IDT Corp (IDT) 2017 Q3 法說會逐字稿

Good morning, and welcome to the IDT Corporation Third Quarter Fiscal Year 2017 Earnings Call. (Operator Instructions) In today's presentation, Mr. Samuel Jonas, CEO of IDT Corporation, will discuss IDT's financial and operational results for the 3-month period ended April 30, 2017.

Any forward-looking statements made during this conference call either in 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 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&A that will follow, IDT's management may make reference to the non-GAAP measures adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS. A schedule provided in the earnings release reconciles adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS 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, www.idt.net. The earnings release has also been filed on a Form 8-K with the SEC.

I would now like to turn the conference over to Mr. Jonas. Please go ahead, sir.

Thank you, operator. Welcome to IDT's Third Quarter Fiscal 2017 Earnings Call. My remarks today will focus on key operational and financial results for the 3-months ended April 30, 2017. Unless I indicate otherwise, the results are for the third quarter of fiscal 2017 and are compared to the year-ago quarter. For a comprehensive and detailed discussion of our results, please read our earnings release issued earlier today and our Form 10-Q, which we expect to file with the SEC on or about this Friday, June 9.

Following my remarks, Marcelo Fischer will join me, and we'll be glad to take your questions.

First, here's a high-level update on several of our key early-stage growth initiatives. National Retail Solutions continues to expand rapidly and is also developing new ways to leverage our point-of-sale units to create additional value for our retailers, consumer packaged goods suppliers and our BR Club members. As part of this effort, NRS plans to release 2 new apps later this year, one for retailers and another that will allow consumers to order products from their local participating retailers.

Net2Phone continues to grow and its cloud-based PBX service offering both domestically and overseas. In the U.S., we are on track to more than double our seat count in the first 6 months of this calendar year.

Outside the U.S, we have achieved early success in our effort to leverage our global infrastructure and international sales force to support cloud-based PBX offerings. We successfully launched the service in Brazil in January and in Argentina in May.

BOSS Revolution money transfer just completed its best quarter ever. We expect to drive growth in our international money transfer offering by gradually expanding our U.S. retail presence beyond our original focus of 10 states, especially now that we're fully licensed throughout the country. But the fastest increases in BOSS Revolution money transfer transaction volumes are coming from B2C or more specifically the BOSS Revolution Money app, which is now fully integrated with the BOSS Revolution Calling app. Transactions have been doubling every 3 to 4 months, and they already represent more than 25% of all money transfers. We are focusing resources to ensure that these trends continue.

Turning now to our financial results for the third quarter. Revenue was $370 million, a $14.9 million increase compared to the year-ago period. Within our telecom platform services segment, revenues generated by our global Wholesale Carrier Services business increased by $26 million to $152.1 million, as we're able to increase traffic significantly to certain destinations. Revenue generated from the businesses within our Payment Services vertical increased by $5.1 million to $60.1 million.

Sales of IMTU increased by 8% compared to the year-ago quarter, while our significantly smaller money transfer and retail solution businesses generated revenue increases of over 50% and 400%, respectively.

Our UCaaS segment, which consists of operations at our Net2Phone division, grew year-over-year revenue during Q3 by $1.2 million to $7.4 million, an increase of 19.6%.

The revenue increases generated by Wholesale Carrier Services, Payment Services and UCaaS more than offset a decline in Retail Communications revenue, which decreased by $14.5 million to $148.6 million. Sales of BOSS Revolution's PIN-less calling service, which accounts for approximately 90% of Retail Communications revenues, decreased 6.4% compared to the year-ago quarter.

On a consolidated basis, direct costs as a percentage of revenue increased 240 basis points to 85%. The increase was due mostly to continued competitive margin pressure facing our international long distance voice offerings. However, we have seen improvement on this since the quarter ended.

Consolidated SG&A expense was $46.2 million, a decrease of $5.4 million, as we continue to achieve cost synergies and efficiencies even as we continue to heavily invest in growth initiatives.

During the third quarter, we recorded a charge of $10.1 million from our resolution of potential liabilities and claims under agreements related to our 2013 spin-off of Straight Path Communications. That charge contributed to a consolidated loss from operations of $6.5 million compared to income from operations of $5.7 million in the year-ago period. Income from operations in the year-ago period also included a $1.1 million gain relating to the sale of Fabrix.

In the third quarter, IDT generated adjusted EBITDA of $9.1 million compared to $10.3 million.

Our GAAP loss per share for the third quarter, including the impact of the Straight Path settlement, was $0.21 compared to EPS of $0.19 in the year-ago quarter.

Non-GAAP EPS, which is reconciled to GAAP EPS in our earnings release, was $0.28 compared to $0.38.

Our balance sheet remains liquid with $132.3 million in unrestricted cash, cash equivalents and marketable securities as of April 30.

From a corporate perspective, we continued to streamline our operations and tighten our strategic focus. As part of this effort, we expect to spin off our previously announced interest in Rafael Pharmaceuticals, which used to be called Cornerstone, along with our real estate assets and some of our other small holdings to our stockholders later this calendar year.

Now Marcelo and I will be happy to take your questions. Operator, back to you for the Q&A.

(Operator Instructions) Our first question comes from John Rolfe of Argand Capital.

I'm sorry. I just wanted to clarify. So you said that you thought you would be in a position to actually effectuate the spin later in this calendar year, is that correct?

Yes, that's correct.

Okay, great. And do you have any sense at this point or have you thought much about what would be going with the spin in terms of capitalization?

I don't have a definitive answer on that, but I would say that in the range of $60 million to $70 million.

This concludes our question-and-answer session and the conference call. Thank you for attending today's presentation. You may now disconnect.