Q2 2024 IDT Corp Earnings Call

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Unknown Attendee: Please continue to hold, ladies and gentlemen, your conference will begin in a couple of minutes. Please continue to hold. Click on the card above to watch the full interview. IDT Corp. IDT Corp. David Polansky, Cherubino, Unknown Attendee, Norway Unknown Attendee, Marcelo Fischer, Amiran Tahl, Chris Santiago, polymercontent Mr. R. Scerbia. Hegel.

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Operator: a I would suggest that you watch until the best part of the video today. For the accompanying video, just watch the bottom half and then the Er titles. Good evening and welcome to IDT Corporation's second quarter fiscal year 2024 earnings. In today's presentation, IDT's management will discuss IDT's financial and operational results for the three-month period ended January 31, 2020. During remarks by IDT's Chief Executive Officer, Shmuel Jonas, all participants will be in listen-only mode. If 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. Any forward-looking statements made during this conference, 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 intends to deliver.

Okay.

Good evening and welcome to IDT Corporation's second quarter fiscal year 2024 earnings call in today's presentation, Idt's management will discuss Idt's financial and operational results for the three months period ended January 31 2024.

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. Jonases remarks, Marcelo Fischer Idt's, Chief Financial Officer will join Mr. Jonas for Q&A any forward looking statements made during this conference either in the prepared remarks or in the Q&A 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.

Any anticipates these.

Operator: These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that IDT files periodically with the SBA. IDT assumes no obligation either to update any forward-looking statements that it has made or may make or to update the factors that may cause actual results to differ materially from those that it forecasts. 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. The schedule provided in the IDT earnings release reconciles adjusted EBITDA, non-GAAP, net income, and non-GAAP earnings per share to the nearest corresponding GAAP. Please note that the IDT earnings release is available on the investor relations page of the IDT Corporation. The earnings release has also been filed on Form 8K with the FDA. I will now turn the conference over to Mr. Thank you very much.

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.

D T 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 the 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 8-K, with the SEC I will now turn the conference over to Mr. Jonas.

Thank you very much.

Samuel Jonas: Welcome to IDT's earnings conference call. My remarks today focus on the second quarter of our fiscal year 2024, the three months ending on January 31st.

Welcome to Idt's earnings Conference call My remarks to stay focused on the second quarter of our fiscal year 2020 for the three months ended January 31st for a more detailed discussion of our financial and operational results for the quarter. Please read our earnings release filed earlier today and our Form 10-Q that we expect to file with the SEC on Monday.

Samuel Jonas: For a more detailed discussion of our financial and operational results for the quarter, please read our earnings release filed earlier today and our Form 10-Q that we expect to file with the SEC on Monday. The second quarter was highlighted by the continued expansion of our growth businesses, with both NRS and BUS money surpassing the $100 million annual revenue run rate milestone. However, our expense management was not where I wanted it to be for the quarter, and I expect it to get better.

The second quarter was highlighted by the continued expansion of our growth businesses with both interest and bus money, surpassing the $100 million annual revenue run rate milestone.

However, our expense management was not where I wanted to be for the quarter and I expect it will get better.

Samuel Jonas: NRS continues to deliver robust recurring revenue per terminal. We again saw strong growth in merchant services and SAS revenues and increased merchant services revenue per NRS pay account. We added approximately 1,500 net new terminals to the NRS network this quarter. We did have some one-time costs related to bad debt, which affected our quarter.

Interest continued to deliver robust recurring revenue per terminal, we against a strong growth in merchant services.

<unk> revenues and increased merchant services revenue per interest pick up.

Added approximately 500 net new terminals to the interest network this quarter.

We did have some onetime costs related to bad debt, which affected our quarter.

Samuel Jonas: Both money delivered another quarter of impressive results with 42% year-over-year revenue growth. Its improving economics helped our FinTech segment to achieve adjusted EBITDA break-even for the quarter. One key to the continued growth of this business has been our commitment to making money transfers faster, more convenient, and secure for our customers. And to that end, we recently introduced an option for our U.S.-based customers to send money directly to bank accounts through the recipient's Visa or MasterCard.

That's both money delivered another quarter of impressive results with 42% year over year revenue growth improving economics helped our fintech segment to achieve adjusted EBITDA breakeven for the quarter.

One key to the continued growth in this business has been our commitment to making money transfers faster more convenient and secure for our customers.

And we recently introduced an option for our U S based customers to send money directly to bank accounts to the recipients visa or Mastercard, we're seeing good customer response in the remittance Carter's where we have launched this offering and we'll be expanding the service to many other destinations in the coming months.

Samuel Jonas: We are seeing good customer response in the remittance corridors where we have launched this offering and will be expanding the service to many other destinations in the coming months. I am also very pleased with Netto on increasing subscription revenue 19% year over year and achieving cash flow break even, which we measure as Adjusted Evadolous Catback. Together, our combined growth segments propelled IDT to achieve another quarter of record consolidated gross profit and increased gross margin.

I'm also very pleased with excellent increases increasing subscription revenue, 19% year over year and achieving cash flow breakeven.

Which we measure as adjusted EBITDA less capex together, our combined growth segments propelled ITT to achieve another quarter of record consolidated gross profit and increased gross margin there.

Samuel Jonas: The businesses within our traditional communications segment continue to generate strong cash flows. Over the past few months, we have been very focused on reducing our overhead and on streamlining our operations within Our Businesses and CompanyWide. You will see the benefits of these efforts in the third quarter and beyond. Now, I want to provide some context to our board's decision to initiate a quarterly cash dividend. NRS, Boss Money, and Netfone no longer need new cash investments to fund their organic growth.

The businesses within our traditional communications segment continued to generate strong cash flows over the past few months, we have been very focused on reducing our overhead and on streamlining our operations within.

Our businesses and company wide and company wide you will see the benefits of these efforts in the third quarter and beyond now.

Now I want to provide some context to our board's decision to initiate a quarterly cash dividend.

S bus money and therefore, no longer need new cash investments to fund our organic growth in aggregate they become significant contributors to our bottom line.

Operator: In aggregate, they have become significant contributors to our bottom line, and we expect them to continue to increase those bottom line impacts. Meanwhile, we expect cash flows from our traditional business to continue to remain robust for years to come. The strength of our operational results and our balance sheet, including our enhanced liquidity, provides us with flexibility as we invest in the development of our next generation of exciting, early stage initiatives and scout for other growth opportunities and other countries in which to add our services. In light of our robust financial position and positive outlook, the board felt that we should supplement our ongoing program of opportunistic stock buybacks, which can vary from quarter to quarter, with regular, predictable dividend payments to our stockholders.

And we expect them to continue to increase those bottom line impacts.

Meanwhile, we expect cash flow from our traditional business to continue to remain robust for years to come the strength of our operational results and our balance sheet, including our enhanced liquidity provides us with flexibility as we invest in the development of our next generation of exciting early stage initiatives and Scott for other growth opportunities in other countries and what.

At our services in light of our robust financial position and positive outlook. The board felt that we should supplement our ongoing program of optimistic or opportunistic stock buybacks, which can vary from quarter to quarter with a regular predictable dividend payments to our stockholders to wrap up I want to thank our employees at all our offices worldwide for.

Operator: To wrap up, I want to thank our employees at all our offices worldwide for their hard work to make these results possible, and thank our board for their support. Now, Marcelo 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 1 on your touch-tone. If you are using a speaker phone, please pick up your handset before pressing the start button. To withdraw your question, please press star, then 2.

Their hard work to make these results possible and thank our board for their support now more so and I'll 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 star keys to.

To withdraw your question. Please press Star then two we will now pause momentarily to assemble our roster.

Samuel Jonas: We will now pause momentarily to assemble our ride. Once again, to ask a question, please press star one on your touch tone. We have. The first question comes from William Vathon on Corrient. Hi gentlemen, congratulations on a great quarter. I just wanted to ask about what you're seeing in terms of the consumer base for the NRS business. What trends are you seeing in that type of consumer in terms of spending, in terms of inflation? and a follow-up question would be, What are you seeing in terms of acquisition opportunities for? I'm out.

Once again to ask a question. Please press star one on your Touchtone.

Phone.

We have.

The first question comes from William <unk>.

With Korea. Please proceed.

Sure.

Yes.

Yes.

Hi, gentlemen, congratulations on a great quarter.

I just wanted to ask about what youre seeing in terms of.

Consumer base.

S business.

Ones that you're seeing in that type of consumer.

In terms of spending in terms of the ablation.

And a follow up question would be what.

What are you seeing in terms of.

Acquisition opportunities for.

Samuel Jonas: These are good questions. Well, the first thing I would say is, you know, we put out a monthly report called NRS Insights that our data team provides, which if you don't get, I suggest you look it up. I mean, you know, I can give you the basics from the report. I don't want to, you know, give away the report before, before we publish it, but I'll give you just a couple of pieces from it, which I think are probably the highlights you're looking for.

Expanding into different businesses in different business segments I'm out in the marketplace.

It's a good question.

Well I mean.

The first thing I would say as you know, we we put out.

On a monthly report called the N. R. S insights that are that our data team provides.

If you if you don't get I suggest you use.

You look it up.

You know I can give you the basics.

From I don't want to like give away the report before before we publish it but I'll give you just a couple of of our pieces from it.

Which I think are probably the highlights here looking for so.

Samuel Jonas: So, overall, I think that, you know, the stores are doing pretty well. Not as, you know, definitely, I would say that, you know, from an inflation standpoint, it's moderated quite a bit. For example, the average price increases for February were 1.2% year over year. And same store sales, you know, February of this year versus February of last year increased three and a half percent. However, there was, you know, one day more.

Overall, I think that you know that the stores are doing pretty well.

Definitely I would say that you know from an inflation standpoint, it's moderated quite a bit like the average price increases for February were one 2% year over year.

And same store sales.

February of this University, you know February of <unk>.

Last year increased three 5%. However, there was one day more so I'm not sure.

Samuel Jonas: So I'm not sure. But I think we might normalize for that. I think we take it out. I think it's actually, I think it's actually three and a half percent once it's normalized for that.

Although I think we might normalize for that I think we take it out I think it's actually it's I think it's actually three 5% once you normalize for that correct.

Samuel Jonas: And then, and then, you know, from January, there was a decent bump; I think sales were up about 7.4%. So those are like the big picture numbers from the insights you can, you know, when the report comes out on Friday, you can read the rest of it. As far as As far as, you know, where the business is going and the types of acquisitions that, you know, that we're looking at, I would say that, in Netafone, we're not really looking to make, you know, any large acquisitions. I mean, we think that, you know, we have a lot of projects that are being worked on internally. And, you know, we're very happy with the pace there.

And then and then you know from January like no other.

You didn't bump I think sales are up about seven 4%.

So those are like the big picture numbers from from the insights you can you know when the report comes out on Friday, you can read the rest of it.

As far as.

As far as you know where the business is growing in these types of acquisitions that we're looking at.

I would say that.

You know in in net to phone, we're not really looking to make any large acquisitions. I mean, we think that you know we have a lot of projects that are being worked on internally and we're very happy with the pace there.

You know in the you know in the remittance side of the business. We've looked at possibly you know, adding you know on certain channels or countries that you know were not so strong and.

Sort of gain a foothold then and then and then expand upon you know the one or two that we had been.

Samuel Jonas: You know, on the, you know, in the remittance side of the business, we've looked at, you know, possibly, you know, adding, you know, certain, you know, channels or countries that, you know, we're not so strong in, you know, to sort of gain a foothold in and then and then expand upon. The one or two that we had been looking at, you know, relatively recently ended up really not And We decided not to go ahead with them.

Looking at you know relatively recently ended up really not sitting our qualifications and we decided not to go ahead with them.

But you know we're always in the market looking for you know.

Acquisitions that will help our bottom line.

And as I said help us grow into new countries and new verticals.

As far as.

You know.

You know in our S.

There are some small acquisition.

You know that that that we are looking at we just made an acquisition in the you know restaurant technology space.

To help us get into into that vertical.

Samuel Jonas: But, you know, we're always in the market looking for, you know. Unknown Attendee, Jason Lustig, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown, You know, NRS, you know, there are some small acquisitions, you know, that we are looking at, you know, we just made a, you know, an acquisition in the, you know, restaurant technology space, you know, to help us get into that vertical. But we, you know, overall, I would say that we're, We're really more focused on growing things organically. I know that's not maybe as exciting, but we think we do pretty well, and we're going to continue to try to grow things organically. This question comes from... Jason Lustig, please announce your affiliation then pose your, guys.

But we you know overall I would say that were.

You know, we're really more focused on growing organically I know that's not as maybe as exciting, but we've we think we do pretty well and we're going to continue to.

Try to grow things organically.

Okay. The next question comes from.

Jason Lustig, please announce your affiliation and pose your question.

Hey, guys I'm.

Just curious how you're thinking about spin offs or potential spin off so that's appalling.

And later them, both being free cash flow breakeven or better going forward.

I you know I would say that we're not looking to do anything imminently.

As I talked about on the you know the Investor Day, I mean, I think you know.

A big piece of that is how the how the market.

Foresees things, particularly in the in the net the phone area you know that the market is still really not been particularly strong for companies. You know I'll say you know in our verticals, even though I think you know we're by far the best.

You know, it's still you know.

No you are you know when youre in a weak vertical you you get you know judge amongst them as well.

You know as as for.

I think you know one day, it's going to make you know a great.

Samuel Jonas: I'm just curious how you're thinking about the spinoff, and NRS in light of it. I would say that we're not looking to do anything imminently. As I talked about on investor day, I think a big piece of that is how the market perceives things, particularly in the Netafone area. The market is still really not particularly strong for companies, I'll say, in our verticals, even though I think we're by far the best. It's still, when you're in a weak vertical, you get judged amongst them as well.

Independent company and you know I think that.

You know when the right time to you know to spin off is I can't comment on that today, but you know we continue to to build it for it to become.

Much more valuable than it than it is now.

Okay. Thank you.

Jesse.

Again, if you have a question. Please press Star then one.

Okay.

Okay, we have a follow up coming from William Boston.

With corium.

Your line is now.

Yeah.

Hi, again.

So I just thought of a follow up.

We mentioned this might have been during the.

Annual meeting.

That in the.

Boss money business.

Business or the money transfer business.

The key is getting to scale, so getting to a scale, where you can reach profitability in getting that transaction volume through.

Samuel Jonas: As for NRF, I think one day it's going to make a great independent company. You know, when the right time to, you know, spin off is, I can't comment on that today. But, you know, we continue to build it to make it, you know, much more valuable than it is now. Okay, thank you. Thank you, Jeff.

So with the reaching of.

I think adjusted EBITDA breakeven this quarter do you feel like you've reached that point of scale, where youre going to get future profitability in that business and can you talk a little bit more about the trends youre seeing there.

And what you think the long term profitability can be.

On the Fintech side.

Yeah.

Operator: Again, if you have a question, please press star, then 1. We have a follow-up. Thank you for joining us.

It's not as simple of a question to enter.

You know as you would think I mean, what I would say as you know I mean, you know we sort of said that if we continue to grow the business that sort of like half the pace that we've been growing it at.

Samuel Jonas: Thank you. Hi again. I just thought of a follow-up question. It might have been, that in the business or the money transfer business, the key is getting to scale. So getting to a scale where you can reach profitability and get that transaction volume. So with the, Unknown Attendee. Unknown Attendee.

You know, we could see it getting to you know I.

I think you said, 14% to $15 million of profitability.

From that part of the business you know over the next two.

Two to three years.

You know it.

The one thing I would say, it's like it's all dependent on how much you want to invest back into acquiring.

Samuel Jonas: Reporter, do you feel like you've reached that point of scale where you're going to get future profits? business, talk a little bit more about the trends you're seeing there and what you, I mean, you know, it's not as simple of a question to answer. You know, as you would think, I mean, what I would say is, you know, I mean, you know, we sort of said, you know, that if we continue to grow the business, that sort of like half the pace that we've been growing it at, you know, we could see it, you know, getting to, you know, I think it's 14 to $15 million of profitability, you know, from from that part of the business, you know, over the next, you know, two to three years, you know, the one thing I would say is, like, it's all depending on how much, you know, you want to invest back into acquiring, you know, more customers and growing, you know, verticals that you're not as strong in. So, you know, I mean, you can pick any country, but you know, pick, Unknown Attendee, Jason Lustig, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown [inaudible] IDT Corp IDT Corp, Don't go for Avenue of them.

More customers and growing you know verticals that you're not as strong and so you know I mean.

You can pick any country, but you know pick a.

You know Vietnam like you know today, we have no volume.

To Vietnam, you know if we wanted to get into Vietnam, Theres really two ways of doing it you can either acquire you know.

Another company that has you know volume to Vietnam.

Or you can spend a lot more than you have to acquire.

Acquiring customers in and you know sort of overpaying on on the pay outside.

And hope that once you get a <unk>.

Larger base of customers, you'll you know Youll, then you know figure out how to maximize the profits on it.

So.

Sort of like taking the approach of really trying to be like.

And much more focused on verticals that we already had you know.

Penetration on you know in our calling business or in our top up business and really trying to like move customers.

From from one place to another.

But.

You know, it's it's definitely going to be a you know a profitable and growing part of our business. So I mean.

I don't know if that answers your question, but Marcel you have anything to add maybe.

I would say I'm, just just put a little more context is that.

Obviously the money.

<unk> bus money he has the lions share of the Fintech segment.

In terms of revenue.

Marcelo Fischer: And that part of the business, Boston Money, has been generating positive EBITDA now for the last two quarters, and now it probably did more than a million dollars in positive EBITDA in the last six months. So it's doing well, and that EBITDA will continue to grow at its pace. But to some extent, Boston Money is now growing EBITDA, funding all the investments in that segment. We have Gibraltar Bank, which is at the cusp of receiving a full license to operate a full bank. We have our initiative in online banking, online bank, LROI or NEO Bank. So you brought out NEO Bank; they're kind of mostly pre-revenue at this stage. And it also requires investment.

And that part of the pivotal study have been generating positive EBITDA now for the last two quarters I think.

With modern.

As part of the EBITDA.

The last six months, so it's doing well in that EBITDA will continue to grow at these skills.

But to some extent.

Money now growing EBITDA funding all the investments in that segment right. We have our Gibraltar bank, which is at the cusp of this and therefore for license.

To operate at a full bank, we have all the initiatives in online banking.

<unk> Bank <unk> bank.

So you brought out in the Opex kind of mostly the pre revenue stage.

And so.

<unk> investment so he kind of investing in those initiatives no with the cash flows from money transfer.

Marcelo Fischer: So, kind of investing in those initiatives now with the cash flows from money transfer at this point. But going back to the money transfer topic and your comment, a lot of the acquisitions that we have looked at in the last few months were focused on the money transfer space. We do believe that skill matters hugely in terms of getting to higher profitability in that industry, and growing organically has been good for us. We've been growing at around a 35-40% clip, which is excellent, better than other places in this industry. But being able to supplement that with an acquisition would probably make a lot of sense in reaching scale. We've looked at a few of them. As you mentioned, the ones we've looked at so far have not met our criteria.

At this point.

But going back to the money capital project.

Youre all your comments.

A lot of the acquisitions that you have to look at in the last few months, we're all focused on the money transfer space.

We do believe that scale matters hugely.

In terms of getting to higher profitability in that.

That industry and growing organically has been good for us we've been growing at around 35%, 40% clip, which is excellent better than others.

I think as the industry, but being able to supplement that with an acquisition, which might make a lot of SaaS.

In reaching scale.

If you looked at a few of them.

Well matched right now.

As we looked at so far have not met our criteria.

Marcelo Fischer: And we're going to maybe continue to look at some future opportunities in the future. Okay, thanks guys. Again, if there are any remaining questions or comments, please indicate so now by pressing star. We have a question coming from Bill Monet. Private Investor Bill. Hi guys, just a question.

And we can appear to continue to look at some future opportunities in that area.

Yeah.

Okay. Thanks, guys.

Right.

Yes.

Once again, if there are any remaining questions or comments. Please indicate so now by pressing star one.

Okay.

Okay. We have a question coming from Bill <unk> with.

He is a private investor Bill. Please proceed.

Hi, guys. Just a question I see cash balances are building fairly rapidly you guys have stated that a big acquisition.

Unknown Attendee: I see cash balances are building fairly rapidly. You guys have stated that big acquisitions do not seem to be part of the plan now, and your businesses are self-funded. I know you put in a small dividend. Unknown Attendee, Jason Lustig, Unknown Attendee, Jason Lustig, Unknown Attendee, Jason Lustig, I mean, you know, either acquisitions or stock buybacks, that's really the two main places.

<unk> seem to be.

Part of the plan now and your businesses are self funded I know you put in a small dividend.

$5 million a year that'll be at this point.

Do you have any plans for the cash building up fairly rapidly and it doesn't seem that the many uses for it.

Yeah.

I mean, either acquisitions or stock buyback, that's really the two main places.

Okay.

Okay.

Got it thank you.

Thank you.

Okay.

Okay. It looks like we have no further questions in queue.

Operator: Thank you. There are no more questions. This concludes our question and answer session. Thank you for attending today's presentation.

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.