IDT Corporation (IDT) Earnings

Management highlights

- Company Milestones * IDT celebrated its 25th anniversary as a NYSE-listed company and 30th anniversary as a public company, with 5 public companies spun off to date over its history. The company has grown from $58 million in revenue and a $16 million net loss in 1996 to $315.7 million in quarterly revenue (22x 1996 annual revenue) and positive profitability today, even after 5 spin-offs. * Consolidated quarterly results hit record highs: gross profit grew 9% to $122.5 million, gross margin expanded 170 basis points to 38.8%, income from operations grew 12% to $29.8 million, and adjusted EBITDA grew 13% to $37.5 million. The company holds a debt-free balance sheet and generates consistent growing free cash flow. * Capital Return Strategy * The Board declared a $0.07 per share quarterly cash dividend. The company repurchased ~84,000 shares for $4 million during the quarter, and will continue opportunistic repurchases alongside dividend payments while investing in growth initiatives. - Strategic & Operational Updates * IDT acquired an 80% controlling stake in tuck-in target OnCore Digital, a digital media brokerage. IDT has partnered with OnCore for years, and will integrate OnCore's platform, demand relationships and publisher network with NRS' screen network and first-party transaction data to improve retail advertising monetization. The acquisition was valued at approximately $6 million plus potential earn-outs. * NRS completed its first international terminal deployment in Colombia, the first non-North American market for the segment. NRS is seeing increased competition from larger players like Toast entering its core independent small retail vertical, but management believes NRS' purpose-built solution for this segment offers superior value, and the business is focused on further improving its core vertical offering rather than expanding into new verticals. * net2phone launched Integrate by Netphone, a no-code integration layer that lets customers connect net2phone services with existing CRM, ERP and other common business tools. AI-powered tools are already used internally to handle over 30% of customer service calls and over 50% of customer service chats, delivering accurate real-time customer support, and the new premium AI product Flex is already generating tens of thousands of dollars in monthly external sales. * BOSS Money (FinTech) gained market share after the new federal remittance tax implementation, with digital channel growth accelerating in Q3. The shift from lower-margin retail to higher-margin digital channels, improved pricing, better FX management, and AI-driven process efficiency are driving ongoing margin expansion. May 2026, the first month of Q4 FY26, was the strongest transaction and gross profit month in BOSS Money's history. * Company-wide, IDT is integrating machine learning and AI tools across all segments to improve customer experience, accelerate product development, refine pricing, enhance marketing, and streamline back-office operations, with some AI developments becoming sellable customer offerings.

Guidance

- Management raised full year FY26 consolidated adjusted EBITDA guidance from the prior range of $147 million to $149 million to a new range of $150 million to $152 million. At the midpoint, this guidance represents 15% adjusted EBITDA growth over FY25's $131.7 million result. - The guidance increase reflects stronger-than-expected operating leverage in the three growth segments and continued resilient cash contribution from the Traditional Communications segment, alongside strong early performance in Q4 FY26.

Segment performance

Consolidated total revenue for Q3 FY26 was $315.7 million, a 5% year-over-year increase. There are four operating segments, with three high-margin growth segments and one legacy segment: 1. NRS (National Retail Solutions): Recurring revenue grew 22% year-over-year, average monthly recurring revenue per terminal increased ~10% driven by merchant services and SaaS fees. The active POS terminal network now exceeds 39,000, and payment processing accounts grew 14% year-over-year to over 29,000. The segment posted a Rule of 40 score of 50 for the quarter, reflecting strong growth-profitability balance. 2. FinTech (BOSS Revolution / BOSS Money): Digital transactions grew 20% year-over-year, while digital send volume grew 40% year-over-year. The segment gained market share following the implementation of a new federal remittance tax, with digital channels commanding much higher margins than legacy retail channels, driving overall margin expansion for the segment. 3. net2phone: Subscription revenue grew 12% year-over-year, total revenue grew 11% year-over-year, and total seats served grew 6% year-over-year to 441,000, with faster growth in CCaaS seats that lifted revenue per seat. Gross margin expanded 130 basis points to 80.6%, and income from operations grew 76% year-over-year. The segment recently launched no-code integration tool Integrate by Netphone, and new AI offerings are on track to become accretive in FY27. 4. Traditional Communications: Revenue edged slightly lower year-over-year, but the segment remained a reliable cash generator. SG&A declined $2.6 million year-over-year from ongoing cost structure rightsizing, and adjusted EBITDA was essentially flat at $19.7 million, with a slight year-over-year increase in adjusted EBITDA contribution. In aggregate, the three growth segments contributed $107 million in revenue, equal to 34% of consolidated total revenue (up from 30% year-over-year). They accounted for 67% of total gross profit (up from 61% year-over-year) and 55% of consolidated adjusted EBITDA (up from 29% year-over-year). Combined adjusted EBITDA for the three growth segments grew 27% year-over-year to $20.5 million.

Risks & headwinds

No specific new material risks or operational failures were discussed in detail on the call. Management noted general risks and uncertainties associated with forward-looking statements, which are detailed in IDT's periodic SEC filings. General competitive risks were acknowledged: NRS faces new competition from larger players like Toast expanding into its core vertical, which has impacted new sign-ups; BOSS Money faces strong competition from larger, more global remittance players that require ongoing focus on competitive pricing and service quality to retain and win customers.

Analyst Q&A

• Q: NRS launched its first non-North American terminal in Colombia. Why Colombia, and how should investors think about international NRS growth? /

  A: IDT had existing local partners that suggested testing the market, so management decided to move forward with an initial expansion there. No additional details on long-term expansion plans were provided.

• Q: With current strong IPO market valuations for cloud communications peers, will IDT spin off net2phone now? /

  A: Management noted that a potential spin-off has become more appealing given current market conditions, but declined to give a definitive answer on timing or plans. Management expressed high confidence that net2phone will outperform investor and competitor expectations, especially with its new AI offerings.

• Q: What is the long-term steady-state EBITDA margin outlook for BOSS Money? /

  A: BOSS Money's strong current margin expansion is driven by a shift to higher-margin digital channels, improved pricing and FX management, and AI-driven efficiency gains. Management is focused on growing both transactions and margin, and expects continued margin expansion over time as the business scales, even with ongoing customer acquisition investment. May 2026 was the strongest monthly performance in the business' history, indicating strong ongoing momentum.

• Q: How will the OnCore Digital acquisition improve NRS advertising, given challenges in the digital ad industry? /

  A: IDT has partnered with OnCore for years, and OnCore brings specialized ad industry expertise and existing publisher and demand relationships that IDT did not have in-house. Management expects the acquisition to be accretive and improve NRS' ability to monetize its screen advertising inventory.

• Q: How is IDT approaching share buybacks going forward? /

  A: IDT will continue opportunistic share repurchases, maintaining a roughly consistent ongoing pace. Management will buy more shares if the stock price declines significantly, and buy less if prices rise sharply, aligning repurchase activity with valuation.