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Edited Transcript of IDT earnings conference call or presentation 10-Oct-19 9:30pm GMT

Q4 2019 IDT Corp Earnings Call

NEWARK Oct 12, 2019 (Thomson StreetEvents) -- Edited Transcript of IDT Corp earnings conference call or presentation Thursday, October 10, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Marcelo Fischer

IDT Corporation - SVP of Finance

* Samuel Jonas

IDT Corporation - CEO

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Conference Call Participants

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* Aman Raj Gulani

B. Riley FBR, Inc., Research Division - Associate Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the IDT Corporation's Fourth Quarter and Full Fiscal Year 2019 Earnings Call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the 3 and 12-month periods ended July 31, 2019. (Operator Instructions)

After the prepared remarks, Marcelo Fischer, IDT's Chief Financial Officer, will join Mr. Jonas for Q&A. (Operator Instructions)

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 either to update any forward-looking statements that may have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast.

In the presentation or in the Q&A that will follow, IDT's management may make reference to the non-GAAP measures, including adjusted EBITDA, non-GAAP net income and non-GAAP EPS. A schedule provided in the IDT earnings release reconciles adjusted EBITDA, non-GAAP net income and non-GAAP 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 turn the conference call over to Mr. Jonas. Mr. Jonas, the floor is yours, sir.

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Samuel Jonas, IDT Corporation - CEO [2]

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Thank you, operator. Welcome to IDT's Fourth Quarter and Full Fiscal Year 2019 Earnings Call covering results for the 3 and 12-month periods ended July 31, 2019. For a more detailed report on our results, please read our earnings release filed earlier today, and our Form 10-K, which we will file with the SEC tomorrow.

IDT achieved fourth quarter results that were relatively consistent with trends from the first 3 quarters of the 2019 fiscal year. Our growth initiatives, net2phone UCaaS offerings, National Retail Solutions and our BOSS Revolution international money transfer service continued the rapid expansions.

Net2phone's UCaaS business generated $7 million in revenue this quarter, a 78% increase year-over-year. Growth has been especially strong in our South American markets. At the quarter close, net2phone reached the 100,000 seat milestone.

At National Retail Solutions, our retailer POS network increased revenue to $1.9 million, up 72% from the year ago quarter. We continue to expand our retail network and now have over 8,000 terminals actively processing transactions. The growth in our network provides us with a scale to develop new opportunities for additional revenue-generating services in the coming year.

BOSS Revolution international money transfer revenue climbed to $.6.9 million in the fourth quarter, a 42% increase year-over-year. Direct-to-consumer channel sales again powered the growth, increasing revenue 88% year-over-year to $4.4 million. Even though D2C has been the growth engine of this business for the last 2-plus years, we continue to work diligently on improving our retail channel offering. That tenacity is beginning to pay off.

Sales to our retail channel, which declined throughout 2018, increased sequentially in the third and fourth quarters. We believe that success at retail will allow us to compete more effectively online and at retail. As expected, revenue from our core Carrier Services and BOSS Revolution Calling offerings continued to decrease as a result of industry-wide headwinds in the paid minute communications market, but the company-wide margin impact was dampened by increased contributions from our growth initiatives. Consolidated revenue less direct cost of revenue has increased sequentially in each of the last 3 quarters.

Consolidated adjusted EBITDA was $7.4 million in the fourth quarter. In the year ago quarter, consolidated adjusted EBITDA was $16.8 million, but was a significant outlier to the upside as a result of changes to estimates for recognizing breakage revenue. For the full fiscal year, consolidated adjusted EBITDA was $30.8 million compared to $38.2 million in fiscal 2018.

Overall, the fourth quarter marked a consistent end to a solid year and I want to thank everyone in our company for all their hard work. As fiscal 2020 gets underway, we are working from a strong position to vigorously pursue our exciting growth opportunities.

That concludes my comments on the quarter's results. Now we would be happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question we have will come from Aman Gulani of B. Riley FBR.

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Aman Raj Gulani, B. Riley FBR, Inc., Research Division - Associate Analyst [2]

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Good to see that the growth initiatives are continuing to ramp. So I guess, my first question, can you talk about any M&A opportunities that you might be seeing? Specifically, are you seeing any opportunities within something that will expand your UCaaS offerings or your point-of-sale offerings?

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Samuel Jonas, IDT Corporation - CEO [3]

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You mean as an acquisition or you mean in terms of...

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Aman Raj Gulani, B. Riley FBR, Inc., Research Division - Associate Analyst [4]

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Yes, like maybe like a tuck-in or a bolt-on that you can sort of add on to acquire more customers and to sort of get that -- those 2 businesses growing maybe quicker or maybe get into other markets? Is there anything that you might be looking at right now? Or is that something that you are thinking about?

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Marcelo Fischer, IDT Corporation - SVP of Finance [5]

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Sure. This is Marcelo. We were very pleased with the way that the net2phone business ended 2019. We felt that reaching the 100,000 seats mark was a real great accomplishment for the entire team. And our initiatives in Brazil, our business in Brazil and Argentina and the U.S. and our acquisition in Canada, all grew very nicely during the year and we just started operations in Mexico and Colombia as well -- about to start as well in Hong Kong. So we are growing geographically around the globe. At the same time, we are looking at different acquisition opportunities in the space. Any day of the week now we are being presented with opportunities, both in the U.S. as well as outside of the U.S. And we are now evaluating now those additional opportunities as they come in. And we have some nice aggressive objectives to continue to grow this in this coming fiscal year.

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Aman Raj Gulani, B. Riley FBR, Inc., Research Division - Associate Analyst [6]

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Okay. That's helpful. Okay. And just more on the UCaaS business, clearly, Brazil and South America -- the South American market are performing very well. Do you have any plans to target any other markets where you think that you can achieve similar growth rates?

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Marcelo Fischer, IDT Corporation - SVP of Finance [7]

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Well, I mean, yes, I mean, we are looking to expand into other geographies, but now even at the current geographies we are in right now, we're really scratching the surface. I mean, like in Brazil alone, even though we are seeing such a large growth, we are really just in the main cities, São Paulo, a little bit in Rio de Janeiro. In Brazil alone, there is such a large opportunity if you go to Curitiba and Fortaleza and Belo Horizonte and now into other cities and the same holds true for Argentina. And we're just entering Mexico right now, which is a huge opportunity. So yes, well, on one hand, we are looking to expand into other countries as well, but there is just so much opportunity right now in the existing countries we just came in. So whether we grow deeper in current countries or are we going to other geographies, we're probably going to do both, but that's likely to do in the countries we're in right now.

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Aman Raj Gulani, B. Riley FBR, Inc., Research Division - Associate Analyst [8]

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Very helpful. Okay. And then just moving on to your NRS business. So again you're adding new terminals at a pretty -- an accelerated rate, but I mean, relative to last year, it slowed down a bit. What's the reason for like the slowdown in the terminals that you're adding? I mean you're doing almost like 1,000 a quarter last year. I think it's come down to about 600 this year. So just trying to get a better feel of what's going on there?

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Samuel Jonas, IDT Corporation - CEO [9]

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I think 2 things have happened. One is that we've changed the pricing on the terminals. And we really did it mostly with the idea of being able to bring on more merchant services accounts with accounts that we're going after rather than accounts that don't do merchant services with us. And that's what I would say slower sales in the first quarter, but better sales. But I think that as the year progresses, we will do better both on sales and quality of sales, it just took a little time to get sales channels used to a higher price.

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Aman Raj Gulani, B. Riley FBR, Inc., Research Division - Associate Analyst [10]

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Got it. Okay. And just last question for me. So I think in your prepared remarks, you mentioned you could add additional revenue opportunities once you started scaling that business. Can you talk about those additional revenue opportunities?

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Samuel Jonas, IDT Corporation - CEO [11]

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Yes, I mean, again, our big ones that we've talked about a little bit publicly are in the data and in the advertising sales. On the data side, there is a big need for -- well, let's say, there's a big black hole of sales that happened in independent retailers and being that we're probably already the largest point-of-sale system in independent convenience stores, there is a lot of need and desire for our data. So we've been doing pretty well already and we just hired a new lady to lead that team. And they have very, very aggressive growth plans for the data side of the business.

On the advertising side of the business, it's also done much, much better off late. And again, we're just really starting to go after targeted ads. And as the person that's buying this, marketing them, something else, et cetera. So we're a big believer that the advertising is going to continue growing quite steadily.

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Operator [12]

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(Operator Instructions) Well, as there are no more questions, this will conclude our question-and-answer session and today's conference call.

Again, we thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you, again, everyone, take care, and have a great day.