IDT Corporation (NYSE:IDT) Q1 2023 Earnings Call Transcript
IDT Corporation (NYSE:IDT) Q1 2023 Earnings Call Transcript December 5, 2022
Operator: Good evening and welcome to the IDT Corporation's First Quarter Fiscal Year 2023 Earnings Call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the 3-month period ended October 31, 2022. During remarks by IDT's Chief Executive Officer, Samuel Jonas, all participants will be in listen-only mode. After Mr. Jonas' 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 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 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. A schedule provided in the IDT 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-K with the SEC. I will now turn the conference over to Mr. Jonas.
EvgeniiAnd/Shutterstock.com
Samuel Jonas: Thank you, operator. Welcome to IDT's earnings conference call. After my remarks, Marcelo Fischer, IDT's Chief Financial Officer, will join me and we will be available to answer questions. My discussion today focuses on the first quarter of our fiscal year 2023, the 3 months ended October 31. For a more detailed discussion of our financial and operational results, please read our earnings release filed earlier today and our Form 10-Q that we expect to file with the Securities and Exchange Commission by Monday, December 12. This quarter, please note that our NRS business is now a separate reportable segment by greater visibility into its financial performance. The Fintech segment, which previously included NRS, now compromises BOSS Money and several smaller financial service offerings and businesses that were previously included in our Traditional Communications segment.
These include our Gibraltar-based bank and our awards to go gift cards. Within Fintech, we have continued to breakout BOSS Money revenue and KPIs for you. In the first quarter, we achieved our second consecutive quarter of record adjusted EBITDA. Our rapidly expanding NRS, BOSS Money and net2phone businesses contributed 25% of our consolidated adjusted EBITDA in the period and their continued expansion positions us for significantly enhanced profitability in the coming years. We are focused on improving the bottom line performances of all of our businesses. And this quarter, both net2phone and the Fintech segment, which now primarily tracks the performance of our BOSS Money remittance business turned the corner and generated positive adjusted EBITDA.
NRS also had another very good quarter, more than tripling its adjusted EBITDA contribution compared to the year ago quarter. As I discussed last quarter, NRS advertising data sales, which contributed over half of NRS' first quarter recurring revenue, is always impacted by seasonal factors and of course industry-wide trends. In the first quarter, we benefited from sales of political advertising and we expect to see a significant amount of holiday and year-end spending in the second quarter. However, January is usually a slower sales month and we have begun to see the impact of macroeconomic headwinds that are buffeting the advertising market. Looking ahead, we are planning to increase our available advertising opportunities by expanding the number of screens in our network and by adding digital windows signs in high-traffic areas, menu boards in busy food service establishments and by opening a variety of other advertising venues, included across our various apps and websites and of course, for NRS retailer sites that we manage.
We expect to drive continued strong growth in SaaS and merchant services revenue by increasing our velocity of sales as well as continuing to expand our offerings as well as the sales channels. Over the next couple of months, we will launch our kiosk ordering and beta version of an app downloadable POS tablet for POS for tablets as well as POS is customized for specific retail verticals with significantly higher SaaS monthly recurring charges than the level we realized in our current retail base. Thinking about longer term NRS growth initiatives, we are also expanding our e-commerce offerings, which we conceived us to help NRS level the playing field for independent retailers who must compete against the expansion of national and regional retail chains.
A key part of the effort is to help retailers expand their supply options and to provide them with remote ordering and home delivery capabilities. On the supply side, we just announced a B2B e-commerce initiative to help distributors and suppliers access NRS' extensive nationwide network of retailers, while enabling NRS retailers to order the right items and the right amount of inventory to maximize sales and cash flows. On the B2C side, we recently announced a partnership with Uber to integrate with their delivery platform. Together, we are providing home delivery at no cost to our retailers when customers order through our BR Club app. This expansion of e-commerce ecosystem will help our retailers become more profitable and serve customers even when they are not in the store.
BOSS Money continued to perform very well in the first quarter with solid year-over-year increases in transaction volumes, revenue and revenue per transaction. This quarter, we beta launched a new digital wallet aptly named Wallet by BOSS Money, which I am personally very excited about. I hope you all agree it provides an amazing user experience for sending, spending and saving money. I encourage you to download the app from either the Apple App Store or the Google Play Store and try it. Preferably, you will also sign up for direct deposit to maximize the wallet benefits. Our wallet has tremendous potential, particularly for the immigrant communities we serve and we expect it to become the ecosystem for many of our payments and financial service offerings over time.
And we don't charge anything, so you have no excuse not to try and give us feedback. net2phone reached a significant milestone this quarter, achieving positive adjusted EBITDA even more quickly than we had expected. We have been able to outperform without slowing our pace of seat growth. In fact, we added over 18,000 seats this quarter compared to 12,000 last quarter. net2phone's strategic focus on the SMB market through channel partners continues to payoff. We have significantly simplified and streamlined the processes for our partners to onboard and provision their SMB customers making experience intuitive, quick and hassle-free while at the same time lowering our onboarding costs and their onboarding costs. In Q1, net2phone sold approximately 1,000 cloud-based contact center seats, leveraging the CCaaS platform that we acquired earlier this calendar year and about which we continue to be super excited.
See also 10 Best Cryptocurrency Stocks To Invest In and 12 Best Blockchain Stocks To Buy.
Because our CCaaS platform is telephony agnostic, we are able to sell CCaaS globally. During the quarter, we sold CCaaS to enterprise call centers and contact center customers in three new markets. We also released our sales force integration for contact centers, which will become a powerful tool. Turning now to our Traditional Communications segment, our IDT digital payments business, primarily our Mobile Top-Up offerings, was again impacted by the decline of the key corridor. Removing the impact of that corridor, digital payments revenue would have increased 5% year-over-year. However, we are not satisfied with the results to date, and we are hard at work enhancing the product and in some cases, changing team members helping night growth in this business.
BOSS Revolution Calling and IDT's global wholesale carrier revenue continued to decline, but we were able to substantially mitigate the bottom line impact. With our strong cash flows and our stock undervalued, we repurchased about $5 million of our Class B common stock in Q1. Over the past two quarters, we have repurchased about 3% of our outstanding Class B shares in the aggregate. The cash we expect to generally will build upon our very strong balance sheet, including $137 million in cash and current investments and no debt. Debt liquidity enables us support our businesses with working and growth capital without resorting to increasingly expensive outside financing. And in fact, we are even earning positive net interest income. To wrap up, we continue to benefit from strong performances from our growth businesses.
As a result, we are on track to continue to deliver healthy improvements in our bottom line results for the remainder of fiscal 2023 and God willing beyond. Now, Marcelo and I will be happy to take your questions, and I'm sorry for the speed at which I read this. I'm just a little tired.
To continue reading the Q&A session, please click here.
