Release Date: June 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IDT Corp (IDT, Financial)'s three high growth, high margin businesses delivered strong results, contributing to a 310 basis point improvement in consolidated gross margin.
- NRS surpassed 30,000 active terminals, making it the largest POS network for C-stores in the country.
- Net2phone's adjusted EBITDA doubled year over year, showcasing significant operational scaling and improved operating leverage.
- BOSS Money achieved its first adjusted EBITDA positive quarter, driven by a balanced omnichannel approach and strong revenue increases.
- Merchant services revenue increased 66% year over year, driven by increases in NRS Pay accounts and a rise in credit card usage.
Negative Points
- SG&A expenses increased year over year and quarter over quarter, partly due to one-time compensatory arrangements.
- Advertising and data revenue is inherently volatile and driven by industry-wide trends and seasonality.
- Despite efforts, IDT Corp (IDT) has not had massive success in bringing cost savings to its NRS retailers through buying groups and inventory deliveries.
- The traditional communications segment continues to face challenges as the market for paid minute communications declines.
- The company is still in the process of stabilizing its IDT digital payments business and returning it to growth.
Q & A Highlights
Highlights from IDT Corp (IDT)'s Q3 2024 Earnings Call
Q: Can you explain the increase in SG&A expenses despite your optimism about finding efficiencies?
A: Marcelo Fischer, CFO: We have initiated a large cost-cutting initiative, but Q3 SG&A was higher due to one-time compensatory arrangements based on executive contracts. These were non-cash charges. The cost-cutting effects will be more visible in Q4 and beyond.
Q: With NRS surpassing 30,000 kiosks, how do you plan to leverage this scale to benefit your smaller store customers?
A: Shmuel Jonas, CEO: We have attempted to create buying groups and delivery systems for inventory but haven't had massive success yet. Our current focus is on increasing customer footfall and spending rather than reducing the cost of goods sold for our retailers.
Q: What are the key drivers behind the strong performance of the NRS segment?
A: Shmuel Jonas, CEO: NRS added 1,600 net new POS terminals this quarter. We are improving per terminal economics by bundling new terminals with NRS Pay and upselling higher revenue payment processing and SaaS plans. Advertising and data revenue increased 16% year over year, and merchant services revenue grew by 66%.
Q: How is net2phone contributing to IDT's bottom line?
A: Shmuel Jonas, CEO: net2phone generated over $2 million in adjusted EBITDA this quarter, more than double the year-ago level. We are focusing on cost control and improving unit economics. Subscription revenue increased by 17%, driven by a 13% increase in seats served and a 4% increase in average revenue per seat.
Q: What are the growth strategies for the BOSS Money business?
A: Shmuel Jonas, CEO: Our strategy includes expanding our agent network, cross-selling BOSS Money services to our broader BOSS ecosystem, and improving customer acquisition costs relative to lifetime value. We doubled our transaction volume over the past eight quarters and aim to double it again more quickly.
Q: How are you managing the traditional communications segment amid market declines?
A: Shmuel Jonas, CEO: We are focusing on maximizing cash flow by reducing costs and streamlining operations. We have stabilized our IDT digital payments business and are working to return it to growth through various applications. Pricing changes for international mobile top-up products have also increased profitability.
Q: What are the future plans for net2phone's pricing and service offerings?
A: Shmuel Jonas, CEO: net2phone will transition to a basic plan with premium feature-driven offerings, including AI-powered functionalities, to drive ARPU expansion. We will also roll out significant enhancements to the user experience, including a single pane of glass interface for all services.
Q: How do you plan to return value to shareholders?
A: Shmuel Jonas, CEO: We will continue to return value directly to shareholders through additional stock repurchases and a quarterly dividend.
Q: What are the key factors driving the improvement in IDT's consolidated gross margin?
A: Shmuel Jonas, CEO: Our three high-growth, high-margin businesses—NRS, net2phone, and BOSS Money—are becoming more significant contributors to our consolidated results. This transition has driven consistent increases in our consolidated gross profit over the past four quarters.
Q: What are the expectations for the Fintech segment's future performance?
A: Shmuel Jonas, CEO: The Fintech segment achieved positive adjusted EBITDA for the first time this quarter. We aim to generate adjusted EBITDA margins in line with industry leaders as BOSS Money continues to scale and improve its economics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
