Good morning, and welcome to the IDT Corporation's First Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] In today's presentation, IDT's Chief Operating Officer, Samuel Jonas, will discuss IDT's financial and operational results for the 3 months ended October 31, 2012. Any forward-looking statements made during the 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 they forecast. In their presentation or the Q&A, IDT's management may make reference to non-GAAP measures: adjusted EBITDA, non-GAAP net income and non-GAAP EPS. A schedule provided in the earnings release reconciles adjusted EBITDA, non-GAAP net income and non-GAAP EPS to the nearest corresponding GAAP measures. Please note that IDT earnings release is available on the Investor Relations page of the IDT Corporation website, www.idt.net. The earnings release has also been filed on Form 8-K with the SEC. Finally, please note this event is being recorded. I would now like to turn the conference over to IDT's Chief Operating Officer, Samuel Jonas. Please go ahead.

Good morning, and thank you, all, for joining the call and for your interest in IDT. For the first quarter of fiscal 2013, we delivered solid results both from our telecom operations and our earlier-stage businesses. Our performance was in line or may be a little bit better than the high-level guidance we gave you last quarter. Our results this quarter were also without a lot of nonroutine events. On a consolidated basis, revenue increased 6.3% year-over-year to $400.6 million. Our gross margin, which had been declining for some time, rose to 16.3% compared to 15.2% in the year-ago quarter. Gross profits for the quarter was $65.3 million. SG&A expense was $55.2 million, a 6.7% increase year-over-year, in part reflecting our continued investment in several growth initiatives that are being prepared for launch. Now I want to provide some additional details and color on the results of the Telecom Platform Services segment or TPS, which generated 98% of our revenue in the first quarter of fiscal 2013. Within TPS, our Retail Communications segment continues to perform very well. Revenue increased by 16.4% year-over-year, led by higher sales in Boss Revolution's pinless calling services, which more than compensated for reductions in revenue from calling cards and a decline in retail sales in Europe. Sales in Europe have now decreased for 4 consecutive quarters. Although we recently rolled out Boss Revolution in the U.K., Spain and Germany, those efforts have yet to have had a significant impact on sales. Revenues generated by our Wholesale Termination Services business decreased 2.8% year-over-year. TPS' gross margin increased to 15.1%, an 80-basis-point increase year-over-year, and gross profit reached $59 million, a very nice increase of 12.1% year-over-year. One of the primary drivers of the improvements in gross margins and gross profit is the slight shift in…

[Operator Instructions] And our first question will come from Jay Srivatsa of Chardan Capital Markets.

Let me ask you a little bit about the Boss Revolution plans. I know you've expanded to Europe. What are some of the other geographies you're looking at as you look into the rest of fiscal '13 to expand the Boss Revolution platform?

We're hoping to launch it in Hong Kong and Australia also in the next quarter. Those are mostly the geographical expansions, I believe.

That's correct. Jay, it's Marcelo. We -- as you know, we have recently launched in Europe, in U.K., Germany and Spain a couple of months ago. Too early to tell the impact of that launch in terms of the opportunity there. It's just starting to grow. We see good indicators in the U.K at this point in terms of minutes growth. And we -- as Samuel just mentioned, our next goal and target really the Asia region, with Hong Kong and Australia leading the country that we're going to be trying to introduce Boss Rev over there.

All right. Just a question on what was your motivation in launching in Europe, when, as you know, the economies there have been pretty weak? What was the thinking behind launching there versus elsewhere? I'm not sure what the logic there was.

Well, it's still our second largest market for calling cards, and we have our largest presence outside of the United States in the U.K. So that's the main reason that we launched there first. I mean, I think, we actually might have greater potential in Hong Kong than we have in the U.K., but it was an easier launch, especially because of the language as well in the U.K.

And macroeconomics outside in terms of the European region, if you have a good product, it's always a good time to launch a good product, which is strategic and leverages the rest of the organization. We do have a very strong presence in Europe on the carrier side as well. We have very trenched and lengthy relationships with many of the distributors in Europe, not just in the U.K., but as well as in Germany, Spain, where we just launched and some of the other countries as well. And to a logic stance, we see the launch of Boss Revolution in Europe, to some extent, that is disruptive strategy in the sense that similar to what we have seen in the U.S., the calling card market for traditional calling cards have been declining quite substantially in Europe as well, as well as the rest of the world. And just like here in the U.S., Boss Revolution was able to transform our presence in the retail space. Even though traction in calling cards continue to decline, we do hope that Boss Revolution will contribute and also help our European operation to have a turnaround and start growing again, if we do the right work and we execute in launching the product in those countries.

All right. In terms of the gross margins, looks like they appear to be stabilizing and maybe even improving. As you look ahead with a lot of these Boss Revolution launches, are you concerned about being able to grow the margins further from here? Or do we -- are we to expect more stability in terms of flat margins going forward?

Sure. You're absolutely right. When we launch Boss Revolution in new markets, typically, as part of the growth strategy, we launch them with aggressive rates. We promote the products heavily. And as such, we generate very low margins on that product at first, sometimes even negative margins. We're trying to get the market share and the minutes to grow. That being said, both the European and the Asian markets are relatively small compared to our overall revenue base. And therefore, those investments really should have very little impact into our aggregate gross margin for the corporation. If anything, I would say that what makes more of an impact to our gross margin trends going forward is really the product mix relationship between our wholesale carrier performance and our overall retail business performance. As you know, Jay, in the wholesale carrier, our margins are lower than in retail. Both the wholesale division and the retail division have been growing nicely year-over-year over the past 2 quarters. And it really depends on which one grows faster. More recently, retail had grown faster than wholesale, and because of that, we have had a positive impact on the gross margin. We, here at IDT, are happy to grow both of them, and if one grows faster than the other in 1 quarter versus another quarter, we are equally happy as long as both of those segments generate incremental gross profit dollars to the company that we could then reinvest in terms of additional investment in SG&A and CapEx or to use the additional money to build value into our balance sheet and hopefully, show to it to our shareholders at the right moment.

All right. In terms of Fabrix and Zedge, it looks like you're pretty close to getting to breakeven. When do you expect meaningful contribution from these 2 segments, both in terms of revenues and earnings as you look at fiscal '13?

It's a hard question to answer. I don't know if in fiscal 2013 they're going to show meaningful impact definitely on the bottom line. But I do believe that 2014 could show meaningful impact from both.

All right. Last question from me. I know macro conditions have been pretty tough globally, but yet, you are posting some pretty good numbers. As you look at the rest of the year, what -- how do you see the landscape, both competitively and macroeconomically? How do you expect that to affect your business, positively or negatively?

I mean we continue to focus on our business. I mean, obviously, the macroeconomics in any economy are going to have an effect on our business, and I think that's been true in the Europe and in the U.S., frankly. But as long as we come out with good products at good prices, people buy them. So that's our focus.

Yes, Jay. I mean I would say that we continue to see good strength in our wholesale carrier business. We are seeing that more and more of our customer base of the carriers that we do business with are migrating more towards gold and platinum offers, high-quality traffic. We have very robust and strong quality networks, and we're doing well with them with those customers. We also focus on buying our termination at better rates with these carriers, and we have been successful in doing so. And by bringing a low termination cost into our products, we are able to maintain and maybe expand our gross margins. And I believe that, that relationship, hopefully, will continue over the course of this year. And on the retail side, even though the traditional calling card market is still very competitive and pricing pressure is there all the time, we probably are going to continue to see some erosion on the traditional calling card products in the U.S. and abroad. But on the other hand, we believe that Boss Revolution continues to grow nicely, to penetrate into various geographies and within the U.S., into different states and growing our customer base quite nicely. I think the customer likes our product. We have created a level of stickiness with them so the moment looks good for IDT. The cash flows are strong. The profitability is good. It's a business that has transformed itself over the past 2 years in the sense that it's now easier for us to actually monitor and actually estimate and look forward in terms of how to budget for it. I think the team is actually executing very well and in good harmony, both from the wholesale side and the retail side. And we continue to invest on the SG&A side in new products and new strategies. We are continuing to hire more sales representatives here in the U.S. to expand the distribution. We continue to invest money in advertising and marketing behind the Boss brand. We continue to develop more costumer-facing applications, whether it is creating new apps for Boss Revolution and some of our other products, whether it is revamping of Boss Revolution and other customer-facing websites. I think we have a lot in our plate, and I think these things, hopefully, will pay off to continue us to generate the cash flow that we need to run the business.

Our next question comes from Jay Kilroy of Willis Investment Counsel.

To follow on your last statement, you mentioned that the cash flow is improving, and the performance is good and that you continue monitor the business. As I look at your balance sheet, I'm curious as to your philosophy on capital utilization. You've got a market cap of $210 million, and you're holding roughly $166 million of cash before the dividend, $152 million after. You just did $22 million in free cash flow this quarter. And you mentioned in the notes how CapEx is expected to remain at reduced levels going forward. Given your increased visibility in all the things you've said on this call, what do you view as an amount of sufficient cash going forward? I mean it would seem as though -- your cash is 70% of your market cap. It would seem as though that's an inefficient use of your cash going forward, particularly with the increased visibility. I'd like to hear your comments on that.

I'm not going to give you like an exact answer because I don't have one. But I mean, I would say that we need definitely over $50 million to run our just day-to-day operations, and we definitely do have, we'll call it, some excess cash on our balance sheet. We do believe that it helps us with the partners that we work with, which are some of the largest phone companies in the world. And they view the fact that we have a relatively strong balance sheet as a positive, and we are continuing to invest in -- money, we'll call -- different types of products related to money remittance, et cetera, that are going to have higher capital requirements for banking licenses, et cetera. And again, I mean, we don't intend on, we'll call it, dividing out excess cash that is on our balance sheet currently. I mean, we do intend on going back to our normal dividend policy in 2014, if tax policy remains relatively stable.

So if the necessary cash is $50 million for day-to-day operations, the other $100 million that you're currently holding is needed for partners?

Again, as I said, it's not an exact answer. I mean, that's one of the reasons.

Right. But I mean, I'm just thinking in order of magnitude, $100 million on a $200 million market cap is an enormous amount of cash to hold without something concrete to designate we're going to allocate to this $100 million. I mean, if you were cash-flow-generative or if you had some sizable CapEx in the pipeline, I could understand it. But an incremental $100 million sitting on the balance sheet, when you say you only need $50 million to run the business, seems really large.

You might be right, but that is our plan.

[Operator Instructions] Having no questions at this time, this concludes our question-and-answer session and conference call. Thank you for attending today's presentation. You may now disconnect.