IDT (NYSE:IDT) held its fourth-quarter earnings conference call on Monday. Below is the complete transcript from the call.
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The full earnings call is available at https://www.idt.net/investors-and-media/quarterly-earnings/
Summary
IDT Corporation reported a 5% increase in consolidated revenue to $315.7 million, with gross profit rising 9% and income from operations up 12%, leading to a 13% increase in Adjusted EBITDA to $37.5 million.
The company raised its full-year FY26 Adjusted EBITDA guidance to $150 to $152 million, indicating 15% growth over fiscal year 2025, driven by the performance of its higher-margin businesses.
Notable operational highlights include a 22% year-over-year growth in NRS recurring revenue and a 14% increase in payment processing accounts, alongside an expanded digital channel with 40% growth in digital send volume.
IDT acquired a controlling stake in Encore Digital to enhance its advertising capabilities, integrating with NRS Screen Network to bolster retail offerings.
The traditional communications segment continues to generate steady cash flow, with SG&A costs reduced by $2.6 million year over year, maintaining a stable Adjusted EBITDA.
Management expressed optimism about future growth, highlighting the integration of AI tools across business segments and the potential for further margin expansion in BOSS Money as the digital channel grows.
The company continued its share repurchase program, buying back approximately 84,000 shares for $4 million, supported by strong free cash flow and a debt-free balance sheet.
Full Transcript
OPERATOR
Good evening. Welcome to IDT Corporation's third quarter fiscal year 2026 earnings conference call. All participants are now in a listen-only mode. A question-and-answer session will follow management's remarks. Anyone requiring operator assistance during the conference call should press Star-0 on your telephone keypad. Please note this conference call is being recorded. I will now turn the call over to Bill Olry of IDT Investor Relations. Bill, you may begin.
Bill Olry, Investor Relations
Thank you, John. In today's presentation, IDT's Chief Executive Officer Shmuel Jonas and Chief Financial Officer Marcelo Fisher will discuss IDT's financial and operational results for the three months ended April 30, 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 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 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 IDT earnings release reconcile these non-GAAP measures to their 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. And now I'll turn the call over to Shmuel for his comments on the quarter's results.
Shmuel Jonas, Chief Executive Officer
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 NYSE to celebrate IDT's 25th anniversary as a NYSE-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 NYSE team had done something really special. They pulled together photos and documents from our past listing anniversaries, creating a timeline of the people, the documents, the 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 spinoff of five public companies, and that has consistently delivered for employees and shareholders alike. Although not always in a straight line, IDT's year-over-year revenue and earnings growth was 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, with gross margin expanding by 170 basis points to 38.8%, a record quarterly high. Income from operations grew 12% to $29.8 million, and Adjusted EBITDA grew 13% to $37.5 million. Based on our year-to-date performance and forward visibility, we are raising our full-year FY26 Adjusted EBITDA guidance to $150 to $152 million, representing 15% 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 SaaS 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 NRS 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 send volume—the actual dollars our customers are moving—grew 40%.
We gained market share following the implementation of the new federal remittance tax as customers sought reliable, cost-effective alternatives. net2phone 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 CCaaS seats growing faster than UCaaS, driving revenue per seat higher. Gross margins expanded 130 basis points to 80.6%. Most significantly, income from operations was up 76%.
We are gaining traction with our AI offerings and expect them to become accretive growth drivers in fiscal year 2027. All net2phone offerings will also benefit from the recent release of Integrate by net2phone, 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 communications segment continued its role as a reliable cash generator.
SG&A declined $2.6 million year over year as we continue to right-size the cost structure, and Adjusted EBITDA was essentially flat at $19.7 million. IDT's global revenue grew 11%, partially offsetting the expected decline in BOSS Revolution calling. Across all our business segments, we are integrating machine learning and AI tools to better understand and meet the expectations of 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, and 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. Thirty 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, 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.
Marcelo Fisher, Chief Financial Officer
Thank you, Shmuel. 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—had 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 IDT remains in force. Our consolidated results increasingly reflect the growing contribution of our three higher-margin growth segments—NRS, FinTech, and net2phone—even as our large traditional communications segment becomes relatively less impactful. That 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 that 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 61% a year earlier.
The combined Adjusted EBITDA from NRS, FinTech, and net2phone grew 27% year over year to $20.5 million. In aggregate, our three growth segments generated 55% of IDT's consolidated Adjusted EBITDA in the third quarter, up from 49% in the year-ago quarter. Because these segments still account 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 equivalents, and current debt and equity securities, exclusive of restricted cash. Last week our board declared a quarterly cash dividend of $0.07 per share. We also continued to repurchase 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 fiscal '26 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 increasing operating leverage we are seeing in our growth segments and the resilience of traditional communications' contribution. To sum up, this was another quarter of disciplined, 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 10-K report from 30 years ago—1996. That year, IDT reported revenue of $58 million and a net loss of $16 million. Today, even after spinning off five 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, IDT 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, back to you for Q&A.
OPERATOR
Thank you. The question and answer session will now begin. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two 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 Diego Alonso with Stoic Capital. Please go ahead with your question.
Diego Alonso, Analyst at Stoic Capital
Hello Bill, Marcelo and Shmuel. 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 newer 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 beta testing? How should we think about the growth of NRS in that country?
Shmuel Jonas, Chief Executive Officer
The real answer is we could have selected, you know, a bunch of different countries to, you know, to have an expansion and we have, you know, some partners there that, you know, suggested that we try it there and we decided, you know, why not?
Diego Alonso, Analyst at Stoic Capital
Okay. I would like to ask 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?
Shmuel Jonas, Chief Executive Officer
I mean, listen, we definitely think that they are going to be a help to our advertising group. They have 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 they're very good guys to work with and we've worked with them as part of partners for a number of years already. So this is sort of a long term relationship already and we expect it to be an accretive acquisition.
Diego Alonso, Analyst at Stoic Capital
Okay. In terms of net2phone, a couple of years ago you went through the process of getting those papers ready to do the spinoff. That was cancelled. 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 and they're trading at three times sales plus. Is this enough of a valuation for you to spin off net2phone?
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?
Shmuel Jonas, Chief Executive Officer
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 it's becoming more appealing to possibly do something. That being said, I'm very, very, you know, confident that net2phone is going to do much better than our investors think it's going to do and much better than some of the competitors that you mentioned without mentioning. So. Yeah.
Diego Alonso, Analyst at Stoic Capital
Okay. And one last question on Boss Money. The performance this quarter has been impressive. You are acquiring customers like, like I haven't seen in a long time. And I'm wondering, you expanded margin despite this customer acquisition cost. If we think about Boss Money in a steady state, what kind of EBITDA margins do you think it can produce? A steady state meaning less marketing expense?
Shmuel Jonas, Chief Executive Officer
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, you know, when we can be. And you know, by the same token, we're very, you know, I'll say, sensitive to the fact that 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 prices that aren't correct in the market. But Marcelo has a couple of things that he would like to say about it as well.
Marcelo Fisher, Chief Financial Officer
Hey, Diego. I mean, indeed, this was a real good quarter for us. It kind of a continuation of what we've started to see already in the beginning of the year. Our digital channel is really doing very, very strongly as you saw in the numbers our digital channel that I mentioned before, those command much higher margin than our retail channel. And that shift channel continues. It adds to the total margin, the net margin. But the story is not just there, you know, 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. So and the business obviously as it grows now, it continues to scale quite nicely to the bottom line. We put that release a few weeks ago about how Mother's Day was a record weekend for us. Now that we have seen the May results. Now the month of May that just finished now for our first month into the into Q4 is our strongest transaction month ever.
It's going to be our strongest gross profit month ever. And I say that for a reason. We are just trying to grow transactions or revenue. We're trying to do so. Okay. With a very large focus into making that to be higher gross margin, higher gross profit. So I think we're in a real good situation of our position gaining market share. And if this continues that way now, obviously we're going to continue to invest behind acquiring customers. But I do expect to see margin expansion as years go by.
Diego Alonso, Analyst at Stoic Capital
Thank you a lot for your time.
OPERATOR
Our next question comes from William Vaughan with Coriant. Please proceed.
William Vaughan, Analyst at Coriant
Hi guys. Congrats on the great quarter, awesome selling anniversary as well. So once again, congratulations. I have a couple questions. First one, on the Encore Digital acquisition, is there any color you can give on, you know, the price paid or any multiple of whatever it is, EBITDA income operations or anything like that?
Marcelo Fisher, Chief Financial Officer
Yeah, I mean we're going to put a little more detail when we file the 10-Q next week. Right. But now this company, you know, it's a small tuck-in acquisition. As Shmuel mentioned earlier. This is a relationship that we have had for many years now. The company carries a lot of the media for CTV for our advertising screens. We took a majority 80% controlling position in the company, valuation about $6 million. Some earn-out, et cetera. We believe that the price we pay for it is an excellent price.
And again the focus is to have them be able to better monetize our screen inventory. And now that they are part of the family, we will be able to work better together. So we could maximize that opportunity.
William Vaughan, Analyst at Coriant
Awesome. Are there any other types of acquisitions or different places within your three growth businesses that you're looking and you're seeing attractive? You know, if there's some tuck-ins or bolt-ons or other things we could do in said space that would be attractive to you and it could be in any one of them. NRS, Boss Money or net2phone.
Shmuel Jonas, Chief Executive Officer
You know, we always have our ears open and we've done some successful acquisitions and some not as successful acquisitions. So you know, we, and you know, we might have dodged a bullet with some of our acquisitions too. That didn't happen. So I don't know, we keep our eyes open and remain cautious and prudent.
William Vaughan, Analyst at Coriant
Okay. Staying opportunistic. I like that. So I just have a question on net2phone AI you brought up in the release and it seems like it's something that is getting a lot more traction. What features of your AI offering do you find your clients are really liking or excited about or using the most?
Shmuel Jonas, Chief Executive Officer
It's a good question. My first suggestion always is you should go and use the product yourself, become a customer. We always want more customers. And again, what I think is really exciting is, is really first of all like for everyone, there's continuous advancements in it. And again we use a lot of the products inside of IDT and we're probably one of the biggest customers, we'll call it, of our own products. And I mean already we're handling probably 30% of our customer service calls, you know, using, using our, our own products we'll call it, obviously they're not our own models but our own products.
And you know, on, on chat it's I think above 50% at this point that's being handled by, by our products again. And you know, all of those, you know, interactions are having to, you know, dip into our systems and provide real time information to customers. It's not just like hi, how are you? Just call it to say hi. Like no, they want to know. Like I sent $200 to my brother in Mexico and he still hasn't received it. And they want to know where it is.
Is there an issue when will be available? And it's able to give as accurate answers as any one of our customer service reps would be able to give that customer. And it does it 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 code anything. So I'm very excited about that. We have a freemium product that we're starting for businesses so that they could try it out called Flex.
You can check it out on our net2phone 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 the warm ups are super impressive and already we're selling tens of thousands of dollars a month of products to customers outside of IDT, besides what we're using ourselves here.
William Vaughan, Analyst at Coriant
That's awesome. Excited.
Marcelo Fisher, Chief Financial Officer
It's too early to see that in the numbers right at this point. I mean, I mean net2phone is doing really great right now. Right. They just crossed the $100 million MRR revenue barrier. So now we are pleased about that. The month of May for them was the best month ever in terms of new sales and they are going to. It shows that the AI element is becoming a large portion of those new sales. Still small, relatively, but becoming a bigger portion. So we are looking forward, going back to the previous question about monetizing a net2phone at some point.
I think we are building the right assets and features to make the net2phone assets a lot more attractive than people believe. It is
William Vaughan, Analyst at Coriant
Awesome. Excited to see how that progresses over time. Switching to NRS. I know in the past you guys have mentioned you don't see too much competition in terms of POS systems in terms of single store operators for bodegas and convenience stores. But following other players in the space, I'm starting to see some other players start to expand into different segments. Specifically Toast. I was shocked to see that they're thinking about or actually starting to expand into convenience stores.
And so I'll just ask the question again. Are you guys seeing any more competition come into 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.
Shmuel Jonas, Chief Executive Officer
I definitely think that we are seeing more competition at NRS, and it's definitely affected the new signups in terms of some of the bigger players. Again, I think Toast is a great company. I might buy some for my personal portfolio. But in terms of the offerings that we provide to convenience stores and liquor stores, I really think that we're a much better value and a much more purpose-built product for those markets. I mean, the same way if you were starting a nice sit-down restaurant in your neighborhood, I wouldn't suggest you come to NRS to have us do your restaurants.
I basically would tell you the same thing if you were starting a convenience store: I don't think you would be best off, financially or otherwise, from choosing anyone but NRS. And again, it's only going to get better in terms of our own roadmap for NRS. It's really about going back and strengthening the product even more. We're not nearly as focused on expanding into new verticals, but more about just continuing to improve the verticals that we're in so much that nobody will be able to compete with us.
UNKNOWN Analyst
Okay, okay. I think focus and a tailored solution to the specific vertical is really important in this space, so I appreciate that color. Moving to BOSS Money, love to see the growth, love to see the increased gross profit, and shifts from retail to digital. I also saw that there's a healthy investment in marketing and new customer acquisition. You know, there are other digital players in the space, which I brought up before, who are growing as well.
They spend a lot more on marketing, and I agree with your assessment that you probably shouldn't be spending nearly as much as those players. But I guess I'm curious to hear your thoughts on maybe not spending a ton in terms of marketing, just in general, on 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, like 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, sort of broaden the reach to more and more countries? How do you guys think about that dynamic?
Shmuel Jonas, Chief Executive Officer
It's a good question. Again, I think we, to some degree, try to do a little bit of both. If I understand your question correctly, I wouldn't say in terms of send countries—right now we're really obviously only from the USA as opposed to some of our larger competitors who are really much more global in terms of send-out countries. I think that over time we would like to expand into other countries on a send-out basis as well. In terms of our penetration into countries that you send to, we definitely take a market-by-market approach to it, and we do offer better pricing, more incentives, et cetera, to customers in certain destinations than we do to others, either because there's more profitability to that country over time or because we're trying to get to a certain critical mass inside of that country so that we can get the benefits of being a larger player. Again, we have really good competitors in that business as well, so every day we have to come in and win customers over with honest, good pricing and great service, because if we don't do that, we won't have a business. So that's really our main focus and, luckily speaking, it seems to be working.
UNKNOWN Analyst
Awesome. Great color. Last question. So I was happy to see the buyback this quarter. It was about 19 million. Do you foresee a similar pace of buybacks going forward? Was this more taking advantage of maybe a more attractive stock price, or do you think, based on where we are, we'll probably continue on this pace or something close to it?
Shmuel Jonas, Chief Executive Officer
I don't know. I added a lot of color on this one or two calls ago, so you can go back and listen to that rather than me repeating redundant information. But in general, I will continue to buy back stock. Obviously, we're opportunistic. If the price were for some reason to fall a lot, we would be buying like crazy, and if the price goes up a lot, we'll probably buy a little less. That being said, we are trying to stay on pace to continuously buy our stock, and this quarter was no exception.
UNKNOWN Analyst
Yep, yep. Awesome. I mean, if I'm looking at EBITDA guide and where the business is headed on a consolidated basis, once you back out cash, enterprise value probably trading at around six times EBITDA, which is just very, very low, at least in my opinion, in terms of where the value is the company is. So love to see the buyback, appreciate the color, and thank you for answering my questions.
Shmuel Jonas, Chief Executive Officer
Thank you for asking your question.
OPERATOR
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.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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