IDT Corporation Q3 FY2026 Earnings Call - Record Margins, 15% EBITDA Guidance Raise, and OnCore Digital Acquisition

John, Conference Operator: Good evening. Welcome to the 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 zero on your telephone keypad. 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.

Bill Ulrey, Investor Relations, IDT Corporation: Thank you, John. In 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 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, 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 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 8-K with the SEC. Now I’ll turn the call over to Shmuel for his comments on the quarter’s results.

Shmuel Jonas, Chief Executive Officer, IDT Corporation: Thank you, Bill. 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 an 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. 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. As you can tell from my notoriously short speeches, I don’t really like long-winded events. 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’d 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 spin-off 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 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 FY 2026 Adjusted EBITDA guidance to $150 million-$152 million, representing a 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 OnCore Digital, a digital media brokerage.

Encore’s platform demand relationships and publisher network will be integrated with NRS’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 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 new guests, 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 communication 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, excuse me, 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.

Marcelo Fischer, Chief Financial Officer, IDT Corporation: Thank you, Shmuel. My remarks on our third quarter fiscal 2026 results will focus on year-over-year comparisons in order to set aside the seasonal impact 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 their 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 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 2026 guidance for consolidated Adjusted EBITDA from the $147 million-$149 million range we provided last quarter to a new range of $150 million-$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. 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 2026, we are now on track to more than double that amount.

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. Shmuel and I will do our best to answer your questions. Operator, back to you for Q&A.

John, Conference 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 Inigo Alonso with Stoic Capital. Please go ahead with your question.

Inigo Alonso, Analyst, Stoic Capital: Hello, Bill, Marcelo, and Shmuel. First, congratulations on the 25 years. 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. I’m glad you are celebrating how it is worth it. That was not the only milestone this quarter. I have a question on another milestone, which was NRS having the first terminal in a non-North American country. This quarter, Colombia was the first country where you had an NRS terminal. I’m wondering why you selected that country. Is it beta testing? How should we think about the growth of NRS in that country?

Marcelo Fischer, Chief Financial Officer, IDT Corporation: The real answer is we could have selected a bunch of different countries to have an expansion, and we have some partners there that suggested that we try it there, and we decided why not?

Inigo Alonso, Analyst, Stoic Capital: Okay. I would like to ask another question on Core 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?

Marcelo Fischer, Chief Financial Officer, IDT Corporation: 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 partners for a number of years already. This is sort of a long-term relationship already. We expect it to be an accretive acquisition.

Inigo Alonso, Analyst, 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 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, 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, IDT Corporation: It’s a good question. I’m not prepared to really give an answer on today’s call. I would definitely say that it’s becoming more appealing to possibly do something. That being said, I’m very 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.

Inigo Alonso, Analyst, Stoic Capital: Okay.

Shmuel Jonas, Chief Executive Officer, IDT Corporation: Yeah.

Inigo Alonso, Analyst, Stoic Capital: Okay. One last question on BOSS Money. The performance this quarter has been impressive. You are acquiring customers like I haven’t seen in a long time. 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?

Shmuel Jonas, Chief Executive Officer, IDT Corporation: I don’t know-

Inigo Alonso, Analyst, Stoic Capital: In a steady state, meaning less marketing expenses.

Shmuel Jonas, Chief Executive Officer, IDT Corporation: Yeah. I don’t know the answer to the question. We had relatively good margins, I agree. We try to be opportunistic when we can be. By the same token, we’re very, 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. To do so, you cannot have prices that aren’t correct in the market. Marcelo has a couple of things that he would like to say about it as well.

Marcelo Fischer, Chief Financial Officer, IDT Corporation: Hey, Diego. Indeed, this was a real good quarter for us. It’s kind of a continuation of what we’ve started to see already the beginning of the year. Our digital channel is really doing very strongly, as you saw in the numbers. Our digital channel, as I’ve mentioned before, does command much higher margins than our retail channel. As that shift in channel continues, it adds to the total margin, the net margin. The story 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 quote 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. 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 our first month into Q4 is our strongest transaction month ever. It’s going to be our strongest gross profit month ever. I say that for a reason. We’re not just trying to grow transactions or revenue. We’re trying to do so, okay, with a very large focus into making that to be with higher gross margin, higher gross profit. I think we’re in a real good situation, well-positioned, gaining market share. If this continues that way, now obviously, we are going to continue to invest behind acquiring customers. I do expect to see margin expansion as the years go by.

Inigo Alonso, Analyst, Stoic Capital: Thank you a lot for your time.

John, Conference Operator: Our next question comes from William Vaughan with Corient. Please proceed.

William Vaughan, Analyst, Corient: Hi, guys. Congrats on the great quarter. Awesome selling anniversary as well. Once again, congratulations. I have a couple questions. First one on the OnCore Digital acquisition. Is there any color you can give on just the price paid or any multiple of whatever it is, EBITDA, income from operations, or anything like that?

Marcelo Fischer, Chief Financial Officer, IDT Corporation: Yeah. We’re going to put a little more detail when we file the 10-Q next week. This company is a small tuck-in acquisition. As Shmuel mentioned earlier, this is a relationship that we have had for many years now. The company now carries a lot of our media for CTV, for our advertising screens. We took a majority, 80% controlling position in the company. Valuation about $6 million. Now some earn-out, et cetera. We believe that the price we paid for it is an excellent price. Again, the focus is to have them be able to better monetize our screen inventory. Now that they are part of this family, we’ll be able to work better together so we could maximize that opportunity.

William Vaughan, Analyst, Corient: 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? If there’s some tuck-ins or bolt-ons or other things we could do in said space that would be attractive to you? It could be in any one of them, NRS, BOSS Money, or net2phone.

Shmuel Jonas, Chief Executive Officer, IDT Corporation: We always have our ears open, and we’ve done some successful acquisitions and some not as successful acquisitions. We might have dodged the bullet with some of our acquisitions, too, that didn’t happen. I don’t know. We keep our eyes open and remain cautious and prudent.

William Vaughan, Analyst, Corient: Okay. Staying opportunistic. I like that. I just have a question on net2phone AI. You brought up in the release, and it seems like it’s something that is gaining a lot more traction. What features of your AI offering do you find your clients are really liking or are excited about or using the most?

Shmuel Jonas, Chief Executive Officer, IDT Corporation: 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. Again, what I think is really exciting is really, first of all, like for everyone, there’s continuous advancements in it. 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. Already we’re handling probably 30% of our customer service calls using our own products, we’ll call it. Obviously, they’re not our own models, but our own products. On chat, it’s I think above 50% at this point that’s being handled by our products again. All of those interactions are having to dip into our systems and provide real-time information to customers. It’s not just like, "Hi, how are you?

Just called to say hi." No, they want to know, "I sent $200 to my brother in Mexico, and he still hasn’t received it," and they want to know where it is there an issue, when will it be available? 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. 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. 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. I think they’re doing great things, and I think it’s really not even early innings, it’s pre-innings.

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, Corient: That’s awesome.

Marcelo Fischer, Chief Financial Officer, IDT Corporation: It’s too early to see that in the numbers at this point. net2phone is doing really great right now. They just crossed the $100 million MRR revenue barrier. Now we are pleased about that. For the month of May, for them, was their best month ever in terms of new sales. They are going to show that the AI element now is becoming a larger portion of those new sales. It’s still small, relatively, but becoming a bigger portion. 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 asset a lot more attractive than people believe it is.

William Vaughan, Analyst, Corient: 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. 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. 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 bigger players coming in, or is it still sort of, not necessarily a white space, but not as much competition, it’s more from smaller guys?

Shmuel Jonas, Chief Executive Officer, IDT Corporation: I definitely think that we are seeing more competition at NRS, and it’s definitely affected the new sign-ups. In terms of some of the bigger players, again, I think Toast, Inc. is a great company. I might buy some for my personal portfolio. In terms of the offerings that we provide to convenience stores, liquor stores, I really think that we’re a much better value, and a much more purpose-built product for those markets. 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 restaurant. 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. Again, it’s only going to get better in terms of our own roadmap for NRS.

It’s really going back and strengthening the product even more. We’re not nearly as focused about 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.

William Vaughan, Analyst, Corient: Okay. That’s good. I think focus and tailoring a 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 the shift from retail to digital. I also saw that there’s a healthy investment in marketing and new customer acquisition. There are other digital players in the space, which I brought up before, who are growing as well. They spend a lot more in marketing. I think I agree with your assessment that probably shouldn’t be spending nearly as much as those players. I guess I’m curious to hear your thoughts on maybe not spending a ton in terms of marketing, just in general, customer acquisition or new customer acquisition.

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 the specific countries? Do you think it 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, IDT Corporation: It’s a good question. 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, we’ll call it countries that you send to, we definitely take a market-by-market approach to it.

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, we’ll call it, 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. 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. That’s really our main focus. Luckily speaking, it seems to be working.

William Vaughan, Analyst, Corient: Awesome. Great color. Last question. I was happy to see the buyback this quarter. I believe 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 to monitor this space or something close to it?

Shmuel Jonas, Chief Executive Officer, IDT Corporation: 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 sort of repeating redundant information. 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. 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.

William Vaughan, Analyst, Corient: Yep. Awesome. If I’m looking at EBITDA guide and where the business is headed on a consolidated basis, and once you back out cash from the enterprise value, you’re probably trading at around 6x EBITDA, which is just very low, at least in my opinion, in terms of where the value is in the company. Love to see the buyback, appreciate the color, and thank you. Stay classy. Thanks for my questions.

Shmuel Jonas, Chief Executive Officer, IDT Corporation: Thank you for asking your questions.

William Vaughan, Analyst, Corient: Cool.

John, Conference 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.