Good evening, and welcome to the IDT Corporation second quarter fiscal year 2022 earnings call. In today's presentation, IDT's management will discuss IDT's financial and operational results for the three-month period ended January 31, 2022. During prepared remarks by IDT's Chief Executive Officer, Shmuel Jonas, all participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After Mr. Jonas' remarks, Marcelo Fischer, IDT's Chief Financial Officer, and Jonah Fink, Chief Executive Officer of IDT's net2phone business, will join Mr. Jonas for Q&A. 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 that they forecast. In their presentation or in the Q&A session, IDT's management may make reference to the non-GAAP measures, including Adjusted EBITDA, non-GAAP net income, and non-GAAP earnings or loss per share. The schedule provided in the IDT earnings release reconciles Adjusted EBITDA, non-GAAP net income, and non-GAAP earnings or loss per share 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. The earnings release has also been filed on a Form 8-K with the SEC.
I will now turn the conference over to Mr. Jonas.
Thank you, operator. Welcome to IDT's earnings conference call. I'm joined on the call by Marcelo Fischer, IDT's Chief Financial Officer, and Jonah Fink, CEO of net2phone, who is preparing to do these calls on his own. The three of us will be available to answer questions after my remarks. My discussions today will focus on the second quarter of our fiscal year 2022, the 3 months ended January 31, 2022. For a more detailed report and discussion on our financial and operational results, please read our earnings release filed earlier today and our Form 10-Q that we expect to file with the Securities and Exchange Commission on Monday, March 14. Our second quarter financial results were highlighted by year-over-year improvements in gross profit, income from operations, and adjusted EBITDA, driven by the continued expansion of our growth businesses.
In our Fintech segment, NRS accelerated the growth of its customer base, activating nearly 1,400 new POS units and 1,200 NRS Pay accounts during the quarter. As of January 31st, NRS serves 16,500 active POS terminals and 8,000 NRS Pay accounts. NRS's recurring revenue increased 118% from the year-ago quarter to $9 million, led by triple-digit gains from advertising and merchant services revenue. For purposes of sequential comparison, keep in mind that our second fiscal quarter includes January, which is invariably the slowest month of the year by far for advertising revenue. We are still in the early stages of NRS development in terms of our addressable markets, new service offerings, and monetization of our current offerings.
At net2phone, subscription revenue increased 32% year-over-year to $12.5 million in the second quarter of 2022. Growth was strong in our Latin American markets, particularly in Mexico, where we continue to find success with larger customers. net2phone's reach into the mid-enterprise market will expand significantly in the coming quarters as we leverage the Integra acquisition that closed just last week. Integra is a fast-growing CCaaS provider with an entrepreneurial team. We are delighted to welcome them to the IDT family. We will incorporate Integra's CCaaS service with net2phone's UCaaS solutions to create a higher value integrated offering that we expect will drive growth and significantly enhance net2phone's unit economics as we become more competitive upmarket.
We expect to pay a total of approximately $15 million in cash and stock for Integra, inclusive of an earn-out of approximately $3.5 million if the business grows as we expect it will in the next few years. In calendar 2021, Integra generated a little over $3 million in revenue and $1.2 million in EBITDA. Integra's CCaaS ARPU is approximately twice that of net2phone's UCaaS offerings. Our goal is to complete the spin-off by the end of the current fiscal year on July 31, should our board authorize it. Also within our Fintech segment, BOSS Revolution money transfer transactions increased 21% year-over-year, while revenue decreased 6% to $12.5 million.
On an apples-to-apples basis, adjusting for the impact of transitory foreign exchange that improved second quarter fiscal 2021 results, transactions in the second quarter of fiscal 2022 would have increased 36%, and revenue would have increased by 48% from the year-ago quarter. We continue to invest in the long-term growth of our payments business with the acquisition of Leaf Global Fintech, a startup with an innovative mobile wallet platform operating in Rwanda, Uganda, and Kenya. Leaf was designed to help traders, refugees, and other vulnerable populations store value and conduct financial transactions safely and securely by leveraging the Stellar blockchain network to track balances and activity. Leaf also uses USSD communications protocol. It's also a viable option for 2.4 billion people worldwide who use feature phones rather than smartphones.
We are excited to work with Leaf and hope that their team adds lots of stuff to IDT over the coming years. Finally, in our traditional communication segment, revenue decreased 3.2% year-over-year to $300.4 million. However, revenue less direct cost of revenue for the segment increased 6%, led by the expansion of our Mobile Top-Up business. While still growing 20% year-over-year, Mobile Top-Up revenue has declined over the past three quarters. The decline is predominantly in our lower margin wholesale B2B channel, where we capitalize on the large opportunity during the third quarter of fiscal 2021 that significantly boosted Mobile Top-Up revenue, but which since has narrowed considerably. We continue to believe that there is large opportunity in Mobile Top-Up, and we expect to return that channel to growth mode soon.
Also, within our traditional communications segment, both BOSS Revolution and IDT Global, which is our wholesale carrier services business, experienced an acceleration in the rate of revenue decline, reverting back to the levels we were experiencing before the COVID pandemic. To wrap up, we continue to allocate capital to accelerate the development of our growth businesses, but through R&D and acquisitions, concurrently, our traditional communications segment continues to generate increasing margins and robust cash flow. Across all our businesses, we remain focused on creating value for our stockholders and expect that the spin-off of net2phone will be exceptional in that regard. Now, Marcelo, Jonah, and I will be happy to take your questions.
We will now begin the Q&A session. To ask a question, you may press Star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star two. At this time, we will pause momentarily to assemble our roster. The first question comes from Brian Warner, Private Investor. Your line is live.
Hi. Thanks for taking my questions. Actually I have three, if I could. First one is on NRS. You’ve done a great job with advertising sales here. Frankly, I’m surprised how well it’s done. I congratulate you, but I’m wondering sort of a couple things. Are you surprised how well it’s done? Can you give a little color on how you’re selling it and if there’s anything changing in your plans there? Are you selling direct to large advertisers now? Just sort of maybe you can give your thoughts around that. A second question relates to your UCaaS business. I’m just wondering if there’s pricing pressure that you’re seeing in that business. Maybe you can contrast that question in both USA and international operations.
If you could give us a sense of where you're trending in terms of maybe average account size, sort of number of lines, stuff like that. Lastly there, if there are any material hurdles to the spin-off in your mind. Finally, on the money transfer business, it's just a little confusing for me to sort of try and reconcile all the various numbers. I realize there was a very unusual transaction a year ago. Can you give us a little sort of the puts and takes on, you know? You point out that the revenue would've been up, I believe it's 48%, and the units would've been up maybe 36%.
I'm wondering if you can sort of reconcile the difference between those two numbers and maybe just give a little color around the calculation.
Okay. I'm gonna try to answer your questions in order as I remember them. As far as the advertising sales for NRS, I don't believe that anything has changed in the way that we sell it, you know, or our expected, you know, growth for that business. So there's no material change. You know, as we said in the earnings release, there is some seasonality to advertising in general.
Sure.
That's why, you know, year-over-year comparison is better than a quarter-over-quarter comparison. However, you know, we are making an attempt to, you know, I would say, increase our direct-to-brand sales force. You know, we hope that will increase the advertising sales over the coming quarters as, you know, more brands hear about us. I'm actually gonna let Jonah take your question on net2phone. We like to welcome Jonathan to our earnings conference call.
Thank you.
Take it away.
Before I respond to the question, firstly, I just wanna thank Shmuel and Marcelo for inviting me on today's earnings call. I'm honored to introduce myself formally to our valued IDT and net2phone communities. I'd also like to take this opportunity of thanking what we've coined internally, net2phone World. net2phone has now successfully launched our UCaaS product line in nine markets around the world, and it's due to the net2phone employees that have really brought us to this point. As we can discuss shortly, a big welcome and virtual hug to our new members in Montevideo, Uruguay at Integra. To answer the two questions, specifically in terms of number one, pricing pressure, we are not. What we've been able to do is really maintain and sustain ARPU levels for net2phone, for net2phone UCaaS.
We look at ARPU very, very carefully as an operational KPI in our dashboards, and like I said, we've been able to maintain and sustain pricing ARPUs around the world. In terms of user size, currently today, average user size for UCaaS net2phone is set to 11, but we do expect because of the CCaaS offering, that CCaaS will not only create a value in and of itself, we also expect a lift rate into our UCaaS business as we have an experience for our customers to get one bill at the end of the month for both UCaaS, telephony and CCaaS. What was your third question before I turn it over to Marcelo to answer your money transfer question?
Yeah, I think your question was regarding the timing of the spin-off, if there are any hurdles around that. The answer is no. Obviously, we wanted to start the process a bit earlier, but because of the Integra acquisition, which is material for net2phone on a standalone basis, we had to wait until that acquisition process reached completion. Now make sure that we get audited financial statements for the standalone Integra business, which will be incorporated into our registration statements. Now that that's behind us, we could now refocus and try to get the spin-off done by the end of the fiscal year.
I see.
Okay. In terms, I think, I believe on your question about money transfer. Indeed, you know, Q2 one year ago, as we had mentioned multiple times before, benefited significantly from special asset opportunities, particularly in Africa. Those opportunities that we have mentioned in the past are behind us. When we look more apples to apples to what would have been, you know, same business a year ago versus now, you know, you would see revenues growing about 48% year-over-year. Like fee revenues growing around 55%-60%. Asset revenues growing around the 45% rate. On a blended basis, that 48% rate that we shared with you.
Obviously our B2C money transfer business is growing at a much faster clip than our retail channel. Our B2C is growing at around the 55% rate year-over-year, whereas retail growing around 35%-40%.
Great. Thanks so much.
Thank you.
Okay. The next question is coming from Jason Lustig with J. Goldman. Jason, your line is live.
Hey, guys. Thanks for taking the questions. Jonah, it's nice to have you on this call. Can I start out by asking you a little bit about the Integra acquisition, the strategic rationale and how it folds into net2phone and your strategy?
Yes, Jason, absolutely. Hope all is well. You know, I'm thrilled to announce the acquisition of Integra by net2phone. You know, just in terms of the what, let's start with the what. net2phone—Integra is not only a complete, modern and robust cloud-based contact center solution. Integra is also a developer platform that will allow for items such as customizations and integrations and AI, more for the modern global contact center workspace. Really, net2phone is getting into the foray, Jason, of selling experiences. The acquisition in general made a ton of sense for us for a variety of reasons. One, most importantly, you know, our UCaaS customers and partners are asking for a cloud-based contact center solution hosted by net2phone. It feels almost on a daily basis.
Our customers love the idea of having a single invoice at the end of the month for all their cloud-based communication needs, UCaaS plus CCaaS, all under net2phone. Just as businesses across the globe have migrated and are migrating their on-premise communication systems to net2phone over the cloud, so too contact centers and enterprise-based call centers will be migrating to net2phone via the cloud as well. On a single bill to our valued customers, net2phone will be serving the complete enterprise needs for UCaaS, telephony and CCaaS. Jason, too, as you know, over the past five years, net2phone has built one of the most efficient UCaaS distribution businesses in the world. net2phone continues to act global and think local, and we've deployed talented teams locally in these markets to now have conversations around a go-to-market for CCaaS.
net2phone has also forged over the past five years significant partnerships with leading master and direct agencies for cloud communication services. net2phone continues to onboard new partnerships in the space with leading master agencies such as Avant, based in Chicago, that has a wonderful and current, might I add, foray into the UCaaS and now CCaaS market segments. The above stated allows for quick and efficient go-to markets. Sales teams are in place, support teams are in place, and the customers and partners are eager to adopt our net2phone technologies.
I'll just add two things to it is, you know, one is that we did, you know, business with Integra before, you know, we entered into a transaction with them. We had some first hand dealing with them as a partner before they became, you know, part of the net2phone team. From everything I heard, you know, directly from you know, the team using them, they were really, you know, great partners before they became, you know, part of the team. The second thing that I think that's important to add is that, you know, they've also, you know, developed everything internally.
Besides this being you know a talented you know sales organization, it's also a very talented development team that we think we can you know leverage to enhance net2phone overall. It's multifaceted in my opinion, but you know not just from being a call center solution, but from also being a you know general technology solution for net2phone.
Okay, great. I guess moving to NRS, you know, and just a few questions about, you know, you guys have given great disclosure about revenue and the various line items over time. Can you talk a little bit about how we should think about gross margin and maybe also the difference between the hardware gross margin and the recurring revenue gross margins?
Yeah. Hi, Jake, it's Marcelo. You hit it in the middle, right? When you think about NRS's recurring revenue, whether it's SaaS fees or advertising and data or merchant services, for all those revenue streams, our margins are approximately close to 100%. When we talk about the margins on the POS, on the POS sales, obviously our goal with them is not to achieve high margins. Our goal there, you know, is just to, you know, distribute the POSs, you know, in strategic ways, with pricing differently depending on different opportunities. Historically, the margins on the POS terminals have ranged anywhere between 10%-20%. Now when you add the two, all the components together, now you probably see a blended rate, you know, of about 80, 85%-90%.
Obviously, that blended rate will continue to move further towards 100% as the recurring revenue become a larger portion of the business.
Yeah. However, we intend to sell a lot more POSs, so that might pull it down a little bit.
Can you talk about, I mean, it seems like you know, the net add for POS seems to have taken a large tick up in the quarter, which is very nice to see. Can you talk about some of the changes that have gone on in the business that have allowed for, you know, that step up?
I think there's two things. I mean, one is it's an increase in sales, and that has definitely helped. The other thing is in terms of you know, making sure that you know, that we don't have any churn. You know, there's nothing we can do about you know, a store going out of business. But you know, we really you know, have put an emphasis on you know, the service that we provide you know, the stores. That's really you know, been helping keeping you know, churn to as low of a level as it has, and we continue to you know, make improvements.
You know, when a business is in rapid growth mode, it's sometimes hard to, you know, I'll say solve every piece of the puzzle. I really give the NRS team credit 'cause they've really put, you know, a big emphasis on making sure that the service levels are, you know, where they need to be considering the growth.
Great. I guess just lastly, what was the adjusted EBITDA for NRS in the quarter?
For NRS, they did around a little more than $2 million in EBITDA for the quarter, so it's showing pretty nice growth compared to about $1.25 million in Q1. The trajectory is good. Obviously, that EBITDA may vary up and down depending on, you know, whether we accelerate investment or not. All else being equal, we should see that EBITDA trend continue to move upwards.
Great. Thank you very much for the questions.
Thank you.
Thank you.
The next question is coming from David Polansky from Immersion Investments. Your line's live.
Hey, guys. Thanks for taking my questions. I really appreciate, and I think everybody else does appreciate you putting a hard date around the net2phone spin. I actually wanna talk about traditional a little bit, and I think you almost answered my question in the commentary. Do you anticipate being able to grow traditional EBITDA on a go-forward basis?
I mean, I would say that, you know, different parts of the, you know, of traditional are growing and different parts of it are contracting. You know, carrier is not in growth mode. You know, we definitely intend to be able to squeeze out more profit from Pinless than we have been. You know, IFU continues to grow. I would say that, you know, net-net, we do intend to be able to continue to grow EBITDA. You know, whether or not we can do that for years and years to come, I can't tell you at this point. Maybe I'll let Marcelo operate and jump in.
Yeah. I mean, David, as you know, traditional consists of three distinct primary business, right? The reality is, when you think about the wholesale carrier business, that business revenues and, you know, operational margins have been challenged, right, for quite a while. Even though in the pandemic, you know, the wholesale business suffered quite a bit, we have been maximizing that business in terms of generating maximum gross profit. Similarly, on the BOSS Revolution Pinless business, we got a fairly nice lift, and a reversal of the trends during the pandemic. Now the trends towards revenues starting to decline again have come back again. That being said, gross profits for Pinless have not been impacted significantly at all, and that's both because of cost of termination have improved-
As well as our mix of our revenues, shifting more business towards our B2C channel, which is higher margin, helps mitigate the revenue decline. At the same time, you know, Mobile Top-Up continues to grow quite nicely at 20% year-over-year. We see nice growth in, specifically in the B2C channel, we've seen Mobile Top-Up. I hope there's quite a bit pressure on revenue. I think there will be tremendous focus on trying to maintain the gross profit around the current levels. As we continue to be the wave of focus on reducing the cost structure, both at G&A and CapEx, you know, we may be seeing, I wouldn't say necessarily improvement in EBITDA. Perhaps we will get so once Mobile Top-Ups are going a little faster.
Certainly we hope to maintain the current EBITDA levels until Mobile Top-Up, you know, starts showing more in the bottom line.
Okay. Basically, if I flatline EBITDA for the remainder of the year, I have traditionally EBITDA at about a $100 million business. I have Fintech, which is roughly breakeven. I have net2phone at negative $15 million in EBITDA, which is gonna be gone in several months. Pro forma, I'm looking at a business that today, including net2phone, is $700 million in enterprise value. I have a $100 million in EBITDA 'cause I'm getting rid of net2phone. Then I have NRS, which as you just disclosed in the previous question, is actually EBITDA positive and growing 100% year-over-year and quickly on its way towards 75, 100 million in ARR. I mean, you can kind of put whatever valuation multiple you want on NRS and basically the pro forma value for all of IDT post-spin is like three or four times.
I guess, like, how low does the stock have to go before there's like some action? Like, you do a buyback, you accelerate the NRS spin, and you pull it forward a little bit and say, "You know, the stock's too low, it's too cheap. We're, you know, we need to realize some value here." Because, you know, the stock fell like 10% the other day on the Integra acquisition on some ridiculous belief that, you know, you wouldn't be able to affect the spin because, oh, well, they're doing an acquisition, so they're not gonna do the spin. You clearly just told everyone that you're doing the spin. I guess, where I'm going with my question, it's like the market doesn't care, right? I mean, the market clearly doesn't care.
They're not willing to give you credit for anything. At what point do we just say, "Screw it, let's just gobble up all of our shares," or accelerate and pull forward the NRS spin? I guess that's where I'm coming from. I appreciate an answer on that.
Yeah. I mean, I don't think that we have you know a definitive answer on that. I mean, again, you know, as you know, we have you know purchased back shares before, we've paid dividends before. You know, all options are you know always on the table. You know, at this moment in time, you know, we are you know laser focused on you know completing the previously announced net2phone spin, and making sure that you know that investment you know continues to you know to do you know really well even when it's no longer under you know IDT anymore. You know, we're also laser focused on making sure that NRS continues to you know grow even you know more than it has previously.
You know, that also takes additional investment in both time and resources. You know, if our stock continues to perform as poorly as it's done over the past couple of months, you know, it's definitely not out of the question that at some point you know, we would start to either buy back shares or some other idea. Again, I don't wanna say that we're gonna do it, you know, because we haven't discussed it with our board and we do not have a plan in place at this particular moment.
Yeah. That's okay. I guess where I'm coming from is just, you know, clearly the execution is there. You're doing well, you're performing. More importantly, you're doing what you say you're gonna do, which is effect the spin of net2phone, and you're doing it. So that-
Yeah.
That's why I ask about.
We think we're also putting net2phone on a really, you know, great footing with this acquisition. I mean, again, entering, you know, a space that, you know, arguably is, you know, significantly sexier, you know, than UCaaS is at the moment. You know, I think it is a major, you know, net benefit to our shareholders that, you know, unfortunately they didn't see in the release.
I mean, again, I was gonna, you know, say that actually, you know, before I forgot, when Jason asked this question, you know, about Integra, you know, we looked at their business model. I would say like, you know, without net2phone, and it was an amazing business model even before, you know, even before net2phone got involved. I would say that, you know, over the course of the next five years, you know, it is gonna look like a home run, you know, irrespective of how well it gets integrated into net2phone. I think it's actually a very, very exciting piece of news that was unfortunately, you know, not loved by the markets, but, you know, markets are weird.
I don't know what else to tell you. I mean, listen. Frankly speaking, you know, we're also going through, you know, I mean, a crazy time in the world right now that, I mean, I think is putting a lot of pressure on a lot of companies, you know, we're very lucky that we don't have, you know, those kind of financial pressures affecting our decisions. You know, that we can, you know, stay the course and make sure that we do, you know, what we told our investors we were gonna do. You know, we think that, you know, we'll be handsomely rewarded for that.
David, totally agree with your calculation that you provided before. Just bear in mind that we do also have about $10 million of corporate costs, okay? Which is a negative to the EBITDA number that you came up.
Yes, of course. Still, I can split this a million different ways.
Okay.
This is an incredibly cheap stock that the company, the management team that's executing, and there are catalysts, and there are a lot of valuable assets in here. I can spin it a million different ways for you. It's still cheap, but I appreciate the clarification. I do wanna ask a follow-up on Integra. Shmuel, did you say the revenue was $3 million or $30 million? Was that 3 or 30?
$3 million. I reach 30-
$3 million.
It will be one day.
Yeah.
Right now it's three.
Okay. It's doing $1.2 in positive EBITDA, right?
That's correct.
Yeah.
You bought it for $15 million. I think.
Yeah. Not all of that is paid up front. I mean, that includes, you know, a large earn out.
That's great. Well, I love seeing it, you know, keep doing what you do, and talk to you next quarter.
Thank you.
Thank you.
Okay. The next question is coming from Sean Berger with Adirondack Retirement. Your line is live.
Hi, Marcel and Shmuel. Congratulations on a good NRS quarter. Question about two things. One is I'm wondering if there's any material impact from Eastern Europe as far as disruption of any tech support or employees or anything like that. The other question is if there's been any change in the reserves for any possible legal settlements with regard to the Straight Path litigation. That's it.
I mean, you know, the answer is, you know, unfortunately, like we always joke that whatever happens in the world somehow affects IDT. You know, listen, we have a very large office in Belarus, and we have, you know, some really amazingly, you know, talented employees, you know, who work for us there. You know, I can tell you know, from speaking to many of them, you know, directly, you know, how they feel about Ukraine and how their, you know, government feels about, you know, Ukraine are completely different.
However, that being said, you know, it does, you know, create a very, you know, unstable environment for them to live in and we are relocating many of them outside of the country. However, many of them, you know, do not wanna be relocated. You know, it has not affected any of our, you know, deliverables or our ability to pay people. You know, it's definitely, you know, a moving target, I'll say, like that. You know, depending on, you know, what happens with sanctions, it could eventually affect us. You know, at this moment in time, it doesn't. I'm gonna let Marcelo answer your second question.
Yeah. Hi. No, we have not had any changes in terms of any type of provisions or anything like that as it relates to any of our litigation.
Yeah, I will say that, you know, we also have, you know, a number of employees in, you know, in Ukraine, and, you know, we really feel for what's going on there. You know, obviously on a personal level, you know, these are our colleagues, but, you know, also from, you know, just watching the news, it's just terrible. You know, our prayers are with them.
Amen.
Okay. Sean, do you have a follow-up question?
No, that was it. Thank you. My prayers go out to the people as well, and I'm just wondering if there was any known business impact at this time. That was it. Thank you.
Okay. The next question is coming from Adam Wilk with Greystone Capital. Your line is live.
Hey, guys. Thank you very much for taking my questions. My condolences to your employees who are having to deal with this situation. Hopefully, everything is okay. I guess one of the pitfalls of going last or toward the end of the line here is that most of my questions have been asked, some really good ones about net2phone and the acquisition and buybacks, et cetera. I guess I just have a couple, hopefully quick ones. I may have missed this, so I'm sorry if it's repetitive, but I'd like to dig in a little bit more to Mobile Top-Up, obviously still showing impressive growth numbers. I'm wondering where you see things shaking out in a few years between wholesale versus the direct opportunity and the revenue split there?
Because my sort of aim or my direction in asking that is, I think the economics could improve materially for both mobile top-up and traditional as a whole if you kind of push toward that direct channel. Please correct me if I'm wrong. Thank you.
I'm gonna let Marcelo also talk to it a little bit, but I mean, I will say that, you know, listen, direct definitely has higher, you know, gross profit, you know, than wholesale. That being said, you know, there's, you know, cost of acquisition, and, you know, and that is, you know, usually in the, I'll call it in the early years or, months, depending on, you know, how lucky we are in terms of cost of acquisition, you know, that can affect, you know, the ability to acquire, you know, customers at the rate that we would want for direct-to-consumer. However, you know, really where we've seen pressure of late is really in the wholesale business, not in the direct-to-consumer business.
I think that's, you know, a large part of that is based on some of the competitors that we've talked about, you know, recently getting large investments and them, you know, spending that money to try to, you know, make sure that we don't you know steal all their business. You know, that definitely has affected you know the wholesale business in the short term. However, that being said, we have some very exciting product launches that we think are gonna really differentiate our wholesale business over the next couple of months, and we think that we are gonna you know gain back a lot of that business. Marcelo, you have anything to add or?
No, I just think that, you know, our strategy for mobile top-up, you know, under the leadership of Emilio, is to continue to focus and grow both the B2B channel as well as the direct-to-consumer channel. They're not independent of each other. I think that we have made large strides in improving our B2B wholesale platform. Our acquisition of Sochitel most recently has helped us towards that. We have a very robust platform for B2B, and we're gonna be leveraging on that platform to position our products for better and faster growth in that space and to take more of a leadership position in that area.
At the same time, you know, Emilio continues to be very focused on trying to grow the catalog of products, trying to continue to leverage our offerings in our apps, as well as trying to, you know, penetrate further, you know, especially into the African continent.
Great. Thank you. That's helpful. You, Jonah answered some questions about contact center services, the demand drivers there and somewhat the opportunity set. I'm, I guess I'm wondering kind of as a follow-on to that. I heard when the question was asked about $3 million or $30 million in revenues. I think I heard Jonah chime in in the background when you said it would be at 30 someday. Maybe you can talk a little bit about, I guess, just the contact center opportunity as a whole. It's not a, you know, not a fad that everybody's piling into, and there's real demand there. Maybe it looks like, I guess, you paid around 4x revenue, excluding the earn-out for Integra. How did you kinda derive that multiple?
Is that kind of like correlated to market conditions or any detail there would be helpful? Maybe when we can see an impact to the P&L for net2phone. Thank you.
Right. I mean, just in terms of the opportunity, again, you know, the same way that net2phone UCaaS has successfully migrated professional businesses over to the cloud, we see that opportunity now as the right time in the world that we live in for cloud-based contact centers to move from on-premise to the cloud as well. As I mentioned before, we have sales teams and partnerships in place to cater towards that. The benefit down to the contact center is not only just the cost savings, but being able to modify and configure and edit any type of settings for the contact center in the cloud instantaneously is a major value add for these call centers to move over.
Might I add, it's not just contact centers, but if you think of, you know, larger enterprises, and this is why we're very hopeful that our average user per account will increase with CCaaS. These are large enterprises with call center functionality residing within the enterprise for call queues, support, billing, sales. That can also layer in very nicely to our UCaaS customers in terms of our partners as well. In terms of the acquisition and the price and the valuation, right now, I can say that on our side, in our teams, we're laser-focused on the plan, where I'm laser-focused on the go-to-market. We're laser-focused on defining the offer and introducing this into the channel.
At this point, I will reserve, you know, discussions around the economics in terms of right now the go-to-market, the channel adoption, the business integration between the two firms, us getting out there into Uruguay, a very energetic and passionate team awaits us, and we're gonna focus mainly on the go-to-market.
Yeah. No, in terms of the valuation, again, I don't think.
You know, I don't think that we paid the, you know, the lowest price ever for a call center company. I think the fact that they have such a A such a good, you know, software, and B, that they were already, you know, EBITDA positive was really two driving forces that made us, you know, pay what we paid. As you know, we don't, you know, write checks easily, and we really thought that this was a great opportunity for net2phone, and that's why we went ahead with it.
I think from, you know, from the perspective of Integra, you know, they see the combination with UCaaS in net2phone as a great way for them to expand, you know, their product portfolio, to have a partner in net2phone to allow them to grow in a way that they on a standalone basis cannot do so right now. They see it as a great opportunity to partner with us. They are taking a portion of the purchase price in equity, as they wanna be able to ride on the opportunity together with us.
Yeah, that's helpful, thanks. I certainly wasn't implying that the price paid was too high, just curious behind the drivers there, so I appreciate that. I guess a quick follow on to your commentary is, can we maybe expect moving forward a little bit of that sort of buy and build or buy and integrate, excuse me, as part of the strategy with net2phone, either you know, I guess post spin, or is it, or is this kind of like a one-off for you guys?
Listen, I think we're always browsing new technologies. I think the Integra acquisition is a great use case where net2phone wants to go to market with new modern technologies in the cloud communication space. Nothing prevents us from browsing. I think the fact that I noted before in my remarks that we've built this really efficient global UCaaS distribution team, and now we're layering in CCaaS. I think there's other experiences that we could focus and concentrate on. But again, our number one focus right now is to continue growing our UCaaS business and our CCaaS business. I actually think that CCaaS being the top of the sphere of new conversations that we have with enterprise will actually provide a lift rate for our UCaaS business as well.
Right. Our history in net2phone has been with a combination of those, right? We have made acquisitions in Canada, we have made acquisitions in Spain in growing the business. Our technology roadmap internally is now it's pretty full right now. We always have to measure whether we are able to continue to build versus buying. We have to get into a mix that makes sense. Buying into CCaaS instead of building it made a lot of sense, both in terms of the valuation.
Speed to market.
As well as the fact that our technology roadmap is pretty full right now, as it is evident.
Great. That's really helpful. Thanks. Last one from me, maybe from Marcelo or whomever. I'm gonna push on this a little bit more. Nothing, no changes with the Straight Path litigation. I'm just kinda curious where you guys stand on wanting, maybe wanting to get this thing resolved and put behind you. Obviously it would benefit, I guess, both parties, you know, to come to some sort of settlement. Is there an element of, like, stubbornness on any one of the sides, or where do you guys kinda stand on that in terms of, you know, trying to get a result?
The trial is scheduled for May of this year. If that timing holds, you can expect a decision later in the year. We are vigorously defending ourselves, and we are optimistic about achieving a stable resolution. You're welcome to read our disclosures on all of our pending legal matters in our 10-Q. Beyond that, as a matter of policy, we really cannot comment on pending legal matters or any strategy around it.
Okay. Yeah, fair enough. Thank you very much. Great job, and I appreciate it.
Thank you.
Up next, we have Daniel Koch from Alta Fox Capital. Daniel?
Hey, guys. Thanks for taking the question. Just quickly on Integra, can you share a little more color on the growth profile of that business? Is it long-term accretive to the growth profile of net2phone? Is all of that revenue outside of the U.S. today?
Yeah. The three million dollars and change is pretty much all outside of the U.S. They do have a few U.S. customers, though, but you know, pretty much in Central and South America is where the three million dollars sits today. They're already accretive. To your question, I think we made reference to the $1.2 million EBITDA. You know, there's really two prongs to the acquisition approach. One is Integra being able to continue to grow. They put together some interesting projection discussions there. Now you know, Integra serving the markets, the service provider aspect to it, of being able to go and serve the markets that we're in today as well.
Got it. Sorry if I wasn't clear. The growth profile of Integra, is that a, you know, 30%+ top-line grower? How should we think about the growth profile of the business?
Yes. I think north of that, but yes.
Oh, great. One last quick one. Historically at net2phone, have you all lost out on converting leads and deals because you did not have the offering that Integra brings to you?
Yeah. As I mentioned in my earlier remarks, you know, first and foremost, we're taking the temperature of our customers and partners, and we're getting active requests, you know, for net2phone to add CCaaS to our product portfolio. Absolutely, from a win-loss perspective, you know, we have the dashboards, we understand where we missed out on a few accounts, and we certainly will start, you know, reaching back. Absolutely, that's a driving force for, you know, why we're adding this product to our portfolio.
Great. Sounds like a really nice transaction. Thanks for taking the questions, and good luck in the quarter.
Thank you.
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