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. [Operator Instructions] 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 by greater visibility into its financial performance. The Fintech segment, which previously included NRS, now compromises 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 breakout 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 is always impacted by seasonal factors and of course industry-wide trends. In…

[Operator Instructions] 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 is a couple of problems that our retailers have. One is that they are unable to buy the amount of volume that you need to order from some of the largest distributors because their minimums are way higher than what a corner store can do. So one of our plans is to sort of group together stores in a market and let them buy their inventory together and then share that inventory across their stores so that they would be able to meet those minimums. And – again, this is not an exact number, but we expect that, that 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 have a problem that they need, obviously, stuff from lots of different distributors. They might carry a wider array of products and they don’t want them coming in with 17 different trucks. Let’s just use that as an example. So they might essentially want to deliver to 1-point and then have all those deliveries brought to the store. And that’s really where…

It does, for sure. Is there – 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. And we also do their merchant processing for the retailers, which we also then make a small margin on. And again, it also enhances just 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 over the long-term, which again helps us. The better our stores do the better we do.

Yes, absolutely. It’s great. I mean I don’t think any – at least I don’t know of anyone in the market doing what you do the offering this product. So, that’s fantastic. And...

And as you know, right, we get the question all the time about how we do the competition, okay. This initiative and the other one that we announced recently just come to demonstrate that NRS is different. NRS is not just selling a POS cash – fancy cash solution. We really try to fully understand the need of our retailers, participate in all their problems kind of own the store, the supply concern, the delivery concern, create that level of stickiness and dependency and do that relationship that they are no match to us.

Yes. I mean again, I think we view ourselves really as a trusted partner like 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 having, we want to come in and solve them. That’s our goal. And I think that, that’s the reason why we succeed. And yes, we are not embarrassed that we want to make money by providing value to our stores. But we are there for them in 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 actually hasn’t like officially, I will say really launched. I mean we signed the deal with them, but it doesn’t start rolling out, I would say until I believe – I believe early in 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. I mean for one, it’s by far the cheapest option to do delivery other than possibly doing it yourself and only if you have a lot of deliveries. And again, most of our stores don’t have a lot of deliveries. So, this is really a great option. It’s a great option for customers as well because again, we are not really trying to make a lot of money on the specific product. Again, this is another example of us doing something that retailers need where we will make a profit. But again, we won’t make a ton of profit. Our goal is not to – like an Uber to mark stuff up 30%. Our goal is to bring it to them for as close to the cost that they pay for it in the store and allow retailers to sell stuff to customers even when they are not in the store, like that is our goal, and that’s what we intend to do.

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 it sustainable, I mean listen, the beauty of the net2phone business is it has very, very low churn – and its revenue is pretty predictable. So, the more lines you sign, the more revenue you have and the more profit. And as long as you manage your costs well, which again, I think that we are really good at, you are going to see continued improvement in the bottom line from that business. And not to mention the fact that like a person I am extremely excited about the CCaaS business that they acquired and its potential to really bring up the ARPU of the entire business as well as enhance the product overall. I think it’s really headed in a great direction. And I am happy that we own more of it for longer, although that was not the plan.

Yes. David, I want to note to the models. And it’s just very good performance right now. Churn is doing very well. ARPU is doing great. I mean we are really focused on how we are deploying capital, acquiring customers in the countries that generate most ROI. So, yes, Q1 was a good surprise for us. We thought we are going to be EBITDA positive end of the year. We are not EBITDA positive now. And I believe this is now the baseline. So, hopefully, in order to continue this way, we will be able to be coming back to calls later this year and start saying when we are going to become actually free cash flow positive, not just EBITDA positive, as you know, net fund spends are a large number of dollars in CapEx acquiring the IP phones that we give to customers. But the rate – at the rate are going we might be talking already in fiscal ‘24 about becoming free cash flow positive.

‘23, you never know. Every day, we really – again, like we focus on optimizing the business to make sure that, again, we are bringing on customers for the right price and the right kind of customers in the right areas where we get the right paybacks. And as Marcelo said to you already, like we think it will only get better from here.

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

Well, that leads into my next question, which is, I think multiples in UCaaS well and in point of sale, too, so across basically everywhere that you are competing, multiples have come down quite a lot. So, as you get closer to being self-sustaining that obviously opens up the door to have sort of self-funding M&A. So, I am curious, should we be thinking about anything on the horizon as it relates to M&A?

We don’t have any big M&A plans in the work. I can tell you that much for sure. I mean I am always open to looking at things that I think will be synergistic and will enhance our bottom line. That being said, I also think that M&A can have the effect of taking your eye off the ball. So, again, we are not thinking that in any rush do anything. And we are – right now, we are focused on improving the business. And when valuations do come back, we think it will be even a much more valuable company than it would have been.

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.

[Operator Instructions] 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.