IDT Corporation Class B 17th Annual Midwest IDEAS Conference

Thank you. Thank you. Thanks, and thanks again to the Three Part Advisors team.

Sure for hosting us today.

I am going to walk through our slide deck, and please don't hesitate to interrupt at any point, should you have questions. First, some housekeeping. IDT's fiscal year ends on July 31st, and our slides today will discuss results through the third quarter of our fiscal year 2026, which were the three months that ended on April 30th. We will report our fourth quarter results and full fiscal year in the last week of September. IDT has been a public company since 1996, and we celebrated our 30th anniversary by ringing the opening bell on the New York Stock Exchange this May. We are firmly in the small-cap space with a market cap currently a little over $1.7 billion. Unlike many other small-cap companies, IDT is distinguished by its strong balance sheet and increasing profitability.

Our balance sheet at April 30th had $251 million in cash and no debt. Over the past 12 months, we generated revenue of $1.3 billion and $147 million in adjusted EBITDA. We use part of the cash we generate to return value directly to stockholders. Over the trailing 12 months, repurchases of our common stock and payment of our quarterly dividend totaled $26 million. Our 1,950 employees are globally dispersed. About a quarter of them work out of our headquarters in Newark, New Jersey. IDT operates six primary businesses. The three growing high-margin businesses on the left side of this slide are increasingly profitable. Collectively, they contribute about a third of our revenue and two-thirds of our gross profit. In aggregate, they are powering the accelerating increases in IDT's consolidated profitability and cash generation.

The three businesses on the right-hand side of the screen comprise our traditional communication segment. The traditional communication segment is a prodigious cash flow generation engine that enabled us to build the three growth businesses from scratch without resorting to debt or dilutive capital raises. In the three decades IDT has been in business, we have also built a core of strategic assets. These strategic assets were foundational in the creation of each of the six businesses in our portfolio. Despite the diversity of the industries in which they operate, each of these businesses is, in this sense, interrelated. Moreover, each of these six businesses continues to invest in and to strengthen one or more of these core assets, synergistically investing in IDT's long-term growth and strengthening our competitive advantages. The presentation today will focus on our three high-margin growth businesses.

Now let's look at the first of these, National Retail Solutions. NRS operates a point of sale-based platform for independent retailers. Think of bodegas, convenience stores, liquor, and tobacco shops. From the time we founded NRS about a decade ago, we envisioned a partnership with the mom-and-pop retailers who are already selling our BOSS retail products. These retailers lack the technology to run their businesses efficiently and effectively enough to compete against the large C-store chains. Today, NRS is a leading POS provider in the independent retail space, and its platform also serves advertisers and marketers who want to reach these retailers' nationwide, multicultural retail customer base. NRS' recurring revenue, which excludes sales of its POS hardware, totaled $36 million in our most recent quarter. Over two-thirds of the recurring revenue was generated by merchant services, which is primarily credit card processing, but also related services for retailers.

Advertising and data sales contributed 16% of NRS' recurring revenue. Each POS includes a customer-facing digital screen that displays still and video ads at the point of purchase. NRS sells its inventory of available advertising, along with access to its SKU-level transaction data to CPG marketers, data analytics firms, and other buyers. The balance of recurring revenue, 12%, was generated by the monthly recurring charges collected from our retailers for the software that operates the POS. Today, NRS operates approximately 40,000 POS terminals at 34,000 retail locations. Reliable data on the total addressable market is hard to come by, but based on what data we do have, we estimate there are approximately 200,000 convenience stores, bodegas, independent liquor stores, and tobacco shops in the U.S. Our current market penetration is about 20%.

We continue to add hundreds of net new stores per quarter by leveraging our unique strengths in this market, including our strong NRS brand, our proprietary software and hardware built specifically to the needs of this market, and a sales force of several hundred experienced agents to help close the sales. Annual recurring revenue at NRS has grown from $45 million annually in 2022 to $141 million in the trailing 12 months. Growth has been powered by strong increases in average monthly revenue per terminal, which climbed to $307 in the most recent quarter from $279 a year earlier. NRS' bottom-line expansion has outperformed as the business has scaled. In the trailing 12 months, it generated over $41 million in adjusted EBITDA for a 28% EBITDA margin.

We look to the rule of 40 for SaaS businesses as a key metric to evaluate growth and profitability, and NRS achieved an enviable 50% score in the most recent quarter. Now let's look at our second high-margin business, BOSS Money. BOSS Money is our international money remittance business that enables our customers, primarily first and second-generation immigrants in the U.S. and Canada, to send money to family and friends back home. We report BOSS Money within our Fintech segment. Although the segment also includes smaller financial initiatives, BOSS Money contributes a large majority of Fintech's revenue and income from operations. BOSS Money is primarily a digital remittance provider. Almost 90% of all our transfers now originate in either the BOSS Money app or the BOSS Revolution Calling app.

We work very hard to provide an outstanding user experience on our apps, and that effort has been a key driver of our success in the space. Because we are a digital-first provider, our growth profile more closely parallels rapidly growing digital money transfer services like Remitly, rather than the more slowly growing or declining retail-dominant money transfer providers like Western Union, Intermex, or Ria. Digital channel revenue increased by 27% in the third quarter compared to the year-ago quarter, driven by a 20% increase in transaction volume and a remarkable 40% increase in send volume, the total amount transferred during the quarter. That marks a steep acceleration compared to the prior quarter. We attribute this acceleration in part to the new federal remittance tax on transactions paid for in cash, typically at a retail store. The tax went into effect on January 1st.

The new federal tax has accelerated a longer-term customer migration from retail to digital that was already transforming the industry. Now, with the tax in place, traditional bricks-and-mortar-based retail providers have seen their growth rate slow further or reverse, while digitally focused offerings have been able to maintain, in the case of BOSS Money, to accelerate their growth trajectories. As we mentioned early on, BOSS Money is the dominant contributor in our larger Fintech segment's results. In our third quarter, BOSS Money drove a 30% increase in Fintech's adjusted EBITDA to $6.6 million, and for the trailing 12 months, adjusted EBITDA surpassed $25 million. Now let's look at the third of our high-margin businesses, net2phone. net2phone provides intelligent communication solutions to business.

We built net2phone leveraging IDT's telephony network in North and South America and the professional staff we had in place across Latin America selling prepaid international calling and SIP trunking services for many years. Today, net2phone offers four core offerings. Unite, a Unified Communications as a Service solution, uContact, a Contact Center as a Service solution for high-volume sales and support teams. net2phone AI Agent handles routine customer interactions and associated workflows, and net2phone Coach helps organizations improve agent performance through sentiment analysis, feedback and coaching, and analytics reporting. net2phone has been able to maintain growth and profitability at rates higher than many industry peers, in part by building its business around three strategic differentiators. First, unlike the largest players in the space, such as RingCentral, net2phone focuses on mid-market and small-market businesses with less than 1,000 seats.

Second, net2phone in most of its markets goes to market exclusively through technology service distributors and channel partners, and its offerings are structured around this go-to-market strategy. Third, net2phone has a unique geographic profile. It generates nearly all of its revenue from North and South America. Nearly half of net2phone's seats are in relatively underserved Latin American markets. These three differentiators have helped net2phone achieve a 17% subscription revenue CAGR over the past four years. Subscription revenue TTM totaled $93.5 million and increased 12% to $24 million in the most recent quarter. At the end of the quarter, net2phone served 441,000 UCaaS plus CCaaS seats. By the way, while seats served is a meaningful KPI for net2phone's UCaaS and CCaaS offerings, it is not applicable to its AI Agent and Coach offerings, which once they become material, we'll begin to report them in different account-based metrics.