Good evening and welcome to IDT Corporation's First Quarter Fiscal Year 2022 Earnings Call. In today's presentation, IDT's management will discuss the financial and operational results for the three-month period ending October 31, 2021. During the prepared remarks by IDT's Chief Executive Officer, Shmuel Jonas, all participants will be in listen-only mode. After Mr. Jonas' remarks, Marcelo Fischer, IDT's Chief Financial Officer, will join him for a Q&A session. Any forward-looking statements made during this call, either in the prepared remarks or the Q&A session, are subject to risks and uncertainties that may result in actual outcomes differing significantly from those anticipated by the company. These risks and uncertainties include specific factors discussed in the reports IDT files regularly with the SEC. IDT has no obligation to update any forward-looking statements made or the factors that may lead to actual results differing from forecasts. In their presentation or during the Q&A session, IDT's management may refer to non-GAAP measures, including adjusted EBITDA, non-GAAP net income, and non-GAAP earnings or loss per share. A schedule in the IDT earnings release reconciles these non-GAAP measures to the nearest corresponding GAAP measures. The IDT earnings release is available on the Investor Relations page of the IDT Corporation website and has also been filed on Form 8-K with the SEC. I will now turn the conference over to Mr. Jonas.

Thank you, operator. Welcome to IDT’s first quarter fiscal year 2022 earnings call. I’m joined on the call by Marcelo Fischer, IDT’s Chief Financial Officer, and we’ll both be available to answer questions after my remarks. My discussion today focuses on our first quarter fiscal 2022, the three months ended October 31, 2021. For a more detailed report and discussion on our financial and operational results, please read our earnings release filed earlier today and our Form 10-Q that we expect to file with the Securities and Exchange Commission on Friday. Our first quarter operational results were strong once again, highlighted by robust performance from our high-margin net2phone, NRS, and BOSS Money businesses, as well as from Mobile Top-Up. As a result, we delivered year-over-year increases in revenue, gross profit, income from operations, and Adjusted EBITDA. At our net2phone-UCaaS segment, subscription revenue increased 37.5% year-over-year, and revenue and margin increased 20 basis points to 82.3%. Both our subscription revenue growth and revenue margin rates remain well above industry averages. In the United States, our expanding network of channel partnerships drove a 42% year-over-year increase in UCaaS subscription revenue, while in Latin America, our strategic focus on mid-sized businesses, multi-channel go-to-market strategies, deeply localized in-country offerings all helped to increase UCaaS subscription revenue by 58%. Net2phone has been getting especially strong traction in several markets, including Mexico, where service revenue increased nearly 150%. This quarter, we landed a leading restaurant franchise, and of course, are also closing deals with small enterprise clients throughout Mexico. Across net2phone’s market, our commitment to provide every customer with top-notch service regardless of size continues to help us win new business, many as a result of referrals from existing satisfied customers. Technical difficulties may have led to some challenges, but net2phone won the Global Partner of the Year award from UC Today, a popular news service covering the business communications and collaborations industry. Net2phone was recognized for providing exceptional performance and solutions through our global channel partners. Never content with the status quo, we continue to work on driving channel partner penetration. In 2022, we will provide our managed service partners with real-time account access, enabling them to directly support, configure and modify their clients’ accounts. This will better enable our partners to focus more on customer experience, while enabling to focus their efforts on high-value services. At NRS, strong demand for NRS PAY payment processing, and our recently launched funding service to provide retailers with ready working capital, digital advertising and transaction data services, coupled with the continued expansion of our POS network, boosted NRS revenue by 104% year-over-year to $10.1 million in the first quarter. Recurring revenue, which excludes revenue from the sale of new terminals, increased 126% to $8.6 million. As of October 31st, NRS had over 15,100 active terminals. One of the strategic strengths of NRS is its ability to leverage our platform to provide new offerings. This opens new markets, creates additional revenue streams to boost ARPU and accelerates growth in our terminal network. This quarter, we deployed software that enables retailers to process electronic benefits provided by the Supplemental Nutrition Program for Women, Infants and Children nationwide which provides nearly $5 billion in benefit annually to over 6 million beneficiaries. Most states have transitioned or are transitioning to pay these benefits electronically, known as eWIC. Our eWIC payment processing solution is a game changer for our merchants, providing an affordable, fully integrated solution to serve this channel. Until now, only larger retail chain stores or those able to pay hefty fees for eWIC payment processing could accept eWIC transactions. We have already begun to roll out our affordable eWIC offering working with our retailers, benefit managers and state regulators to certify our solution state-by-state. Money Transfer had an exceptional quarter. Revenue increased nearly 15% sequentially to $12.5 million. Although the first quarter ‘22 revenue decreased 18% compared to the year-ago quarter, the decline is entirely due to the impact of our transitory foreign exchange market conditions that materially improved revenue and gross profit during calendar 2021. Absent that impact, first-quarter fiscal 2022 revenue increased by 45% from the year-ago quarter. Traditional Communications revenue increased 6.7% year-over-year to $334.6 million. Within Traditional Communications, Mobile Top-Up revenue increased 34.1% to $128.5 million, and IDT Global carrier services revenue climbed slightly. These increases more than offset a decline in BOSS Revolution Calling revenue in line with expectations. Our Mobile Top-Up business generated double-digit year-over-year growth in its three largest sales channels, strengthening its unique position as the only significant omnichannel player in the top-up space. All our Mobile Top-Up regional corridors continue to expand, led by the U.S. to Africa corridor. Sales of top-up bundles which include both airtime and data are key in growth. These data bundles now account for roughly 30% of our total sales, and that helped increase average revenue per transaction by 11%, compared to the year-ago quarter. We forecast that demand for data packages will continue to drive revenue and revenue per transaction increases. On a consolidated basis, income from operations and adjusted EBITDA both increased modestly compared to the year-ago quarter, rising to $13.8 million and $18.3 million, respectively. This quarter, we had a loss per share of $0.10 compared to EPS of $0.32 a year ago, plus an unrealized $0.49 per share loss on the mark-to-market value of our investment in Rafael Holdings stock. Looking ahead, we are making good progress and expect to be in a position in early 2022 calendar year for the potential spin-off of net2phone should our Board authorize it. To wrap up, this is a strong quarter for each of our high-margin businesses and sales of Mobile Top-Up continued to drive growth in our Traditional Communications segment. Now, Marcelo and I would be happy to take your questions. Thank you.

The first question is coming from Daniel Koch from Alta Fox Capital.

Hey, guys. Congrats on a strong quarter across the board. The NRS numbers look pretty great, specifically the strong ARPU in the quarter. Can you shed some light on the drivers of the ARPU growth? And maybe how we should think about ARPU growth going forward from here? Thanks.

Yes. Hi Dan, thanks for joining the call today. Yes, we at IDT are very pleased with the progress that we have seen at NRS. While we try to shy away from giving specific guidance, let me just share with you some specifics on what NRS has been doing recently. On the SaaS-based fees vertical, where we charge our retailers monthly, we continue to look at ways to increase the SaaS fees per terminal, right? We think we can accomplish this by partnering with our retailers to understand their specific needs, developing solutions to these needs, and then finding ways to upcharge for these features. And when we think about NRS PAY and the merchant services vertical, we will continue to focus on growing the payment processing side of the business and offering that very compelling solution to our retailers. Now, our offer today is very valuable, right? We offer our retailers a no contract, free equipment, a multiple plan approach with live customer service. And also more recently, we have been able to start onboarding higher-risk retailers such as tobacco shops, where the processing fees are higher. So, while our focus so far has been on the small independents that also purchased our POS system, NRS PAY is now in position to expand payment processing services beyond this channel as well. Like another merchant service product that NRS has launched recently, which you may have heard about is called NRS Funding, which provides our retailers access to capital in a very easy and seamless process. So, it’s still very early. But to-date, we have provided over 100 loans. And then, when we think about our digital-out-of-home vertical, we are seeing that this market continues to grow rapidly. As we sell more POS terminals, the available inventory increases. For example, if an advertiser wants to offer advertising in California, the more terminals we have in California, the more revenue we’re going to generate. Advertising and data partners are starting to see how our model can directly impact their business. This is translating into the strong growth that you saw this quarter, where you saw advertising up sequentially about 150%. Last but not least, we have a multipronged approach when it comes to expanding our POS and our NRS PAY terminal network. We have today three different complementary sales channels: we have one, a growing inside sales team; we also have our own boots-on-the-ground sales force, making in-person visits to retailers nationwide. We leverage that sales force together with our other IDT offerings at retail, such as BOSS Revolution products, Money Transfer, and Top-Up. We also have a well-established third-party distributor channel. Our continued investment in developing all three of these sales channels is really critical to our continued success. If the team continues to focus on these strategies, it should translate into a very healthy growth rate for NRS going forward.

The next question is coming from Brian Warner, private investor.

Congratulations. Two questions. The first is on NRS. I thought, in your commentary, you mentioned some small loans to merchants that you had started. Did I hear that right? And can you just give us sort of a 5,000 square foot view of how you think about that business and maybe a banking charter?

We don’t do loans; we provide merchant cash advances. Currently, we have not taken steps to become a bank, and as Marcelo mentioned, it is a small endeavor at this time.

Sure. Okay. So, just to clarify, you were actually discussing cash advances, which is nothing new?

Correct.

I got you. Okay. That actually answers that one. My second question regards the Money Transfer business. There seems to be a general concern that pricing in that business is on a downward trend and is going to be sort of a big headwind or at least some people sort of think that. And I know you’ve sort of commented in the past that there may be some more creative ways to make money sort of in-country or differently than you have in the past. Can you give us a sort of a 2, 3, 4-year view of what you think that business is capable of doing? And do you think that that franchise can continue to grow at a healthy rate?

Yes. I would like to highlight two points. First, I cannot predict the exact timeline for when changes will take place. You might expect something to occur in six months, only for it to take ten years instead. Regarding pricing for Money Transfer, it's already clear that Facebook has launched its Novi product in Guatemala. As I mentioned last quarter, nothing is truly free. If a service is free, then the user becomes the product. Money Transfer will not be an exception to this; it won't be free due to compliance and banking costs, among other expenses. It’s simply not feasible to provide those services for free indefinitely. While there may be some short-term promotions that support this, ultimately, profitability is necessary. I believe that over time, money transfers will become significantly less expensive. However, I can't determine if cash transfers in stores or online transfers will experience a faster price decrease; I’ve heard differing opinions on that matter. I do believe that making money in-country will be essential. We are planning to launch in 22 countries, providing a Visa card that people can use to spend money locally, with us earning from every transaction in those countries. This is how I envision the future. As for our growth rate, I think we are doing well in Money Transfer; retail is growing again, and online performance is strong. Our focus is on enhancing the product, attracting more customers, and increasing loyalty. While we can't control global events, we will do our best to manage what is within our reach.

We have a question coming from David Polansky from Immersion.

Great job on NRS as per usual. High level, what is the opportunity on terminal deployments? I mean, this kind of started in the independent bodegas. You’re up to 15,100 installs now. Where does that go over time? Because I’ve seen that you’re in beauty salons, you’re in some coffee shops, you’re in grocers, you’re in tobacco and liquor. How should we think about this over the next five years? How many terminals could you have deployed, and what does the market look like?

I don’t know the answer to that question. That’s the first thing I would say. What I would say is that the amount of deployments that we’ve done recently has increased, and we see it continuing to increase. So, I definitely think that there is no slowdown on the horizon. What I would say is that you’re right that each of those verticals that you discussed has seen some of our terminals, and each one of those is an opportunity for us to grow probably tens of thousands of terminals in. Each one of those is also a separate business line. Right now, we’re starting to work on a new business line, which I’m not yet ready to talk about. We believe that will be something that’s capable of adding 10,000 terminals to our network. We’ve talked about Petro in the past. And again, those are a smaller number of deployments but tend to be larger volume stores. I really think we have only scratched the surface of what we can do. And that’s only in the U.S. I think there’s definitely opportunity in international markets for our services, and we’re starting to deploy our first units in Canada. We’re very excited about where the business is going.

Sorry. You said you’re starting to deploy in Canada. Is that what you said?

That’s correct. Yes.

And on this opportunity that you’re not ready to talk about, are you talking about a new vertical, or is that like an enterprise contract?

We are not really focused on the enterprise market. We believe that market is saturated and it requires a different type of sales force and is fundamentally a different business from what we aim to support today. We do not plan to pursue that area in the next couple of years at least.

Great, excellent. And so, on payment processing accounts, you’re at 6,800, so that’s 45% of your base and a year ago, you were at 28%. Do you see that going to 80%, 90% over time? How should we think about that?

I don’t know if it can get to 80% or 90% over time. I mean, I think that it will, personally, but I don’t know if I’m right. I would say that we’re already signing up probably two-thirds of our new customers onto merchant processing. We are definitely making an effort now to start to convert customers that signed up with us earlier without merchant services. We haven’t really focused on going after our base of customers yet but are hoping to add salespeople and installation people that will help us go after existing accounts.

Right. And your Merchant Services revenue, are you reporting that net of fees? So, is that really a gross profit number?

Yes, I mean, it is net of fees.

It’s not of fees. So therefore, the revenue is really 100% gross profit.

Okay. So, I think it’s over $100 million in revenue for NRS, if you were to report it gross. Am I off by saying that?

I don’t want to say that you’re off. I never did the translation, our numbers to their numbers. I can say that ours are net.

Okay. All right. Well, I think it will be a huge business. I mean, this could really be like a $100 million ARR business, net of merchant services, in a couple of years. If you look at the valuation...

We hope so. We hope sooner.

But I mean, that’s like $1 billion in enterprise value, and the entire stock today is at 1.3 billion, 1.4 billion. So, I guess like how do you think about that? And how do you think about the timing of a potential spin for NRS?

Again, we don’t want to commit to a timeline at this point in terms of a potential spin. Right now, we’re really focused on getting our spin that’s already announced on. Once we’ve completed that, we’ll start to think about others. But again, we’re right now focused on building this into a huge business, and that’s our number one priority.

Well, I think it will be a huge business. And you look a few years out, I think the stock is tremendously undervalued, if you just think about where NRS could be in a few years. But anyway, I’ll get off my soapbox. I really appreciate you guys taking the time to take more questions.

The next question is coming from Adam Wilk from Greystone Capital Management.

Really impressive quarter in a number of areas. I’ve been incredibly impressed with the recent efforts of NRS and Mobile Top-Up specifically. So, starting with NRS, can we talk a little bit about the data and advertising opportunity? There’s pretty significant growth in that segment. I’m wondering how you guys are thinking about that moving forward in terms of maybe signing new deals with third parties or CPG companies, or growing ARR or what you think the ceiling is there? Although I know it’s early stages, I’d be interested in your thoughts.

It's definitely early stages, and I don’t have a clear view of the potential limits. What I can say is that we're still quite far from reaching any ceiling. We're actively signing large advertising partners and finalized several significant deals this week, with no signs of a slowdown. Regarding our data partners, they're consistently increasing their purchases from us, which shows no slowdown on that front either. We're hiring more people because, like everything, we need to effectively share our story with the right audience. In terms of enterprise sales, we don't offer that for POS, but we do in advertising and data. We're onboarding new team members, some of whom have already started, and we believe this will become a substantial part of our business in the future. I can't provide more specifics than that. Did you have another question?

I did. I appreciate the helpful information. For Mobile Top-Up, this segment has shown remarkable growth in supporting Traditional Communications overall. I'm curious about your strategies for expanding this business in the future, whether through geographic expansion, emphasizing unit economics, or perhaps increasing focus on direct channels instead of retail. I would like to hear your thoughts on this as well.

I’m going to let Marcelo answer a little bit of the question because he’s been doing more of the work on that in the background in terms of breaking it out and what have you. What I would say is from a sales perspective, and again, I think I also talked about this a little bit last quarter. To a degree, the growth in this business was surprising to us. We’re really putting in place a team to capitalize on the growth. We’ve made some small acquisitions in the space that have really helped us grow geographically. We’re looking at some more small acquisitions as well to enhance the product and the technology. But again, this is a business where we think that we have a very small piece of the market; and we’re really only a U.S. and Africa player. We think there’s a ton of market share to be gained, and we intend to have a very sizable and predictable business.

Yes. I mean, Mobile Top-Up business today is a U.S. story. And our plan is really to bring this business to be a large business outside of the U.S. as well in terms of origination. Our entry to Africa has more recently accelerated some of that. At the same time, we are not just a one pony show; we’re also starting to increase the product portfolio, adding vouchers and subscriptions into that business. That’s a large opportunity for us. Recently, we’ve seen some private equity investment into that space. I think we had a company called wi-charge.com just got a nice funding of about $35 million. There are a lot of opportunities and interest in these fintech opportunities. Internally at IDT, we’re trying to carve out the economics of that business away from the rest of the Traditional Communications products. We want to manage that more independently. Today, the top-up business shares a lot of resources with our other U.S. offerings, especially Money Transfer and Top-Up sales force along the operations and technology. We’re going through that process, and once we get better at doing that, we’ll be glad to share that with our investors.

Great. Yes, that’s helpful. I’m glad you guys are thinking about it that way. I would echo David’s comments as well, and I’m looking forward to watching you guys continue to execute. Thanks again for taking my questions, and great job.

We have a question coming from Kevin Zhang from Tribunal Capital Ventures.

I’d echo the thoughts mentioned by Adam and David; I think IDT as a business in challenges doing great. You guys are executing well. I just had a few questions on Mobile Top-Up in general. So, you mentioned that you guys have recently extended with your acquisition of the African Mobile Top-Up business. I was just curious how that’s been going? Any color on that acquisition progress? Has revenue been inflecting? Any sort of color there would be great.

Yes, I’ll let Marcelo discuss the financial specifics. From an operational perspective, I can share that the integration has been very successful. On Thursday, we will have a company-wide kickoff where they will present their business to everyone. They are participating in all our meetings with carriers globally, showcasing their capabilities in selling to Africa and across the continent. The partnership has been excellent, and we are very pleased to have them on board. I’ll let Marcelo provide more details regarding the P&L associated with them.

Sure. Yes, the company that we acquired is not a new relationship to IDT. We have been doing business with them for more than a decade. They have been one of the largest aggregators supplying us with Mobile Top-Up time for African MNOs. We acquired a majority stake in them. By doing that, we have been able to verticalize the relationship. We now have direct access to the MNOs, which previously we did not. That improves our costs for time for African carriers. Better pricing allows our team in the U.S. to price Mobile Top-Up offerings better in the marketplace. By doing so, they’ll be able to gain market share in the U.S. They also have some platforms, especially on the B2B side, which are probably better than what we had in IDT. We are incorporating their platforms into ours to take the best of both. This initiative has been strong, and the integration is going well. Additionally, having boots on the ground in several African countries opens our ability to market our products on that continent faster as part of our international growth strategy.

I would add one more thing: they have been doing quite well in sales to African carriers, and their own margins have improved.

I see. No, that’s amazing to hear. I’m glad that the integration is going well and that in terms of the P&L, it’s helping in reducing costs and verticalizing relationships. And this is for Marcelo specifically. I think you mentioned that there was private equity interest in the business. My internet was a bit shaky, so I’m not sure if I heard it right; like a $35 million like unsecured – so can you give any color on that?

Yes. I think that recently, if I read correctly, a company we know well with ours, wi-charge.com, I believe the private equity funding recently was around $35 million. It’s just an example of the market interest in Mobile Top-Up and other digital offerings.

Got it. That makes sense. I guess, one last question about Mobile Top-Up. You guys have talked a lot about how you’re mostly in the United States right now, but you’re thinking about doing some sort of expansion outward. So just looking at year-over-year growth, Mobile Top-Up is around 30% to 40%. I’m curious, do you think that it’s going to trend down from here over the next few years or is this an inflection point? What’s your outlook?

I don’t see it trending down. That’s for sure. What I would say is that we need to build out some of the capabilities to take advantage of the amount of growth that is out there. That comes both on the direct-to-consumer side. Again, we’ve been focused on acquiring customers in the U.S. and haven’t focused on acquiring customers outside of the U.S. We need D2C marketing personnel in each of the markets that we go after because each of them is different. They all need their own SEO and SEM, and their own advertising partners. From a technology viewpoint, we need to be able to accept different payment types in different countries and ensure competitive foreign exchange rates. I think that it may not be linear growth internationally, but definitely, over time, the amount of growth that we could get from international will be way in excess of a 30% a year; even that would be an understatement.

Great, sorry! I just thought of a new question while you were answering. So, one last one for real. I was thinking in terms of just the take rate for Mobile Top-Up. So, I guess, two parts to this question. One, the next expansion step is international, right? I was curious about the dynamics in terms of the take rate; would it trend down internationally? Also, do you see competitive pressures pushing down your take rates in general? Do you think you could defend your take rate or if you think that would shed some take rate loss over time?

I think domestically, we've done a good job of improving our take rate by moving more of the business to direct-to-consumer and negotiating better deals. As for internationally, we don’t have as much experience. We definitely don’t think that in every country we’re going to be able to get the same take rates that we have here in the U.S. But we believe that certain countries will have better economics, while others may have worse. We hope that when it equalizes out, the rates will be similar to those in the U.S., but it might end up being slightly lower.

Got it. All right. Thank you so much. Did you have something else you wanted to add?

No, that was it.

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.