IDT CORP Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• NRS deepening independent retailer market penetration and launching new features to drive growth.
• BOSS Money strong transaction growth and focus on margin improvement in retail channel.
• net2phone expanding with virtual AI agent launch and subscription revenue growth.
• Traditional communications segment increasing adjusted EBITDA for third quarter, shifting sales and geographical mix.
• Board increased quarterly dividend by 20% and stepped up stock repurchases.

Segment Performance:

• NRS: Had 32% recurring revenue growth and adjusted EBITDA exceeding $10 million. $310 recurring revenue per terminal. Contributes to deepening independent retailer market penetration with new features.
• BOSS Money: Transaction volume reached 5.7 million, digital transactions over 80% of remittances. Focused on margin improvement in retail channel, Fintech segment gross profit grew 35% to a record $22 million. Post-quarter end, February transactions and revenue up over 30% y-o-y.
• net2phone: Subscription revenue $21 million, 9% y-o-y growth (14% constant currency). Adjusted EBITDA $2.9 million, up 55% y-o-y, margins from 9% to 13%. Launched virtual AI agent.
• Traditional Communications: Adjusted EBITDA over $20 million in Q2, 19% y-o-y increase, CapEx decreased slightly. Focused on shifting sales and geographical mix to maximize gross profit.

Guidance:

• Consolidated adjusted EBITDA record in Q2, expects at least as much adjusted EBITDA in the second half.
• Fiscal '25 adjusted EBITDA expected to be ~40% growth on '24's record $90 million.
• BOSS Money transactions and revenue up over 30% in February post-quarter end.

Risks:

• Potential impact of new federal immigration policies on NRS and BOSS businesses.
• Currency fluctuations affecting net2phone's performance.
• Industry-wide IoT voice market capital decline impacting traditional communications segment.

Q: About NRS, on the number of terminals and expansion, was there color on why they were slightly behind initial expectations and if they'd make up for it?

A: Slightly behind initial units, but new salespeople need training, and they expect to make it up in the rest of the year with high hopes for their success.

Q: On net2phone, tied to industry dynamics like Metaswitch sale and Avaya not supporting small/medium customers, any impact?

A: Didn't specifically tie results to industry dynamics, but saw slightly larger deals coming in, optimistic about AI's impact on net2phone.

Q: On BOSS Money, working capital needs and cash holding, what's the comfortable cash amount for BOSS Money?

A: Strong balance sheet allows funding working capital needs, avoiding financing costs, and will continue to support with opportunistic share repurchases and dividends.

Q: Reason for ramping share repurchases?

A: Investor feedback about cash on balance sheet led to decision to ramp repurchases as seen as a good opportunity to buy back shares.

Q: On NRS growth geographically and verticals, any specific opportunities?

A: Growth across all channels, excited about delivery service integration, QSR business, but some initiatives not as fast as expected, but SaaS revenue expected to grow with new features.

Q: On NRS screens and KPI disclosure, plans?

A: When screens become material, may show as separate KPI, optimistic about advertising revenue expansion, but details on quarterly screen additions not provided.