IDT at Sidoti Small-Cap Conference: Strategic Growth in Focus

On Wednesday, 19 March 2025, IDT Corporation (NYSE: IDT) participated in the Sidoti Small-Cap Virtual Conference, discussing its second-quarter financial performance and strategic direction. The company highlighted its robust growth in key segments and strong cash position, while also addressing challenges in traditional communications.

Key Takeaways

• IDT reported a 32% increase in revenue for NRS and a 36% rise in Boss Money transaction volumes.
• The company holds over $170 million in cash with no debt, emphasizing financial stability.
• Adjusted EBITDA is projected to reach at least $126 million for fiscal 2025, up from $89.7 million in fiscal 2024.
• IDT increased its quarterly dividend from $0.05 to $0.06 per share, highlighting shareholder returns.
• Traditional communications are expected to stabilize with a 10% EBITDA growth forecast.

Financial Results

• Cash and Debt: IDT maintains over $170 million in cash and no debt, showcasing a strong balance sheet.
• NRS Revenue Growth: Achieved a 32% year-over-year increase in the second quarter.
• Boss Money Growth: Transaction volumes rose by 36%, with a significant boost from digital transactions.
• Net2phone Growth: Seats served increased by 9% year-over-year in the second quarter.
• Consolidated Gross Profit Margin: Increased to 37%, a 400 basis point rise year-over-year.
• Adjusted EBITDA: Generated $108.8 million TTM, with expectations to reach at least $126 million in fiscal 2025.

Operational Updates

• NRS (National Retail Solutions): Active terminals reached 34,800, with 30,100 active stores, representing 14% market penetration.
• Boss Money: Expanded to serve nearly 50 countries.
• Net2phone: Served 410,000 UCaaS and CCaaS seats, with adjusted EBITDA rising 55% to $2.9 million.

Future Outlook

• Growth Businesses: Continued expansion is expected to significantly contribute to IDT’s consolidated results.
• Gross Margin: Anticipated to expand further due to a shift towards higher-margin businesses.
• Traditional Communications Segment: Expected to stabilize with potential for a 10% EBITDA growth.
• Capital Allocation: Focused on stock repurchases, dividend increases, reinvestment in growth initiatives, and potential M&A activities.

Q&A Highlights

• NRS Strategy: Utilizes a sales force and call center in Guatemala to drive market penetration.
• Competition: Primarily faces small, localized competitors.
• Capital Priorities: Emphasizes stock repurchases, dividend hikes, and reinvestment in growth areas like Net2phone’s AI features.

For more detailed insights, refer to the full transcript below.

Full transcript - Sidoti Small-Cap Virtual Conference:

Greg, Host, SOTI: Alright. Welcome everyone to the SOTI March Small Cap Conference. Thanks for joining us here for the IDT Corp presentation. With us from the company, we have, Marcello Fisher, the company’s CFO, and William Ohray, the the, who heads up their IR program. They’re gonna run through a presentation, and then we’ll have some time for q and a at the end.

So if you do have any questions, please enter them through the q and a function in Zoom, and we’ll get to as many of those as possible. So with that, I’m gonna now turn it over to, Marcello to run through the presentation.

Marcello Fisher, CFO, IDT Corp: Thank you, Greg, and good morning, everyone. I’m joined today by Bill Urey with IDT’s Head of Investor Relations. We have about a half hour for this meeting. So Bill will take the first twenty minutes or so to walk you through our investor deck, and then we will be happy to take your questions. So now Bill will get started with the presentation.

William Ohray, Head of Investor Relations, IDT Corp: Thank you, Marcelo. Please note, that we’ll be discussing our financial and operational results for IDT’s second quarter of fiscal year twenty twenty five, the three months ended January 31. Please read our forward looking statement at your leisure. Let’s begin with some basics about IDT. We’re an innovative SaaS platform and fintech services company.

And although we are firmly in the small cap orbit with a market cap of approximately 1,200,000,000.0, We are not your typical small cap company. So what makes IDT unusual? For one thing, we’ve been in this business for thirty five years, a lot longer than most. Also, we’re growing both our top and bottom lines, And we support our businesses with prudent cash management. You can see this reflected in our balance sheet where we have over $170,000,000 in cash and no debt.

And again, unlike many small cap companies, higher interest rates are a positive for our balance for our balance sheet, not a negative. IDT operates six interrelated businesses. In today’s presentation, we’ll focus on the three high margin, high growth businesses listed on the left hand side of this slide, NRS, Boss Money, and Netathon. Collectively, they are the primary drivers of IDT’s top and bottom line growth and value creation. All six of these businesses

Marcello Fisher, CFO, IDT Corp: on

William Ohray, Head of Investor Relations, IDT Corp: the right hand side of this side are three largest businesses in terms of revenue. All three sit within our traditional communications segment. All six of these businesses were built around one or more of our core strategic assets. These assets include the BOSS consumer brands, which we serve approximately 5,000,000 unique customers each month, our extensive nationwide distribution network, including 25,000 plus independent retailers who sell our products and services, our highly scalable technology platform and our global telephony and VoIP infrastructure networks. IDT developed each of these assets over the decades and we continue to invest to keep them strong and vibrant.

Now let’s dig into the first of our high growth, high margin businesses, NRS. National Retail Solutions, NRS, operates the largest point of sale platform for independent retailers in the country. Our primary market includes owner operated convenience stores and bodegas and also liquor stores and tobacco shops. These small retailers primarily serve immigrant and multicultural communities in urban areas across America. We founded this business about eight years ago after having worked with retailers that sold IDT’s Boss Revolution calling service for many years prior to that.

Through these relationships, it became apparent to us that these mom and pop stores needed better technology to compete against the large retail chains. So we launched NRS to level the retail playing field. Our proprietary POS solution now provides these retailers with essential tools and services to help them manage their businesses more easily and profitably. As I mentioned, the primary addressable market for the NRS platform is independent C stores and bodegas, liquor stores, and tobacco shops in The US. So good data on this market is hard to come by, but we believe there are at least 200,000 such stores in The US.

And as of January 31, we operated 34,800 active terminals and approximately 30,100 stores, meaning that approximately 86% of our target market remains available to us. We’ve been generally adding between 1,117 new terminals net of churn per quarter. The bottom line is that we have an exceptionally long runway in our current market with limited competition. So this graphic provides some perspective on the scale of the NRS retail network compared to the largest retail brands in America as a function of store counts. With over 30,000 retail locations, the NRS network is nearly 50% larger than the largest retail chain, Dollar General, which has about 21,000 stores.

NRS is now deploying new POS formats, a tablet based a tablet based software only version and a self ordering kiosk that will gradually help it deepen its penetration of its current core TAM and add new verticals, including quick serve restaurants, cafes, and beauty salons. NRS’ recurring revenues exclude the one time sale of the POS hardware. So recurring revenues are generated primarily by three offerings. First, sales of our payment processing service offered under the NRS Pay brand that enable retailers to accept credit and debit cards. Second, advertising and data revenue, predominantly sales of advertising displayed to consumers on the POS’s customer facing digital screen.

And third, SaaS fee revenues are monthly recurring fees for use of the software that drives the POS’s functionalities. NRS’s top line has been growing fast, increasing 32% year over year in the second quarter. The primary driver of the increase has been the expansion of our POS network to new retailers. In addition, we’ve been working to increase the monthly average recurring revenue per terminal. Recurring revenue per terminal in the second quarter increased to $310 per month from $285 in the year ago quarter.

That’s up 9%. So now let’s look at each of the three revenue streams in a little bit greater detail. Over 90% of the revenue in our merchant services category is contributed by NRS Pay, which is now utilized by nearly 24,000 retailers. For q two, our most recent quarter, the number of NRS pay accounts increased by 32% year over year. Over the past few years, we’ve introduced several premium NRS pay plans to drive increases in per terminal revenue.

The increases in the number of NRS pay accounts and rising revenue per terminal drove a 45% year over year increase in merchant services revenue during Q2. NRS sells its large and growing ad inventory through its direct sales efforts and through programmatic platforms. This vertical also includes revenues from sales of our POS transaction data to consumer marketers. So advertising and data revenue was $10,000,000 in q two and totaled $32,500,000 over the trailing twelve months. Now let’s look at SaaS fee revenue.

NRS’s NRS retailers pay a monthly recurring charge for the software services that each active POS terminal utilizes. The MRC ranges between $20 and $75 a month. We successfully increased the average MRC in recent years by migrating retailers to premium SaaS plans. The increase in the average MRC and the growth of our POS network to over 30% year over year increase in SaaS fee revenue in Q2. We expect that these drivers will continue to deliver strong SaaS revenue growth.

NRS’s economics are extremely attractive. The only significant cogs for the are the terminals themselves. Moreover, approximately half of NRS’s SG and A is fixed or semi fixed, so the economics of the business will continue to improve as we scale. In q two of fiscal twenty twenty five, NRS generated 10,100,000.0 in adjusted EBITDA on 31,600,000.0 in total revenue for an EBITDA margin adjusted EBITDA margin of 31%. So thinking about the performance of interest in terms of the rule of 40, we achieved a 55% score in q two, which suggests that we’re doing a pretty good job of balancing growth and profitability.

To wrap up, NRS is just a fantastic business, both operationally and financially with an extended runway ahead. So now let me introduce introduce you to another fantastic IDT business, Boss Money. Boss Money is our international money remittance business. It generates over 90% of the revenues in our fintech segment, which also includes much smaller earlier stage initiatives. When we launched Boss Money a decade ago, we’ve leveraged our large retail customer base, the Boss brand, and our retail distribution network to build this business from the ground up.

Today, Boss Money customers here in The United States send their cash to friends and family in nearly 50 countries. Boss Money goes to market through two channels, digital and retail. A significant majority of transactions originate through our digital channel by customers using our highly regarded Boss Money and Boss Calling apps. Our retail channel, where the customer visits a Boss Money retailer and can pay with cash, brings large numbers of new often unbanked customers into this Boss ecosystem. BOSS money is growing robustly.

Transaction volumes increased 36% in Q2 led by nearly 40% year over year increase in digital transactions. Although money remittance is an extremely competitive industry, we’ve been able to achieve and sustain one of the highest growth rates in the industry, primarily by leveraging the synergies for customer acquisition and retention provided by cross marketing BOSS money to our much larger BOSS calling and mobile top up customer bases. This BOSS ecosystem is a unique asset that significantly lowers our cost our acquisition costs and increases customer lifetime values. Looking ahead, we are pursuing a variety of initiatives to continue our momentum. Driven by the expansion in transaction volumes, in the first quarter, Boss Money revenue increased by 34% year over year to reach an annualized revenue run rate of 134,000,000 Revenue growth rate of our digital channels surpassed 38% while revenue generated from transactions initiated at our retailers increased 24%.

As Boss Money scales, our unit cost structure continues to improve as we leverage our larger transaction volumes to cut better deals with payout partners while also optimizing our operating model through automation, including leveraging AI. Boss money turned adjusted EBITDA positive last year. In the second quarter of this fiscal year, the fintech segment, which also includes investments in our early stage fintech business initiatives generated adjusted EBITDA of 3,990,000 for an adjusted EBITDA margin of 10.5%. Thinking ahead about profitability over the longer term, many of the public players in the money transfer space generate 15% to 25% adjusted EBITDA margins. We’re working to achieve comparable levels of profitability as we continue to scale the business over the next few years.

Now, let’s turn to the last of our high margin growth businesses, Net2phone. Net2phone provides cloud based communication services to businesses. Like NRS and Boss Money, we built Net2phone around several of IDT’s core assets. In this case, we leveraged IDT’s extensive telephony infrastructure and voice voice VoIP expertise as one of the earliest providers of voice over IP calling. Under the Unite brand name, Nettofone’s unified communications as a service offering is priced in differentiated tiers starting at $19.95 per user per month here in The US.

UContact, Nettofone’s contact center as a service offering, starts at 59.99 per seat per month in The US. Both services are also offered in our South American markets, which comprise approximately half of our total seats served. Nettofone’s strong growth and cash generation are a function of several strategic differentiators that in their totality insulated somewhat from the fierce competitive pressures in the industry. These differentiators include our focus on middle market enterprises rather than the largest multinational accounts, a channel centric approach that makes it easy for technology partners to price provision service, both Nettofone’s UCaaS and CCaaS offerings. And finally, Nettofone is uniquely focused on North And South the North and South American markets.

Latin America remains an underserved market and Netafone has prospered there with truly localized offerings that are difficult for the largest players to replicate. At the close of Q2 of fiscal twenty twenty five, Nettofone served 410,000 UCaaS plus CCaaS seats across North And South America. Seats served increased 9% year over year, driving a 9% increase in subscription revenue. On a constant currency basis, revenue increased 14%, reflecting the increase in seats served and also the increase in the number of higher ARPU CCAS seats. Netafone, second quarter fiscal twenty twenty five adjusted EBITDA jumped 55% to $2,900,000 from $1,800,000 a year earlier, while the adjusted EBITDA margin increased to 13% from 9%.

Net2Phones improving bottom line performance is driven by the growth of its higher ARPU CCaaS offering, favorable operating leverage, our efforts to reduce churn, and our progress in reducing per seat customer acquisition costs. We expect continue to drive ARPU and margin expansion in the coming years by migrating customers’ premium plans and offerings with AI powered features. Most notably, Nettofone recently launched its AI agent, a scalable virtual assistant providing exceptional customer experiences across sales, support, and administrative tasks. The internal reviews of Nettofone’s AI agent and early customer feedback has been exceptionally positive and we are excited about the potential both to increase ARPU from our current customer base and to accelerate customer net customer acquisition margins. Now let’s take a look at our traditional communications segment.

IDT Digital Payments, Boss Revolution Calling and our IDT Global carrier services along with smaller offerings, comprise our traditional communications segment. In aggregate, this segment generated $875,000,000 $879,000,000 in sales, equal to 72% of IDT’s consolidated revenue over the trailing twelve months. Revenue from the largest of these businesses, IDT Digital Payments, predominantly comprised sales of mobile top up, a service enabling customers to transfer airtime and bundles of airtime messaging and data to international and domestic mobile accounts. Revenue from this business has been relatively stable over the past year, while its contribution to bottom bottom line profitability has increased significantly. Our BOSS Revolution and IDT global carrier service services businesses are legacy businesses in the paid minute international long distance calling industry.

Marcello Fisher, CFO, IDT Corp: As you

William Ohray, Head of Investor Relations, IDT Corp: can see, we’ve been able to maintain or grow traditional communications adjusted EBITDA significantly over the past year even as revenues have decreased. In the second quarter, traditional communications adjusted EBITDA increased by $3,200,000 year over year or 19% even as revenue decreased by $10,500,000 Now let’s wrap up by taking a quick look at our recent consolidated results. Although IDT’s top line has been had been decreasing for years because of the gradual contraction and BOSS revolution calling in IDT global carrier sales, beginning in the second half of fiscal twenty twenty four, again in the first quarter of fiscal twenty twenty five, the accelerating expansion of our growth businesses more than offset the legacy businesses declines. Revenue was down sequentially a bit in Q2 as January is typically a seasonal low. Looking ahead, while Q3 is seasonally our most challenging, we believe revenue continued to expand in the mid term as the growth businesses continue to become larger contributors to IDPs consolidated results.

Three years ago in second quarter of fiscal twenty twenty two, the segments that held IDT’s three growth businesses contributed 34% of the company’s consolidated gross profit. By the second quarter of twenty twenty five, that percentage of GP from the growth businesses had nearly doubled to 62, helping to drive IDT’s consolidated gross profit to a record 37%, a 400 basis point increase compared to the year ago quarter. In q two of fiscal twenty twenty five, the High Growth segments had an average gross profit margin of 67% compared to 20% for Traditional Communications and the rotation of the revenue mix to the growth businesses should continue to drive gross margin expansion for the foreseeable future. IDT generated $108,800,000 in adjusted EBITDA TTM and we expect to generate at least 126,000,000 for all of fiscal twenty twenty five as our high margin growth businesses continue to gain scale, a significant step up from the $89,700,000 we generated in fiscal twenty twenty four. IDT also has built a very strong balance sheet, including a hundred and 71,000,000 in cash, cash equivalents, debt securities, and current equity investments at January 31, and we have no debt.

IDT returns IDT returns value directly to our stockholders through both our regular quarter quarterly dividend, which we just increased from 0.05 to $0.06 per share and through stock repurchases, which totaled $15,800,000 over the last twelve months. To wrap up, IDT offers an exceptional opportunity in the small cap space. We’re generating increasing level levels of cash and return to top line growth driven by the successes of NRS, Boss Money, and Nettofone. Each of these tech platform businesses is working on a big opportunity with a long runway and expect they will generate tremendous value for our shareholders in the coming years. Our balance sheet is strong with robust levels of cash and securities and no debt for positive interest rate exposure.

And we are turning value to shareholders and are positioned both to pay higher levels of quarterly dividend over time and continue to buy back opportunistically. Now, Marcello and I would be happy to take your questions.

Greg, Host, SOTI: Alright. Great. Thanks, very much for that presentation. If you do have a question, just enter it through Zoom and we’ll we’ll get some of those. But I’ll I’ll kick it off here.

When we look at the the, the growth of NRS, what is your go to market strategy and, you know, how do you plan to, I guess, increase that market share penetration within that market?

William Ohray, Head of Investor Relations, IDT Corp: Sure. So we go to market, Greg, primarily through three channels. We have approximately a sales force that’s boots on the ground of approximately a hundred sales agents that are going door to door to these retailers, most of whom we have relationships with, through the Boss Revolution. We’ve been selling Boss Revolution products to them for over two decades. So that’s invaluable in this market, which is very insular and hard to reach.

We also, go to market through a call center that’s based in Guatemala. We have about a hundred agents calling in to retailers around the country, to begin the sales process. And then finally, we work through technology and payment processing providers, distributors, who constitute the largest channel. So those are the our three, our three channels. I don’t know, Marcel, if you have anything Yeah.

Marcello Fisher, CFO, IDT Corp: And in terms of the strategy, it has been a dual strategy. On one hand, we continue to be very focused on trying to grow the total size of the POS network. We have done a very consistent job in the past few years in growing that net, the network on a net basis by about 6,000 group POSs a year, about 1,500 a quarter on average, and that continues to be very much part of the focus. But at the same time, there has been a lot of effort of going back to the existing base of of existing retailers that have the POS, and that base have become a pretty large one. As we saw earlier in the presentation, retailers.

And part of the effort is to go back to that base and upsell. Back to that base, and when I talk about upsell, it means upselling higher SaaS plans. And you’ll see that now the ARPU growth in SaaS revenue, have exceeded, right, the growth of the value. And, and even more so when it comes to merchant services, what we call NRSPay or credit card processing, that business has grown by about 50%, year over year, and that’s because we are going back to the base and trying to migrate more of the total retailers to become NRS Pay customers. A year ago, about 63% of the total days used to take NRS Pay with them.

Today, it’s about close to 70%, and that means a huge it makes a huge difference. And you and you see that difference in one of our key metrics, which is the average average revenue, per terminal, which now have exceeded $300 on a monthly basis, And we are getting more and more revenues from the existing base that was taking more of the recurring revenues, into those services.

Greg, Host, SOTI: Okay. Great. Thanks. And, like, when you’re when you’re trying to sell new terminals into this market and expand your your penetration, what do you who are you typically up against? What what are you replacing?

Like, who are you replacing in the market? I just wanted to better understand maybe your competitive dynamics, there.

Marcello Fisher, CFO, IDT Corp: Yeah. So by and large, you know, the NRS story, from a competitive standpoint, hasn’t changed much from what we have been saying over the past two years. The overwhelming majority of new retailers that buy our POS are still signing up for our POS system for the very first time, migrating away from having an old cash register or a shoebox or something something like it. So that continues to be the trend. We do see competition now, in different pockets around the country.

It’s mostly small, localized, original competitors. Now none of the large names in the industry, usually show up in the map when we know when we think about the competitors. So it’s really just small, you know, niche type of compare of compare of competition, and that and that bodes well for NRS. I think they did NRS has really built a real nice competitive mode in this market. I think that getting signing up independent with Taylor requires a level of interaction and establishing establishing a trusting relationship, which our sales force have been able to do and became good at it over the past twenty years.

Now selling selling other BOSS products into it. And I think more and more, we create more stickiness with our retailers by introducing more and more services that, now expand the range of just the typical services you get from POS. Most recently, we just introduced our partnership with Dollar Dash, and hopefully, we’ll do it soon with some of the other large players like Uber Eats and Grubhub. And that enables the that sole proprietor independent retailer to have his products and services, marketed on on a broader platform. And we do so by interfacing our POS with DoorDash so that, DoorDash has, you know, real time information on the inventory and the pricing that each retailer is offering.

So it makes the whole transaction process a lot smoother. And that’s just another way of trying to create that stickiness and the value add for the independent retailer to believe and understand that NRS is the best choice for them when shopping for a POS system.

Greg, Host, SOTI: Alright. Great. No. Thanks for that. Yeah.

When we think about, like, the inflection that you mentioned in terms of the the growth businesses kind of now, becoming big enough to offset the declines on the traditional telecom business, what what is the the outlook for that traditional telecom business in terms of the trajectory of decline? Has it reached a kind of a stable level? Do you expect it to continue to decline? What is the outlook for that traditional business going forward?

Marcello Fisher, CFO, IDT Corp: Yeah. I mean, at this point, we are not looking any more traditional as we being a declining business in terms of the segment as a whole. The IoT voice components of that segment, which is our business, our wholesale carrier businesses, the revenues in those business probably will continue to trail trend down over time, as more and more people shift away from using voice services to using peer to peer communications. But the impact to the gross profits and the bottom line I’m not that large because of a lot of the pricing and channel changes that we made and horrible changes as well as the aggressive cost cutting and productivity efficiencies that we have achieved over the past few years. And when you add the larger revenue component of that segment, which is our digital payments business, that business is growing and will continue to grow probably in the single digits, but it becomes a very, very profitable, even more profitable business than it used to be, for a host of reasons, including some very tactical, clever pricing changes that we have made and will probably continue to make.

So in the totality, I’m viewing traditional segment now as being quite a stable segment and expected to grow the EBITDA of that segment this year by about 10% and hopefully continue to do so, okay, in the in the quarters and years ahead.

Greg, Host, SOTI: Okay. And then maybe you can just talk about maybe the capital allocation priorities in terms of, you know, the cash flow you’re generating from that traditional business, how your view on maybe reinvesting back into the business on the growth side, in some of the growth businesses versus maybe, other capital allocation priorities like share buybacks or or dividend?

Marcello Fisher, CFO, IDT Corp: Right. So that’s all of the above. Right? We are, repurchasing stock, a little more aggressively than we used to. Hopefully, we’ll continue to do that.

Opportunistically, we have increased our dividend by about 20%. We continue to reinvest into new initiatives within the company, whether it’s in other fintech areas. We continue to invest behind growing Netliphone. We believe that the newly announced Netliphone AI agent, which hopefully will be a great success for IDT. We are getting we are putting the plans around how to go to market, but we hope to be deploying capital behind it and make this to be a real nice growth opportunity for for Maclophone.

And, the m and a markets have become, I think, more interesting. We’ve been looking at different acquisitions. Valuations have come down in certain areas, which makes some of these acquisitions more attractive. So we might be deploying to have more capital now in that arena over the next few months.

Greg, Host, SOTI: Alright. Great. We’re kind of at the end of our allotted time. So, maybe I’ll leave it to you for some closing comments, and then we’ll wrap it up.

William Ohray, Head of Investor Relations, IDT Corp: I think we’re good, Greg. Thank you very much. We thank you very much. Appreciate it.

Greg, Host, SOTI: Alright. Great. Thanks a lot, guys. Thanks, everyone, for listening in.

Marcello Fisher, CFO, IDT Corp: All the best. Bye bye. Thanks.

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