IDT Corporation (IDT) 2026 Q4 法說會逐字稿

Good evening. Welcome to the IDT Corporation's fourth quarter and fiscal year 2026 earnings conference call. (Operator Instructions) Please note this conference call is being recorded.

I will now turn the call over to Bill Ulrey of IDT Investor Relations. Bill, you may begin.

Thank you, John. Today’s presentation, IDT’s Chief Executive Officer, Shmuel Jonas; and Chief Financial Officer, Marcelo Fischer, will discuss IDT’s financial and operational results for the 3 and 12 months ended July 31, 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, IDT’s management may make reference to non-GAAP measures, including Adjusted EBITDA, 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.

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. IDT’s fourth quarter capped off a strong fiscal year, highlighted by accelerated top line and adjusted EBITDA growth. Our three high-margin growth segments, NRS, Fintech, and net2phone, each increased their respective quarterly and full-year contributions, while our traditional communications segment generated more adjusted EBITDA in fiscal 2026 than it did in fiscal 2025 or 2024.

At NRS, we continued to develop and deploy new high-value functionalities for our retailers, such as our recent Uber Eats integration following the Grubhub and DoorDash partnerships we announced last year. These advances are supplementing other tailwinds driving gains in merchant services revenues. Also in the fourth quarter, advertising and data revenue returned to growth, bolstered by a recent acquisition. Taken together, these developments helped drive a 47% year-over-year increase in NRS’s fourth quarter adjusted EBITDA.

Looking ahead, we are working on several product initiatives to increase sales to our existing retailer base and to attract new retailers to the NRS network. Our BOSS Money Remittance business shares its brand identity, distribution networks, and addressable markets with our other BOSS-branded offerings. In recent years, we invested heavily to build and improve our BOSS apps. That strategy is paying off as BOSS Money continues to grow rapidly, thanks in part to the quality of our apps and our customer-centric service.

At BOSS Money, remittances surpassed a 30 million annual transaction run rate for the first time in May, thanks to strong Mother’s Day results in our digital channel. This channel contributed 88% of our total transaction volume in the fourth quarter, with transactions and revenue both increasing by 20%-plus.

We recently launched money transfers via our WhatsApp channel, and we closed the fiscal year by deploying a digital wallet here in the US. The wallet enables our customers to load funds, store promotions, and pay for services. In addition, the BOSS Money app is extending its geographic reach, launching internationally with differentiated features by country, including peer-to-peer remittances, a stablecoin-backed wallet with a reloadable debit card, and other money management tools.

We are also launching a BOSS Money-branded rechargeable card with credit-building features. All these developments mark early steps towards a broader suite of BOSS Money-branded financial services and tools that we intend to offer globally.

net2phone delivered another solid quarter as we enhanced our cloud communications portfolio with both native and standalone AI solutions for businesses across the globe. Our agentic AI solutions, AI Agent and Coach, combined with our new integration layer, enables customers to connect their everyday business applications and workflow tools with net2phone’s suite of services.

net2phone’s AI tools and applications are driving nearly every conversation with our clients. That process is delivering new logos and accelerating accretive sales. net2phone is on track to surpass the $100 million ARR milestone in the current quarter, and we expect continued top-line expansion throughout fiscal 2027.

Overall, IDT is well-positioned as we begin the new fiscal year, with accelerating top-line growth, increasing cash generation, and a debt-free balance sheet that affords us strategic flexibility.

Now, Marcelo will discuss our financial results.

Thank you, Shmuel. I apologize for my voice. I am trying to recover from a cold, so I may have to pause a little more to take a breath from time to time.

Okay. As always, my remarks will focus on year-over-year comparisons in order to set aside the seasonal impacts on our business. Our fourth quarter’s financial results were very strong and capped off the best year in IDT’s operational history. We generated record quarterly and full-year gross profit, gross profit margin, and adjusted EBITDA.

The key dynamic driving our financial performance continues to be the increasing contributions of our three segments containing our higher margin growth businesses, NRS, Fintech, and net2phone, relative to the larger, lower margin traditional communications segment.

In fiscal '26, the three higher growth segments boosted the aggregate adjusted EBITDA contribution by $22 million to 53% of consolidated adjusted EBITDA, exclusive of corporate overhead, compared to 46% in fiscal 2025, while generating only one-third of our consolidated revenue. We expect that this ongoing rotation will continue in the coming quarters and years and be the key driver for our continued growth.

Looking at our consolidated results, fourth quarter revenue increased by 7%, while full fiscal year revenue increased 5%, accelerating from 2% growth in fiscal 2025. For a company like IDT, where the top line had decreased for many years because of the decline of the international long-distance voice paid minute market, generating two consecutive years of top-line accelerating growth while simultaneously expanding our gross margin at a very healthy pace is indeed a gratifying inflection.

Consolidated gross profit and gross margin attained record quarterly and full fiscal year levels, driving a strong increase in both adjusted EBITDA and net income. The full-year adjusted EBITDA increase of 17% to $154.6 million exceeded the revised guidance range of $150 million to $152 million that we provided when we released our Q3 results.

NRS closed the fiscal year with its strongest quarter yet. Total revenue in Q4 increased 31% to $45 million, led by an increase of 31% in merchant services revenue to $28.5 million, and a 49% increase in advertising and data revenue to $10 million. NRS’s adjusted EBITDA in Q4 grew 47% year-over-year for an adjusted EBITDA margin of 31%.

In addition to the positive revenue growth impact, fourth quarter gross profit and adjusted EBITDA benefited from a one-time import tariff refund recorded in cost of revenue. Excluding it, gross margin was in line with recent quarters. Tariffs were less important on a full-year basis, so the full year’s growth margin of 92% is the better indicator of our future performance. Nevertheless, you can see the underlying operating leverage as we continue to scale the business. Our Rule of 40 score climbed to 60 from 49 in 4Q '25.

Income from operations more than doubled to $12 million in Q4. This increase was positively impacted by non-recurring legal expenses that were recorded in the comparative year-ago quarter. A word on how we will report a key performance indicator of the NRS network going forward.

Starting this quarter, we are sharing in our earnings releases two new KPIs, retailer locations and average monthly gross profit per location. We are retiring the monthly average recurring revenue per terminal KPI to more meaningfully and precisely reflect the economic performance of our retailer network.

BOSS Money represents the dominant driver of results within our Fintech segment. It contributed 90% of Fintech revenue in the fourth quarter, and its digital channel, in turn, is what drives BOSS Money revenue growth. Digital channel transactions increased by 20% in Q4, while revenue increased 22%.

Digital send volume, namely the principal funds our customers remitted, increased 38% as our customers sent more money per transaction. The new federal tax on remittances, which impacts only cash-originated transfers typically conducted at retailer agents, have further accelerated the long-standing migration of transactions from retail to digital alternatives. Although revenue from our retailer agent channel declined 17% in Q4, every customer who migrated from retail to digital contributed more profitable transactions. We ended the year with 88% of our total BOSS Money transactions originating in our BOSS apps.

Turning now to the larger Fintech segment in which we report BOSS Money. During Q4, gross profit margin expanded by 650 basis points year-over-year to 66%, reflecting mainly the mix shift to digital, the higher average send amounts, and also better pricing terms from our payout partners. As BOSS Money continues to grow and scale, we are deploying AI-driven process automation throughout the business to achieve measurable productivity gains. Those gains have enhanced the operating leverage effect on the Fintech segment profitability quite significantly.

Fintech revenue grew 14% to $176 million during fiscal 2026, while income from operations grew 40% and adjusted EBITDA 41%. Our bottom line was also boosted by increased contribution from the other smaller businesses in our Fintech segment, including our fully licensed Gibraltar-based bank, IDT Financial Services.

At net2phone, every new potential customer conversation now leads with AI. Subscription revenue increased 10% year-over-year in the fourth quarter, a 7% increase on a constant currency basis, and we ended the year with 447,000 seats, a 6% increase. Growth was a little stronger in the USA than elsewhere, with seats increasing by 7%. Our CCaaS business grew revenue by 24%.

For the full year, subscription revenue grew 10% to $94.6 million. Income from operations grew 84% to $9.1 million, and adjusted EBITDA grew 33% to $16.1 million. We are quite pleased with net2phone’s strong operating leverage, with adjusted EBITDA margins increasing to approximately 17%, even as we invested throughout the year in building out our AI capabilities.

Finally, in discussing our segment’s performance, I want to call your attention to the traditional communications segment, which once again outperformed our expectations. In fiscal '26, the segment grew both revenue and adjusted EBITDA, and increased its adjusted EBITDA for the second consecutive year. Quarterly gross profit during fiscal 2026 remained steady throughout the year at about $41 million, while declining 4% for the full year to $163 million. We continue to benefit from top-line growth at IDT Digital Payments, while the GP contribution from IDT Global and BOSS Revolution Calling declined in the low single digits year-over-year, as we expected.

For the full year, Adjusted EBITDA increased 1% to $77 million, as we compensated for the decline in GP by reducing SG&A expense by nearly 6% compared to fiscal '25. We continue to believe that this segment will remain a reliable contributor to our cash generation for many years to come.

From a balance sheet perspective, we ended the year with $272 million in unrestricted cash and liquid investments, and we have no debt. We continue to repurchase shares opportunistically, buying back approximately 31,000 shares for $2 million in the fourth quarter, and approximately 422,000 shares for $21 million over the course of fiscal 2026.

In terms of our financial outlook for fiscal '27, we are already working hard to generate strong results on top of our fiscal '26 records. Continuing a trend that we have established for the past few years, we expect to again expand consolidated gross profit by double digits to a range of $545 million to $555 million, an increase of 11% at the midpoint.

In terms of adjusted EBITDA, we are working to build on the record $155 million we achieved in fiscal 2026 and to reach $176 million to $180 million in fiscal '27, with each of our operating segments expanding its contribution. This represents a 15% increase year-over-year at the midpoint.

To sum up, fiscal '26 was the best year in IDT’s history, and we finished it with our strongest quarter. The rotation toward our high-margin growth businesses is accelerating. Our top line is growing faster, and we are entering fiscal '27 debt-free with a stronger balance sheet and a lot of momentum. Now, Shmuel and I will do our best to answer your questions.

Operator, back to you for Q&A.

(Operator Instructions)

Emirlan Kelimbetov, Freedom Broker.

First, I want to ask on the next financial year outlook. Could you please walk us through the main drivers behind the EBITDA guidance across the different segments?

Yeah. As I just mentioned in my remarks, we expect to grow EBITDA in each one of our segments. To a large extent, some of it is going to mirror the same pattern of growth that you saw in fiscal '26. For example, in fiscal '26, we said we were going to grow NRS’s revenue by 20% to 25% and EBITDA between 25% to 30%. We achieved that. For this coming fiscal year, we are again assuming almost the same type of guidance. That NRS will again be able to grow revenue 20% to 25%, as well as EBITDA at a higher clip than that.

The same type of guidance is still also at Fintech, where we believe that EBITDA will continue to grow quite nicely. It will continue to benefit from the scale of the business as it grows, from the efficiencies that we have incorporated into the business processes of the segment, from better performance, even from the smaller businesses within that segment.

In the case of net2phone, we budgeted a very small increase in EBITDA for this coming year. We did the same thing last year, as a matter of fact. They ended up delivering a lot higher EBITDA last year than we had budgeted for them. Again, for this year, we are trying to budget and allow the management team of net2phone to redeploy a lot of EBITDA coming from the growth back into the business so they could continue to roll out and improve on their AI development roadmap.

Even in our traditional segment, we hope to once again be able to demonstrate that that segment is no longer a contracting segment, but it will be, once again, for the third year in a row, a segment that is actually adding to total EBITDA.

As we stopped at net2phone, may I ask one more on that segment, please? Where are we seeing the clearest commercial impact from the AI products so far in net2phone?

Yeah, I would say that we are definitely seeing clear evidence of our product being used. Mostly, I try not to talk about other customers without their permission, but I can talk about IDT as a customer of net2phone for our own solutions and in our own customer service areas, as well as in lots of other areas in the company where they are helping us.

We are using it tremendously. I would say probably 70%-plus of communications are being handled by AI in some way, shape, or form. Some of those from start to finish. Some of them require an agent at some point. But it has been a real game changer in terms of the cost and the efficiency of servicing our customers. From the customers I have spoken to at net2phone, the same thing is true from their perspective.

And then one on NRS, if I may. How are you thinking about the balance between network growth and monetization of the existing retailer base from here?

I would like to grow the network much more than we’ve been growing it. I’ll say that just as a starting point, and we’re going to be investing more in our sales growth. That being said, for a long time, we looked at every retailer as equal to another retailer, and we focused more so on the quantity rather than the quality. We’ve become much more, I don’t want to use the word analytical, but I’ll say that we’ve become much more regimented about making sure that we’re going after the right kinds of stores that produce the right results for our business.

Sometimes that -- unfortunately, leads to less gross number of adds, but the revenue coming from those locations tend to be quite a lot better than they were beforehand. You can see that playing out in our numbers, and I think you’ll continue seeing that playing out into the future. That being said, we are going to be hiring quite a lot of salespeople this year and really upping our game to make sure that we also bring in higher numbers than what we’ve been bringing in.

Please, the last one from me on traditional communications. Could I ask you to add some more color on the main drivers you see for EBITDA growth in the next financial year for that segment?

Again, I think, the general switch from a lot of our customers becoming digital-first customers rather than retail-first customers has definitely allowed our margins to improve. Again, from a very macro point, if a customer goes into a store and they spend $10, $2.50 of that revenue goes directly to the store, if not more.

When a customer comes to us directly and spends $10, $10 goes directly into our pocket. We are a multi omnichannel, I’ll call it, type of a company. We sell in retail, wholesale, direct to consumer. But we’ve definitely upped our game in the digital space, and we’ve seen our customers very satisfied by that, and us as well.

Understood.

If we could just add to that, right? Now, we are going to still expect to see double-digit decline in the revenue of the BOSS Revolution calling business. But as Shmuel mentioned, the impact that has to the bottom line is much smaller because of our migration from retail to digital, as well as introducing subscription plans and other higher margin elements.

On our digital payment business that have been driving growth the past few years, and we now expect that to continue and to offset the declines on the ILD side of the business. Just to mention also now that it’s been part of the modus operandi for us at IDT now for many years, that we are constantly looking to reduce the cost structure in that segment. Now we’re coming to achieve reduction in cost and SG&A so that we could now net see positive growth in EBITDA.

Yeah. But again, I would say more than anything, we drive customer growth by driving happy customers. When one customer tells another customer, if you’re needing to provide balance to your family, whether that be in cash top-up, their utility bills, their supermarkets, anything related to supporting your family back home, go to IDT. You can trust them. That’s really what drives the business. That’s what we focus on every day.

William Vaughan, Private Investor.

Just want to ask a question on -- you mentioned trying to reaccelerate new store growth at NRS, which is awesome to hear. Also like maximizing profitability in the types of stores that are brought on. Do you see any types of verticals being more or less attractive in that initiative in terms of thinking about independent retailers versus tobacco versus quick service or liquor stores? Are there any types of verticals that are more attractive than that?

There are, definitely ones that are more attractive and ones that are less attractive. In general, I would say that we are looking for stores that are doing higher volume versus stores that are doing lower volume. That is really the main factor of what we are focusing on. That being said, there definitely are verticals in specific where our solutions are better situated to those types of stores, and we get more revenue from them because they are able to take more types of our services.

Again, I will just -- it is a bad example, but if somebody is a tobacco shop, we will just use them as an example. They are most likely not going to be able to take a lot of our services at this point because they are not allowed to do delivery in most places. As opposed to a store that has a big food element to it and does a lot of deliveries, they would be much more profitable, as well as they would be doing much more deliveries for the store. So it is those kinds of factors that influence the overall profitability of a store.

Okay. A follow-up on that, do you still see that new stores that are brought on are mostly converting folks who did not really have a good POS system prior? Or have you gotten to the point where the offering is taking business away from other providers because of the specialization in terms of services that you add and becoming more competitive that way?

I don’t know the answer exactly to the question off the top of my head, but I would just give you my thoughts on it. These aren’t statistical numbers. I would say at this point in time, most stores have a point-of-sale system. They’re not moving from a Casio to a POS at this juncture. I’m not saying that none are moving off of a Casio, we’ll call it.

But in general, they’re moving to us because of all of the different services that we provide and the fact that it’s just much more robust and much lower cost than anybody else is offering those services for. We’ve had customers that have left us for something new and shiny, and a couple of months later, they realize their bills are not what they thought they were going to be, their service is not what they thought they were going to get, and they end up coming back.

A huge percentage of stores also that I would say sell their store to a new operator also come back to us, which I think is also proof of what a good value and good job we do. Because if you’re coming into a new business and you want to improve it, and you choose to go with the main core of your business, again, from NRS IDT, that means that you think that part of your business is not what needs changing. We’re very focused on making sure that we provide great service and affordable pricing to our retail partners so that they can continue to do well in really a very tough environment.

Awesome. Last question on NRS. It’s great to see the recovery and increase in advertising spend and advertising revenue. What would you say has really driven that? You mentioned the acquisition. Is it just getting more bidding for ad impressions? What specifically has drove the recovery? If you could just give some color on that.

Yeah. It’s not a one facet answer. I would also say, listen, unfortunately and fortunately, depending on which quarter we’re talking about, advertising has been somewhat, I don’t want to say seasonal, but has been somewhat imbalanced. Right now, it’s doing very well. As we’re speaking this quarter, it’s doing better than ever.

I think this is, again, my own opinion, not fact. It’s that more and more retailers are seeing good results from the ads that are happening. They’re driving results in their stores. Our partners who are usually the brands that sell products in these stores are seeing the results. Our partners who sell other services, whether or not it’s legal services or immigration services or any of a number of types of companies that advertise in our network, see the results from the dollars that they’re spending in NRS in a community that’s harder to reach than maybe somebody who, I don’t know, we’ll say you, who works in Wall Street.

I think that that’s generally speaking what’s happening. That being said, the acquisition brought on other pieces of business that they do that have nothing to do with what happens in our stores directly, and that’s been a new area of growth. It’s that whole combination together.

Awesome. Thank you. Just one on BOSS Money. Nice growth there. How would you say the market is evolving in the remittance space, with the tax and then with people shifting more to digital? Just any comments you could give there. Do you feel like you guys are taking share in the overall market, and do you guys feel like you’re taking share within the digital part of the market specifically as well?

Listen, I can’t speak to how our competitors are doing that aren’t public competitors. You can see a lot of the public competitors to us who have retail businesses and how it’s affected them. That’s very public information, and it’s easy to see that it’s hurting their business, this remittance tax and the move to digital in general.

In terms of how we’re doing digitally versus our competitors, I would say we’re doing well. I wish we were doing always a little better than we’re currently doing. We’re trying our best always. Right now the business is doing very well, and I don’t expect anything to change. We’re definitely being helped by the market moving to digital. It’s not just us, I would say it like that.

Yeah. We do see that our market share has remained stable to growing to our largest destinations. I’ll give you an example. Taking the case of Mexico. Mexico, as you know, is the largest corridor for remittances out of the US. So you go back a year ago, we probably had a little less than 2% of the market share. Now we probably have about a little bit less than 3%, so we’ve grown a little bit there. I think hopefully there will be a lot more opportunities for us to grow market share into Mexico, and we think about Mexico all the time as an area of opportunity for continued growth.

Being able to have the best app out there, which is a BOSS Money app, have been rated, and a great service, now we hope that will be a way to, over time, educate more and more users to try our service and stick with us.

(Operator Instructions)

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.