IDT CORP Q4 FY2026 earnings call

Strategic Shift to High-Margin Growth:

• IDT is experiencing an accelerating rotation toward its three high-margin growth segments (NRS, FinTech, NetPhone), which now contribute 53% of consolidated adjusted EBITDA (up from 46% in FY25) while generating only one-third of total revenue.
• The company achieved record quarterly and full-year gross profit, gross margin, and adjusted EBITDA, marking the best operational year in IDT's history.

NRS Operational Updates:

• Launched new high-value functionalities for retailers, including integrations with Uber Eats, GrubHub, and DoorDash.
• Advertising and data revenue returned to growth, bolstered by recent acquisitions.
• Introduced new KPIs: Retail Allocations and Average Monthly Gross Profit Allocation, retiring the previous monthly average recurring revenue per terminal metric to better reflect economic performance.
• Focusing on acquiring higher-volume retailers rather than just increasing the quantity of stores.

FinTech (Boss Money) Developments:

• Remittances surpassed the 30 million annual transaction run rate in May.
• Digital channel transactions grew 20% in Q4, contributing 88% of total volume.
• Launched money transfers via WhatsApp and a U.S.-based digital wallet for loading funds and promotions.
• Expanding internationally with features like peer-to-peer remittances, stablecoin-backed wallets, and debit cards.
• Deploying AI-driven process automation to enhance operating leverage and productivity.

NetPhone AI Integration:

• AI solutions (AI agent and coach) are driving nearly every client conversation, leading to new logos and accretive sales.
• On track to surpass the $100 million ARR milestone in the current quarter.
• Internally, over 70% of IDT’s own communications are handled by AI, improving efficiency and reducing costs.

Balance Sheet and Capital Allocation:

• Ended the year with $272 million in unrestricted cash and liquid investments and no debt.
• Continued opportunistic share repurchases, buying back approximately 422,000 shares for $21 million during fiscal 26.
• Rule of 40 score climbed to 60 from 49 in Q25.

NRS (Network Retail Services): Revenue increased 31% year-over-year to $45 million in Q4, driven by a 31% rise in merchant services revenue to $28.5 million and a 49% increase in advertising and data revenue to $10 million. Adjusted EBITDA grew 47% year-over-year with a margin of 31%. For the full fiscal year, NRS contributed significantly to the company's high-margin growth profile.

FinTech: Driven primarily by Boss Money, which accounted for 90% of segment revenue in Q4. FinTech revenue grew 14% to $176 million for the full fiscal year. Adjusted EBITDA increased 41%, supported by a shift to digital channels (88% of transactions) and higher average send amounts. Gross profit margins expanded by 650 basis points to 66% in Q4.

NetPhone: Subscription revenue grew 10% year-over-year to $94.6 million for the full fiscal year (a 7% increase on a constant currency basis). The company ended the year with 447,000 seats, a 6% increase. Income from operations grew 84% to $9.1 million, and adjusted EBITDA grew 33% to $16.1 million, with margins increasing to approximately 17%.

Traditional Communications: Revenue declined 4% to $163 million for the full fiscal year. However, adjusted EBITDA increased 1% to $77 million due to cost reductions (FG&A expense down nearly 6%) and improved margins from the migration of customers to digital channels. This segment remains a reliable contributor to cash generation.

Fiscal 2027 Outlook:

• Gross Profit: Expected to expand by double digits, with a target range of $545 million to $555 million, representing an 11% increase at the midpoint compared to fiscal 26.
• Adjusted EBITDA: Targeting a range of $176 million to $180 million, representing a 15% year-over-year increase at the midpoint, building on the record $155 million achieved in fiscal 26.
• Segment Expectations:
  • NRS: Anticipates revenue growth of 20-25% and EBITDA growth at a higher clip, mirroring the successful trajectory of fiscal 26.
  • FinTech: Expects continued strong EBITDA growth driven by scale efficiencies and better performance from smaller businesses within the segment.
  • NetPhone: Budgeted for a small increase in EBITDA to allow management to redeploy growth capital into AI development and roadmap improvements, though historical trends suggest potential for upside.
  • Traditional Communications: Expects the segment to remain profitable and add to total EBITDA for the third consecutive year, offsetting ILD declines with digital payment growth and cost reductions.

Market and Regulatory Risks:

• New federal taxes on remittances impact cash-originated transfers conducted at retailer agents, accelerating the shift to digital channels but potentially affecting traditional retail agent revenues.
• Decline in international long-distance voice (ILD) paid business market continues to pressure the traditional communications segment's top line.

Operational and Competitive Risks:

• Intense competition in the POS and retail technology space, where customers may switch to new providers, though IDT notes that many customers return after realizing competitors' service levels or costs are inferior.
• Dependence on the continued success and adoption of AI solutions in NetPhone; failure to deliver expected value could hinder growth.
• Execution risk in integrating new acquisitions (e.g., in advertising/data for NRS) and expanding Boss Money internationally.
• Potential volatility in advertising revenue, which has shown some seasonal imbalance despite recent strong performance.

Q: Analyst asked about the main drivers behind the EBITDA guidance across different segments for fiscal 27. / A: CFO Marcelo Fischer explained that each segment is expected to grow EBITDA. NRS will likely replicate FY26 patterns with 20-25% revenue growth and higher EBITDA growth. FinTech benefits from scale, process efficiencies, and better pricing. NetPhone budgets conservative EBITDA growth to reinvest heavily in AI development, though past performance suggests potential upside. Traditional Communications aims to add to total EBITDA through cost reductions and digital migration, offsetting ILD declines.

Q: CEO Shmuel Jonas discussed NetPhone's commercial impact from AI products. / A: Jonas stated that clear evidence of product usage is visible, noting that over 70% of IDT's internal communications are now handled by AI, significantly improving cost and efficiency. He emphasized that customer conversations with NetPhone also lead with AI, driving new logos and sales. The AI tools are integral to connecting business applications with NetPhone’s services, accelerating accretive sales.

Q: Analyst asked about the balance between network growth and monetization in NRS. / A: Jonas clarified that while they aim to grow the network, they are shifting focus from quantity to quality, targeting higher-volume stores that yield better results. This strategic shift sometimes reduces the gross number of ads but improves revenue per location. They plan to hire more salespeople to bring in higher numbers, ensuring that new additions are financially robust rather than just numerous.

Q: Analyst inquired about vertical attractiveness and competitive dynamics in NRS. / A: Jonas noted that high-volume stores are preferred, and certain verticals like tobacco shops are less attractive due to regulatory restrictions on services like delivery. Regarding competition, he stated that most stores already have POS systems; new conversions happen because IDT offers a more robust, lower-cost suite of services. Many customers who leave for competitors eventually return due to dissatisfaction with service or billing, indicating strong value retention.

Q: Analyst asked about the recovery in NRS advertising revenue and market share in remittances. / A: Jonas attributed ad revenue recovery to retailers seeing tangible results from ads and partners recognizing the value of reaching hard-to-access communities, alongside contributions from recent acquisitions. Regarding Boss Money, CFO Fischer highlighted that market share is stable to growing in key corridors like Mexico (increasing from under 2% to nearly 3%), driven by the superior app experience and the broader industry shift from retail to digital channels.