Q3 2025 IDT Corp Earnings Call
Good afternoon, ladies and gentlemen, and thank you for your patience. Your conference will begin shortly once again. Thank you for your patience Your conference will begin shortly.
[music].
Speaker Change: Good evening and welcome to the IDT Corporation's third quarter fiscal 2025 earnings Conference call. All participants are now in a listen only mode. A question and answer session will follow management's remarks anyone requiring operator assistance during the conference call should press Star Zero on your telephone keypad. Please note this conference call.
Speaker Change: <unk> is being recorded.
Speaker Change: Now I'll turn the call over to Bill Ori of I D. P Investor Relations Bill you may begin.
Speaker Change: Thank you John in today's presentation, Idt's, Chief Executive Officer, Shmuel, Jonas and Chief Financial Officer, Marcelo Fischer will discuss Idt's financial and operational results for the three months period ended April 32025.
Speaker Change: After their remarks, they will be happy to take your questions any forward looking statements made during this conference call either in their remarks or in the Q&A that follows 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.
Speaker Change: And uncertainties include but are not limited to specific risks and uncertainties discussed in the reports that IDT files periodically with the SEC.
Speaker Change: 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.
Speaker Change: Patient 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.
Speaker Change: Schedule is 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 our form 8-K with the SEC now.
Speaker Change: Now I will turn the call over to Shmuel for his comments on the quarter's results.
Shmuel: Thank you Bill and thank you John and.
Shmuel: Marshall.
Speaker Change: Third quarter was solid with strong year over year gains was slightly softer than our second quarter in part because of the expected seasonal factors year.
Speaker Change: Over year revenue growth and continued expansion of each of our business segments bottom line results drove a 133% year over year increase in consolidated income from operations was 57% increase in consolidated adjusted EBITDA and a 290% increase in EPS.
Speaker Change: <unk> recurring revenue increased 23% year over year powered by a 37% revenue increase.
Speaker Change: Arrest is largest.
Speaker Change: Vertical merchant services, and a 32, 3% increase in sepsis.
Speaker Change: Which more than offset a 12% decrease in advertising and data revenue.
Speaker Change: Income from operations and adjusted EBITDA were both up 29% year over year and the business has generated a record three $2 million and adjusted EBITDA over the past 12 months.
Speaker Change: Looking ahead, we continue to focus on developing new offerings that leverage the <unk> platform to enable retailers to compete more effectively with large retail chains.
Speaker Change: For instance, independent neighborhood retailers have not yet meaningfully benefited from as consumers shift to online ordering and delivery.
Speaker Change: We're working to change that by integrating our network with online ordering and delivery platforms, enabling retailers on the interest network to provide hyper fast local delivery of sundries and prepared foods.
Speaker Change: The 100, or so retailers you have signed up so far already receiving in aggregate over 2000 delivery orders a week.
Speaker Change: Both money or minutes platform increased transactions by 27% and revenue by 25%.
Speaker Change: The growth rates are impacted by the deliberate shift we made last summer to prioritize gross profit per transaction in our retail channel rather than market share and by a recent shift in customer preferences towards larger send demands permits.
Speaker Change: Fewer transactions.
Speaker Change: The Fintech segment, which includes Boston money, an early stage fintech initiatives generated over $5 million and adjusted EBITDA compared to 244000 in the year ago quarter. Looking ahead bus money is working on initiatives to drive sustained long term growth and innovations that reduced cross border friction and increased profitability.
Speaker Change: Net home continued its steady progress with balanced growth in the U S, Brazil and Mexico.
Speaker Change: The team has done a great job growing its business, while holding the line on overhead.
Speaker Change: Adjusted EBITDA margins reached 15% in the third quarter of 25.
Speaker Change: Net probably began to offer.
Speaker Change: This quarter and customers are already seeing the benefits, including enhanced efficiency, even as we deploy agents were five for specific market verticals. We're preparing to launch another air powered service, which we internally refer to as coach we think will be very successful.
Speaker Change: In our traditional communications segment income from operations and adjusted EBITDA.
Speaker Change: It jumped over 30% year over year.
Speaker Change: To $17 3 million and $19 $3 million, respectively. Underscoring that this segment continues to be a long term cash generator.
Speaker Change: I D T on a consolidated basis, we continue to scale, our three primary growth businesses and their operating leverage in combination with our resilient contributions of our traditional communications businesses.
Speaker Change: I think expansion Igt's cash generation and earnings as we enter our budgeting season, we are fortunate to be in a great position.
Speaker Change: <unk> to pursue next generation of exciting growth initiatives.
Speaker Change: Want to wrap up by thinking the millions of customers, who puts all of their hard earned dollars to work through our boss offerings and the business customers around the world, who rely on us to enhance their businesses and communications our ability to provide these services depends on the dedication of our employees they've been executing and innovating on so many fronts and our stockholders.
Speaker Change: Who entrust us with their capital and grateful for your continued patronage and support.
Speaker Change: Thank you.
Speaker Change: Thank you Shmuel my remarks on the third quarter with financial results, we will focus on the year over year comparisons in order to set aside seasonal impact on our business.
Speaker Change: And as Shmuel just mentioned in his remarks.
Speaker Change: Our third quarter was slightly softer than our second quarter and seasonality does factor in our results.
Speaker Change: For one thing our fiscal clubbed them has just 89 days in years like this one.
Speaker Change: Roughly 3% fewer than the 92 days in our fiscal quarters.
Speaker Change: In addition, our February through April fiscal third quarter is typically the lowest revenue quarter for <unk>.
Speaker Change: Advertising.
Speaker Change: Advertising budget spend by our customers trend higher over the course of the calendar year.
Speaker Change: Given that we are extremely pleased with our consolidated financial performance in the third quarter.
Speaker Change: We again grew revenue year over year.
Speaker Change: Expansion about Fintech and SaaS businesses more than offset the expected top line decline of boss Revolution, calling.
Speaker Change: Gross profit increased 15% year over year, reflecting increased contribution from each of our four reporting segments and it was just on the left guava dose rapid level.
Speaker Change: Our gross profit margin reached another record high of 37, 1%.
Speaker Change: The robust you'll be yield increases in our income from operations adjusted EBITDA and earnings resulted from the expanding operational leverage above three high growth businesses and from a positive contribution from our traditional communications segment.
Speaker Change: Traditional communications adjusted EBITDA margin for Q3 grew to nine 2% from six 7% one year ago.
Speaker Change: And RF had solid third quarter results.
Speaker Change: Merchant services revenue increased 37% year over year, and Seth fees increased 33, 33%.
Speaker Change: Rate increases of 29% in both income from operations and adjusted EBITDA.
Speaker Change: And the rest of the financial results would have been even stronger had it not been for a few proactive steps we took during the quarter.
Speaker Change: Advertising and data revenue decreased 821000, or 12% year over year, largely because of our decision to limit sales to one of our larger program programmatic platform clients in order to manage our receivables.
Speaker Change: <unk> with them.
Speaker Change: Exclusive of sales to partner the underlying advertising business grew nicely compared to the year ago quarter.
Speaker Change: We also decided in an abundance of caution to set up a bad debt expense provision of $1 4 million relating to amounts due from this client.
Speaker Change: And finally, IGT exercised its right to purchase certain deferred stock units from an RF employees during the third quarter.
Speaker Change: This was a win win deal.
Speaker Change: It provided an RF employees with access to liquidity, while enabling enabling IGT to slightly increase its majority stake and RF at an attractive valuation.
Speaker Change: The details of this exchange offer have been fully disclosed in our previously filed 10-Q reports.
Speaker Change: As part of this transaction and RF and code additional compensation costs of approximately half a million dollars during Q3.
Speaker Change: At Bath money remittance transactions, which is another record 6 million with digital transactions through our boss Monday and bought the evolution apps again constituting more than 80% of our remittances.
Speaker Change: We did see a reduction in the rate of transaction growth.
Speaker Change: Mainly because of our decision to optimize gross profit per transaction in our retail channel, but also because our customers are now sending more money per transaction, while cutting back on the frequency of dose interruptions.
Speaker Change: So while transactions and revenue increased 32% and 31% respectively digital sand volume increased at an even higher rate 40% year over year.
Speaker Change: Adjusted EBITDA margin for the Fintech segment continued to expand during Q3 to 13%.
Speaker Change: As the remittance business continues to grow into skill and depth. We continued to improve operational efficiencies. We expect adjusted EBITDA margins for both money when considered as a standalone business to reach 15% to 20% comparable to other industry players.
Speaker Change: Net phone continued on its steady growth cash activity, although foreign exchange translation once again masked the strength of the underlying performance of the business on a yield on a year over year basis.
Speaker Change: Subscription revenue increased 7% to $21 5 million in the quarter.
Speaker Change: However, on a constant currency basis, the rate of increase was higher at 11%.
Speaker Change: Net of phone continued to be disciplined in cost management and customer acquisition spending as they did last quarter. The <unk> team was able to decrease <unk>.
Speaker Change: G&A spend year over year.
Speaker Change: Again, this quarter, even adding revenue continued to grow.
Speaker Change: Thus, enabling a 188% increase in income from operations to $1 4 million and a 50% increase in adjusted EBITDA to three 2 million.
Speaker Change: And our traditional communications segment gross profit increased 5% year over year powered by IDT digital payments and supported by strong results from our IGT global wholesale carrier business.
Speaker Change: SG&A expense decreased nine 5% year over year of $2 2 million as we continued to benefit from previously announced and ongoing cost reduction initiatives and that helped drive a 39% increase in income from our.
Speaker Change: Operations, and a 30% increase in adjusted EBITDA.
Speaker Change: The strong gross and net margin results confirms our conviction that traditional communications will be a robust and resilient contributor to our long term profitability.
Speaker Change: Our balance sheet saw a sequential lift in cash cash equivalents and current investments to 224 million from $171 million at January 31st.
Speaker Change: This quite large 53 million increase is highly impacted by our boss monthly weekly working capital cycle.
Speaker Change: On any given week most of the weekly remittance volumes typically take place over the course of the weekend.
Speaker Change: Anticipation of these ahead of each weekend, we must pre fund the wallet of our disbursement videos and we gradually recover the proceeds from the weekend transactions at the beginning of the following week.
Speaker Change: As a result for fiscal quarters, ending on Thursday, Friday, and Monday, we will typically show significantly less cash at quarter end than those ending on Tuesdays and Wednesdays such was the case with the SKU orders April 30th.
Speaker Change: And that.
Speaker Change: That happened on a Wednesday as compared to the previous quarters January 31st quarter and that happened on a Friday.
Speaker Change: One final point on capital allocation this quarter.
Speaker Change: Why.
Speaker Change: Both just just a few thousand shares on the open market in Q3.
Speaker Change: Company did both just 6 million of employee owned shares that vested during the quarter in order to satisfy tax obligations triggered by divest.
Speaker Change: I want to wrap up todays remarks by confirming our guidance for the full year fiscal 2025.
Speaker Change: Last quarter, I said that we expect it to double our first half $63 million adjusted EBITDA total for the full year to 126 million.
Speaker Change: Given our results to date, we remain fully on track to meeting that goal.
Speaker Change: We are now in the midst of our fiscal 2026 budgeting process and I look forward to providing guidance for next fiscal year during our fourth quarter earnings call in late September.
Speaker Change: Now operator back to you for Q&A.
Speaker Change: The question and answer session will now begin if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment. Please while we poll for questions. Once again. Please press star one if you have a question or comment.
Speaker Change: First question comes from Andy Go Alonso.
Speaker Change: With Mauro capital. Please proceed.
Lowis: The lowest more Hello, Marcello if I may I would like to ask a question or know if each of the past growing businesses and another one on capital allocation.
Lowis: Let's start with N R S.
Lowis: Last quarter you mentioned the addition solve their salespeople, there's really interesting numbers in the reports a day there were some one and record <unk> revenue and when it comes to only the purely purely the product the terminal itself.
Lowis: And we also see EM.
Lowis: That happened despite a lower addition of net terminals.
Lowis: So if you could provide more color on these items and the go to market strategy, how you're leveraging your agents versus this third party distributors now that you have increased your staff I would really appreciate that.
Lowis: No problem I think just I would say that more effort was put on bringing.
Lowis: Both new as well as existing retailers that don't yet have our merchant processing to take it this quarter.
Lowis: And that was definitely helped by.
Lowis: Many of the salespeople that we brought on.
Lowis:
Lowis: Okay and are you switching to worst was higher <unk>.
Lowis: Sales cost terminals, maybe kiosk or how would you explain the increase over than that their mental additions.
Lowis: And also.
Lowis: More color on on the NRA spay accounts that was a record number for Q3 two.
Lowis: Yeah.
Lowis: And as I said, its mostly related to cloud.
Lowis: So just.
Lowis: Good so you know it wasn't really anything particularly.
Lowis: That's a really interesting, but I can tell you other than that you know all around both from distributors or existing sales base as well as our new salespeople.
Lowis: They all they all had strong numbers this past quarter.
Lowis: In terms of you know.
Lowis: The you know the.
Lowis: The other types of I'll call. It form factors that we provide in the store I don't think that those set of material.
Lowis: In this particular quarter.
Lowis: Okay.
Lowis: And let me move to net to phone. So you launched the AI agent.
Lowis: And you are probably seeing the first customers on that end and I would like to know more about what type of customers Youre seeing are those already met two phone customers are you getting customers outside of Dod.
Lowis: Outside of those existing clients.
Lowis: Most of the customer.
Lowis: Right now our our existing at the phone customers.
Lowis: A couple of exceptions to that rule.
Lowis: But we are trying to make sure that it works perfectly for our existing customers.
Lowis: And then we will essentially add on.
Lowis: Third parties as well.
Speaker Change: Can you provide some color on what type of businesses are purchasing these AI agent.
Speaker Change: We've really I mean, all different types of customer.
Speaker Change: Customers everything from you know call centers to doctors' offices.
Speaker Change: Accounting firms to collection companies.
Speaker Change: There's a bunch of others.
Speaker Change: Again, we're making a bigger effort in the future to sort of you know vertical is that.
Speaker Change: Into some of those areas.
Speaker Change: We believe accountants.
Speaker Change: The need for it.
Speaker Change: We believe the doctor's offices.
Speaker Change: The need for it and that we could build similar functionality for each of those ones are same thing for call centers.
Speaker Change: Hum.
Speaker Change: So we expect it to get a little bit more vertical wise over the next.
Speaker Change: Yeah, so but.
Speaker Change: The sales are are are really starting to pick up quite a lot.
Speaker Change: We're very excited about where it's going to go.
Speaker Change: Is the focus going to be a small medium enterprise.
Speaker Change: No it's going to be both I mean, we were you know we have users or who obviously are going to be smaller businesses.
Speaker Change: We have users that are talking about using millions of interactions a month.
Speaker Change: Well okay.
Speaker Change: Then on Baas money.
Speaker Change: U S. Dod area this quarter, a beta program or the earnings program for the owners in the stores I think you kicked it in some of your higher traffic in stores in the southern part of the country.
Speaker Change: How can you go how was the start of that program.
Speaker Change: I'm not I'm not honestly sure about the results of the program. So far so I don't feel comfortable commenting.
Speaker Change: Okay.
Speaker Change: And then on the last conference that you had then you mentioned that M&A valuations are attractive for I saw that you recently acquired really small company for NR is called E G or something like that I'm not sure how it is pronounced.
Speaker Change: Would we expect any more transactions in the remainder of the year or.
Speaker Change: More bigger transactions or is the one you were referring to in that conference.
Speaker Change: No that was not the one I was referring to in that conference, but I mean, we are definitely looking at acquisitions.
Speaker Change: We believe that you have to pay the right price.
Speaker Change: And really extract the most value out of out of an acquisition.
Speaker Change: So you know we don't we don't chase things at any price but.
Speaker Change: But if we think that there is good value to be created by.
Speaker Change: But having it inside about any kidney we definitely you know pursue it.
Speaker Change: We are pursuing.
Speaker Change: A couple of different.
Speaker Change: Acquisitions.
Speaker Change: What type of technology, there's loss acquisition bring to the table.
Speaker Change: If you're referring to the small and lychee, it's a restaurant technology company.
Speaker Change: Okay.
Speaker Change: And one last one if I may.
Speaker Change: And the stock prices slightly higher than you've been repurchasing a lot would you still be keen to repurchase shares or are you going to consider a one off dividend and view that you are going to exceed the targets for the year most likely.
Speaker Change: I was kind a question off to Marcello I mean, what I would say is that you know.
Speaker Change: I think that.
Marcello: Yeah, it's definitely not as cheap as it was when we were buying back earlier I still think it's a great value.
Marcello: But our our capital allocation.
Marcello: It is also dependent on whether or not we're doing you know.
Marcello: Acquisitions are not doing acquisitions.
Marcello: No more on that over over hopefully the next.
Marcello: Quarter.
Marcello: Yeah.
Marcello: Sure as you just mentioned.
Marcello: We believe that repurchasing our stock.
Marcello: Is a good way of allocating our capital.
Marcello: And we have been doing so.
Marcello: At the same time, okay, we protect our cash to be able to deploy it.
Marcello: Towards.
Marcello: Growing the business towards acquisitions.
Speaker Change: At Schuh will mention the M&A environment right now is quite attractive.
Speaker Change: And we have been looking at a variety of opportunities in each one of our segments.
Speaker Change: So to the extent that we decide to deploy that cash in ways to create a lot of value to shareholders. We will deploy the cash in towards growth and M&A, if not we will continue to repurchase stock.
Speaker Change: I was wondering I can tell you for sure is we will we will not take on you know that like some other companies do to take to buy back shares like we buy back shares with excess cash not with borrowed cash.
Speaker Change: Mhm.
Speaker Change: Really good thank you.
William von: The next question comes from William von with Coram. Please proceed.
Speaker Change: Okay.
Speaker Change: Hi.
Speaker Change: Marcel Thanks for taking my question and also congrats on the quarter.
Speaker Change: Really good growth.
Speaker Change: And in Iraq.
Speaker Change: Does it look like the pace of a Pos terminal additions payment processing accounts.
Speaker Change: Merchant services revenue is slowing down a little bit.
Speaker Change: What would you diagnosis causes this economy industry dynamics competition, just any commentary you have on just the slowing pace I would be helpful.
Speaker Change: Yeah, I think I don't know if I would agree that that's a slowing pace I mean, I think Brett.
Speaker Change: The numbers might not have been.
Speaker Change: Quite a strong as we had hoped as I sort of indicated in our release, but I think that the numbers are still very strong and I actually I mean again just from you.
Speaker Change: You know being closer to like what's happening a lot of the accounts that we recently signed signed on.
Speaker Change: So what I'll call it like the benefit that youre seeing from added.
Speaker Change: Don't really hit us in the past quarter, they hit us and you know in <unk>.
Speaker Change: Future quarters, So I mean, I expect the fact that we've been growing.
Speaker Change: Better than than previously actually to help us more in.
Speaker Change: The current quarters as well as upcoming quarters after that.
Speaker Change: So I don't actually think that it's slowing down at all.
Speaker Change: Okay. Thank you that's good color a couple of follow ups.
Speaker Change: Can you just describe how the food delivery.
Speaker Change: The door dash and other services, how that actually works with the point of sale system is it.
Speaker Change:
Speaker Change: Sunday was display where drivers can pick things up easier I'm, just trying to kind of walk through holiday.
Speaker Change: Yeah, well, it's a variety of different.
Speaker Change: No elements to it it's not a it's not a it's not a very simple product.
Speaker Change: But you can just because this is a call I'm more than happy to have.
Speaker Change: A call with you after the call to explain in more detail.
Speaker Change: But I mean, just because this is an earnings call to give you a very brief description of it basically all the orders come in to our order management system.
Speaker Change: And then those are placed into Q.
Speaker Change: On the us or in the kitchen.
Speaker Change: And then you know as things are being you know either worked on are filled those notifications are then going back.
Speaker Change: You know the different delivery companies and or somebody who is picking up an order, saying Hey, your you know the order is ready you know or the orders in process or et cetera.
Speaker Change: Come and get it I mean also on the pricing side that allows retailers you know what.
Speaker Change: They have different pricing for them.
Speaker Change: When you use delivery service doesn't when you don't use delivery services that allows them to price it higher.
Speaker Change: In the afternoon hours when people might be less sensitive to pricing than in the morning, when they are more sensitive to pricing.
Speaker Change: Theres a lot of features and functionality.
Speaker Change: It has.
Speaker Change: Does that help.
Speaker Change: Get more orders.
Speaker Change: Thank you that's that's helpful color.
Speaker Change: Question on boss money.
Speaker Change: The rate of growth did slow overall, but you had a really good growth.
Speaker Change: In the digital channel.
Speaker Change: In terms of remittances.
Speaker Change: You mentioned profit mass maximization.
Speaker Change: Terms of proving profit per transaction. So I was just wondering if those profit maximization efforts or really only on the retail side versus the digital side.
Speaker Change: Okay. So it's on both.
Speaker Change: It's on both I mean, what I would say, it's like within that.
Speaker Change: There is a dynamic happening and we are earning.
Speaker Change: Our earnings release, and you know what.
Speaker Change: You know of where.
Speaker Change: Transactions are starting to become larger.
Speaker Change: Where somebody might have let's say four transactions.
Speaker Change: <unk> previously, they're now sending three transactions a month the the amount per transaction has actually grown quite a lot as we said year over year.
Speaker Change: Our sand volume was up 40%.
Speaker Change: So if you had.
Speaker Change: If that had been.
Speaker Change: Our called standard size of transactions, a year ago that would've been 40% growth.
Speaker Change: Because it's being put into larger transactions.
Speaker Change: I don't think that we completely optimized our pricing to sort of take into account that people are sending fewer transactions of larger volumes. So we are testing different pricing.
Speaker Change: In different regions.
Speaker Change: To help.
Speaker Change: I'll call it improve the profitability.
Speaker Change: Hum.
Speaker Change: And Ken assuming that it doesn't hurt.
Speaker Change: <unk> growth or attention.
Speaker Change: In the markets that we're testing it will you know we'll roll it out.
Speaker Change: Yeah.
Speaker Change: All of our markets across the country.
Speaker Change: As far as new technology, and there is many different things that we're doing I don't want to as I said. This is an earnings call I don't want to spend a lot of time talking about it but everything from stable coin transfers.
Speaker Change: Wallets in country.
Speaker Change: That will be able to have a visa card linked to some people can.
Speaker Change: Spend money in country, and we make money on interchange.
Speaker Change: So again, a variety of different things being worked on that we think will both add to the profitability as well as really improve the user experience.
Speaker Change: Okay. Thanks, guys I appreciate it.
Alex Roar: The next question comes from Alex Roar with investment management. Please proceed.
Alex Roar: Hi, guys.
Alex Roar: On the on the interest ads business now.
Alex Roar: Now that that one partner has been turned off.
Alex Roar: This business look like on a run rate basis can you can you backfill that demand that was turned off or are we going to sort of be declining year on year for a little bit here. Thank you.
Alex Roar: Yes.
Alex Roar: It's too soon for us to give you like you know a 100% answers to that question I mean, I would say that we're definitely seeing.
Alex Roar: Better numbers so far this quarter, then than we did last quarter.
Alex Roar: So our our I'll call. It our other partners are making up quite a fair share of it it hasnt quite you know Phil.
Alex Roar: Total GAAP, yet, but I'm, hoping that before quarter, then we will fill it back up.
Alex Roar: At the same time, we're also expanding our direct team, but I think Marcello wants to say something I apologize, yeah, Hi, Alex how are you.
Speaker Change: So just to correct, we have not completely shut down that programmatic partner, Okay. We have just.
Speaker Change: Uh huh.
Alex Roar: Deliberately reduce significantly the amount of sales, we do to them because of the current situation.
Alex Roar: Note that.
Alex Roar: That partner.
Alex Roar: With a very large partner a year ago.
Alex Roar: Probably represented more than 20% of our total advertising revenue.
Alex Roar: Currently represent probably about 5% now a much much much smaller number.
Alex Roar: And the fact that the advertising revenues excluding that partner has been have been growing quite nicely above 10% also below the other programming partners. We are almost there about being able to completely cover for that decline on that one partner by the growth in the auto relationships.
Alex Roar: Thank you.
Alex Roar: Mhm.
William Vaughan: Okay, we have a follow up coming from William Vaughan with Korean. Please proceed.
William Vaughan: Hello again.
Speaker Change: Is that a follow up on on net to phone.
William Vaughan: Where do you guys think that the EBITDA margins on that business can get to over time like in terms of a mature or steady state.
William Vaughan: Okay.
William Vaughan: No it's not a simple question to answer.
William Vaughan: Because you know again, we have a lot of new initiatives.
William Vaughan: Particularly with AI agents and on our coach product that you know should be launching this quarter and.
William Vaughan: Those have you know we don't have a history of running those programs to sort of know.
William Vaughan: Where exactly the margins are going to shake out.
William Vaughan: My my my own personal opinion is that they should be accretive by you know a substantial amount, but it might take.
William Vaughan: Year or two because there's you know a lot of costs and setting up those programs.
William Vaughan: But don't necessarily.
William Vaughan: You know I'll say.
William Vaughan: <unk> hit the bottom line in a positive way.
William Vaughan: Even though we charge for implementation, we charge a very very low price shrimp implementation. If you were to go and get it.
William Vaughan: It helped.
William Vaughan: Our best buy you know it might cost.
William Vaughan: More money than what we charge for.
William Vaughan: For for <unk>.
William Vaughan: I help and so essentially speaking like we are subsidizing the the launch of the product by by lowering the cost of implementing it for our customers.
William Vaughan: And.
William Vaughan: That will over time, probably increase in price you know once we have more you know once we have more scale and at the same time you know once the once the customers have been implemented.
William Vaughan: Their usage.
William Vaughan: When you go up.
William Vaughan: Quite substantially and that will obviously add to our margins overtime.
William Vaughan: So I know that's not a very quick answer to your question, but that's.
William Vaughan: With more color.
William Vaughan: Awesome. Thanks.
William Vaughan: Another one circling back to.
William Vaughan: The boss money and I know that.
William Vaughan: We're focused on profitable growth in it.
William Vaughan: And we always want it to be profitable I do wonder your thoughts on.
William Vaughan: With the digital channel and it is it is a scale business so profitability increases as you get more users and customers.
William Vaughan: What are your thoughts on actually increasing investments just to get more customers.
William Vaughan: Thinking about the landscape, though.
William Vaughan: How does a lot of white space with these legacy players that are mostly retail like western Union and others.
William Vaughan: Lot of.
William Vaughan: Customers to grab there.
William Vaughan: Hum.
William Vaughan: Your thoughts on that area.
William Vaughan: So it's a very fair point and again, it's budget season, and we are definitely you know looking at our unit economics, our cost of acquisition.
William Vaughan: All the types of fun things that you can get to you know to try to figure out.
William Vaughan: You know.
William Vaughan: The season.
William Vaughan: What I would say is that like.
William Vaughan: If we don't make any.
William Vaughan: Acquisitions in any of these businesses like we will definitely.
William Vaughan: Grow organically at a much faster pace bye bye bye investing more.
William Vaughan: In in and acquisitions.
William Vaughan: And sometimes I have to say that.
William Vaughan: Even though it's a slower and I'll call. It harder grind I actually think that you know.
William Vaughan: Sometimes it's better to grow things organically that then do acquisitions.
William Vaughan: Because of this acquisition is going to always.
William Vaughan: Have you know things that go wrong as opposed to like when Youre doing yourself, you kind of know what youre comfortable with and how and how to do it.
William Vaughan: So yeah I mean.
William Vaughan: It's budget season, and I would say that that is definitely going to be part of our plan and connect year.
William Vaughan: And just to go back a little bit on your comment about net margin growth for net to phone I think just important to bear in mind that you do your models.
William Vaughan: For the past few years.
William Vaughan: We have been investing roughly about $20 million to $25 million each year.
William Vaughan: In customer acquisitions.
William Vaughan: Net phone.
William Vaughan: And most likely budget season, but most likely we will continue to deploy those type of dollars as long as the IRS for every one of our markets.
William Vaughan: Continue to be very attractive.
William Vaughan: And as we continue to grow with that type of investment you have seen over the past few quarters. How we get we are in terms of maintaining our fixed cost.
William Vaughan: Instead state so the business really scales nicely as you can.
William Vaughan: We used to grow.
William Vaughan: A few other things to bear in mind is that as the mix of ucas and seek gas.
William Vaughan: Continues to change that would affect the operating margins as pks customers efficacy businesses.
William Vaughan: With that much higher margin than do our UK businesses, and finally, as we hope to introduce and launch and grow.
William Vaughan: AI agent and other AI initiatives all of those things could make a big difference in terms of.
William Vaughan: ARPA growth.
William Vaughan: There could lead again, no two enhancing the growth and the net margin.
William Vaughan: Yeah, I mean, I just had.
Speaker Change: One last thing to what Marcelo said, which is like I think we're much more focused on on net the phone going forward on.
William Vaughan: Revenue and gross profit.
William Vaughan: Bottomline profitability than we are on seed.
William Vaughan: See cros and and what have you and it's and even though you need both to to get those results.
William Vaughan: We're more.
William Vaughan: It's a change in mindset and I think that it won't be a you know it will be reflected positively.
William Vaughan: And the business itself over the next year.
Speaker Change: Awesome. Thank you gentlemen, I appreciate all the color answering my questions.
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