Shmuel Jonas - CEO

John Rolfe - Argand Capital

Thank you, Operator. Welcome to IDT’s third quarter fiscal 2017 earnings call.

My remarks today will focus on key operational and financial results for the three months ended April 30, 2017. Unless I indicate otherwise, results are for the third quarter of fiscal 2017, and are compared to the year ago quarter.

For a comprehensive and detailed discussion of our results, please read our earnings release issued earlier today and our Form 10-Q, which we expect to file with the SEC on or about this Friday, June 9th. Following my remarks, Marcelo Fischer will join me and we will be glad to take your questions.

First, here is the high level update on several of our key early stage growth initiatives. National Retail Solutions continues to expand rapidly and is also developing new ways to leverage our point-of-sale units to create additional value for our retailers, consumer package good suppliers and our BR Club members.

As part of this effort, NRS plans to release two new apps later this year, one for retailers and another that will allow consumers to order products from their participating retailers. net2phone continues to grow and is cloud-based PBX service offering both domestically and overseas.

In the U.S. we’re on track to more than double our seat count in the first six months of this calendar year.

Outside the U.S. we’ve achieved early success in our effort to leverage our global infrastructure and international sales force to support cloud-based PBX offerings.

We successfully launched the service in Brazil in January and in Argentina in May. Boss Revolution money transfer just completed its best quarter ever.

We expect to drive growth in our international money transfer offering by gradually expanding our U.S. retail presence beyond our original focus on 10 states, especially now that we’re fully licensed throughout the country, but the fastest increases in Boss Revolution money transfer transaction volumes are coming from B2C or more specifically the Boss Revolution Money app, which is now fully integrated with the Boss Revolution call app.

Transactions have been doubling every three to four months and they already represent more than 25% of all money transfers. We’re focusing resources to ensure that these trends continue.

Turning now to our financial results for the third quarter. Revenue was $370 million or $14.9 million increase compared to the year ago period.

Within our Telecom Platform Services segment, revenues generated by our global wholesale carrier services business increased by $26 million to $152.1 million as we were able to increase traffic significantly to certain destinations. Revenue generated from the businesses payment service vertical increased by $5.1 million to $60.1 million.

Sales of IMTU increased by 8% compared to the year ago quarter, while our significantly smaller money transfer and retail solutions businesses generated revenue increases of over 50% and 400% respectively. Our UCaaS segment which consists of operations at our net2phone division grew year-over-year revenue during Q3 by $1.2 million to $7.4 million, an increase of 19.6%.

The revenue increases generated by wholesale carrier services, payment services and UCaaS more than offset a decline in retail communications revenue, which decreased by $14.5 million to $148.6 million. Sales of Boss Revolution’s PIN-less calling service, which accounts for approximately 90% of retail communication revenues, decreased 6.4% compared to the year ago quarter.

On consolidated basis, direct cost as a percentage of revenue increased 240 basis points to 85%. The increase was due mostly to continued competitive margin pressure facing our international long distance voice offerings.

However, we have seen improvement on this since the quarter ended. Consolidated SG&A expense was $46.2 million, a decrease of $5.4 million as we continue to achieve cost synergies and efficiencies even as we continue to heavily invest in growth initiatives.

During the third quarter, we recorded a charge f $10.1 million from our resolution of potential liabilities and claims under agreement related to our 2013 spin off of Straight Path Communications. That charge contributed to consolidated loss from operations of $6.5 million compared to income from operations of $5.7 million in the year ago period.

Income from operations in the year ago period also included $1.1 million gain relating to the sale of Fabrix. In the third quarter IDT generated adjusted EBITDA of $9.1 million compared to $10.3 million.

Our GAAP loss per share for the third quarter including impact of Straight Path settlement was $0.21 compared to EPS of $0.19 in the year ago quarter. Non-GAAP EPS, which is reconciled to GAAP EPS in our earnings release was $0.28 compared to $0.38.

Our balance sheet remains liquid with a $132.3 million in unrestricted cash, cash equivalents and marketable securities as of April 30th. From a corporate prospective, we continue to streamline our operations and tighten our strategic focus.

As part of this effort, we expect to spin off our previously announced interest in Rafael Pharmaceuticals which used to be called Cornerstone, along with our real estate assets and some of our other small holdings to our stockholders, later this calendar year. Now, Marcelo and I’ll be happy to take your questions.

Operator, back to you for the Q&A.

Hey, guys. I am sorry.

I just wanted to clarify. So, you said that you thought you would be in a position to actually effectuate the spin later in this calendar year, is that correct?

Yes, that’s correct.

Okay, great. And do you have any sense at this point -- have you thought much about what would be going with the spin in terms of capitalization?

I don’t have a definitive answer on that. But I would say that in the range of $60 million to $70 million.

Okay, great. Thanks very much.

I appreciate it.