Good evening, and welcome to the IDT Corporation's Second Quarter Fiscal Year 2021 Earnings Call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the 3-month period ending January 31, 2021. 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 question-and-answer 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 have made or may make or to update the factors that may cause actual results to differ materially from those they forecast. In their presentation or in the question-and-answer session, IDT's management may make reference to non-GAAP measures, including adjusted EBITDA, adjusted EBITDA less CapEx, non-GAAP net income or non-GAAP earnings per share. A schedule provided in IDT's 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 the IDT earnings release is available on the Investor Relations page of the IDT Corporation's website. The earnings release has been filed also on the Form 8-K with the SEC. I would now like to turn the call over to Mr. Jonas. Please go ahead.

Thank you, operator. Welcome to IDT's Second Quarter Fiscal Year 2021 Earnings Call covering results for the 3 months ended January 31, 2021. 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 and our Form 10-Q, which we expect to file with the SEC on or about March 12. IDT delivered another strong quarter, including significant year-over-year increases in consolidated revenue, income from operations and EPS. Consolidated revenue increased $16 million to $340 million. It is our third consecutive quarter of year-over-year increases in revenue and our sixth consecutive quarter of year-over-year increases in revenue less direct cost of revenue. Consolidated income from operations increased $11.6 million to $12.9 million this quarter, powered by a $9 million year-over-year increase in revenue less direct cost of revenue. Consolidated SG&A expense meanwhile was substantially unchanged year-over-year. We are successfully reducing the overhead in our Traditional Communications segment and redeploying those resources to support and accelerate the growth of our higher-margin businesses in the Fintech and net2phone-UCaaS segments. Fully diluted EPS increased to $0.51 from $0.04 in the year-ago quarter. The quarter's results were highlighted by year-over-year revenue expansion from our 3 higher-margin businesses, National Retail Solutions, BOSS Revolution Money Transfer and net2phone-UCaaS. Within our Fintech segment, NRS added over 1,300 units to its POS terminal network this quarter. In the year-ago quarter, we added less than 800 units. We've picked up the pace of network expansion significantly. At January 31, NRS had over 13,700 billable units in the network. NRS' quarterly revenue increased by over 150% year-over-year to $5.2 million, led by growth in payment processing services and in digital out-of-home advertising sales. Although we are in the early stages of monetizing both of these offerings, they helped to drive a 50-plus percent increase in revenue per POS terminal over the past year. Also within Fintech, our BOSS Revolution Money Transfer service increased revenue 73% to $13.3 million. We continue to build out our global disbursement network, and this quarter passed an important milestone, opening corridors to Southern Asia with the addition of Pakistan and Nepal. Looking ahead, we are laying the groundwork for the first expansion of our origination market. The reach of our disbursement network and significant transaction volumes into key destinations enable us to provide a highly competitive D2C service from a number of countries. We expect to launch our expansion by offering BOSS Revolution Money Transfer in Canada and the U.K. in fiscal 2022. As we noted in our earnings release, our Money Transfer business continued to benefit from the unusual foreign exchange market conditions that drove strong growth in the second half of last year, but which diminished through the first 2 quarters of fiscal 2021 before dissipating by the end of the second quarter. In our net2phone-UCaaS segment, subscription revenue climbed 36% to $10.1 million. Growth has been solid in all of our markets, the U.S., Canada, South America and Spain. Our continued growth validates our geographic strategy, but also reflects the accelerated rate at which we have been able to develop and deploy enhancements to the offering itself, most notably adding integrations with some leading CRMs and communications platform. In the second quarter, we launched our integration with Slack, the leading channel-based messaging platform, building on previous integrations with Zoho and Microsoft Teams. More recently, we launched a powerful integration with Salesforce, the world's largest CRM. These integrations enable net2phone to approach higher seat count customers and position us to strengthen per seat revenue without sacrificing growth. The increase in sophistication of our feature set and adaptability of our offerings prompted CIOReview, a publication for technology leaders, to name net2phone as one of its top 20 companies providing transformative solutions for retail businesses. In our Traditional Communications segment, aggregate adjusted EBITDA less CapEx increased to $18.2 million, $4.6 million more than in the year-ago quarter. Strong year-over-year growth in international mobile top-up sales in combination with stable BOSS Revolution Calling revenue more than offset a decline in Carrier Services revenue. Looking beyond our established businesses to new opportunities. We are preparing to relaunch the BOSS Revolution Mobile initiative. Our initial MVNO effort in partnership with Sprint struggled, but we are confident that this time around, we will do much better. Across our businesses, the entrepreneurial spirit drives everything we do and will be a powerful source of value creation as we continue to build IDT. Now Marcelo and I would be happy to take your questions.

And the first question will come from Brian Warner, Investor.

I have two questions, and the first is a two-part question. I'm curious if you could share some insight into the timing for a Fintech spinoff and what operational metrics you might want to achieve before considering that. The second part of the question is when you think the net2phone-UCaaS business might be ready for a similar move. Additionally, I would like to know more about your traditional phone business, which seems to be performing well. Congratulations on the strong results across all your businesses. In your traditional business, where you're achieving better revenue growth and maintaining tight costs, what outlook metrics do you foresee? In this quarter, you generated over $18 million in free cash flow, so I'm interested in your outlook for that business.

Okay. This is Shmuel. I will try to remember everything and answer your questions. And Marcelo, feel free to either step in at any point, or if you want to better answer that after I'm finished, you're welcome to do so as well. So I believe that our goal is to spin off net2phone sometime, I would say, before the end of the calendar year, possibly slightly after. We've done quite a number of spinoffs, as you know, but they do take a lot of work. And the pandemic and building businesses come first, unfortunately, but that is our goal. And frankly, we don't really have enough bandwidth to do 2 spinoffs all at once. So I would say that we can't really even start to think about the second one until we finish the first one. But we're also building other new businesses in the background as well.

That sounds great.

I think that answers the first part. And then as far as your question about cash flow and what can you expect from the business going forward, or I'll call it, the traditional business going forward, again, we don't give forecasts on what our results will be. But we feel that the business is doing very well. I mean, again, I don't know if some of it has to do with COVID and people wanting to stay in touch and share resources back home more than they would if the pandemic wasn't going on or if we're just doing a good job operating the business. It's hard for me to give you much more insight because frankly, I don't know. But all I can say is we come in every day and we try hard, and we feel pretty confident in the strength of the traditional business going forward.

Okay. And some of the stuff that I've read on the traditional business, I guess, I'm curious to what extent are the free services and the WhatsApps of the world maybe impacted than less than some people would have thought.

I believe that free services are our biggest competitor, not other PIN-less companies. We provide a great service to our customers, and the quality we offer compared to free options is significantly better in some countries. However, in other countries, the presence of free services has made us less competitive. So it really depends on the market.

Terrific. I'm sorry, go ahead.

It's Marcelo. Just a few comments on top of Shmuel's in terms of the spinoffs. Obviously, our focus right now is on net2phone with our efforts on it. We haven't really done much thinking about the Fintech segment. And even when we start that process, post-net2phone, discussions will be held at that time as to whether a potential spinoff would occur for the entire Fintech segment or just of the NRS part of the business. But that's to be determined probably a year-plus from now, those discussions will take place. And in terms of the traditional business, so yes, the business has shown stronger resilience than what we had expected. COVID has helped that process as well, particularly on our PIN-less business. The margins on PIN-less have improved as more of our big charges are shifting toward digital direct-to-consumer in terms of the mix of retail where we have better margins. Our IMTU business is doing extremely well. It continues to be very strong. And we believe that, that will continue to grow in the coming years. The combination of IMTU together with PIN-less will more than offset, we believe, or continue to offset declines that we see in our revenues and margins happening on the Wholesale Carrier side. Wholesale Carrier has been affected by COVID, but the fact that more and more of the calling that goes on happens on VoIP over the top, video conferencing and other mode of communication. So we do expect Wholesale Carrier revenues and margins to continue to decline, but hopefully, we'll be able to offset those declines with the strengths of the other 2 businesses. And because of that, we are expecting that this strong cash flow generation that we have seen from the Traditional Communications business in the $40 million to $45 million range when you look at EBITDA less CapEx, that, that could probably continue for quite a long time.

The next question will come from James Smith, Investor.

I had two questions for you. The first was mentioned in the prepared remarks, roughly 50% revenue per terminal increase in the NRS business has been achieved in the last 12 months. If you think very directionally over the next year or two, with the various initiatives you have going on to monetize that business, do you have sort of a house view as to where revenue per terminal may head over the next year or two? And then the second question was specifically as regards UCaaS. Do you have a revenue figure in mind at which you think that business potentially breaks even at the EBITDA level?

I have a good understanding of the economics behind each NRS terminal's revenue, but it varies widely. There can be hundreds of percent difference between a store that isn't processing merchants with us in a less desirable area for advertisers, versus one in a prime area with high merchant processing volume. Therefore, it’s difficult for me to provide a precise answer. It's akin to asking what an average restaurant earns in profit; the answer can vary greatly. For instance, a fully operational restaurant in Texas might be thriving while a restaurant in New York could be limited to 25% to 35% capacity and struggling. Thus, it’s challenging to define a target performance for each store. However, I believe our penetration of merchant services will significantly increase over time. We are already witnessing this trend and expect it to continue. The services and features we offer our merchants are unmatched for the price, and we have made pricing adjustments to distinguish costs between getting merchant services and not. Our approach is unique because we do not mandate that customers use our merchant services; they can opt for our offerings without it, but at a higher cost for the software. I hope that provides some clarity, and feel free to rephrase your question if needed. Regarding the net2phone business, the timeline for achieving EBITDA profitability could be relatively short if we decided to slow down on sales. However, increasing sales incurs costs with every new acquisition. We aim for a healthy balance between investing in sales and technology without being overly aggressive. Sometimes I question if we should invest more quickly, as we are seeing excellent returns and retention rates, and we have the financial resources to support that growth. This principle holds true across all our expanding businesses; it's a matter of deciding how much debt we want to take on for quicker growth. Investors seek a balance between generating profits and efficient operations while also pursuing growth. We strive to achieve that balance, but there are days when I wonder if we’ve chosen the right course or if we should invest more aggressively to accelerate growth in these areas.

That is very helpful and I appreciate all the color. If I wouldn't mind rephrasing the NRS question slightly differently, I think you mentioned in the most recent 10-K that the business is sort of servicing into the 35,000 merchants into which the Traditional Communications products have been distributed. You're now at, call it, 13,000, 14,000 merchants with the NRS product. Do you see a sort of ceiling on that business over the next year or 2 or 3? And how do you think about the addressable market in terms of number of merchants potentially?

Not at all. I actually think that many people assume we only target stores that have previously sold BOSS Revolution, but that's not the case. A significant portion of our customers initially came from BOSS Revolution stores. Even today, we naturally find it easier to engage with stores we've been working with for years. However, a large share of our sales is coming from stores that have never carried any IDT products before. Regarding the potential market, we believe it encompasses hundreds of thousands of stores, not just 35,000. Nevertheless, we've performed exceptionally well in reaching out to stores that have been our long-term customers, as they recognize the exceptional service and quality products we offer.

The next question will come from an unidentified analyst.

Congratulations on another great quarter. I just wanted to ask what's differentiating the National Retail Solution from other point-of-sale companies such as Square? They're obviously bigger companies. So just if you could provide a little bit of color on that, I would appreciate it.

It seems like you're familiar with the industry. Perhaps you could share more insights. However, I want to mention that I’m hearing some feedback, so if you could mute your line, I apologize for that. I believe there are a few key factors that set us apart. As I mentioned earlier, one major differentiator is that we do not require our clients to use our merchant services. Companies like Square, Clover, and Toast mandate that their customers adopt their merchant services. This can pose a challenge for merchants who are locked into contracts or hesitant to change from their current banks for various reasons. We don’t compel our merchants to switch to our services. We are confident that we offer better pricing and superior service compared to some of our biggest rivals. Unlike some competitors, you can actually reach a real person when you contact us. Additionally, we take a more subtle approach compared to larger competitors. Our software is designed specifically for the types of stores we serve, and we plan to enhance this in the future. Currently, our terminals may not be the most visually appealing, but we are introducing a new line of higher-end terminals that are more attractive and will appeal to an additional segment of stores that may not currently consider our terminals. We’re not ceasing our current offerings; rather, we are expanding our hardware line. Furthermore, we are developing a straightforward way for customers to access our services, similar to Square, where they can easily download our app and obtain one of our devices to begin using our services. In my view, our software is superior to theirs in many ways. I realize that may come off as overly confident, and in some aspects, they may excel, but we genuinely believe we have an outstanding, reliable product with minimal outages. Ultimately, it’s a high-quality product offered at a competitive price, and we have an excellent sales team promoting it.

The next question will come from Brian Warner, Private Investor.

If I could just get a follow-up on the NRS business. If you think about that business at some point in the future, call it, maybe 3 or 5 years, and you think of sort of a reasonably healthy merchant in a reasonably healthy market and if you take bucket merchant services for somebody who takes it, and then another bucket, I guess, is advertising and maybe a third is analytics, can you give any sort of color on proportionately the size of the opportunities, in your mind, what a typical merchant like that might look like in terms of a revenue split between those segments?

I can't provide a definitive answer. There are many different factors to consider. For instance, from an advertising perspective, a store might attract 3,000 visitors daily, but if advertisers aren't particularly interested in that location or its demographics, the advertising revenue may not be strong. Similarly, data insights could be valuable to a beer company looking to understand its competitors in a struggling market, leading it to pay us for that information. However, in a larger market where they're thriving, they might not be as interested. In contrast, with merchant services, it's easier to estimate earnings based on each transaction, and our efficiencies have improved over time as we've grown. While I can't provide specific numbers, I believe the market potential is vast. We’ve only scratched the surface, and I anticipate that NRS will become more valuable in the future than IDT is today. Investing in IDT now presents a great opportunity as we explore three significant avenues that already exist.

Right. So Brian, as Shmuel said, it's hard to predict what the mix will be down the road. But one thing is for certain. As we continue progressively trying to go the timing of analytics and our merchant services, those 3 channels obviously have significantly higher margins than just selling the terminal unit and the monthly recurring fee that you get on that. So one thing that probably will be very likely that as NRS continues to grow, both network and the services, is that the gross margin and net margins on this business will continue to increase.

Yes. I mean I'll just add one more piece of color. I mean, as I certainly talked about a little bit earlier, we have changed the pricing with our software so that you're incentivized to go with merchant services. That being said, we've also added a ton of features. And even customers that are getting our merchant services are now adding more revenue to us than they ever had before, because they're able to buy higher plans that include more features. And that's really something that's only happened very, very recently.

As there are no more questions, this concludes our question-and-answer session and conference call. Thank you for attending today's presentation. You may now disconnect.

Thank you.