Shmuel Jonas - CEO Marcelo Fischer - SVP of Finance, CFO of IDT Telecom.

Analysts:.

Good day, everyone, and welcome to the IDT Corporation's Fourth Quarter and Full Year 2018 Earnings Call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the three-years [ph] and 12-month period ended July 31, 2018.

During prepared remarks by IDT's Chief Executive Officer, Shmuel Jonas, all participants will be in listen-only mode [Operator Instructions]. After the prepared remarks, Marcelo Fischer, IDT's Senior Vice President of Finance and the Chief Financial Officer of IDT Telecom will join Mr. Jonas for a Q&A session. [Operator Instructions].

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 that 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 have caused actual results to differ materially from those that they forecast.

In their presentation or in the Q&A that will follow, IDT's management may make reference to non-GAAP measurements, including 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 IDT Corporation website at www.idt.net. The earnings release has also been filed on Form 8-K with the SEC. And with that I would now like to turn the conference over to Mr. Jonas. Please go ahead..

Thank you, operator. I apologize, as usual I have my quarterly cough. Welcome to IDT's fourth quarter and full fiscal year 2018 earnings call covering results for the 3- and 12-month period ended July 31, 2018. I'm joined today on the call by Marcelo Fischer, IDT's CFO.

In my remarks, I'll focus on the fourth quarter results as well as overall strategy and operational developments. For more detailed report on our financial results, including a discussion of the full fiscal year's results please see our earnings release filed earlier today in our Form 10-K which we will file with the SEC next week.

The fourth quarter overall is consistent with the recent trends with our top and bottom line positively impacted by the growth in our early stage businesses. The resilience in many of our core offerings also collectively increased profitability despite industry-wide headwinds in the paid minute communications market.

As you examine the results presented in our earnings release, please keep in mind that this quarter we adjusted our estimates of breakage, principally consisting of the valuation of the unused balances on prepaid calling cards and accounts adding $9.5 million in revenue to the fourth quarter and full-year results.

We also adjusted the estimates of accruals required for certain regulatory fees, increasing our direct costs of revenue by $4.5 million. These two changes effectively boosted our revenue less direct cost by the net amount of $5 million. Also when making sequential comparisons, note that our fourth quarter had 92 days, 3 more than the third quarter.

Together, the accounting changes and the longer fourth quarter accounted for about $22 million of the $27 million sequential consolidated revenue increase and about $7 million of the $9 million sequential increase in revenue less direct costs.

Although, fourth quarter revenues would have declined by $11.8 million year-over-year instead of the $2.3 million decrease we reported, adjusted EBITDA would have increased $3.2 million to $11.8 million. Setting all these adjustments aside, our business performed pretty well in the fourth quarter.

Part of the reason that our core retail offerings continued to perform ahead of expectations is the strategic investment we have been making in the BOSS Revolution Communications and Money apps, both of which are about to launch major upgrades.

The BOSS Revolution Money app has helped us to triple the volume of money remittances through our digital channels over the past year. Our BOSS Money app on iOS is now the fourth most downloaded international money transfer app in the United States.

Just as importantly also is one of the key reasons while mobile top-up and plan sales have increased in recent quarters and while other telecom companies have begun to rely on us to design their top-up and international calling plans and programs. Carrier services also had strong quarter.

Although, revenue declined year-over-year, wholesale results helped drive the significant year-over-year increase in the TPS segment profitability. Now let me update you quickly on our primary growth initiatives. Following the quarter close, net2phone took a big leap forward with the launch of the new technology platform, net2phone 2.0.

The new platform is built on an internally developed proprietary stack instead of a third-party platform and incorporates so many revolutionary technologies that we pioneered at IDT and at net2phone over the past 25 years.

It also incorporates many of these technologies from the LiveNinja acquisition and many more which we will incorporate from the acquisition we just did of Versature, our Canadian arm.

We decided to develop our own proprietary platform because we were once technology leaders and we will be again, and because we have seen that to be a leader in a space, you need to control your own destiny. Net2phone's new platform will also allow us to do just that.

Just as importantly or even more importantly, our dedicated team is making sure this new platform is delivered with excellent service, reliability, and amazing features at an amazing price that our customers and channel partners have come to expect from the net2phone team.

From our user's perspective, the new net2phone platform brings voice, chat, and messaging together seamlessly all from anywhere since everything can be done from your laptop, desktop, office phone, or mobile device.

National Retail Solutions continues to build out its POS network and help independent urban retailers compete against the large retail chains. NRS now has over 5,000 active users and is growing at a rate of approximately 1,000 installs per quarter.

The NRS ecosystem helps retailers in many ways, and each of these provides the potential revenue stream for us. NRS currently generates revenue primarily from the sale of POS terminals and the associated monthly recurring fees.

As the network grows and our technology advances, we are beginning to realize revenues from a diverse set of services, including the sale of display, advertising, payment processing, and many other services.

With greater scale and investment, we will be able to further develop these revenue sources and significantly enhance the network's cash generation capability. The NRS terminals also likely contribute to the sales and profitability of our core businesses, since many BOSS Revolution retail offerings are integrated seamlessly with the NRS terminal.

We continue to see strong growth from our money transfer business, and specifically our direct-to-consumer channel. These international transfers, which can be initiated with the BOSS Revolution money app or website now outnumber transactions initiated at retailers by a 3:1 margin, but that is more of a reflection of our failure at retail so far.

We are working to further expand direct-to-consumer transfers, in part by building out our disbursement networks in certain African and Latin American corridors. In cross-border money transfer, technology is altering the landscape and presenting new opportunities. We recently conducted and finalized a month-long pilot with Ripple’s xRapid service.

xRapid uses Ripple’s XRP cryptocurrency as a bridge asset and provides a streamlined process to transfer both value and data. We're considering how xRapid can be integrated operationally, likely starting with a few select corridors.

Later this quarter, we expect to launch a significantly improved retail portal for money transfer, which we hope will allow us to finally succeed at retail. Along with the launch, we intend to aggressively recruit retailers in California and elsewhere as well.

California originates as many international money transfers as the rest of the country combined. We held up entering the stakes of our retail portal until the functionality [ph] was ready for prime time and we believe it finally is.

To wrap up, this is a pretty strong quarter and with our growth initiatives continuing to scale, we are ramping up our investments, so they can move to take advantage of their abundant growth opportunities.

The need for additional capital to invest in our growth initiatives as they scale and the low valuation of the company in the current market prompted IDT's Board of Directors to discontinue our quarterly dividend.

The Board determined and I agree that we can more effectively enhance long-term shareholder value by using the cash generated by our core offerings to increase the rate of investment in our high growth initiatives, while retaining the flexibility to return value to shareholders through stock repurchases when warranted by market conditions, available resources, and our business outlook and results.

Pursuant to this strategy, we have bought back nearly 1.1 million shares of our Class B common stock in the open market for $5.7 million over the past three months. By way of comparison, our former dividend returned about $2.8 [ph] million a quarter to stockholders. Now Marcelo and I'd be happy to take your questions..