Shmuel Jonas - Chief Executive Officer Marcelo Fischer - Senior Vice President, Finance & CFO, IDT Telecom

Thank you, operator. Welcome to IDT's second quarter fiscal year 2018 earnings call for the three months ended January 31, 2018.

Last week the Securities and Exchange Commission concluded its review of our spinoff of Rafael Holdings. As announced, we now expect to distribute the Rafael Holdings shares to our stockholders on or about March 26 This spinoff continuous to process a strategic divestment of the noncore assets that we started nearly a decade ago, and which have delivered incredible value for our shareholders.

This spinoff of Rafael Holdings will include our pharma investments and over $100 million of cash marketable securities, real estate and investment. Turning now to our second quarter results.

Consolidated revenues increased by $28.3 million compared to the second quarter 2017 and by $2.3 million sequentially. Our Wholesale Carrier business achieved its sixth consecutive quarter of revenue growth.

However, due to margin pressures in the market Wholesale Carrier revenue growth has not generated corresponding increases in gross profit. Payment Services revenue grew by $9.8 million compared to the year ago quarter, which was driven by increases in money remittance transactions originating from our direct consumer channel and by sales of international and domestic mobile top-up.

Retail Communications revenue decreased this quarter by $9.4 million compared to the year ago quarter. But we have slowed the rate of decline over the past year, while also improving Retail's margin contribution.

We also continue to invest heavily in enhancing our BOSS Revolution mobile app. That investment has helped to increase customer stickiness and improved our margins over the last year.

The mobile app is also important as a path to monetize millions of eyeballs that use it, over 80 times a month on average. As we add more content and features, we believe that the revenue from it will grow outside of just telecom.

The consolidated revenue growth generated an additional $2 million in revenue less direct cost in the second quarter versus one year ago. However, SG&A increased an unacceptable $5 million year-over-year to $52.4 million as we ramped up our investment in our growth initiatives.

We will be reducing our SG&A spend over next couple of months, primarily in our legacy businesses, while continuing to maintain and support the investment behind our growth initiatives. Consolidated adjusted EBITDA was $6.3 million, a $3 million decrease compared to the year ago quarter and our EPS was $0.06 a share.

Now let me update you on our growth initiatives. net2phone cloud communication solution continues to accelerate growth in both the U.S and South America.

Later this year we plan to deploy net2phone's next generation platform and user management portal with a suite of industry leading communication features, including physical phones, virtual phone, live chat, messaging and collaboration tools. In our international money transfer business we’re doing very well on the direct to consumer side, especially through our BOSS Revolution money app, which is growing rapidly.

Our direct to consumer money transfer business is now contributing a majority of our transactions and gross profit. Similar to our migration years ago from selling primarily telephony hard parts, our BOSS Revolution PIN-less digital platform, the direct to consumer money transfer channel offers important advantages over the retail channel, including greater scalability, increased stickiness and lower operating costs.

We’re investing heavily in building a better and more robust platform as well as adding many in country payers for money transfer services and in adding new feature to further enhance the user experience and further accelerate growth. Money transfer services through our retail side has been a big disappointment, but it's not in our nature to give up, so we’re soon launching a new pricing model and feature program aimed at incentivizing both the retails and customers to remit smaller dollar denomination transfers, which we think will be our niche.

Our National Retail Solutions business continues its aggressive expansion. NRS POS terminals are now deployed in over 10% to our BOSS Revolution retail stores around the U.S and the fruits of this investment are starting to pay off.

We see ourselves as becoming the square for bodegas and other small markets. You can learn more of the products and services that NRS currently offers our retailer at nrsplus.com.

BOSS Revolution mobile, our U.S wireless service offering has now been deployed to retailers nationwide. It’s a pay as you go with a monthly pricing model, sort of like insurance.

It is a better valued than any unlimited plan out there. I encourage everyone listening to this call to give it a try, you can sign up at bossrevolutionmobile.com or even better go to a store anywhere around the country.

We also expect to complete the sale of our Gibraltar based bank soon. The sale is still pending approval by the Gibraltar Financial Services Commission.

IDT is not pursued by Wall Street as a technology company. We’re seen as a legacy telecom company, but the trust is we are a technology company first and foremost.

However many elements of our technology were in disarray. That has hurt us immensely.

It delayed many projects and led to numerous small outages, which both hurt our business in the short term and damaged our reputation of delivering excellent products. So we recently on boarded a new management team in our technology group.

They are driven and dedicated to improving our processes, quality, scalability and most important great product. They have been working diligently over the past couple of months with our product owners and are extremely talented developers to improve and or rebuild legacy system, while at the same time launching those new products.

As a matter of fact during the massive snow storm yesterday they were all at their desks hard at work here in New York. I’ve never sold any of my shareholdings in IDT, well except to give charity and or pay taxes stemming from stock grants I received, and I assure to tell I'm not going to sell any now.

I believe that those shares are going to be worth a lot of money in a not too distant future, because great things are going to come out of our technology group and the rest to the team here at IDT knows how to sell and support our products and features. In light of our intention to continue to invest heavily in our promising growth initiatives and the impact of the spin-off of Rafael on our balance sheet, IDTs Board to Directors has reduced our dividend for the second quarter to $0.09 per share.

I hope you stay along for the ride and I wish Rafael much success in their very noble cause of doing good while doing well and as an independent company. Now, Marcelo and I would be happy to take your calls.

I've two questions, and thank you for doing this call. Number one, regarding BOSS Revolution mobile.

Your first effort is going to try to market the service to your preexisting BOSS Revolution customers. Do you have a good demographic understanding of who these customers are in terms of what portion of them -- English or other languages, are their first languages because obviously they make international calls and the reason I ask is, to what degree will your marketing materials communications be hopefully in the first languages of all these existing users to better be able to encourage them to give your mobile offering a try?

I would say that we have a pretty good idea of who our customers are and what countries they are from. And we definitely intend to market to them in their native tongue and in the places that they watch or look at etcetera.

I think that is our specialty in general and we will definitely continue that with BOSS Revolution mobile.

And the second question, can you give us a little extra insight in terms of how large this new technology team is that you have on-boarded in the past, let's say three months. I mean is it 2 people, 10 people, and if you can just give us a little extra understanding about their backgrounds and capabilities because I understand you are excited about what they might create?

Because as outsiders we've never met them, so I'm hoping through your eyes you can maybe convey to us what is about these people that makes them so talented in your mind, that you're hoping for them to have outstanding achievements in the future?

We've brought in five people in management, we've brought -- not beneficially appointed as CTO but we have a meeting about that scheduled for later this month that we are expect them to be appointed at that time. We've brought in a new CTO name David Wartell, who is from a company called IDERA, which was a start-up that he was a part of growing and sold.

We've brought in somebody named Keith Powe who is the Head of QA, who worked with David at IDERA. We also brought in Head of Engineering for BOSS Revolution as well as Head of Engineering for net2phone, as well as someone who is running our database and BI department.

So it's a pretty robust staff and they have in turn brought in a lot of new people under them and changed the processes of the way we do things. And I think -- again it's not a one day process or a six months process to fix something.

But just today, I mean, I came from a meeting couple of minutes ago where we're having a discussion about rebuilding a billing system and I mean if you can imagine how complicated billing systems are when you do $1.5 billion in multiple businesses. So to-date, I mean I would say the strategy in the past has always been to fix and patch what we have but they are actually looking at whether or not to rebuild it or to use an outsourced service and I think that's the kind of new thinking that they brought to all different problems around here, so again we're, I'll say our optimistic.

Great, thank you. Best of luck.