IDT Corp (IDT) 2021 Q3 法說會逐字稿

Good evening, and welcome to the IDT Corporation's Third Quarter Fiscal Year 2021 Earnings Call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the 3-month period ended April 30, 2021. (Operator Instructions)

After the prepared 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 SEC.

IDT assumes no obligation to either 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 included adjusted EBITDA adjusted EBITDA less CapEx, non-GAAP net income and non-GAAP earnings per share. A schedule provided in the IDT earnings release reconciles adjusted EBITDA, adjusted EBITDA less CapEx. And 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 a Form 8-K with the SEC.

I will now turn the conference over to Mr. Jonas.

Thank you, operator. Welcome to IDT's Third Quarter Fiscal Year 2021 Earnings Call covering results for the 3 months ended April 30, 2021. I'm joined today on the call by Marcelo Fischer, IDT's Chief Financial Officer. For a detailed report on our financial and operational results, please read our earnings release filed earlier today and our Form 10-Q, which we expect to file with the SEC on or about June 9.

IDT continued to deliver strong results, reflecting the sustained execution of our strategic priorities and the robust operating performances of our businesses. As a result, our top and bottom lines increased appreciably compared to the year ago and prior quarters. Even when excluding the positive impact of a reversal of income tax valuation allowances and gains on investments recorded this quarter, consolidated revenue increased $52 million year-over-year to $374 million. It was our fourth consecutive quarter of year-over-year revenue increases. With solid performances across the board, including an exceptional increase in Mobile Top-Up revenue among our Traditional Communications offerings. Consolidated income from operations increased $10.1 million to $13.9 million this quarter, while adjusted EBITDA less CapEx, which is overall a good proxy for cash generation jumped to $13.2 million from $5.7 million.

Sorry, my kids just joined me. I apologize. I'm sorry, everyone, that's the problem with not pre-recording. I'm just kind of go back and try, I apologize.

Consolidated income from operations increased $10.1 million to $13.9 million this quarter. While adjusted EBITDA less CapEx, which is overall a good proxy for cash generation jumped to $13.2 million from $5.7 million. All 3 of our reporting segments, net2phone, UCaaS, fintech and Traditional Communications met or exceeded our expectations.

Our high growth, high-margin businesses once again performed extremely well. net2phone delivered subscription revenue growth of 39% year-over-year. The increase reflected in part progress on net2phone's development road map. net2phone continue to add API third-party integrations and now offers integrations with Salesforce, Zoho, PurpleCloud, Slack, Zapier and Microsoft Teams, among others.

Its growing integration toolkit enhances access to new segments across its domestic and international markets. In our fintech segment, NRS accelerated its impressive revenue growth, increasing revenue by over 120% year-over-year, led by payment processing and digital advertising services. This quarter, NRS announced a partnership enabling our independent retailers to ship and receive commerce packages.

This deal illustrates the real strength of the NRS ecosystem namely its ability to generate revenue from a variety of services in ways that add tremendous value to our retailers.

Also within fintech, our BOSS Revolution Money Transfer business remains strong, generating 63% revenue growth year-over-year after excluding the significant positive impact of the transient FX opportunities we successfully pursued, starting with the year ago quarter, and which finally and completely ceased in the second quarter of this year.

Our Money Transfer team has done a great job of enhancing the BOSS Revolution money app user experience and is systematically cross-selling customers from our other BOSS offerings. In the coming months, we will continue to grow our money transfer service to new corridors, enhance our distribution network, notably in Africa and expand it to new origination markets.

These initiatives offer abundant long-term growth potential. And finally, within our largest segment, Traditional Communications, Mobile Top-Up revenue jumped by $36 million sequentially and by $47 million year-over-year, underscoring the vigor of these offerings and their potential to sustain long-term cash generation. This significant revenue increase reflects our recent efforts to grow our share in the mobile top-up space. Powered by Mobile Top-Up, adjusted EBITDA less CapEx for the Traditional Communications segment jumped to $20.8 million, an increase of $8.7 million from the year ago quarter.

Finishing up our strong third quarter operational results enabled us to further strengthen our balance sheet with a significant improvement to available cash and current ratios this quarter.

Now Marcelo and I would be happy to take your questions. And I'm sure some of my kids would love to join, but hopefully, it will just be the 2 of us.

(Operator Instructions)

Our first question will come from [James Smith], a private investor.

I had 2 questions. The first one is in relation to MTUs, the large sequential jump. If you could just go into a little more detail there as to product development initiatives and the extent to which you think that's sustainable in future quarters? And then the second question was on MarketSpark in early April. Just a little more detail on what that product is, in which division it's going to sit and sort of what the plan is there?

Okay. Marcelo, if you want to answer any or part of it, please feel free to jump in here. The IMTU business was really broad-based gains. I mean we at gains at retail, wholesale, direct-to-consumer, Africa, Latin America, there were some significant opportunities that we seized upon this quarter that we believe will continue. And we think that it has a bright future ahead.

As far as MarketSpark, it's been an interesting ride so far. We're very excited about it. That being said, it's not -- it's -- we're not used to being passive investors, we're used to being real operators. And we did not do the MarketSpark investment as the management in the business.

That being said, I think the management in the business is very strong. The basic opportunity that we see in MarketSpark is there's a need to move from what people call POTS lines to basically cellular lines. As carriers effectively try to cut the copper wires in whole sections of the country, there is a need for security systems, POS systems, really, any phone lines that require, a specialized connection that was done over copper for years and years to switch to cellular.

And basically, MarketSpark provides the technology to do so. And it's a very compelling offer for a variety of reasons. The easiest one to explain is that there's a big advantage in the offer based on the taxes, so that the FCC taxes POTS lines at a very, very high rate and cellular at a very, very low rate.

So immediately, you're able to save customers money almost guaranteed. And that's been the reason why they've landed so many large customers so quickly. That being said, it's having its growing pains. And -- but we think that it has an eventual very, very bright future. So I hope that kind of answers the question. Does that answer the question?

Yes, it does.

And [James], in terms of where it belongs, because as Shmuel mentioned, we have taken a minority position in the company. So we are going to be accounting for that investment under the equity method. We are not consolidating it. And therefore, now the results -- our shareholder results of that business will be reflected as an operating income or expense item in our P&L.

(Operator Instructions)

Our next question will come from [Brian Warner], a private investor. Apologies, [Brian] seems to have dropped off. Our next question will be a follow-up from [James Smith].

Without wanting to hog the microphone, is there an update you can share with regard to the potential spin-off or spin-out of the UCaaS division?

It's still on track. We don't have any change in status to what we told you last quarter.

Our next question will come from [Tim Delaney with Emergent].

Could you comment on the change in the reporting for the NRS installs?

Yes. Sure. Yes. I mean we decided to show as the metric, the amount of point of sales units that are active in the network, which is the method that we used to show until a few quarters ago. We found that to be a better metric to help investors in being able to associate better the growth of the POS terminals and the SaaS growth on the revenues as opposed to using billable information. Because billable information sometimes varies depending on some of the billing terms to the end customers and some of the collection terms. It can be a little more spotty.

Using active terminals now showed a better trend. Maybe -- and it's a bit more of a conservative number as well because typically, you may have more billable units than active units. For example, if a retailer is closed for vacation or it's a seasonal retailer, in those situations now even though we might be billing the retailer, the unit might not be active. And we define active, meaning that there is a transaction activity going through the unit.

So we found that showing active units of the terminals would be a better way to show the KPI trend in a more consistent way with our revenue increase.

Our next question will come from [Brian Warner], a private investor.

Sorry about that before. I'm not sure what -- when I got cut off, but I had 3 questions. One was, maybe if you can give us a little more color on what you're doing in mobile top-up to take share there because that was quite a quarter? And maybe you can frame the opportunity as you see it over the next few years for that piece of traditional?

Secondly, maybe you could touch on how your mobile offering with T-Mobile is going? And then finally, maybe you can give us a little color on the timing and anything else you might want to share on the net2phone spin-off?

So maybe not in order of the way you asked them. But on the third one, I mean, I think that we answered that question to a previous caller, there's no change in the time frame that we've provided last quarter. As far as the MVNO through T-Mobile, it's actually going very well. We had our best growth so far the past couple of weeks. And again, it's a product that had a hard time, as everyone knows, launching, but we're actually doing pretty good numbers so far.

As far as the IMTU, as I said, it really was a very broad-based gain really throughout every channel that we sell internationally, domestic, B2B, wholesale, et cetera, we really did well across the board. And again, there's always market opportunities, and we try to capitalize on them when they come. And we believe that a lot of the small acquisitions that we've done in the space are helping with it, both in terms of the technology that we've acquired as well as the expertise and pricing information that we now have. And that's allowed us to capture a larger percentage of the market.

And we think it's a very growing market in general. I mean the amount of data that people are using worldwide continues to grow and the need for people to top-up both their loved ones' phones as well as their own phones in the country continues to grow, and we're providing that services in both places, both domestically as well as internationally.

(Operator Instructions)

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.