IDT Corporation (NYSE:IDT) Q2 2023 Earnings Call Transcript

IDT Corporation (NYSE:IDT) Q2 2023 Earnings Call Transcript March 8, 2023

Operator: Good evening and welcome to the IDT Corporation’s Second 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 January 31, 2023. 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 the Form 8-K with the SEC. I will now turn the conference over to Mr. Jonas.

Samuel Jonas: Thank you, John. 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 your questions. My speeches lately have been a little long and personally I prefer short and sweet. So today, that’s what we are going to do. On the second quarter, the 3 months ended January 31, you can read a more detailed discussion of our financial and operational results from our earnings release filed earlier today or our Form 10-Q that we expect to file with the Securities and Exchange Commission early next week. NRS, BOSS Money and net2phone are three primary high growth businesses again performed very well this quarter. Their formula is simple deliver exceptional value and superior customer experiences.

I am pleased that they continued on their growth trajectories, while remaining very focused on improving their bottom lines. Each of these businesses grew robustly in the second quarter. NRS added approximately 1,600 net new terminals this quarter, a record increase and more than doubled its recurring revenue. The revenue increase was led by a year-over-year jump in advertising and data sales, which grew by 130%. net2phone achieved 30% year-over-year subscription revenue growth, including the 35% increase in our Latin American markets and a 23% increase in our U.S. market. At BOSS Money, transaction volumes through both our retail and direct-to-consumer sales channels increased by 39% year-over-year as we continue to leverage the synergies between these two channels.

Led by the contributions of these three businesses, IDT delivered significant year-over-year increases in quarterly adjusted EBITDA, up 25% to $23 million and income from operations of 32% to $18 million and an earnings which more than doubled to $0.56 per share. Our strong operating results this past quarter enabled us to further strengthen our balance sheet. At the quarter’s end, we had over $156.8 million in cash, cash equivalents, debt securities and current equity investments, an increase of nearly $20 million over the first 3 months. Once again, we had no debt. I want to wrap up by thanking our stockholders, both our long-term investors and those that are new to our story, for putting their faith and their capital with us. And finally, a huge thank you to our employees, some of whom continue to work under difficult conditions overseas for their many contributions above and beyond the ordinary.

The best thing about IDT is our amazing team, whose hard work and innovative sure powers all our progress. Now, Marcelo and I will be happy to take your questions.

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Q&A Session

Operator: Thank you. The first question comes from David Polansky with Immersion Investments.

David Polansky: Hey, guys. Samuel, I think you win the award for shortest prepared remarks of any public company that I have ever listened to. So if they give out medals for that, congrats, I think you should be getting one soon. But on my question, I want to talk about advertising and data a little bit within NRS. It’s now on a trailing 12-month basis. It’s over 50% of NRS revenue excluding terminal sales. So I think the data and advertising piece of that business is not super well understood. I think people know point-of-sale generally and they know about payments, but the marriage of data sales and advertising from a point of sale is not €“ I don’t think it’s super well understood amongst investors. So, could we get a €“ one, could we get an update on advertising, so like where are you in terms of penetration developing relationships there and selling more advertising?

And then on data, could you speak high level about why your data is attractive and sort of what is so interesting about the NRS offering to maybe a third-party data aggregator or a CPG company? That would be great. Thanks.

Samuel Jonas: Okay. Well, first of all, thank you for recommending me for the award for shorter speech, I appreciate that. I wear that badge with honor. And I mean €“ listen, I wish that we had more direct salespeople working for us at NRS on the advertising front. The ones that we have, have been very, very productive and have really done a great job showing our customers the value that they are getting from advertising on the NRS terminals both to consumers as well as to the merchants. As far as the data, I mean there is two things I would say just generally. One is that until now, I would say the data available to CPGs and a variety of other organizations that buy our data has been very, very limited. So the biggest piece is that when people have nothing and you give them something really amazing like they are even more wowed by it than if they had something before.

So we have scanned data from pretty much all of our stores. And just to use an example, manufacturer can see exactly how much in sales they are doing in a particular store in a particular ZIP code, they can see how their competitors are doing. They can see how their pricing affects their sales. They can see how discounts that they are giving to consumers are affecting their sales. They can really see basically what I would say is everything that they could get from a big box retailer, but maybe even more because like in a certain way, I think that we are more open with them than what some of the big box retailers might give them. They might not give them what their competitors sell just as an example. And I give them €“ if they were doing testing on pricing, how pricing is affecting sales volume and the manufacturers that we deal with see great value in that.

And they also want to see how their advertising dollars in our stores are doing for them. And that’s another reason that they buy the data, because they can see the impact from one to the other. Maybe Marcelo wants to add something too.

Marcelo Fischer: No, I was just thinking, David, I mean, like, yes, I mean, obviously, we are very, very pleased about advertising data performance. But just to be totally honest, we actually are underperforming versus what we had budgeted in the beginning of the year and of all of our segments, NRS is the one underperformed versus budget even though it’s our fastest growing segment, because when we did the budget back in June, July, we are really hoping that the broader advertising market will be stronger than they are. We are feeling the headwinds to advertising revenue like everybody else is feeling. But on the other hand, now we provide our digital screens inventory out there, mostly programmatic buyers to match it with fellows.

And we believe that our digital screens are better than most of the inventory out there because of the amount of time that people are looking at the screens as they are approaching to pay for the goods at the NRS stores. So yes, we are very happy with it. It’s a great element of our business model to have the advertising. But even said that, no, it’s a little softer than what we had hoped it would be because of the macro situation.