Company Overview
IDT Corporation (IDT) is a diversified global technology company that has evolved from its roots as a telecommunications provider to become a leading player across fintech, cloud communications, and traditional communications solutions. With a strong balance sheet, strategic investments, and a portfolio of high-growth and mature business segments, IDT has positioned itself as a compelling investment opportunity in the rapidly evolving tech landscape.
History and Evolution
IDT Corporation was founded in 1990 as International Discount Telecommunications, Corp., initially focusing on providing international long-distance calling services primarily to immigrant communities in the United States. In the late 1990s, the company began expanding its business beyond international long-distance calling, launching new initiatives such as IDT Digital Payments, which enabled customers to transfer airtime and data to international and domestic mobile accounts, and BOSS Revolution, an international long-distance calling service marketed to immigrant communities.
The early 2000s brought significant changes and challenges to the telecommunications industry, prompting IDT to further diversify its business. The company made strategic acquisitions in the financial technology (fintech) and cloud communications spaces, including net2phone, a provider of cloud-based communications services, and National Retail Solutions (NRS), an operator of a nationwide point-of-sale network for independent retailers. These moves were crucial in transforming IDT from a traditional telecommunications company into a diversified global provider of fintech, cloud communications, and traditional communications solutions.
Business Portfolio
IDT's current business portfolio consists of three high-growth segments - National Retail Solutions (NRS), Fintech, and net2phone - and three mature but cash-generating traditional communications offerings. This diverse mix of businesses has allowed IDT to weather industry-wide challenges and leverage synergies to drive consistent financial performance.
Financials
In the most recent fiscal year 2024, IDT reported annual revenue of $1.21 billion and net income of $64.45 million, with annual operating cash flow of $78.19 million and free cash flow of $59.27 million. The company's balance sheet featured $193 million in cash, cash equivalents, and short-term investments as of July 31, 2024.
For the second quarter of fiscal 2025, IDT reported quarterly revenue of $303.35 million, representing a 2.4% increase compared to Q2 2024. Quarterly net income rose to $20.27 million, a significant 40.5% increase year-over-year. As of January 31, 2025, the company's cash and cash equivalents stood at $142.15 million.
IDT's financial position remains strong, with a debt-to-equity ratio of 0.005, a current ratio of 1.66, and a quick ratio of 1.66 as of January 31, 2025. The company's subsidiary, IDT Telecom, maintains a $25 million revolving credit facility with TD Bank, N.A., which remained unused as of January 31, 2025 and July 31, 2024.
Segment Performance
National Retail Solutions (NRS)
NRS, the company's point-of-sale network and software provider for independent retailers, has been a standout performer, delivering 32% growth in recurring revenue and $10 million in adjusted EBITDA during the second quarter of fiscal 2025. The segment's active POS terminal count increased 21% year-over-year to 34,800, and it continues to expand its suite of value-added services to drive further penetration and monetization.
NRS represented 10.9% and 10.3% of IDT's total revenues in the three and six months ended January 31, 2025, respectively. Revenues from NRS increased by 30.7% and 28.7% in the three and six months ended January 31, 2025 compared to the same periods in fiscal 2024, driven primarily by revenue growth from NRS merchant services and the expansion of the NRS POS network.
As of January 31, 2025, NRS had 34,800 active POS terminals and 23,900 payment processing accounts, representing increases of 21.0% and 32.0%, respectively, compared to January 31, 2024. The company expects recurring revenue per terminal to remain around $300 for the remainder of the fiscal year, reflecting continued deepening penetration of NRS Pay and migration of retailers to premium sales plans.
Fintech
IDT's Fintech segment, anchored by its BOSS Money international remittance and payments platform, also achieved impressive results, with a 35% increase in gross profit to a record $22 million in the second quarter. BOSS Money's transaction volume reached an all-time high of 5.7 million during the period, as the business continues to scale its digital channels and optimize its retail operations.
Fintech represented 12.1% of IDT's total revenues in both the three and six months ended January 31, 2025. Revenues from Fintech increased by 31.6% and 35.5% in the three and six months ended January 31, 2025 compared to the same periods in fiscal 2024, driven primarily by a 33.8% and 36.4% increase in revenues from BOSS Money due to increased transaction volume in both its digital and retail channels.
net2phone
The net2phone segment, which provides cloud-based communications and contact center services, reported a 9% increase in subscription revenue to $21 million in the second quarter, driven by strong performance in the U.S. and Latin American markets. The segment has also made strategic investments in artificial intelligence, leveraging conversational AI to enhance customer experiences and drive operational efficiencies.
net2phone represented 7.1% and 7.0% of IDT's total revenues in the three and six months ended January 31, 2025, respectively. net2phone's revenues increased by 5.6% and 7.0% in the three and six months ended January 31, 2025 compared to the same periods in fiscal 2024, driven primarily by growth in subscription revenue, most significantly in the U.S. and Latin America markets, which reflected a 9.0% increase in the number of seats served as of January 31, 2025 compared to January 31, 2024.
Traditional Communications
While IDT's traditional communications businesses, including IDT Digital Payments, BOSS Revolution, and IDT Global, face persistent industry-wide challenges, the company has demonstrated its ability to manage these mature operations for cash flow generation. The traditional communications segment increased its adjusted EBITDA by 19% year-over-year in the second quarter, underscoring the team's disciplined execution.
Traditional Communications represented 69.9% and 70.6% of IDT's total revenues in the three and six months ended January 31, 2025, respectively. Revenues from IDT Digital Payments increased by 1.9% and 3.5% in the three and six months ended January 31, 2025 compared to the same periods in fiscal 2024. However, revenues and minutes of use from BOSS Revolution decreased by 20.0% and 20.1% in the same periods, reflecting ongoing industry trends. IDT Global saw revenue increases of 5.2% and 2.9% in the three and six months ended January 31, 2025 compared to the same periods in fiscal 2024, despite a decrease in minutes of use.
Liquidity
IDT's diversified business model, strong financial position, and strategic focus on high-growth technology solutions position the company well to navigate industry headwinds and capitalize on emerging opportunities. The company's consistent cash flow generation has enabled it to invest in organic growth initiatives, pursue strategic acquisitions, and return capital to shareholders through a recently increased quarterly dividend and opportunistic share repurchases.
Future Outlook and Guidance
IDT has provided guidance indicating that they expect to generate at least as much adjusted EBITDA in the second half of the fiscal year as they did in the first half. This implies that IDT is on track to deliver approximately 40% adjusted EBITDA growth in fiscal 2025 compared to the record $90 million in fiscal 2024.
The company remains cautiously optimistic about the potential impact of new federal immigration policies on their NRS and BOSS Money businesses, as they have not seen a meaningful slowdown so far. Regarding NRS, while the company is slightly behind its previous "soft guidance" of 6,000 new terminals for the current fiscal year, they expect to make up the shortfall over the rest of the year.
Legal Matters
IDT was named as a defendant in a class action lawsuit filed on behalf of shareholders of its former subsidiary, Straight Path Communications Inc. The company incurred legal fees related to this lawsuit, but the claims were ultimately dismissed in October 2023.
Investment Outlook
As IDT continues to execute on its transformation strategy, investors should closely monitor the company's ability to scale its high-growth segments, drive further operational efficiencies in its mature businesses, and prudently allocate capital to enhance shareholder value. With a compelling valuation, a diversified portfolio, and a track record of navigating industry disruptions, IDT presents an intriguing investment proposition in the dynamic technology sector.
The company's focus on expanding its NRS and Fintech segments, coupled with the ongoing growth in net2phone's subscription revenue and the strategic management of its Traditional Communications businesses, positions IDT well for continued success. The launch of new initiatives, such as net2phone's virtual AI agent, further demonstrates the company's commitment to innovation and market leadership in its key business areas.