Shmuel Jonas - Chief Executive Officer, Chief Operating Officer Marcelo Fischer - Senior Vice President - Finance.

Jay Srivatsa - Chardan Capital Markets.

Good day. Welcome to the IDT Corporation's Fourth Quarter and Full Fiscal Year 2014 Earnings Conference Call. During management's prepared remarks, all participants will be in a listen-only mode. (Operator Instructions) After today's presentation by IDT's management, there will be an opportunity to ask questions.

(Operator Instructions) In today's presentation, IDT's Chief Executive Officer, Shmuel Jonas, will discuss IDT's financial and operational results for the 3-month and 12-month's period ended July, 31, 2014.

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 they forecast.

In their presentation or in the Q&A, IDT's management may make reference to the 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 the 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 a 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 Executive Officer, Shmuel Jonas..

Thank you, operator. Good evening and thank you for joining our Q4 2014 conference call. I apologize in advance if I coughed during my remarks. I am a little under the weather. My remarks today will focus on key operational and financial results for the fourth quarter 2014.

Throughout my remarks, the financial results I discuss are for the quarter and are compared to the fourth quarter a year ago unless I specify otherwise. I also will be discussing our business strategy and outlook for fiscal year 2015.

For a more comprehensive and detailed discussion of our results including for the full fiscal 2014, please read our earnings release issued earlier today and our Form 10-K, which will be filed no later than on October 14th.

Following my remarks, Marcelo Fischer, our Senior Vice President - Finance and IDT Telecom's Chief Financial Officer will be glad to take your questions. IDT delivered strong results including year-over-year increases in revenue, adjusted EBITDA and earnings per share.

Our IDT Telecom division and in particular its Boss Revolution PIN-less voice offering, again, was the key growth driver. Consolidated revenue for the quarter increased 2.1% to $421 million. This was the 17th quarter out of the last 18, in which we delivered a year-over-year revenue increase.

Revenue in our core Telecom Platform Services segment, which we refer to as TPS was $410 million, 1.5% increase and a 3.9% increase sequentially. For sequential comparisons here and throughout my remarks keep in mind that our third quarter had three less days than our fourth quarter.

For the full year, consolidated revenue was $1.65 billion compared to $1.62 billion in the fiscal 2013, an increase of 1.9%. Drilling down a bit, within TPS, our Retail Communications vertical accounted for 44.1% of TPS's revenue. Retail Communications' revenue increased 2.4% year-over-year and 5% sequentially to $181 million.

For the full year, Retail Communications revenues increased 5.9% compared to fiscal 2013 to $696 million. Sales of Boss PIN-less, our international long distance calling services used primarily by foreign-born residents of the United States is a dominant driver of this vertical.

Several quarters ago, we made a point in discussing with the decline in Boss Revolutions' growth rate. While Boss Revolutions PIN-less is a maturing product, it did grow full year revenues by 24% compared to 2013.

Boss revolution continues to attract new customers and its domestic customer base increased 23% year-over-year, which was more than enough to compensate for the secular decline in permanent termination rates.

We are working to sustain that momentum by ratcheting up our sales and marketing efforts in fiscal 2015 and are aiming to achieve a mid-single digit increase in Retail Communications revenues for the year. Retail Communications gross margin is generally in the high-teens to low-20s.

Strategically, last quarter we acquired the assets of a highly regarded over-the-top messaging firm and we have been working to integrate their technology into the Boss Revolution app. We expect to introduce messaging within the app in the first half of calendar 2015.

I am very excited about the potential of messaging and within messaging of our branded MagicWords technology, which delivers contextually appropriate content. MagicWords offer significant potential for monetization and over time could become a significant source of shareholder value.

The Boss Revolution app continues to perform very well and surpass the 1 million download milestone following the quarter close. The addition of messaging should further accelerate user adoption and I hope that the Boss Revolution app will become a go-to application on tens of millions of phones.

Moving on, our Wholesale Termination vertical performed to expectations, generating $165 million in revenue during Q4. Year-over-year, revenue was flat while increasing 2.4%, sequentially. Historically, wholesale revenue has been volatile.

Though these fluctuations cannot have significant impacts on our bottom-line, we expect that Wholesale Terminations' gross margins in fiscal 2015 will again be in the high single digits to low double digits and that wholesale will continue to be a proportionately less significant contributor to our bottom-line and our Retail Communication vertical.

Turning now to our Payment Services vertical, revenue in this article is derived primarily from sales of our international mobile top-up service or IMTU. IMTU continues to grow on top-line while Payment Services gross margins, which are generally in the low teens are being squeezed by competitive conditions.

Fourth quarter revenues were $53 million, a 3.2% increase and 6% increase sequentially. Operationally within the Payment Services vertical, we continue to expand our launch of the Boss Revolution money remittance service.

We are now active in seven states and have begun to roll out the service and a dozen more, including Texas which as you know has a large population of immigrants. Based on our early growth rates and reception, we remain positive about the long-term outlook for this offering.

Also in Payment Services, we have begun beta testing our general-purpose reloadable or GPR Visa card in a couple of small markets. We expect to launch it next spring under the Boss Revolution brand.

In recent years, GPR cards have gained traction under bank communities since they provide many of the services afforded persons with traditional checking accounts. Hosted Platform services, our smallest vertical generated fourth quarter revenues of $10.9 million, a decrease from $11.3 million.

The largest business within this vertical is the provision of voice calling services to midsize and small cable providers. This business has been in harvest mode.

However, this past quarter, we were able to re-sign our two major cable customer clients to new five-year contracts and we intend to explore whether there maybe additional market opportunities with other similar sized cable operators.

Also, during the fourth quarter, IDT launched Net2Phone Office, our first integrated telecommunication solution for small and mid-size enterprises. We are selling Net2Phone Office directly and through agents.

If you would like to know more about whether Net2Phone Office can help your business, cut costs and improve the quality of your communications, please visit our website at net2phoneoffice.com. Outside our core TPS segment, Zedge revenues were $1.7 million compared to $1.6 million in both the year ago and prior quarters.

Our all other segments, which includes Fabrix and our real estate holdings, generated $6.3 million in revenue compared to $3.1 million in the year ago quarter, reflecting Fabrix's strong top-line growth.

Moving down to income statement to SG&A, on a consolidated basis, our SG&A spend was $58 million, including a $0.5 million in non-cash compensation costs. SG&A in our core TPS segment was $51 million, a 6.6% increase compared to the year ago quarter and a 5.9% increase sequentially.

Increased employee compensation expense, including sales commissions and increased marketing expense associated with the World Cup were the significant drivers.

We continue to build out our internal sales force to drive Boss Revolution's growth and particularly to support the expanded scope of our Boss Revolution offerings, including money remittance. From a marketing perspective, the World Cup was a tremendous draw for our target market and we sought to take full advantage of it.

Don't be worried by the spending growth. I am intent on maintaining the fiscal discipline that has been so instrumental to our continued success since our turnaround. I expect TPS's SG&A to decrease in fiscal 2015.

Corporate SG&A decline for the third consecutive quarter to an annual run rate of just over $12 million versus $14 million a year ago and is at its lowest level since the first quarter of fiscal 2013. On a consolidated basis, our adjusted EBITDA increased $700,000 year-over-year to $10.4 million.

However, the increase in SG&A during the fourth quarter resulted in a $2.9 million sequential reduction in adjusted EBITDA. For the full-year IDT generated $45.3 million in adjusted EBITDA compared to $39.4 million in the prior year. I want to take a moment to commend the team at IDT Telecom.

We delivered $60 million in adjusted EBITDA for the year, an increase of over $6 million compared to fiscal 2013. For the quarter, our core TPS segment delivered adjusted EBITDA of $12 million compared to $13.4 million in the year ago quarter and $15.9 million in the prior quarter.

Such decline reflecting the impact of the fourth quarter's increased SG&A spend. For the year, TPS exceeded our expected target and delivered $58 million in adjusted EBITDA compared to $52 million dollars in 2013.

Looking ahead to fiscal year 2015, we expect that adjusted EBITDA levels, both at our TPS segment and on a consolidated basis, will likely decline a little from fiscal 2014's level as we continue to ramp up marketing and new product sales and support, including continued expansion of our most recent offerings such as messaging, money remittance, Net2Phone Office and GPR cards.

Depreciation expense has very gradually increased over the last few quarters, reflecting rising levels of CapEx to develop new products, including the Boss Revolution app, Net2Phone Office and integration of IDT messaging. Our industry is in constant change and our long-term growth depends on our ability to deliver competitive new offerings.

In addition to continued investment in new product development, in fiscal year 2015, we expect to invest approximately $8 million in CapEx to renovate several floors as well as upgrade to HVAC system in common areas in our former headquarter building in Newark and we will relocate back to the building.

Our decision to remain in Newark and invest in the building which had been vacant was influenced by taxing centers offered by the state of New Jersey. In addition, I believe that having IDT in the building as anchor tenant will significantly improve our chances of renting or selling the remaining space.

On a non-GAAP fully diluted basis, exclusive of tax adjusted depreciation and amortization expense, non-cash compensation and other gains and losses and a $4.1 million benefit from the reversal of a valuation allowance on foreign deferred income tax assets in the fourth quarter, EPS was $0.39 compared to $0.13 in the year ago quarter and $0.37 in the prior quarter.

That concludes my discussion of the quarter's results. Overall, I am pleased both, with the continued growth at Boss Revolution and by the pace with which we are developing and deploying new technologies that will be the drivers of our business in the coming years.

After the quarter close, we reached an agreement to sell our 78% stake in Fabrix systems business to Ericsson. The final sell price for 100% of the shares in Fabrix was $95 million in cash, excluding transaction costs and working capital and other adjustments. We expected deal to close in the next few days.

I am extremely thankful to the management of Fabrix and particularly to its cofounders Ram Ben-Yakir and Nir Drang. They had the vision to see Fabrix could become and has put close to a decade of their lives into building the business. It has been a pleasure and an honor to work with them and we wish them much continued success.

The sale of Fabrix will significantly boost our cash on a consolidated basis. We are considering alternative paths to create shareholder value with the Fabrix cash proceeds. First, we may pursue a significant strategic acquisition in the telecommunications industry.

We would target an opportunity, that will be immediately accretive to our bottom-line and complementary to our existing businesses. If we don't find a significantly sized deal, we will consider smaller acquisitions with accretive value or other strategic advantages.

Additionally, we always consider stock repurchases and special dividends as a method to return value to shareholders and may end up with some combination of these possibilities. As we have demonstrated, we always seek to bound short and long-term shareholder value creation and we will keep you updated as developments merit further disclosure.

While we are on the topic of shareholder value, I want to touch upon Zedge, which like Fabrix has been widely ignored by the market, which I believe has considerable value. I am happy to report that Zedge has been installed close to 120 million times across Android, iOS and Windows Mobile.

Zedge recently surpassed its 100 millionth install on Google Play placing it in the elite club of 40 publishers globally that has apps that have been installed 100 million times or more in the Google Play store. Furthermore, around 45% of Zedge's total installs are active installs, meaning that the user hasn't uninstalled the app from their phone.

Zedge's app now boast 22 million monthly active users, a key metric in measuring app health and potential. On that note, let me spend a minute talking about the initiatives that fueled the company's continued growth.

Fundamentally, the Zedge team is introducing social sharing features, new content types, localization which encompasses not only at translation but also localized content acquisition design, optimization and marketing and finally new marketing tools which will be used to drive increased customer engagement.

These enhancements are significant and will make Zedge more engaging, relevant and monetizable than ever before. Before wrapping up, I should point out that IDT's Board of Directors declared a dividend $0.17 for the fourth quarter. The dividend was paid on October 3, 2014 to stockholders of record as of the close of business on September 29, 2014.

That concludes my remarks..

Thank you, sir. We will now begin the question and answer session. (Operator Instructions) Our first question comes from Jay Srivatsa of Chardan Capital Markets. Please go ahead..

Yes. Thank you for taking my question. Shmuel, on the money remittance services, you mentioned you have expanded to about seven states. Just a couple of questions around that, one is when we expect to start to become material to the company.

Two, would you consider using some of the cash from the Fabrix transaction to kick start or accelerate the rollout of that that product nationwide..

I guess, to answer your question maybe in the reverse order is I don't believe that the cash from the Fabrix transaction is necessary to increase the growth in money remittance. I think that money remittance is going to take a bit longer than we expected to become a material part of the business.

It is probably more like two to three years before it becomes a very meaningful number and I don't think that that will really be helped by us throwing money or call at it.

We have to get some more of our technology, I would say ready as well as our sales force in our compliance for each of the individual states up and ready before we can really expand it a lot..

Okay. Then in terms of TPS, you seem to indicate that next year you doubt my drop off a little bit because of additional expenses and you also talked about using the Fabrix money to look at some acquisition that area.

Can you give us some timeline on what you are thinking and when do you expect to close the transaction that would hopefully make some contribution to 2015 guidance that you have given,.

I don't have an answer to that yet, but I mean, we are hopeful that it will be in the next, let's say, three to six months, but it's not definitive in any way..

Okay. Then last question from me. In terms of Zedge, obviously, you have had a very good transaction with Fabrix. Are you considering a similar disposal of the Zedge. If not, what are you waiting for in terms of its own revenue contribution before you consider sale of that division..

We have no urgent need to sell any asset in IDT. Again, we believe that that will continue to grow. We think that it's actually really about to grow much more than it has up until now. We think that they will be even more valuable in a year from now..

Okay. Maybe one follow-up for Marcelo, I know you had a little bit of tax benefit this quarter.

When you look at 2015, are you expecting a 40% tax rate to continue?.

Hi Jay. If you look at our numbers, even when you skip out that one-time benefit with taxes related to the full valuation allowance. We ended our 2014 at an effective tax rate of 30%.

As we go into 2015, there is a number of moving parts happening around the business worldwide, but in terms of guidance, I think you should use anywhere between 28% to 33% as a good range..

(Operator Instructions) Well, at this time, we are showing no further questions. That will conclude today's conference call. We thank you all for attending. At this time, you may disconnect your lines. Thank you. Have a great day, everyone..