IDT CORP Q1 FY2025 earnings call

• Building on momentum from fiscal 2024, IDT delivered strong financial results in Q1 2025 with record gross profit, gross profit margin, and adjusted EBITDA; consolidated revenue increased sequentially for three consecutive quarters.
• NRS focused on addressing independent retailer market needs, investing in new products/services, and achieving increased adoption rates on payment processing and SaaS plans.
• BOSS Money enhanced margins in retail channel, with Q1 income from operations boosted by $4.6 million year-over-year, and transaction growth rebounded in November led by D2C.
• Net2phone saw seats served increase over 400,000, subscription revenue up 13% despite FX impact, and healthy increases in income from operations and adjusted EBITDA.
• Traditional communication segment operating activities improved economics, with year-over-year revenue down 4% but income from operations up 2%.
• Now on track to significantly beat previous EBITDA projections.

NRS: In Q1, NRS achieved robust increases in revenue, gross profit, and adjusted EBITDA. It focuses on providing solutions to the independent retailer market, invests in developing new products/services, and saw increased adoption rates on payment processing offerings and SaaS feature plans. Fintech segment (powered by BOSS Money): BOSS Money's Q1 results reflected margin enhancement in the retail channel, with gross margin expanding significantly and transaction growth slowing somewhat; the enhanced margins boosted Q1 income from operations by $4.6 million year-over-year, and transaction growth rebounded in November led by D2C. Net2phone: Seats served increased over 400,000, driving a 13% increase in subscription revenue despite negative FX impact to Latin American operations; net2phone's financial discipline contributed to healthy increases in income from operations and adjusted EBITDA. Traditional communication segment: Year-over-year revenue decrease was 4% while income from operations increased by 2%. Revenue contributions: Specific percentages not explicitly stated in absolute terms but each segment contributed to overall consolidated revenue growth.

• Now on track to significantly beat the EBITDA projections previously had.

• Immigration policy changes could impact growth of BOSS Money.
• Strong U.S. dollar causing FX impact on Net2phone's Latin American operations, and local cost inputs affected by dollar also impacting profitability.

Q: Hello. Thank you for the great results again. I have questions on the three growing businesses. I'll start with a double question on net2phone and BOSS Money. BOSS Money has had extraordinary growth in the last couple of years and a lot of that growth has been driven by the mass immigration into the U.S. during the last presidential term. So how confident do you feel on your ability to keep growing at those rates and stealing market share from your competitors if the immigration policies into the U.S. tightened? And then the sec and the second question about net2phoen is we have over 50% of the revenues coming from Latin America, and with the strengthening of the USD, we are seeing the forex impact. Last week we had a huge event in the Brazilian Real with devaluation on that currency where you're really strong. I was wondering on your confidence level to achieve double digit revenue growth this year.

A: Okay. So I'll try to answer your question on immigration first. It's really in my opinion too early to tell what will really be the end result of the new administration's policies. My personal opinion is that you can't build things in America and make America stronger without immigration into this country. So if you're going to have tariffs, you need immigrants to work hard and help build America like they always have. That's my personal opinion. But as for what really happens, I don't know. One thing I would say is that we continue to focus on improving the product every day and that is my opinion what really drives the results not how many people cross the border on a daily basis, but that's my own opinion. Yes, I'll answer the question to you on net2phone. So you're absolutely right. The exchange rates are not helping net2phone right now. As you know, a significant portion of the business comes from Latin American countries, Brazil and Mexico in particular. When you look about year-over-year, Q1 versus Q1, the Brazilian Real is down about 14%, the Mexican Peso is down about 11%. So those clearly impact the business when you cancel it into U.S. dollars. Our subscription revenue growth was 13% for Q1. If not for this FX impact, it would have been 16%. So we are looking at it carefully. We keep on monitoring that. And also, some of the cost inputs in operating the business in Latin America are really U.S. pegged, if not U.S. denominated necessarily. So that has also a slight impact on the economics, on the profitability, not just on the translation side. And net2phone team and ourselves are really focusing very much on how we could offset some of those cost implications as well as the growth rates going forward. Now because it does sound like the U.S. dollar will continue to be strong for the foreseeable future. That being said, those markets in local currencies are really doing very well and continue to grow at a really nice pace and we feel very positive about their long-term success and growth.

Q: Can I ask about NRS, so NRS this quarter there was seasonal churn? I would appreciate if you can provide a little bit of color on that seasonality of the terminal deployments. And I also noted that the terminal sales were lower. And I wonder if this is due to the kiosk run out that you mentioned last quarter or there's different impacts here?

A: We have a large seasonal customer in the fireworks business that comes and goes. They were larger this year than they have been previously, which is both good and bad. So that's really the seasonal impact as far as your questions related to the kiosk, it definitely did have an effect and we also had a lot of new product launches in terms of our software plans and that also really, I think unfortunately I'll say shifted some of the sales people's attention to educating customers on those new plans and away from pushing out more units but we're back on track.

Q: And one final question on NRS, in the last few quarters you have mentioned how you are offering new forms of advertisement beyond the initial customer facing checkout screens. I was wondering what categories or real estate of businesses you are targeting for these new screens. Are these screens located in outdoors high traffic areas or are they inside businesses? How many of these screens did you place in Q1 for example?

A: I don't have the numbers offhand how many we placed in Q1. I do know that we ordered over 3,000 new screens. I don't believe that they've all arrived yet. And we've mostly placed them into hotels and entertainment attractions and all of them are pretty highly trafficked.