IDT Corporation Class B Aktie

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' 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 fiscal 2026 than it did in fiscal 2025 or 2024. At NRS, we continue 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 our recent acquisition. Taken together, these developments helped drive a 47% year-over-year increase in NRS' 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 app. 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 the $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 stand-alone 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'm trying to recover from a cold, so I may have to pause a little more to take a breath from time to time. Okay, so 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 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 3 segments containing our higher-margin growth businesses: NRS, Fintech and net2phone relative to the larger lower-margin traditional communications segment. In fiscal '26, these 3 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 1/3 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 2 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' 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 onetime 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 gross 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 nonrecurring 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 2 new KPIs: retailer locations and average monthly gross profit per location. And 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 has 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, profit -- 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 '26, 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. 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 '26 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 had no debt. We continue to repurchase shares opportunistically, buying back approximately 31,000 shares for [indiscernible] million in the fourth quarter and approximately 422,000 shares for $21 million over the course of fiscal '26. 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 '26 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] The first question is from [indiscernible] with Freedom Broker.

First, I wanted 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?

Yes. I mean, 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 revenue by 20% to 25% and EBITDA between 25% to 30%. We achieved that. And for this coming fiscal year, we are, again, assuming almost the same type of guidance that will again be able to grow revenue 20%, 25% as well as EBITDA at a higher clip than that. And the same type of guidance is still also at Fintech, where we believe that EBITDA will continue to grow quite nicely.

We 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, better performance even from the smaller businesses within that segment. And 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. And again, for this year, we are trying to budget and allow the management team of net2phone to redeploy a lot of the EBITDA coming from the growth back into the business, so they could continue to roll out and improve on the AI development road map. And 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's actually adding to total EBITDA.

Got it. That's helpful. And as we stop at net2phone, may I ask one more on that segment, please? So where are you seeing the clearest commercial impact from the AI products so far in net2phone?

Yes. I mean I would say that we're definitely seeing clear evidence of our product being used. I mean, 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're helping us. We're using it tremendously. I mean I would say probably 70-plus percent 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 I mean, it's been a real game changer in terms of the cost and the efficiency of servicing our customers. And from the customers I have spoken to at net2phone, the same thing is true from their perspective.

Understood. Okay. And then one on NRS, if I may. So now 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 the -- to another retailer, and we focused more so on the quantity rather than the quality. And 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. And sometimes that unfortunately leads to less gross number of ads, but the revenue coming from those locations tend to be quite a lot better than they were beforehand. And you can see that playing out in our numbers, and I think you'll continue to see 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.

Great. And please -- yes, the last one for 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?

I mean 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. I mean, 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. And when a customer comes to us directly and spends $10, $10 goes directly into our pocket. So 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.

If I just add to that, right, we are going to still expect to see double-digit decline in the revenue of the BOSS Revolution PIN-less business. But as Shmuel mentioned, right, the impact that, 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. And on our digital payments business, that has been driving growth in the past few years, and we expect that to continue and to offset the declines on the ILD side of the business. And just to mention also that it's been part of the modus operandi for us at IDT for now for many years that we are constantly looking to reduce the cost structure in that segment. Now we're trying to achieve reduction in cost and SG&A so that we could net-net, see positive growth in EBITDA.

Yes. But again, I would say more than anything, is we drive customer growth by driving happy customers. And 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. And that's what we focus on every day.

The next question comes from [William Vaughan] private investor.

Congrats on a fantastic quarter. Just I just want to ask a question on -- you mentioned trying to reaccelerate new store growth in NRS, which is awesome to hear. Do you see -- and also like maximizing profitability sort of 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 in that?

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

So again, I mean, like I just -- it's a bad example, but if somebody is a tobacco shop, right, we'll just use them as an example. They're most likely not going to be able to take a lot of our services at this point because they're 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. I mean, so it's those kinds of factors that influence the overall profitability of a store.

Okay. And a follow-up on that. Do you still see that new stores that are brought on are mostly converting folks who didn't really have a good POS system prior? Or have we got to the point where the offering is sort of taking business away from other providers because of the specialization in terms of services that you add and becoming more competitive that way?

I mean, I don't know the answer exactly to the question like off the top of my head. But I mean, I would just give you like my thoughts on it. And again, these aren't statistical numbers. But 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. And again, we've had customers that have left us for something new and shiny. And a couple of months later, they realized 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.

And 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 a 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. And 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. 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? So you mentioned the acquisition. Is it just getting more bidding for ad impressions? Is it -- what specifically has drove the recovery? If you could just give some color on that?

Yes. I mean it's not a one facet answer. And I would also say, listen, I mean, 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. And right now, it's doing very well. Like as we're speaking this quarter, it's doing better than ever. And 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. And the -- our partners who are usually the brands that sell products in these stores are seeing the results.

And 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. So I think that, that's, generally speaking, what's happening. That being said, I mean, 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. So it's that whole combination together.

Awesome. And 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? And 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?

So I mean, listen, I can't speak to like how our competitors are doing that aren't public competitors. I mean you can see a lot of the public competitors to us who have retail businesses and how it's affected them. I mean 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. And we're trying our best always. I mean, right now, the business is doing very, very well. And I don't expect anything to change. But yes, I mean, we are definitely being helped by the market moving to digital. Like it's not just us, I would say like that.

Yes. I mean we do see that our market share has remained stable to growing to our largest destination. I'll give you an example, in the case of Mexico. Mexico, as you know, is the largest corridor for remittances out of the U.S. 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 grew a little bit there. So I think hopefully, there will be a lot of opportunity for us to grow market share into Mexico, and we think about Mexico all the time as an area of opportunity for continued growth and being able to have the best app out there, which is above 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.

Good evening. Welcome to the IDT Corporation's Third Quarter 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. 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 3 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 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' 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.

And 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. Last Friday, my father ran 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 generally 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 time line of the people, the document, the, I don't know if 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 5 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 3 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 '26 adjusted EBITDA guidance to $150 million to $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 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. OnCore'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 at customers but reliable, cost-effective alternatives. Netphone 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 Netphone offerings will also benefit from the recent release of Integrate by Netphone, an integration layer that enables our clients to easily through 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 rightsize 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 refined 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. 30 years ago, IDT was a scrapping 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 communication segment that continues to generate meaningful cash. Thank you all for your continued confidence in IDT.

Marcelo will now walk through the financial details.

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 have 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 3 higher-margin growth segments, NRS, FinTech and net2phone, even as our large traditional communications segment becomes relatively less impactful. That location 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 3 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 3 growth segments generated 55% of IDT's consolidated adjusted EBITDA in the third quarter, up from 29% in the year ago quarter. Because these segments still account for only about 1/3 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 9 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 million to $149 million range, we provided last quarter to a new range of $150 million 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 5 public companies, we are generating 22x 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 5 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 Instructions] Our first question is from [indiscernible] Capital.

First, congratulations on the 25 years, and thank you for sharing the touching words. I'm happy you spent some money fighting people over to New Stock Exchange, knowing how tightly you manage money. So I'm glad you are 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 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?

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.

Okay. I would like to ask another question on OnCore 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?

I mean, listen, we definitely think that they are going to be a help to our advertising group. I mean 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. So this is sort of a long-term relationship already. And we expect it to be an accretive acquisition. 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 3x sales plus. Is this enough of valuation for you to spin off netsphone 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?

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 confident that Netphone 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 yes.

Okay. And one last question on BOSS Money. The performance this quarter has been impressive. You are acquiring customers like -- I mean, like I haven't seen in a long time. And I'm wondering, you expanded margin despite the customer acquisition costs. If we think about BOSS Money in a steady state, what kind of EBITDA margins do you think it can produce? I mean less marketing expenses.

Yes. I don't know the answer to the question. I mean we have relatively good margins, I agree. We try to be opportunistic when we can be. And 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. And to do so, you cannot have prices that aren't correct in the market. But Marcelo has a couple of things that you'd like to say about it as well.

Okay, I mean, indeed, this was a real good quarter for us. It's kind of a continuation of what we 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, as I've mentioned before, those command much higher margins than our retail channel. And that shift in channel continues, it adds to the total margin, the net margin. But the story is not just that. We're doing a better job understanding our customer, understanding how to price the service better, how to manage the FX that we go to our customers for the various corridors, like 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, it continues to scale quite nicely to the bottom line. I mean we put that release a few weeks ago about how modest day was a record weekend for us now that we have seen the May results, the month of May that just finished now and our first month into Q4 is our strongest transaction month ever. It's going to be our strongest gross profit month ever. And I think that's the reason. We're not just trying to grow transactions or revenue, we 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, well positioned, gaining market share. And if this continues that way, obviously, we're going to continue to invest behind acquiring customers. But I do expect to see margin expansion as the year go by.

Our next question comes from William Vaughan with Corient.

Congrats on the great quarter. Awesome anniversary as well. So once again, congratulations. I have a couple of questions. First one on the OnCore Digital acquisition. Is there any color you can give on the price paid or any multiple of whatever it is EBITDA, income from operations or anything like that?

Yes. I mean we're going to have to put a little more detail when we file the 10-Q next week, right? But note 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 carries a lot of media for CTV or our advertising screens. We took a majority 80% controlling position in the company, valuation of about $6 million, now some earn-outs, et cetera. We believe that the price is basically an excellent price. And again, the focus is to have them be able to better monetize our screen inventory. And now that we are part of the family, we will be able to work better together to maximize that opportunity.

Awesome. Are there any other types of acquisitions or different places within your 3 growth businesses that you're looking and you're seeing attractive, if there are some tuck-ins or bolt-ons or other things you could do in that space, that would be attractive to you? And it could be in any one of them, NRS, BOSS Money or net2phone.

We always have our ears open, and we've done some successful acquisitions and some not as successful acquisition. So we -- and we might have dodged the bullet with some of our acquisitions, too, but it didn't happen. So I don't know. We keep our eyes open and remain cautious and prudent.

Okay. Staying opportunistic. So I guess just a question on net2phone AI. You brought up in the release. It seems like it's something that is gaining a lot more traction. What features of you're offerings do you find your clients are liking or excited about using the most?

It's a good question. I mean 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 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 using our own product, we'll call it. Obviously, they're not our own models, but our own products. And on chat it's, I think, above 50% at this point that's being handled by our products again.

And 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 call to say, hi, 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 it 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 premium product that we're starting for businesses so they could try it out called Flex. You can check it out on our website.

Yes, I mean, I think they're doing great things, and I think 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.

To see that in the numbers, right, at this point. I mean, net2phone is doing really great right now, right? They just crossed the $100 million MRR revenue barrier. So 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 show that the AI element is becoming a larger 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 Netphone at some point. I think we are building the right assets and features to make the net2phone attractive -- a lot more attractive than people believe it is.

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 U.S. systems, in terms of single store operators for Bodegas and convenience stores. We're following other players in the space. I'm starting to see 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 coming into the space in terms of point-of-sale operators and bigger players coming in? Or is it still sort of kind of not white space, but not as much competition as more from smaller guys?

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, I mean, again, I think Toast is a great company. I must buy some for my personal portfolio as -- but in terms of like 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. 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 restaurant. I basically would tell you like the same thing if you were starting a convenience store, like I don't think you would be best off financially or otherwise from choosing anyone NRF.

And again, it's only going to get better. In terms of our own road map 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.

Okay. I think focus and solution to a specific vertical is really important in this space. So I appreciate that color. Moving to our 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 with a healthy investment in marketing and new customer acquisition. There are other digital players in the space I brought up before, who are growing as well. They spend a lot more in marketing. And I think -- I mean, I agree with your assessment that 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 customer acquisition and 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, 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? Like how do you guys think about that dynamic?

It's a good question. I mean, 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 like send countries, right now, we're really obviously only from the U.S.A. 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 in terms of like our penetration into, we'll call it, 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, we'll call it, inside of that country so that we 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 honestly pricing and great service, because if we don't do that, like we won't have a business. So that's really our main focus. And thoughtfully speaking, it seems to be working.

Awesome. Great color. Last question. So I was happy to see the buyback this quarter, which was about $19 million. Do you foresee a similar pace of buybacks going forward? Was this more taking advantage of maybe more attractive stock price? Or do you think based on where we are, we'll probably more or something close to it.

I mean, I have a lot of color on this 1 or 2 calls ago. So you can go back and listen to that rather than be like sort of repeating redundant information. But I mean, in general, I will continue to buy back stock. Obviously, we're opportunistic. If the price for some reason to fall a lot, like 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.

Yes. Awesome. I mean if I'm looking at the EBITDA guide and where the business is headed on a consolidated basis, once you back out the enterprise value, we're probably trading at around 6x EBITDA, which is very, very low, at least in my opinion, in terms of where the value in the company. So love to see the buyback. I appreciate the color.

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.

Good evening. Welcome to the IDT Corporation's Second Quarter 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. In today's presentation, IDT's Chief Executive Officer, Shmuel Jones; and Chief Financial Officer, Marcelo Fischer, will discuss IDT's financial and operational results for the 3 months ended January 31, 2026. After their remarks, they will be happy to 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 adjusted measures including adjusted EBITDA, adjusted EBITDA margin, non-GAAP earnings per share, NRS' 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.

Thank you, Bill, and thank you to everyone who joined the call. NRS and BOSS Money and net2phone's top and bottom line expansion drove IDT's strong overall results again this quarter. NRS recurring revenue grew year-over-year, powered by large increases in merchant services and SaaS fee revenues. This quarter, we continue to make progress on initiatives to drive additional merchant services and SaaS growth and expand our delivery partnerships. We are also developing offerings for differentiated retailer verticals. Advertising and data results came in lower than we expected after decreases in CPM rates pressured revenues. At BOSS Money, our digital channel continued to outperform relative to the industry as transactions increased 17% year-over-year. The new federal admittance tax, which applies mainly to transactions originated with cash went into effect on January 1. As expected, the tax implementation has accelerated customer migration from the lower-margin retail channel to the higher-margin digital channel, and you will begin to see those positive impacts next quarter.

net2phone's bottom line continues to benefit from its strengthening gross margins and operating leverage, and this quarter, we also got a boost from favorable foreign exchange rates. Looking ahead, our AI offerings are generating very positive customer reviews and increased spend. Based on these early results, we are readying a new offering, Agent seamlessly integrated with unified communications with a go-to-market strategy targeting both direct and channel sales to small and medium businesses.

Traditional Communications remained a strong cash generator. The segment contributed $19 million in adjusted EBITDA during the second quarter, a decrease from the year ago quarter but approximately the same as in the prior 2 quarters. Because of our recent strong financial and operational performance growth and outlook and balance sheet, we again repurchased stock in the second quarter, and our Board has increased our annual dividend by 17% to $0.28 per year.

Now Marcelo, who is more of a gifted orator than I will discuss our financial results. I also just can't go without saying that our hearts and prayers are with all of our soldiers abroad, and we hope that you come home safely.

Thank you, Shmuel. My remarks on our financial results for the second quarter of fiscal year 2026. will focus on the year-over-year comparisons to set aside seasonal impacts on our business. IDT achieved record levels with several key consolidated financial metrics in the second quarter, gross profit, gross profit margin, adjusted EBITDA, adjusted EBITDA margin and non-GAAP EPS. These results were very much in line with our recent year-over-year growth trajectory. The underlying positive dynamic at IDT remains the same as it has been for several years, namely, our consolidated results increasingly reflect the growing contributions of our 3 higher-margin growth segment and RF fintech and net2phone, while the contributions of our larger lower-margin Traditional Communications segment becomes relatively less impactful.

To date, we have been pleased by the speed with which each of our 3 growth segments have increased their cash flow contribution. In aggregate, these 3 segments contributed during Q2, 53% of IDT's consolidated adjusted EBITDA less CapEx, which we view as our profit or free cash flow compared to 45% in the year ago quarter. Given this ongoing rotation plus our strong results through the first half of the year and our positive outlook, we have begun to increase our allocation to shareholder returns.

Shmuel already mentioned the increased levels of our share buyback and our dividend. I just want to add that the increase in our dividend marked the second consecutive year of dividend increases, and we hope and expect to be in a position to continue increasing the dividend in the years ahead. Also of note is that the 15 million of stock repurchases in the first 6 months of fiscal '26 put us on track to exceed the rate of share buybacks compared to the preceding years. We allocated $18 million to share repurchases in all of fiscal 2025 and $11 million in fiscal '24.

Now I want to discuss our outlook for the remainder of the year. IDT raised its consolidated adjusted EBITDA guidance for fiscal '26 from the $141 million to $145 million range we shared at the start of the year to now being $147 million to $149 million. At the midpoint, this revised guidance is a $5 million adjusted EBITDA increase and a 12% increase compared to fiscal 2025 actuals. The guidance increase reflects certain developments in each of our segments. At net2phone, our initial guidance made at the beginning of the year was predicated on the assumption that increased investment in AI product development would pressure adjusted EBITDA growth. It has not worked out that way. The net2phone team has been extraordinarily disciplined and made excellent progress thus far this fiscal year developing and refining its AI offerings with only modest increases in spend. That approach drove a 37% year-over-year increase in adjusted EBITDA to $3.9 million in the second quarter, a stronger increase than we anticipated.

For the remainder of this fiscal year, we expect net2phone's adjusted EBITDA growth rate to moderate somewhat as the increased investment in growth initiatives during the second half of the year is expected.

At BOSS Money, federal immigration policies and the new federal tax on remittances that took effect on January 1 have had a massive impact on the remittance industry. No question. But the impact has been felt primarily on transactions originated at retail agents rather than those initiated through a digital channel. As such, IDT has benefited from an accelerated rotation from higher revenue, but lower margin with the charter transactions to relatively much lower revenue but higher margin digital channel transactions. This rotation has also been accelerated by our decision to maximize near-term cash generation at BOSS Money Retail.

As a result, our higher-margin digital channel transactions increased at 17% year-over-year. That helped to drive a $0.15 increase in fee tax segment gross profit in the second quarter. We are also achieving significant cost advantages as the money business continues to scale, specifically by negotiating better terms without payout agents as well as by continuing to integrate AI into our back office operations.

The combination of stronger GP and more efficient operations drove a 44% increase in adjusted EBITDA compared to a year ago, well ahead of the pace we had envisioned in our original guidance. At Traditional Communications, we once again were very pleased by our ability to extract more cash from our telecom businesses. To date, this year, our BOSS Revolution calling business has been a true standout. Revenue is down by double digits that we did expect and continue to foresee going forward, but gross profit has been rocksteady over the past year. The BOSS Revolution team has done an amazing job developing and bringing to market international prepaid call plans that have significantly improved the unit economics of this business and helping traditional business adjusted EBITDA to decline by just 3.5% in the first 6 months of the year compared to the same period a year earlier, which represents a lower rate of decline than we had expected in our original guidance.

Finally, at NRS merchant services and SaaS fee revenue outperformed our expectations. But as Shmuel mentioned, the broader market softening in CPM rates in certain segments of our advertising markets offset those gains so that adjusted EBITDA remains on track with our original guidance to achieve our forecast range of 20% to 25% growth for fiscal '26.

To sum up, overall, we are very pleased with our financial results so far this year and are continuing to build on our momentum. Now Shmuel and I will do our best to answer your questions. Operator, back to you for Q&A.

[Operator Instructions] Our first question is from Inigo Alonzo with Stoic Capital.

I would like to ask 4 questions. I'll start with NRS. The first one is -- well, a couple of questions on NRS. So are we going to see the monthly report again? We haven't seen the release for this year? And then in the past, you have mentioned how the opportunities for growth are ample. And I was wondering if you could provide some color on the execution level at the group in this quarter for those opportunities and maybe some color on why SG&A went up and advertisement picked up a little bit from last quarter.

On the first question, why the NRS release didn't go out? I don't know. I'd have to check.

Probably tomorrow or the day after.

And as far as your second question on the pickup in SG&A, again, I would say it's probably a couple of different things. There's no one answer, unfortunately. One is maybe I should be watching them a little closer. Number two is that we are sort of beginning to sell a new product inside of NRS and we've done some hiring sort of in advance of of it coming out. And that has probably led to some increase in SG&A. And the third piece is, I would say that probably a larger percentage of our sales came through, through resellers recently, and they are both slightly higher percentage goes back to them. So I think that those are probably the 3 main effects.

If I had to -- did I miss one of your questions?

Yes. The other one was on dynamics and if you can give some color on those opportunities that you have been working on.

I mean, again, we continue to work every day to try to increase our advertising sales. As you know, we've had a couple of different challenges, including partner that we worked with for quite some time that's no longer in business. But I think that, overall, they're doing their best to get through this period. I think that going forward, we're going to do a much better job of really connecting the data that we have with the ads that we're trying to sell. And we think that that's going to be a much bigger contributor to volume going forward. Unfortunately, like it wasn't yet a big enough contributor, but we expect that to be what helps NRS ads turn the corner.

Okay. On BOSS Money, obviously, this was an important release because it was the first month of January included in the results, and that is after the tax change. So we have seen a revenue decrease quarter-over-quarter, which is logical because you have seasonal promotions that you ran in the winter, and you are probably trying to get customers. So part of it might be due to customer acquisition cost.

I would appreciate color on, obviously, the surveys that we have done in the markets, so see that immigrant communities are echoing about this tax transaction, and they are adapting quickly to minimize their cost in remittances. So can you provide some of the picture of how many new users are you getting compared to what it has been in the past and maybe explain that revenue decrease quarter-over-quarter? Is it due to increased competition from retail players going digital? Or is it purely due to customer acquisition costs?

I'll let Marcelo answer it a little bit more thoroughly. But I mean one thing I'll say is that we had a weaker November and December than we had planned for. Frankly, we don't know why. Just it was just weaker than we expected. January picked up quite dramatically, and it's picked up since then as well. But I'll let Marcelo answer.

Yes, Yes, Shmuel is right. I mean since the remittance tax kicked in, in January, we saw digital transactions increased significantly. And that impacted Q2 by only 1 month. Now if you go into Q3, we continue to see a very nice uptick in digital transactions during February and now you're going to March. I mean just we ourselves are still trying to better determine how significant the remittance tax is going to be impacted the dynamics. There is no question that we are seeing some of our retail customers migrating into our app. So some of the apples on our apple tree are moving to digital. But I think more than that is that I think we are picking up apples with apple of some other players as well and adding those apples into our digital offering. So -- and that's driving digital transactions.

For example, this past week was our third best week ever in transactions for BOSS Money behind just the week of Christmas and the week of Mother's Day, right, which typically are the tons we, right? So in general, March, you should have nice uplift seasonality. We've seen that in previous years.

So it's a bit early to tell. We also are trying to get our hands around how strong this shift to digital is going to continue to be. A bit too early to tell. But so far, it's been good sailing since the tax kicked in.

Really good. A higher picture question related to this quarter performance. In 2021, you acquired a minority stake in Marcus Park. That company recently turned profitable. I was wondering what's the plan with Marcus Park. Do you have any call options to acquire the full business? Is it planning to go public in the future? How do you see that investment today?

I don't think that I can really comment on that. I mean I'm a Board member, and I wouldn't feel comfortable commenting on their business without their authorization to do so.

We have a minority stake in the company.

Okay. And the last one. Last quarter, you mentioned how on the M&A front, you were planning your next big move. Do you have any updates on the future in terms of M&A and if those conversations are still progressing adequately?

Not right now.

[Operator Instructions] We have a question coming from William Van with Coriant.

Congrats on the quarter. My question -- first question relates to NRS. Just wondering if you guys give us some commentary just on the general single-store operator, convenience bodega market. Like what trends are you guys seeing? I know in the past, it's been mentioned that there is a little bit of an effect in terms of store traffic from the immigration policies. Has that changed? Are you seeing any trends or any type of commentary you can give on the economics around those businesses and what the NRS side is seeing? That would be helpful.

Yes. I mean, I think ultimately, what drives the economics of the single retailer that we service is probably a lot less about the immigration issue. Now that could be a factor. Maybe certain markets in certain location. By and large, I think it's much more a reflection of the larger economy on the side of the customer pocket, affordability. So I think that inflation and other measures of customer demand, a much more of a factor impacting how the retailers are doing than the immigration side.

And so far, over the past few retail report that we put out on a market basis, now we have seen that the retailers continue to grow the businesses that are now quite nice percentages. So I think that overall, when you look at the at our 35,000-plus retailers. I think that category mains quite strong.

Okay. Good color. Another question on BOSS Money. Nice growth in the quarter. It sounds like you mentioned that the digital transaction business might be accelerating maybe in the second quarter. So just wondered if you could give some color on that. And also, what do the competitive dynamics look like in the business. There are some other digital first ran players that have shown a really good growth in their previous quarter in their filings as well.

So just if you could comment on the competitive positioning, thoughts on investments in that business in terms of increased possible marketing to compete with those players. How do you guys think about that?

I mean, again, as we, I guess, answered in the last question, it's definitely accelerating. I mean in terms of competition, we have some very strong competitors, both from the traditional players as well as only digital players. And I'm sure that they're also benefiting from the change from a retail-driven business to a digital-driven business. That being said, I think that we really do have an excellent app and an excellent experience for our customers, and we received probably by at least some measurements, the highest ratings of any app in the U.S. And we think that there's a reason why our customers come to us and stay with us.

And our pricing is extremely competitive. The experience, as I said, is extremely good. If I were looking for a money transfer service myself, I would use BOSS Money. So that being said, we do have strong competitors, and it's a competitive market. But we are spending, I would say, probably also more acquiring customers than we have in the past just because we have been doing a good job bringing on customers, so might as well spend money to get more of them and keeping them.

I would just add what I just mentioned in my remarks, something to bear in mind is that, as you know, revenues at retail are significantly higher than revenues that are derived digitally. I think this is for relative grew for other players in the industry as well. And the reason being is that when we sell something at retail, we charge a much higher fee because usually half of that fee then goes back to the retailer, either cost of goods sold or something like that.

So in general, revenue per transaction is much higher at retail than in digital. But at least for us, our digital net margins I think is higher than retail. So to some extent, you're seeing that dichotomy that, on one hand, our revenues continue to grow because of digital, but maybe not as fast as they used to. But some of it is because the retail revenues are coming down, which is almost 2x as high as our digital revenues. But at the same time, you see our EBITDA growing at a much faster clip because the margins at digital are so much higher.

Awesome. Great color. Last question. So I was definitely pleased to see the buyback this quarter. Just in terms of capital allocation, the buyback of [ $15 million ] or so, definitely a great first step. But if I'm thinking about the businesses, you got some really cash in your businesses here, the 3 high-growth businesses, plus even the legacy business. And so the current capital allocation plan, it's great, but doesn't necessarily put a huge dent in the cash position. So how do you guys think about going forward, is it do buybacks got to keep the cash where it is right now and maybe wait for a bigger opportunity for M&A transaction? Or do you expect buybacks to eventually sort of start eating away at the large cash position that you have?

I would probably say the first rather than the second. I don't expect cash to materially decline from where it is. I think we prefer having more cash available for lots of different purposes, including potential acquisitions. That being said, as you're pointing out, the businesses are very cash generative, and we intend to continue to purchase back shares depending on the price more or less opportunistically. And we increased the dividend this quarter, as you know. And we try to be as responsible as we can.

[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.

Thank you.

Good evening. Welcome to the IDT Corporation's First Quarter 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. 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 3 months ended October 31, 2025. After their remarks, they will be happy to 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 in 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' 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, everyone, on the call for joining this evening. IDT delivered consolidated revenue growth and record levels of gross profit, adjusted EBITDA -- and adjusted EBITDA in the first quarter. NRS led top line expansion, while all 3 of our growth segments reported strong bottom line results. Our traditional communications segment again provided steady cash generation. NRS recurring revenue increased 22% year-over-year, helping to drive a 35% increase in income from operations and a 33% increase in adjusted EBITDA.

This quarter, we continue to launch and build out innovative premium services, delivery integrations, couponing and product data scan programs, to name a few. Our premium offerings are becoming important growth drivers and factored into the large increase in average recurring revenue per terminal this quarter. There is tremendous opportunity for additional long-term growth through innovation, both in NRS' current and in adjacent markets.

At BOSS Money, our digital channel continues to outperform retail and that churn may accelerate as implementation of the new federal excise tax on cash remittances begins on January 1. The Fintech segment's income from operations and adjusted EBITDA nearly doubled year-over-year, aided by BOSS Money's increasing operating leverage and enhanced profitability of other smaller Fintech initiatives. Our push to integrate tailored AI and machine learning into BOSS Money customer service and fraud detection activities have helped to significantly improve unit economics. Looking ahead, we will soon introduce the first integration of the BOSS wallet enabling our U.S. customers to share money and receive rewards.

During the quarter, net2phone began offering its AI agent to both our existing and new customers and added our Coach AI solution at quarter's end. Increasingly, our customers are ordering multiple net2phone offerings to enhance their operations and streamline workflows. As a result, we have pivoted from stand-alone product offerings to holistic solutions comprised of multiple offerings tailored to customers' communications and workflow needs. This approach plays net2phone's product and distribution place to net2phone, product and distribution strengths and we are very excited about the potential as we continue to add new AI solutions.

On a final note, the Delaware Supreme Court and ruling issued yesterday affirmed the decision of the Court of Chancery dismissing all claims against IDT in the straight at class action suit. And we are very pleased that this case has now been favorably resolved. I don't usually do this, but I would like to thank a couple of people in particular. I would like to thank [Jason Seronik] and [Paul Federico] and [Rudy Catch] as well as our own [indiscernible]. I would also want a sad note, I like to remember our esteemed colleague, [Susie Silom], who led the data of the division of NRS and worked tirelessly for NRS even while very sick and loss of pain and unfortunately, has departed.

I will wrap up by thanking everyone on the IDT team for their hard work and another great year and wishing them and all of you on the call a very Joy's holiday season.

Now Marcelo will discuss our financial results.

Thank you, Shmuel. My remarks on the fourth quarter of our fiscal year 2026, we'll focus on the year-over-year comparisons to set aside seasonal impacts on our business.

From a financial perspective, this was a terrific quarter, highlighted by good top line growth, record gross profit and record adjusted EBITDA and adjusted EBITDA margin. Consolidated revenue increased 4% to $323 million, driven by our 3 growth segments: NRF, Fintech and net2phone, which together grew by 16%, with particularly strong contributions from NRS and Fintech. Consolidated gross profit increased 10% to a record $118 million for a gross margin of 37% as we continue to benefit from the increasing contributions of our 3 higher-margin growth segments relative to that of our low-margin traditional communications segment.

Consolidated income from operations increased to $31 million, a 31% year-over-year increase. Adjusted EBITDA and adjusted EBITDA margin also hit record levels at $37.9 million and 11.7%, respectively. EBITDA less CapEx totaled $32.1 million in the first quarter, a 30% year-over-year increase and also an IDT all-time high.

EPS increased by 31% or $0.21 to $0.89 per share on both the basic and diluted basis. Non-GAAP diluted EPS also climbed by 32% to $0.94 from $0.71.

As Shmuel pointed out, the big driver in the first quarter was again our 3 growth segments. Together, they contributed $103 million in revenue, equal to 32% of our consolidated revenue compared to 29% a year earlier. But because the average gross margin is 66% compared to 18% in our traditional communications segment, they provide tremendous operating leverage as the revenue contribution increases and the cost structures continue to be optimized.

Adjusted EBITDA from NRS, Fintech and net2phone combined totaled $21.4 million in the first quarter, a 50% increase from the first quarter of fiscal 2025. Together, they now represent 57% of our consolidated adjusted EBITDA compared to only 48% 1 year ago. Because these segments still generate less than 1/3 of our revenue, that rotation from low-margin businesses to higher ones still has a long way to run.

This being said, given the quite solid and consistent profitability results delivered by our traditional communications segment, we believe that the largest segment of ours will continue to be a major contributor to our adjusted EBITDA generation for years to come.

Now let's take a closer look at each of our segments. At NRS, results were highlighted by the very strong increase in the monthly average recurring revenue per terminal to $313 from $295 in the year ago quarter as a result of the strong revenue growth in Merchant Services, which is up 38% and SaaS fees up 30% that more than offset the 15% decline in advertising and data revenue. Merchant Services revenue this quarter continue to benefit from consumer and retail trends that we believe will drive long-term increases in payment processing revenue per account. Overall, NRS's recurring revenue climbed 22% to $35 million. Income from operations in the first quarter increased 35% to $9 million, primarily reflecting a 21% increase in gross profit, while adjusted EBITDA increased 33% to $10.3 million.

In our BOSS Money remittance business, revenue growth at our dominant digital channel, which generated 84% of our transactions during the quarter was 20%. Although revenue growth has slowed, we continue to take market share from our peers, many of whom especially the retail centric providers have seen revenues from U.S.-based remittances decrease in recent quarters.

Income from operations in the Fintech segment, which includes also our Gibraltar-based bank and other smaller financial businesses and offerings increased 97% to $6 million, and adjusted EBITDA climbed 87% to $7.5 million. These exceptional increases reflect the reduction in our transaction cost structure that machine learning and AI are providing the increasing operating leverage of the business and the improving profitability of the other businesses we've seen in our Fintech segment. Fintech's adjusted EBITDA margin climbed to 18%, and BOSS Money as a stand-alone entity would likely have achieved several percentage points above that, an impressive accomplishment that stacks up favorably in comparison to the larger long-established players in the remittance industry.

With the recent launch of its AI offerings, net2phone is transitioning its focus away from the per seat metrics we have traditionally used as a key indicator of the performance of this business. As Shmuel just noted, net2phone customers are now increasingly looking for communications and operating solutions comprised of multiple orderings. So in order to better capture and report this new dynamic, over the next year, net2phone will begin reporting new customer-based KPIs that more meaningfully attractive performance of customers of customer economics as opposed to post economics.

For now, however, seat growth remains a key performance indicator. And this quarter, seats increased 7% to 432,000, while revenue increased 10% on a net reported basis and 9% on a constant currency basis. Revenue growth outstripped seat growth in part because of some nice win for our higher-value CCaaS offering.

Income from operations increased 94% to $2 million in the first quarter, while adjusted EBITDA increased 44% to $3.6 million. EBITDA less CapEx increased 104% to $1.9 million. Net2phone was able to achieve all of this, while at the same time ramping up its investment in strategic AI technologies. Looking ahead, net2phone expects to further increase its investment in technology development as we build out integrations and features for new verticals, such as health care.

For our traditional Communications segment, this was another very good quarter, exceeding our expectations. Income from operations again increased up 1% year-over-year to $16 million, adjusted EBITDA increased 2% year-over-year to $18.9 million as modest decreases in gross profit were more than offset by our ongoing efforts to reduce OpEx in our legacy paid minutes businesses. Adjusted EBITDA less CapEx for this segment increased 1% year-over-year to $17.3 million, indicating once again the durability of this segment's free cash flows.

Turning to our balance sheet. At October 31, 2025, IDT held $220 million in cash, cash equivalents, debt securities and current equity investments. This represents a decrease of $34 million compared to the $254 million held at July 31. This reduction mostly reflect the fact that our first quarter fiscal '26 ended on a Friday compared to last quarter, which ended on a Wednesday. As I have mentioned in previous calls, as part of our weekly process of funding, weekend transactions for our BOSS Money remittance business in any given week, our highest cash balances are typically on Wednesdays and our lowest on Fridays.

During the first quarter, IDT also repurchased $7.6 million in stock. We expect to opportunistically buy additional shares during the remainder of our fiscal year and to return cash directly to our stockholders through our quarterly dividends.

To conclude, after generating $38 million in consolidated adjusted EBITDA this quarter, representing a 26% year-over-year growth, IDT is extremely well positioned to achieve our full year '26 adjusted EBITDA guidance of $141 million to $145 million, which would represent a 7% to 10% full year-over-year growth rate. For now, we will monitor Q2 performance and update our guidance when we report our next quarterly results, god willing, in early March.

Now Shmuel I would be happy to take your questions.

[Operator Instructions] Our first question comes from [ Anigo Alonzo ] with Maram Capital.

Congratulations on the 26% EBITDA growth and on the resolution of the [indiscernible] litigation. You have always been a really shareholder-friendly company and know that there is gone and as you wait for the M&A market to figure out over the first half of the fiscal year. I was wondering if we could expect any special dividend accelerated buybacks in the second half of the year or you still think that M&A is the way to go for that capital allocation.

I mean, on the M&A front, we're not looking at anything very large right now. unless something regulatorily changes in the market, I think we're sort of waiting to see how the effects of the tax on money transfers affect retail businesses in particular. On the NRS front, we're not looking at any major acquisitions, but we do have 1 or 2 small acquisitions in mind for them. And we're continuing to plan sort of our next big move, and we hope that it will be pleasing to our investors.

Okay. Another question, this one on additions of net payment processing accounts exceeding at the terminal count I was wondering if these additions are coming from businesses that do not require EOS. And if so, how relevant is a percentage of businesses to your revenue or it is coming from conversions.

No. It's coming from ones that require a POS.

Okay. And then in the prepared remarks, you comment on NRS, and you mentioned that there's tremendous opportunities for growth in pen markets. I was wondering what those adjacent markets are.

I mean there's a bunch of adjacent markets, some of which we've talked about in the past related to food service and related to international markets that we've yet to really launching with the exception of Canada. And there's lots of adjacent markets inside of the -- that are sort of specialties in spite of the businesses that we do already. I mean I can give you a bunch of examples, but you know most of them, whether or not it's hard work stores or CBD shops or there's lots of different verticals. I mean as I said, I can give you 100 different ones that if we build out a couple of small features for each one of them, they open up tens of thousands of stores each.

In the international market comments, do you think we could see other countries started to the IDT [indiscernible].

Yes. I mean, again, I can't say 100% that we have decided to go into more countries yet. We're looking at an acquisition outside the country that would accelerate that for us. But it's definitely on the road map. As I said, I'm not sure I can say it will be on the '26 road map, but definitely on the road map.

And the last one, this is on IDT Global. You have commented traditional exceeding the expectations, especially on the bottom line front and [indiscernible] commented on the initiatives to expand their bottom line but you have not commented on the record IDT global top line revenue. I mean, it's a record number for the last 2 years. And I know there's some seasonality to it, but if you could provide some color there, I would appreciate it.

Yes. I mean I think that they're doing a great job all around bringing lots of new and interesting solution to our carrier partners all around the world, whether or not it's SMS solutions, voice solutions, some of even our new AI solutions that we're using a net2phone are being, I'll say, offered to carriers as well. And they've really done a great job all around.

Yes. And [indiscernible], as we maybe have spoken before, when we manage our IDT Global wholesale carrier business, our account managers are incentivized to manage it in terms of generating maximum gross profit. on any quarter, revenues might go up or down depending on whether they chose the opportunities in a high revenue per minute country or a low revenue per mile country by high marginal margin.

So the IDT Global folks are doing exceptionally well in the sense that despite that the minutes business have been in decline now for so many years, they have consistently delivered what we look from a managerial perspective, about $9 million to $10 million of GP, gross profit, every quarter for now several years. despite the declines in the minutes, right? So the fact that the revenue has grown in the last 2 quarters. It's just a small indicator, okay, on the resilience of the business. And the revenues could come down, but the focus is really that the gross profit continues to be maximized as much as possible.

[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.