IDT Corporation

Good evening. Welcome to the IDP Corporation's third quarter fiscal year 2026 earnings conference call. All participants are now in a listen-only mode. The question and answer session will follow management's remarks. Anyone requiring operator assistance during the conference call should press star zero on your telephone keypad. Please note this conference call is being recorded. I will now turn the call over to Bill Lowry of IDP Investor Relations. Bill, you may begin.

Thank you, John. In today's presentation, IDP's Chief Executive Officer, Shmuel Jonas, and Chief Financial Officer, Marcello Fisher, will discuss IDP's financial and operational results for the three months ended April 30th, 2026. After their remarks, they will take your questions. Any forward-looking statements made during this conference call, either in their remarks or during the Q&A that follows, 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, IDP's management may make reference to non-GAAP measures, including adjusted EBITDA, adjusted EBITDA margin, non-GAAP earnings per share, NRS's Rule of 40 score, and adjusted net cash provided by operating activities. Schedules provided in the IDP earnings release reconcile these non-GAAP measures 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 8K with the SEC. And now I'll turn the call over to Shmuel for his comments on the quarter's results.

Thank you, Bill. And thanks to everyone on the call for joining us this evening. Last Friday, my father rang the opening bell at the NYFC to celebrate IDT's 25th anniversary as a NYFC-listed company and our 30th anniversary as a public company. Over 100 employees on their own dime from all over the world made the trip into Manhattan to be part of the event. After the event, I agreed to reimburse them, but I wanted only people to come who genuinely wanted to be there. I'll be honest, I wasn't sure what to expect going in, and as you can tell from my notoriously short speeches, I don't really like long-winded events. But the moment we approached the exchange and my father saw the IDT sign and smiled at me, something shifted for me. The NYIC team had done something really special. They pulled together photos and documents from our past listing anniversaries, creating a timeline of the people to document the, I don't know, history of IDT. And it was a very proud moment. What struck me most throughout the morning was the pride of being part of an organization that has stayed relevant and innovative throughout those 30 years, including the Center for Five Public Companies, and it has consistently delivered for employees and shareholders alike, although not always in a straight line. IDQ's year-over-year revenue and earnings growth is again powered by the continued expansion and operating leverage of our three higher-margin businesses, paired with another quarter of steady cash generation from our traditional communications segment. Consolidated revenue grew 5% to $315.7 million, gross profit grew 9% to $122.5 million, its gross margin expanding at 170 points, to 38.8%. A record quarterly high. Income from operations grew 12% to $29.8 million, and adjusted EBITDA as of 13% to $37.5 million. Based on year-to-date performance and core visibility, we are raising our full-year FY26 adjusted EBITDA guidance to $150 to $152 million, representing a 50% growth at the midpoint over fiscal year 2025. NRS recurring revenue grew 22% year-over-year, and monthly average recurring revenue per terminal increased approximately 10%, driven by merchant services and SAS fees. We expect both categories to continue driving growth in the coming quarters. The terminal network now stands at over 39,000 active POS terminals, and payment processing accounts are also above 29,000, up 14% year-over-year. NRS's rule of 40 score was 50 in the quarter, reflecting a healthy balance between growth and profitability. After the quarter closed, we acquired a controlling stake in Encore Digital, a digital media brokerage. Encore's platform, demand relationships, and publisher network will be integrated with NRF's screen network and first-party transaction data to create a more competitive retail offering. Our digital channel revenue growth rate accelerated in the third quarter compared to the second quarter. Digital transactions grew 20% year-over-year, and digital spend volume, the actual dollars our customers are moving, grew 40%. We gained market share following the implementation of the new federal remittance task as customers got reliable, cost-effective alternatives. NetFoam continued its growth trajectory with subscription revenue up 12% and total revenue up 11%. Seats served reached 441,000, up 6% year-over-year, with CCAT seats growing faster than UCAT, driving revenue per seat higher. Gross margins extended 130 basis points to 80.6%. Most significantly, income from operations is up 76%. We are gaining traction with our AI offerings and expect them to become accretive growth drivers in fiscal year 2027. All NetPhone offerings will also benefit from the recent release of Integrate by NetPhone, an integration layer that enables our clients to easily, through a straightforward no-code interface, use our offerings with the tools they already work with every day, such as popular CRMs and ERPs and much more. Our traditional communication segment continued its role as a reliable cash generator. SGMA declined $2.6 million year-over-year as we continued to right-side the cost structure. And adjusted EBITDA was essentially flat at $19.7 billion. IDT's global revenue grew 11%, partially offsetting the expected decline in bus revolution calling. Across all our business segments, we are integrating machine learning and AI tools to better understand the new expectations for our customers. develop and provide new features faster, better, and cheaper. Additionally, we are enhancing customer service, refining pricing strategies, accelerating product launches, creating marketing campaigns, streamlining back-office operations, to name just a few. We expect that our AI efforts in some cases will serve as the basis for AI offerings that we can sell to our customers. 30 years ago, IDT was a scrappy, long-distance phone company. Today, we operate a POS network serving nearly 40,000 independent retailers, a growing digital remittance business, gaining market share in real time, and a cloud communications platform with AI capabilities, and a traditional communications segment that continues to generate meaningful cash. Thank you all for your continued confidence in IDT. Marcelo will now walk through the financial details.

Thank you, Sheryl. My remarks on our third quarter fiscal 26 results will focus on year-over-year comparisons in order to set aside the seasonal impacts on our business. As a reminder, our fiscal third quarter, February through April, have just 89 days, roughly 3% fewer days than our other fiscal quarters. With that as context, we were very pleased with our consolidated performance. The third quarter extended the trajectory that we have been on for several years. The underlying growth dynamic at IDP remains in force. Our consolidated results increasingly reflect the growing contribution of our three higher-margin growth segments, NRS, Pintec, and Metaphone. Even at our large traditional communications segment, becomes relatively less impactful. Debt rotation, again, produced record consolidated gross profit and a record consolidated gross profit margin in the quarter. Gross profit increased 9% to 122.5 million, and our gross profit margin expanded 170 basis points to 38.8%. Let me put debt rotation in number terms. Our three growth segments contributed $107 million of revenue in the quarter, about 34% of our consolidated total up from 30% a year ago. Because the combined gross margin is far higher than that of traditional communications, that shift continues to generate substantial operating leverage as the revenue scales. In the third quarter, our growth businesses' gross profit contribution increased to 67% from 51% a year earlier. The combined adjusted EBITDA from NRS, FinTech, and Netophone grew 27% year-over-year to 20.5 million. In aggregate, our three growth segments generated 55% of IDTs consolidated adjusted EBITDA in the third quarter, up from 49% in the year-ago quarter. Because this segment still accounts for only about one-third of our revenue, that rotation has a long way left to run. I also want to call your attention to the consistent profitability of traditional communications. which slightly increased its adjusted EBITDA contribution year-over-year this quarter, even as its revenue edged slightly lower. This segment will remain a reliable contributor to our cash generation for many years to come. On the balance sheet, we ended the quarter with $251 million in cash, cash equivalent, and current debt and equity securities exclusive of restricted cash. Last week, our board declared a quarterly cash dividend of seven cents per share. We also continue to repurchase our shares opportunistically during the quarter, repurchasing approximately 84,000 shares for $4 million. Our growing free cash flow and debt-free balance sheet let us keep investing in our growth initiatives while returning cash to stockholders, and we expect to continue doing both. In terms of our outlook, given our results through the first nine months of the year and our visibility into the fourth quarter, we are again raising our full year 326 guidance for consolidated adjusted EBITDA. From the 147 to 149 million range we provided last quarter to a new range of 150 to 152 million. At the midpoint, This 3 million increase represents 15% growth over our fiscal 2025 adjusted EBITDA of 131.7 million. This latest guidance raise reflects both the increase in operating leverage we are seeing in our growth segments and the resilience of traditional communications contributions. To sum up, This was another quarter of discipline, profitable growth, and we are carrying real momentum into the close of our fiscal year. Just to finish up on a nostalgic note, as Shmuel mentioned, this year is our 30th year as a public company. So naturally, I had to take a look at IDT's first annual 10K report from 30 years ago, 1996. That year, IDTA reported revenue of 58 million and a net loss of 16 billion. Today, even after spinning off size public companies, we are generating 22 times the revenue and over $100 million more in net earnings. I am especially pleased by our performance over the past few years. In fiscal 2021, just five years ago, IDP reported $75 million in adjusted EBITDA. In fiscal 26, we are now on track to more than double that amount. So indeed, there was much to celebrate at the New York Stock Exchange last Friday. We are proud of all that we have accomplished and excited by the opportunities ahead. Now, Shmuel and I will do our best to answer your questions. Operator, that's you from Q&A.

Thank you. The question and answer session will now begin. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please. while we assemble the roster. Our first question is from Inigo Alonso with Spilak Capital. Please go ahead with your question.

Hello. First, congratulations on the 25 years and thank you for sharing the touching words. I'm happy you spent some money flying people over to the New York Stock Exchange knowing how tightly you manage money. So I'm glad you're celebrating how it is worth it. So the first, that was not the only milestone this quarter and I have a question on another milestone which was NRS having the first terminal in a non-North American country. So this year, this quarter, sorry, Colombia was the first country where you had an NRS terminal. I'm wondering why you selected that country and is it better testing? How should we think about the growth of NRS in that country? The real answer is We could have selected, you know, a bunch of different countries to, you know, to have an extension and we have, you know, some partners there that, you know, suggested that we try it there and we decided, you know, why not. Okay. I would like to ask you another question on Encore and the acquisition. We know that advertisement has been a challenging industry in the last few years with so many streaming services offering screen time, and you have suffered those consequences. Now, with this acquisition, how should we think about advertisement in NRS? What can we expect of it? I mean, listen, you know, we definitely think that they are going to be, you know, a help to our advertising group. I mean, they have, you know, a lot of expertise internally that we as a company didn't have. They have a lot of relationships that we as a company didn't have. And, you know, they're very, you know, good guys to work with. And we've worked with them as partners for a number of years already. So this is, you know, sort of a long-term relationship already. And, you know, we expect it, you know, to be an accretive acquisition. Okay. In terms of Net2Phone, a couple of years ago you went through the process of getting those papers ready to do the spin-off. That was canceled. Now we are in an environment where IPOs are the topic of the hour again and valuations are stretched. I'm looking at one of your peers in the segment that is growing organically less than you has literally the same amount of revenue. They're trading at three times sales plus. Is this enough of evaluation for you to spin off Netzufone or in view of the excitement that you have around the new AI offerings, you would like to keep it close to your chest for a longer time? It's a good question. I'm not prepared to really give an answer on today's call. I mean, I would definitely say that, you know, it's becoming, you know, more, you know, appealing to possibly do something. That being said, you know, I'm very, very, you know, confident that next one is going to do much better than... our investors think it's going to do it much better than some of the competitors that you mentioned without mentioning um so yeah okay and one last question on boss money the performance this quarter has been impressive you are acquiring customers like I mean, like I haven't seen in a long time, and I'm wondering, you expanded margin despite these customer acquisition costs. If we think about bonds money in a steady state, what kind of EBITDA margins do you think it can produce? In a steady state meaning less marketing expenses. Yeah, I don't know the answer to the question. I mean, you know, we had, you know, relatively good margins, I agree. You know, we try to, you know, be opportunistic, you know, when we can be. And, you know, by the same token, we're very, you know, I'll say, you know, sensitive to the fact that, you know, we want to continue to have our customers for a long time and continue to attract new customers. And to do so, you cannot have, you know, prices that aren't, you know, correct in the market. But Marcelo has a couple of things that he'd like to say about it as well.

Hey, Inigo. I mean, indeed, this was a real good product for us. It's kind of a continuation of what we've started to see already in the beginning of the year, our digital channel. It's really doing very, very strongly at destroying the numbers. Our digital channels, I've mentioned before, those command much higher margins than our retail channel. And as that shift in general continues, it adds to the total margin, the net margin. But the study is not just there. We're doing a better job understanding our customer, understanding how to price the service better, how to manage the effects that we call to our customers for the various corridors, managing the entire cost structure, taking advantage of AI, features to make our workflows and processes more efficient. And the business, obviously, as it grows, it continues to scale quite nicely to the bottom line. We took that release a few weeks ago about how Model Day was a record weekend for us. I think the main results, the month of May that just finished, our first month into Q4 is our strongest transaction month ever, the strongest gross profit month ever. And I think that's our reason. We're not just trying to grow transactions or revenue, we're trying to do so with our very large focus into making that to be higher gross margin, higher gross profit. So I think we're in a really good situation, well positioned, gaining market share. And if this continues that way, now obviously we have to continue to invest behind acquiring customers. But I do expect to see margin expansion at the end of the time.

Thank you a lot for your time.

Our next question comes from William Vaughn with Koyant. Please proceed.

Hi, guys. Congrats on the great quarter. Awesome selling anniversary as well. So, once again, congratulations. I have a couple questions. First one on quarter to acquisition. Is there any color you can give to the price paid or any multiple of whatever it is, EBITDA, operations or anything like that.

Yeah, I mean, we're going to put a little more detail when you follow the 10-Q next week, right? But, you know, this company, you know, it's a small, touching acquisition. As you mentioned earlier, this is a relationship that they have had for many years, and now they, you know, The company now carries a lot of our, the media for PTV, for our advertising screens. We took a majority, 8% controlling position in the company. Valuation about $16,000. Some earn out, et cetera. We believe that the, that the price of paper is an excellent price. And again, the focus is to have them be able to better monetize our screen inventory, you know, and now that they are part of the family, you know, we'll be able to work better together in order to maximize that opportunity.

Awesome. Are there any other questions? types of acquisitions or different places, you know, within your three growth businesses that you're looking at just being attractive. You know, if there's some tap-ins or bolt-ons or other things you can do in said space that would be attractive to you. And it could be any one of them, NRS, Boss Money, or S2Pone.

You know, we always have our, you know, ears. open you know and we've done some you know successful acquisitions and some not a successful acquisition so you know we and you know we might have dodged the bullet with some of our acquisitions too so it didn't happen so I don't know we keep you know our eyes open and you know remain you know cautious and prudent okay staying opportunistic I like that

So I just have a question on Netflix One AI. You brought it up in the release. It seems like it's something that is gaining a lot more traction. What features of your AR offering do you find your clients are really liking or are excited about or using the most?

It's a good question. I mean, my first suggestion always is you should go and use the product yourself. Become a customer. We always want more customers. And, you know, again, what I think is really exciting is really, first of all, you know, like for everyone, you know, there's continuous advancements in it. And, you know, again, we use a lot of the products inside of, you know, IDT. And we're probably, you know, one of the biggest customers, we'll call it, of our own product. And, you know, I mean, already we're handling, you know, probably 30% of our customer service calls, you know, using our own products, we'll call it. Obviously, they're not our own models. They're our own products. And, you know, on chat, it's, I think, above 50% at this point that's being handled by our products again. And, you know, all of those, you know, interactions are, you know, having to, you know, you know, dip into our systems and, you know, provide real-time information to customers. It's not just like, you know, hi, how are you? I just called to say hi. Like, no, they don't know. Like, you know, I sent, you know, $200 to my brother in Mexico and he still hasn't received it. And they want to know, you know, where it is. Is there an issue? When will it be available? You know, and... It's able to give, you know, as accurate answers as, you know, any one of our customer service reps would be able to give that customer. And it does it, you know, perfectly every time. And again, those same kinds of integrations are what we're providing to our customers in a way that they don't even have to be able to, you know, to code anything. So I'm very excited about that. You know, we have a freemium product that we're starting for businesses so they can try it out, you know, called Flex. You can check it out on our website. Yeah, I mean, I think they're doing great things, and I think it's It's really, really like not even early innings. It's like pre-innings. But, you know, the warm-ups are super impressive. And already we're selling, you know, tens of thousands of dollars a month of product to, you know, customers outside of IDT besides what we're using ourselves here.

It's too early to see that in the numbers, right, at this point. I mean, Epiphone is doing really great right now, right? It just crossed the $100 million MRR revenue barrier, so now we have that for the month of May. For them, it was the best month ever in terms of new sales. And they are going to show that the AI element is becoming a larger portion of those new cells. Still small, practically, but becoming a bigger portion. So we are looking forward. Going back to the previous question about monetizing and action at some point, I think we are building the right assets and features to make a natural asset a lot more attractive than people believe it is.

Awesome. Excited to see how that progresses over time. We're seeing the NRS. I know in the past, you guys have mentioned, you don't see too much competition in terms of COS systems, in terms of single-store operators for bodegas and convenience stores. But following other players in the space, I'm starting to see other players start to expand into different segments, specifically toasts. I was shocked to see that there are thinking about or actually starting to expand into convenience stores. And so I think that's the question again. Are you guys seeing any more competition coming to the space in terms of point-of-sale operators and, you know, bigger players coming in, or is it still sort of kind of not necessarily white space, but, you know, not as much competition as more from smaller guys?

You know, I definitely think that we are seeing, you know, more competition, you know, at NRS, and it's definitely, you know, affected the new sign-ups. You know, in terms of, you know, some of the bigger players, I mean, again, I think, you know, Toast is a, you know, a great company. You know, I might buy some from my personal portfolio, you know, as well. But in terms of, you know, like the offerings that we provide to, you know, convenience stores, liquor stores, I really think that we're, you know, a much better value and a much more purpose-built product, you know, for those markets. I mean, the same way, you know, if you were starting, you know, a nice, you know, sit-down restaurant in your neighborhood, I wouldn't suggest you come to NRF to, you know, have us do your restaurant. I basically would tell you, like, the same thing if you were starting a convenience store. Like, I don't think you would be best off, you know, financially or otherwise from choosing anyone's NRF. You know, and again, it's only going to, you know, get better. You know, in terms of, you know, our own roadmap for NRF, it's really, you know, really going back and strengthening the product even more. We're not, you know, nearly as focused about, you know, expanding into new verticals, but more about just continuing to improve, you know, the verticals that we're in so much that nobody will be able to, you know, compete with us.

Okay. Okay. Okay. And I think, you know, focus and... You know, tailoring a solution to the specific vertical is really important in this space, so I appreciate that, Tyler. Moving to our boss money, love to see the growth, love to see the increased gross profit and the shift from retail to digital. Also saw that there's a healthy investment in marketing and new customer acquisition. You know, there are other digital players in this space, which I've brought up before. who are growing as well, they spend a lot more on marketing. And I think, you know, I mean, I agree with your assessment that probably shouldn't be spending nearly as much as those players. But I guess I'm curious to hear your thoughts on, you know, maybe not spending a ton in terms of marketing, just in general, a customer acquisition, a new customer acquisition, but let's say for specific verticals, does it make sense to be more aggressive in verticals where, you are on the precipice of high market share and gaining dominance in those verticals of specific countries? Or do you think it makes more sense to try to attack specific verticals in countries where you have a very low market share to broaden the reach to more and more countries? How do you guys think about that dynamic?

It's a good question. Again, I think we to some degree try to do you know, a little bit of both. If I understand your question correctly, I wouldn't say in terms of like 10 countries right now are really obviously, you know, only from the USA as opposed to some of, you know, our larger competitors who are really much more global in terms of, you know, sent out, you know, countries. I think that, you know, over time we would like to expand, you know, into other countries you know, on the send-out basis as well. You know, in terms of, you know, in terms of, like, our penetration into, we'll call it, countries that you send to, you know, we definitely take a market-by-market, you know, approach to it, and, you know, we do offer, you know, better pricing, you know, more incentives, et cetera, to you know, to customers in certain destinations than we do to others, either because, you know, there's more profitability to that country over time or because, you know, we're trying to get to a certain, you know, critical mass, we'll call it, inside of that country so that we get, you know, the benefits of being a larger player. Again, we have really good competitors. you know, in that business as well. So, you know, every day, you know, we have to, you know, come in and, you know, win customers over with, you know, honest good pricing and great service. Because if we don't do that, like, we won't have a business. So, you know, that's really our main focus. And, you know, possibly speaking, you know, it seems to be working.

Awesome. Great comment. Last question. So I was happy to see the buyback this quarter. It was about $19 million. Do you foresee a similar case of buybacks going forward? Was this more taking advantage of maybe a more extractive stock price? Or do you think, you know, based on where we are, we'll probably get more in this case or something close to it?

I mean, I have a lot of color on this, you know, one or two calls ago, so you can go back and listen to that rather than, you know, sort of, you know, repeating Redundant's information. But, I mean, in general, you know, I will continue to buy that stock. You know, obviously we're opportunistic at the price, you know, for some reason, you know, to fall a lot, like we would be buying like crazy. you know, and, you know, if the price goes up a lot, we'll probably buy a little less. You know, that being said, you know, we are trying to stay on pace, you know, to continuously buy, you know, our stock, and this quarter was no exception.

Yep, yep. Awesome. I mean, if I'm looking at, you know, EBITDA guide and where the business is headed, I mean, on a dollar basis, once you back out, the cash from the enterprise dollars is probably trading at a which is just very, very low in terms of what the value is in the company. So love to see the buyback. Appreciate the color. And, you know, thank you. Thanks for answering my question.

Thank you for asking. You're welcome.

As there are no more questions, this concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.