IDT Corporation (NYSE: IDT) is a global provider of fintech, cloud communications, and traditional communications services. With a history dating back to 1990, the company has evolved from its roots in international long-distance calling to become a diversified technology conglomerate serving consumers and businesses worldwide.
Business Overview IDT was founded in 1990 as International Discount Telecommunications Corporation, offering low-cost international long-distance calling services. The company initially focused on serving immigrant communities in the United States and Canada. In the late 1990s, IDT expanded its telecommunications offerings, launching services like IDT Digital Payments, which enabled customers to transfer airtime and data to international and domestic mobile accounts.
Throughout the early 2000s, IDT continued growing its traditional communications business while diversifying into new areas like financial services. A significant milestone came in 2008 when the company acquired Boss Revolution, an international long-distance calling service that became a key part of its Traditional Communications segment. This acquisition also laid the groundwork for the launch of IDT's Fintech division, including the BOSS Money international remittance service.
The 2010s marked a period of strategic acquisitions for IDT, further diversifying its portfolio. In 2017, the company acquired National Retail Solutions (NRS), which operates a nationwide point-of-sale network providing independent retailers with store management software, electronic payment processing, and other merchant services. The following year, IDT acquired net2phone, expanding its offerings to include cloud communications and contact center services.
Today, IDT operates through four main business segments: National Retail Solutions (NRS), Fintech, net2phone, and Traditional Communications. NRS provides point-of-sale (POS) solutions, electronic payment processing, and other merchant services to independent retailers, while the Fintech segment encompasses the company's BOSS Money international money transfer business and other financial services. The net2phone segment offers integrated cloud communications and contact center services, and the Traditional Communications segment includes the company's legacy international long-distance and wholesale voice and SMS termination offerings.
Financial Performance In the fiscal year ended July 31, 2024, IDT reported total revenue of $1.21 billion, down slightly from $1.24 billion in the prior year. However, the company's profitability improved significantly, with net income increasing to $64.45 million from $40.49 million in fiscal 2023. This translated to diluted earnings per share of $2.54, compared to $1.58 in the previous year.
For the fourth quarter of fiscal 2024, IDT reported revenue of $308.83 million, up 3.2% year-over-year. Net income for the quarter was $36.82 million, a 1.6% increase from the same period last year. Operating cash flow (OCF) for Q4 2024 was $28.88 million, up 2.5% year-over-year, while free cash flow (FCF) increased by 4.0% to $23.58 million.
For the full fiscal year 2024, IDT generated operating cash flow of $78.19 million and free cash flow of $59.27 million.
Liquidity IDT's financial position remains strong, with $193.00 million in cash, cash equivalents, and short-term investments as of July 31, 2024. The company's balance sheet is largely debt-free, with only $1.53 million in total debt. IDT's current ratio stood at 1.51, indicating a healthy liquidity position. The company's cash and cash equivalents alone amounted to $164.56 million at the end of fiscal 2024.
IDT Telecom, a subsidiary of the company, has a $25 million revolving credit facility with TD Bank, of which no amounts were outstanding as of July 31, 2024. This provides additional financial flexibility if needed.
Segmental Performance National Retail Solutions (NRS) NRS, which represented 8.4% of IDT's total revenue in fiscal 2024, continued to deliver robust performance. Revenues increased 31.0% year-over-year to $74.93 million, driven by growth in the company's merchant services and the expansion of its POS network. NRS' gross margin improved to 87.3%, and the segment's operating income grew 22.8% to $15.58 million.
In the three months ended April 30, 2024, NRS revenues increased 42.3% compared to the same period in fiscal 2023, driven primarily by growth in NRS merchant services and expansion of the NRS POS network. Key metrics for the NRS segment include recurring revenue, active POS terminals, and payment processing accounts.
Fintech The Fintech segment, which includes the BOSS Money international money transfer business, saw revenues increase 38.8% to $86.08 million in fiscal 2024. BOSS Money's transaction volume and revenue grew by over 40% year-over-year, and the segment became EBITDA positive for the first time, generating $4 million in EBITDA. The Fintech segment's operating income was $2.67 million, compared to $613,000 in the prior year.
In the three months ended April 30, 2024, Fintech revenues increased 44.7% compared to the same period in fiscal 2023, primarily due to growth in BOSS Money's transaction volume in its retail and digital channels. The Fintech segment also includes other smaller financial services businesses, such as Leaf Global Fintech Corporation, a provider of digital wallet services in emerging markets, and IDT Financial Services Limited, the company's Gibraltar-based bank.
net2phone The net2phone segment, which provides cloud communications and contact center services, grew its revenues by 14.7% to $60.96 million in fiscal 2024. The segment added approximately 44,000 net new seats, including 2,000 in the contact center as a service (CCaaS) offering. net2phone's adjusted EBITDA margin more than doubled year-over-year, reflecting the segment's focus on cost control and revenue growth.
In the three months ended April 30, 2024, net2phone's revenues increased 12.4% compared to the same period in fiscal 2023, driven primarily by growth in subscription revenue in the U.S. and Latin American markets. Key metrics for the net2phone segment include the number of seats served and subscription revenue.
Traditional Communications The Traditional Communications segment, which includes IDT's legacy international long-distance and wholesale voice and SMS termination businesses, saw revenues decline 11.5% to $674.98 million in fiscal 2024. However, the segment's profitability improved significantly due to cost-cutting initiatives, with operating income decreasing by only 10.0% to $42.49 million.
In the three months ended April 30, 2024, Traditional Communications revenues decreased 8.0% compared to the same period in fiscal 2023. This segment includes IDT Digital Payments, BOSS Revolution Calling, and IDT Global, a wholesale provider of international voice and SMS termination and outsourced traffic management solutions. A key metric for the Traditional Communications segment is minutes of use.
Geographic Performance IDT primarily operates in the United States, with 78% of revenue coming from the US in the most recent quarter. The company also has a presence in the United Kingdom, which accounted for 16% of Q4 2024 revenue. Other international markets made up the remaining 6% of revenue.
Outlook and Growth Strategies IDT enters fiscal 2025 with strong momentum in its high-growth business segments, NRS, Fintech, and net2phone. The company is focused on driving continued expansion in these areas, leveraging its strategic assets and expertise to capture market share and improve profitability.
For fiscal year 2025, IDT expects to continue driving the expansion of its profitable and growing businesses - NRS, BOSS Money, and net2phone. The company is particularly focused on further improving net2phone's bottom-line through continued volume growth and increasing revenue per user.
In the NRS segment, IDT plans to further expand its merchant services and POS network, while also exploring new verticals and developing innovative product offerings. The company expects NRS EBITDA to grow another 30% in fiscal 2025 on top of the $25 million delivered in fiscal 2024, driven by continued expansion of the POS network and new product initiatives.
The Fintech segment, led by the BOSS Money business, is expected to continue its rapid growth, with a focus on improving gross profit margins per transaction. BOSS Money achieved over 40% year-over-year growth in transaction volume and revenue during Q4 2024, and this momentum is expected to continue.
In the Traditional Communications segment, IDT expects the rate of EBITDA decline to be significantly less in fiscal 2025, around $5-6 million, compared to the $11 million decline in fiscal 2024. The company will continue to optimize operations and maximize cash flow generation in this segment.
IDT provided a "soft guidance" that its consolidated EBITDA could surpass $100 million in fiscal 2025, up from the record $90 million achieved in fiscal 2024, highlighting the company's confidence in its growth trajectory.
Industry Trends The international money transfer and mobile top-up markets that IDT's BOSS Money and IDT Digital Payments segments operate in have seen steady growth, with compound annual growth rates (CAGRs) of 7% and 5% respectively over the past 3 years. The cloud communications market that the net2phone segment serves has grown at a 15% CAGR during this period, indicating favorable market conditions for IDT's growth segments.
Risks and Challenges While IDT has successfully diversified its business and positioned itself for growth, the company faces several risks and challenges. The highly competitive nature of the telecommunications and fintech industries, regulatory changes, and technological disruption pose ongoing threats to the company's legacy businesses. Additionally, IDT's international operations expose it to foreign currency fluctuations and geopolitical risks.
The company's ability to effectively integrate and scale its newer business segments, such as NRS and Fintech, will be crucial to its long-term success. IDT must also continue to innovate and adapt its product offerings to stay ahead of the curve in rapidly evolving markets.
Conclusion IDT Corporation has transformed itself from a traditional telecommunications provider to a diversified technology conglomerate, leveraging its core assets and expertise to capitalize on growth opportunities in fintech, cloud communications, and retail technology. With strong performance in its high-growth segments, a healthy financial position, and a focused growth strategy, IDT appears well-positioned to navigate the challenges of its industry and deliver long-term value for shareholders. The company's debt-free balance sheet, strong cash position, and positive free cash flow generation provide a solid foundation for future growth and investments in its expanding business segments.