Q3 2024 IDT Corporation Earnings Call

Good evening and welcome to the IDT Corporation's third quarter fiscal year 'twenty 'twenty four earnings call in today's presentation, Idt's management will discuss Idt's financial and.

Operational results for the three month period ended April 30th 'twenty 'twenty four.

During remarks by Idt's, Chief Executive Officer, Shmuel Jonas all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After Mr. Jonas his 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 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 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 S E C.

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 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 John.

First of all I apologize, but at least there's a little longer than I prefer to read but nonetheless here. It goes welcome to Idt's earnings Conference call. My remarks today focus on the third quarter of our fiscal year 2020 for the three months ended April 30th 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.

Idt's three high growth high margin businesses again delivered strong results in the third quarter contributing to a 310 basis point improvement in our consolidated gross margin.

<unk> has surpassed 30000 active terminal this quarter, making it the largest Pos network for C stores in the country and.

Net phone adjusted EBITDA doubled year over year in the current quarter as the business continues to scale and improve its operating leverage in our Boston money, our balanced omni channel approach to customer acquisition and focus on customer service and user experience drove another quarter of strong revenue increases, helping the fintech segment to its first adjusted EBITDA positive quarter.

<unk>.

Yeah.

Looking ahead, we are very excited about the potential of each of these three businesses for sustainable profitable growth in our traditional communications segment, we are making progress turning around our IDT digital payments business unexpected Bottomline results will continue to improve.

Now I want to spend a few minutes on each of the three high growth businesses.

Interest you.

The interest segment added 600, net new point of sale terminals during the quarter and we see a long sales runway ahead, and our independent C store retailer market and we have several initiatives that recently launched.

Our product offering range has really increased and this has increased our total addressable market in.

In addition to growing our retail network, we are continuing to improve per terminal economics by bundling more of the new terminals, we sell with interest paid.

And for existing customers by successfully Upselling higher revenue payment processing and SaaS plans.

We generated a solid year over year increase in advertising and data revenue up 16% year over year and are well positioned are well positioned for continued advertising revenue growth.

Advertising and data revenue is inherently volatile and driven by industry wide trends and seasonality.

As we continue to grow in this space, we are strengthening our positioning by making progress on three important fronts building our base of direct advertising customers, including CPG is positioning our digital screen inventory offerings within the retail media network market, which is a popular advertising space and expanding content partnerships to attract new.

<unk> buyers.

Merchant services revenue increased 66% year over year, driven by increases in interest pay accounts as we optimize the incentives for P. O S users to take our payment processing solution.

We are also benefiting from a steady and measurable rising credit card usage as a percentage of total transactions in our retail locations.

All in all boosted by solid increases from each of our revenue verticals interest income from operations and adjusted EBITDA more than doubled year over year, and we're going to build on that momentum as we move through the remainder of calendar 'twenty 'twenty four and definitely beyond.

The next phone segment continued to increase its contribution to Idt's total bottomline genera.

Generating over $2 million and adjusted EBITDA this quarter more than double the year ago quarters level.

We are seeing the benefits to Netherlands operating leverage as the business continues to scale at the same time, we continue to we continue to rigorously focused on cost control and improving unit economics. For example, we have enhanced that the phone customers and channel partners portal to enable deeper self management and account administration, increasing user convenience.

While D C while decreasing.

Demand in the rest of the organization.

As a result of our initiatives, Netherlands, combined SG&A expense and technology and development costs have declined as a percentage of net phones revenue in each quarter this fiscal year.

All in all we continue to improve Netherlands bottom line, while investing in acquiring customers at a very attractive ROI Ned.

Net phone seats served increased 13% year over year, driving a 17% increase in subscription revenue with especially strong contributions from the U S, Mexico, and Brazil, while average revenue per seat increased 4%.

Over the next several quarters net phone will transition from its current single all in Ucas pricing plan to basic plan with premium feature driven offerings, including AI powered functionalities, which we believe will drive continued <unk> expansion. We will also be rolling out significant new enhancements to the user experience in the coming months, including a powerful single.

Pane of glass interface for all net phone services and on all types of devices.

With new plans and deeper customer engagement and the large market opportunities in the U S and especially Latin America I'm excited by net funds growth potential and we expect all these initiatives to increase growth in our pool and seat counts along with our <unk> offerings, which we didn't even discussed today.

Within our Fintech segment are Bosch money business had a strong quarter further expanding its transaction and revenue growth rates, both of which were already well above industry averages. We continue to take market share in our primary and our primary cargoes from the U S to Latin America, and the Caribbean and in key U S to Africa quarters, as well our Bosch money.

Growth strategy is three pronged first we're expanding our agent network by adding new retail locations transactions. Originally in our retail agent channel are up 49% year over year second we consistently focus on cross selling Bosch money services to our much broader bus ecosystem.

And our customer base and third we continue to improve and refine our ability to profitably acquire new customers by paying close attention to customer acquisition costs vis vis the lifetime value.

All in all we doubled our transaction volume over the past eight quarters and are pushing hard to double it again hopefully much more quickly.

We feel very encouraged that Boston money recently became cash flow positive and as it continues to scale, we aim to generate adjusted EBITDA margins in line with the industry leaders.

Due to the improving economics of our money transfer business. Our Fintech segment overall was able to achieve positive adjusted EBITDA for the first time this quarter.

Traditional communication segment, we continue to focus on maximizing cash flow by reducing costs and streamlining operations in our ILD voice and wholesale communications businesses.

As the market for paid minute communications continues to decline at the same time, we have stabilized our IDT digital payments business in recent quarters and are working to return it to the growth to resent it and many other.

Applications that we have developed we are also rolling out pricing changes for our international mobile top up products to various corridors and we will be carefully monitoring.

The effect of those changes however, so far they have created a lot more profitability.

Looking at IDT on a consolidated basis, our three high growth high margin businesses are steadily becoming more significant contributors to our consolidated results relative to our larger lower margin traditional telecommunications segment. This transition has driven consistent increases in igt's consolidated gross profit over the past four quarters and will graduate enable us to deliver strong.

Our total bottom line results at the same time, we will continue to return value directly to shareholders through additional repurchases of stock and a quarterly dividend now Marcelo and I will be happy to take your questions.

Okay.

All right.

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 Iraq there.

Yeah.

Your first question is coming from Alec.

Alex sure.

Speaker Change: Please announce your affiliation and pose your question.

Hi, Sheila Marcelo.

Quickly he.

In traditional I think you had expressed some optimism that SG&A.

Speaker Change: You would find some efficiencies there.

A little bit surprised to see the SG&A up year over year and quarter over quarter. So can you share a bit.

Speaker Change: What drove that without a follow up.

Yes, hi, Alex Thanks for joining the call.

But now we have put in place.

A large cost cutting initiative.

It should be seen.

Lot of that coming through.

In future quarters.

In Q3, some of that was up obligated by the fact that we had.

Speaker Change: Higher.

Speaker Change: Expanding to.

Two one time.

Competitory arrange of months.

Now based on executive Carlyle contracts, we have that we have entered into.

Filed on those on those on that contract.

Speaker Change: A few weeks ago.

So that was a onetime noncash compensation type of charge that led for the SG&A to be higher but when you remove.

Some of the.

Some of those charges you would start seeing.

Some of the cost cutting already.

No being assigned to show in Q3, but you're going to see most of it.

Lot of it in Q4 and beyond.

Understood. Thank you and small.

Obviously, it's amazing to patients.

30000.

Kiosks, that's yeah, it's more than circle, Okay, I can care that they get a C store chain in the country and I know they are paying a lot less for most of the items most of the cost of goods sold.

It's flowing through the stores and your fault the small.

The smaller stores are getting more right. So like how high do you think about bringing some of the benefits of the massive scale of interest to your individual customers as they run their stores procure products et cetera.

Well, we have more than one tried to do stuff and you know in terms of buying groups and deliveries to the store of their inventory.

To date, we haven't had massive success.

Bringing I will say those savings to fruition for our retailers and the <unk>.

Speaker Change: Benefits to us from that.

I do expect that to be.

It's something that we try again.

You know in the in the coming year, but at the moment, we're more focused on bringing in more customers to the store and getting the customers to spend more rather than to bring down their cost of goods sold.

Understood. Thank you guys.

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

Yeah.

As there are no more questions. This concludes our question and answer session and conference call.

Can you for attending today's presentation you may now disconnect.