onto our own. That being said, that's not the reason that we wanna do it. The reason we wanna do it is really about the...
Rented platforms onto our onto our own.
That being said that's not the reason that we want to do it. The reason we want to do it is really about the.
Speaker 2: you know the functionality, the improved experience that the customers are going to get, not about the dollar to $2 per user, that it costs us to have a rented platform for some of our older customers.
The functionality the improved experience that the customers are going to get not about.
Dollar to $2 per user.
Cost us to have.
Have a rented.
The platform for some of our older customers.
Speaker 5: I think you asked one more question I might have forgotten about Yeah, about the contract length and let it clarify an item there. So what I meant by backlog
I think you asked one more question I might have forgotten.
Well the contract lengths and literally clarify an item there so what I meant by backlog is the contra.
Speaker 5: is the contracts that you already have signed with your cash commerce and I get to be paid. So those that will be paid in the future.
Contracts that you already have signed with your customers and are yet to be paid so those that will be paid in the future.
That's a backlog that has to be collected.
Speaker 2: I don't know the answer to that question. I mean, most of our customers are build monthly. You know, we do have some, you know, annual contracts. And but the vast majority of our customers pay on a monthly basis. So there's not a huge backlog in terms of payment. As far as, you know, the length of the contracts, you know, most contracts tend to be three years, but we have as little as one year depending on the country and the specific users.
I I don't know the answer to that question I mean, most of our customers are billed monthly.
We do have some annual contracts.
But the vast majority of our customers pay on a monthly basis, so theres not a huge backlog in terms of payment.
As far as the length of the contracts you know me.
Most contracts tend to be three years, but we have as little as one year, depending on the country and the specific users.
Speaker 4: And she was correct, right? We have, you know, how you define in backlog, right? You know, they'll wear me majority of our customers on a monthly payment basis. So we usually have like one month of the full revenue on the balance sheet, no more than that.
Lewis correct, Greg we have in terms of how you're defining backlog, though the overwhelming majority of our customers.
A monthly payment basis.
Do they have like one month of deferred revenue on the balance sheet.
No more than that.
Speaker 6: And in the moment, we do the real backlog. You know, the reality is that we have been adding roughly about 12.
And at the moment, we've got a real backlog.
The reality is that we have been adding roughly about 12 to 13000 seats quarterly noteworthy last several quarters and we believe that that trend is likely what we have.
Targeting on in terms of trying to achieve going forward as well with Apple improvements as we launched no no.
Higher up the projects and also as we seek tests.
Speaker 6: Customers become gradually larger portion of the total portfolio because C-CAS R-PW is about 7 to 8 times larger than the R-PW of a regular customer.
Customers become gradually larger portion of the total portfolio because <unk> I believe about seven to eight times larger than the outflow of a level of customer.
Okay.
Speaker 2: Good. And I think they haven't asked about M&A last quarter. You reference in a small acquisition on the NRS side. I haven't seen any outflows of money dedicated to acquisitions. So if you can provide any updates, that would be greatly appreciated. It's very small. It's not.
Good.
I think I Havent asked about M&A last quarter, you reference and a small acquisition on the <unk> side I haven't seen any outflows of money dedicated to acquisitions. So if you can provide any updates that would be greatly appreciated.
It's very small it will not be it's not material.
Okay.
Thank you.
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