IDT 2026 Q4 Earnings Call

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 31st, 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 3 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 FY 2026 than it did in FY 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 U.S. 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 AI, 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 2026, 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 2025. 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 Money 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 U.S.A. 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.