Good evening and welcome to the IDT Corporation’s First Quarter Fiscal Year 2023 Earnings Call. In today’s presentation, IDT’s management will discuss IDT’s financial and operational results for the 3-month period ended October 31, 2022. During remarks by IDT’s Chief Executive Officer, Samuel Jonas, all participants will be in listen-only mode. After Mr. Jonas’ 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 reference to non-GAAP measures, including adjusted EBITDA, non-GAAP net income and non-GAAP earnings or loss per share. A schedule provided in the IDT earnings release reconciles adjusted EBITDA, non-GAAP net income and non-GAAP earnings or loss 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 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.

Thank you, operator. Welcome to IDT’s earnings conference call. After my remarks, Marcelo Fischer, IDT’s Chief Financial Officer, will join me and we will be available to answer questions. My discussion today focuses on the first quarter of our fiscal year 2023, the 3 months ended October 31. For a more detailed discussion of 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 by Monday, December 12. This quarter, please note that our NRS business is now a separate reportable segment for greater visibility into its financial performance. The Fintech segment, which previously included NRS, now comprises BOSS Money and several smaller financial service offerings and businesses that were previously included in our Traditional Communications segment. These include our Gibraltar-based bank and our Awards2Go gift cards. Within Fintech, we have continued to break out BOSS Money revenue and KPIs for you. In the first quarter, we achieved our second consecutive quarter of record adjusted EBITDA. Our rapidly expanding NRS, BOSS Money and net2phone businesses contributed 25% of our consolidated adjusted EBITDA in the period and their continued expansion positions us for significantly enhanced profitability in the coming years. We are focused on improving the bottom-line performances of all of our businesses. And this quarter, both net2phone and the Fintech segment, which now primarily tracks the performance of our BOSS Money remittance business turned the corner and generated positive adjusted EBITDA. NRS also had another very good quarter, more than tripling its adjusted EBITDA contribution compared to the year-ago quarter. As I discussed last quarter, NRS advertising data sales, which contributed over half of NRS’ first quarter recurring revenue, are always impacted by seasonal factors and, of course, industry-wide trends. In the first quarter, we benefited from sales of political advertising and we expect to see a significant amount of holiday and year-end spending in the second quarter. However, January is usually a slower sales month, and we have begun to see the impact of macroeconomic headwinds that are buffeting the advertising market. Looking ahead, we are planning to increase our available advertising opportunities by expanding the number of screens in our network and by adding digital window signs in high-traffic areas, menu boards in busy food service establishments, and by opening a variety of other advertising venues, included across our various apps and websites and, of course, for NRS retailer sites that we manage. We expect to drive continued strong growth in SaaS and merchant services revenue by increasing our velocity of sales as well as continuing to expand our offerings and sales channels. Over the next couple of months, we will launch our Kiosk ordering and beta version of an app for downloadable POS tablets as well as POS customized for specific retail verticals with significantly higher SaaS monthly recurring charges than the level we realized in our current retail base. Thinking about longer-term NRS growth initiatives, we are also expanding our e-commerce offerings, which we view as crucial for helping NRS level the playing field for independent retailers who must compete against the expansion of national and regional retail chains. A key part of this effort is to help retailers expand their supply options and to provide them with remote ordering and home delivery capabilities. On the supply side, we just announced a B2B e-commerce initiative to help distributors and suppliers access NRS’ extensive nationwide network of retailers while enabling NRS retailers to order the right items and the right amount of inventory to maximize sales and cash flows. On the B2C side, we recently announced a partnership with Uber to integrate with their delivery platform. Together, we are providing home delivery at no cost to our retailers when customers order through our BR Club app. This expansion of the e-commerce ecosystem will help our retailers become more profitable and serve customers even when they are not in the store. BOSS Money continued to perform very well in the first quarter with solid year-over-year increases in transaction volumes, revenue, and revenue per transaction. This quarter, we beta launched a new digital wallet aptly named Wallet by BOSS Money, which I am personally very excited about. I hope you all agree it provides an amazing user experience for sending, spending, and saving money. I encourage you to download the app from either the Apple App Store or the Google Play Store and try it. Preferably, you will also sign up for direct deposit to maximize the wallet benefits. Our wallet has tremendous potential, particularly for the immigrant communities we serve, and we expect it to become the ecosystem for many of our payments and financial service offerings over time. And we don’t charge anything, so you have no excuse not to try it and give us feedback. net2phone reached a significant milestone this quarter, achieving positive adjusted EBITDA even more quickly than we had expected. We have been able to outperform without slowing our pace of seat growth. In fact, we added over 18,000 seats this quarter compared to 12,000 last quarter. net2phone’s strategic focus on the SMB market through channel partners continues to pay off. We have significantly simplified and streamlined the processes for our partners to onboard and provision their SMB customers, making the experience intuitive, quick, and hassle-free, while at the same time lowering our onboarding costs and their onboarding costs. In Q1, net2phone sold approximately 1,000 cloud-based contact center seats, leveraging the CCaaS platform that we acquired earlier this calendar year and about which we continue to be very enthusiastic. Because our CCaaS platform is telephony agnostic, we are able to sell CCaaS globally. During the quarter, we sold CCaaS to enterprise call centers and contact center customers in three new markets. We also released our sales force integration for contact centers, which will become a powerful tool. Turning now to our Traditional Communications segment, our IDT digital payments business, primarily our Mobile Top-Up offerings, was again impacted by the decline of the key corridor. Without the impact of that corridor, digital payments revenue would have increased 5% year-over-year. However, we are not satisfied with the results to date, and we are hard at work enhancing the product and, in some cases, changing team members in efforts to drive growth in this business. BOSS Revolution Calling and IDT’s global wholesale carrier revenue continued to decline, but we were able to substantially mitigate the bottom-line impact. With our strong cash flows and our stock undervalued, we repurchased about $5 million of our Class B common stock in Q1. Over the past two quarters, we have repurchased about 3% of our outstanding Class B shares in the aggregate. The cash we expect to generate will build upon our very strong balance sheet, including $137 million in cash and current investments and no debt. Our debt-free liquidity enables us to support our businesses with working and growth capital without resorting to increasingly expensive outside financing. And in fact, we are even earning positive net interest income. To wrap up, we continue to benefit from strong performances from our growth businesses. As a result, we are on track to continue to deliver healthy improvements in our bottom-line results for the remainder of fiscal 2023 and, God willing, beyond. Now, Marcelo and I will be happy to take your questions, and I’m sorry for the speed at which I read this. I’m just a little tired.

And our first question is coming from David Polansky with Immersion Investments. Your line is live.

Hey, guys. Thanks for taking my questions. I thought the performance was excellent, and I love seeing the buybacks. I mean, that’s great to see. So I want to talk about NRS first. Samuel, you’ve spoken about offering something like a B2B marketplace in the past. Can you talk big picture about what it means to your retailers? Why is it important and then obviously, any potential financial impact to the NRS business?

Yes. I’ll try to give you, call it, a 50,000-foot view of what I would like to see the B2B opportunity become. To start with, I mean, we already have an NRS marketplace, which, again, is not a huge business for us, but we do tens of thousands of dollars already through it. We already have a couple of distributors signed up through our new B2B platform. And again, we also do tens of thousands of dollars in addition every month with those partners to date. And this is really an expansion upon what we’ve already been beta testing sort of in New Jersey. Basically, from a 50,000-foot view, there are a couple of problems that our retailers face. One is that they are unable to buy the volume needed to order from some of the largest distributors because their minimums are way higher than what a corner store can handle. So one of our plans is to group together stores in a market, allowing them to buy their inventory together and then share that inventory across their stores to meet those minimums. And, again, this is not an exact number, but we expect that this will save retailers anywhere from 10% to 20% on the cost of their goods, which will help with their margins. For other retailers, they have different problems. Some retailers need, obviously, products from lots of different distributors. They might carry a wider array of products and they don’t want deliveries coming in from 17 different trucks. Let’s just use that as an example. So they might want a single delivery point and then have all those deliveries brought to the store. That’s really where our part of the business comes in, and we are able to gather all the deliveries to one location and then bring them to the store so that they don’t have to manage multiple orders. Through EDI integrations, we will basically be able to immediately update all of their inventory as soon as they receive a delivery. So from a tracking and cost standpoint, it will give them immediate access to that data. It also generally opens their eyes, I’ll say, to the fact that there are lots of different suppliers that they can source products from. I believe that when you have a competitive market, that’s good for customers and, in this case, retailers because their costs get driven down by the availability of more suppliers and new opportunities for goods that they have not carried before. Some of these stores haven’t dramatically changed their product offerings over the past decade, while customer demands have evolved. People are now looking for healthier, natural, organic, and gluten-free options. Many stores don’t carry those types of products. So this is a chance to introduce new types of products to our stores that they wouldn’t otherwise consider carrying. We have lots of, I’ll say, grander ideas that we believe could be layered on top of this, but we first have to get through what I call the basics before pursuing the grander vision. So I hope that that answers your question to some degree.

It does, for sure. How is NRS being – how are you going to be compensated on that? I mean how does this help us?

So basically, we charge a small percentage to the distributors for facilitating these orders for them. We also handle their merchant processing for the retailers, which allows us to make a small margin as well. Again, this also enhances the ecosystem in general. So even though it might not be our biggest profit generator in the near-term, it really will help, we believe, stores in the long-term, which in turn helps us. The better our stores do, the better we do.

Yes, absolutely. It’s great. I mean, I don’t think anyone in the market is doing what you do by offering this product. So, that’s fantastic. And...

And as you know, we get the question all the time about how we do the competition. This initiative and the other one that we announced recently just come to demonstrate that NRS is different. NRS is not just selling a fancy cash solution. We really try to fully understand the needs of our retailers, participate in all their problems, and create a level of stickiness and dependency in that relationship that they can’t find elsewhere.

Yes. I mean, again, I think we view ourselves really as a trusted partner through good times and bad times. When a retailer is struggling, we are there to help them with their cash flow. When we see problems that they are facing, we want to come in and solve them. That’s our goal. And I think that’s the reason why we succeed. We are not embarrassed to want to make money by providing value to our stores, but we are there for them in both good times and bad times.

Great. Fantastic. So, are there any early learnings from the Uber partnership, or is it kind of too early to tell?

The Uber partnership hasn’t officially launched yet. I mean, we signed the deal with them, but it doesn’t start rolling out until early January, right after the holiday season. We didn’t want to launch it during the holidays when things are harder to manage. But again, I have no doubt that the Uber partnership is going to be a major benefit for these stores. For one, it is by far the cheapest option for delivery other than possibly doing it yourself if you have a lot of deliveries. Most of our stores don’t have many deliveries. So, this is really a great option for customers as well because, again, we are not really trying to make a lot of money on the specific product. This is another example of us doing something that retailers need while ensuring we make a profit, but we won’t make a ton of profit. Our goal is to bring it to them for as close to the cost that they pay for it in the store and enable retailers to sell items to customers even when they are not in the store.

That’s fantastic. I want to jump to net2phone. I think we were initially thinking about net2phone being closer to EBITDA breakeven at the end of this fiscal year, and that’s obviously tracking well ahead of what we initially anticipated. So, I would love to see that. But is there anything we should be aware of from like anything one-time, or do you think it’s sustainably going to be profitable from here, or I just want a little bit of color on that.

I mean listen, my personal opinion is that it is sustainable. The beauty of the net2phone business is it has very low churn, and its revenue is pretty predictable. The more lines you sign, the more revenue and profit you generate. As long as you manage your costs well, which we believe we are good at, you should see continued bottom-line improvements from that business. Not to mention, I am extremely excited about the CCaaS business that they acquired and its potential to really raise the ARPU of the entire business as well as enhance the overall product. I believe it’s headed in a great direction.

Yes. David, I want to clarify to the models. The performance is very good right now. Churn is doing very well, and ARPU is great. We are really focused on how we deploy capital, acquiring customers in countries that generate the most ROI. Q1 was a surprise for us. We thought we were going to be EBITDA positive by the end of the year. We are now EBITDA positive, and I believe this is the baseline. So, hopefully, we will come back to calls later this year and start discussing when we are going to become free cash flow positive, not just EBITDA positive. The customer acquisition costs are significant due to the CapEx associated with distributing IP phones to customers, but at this rate, we might be talking about becoming free cash flow positive in fiscal '24.

We never know. Every day we focus on optimizing the business to ensure that we are bringing on customers at the right price and in the right areas to achieve optimal paybacks. As Marcelo said, we believe that it will only improve from here.

It’s great to see that the business is still spending about $20 million a year or so acquiring customers, and they are very close to being completely self-funding.

That leads into my next question, which is, I think multiples in UCaaS, as well as in point of sale and basically everywhere that you are competing, have come down quite a bit. So, as you get closer to being self-sustaining, that obviously opens up the door for self-funding M&A. Should we be thinking about anything on the horizon relating to M&A?

We don’t have any big M&A plans in the works. I can tell you that much for sure. I am always open to looking at things that I believe will be synergistic and enhance our bottom line. That being said, I also think that M&A can take your eye off the ball. We are not in a rush to do anything. Right now, our focus is on improving the business. When valuations do come back, we think we will be a much more valuable company than we would have been otherwise.

That’s great. Alright. Thank you for all the color on all my questions. I will hop back into the queue and let someone else take it.

Alright. Thank you, David.

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