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IDT (IDT) Q1 2021 Earnings Call Transcript

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IDT (NYSE: IDT)
Q1 2021 Earnings Call
Dec 03, 2020, 5:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good evening, and welcome to the IDT Corporation's first-quarter fiscal year 2021 earnings call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the three-month period ended October 31, 2020. [Operator instructions] After the prepared 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 references to non-GAAP measures included adjusted EBITDA, adjusted EBITDA less capex, non-GAAP net income and non-GAAP earnings per share.

A schedule provided in the IDT earnings release reconciles adjusted EBITDA, adjusted EBITDA less capex, non-GAAP net income and non-GAAP earnings per share to the nearest corresponding GAAP measures. Please note that 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.

Samuel Jonas -- Chief Executive Officer and Chief Operating Officer

Thank you, operator. Welcome to IDT's first-quarter fiscal year 2021 earnings call covering results for the three months ended October 31, 2020. I'm joined today on the call by Marcelo Fischer, IDT's chief financial officer. For a detailed report on our financial and operational results, please read our earnings release filed earlier today in our Form 10-Q, which we expect to file with the SEC on December 10.

Starting this quarter, we are disclosing our financial results in new reportable segments and more accurately reflect management's current view of the business and the increasingly important contributions of our higher growth, higher-margin businesses. Please see the earnings release for a description of our new reporting segments. This was another strong financial quarter for IDT, with substantial year-over-year improvement in revenue less direct cost of revenue and bottom line results. All three of our high-growth, higher-margin businesses, BOSS Revolution, money transfer, NRS and net2phone cloud communications offerings generated impressive year-over-year revenue growth.

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In aggregate, these businesses have been contributing an increasing share of our consolidated revenue less direct cost of revenue, and this quarter, their contribution topped 30%. Our money transfer business benefited, although significantly less this quarter, from the same favorable foreign exchange market conditions that boosted our money transfer results last quarter. Within the new fintech segment, BOSS Revolution money transfer revenue increased by $8 million to $15 million, driven by a 77% year-over-year increase in digital transaction volumes. Also within fintech, NRS revenues increased 109% to $4.9 million, with payment processing in digital out-of-home advertising revenue leading the way.

The COVID-19 pandemic has definitely impacted consumer spending patterns, and many local convenience stores are benefiting from increased foot traffic. I am more excited than ever about the potential of our NRS business, our most promising offerings, including advertising, payment processing and analytics have just begun to realize their potential. And we continue to grow our retail network, adding 450 to 500 new POS terminals a month. We expect the pace of growth to accelerate once COVID vaccines are widely available.

By the end of the quarter, we were building for over 12,000 deployed terminals. net2phone's cloud communications business, now reported as the net2phone UCaaS segment, increased revenue by a third compared to the year ago quarter to $9.6 million. I was particularly happy to see strong sequential growth in our Latin American markets. Many of these markets slowed early in the year as a result of COVID-19.

LatAm subscription revenue increased 30% sequentially, and our business there should benefit from expansion in new markets going forward. We also recently launched in Peru, the sixth largest market in Latin America, and we will add six more cities in Brazil before the end of the current second quarter. So as you can hear and see, we are investing heavily in sales growth. We also continue to invest aggressively in product development.

We are confident that this will position net2phone for an even more impressive growth going forward. Turning now to our traditional communications segment. BOSS Revolution calling and mobile top-up both had a good quarter, continuing the trend since the onset of COVID-19 pandemic. While our carrier services business continued to be impacted by the pandemic-related loss of international corporate voice traffic, in aggregate, revenue for this segment decreased by $10 million to 314 million while adjusted EBITDA less capex as reasonable proxy for cash generated increased by 4.8 million to 17.8 million.

Cash generation was boosted by our ongoing efforts to streamline operations and reduce the overhead associated with these offerings. Across our businesses, we continue to invest to develop new technology-driven offerings and features that will enable us to better serve and maintain our customers and to pursue exciting growth opportunities, as well as systems that make us more efficient. Within fintech, we will roll out BOSS Money Visa card in peer-to-peer transfers early next year. This is the first step in a broader and strategic challenger bank initiative that we are now focusing on to help our immigrant, under-banked and unbanked customers conveniently access and participate fully in the digital economy.

At NRS, we launched NRS Petro in the first quarter, a new pay-at-the-pump solution for independent gas station owners that we believe will open a potentially large new market for us in both petro and convenience and food stores that are located in gas stations and now can use a seamlessly integrated solution from NRS. At net2phone UCaaS, we continue to focus on developing and releasing integrations with third-party applications and CRMs. Last quarter, we released an integration with Microsoft Teams. Since then, we have released integrations with Zoho and Slack.

Our customers love these integrations, and we expect that these, along with other terrific new features in the development pipeline, will fuel net2phone's expansion in the coming year and beyond. IDT closed the quarter with a stronger balance sheet, even as we continue to invest in our businesses and repurchase our stock. At October 31, we held $119 million in cash, debt securities and current equity investments. Now, Marcelo and I would be happy to take your questions.

Questions & Answers:


Operator

Thank you, sir. [Operator instructions] At this time, there appears to be no questions. [Operator signoff]

Duration: 9 minutes

Call participants:

Samuel Jonas -- Chief Executive Officer and Chief Operating Officer

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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Motley Fool Transcribing has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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