IDT Q4 2023 Earnings Call Transcript

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October 12, 2023

There are 5 speakers on the call.

Operator

Good evening, and welcome to the IDT Corporation's 4th Quarter and Full Fiscal Year 2023 Earnings Call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the 3 12 month periods ended July 31, 2023. During remarks by IET's Chief Executive Officer, Shmuel Jonez, all participants will be in listen only mode. After Mr. Jonas' remarks, Marcelo Fischer, IDT's Chief Financial Officer, will join Mr.

Operator

Jonas for Q and A. Any forward looking statements made during this conference call, either in the prepared remarks or in the Q and 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 SEC. 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 and 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.

Operator

A schedule provided in IDT's earnings release reconciles adjusted EBITDA, non GAAP net income and non GAAP earnings or loss 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 ks with the SEC. I will now turn the conference over to Mr. Jonas.

Speaker 1

Thank you, operator. Welcome to IDT's earnings conference call. After my remarks, Marcelo Fischer will be joining me virtually. First of all, I just want to say it's really been a very hard week, Really tragic week in Israel and our thoughts and prayers are with our family, our friends, our colleagues, Some of who are on the front lines and maybe God willing be safe. My brief remarks Today, we're focused on the Q4 fiscal year 2023 and the 3 months ended July 31.

Speaker 1

For a more detailed discussion of our Financial and operational results for the Q4 and full fiscal year 2023. Please read our earnings release filed earlier today in our Form 10 ks that we expect to file with the SEC on Monday. Our results this quarter were highlighted by the continued expansion of our 3 high growth, high margin businesses, while Our traditional communications segment performed as expected. At NRS, we have ramped up our investment to accelerate the growth of the NRS terminal and payment networks And we delivered record quarterly increases in both net new terminals and net new NRS pay accounts. With that tailwind, merchant services Q4 revenue increased 79% year over year.

Speaker 1

Advertising and data revenue, while 40% below the year ago peak improved sequentially And advertising data revenue increased 7% from the prior quarter and is on track for a larger sequential increase in the current quarter. NRS results also reflected our investment in growth initiatives including development of new features and functionalities as well as our new tablet POS. At Net2phone, subscription revenue increased 19% year over year, powered by the increase in seats served and an increase in average subscription revenue First seat in Latin America. Here too, we are investing in initiatives to expand the business. In the coming quarters, we are preparing to roll out 2 exciting premium services, Netafone AI and call center essentials that we expect to enhance ARPU and margins across our markets.

Speaker 1

Within our FinTech segment, Boss Money, our international Remedium's business continued to benefit from the synergies between its retail and direct to consumer channels and from our cross marketing programs within the larger BOSS ecosystem. Also in our FinTech segment, we've begun enrolling customers in our new mobile banking app, Elroy. Elroy is replete with innovative features to help under banked and unbanked customers integrate into the U. S. Financial mainstream, while appealing to anyone who despises bank fees but appreciates financial convenience.

Speaker 1

Within our traditional communications segment, we are working to further streamline the operations of our BOSS solution calling and IDT Global businesses, while pushing new initiatives to We appreciate the time the court invested in resolving this matter and so we are legal team whose sound judgment and tireless efforts proved invaluable throughout the course of the litigation. As we noted in our earnings release, we continue to buy back our stock in the Q4 and after the start of fiscal 2024, Consistent with our view that the plaintiff's claims in this case were premised on slot assumptions and the justice would prevail, as well as the fact that we thought our stock was very undervalued, especially given the strong performance of our 3 high growth businesses. Before we move on to the Q and A, I want to again thank our employees for their great work and our stockholders for putting their faith and their capital with us. Now, Marcel and I will be happy to take your questions.

Operator

Thank you. We will now begin the question and answer Okay. Our first question comes from Alex Roehr with Emmett. Please proceed.

Speaker 2

Hi, guys. So just quickly on mobile top up, I was hoping you could speak to that business In particular, and if there's any hope, it's been a while now, if there's any hope for a bottoming there anytime soon.

Speaker 1

I think the answer is yes. In terms of our I will say our gross margin on it, it's actually We've been improving a bit. We've been selling more of it through our direct To consumer channels, unfortunately, the wholesale business has not come back as quickly as we would have You know, like or expected, but our new platform just recently got We've actually brought on, I think about 5 new customers just this week alone onto it. So we're very hopeful that we'll see some good revenue growth going

Speaker 2

Great. And just one more. So obviously, we can see the increase in spending In NRS on the SG and A line, do you I mean, was this kind of a period of Significantly increased spending and now you're going to wait and see or are you should we expect to see kind of similar significant year over year increases Off of this new base in the NRS SG and A line?

Speaker 1

No. I expect SG and A to be much More well controlled than it has been, both in MRS and across the company.

Speaker 2

Great. Thank you, guys.

Operator

Okay. Our next question comes from Anigu Alonso. Please state your affiliation. Your line is live.

Speaker 3

Hello. Congrats on the strong deployments In NRS, I wanted to ask about the new tablets that you mentioned. I know that your supplier PAX Global has released this New product line called Elis. And I was wondering if this is going to trigger you expanding into new markets, In particular, in the restaurant market and completing against the likes of Toast and those people, what are the initial results From the ILUCE product line.

Speaker 1

We actually don't use that specific Product from PACS, we do use other products from PACS, although we have looked into that product in specific. As far as Your question related to restaurants, we're in the process of acquiring A company that's in that space, already a very small company, and we think that that will help us get into it. That being said, our goal is not to be a toast competitor or it's really to be for Restaurants that have a convenience store or something similar to it attached to their store. So I would say it's not going to be our goal is not to be a toast.

Speaker 3

Wonderful. That's Great to hear, especially considering that a lot of immigrant owned businesses are restaurants and we know how you have a brand among in the U. S. So that's great news. And you kind of answered already one follow-up question, but it was around the capital allocation.

Speaker 3

So After the result of the litigation, you have unlocked some capital. I assume you had us a provision And waiting for the outcome of the mitigation and now that you have an outcome, I was wondering how are you going to allocate that capital other than these are the core system that you already mentioned?

Speaker 1

I think that we're on the lookout for Smart acquisitions and investing in growth when we're getting good returns on those investments. So I don't I mean, again, I expect us to keep more cash on the balance sheet Some investors believe it's necessary, but at the same time expect us to deploy some of that cash to get good returns for our investors.

Speaker 3

Okay. So have you well, do you intend to proceed with Repurchases once this earnings release, I mean, given inquiry period so far, so Is that one of the allocation?

Speaker 1

It's very possible. I mean, again, you've seen just The past, I don't know, year we've probably purchased over $15,000,000 of stock. So Yes. I mean, I expect us to continue to purchase shares when the price is low.

Speaker 3

Wonderful. And last question is about NetSuPhone. Do you have your own platform or do you use the platform of another provider?

Speaker 1

The answer is both. Originally when we got into the business, We used a 3rd party platform and eventually we built our own. So today we unfortunately have not migrated everyone off of I will call it a rented platform, but we have people on both a rented platform as well as our own platform. And hopefully, over time, we'll move everyone off of the rented platform and on to ours.

Speaker 3

Okay. Thank you a lot and congratulations again.

Operator

Thank you. The next question comes from Jason Lustig. Please announce your affiliation, then pose your question.

Speaker 4

Hi, Shmuel. I know you and I'm sure many other IDC employees have family and friends in Israel. So Just wanted to say my thoughts are with you all.

Speaker 1

Thank you.

Speaker 4

So we saw the NINRS really nice step up in merchant Revenue per unit. Should we expect continued growth in that ARPU or is merchant services more likely to grow Kind of more in line with units going forward. And can you speak to some of the drivers?

Speaker 1

Again, it's I I mean, there's definitely been, I will say, a higher take rate for us, both in terms of new sales That are coming with merchant services. So I mean, I think that we've done a good job of incentivizing our sales organization, Both distributor direct, etcetera to really try as much as you possibly Not to sell a POS that doesn't include merchant services. And you can see that very clearly in the numbers. So So I expect there to be a higher percentage of our terminals just in general Having merchant services from them and therefore you're just going to see again less and less cash being used in stores And more and more merchant processing coming from it. I don't know if every quarter We'll have the same increase like we had this quarter, but every quarter will increase.

Speaker 4

Okay. And you mentioned in the release a seasonal uptick you're expecting in advertising. Is that How much of that is macro recovery and how much of that is kind of advertising seasonality into the holidays?

Speaker 1

I wish I knew the answer to that question. Again, I don't even know if it's really seasonal. I mean, like, we're pre the holiday season, and we've seen quite a big jump. Hopefully, the holiday season will be even better. So I wish I could answer the question Better, but I don't have an answer.

Speaker 4

All right. Thank you.

Speaker 1

Thank you.

Operator

As there are no more questions, this concludes our question and answer session and the conference call. Thank you for attending today's presentation. You may now disconnect. Thank you.

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Earnings Conference Call
IDT Q4 2023
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