IDT Corporation

Item 2.          Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the accompanying condensed consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2025 (the “2025 Form 10-K”) filed with the United States Securities and Exchange Commission (or SEC).

As used below, unless the context otherwise requires, the terms “the Company,” “IDT,” “we,” “us,” and “our” refer to IDT Corporation, a Delaware corporation, its predecessor, International Discount Telecommunications, Corp., a New York corporation, and their subsidiaries, collectively.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks, and uncertainties that could result in those differences include, but are not limited to, those discussed under Item 1A to Part I “Risk Factors” in the 2025 Form 10-K. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including the 2025 Form 10-K.

Recently Issued Accounting Standards Not Yet Adopted 

In September 2025, the FASB issued ASU 2025-06 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which simplifies the capitalization guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The amendments in this update permit an entity to apply the new guidance using a prospective, retrospective or modified transition approach. We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements.

Results of Operations

We evaluate the performance of our business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.

As of April 30, 2026, we owned 94.0% of the outstanding shares of our subsidiary, net2phone 2.0, Inc., or net2phone 2.0, which owns and operates the net2phone segment, and 82.3% of the outstanding shares of National Retail Solutions, Inc. or NRS. On a fully diluted basis assuming all the vesting criteria related to various rights granted have been met, we would own 89.9% of the equity of net2phone 2.0 and 80.2% of the equity of NRS.

Explanation of Performance Metrics

Our results of operations discussion may include the following performance metrics:

NRS utilizes two performance metrics to measure the size of its customer base: active POS terminals and payment processing accounts. Active POS terminals are the number of POS terminals that have completed at least one transaction in the calendar month. It excludes POS terminals that have not been fully installed by the end of the month. Payment processing accounts are accounts that can generate revenue. It excludes accounts that have been approved but not activated. 

In addition to the foregoing, NRS uses recurring revenue and monthly average recurring revenue per terminal as performance metrics. NRS recurring revenue is NRS’ revenue in accordance with U.S. GAAP, excluding its revenue from POS terminal sales.  Monthly average recurring revenue per terminal is recurring revenue divided by the average number of active POS terminals in the relevant period, divided further by the number of months in the relevant period. Trends and comparisons between periods for these metrics are used in the analysis of revenue, direct cost of revenue, and gross profit.

BOSS Money uses several performance metrics including transactions, average revenue per transaction, and send volume, to evaluate customer usage and revenue productivity. Transactions represent the number of remittance transfers processed during the period, average revenue per transaction is calculated by dividing BOSS Money revenue by the number of transactions, and send volume represents the aggregate amount of principal remitted by customers. Trends and comparisons between periods for these metrics are used in the analysis of revenue, direct cost of revenue, and gross profit.

net2phone’s UNITE (UCaaS), and uContact (CCaaS)  offerings  are priced on a per-seat basis, with customers paying based on the number of users in their organization. net2phone AI Agent and Coach (an AI-based contact center performance optimization tool) offerings are priced according to fixed bundles of interaction credits. net2phone’s subscription revenue is its revenue in accordance with U.S. GAAP including its AI Agent bundle offering but excluding its equipment revenue and revenue generated by a legacy SIP trunking offering in Brazil. Trends and comparisons between periods for these metrics are used in the analysis of revenue, direct cost of revenue, and gross profit.

Minutes of use is a nonfinancial metric that measures aggregate customer usage during a reporting period. Minutes of use is an important factor in BOSS Revolution’s and IDT Global’s revenue recognition since satisfaction of our performance obligation occurs when the customer uses our service. Minutes of use trends and comparisons between periods are used in the analysis of revenues, direct cost of revenues, and gross profits.

Three and Nine Months Ended April 30, 2026 Compared to Three and Nine Months Ended April 30, 2025

NRS Segment

NRS, which represented 12.0% and 10.3% of our total revenues in the three months ended April 30, 2026 and 2025, respectively, and 11.9% and 10.3% of our total revenues in the nine months ended April 30, 2026 and 2025, respectively, operates a POS network in the United States and Canada that provides independent retailers with POS equipment, store management software, electronic payment processing, and other ancillary merchant services. NRS’ POS platform also provides marketers with retail media advertising and transaction data.

Revenues. Revenues increased in the three and nine months ended April 30, 2026 from the comparative prior-year periods. These increases were driven primarily by continued growth in recurring revenue, reflecting the expansion of NRS’ retailer network, increased penetration of payment processing services, improved payment processing economics, retail customers' increasing use of credit/debit cards rather than cash, and increased software revenue per terminal as retailers increasingly adopted premium software as a service (SaaS) features and functionalities.

Direct Cost of Revenues. Direct cost of revenues increased in the three and nine months ended April 30, 2026 from the comparative prior-year periods, driven primarily by higher direct costs associated with the increased scope of NRS’ operations and increased sales, including increased costs related to POS terminal sales and merchant services.

Selling, General and Administrative. Selling, general and administrative expense increased in the three and nine months ended April 30, 2026 from the comparative prior-year periods. These increases were primarily driven by increases in personnel-related costs and other operating expenses supporting NRS’ continued growth. As a percentage of NRS’ revenue, NRS’ selling, general and administrative expense decreased to 61.5% from 64.2% in the three months ended April 30, 2026 and 2025, and to 60.1% from 61.4% in the nine months ended April 30, 2026 and 2025, respectively

Technology and Development. Technology and development expense increased in the three and nine months ended April 30, 2026 from the comparative prior-year periods. These increases were primarily driven by general ongoing business investments to develop premium software services provided through the NRS platform, and in other development and operations supporting our business platforms.

Fintech Segment

Fintech, which represented 14.3% and 12.8% of our total revenues in the three months ended April 30, 2026 and 2025, respectively, and 13.4% and 12.3% of our total revenues in the nine months ended April 30, 2026 and 2025, respectively, is comprised of: (i) BOSS Money, a provider of international money remittance and related value/payment transfer services; (ii) IDT Financial Services Limited, or IDT Financial Services, a Gibraltar-based bank; (iii) IDT Services Limited (“IDTS”), a Malta-based electronic money institution; and (iv) other, significantly smaller, financial services businesses, including a variable interest entity (“VIE”), that processes disbursement payments, which we refer to as the Disbursement Payments VIE.

Revenues. Revenues from BOSS Money increased in the three and nine months ended April 30, 2026 from the comparative prior-year periods. These increases were driven by higher digital transaction volumes initiated on the BOSS Money and BOSS Revolution Calling apps in addition to higher foreign currency exchange revenues to select regions, mainly Guatemala and Mexico. BOSS Money continued to benefit from cross-marketing to BOSS Revolution and IDT Digital Payments retail customers.

Direct Cost of Revenues. Direct cost of revenues increased in the three and nine months ended April 30, 2026 from the comparative prior-year periods primarily due to increases in BOSS Money’s direct cost of revenues, consistent with the growth in Boss Money revenue. As transaction volumes increase associated payout and processing fees also increase, partially offset by us reducing the transaction fee that we pay to our money transfer payors.

Selling, General and Administrative. Selling, general and administrative expense increased in the three and nine months ended April 30, 2026 from the comparative prior-year periods. These increases primarily reflected higher debit and credit card processing charges, chargebacks, and other operating costs associated with growth in BOSS Money’s digital transaction activity. As a percentage of Fintech’s revenue, Fintech’s selling, general and administrative expense increased to 44.8% from 41.5% in the three months ended April 30, 2026 and 2025, respectively, and decreased to 42.7% from 43.0% in the nine months ended April 30, 2026 and 2025, respectively. 

Technology and Development. Technology and development expense increased in the three and nine months ended April 30, 2026 from the comparative prior-year periods. These modest increases primarily reflected higher depreciation and amortization expense, partially offset by lower employee compensation and development-related costs.

net2phone Segment

The net2phone segment, which represented 7.7% and 7.3% of our total revenues in the three months ended April 30, 2026 and 2025, respectively, and 7.5% and 7.1% of our total revenues in the nine months ended April 30, 2026 and 2025, respectively, is comprised of net2phone’s communications and workflow solutions including its UCaaS, CCaaS, net2phone AI Agent and Coach solutions.